Compensating For Wetland Loss: A Case Study Of Michigan Riparian Zones

State and federal laws regulate the use of wetlands in Michigan. Under the current regulatory system, the destruction of a wetland may require the creation or restoration of a wetland to compensate for the wetland destroyed. Wetland ecosystems vary in ecological quality and type. Determining the appropriate amount of compensatory wetland creation and restoration is difficult. The number of acres restored may not adequately account for the variations and quality of the ecoservices lost in the destroyed wetlands. This paper describes an economic approach for determining the adequacy of compensatory wetland creation and restoration. Coefficient estimates and data from previous studies are used to examine four hypothetical wetland restoration scenarios. The results indicate that the appropriate amount of compensatory creation and restoration (a) increases with the quality of the destroyed wetland and (b) declines with the quality of the created or restored wetland. The results of the economic model are compared with mitigation results obtained using the standard procedures in Michigan. The comparison indicates that standard wetland mitigation procedures may require too little compensation when the restoration accomplished is not of the highest quality. Relative to the economic model of compensatory mitigation, standard procedures seem to result in too little restoration when (a) the destroyed wetland is high quality habitat and (b) the restored wetland is poor quality habitat. Standard procedures also appear to require too much restoration relative to the economic model when (a) the destroyed wetland has poor quality and (b) the restored wetland is high quality.