Risk of Advance Credits – The Billion $ Bet

According to USACE, Advance Credits are “any credits of an approved in-lieu fee program that are available for sale prior to being fulfilled in accordance with an approved mitigation project plan." The National Environmental Banking Association estimates the current market value of these Advance Credits at well more than $1Billion USD.

According to US Army Corps of Engineers (USACE) data, there are more than 8 million Advance Mitigation Credits sitting on the ledgers of the many dozens of In-Lieu Fee (ILF) Programs across the United States today, nearly all of which are exempt from any financial assurance that the mitigation projects will actually be performed.

Graph shows Advance Credits currently available for sale by government and non-profit programs in the U.S.

These credits represent lots of potentially risky bets by USACE contingent on little more than promises of future project deliveries.

As USACE continues to shut down these failing and out-of-compliance programs >RECENT EXAMPLE, this vast present day inventory of unearned credits simply amplifies the undue risks and potential costs. What are the environmental and economic costs when many of these credits are sold without any appropriate environmental offset, as has happened unfortunately in so many cases in the past?

The architects of the 2008 Final Mitigation Rule were close to throwing out In-Lieu Fee as an acceptable form of mitigation owing to the nearly wholesale historic programmatic failures. Researchers who have studied ILFs across the U.S., point to 'moral hazards' and other reasons for the many failures. >MORE

Perhaps the 2019 Duke University Study best summarized: “There is a real potential for ILF programs to accumulate significant and grossly underfunded financial liabilities.” That risk, as the many millions of Advance Credits currently on the ledgers of ILFs expose, will be cumulative.

Recent U.S. Congressional action has made clear that ILFs and their credits are to be considered for Section 404 offset only where mitigation bank credits do not exist. >MORE