[Advance to content]

The Bay Bank

The Chesapeake’s Conservation Marketplace

Forest conservation

How does this market work?
Am I eligible to sell credits?
How do I generate credits?
How much money do credits sell for?
How much will it cost me to generate and sell credits?
What is required of me in order to generate credits?
Can I see my county's specific requirements?
I'm Interested. Now what do I do?

How does this market work?

Bay Bank connects forest landowners to Maryland forest conservation buyers. The state Forest Conservation Act (FCA) requires residential and commercial developers to replace trees cut during development. If a developer is unable to plant trees on the construction site, s/he may:

  • Buy forest mitigation credits generated by landowner “forest mitigation banks”
  • Pay a fee to the county that may then be used to buy forest mitigation credits generated by landowner “forest mitigation banks” or
  • Pay landowners for the opportunity to plant trees on a portion of their property through “off-site mitigation”

You can voluntarily generate credits by planting trees or permanently protecting woodlands. Credits, your interest in generating credits, or your willingness to host an offsite mitigation site can be posted on the Bay Bank Marketplace, where buyers can find and contact you.

top ↑

Am I eligible to sell credits?

The first step in determining your eligibility is to visit LandServer, http://www.landserver.org, where you can generate a report to estimate your potential to generate credits for a variety of market areas.

Each county has their own FCA regulations managed by the county planning department. Landowners in Garrett and Allegheny Counties are ineligible because of the high percentage of forest cover in their counties. Ten counties (Anne Arundel, Calvert, Carroll, Cecil, Dorchester, Frederick, Howard, Montgomery, Queen Anne’s, and Worcester) have procedures that specify how landowners can create and sell forest mitigation credits to developers.

While each county program has slightly different requirements, there are some general land eligibility criteria:

  • Establishing or enhancing a riparian stream or wetland buffer;
  • Located within a 100 year floodplain;
  • Containing steep slopes, erosive soils, low productivity agricultural land; and
  • Located within an agricultural preservation district.

In all other counties and some municipalities, you can provide credits to buyers through the Forest Conservation and Management Agreement (FCMA) program. FCMA freezes or reduces your property tax assessment in exchange for an agreement to manage your forestland according to a forest stewardship plan. All new Forest Conservation and Management Agreements are eligible for forest banking, regardless of whether a given county has an active forest banking program. It is still necessary, to check with your county to determine if they are prepared to allow buyers to use credits stemming from an FCMA to meet mitigation requirements. Bay Bank will help facilitate this connection with county governments on your behalf. Contact Us.

Additionally, if you live in a county without forest banking rules, you can generate revenue through off-site mitigation.

top ↑

How do I generate credits?

You can generate credits either by planting trees or conserving existing woodlands. Some counties only qualify new tree plantings for forest mitigation credits. You can learn more about the rules specific to your county by reading the forest mitigation banking protocol for your county.

In most counties, one acre of forest is equal to one forest mitigation credit. Some counties use a smaller geographic increment for defining credits, usually 1/10 of an acre. In all cases, credits may be subdivided when sold to developers, e.g. if a developer is only required to provide ½ acre of forest mitigation, they can meet this obligation by purchasing ½ of a forest mitigation credit from your bank. The other ½ credit is still available for sale to a different developer.

Most counties also require a minimum mitigation bank size threshold. The most common minimum size is one acre, but requirements range from as little as 10,000 sq/ft to as much as 10 acres. You can learn more about the rules specific to your county by reading the forest mitigation banking protocol for your county and the forest conservation credit accounting form.

With offsite mitigation, you do not generate credits. Off-site mitigation is a direct, one-time transaction between the landowner and a buyer. The buyer is paying you for the opportunity to use your land for forest mitigation and will only plant the amount of forest needed to meet his/her legal obligation.

top ↑

How much money do credits sell for?

Because credit demand results from residential and commercial development, credit values will be highest in counties with high rates of development and limited supply of credits from landowners. Generally, credit values will be higher for mitigation banks containing newly planted forests than for mitigation banks containing protected existing forests. Another factor in determining the price of forest mitigation credits is the forest mitigation in-lieu fee rate in your county. Counties with higher in-lieu fee rates tend to have higher credit prices because the in-lieu fee rate serves as an indicator of the value of forest land in the county. More urban counties tend to have higher in-lieu fee rates.

As an example, in 2008, Frederick County estimated the value of forest mitigation credits from mitigation banks containing newly planted forest at $16,000 to $20,000 per acre. The estimated value of forest mitigation credits from mitigation banks containing already existing woodlands was $6,400 to $8,000 per acre. At the time these estimates were made, the county in-lieu fee rate was $0.43 per sq/ft or $18,730.90 per acre. The current in-lieu fee rate in Frederick County is $0.565 per sq/ft or $24,611.40 per acre. As a result, it is reasonable to expect that the value of mitigation credits has increased since 2008.

In most counties, one acre of forest is equal to one forest mitigation credit. Some counties use a smaller geographic increment for defining credits, usually 1/10 of an acre. In all cases, credits may be subdivided when sold to developers, e.g. if a developer is only required to provide ½ acre of forest mitigation, they can meet this obligation by purchasing ½ of a forest mitigation credit from you. The other ½ credit is still available for sale to a different developer.

It is likely the compensation you receive for off-site mitigation will be significantly less than what you would receive by selling credits from a forest bank. This is because the buyer must pay all the costs of establishing the forest — these costs will likely be deducted from the amount the developer is willing to pay. On the other hand, off-site mitigation is low risk because you are not required to put up money of your own.

top ↑

How much will it cost me to generate and sell credits?

To plant 10 acres of new trees, the approximate cost is:

  • $50,000 to establish planting (based on $5,000/acre, which includes administrative fees)
  • $1,000 to purchase a financial guarantee on the survival of the trees planted in the forest bank (based on 2% of the project cost). The financial guarantee is returned to the bank owner after one to three years assuming successful bank establishment. The cost can vary given the type of guarantee (e.g. bond, letter of credit, or surety).

To protect 10 acres of existing woodlands, the approximate cost is:

  • $5,000 to develop project (based on $500/acre, which includes administrative fees)

For offsite mitigation, the buyer is responsible to establish the off-site mitigation location, including all relevant paperwork with the county, maintenance, financial assurance against unsuccessful forest establishment in its first few years, etc. If you plan to develop a forest bank, you will be responsible for all of these activities.

top ↑

What is required of me in order to generate credits?

To generate forest mitigation credits, the following is required:

  • A permanent conservation easement that restricts development in the project area. Local, state, and federal tax benefits may be available.
  • All other documentation and applications required by your county. This generally includes a banking agreement with the county, a banking plan that shows the bank‚’s location on a survey map and provides a plan for planting and maintaining trees, a form of financial assurance against bank failure, and a maintenance agreement.
  • Your banking plan and other paperwork must be prepared by a Maryland Certified Forestry Professional.
  • All forest conservation credits will be registered with Bay Bank. Registered credits will make it easier for landowners to determine eligibility and enroll in other markets or conservation programs.
  • All purchased credits will be monitored for the life of the project by county staff. During the first few years after you establish a mitigation bank, monitoring will be conducted in accordance with your maintenance agreement with the county After the maintenance period, the county will conduct periodic monitoring in order to ensure you forest bank is maintained as required in the banking agreement and conservation easement.

top ↑

Can I see my county's specific requirements?

You can find more detailed requirements below:

top ↑

I’m interested. What do I do now?

To get started with a forest mitigation bank, simply:

  • In your account page, create an “expression of interest” to develop a forest bank or off-site mitigation. Potential buyers will now be able to find you.
  • Fill out application
  • Once you have used Bay Bank‚’s credit calculators to assess your credit potential, update your Marketplace listing with your number of estimated credits (i.e., “advance credits”). Buyers will now be more interested in your property.
  • Contact a service provider to help you develop your bank. Alternatively, you can hire a service provider at the beginning of the process.
  • After your county approves your bank, update your account with the actual number of registered credits you can sell. Buyers will now be more interested in your property.
  • Complete transaction with buyer and report results to the Bay Bank registry

All Bay Bank tools