On Nov. 28, 1995, U.S. Department of the Army Corps of Engineers in conjunction with the Environmental Protection Agency, the Department of Agriculture (Natural Resources Conservation Service), the Department of the Interior (Fish and Wildlife Service), and the Department of Commerce (National Oceanic and Atmospheric Administration) issued a document entitled "Federal Guidance for the Establishment, Use and Operation of Mitigation Banks." With the release of this guidance document, the concept and implementation of wetland mitigation banking has become a reality. Use of mitigation banks is fully embraced by permitting and resource agencies. In some cases, use of a mitigation bank is the preferred alternative to satisfying a permit condition.

The federal guidance document defines mitigation banking as "the restoration, creation, enhancement and, in exceptional circumstances, preservation of wetland, and/or other aquatic resources expressly for the purpose of providing compensatory mitigation in advance of authorized impacts to similar resources."

Although mitigation banks are an accepted and sometimes preferred mitigation method, the adherence to the CWA Section 404(b)(1) sequencing guidelines is required. A project must first avoid then minimize impacts to aquatic resources including wetlands. If impacts are considered unavoidable, mitigation is often required.

Although on-site mitigation is still preferred, the federal guidance documents states, "In general, use of a mitigation bank to compensate for minor aquatic resource impacts (e.g., numerous, small impacts ...) is preferable to on-site mitigation."