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No Subdivision Rules: Take That To The (Mitigation) Bank

The creation of a "land bank" and the subsequent sale of mitigation credits within the bank is not subject to requirements of the Subdivision Map Act, according to the attorney general's office.

The opinion, prepared by Deputy Attorney General Marc Nolan, is potentially good news for advocates of using mitigation banks to offset development's impact on endangered species — a fairly routine practice used statewide. The opinion was prepared for state Sen. Dick Ackerman (R-Irvine) in response to a specific situation in San Bernardino County.

After the U.S. Fish and Wildlife Service listed the Delhi sands flower-loving fly as an endangered species in 1993 (see CP&DR Environment Watch, September 1999), Vulcan Materials Company signed an agreement with the agency to operate a conservation bank for the fly. Vulcan agreed to transfer in phases portions of its property in the City of Colton to the Fish and Wildlife Service. Vulcan would then receive mitigation credits that it could sell to other potential developers. According to Ackerman's request letter, Vulcan has effected one transfer and sold three 1-acre mitigation credits.

However, the question arose as to whether the arrangement constituted a "subdivision" within the meaning of the Subdivision Map Act, which could then start a whole new planning and environmental review process. The granting of an easement is not typically considered a subdivision. But an argument could be made that the credits constitute a "lease" for a definite period of time, which could trigger the map act. In addition, the arrangement might also be considered an "environmental subdivision," which would be subject to map act requirements.

In response, the attorney general started with the definition of "subdivision" in Government Code § 66424: "[T]he division, by any subdivider, of any unit or units of improved or unimproved land, or any portion thereof, shown on the latest equalized assessment roll as a unit or as contiguous units, for the purpose of sale, lease or financing, whether immediate or future."

Other portions of the act speak to the intent to create "one or more new or additional, separate parcels of property," Nolan wrote.

A mitigation bank does not fit within these definitions, the attorney general concluded.

"While the grant of a conservation easement may involve identifying a portion of a larger tract of land upon which will be placed enforceable use restrictions, the grant does not constitute a division of the land within the meaning of the act," Nolan wrote. "The owner has neither conveyed the land so designated, nor expressed any future intent to convey it, as a separate unit. The creation of a conservation easement, in which the owner maintains ownership and possession of the land, does not, in itself, evidence an intent to convert the designated property into a separate parcel that can be transferred or sold."

"Moreover," Nolan continued, "the purpose of granting a conservation easement ‘is to retain land predominately in its natural, scenic, historical, agricultural, forested, or open-space condition' (Civil Code § 815.1) and not to effect a ‘sale, lease or financing, whether immediate or future.'"

There is no sale involved in the mitigation bank arrangement because ownership of the property does not change hands, Nolan explained. And there is no lease within the meaning of the act, because the "occupier" — in this case, the purchaser of mitigation credits — does not gain exclusive possession of the property. In fact, developers who buy credits "will not acquire any right to actual possession, much less the right to exclusive possession."

The financing provision of the act does not apply because the mitigation bank involves no transfer of the property title, the attorney general concluded.

Because the mitigation bank does not qualify as a subdivision under the map act, the provisions for an "environmental subdivision" do not apply, according to the opinion.

The attorney general also rejected the notion that Vulcan's receipt of mitigation credits or the subsequent sale of the credits triggered the map act. "Under the federal program, such a credit represents ‘the quantification of a species' or habitats' conservation values within a bank' so as to offset the negative impact of a credit purchaser's development of other land," Nolan wrote, citing Fish and Wildlife Service guidelines. "No ‘division' of land results from the receipt, sale or use of mitigation credits."

Although an attorney general's opinion does not set legal precedent, courts often rely on the opinions when making decisions.

The opinion is No. 06-801 and was issued August 14, 2007. It may be found at 07 C.D.O.S. 9630 and 2007 DJDAR 12483.