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Meet the Disruptor: Magnolia Mitigation

The Philly-based startup parlays money from developers into environmental protection, one bog turtle at a time

The Philly-based startup parlays money from developers into environmental protection, one bog turtle at a time

John Yarchoan, the head of Philadelphia’s Magnolia Mitigation, has done vital work to protect two separate endangered species in Pennsylvania, and has saved thousands of acres of wetland throughout the country—work that is more important now than ever. But it’s no simple thing to explain how, exactly, he’s done it.

“It’s complicated,” he laughs, before jumping into a well-rehearsed explainer on his business and vocation—something called “mitigation banking.” More complex still, he says, is what makes his mitigation banking shop so different from the others out there.

But before we launch into that, let’s start at the beginning. Mitigation banking, as simply put as possible, is analogous to a carbon offset, but for developers. Say you’re a developer, interested in constructing a set of condos on previously-uninhabited or underutilized land. But developing on that land will, as the EPA puts it, have “unavoidable” impact on local wildlife, wetlands or other protected flora or fauna. To make up for that, federal agencies like the Army Corps of Engineers will require or encourage you to invest in the reconstruction of a nearby wetland or other endangered ecological area. The work on that habitat is done by companies like Magnolia.

There are nearly 3,000 mitigation banks that are operating, pending government approval or that have been terminated. That has meant that deep-pocketed investors are chomping at the bit to get into the game. That has also meant a boon to the environment.

Magnolia differs from other mitigation bankers in a critical way: Instead of working on large, easier-to-manage and more profitable plots, the company focuses on smaller, but more ecologically vital tracts of land. To Yarchoan, it’s a moral imperative, especially now. Already, more than 20 states have lost over 50 percent of their natural wetlands to development or draining to create farmable land. And among the first moves of the new presidential administration has been to dismantle federal protections for many types of wetlands and waterways that Magnolia seeks to rebuild or protect. That means Magnolia’s work has become even more vital to saving those lands, and the species in them. 

“For every single one of our projects, we’re trying to ask, ‘What did this place look like before humans were even here?’” Yarchoan says. “With the restoration process, we’re trying to return the land back to that stage.”

In Pennsylvania, for example, Magnolia is replanting a 270-acre parcel in Berks County, which is the only known land in the world that supports two separate endangered species: the Indiana bat and the bog turtle, which is North America’s smallest turtle. “What makes me so excited about this project is that, in the past, the property owners viewed these species as a detriment,” Yarchoan says. “We were able to go in and say, ‘This is a program where we’re able to compensate you for these endangered species.’ And when you talk to them now, they say that they were always excited to live in such an environmentally important area, but there was no financial investment to do good environmental practices.”

magnolia mitigation saving the bog turtle
A newly hatched bog turtle. Photo by Rosie Walunas for the U.S. Fish and Wildlife Services

Yarchoan has been involved in environmental protection and ecological business for a long time. While in college at Amherst College, he served an internship with the National Oceanic and Atmospheric Administration; his first job out of school was as a land analyst for an ecological offset company, similar to Magnolia. A few years back, he helped found a weather insurance company called Sky Mutual that deployed predictive modeling and maybe a bit of game theory in an effort to help people defend against growing environmental threats. In short: Magnolia is not Yarchoan’s first eco-business rodeo.

Yarchoan characterizes the state of the mitigation bank industry as somewhere between a gold rush and a socially-conscious business innovation. The concept of mitigation banking is relatively new; the Environmental Protection Agency began tracking it in the early 90’s, when there were only 46 federally-approved mitigation banks. But the popularity of the programs has exploded: Currently, in the Army-run Regulatory In-lieu Fee and Bank Information Tracking System (RIBITS), which tracks mitigation banks in the U.S., there are nearly 3,000 mitigation banks that are operating, pending government approval or that have been terminated. That has meant that deep-pocketed investors are chomping at the bit to get into the game.

That has also meant a boon to the environment: The interest in conservation and in creating a sort of environment-neutral investment practice has allowed environmentalists like Yarchoan to increasingly save some of the most threatened ecological areas in the country. It’s something that could continue growing, even if Pres. Trump completely dismantles the EPA, because many states will still likely have wetland protections on the books.

Magnolia is based in Philadelphia, but is currently active in eight states, with business as far west as Texas. Yarchoan, a DC boy who blew into Philadelphia a couple years back when he was offered a Venture For America fellowship, is on the road a lot; at the time of our first chat, he was in Louisiana, where Magnolia is making inroads. Days before, on Super Bowl weekend, he was in Houston. Yarchoan says that Magnolia is currently working with up to 600 acres of preserved land in Pennsylvania, where the group controls the most property. The company has been open for about two years, and has 10,000 acres under conservation nationally. They’ve grown rapidly, and are now pulling in $1 million in recurring revenue per month, but the work is no easy thing—mostly by choice.

“For every single one of our projects, we’re trying to ask, ‘What did this place look like before humans were even here?’” Yarchoan says. “With the restoration process, we’re trying to return the land back to that stage.”

Yarchoan says the company spends a lot of time and effort upfront, selecting and creating a plan for compromised plots of land that fit in line with their company’s principle of putting function before profit when it comes to wetland reconstruction. “One thing we try to do is focus on properties that are adjacent to or near other preserved areas, areas that are sort of a link in a biological chain,” Yarchoan says. “In today’s world, there’s this idea of a hub and spoke model for how preservation should work, and how species should move, and there are areas that are pressure points, where we can get the most effort for what we do.”

That’s even before they negotiate with resource agencies, and sell a single credit to a developer. Then there’s the tricky act of negotiating easements on private parcels, most often farmers in rural areas. This isn’t a breezy task: Like the family in Berks County, these landowners have often had their family plots for generations; many have rebuffed similar offers for development. The process requires cajoling, pursuit and generally being a pain in the butt.

But the results can be just beautiful—say, for example, when you help save the Indiana bat and the bog turtle.

“The owners were hesitant at first,” says Yarchoan. “But when we made the deal happen, it was just immensely rewarding.”

Clarification: An earlier version of this story misstated the government body that requires mitigation banking. It is federal environmental agencies. It also called Amherst a university; Amherst is, of course, a college.

Header Photo: Big Deer Swamp in Pennsylvania's Wyoming County. Image by Nicholas A. Tonelli via Flickr

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