Coverage of the National Mitigation and Ecosystem Banking Conference - May 5

Becca Madsen on May 5, 2010 Comment

...continuing coverage on the National Mitigation and Ecosystem Banking conference in Austin Texas from May 3-6.

Evaluating and Managing Risks Session

This session focused on the private perspective of risks of mitigation banking, and the dollars often associated with those risks.

Randy Wilgis, of Environmental Banc & Exchange, shared results of research on costs associated with risks collected from a dataset of 30 projects. Some of the costs Mr. Wilgis noted were:
- Maintenance and repair costs of projects ranged from 2%-24% of the total construction costs;
- Actual expenses (of design changes, cost of material changes, regulatory changes, etc.) can range from -14% (less than) to +22% (more) than initial budgeted/planned costs;
- Amount of credits that are actually granted can be more or less than originally anticipated. On average, the number of credits actually granted is the same as originally anticipated, but the range can go from -11% to +19% of credits originally anticipated.

Adding up all these risks, project costs were 4.5% above initial budgeted costs, with a range of -41 to +90% of initial budget (or -12%-43% of project revenue). Across a portfolio of projects, mitigation banking risk is manageable, but the risk of a single project is a risky bet.

Todd BenDor, of the University of North Carolina-Chapel Hill, presented the results of research (+partners') on the timing of mitigation bank approval process and the costs associated with delays. This research compared a timetable of the regulatory approval process that was set forth in the 2008 'new rules' (/regulations on compensatory aquatic mitigation). An informal survey of timelines of Corps Districts has shown that many parts of the approval process took 100% - 300% longer than they were supposed to (ex - if a part of the process was supposed to take 30 days per regulations, it took 50 days). As an example, a 170-day lag in the approval process could cost a mitigation bank $1/acre/day loss of net present value, or a total of $90,000.

Mr. BenDor's suggestions for improvements included providing Corps Districts with feedback via 'gradesheets' that recorded timeframes as laid out in the regulations and actual time to complete parts of the approval process. Reason for this 'grading' would be to find out the good and bad processes happening in Districts and trying to replicate the good. Another suggestion made was to increase permitting fees to allow greater staffing, reduced processing time and therefore reduced costs to business. [Comment from moderator: a raise in fees for the Corps of Engineers requires an act of Congress.]

Lunchtime Plenary on Stacking

Lunchtime discussions were centered on stacking (see EM article on stacking) - what that means, what needs to be addressed, and what's in the future for this issue.

First up, Jessica Fox with the Electric Power Research Institute presented results on an EPRI+partner national survey on ecosystem credit stacking that was completed in early 2010, from 318 responses. This is the first public release of the results, with plans to publish the research in the summer of 2010.

Some of the results (as quickly jotted down - apologies for rough or incorrect figures):
- There is some consensus on the definition of stacking, with over 80% of the respondents agreeing to the following definition: "Establishing more than one credit type on one piece of property but not spatially overlapped". The second definition that 10% of respondents agreed with was "Establishing more than one credit type on spatially overlapping areas, ie on the same acre". No respondents thought that stacking meant establishing credits on publicly-owned property.
- Around a quarter to half of the respondents thought that credit stacking could have positive ecological vales over creating credits for one purpose/credit. Many respondents thought that the ecological effect of stacking 'depends on the credit stacking scenario' - roughly 40-50% of respondents. Around 4-12% of respondents thought that there would be a negative ecological effect of credit stacking.
- A great deal of policy makers (over 60%) said they planned to be involved in regulating credit stacking in the future.
- When asked how many examples there are in the country of credit stacking, the survey only found about a handful (following the consensus definition). One of the examples most cited was the Willamette Partnership.

Sally Collins followed the presentation of survey results with a discussion of the Office of Environmental Markets (OEM - see EM article on OEM for background). USDA is thinking about the farm/forest of the future, where they envision traditional ag/forestry products, along with certified goods (eg - FSC sustainable forest products), biofuels, and ecosystem credits.

The OEM office is focusing on:
- opportunities to advance/coordinate federal research/programs;
- create strategies to align incentives and leverage federal funding with private sector capital for national environmental protection/conservation; learn from inter-departmental pilot projects; and incorporate ecosystem values into federal decision processes.

Ms. Collin's office has frequently gotten the question 'What's the federal government policy on selling ecosystem credits off of land that's gotten federal subsidies?' and the quick answer is that for the following programs, the government does not hold the option of selling credits that may have been created on land from federal subsidies (eg - the landowner can sell): CRP - OK, EQIP - OK, WRP - OK. One philosophical shift she forsees is paying for environmental outcomes rather than payments for practices.