Sunday, June 10, 2012

Risky business: pre-compliance mitigation in habitat and water quality

Imagine you are a landowner in, say, southwestern Oregon. Turns out that on your land lives the rare red-bearded Jackson County song lark (a bird that I made up. Threatened species always have the best names, don't they? Some folk may be partial to charismatic megafauna, but I'm a fan of what I guess you could call eccentric microspecies.) The bird's not yet regulated under the US Endangered Species Act - it's just a candidate - but it might be listed soon if the WildEarth Guardians' lawsuit goes through. You're inclined to protect it anyway and guess what, USFWS is going to let you restore more of its habitat and then sell credits to developers elsewhere who are destroying its habitat.

The basic idea behind the concept of pre-compliance mitigation is to provide land managers with incentives to do conservation and to encourage developers (a name I use generically for anyone making a habitat impact) to fund that work. In a PowerPoint, Alice Appleton from the new-ish USDA Office of Environmental Markets names ESA pre-compliance trading as one of 4 or 5 conservation markets already existing in the US (others being Clean Water Act 404 wetland/stream banking, TMDL water quality trading, listed species banking, and carbon offsets). In the presentation Appleton suggests ecosystem markets like ESA banking can be useful for:
  • Compensating landowners for the ecosystem services they provide on their private lands
  • Investing private funds in natural infrastructure
  • Reducing societal costs of regulatory compliance
  • Encouraging innovation
  • Improving the effectiveness of practices 
  • …bringing real, verifiable conservation to scale
Interest in pre-compliance mitigation seems to be growing as agencies figure out ways of accounting for what they can't legally account for (e.g. non-point source water pollution or unlisted species; also voluntary carbon offsets may be a distinct case of pre-compliance mitigation, or maybe they were pre-2010 when federal cap and trade schemes were still on the table) and as they try to, as OEM notes, reduce the costs of regulation. As far as I can tell there are two different pre-compliance programs actually in the works: ESA pre-compliance, like the red-bearded Jackson County song lark scenario, and water quality. How pre-compliance mitigation looks differs between the two, but the concept of "regulatory relief" is at the heart of both.

The idea of creating or restoring habitat for endangered species, as one might do with wetlands for wetland mitigation banks, has been around for a while. However, on the ground projects seem to exist only in California, and just recently in Oregon. A lot, but certainly not all, of these seem to be for fish, especially salmon (see especially Salmon Safe and the Willamette Partnership's "tri-fecta" of incentives). Becca Madsen notes that ESA banking is likely to be a top issue for mitigators in 2012 because of Interior's agreement, in the face of lawsuits like the one mentioned above, to list over 200 species - what the New York Times calls the biggest change in ESA enforcement since the early 90s (spotted owl times). Pre-compliance could come out of that court settlement in a large way as developers realize the costs of having to deal with the new listings.

The thought of providing land managers with relief from water quality (nutrients, e.g.) regulation has been around since at least 2005-6, but for all I know, longer. Last summer USDA and EPA drafted a "certainty framework" that outlines what pre-compliance conservation might look like for water quality standards. It's not clear what the main driver would be, though one could guess it would be TMDLs. As with most water quality programs, it's up to the states to figure out specifics. and there are two state-level programs that I've heard of: Minnesota's and Michigan's. Michigan's is older, pre-dating the framework. However, the sense I get of the Michigan program is that it is less about reducing farmers' liabilities from water quality nutrient/temperature/sediment regs like a TMDL as much as it: 1) reduces liabilities from other rules on for instance pesticide handling; 2) is basically a good practices certification program like GAP. Apparently you can also buy a t-shirt with the program's logo. Minnesota's seems to be more of a relief program where farmers get "immunity" from the state's water quality standards by performing certain conservation activities. These activities are not yet set, but technical advisory committees will be forming them soon.

But here's a true point: what's ultimately fascinating about pre-compliance banking is that at the same time it represents some form of "regulatory relief" for develoers, and thus a supposed withdrawal of government from the business of mandating conservation (as it "mandated" firm-specific tech controls on water quality before allowing water quality trading), pre-compliance banking is also a re-assertion of agency involvement. Of course anyone familiar with mitigation in the US knows that it's all about agencies' regulatory drivers. Yet in this case, the regulatory driver doesn't yet exist. The temporal dimension here is key: a new kind of ecosystem governance is emerging that is done on the basis of what might happen in the future. And this uncertainty, I think, is what makes pre-compliance mitigation tricky, for three reasons. First, it involves agency staff in determining what they think would count as mitigation activity and then enforcing the verification of those activities and outcomes. Second, listing a species is a long and unsure process rife with lawsuits and lobbying. Related, and third - as some agency officials argue, the goal of pre-compliance mitigation is to allow trading in credits in habitat for potentially listed species, so that those species ultimately don't have to be listed. But as a developer, does it pay to engage in voluntarily conserving a species that might not actually be listed, especially if other firms buy credits and build up the species population? We might ask the same for farmers' efforts to reduce runoff - won't others improve water quality enough? In the end the question is: what's more risky or worth the time - lobbying to prevent a listing, letting others choose to buy credits, or buying a credit/doing mitigation yourself?

These are the sort of dilemmas that developers, land managers, and agencies will have to answer going forward.


Note: This pre-compliance conservation is different, though related, from the similarly named conservation compliance. Conservation compliance is the requirement that farmers take certain measures to prevent soil erosion, protect habitat, save wetlands, etc. in exchange for receiving government subsidies. It's become a cornerstone of debate in this year's Farm Bill - direct subsidies to farms are likely on their way out, replaced by subsidizing crop insurance, but conservation compliance hasn't been attached to insurance subsidies yet. In both pre-compliance conservation and conservation compliance, however, the basic idea is to encourage voluntary conservation. Of course there is always some form of coercion lurking in the background (we'll regulate it soon anyway/do it or you won't get your money...)

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