Science and Law Conference 2015

SAN RAFAEL • SAN DIEGO • DENVER • FORT BRAGG www.wra-ca.com (415) 454-8868 1

(415) 454-8868SAN RAFAEL SAN DIEGO DENVER FORT BRAGG

County of MarinPreliminary Engineering, Environmental and Design Services for

Mill Valley – SausalitoPath Preservation STPL-5927(107)

(415) 454-8868SAN RAFAEL SAN DIEGO FORT BRAGG DENVER

Science and Law of Water in California

Conservation and Mitigation Banking: Challenges for the Future

Michael Josselyn, PhD, PWS

http://www.wra-ca.com/

http://bit.ly/16cfWVU



Topics to be covered

Mitigation and Conservation Banking• What is a mitigation/conservation bank?• What are the trends in mitigation/conservation

banking? • What are some of the issues associated with

banking that attorneys need to know?• What are the future issues related to climate

change and water that require legal attention?




Bottom LineMitigation Banking is the preferred method to achieve offsets for habitat and species impacts but will face challenges from climate change that will affect their long-term success. Changes in their legal status will be needed to address these issues.




What is a mitigation bank?




Where can you sell credits




Who are the players?

Bank Sponsor• Landowner• Consultant team• Legal counsel• Bank operator• Conservation

Easement Holder

Agencies• Corps of Engineers• Regional Water

Quality Control Board

• DFW• USFWS/NMFS

Purchaser• Developer or

Government Agency needing credits




Why use mitigation banks?

Mitigation Credits versus Permittee-Responsible Mitigation:

• Expedited process for Purchaser• Favored in mitigation hierarchy by Agencies• Lower mitigation ratio required by Agencies• Specialization of Bank Sponsor favored by Agencies• Liability and Performance Standards Transferred

from Purchaser to Bank Sponsor• Less expensive to Purchaser in most cases when all

factors considered




Wetland vs Conservation Bank




Where are banks? • California and

Florida lead the way in # banks

• Other states in southeast have many wetland banks

• Fewer in Plain states




Who is a “typical” banker

An entity that is comfortable with:

1. High Cost of Entitlement ($750K - $1M Equity)

2. Construction Costs / Financial Securities

3. High Regulatory and Market Risk4. Long Timeframe (2-4 year

Entitlement period / 10-15 year credits sales)

No typical banker, but usually firms with large landholdings (e.g. forest product or real estate) or specialized companies and investment groups.

Discourage “mom and pops”




What roles do legal counsel playLegal Guidance and Review • Bank Enabling Instrument (BEI)

– Indemnification – Consistency

• Conservation Easement– Prohibited uses

• Endowment Agreement– Revisions to Template– Structure and timing of payments in accordance with BEI

• Property Assessment and Warranty (PAW)• Agency Coordination

– Watch out for client’s interests– Push when pushing is warranted




Easements and EndowmentsEasement in Perpetuity• Is not revocable• Conditions are permanent• Financing proforma must

deal with uncertainty• Returns must include

inflation estimate• Usual return for activities at

3.5%• Third party holder stability• Expectation that habitats

will always be the same

Annual Maintenance = $50,000/yr

Endowment = $1,428,600




Practice Issue: Lawsuits related to banking• Pioneer Reserve LLC: Bank agreement is a

binding contract, not merely a regulatory approval subject to revocation.

• Walther v US: Corps directed purchasers to another mitigation bank outside Service Area

• South Carolina Coastal League v Corps: Mitigation bank will harm other adjoining wetlands

• Conservation Resources: Consultant failed to perform in design of wetland areas that were denied credit by Corps

• Swallow Tail : Agencies favoring non-profit foundation mitigation bank for stream credits




Banking success = Stability

Climate change can lead to instability• Long term drought can reduce wetland

acreage• Stream flow reduction affects riparian

habitat quality• Climate effects on species distribution • Invasive species may alter habitat

conditions• Insect pests can affect tree survival

necessary for habitat or carbon sequestration

• Sea level rise will alter tidal marsh distribution




Habitat design solutions

Sea-level rise • Create suitable

habitat for current needs

• Build in areas that will be suitable for tidal marsh in future

• Credits allowed to be “floating”




Habitat design solutions

Vernal pooland drought• Careful assessment of water budgets• Build features that may be seasonal wetlands under

current conditions; but vernal pools under drought and allow credit change.




Species issues more difficult

Habitat shifts • Temperature

and rainfall• Fire

frequency• Snow levels• Developmen

t




Shifting easements

• Larger scale holdings within conservation easements to allow for species shifts

• Allowing for more adaptive management within conservation holdings

• Conservation easements may be revocable if purpose is impossible due to climate change– Atlantic & North Carolina Railroad Co. v. Way

• Conservation land leasing and allowance for shifting easements– Usually reserved for large land holdings or government agencies




Tradable Easement for Vulnerable Conservation Objectives (TEVCO)

1.Securing an easement over a new property that is better property for the conservation objective

2.Securing an updated appraisal of the value of the restrictions on the property on which easement will be removed

3.Securing from the owner of the original property an agreement to sell back the restrictions for an amount for the updated appraised value of the restrictions

4.Carrying out a simultaneous closing in which the restrictions are released from original easement including provisions in the successor easement that are consistent with federal tax regulation

5.Placing any excess funds recovered in a restricted account to be expended solely on the acquisition of land or interests in land that contributes to the primary conservation objectives

http://labs.russell.wisc.edu/rissman/files/2013/10/Weeks-tradeable-CEs-vulnerable-goals-Duke-LCP.pdf




Practice tips: Conservation Easements

• Draft goals broadly to allow for ecosystem goals

• Include multiple purposes

• Include amendment provisions

• Termination and release provisions OR Climate change cannot be used to terminate agreement

• Allow adaptive management




Thank you for listening

WRA, Inc.www.wra-ca.com

Mitigation and Conservation Solutions

www.mitigationandconservation.com




http://www.mitigationandconservation.com/

http://www.mitigationandconservation.com/


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Science and Law Conference 2015

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