Friday, June 29, 2012

The First Wetland Bank

History lesson!  Settle back, kids.

Wetland banking did not, contrary to some current narratives, emerge out of the ferment of enthusiasm for markets in the 1980s, as some kind of think-tank product pushed by headquarters ideologues.  It had a very practical beginning, and cleaning my office yesterday I came across one of the founding documents of the field, so I thought I'd post it up here.  The instrument for the very first wetland bank to bear the name.  It's a great read, representing some outstanding work by the pioneers of the field -- and this copy (which was being discarded while I was at EPA) appears to have belonged to David Soileau himself, the FWS field biologist who was the primary author.  And ya gotta like the old skule pen sketch on the cover, right?  It has the aesthetic of a very earnest high school newspaper cartoon.

Following the 1979 oil shock there was a surge of interest from Texas oil firms in reopening the Louisiana oilfields.  They plowed into the bayou, buying up old operations and digging new channels for laying pipelines.  But they came up against something that no powerful resource industry had yet encountered: the permitting requirements of Section 404 of the Clean Water Act, established in 1972 and newly clarified in the 1977 amendments.

The New Orleans Corps District wasn't about to start denying permits to oil companies, and was inclined to call project-by-project compensation "impracticable" in a landscape composed almost entirely of wetlands.  So the Lafayette Office of the Fish and Wildlife Service got creative and from 1981-83 worked with one of the oil companies (Tenneco) to create a large amount of advanced compensation in anticipation of their impacts.  This made compensation "practicable" in the eyes of the Corps, and it was called a wetland bank -- the term had been used over the past decade (the earliest reference I can find is in a conference paper by LaRoe in 1974, in which he's essentially spitballing the idea), but they didn't really exist in the form we know them today.

The report is a really interesting read for those of us who've followed the industry.  First of all, even though the credits at the LaTerre bank were intended for Tenneco's own use, the instrument explicitly contemplates entrepreneurial banking, and in fact envisions an entire future sector:
The interagency group concluded that the selling or trading of credits by a mitigation banker would be a reasonable extension of the mitigation banking concept. ... Major land holding companies having mitigation credits in one region or State could trade with other companies having credits in other regions or States to facilitate permit issuance for activities of a company within an area where that company may not have an available supply of its 'own' credits. (p.16-17)
The authors took a cue on this from a federal/state conference on wetland policy in Baton Rouge in June of 1983, but this was the first instance of using the idea in practice.  The first credit sale to an outside party didn't occur until 1986, and we'd have to wait until 1994 to see the first sale of a credit at a wetland bank established entirely as an entrepreneurial venture.

Secondly, their crediting methodology is insanely complicated by today's standards.  It attempts to account for so many issues of ecological and geomorphic complexity that trying to use it truly makes your head spin. (See my thoughts on this trend here).  For example, since the entire wetland landscape of southern Louisiana was subsiding, the instrument defines the credits the Tenneco LaTerre bank in terms of the years of deferred subsidence.   FWS assumed, using a coastal marsh loss rate of 6.6%/year, that the LaTerre site would be open water in 77 years, and that the that the physical modifications made in constructing the bank (largely a matter of erecting berms and controlling water flow) would delay subsidence -- and thus preserve wetland habitat.
...a net annualized increase of 3,306 acres of fresh and intermediate marsh, aquatic bed, and scrub/shrub is expected over the 77-year project life under the [Future-With-Management] condition; this net increase represents a reduction in the average annual decline of fresh and intermediate marsh acreage, compared to the [Future-Without-Management] condition. (p.11)
That is, in delaying subsidence by controlling wave action, in 2059 there will be 3,306 more acres of wetland than there would have been without the bank.  It's a kind of an astounding accounting for geomorphic instability, and it's the kind of temporal nuance that rarely if ever enters into crediting these days.  One consequence of this is that the bank can only be used to compensate for sites that would naturally be open water by 2059, meaning that the bank becomes naturally obsolete as time goes on.

What's more, there are no Acres or Ecosystem Services at Tenneco LaTerre... their credits were sold in Average Annualized Habitat Units (AAHUs) using the good ol' Habitat Evaluation Protocols (HEPs).  The HEPs were used to establish baseline habitat condition for Year 1, and the assumption was that by Year 77, the site would have degraded back to that condition after the lift provided by the management actions.  For each project year (1 through 77), Habitat Value (measured with HEP) is multiplied by Habitat Area (acres).  The average of all 77 values is the AAHU, and to make matters more complicated, Tenneco had AAHUs in three different habitat types (wildlife, freshwater fishery and estuarine fishery).  So, if you like, the first wetland bank sold stacked credits.

Debiting at an impact site was rather charmingly assumed to work the same way: wetland loss rates through subsidence would be applied to both the direct and indirect (!!) impacts of the activity and the acreage of open water produced by 2059.  These would also be translated into AAHUs by HEP analysis, and debited from the LaTerre bank.  This kind of apples-for-apples talk -- the need to conduct assessment of impact sites that is as rigorous as that at the bank site -- has been around since the beginning... only back in 1983, the difficulty of doing so (and doing so in a temporal dimension!) was simply seen to be the cost of doing business.

The entire document is responding to FWS 1981 Mitigation Regulations, which is where the mitigation sequence really comes from (ok, it comes from the 1978 CEQ regs for NEPA, but FWS was the first to make it clear that the steps in mitigation are sequential).  FWS had written these to govern its commenting role over Section 404 permits and other regulated impacts. Notice who's not at the table?  Their name begins with "Environmental" and ends with "Agency."  EPA is nowhere to be found in this whole document -- not even in the signature block!  (Neither is the Corps, shockingly, although they did allow LaTerre bank credits to serve as compensation -- of the feds, only FWS and NMFS signed).  Until the late 1980s, its safe to say that FWS was the driving force in mitigation banking, a fact largely forgotten now.  EPA was busy self-destructing at the time: they had only just written environmental criteria for 404 permits (in 1980) and then turned around and attempted to nullify them (in 1983) just as their Administrator was found in contempt of Congess.  They were in no position to worry about wetland compensation.

So yeah.  Wetland banking didn't pop out of the forehead of a market-happy Zeus -- third-party sales were "a reasonable extension of the concept", but not at its core.  It was the solution to a very conventional command-and-control problem of getting big, wealthy, powerful permittees to comply with the CWA, in a situation where the agency tasked with providing an accepted and reliable answer to the question of "what should wetland mitigation look like?" was unable to do so.   So FWS had to invent an answer that worked in that place and time.  Some amazingly creative work by the FWS, and some credit probably goes to Michael Zagata as well, the negotiator for Tenneco Oil.  Zagata popped up later in the 1990s in New York as Gov. George Pataki's Secretary for Natural Resources, where he proposed privatizing the state parks and was promptly shown the door.  Gotta be a story there, but that's for another time.

Thursday, June 28, 2012

Obamacare and the Commerce Clause

Well, I was sort of right.  Who knew that Roberts would find his inner Kennedy and be the one to use the nexus taxing authority to fill a hole left by the Incredible Shrinking Commerce Clause?  And who knew that Kennedy would pull a Full Scalia?

Clear win for Obama aside, what's clear is that the Commerce Clause as a foundation for federal regulation is weaker today than it was yesterday.  And that matters for environmental law.

Wednesday, June 27, 2012

"Let's go read the Clean Air Act together, shall we?"

(Shorter DC Circuit on upholding EPA's carbon rules.)

It's always nice to see a undiluted decision upholding the procedural strengths of these wonders of environmental law -- built long ago by a now-lost people, we cannot even imagine how such things might be constructed now.

There is a line of heritage in these laws that forbids judicial balancing, saying that no human or social consideration can overcome the primacy of the environment, and the importance of preventing environmental damage.  That line is dying out -- it was written out of the Endangered Species Act, for example.  But it's nice to see it bolstered here: "Oh, you mean someone might go out of business because EPA is regulating carbon?  It might cause some complicated and expensive social adjustments?  Tough.  Danger means danger, no matter how inconvenient or expensive it is to recognize."
That EPA adjusted the statutory thresholds to accommodate regulation of greenhouse gases emitted by stationary sources may indicate that the CAA is a regulatory scheme less-than-perfectly tailored to dealing with greenhouse gases. But the Supreme Court has already held that EPA indeed wields the authority to regulate greenhouse gases under the CAA. See Massachusetts v. EPA. The plain language of § 202(a)(1) of that Act does not leave room for EPA to consider as part of the endangerment inquiry the stationary-source regulation triggered by an endangerment finding, even if the degree of regulation triggered might at a later stage be characterized as “absurd.”
Note also that the court accepts the EPA's standard of "very likely" that GHGs are responsible for the deleterious effects of global warming.  They do not require "certainty":
But the existence of some uncertainty does not, without more, warrant invalidation of an endangerment finding. If a statute is “precautionary in nature” and “designed to protect the public health,” and the relevant evidence is “difficult to come by, uncertain, or conflicting because it is on the frontiers of scientific knowledge,” EPA need not provide “rigorous step-by-step proof of cause and effect” to support an endangerment finding. Ethyl Corp. v. EPA, 541 F.2d 1, 28 (D.C. Cir. 1976). As we have stated before, “Awaiting certainty will often allow for only reactive, not preventive, regulation.” Id. at 25. ... Requiring that EPA find “certain” endangerment of public health or welfare before regulating greenhouse gases would effectively prevent EPA from doing the job Congress gave it in § 202(a)—utilizing emission standards to prevent reasonably anticipated endangerment from maturing into concrete harm.
Reaffirming the precautionary principle in environmental regulation is a BFD.

It's also kind of fun to see the court engage in a point-by-point explanation of why the Climategate emails are completely irrelevant to the EPA's rulemaking:
Only two of the errors they point out seem to be errors at all, and EPA relied on neither in making the Endangerment Finding. First, as State Petitioners assert, the IPCC misstated the percentage of the Netherlands that is below sea level, a statistic that was used for background information. However, the IPCC corrected the error, and EPA concluded that the error was “minor and had no impact,” and the Endangerment Finding did not refer to the statistic in any way. Second, the IPCC acknowledged misstating the rate at which Himalayan glaciers are receding. EPA also did not rely on that projection in the Endangerment Finding.
On the other hand, I can understand why the anti-carbon folks were upset.  It's almost as if someone had passed legislation preventing us from having accurate information on sea-level changes!  Oh, wait.

Monday, June 25, 2012

Where's that Jursdictional Guidance?

The NY Times actually noticed that it's taking rather a long time. This one is probably hung up in Corps/EPA disagreements about the practicability of various potential measures for determining jurisdiction.

EPA, being the stewards of the definition of "Waters of the United States," has an enormous stake here -- and since the definition of WOTUS applies across the entire range of EPA water programs, not just the Section 404 program, EPA's sense of ownership is broader and deeper than the Corps', and changes in jurisdiction are more consequential for the agency's overall reach.  Corps Regulatory, by comparison, is one small office within an organization that is still miniscule -- both in personnel and in budget -- relative to the Department of Defense in which it sits.

On the other hand, on a practical day-to-day basis it is the Corps who goes out into the field every day and makes the 404 permit program work.  By the numbers they have probably 10 times the field staff committed to running 404 that EPA does, in 38 Districts (as opposed to EPA's 10 regional offices).  The daily grind of issuing permits and interfacing with the regulated community falls almost entirely on the Corps' shoulders.  Although EPA has the ability to comment on whether the Corps has correctly applied the environmental criteria for permit issuance at 40 CFR 230.10(a-d), they do not have staff time available to comment on all permits.  And at any rate the majority of permits are Nationwides, which other agencies do not comment on (except when the suite of NWP categories are approved every five years).

Last June's draft Jurisdictional Guidance gets high marks from me for trying hard to make the Kennedy concurrence make sense in the real world, but it does so by approaching the concept of "nexus" with a good deal of nuance and ecological sophistication.  This could all translate into a lot of hard work -- very hard work -- on the part of the people who delineate wetlands and review the delineation reports for the purposes of establishing jurisdiction.  My guess is that doing a full "Kennedy Waters" analysis for each delineation would require far, far more staff time than the Corps has.  It could result in less overall protection as staff time gets concentrated on a few projects at the expense of others that get less scrutiny than they deserve.

So, ever thus: the Corps is always trying to give its field staff space to do their jobs well without being overwhelmed by impracticable directives from on high, while EPA is always trying to keep the integrity of WOTUS from being further eroded.  Both worthy goals.

Tuesday, June 5, 2012

How credit stacking REALLY works

These can't be considered LOL404s, strictly speaking, although the second might be a LOL402. Thanks for these, uh, submissions.  No corner of the world is immune from mockery by the unbeatable combination of cats and Arial Black.

[images by Eric Nost and Patrick Bigger]

Blue Carbon Standards: Carbon from Wetlands

Got an opinion on how to construct a crediting standard for carbon in wetlands?  Sure ya do.

"Blue carbon" is shorthand for carbon sequestered in water bodies (including wetlands: coastal marshes, hardwood swamps, mangrove forests, kettleholes, you name it) -- wetland restoration can therefore create carbon credits if a standard is agreed upon.  Verified Carbon Standard's draft protocol is open for comments until June 23, so get on over there and tell them what a blue carbon commodity should look like.  Jokes about "Blue Harvest" will probably be ignored.

And while you're at it, check out this video by Stanford's David Moreno Mateos on whether wetlands can be restored to sequester carbon.  He's asking for your help!

IBPES is now a thing

I've missed a few things during the past few months, so there is a light rain of newsy posts such as this: the Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES) was established on April 21 by the United Nations Environment Program (UNEP).  It is equivalent to the Intergovernmental Panel on Climate Change (IPCC), and can be found here.

Expect this to be a major global coordinating forum for biodiversity banking, REDD, PES, and all kinds of other ecosystem service development and conservation policy initiatives, churning out assessments and protocols and reports.

Monday, June 4, 2012

ES blogosphere update

If you're interested in environmental markets, you should probably be reading Robert Stavins' blog.  (h/t Patrick Bigger). But then also go read Fabien Quetier's blog on ecosystem services.

If it's Florida and it's wetlands, there will be drama.

Nation's best wetlands journalist (Craig Pittman), still on the beat in Florida.  The state wetlands regulatory lead is suspended for failing to issue a permit for a wetland bank. This is a real shame -- Connie Bersok is a great wetlands advocate.  But after 150 years of Florida making money off of selling wet land that was promised to be dry, isn't it rich to see someone trying to make money off of selling dry land that is promised to be wet?

Check out Craig's excellent book on Florida wetland history and policy here.

UPDATE:  A Florida reader sent in the following links to news articles on the bank, and notes that Connie Bersok has been reinstated.  
 Public documents related to the Highlands Ranch bank draft proposal can be accessed here.

As someone who's been a mitigation regulator, I have to say that almost without exception, wetland bankers want strong and competent regulators at the helm, regulators who can police the industry and crack down on bad actors (while being held to rigorous action timelines themselves).  Without that, faith in their product deteriorates, and their production process becomes unpredictable -- both fatal to any going concern.  Bankers are much more aware of this than most private industries.  Donnybrooks like this help no one but bad-faith permittees.

Also, as long as we're in Florida, I might as well flog Michael Grunwald's book for understanding the deep background.