Examples of Forward Thinking in Water and Land Conservation
Part 3 of 3 – By Tom Roberts
The following article is the third in a three part series where Open Fences is highlighting innovative land and water conservation practices by landowners throughout the United States. In the first article, we introduced a rice farmer in Texas who has conserved 40% of his water usage and increased yields with a technique called precision grading on his fields. In the second article, we introduced Beartooth Capital, an investment group out of Montana that acquires degraded ranch properties and conducts ecological enhancements to increase the value of the investments.
For this third article, we are going to introduce a land management and business tool called environmental banking as a way for property owners to generate substantial income from their land while simultaneously improving the health of the environment.
Environmental banking can basically be described as the creation of a natural resource commodity that is then sold to a customer, usually a developer or polluter who is required to pay compensation for the impacts associated with their activities.
For example, if a developer had plans to build houses or roads on a parcel of land that included wetlands and these wetlands were impacted from the construction activities, then by regulations set forth by the US Environmental Protection Agency through the Clean Water Act, the developer would be required to compensate for these wetland losses. The US Army Corps of Engineers would have jurisdiction of the process and would be the agency responsible to ensure the compensatory actions were met.
To further the example, say this developer impacted one acre of wetlands, then they would be required to mitigate for at least one acre of newly built wetlands, but oftentimes the Army Corps of Engineers will set the ratio at 2 acres to 1 or even 3 to 1. This process can become very expensive as they will have to pay for the design, construction, monitoring and maintenance of the mitigation wetlands. Plus, they are not off the hook until the Army Corps of Engineers certifies them as successful wetlands five years after construction is completed. This can be a long and expensive process, especially if their mitigation efforts are unsuccessful because they will have to start over.
However, there is another better option for this developer, which would be to purchase credits from an existing wetland mitigation bank instead of going through the process of doing it themselves. This article isn’t to show how developers and polluters can get out of having to mitigate their actions, but rather to show how ranch owners can provide an environmental benefit and take advantage of a growing market.
A wetland mitigation bank is where a landowner has built wetlands on their property for the purpose of selling the credits to people like this developer. The owners of the bank must go through a process to have the wetlands certified to ensure they function as a healthy ecosystem, but once they do, they are able to sell these credits on the market to customers within their area, usually based on the watershed where the wetlands are located. This is almost always substantially more cost effective for the developer and provides a much healthier and functional result on the ecosystem scale.
This isn’t just a better option for the developer because on the other side of the deal is that landowner who understood that they could create a commodity that could be sold in a real market that is producing substantial revenue streams. Some estimates have shown that the average cost to construct a wetland mitigation bank could be in the range of $10,000 to $30,000 per acre and would include the design, planning, and construction costs. However, these estimates also show that the average cost of the sale of the credits can range between $60,000 to $100,000 per acre depending on the supply and demand forces as well as the intensity of development within a certain area.
Some of the resources required for the wetland bank would, obviously, be to have land, appropriate soils, a good water source and the rights to use this water in this manner. If the resources were available, then it could make a lot of sense to explore the option of creating an environmental bank as another source for potentially substantial income and to create a real and lasting benefit for the environment. For ranchers and farmers who already have the natural resources available, but not the financial resources, they could explore the option of having an investor provide the capital costs to get the project going and share in profits from the sales.
Although the example that we discussed highlighted a wetland mitigation bank, there are many other types of environmental banking opportunities that a landowner could potentially initiate. These banks are becoming a major tool for the entrepreneurial land owner and investor. As with any business decision and investment, they will want to explore the potential of the commodity market they would be entering and identify the opportunities and constraints on their land.
Some of the other environmental banks that have been initiated are as follows:
• Wetland mitigation banks
• Carbon banks
• Energy banks
• Endangered species habitat banks
• Land development banks
• Water and water quality banks
To learn more about environmental banking and to see if developing a bank would make sense on your ranch property, please contact Tom Roberts, president of Western Lands – Ranch Restoration Services at 720-936-9973 and also visit their website at www.western-lands.com
Western Lands – Ranch Restoration Services is a company with offices in Parker, Colorado and Bozeman, MT. We provide design, project management, and owner’s rep services for the owners of legacy ranch properties throughout the United States.
Search for ranches for sale that would be feasible wetland resource banks.