New West Unfiltered

Mitigation Banking:  Restoring Habitat at a Profit

By John Andrulis, Unfiltered 4-12-06

In Montana's Blackfoot valley, a new approach to restoring streams and wetlands is gaining ground. It's been dubbed "for-profit" or "incentive-based" conservation. The program, overseen by the Army Corps or Engineers, is called "mitigation banking."

Using red, white and blue capitalistic drive as incentive, the public-private partnership to restore habitat is catching on quickly in Western states. But whether it is the golden egg for stalled, cash-strapped conservation measures, still remains to be seen.

To ensure no net-loss of wetlands, the Army Corps must first approve a development project before it can enter the mitigation banking process.

"It's not a blank check that says go ahead and impact the area," says Karen Lawrence from the Corps's regional office in Omaha, Nebraska. "Buying conservation credits through a mitigation bank does not allow developers to forego the regulatory process that minimizes environmental impacts."

The basic formula is this: through private investment and public grant money, damaged wetland and stream habit is financed and restored. The Army Corps then assesses the value of the improvements ("ecological lift" in Corps jargon) and awards "credits" that can be sold to developers in the same region or "service area."

In October, Oxbow Land Management, a Helena-based company, received approval from the Corps to begin selling credits for the first mitigation "streambank" in the northern Rockies.

The streambank is located on the 1,920-acre Nevada Spring Creek Ranch, just north of Helmville in the Blackfoot valley. Oxbow purchased the land through a bridge agreement with the Nature Conservancy in 2002.

Oxbow spawned as a partnership between Paul Roos and John Kowalski, long-time Montana fishing and hunting outfitters, and Boston-based venture capitalist Fred Danforth.

Born-and-raised in Lincoln, Roos has guided fly fisherman down the Blackfoot for more than 30 years. Roos joined forces with Kowalski, a native of Roundup, to create Paul Roos Outfitters. They met Danforth when he was a client on one of their fishing trips.

"The river has a lot to say about the health of the valley," says Roos. "By the early 80s, the river was in great decline. In 1985, I guided one day all summer because the fishing was so poor." But as the value of Montana's recreation industry soared, the state began to seriously invest in cleaning up its wildlife habitat.

In addition to showing clients their favorite fishing holes, Roos and Kowalski often guided conservation-minded buyers to real estate parcels with exceptional natural resources.

Don Peters, who led the Blackfoot River Restoration Project for Montana's Department of Fish, Wildlife and Parks, and mitigation banking expert David Patrick also joined Oxbow, creating the skill set to start the banking process at Nevada Spring Creek.

With a bank under its belt, Oxbow is now ready to market its mitigation banking expertise. Oxbow's Web site (oxbowland.com) lists some of its services offered as: developing recreational-use plans, assessing water rights and outlining tax incentives.

To date, Oxbow has invested more than $1 million of private funds into the restoration of two miles of Nevada Spring Creek and 264 acres of surrounding wetlands. For its troubles, the Corps awarded Oxbow 20,000 stream credits for immediate sale, says Patrick, who expects another 40,000 stream credits to be approved in the near future.

What is a mitigation banking credit worth? Like a good banker, Patrick says it's difficult to tell without an established mitigation banking market in the area. But based on the credits that are selling on the East Coast, as well as Montana land prices, Patrick estimated the worth of the stream credits at $100 - $200, and between $25,000 and $75,000 per wetland credit.

The 264 acres of wetlands will yield about 185 wetland credits, Patrick says, whereas 11,000 feet of restored stream (with a 150-foot wide riparian corridor on each side) translated into 60,000 credits. "It's a complex formula," he admits.

Throughout the West, ranching, farming, mining and timber harvesting have degraded significant portions of once pristine land.

"Landscape-scale restoration is hard to accomplish without extra economic inputs," says Patrick, who believes that once streams and wetlands have been fully restored, a ranch owner can generate additional income through hunting access programs, recreational user-fees and protecting fish habitat (in-stream flow programs).

In 2004, fishing, hunting and wildlife viewing generated $1.1 billion in revenue for Montana- a testament to the buying power of the West's New Economy. Suzanne Miller, the lead consultant for a study on Montana's growing tourist-based economy, said demographers sometimes refer to the Rockies as the "Third Coast."

"What makes Montana unique along that Third Coast is our wildlands and wildlife. Those two are really Montana's brand," says Miller. "For years conservation has been seen as an impediment to economic development, but in fact what we are finding is that conservation is a spur to economic development."

Restored ecosystems could also qualify for conservation easements, says Patrick, which would reduce a rancher's tax burdens, without eliminating all aspects of cattle grazing, hay production or farming on the property.

Oxbow is currently looking at six more potential mitigation-banking sites in Montana. Following Montana's booming growth tends, Patricks says Oxbow is assessing acreage with superb natural resources in rapid growth areas such as Flathead and Gallatin counties.

Although Oxbow has yet to be contacted by any potential buyers, word is just getting out, says Patrick.

There are currently no other privately funded restoration banks in the Northern Rockies (Idaho and Wyoming) or the Dakotas. But that distinction may be short lived as a mitigation bank is in the works along the Priest River, near Sandpoint, Idaho, says Lawrence.

"The most important things about conservation incentive programs is the ability to create sustainability in a rural landscape," adds Patrick, who believes mitigation banking allows "conservation to be done at a quicker pace and on a larger scale."

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