What we were watching for at the NMBEC 2013 – and what we saw.

The 2014 Date for the National Mitigation Banking Association (NMBA) Annual Conference will soon be announced. This comes hot of the heals of the release of proceedings from the 2013 Conference in New Orleans, made available for the conference attendees – for those who wanted to revise slides in more detail, or those who want to listen in to concurrent sessions and plenary talks they might have missed.

But for those who weren’t there and without on-line access, Ecosystem Marketplace provided tweets, blogs and video posts to cover highlights and key items for discussion.

And to start out we posted five key questions to look out for on May 6th in the conference lead-up. Now the proceedings are out, lets take a look at those again and see what came up in New Orleans.

Mental Acrobatics with Candidate Species… or disappearing act?

Conspicuous only by absence: if you’d come to the conference looking for ground-breaking candidate banking news and the latest emerging market here, I suspect you left a little disappointed. Yes, last years’  Advanced Notice of Proposed Rulemaking (ANPR) was mentioned in a plenary or forum, but primarily to recognise that comments were received and interest was hearty. The Fish and Wildlife Service did made it clear that it was not bound to present any formal result from this exercise, and it appears even still they are weighing the results and the next stages.

In other species news we did hear mention from Mr. Mike Oetker , recently appointed Deputy Director of the FWS southeast Region at the opening Plenary, about the South-East’s Conservation Strategy for At Risk Species. At risk species are those coming up for listing decisions in the next 5 years. That’s 375-plus species and this is a huge workload for the agencies. Trying to get out ahead of this and prevent listings through conservation is part of the Candidate Conservation conversation so this Strategy falls into this topic. Similar to last years Landscape Conservation Cooperatives’ pioneering of ecosystem not species-by-species approach, which he also mentioned, this At Risk Strategy is currently focused on plenty of cooperation between state and federal agencies, energy and forestry companies. Credit Trading is hoped to contribute to this effort, but appears yet to have industry Market Impact.

So what might those in Conservation Banking have taken away from New Orleans this year? We saw a new ‘Advanced’ Session in Conservation Banking, and while the presentations were informative and relevant, they presented examples and information a little too familiar to many Industry veterans. Perhaps a reminder that Conservation Banking is maturing (at least at a national level) in a different manner to the more-established Mitigation Banking. Perhaps if sequestration has ended by next year, we’ll see a return of more Fish and Wildlife Service regulators – and make more advanced topics such as General Conservation Planning, Credit Stacking, and Candidate Species, possible.

For other Candidate Species updates we’d looked to Mr. Craig Denisoff’s presentation “Alternative Habitat Credit Trading Systems: Friend or Foe?”, with alternative credit trading systems being one approach to Candidate Species Banking.

Sadly, Craig didn’t have the information he wanted for his presentation. The FWSs proposal to create a special rule under authority of section 4(d) of the Endangered Species Act of 1973, for the lesser prairie chicken only came out on the Monday the 6th of May leaving little time for this to impact the NMBA Conference.

Nevertheless we posted an excellent video blog with Craig, yet he lamented that the progress he’d planned for his presentation over 6 months ago, had simply not been made. It’s great to hear that all parties are taking the time to secure expert consultation and due consideration but there are many keen to see what the outcomes will be – species continue to decline, and projects with impact continue to be proposed.

A personal highlight of mine – taking to Will McDow, Senior Program Manager for the Environmental Defence Fund (EDF) in Raleigh, NC, and Timothy Male Vice President for Conservation Policy and Science at Defenders of Wildlife in Washington DC. Non-Profits and Mitigation Bankers haven’t always seen eye to eye, but Will and Timothy’s groups are doing some great work with the NMBA and Mitigation Banking Experts, such as Craig Denisoff and Wayne White. To hear them so excited about this partnership means great things for finding solutions to Candidate Species conservation. It’s quite a breakthrough in my eyes. 

 In the (Gulf Coast) Neighbourhood… there’s a lot of work – and a lot of enthusiasm – to be found.

Being in New Orleans was a great opportunity to focus on the massive wetlands restoration needs of the Gulf Coast Area and the conference opened with a focus on this area. The BP oil spill and devastating hurricanes such as Katrina may be many years ago now, but the wheels of progress have turned and it seems that by 2013, eyes are looking towards implementing the restoration and recovery so needed.

John Edinger – EPA Liaison to the USACE in New Orleans District –humorously took the movement to issue some USACE Policy – let’s use a 4:1 Mitigation Ratio, and only use banks. He’s clearly in the right crowd. But on a serious note, he tells us the region is “back in business”: they’re moving into the restoration phase – so what’s the role for the banker?

It was a poignant juxtaposition to open the Morning Plenary with: the Gulf’s oil and gas power the nation, it’s seafood feeds the nation, and it has around 80% of the nations wetland loss. Did you know that over 19000 square miles of coastline – wetlands, estuaries, barrier islands, have been lost over the last 80 years? John compared this to roughly the size of the State of Delaware. He’d supplied an appropriate platform to tell us Louisiana is in a Coastal Crisis.

Yet with only 16 square miles lost to Regulated impacts per year it is clear banking isn’t the primary solution. On the up side, The Coastal Plan (of 2012) is a watershed plan, so we need to have banks working in cooperation with this plan, and to incentivise banks that work within this plan to support it. Could bankers get credit for working within this plan?  Or should be take all mitigation money and put it into large, public projects? The later idea is of course less popular here…

In general – ‘Offer us your assistance, your ideas’. It may seem like a quiet move, but this kind of willing collaboration is an important launch pad for getting good things happening in the future.

So it seems there are two reasons for Mitigation Bankers to be excited in the Gulf Coast – with millions of miles of roads and bridges to be worked on, likely needing plenty of mitigation, this could drive demand for mitigation banks. Speaking of mitigation money, John mentioned that there is also a large fund sitting there from work on the levee building after Katrina – and bankers want to see where that goes, too.

Bringing in the Bacon… or taking the bacon to the people?

There seemed to be shift in focus this year; seemingly the biggest strides are not lying in advances in investment tools as they have been previously. Economic cycles aside, this years’ shift might reflect how investment mechanisms have become well oiled by practice, or perhaps that early bankers with ‘round two’ projects established feel confident they have investment strategy that works.

Shifting focus to sales and marketing means shifting towards finding additional points of sale for mitigation credits and expand the ways mitigation credits might be used to address environmental loss and compensation more broadly. For several years the NMBA has been interested in this, for example potential for credit use within NRDA programs and Water Quality programs. Outside regulatory programs, there has also long been interest in credits interacting with carbon programs. Each year we see more of such interests creeping in, and this year Sarah Mack presented on American Carbon Registry (ACR)’s new methodology and potential for Carbon Credits and Wetland Banking, as Genevieve Bennett covered.

The shift heralds a slightly new perspective on marketing as well. There were many at the conference who spoke about the need to communicate the benefits and opportunities of mitigation banking to the wider public and broader groups – departments, regulators, and other industrial sectors – who might be interested in the benefits mitigation banking can offer. Given the regulatory drivers and legislation it’s natural that mitigation banking has been a somewhat niche sector previously, but there’s a sense now that there is sufficient experience and evidence within the industry to look outwards with more confidence.

This was reflected in Adam Davis’ presentation, where he placed mitigation banking investments clearly in the SRI sphere – a way of communicating mitigation banking in more ‘mainstream’ terms, perhaps. SRI isn’t new, but maybe putting Mitigation Banking squarely in that frame, is. New Buzz Word: Alternative Assets with SRI filters – people are investing in projects that provide benefit, not just avoid certain ethically-questionable elements of some traditional investment products. Over half of these are in property and real-estate, with US$1.7 Billion of this SRI investing in Sustainable Forestry/Conservation, across 28 funds. So how about an ecosystem services investment sector? As Mitigation Banking matures, what kind of investment sector should we be in? Which partners would we want?

The most interesting item in finance this year for me?

Ben Guillion, Director of Mitigation Banking and Environmental Finance at WRA, Inc presented an excellent workshop explaining the more technical sides of financing and investing in Mitigation Banks. For three hours Ben expertly walked participants through some of the finer mechanisms of subjects such as due diligence, pro formas, and investment models in detail not previously described at the National Conference. The audience appeared to be part regulator, part expert banker, and part curious novice such as myself. It may not be the level of detail might not be directly applicable to all market participants.

But that these specialised technical skills have reached a point to be taught and learnt in a workshop is interesting to the whole industry. And it’s a great step for transparency. With more people equipped to understand and work with the complex financial mechanisms and techniques of Mitigation Banking there will be more people who can benefit from the information and data involved. Transparency is about being able to see the terrain, and workshops like Ben’s are important map-reading skills.

Clear As…. Statistics?

But transparency wasn’t only seen in finance. Many of you will have seen the brilliantly received presentation by Katherine Birnie of EIP and her work with ORMS and RIBITS data to illustrate more clearly how impacts and mitigation are occurring across the nation, how these fit within wider development permitting, and how it’s changing over the years. There are some fascinating take-home messages in our review of here presentation, and more detail in a blog-review comming soon on Mis J P @ WordPress.

The material she presented in itself was fascinating and really opened up permitting and mitigation in a newly transparent way. But it also set a stage for future work in this vein. It’s presented a methodology to apply, and set a bar of sorts, to how data could and should be used in the future.

There is certainly huge appetite for her work, and great enthusiasm for what will possible in the future for better data on mitigation banking. As Mr. Urban of EIP put it “we have now defined the universe”. And it’s the way this data can now be understood, shared and communicated means we can share this view with the transparency we’re looking for.  It’s a moving target though, and transparency will continue to be a focus; the goal is not achievement, it’s maintenance.

You still knew you were at the NMBA Conference when …

Where previous years 2008 Rule Enforcement has focused on the preference for banks, this year was the year for equivalency and consistency.  Equivalency in the standards required or enforced between the various types of mitigation; between In Lieu Fee, Permittee-Responsible and Mitigation Banking. And consistency in the way the 2008 Rule is applied and enforced across districts. Consistency is important to ensure that each area is achieving the environmental outcomes desired, and veering too far away from the 2008 Rule’s ideals risks some less-than-desirable outcomes. But a degree of variation between districts is to be expected – partly due to the different environments across geographic regions, and partly due to the degree of institutional autonomy provided to Corps. Districts.

Actually, Katherine Birinie’s data discussed above looks to be a key launching pad for looking in a more targeted way at when and where the 2008 Rule might not have been adhered to, and why. Transparency and consistency go hand in hand when talking about enforcement, so it’s no surprise these topic continue their perennial presence at the Conference.

In Conservation Banking the call is still out for an upgrade of the current Guidance to Regulations more in line with the strength of the 2008 Rule in Mitigation Banking. Desire, and even need, for this is clearly alive and well but remains a horizon-based item. Meanwhile, among moves towards greater consistency is a Draft proposal to align decision-making recording in FWS regions. This doesn’t mean their decision-making will be consistent, but it does mean that they will record how they come to their decisions in a consistent manner. This makes it easier for those outside the region to see how decisions are reached. It’s a great start, but clearly a softly-softly approach we’ll have to return to again in years to come. There’s more here on the FWS Regulatory update provided by Jennifer Moyer on the last day.

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