UTAH FARM BUREAU FEDERATION
9865 South State Street
Sandy, UT 84070
Tel: 801-233-3040
June 6, 2017
Kaelyn Anfinsen
Utah Department of Natural Resources
Administration Room 3710
1594 W North Temple
Salt Lake City, UT 84116-3154
RE: Rule R634-3 (Compensatory Mitigation Program)
To whom it may concern:
The Utah Farm Bureau is writing today to express our appreciation for your work on Rule R634-3 establishing the Compensatory Mitigation Program for the Greater Sage-Grouse. While the rule is well structured and contains numerous positive elements, we wish to highlight two potentially fatal flaws.
First, the ruleproposes that the state government will create and sell mitigation credits. While this may make sense to offset impacts where mitigation is not required (e.g. on private lands), we are concerned that, as drafted, this section of the rule will create a government-run program that will undercut private mitigation markets in Utah to the detriment of Utah landowners, Utah state trust lands, and ultimately the Greater Sage-Grouse.
Neighboring western states including Wyoming and Nevada have taken a very different approach to Sage Grouse mitigation. Rather than creating a government-run program to develop credits, these states have created a framework for private landowners to develop and market credits. By harnessing the power of free market, these states are attracting private capital into habitat restoration projects and creating incentives for landowner participation. This approach saves taxpayer dollars, reduces the size of government, and increases opportunities for protection and restoration of Sage Grouse habitat.
Second, the draft rule does not appear to recognize the importance of conserving and enhancing (as opposed to restoring) habitat andwill disadvantage farmers and ranchers who have been good stewards of the land and who are willing to make commitments to maintain high-quality habitat for the bird on their property. Here again, the draft rule is out-of-step with other western states and with federal policies which explicitly allow credits to be generated through long-term commitments to conserve and enhance Greater Sage-Grouse habitat.
We have attached a set of redline edits to the draft rule which addresses these two concerns. If the attached edits are incorporated into the rule, the Utah Farm Bureau Federation would be better positioned based on our policy and philosophy to support this rule-making proposal.
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Background
The Utah Farm Bureau Federation represents more than 30,000 member families committed to protecting Utah’s farms and ranches, and ensuring a safe, fresh and locally grown food supply. Our members live in all of Utah's 29 counties and belong to county Farm Bureaus which is the foundation of our grassroots policy process. These families, located across the Utah landscape, make up the Utah Farm Bureau Federation.
The Utah Farm Bureau has long been a national leader in promoting the critical role that private landowners can play in wildlife conservation. In 2006, the Utah Farm Bureau signed an MOU with the Utah Division of Wildlife Resources, the Utah Department of Natural Resources, and others that led to the establishment of the Utah Prairie Dog Habitat Credits Exchange and Safe Harbor Program.
This program used the power of private markets to engage landowners in habitat conservation. By structuring a private market, the Utah Prairie dog exchange has provided incentives for private landowners to conserve habitat and thus avoided the need to create a new government-run system or to place burdensome regulations on private landowners. This program has become a national model of how to establish an effective private market and partnership for habitat to the benefit of landowners and the impacted resource.
The Draft Rule Undercuts Free Markets
As noted above, the draft rule contains some positive provisions. For example, the rule defines key terms necessary for a regulated private marketplace (R634-3-3), it allows for the creation of term credits on private lands (R634-3-5), and it allows for the establishment of privately run conservation banks in Utah (R634-3-6). Unfortunately, these provisions will likely never be used by a private marketplace in Utah because the draft rule also contains provisions that will make it highly unlikely that such a market will develop.
Section R634-3-4 establishes a “State Sponsored Compensatory Mitigation Program” under which the Department will “conduct Credit Generation Projects to generate Credits” (R634-3-3(a) to offset impacts to “Private, SITLA and other State Lands,” (R634-3-4(1)). However, this program is also made available to federal agencies and developers needing offsets to federal impacts (R634-3-4(7)).
The rule provides that “[a]ny federal agency may authorize the use of in-lieu payments from a developer to offset the Department’s cost to generate and maintain the Credits” and that such Credits could then be used by developers to offset their federal impacts. (R634-3-7)
A private market cannot compete with a government-run program because government pricing does not take into account the full costs of credit development (e.g. overhead, the cost of capital, diminution in land values, etc.) and does not take into account the need for revenue generation above the base cost of the credit project.
So long as the State of Utah is in the credit development business and is selling credits at cost in competition with private sellers, a free market will never develop in Utah. This will have negative consequences for Utah landownersand for the Greater-Sage Grouse. If a habitat market develops in Utah, private capital will begin to flow into the state to finance habitat mitigation and preservation projects. This will engage additional private
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landowners in conservation helping to increase Sage Grouse habitat and ultimately bird populations. Without such a marketplace, the State may fund individual habitat restoration projects but the scale of such efforts will always face public funding limitations and likely lag behind efforts driven by the free market.
Recommendation:
If the State of Utah is determined to generate credits and make them available to private buyers but also wants to encourage development of a free market,the State should specify that it will sell credits and accept in-lieu fee payments only if private credits are not available for sale. This would ensure that buyersalways have access to credits but would keep the State credits from competing with private credits.We see this kind of marketplace arrangement in agricultural lending where if private lenders are unable or unavailable, the federal government can fill the gap.
The Draft Rule Does Not Clearly Allow Preservation Efforts to Serve as Mitigation
The Utah Farm Bureau is concerned that the draft rule is focused exclusively on habitat restoration projects and appears to not provide crediting opportunities for landowners who have kept their property in good shape and who are willing to maintain sage-grouse habitat into the future. Section R634-3-5(1)(a) states that private landowners may develop credits only if they own property “that is not Functional Habitat or a Corridor, but with completion of a Credit Generation Project may become Functional Habitat or a Corridor.”
This limitation of credit generation to restoration projects is out of step with most of the other state programs developed in the western U.S. Many Utah ranchers have maintained high-quality habitat by not chaining sage-brush, by incorporating responsibly grazing programs on their property and spraying for weeds, and by managing fire and limiting residential development. Without a commitment by these ranchers to continue these critical activities, there is no certainty that this important habitat will continue to function for the Greater Sage-Grouse. Unfortunately, the rule appears to focus exclusively on degraded habitat and crediting based on habitat restoration projects while providing no incentive for ranchers to maintain habitat well into the future. This is a significant short-coming in this rule that should be addressed.
It is our understanding that section R634-3-5(8) “Federal Agency Use of Term Credits” is intended to allow federal agencies the discretion to use the state framework for preservation projects provided the federal agency or the credit buyer are responsible for such additional monitoring or verification requirements associated with such projects. Unfortunately, this is not clear from the way the rule is currently drafted. For example, section R634-3-5(1)(a), cited above, would appear to preclude private landowners from generating credits on property that is currently serving as functional habitat.
Recommendation
Like other states, Utah should clearly indicate that landowners may generate credits by agreeing to conserve or enhance high-quality habitat on their land for an extended term.
The attached redline copy of the draft rule incorporates recommendations in language that would address Utah Farm Bureau referenced in the above identified concerns.
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Conclusion
The Utah Farm Bureau Federation appreciates the opportunity to comment on this proposed rule. We are concerned that the rule creates a government-run program that limits or discourages private mitigation markets to develop in Utah. The draft appears to focus on habitat restoration while disregarding the importance of farmers and ranchers who have been good stewards who would be willing to make commitments to maintain high-quality habitat for the bird into the future.
We are offering edits in the proposed rule that would better position it to be market responsive providing appropriate, broad-based credits giving landowners incentives to engage in, or continue to be active participants in Sage Grouse conservation efforts.
Sincerely,
Ron B. Gibson
President