Getting More Of A Good Thing? California Introduces New Law on Conservation Banking

Jemma Penelope

New legislation from California on conservation banking could invigorate the state’s long-running but stagnate industry and serve as a framework for other states and even at the national level. But the conservation banking sector is in disagreement over if the new rule will actually deliver on intended benefits.

25 June 2013 | On June 5th, California passed Senate Bill 1148, so enacting legislation under the Fish and Game Code to set up new rules and processes around how conservation banking is practiced in the state.

The legislation may have been designed to both promote and improve a stagnating state conservation banking industry, but the outcomes of these new rules might not have this desired positive effect and has not been unanimously supported by the conservation banking community.

It started in California…

State-level conservation banking has been practiced in California for18 years and was a real incubator for the wider conservation banking industry now operating at the state level in California, and elsewhere across the US. There are nearly 30 conservation banks approved by state agencies in California. State-listed species from the Swainson’s Hawk to the Giant Garter Snake and the San Joaquin Kit Fox have been successfully conserved to date.

Yet despite the great conservation banking that has been going on in California, seemingly fewer banks have been proposed and established in recent years. This month the California Agriculture journal featured a study of this 18 year-old industry by professors from the University of Davis, near Sacramento, CA. They noticed this declining trend, and wondered how existing banks fit into the State’s wider large-scale conservation planning framework.

The study used interviews with conservation bankers and regulatory agencies and found that, yes, there are some barriers to setting up a state-approved conservation bank in California. They noted a number of potentially problematic issues identified for both conservation bankers and regulators – perhaps an indication of the complexity of the process overall. There are ecological values, site selection, credit determinations and legal issues to resolve. It’s not surprising that most regulators felt getting conservation banks approved is difficult and overwhelming. And judging by the declining number of proposals being made each year, conservation bankers are also feeling the pain of these challenges.

All these challenges have led to an increase in the amount of time it takes for a bank to be approved -sometimes up to seven years. Part of this delay is staff resourcing. Especially since the financial crisis of 2008, regulating agencies have had decreasing resources to draw upon. But the other challenge the UC Davis study revealed was that it was hard to assess the costs and risks of a conservation bank proposal as well as hard to resolve decisions such as site selections, credit allocation or ecology on site.

And this is where California’s new regulations come in: clearer, more useful regulations to guide conservation banking decision-making, and a new approach to the resource shortage and drawn-out permitting process that requires bankers pay fees.

Still Conservation Banking…just better?

These kinds of specifications seem to be something both regulators and conservation bankers have been wanting for a while. Overall, the reforms are needed to help streamline the process, reduce delays and disagreements, and ensure effective and efficient participation from everyone- agencies and conservation bankers alike.

So now, under Fish and Game Code, section 1797-1799.1, passed under Senate Bill 1148, state rules on conservation banking are here.

These rules provide better procedures for how to evaluate and approve proposed conservation banks. However, they stop short of actual conservation banking standards which many feel would better ensure real conservation outcomes. It would also allow the prioritization of areas to meaningfully assist in site selection.

These new regulations also provide a mechanism to fund more staffing resources to assist in quicker processing times and better monitoring. This involves charging prospective conservation bankers sizable application fees. Not everyone believes these fees are the most equitable approach. Starting a conservation bank is an expensive process regardless, and additional fees may make small private ranchers and landowners-the groups conservation banking was meant to incentivize toward conservation in the first place-less willing to participate. So fees may still slow approval and frustrate the longevity of the California Conservation Banking Program.

It’s no question greater financial resources are needed to run the program smoothly, but should a state agency be funded by the very sector they are charged to oversee? If the conservation banking sector is funding conservation banking approvals, are they then obliged to some level of service, and what happens if that service is not provided? Put another way, should conservation bankers be ‘paying for the agencies to do their job’? If this opinion holds out, perhaps conservation bankers will decide not to engage and again, the long-term viability of the program will suffer. While not yet clear which of these positions will stand the test of time, fees that will fund the improvement of agency resources is not altogether the panacea sought.

New rules, but not a ‘New Rule’

Despite lingering concerns about the regulations themselves, this new governance of conservation banking in California is an exciting step for the industry nationally and is expected to be a template for other states to follow. Conservation banking occurs in several other states looking to increase their programs. Perhaps California’s move will contribute to this momentum.

Taking it a step further, there is a desire to see conservation banking regulations at the federal level, similar to the Mitigation Banking Rule established in 2008 by the US Army Corps of Engineers to oversee mitigation banking.

California’s new regulations are focused on fixing identified problems, but it’s also abouut keeping a program alive and well. The state’s decision to craft conservation banking legislation to keep up the good work it has been doing is a positive sign regulations at the federal level will be created in the future.