IEAB Independent Economic

Analysis Board

Noelwah R. Netusil, Chair 

Hans Radtke, Vice-Chair 

Daniel D. Huppert 

Joel R. Hamilton 

Susan S. Hanna 

Roger Mann 

John Duffield 

Continuing Investigation of Alternative 

Strategies for Habitat Acquisition

Independent Economic Analysis Board 

Task Number 117 

October 30, 2007 

Document IEAB 2007-5 
Continuing Investigation of Alternative Strategies 

for Habitat Acquisition

Executive Summary 

The IEAB examined the cost-effectiveness of different approaches used by BPA to acquire and 

protect habitat in Task 104 “Scoping Investigation of Approaches to Preserving Habitat” (IEAB 

2006). In that report the IEAB offered several conclusions and included recommendations for 

future analysis. 

This report builds on our earlier analysis by addressing the following questions: (1) Can the Fish 

and Wildlife Program (FWP) work with federal, state and non-profit conservation programs to 

acquire habitat, improve habitat quality or reduce costs? (2) Could the FWP participate, as a 

buyer or as a seller, in the emerging markets for environmental attributes associated with habitat 

units? (3) What problems and opportunities exist when habitat acquisition occurs in more 

developed regions such as the Willamette Valley? (4) How might land acquisitions respond to 

fluctuations and uncertainties in land values, and how should the program work with federal and 

state agencies and non-profits to manage risk? (5) What additional strengths and weaknesses of 

the strategies identified in the Task 104 report can be identified and described? 

This report is focused on the acquisition of wildlife habitat although the principles apply equally 

to fish habitat. The IEAB concludes that: 

1. The FWP has successfully worked with tribes, state and federal agencies and non-profits 

to acquire and improve wildlife habitat. The vast majority of habitat units -- more than 

99% -- have been generated by projects implemented by tribes and state agencies. 

Expanding existing partnerships and seeking new partners is crucial for protecting and 

restoring habitat in areas with high land values and hence, costly habitat units, such as the 

Willamette Subbasin, Methow Valley and Deschutes Subbasin. 

2. Opportunities exist for the FWP to participate in the emerging markets for environmental 

attributes, for example, carbon sequestration, biodiversity credits and water quality. 

These markets are in their infancy, but they hold promise for reducing the cost of meeting 

habitat unit obligations and could potentially generate a revenue stream from existing 

projects. Before pursuing this opportunity the Council should seek to clarify whether 

they, or project sponsors, have the right to sell environmental attributes generated by 

projects receiving Council support. 

3. Areas with high land values such as the Willamette Subbasin, Methow Valley and 

Deschutes Subbasin present opportunities for partnerships since many state and local 

agencies and nonprofits are active in these areas. However, partnerships can be 

challenging to implement when partners have objectives that are inconsistent with the 

Council’s program. In addition, the process of formulating a multi-party agreement for 

habitat conservation can involve extended negotiations and legal reviews. 

ES-1 
ES-2 

4. Because land values vary widely and useful parcels for habitat preservation or 

enhancement become available infrequently, it is important that the program be flexible 

and able to act quickly when acquiring land and conservation easements. This is difficult 

for BPA due to its planning and budgeting processes. Some potential partners, however, 

do have the ability to act quickly. An example is the Columbia Basin Water Transactions 

Program, which operates a riparian conservation easement pilot program. The IEAB 

suggests that the Council consider expanding this type of program to increase the 

flexibility, and likely the effectiveness, of the Council’s program. We believe these types 

of programs are consistent with the FWP’s call for a land and water conservation fund. 

5. Given the diversity of possible ways to acquire habitat, the IEAB has concluded that the 

evaluation template it proposed in Task 104 is unnecessarily cumbersome. Instead we 

propose a checklist (Table 5) of alternative acquisition methods and alternative 

evaluation criteria that should be reviewed for each potential acquisition. We present 

three hypothetical scenarios which illustrate how the alternative ways of acquiring a 

particular habitat parcel can be evaluated. 

Additional recommendations include: 

6. Given the issues and complexities involved with habitat unit accounting, the IEAB 

recommends that the next FWP include a section detailing a policy for habitat unit 

accounting. This policy should address the differences between the Council’s 2:1 

accounting directive and the 1:1 ratio used in practice by BPA. It should also address 

how wildlife HUs are credited for projects that are expensed versus those that are 

capitalized and how HUs are credited for projects that receive funds from partner entities. 
Continuing Investigation of Alternative Strategies 

for Habitat Acquisition 

1. Introduction

The Bonneville Power Administration (BPA) is required to mitigate the impacts on wildlife 

caused by the development of the Federal Columbia River Power System (FCRPS). Losses of 

Columbia Basin wildlife habitat as a result of the construction of the FCRPS have been 

quantified by the Region’s fish and wildlife managers through the completion of "loss 

assessments" for each dam. These form the basis for the losses identified in the Northwest 

Power and Conservation Council’s Columbia River Basin Fish and Wildlife Program. Loss 

assessments identify "habitat units" (HUs) lost due to construction for wildlife; no loss 

assessments or habitat units have been developed for anadromous and resident fish1. A habitat 

unit is an acre of habitat adjusted for suitability for use by target species that typically rely on a 

particular kind of habitat. The suitability is measured by wildlife experts and expressed as a 

“habitat suitability index” (HSI) which ranges from zero (zero carrying capacity for the species 

of interest) to 1 (highest quality habitat). Habitat units are then calculated as the acres of habitat 

multiplied times the suitability index. As BPA implements a mitigation activity, it takes credit 

for its effort in HUs. The habitat units are measured or estimated and then counted against the 

loss assessment for the particular dam project under consideration. 

The IEAB report “A Scoping Investigation of Approaches to Preserving Habitat” (IEAB 2006), 

provided an overview of the approaches used by Bonneville Power Administration (BPA) to 

mitigate for lost habitat, analyzed the attributes of these approaches, and proposed areas for 

future research. The report, which focused primarily on fee simple acquisitions and conservation 

easements, concluded, “there is no one method of habitat acquisition that is best in all cases, so 

each proposal for habitat preservation needs to be examined in terms of the specifics of the 

proposal. The ecological and economic consequences are specific to the parcel and context” 

(IEAB 2006; 1). Recommendations for future work included analyzing other methods of habitat 

acquisition and protection and suggested “with partnering and coordination these methods could 

play a useful part in habitat protection in the region” (IEAB 2006; 2). 

The Independent Economic Analysis Board (IEAB) was asked to extend the analysis presented 

in Task 104 by addressing the following questions: (1) Can the Fish and Wildlife Program 

(FWP) work with federal, state and non-profit conservation programs to acquire habitat, improve 

habitat quality or reduce costs? (2) Could the FWP participate, as a buyer or as a seller, in the 

emerging markets for environmental attributes associated with habitat units? (3) What problems 

and opportunities exist when habitat acquisition occurs in more developed regions such as the 

Willamette Valley? (4) How might land acquisitions respond to fluctuations and uncertainties in 

land values, and how should the Program work with federal and state agencies and non-profits to 

manage risk? (5) What additional strengths and weaknesses of the strategies identified in the 

Task 104 report can be identified and described? 

 

1

 In this report the phrase “habitat units” refers to wildlife habitat units. 

1
This report is organized as follows. Section 2 provides background information on habitat units 

and HU accounting, Section 3 describes several existing partnerships, identifies partnership 

opportunities and develops a case study that examines the feasibility of partnering with Metro’s 

Open Space Acquisition Program; this section also addresses the multi-party management 

problems, opportunities, and risks that exist when habitat acquisition occurs in areas with high 

land values. Section 4 provides background on the market for environmental credits and 

evaluates the potential for the FWP to participate, as a buyer or seller, in these markets. Section 5 

proposes a checklist of alternative acquisition methods and alternative evaluation criteria that 

should be reviewed for each potential acquisition, and then presents three hypothetical scenarios 

which illustrate how the alternative ways of acquiring a particular habitat parcel can be 

evaluated. 

2. Habitat Units and HU Accounting 

Estimated wildlife losses due to hydropower construction were included in the Council’s 1994-

1995 Fish and Wildlife Program (NPPC 2000, C4). These habitat losses are shown in Table 1. 

Table 1: Habitat Units Lost, Acquired and Estimated, by Dam Group 

(Using BPA 1:1 Accounting System) 

Dam Group Habitat Units 

Lost 

Total Habitat Units 

Acquired & Estimated 

Percent 

Completed 

Lower Columbia 74,752 74,239 99.3% 

Lower Snake 26,775 25,266 94.4% 

Upper Columbia 149,276 85,375 57.2% 

Upper Snake 59,362 19,017 32.0% 

Willamette 94,402 2,652 2.8% 

Total Habitat Units 404,567 206,549 51.1% 

Source: NPCC (2006, Table 12B) 

In order to assess the degree to which habitat acquisition has mitigated for the habitat losses from 

dam construction, it is necessary to look at the accounting systems that BPA and the Council use 

to measure mitigation. Each area of wildlife habitat that is purchased or included in a trust or 

easement for BPA’s wildlife habitat mitigation effort is assessed by wildlife scientists. As noted 

above, habitat units are measured by multiplying the HSI, a ranking that runs from 0 to 1, times 

acres of habitat. According to the Council’s FWP, all habitat units lost due to Federal dam 

construction are to be mitigated by enhancement of existing habitat or protection of habitat at 

risk of deterioration. 

Program language states “Bonneville and the fish and wildlife managers should complete 

mitigation agreements for the remaining habitat units. These agreements should equal 200 

percent of the habitat units (2:1 ratio) identified as unannualized losses of wildlife habitat from 

construction and inundation of the federal hydropower system” (NPCC 2000; 3). BPA, however, 

has a 1:1 crediting policy for wildlife acquisitions and enhancements and does not believe that 

“annualized, secondary, and cumulative impacts are a ratepayer obligation” (Wright 2002; 1). 

2
Using BPA’s 1:1 crediting policy, 51.1 percent of the wildlife habitat loss in the FCRPS area has 

been mitigated, as shown in Table 1 (NPCC 2006, 36). According to BPA, habitat unit goals are 

close to being met for some dam groups -- the Lower Columbia dams and Four Lower Snake 

River dams have achieved 99.3% and 94.4% of their goals, respectively. In contrast, only 2.8% 

of habitat units lost in the Willamette have been mitigated. The largest absolute number of 

habitat units remaining to be mitigated is in the Upper Columbia and Upper Snake (NPCC 2006, 

36). However the implication that the Lower Snake and Lower Columbia have nearly completed 

their required mitigation is not in accord with the 2:1 crediting policy articulated in the Council’s 

F&W Program. Under the Council’s methodology mitigation has been achieved for only half of 

the loss. 

Because population growth is associated with increases in land prices, and because a large 

proportion of wildlife habitat is on private land (ISAB 2007; 55), the primary mitigation tools 

that have been used in the Council’s Fish and Wildlife Program – fee-simple acquisition and 

conservation easements – will be more expensive in these areas than in other parts of the 

Columbia Basin. As purchase of land (fee simple or conservation easements) for protecting 

wildlife habitat becomes increasingly expensive, it seems reasonable that the wildlife and fish 

habitat mitigation efforts would be more closely coordinated. This could involve a collaborative 

effort by fish and wildlife agencies and tribes to assess and rate various habitat mitigation 

opportunities. Consistent with current criteria for selection of wildlife projects which provides 

priority for wildlife projects that provide fish and wildlife benefits, those habitat acquisitions that 

protect both fish and wildlife habitat could potentially provide the “biggest bang for the buck.” 

Further, by closer integration of fish and wildlife habitat projects, some additional opportunities 

would likely arise for combining the objectives of regional and national organizations, both 

wildlife- and fish-focused organizations, in mitigating for lost habitats. As noted below, 

partnering with various habitat enhancement entities may be the best route for BPA’s mitigation 

program in sub-regions with high land prices. (It should be noted that there are a number of 

examples of these types of partnerships that have already been undertaken for wildlife projects 

with organizations such as The Trust for Public Land, The Nature Conservancy and regional land 

trusts.) Combining fish and wildlife habitat in the project selection process could help to 

increase total habitat units and to bring more partners to the negotiating table. 

While combining fish and wildlife habitat in the project selection process and bringing in more 

partners may have benefits, they also raise habitat accounting issues. Projects funded through 

the Council’s FWP are classified as anadromous fish projects, resident fish projects, or wildlife 

projects. As stated in the Council’s Program (NPPC 2000; 47) “To prioritize the many needs to 

address fish and wildlife impacts throughout the basin, the Council will maintain the current 

funding allocation for anadromous fish (70 percent), resident fish (15 percent) and wildlife (15 

percent), until a new budget allocation is adopted." 

According to Peter Paquet, Manager, Wildlife and Resident Fish, BPA claims mitigation credit 

for habitat units resulting from both wildlife projects and fish projects, irrespective of which 

budget they are funded from. However, complications arise because only projects that are 

capitalized can generate habitat units. BPA’s Fish and Wildlife Capitalization Policy (Maslen 

2006; 9) requires that all of the following primary criteria be met: 

3
1) BPA share of project costs must exceed $1M (excluding all conceptual and preliminary 

costs for projects that go through the Council’s 3-Step Review). 

2) The capital construction must have an estimated useful life of 15 years or longer. 

3) Provides a measurable future benefit, defined as fulfilling a legal obligation of the 

FCRPS. 

There appears to be considerable confusion and inconsistencies in how habitat accounting 

occurs. There are examples of projects that were expensed, but generated habitat units and 

projects, such as the two transactions in the Columbia Basin Water Transaction Program 

Riparian Easement Program, that appear to meet the criteria in BPA’s Fish and Wildlife 

Capitalization Policy, but have been expensed and, therefore, have not generated HUs. A memo 

written by Steve Wright also highlights the issue, stating that BPA has protected more than 

“100,000 acres of wildlife habitat with fish measures” and that “these habitat units are not 

reflected in BPA’s tally of completed mitigation” (Wright 2002; 17). At the very least, it 

appears that the policies that govern crediting of HUs are not well understood by all the 

stakeholders. The IEAB sees no problem with crediting HUs to projects that have been 

expensed, so long as the HUs will be protected in perpetuity and are of a type and in a location 

where they are useful. We recommend that the rules for crediting HUs for projects be clarified 

and made accessible to all stakeholders. 

When BPA partners with other entities its policy is to credit HUs in proportion to BPA’s portion 

of project funding. This approach may have worked well in the past but given present conditions 

may be unnecessarily restrictive, and may reduce the incentive for BPA to partner with other 

entities to secure funds for habitat preservation. As outlined later in this paper, there may be 

opportunities for BPA to partner with entities such as USDA, Metro, and others to help fund 

habitat acquisition and enhancement. Unless BPA can claim mitigation credit for these HUs, it 

has little incentive to pursue such partnerships. 

Given the issues and complexities involved with habitat unit accounting, the IEAB recommends 

that the next Fish and Wildlife Program include a section detailing policies for habitat unit 

accounting. The section should address the differences between the Council’s 2:1 accounting 

directive and the 1:1 ratio used in practice by BPA. It should also address how wildlife HUs are 

credited for projects that are expensed versus those that are capitalized. It is not clear that these 

accounting procedures are consistently applied or even consistently understood. It does appear 

that changes to present policies could increase the incentive for BPA to partner with other 

entities. Resolving the issue of whether, and under what conditions projects will generate HUs 

should make HUs a better measure of how much of the required mitigation has been completed. 

Including a clear statement of Council accounting policies in the next Fish and Wildlife Program 

should help. 

3. Partnership Opportunities

The Council’s Fish and Wildlife program has worked with project sponsors – federal and state 

agencies, tribes, and nonprofits – to undertake activities that generate habitat units. Tribes and 

the Washington Department of Fish and Wildlife have generated 90.4% of the total HUs with the 

4
remainder coming from the Idaho Department of Fish and Game, the Oregon Department of Fish 

and Wildlife, U.S. Fish and Wildlife Service and The Nature Conservancy. 

3.1 Existing project sponsors 

Table 2 shows the quantity of HUs generated by sponsor (Welch 2007a). Sponsors typically 

propose a project for funding and then manage the site, although this is not always the case. For 

example, Green Island was purchased under the Oregon Department of Fish and Wildlife’s 

Willamette Basin Wildlife Mitigation Project (1992-068-00), but the McKenzie River Trust 

holds title to the property (Welch 2007b, 2007c). 

Table 2: Habitat Units by Sponsor 

(Using BPA 1:1 Accounting System) 

Sponsor Habitat Units

Percentage of 

Total Habitat 

Units 

Generated 

Burns-Paiute Tribe 4,266 1.93% 

Coeur d'Alene Tribe 761 0.34% 

Colville Confederated Tribes 31,434 14.22% 

Confederated Tribes of Warm Springs 14,057 6.36% 

Kalispel Tribe 2,493 1.13% 

Kootenai Tribe 183 0.08% 

Nez Perce Tribe 20,928 9.46% 

Shoshone-Bannock Tribes 5,898 2.67% 

Spokane Tribe 3,825 1.73% 

Umatilla Confederated Tribes 11,626 5.26% 

Yakama Confederated Tribes 36,611 16.56% 

The Nature Conservancy 948 0.43% 

Idaho Department of Fish and Game 16,442 7.44% 

Oregon Department of Fish and Wildlife 2,819 1.27% 

Washington Department of Fish and Wildlife 67,805 30.67% 

US Fish and Wildlife Service 1,014 0.46% 

Total Habitat Units 221,110

Source: Welch 2007a 

Note: Habitat Units are aggregated across species and were credited at different points in 

time 

The percentage of HUs generated by project sponsors shows that tribes have generated 59.7% of 

the total. The Washington Department of Fish and Wildlife accounts for 30.7% with the 

remaining 9.6% coming from the Idaho Department of Fish and Game, Oregon Department of 

Fish and Wildlife, U.S. Fish and Wildlife Service and The Nature Conservancy.

3.2 Potential partnership opportunities

5
There are many reasons to form partnerships including the potential to leverage funds and the 

ability to use the expertise of staff in other organizations. Tight budgets and increasing land 

values mean that more government and non-governmental organizations are seeking to form 

partnerships – a recent workshop sponsored by Metro, a regional government of twenty-five 

cities in the Portland metropolitan area, brought together elected officials and experts from 

throughout the state to develop a vision for linking parks and natural areas throughout the region 

(The Oregonian 2007). Partnerships will also be important in rural areas with high recreational 

and scenic values since demand for land in these areas has increased the cost of acquisitions and 

conservation easements. 

One option to make high-cost habitat mitigation less burdensome on BPA’s budget is to seek out 

new opportunities to partner with federal, state and local governments, tribes and non-profits to 

acquire HUs. Partnership opportunities may be especially important for the Willamette Subbasin 

given the high cost of land and the need to acquire habitat units since, in total, only 2.8% of the 

habitat units lost for the Willamette dam group have been mitigated (Table 3). 

Partnerships, especially if they rely on conservation easements, may not be a panacea. As 

described in an earlier report, conservation easements in urban areas are estimated to cost 90% of 

the fee-simple price (IEAB 2006). When this is the case, the costs of establishing an easement 

and monitoring the subsequent performance of the landowner may make the easement more 

expensive than a fee-simple purchase. 

Table 3: Habitat Units Willamette Dam Group 

(Using BPA 1:1 Accounting System) 

Dam HUs Lost Total HUs Acquired 

& Estimated 

Percent Completed 

Big Cliff 413 32 7.7% 

Cougar 11,124 307 2.8% 

Detroit 11,298 58 0.5% 

Dexter 6,648 150 2.3% 

Foster 3,544 96 2.7% 

Green Peter 16,432 0 0.0% 

Hills Creek 19,489 1,496 7.7% 

Lookout Point 25,454 513 2.0% 

Total 94,402 2,652 2.8% 

Source: NPCC (2006, Table 12B) 

3.3 Government Programs

This section of the report provides an overview of potential partnership opportunities including a 

description of USDA programs and whether they are consistent with the Council’s Fish and 

Wildlife Program. Several state programs, and an initiative being undertaken by a partnership 

that includes government agencies and nonprofits, are also described. 

3.3.1 Federal Programs

6
USDA Programs

The United States Department of Agriculture has a number of programs that offer partnership 

possibilities. Details on these programs are available on the Farm Service Administration 

(FSA) web page at http://www.fsa.usda.gov. The 2007 Farm Bill is currently being written. 

Current indications are that the present conservation programs will be continued, and perhaps 

expanded, although possibly under different names. However this result is far from certain 

given high crop prices that reduce the urgency of farm subsidies, the uncertainty introduced by 

crops that can be used for biofuels, and budgetary constraints caused by the Iraq War. 

Conservation Reserve Program (CRP) The CRP encourages farmers to convert highly 

erodible or sensitive lands to permanent cover. Since CRP contracts are usually for a period of 

10 to 15 years, habitat protected in this way would not meet the permanent protection 

requirement to qualify for BPA habitat credit. 

Despite this limit, CRP might still be a useful tool in partnership with some of the other tools 

described in this paper. For example, a landowner reluctant to relinquish control of his land 

today might be willing to enter into a CRP contract and also make an agreement with a land 

trust to have a conservation easement take effect at the end of the CRP period. 

On the other hand, it should be noted that much of the marginal land under CRP is either not 

being renewed or is being withdrawn as its use for producing crops for biofuels has become 

viable. 

Conservation Reserve Enhancement Program (CREP) The CREP is a sub-program under 

CRP, requiring a partnership between the USDA and the individual states. CREP addresses 

high-priority conservation issues of both local and national significance, such as impacts to 

water supplies, loss of critical habitat for threatened and endangered wildlife species, soil 

erosion, and reduced habitat for fish populations such as salmon. CREP is a community-based, 

results-oriented effort centered on local participation and leadership. 

Participating states each have an agreement with the USDA for protecting and restoring 

degraded riparian areas on agricultural lands in targeted areas of concern. States must fund at 

least 20 percent of the program cost, while the CRP program provides the remainder. Protection 

practices include fencing to restrict cattle access, tree planting, and wetland restoration. There 

is an opportunity through CREP to encourage other creative and possibly ecologically 

significant practices. As is true of all CRP programs, the basic CREP contract is for 10 to 15 

years, although the individual state agreements open the possibility of longer or even permanent 

contract periods. 

A specific CREP project begins when a state, Indian tribe, local government, or local nongovernment entity identifies an agriculture-related environmental issue of state or national 

significance. These parties and FSA then develop a project proposal to address particular 

environmental issues and goals. Enrollment in a state is limited to specific geographic areas and 

practices. The Council has supported the enrollment of riparian agricultural lands in the CREP 

through projects that support USDA Natural Resource Conservation Service (NRCS) personnel 

to develop and implement contracts. 

7
Oregon and Washington have had active CREP programs since 1998. The Oregon program 

includes all streams providing habitat for the endangered salmon and trout species that cross 

agricultural lands. Goals of the Oregon Enhancement Program include: 

 Reducing water temperature to natural levels; 

 Reducing by 50 percent the sediment and nutrient pollution from agricultural lands 

adjacent to streams; 

 Stabilizing streambanks along critical salmon and trout streams; 

 Restoring natural hydraulic and stream channel conditions on 2,000 miles of streams. 

The Oregon Enhancement Program is authorized to enroll up to 95,000 acres of riparian buffers 

and filter strips, plus 5,000 acres of wetlands. For FY 2006, Oregon had a total of 24,084 acres 

under CREP contract. 

The USDA and the State of Washington agreed to a voluntary CREP program to improve the 

water quality of streams providing habitat for salmon species listed under the Federal 

Endangered Species Act. The project area includes all streams in Washington crossing 

agricultural lands providing spawning habitat for endangered salmon species. 

The Washington State Enhancement Program is authorized to enroll up to 100,000 acres to be 

devoted to riparian buffers planted to trees. CREP enrollment in Washington for FY 2006 

totaled 10,481 acres. 

Idaho’s CREP program was initiated in 2006 in an attempt to reduce groundwater pumping in 

response to senior surface water users call to curtail pumping by junior well pumpers. The 

Idaho Eastern Snake Plain Aquifer CREP targets the enrollment of up to 100,000 acres of 

eligible irrigated cropland to reduce irrigation water use, increase water quality, reduce soil 

erosion and sedimentation and increase wildlife populations. In addition to CREP payments, 

Idaho State water authorities will enter into State Water Use Contracts with participants on 

CREP-enrolled land to help ensure that irrigation water is conserved during the 14- to 15-year 

CRP contract periods. 

Enrolling up to 100,000 acres of eligible cropland will significantly reduce irrigation water 

consumption. The CREP will improve water quantity and quality in the Snake River and its 

tributaries by reducing agricultural chemicals and sediments. Establishing permanent vegetative 

cover will provide wildlife habitat for terrestrial and aquatic species. The goals of the Idaho 

Eastern Snake Plain Aquifer CREP, when fully enrolled, include: 

 Reducing irrigation water use by up to 200,000 acre-feet annually by reducing or ceasing 

water application on up to 100,000 irrigated cropland acres; 

 Improving the Snake River's water quality and flow by increasing the aquifer's 

groundwater levels and tributary spring water discharge by up to 180 cubic feet per 

second; 

 Establishing permanent vegetative covers to increase wildlife habitat and reduce the 

amount of agricultural chemicals, non-point source contaminants and sediment entering 

the water; 

 Improving habitat and populations of sage grouse, sharp-tailed grouse and other 

grassland-nesting birds by establishing up to 100,000 acres of native grassland habitat in 

the priority area; 

 Enhancing habitat for fish species by increasing stream flow; 

8
 Improving water quality by reducing soil erosion and non-point pollution adjacent to 

streams and rivers; and 

 Reducing irrigation water pumping power consumption by 300-350 million kilowatt 

hours annually. 

Signup was initially slow compared to the 100,000 acre goal, but as it became clear that some 

wells were likely to be shut off, signup has surged. As of early June 2007, some 18,900 acres 

have been approved and another 26,720 are pending. 

While the existing Washington, Oregon and Idaho CREP programs do not directly meet BPA’s 

need to generate habitat units, they do demonstrate the flexibility and potential of the CREP 

tool. BPA funding has allowed limited NRCS funds to be leveraged in ways that generate 

greater acreage of riparian habitat protection. The principal problem is the need to assure 

permanent habitat protection – which BPA could address by funding the extension of CREP 

contracts beyond the usual 10 to 15 years. BPA could also work with FSA and the states to 

design programs more targeted to BPA habitat protection needs. Finally, BPA could cost share 

or fund other conservation practices not now covered by CREP, to increase the incentive for 

landowner participation. 

Wetlands Reserve Program (WRP) The WRP is a voluntary program to restore and protect 

wetlands on private property by retiring marginal agricultural land. Incentives are provided for 

landowner participation under the following options: 

 10-year cost-share agreement 

 30-year conservation easement 

 Permanent easement 

The fact that the WRP program includes language allowing for permanent protection makes this 

program a prime candidate for BPA to partner with UDSA and a land trust in its habitat 

protection program. 

Farmland Protection Program (FPP) The FPP provides matching funds to organizations with 

existing farmland protection programs to purchase conservation easements. Eligible land must 

contain prime/unique soils or have historical/archeological value. Landowners retain the rights 

to use the property for agriculture. The program allows for 30-year or perpetual easements. 

The FPP program also appears to offer a good opportunity for partnering between USDA, BPA, 

and a land trust. 

Other USDA programs Several other USDA programs may offer partnering possibilities in 

particular situations. The Environmental Quality Incentives Program (EQIP) provides 

landowners with financial assistance for structural, vegetative, and management practices. 

Contract length is only 1 to 10 years. The Conservation Security Program (CSP) provides 

landowners with payments to address resource concerns including water quality and quantity; 

soil erosion, deposition, and quality; air quality; plant suitability condition, and management; 

animal habitat; and animal management. EQIP contract length is also 1 to 10 years. 

Both of these programs would seem to hold promise as a way to fund restoration costs on 

protected parcels. 

9
U.S. Department of the Interior Landowner Incentive Program

The primary objective of the Landowner Incentive Program (LIP) is to establish or supplement 

State landowner incentive programs that protect and restore habitats on private lands, to benefit 

species identified in the State's Comprehensive Wildlife Conservation Strategy (State Wildlife 

Action Plan) or classified as Special Concern by the State, or Federally listed, proposed, or 

candidate species or other species determined to be at-risk, and provide technical and financial 

assistance to private landowners for habitat protection and restoration. 

LIP allocates a basic (tier 1) grant of $180,000 to all participating states. The states then develop 

tier 2 project funding proposals in cooperation with landowners. Idaho, Oregon and Washington 

have all participated in LIP in past years, with tier 2 award levels as shown in the following 

table. LIP funding for FY 2007 is at about the same level as in FY 2006 

Table 4: Landowner Incentive Program Tier 2 Grants to Idaho, Oregon and Washington 

Idaho Oregon Washington US Total 

FY 2003 0 $1,533,900 $1,560,000 $27,947,910

FY 2004 0 1,120,000 760,000 19,362,000

FY 2005 0 525,000 0 11,686,751

FY 2006 765,760 765,760 765,760 765,760

The LIP appears to offer some possibilities for BPA/state/land trust partnerships.

3.3.2. State Programs

Federal Funds provided by the Pacific Coastal Salmon Recovery Fund (PCSRF) have been 

combined with significant amount of state funds to develop programs to “contribute to the 

restoration and conservation of Pacific salmon and steelhead and their habitats” (NOAA 2007). 

These funds are distributed through NOAA Fisheries Service which has developed a 

memorandum of understanding (MOU) “with the states of Washington, Oregon, California, 

Idaho and Alaska, and with three tribal commissions on behalf of 28 Indian tribes; Northwest 

Indian Fisheries Commission, Klamath River Inter-Tribal Fish & Water Commission, Columbia 

River Inter-Tribal Fish Commission. The MOUs establish criteria and processes for funding 

priority PCSRF projects” (NOAA 2007). Additional details are provided in 2006 Report to 

Congress “Chapter 4: State and Tribal Efforts.” 

In Washington the implementing agency is the Washington Salmon Recovery Funding Board, in 

Oregon, it is the Oregon Watershed Enhancement Board, and in Idaho the Idaho Office of 

Species Conservation. While the majority of the PCSRF funds have gone to habitat preservation 

and restoration funds, some of the funds have also been allocated to watershed/species 

assessment, sub-basin planning, research, monitoring, enhancement and education projects. 

From 2000 to 2006 the PNW states and tribes committed the following funds to PCSRF projects: 

PCSRF Funds Committed State Match 

Washington $155,000,000 $79,000,000

10
Oregon 75,000,000 126,000,000

Idaho 9,800,000 4,100,000

Columbia River Tribes 16,200,000 -

Pacific Coast Tribes 43,900,000 -

All of these PCSRF funded, state matched and administered programs would seem to offer 

opportunities for partnering with the BPA fish and wildlife program. 

The Salmon Recovery Funding Board (SRFB) was created in 1999 by the Washington State 

legislature to administer state and federal funds to protect and restore salmon habitat. Since 

2000, the SRFB has awarded more than $171 million in grants for 731 projects in 30 counties. 

Grant applicants are required to provide some matching funds. These additional funds have 

accounted for nearly $101 million for SRFB-funded projects. 

Each grant funded by the SRFB must be developed and approved by a “lead entity.” Lead 

entities are local, watershed-based organizations that solicit, develop, prioritize, and submit to 

the Salmon Recovery Funding Board (SRFB) habitat protection and restoration projects for 

funding consideration. Lead entities consist of: 

• A coordinator (usually county, conservation district, or tribal staff) 

• A committee of local, technical experts 

• A committee of local citizens 

The technical experts help develop salmon recovery strategies, and identify and prioritize 

projects. The citizen committee develops the final, prioritized project list and submits it to the 

SRFB for funding consideration. 

The lead entities develop local salmon recovery strategies based on science and their recovery 

plans. They then recruit sponsors to propose projects to implement the strategies. Lead entities 

convene technical committees to review proposed projects and citizen committees to place 

projects on a prioritized list. The project lists are submitted for consideration to the SRFB and 

must implement the recovery plans adopted by the regional recovery boards and NOAA. Project 

sponsors include public or private groups or individuals. Typical sponsors are regional fisheries 

enhancement groups, cities, counties, tribes, state agencies and conservation districts. 

Lead entities are typically organized to encompass Watershed Resource Inventory Areas 

(WRIAs), or counties. Regional recovery boards within Columbia River basin are organized on 

an Evolutionarily Significant Unit (ESU) scale and include: Lower Columbia Fish Recovery 

Board, Upper Columbia Salmon Recovery Board, Snake River Salmon Recovery Board, 

Klickitat county, and Yakima River Basin Salmon Recovery Board. All but Klickitat County are 

both “lead entities” and/or regional boards for the SRFB and sub-basin planning boards for 

BPA/NPCC. Hence, the projects proposed for SRFB funding are closely tied to the ESA 

recovery planning directed by NMFS, and sub-basin plans developed for NPCC. 

The organizational context for salmon recovery planning in Washington differs substantially 

from that in Oregon. Oregon’s efforts are largely driven by central State planning, whereas 

Washington relies on the geographically dispersed watershed councils. Despite the delegation of 

project planning in Washington, the proposed projects are reviewed for consistency with Federal 

11
recovery plans and NPCC-sponsored sub-basin plans. Hence, there are ample opportunities for 

broad regional plans (under NPCC and BPA) to be coordinated with, if not partnered with, the 

locally supported projects approved and funded under the SRFB. We conclude that the 

connection between the NPCC-sponsored sub-basin planning groups and Washington States’ 

"lead entities" facilitates the close coordination of F&W project planning (especially for salmon), 

including perhaps shared funding where the local project sponsor obtains BPA funding and 

SRFB funding. There may be technical and scheduling difficulties in making this a real option. 

The Oregon Watershed Enhancement Board (OWEB) is launching a strategic investment 

partnership program. This program will “focus on complicated proposals or special partnerships 

for projects with substantial funding or long-term funding needs, that would not normally fit into 

OWEB’s regular grant program, and that would benefit economic and community sustainability” 

(OWEB 2007). 

3.3.3. Nonprofits

Ecotrust, a non-profit based in Portland, Oregon, will receive $300,000 of funding in October 

2007 from NOAA’s Community-Based Restoration Center for its “Whole Watershed Restoration 

Initiative.” The primary goal of this project is to “complete whole watershed restoration by 

focusing resources through the Partnership Fund on basins with the highest conservation priority 

for salmon in Washington, Oregon, northern California, and Idaho, expediting recovery of 

important at-risk salmon stocks” (Davies 2007). 

Although many of the priority watersheds are coastal watersheds, some are located in the 

Columbia River Basin including the Middle and North Fork of the John Day, the Lower 

Columbia River (Sandy River, Oregon and Lewis River, Washington) and the Upper Columbia 

(Methow/Twisp Rivers) (Pacific Coast Watershed Partnership 2007; Davies 2007). 

The PNW Whole Watershed Restoration Partnership includes Oregon Trout, Wolftree Inc., 

Oregon Watershed Enhancement Board, USDA Forest Service, Bureau of Land Management, 

National Fish and Wildlife Foundation, and Ecotrust as the fiscal agent and program coordinator. 

In 2006, these partners created the Partnership Fund, which invested almost $900,000 in 22 

projects in Oregon and Washington. The 2006 investment will result in restoration of 31 miles of 

stream habitat and more than two hundred acres of critical riparian, wetland, and forested habitat 

and the decommissioning of more than 20 miles of sediment-producing roads—all in high 

priority basins for salmon recovery. Plans for 2007 include expansion of their targeted 

watershed restoration strategy into Northern California (implementation in 2008) and Idaho 

(implementation in 2009) (Davies 2007). 

3.5 Case Study: Partnering with Metro’s Regional Parks and Greenspaces Program 

Metro, the regional government that encompasses twenty-five cities within the Portland 

Metropolitan Area, raised 135.6 million dollars in a 1995 bond measure to purchase “natural 

areas, trails and greenways to be held for future use as parks, trails and fish and wildlife habitat” 

(Metro 2007a). More than 8,175 acres of land were acquired protecting “nearly 76 miles of 

stream and river frontage” (Metro 2007a). A second bond measure, which passed in November 

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2006, will raise 227.4 million dollars to protect areas with high ecological value including the 

“best remaining fish and wildlife habitat” (Metro 2007b). 

Twenty-seven target areas were identified for protection in the 2006 bond measure (Metro 

2007b) and many of these areas, including the mainstem and tributaries of the Clackamas and 

Tualatin Rivers, Johnson Creek, the Columbia Slough, and the mainstem of the Willamette, are 

included in the Willamette Subbasin Plan (Willamette Restoration Initiative 2004). 

Partnering with Metro has many advantages: 

1. Metro has expertise in identifying, negotiating, purchasing, and restoring properties; 

2. Metro has the ability to finalize the sale of a property in a short period of time closing, in 

some cases, within thirty days; 

3. Metro has successfully partnered with other organizations on restoration projects, for 

example, the recreation of a side channel in the Clackamas River with Portland General 

Electric and Oregon Department of Fish and Wildlife (Metro 2007c); 

4. Metro must be listed on a property’s title while BPA does not want to hold properties; 

5. Metro’s target areas for land acquisition and restoration overlap with areas identified in 

the Council’s Fish and Wildlife Program; 

6. Economies of scale and scope can be achieved by coordinating purchasing and restoration 

efforts. For example, BPA assisted the USFWS in establishing the Tualatin National 

Wildlife Refuge and Metro has identified Wapato Lake, an area that is adjacent to the 

refuge, as a target area for acquisitions and restoration (Metro 2007b); 

7. Metro needs funding to restore properties and, under the Council’s Fish and Wildlife 

Program, BPA receives full credit for habitat units generated through restoration; 

8. Metro is willing to assign habitat units resulting from restoration projects to BPA. 

A meeting between Peter Paquet, Manager, Wildlife and Resident Fish, Lynn Palensky, Subbasin 

Planning Project Manager, and Jim Desmond, Director of Metro’s Regional Parks and 

Greenspaces Department identified only one major obstacle -- the Council’s funding cycle -- to a 

successful partnership. Metro is in the process of acquiring lands using money generated by the 

2006 bond measure, but funding recommendations for the Council’s 2007-2009 Fish and 

Wildlife Program have already been decided. 

The Council’s current Program calls for a land and water acquisition fund intended to address 

the issues raised here. The IEAB believes that this would increase the flexibility, and likely the 

effectiveness, of the Council’s program. The IEAB recommends that the Council consider 

implementing a program that builds on the experience of the Columbia Basin Water Transaction 

Program’s Riparian Conservation Easement Program. 

3.6 Some Potential Problems and Risks in Multi-party Habitat Conservation 

While partnering with like-minded agencies and non-profit organizations brings the benefits of 

cost sharing, of collaboration across governmental boundaries, and of combining talents and 

expertise, there are possible drawbacks to managing fish and wildlife habitat through multi-party 

arrangements. Among these are the following: 

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1. Where the parties involved in the habitat conservation effort have inherently different 

incentives, objectives, and legal or policy limitations, it can become difficult to reconcile 

the parties specific needs. Multi-party contracting is inherently a difficult process under 

the best of circumstances among private parties; when governmental entities are involved 

it typically becomes even more difficult because of legal limitations on the authority of 

the various entities and mis-matched budgeting processes. 

2. The process of formulating a multi-party agreement for habitat conservation can involve 

extended negotiations and legal reviews – incurring transaction costs. Transactions costs 

involve agency personnel time devoted to extended meetings, reviews of agreements, and 

negotiating sessions. In addition, agencies, private landowners and foundations may seek 

assurance, through detailed legal review of agreement and deeds that the intended land 

use patterns will emerge from the joint agreement. These legal expenses can add 

significantly to the overall costs of establishing a collaborative conservation easement. 

3. A requirement of typical conservation easements involving numerous parties is a plan for 

monitoring and enforcement of the agreement. Clearly, these activities are less of a 

burden for a single-agent, fee-simple land purchase. On the other hand, a conservation 

easement generally involves at least two parties – one being the landowner, the other 

being the easement holder. To assure that the landowner (perhaps a farmer) is adhering to 

the letter of the easement (for example, not plowing or planting land near a stream), the 

easement holder needs to monitor the site regularly. This incurs an additional cost which 

might be avoided through fee simple purchase of a riparian corridor. 

4. Land trusts have a perpetual obligation to steward conservation easements or manage 

lands they hold in fee for conservation purposes. This means that the land trust must 

have a source of funds available to meet these ongoing responsibilities. Before a land 

trust decides to accept land or an easement, it must consider the financial and 

management implications of stewardship. Enforcement, should violations arise, requires 

even greater resources. Joe Moll of the McKenzie River Trust has stated “The part...that 

is getting the most attention these days is the section covering legal defense costs...Now 

that land trusts have actually had to go to court over easement violations, it has been 

recognized that one lengthy court case could wipe out an organization’s stewardship 

funds” (Moll 2007). The Minnesota Land Trust, for example, estimated that judicial 

action could cost between $20,000 and $60,000 per violation (Wright 2003). To meet 

these costs, a dedicated stewardship and defense fund should be established separately 

from the trust’s general operating costs. The Land Trust Alliance has been exploring a 

collective insurance fund to draw upon in tough legal battles (Land Trust Alliance 2005). 

4. Emerging Markets: Credits and Banking 

The market for environmental credits may provide another opportunity to meet habitat unit 

obligations at a lower cost. These markets may also provide a revenue source if property 

acquired for the Council’s Fish and Wildlife program can be shown to generate benefits such as 

sequestering carbon, improving water quality or increasing water flows. 

14
Mitigation banking traces its origins to the Clean Water Act, which was approved in 1972. This 

Act prohibited the “discharge of fill or dredged material into wetlands without a permit from the 

Army Corps” (Bayon 2002, 32). If harm to a wetland was found to be “unavoidable” then the 

harm had to be mitigated, which lead to the creation of wetland mitigation credits. 

Credits, and formal markets where buyers and sellers can exchange credits, exist for a variety of 

pollutants, for example, the Environmental Protection Agency's Acid Rain Program for sulfur 

dioxide, greenhouse gases in the Chicago Climate Exchange and European Emissions Scheme, 

and nitrogen oxides and sulfur oxides in the Regional Clean Air Incentives Market (RECLAIM) 

in the South Coast Air Quality Management District of California. Markets also exist for 

wetland mitigation credits and for mitigating the impacts of development on threatened or 

endangered species (Bayon 2002; Ecosystem Marketplace 2007; Stratus Consulting 2003). 

The Willamette Partnership, a non-profit coalition of "conservation, city, business, farm and 

science leaders" received an EPA grant in 2006 to execute a water quality trade in the Willamette 

Basin and to propose "an institutional mechanism for a "multi-credit ecosystem marketplace" 

where trades for different types of ecosystem services could be centralized and financial 

incentives for voluntary restoration could be created" (LaRocco and Vickerman 2007, 3). A 

pilot program has been proposed to fund projects that would generate multiple credits, for 

example, credits for water quality, wetlands, habitat, and carbon sequestration. No statutes or 

regulations in Oregon prohibit the development of a credit market, although a multicredit 

ecosystem marketplace has no precedent (LaRocco and Vickerman 2007). 

Conservation banks, which mitigate the impacts of development on threatened or endangered 

species, are starting to become active in the Pacific Northwest. There are currently thirty-five 

conservation banking agreements in the United States; California has thirty banks, while Arizona 

and Texas have two and Colorado has one (LaRocco and Vickerman 2007). Oregon's 

Department of Fish and Wildlife has proposed a statewide system of conservation banks as a 

way to meet statewide conservation goals (ODFW 2006) and Wildlands, Inc. has a site listed in 

Washington State as "Proposed/In Progress" (Wildlands 2007). 

The Council’s Fish and Wildlife Program could participate in these emerging markets by buying 

habitat units and/or by selling environmental credits that cannot be counted as habitat units. 

4.1 Buyer of habitat units 

The proposed multi-credit ecosystem marketplace includes a bank and registry where credits 

would be deposited and then certified through an audit process. Once certified, credits would be 

available in the marketplace for purchase (Willamette Partnership nd-a). For-profit conservation 

banks, such as Wildlands Inc. (2007), may also become active in the Columbia Basin. This 

raises the possibility that habitat units could be purchased directly. 

This approach may have many advantages including a lower cost than fee-simple purchases or 

conservation easements since only habitat units, and not the land or expensive development 

rights, are acquired. Organizations generating habitat units are able to achieve economies of 

15
scale and scope since they frequently function on a large scale; they also assume the monitoring 

and enforcement costs associated with the property. 

4.2 Seller of environmental services 

Fee-simple acquisitions and conservation easements funded by the Council’s Fish and Wildlife 

Program may generate environmental benefits that can be sold, for example, carbon 

sequestration and, in some parts of the basin, water quantity and water quality. 

Examples of programs and organizations that compensate landowners for sequestering carbon 

include the Oregon Forest Resource Trust Program, Climate Trust and the Chicago Climate 

Exchange. Oregon Water Trust worked with a property owner in the Rogue Basin to enroll 

irrigated pastures in the Oregon Forest Resource Trust program. Oregon Water Trust also 

executed an option for a “29-year instream transfer of 25 acres of the ranch’s water rights” 

(Oregon Water Trust 2007, 16; Oregon Department of Forestry 2007) demonstrating how 

multiple environmental benefits can generated from a single property. Climate Trust funded 

riparian reforestation in the Deschutes River Basin (Climate Trust 2007) and the Chicago 

Climate Exchange funds carbon sequestration resulting from agricultural and rangeland soil 

management and for “forestation and forest enrichment, urban tree planting, and, in specified 

regions, combined forestation and forest conservation project” (Chicago Climate Exchange 

2007). 

Leasing and purchasing of water rights occurs throughout the Columbia Basin. The Columbia 

Basin Water Transactions Program (CBWTP) works with eleven “Qualified Local Entities” to 

improve stream flows (CBWTP 2007). 

Thirty-nine water quality trading programs existed in the United States in 2005, but many of 

these programs were not active due to a lack of demand (Willamette Partnership nd-b). 

Temperature credit trading currently occurs in the Tualatin Basin (Clean Water Services 2007) 

and the Willamette Partnership has identified a need to “authorize trading for other constituents 

like phosphorous, dissolved oxygen, and bacteria” (Willamette Partnership nd-b). 

The question of who has the right to sell environmental services that have been generated as a 

result of restoration efforts funded by the Council's Fish and Wildlife Program is uncertain. 

Remarks by Bruce I. Knight, Chief, Natural Resource Conservation Service (2006) indicate that 

“USDA considers environmental credits from agriculture – whether for carbon sequestration, 

water quality, biodiversity or wetlands – to be the property of the farmer – the landowner – the 

one who’s applied conservation practices on the land – regardless of federal cost-share dollars 

invested.” The issue of property rights to these environmental services should be reviewed and 

clarified by the Council. Currently, BPA’s position is that if funds are generated on properties 

purchased by BPA then those funds will be used to offset BPA O&M obligations. 

5. Scenarios for Habitat Acquisition 

In the IEAB report, “A Scoping Investigation of Approaches to Preserving Habitat”, we 

proposed using a grid template to evaluate alternative habitat acquisition against a set of 

16
evaluation criteria. We concluded that the grid template would have to be applied on a case-bycase basis, because each proposed acquisition is unique. For this report we agreed to try to apply 

the template to several hypothetical habitat acquisition scenarios. What we found was that filling 

in the grid was too formulistic, since many of the cells were obviously inapplicable to a 

particular scenario. We suggest instead that the two lists of alternative habitat acquisition 

methods and effectiveness evaluation criteria be retained as a checklist for evaluating specific 

projects (Table 5). 

Table 5: A Checklist for Evaluating Habitat Acquisition Projects 

Alternative Ways to Acquire Habitat

Fee simple acquisitions 

Conservation easements

Settlement agreements

Habitat Conservation Plans 

Land leases 

Options to purchase 

PDR and TDR Programs 

Tradable environmental credits 

Federal farm programs 

Certification programs 

Evaluation Criteria

Cost-effectiveness 

Certainty and durability of protection 

Ability to finance under the Fish and Wildlife 

program or other programs 

Economies of scale and scope 

Opportunities for partnerships and leveraged 

funding 

Ability of BPA to take credit for habitat units 

Incentives for landowner participation 

Community acceptability of ownership 

The section which follows will develop several hypothetical scenarios to illustrate some of the 

alternative ways in which habitat might be acquired, and how the issues in this checklist can be 

addressed. 

Scenario 1: Large Ranch, Inter-generational Transfer Issues, Conservation Easement 

The Jones family has owned a 3000 acre cattle ranch for three generations. The land includes 

five miles of riparian land along a meandering stream tributary to the Snake River. The land is 

20 miles from a small town of 20,000, but two nearby ranches have recently been subdivided 

into 40 acre ranchettes. The land is currently owned by James Jones and his wife, who are 68 

and 65, with some health problems, and thinking seriously about retirement. Of their three 

children, one is a doctor in Portland; another is a lawyer in Boise; and after completing college 

ten years ago the third son returned to help his parents run the ranch with his wife and three 

children. The family has been approached by a developer who has offered the Joneses $6 

million for the ranch. The stream frontage would be especially valuable for ranchettes 

development. James and his wife are tempted, since it is time for them to move closer to medical 

care. The third son is conflicted. He certainly can’t pay his parents $6 million for the ranch, and 

ranch profits have been lean, especially considering the property taxes. However, ranching is in 

his blood and who knows, maybe one of the grandchildren may want to be the fifth generation to 

run the ranch. 

While BPA has in the past demonstrated a preference for fee simple purchase of land for habitat 

mitigation, that option appears unlikely in this case, because the Jones family is very conflicted 

17
about outright selling the property. Moreover, the likely selling price of $6 million is probably 

prohibitive for the Fish and Wildlife Program. (Note that if a fee simple purchase were possible, 

the $6 million expenditure is large enough that it could be capitalized by BPA, so it wouldn’t 

have to be covered under the BPA annual fish and wildlife budget.) 

The obvious alternative to a fee simple purchase is a conservation easement. Working with a 

local land trust and BPA it may be possible for the Jones family to keep the ranch in the family 

and at the same time address some of the financial hurdles of intergenerational transfer. The 

conservation easement would be developed to preserve those elements of habitat that are of 

importance to the BPA Fish and Wildlife Program. Presumably this would involve restrictions 

on the use (including a prohibition against subdivision) for at least the riparian portions and 

perhaps the entire ranch. The value of this conservation easement would be the difference 

between the market value of the ranch with and without the easement. The without-easement 

land value appears to be at least $6 million based on offers already received by the family. The 

with-easement land value is more conjectural. Based on just the value of the ranching returns 

under the restrictions of the easement, the land value might be $1 million or less. This would 

make the apparent value of the easement about $5 million. However the value of rural land has a 

significant lifestyle component, especially for land that includes or is adjacent to protected 

habitat amenities. Research on the land value effects of conservation easements has in many 

cases failed to document a significant reduction in value as a result of an easement (Anderson 

and Weinhold 2005). Establishing an easement value for the Jones ranch would require the work 

of an experienced appraiser. For this scenario, where the easement is intended to prevent 

imminent subdivision, the value could be quite large. Assume for purposes of this example that 

the with-easement value of the ranch is estimated to be $3 million, leaving an easement value of 

$3 million. 

There are a number of possibilities for financing this transaction. The land trust might pay the 

Jones family $3 million for the conservation easement. Presumably at least a major part of the 

purchase price would eventually be paid using BPA Fish and Wildlife Program funds. It is 

possible that some of the transaction costs and a part of the purchase price might be paid from 

other land trust sources. (The transaction costs of organizing and implementing such a complex 

transaction would be considerable – much larger than for a fee simple purchase.) The $3 million 

purchase price would help solve the intergenerational transfer problem facing the Jones family. 

That is, the parents could move to the local town and live on the proceeds of the sale, while the 

son could continue ranching, subject to the easement provisions. 

The family may be willing to accept less than $3 million for the conservation easement. In fact, 

they may be willing to donate at least some portion of the easement value to the land trust. Their 

incentives include the following: 

• They have strong emotional ties to the ranch and are reluctant to see it subdivided and its 

environmental amenities altered. 

• Reaching a conservation easement deal may be the key to addressing family and financial 

goals. 

• A conservation easement may reduce the assessed valuation and the real estate taxes paid 

by the ranch. There may be implications for estate taxes as well. 

18
• The portion of the value that they donate may qualify as a tax deductible charitable 

donation. In the case of the Jones family this may not be a significant consideration, 

since the ranch probably has little taxable income to offset. 

• The family has strong ties to the local community, and is reluctant to make the locally 

unpopular decision to sell the land for subdivision. They are even more reluctant to do a 

fee simple sale to BPA, which would remove the land from the local tax roles. 

There will be ongoing management, monitoring and enforcement costs for the conservation 

easement. Since the easement will presumably be held in perpetuity by the land trust, they will 

also be responsible for these ongoing costs, and may pay some of these costs from their own 

funding sources. Since the funding available to a land trust from its own sources is typically 

limited, an endowment fund is sometimes set up. Such an endowment would need to be funded 

by BPA. For BPA, the endowment route would have the advantage of possibly being 

capitalized, rather than a part of the annual fish and wildlife as is the case of O&M costs of fee 

simple owned habitat land. 

There are several other partnership possibilities that could further enrich this deal. For example, 

the USDA Wetlands Reserve Program or Conservation Reserve Enhancement Program could 

possibly be used to finance projects that enhance the habitat values of the easement lands. 

Similarly, the Department of Interior’s Landowner Incentive Program could be a source of 

enhancement funds. Other long-shot alternatives bear thinking about, and may become more 

important options in the future. If the region has tradable development rights or tradable 

environmental credits programs, the Jones ranch might qualify as a seller. 

In summary, the Jones ranch transaction could not have been done as a fee simple deal because 

of the family’s reluctance to sell. The conservation easement option allows the Jones family to 

meet some important family and financial needs, and allows the BPA/land trust partnership to 

acquire and protect the ranch habitat that they value. At least in this hypothetical case the 

conservation easement alternative cost BPA less than the fee simple route, although the 

transaction cost of setting up the deal would be substantially more than a simple purchase. From 

a cost-effectiveness standpoint, the conservation easement approach proves to be superior in this 

case. 

Whether under current practice BPA could actually claim habitat credits for this transaction is 

unclear – but given the critical role of BPA funding in such a transaction, it is the IEAB view 

that credit should be claimed. 

Scenario 2: Urbanizing Parcel, Metro Partnership 

 

Ten years ago Mr. Jackson bought a 40 acre undeveloped parcel on the fringes of the Portland 

metropolitan area. Mr. Jackson is a successful local businessman. So, while he had no intention 

of farming the land, he thought it looked like a good investment. Mr. Jackson has made 

significant improvements to the grounds and house. The land has remained undeveloped, and the 

cropland has been rented to an adjacent farmer. The parcel also contains 15 acres of forest and 

wetland with high habitat value. The urban growth boundary was recently expanded and now 

includes this property -- an adjacent parcel was subdivided for up-scale residential use last year. 

19
Rumors of impending development on the Jackson parcel have reached the local neighborhood, 

where people value both the open space and the abundant wildlife habitat provided by the parcel. 

This appears to be a prime candidate for acquisition by Metro. Mr. Jackson is not anxious to 

outright sell the parcel for development since he has invested considerable financial and 

emotional resources into the house and grounds, and because he highly values the surrounding 

open space. Metro would be able to move quickly to acquire full market value fee simple 

ownership of the 38 acres exclusive of the Jackson house and grounds. It might also be in 

Metro’s interest to acquire a conservation easement on the 2-acre footprint of the Jackson home 

to prevent future subdivision of that parcel. BPA could partner in the financing of the deal, and 

thus acquire some habitat credits. Mr. Jackson may be willing to donate all or a portion of the 

value of the 2-acre conservation easement since he has capital gains income from the Metro sale 

and other business income to offset with the charitable donation, and there may be real estate tax 

benefits as well. 

If Metro is not interested in this parcel, another possibility is a BPA/land trust deal. One way a 

land trust might structure the transaction is to buy the 38 acres, place a conservation easement on 

that parcel, and acquire a conservation easement on the 2 home site. The land trust might then 

sell a portion of the property for subdivision development subject to the conservation easement 

to help finance the deal. BPA might also help finance the deal in exchange for habitat credits. 

The Metro deal could be accomplished quickly, with low transaction cost. The land trust 

acquisition would be quite complex, which would mean more time and more costs. From the 

BPA perspective, either option could be more cost effective than outright purchase of the habitat 

land by BPA. 

Both the Metro and the land trust options could also involve tradable development rights or 

tradable environmental credits as the use of these tools become more commonplace. 

It is important to note that there is strong opposition by the Tribes to the use of BPA funds for 

mitigation activities in urban areas since they believe these activities provide very little benefit 

to either wildlife species impacted by the hydro system or to the Tribes. 

Scenario 3: Timber Parcel, Conservation Easement 

The Baxter family purchased 100 acres in an Upper Willamette watershed in 1972 and built a 

residence there in 1980. The timber had been logged in 1950, reseeded naturally, and now 

contains about 2 million board feet of mixed species timber valued at $1 million. The current 

family owners, in their late 60s, would like to continue living on the property, but also desire to 

convey some funds to their adult children. 

The land is surrounded by State and Federal forest lands and contains healthy, mature forests 

dominated by spruce, hemlock and cedar, which provide shading for aquatic species, refuge for 

terrestrial species, and woody material for the creek system. Running through the property is a 

small stream that contains important spawning habitat for fish species including steelhead, 

cutthroat trout, and Chinook salmon. 

20
The alternatives facing the Baxter family are similar to Scenario 1, except that the monetary 

value of the parcel is in the trees and not the land itself. The Baxter family could sell the timber 

on their land for $1 million, or they could sell a conservation easement for $1 million. Property 

tax implications are minor under existing state laws. Given the way property tax on Oregon 

timber land is determined, the conservation easement may result in no more than $400 saving 

per year for the parcel. 

A major alternative considered but rejected by the Baxters was to proceed with a Measure 37 

claim which might allow future subdivision of the parcel. (Measure 37, passed by Oregon 

voters in November 2004, allows landowners to claim compensation if land use regulations 

reduce the value of their land, or else to proceed with development.) Legal costs and uncertainty 

of the Measure 37 process are at present a disincentive. Facing the reduced monetary returns of 

forgoing development versus the possibility of maintaining a chosen lifestyle, the family is 

willing to consider negotiating a conservation easement. 

Since the property is within the BPA power supply area (the local PUD receives its power from 

BPA), and the property contains habitat essential to a variety of wildlife species considered 

important to the BPA region, wildlife habitat units may be generated by a conservation 

easement on the land. Private foundations have purchased land (fee simple) in the area; 

however the family is not interested in land sales. Partnerships between BPA, other state and 

federal agencies, and private foundations are a possibility, since the site is in a key watershed 

for numerous species. Overall, the family considers an easement sale a win/win situation. It 

allows continuation of a chosen lifestyle, with some economic returns from the land, while at 

the same time contributing to the support of rebuilding several species of fish and wildlife in the 

region. 

Logging the parcel would destroy many of the attributes that the family values. Rather than 

logging the property, the owners are negotiating a conservation easement package that would pay 

the Baxters $500,000 for the timber cutting rights and allow them to keep the property with a 

“footprint” parcel of two acres for their residence. A regional land trust organization is 

considering including this easement and 500 additional easement acres in the watershed for a 

total of $2.5 million (with funding obtained from private foundations, state and federal sources). 

This land trust will establish an enforcement endowment trust fund of $250,000 in order to cover 

anticipated annual expenses of $12,500. Additional monitoring and enhancement and 

management programs are anticipated as funding becomes available. 

6. Bibliography 

Anderson, Kathryn and Diana Weinhold. 2005. Co Conservation Easements Reduce Land 

Prices? The Case of South Central Wisconsin. Staff Paper No. 484 University of 

Wisconsin-Madison Department of Agricultural & Applied Economics (June) 

Bayon, Ricardo. 2002. A Bull Market in Woodpeckers? Making Money in Environmental 

 Derivatives The Milken Institute Review (First Quarter) 30-39. 

Chicago Climate Exchange. 2007. Forestry Carbon Emission Offsets (accessed June 8, 2007) 

http://www.chicagoclimatex.com/content.jsf?id=242

Clean Water Services. 2007. Temperature Management Plan (accessed June 8, 2007) 

 http://www.cleanwaterservices.org/PlansAndProjects/Plans/TempManagementPlan.aspx

21
Columbia Basin Water Transactions Program. 2007. The Program (accessed June 8, 2007) 

http://www.cbwtp.org/jsp/cbwtp/program/partners.jsp> 

Davies, Brent. 2007. E-mail communication with N. Netusil (June 15). 

Ecosystem Marketplace http://www.ecosystemmarketplace.com

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