The political economy of watershed restoration

My research from my position at Wildlands CPR last year is finally through the approval process and being decimated in the public realm. I have the Executive Summary pasted below, with the links to the specific subsections in the titles.

Watershed restoration provides much more to society than just clear streams, clean drinking water, healthy aquatic and terrestrial wildlife, and thriving forests. It also constitutes an increasingly important part of rural and urban economies. Restoration employs thousands of Americans, many from declining extraction-based sectors of the economy, in well-paying jobs. It often increases long-term community vitality and quality of life. Watershed restoration presents a rare “win-win” situation to conservation and business communities. As such, an expansion of the ecological restoration sector of the economy is in the nation’s best interest.

Unfortunately, relatively little research has been done on the watershed restoration sector of the economy. Important questions remain unanswered. What does the public think about watershed restoration? Who funds most current restoration projects? What policy changes are needed to expand the restoration economy? Wildlands CPR undertook an ambitious yearlong research project to help provide some answers, culminating in the publication of six reports:

1. Perceptions of Watershed Restoration;
2. Economic Benefits of Watershed Restoration;
3. Characteristics of Watershed Restoration Funding;
4. Innovative Financial Mechanisms to Fund Watershed Restoration;
5. Business and Regulatory Environments of Watershed Restoration; and
6. Possibilities of Forming an Ecological Restoration Trade Association.

These reports are an important first step in building up knowledge about various aspects of the watershed restoration economy. This executive summary discusses the findings of each of the six reports, and concludes with a summary of the most important recommendations.

What is Watershed Restoration?

Ecological restoration activists, scientists, and practitioners debate about what actually constitutes proper restoration. The Society for Ecological Restoration’s definition is:

Ecological restoration is the process of assisting the recovery of an ecosystem that has been degraded, damaged, or destroyed.

This leaves much room for interpretation and goes beyond watersheds to include all ecological restoration. For our research, we deemed a project or activity restoration-related if it seemed to fit the spirit of the Society for Ecological Restoration’s definition, especially as applied to watersheds. Some management activities are controversially labeled as restoration, and we purposefully avoided these contentious issues. We deemed a project watershed-related if the project was designed to affect the terrestrial and aquatic components that impact large or small watersheds.  This could include, for example, projects to restore free-flowing rivers through dam removal; projects to reduce stream sedimentation through road removal; in-stream restoration activities; mining reclamation that would reduce or prevent acid  mine-drainage; etc.  We did not include projects that dealt exclusively with forest stand manipulation to address forest structure or fuel hazard reduction, as these projects do not typically consider watershed benefits as their primary purpose.

In addition, urban resource management and watershed restoration may be integrally related.  For example, Maryland has a program that taxes household sewer connections in order to pay for sewage treatment plant upgrades. While this project in and of itself may not be watershed restoration, the project is part of a much larger watershed-level effort to restore the Chesapeake Bay. One major component of the restoration program in the Chesapeake is pollution prevention, to ensure that the water entering the bay is as clean as possible. Thus we deemed the Maryland subprogram as a watershed restoration activity because its ultimate purpose was to enhance the watershed.

Public Perceptions of Watershed Restoration

Understanding public perceptions of watershed restoration is critically important to ensure public support for restoration activities. The public elects officials who have political sway in implementing projects. They vote on bond measures and other restoration funding mechanisms. They also can vociferously oppose projects. We conducted research into how the public perceives watershed restoration activities in order to better address these issues, reaching the following conclusions:

• Among Americans’ environmental concerns, clean drinking water is at the top of the list. Accordingly, they are also concerned about healthy lakes, rivers, and streams;
• While almost 70% of Americans support watershed restoration, an even greater number — 90% — are concerned about healthy lakes, rivers, and streams; and
• People are primarily concerned about their local environments and are most motivated to support local watershed restoration efforts.

Economic Benefits of Watershed Restoration

People often misunderstand watershed restoration as an activity with no product. This misunderstanding is predictable given the complex economic nature of restoration activities. Therefore, it is critical to understand both how watershed restoration fits within an economic framework and the general economic benefits arising from restoration. Our research found the following:

• Watershed restoration is subject to market factors that make its goods and services difficult to trade in traditional economic markets. This usually results in the government acting as the primary provider of watershed restoration. The demand comes from society as a whole, since restored watersheds are a public good;
• Measured by damage caused, willingness to pay, political referenda, averted expenditures, travel costs incurred, and changes in housing values, researchers consistently conclude that watershed restoration has significant economic benefits; and
• Watershed restoration projects have other economic benefits as well, directly and indirectly employing many people and potentially contributing to the long-term viability and growth of communities.

Characteristics of Watershed Restoration Funding

Because so few traditional markets exist for the products that arise from healthy watersheds, local, state, and federal governments fund the majority of restoration efforts. However, little research exists on how these governments go about funding this work. By understanding funding mechanisms and trends in their use, the public can become better informed about how to increase funding for restoration activities. Our research concluded:

• State and local governments usually provide the majority of funds for major watershed restoration projects, although the federal government does significantly contribute;
• A large variety of funding mechanisms provided by different levels of government typically fund large-scale and consistently viable restoration projects; and
• A heavy reliance on issuing debt (e.g. bonds) to pay for restoration activities may change how governments fund watershed restoration in the future.

Innovative Financial Mechanisms to Fund Watershed Restoration

The watershed restoration sector of the economy needs more funding sources. Even though various levels of government already fund—directly or indirectly—the majority of restoration work, these financial and regulatory mechanisms do not achieve the level of restoration that the country needs for a more sustainable natural environment and for a sustained, long-term restoration sector of the economy. We investigated possible financial recommendations and reached the following findings:

• Funding mechanisms differ according to whether liable parties exist that have caused or continue to cause the environmental damage that requires restoration;
• A variety of innovative and promising funding options exist, including mitigation banking, taxes on damaging activities, tax increment financing, special governmental districts, resort taxes, and surcharges on retail goods; and
• Future national climate change legislation has the potential to fund watershed restoration activities. While the science and economics behind whether carbon offsets can fund watershed restoration is uncertain, the potential does exist to fund restoration through adaptation and mitigation monies.

Business and Regulatory Environments of Watershed Restoration

The watershed restoration economy would not exist without the private businesses that implement restoration work. Without robust growth and revenue generating opportunities, expanding and mainstreaming the restoration economy is unlikely. Therefore, it is prudent to analyze what the business environment of watershed restoration is like, what helps and hinders it, and what precipitates long-term economic viability within the sector. This analysis yielded the following results:

• Preliminary evidence shows that watershed restoration firms who engage in federal contracts tend to be small businesses that employ less than ten people and have annual revenues of less than one million dollars. The majority of the firms principally engage in construction activities, but many forestry, consultative, and administrative firms exist as well;
• The permitting process for restoration projects can be duplicative and time consuming, but permitting is required to ensure good work;
• Some practitioners are concerned about liability for their restoration treatments, fearing that they could face lawsuits if their work fails for unforeseen and unintended reasons 10 or 20 years in the future.

Possibilities of Forming an Ecological Restoration Trade Association

Changes in public policy greatly affect the ecological restoration industry. Many other industries that are similarly dependent on the government for their existence have formed themselves into trade associations to influence public policy to their advantage. In doing so, they leverage the respect, influence, and resources of their entire industry to help shape their own future. We researched the possibility of forming an ecological restoration trade association, concluding that:

• The primary goal of a restoration trade association would likely be to conduct lobbying and outreach in order to expand market opportunity, influence regulation, and maximize profits for shareholders;
• A trade association would be best equipped to alleviate the significant gap of knowledge that still exists on the ecological restoration sector of the economy; and
• Restoration firms must perceive that the benefits of joining a trade association would outweigh the time and money it costs them.

Recommendations

These research findings on the various aspects of the restoration sector of the economy yielded many recommendations. The following five items are among the most important:

• Environmental activists should develop talking points and formalize a public relations campaign to better inform the public about the connection between restoring watersheds and clean drinking water;
• To ensure financial stability, the restoration sector of the economy needs multiple new funding sources that should be at local, state, and national levels and consist of multiple different mechanisms;
• Government agencies should consider implementing streamlined and coordinated watershed restoration permitting processes;
• Government agencies should enact a wider variety of permit shields for properly designed watershed restoration projects; and
• Businesses that engage in ecological restoration should form an industry trade association that lobbies all levels of government for business-friendly restoration policy, researches industry activities, and undertakes critical public outreach.