Ecosystem Market – Water Quality and Quantity

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Northern Forest Watershed Project

December 10, 2009 Webinar

Forested watersheds provide two-thirds of drinking water in the United States as well as recreational opportunities, carbon sequestration benefits, and wildlife habitat.¹ With increasing uncertainty in a changing climate, foresters and woodland owners will likely be required to manage for the adaptation and resilience of forests’ natural benefits, also known as “ecosystem services.” Loss of forests to development, such as suburban and exurban sprawl, also threatens perhaps the most important ecosystem service: clean water. Because many municipal water supplies originate in nearby watersheds, forests near metropolitan areas are often the most critically threatened. A recent study found that forests in New Hampshire that contribute to water supply were four times as likely to be developed as other forest land in the state.² In the Northeast, family woodland owners own more than half of the forested land, making them key players in any conservation strategy that protects the water supply and other forest ecosystem services.³

To address this emerging issue in private forest management, the American Forest Foundation (AFF), along with key partners, is developing and implementing a Northern Forest Watershed project that will financially recognize the value of forested watersheds to municipal and other downstream users. The project will provide economic incentives and technical assistance for family woodland owners to restore, enhance, and protect aquatic resources in two critical watersheds in the Northern Forest region—the Crooked River in Maine and the upper Connecticut River in New Hampshire and Vermont.

Market-based approaches are proven effective incentives for sustainable forest management and watershed services. The goal for the Northern Forest Watershed project is to establish a new framework that will “broker” the sale of ecosystem services by private landowners to buyers such as municipalities, government agencies, land trusts, nonprofit organizations, and corporations. For example, conserving the water filtration functions of a healthy forest may prove cheaper than constructing a new water filtration plant.

Funded through a $500,000 Conservation Innovation Grant from the Natural Resources Conservation Service, the three-year project marries two pilot projects in the Northern Forest focused on watershed enhancement and protection through forest management. Key partners on the project include Hubbard Brook Research Foundation, Manomet Center for Conservation Sciences, Western Foothills Land Trust, and White River Partnership. AFF coordinates the parallel pilot projects while Manomet Center for Conservation Sciences and Hubbard Brook Research Foundation provide the technical expertise in the Crooked River watershed and upper Connecticut River watershed respectively. The Western Foothills Land Trust serves as the liaison to landowners in Maine, while the White River Partnership works with landowners in the upper Connecticut River watershed.

Each pilot area is within a discrete forested watershed with significant family woodland ownership. The Crooked River watershed feeds Sebago Lake, which in turn provides the primary water supply to the city of Portland, Maine. The upper Connecticut River watershed spans from the Canadian border to the town of White River Junction, Vermont. While both pilot sites have significant family woodland ownership, each has distinct qualities that illustrate a variety of common issues for connecting watershed users to family woodland owners.

Crooked River Watershed
In addition to recreational opportunities and providing habitat for the indigenous land-locked salmon, the Crooked River watershed directly affects the drinking water of a single major municipality. Sebago Lake is the primary water source for Portland Water District, which serves 25 million gallons of water to nearly 200,000 people daily.⁴ The city of Portland currently holds a filtration waiver from the Environmental Protection Agency, having demonstrated that the water meets federal requirements without filtration. If exurban development continues unabated, the city may lose the waiver, mandating an increased investment in a filtration facility. A proactive investment in forests now will help Portland keep its waiver and avoid far more substantial filtration and treatment costs. Because of the direct linkage between the Crooked River watershed and downstream users in Portland, the project will explore connecting the municipal utility as the buyer and family woodland owners as the seller of watershed credits. The connection to other public “buyers” of clean water, such as mitigation funds and NRCS EQIP incentives, will also be explored.

Upper Connecticut River Watershed
The upper Connecticut River watershed pilot site differs from the Crooked River watershed example primarily because there is no single municipality recipient of the watershed services and the watershed is mostly ground water (rather than surface water). The mainly rural population includes several small townships and a significant agricultural community. The users of watershed services provided in the upper Connecticut are more reliant on water for recreational use than for drinking water. The recreational opportunities in the upper Connecticut attract significant boating and fishing enthusiasts. These distinctions from the Crooked River will provide an opportunity to examine and determine the variety of possible avenues for watershed user engagement.

Project Implementation and Success
The two pilot projects will complement each other by providing concrete examples of payment for watershed services by users. Each pilot site offers a unique context to determine the mechanisms and project steps necessary to develop successful projects. Success is measured not only by a functional trading and incentive system, but also the replication of the project model in other watersheds.

Technical advisory teams for each pilot site will develop the framework for actual transactions. For maximum participation and conservation benefit, we will explore a variety of different incentives for transaction, including direct payments (one-time, annual), cost share assistance, tax incentives, market access preference, and technical assistance. Understanding the political, economic, social and ecological context of each separate watershed will help advisory teams determine which incentives will work best.

Trading criteria are not yet defined, but will include an acreage minimum and a management plan approved by project partners. Family woodland owners will need to demonstrate long-term management actions that actively protect and enhance water quality and quantity, air quality, and sustainable land use. These management actions can include, but are not limited to: riparian buffer management, invasive species control, and adoption of forest road best management practices. Woodland owners will work closely with their foresters in the implementation of the management plan and the monitoring of management activities.

The permanent protection of watersheds also plays a critical role. Therefore properties under conservation easement will be assigned a higher value, as long as their owners implement appropriate riparian buffer and forest management activities. Currently, only 4.7% of the Crooked River watershed and 23% of the Connecticut River watershed is permanently protected under conservation easement. The project will include both the purchase and donation of easements, leveraging granted funding through existing programs like the Portland Water District’s easement program and local land trusts.

While transactions will be primarily based on watershed management activities, we expect the project to produce and enhance other natural benefits, such as wildlife habitat and carbon sequestration. These results (often called “co-benefits”) will help ensure ecological integrity and the protection of healthy forested ecosystems into the future. At first we expect to measure these benefits qualitatively, but eventually the projects should show quantifiable benefits like increased wildlife habitat and carbon sequestration. We hope there is sufficient access to additional markets for these quantifiable co-benefits. For example, if carbon sequestration is measured and verified on an enrolled property, it should be able to participate in the carbon market by selling its carbon credits. Woodland owners will then play an essential role in protecting and adapting natural resources in these critical watersheds.

The Northern Forest Watershed project builds on existing market-based conservation projects, such as the New York City Watershed program and the Willamette Partnership’s Counting on the Environment Program. In preparation for the framework development, we are undertaking an extensive case study review on projects around the globe that provide incentives for landowners managing for water quality. For the first time, parallel watershed projects will be developed, monitored, and assessed in comparison to each other. This parallel comparison will provide a richer analysis of tools and mechanisms necessary for success. To ensure the longevity and integrity of each project, we expect to develop a self-sustaining entity to broker transactions well into the future. These projects will easily link into other public and private partnerships focused on sustainable forest management, water quality issues, and other critical ecosystem services. By serving as a replicable model for other forested watersheds, AFF’s Northern Forest Watershed project will help ensure long-term protection and enhancement of forests and the multitude of services they provide.

Press Release — November 19, 2009