ARIZONAAnnual Report 2016

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2We have witnessed the power of nature around the world this past year in record breaking floods, drought, rising sea levels and more. Nature also has the power to heal, to restore and nurture. As populations increase and demand for food and energy rise, we are faced with serious challenges. How do we meet the needs of people while maintaining the health of the natural environment that sustains us? It is not enough to simply to acquire lands to protect them. Nor is it wise to try to solve one challenge without considering the impacts on other challenges.

The work you are investing in is designed to tackle those challenges by bringing people together, designing innovative solutions, and thinking and acting at a scale that will make a difference. We strive to be a trusted partner and leader, ensuring the power of nature.

Thank you for supporting The Nature Conservancy.

Sincerely,

Pat Graham, State Director

DEAR FRIENDS

The Nature Conservancy in Arizona

LEADERSHIP STAFF Patrick Graham, State Director

Daniel Stellar, Deputy State Director

William Mandeville, Director of Development

Rob Marshall, Director of the Center for Science and Public Policy

Chandra Stewart, Director of Strategic Communications

Christian Stumpf, Director of External Affairs

Sonja Stupel, Director of Finance and Operations BOARD OFFICERSChair: David J. LaneSecretary: Karen L. PetersTreasurer: Timothy R. Snider TRUSTEES David N. BeckhamSteven A. BettsDonald E. Brandt Bonnie ColbyBennett DorranceDavid FarcaSybil FrancisJohn W. Graham

ON THE COVER Agave attenuata in front of saguaro THIS PAGE left to right Patrick Graham © Mark Skalny; Tonto National Forest © Tyra Hughes OPPOSITE PAGE Map: Where TNC works in AZ. Design by Black Dog Design. inset photos clockwise from top: Cabin at Hart Prairie Preserve © Meg Thompson; Male Gila woodpecker in a saguaro cactus © David Harvey; Turkey © TNC photo; Desert bighorn ram © Eric Fazio-Rhicard; Arizona tree frog © Elizabeth Makings; Enjoying kids camp © Chris Chappell; Patagonia-Sonoita Creek Preserve © TNC photo; Vermillion flycatcher © TNC (Tana Kappel)

T H E M I S S I O N

of The Nature Conservancy is to conserve the lands and waters on which all life depends.

Carrie L. HulburdEd PastorEarl Petznick, Jr.Cathy Ries David RousseauAnn SinerDavid C. TedescoWilliam G. Way

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WH

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San Pedro River

Colorado River

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Hart Prairie Preserve Lower San Pedro River Preserve

Muleshoe Ranch Cooperative Management Area

Canelo Hills Cienega Preserve

Aravaipa Canyon Preserve

Ramsey Canyon Preserve

Patagonia-Sonoita Creek Preserve

Hassayampa River Preserve

San Pedro River

Colorado River

Salt River

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Four Forest Restoration Initiative

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San Pedro River

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Colorado River

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THIS PAGE Zach Hauser, Verde Valley farmer and Conservancy partner, inspects his crop at the Conservancy’s Shield Ranch. © Rick Triana OPPOSITE PAGE top to bottom Wine grapes growing at Page Springs Cellars © Felice+Whitney; Grasshopper Point on Oak Creek, a tributary of the Verde River © Paul Gill Photo

Water for Nature, Water for People

We all need water. But as our population grows and our demand for water increases, our rivers are no longer flowing as they once did. New tools are needed to manage this increasingly scarce, and vital, natural resource.

Two new tools are now being employed to support people and wildlife dependent on the Verde River.

Salt and Verde Rivers Water Fund The new Salt and Verde Rivers Water Fund offers a way for communities, businesses and organizations to invest in land and water protection upstream in order to benefit both upstream and downstream water users. The fund would support such water-saving projects as agreements with farmers to grow low-water-use crops and adopt water-efficient irrigation systems.

The fund combines the resources of the Conservancy’s members and donors, with grants and corporate

donations for projects that will enhance water supplies for the Verde River and the many communities who depend on it for water, including metropolitan Phoenix. This year, the new fund harnessed $600,000 in support, including funds from PepsiCo Recycling, Avnet, REI and Boeing, and implemented projects as part of a $2.8 million federal matching grant. One farmer cut water use by 40 percent while doubling the production of watermelons.

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Verde River Exchange A second innovative program is the Verde River Exchange that enables historic water rights holders to voluntarily and temporarily reduce their water usage – creating water credits – that can be subsequently sold to other water users who are seeking to reduce or “offset” the impacts of their water use. The exchange matches buyers and sellers, and as a result, creates a voluntary mitigation program for Verde Valley water supplies.

As part of the program’s inaugural project, Page Springs Vineyards and Merkin Vineyards have each agreed to purchase Water Offset Credits in 2016, offsetting the impact of groundwater use associated with almost 10 acres of vineyards.

The wineries are no strangers to water stewardship. Both use

efficient drip systems to irrigate the grapes for their wines. The exchange enables them to go beyond efficient water use and give some water back to the river.

“The river to me is a gigantic indicator and metaphor for the condition of our landscape and our relationship to it,” said Eric Glomski, owner and winemaker at Page Springs Cellars and Vineyards.

The credits will be used to pay a local farmer who is voluntarily giving up the right to irrigate a small pasture this year.

The program was developed and funded by the Conservancy, Walton Family Foundation, Environmental Defense Fund and Bonneville Environmental Foundation. The Friends of the Verde River Greenway serves as the program administrator, with the guidance of a local advisory council.

One farmer cut water use by 40 percent while doubling the production of watermelons.

“The river to me is a gigantic indicator and metaphor for the condition of our landscape and our relationship to it.”

Eric Glomski, Owner and winemaker at Page Springs Cellars and Vineyards.

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THIS PAGE left to right Phoenix © iStock.com; San Pedro River © Alan W. Eckert OPPOSITE PAGE Leaves in water © Fred Weymouth

When it Rains It Pours in ArizonaA challenge that desert civilizations have wrestled with for millennia is how to store precious rainfall from intense storms, for use later on.

In Arizona’s cities, rainfall no longer sinks into the ground as it once did before we built hard surfaces like roads, parking lots and roofs. In these areas, flood risks are greatly increased. For decades, urban runoff was considered a nuisance, to be efficiently disposed of through sewer systems, ditches, culverts and other means.

Now The Nature Conservancy and its partners in southern Arizona are designing systems that capture that water, allowing it to sink slowly back into the ground where it replenishes the aquifer and feeds the San Pedro River.

One system built in 2014 is already showing its effectiveness at capturing stormwater and replenishing the groundwater: The Palominas recharge facility built by the Cochise Conservation and Recharge Network.

Now, working with Cochise County and the City of Sierra Vista, the Conservancy is developing a new model, this one focused on slowing urban runoff. While occasional natural floods are important for maintaining the health of rivers like the San Pedro, additional urban runoff can wreak havoc in rivers and natural areas by increasing erosion, and transporting sediment and other contaminants from urban areas. Conservancy staff are working closely with engineers and hydrologists this year on designs

for infrastructure that can slow urban runoff moving through the desert washes to enhance the ability of water to sink back into the ground.

The infrastructure would be located on a 3,000-acre property the Conservancy purchased in 2013, which is downhill from Sierra Vista, spanning from the city limits to the adjacent San Pedro Riparian National Conservation Area along the river.

The effort should benefit wells in the area and increase groundwater availability for streamside forests along the San Pedro. The hope is that in the future, when it rains, it not only pours, it recharges.

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Conservancy staff are working closely with engineers and hydrologists this year on designs for infrastructure that can slow urban runoff moving through the desert washes to enhance the ability of water to sink back into the ground.

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THIS PAGE The lower Colorado River where it meets the Gulf of California © Sonoran Institute OPPOSITE PAGE The Nature Conservancy’s Eloise Kendy admires cottonwood seedlings that will now have a chance to germinate on the lower Colorado River after the 2014 “pulse flow.” © Nick Hall

Restoring the Magic of the Lower ColoradoSeveral decades ago, before most of its waters were diverted, the Colorado River still flowed to the Gulf of California, creating a magic mix of freshwater and saltwater that resulted in some of the greatest productivity on earth.

In 2014, the public got a glimpse of that magic when a “pulse flow” of Colorado River water reached the sea for the first time in decades. That pulse flow, combined with a follow-up burst of water, helped produce cottonwood and willow seedlings in areas of restoration along the lower river channel.

This year, Conservancy scientists worked closely with other experts and staff at the Sonoran Institute to develop plans to increase the flows of the Colorado River and restore the estuary where the river meets the Gulf of California.

This year brought a wonderful surprise when Mexican scientists found that native fish, thought to be no longer present, still use the small remnants of the historic estuary. Included are two fish species found nowhere else on the planet. In addition, two of the most important commercial fish species in the northern Gulf of California, totoaba and corvina, that historically grew much faster in the low-salinity conditions of the estuary, were also found in the area.

Successfully restoring the estuary, by returning at least a portion of the Colorado River’s historic flows to the ocean, could revive the fisheries for human communities around the Gulf in addition to rebuilding this ecosystem of global significance.

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Add water and good things happen: Plants, birds and fish begin to return to this once rich delta.

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This year brought a wonderful surprise when Mexican scientists found that native fish, thought to be no longer present, still use the small remnants of the historic estuary. Included are two fish species found nowhere else on the planet.

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10 Forest Planning Takes to the AirTo develop optimum restoration plans, forest planners need data about forest structure, bird populations and landscape patterns. To help with this, the Conservancy along with Northern Arizona University and the U.S. Forest Service are testing the use of remotely sensed LiDAR data (lasers from planes) to predict habitat features on the landscape as well as to predict the amount of small diameter wood available in the forest. The information will help industry make informed decisions about the wood supply and investments in products.

Forest Restoration Goes DigitalFOREST

In with computer tablets, out with paint! This year, the U.S. Forest Service will send its restoration crews into the Coconino National Forest with tablets equipped with mapping software that allow them to “digitally mark” treatment areas with site-specific prescriptions. Harvesters then upload these maps into their own tablets set up in harvesting equipment.

The Nature Conservancy found, as part of pilot tests at two sites, that digital marking was faster than painting by five-fold and reduced per-acre costs from $40 to $16. Also, the results provided clearer representations of tree groups and openings.

The Conservancy is sharing this technology with other northern Arizona forests as well as large forest restoration collaboratives across the country. Use of this technology will accelerate the pace and scale of forest restoration in the country.

THIS PAGE clockwise Computer tablets help in identifying trees to be cut. © Chris Crisman; Fall in the forest © Paul Gill; Logger Ken Ribelin uses new in-cab technology to track thinning in the Coconino National Forest © Mark Skalny

11Restoration Under FireOur forests in northern Arizona evolved with — and need — regular, low-intensity fires to reduce fuel loads, regenerate a diverse understory of grasses and shrubs, and provide light for new growth. Fire can be more often used as a management tool if forests have a lower fuel load that will not increase the risk of fire changing to damaging crown fires.

Increased thinning and other mechanical treatments are reducing fuel buildup across Arizona forests, and that has allowed more use of controlled fire — on more than 120,000 acres this past year. This helps reduce the risk of larger, more catastrophic mega-fires that often burn unnaturally hot in areas of overly-dense trees and cause significant damage to water, wildlife habitat and human communities.

THIS PAGE clockwise Aspens and ponderosa pines at Hart Prairie Preserve near Flagstaff © Rick Braveheart; Arizona Centaury © TNC photo; Controlled burning helps maintain forest health. © Jason Houston

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Healthy Forests Coming to Rim Country

The nation’s largest forest restoration project in the country is underway in four national forests in Arizona. The first plan completed in 2015 covers nearly one million acres around the Flagstaff area.

This year, the U.S. Forest Service, with support from the 30-member Four Forest stakeholder group on which the Conservancy participates and helps lead, embarked on an even larger plan. The Rim Country project covers over 1.2 million acres of the eastern Coconino, Sitgreaves portion of the Apache-Sitgreaves, and Tonto National Forest under the Mogollon Rim. The Conservancy has developed mapping and satellite imagery to analyze these large, complex habitats.

The forest restoration across more than two million acres is aimed at protecting our state’s water supply; keeping our communities safe; maintaining quality wildlife habitat and recreational opportunities; and providing jobs to rural economies.

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Empire Valley to Stay OpenIn southern Arizona between the Whetstone and the Santa Rita mountains is the historic Empire Valley ranchland with Las Cienegas National Conservation Area at its center. Protection of this important grassland — which filters groundwater for the Tucson metropolitan area — has taken a big step forward with the Conservancy’s purchase of a conservation easement covering 800 acres of the Vera Earl Ranch.

The ranch extends north from the community of Sonoita for about five miles across the Empire Valley. The voluntary conservation agreement creates a strategic buffer between Las Cienegas and development near Sonoita. The ranch is located within the training airspace for unmanned aerial vehicles from Fort Huachuca, which partnered in the conservation easement by providing funding through the Army Compatible Use Buffers Program.

The agreement will limit future groundwater pumping that could reduce water in Cienega Creek. The creek harbors several endangered species including Gila chub, Huachuca water umbel, Chiricahua leopard frog and yellow-billed cuckoo.

The owner of the Vera Earl Ranch, Ian Tomlinson, and the Conservancy have collaborated with the

Bureau of Land Management on Las Cienegas for many years. The Conservancy helped design the adaptive management program at Las Cienegas, making it one of the most important grassland demonstration areas in Arizona. The Vera Earl Ranch has been active in this effort through managed livestock grazing, endangered species recovery, and youth education programs.

One indication of the importance of this landscape is that the only jaguar currently resident in Arizona crossed the Empire Valley in this area from

the Whetstone to the Santa Rita Mountains where it currently is thought to live.

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“We’re all adapting to a changing marketplace and changing programs. I think it’s smart to collaborate and to do things the right way.”

Ian Tomlinson, Owner of the Vera Earl Ranch

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THIS PAGE left to right Desert bighorn sheep © George Andrejko; Muleshoe Ranch Cooperative Management Area © Amy Zimmermann OPPOSITE PAGE top to bottom Vera Earl Ranch cattle © courtesy Ian Tomlinson; Prairie dogs © Paul Berquist; Ian Tomlinson © Tahnee Robertson inset Jaguar © Wayne M. Bennet

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Bighorn Sheep Like the Muleshoe Burn One indication of the benefits of fire on the landscape is when wildlife flock to newly burned areas. In early 2016, after a 22,000-acre controlled burn mostly within the Muleshoe Ranch Cooperative Management Area, desert bighorn sheep were attracted to the new grass growth on the newly burned areas.

The burn was part of a FireScape plan to burn 137,000 acres of the Coronado National Forest within the Galiuro Mountains over the next nine years. The Nature Conservancy helped draft the plan, the goals of which are to reduce the risk of catastrophic fire, enhance wildlife habitat, protect private property and restore the natural fire regime to the land.

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THIS PAGE Lestis escietur aut od ute provid mos © Credit

Native Grass Improves Aravaipa Creek Health

It’s no secret that Aravaipa Canyon is one of the most pristine natural areas in the Southwest, with a creek that supports the state’s healthiest native fishery.

What makes the stream and the riparian community so healthy? The answer has to do with how the land upstream is managed.

Efforts at the Conservancy’s Cobra Ranch, part of the Aravaipa Canyon Preserve, are demonstrating that connection. Native grass cropping begun five years ago is helping build diverse seed stock, soil and organic matter, which means better water infiltration.

Native grass hay from the farm is used as mulch on the uplands and fed to cattle as a restoration strategy. The native grasses require one quarter the amount of irrigation as traditional crops such as alfalfa and Bermuda grass.

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THIS PAGE top to bottom Native grass at Aravaipa Creek Preserve © Mark Skalny; View of Aravaipa Creek from the uplands © Justin Baile inset left to right Monarch butterfly on milkweed © Terrie Day; Underwater view of longfin dace, a native fish species found in Aravaipa Creek © John Hoffman

Neighboring ranches are expressing interest in growing the native grass. Analysis of the hay shows it to be comparable in nutrition to traditional hay crops, and in most cases higher in protein.

The Conservancy is also doing erosion control and restoring the natural meanders of tributaries to the creek.

The Bureau of Land Management funded this work — all of it on Conservancy land — as part of a five-year cooperative agreement. Watershed improvements on the Cobra Ranch and other lands upstream from the BLM wilderness area translate to improved flow and function downstream.

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WE CARRY OUT OUR WORK WITH A DEEP COMMITMENT TO ACCOUNTABILITY AND TRANSPARENCY. As a leading global charity, we hold ourselves accountable to our members, the public and all who have a stake in the preservation of the world’s natural resources. And we seek to make use of every dollar donated to The Nature Conservancy with careful attention to effectiveness and efficiency.

We are able to accomplish so much because we make careful use of our resources, with 79 percent of our funding going directly to our science-driven conservation work. Charity Navigator and the Better Business Bureau applaud program efficiencies above 66 percent, so you can be confident that any investment in the Conservancy will be put to good use.

Programmatic Efficiency

Support & Revenue

Conservation79%

Donor Support79%

General &Administrative10%

Grants & Contracts 18%

Assets At June 30, 2016 At June 30, 2015 Operating Cash $2,138,264 $2,433,035Reserve and Land Funds $28,831,936 $28,518,213Endowment Funds $26,670,218 $28,298,292Conservation Lands $44,317,054 $42,507,054Other Assets* $8,636,684 $2,693,538Total Assets $110,594,156 $104,450,132 Liabilities $13,357,164 $13,426,737Net Assets $97,236,992 $91,023,393Total Liabilities & Net Assets $110,594,156 $104,450,130

(July 1, 2015—June 30, 2016)

Fundraising 11%

Investment Income3%

FY 2016Total Support

& Revenue$15,673,625

FINANCIAL RESULTS*

THE NATURE CONSERVANCY IN ARIZONA STATEMENT OF FINANCIAL POSITION

FINA

NCIA

L RESULTS

*Effective FY16 specific TNC chapters realize revenue from pledges at the time they are made. This resulted in $4,119,994 in Other Assets - Receivables.

FY 2016 Total Expenses

$9,460,026

*These financial results are unaudited and chapter specific. Please check nature.org for TNC-wide audited financials that are GAAP compliant.

Nonprofit OrgUS Postage

PAIDTucson, AZ

Permit #2216

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NATURE THANKS YOU

Blackfoot daisies © Tana Kappel; Poppies in bloom at Muleshoe Ranch © Janice Thorup; Red fox © Paul Berquist; Flame-colored tanager © Arlene Ripley; Comanche Skimmer dragonfly © Cary Kerst; Mary Lata, a Forest Service fire ecologist, monitors prescribed fires in Arizona. © Chris Crisman

The Nature ConservancyArizona Chapter 7600 N. 15th Street, #100 Phoenix, AZ 85020

nature.org/arizona

Tucson Conservation Center1510 E. Fort Lowell Rd.Tucson, AZ 85719