report of the ‘mapping, mitigation & assumption’ sub …

1 December 14, 2018

REPORT OF THE

‘MAPPING, MITIGATION & ASSUMPTION’ SUB-WORK GROUP

Recommendations for Action

SUB-WORK GROUP CHARGE

The Mapping, Mitigation and Assumption Sub-Work Group was charged with identifying short-term recommendations for the 2019 legislative session, as well as longer-term priorities, from a list of possible topics generated at the September 27, 2018 Wetland Regulation Work Group Meeting. The list of topics to be considered included: 1) the Statewide Wetlands Inventory (SWI) rollout, 2) Wetland Land Use Notification (WLUN) process, 3) insufficient maps, 4) Local Wetlands Inventories (LWI), 5) Advance Aquatic Resource Plans (AARP), 6) storm water agency coordination, 7) state assumption of the 404 program, 8) mitigation banking supply and credit cost, 9) mitigation ratios, 10) Transfer of Development Rights (TDR) opportunities, 11) zoning, and 12) affordable housing in rural communities.

SUB-WORK GROUP MEMBERSHIP

Twelve individuals were selected by Co-Chairs Susan McLain and David Brock Smith to serve on the Sub-Work Group:

• Amanda Punton, Oregon Department of Land Conservation and Development

• Brian Latta, City of Harrisburg

• Chandra Ferrari, Trout Unlimited

• Dave Hunnicutt, Oregonians in Action

• Eric Metz, Department of State Lands

• Jon Chandler, Oregon Home Builders Association

• Joy Vaughan, Oregon Department of Fish and Wildlife

• Kahreen Tebeau, The Nature Conservancy

• Mary Anne Cooper, Oregon Farm Bureau

• Pat Hare, Cascades West Regional Consortium; City of Adair Village

• Peggy Lynch, League of Women Voters of Oregon

• Susan Morgan, Association of Oregon Counties Additional individuals played resource or substitute roles: Dana Hicks (DSL), Jevra Brown (DSL), Mike Eliason (AOC), and Samantha Bayer (OFB). The Nature Conservancy and Trout Unlimited needed to withdraw early in the process due to staffing resource limitations. Therefore, it should be noted that the environmental conservation perspective was not fully represented and engaged in report discussions and final recommendations. State agency representatives were full participants, but non-voting members. Staff: Laura Kentnesse, LPRO Analyst

2 December 14, 2018

RECOMMENDATIONS FOR ACTION

The Sub-Work Group recommends action on the following three topics: mapping, mitigation banking, and

assumption of the Clean Water Act Section 404 program.

I. Mapping: Statewide Wetlands Inventory & Wetland Land Use Notification Process

ORS 196.674 directs the Department of State Lands (DSL) to compile and maintain a

comprehensive Statewide Wetlands Inventory (SWI), and to revise the inventory maps as new or

more complete information becomes available. In recent years, the SWI has consisted of the

National Wetlands Inventory (NWI), Local Wetlands Inventories (LWI), and wetland delineations. In

2018, DSL updated the SWI to add and integrate the National Hydrography Dataset and Natural

Resources Conservation Service (NRCS) soil datasets. These changes will result in the SWI now

showing areas that have a high probability of containing wetlands, which should reduce the

likelihood that local jurisdictions unknowingly approve projects sited in wetlands, and the likelihood

that landowners unknowingly develop in wetlands and face possible enforcement action. The

majority of the Sub-Work Group supports the intent of this mapping change.

The increased map coverage is expected to result in local jurisdictions submitting an increased

number of Wetland Land Use Notices (WLUN) to DSL. DSL estimates an approximate 50 percent

annual increase from 481 WLUN to 732 WLUN per year on average.

Recommendations for Legislative Action

1. Fund NRS-3/1.0 FTE for DSL to increase capacity to respond to expected increase in WLUN; also allows DSL to respond to WLUN with more onsite wetland determinations where possible, reducing some need for landowner-funded wetland delineations

2019 session Consensus support

Recommendations for Non-Legislative Action

1. DSL should roll out the updated SWI to agencies, local jurisdictions, and the public, for all areas where LWIs haven’t been completed

As soon as possible

Majority support

Nay: Mary Anne Cooper (OFB)

2. DSL and local jurisdictions that use LWIs shall continue conversations to resolve the relationship between LWIs and SWIs for the purposes of Wetland Land Use Notification

As soon as possible

Consensus support

3. DSL shall ensure that all SWI messaging is very clear that hydric soil maps are usually an overestimation, and do not always reflect wetland presence

As soon as possible

Consensus support

4. A robust education program shall be created for SWI users so that local planners understand its capabilities and applications

As soon as possible

Consensus support

5. A regular advisory group of SWI users shall be formed to discuss implementation and needed changes, and DSL should be flexible and responsive to feedback

As soon as possible

Consensus support

3 December 14, 2018

II. Mitigation Banking

Compensatory mitigation aims to replace aquatic resource functions and values that are lost due

to removal-fill project impacts. Current compensatory mitigation options include purchasing credits

from a mitigation bank or in-lieu fee project, permittee-responsible mitigation, and payment-in-lieu

mitigation. Purchase of mitigation bank credits is the option most frequently used by developers in

recent years, with 21 banks operative in Oregon and 4-5 additional banks in process. Mitigation

banks set the price of their credits and release them over time (typically over 5-7 years) as the

project achieves performance measures for aquatic resource improvement.

Mitigation banks can be private or public business ventures. Private sponsors currently use private

financing options. For public sponsors, Business Oregon can function as a lender offering long-

term, low-interest loans from the Special Public Works Fund. Under current statute and rules,

Business Oregon has the flexibility to tailor loan terms, rates, and patience timelines to the unique

needs of mitigation banks. Some of those unique qualities include a potentially long return-on-

investment timeline, the synchronization of numerous environmental and economic variables, and

a requirement to maintain and monitor a site for five years following credit sales.

The Wetland Regulation Work Group, Department of State Lands, and various stakeholders, have

been hearing concerns about a diminishing supply of mitigation credits in some geographic areas

of the state, and the high and variable cost of mitigation credits. The Sub-Work Group has noted

that these issues make it challenging to develop affordable housing on properties containing

wetlands, particularly in small, rural communities.


1. Create pilot program for a county-city partnership (Cascades West Regional Consortium) to build their own mitigation bank on publicly-owned land and/or hire a mitigation bank developer to build a bank on the consortium’s behalf, to be paid in credits; provide funds to Business Oregon to support pilot program loan


2. Amend ORS 196.643 to allow payments to the Oregon Removal-Fill Mitigation Fund when credits from approved mitigation banks are available



1. Increase use of in-lieu fee program to allow DSL or other sponsors to buy and hold credits, and to sell advance credits

2019 – 2020 Consensus support

2. Educate communities that they have the option to put out Request for Proposals (RFPs) for bids to provide credits


3. Encourage DSL and Business Oregon to collaboratively educate public entities on Business Oregon programs that may support mitigation bank development


4. Initiate robust collaboration among the private sector and local, state, and federal entities to better align mitigation opportunities, regional restoration implementation, and funding (Appendix A)


4 December 14, 2018

III. Partial State Assumption of the 404 Program

Section 404 (404) of the Clean Water Act establishes a program to regulate the discharge of

dredged or fill material into waters of the United States, including wetlands. The U.S. Army Corps

of Engineers (Corps) administers the federal 404 permit program, and the U.S. Environmental

Protection Agency (EPA) enforces the program. The Clean Water Act contains a provision

enabling states to “assume” the 404 program, provided that the state has a waterways and

wetlands regulatory program equivalent to the federal program.

The State of Oregon has had a regulatory program for removal and fill activities within waters of

the state since 1967; it is administered by the Department of State Lands (ORS 196.795-990).

Oregon’s removal-fill law contains adequate language for state program equivalency, and the

Oregon Department of Justice has determined that the state and federal programs are sufficiently

equivalent for the purposes of assumption, though there are significant differences in exceptions

and administration of the programs. Additional legislative approval is needed to allow state

assumption.

In July 2018, the U.S. Army Corps of Engineers and Environmental Protection Agency (EPA)

reversed position and are now not only supportive of states and tribes assuming the 404 program,

but actively encouraging it. The EPA is engaged in a 2019-2020 rulemaking process for 404(g)

regulations that will likely include allowing state ‘partial assumption’ of the 404 program. If the

Oregon Legislative Assembly were to pass the bill recommended below, several actionable items

would still need to occur prior to assumption: Governor Brown would need to write a letter of

support, DSL assumption application would need to be submitted and approved, and the

legislature would need to approve a future biennial budget that included funding for assumption.


1. Legislative approval to allow DSL to partially assume federal 404 jurisdiction. Activities to be assumed would include development activities inside urban growth boundaries and non-agricultural and non-forest uses outside urban growth boundaries

2019 session Majority support

Nay: Peggy Lynch (LWVOR)

2. Amend ORS 196.800-.905 uncodified session law to reflect the exclusion of agricultural or forest uses from assumption authority, and to restore agricultural and forestry exemptions that had been removed in anticipation of full assumption



3. Fund NRS-4/1.0 FTE for DSL to engage stakeholders, resolve questions related to tribal and Endangered Species Act consultations, and to prepare the partial assumption application




1. DSL should continue conversations with the EPA and Corps to ensure federal CWA modernization rulemaking allows for partial assumption by states in a way that is workable and desirable for Oregon

As soon as possible

Consensus support

2. DSL should conduct a funding analysis to better understand funding needs and a funding strategy for partial assumption

As soon as possible

Consensus support

5 December 14, 2018

STATEMENT RELATED TO FUNDING PROPOSALS

This Report includes several funding proposals: 1) 1.0 FTE for DSL wetland land use notice response

capacity, 2) 1.0 FTE for DSL 404 assumption process capacity, and 3) funding for the public mitigation

bank pilot program.

The Sub-Work Group was divided on which of these proposals most deserved funding. For at least one

Sub-Work Group member, support for the mitigation bank pilot program was also given with the caveat of

not knowing the cost at this time.

APPENDIX A

Restoration Community Engagement in Mitigation Banking


1) Improved interagency collaboration among the private sector and local, state and federal entities to identify mitigation opportunities and implement regional priorities for restoration on public or private lands. This may include:

• Continued encouragement of new mitigation opportunities throughout the state;

• Coordination with local governments on mitigation opportunities that align with greenspace/habitat/storm water and water quality improvement needs;

• Alignment of grant opportunities and DSL mitigation funds by basin, and improved interagency coordination related to monitoring methodology and reporting for jointly funded projects.

2) Development of education and outreach tools highlighting the framework and opportunities of aligning the restoration community and compensatory mitigation sites (permittee responsible, PIL, ILF, or mitigation banks). This may include:

• The development of outreach materials for watershed councils, land trusts, NRCS, SWCDs, and others to increase collaboration between net-benefit funding sources and net-zero mitigation sources;

• Development of tools that help guide landowners to restoration funding sources, understanding mitigation opportunities and encouraging public-private partnerships investing in conservation outcomes;

• Facilitating networking opportunities between permit applicants trying to find mitigation sites with restoration organizations and willing landowners.

3) Build capacity to provide a higher level of technical assistance in achieving conservation outcomes. This may include:

• Increase awareness and access to information already available related to watershed priorities and conservation actions (watershed assessments, Oregon’s Wetland Program Plan, state strategic plans, conservation and recovery plans, etc.);

• Increased resources to improve the effectiveness of the Mitigation Planning Map Viewer (http://oetest.library.oregonstate.edu/topics/aquatic-mitigation?qt-subtopic_quicktab=0&ptopic=38) and other GIS and web-based tools to provide current data that support wetland and stream project siting;

• Increased resources for updating existing watershed assessments and planning documents with the identification of specific opportunities for wetland and stream projects;

• Increased resources for DSL staff to identify and investigate potential mitigation sites.

http://oetest.library.oregonstate.edu/topics/aquatic-mitigation?qt-subtopic_quicktab=0&ptopic=38

http://oetest.library.oregonstate.edu/topics/aquatic-mitigation?qt-subtopic_quicktab=0&ptopic=38

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APPENDIX B

404 Partial Assumption Strawman Language

Recommendations for Legislative Action: 2019 Legislative Session

Relating to assumption of authority to administer permits under Federal Water Pollution Control Act; and

declaring an emergency.

SECTION 1

(1) In accordance with the requirements of section 11, chapter 516, Oregon Laws 2001, the Legislative

Assembly approves the grant of authority from the United States Environmental Protection Agency

to the Department of State Lands to partially assume administration of the program to issue permits

for the discharge of dredge or fill materials under Section 404 of the Federal Water Pollution Control

Act (P.L. 92-500, as amended).

(2) Partial assumption authority is limited to development activities inside urban growth boundaries and

non-agricultural and non-forest uses outside urban growth boundaries.

(3) Prior to assuming authority under subsection (1) of this section, the Department of State Lands shall

submit a report to the appropriate legislative committee during the regular session of the Legislative

Assembly, or to the appropriate legislative interim committee between legislative sessions, setting

forth the final proposed agreement with the United States Environmental Protection agency and any

proposed revisions to administrative rules of the department that are necessary for the assumption

of authority.

SECTION 2. Amend ORS 196.800-.905 uncodified session law to reflect the exclusion of agricultural or

forest uses from assumption authority, and to restore agricultural and forestry exemptions that had been

removed in anticipation of full assumption.

SECTION 3. This 2019 Act being necessary for the immediate preservation of the public peace, health and

safety, an emergency is declared to exit, and this 2019 Act takes effect on its passage.

Note: The legislative approval in Section 1 is needed to make prior statutory changes operative (ORS

196.800(17); SB 172, 2001).

7 December 14, 2018

APPENDIX C

Additional Recommendations from Sub-Work Group Members

The following items are additional policy recommendations submitted by Sub-Work Group members. The

recommendations are listed in this Appendix because they either did not receive majority support, or there

was not sufficient time for the group to discuss and consider them fully.

Dave Hunnicutt (Oregonians in Action), Pat Hare (Cascades West Regional Consortium),

Jon Chandler (Oregon Home Builders Association)

1. We support legislation that provides that an applicant who obtains a 404 permit from the Corps is not required to obtain a removal/fill permit from DSL for the same activity. This legislation would terminate for those uses for which DSL has assumed 404 jurisdiction upon federal approval of DSL’s assumption request.

2. For wetlands that are not WOTUS, we support a lowering of the mitigation ratios for fill permits

required as a result of needed housing development, as defined in ORS 197.303.

3. We support legislation that allows an applicant for development in a jurisdiction that has an approved Advance Aquatic Resource Plan to not be required to obtain an individualized delineation of the development site, provided they are not developing within the area mapped as wetland on the AARP maps.

Mary Anne Cooper and Samantha Bayer (Oregon Farm Bureau)

1. It is evident that the regulatory uncertainty and associated land costs are making mitigation banks challenging from a business perspective. In light of these difficulties, the State should determine whether its requisite ratios/standards are appropriate.

2. For wetlands that are not considered Waters of the United States, OFB supports lowering mitigation ratios for fill permits that are required as a result of housing development.

3. In terms of streamlining, the State should consider not having state standards when a federal

permit is already required. As such, OFB is supportive of legislation mandating that if an applicant obtains a 404 permit from the Corps, that applicant is therefore not required to obtain a removal/fill permit from DSL for the same activity.

4. Any proposal for mitigation banking should be properly analyzed to ensure there is no added flood

risk to neighboring land.

5. OFB has remaining concerns about the statewide wetland inventory and how it could affect agricultural practices that have unclear status under current state fill and removal laws. OFB is supportive of a legislative exemption from the wetland land use notification process for small-scale farm stand-type operations.

Joy Vaughan (ODFW), Dana Hicks (DSL)

See Appendix A for ODFW and DSL recommendations on the relationship between mitigation banking and

the restoration community.

8 December 14, 2018

Amanda Punton (DLCD)

Question for the Wetland Regulation Work Group: Would changing the way a buildable land

inventory (BLI) is compiled, to more accurately recognize the constraints to development posed by

wetlands, alleviate some of the challenges faced by cities located in areas where wetlands are

prevalent?

DLCD rules for identifying buildable land treat locally significant wetlands differently from other wetlands.

Locally significant wetlands that are protected by local codes are not counted as buildable. Non-significant

wetlands are counted as fully buildable. These rules were developed 25 years ago at a time when state

and federal mitigation requirements were less stringent and mitigation sites were easier to come by. It was

assumed that, in the absence of local protection, all wetlands were potentially buildable. The mitigation

side of the equation needed to make this true was not addressed in local or state long range plans. The

current reality is that there are additional costs and substantial logistical obstacles to developing land with

jurisdictional wetlands. In some cities much of the vacant land zoned for housing and industrial

development is wetland, yet a clear path to developing these properties is not apparent. Changing DLCD

rules and policies to be more considerate of state and federal wetland mitigation requirements would result

in more accurate estimates of buildable lands.

One possibility is to count only a percentage of non-significant wetlands as buildable. Further study is

required to determine an appropriate percentage, however for the sake of discussion, if 30% of non-

significant wetland acres were counted as buildable, long range plans could allow for 70% of degraded

wetland in the city to be available for mitigation. This would result in more wetland being retained inside

UGB. Such an approach would need to be evaluated from the perspective of various land use objectives.

Land use considerations related to changing the buildable land status of non-significant wetland

Wetland Function

Ag Land Considerations

Planning Hurdles Planning Benefits

Restoration inside UGB

• Functions that benefit a city are maintained.

• Small wetland restoration projects [< 0.2 acres?] are more likely to lose function over time.

• Restoring and maintain wetlands inside UGB will result in future need to expand the UGB into Ag land.

• Some clustering and higher density housing options will need to be considered.

• UGB expansion may be needed sooner.

• Retention of natural areas in a city can be benefit.

• Wetlands can be compatible with city recreation objectives.

Restoration outside UGB

• Functions that benefit a city are lost.

• Consolidated mitigation for many small impacts is more likely to maintain function over time.

• Wetland bank credits to mitigate impact of development inside UGB will be created on Ag land.

• Lack if control over credit supply and cost brings uncertainty to developers.

• Allows site design to be determined without consideration for location of wetlands.

9 December 14, 2018

Dana Hicks (DSL)

DSL recommends that public money would be best directed to the following:

1. Increase the certainty of investment in mitigation projects – ensure a certain number of credits will be purchased to lower risk and provide a stronger business plan; provide land use planning to identify where wetlands are located and which functions and values may need to be compensated for if the wetlands are developed; provide a backstop for unsold/unrealized credits attributable to factors beyond the bank sponsor’s control (e.g. force majeure for weather, floods, decreased market demand, decreased water availability due to upslope uses, etc.); promote public/private partnerships.

2. Pre-identify suitable compensatory mitigation sites – provide resources to identify and plan sites for compensatory mitigation projects (e.g. do the advance work necessary to locate a site, gather necessary baseline information such as a function assessment and wetland delineation, screen the site for contaminants, screen for and remove land title issues, etc.); focus on publicly-owned land to avoid issues and costs associated with purchasing private land.

3. Provide patient start-up financing – provide patient repayment of financing for start-up costs so

that funds can be repaid as the mitigation site performs and mitigation credits are sold.

4. Broaden and deepen the pool of conservation easement holders – promote development and training of qualified entities to hold conservation easements.

Susan Morgan (Association of Oregon Counties)

1. Amend Business Oregon statutes to allow infrastructure funding to be used to buy mitigation

credits for sale at cost to specified types of projects (e.g., affordable housing). The purchased

credits would be banked by Business Oregon to be used as needed.

Note: If we can encourage the development of credits in slow economic times that we can bank

and use in hot economies, then the pace of economic development will be increased, and the cost

of credits may be somewhat contained.

2. The legislature should require DSL to report regularly to appropriate committees on the substance

and progress of assumption.

3. The DSL assumption funding analysis should include costs internal to DSL, and costs external to

DSL, including local government and the private sector.

A1 December 14, 2018

ADDENDUM TO THE SUB-WORK GROUP REPORT

Recommendations for Action

ADDENDUM

The following recommendations and comments reflect feedback pertaining to the Report of the ‘Mapping Mitigation & Assumption’ Sub-Work Group.

Feedback was solicited at the work group meeting on December 11th, 2018. Feedback was also solicited via electronic submission, though no additional comments were submitted.

Mapping: Statewide Wetlands Inventory & Wetland Land Use Notification Process

Notes

12/11 Meeting

• Mary Anne Cooper: Just wanted to clarify for folks why I was listed as a “nay” on that. There’struthfully an entire class of small-scale ag activities that maybe do pull local permits like a smallfarm stand, or that do have local government touch, that have probably never gotten a permit, orprobably never thought about how they might trigger this kind of permit. If they’re close in to theirexisting home site, they may not. I think some of them may. It may be kind of cost-prohibitive forthat whole class of small, on-farm activities. Without resolving some of the issues around cost ofmitigation, cost of the permitting process, expense and time involved. I know this is probably trueof an entire class of small development activities. I’m just thinking of the farm ones. Having themtrigger on a mass scale a lot more interaction with DSL without first having fixed some of thoseprocess issues, and requirements for really small-scale projects. We just can’t get behind it. Iknow that existing law is that this would exist and be triggered. For us, having interacted with theprogram enough, there’s a whole class of small-scale development out in rural areas thatprobably just won’t happen with this trigger. That’s a policy choice. That’s why on our policychoice – to the extent that we got one – we said no.

• Rep. McLain: We’re talking about mapping. When we’re talking about mapping we’re talking aboutmoney. We’re also talking about trying to take out the incongruencies between the differentmapping that’s been done. And ground-truthing. Seems like that’s a good discussion to have.

• Peggy Lynch: The other FTE that’s about the mapping… I believe was also not a part of DSL’soriginal budget. So I wanted to make that clear.

• Rep. McLain: Any comments on ‘ongoing conversations needed?’

• Pat Hare: There’s wide support for mapping, all they’re waiting to do is roll that out. But there aresome concerns from cities and the ag community about the nervousness… well, for the citiesLWI. If we have to notify based on the SWI, why are we doing LWIs? What would be the point?That was part of our argument. The other part was – is the soils layer going to be misconceived towhere everyone is submitting applications. You can already tell DSL is expecting that to happen,that’s why they need an FTE. They’re going to get a ton more applications. I’m not saying that’s abad thing. In our group, we talked about a pilot for rolling that out, or forming a committee to workwith DSL so that cities that have LWIs work with them to roll it out. See what those impacts are.There was concern about just rolling it out without education, and without some way to come backand revisit it about any negative impacts. The soils map is the real concern. We thought it’d behelpful if we helped them roll it out.

• Jevra Brown: I want to make a comment to clarify that again – I think you’re very understanding ofthe intent, which is to provide a way to decrease the number of false-negative mapping. Thinkingthat the map showing uplands when there may actually be wetlands. What the opportunityprovides is that educational opportunity – oh, something might be there. It allows both the publicand planners to enter into a conversation with the department. That’s a free step. Wetland landuse notices are free. Offsite determination requests are also free. The FTE really allows us to takethe additional free steps to planners and the public. It also allows us to go on site when possible.That site visit may allow us to say – over here where you’re thinking of doing this activity, thatwould impact wetlands. But if you do it over here, it wouldn’t impact wetlands and you could avoida permit. It avoids all of these issues that we’ve been discussing. That FTE allows us to help


people avoid the issue entirely. There is a conversation for us to continue to have with the LWI cities, and I’m looking forward to it.

• Rep. McLain: What it points out again is the importance of the partnerships. The weakness of thesystem. We’ve got to try to improve the data, improve the mapping. And that we have what weneed as far as process and access. And make sure that everyone’s on the same page withoutconfusing the landowner, developer, or person developing a mitigation bank.

• Brian Latta: I’m probably the biggest skeptic to the SWI, which is sad because I love maps. I’m amap guy. I’m going to come at this from a practitioner standpoint because I’m also the cityadministrator and planner for the City of Harrisburg, so I’m involved in wetland land use noticesand I get them all the time. The concern I have is that the statute that requires the wetland landuse notice is under ORS 227, so it’s a planning requirement not a state lands requirement. It says– we should provide notice when there’s a wetland that’s shown on the SWI. I like maps, and I likegood information, but where we start to require notices on things that are not wetlands per se, orpotential wetlands, it becomes unclear about when wetland land use notices are required. Are weactually achieving protection at the sacrifice of delays in development activities and permitting. Ihave great concerns in that respect bc we do these LWIs, which becomes part of the SWI. A LWIprovides better information than the information on the NWI or LWI. The concern expressed in thegroup was that LWI doesn’t always provide site access (the person that provided the data didn’tget onto all the properties in the city, so how do we have good data). Same logic for soil maps –did we go onto every piece of property to provide the soil data? I don’t think so. So, it’s not like thesoil data is better than the LWI, I’d argue the opposite. I have a hard time saying that we gothrough a big process and spend a lot of money – and we’re a small city, but we found it importantsince we have a lot of wetlands – to provide an LWI. But now the LWI really wouldn’t have aneffect because the SWI is what I have to base my wetland land use notices off of for ORS, whyam I doing the LWIs? I lose the incentive to do an LWI if I have to look at the SWI for a wetlandland use notice. My other concern is if we are basing it off of the SWI and hydric soils are a part ofthat, and it has much broader impact than the wetlands on there, it’s not only not in the statute butwe’re getting back to Bill’s point that DSL is already slammed. They expect if we roll out the SWIfor the number of wetland land use notices to go way up. Good luck with that.

• Peggy Lynch: This is actually the issue that created this work group as I understand it. The factthat there was a landowner out of Junction City who discovered after the fact that he might havedone the wrong thing. So DSL has tried to address that issue with the SWI, and we’re back atsquare one. It is important, and Brian’s comments are really important about the LWI and SWI,that’s why on p.2 #5 rec was to get people together to figure out how to address the issues still onthe table around this. It has to do in part with those cities who actually took on the LWI work v. therest of the state counties and cities that haven’t. Trying to work out that balance and figure thatout is in fact what that advisory group is for.


Mitigation Banking

Notes

12/11 Meeting

• Peggy Lynch: Related to Business Oregon and mitigation banking – great conversation. Goodthings that may be able to happen. Or not. I want to put out a couple of points that are in thereport, but I want to make sure people understand. I’m not an expert on mitigation banking. As Iunderstand it, you have to maintain that bank for at least 5 years. That’s a cost. When we listenedto mitigation bankers, they explained that that’s an issue. The fact that they sometime have tohold those areas for a number of years before they got to sell their credits. So patient financing isalso something that’s really important. As we pursue this conversation about Business Oregon’slink to this process, the people with the fiscal acumen need to pay attention to that. Is this reallythe right thing to do with the state’s money? How can we protect the state’s money, while alsoaccomplishing our goals? Those are some of the concerns I had about this. Lastly, we did learnthat the Special Works Public Funds could be used, I understand, possibly, as a grant or loan forthis. In the Governor’s budget, there is an increase in the water quality permitting processes. Thereason that those permits have not happened as fast as they should have over the years, isbecause of the cost of actually implementing those permits, particularly by small, ruralcommunities and small entities. This push to get the permits done – which the League hassupported and is supporting – will trigger the need for moneys in the Special Public Works Fundfor those loans for those entities. When we’re looking at the mitigation banking, and BusinessOregon and the legislature looks at this, we need to think about the balancing act of limiteddollars, and/or getting more money into the revolving loan fund to make sure those things happen.I think those are really important. I like the idea – since so much work has been done byCascades West (17 sites, 5 cities) that perhaps we could find some funding to actually do a pilotto see how this system would work. But that would be limiting the funding and opportunity to dothis.

• Dave Hunnicutt: Here’s what we found when we started talking about mitigation banking. We hadthree different private mitigation bankers come in. As you know, there’s a statute currently thatprohibits the state from competing with private bankers. I may have had a part in that when thatwas passed, but I’m here to tell you from our conversations, that we need to get rid of that statute.What we’re finding is that it’s almost impossible for a private citizen, property owner, that wants tostart a mitigation bank, to find traditional financing. You can’t walk into Wells Fargo or US Bankand say I need a million dollars to develop wetlands. The bank will say how are you going to payback your loan? You say, well maybe I’ll be able to sell them at some point but it may be oneyear, might be 20 years, might be 40 years down the line. We heard repeatedly that you can’t findtraditional financing. One of the bankers went down to the local bank credit union where he knewthe manager. In the end, they borrowed money. But the only reason the bank didn’t foreclose isbecause they would’ve just turned right back around to him and say manage the mess that yougot us into. For that reason alone, we need some help. There’s also very uncertain regulations.So when you’ve got capital to invest and you have a project with uncertain regulations, youprobably will find a project to invest your money in where you have more certainty on the return.What we’ve discovered, and one of the reasons I’m very interested in this – the mitigation bankingcosts, especially for the small cities in the valley, are killing development. Development that theland use system says we’re supposed to do. We can’t do, because the mitigation banking costsare so high, that if you have to do offsite mitigation to make your development project work, itwon’t pencil out when you’re paying $200,000/acre in offsite mitigation for a project in a smalltown where you’re not selling the houses for $475,000 a unit bc no one in town has the money topay that. If you want development in smaller cities where you have wetland issues, which is thisside of the mountains, we need some help to get some more banks. I thought the work groupcame up with a really elegant solution on mitigation banking and partial assumption to help us getthere.

• Rep. Leif: Dave, you said at the beginning… “get rid of…” I didn’t catch what that was.

• Dave Hunnicutt: There’s statutory language that provides that when you have a private mitigationbank serving a watershed, that a government mitigation bank cannot be sited to compete with thatprivate mitigation bank. What we discovered was that if we keep that statute in place – and youdon’t get much more of a private sector guy than me – we’re not going to get enough mitigationbanks to lower the cost so we can do the development we need to do (p. 3, Recs for Legislation#2; ORS 196.643)

• Vicki Walker: I always appreciate it when someone admits they weren’t quite thinking correctly

when they drafted legislation… so Dave, it’s nice to hear 😊


• Bill Ryan: The state currently has a system where we’ve got private mitigation banks with serviceareas, watershed-based areas, within which the impacts for wetlands and waters in those areascan be mitigated by purchasing credits within those banks. When the mitigation banking statuteswere originally developed here in Oregon 30 years ago now, the original vision was that the statewould actually own and operate the mitigation banking program that would then provide service tothose needing credits. What happened is that private sector individuals developed their ownbanks. And the thought was – well that’s great, if the private sector is going to do this let’s let themdo that, let the power of the market do its thing, and there’d be efficiencies, etc etc. The problemis that, most of the state actually doesn’t have the kind of market, the kind of permit and creditneeds, that would support a for-private bank. So the state developed an in-lieu fee program,which is an agreement with have with the Army Corps of engineers that allows us to acceptmoney for mitigation impacts, and then we’re required to provide credits for that. We’re allowed todo that in 6 different watersheds across the state. We had to do the analysis of where the needsmight be and what that would be. What happened then is that we started developing banks,working with partners like SWCDs to develop credits in areas, and then we had private sectorbanks come in after the fact, in those same areas, and develop a private bank. They complainedwe were undercutting them. It was this competition between public and private sector needs.That’s where the legislation came through to basically protect the investment, and encourageinvestment from the private sector. It has caused a dampening from the state in terms of beingwilling to invest in an area. We don’t want to invest in an area where we’re then going to be stuckholding credits we’re not going to be reimbursed for. We’ve got to make sure that mitigationrevolving fund is replenished by selling credits. That’s where we are today, and how that cameabout.

• Pat Hare: One thing we’re also seeing that I think needs to be pointed out – the credits and theirprice is being set because when the market is high, when farmland is at its highest, it’s not worthbuying farmland especially with hazelnut trees. When that’s going and the economy is good,credits are then super expensive and there’s not enough of them. When the economy tanks, thefarmland is low but there’s no housing going on. We’re not building when it’s right to buy. Thenwhen it is, they both go up at the same time. If we could step in and do that when it’s low, andhold onto those credits, we don’t have a loan that’s high risk. That’s what the bankers said as well,that they have to hold onto them for a long time paying that interest, that’s an issue. If we couldhave the ability to build our own, we can sustain them. That was a big point made by all of them.

• Susan Morgan: The point that Pat brought up is the one I want to discuss bc I think that in largeparts of the rural parts of the state I think the cost of the credits is prohibitive. As Dave said, thecost of the credits often way outstrips the value of the land you’re putting them on. It’s just not aviable situation. In the discussions we had with the private wetland bank owners and developers,one of the issues they had that kind of slows them down is that when they decide to put theirmoney on the table, go to the bank and borrow money, and develop the wetlands to have thecredits ready for sale… If they can’t sell them right then, then they have to somehow service thatloan while waiting for the market to heat up again. Pat did a great description of how the housingmarket, the development market, rises and falls. The wetland mitigation market kind of followsthat sine wave. If there is a way for the state to develop a mechanism to buy those credits fromprivate wetland developers when they’re ready, hold them somewhere – in Business Oregon orDSL – and have them ready to sell at some predetermined price that wouldn’t undercut the privatesector, but would have them more available on more of a straight line than having this up anddown, over supply no supply. It would also help the private wetland developers as they have todevelop their business case to get funding to develop more wetlands. Part of the issue is justhaving a supply of them. Part of the issue is geographic, bc I come from a part of the state wherewe can’t find anywhere to put a wetlands bank. We don’t have any developable places.Regionality would be an aspect of this. Opening up the regionality if it’s possible to do that. Tryingto come up with an innovative way to incentivize private wetland developers to continuedeveloping credits, no matter what the overall economy is doing, and develop some kind of way tomake those credits available to develop in rural areas as the opportunities arise. It may also havethe added benefit of helping stabilize the cost of the credits.

• Peggy Lynch: Those were totally valuable conversations. But again, I want to remind everyonethat while that land is sitting there waiting to be checked off and used as a credit, someone has tomaintain them. One of the thing the private developers shared with us is that during the time hecouldn’t sell the credits, he sold the first few and then sat there with the rest of his bank not beingable to sell anything. He’s having to pay the interest on that loan, keep the bank maintained so it’savailable to be used as a credit. That’s the conversation that Business Oregon and others need tohave to make sure that we the State of Oregon recognize the cost. I’m not saying it’s a good idea


or bad, but we need to weigh the cost of that vs. the value of getting that development to happen eventually.

• Chuck Knoll: This is a different concept. This is a great conversation, very proactive. We’ve gotOWEB and watershed councils to restore streams and wetlands. Not used for mitigation, justrestoration of wetlands. We have people working with farmers to restore wetlands by regulation,but still, it’s mitigation. Lost opportunity to use that for wetland mitigation for banking. We’repaying money, lottery money whatever, for watershed councils which I work with. Have greatpartnerships. There’s an opportunity for providing more wetland mitigation banking mechanismthat no one’s using. Gosh, there’s all kinds of mitigation going. We have this Babbling Waters inAlbany, treating wetlands, they’re really proud of it. Did you get any wetland mitigation credits forthis? Dead silence. Maybe it’s something to think about.

• Peggy Lynch: I want this on the record. Dave Hunnicutt suggested something that I think is animportant conversation and Chuck just did too. We have multiple agencies that deal with multiplewater issues. There are storm water responsibilities developers have to do. What’s the nexusbetween storm water development, wetland mitigation, and discussion that OWEB works on theseproject? Some time, some place, some how, a conversation with all of the agencies involved tosee if we can be more efficient and address all of the issues. Address the issues we want. Weknow wetlands have a purpose, a need. We know we need to address storm water issues. Weknow we need to use natural filtration instead of as much costly other kinds of uses to deal withour wastewater treatment. We need to have that broad conversation.

• Joy Vaughan: Just wanted to highlight that at the work group meeting we did have someconversation about aligning restoration opportunities with mitigation. But understanding that thereare some challenges when you have voluntary restoration it can’t always intermingle withcompensatory mitigation. But sometimes there are opportunities, so how to we better align thatand be more strategic as a state? Appendix A – we put together some brief recommendations ofwhat we could do as a state to align. Some of its just education. Understanding when there’sopportunities. Where if there is a project and there’s a net benefit in that project, can you developsome credits? Or, just how you can work so there’s still accountability for grants and funding, thatmaybe OWEB has, or federal funding, but that those aren’t used for compensatory mitigationrequirements. I think there is opportunity. Some of it’s already happening. How can we be morestrategic with implementing the state goals and strategies in place, and being implementedregionally and locally. And having support to be more strategic.

• Eric Metz: Joy stole my thunder… in addition to the hard mitigation requirements and the hardregulatory world, there’s a lot of room for additional creativity. And we haven’t even begun to tapthe possible nuances. DSL would like to take a broad look at mitigation banking nation-wide tohelp inform us as we move forward with whatever initiatives we undertake to make sure we’re notoverlooking any opportunity, increase efficiency. We’re in the very primitive stages ofcompensatory mitigation compared to where we’ll be in 20 years.

• Bill Ryan: I just want to provide a little bit more context about banking and mitigation in general. Istarted my career here in Oregon 22 years ago developing mitigation for ODOT, wetlandmitigation specifically. Back then, there weren’t banks really available. So back then, all themitigation was done on an individual project basis. You impacted a ¼ acre, you had to develop ¼acre of mitigation. It was super expensive. We’re complaining about how expensive banks are,but they’re still way cheaper than project-specific mitigation. You have economies of scale thatgreatly reduce the costs, though you do have an upfront investment that needs to occur. That’sthe big challenge. That’s where I think Business Oregon can really help towards those kinds ofsolutions, to help mitigate some of that risk, particularly for having private sector individualsproviding that. The ecological benefits of banks are much greater than the individual sites also. A¼ acre of wetland really doesn’t provide a lot of function, especially if you’re creating it in a placewhere there wasn’t a wetland before. They are expensive, but they’re really valuable for restoringthat functions and values we’re replacing. Also - We’re kind of in a different economic world. Thedays of cheap development are gone. Easy, cheap, developable land has pretty much been built.Erin’s nodding… that’s the case. What we’re left with is what we’re left with, and the costs thereare greater. One of the big drivers of the mitigation costs for the banks are that the early banksthat were established 10-20 years ago that were done on an opportunistic basis by people whoalready owned the land. These were farmers who had wettish, less productive parts of theirproperty that said – hey, I could probably create some wetlands here and make some moneydoing it. The credits were really cheap. They didn’t really realize what the value was. What hashappened is that the market has matured. Now, people are really seeing what the value is andthose banks are competing on a cost-basis in the Willamette Valley and that’s why the prices areso high.


Partial State Assumption of the 404 Program

Notes

12/11 Meeting

• Rep. McLain: When you’re thinking about a large effort at the federal level on rulemaking, youthink about the difference between full and partial. What are some of the issues that came to themind of the subcommittee that we should really watch out for? or think about? The state approach– we need to try to not only make it an approach that works for us, but make it an approach thatwill fall in a way that it’s going to be acceptable on a number of different levels. What were someof the pitfalls? successes? benefits of what was done?

• Peggy Lynch: You will notice that I do support the non-legislative action. That’s really important forme to put on the table. It’s not that I’m saying that this is not a possible good idea for the State ofOregon, but we don’t have the information yet. The EPA has not started their rulemaking onwhether or not they could do partial assumption. We all may have comments about how thatrulemaking happens, whether it would be good for Oregon or not, and what the rules would be.We need to know what it would cost DSL if they do this job. We do know that they need at leasttwo people – one to deal with cultural issues related to the tribes, and one to deal with the ESA. Idon’t know how many more staff people they need. To me, in order to make a good decision,that’s the budget lady in me. I want to know those things. I think it’s premature. Yesterday, theEPA announced they are going to be doing a new wetlands WOS rule. I just have real concernsabout this process right now. I think it’s really important we get the information before we moveforward on this issue. Lastly, I was the only voice… League of Women Voters has many positions.We are not just an enviro group. We have lots of different positions in lots of different areas. Wecare about housing. We care about economic development. And yet, I was the only voice in theroom when I know there are other voices that have real concerns about assumption. I want tomake it clear that those voices were not heard during this discussion. They need to be heard. Ijust want to caution the legislature to understand that those voices are out there. Just because Iwas the lone ‘nay’ voice doesn’t mean that there isn’t a chorus of voices, perhaps, out there. Andmaybe not! But I want to caution the legislature about that.

• Eric Metz: I had the opportunity to attend a meeting convened by EPA last week in Washington,DC, for states to talk about the 404(g) rulemaking. The prospective rulemaking. There were about50 people on the webinar. I’m not sure how many states that was. There were 50 people in theroom. So many states were represented. EPA ran through a series of questions about the factthat since they’re revising the rule, what would be their priority target areas for the states. Thetopic of partial assumption was one that the EPA itself hadn’t really thought about or have much ofa handle on. Jennifer Wigal of DEQ and I were able to present that to the group and to individualmembers of EPA’s senior staff during a luncheon meeting. While they couldn’t say yes – we’lldefinitely write a rule that’s perfect for Oregon. They encouraged us to go ahead and prepare theapplication package because that would help inform the rulemaking. It would give them anexample of what partial assumption looks like. Partial assumption has broad-based supportamong the states. It’s hard to tell exactly what their ideas of that are since many haven’t thoughtthrough it yet. It is a heavy lift for states. Particularly those that don’t have any program and haveto start from scratch. Even for programs like ours that have a robust program, it’s been such aheavy lift that it hasn’t been feasible to do a full assumption. There’s too many stakeholders thathave to buy into it from scratch. Like a new program. The EPA administrator said it was hispersonal goal to see 10 states assume in the next 5 years. They think it’s the role of the states todo this kind of work, like they do for the other state programs that are delegated to DEQ. There’sstill no offer or promise of federal funding as a part of the rulemaking. That’s a separate process,a budget process. That’s the latest from the EPA. I know that the EPA has just releasedinformation about the WOTUS rule. I want everyone to know that states are not required, or evenencouraged, to lower the bar. If the federal rules are less stringent, there’s no impediment to uschanging the current level of regulation we have. There’d be no less resource protection.

• Mary Anne Cooper: To Peggy’s earlier point, I think Chandra from Trout Unlimited was in theroom for the first assumption conversation. I don’t think she reviewed the recommendations oranything else, but I don’t think it’s fully accurate to say nobody was there, because she was therefor the first of only two meetings on this topic. Beyond that – for additional context on assumption,we were one of the groups with major concerns about assumption because for ag, the federal andthe state programs really aren’t congruous at all. They have exemptions in federal law that aren’tin state law. And there are exemptions in state law, that aren’t in federal law. The jurisdictionaldifferences become significant. Importing the federal program where we’d lose the federal andstate exemptions, and import that all to WOS vs. WOTUS, which is what the Clean Water Rule isdealing with – was too much for us to unpack. We were looking at it and saying, pretty mucheverything we do would be subject to regulation bc between the state and feds, we have


exemptions that have fit together to where some of our folks are more concerned with Army Corps, coastal waters, any of the Section 10 waters that aren’t assumable anyways. That’s where we’re most frequently dealing with Army Corps. Most of the rest of the time it’s dealing with DSL. Writing a federal permit to the jurisdiction of the state reach, was very uncomfortable for us. But we fully understand that for a lot of folks within cities and for the development community, they are pulling both permits, and they are largely the same – they don’t have different exemptions. And they’re getting different requirements for what the permit conditions look like, which would be very frustrating. We want to be able to support their needs, and I think partial assumption does that. It doesn’t create having to unravel this confusing crosswalk for ag of where they have state or federal, where the exemptions aren’t perfectly aligned, so we risk losing both. I think for us, this is a really elegant solution, and a way to bite it off in bite-sized chunks so that DSL isn’t looking at creating a regulatory program, and staffing a regulatory program, that is much more significant than what they’ve done before because, for example, some state exemptions went away and they now have to regulate new activities or something like that. To that end, I think it’s very important that bill that was passed in 2009 in anticipation of assumption is rolled back so that the exemptions that were removed upon assumption do get restored. For us, otherwise, that would defeat the entire purpose of partial assumption. So that second piece is very important. Background – we passed provisional legislation in anticipation of full assumption that got rid of a number of exemptions that the agricultural community relies on. So we would need those restored back, and for that bill to look different upon assumption. To Eric’s point, which I think is a very good one, we hear a lot about the Clean Water Rule and everyone’s like – oh my gosh we’re rolling back so much! We’ve always been more stringent in the State of Oregon. This doesn’t change that. They’re specifically saying that some of these matters should be left to the states, but they’re not telling the states how to do that. I don’t think the new Clean Water Rule has much bearing on this. As always, the state can do what the state wants to do. It’s really about jurisdictions. It feels like the federal government is pulling back jurisdiction on something the state wants to have jurisdiction over. Quite frankly the state probably already does, because WOS is one of the most expansive definitions you’ll find in law, vs. WOTUS.

• Rep. McLain: I do want to acknowledge that Chandra and I have had conversations as wellbecause of the meetings she was able to attend. I want to acknowledge that. There have beenfolks there for part of that. We have been discussing with them, and having them look at some ofthis work in the report. We will continue to do that. As Eric pointed out, we have so many partnersand so many folks that are involved at so many different levels. We’ve been working on this foreons, and we have other documents this has to integrate with including the work in 2009. There’sa lot to look at.

• Sara Christensen: The “development inside UGBs” that’s pretty black-and-white. I get that. Canyou speak a little more about the other part “non-agricultural and forest uses outside UGBs.” Thatjust seems so broad and overwhelming to me. I want to get a better understanding of what thatmeans?

• Dave Hunnicutt: When we got to that point, we weren’t exactly sure how we were going toencapsulate all the non-farm and non-forest type uses that occur outside the UGB. There arequite a few. We didn’t have time as a sub-work group to go through each one of the particularuses that’s allowed outside the UGB and decide whether that should be subject to partialassumption or not. So we just left that open, figuring that if the committee was interested inmoving forward with that legislation then we could start to fine tune once we got the blessing ofthe committee to move forward.

• Susan Morgan: Counties do land use planning and do a lot of wetlands issues that are sometimesin cities by contract, but more commonly in the rural areas outside UGBs, there’s a lot of ruralresidential developments, accessory uses, and things like that. I totally appreciate Dave’s look atthis. It’s a complicated world out there in the rural, developed part of the discussion. To lookfurther Into that, and figure out what makes sense and what doesn’t make sense, would be fertileground for discussion.

• Pat Hare: I wanted to point out what our ask is here, what came out of the group, is that we’re in aunique position right now to be a driver and a leader. Oregon and land use, we’re one of the top inthe country. As Eric said, he went back east and they’re looking at states to start this process andto see what it could look like. We have an opportunity right now to really control what that lookslike. We’re not asking right now to assume, we can’t. The federal government hasn’t even ruledon it yet. What we’re asking for, is that instead of talking about this for the next 20 years, let’sassign an FTE to answer all the questions that are going around this table right now. We have areally unique opportunity to drive this. What we’re asking for is – let’s submit an application, thatwe don’t even know if it’s going to be approved, let’s provide the funding and come back andanswer the unresolved questions. What does that definition look like? How do we work with the


ESA? We’ve never taken the step in the past 20 years to answer those questions. Every time we say – well, there’s the ESA. Well, there’s the tribes. And that’s been the point where we’ve stopped. We have a really unique opportunity to answer these questions by the FTE.

• Brian Latta: I appreciate Peggy’s comment earlier about not having the environmental groupsthere. I want to recognize from the cities’ perspective, we have to balance natural resources witheconomic development, housing and other things as a part of Goal 5, and we incorporate that. So,to say the environmental perspective wasn’t there, that’s a little unfair. Cities have thatenvironmental perspective as well. What we recognize though is that this has really become aproblem. Our hands are really tied. It becomes very expensive to balance in an equitable wayGoal 5 with the other goals related to economic development and housing. We think partialassumption is something that would allow the state to have control over wetlands. The state doesa better job, a really good job, has good programs in place that would help. I’m a part of theconsortium as well. We did some pre-planning. There’s an AARP process that went through – andspent a lot of time, money, resources – for industrial development on lands that haveencumbrances of wetlands. We went through the process, the state said it was great, and theCorps said “no.” Partial assumption would allow that process that the state already has, which isgood planning, to be able to be accomplished. Right now we can’t do that, so why are we wastingour time and money on programs the state has developed that will have no effect? We thinkpartial assumption is a really good idea. We think the questions need to be answered. We needthe FTE funded so we can start to answer these questions and move in the direction of gettingthis program assumed. I think the state is capable. I think it will require additional funding for DSLto be able to manage that, but again, we’re going to have control. We don’t have control of thefederal government.

• Ellen Miller: Question for Director Walker: was this concept submitted as a POP? Or is this a newconversation? (Director Walker: this is a brand new conversation).

• Dennis Albert: Very fine point on page 4, Leg Actions #1: should be non-agricultural or non-forestuses (yes, that’s intent)

• Chuck Knoll: Have a project, submit a joint permit application. Generally, you can get a permit outof state lands within 45 days or two months. Corps of Engineers… the last one was really simpleand I’m still waiting for it six months later. I don’t know what the problem is. The Corps ofEngineers does consultation with NOAA, which takes time because you have different people atNOAA and their expertise varies, people come and go. The people in DSL have more stablepeople that have been there for awhile. They’re great. The other thing the Corps does isconsultation with SHPO, and ESA consultations. It’d be nice if one agency did all of those things.Is DSL going to be doing consultations with NOAA? If they are, they sure need a lot more than 1FTE, they need a lot more people to run this program. So there’s some consideration on the costsfor those permits to staff up. You really need to look at that. How do we really need to staff up todo that? How long would it take? Stuff like that.

• Sara Christensen: Just for clarification along those lines, I’m thinking this FTE is just to reallyoutline everything that’s needed for assumption. I’m concerning about putting the cart before thehorse. If there’s legislative approval, it doesn’t mean it would automatically be done – right?There’s still a lot to talk about. What the timing?

• Eric Metz: I can speak to timing. The reason for the legislative authorization now is that the nextopportunity probably won’t be until the next full session. We could wait until then, but then theproblem would be that if we did decide to go, we’d need the legislative approval before EPA couldapprove the application. It would have the effect of delaying everything by two years. Thisapproval you’d be giving us now would be approval to actually assume the program completelybecause we have other steps. Waiting for two years for legislative approval, that’s the problem.

• Rep. McLain: That’s a point we should explore. Note: on p. 4, recommendations on staffing andstaffing up, they’re there. 3rd paragraph. Also down under recommendations for non-legislativeaction, #2. We do need to make sure we have the budget and the interaction to work with allagencies and all partners. It’s a slow process.

• Peggy Lynch: Thank you Chuck, and that is the point of non-legislative recommendation #2 re:funding analysis, and I really want it. We got short sessions on purpose. For me, by 2020, youmight have the answers you need to be able to determine whether you want to move forward.That’s why I’m saying – no today on partial assumption. Do the homework. Get the dollaramounts. Figure out how this will happen in Oregon. The League supported short sessions onpurpose, for exactly this kind of situation. By then, we may have the rules on partial assumption,or at least more of an idea about it. There will have to be 3 or more staff members, or more, that


have to come in. And it may be worth it. But I want to know that before we commit. We do have a 2020. Though we’re a biennial budget, the legislature does do stuff in the short session.

• Rep. McLain: I will point out that Eric and Peggy have given us the book-ends of this conversationon timing. We need to think more about that. It’s kind of a chicken and egg situation. Eric’spointing out we need to do some of the pre-work to hit the ground running and have the steppedup staff by that point. Peggy’s pointing out we need some of the facts, figures and rules so weknow what our framework is for the work we might do in Oregon. I think they’re both valid book-ends. There might be a between compromise there. I think it’s important to understand it’s never aline and the race starts today. It’s a situation that this is an ongoing task that we continue to try toimprove on – improve processes, improve budget, improve effort. Make sure we’re doingsomething that helps the economy, housing and our environment. Doesn’t start on Dec. 31st, it’san ongoing task. We have to answer that question.

• Amanda Punton: It’d be helpful to lay out other decision points, and who’s making the decisions,as we go from opening the door to assumption to finally – whether it’s submitting the application,who’s signs it? The governor? DSL? Where else along the line is someone going to say, the stateis still on board with this and let’s go forward. In our department, we have the coastalmanagement program and we have a relationship with the Corps because in the coastal zone, weare able to review Corps permits for consistency. There are questions there that we still need towork out. We’re still supportive of going forward because we assume those things will be able tobe worked out, but even I would feel a little more comfortable if I knew where decision points weregoing forward, and who was making the decisions.

• Brian Latta: I appreciate your analogy of the book ends. And the story was provided by Bill Ryanearlier, which is DSL is slammed. They don’t have the staff to answer the questions on this bookend over here by 2020. I don’t think that’s going to be a reality unless the legislature funds an FTEthat can start to study this side of the book. That can say – what are the issues that still need tobe resolved that are raised over here. I think it’s important to recognize that you’re not approvingassumption by funding an FTE. You’re simply saying – let’s answer the questions that need to beanswered to build a framework for a program that … can we ultimately fund that at the end? Ifwe’re not willing to even open the door and fund that FTE, then assumption in 2 years or 20 yearsis irrelevant. We’ve been discussing this for 25 years plus and we’ve always gotten to thequestion of how can we answer these questions? And we don’t answer the questions because wedon’t have the funding or time or resources to make that happen. That’s what we’re asking for,plain and simple.


Rep. McLain’s Question on Prioritization of the 3 Report Topics

Notes

12/11 Meeting

• Chuck Knoll: The number 1 priority is to figure out how to make it easier to providemitigation banks. Mitigation sites so it’s less costly so watershed councils can do that, cities cando that. It’s tough to set up a mitigation site, that’s why I stayed away from it. If you really look atthe steps to get it, it’s next to impossible. You really need to take a look at that. #1.

• Erin Doyle: Thinking about some of the priorities that have been outlined by state, by localgovernments, finding the resources to do the looking at assumption and how to better workon mitigation banking costs are going to meet other goals that the state and local governmentshave established, particularly in the world of housing and economic development. The push to getassumption at least explored, looked at, getting that full-time employee at DSL so we can beprepared to tell the feds how we think it can be done and done to protect all the interests andgoals, is going to be really vital. Bc one of the big issues we’re seeing discussed in a lot ofdifferent arenas is the question of land supply. When it comes to housing development, there’smore of a push on local government to do more and more on less and less land. But a lot of thatidentified land, particularly in the valley is going to run into this problem. The other place we’rebeing pushed really hard is development costs, and mitigation banking is a huge part of that costthat we don’t get to control. So we have to cut all of our fees, and things like that. I think thosemain two pushes in the short term, is going to have the best bang for meeting the broad goals ofOregon at this point in time. Between providing housing inside UGB, supporting our land usesystem, supporting our environmental system, and making sure we can house Oregonians. Ifnothing else comes out of this – which would make me very sad – finding ways to reduce thosecosts but really finding ways to reduce the process by which our local governments and ourdevelopers within those local governments have to work, which is what I think assumption willultimately end up doing, are vital. They meet broad goals, not just of this committee, but anumber of committees and goals of leadership.

• Bill Ryan: Really need FTEs to do this work. My staff are slammed. We have a very small staffthat’s working statewide on wetlands regulatory and waters regulatory issues. We really do needthe extra FTE. Our permit workload has increased steadily since the economic downturn in 2008.The numbers are the highest we’ve seen. We’re not asking for bodies just because we wantbodies. We really don’t have the capacity. Our people are working their 40 hours plus each weekjust to get through the permit workload we have today.

• Rep. McLain: Makes me want to say something. I agree with you 100% on people having to domore work than they have hours in the day to get it done. Please, we need to keep talking aboutprioritizing. As you’re listening to Bill, I hope you understood why we need to prioritize this wetlandwork on all the topics before us today, and make sure that it gets to the top of the list somehow.No matter how we get the FTEs or what the budget amount is, because again we want housingfor Oregonians as Erin points out, and again, we have fewer resources and we have to againprioritize how we use those resources. I get to commute a lot, so I get to listen to a lot of radioprograms. The idea that we should do more with less is really a theme, right? I really appreciatefolks around this table giving really good, logical reasons on why this work is so important. It’simportant for housing, sharing of water, sharing of resources. Protecting things we want protected,and helping our economy continue to grow. We can’t walk away from this conversation justbecause it’s becoming a budget conversation.

• Pat Hare: For the regional consortium, I want to state our first priority is 404 assumption. Thereason is, we were not looking for a cheaper alternative. I’ll speak for Adair Village. We’re one ofthe smallest cities in Oregon. We went out and spent thousands upon thousands to do this pre-planning process. We did the AARP. We built the consortium. We spent years doing it. We wentout of our way to protect the resources. All we said, is that we want assurity. There were 19industrial sites, we wanted to give assurity because of what happened in Albany with Pepsi. Ittook them almost 2.5 years to get their wetland delineated and approved, and most of it wasthrough the Corps that held them up. We said – hey, we can’t have this issue. Two years. If Pepsihadn’t had that problem, they probably would’ve located in Albany. Then the economy tanked. Wesaid, hey – we need our industrial sites ready to go. We did this AARP process that DSL has, andwe got done, and it did nothing. Because it wasn’t recognized by the Corps. Now I say nothing,and DSL may say, but hey, at least you got it delineated and I would agree with her. But now, wehave a question. That goes away after a certain time period and we have to do it again. If we’retalking and 404 assumption is not on the table, we’re probably not going to re-delineate our sites.Which would be very unfortunate. We were trying to protect our resources. We just want to getahead of the game, get assurity, that when we had a developer that they didn’t have to do thedelineation. We would just say, here’s your wetlands. Go ahead and do what you need to do. I


wanted to make that very clear. That’s why the Consortium is pushing for 404 assumption. We’ve worked on this for 8 years. We were sitting there talking, how do we get this passed? Just at the end of a meeting someone said, why don’t you look at 404 assumption. Are you kidding me? Why hasn’t anyone told us about this? You’re telling me the state can give us a hard answer if we take this over? And we have a better program that’s more restrictive than the army corps? That needs to be pointed out – our program is more restrictive. By getting rid of the Corps, I’m not saying there’s less protection of the resources. We’ll spend the money if we can get that assurity. Assurity is what I’m really pushing for the Consortium out of 404 assumption. And assumption does other great things – lower costs, helps us look at different options.

• Brian Latta: I’ll speak for the City of Harrisburg. We went through an UGB in 2013 because we ranout of a lot of our buildable lands on the residential side. We’re right outside of Eugene, Albanyand Corvallis, so easily commuted, and it happens a lot in our town. The expectation was thatonce we expanded our UGB, we’d get a lot of housing development coming in. Since that time,we’ve had very little housing. Zero subdivisions. On the residential side infill. The reason thatoccurs- it isn’t that developers aren’t interested in our land. It’s that when they get there, it’sencumbered with wetlands. I started to ask them – what’s the challenge with the wetlands? It’sprocess. They get confused, it’s challenging, it’s costly. So they leave our town and gosomewhere else. That’s why I’m here. To understand how to reduce the cost of mitigation, how tomake the process easier. The priority for the City of Harrisburg, and I would venture to say alot of cities, is 404 assumption, which would ease the process I believe so that we’re not goingthrough a redundant process. We’re implementing thorough, federal rules and state rules toprotect the same resources. That seems silly to me. Also, the mitigation – being able to find away, like Susan said, to flatten out the sine curve on the cost of when you’re developing them andwhen you’re selling them

• Susan Morgan: 404 is critical and I think that right now the state has an opportunity that hasn’tbeen on the table in quite awhile. This is a very favorable environment. The current administrationis interested in states taking things over. I’ve been in a couple of conversations about the newWaters of the U.S. thing and from my perspective, they could have done a lot more, these aresmall steps that they’re taking, but I want to urge you to go ahead with 404. To get a program inplace and get it moving. You can create a program that has a position or positions in it, but don’tfund them until you get the information that justifies moving ahead with funding. Look at this as aniterative thing. This is going to roll out over probably a couple of years before you get it all... Youcan create a structure that you can light up as you cross thresholds in a way that you’recomfortable with. I think you don’t want to slow this process down any more than you have to, butyou also want to make sure that the process that’s being developed is a good process for all thedifferent priorities that you’ve got to keep in mind. I think you should begin with the end in mind.Start with a vision that you can bring into being iteratively without waiting for the next legislative tohappen. But rely on the legislative sessions, interim committees, ways and means process – all ofthe different tools that are at your disposal to take advantage of this opportunity.

• Dave Hunnicutt: I don’t want anyone to forget about mitigation banks. We weren’t asked in thegroup to prioritize A, B, and C of the categories we recommended. I am completely with thecities and Susan on 404 partial assumption. Eric said it best in one of our meetings: this is apartnership between the federal government and state government. We haven’t had a federalgovernment interested in state assumption, but we do now. We may not 2 years from now, but wehave them interested now. So if we don’t at least start moving forward now, we may never get theopportunity to do it again. I completely agree with DSL that we need to get that started now. But Idon’t want you to lose sight of mitigation banks. I think if we can fix the mitigation bankingsituation so that we’re paying $80k a credit instead of $200k a credit, we could start developing inthe Harrisburgs and Sheridans (my horror story), Adair Villages… the small valley cities, where ina lot of instances we can’t now. And we can fix that in 2019 through legislation, without an FTE.

• Erin Doyle: On the timing question, I think it’s important to pursue 404 assumption recs 1 & 3[legislative approval + FTE] at the same time starting in the 2019 session for a couplereasons. First, it sounds like from the report Eric provided updated on what the EPA said, the EPAis asking us to outline what a partial assumption would look like, so they can create rules toaccommodate such a consideration. I think for the purposes of preparing DSL to be able toparticipate in the rulemaking that the feds have scheduled from 2019-2020, they need to beworking on that application and need the legislature’s approval to do that. And they also need thatFTE to be working on it. While I know Eric spends a lot of his time training the rest of us on whatthe heck we’re talking about here, he’s got other duties as assigned, we really need someone whocan be focused on those important relationships between tribe perspectives and the ESA. Theseare very particularized issues where you need someone who can focus their time and energy.And then preparing that application so that the rules can actually accommodate our concept of


partial assumption so that the state gets what we need out of the feds for this. The other reason I think it’s important to do both of these in the 2019 session is because when you’re looking at the cost to take on this program, we also need to consider the lost revenue opportunities that come out of delayed development or expending resources to go through a project that the state has a huge chunk of, the local governments have a huge chunk of, which end up sitting on a shelf and possibly expiring because there’s a federal overhang to moving forward. So there’s a lost opportunity cost, lost revenue sources from development. When jobs don’t come in, you get less income. You get less income tax. When properties aren’t developed the way they’re expected to be, you have property taxes that are sitting at really low levels or low income, that could be used for meeting other important goals that we have across the state. So, as we’re thinking about 404 assumption, we need to take advantage of the hot iron that EPA has provided us to strike by being prepared to start now. If at the end of 2 years as they’ve started to look at this process and started to do the cost analysis, and it comes back to cost $1 billion, I imagine the legislature has the means to revoke their permission if it just becomes impractical. But we need to be prepared to let the federal process reflect what Oregon needs, and not just think about the fact that the federal process has to happen first. That’s my thinking on the timing, and why 2019 is the right time to pursue even the permission to seek assumption.

Miscellaneous Comments

Notes

12/11 Meeting Current DSL Rulemaking: Aquatic Resource Mitigation Framework

• Chuck Knoll: A bit of background – I did stream assessments when I was a junior in high schoolwith ODFW believe it or not. I also did a stream assessment Seattle creek. Even though I’m not aso-called biologist, I’ve been associated with that kind of stuff all my life. Stream restoration. Imissed saying one thing – 401 certifications for DEQ storm water issued by the Corps, 404assumption, that needs to be included too. Wanted to make sure you also knew there’srulemaking for mitigation right now on the docket. If you really look at that rulemaking, a lot ofthose rulemakings are really jumping the gun. They’ve tried to incorporate things associated with404 assumption. We’re not ready to do that yet. Need to set that thing on its heels, or cool thatrulemaking until you figure this whole thing out. You don’t have enough staff to do it. Figure outhow to put this all together.

• Rep. McLain: I understand. This is the state rulemaking that DSL’s been working on. Did you wantto say anything else.

• Bill Ryan: Appreciate the concern, Chuck. The rulemaking regarding the aquatic resourcemitigation framework, which is really a functional assessment to determine the appropriatemitigation for an impact, is really independent from 404 assumption. It’s completely independent.Interestingly enough, we’ve been working on this in partnership with the Army Corps becausethey have a directive from the 2008 mitigation rule to do this. So, we’ve been partnering with themto develop this, so that whatever method the Corps would require, we would require as well, sothat we didn’t have different standards for a Corps permit v. a DSL permit. It’s pretty independentfrom this discussion. Holding off on that would mean the state not requiring it, but the feds wouldbe requiring it. It would create more disruption to delay the rulemaking than move forward with it.

• Rep. McLain: I think what I’m going to do is suggest you guys take this offline. We want it to beclear, concise and complete.

Rep. McLain’s question about what ongoing conversations or work groups are needed?

• Bill Ryan: There’s obviously a need for continuing conversations. That’s something DirectorWalker and I were talking about just yesterday… about how do we do this? There’s a lot ofconcern and angst, and some misunderstanding about the rulemaking that we’re doing, but alsothese issues we’re talking about today. I think it really makes sense to have a standing meeting orgroup that gets together and deals with these issues. The department is very interested in doingthat. This work group has been a really great opportunity for relationship building and education,bringing people up to speed about this different issues and being able to be informed as we’remaking policy recommendations moving forward. It’s been a really great opportunity. There’s alsobeen some turnover in the ranks here that I hadn’t worked with in the past. So, we think that’s a


really good idea. We’d have to develop a governance structure and where the decision-making authority is for the group, but I think it’s a really good idea to do that and think about how we might structure that, and who would participate in that moving forward. Sort of a continuation of what this group has been doing for the past 4 months.

• Rep. McLain: I heard at least 3 or 4 tasks. You have the mapping issues (notification issued off ofwhat map, advisory group on that), rulemaking, partial assumption… there are a lot of purposesfor continuing to talk. It seems very positive to me. I hope it sounds positive to others around thetable. I really do think DSL needs to figure out what they need, and prioritize with partners on that.

• Director Walker: Thank you, representative. We had that conversation as Bill said because I had avisit by some folks opposed to our rulemaking, and are asking us to delay it. We finally had achance to dig down deeper on that yesterday. I said – we’ll make a decision after we get out ofthis meeting and see what’s coming out. See if it conflicts with our rulemaking: if it does conflictthen it doesn’t make sense, if it doesn’t conflict then it does make sense. One of the things I’veput out on the table – what if we had a technical advisory committee that we meet with on a veryregular basis. I think we used to have one like that and it just went off the table and hasn’t beengoing for quite awhile. I’m all about transparency. I lived and breathed that as a legislator, and liveand breathe it in the agencies I run. So, to me, - that sounds like a great opportunity to continuethese conversations. As you pointed out, there’s at least 5 issues here for DSL. I suspect we’llprobably engage in that, but as Bill said, it requires a structure. We need some feedback fromfolks about how they’d like to participate. I know Peggy already doesn’t want to deal with 404 soshe won’t be coming (P: I spent my time!). We might loop those all in as regular meetings, buteach meeting might take up different issues so she can step out when she wants to, bc I valuePeggy’s input and always have. So yes – I think that’d be a very successful outcome of this workgroup. It’s a good way to continue. And we have the facilities to host.

• Peggy Lynch: One quick comment. Yes, there used to be a technical advisory committee for DSLand it was very active for quite awhile. Then members grew old, left, or whatever. We had aleague member who was an expert on wetlands and who was really involved. I think it’s importantto say that what happened in part, at least with the environmental community, bc they have limitedresources, staffing, etc. Eric couldn’t find anyone to fill the spots. He tried, over and over again.Just couldn’t find someone to do it. So it will be a challenge for DSL to find people with the timeand the balance to serve on this.

• Pat Hare: I’d like to say to that, they’re invited. To say they don’t have the staff or the time. Wehave 5 people at our city. I’m the city planner, public works director, manager… and I’ve spent 7meetings. I’ve made the time. Because to our city, this is the #1 priority. When I hear thatsomeone can’t be here bc they don’t have the time, it must not be their main priority. Becase I’mhere. I do get real excited when I hear that. I mean, I have 3 kids in sports…

• Rep. McLain: I think some of these folks have other jobs, that they’re actually doing somevolunteering for some of these conservation groups. But I appreciate your comment. Thanks.

report of the ‘mapping, mitigation & assumption’ sub …

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