Show Me The Money     

Friends, 

The spectacular beauty and boundless outdoor amenities of Colorado have always been a source of deep pride - and considerable economic benefit - to its citizens. With world-renown ski resorts and other scenic attractions, a history of progressive cutting-edge environmental policies, and a rapidly growing wind and solar power sector, the Centennial State seems to know how to make the most of its natural bounty.    

The state is now looking to go even further: using its natural assets to generate income is smart, but generating income by not using them is brilliant.  

The forward-thinking Commissioners of the Colorado State Land Board believe that its state trust lands' ecosystem values - streams, wetlands, and wildlife habitat - are not only worth preserving, but may actually generate millions because they are preserved.  We were delighted to be asked by the board to help test this advanced concept by exploring the potential for the board to engage in the emerging ecosystem services marketplace. 

"The ecosystem services market is based on the premise that an environmental benefit has monetary value," explains Susan Culp, a project manager with Western Lands and Communities, a joint venture of the Sonoran Institute and the Lincoln institute of Land Policy. "It is driven largely by markets regulated under federal law. Under the Endangered Species Act, for example, if you disturb or "take" an endangered species, or destroy its habitat, you are required to offset that impact and pay for mitigation. Through a market like this, you could pay to purchase credits from an entity that has the ability to improve or preserve habitat for that species elsewhere." 

State Trust Lands: A Western Legacy 

Congress granted state trust lands to newly formed states to promote westward expansion and support public schools and other public institutions. Many original land grants are now privately owned, but over 40 million acres remain in trust, mostly concentrated in nine Western states:  Arizona, Colorado, Idaho, Montana, New Mexico, Oregon, Utah, Washington, and Wyoming. States decide for themselves how to manage their trust lands, but all have a fiduciary duty to use the lands to generate revenue for the trust's beneficiaries, primarily public schools.  

The Colorado State Land Board controls almost three million acres of land and four million acres of mineral rights below the land's surface. Currently, the trust generates the majority of its revenue through mineral development - extraction of coal, oil, and natural gas-agricultural leases for grazing and crop lands, and the interest on invested funds. In fiscal year 2009-2010, this interest generated $67.9 million for all beneficiaries.  

High Priority on Good Land Stewardship 

The obligations to maximize revenue for beneficiaries while preserving the trust's assets in perpetuity can be paradoxical: if property is sold to the highest bidder, the opportunity for that land to produce future revenue is lost.  

"Fortunately, Colorado is uniquely able to be innovative and incorporate conservation values in its mission," says Susan. In 1996, voters approved an amendment to the state constitution that reaffirms the intergenerational nature of the trust and mandates that the board place a high priority on sound stewardship, so the trust can benefit future generations of Colorado schoolchildren. The amendment also created a 300,000-acre Stewardship Trust of lands to receive special stewardship attention and protection.   

Through the ecosystem services marketplace, the State Land Board sees a significant opportunity to increase and diversify its revenue-generating capacity, and set a goal of producing $10 million in conservation revenue by 2016. "The opportunity to generate revenue from ecosystem services is an integral part of the Colorado State Land Board's new long-term approach to managing its entire portfolio of land assets," says Mindy Gottsegen, Stewardship Trust/Conservation Services Manager with the Colorado State Land Board. "This strategic initiative expands the Board's traditional view of the value of its lands, leading it to take a more active stewardship role in protecting the ecological values of its trust lands for current and future beneficiaries."  

The board enlisted the Sonoran Institute, Parametrix, and Solano Partners, Inc. to help determine what kind of demand there is for ecosystem service credits, and whether its trust lands contain these environmental assets. "This work by the Sonoran Institute is part of a longer process with state trust lands, intended to reveal the financial value of conservation and restoration actions," says Adam Davis, president of Solano Partners, Inc.  "This work represents a great opportunity to explore the use of environmental market mechanisms to support conservation outcomes on state trust lands." 

High Demand and High Values 

Our research found there is ample demand for ecosystem services as well as ecosystem values present on the sample sites. The analysis by Solano Partners revealed five main categories of demand. Briefly, these include currently planned Colorado Department of Transportation projects that will create mitigation needs; the maintenance and enhancement of watersheds to produce high-quality drinking water for downstream municipal water supplies; compensatory mitigation requirements related to the new energy boom in the West; U.S. markets for carbon credits; and wetlands and species mitigation banking for other developmental activities.  

To evaluate resources, we selected three Stewardship Trust sites representative of the range and type of properties under the board's management: montane and upstream of water supplies, the Eastern plains, and the West Slope. The Parametrix team found a variety of marketable ecosystem services on all three sites that could meet current demand in Colorado. We recommended that the board conduct a more rigorous and comprehensive analysis to target lands that could bring the highest value in these markets. 

If successful, the Colorado State Land Board may have found the goose that lays the golden egg. "Engaging in these markets will give the board the opportunity to do conservation initiatives on a larger scale than previously imagined, and everyone wins," Susan says.  "You get the conservation result you want, but also generate money for public education and the greater community." 

"We were impressed at how thoughtful, open and receptive the commissioners of the State Land Board were to viewing their land assets as long-term investments," says Kevin Halsey, a senior policy analyst with Parametrix. "This project was a great opportunity to take the abstract idea of ecosystem markets, and actually apply it on the ground in Colorado."  

We applaud the vision of the Colorado State Land Board. The stated intention of its 2011 Strategic Plan is to guide the agency to become "the model of a 21st century land board - respectful of its Western heritage, mindful of its fiduciary responsibilities to present-day beneficiaries, and innovative with regard to using science and knowledge to support long-term asset value and stewardship for future generations of beneficiaries."   

We think it is well on its way. 

Sincerely,    

Luther Propst

Executive Director