Stream Mitigation Summit:

Exploring Opportunities to

Facilitate Investment in

Compensatory Stream

Mitigation in the Colorado

River Basin

March 7-8, 2018 Denver, Colorado

Prepared by

Meridian Institute

with support from

the Walton Family

Foundation

Colorado River Basin Stream Mitigation Summit:

Highlights and Next Steps March 7-8, 2018 Denver, Colorado

Introduction

Meridian Institute was asked by the Walton Family Foundation (WFF) to work with

stakeholders to develop strategies to create enabling conditions for public and private

investment in Clean Water Act (CWA) Section 404 mitigation projects that contribute to river

restoration in one or more Colorado River Basin (CRB) state(s). To begin this process, Meridian

reviewed literature, regulation, and documents from stream mitigation programs, and

interviewed key stakeholders and thought leaders to better understand opportunities for and

obstacles to investment in stream mitigation projects in CRB states. Meridian’s interviews

suggested that three initial conditions needed to catalyze greater investment in stream

mitigation in this region include: consistent enforcement of mitigation requirements of

permitted impacts to jurisdictional waters, clear procedures for stream mitigation, and greater

certainty and understanding regarding the amount and location of demand for stream

mitigation credits.

Following these conversations, Meridian organized a Summit in early 2017 with a subset of key

stakeholders to further the discussion. Summit participants identified a set of strategies to

facilitate investment in the CRB, with an initial focus on two specific near-term efforts: field

testing and desk analysis to provide feedback on the beta version of the Wyoming Stream

Quantification Tool, which will inform development of the Colorado Stream Quantification

Tool, and an assessment of demand for current and future stream mitigation in Colorado. While

the strategies identified focus on Colorado as an initial area of emphasis, they could inform

future mitigation investment in other parts of the CRB as well.

Upon completion of these workstreams, Meridian organized a second Summit in March 2018

with key stakeholders in stream mitigation to provide feedback on the two reports, discuss

other challenges identified at the previous Summit, and coordinate next steps to further

investment in stream mitigation in Colorado. The following is a summary of the information

shared and discussion that took place at the March 2018 Stream Mitigation Summit.

Participant News and Updates

Meeting participants shared a number of developments in stream mitigation in Colorado and

other states in the CRB.

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Development of Mitigation Banks and In-Lieu Fee Programs

• The Colorado State Land Board (SLB) manages state land, held in trust, for the purpose of

generating revenue for public schools. They are in the process of developing five stream

mitigation banks across the state in partnership with mitigation bankers, some of which

are paired with Endangered Species Act (ESA) banks. The SLB model for creating

mitigation banks allows bankers two years to evaluate a site and create a feasible plan for

establishing a bank. From there, the SLB leases the land to the banker to develop a

mitigation project. There are five projects currently underway, each in various phases of

planning and regulatory review.

• The Nature Conservancy (TNC) established one of the country’s oldest and largest in-lieu

fee (ILF) programs in Virginia in 1995, with over 100 banks across the state. Their program

operates under guidance from the U.S. Army Corps of Engineers (USACE) and the

Virginia Department of Environmental Quality (DEQ). In 2003, they established their first

stream mitigation bank, and in 2007 a unified stream methodology for projects was

developed. Projects typically require two years of review by the interagency review team

(IRT) before being approved. Credits are released over a ten-year monitoring period,

based upon the fulfillment of criteria for site success.

• The National Forest Foundation is working to establish Colorado’s first ILF program for

streams and wetlands on the Western Slope. They are currently in the final review period

with USACE, after which they expect the plan to enter a 75-day comment period for

approval or denial of the instrument. All proposed projects will be implemented on (or

directly adjacent to) US Forest Service land, which will require a unique approach to flow

assurances and monitoring.

Watershed and Restoration Planning

• The Colorado Water Conservation Board (CWCB) is in the process of creating a database

of watershed plans across the state. This collection includes watershed plans of different

varieties at the HUC 8 level, including pre-fire mitigation strategies, Environmental

Protection Agency (EPA) nine element plans, stream management plans, environment and

recreational assessments, and others. Their work culminated in a GIS data layer, available

upon request, which managers and planners can use for integrated watershed planning in

their area of interest.

• The Colorado Department of Natural Resources (DNR) through Colorado Parks and

Wildlife (CPW) is partnering with the Northern Colorado Water Conservancy District,

Denver Water, Grand County, and others on the Windy Gap Firming Project. The effort is

a series of restoration and bypass projects in Grand County that would mitigate effects of

two trans-mountain water development projects. The project includes efforts to improve

habitat for native cutthroat trout, which may present an opportunity for stream mitigation

banks and ILFs on Colorado’s Western Slope.

• CWCB manages the Colorado Watershed Restoration Program, which provides funding

for monitoring of a variety of restoration projects. They currently monitor approximately

100 projects under the program.

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• The Colorado Natural Heritage Program (CNHP) has worked with CPW to create a series

of wetland priority species habitat scorecards showing conditions needed by state Tier 1

and Tier 2 wetland species. The scorecards could help inform mitigation projects. CNHP is

also creating an online watershed planning toolbox, which will be piloted in two sub-

basins in Colorado, including data on wetland landscape position, hydrologic flow paths,

and likely functions, along with layers like irrigated lands. CNHP is identifying likely

historic wetlands and priority areas for restoration in the pilot area, based on current and

likely historic wetland extent, along with driving hydrogeomorphic processes and

ecological functions. Their next step is to ground-truth the GIS information and determine

which restoration activities are feasible and have the most potential for functional lift,

while involving local stakeholders and watershed plans in the process.

Development and Revision of the Wyoming Stream Quantification Tool

Over the past few years, USACE and Region 8 of the EPA, in coordination with Stream

Mechanics and state agencies, have been working to develop Stream Quantification Tools (SQT)

for use in Wyoming and Colorado. The purpose of the tools is to create a consistent approach

for permittees, bankers, ILF sponsors, and USACE regulators to determine the number of debits

associated with stream impacts and credits generated by subsequent mitigation. USACE

released a beta version of the Wyoming SQT in August 2017 for a four-month public comment

period. During that period, Meridian partnered with Otak, Inc. to test the tool at six field sites

in Wyoming and Colorado, and provide feedback on its utility in the field, as well as the

likelihood of the tool to lead to environmentally sound and stable mitigation. Otak, Inc.

submitted a report on their findings to the USACE during the public comment period.

Based on the feedback provided during the public comment period, as well as feedback from

the USACE Engineer Research and Development Center (ERDC), EPA and USACE are in the

process of developing a new version of the Wyoming SQT and a beta version of an SQT for

Colorado. The agencies are considering the following improvements to the tool: addition of a

scientific technical support document explaining more thoroughly the design of the tool;

increased simplicity and clarity for users; an improved approach to flow alteration assessment;

and clarifying the applicability of the tool within a wider range of stream types. There will be

minor differences between the Wyoming and Colorado tools, the majority of which are related

to differences in state standards for measuring performance curve data.

During the Summit, Otak, Inc. provided a brief presentation on the findings and

recommendations from their field and desk studies. Their main takeaways included:

1) Consider alternative metrics for sediment and flow regimes that better represent

physical functions and boundary conditions;

2) Incorporate channel evolution and hydrologic regime to set the context for metrics and

classification that reflect an understanding of watershed context and river functions;

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3) Consider an alternative to bankfull measurement, such as median annual peak flow and

at-a-station hydraulic geometry; and

4) Reduce the number of metrics and clarify the methods used for calculations to help

simplify the tool and make it easier to understand.

Following the presentation, participants shared a number of comments on the development of

the tool and feedback on the presentation, including the following:

• When reviewing the SQT, it is important to consider that it was created to calculate debits

and credits at project sites and needs to be accessible and understandable to individuals

from a variety of backgrounds, including those responsible for reviewing permit

applications (e.g., USACE staff and IRT members), as well as the regulated public. It is

important to balance accuracy with feasibility to implement in the broader context of the

compliance market.

• While linear feet is often the simplest way to measure impact and mitigation, for more

complex stream systems, such as braided streams, this may not be practical. To address

this, agencies are looking to identify which metrics are most relevant for different stream

types. As an alternative, participants suggested the use of valley length (as opposed to

stream length) or “functional feet” as a substitute for linear feet. Valley length has the

advantage of redirecting the emphasis of mitigation onto the condition of the entire

corridor rather than the stream channel itself. However, removing linear feet as a

measurement could reduce the potential for development of stream mitigation programs

because of concerns about the ability to accurately capture the total restoration achieved.

In addition, a linear foot is the metric used in the national USACE Operation &

Maintenance Business Information Link (OMBIL) Regulatory Module (ORM) database. If

the SQT uses valley length, it will be challenging to reconcile this metric with the data in

the ORM database. As an alternative hybrid approach, participants suggested that channel

length could be used to calculate debits, while valley length could be used for calculating

credits. This approach may address the need for consistency with the ORM database,

while deterring ILF sponsors and bankers from taking advantage of linear feet

measurements, and focusing mitigation outcomes on corridor-wide lift. Currently, the

proposal for the SQT is to use functional feet, which would be derived by multiplying

linear feet by a value for function.

• It is important for the designers of the tool to take steps to reduce the ability of users to

“game the system.” For example, using linear feet as the primary method of measurement

could incentivize ILF sponsors and/or bankers to increase sinuosity of a stream (and

therefore total stream length) as much as possible to gain the most linear feet. Training to

help IRT members recognize ways to “game the system” will enable them to vet incoming

projects to avoid manipulation.

• Adjustments and/or improvements to the tool will be made as projects are implemented

and the IRT, USACE, and the EPA gain a more thorough understanding of how the tool

works in practice. For that reason, the tool design is flexible to accommodate future

changes in metrics, as needed.

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• Once the tool is published and mitigation banks have been established in Colorado, it will

be important to evaluate the degree to which mitigation projects are achieving

environmental targets, and if not, whether modifications to the tool and/or its metrics

could help improve ecological effectiveness of mitigation projects.

Development of Colorado Stream Mitigation Procedures

The three USACE districts in Colorado are collaborating to create the Stream Mitigation

Procedures (SMP), a companion piece to the Colorado SQT. While the SQT will provide an

approach to measurement of impacts and potential lift, the SMP will elaborate on USACE

policies and procedures for implementing stream mitigation in Colorado. The SMP will include

information regarding topics such as guidelines for when to use the SQT, the threshold for

requiring mitigation of stream impacts, site selection guidance, information on reference

streams, real estate protection, levels of assurance necessary for instream flows, the necessity for

a watershed approach to mitigation, and guidelines for monitoring. USACE plans to release the

SQT, technical support document, and SMP simultaneously in 2018 (exact timing to be

determined).

Attendees offered the following suggestions for the USACE to consider when developing the

Colorado SMP:

• Strike a balance between clear requirements and flexible implementation. Include

clarity regarding requirements for hydrological assurance and options for meeting those

requirements. However, ensure that the policies are flexible enough to allow for creative,

new approaches to ensuring flows required to maintain mitigation.

• Address issues associated with “gaming the system.” As described above, participants

mentioned concerns regarding the ability of applicants to “game the system” through use

of the SQT. To address this issue, the SMP could include a requirement that applicants

(permittees on the debit side or bankers/sponsors on the credit side) provide additional

information regarding how they determined what reference data to use, and articulate

assumptions regarding other critical measurements. In addition (or as an alternative), the

SMP could include guidance for IRT members regarding what to consider during

evaluation of proposed mitigation or development projects (e.g., a checklist, questions to

ask, etc.). This guidance could help ensure thorough and consistent evaluation.

• Consider including incentives for indicators of corridor health, such as presence of beavers

or biodiversity, to encourage mitigation project designers to focus on floodplain function

in addition to stream channel health.

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Analysis of Demand for Colorado Stream Mitigation

In 2017, Meridian partnered with a team from Texas State University (TSU) to analyze current

and future demand for stream mitigation in the state of Colorado. The purpose of the analysis,

available here, was to reduce uncertainty for potential investments in the region and project

demand from 2017 to approximately 2022. At the Summit, the TSU team provided an overview

of the findings and offered an opportunity for discussion among participants. The TSU team

shared that while 13 of the 89 HUC-8 watersheds in Colorado have current demand for

compensatory stream mitigation, mainly in north-central Colorado along the I-25 corridor, very

few stream credits are available to mitigate impacts. Related to future growth, they noted that

future impacts will mainly be located in the Denver metropolitan area, northeastern Colorado

along I-76, west-central Colorado around Grand Junction, and between Colorado Springs and

Pueblo. Finally, they discussed challenges for compensatory stream mitigation, such as securing

adequate hydrological assurance of mitigation sites, ensuring that mitigation projects yield the

desired ecological results, and the potential for investors to “game the system” to use the most

profitable sites or maximize credit ratios. Key comments from participants following the

presentation included:

• The report serves as a novel model for the stream mitigation industry and could spur a

significant increase in investment from financial groups looking to enter the marketplace.

• This model for demand analysis could have a number of applications outside stream

mitigation, including watershed planning and prioritization of restoration sites based on

likely future impacts.

• Changes in policy could greatly affect the estimated demand for stream mitigation in

Colorado, including potential changes in the threshold requirements for stream mitigation,

the implementation of an enforced stream mitigation policy, changes in ratios of stream

impacts to mitigation and therefore price of credits, schedules for releasing credits to be

sold, and level of flow assurances required for mitigation.

Hydrological Assurance

A main barrier identified at the 2017 Summit was Corps requirements to ensure flows in

perpetuity, given the system of water rights and limited water resources in Colorado. During

the 2018 Summit, the group discussed critical challenges and identified potential solutions

related to hydrological assurance for mitigation projects.

Securing Water Rights for Instream Flows

CWCB provides three potential options for obtaining instream flow water rights through their

program:

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• A Temporary Lease is a ten-year lease that allows use of 180 days of water per year for a

maximum of three years. If used, the lease cannot be renewed. This method of obtaining a

water right requires approval from the Colorado Division of Water Resources and must be

used in conjunction with an existing instream water right of at least the same flow rate.

The processing period for this lease is significantly shortened, because there is no need to

appear in water court.

• A Long-Term Lease allows the lessee to use water each year for a defined period of time

(CWCB has not established a maximum number of years for this type of lease). The lease

requires an appearance in water court, and typically requires adding instream flows to the

water right being leased. The lease requires historic consumptive use and injury analyses,

has the potential to be objected to by other water users, and is a considerably more in-

depth process than a temporary lease. It could be possible to obtain a temporary lease to

begin a mitigation project, during which time a long-term lease is attained. This may result

in substantial added risk to the ILF sponsor or mitigation banker, given that a long-term

lease is not assured before the project begins.

• A Permanent Purchase requires an appearance in water court to change a water right to be

protected under the CWCB instream flow program. It requires the same analyses as a long-

term lease and has the same risk for objectors in court. This type of water right ensures the

highest amount of flow assurance among these three options. However, the biggest

challenges with this option are the low availability and cost of senior water rights.

However, it may be possible to offset the high cost of this water right by leasing water

downstream from the mitigation site.

Identifying Partnership Opportunities

• In 2018, the Colorado Water Trust is implementing a pilot program, Request for Water,

which is an open request to the public to voluntarily place excess water into streams

through temporary or permanent instream flow protections. Contributions to the program

are due at the end of April 2018, when the Water Trust will evaluate the rights coming in

and their potential use for the CWCB instream flow program, among other options. ILF

sponsors and mitigation bankers may find opportunities to collaborate through this

program. Depending on the success of the pilot program, the Water Trust will decide

whether to continue in future years.

• Agreements with mutual ditch companies may provide a unique solution to water rights.

Bankers and ILF sponsors could potentially lease from companies with trans-basin shares

for consumptive use to avoid water court. This would require hiring a local water rights

consulting firm, engineer, and water rights attorney with a good rapport in the area to

explore potential options.

• There are many organizations in the conservation and recreation communities looking for

and experimenting with creative ways to return water to Colorado watersheds. Finding

local partners to explore potential solutions may be a path forward for ILF sponsors and

bankers.

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• There may be opportunities to enter non-diversion agreements or agreements to change

the timing of diversions with ranchers to keep the river wet during critical periods.

Approaches like this are being tried in Grand and Crystal counties.

Selecting Sites in Relation to Water Rights

• Banks and ILFs could develop site selection models that look for potential senior water

rights or areas without all water allocated and then examine demand for stream mitigation

in the area. Another option to explore is how to create a mitigation bank in a low-demand

area, where junior water rights may be adequate for flow assurances.

• Water rights are typically required when making an alteration to a stream that changes its

function away from what it has been historically. ILF sponsors and bankers may be able to

use historic photos and stream data to prove historic flows were higher than currently

allocated, without the need for water court. However, changes, such as adding storage

functions to the river (e.g., beaver habitat), may require a water right, as water stored for

longer than 72 hours necessitates a storage right and storage may injure downstream water

rights. It is also important to note that even with historic proof, another water right holder

can still claim injury. To help ensure this method of flow assurance, the ILF sponsor or

banker would likely need to establish relationships with downstream water users and

demonstrate the added benefits to their water, such as improved quality or less sediment.

Implications for Policy Decisions

As the Colorado SMP is developed, USACE could explore the potential to assign credits

differently to different types of flow assurances, depending on the level of certainty – as

hydrological assurance increases, the number of credits would increase, which would allow ILF

sponsors and bankers to select the most relevant option from a range of choices. It was also

noted that larger service areas would make it easier to identify high quality sites for mitigation

that also have access to water rights.

Monitoring for Success

Participants discussed the importance of long-term monitoring to ensure ecological lift. The

group noted several important considerations related to site monitoring.

• As noted above, as mitigation banks are established in Colorado, it will be critical to

monitor for ecological lift, and, if needed, make adjustments to the SQT and SMP to

achieve desired outcomes.

• EPA is working on guidance for long-term ecological monitoring.

• Monitoring for different projects around the state provides an opportunity to create a

coordinated database with GIS data regarding native and invasive plant species, and

historical hydrologic data, among others. Monitoring can help to ground-truth GIS and

remote sensing data to ensure accuracy of different data collection methods.

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• Restoration projects often have limited budgets for monitoring; however, focusing on the

most important indicators for different types of sites can make monitoring more efficient

and affordable.

• As stated above in the participant updates, CWCB has funding available for various types

of monitoring projects for up to five years.

• It may be possible to fund monitoring through the sale of credits. This could be included in

the SMP as a “tax” on bankers and ILF sponsors for monitoring purposes.

Coordination with Other Mitigation Frameworks

Pairing CWA Section 404 mitigation with other types of mitigation, such as ESA banks, could

represent an opportunity for increasing investment in stream mitigation in Colorado.

Participants offered the following ideas:

• The SLB is currently in the process of developing a combined bank in Colorado that would

offer ESA credits for the Preble’s meadow jumping mouse, as well as stream mitigation

credits.

• CPW does extensive work with habitat creation/restoration for native cutthroat trout,

which has the potential to be combined with stream mitigation work.

• One challenge to combined ESA-CWA banking is the potential to remove focus on overall

biodiversity of a site in favor of protecting a single species.

• There may be opportunities to combine CWA stream mitigation and required mitigation

for mining operations. However, this can be challenging since damage from a mine

blowout does not necessarily create the need for CWA Section 404 stream mitigation.

• Attendees also mentioned potential opportunities to coordinate with mitigation

frameworks at the state and national levels, such as total maximum daily loads (TMDLs),

non-point source impacts, and the Colorado Department of Public Health and

Environment (CDPHE) Watershed 319 program.

Next Steps

In their closing statements, attendees expressed appreciation for the value of the Summit as a

space to share ideas, and optimism for the path ahead. Throughout the Summit, the following

next steps emerged.

1. Summit participants will continue to exchange relevant information with one another

Following the Summit, Meridian shared a number of documents that were mentioned by

participants during the discussion. Attendees may continue to exchange information with

one another by responding to emails related to the Summit, or by sending materials to

Meridian for distribution.

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2. Prepare a summary of ideas related to the Colorado SMP

Meridian will extract suggestions offered at the Summit related to the SMP and create a

stand-alone document with these ideas to share with USACE.

3. Develop a reference document on options for flow assurances

Meridian will coordinate with partners to prepare a document that lays out the various

options for flow assurances in Colorado in order of certainty that were identified at the

Summit. Meridian will invite DNR to review and then send to USACE for possible use in

the development of the SMP.

4. Plan to evaluate the first set of mitigation banks and ILFs established in Colorado

Participants expressed an interest in a third-party evaluation of mitigation projects to

determine if mitigation projects are achieving ecological lift. This will inform if adjustments

in the SQT, SMP, or mitigation design, are needed to foster environmentally sound

mitigation projects. CWCB expressed interested in partnering on this effort.

5. Consider organizing another Summit next year and inviting additional stakeholders

Participants highlighted a number of relevant stakeholders to include in future summits

including CDPHE, recreation users, the agricultural community, the State Revolving Fund

Green Program, additional attendees from DNR, major permittees, such as Denver Water,

the Colorado Water Trust, IRT members, and various counties around the state. One

participant also suggested a future summit where attendees walk through a mock

establishment of a mitigation bank in Colorado to learn how challenges identified play out

in practice.

6. Review and comment on the Colorado SQT, science document, and SMP

Summit attendees are encouraged to review the Colorado SQT beta version and associated

documents when they are released and submit input through the public comment process.

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Appendix A: Participant List

Julie Ash

Senior Project Engineer, Project Manager

Otak

Linda Bassi

Section Chief

Colorado Water Conservation Board

Jackie Corday

Water Resources Section Manager

Colorado Parks and Wildlife

Jeff Deatherage

Water Supply Chief

Colorado Division of Water Resources

Mindy Gottsegen

Conservation Services Manager

Colorado State Land Board

Karen Hamilton

Manager, Aquatic Resource Protection and

Accountability Unit

US Environmental Protection Agency

Karen Johnson

Director of Wetland and Stream Mitigation

The Nature Conservancy

Jason Julian

Associate Professor, Department of

Geograhy

Texas State University

Matt Kondratieff

Aquatic Research Scientist

Colorado Parks and Wildlife

Sarah Marshall

Wetland Ecologist

Colorado Natural Heritage Program,

Colorado State University

Julia McCarthy

Environmental Scientist

US Environmental Protection Agency

Emily Olsen

Colorado Program Manager

National Forest Foundation

Becky Pierce

Wetland Program Manager

CDOT

Adam Riggsbee

President

RiverBank

George Schisler

Aquatic Research Section Leader

Colorado Parks and Wildlife

Peter Skidmore

Program Officer

The Walton Family Foundation

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Allan Steinle

Chief, Regulatory Division

US Army Corps of Engineers

Chris Sturm

Stream Restoration Coordinator

CO Water Conservation Board

Luke Swan

Senior Geomorphologist/Project Manager

Otak

Rusty Weaver

Assistant Professor, Department of Geography

Texas State University

Meridian Institute

Sophie Gutterman

Project Assistant and Fellow

Meridian Institute

Diana Portner

Mediator and Program Manager

Meridian Institute

Jennifer Pratt Miles

Senior Mediator

Meridian Institute