introduction to the forest resilience bond · colorado springs, denver, northern water, pueblo...
TRANSCRIPT
Page 1
Introduction to the Forest Resilience Bond
Prepared for CO Watershed Wildfire Protection Group
March 10th, 2017
Page 2
Enabling Conditions for Success
Page 3
13 Cases
San Francisco
Flagstaff
Rio Grande
Central Arkansas
Aurora,
Colorado Springs,
Denver,
Northern Water,
Pueblo
Santa Fe
Portland
Raleigh
Upper
Delaware
River Basin
Page 4
The Business Case: Northern Front Range, CO
Preliminary summary financials for natural infrastructureApproaches for managing fire risks in Northern Front Range, CO
172
15239 4
198
367
565
GI scenario
fire costsThinning,
prescribed
fire,
restoration
Fuel
breaks
Road
decommissioning
and maintenance
Total
Green
Savings Baseline
Fire
costs
Present value of investments over 20 years, Base Case Scenario
US
D m
illio
ns
Source: Talberth, J. et al. 2014. Analysis of the Cache la Poudre and Big Thompson
Watersheds of Colorados Front Range – Preliminary Report: WRI and CSE
Page 5
The Business Case: Northern Front Range, CO
Fire Suppression
$124 , 42%
Insured Property Loss
$73 , 25%
Carbon Emissions
$37 , 12%
Dredging Costs
$30 , 10%
Burned Area
Rehabilitation
$17 , 6%
Lost Recreation
$11 , 4%Turbidity
$2 , 1%
Source: Talberth, J. et al. 2014. Analysis of the Cache la Poudre and Big Thompson
Watersheds of Colorados Front Range – Preliminary Report: WRI and CSE
Preliminary summary financials for Northern Front Range, CODistribution of (real-time) Savings, USD millions
Base Case Scenario
Introduction to the FRBLeveraging Private Capital For Restoration
Page 7
National Forests in Crisis
PROBLEM:OVERGROWN FORESTS
1929 Today
• Overgrowth intensifies drought and wildfire• Water quality threatened• Hydropower generation severely affected• US Forest Service facing rising suppression costs
Photo Credit: US Forest Service, Viewing Forests Through a Historical Lens, Fall 2009
Page 8
Consequences of Overgrowth
TREE MORTALITY WILDFIRE
Over 830 million dead trees in Colorado1
Nine of the ten worst wildfire seasons have occurred since 20002
Overgrowth threatens climate and community resilience
Significant impact to climate change, water quality and clean energy generation3
1. Colorado State Forest Service, February 20172. National Interagency Fire Center3. Sierra Nevada Conservancy: California's Primary Watershed
Page 9
Forest Restoration as a Solution
Overgrown Restored
Reduces Fire Severity1
Protects and even augments
water resources2
Preserves forests’ ability act as carbon
sink3
1. Increasing the Pace of Restoration and Job Creation on Our National Forests, US Forest Service2. Sierra Nevada Watershed Ecosystem Enhancement Project; Sierra Nevada Research Institute & UC-Berkeley3. Forests and Carbon Storage; USFS Climate Change Resource Center
Page 10
USFS: Rising Costs of Fire Suppression
1. The Rising Cost of Wildfire Operations, USDA Forest Service
FY 1995 FY 2015 FY 2025E
Cost of Wildland Fire (% of USFS Annual Budget)Preparedness, Suppression, FLAME, and related programs1
Vicious cycle in which USFS is
forced to pay for today’s fires out
of the funds designed to
prevent tomorrow’s
US Forest Service
Page 11
Utility Benefits of Forest Restoration
►Reduces fire risk to water quality
►Potential to increase water quantity
►Protects against reservoir sedimentation
►Potential to increase utilization of cheap, carbon-free hydropower
Water Utilities
Electric Utilities
Watershed Challenges
Water quality
Declining watershed
yield
Instream flow protection
Timing of flows/ runoff
Infrastructure damage
Sedimentation
Insect and disease
Flood control
Threatened/ endangered
species
Infrastructure damage
Instream flow protection
Insect and disease
Declining yield
Sedimentation Timing of flows/runoff
Water quality
Flood control
Threatened and endangered species
Page 12
Status Quo Results in Inaction
► Severe fires: C02 emissions and limited ability of forests to store carbon► Watershed erosion: costly sedimentation and threats to utility infrastructure► Underutilized hydropower: more natural gas generation/increased C02
► Social & economic impacts: destruction of homes and habitats; jobs at risk
Consequences of Inaction
Multiple Beneficiaries Single Payer Beneficiaries = Payers
Status Quo Forest Resilience Bond
State Gov’t
Utilities
State Gov’t
UtilitiesUS
Forest Service
US Forest Service
US Forest Service
FRB Development
Page 14
The Forest Resilience Bond Ecosystem
Singular focus on stakeholders
Cultivating stakeholder relationships
Subject matter expertise
Dedicated legal resources
Investor engagement and structured finance acumen
Forest Resilience Bond Team
Page 15
Collaborating with
Page 16
Advantages of Private Capital
•Delays repayment by beneficiaries, allowing for cost sharing once benefits are proven
•Opportunity to influence policy by demonstrating that this work can be successful
•Preventative investments not prioritized in current funding structure
•Potential to tap into billions of dollars seeking conservation finance opportunities
Vast, Underutilized
Resource
Budget-Constrained
USFS
Enables Cost
Sharing Ex-Post
Potential to Set
Precedent
Page 17
The Path to Accessing Private Capital
Investor Capital
Immense, untapped
resource to fund
conservation
EvaluationToolkit
Innovative Contracts
Financial Vehicle
Ecosystem Services
Quantifies benefits
accruing to multiple
stakeholders
Monetizes multi-
faceted benefits as payments
Converts contractual payments
into investor returns
Hydro, water, and
fire benefits valuable to
stakeholders
Forest Resilience Bond
FRB Structure
Page 19
Proposed Financial Structure
FundsForest
ResilienceBond
Funds
Interest
Funds
Residual CF
Water Quality/Resiliency Benefits Accrue to Water
and Electric Utilities
Fire Suppression Benefits Accrue to
USFS and State
Debt Investors
Equity Investors
Forest Restoration Evaluation Platform
Contracted cash flows as determined by evaluator
Contracted cash flows for successfully restored acres
Page 20
Simplified USFS Agreement Structure
USFS FRB
Stewardship or Challenge-
Cost Share Agreement
FRB Development
Team
• Utility contracting
• Investor contracting
• Implementation partner lets contracts
• State funding
• Community engagement
• Engagement with forest collaboratives
• Deal structuring
• Biomass handling
* Restoration funding at a discount due to matching funds
Page 21
Impacts and Opportunity
BENEFITS OF THE FOREST RESILIENCE BOND
• Sharing of costs saves taxpayer dollars• Opportunity to accelerate restoration through new
partnerships and funding sources• Achieves restoration-related policy goals
IMPACTS
Water Quantity & Quality
Air Quality & Emissions
Fire Severity
Job Creation
Hydropower Generation
Page 22
Potential Application to Colorado
Taking An All Lands Approach
• Start of 3-year USDA CIG
• Leverage and scale existing projects
• Seek feedback and collaboration
Source: http://www.methownet.com/grist/features/stateforest_rehab.html
The Forest Resilience BondLeveraging Private Capital For Restoration
Todd Gartner, WRI
Zach Knight, BFC
Nick Wobbrock, BFC
Appendix
Page 25
Moving from Pilot to Policy - AB 2480
Page 26
Major Near Term Policy Opportunities