1. Mitigation and Conservation Banking Vanessa P. Hickman Chair, Governor’s Natural Resources Review Council State Land Commissioner November 12, 2014

2.  Texas Conservation Plan Litigation  Contractor Alternatives Analysis  Conservation/Mitigation Area Identification Subcommittee Updates

3.  Background  In 2012, the Fish & Wildlife Service (FWS) withdrew a proposed rule to list the dunes sagebrush lizard as an endangered species.  FWS cited the Texas Conservation Plan (Plan), a voluntary agreement spearheaded by the Texas Comptroller and supported by a broad group of stakeholders.  Private property owners, oil and gas industry, agricultural interests, biologists, education sector, state and federal agencies, etc. Texas Plan Litigation

4.  Substance  The range of the dunes sagebrush lizard includes areas of the Permian Basin, which supplies 57 percent of Texas’ total crude oil production.  Economic activity in this area supports more than 47,000 oil and gas-related jobs  Stakeholders collaborated to proactively develop a creative solution to balance economic and environmental needs.  More than 227,000 gross acres and 108,000 habitat acres are currently enrolled in the Plan. Texas Plan Litigation

5.  Litigation  In June of 2013, Defenders of Wildlife and the Center for Biological Diversity (Plaintiffs) commenced a lawsuit against the Department of the Interior and others (Defendants).  Plaintiffs alleged that FWS (1) failed to account for the Endangered Species Act (ESA) listing standards; (2) did not base its decision on the best available science, as required by the ESA; and (3) acted in an arbitrary and capricious manner. Texas Plan Litigation

6.  Holding  On September 30, 2014, the United Sates District Court for the District of Columbia granted Defendants’ motion for summary judgment.  Defenders of Wildlife v. Jewell, No. 13-0919 (RC), Mem. Op. & J. (D.C. Sept. 30. 2014), available at https://ecf.dcd.uscourts.gov/. Texas Plan Litigation

7.  Reasoning 1.FWS properly considered the five ESA listing factors.  Cited surveys conducted by scientists at Texas A&M University. 2.FWS relied on the best available science.  FWS sought out experts and considered extensive scientific studies.  Plaintiffs did not offer superior science. 3.Decision by FWS was not arbitrary and capricious.  The Plan had clear objective and included regular habitat monitoring.  Implementation of the conservation efforts outlined in the Plan was “sufficiently certain.” Texas Plan Litigation

8.  Background  The Land Department contracted with consultant Craig Denisoff to complete a mitigation alternatives analysis in order to assist in identifying the most beneficial manner in which to potentially develop a habitat mitigation program on certain less developable State Trust lands.  Mr. Denisoff assessed the viability of permittee responsible mitigation, in lieu fees, and mitigation/conservation banks, as outlined in the available handouts. Alternatives Analysis

9.  Findings  After assessing the three primary alternatives, Mr. Denisoff determined that each could be a viable option for the Land Department.  The most beneficial option, or combination of options, will be dependent upon the selection process implemented by the Land Department.  Mr. Denisoff provided a general discussion of the benefits and concerns to be considered under each option. Alternatives Analysis

10.  Considerations 1.Permittee Responsible Mitigation  Provides greater cost control over mitigation implementation, but offset costs may vary and liability will remain with the permittee. 2.In-Lieu Fees  Third parties may absorb planning and implementation costs, and landowner may set prices in advance of sale; however, project cost determination may be difficult, sponsors assume liability, and the process may take years to complete. Alternatives Analysis

11.  Considerations, cont’d. 3.Mitigation/Conservation Banks  Landowners may increase demand for otherwise less- developable lands while increasing potential investment returns; however, up-front expenses may be significant, sponsors assume liability, and the approval process may take months to years to complete. Alternatives Analysis

12.  Purpose  Encouraged by the success of the Texas Conservation Plan and the guidance received from consultants, the Land Department is in the process of developing a process with which to identify areas of State Trust land that may be best- suited for use in conservation and/or mitigation activities. Area Identification

13.  Approach  A factors-driven analysis will aid in determining whether an area’s best use is for development or conservation/mitigation purposes.  Examples of potential factors to potentially be used in the analysis include, but are not limited to, the following:  Sightings of threatened and/or endangered species  Critical habitat designations  Wetlands  Infrastructure  Development activities Area Identification