By Daniel Seligman, Guest Blog Contributor
Seattle is lucky: the city owns virtually all of the land in the Cedar River watershed on the western slopes of the Cascade Mountains. The area is forested and the city wants it to remain that way. When you turn on the tap, you don’t need to worry about runoff from roads or leaky septic tanks or pesticides from farms.
Not all the cities in the Pacific Northwest are so fortunate. Eugene, Oregon, for example, owns only one percent of the McKenzie River watershed that serves as the sole source of drinking water for 200,000 people. 
The watershed currently contains large wooded areas adjacent to the river but who knows what the landscape will look like in 20 or 30 years?
That’s why the city’s utility – the Eugene Water & Electric Board (“EWEB”) – is attempting to act now. EWEB says its water supply is excellent but it doesn’t want to wait until it can measure the cumulative detrimental impacts of human activity. Although the largest landowner in the watershed is the U.S. Forest Service, particularly in the upper reaches of the river, EWEB believes that gradual suburbanization and development over time is the biggest threat to water quality.
So EWEB has proposed a voluntary, market-oriented solution involving Payments for Watershed Services (“PWS”). In a typical PWS transaction, also known as a Payment for Ecosystem Services, one party buys services or benefits from another party in a river basin. Under EWEB’s proposed program, it would pay a landowner to preserve existing riparian forests in the watershed. In return for an annual payment, the landowner would agree to forego building a home, road or other development close to the river. (For more information, see www.eweb.org/sourceprotection.)
EWEB came to this strategy somewhat reluctantly and only after looking at alternatives. It doesn’t have the money to buy tens or hundreds of thousands of acres outright and keep them, or return them, to pristine condition.
Nor can EWEB regulate its way to a solution. Two years ago, it tried that approach. EWEB proposed a 200-foot riparian setback requirement for new construction and provoked a strong negative reaction in upstream rural communities. One landowner called the proposal “a blanket seizure” of private property and likened it to Communism. More temperate critics complained that EWEB had adopted a heavy-handed approach rather than a voluntary one that rewarded individuals and businesses for being good land stewards.
To its credit, EWEB responded. It unveiled a proposed Voluntary Incentives Program modeled loosely on the PWS approach adopted by New York City in the 1990s for its watershed. In New York City’s case, it bought land for preservation and paid upstream landowners in the Catskill-Delaware River watershed to reduce siltation and runoff. New York City also paid for smaller communities to upgrade their sewer systems and reduce effluent. Why? Because the alternative for New York City was to build an expensive, multi-billion dollar filtration plant. The PWS transactions, New York City concluded, were far cheaper.
Some utilities in the West have implemented their own variation of PWS agreements to protect their watershed. The water utility in Denver, Colorado, for example, is implementing a program with the U.S. Forest Service called “Forest-to-Faucet.” The purpose is to reduce the risk of catastrophic fires that can lead to severe erosion and sedimentation in the South Platte River that supplies Denver. The solution involves thinning trees and prescribed burns on federal land. Denver and the Forest Service share the cost. In effect, Denver pays the Forest Service to do something it might not otherwise do.
Nor are PWS transactions limited to the United States. In France, Nestle Waters pays farmers to adopt better agricultural practices in an effort to prevent nitrates and pesticide residue from seeping into the groundwater and harming the supplies from which the company bottles the Vittel brand of mineral water. In Latin America, water utilities and other public agencies, working in cooperation with the Nature Conservancy, have established water trusts to protect municipal watersheds. The trusts buy land or pay upstream farmers to restore forests and reduce the use of fertilizers and chemicals that threaten water quality.
If EWEB’s effort goes forward as planned, it would be the first significant PWS scheme to protect a large watershed in the Pacific Northwest. EWEB says it hopes to make the first payment in early 2014 from a special watershed investment fund — an endowment — that will build up over the years. The money would come from a variety of sources that benefit from clean water, such as EWEB itself, businesses and large water users. EWEB believes it can use those funds to leverage additional money from other entities, such as federal agencies and foundations. In the beginning, the annual budget is likely to be small, perhaps only $200,000 or $250,000. EWEB would initially rely on its own money but would then bring in additional sources to the investment fund each year.
An economic consulting study done earlier this year estimated that the “natural capital” of clean water in the McKenzie River watershed provides between $248 million and $2.4 billion in annual benefits, including biodiversity and soil retention, to the regional economy. The study concluded that riparian forests and wetlands provide the highest per acre value as “natural capital” by maintaining clean water, thus providing tangible benefits to downstream users.
EWEB notes that existing government programs reward landowners whose land has been degraded: the landowners receive money to restore habitat. Ironically, the landowners with healthy riparian forests get nothing. EWEB’s Voluntary Incentives Program seeks to correct that problem. EWEB wants to make payments to landowners to prevent destruction and degradation in the first place. Its first priority: about 3,000 acres of forest along or near the river.
But with every voluntary acquisition program comes certain risks. And one of the main risks for EWEB is that some landowners may want to hold out for more money or may not want to sell their “natural capital” to EWEB or anyone else. The success of EWEB’s program will depend on how good it and its partners are in rallying community support for its innovative watershed preservation effort.
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Daniel Seligman is an attorney and the principal in the Columbia Research Corp., a consulting company in Seattle. He has written extensively about Payments for Watershed Services and complex water problems, www.danielseligman.com Ph: 206-349-4769.
Photographs courtesy of EWEB.