Thank you, Mr. Chairman and members of the committee.
My name is David Poulton. I am the principal of Poulton Environmental Strategies Inc., a small consulting firm here in Calgary. I am also the director of the Alberta Land Institute, which is a land use policy research institute at the University of Alberta, and I am the executive director of the Alberta Association for Conservation Offsets, a multi-stakeholder forum for advancing offset thinking here in Alberta. I wish to make clear, though, that all my comments are my own individually, and not necessarily representative of the members of the groups that I am affiliated with or of the groups themselves.
Bill C-68, as originally presented, included provisions for banking arrangements whereby a development proponent could arrange to undertake conservation actions to produce habitat credits and then bank those credits for application against future offset obligations from future development plans. This is dealt with in proposed section 42.01, as I am sure the committee members are well aware.
This is known as first party banking, because the party that creates and banks the credits is the same as the party that ultimately uses them. It's also known as self-banking or, in some of the documents, as proponent banking.
First party banking has occurred selectively for several years under the existing Fisheries Act. It has been largely restricted to a few proponents with repetitive or ongoing projects that require a flow of offset measures. I expect that committee members are familiar with the report from SENES Consultants from a few years ago that reviewed those arrangements.
I have comments on banking generally and then third party banking, and some suggestions about how we might ease into this business. In my comments, I should make clear that I completely agree with everything that Dr. Weber has said with respect to the administration of banking, and I wouldn't want my comments to be seen to be detracting from what she said at all.
With respect to banking generally, it's generally acknowledged that it has three advantages over proponent-led offsets and also over in-lieu fees.
First, and what really distinguishes it, is that it allows for the development and maturation of offset measures prior to the corresponding development.
A common problem in offset arrangements is that there is a time lag between the negative impact of the development and the positive impact of the offsets. With banking, the offsets precede the development, and therefore the negative aspects can be minimized or even reversed. It also allows an opportunity, because it is done in advance, to ensure that the conservation measures are actually successful in achieving their goals, thereby mitigating the risk that there would be some failure in the offset measure when it is too late for any accounting for it in the development process.
Finally, because banking of banked offsets credits is pursued in a proactive way, it allows for an opportunity to match those actions with land use planning and species planning in order to pursue strategic priorities, something that may not happen if offset measures are pursued on an ad hoc basis, with developers each designing their own specific measures.
Let me turn now to third party banking.
The amendments that are currently under consideration would expand habitat banking to include third party bankers, those who do not intend to use the credits for development projects of their own. This opens the prospect of a community of professional fish habitat bank sponsors whose business model is based on the creation of fish habitat for the purposes of generating habitat credits for commercial sale. This could lend a community with both expertise and efficiency to the activity of habitat restoration, enhancement and creation.
Further, I believe it is the intention that there would potentially be several banks of credits available at any one time in a region, which would bring competition and market pressure on those habitat bankers to be cost-efficient and produce quality work.
In case you can't tell, I am certainly in favour of the amendments for creating the third party banking. I do understand, however, that the department is concerned with the extent of the policy and administrative infrastructure that third party banking may require. I'd like to offer a couple of suggestions in that regard.
Again, I endorse Dr. Weber's suggestion that there be an agency responsible for this, with standard metrics and so on, and I believe there may be some interim measures that we can take in the short term while we are developing that infrastructure.
However, even if full implementation is delayed, I think the passage of the amendments would be an important signal to the department and to the Government of Canada as a whole that habitat banking is a path worth following and that resources should be dedicated to developing it.
My first suggestion is that we look to the U.S. for guidance as to how a system might be developed. The United States has had a system of wetland banking in place for over 30 years, but it is important to note that during a lot of that time it was developed on an ad hoc and relatively informal basis. Indeed it was only formalized into a set of federal regulations in 2008. Prior to that, it developed largely on the basis of practices that were accepted informally in regional offices of the U.S. Army Corps of Engineers, and as those practices proliferated and greater dependence upon banking arrangements grew, the federal authorities thought it was important to provide uniform guidance in order to assure consistency across the system.
That example does indicate that this sort of activity can occur on a small scale and a relatively informal basis, providing that there is an acceptance of the notion that a habitat credit is a transferable asset and not something that is bound to a particular proponent or a particular project.
Second, I would suggest that we could start putting our toe into these waters—no pun intended—by allowing the first party bankers that currently exist or that are contemplated under the new legislation to transfer their credits to third parties. Those would be other developers in the region in which the first party bankers are operating, and those third parties would have a need for credits to mitigate and offset their own impact.
Why do I suggest this? The first party bankers that we either have or are contemplating are presumably established, sophisticated entities that are well known in their regions and that have an ongoing relationship with the Department of Fisheries and Oceans. As such, they are likely to be a source of information for those others in the region that may be looking to solve their fisheries challenges. We already have a process to certify their first party credits as being valid and bankable. That process exists, and may undergo further development. All we need then is to allow them to transfer credits, and conversely to accept transferred credits as valid when submitted for use by the third party recipients of the credits.
This relatively informal process would allow us to gain some initial knowledge as to where demand for credits may come from, how buyers and sellers can effectively connect, how transfers can be effected and what issues might arise with transferring credits. As those issues arise, we can indeed deal with them through a regulatory framework.
My understanding is that Port Metro Vancouver is currently the only first party bank that is allowed to transfer its credits. I don't know if that has ever actually been done, but it does indicate that there has been some contemplation of this model and that perhaps there may be some experience with it of which I'm not personally aware.
I just want to make a couple of remaining points here. One is that in creating third party banking, the legislation would effectively create transferable habitat credits as a new form of tradable asset, one whose value lies in its satisfaction of a regulatory offset requirement.
As Dr. Weber indicated, this carries with it certain expectations that the credit must be backed by some system that assures its performance environmentally and establishes some liability for ensuring that the performance is actually seen through.
Further, we need some clear system in order to establish when a credit actually comes into existence and when it is used and extinguished so that there is no fuzziness around what is and is not a valid credit.
Perhaps the best way to achieve this is through the use of a registry, an approach that is often used for intangible forms of property. Indeed, the legislation does provide for a registry of projects under the Fisheries Act. It does not specify that it would carry information with respect to banking and credits, but I think if it did, it would be a very valuable tool for validating the process.
With that, I think I will close my comments. I look forward to hearing from the committee in due course.