Q&A with Michael Higuera on Enviropreneurship and Land Conservation

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Friday, March 2, 2012

For more of PERC's ongoing Q&A series visit perclatorblog.org

Michael Higuera attended PERC’s Enviropreneur™ Institute (PEI ) in 2011. Higuera works for the Nature Conservancy in Boulder‚ Colorado‚ where he protects land through conservation transactions. He began his career practicing transactional law‚ but discovered that finding solutions and bringing people together resonated with him more than the process of litigation.

Q: What types of conservation transactions are you currently facilitating?

A: I am primarily responsible for obtaining conservation easements on large ranches (over 10‚000 acres) in eastern Colorado in order to preserve shortgrass prairie and protect native bird and wildlife species. In addition‚ I am working with a small group of people to determine ways to bring private capital into our conservation work and land transactions. We have been exploring ways to engage the private sector in acquiring properties with significant biodiversity value and are considering using an investment vehicle such as a real estate investment fund. The fund would manage the properties for a profit while also protecting their biodiversity by placing a conservation easement on the land. The sale of the conservation easement would help the fund acquire the property at a lower basis thereby increasing the operating return on its investment.

Similarly‚ my project at PERC’s PEI program sought to find ways to work with oil companies to manage drilling operations in an environmentally sensitive manner. The common element between the real estate fund and the oil company idea is finding market-based incentives that make it attractive for those ventures to promote conservation on their properties.

Q: What might some incentives be for companies to conserve land tracts used in part for drilling?

A: We cannot use a conservation easement to address drilling for oil because mineral rights are very different than surface rights‚ but my idea was inspired by the success of the conservation easement as a way to facilitate the acquisition of property rights that are valuable to the Nature Conservancy’s (TNC) mission to protect biodiversity. The crux of my project at PEI was exploring ways to create incentives for oil companies to work with conservation organizations to plan their projects to avoid sensitive areas and minimize impacts. The most ambitious way to do that would be for companies to create a product that is differentiated in the marketplace from others by the way in which it was extracted. We certainly see this in the organic food and forestry markets. Unlike the conservation easement model that relies in part on public funding and tax incentives‚ this model would rely on the consumer to pay for the conservation benefits.

A conservation drilling plan would provide protections for biodiversity‚ which is a win for TNC and others who value nature. It could also be a win for the oil company by allowing them to differentiate their product‚ increase market share‚ and command a premium at the pump. Consumers who want to be part of the solution would win too.

Q. You have discussed the possibility of an eventual fourth pump at gas stations. What would this new “conservation gasoline” be‚ and how would it work?

A: The fourth pump is really the home run for this idea and represents something that I think needs to happen in conservation more generally. It represents a way to empower consumers with choices. If conservation is important to people‚ then people need to step up and vote with their dollars. Part of the reason that I have come to this conclusion is because I have more faith in people’s ability to make change through the market than at the ballot box. The lobbying efforts of the oil industry have proven pretty effective at limiting new regulations. Consumer demand and pressure at companies such as Walmart (that’s now carrying organic food and taking steps to be energy efficient) have resulted in changes that I do not think could have originated from a legislative process. Another reason this kind of consumer or market-generated conservation has the potential to be so powerful is because it creates self-funded conservation that does not rely on public funding and‚ if successful‚ it ends up being replicated by competitors who see that it creates value. This kind of domino effect is where you really end up having change happen on its own and at scale.

Q. What challenges lie ahead in creating market incentives for oil companies to conserve land?

A: I think that the primary challenges are building a cooperative relationship with an industry that has not seen it in its interest to proactively work to promote conservation. Another key challenge will be developing a market for this type of product in a market space that did not previously exist. It will be critically important to create a market that has a mechanism to assure consumers that their dollars are making a difference on the ground and really advancing conservation while at the same time that mechanism needs to be user friendly for the oil companies.

Q: What did you take away from PERC’s Enviropreneur™ Institute that will help you develop your project?

A: I came away from PERC with a fresh way of looking at problems and new tools for doing so. Additionally‚ I forged relationships with a great network of people who renewed my enthusiasm for my work and with whom I hope to collaborate in the future. PERC also helped deepen my understanding of markets‚ incentives‚ and property rights as a way to advance conservation.

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Mike Higuera works for The Nature Conservancy in Boulder, Colorado, where he protects land through conservation transactions across the state. He focuses on sourcing, structuring and closing large land conservation transaction, most of which consist of conservation easements. He grew up in Michigan and has traveled extensively throughout his life...
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