Victory on Jones Street: New state law means big changes for mitigation in North Carolina

As poorly headlined in last Sunday’s Raleigh News and Observer [Legislature OK’s Rule on Streams 6/19/2011], our little state trade association, the North Carolina Environmental Restoration Association, had a huge legislative win in the just adjourned 2011 session of the North Carolina General Assembly.  It is not our way at RS to get out ahead of ourselves, so Stories from the Field wanted to wait until the Governor signed the bill before announcing this bit of good news for the ecological balance of the Tar Heel state and commercial mitigation.

She signed it last night.

SESSION LAW 2011-343 puts the state fee-program and private mitigation banks in much closer compliance with the 2008 Federal Mitigation Rule by establishing a statutory preference for mitigation bank credits in North Carolina in almost all cases, as well as establishing “Full-Delivery” turn-key mitigation as the preferred method for contracting for the state’s continuing fee-program obligations where banks are not yet available.

The law continues the wise policy taking hold nationwide of transferring responsibility for restoring and caring for compensatory ecosystems from governments to privately capitalized and bonded green firms like RS and our competitors.  It almost ensures that mitigation in North Carolina will continue its progress from a state monoply functioning with state mandated “static” prices, to a vibrant ecosystem services market with true-cost competitive pricing.

All progress in commercial mitigation is incremental.  A win in the legislative halls for the NCRA is a long way from the bottom line of any individual company. But this legislation may finally have turned the ship of state in North Carolina toward performing mitigation that is not established according to available funds — but priced according to true costs.

The former method, state production and pricing, has failed miserably as detailed in the recent News and Observer series, “Washed Away.”  The latter method endorsed by the new law – establishing mitigation and then market pricing it for sale — makes sure that someone (I hope RS) is taking personal economic and ecological responsibility for a given impact to the waters of the U.S. within our state.

The bill description below may read like a wonky little change to policy but it makes a huge difference on the ground. It allows the green shoots of true-cost restoration and advance mitigation to grow in Tar Heelia without fear of being plucked by the cold dead hand of The Leviathan.

I can’t let this post end without giving a shout-out to the NCERA lobbyist from McGuireWoods Raleigh office, Harry Kaplan.  It takes a special kind of patience to navigate legislation in a heretofore unknown field with desperate entrepreneurs nipping at your heels in the halls.

Here is Harry’s summary of the law:

Analysis of Senate Bill 425:

During their 2008 Regular Session, the North Carolina General Assembly enacted legislation to provide that, under certain circumstances, certain applicants for compensatory wetlands mitigation must seek that mitigation from a private wetlands mitigation bank before seeking that mitigation from the Ecosystem Enhancement Program (“EEP”) in the North Carolina Department of Environment and Natural Resources. During their 2009 Regular Session, the General Assembly enacted legislation to extend this preference for private mitigation to the areas of riparian buffer protection and nutrient offsets. Under the law prior to the enactment of Senate Bill 425, the preference for private mitigation and nutrient offset did not apply to the State, the federal government, or to local governments.

Section 1.1 of Senate Bill 425 amends the definition of “governmental entity” in GS 143-214.11 (Ecosystem Enhancement Program: compensatory mitigation) so that the preference for private mitigation and nutrient offsets now applies to local governments unless the unit of local government was a party to a mitigation banking instrument executed on or before July 1, 2011, notwithstanding subsequent amendments to such instrument executed after July 1, 2011. Section 1.1 defines a “private compensatory mitigation bank” as a site created by a private compensatory mitigation provider and approved for mitigation credit by State and federal regulatory authorities through execution of a mitigation banking instrument. No site owned by a government entity or unit of local government shall be considered a “private compensatory mitigation bank.” Section 1.1 also requires an existing local compensatory mitigation bank to comply with the requirements of Article 12 of Chapter 160A of the General Statutes governing the sale and disposition of property whenever it transfers any mitigation credits to another person.

Section 1.2 of Senate Bill 425 establishes a new process by which the EEP provides for compensatory mitigation. This new process creates a priority system for different types of programs for the procurement of compensatory mitigation – with “Full Delivery/Bank Credit Purchase Program” listed as the first priority. Under Senate Bill 425, EEP must first seek to meet compensatory mitigation procurement requirements through its Full Delivery program or by the purchase of credits from a private compensatory mitigation bank, as defined above.

Senate Bill 425 became effective when it became law on June 17, 2011 and applies to all projects and contracts awarded on or after that date.

3 replies
  1. Waterdog
    Waterdog says:

    Golly gee Swampmerchant, my family sleeps better at night knowing that you and your quaint little guild maintain vigil atop the parapets, protecting us from all threats, real and imagined, that could be foist upon the free market by the incompetent hands of the Leviathan and its minions. However, i must quibble with a few points of your most recent screed.

    Specifically, it bears mention that “The former method, state production and pricing,” has always relied heavily on RS and other firms through the Full Delivery procurement process. There have been several years during which you and your ilk provided 90% of the state’s mitigation needs, so if the former method has failed miserably, perhaps you might step up to some responsibility. No need, however, because, viewed programmatically, the state’s mitigation needs have been met, and failures have been relatively minor. While the reported $147 million price of failure suggests an exorbitantly high cost of confusion, letters to the editor by more informed private sector sources documented that the overwhelming preponderance of those expenditures were not made by the Ecosystem Enhancement Program.

    Now, the state’s mitigation needs have been met, but could this have been achieved with greater ecological uplift AND with more cost-efficiency? You betcha, Swampmerchant!

    You will recall that, prior to your most recent legislative adventure, you and many other private sector partners provided meaningful and productive input to EEP management, contributions that helped shape substantial changes to EEP’s operational priorities and organizational structure. This new law you herald is, in large part, the codification of EEP’s new emphasis, begun in late February (several weeks before you bill was submitted) on private sector mitigation sources. The fact that EEP had begun implementing aggressive outsourcing policies before your legislation was filed does not diminish the importance of SESSION LAW 2011-343, however, because taxpayers now have some protections, arcane though they may be, that public expenditures compelled by state and federal regulation will be made (we all expect) with increased cost-effectiveness and contractual accountability.

    While your shout-out to the representative of your special interest politics may be deserved, you should at least offer a hat-tip to Shawn Wilkerson and Tara Allden, members of your quaint little guild who slogged through the tedium of crafting a decent bill when they could have been out printing money like all good bankers do.

    Your disparagement of state mandated static prices is nothing new, and it is hoped that you will participate in the upcoming forum intended to address this issue. Perhaps, rather than single-minded grandiloquence, you can contribute to the development of a pricing structure that allows some level of cost-certainty for those less fortunate permit applicants without access to mitigation banks, while at the same time minimizing the influence of the in lieu fee structure on private market prices. Surely this is a conundrum worthy of your considerable cognitive capacity.

    Finally, the representative of your special interest politics failed to mention Section 1.3 in his summary. Hopefully you’ll devote an entire post to this section and the protections provided therein to the entire mitigation community from the vagaries of multi-agency appeasement.

  2. Waterdog
    Waterdog says:

    Damn you’re good, Swamp merchant! Printing money from a golf course!
    Nice work if you can get it.

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