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

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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.

Ecosystem Marketplace: Mitigation Bankers Say Army Corps Not Following the Rule

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From Hannah Kett and Ecosystem Marketplace

According to law, if you damage a wetland in the US, you must restore a comparable piece of property in the same watershed. A 2008 regulatory rule says wetland credits from a mitigation bank should be your first option. Mitigation banks, however, say this isn’t happening, and they want the Army Corps of Engineers to tell them why. The Corps says it’s just trying to be flexible – and promises more transparency in the future.

29 September 2010 | In April, 2008, wetland scientist Rich Mogensen read “The Rule” and speculated that the number of wetland mitigation banks in the United States could triple from 500 then to 1500 right about now as a result of its issuance.

Officially titled the Compensatory Mitigation Rule for Losses of Aquatic Resources, the Rule was jointly issued by the US Environmental Protection Agency and the Army Corps of Engineers (USACE) (with a push from Congress), and it declared that anyone who damages a US wetland should look first to mitigation bankers to compensate for the damage before exploring other alternatives.

National Mitigation Banking Association letter to Army Corps of Engineers regarding the implementation Fede… Read more

UNC School of Government Study of EEP: Solid as Banana Cream Pie

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UNC School of Government Study of EEP: Solid as Banana Cream Pie

This past Friday the UNC School of Government released its “Phase 1 Report” on evaluating the Ecosystem Enhancement Program’s method for procuring its mitigation.

As all long suffering followers of the inner workings of the ‘black box’ known simply as EEP understand, there are two separate processes for this: 1) a competitive bid system known as Full Delivery in which the provider assumes all liability for delivering the contracted amount of mitigation without an any change order provisions and is fully bonded, and 2) an arbitrarily awarded design contract (not competitive bid) for projects from a list of ‘on-call’ design firms which is then subsequently farmed out to bid for only the construction component known as Design Bid Build.

One would have assumed that UNC would have actually looked into the mechanics of these two methods and drawn some conclusions or at least made some salient observations. Oh wait, if that’s what was done then there would actually be something useful coming from this process. Instead, all that UNC did is establish a set of criteria for how to evaluate the two methods and with apologies to my friends at UNC—a third grader could have come up with the two main ones: effectiveness and transparency. The SOG work so far has been analogous to a round table discussion of the shade of black on the side of the box, with little discussion of what’s inside and why nobody gets to see it.

Was it really necessary to engage dozens of stakeholders in the process to come up with those revelations? Can you say ‘pass the butter knife so I can cut the banana cream pie’?

As one of those stakeholders who falls under the category in the study of “Mitigation Provider” i.e. one who actually does this work and has been well acquainted with both EEP and its DENR management since before the 2003 start of the program, let me add one point of clarification to the second sentence of the second paragraph on page 1 of the study which reads “DENR’s new leadership identified a need to have an objective third party review EEP’s procurement process.” WHOA!

There is an elephant in the room here and it needs to be acknowledged. The Assistant Secretary of DENR ever since the EEP has existed, Robin Smith, is married to Mike Smith the head of UNC’s School of Government. Now, both

and Smith are well regarded in their respective capacities and I am not trying to imply any cronyism was at play in the decision for DENR to give UNC the $25,000 contract for this study. After all, if DENR had wanted to bring in Bain Consulting to perform a thorough top to bottom review of the EEP, as UNC did when it had Bain study its layers of overlapping university bureaucracy, it would have cost a heck of a lot more than $25k.

However, I am disappointed that the study offered no disclaimer to this obvious reality which was discussed by several stakeholders outside of the series of meetings. It does neither institution any favors when even the appearance of a potential conflict of interest is involved, especially so when it is not duly acknowledged in an allegedly “transparent” process.

The one clear take away result from the study is that what is likely to come next—you guessed it, is another study! One can only hope that the Phase 2 Report actually comes up with real analysis and recommendations.

If not then we ‘stakeholders’ better be prepared for more banana cream pie. One can only wonder what the budget is for another serving of the same mush?

BrassGrill

Mea Culpa: SOG not involved in Fee Program Development

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We had a facinating meeting today at the UNC-School of Government.  As Stories predicted yesterday it was a heavily proscribed discussion guided by public policy development and analysis methodology.  But I will elaborate on the dangers of that approach later in a separate post.

For now, a quick fact check is necessary regarding the Swamp Merchant’s claim yesterday that the SOG was involved in the development of the original NC Fee Program. Untrue, as far as Richard Whisnant (now) of the SOG knows and informed me today in an entirely affable manner.   And Richard has reason to know.  He was at DENR as general counsel when the program was first developed in the mid-90’s — not at SOG as I mistakenly believed.

According to Richard, while DENR counsel he did answer some discreet legal questions regarding the program prior to it becoming law.  I think that was the source of my mistake.  Mitigation policy has an informal oral history maintained by the older rats in the barn.  Somewhere in that history it became a relatively unimportant footnote that Richard Whisnant was involved in the formulation of the program — strictly, true. Did SOG and Richard Whisnant have a policy formulation role of the kind I was implying might bias today’s review? Plainly, no.

Richard’s limited involvement with the Fee Program was  previously at DENR, not SOG.  The UNC – School of Government and Richard are looking under the hood of the Fee Program for the first time.

The Swamp Merchant is duly chastened and will work to re-earn what credibility I have lost.  My only solace is my belief that it is not the point of blogs to provide facts — it is the point of blogs to discover them through enhanced communication.  That happened here.  Sometimes being wrong in public will reveal the truth.

Confab: Yet another huddle on the fate of the NCEEP

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If I had a dollar for every stakeholder meeting, facilitated discussion, working group, and RFP modification effort I have attended in the last decade concerning the North Carolina mitigation fee program — I could pay for a robust lunch and still have some jingle in my pocket. In fact, I keep a box of magic markers on my desk at all times in order to be prepared for these tedious sessions and their inevitable chart-fliping diagrams of the problems.

A facilitated discussion

Once again, a seeeerious evaluation is being made by the wetland policy industry of the North Carolina Ecosystem Enhancement Program.  In this case it is the respected UNC School of Government (SOG) sitting us down to see if we can all just get along.  The ultimate goal is, I fear, to find some political method for justifying the out-of-control, nobody-on-Jones-street-authorized-it, mistake-prone, developer-facilitating, government-price-fixing expensive mess that is the NCEEP.

How about this for an idea taken from the National Environmental Policy Act:  The “No-Build” alternative.

It is time to wind it down.  It is time for “No-Build.” Somehow, 49 other states struggle through the day without subsidizing their developers with a state-wide-pay-and-pave-program.  The North Carolina monstrosity was concocted in 2002 only to sweep a previous scandal concerning the NC Wetland Restoration Program (NCWRP) under the rug with a new name and more money.  Tar Heels would not miss it.   (Unless, of course, you were seeking a subsidized permit to dredge and fill wetlands.)

Yet, I wonder.  Is the “No-Build” alternative even in the SOG’s play book?  The SOG, I understand, had a hand in developing the NCWRP [WRONG — Mea Culpa], the first iteration of fee-based mitigation in North Carolina. And the SOG is certainly not the School of less Government.  Is it possible for the SOG to simply do the right thing and recommend that the state back-out of the business of providing developers with compensatory mitigation at fixed prices?   Or will we once more trod down the well-worn path of “reform” without substance and meetings without results.  I am keeping an open-mind, but I am not encouraged based on my years of experience.

In the meantime, here is a preview of tomorrow’s gathering lifted from the quite cool NC Water Wiki sponsored by the SOG. One of the other invitees posed a few questions to our host :

In the meantime, here are some similar questions from another potential participant and my answers –

Maureen,
Thank you for the invitation to participate in the SOG Evaluation of the EEP.  In discussing this process with colleagues, some questions have arisen.  Based upon the stated goal of the project: “an independent analysis of EEP’s procurement methods,” the range of topics covered is not clear.
Q:  Can you provide more detail?
A:  The School of Government has been asked to evaluate the EEP’s procurement methods.  I am overseeing the evaluation from the position of evaluation methodology and research methods expertise.  Paul Caldwell, a SOG project director, runs the nuts and bolts of our evaluation projects – he will be the main contact for day to day activities.  Bill Holman and Richard Whisnant are colleagues who are content experts, and they will help facilitate the process, especially the technical conversations.
The word independent is to emphasize that the SOG will be conducting the evaluation in a transparent, neutral fashion, without any preconceptions about the program.  In fact, I have taken steps to avoid even reading about controversy about the program (though I know something is there) so that I can ask as un-biased, methodologically sound questions as possible.

Something Fishy

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Red Herring?

Last Thursday representatives of the North Carolina Division of Water Quality (DWQ) concluded an overview presentation of their mitigation programs to the Environmental Management Commission in defense of credit stacking by expressing a red herring message of fear that without the ability to sell the same piece of mitigation twice,

mitigation costs will be higher

— NCDWQ

and that some areas of the state could

run out of buffer and stream sites

— NCDWQ

to restore??

I’m confused.  DWQ just threw away several hundred thousand dollars and caused an immediate and future degradation to water quality and they’re concerned that correcting the policy that led to this might cause mitigation fees to go up?!  That’s almost as ridiculous as their implication that running out of degraded streams and buffers would somehow be a bad thing.

The tone of these comments by DWQ staff force a reasonable person to ask:  is DENR more concerned with subsidizing the cost of development at the expense of the environment than actually protecting the environment? A skeptic would ask if DENR management is more concerned with protecting it’s empire of programs and divisions than the environment.  And a cynic would merely point out that the Endless Employment Project and the Ecosystem Enhancement Program share the same acronym.

Thursday’s presentation was given at the bequest of EMC Chair Stephen Smith in response to the recent publicity regarding DENR, DWQ, EEP, and EBX that questioned whether roughly a million dollars of mitigation fees required by DWQ, collected by EEP, and awarded to  EBX actually did anything to protect the environment.  According to the NC Program Evaluation Division the answer to that question is clear,

DWQ’s decisions related to this controversy resulted in actual and potential future losses to the environmental integrity of the Neuse River basin. — Program Evaluation Division, NC General Assembly

What’s not so clear is why DENR’s been making policy decisions that degrade the environment as opposed to protect it.  Their public explanations thus far have been premised as simplified versions of complicated issues.  The EMC rule makers need to understand that DENR’s not telling them the whole story.  The most notable omission is that EEP has been charging mitigation fees to developers based on the costs of providing unstacked mitigation credits, their nutrient offset program was at a huge deficit of  compliance,  and they seem to have used retroactive credit stacking, shielded by a process called  “direct purchase” to help balance their books.

It’s time for DENR to stop treating everyone from policy makers to legislators like children and start telling the whole story.   A good place to start would be explaining why DWQ Buffer Interpretation/Clarification #004 was written, and whether it was intended to help every public and private mitigation project that has subsequently taken advantage of it, or just the needs of a certain Canadian mining company.   The first step to recovery is admitting that you have a problem.  Everybody makes mistakes, what’s important is that we learn from them.

Trying to get around all this monkey business, and as a bit of a Curious George myself,  I went to the Man in the Yellow Hat (an industry veteran) who reminded me that at its root, DWQ was a permitting agency.  This DWQ summary, and the Rationale and Methodology for Flexible Buffer Mitigation for PCS Phosphate Company, Inc. help explain the connection between the proposed Consolidated Buffer Rule, the 800 pound gorilla sitting silently at the back of all these public policy meetings, and DENR’s hesitancy to correct their mistake.

PCS Phosphate is currently pursuing a permit to make what could be the largest single impact to water quality in the state of North Carolina and they’re using the Consolidated Buffer Rule to help do it.  But DWQ’s most recent version of the Rule was not only a fix for PCS, but also a fix for DENR’s recently publicized policy problems.  Lucky for the environment, it has been temporarily tabled.  Maybe next time it’s presented they’ll stop monkeying around and call it what it is, The Rule to Help PCS Get Its Permit and Help DWQ Cover Its Ass.  Just goes to show that the Man in the Yellow Hat knows what he’s talking about, at its root DWQ is a permitting agency.

However, this still doesn’t help explain the DENR Assistant Secretary’s response when asked by members of the ERC on December 17th if the recent controversial policy decisions by her department had any impact on PCS, because she appeared to have no idea that there was a connection.  That’s a little ironic, considering she has served as legal counsel to the state’s mining commission, the Southern Environmental Law Center is currently challenging the PCS permit and DWQ has been working for several years on a new Rule to help PCS meet their buffer mitigation requirement.

Maybe she didn’t get the MEMOs, or like Peter Gibbons in Office Space maybe she just ignored them.  When I recently heard DENR had engaged the UNC School of Government to do an ‘outside, third party’ review of EEP and its practices I was encouraged.  But then I heard that the Dean of the School was married to the DENR Assistant Secretary. Sheesh.

The real world ain’t like  school and it ain’t like the movies, and sometimes it makes me sick.  As historian Howard Zinn’s book demonstrates in both title and text, You Can’t be Neutral on a Moving Train.   Letters and MEMOs are important and policy decisions have real and immediate consequences that can’t be brushed over by studies and simplified examples.

For the time being it’s looking more and more like the dead fish in the Neuse aren’t the only thing putrid effecting our waters.  In case they missed the other ones, I hope the DENR hierarchy gets this most recent memo from concerned advocates and this time decides to do something good for the environment.

Four Year Checkup: Lowell Park looking good for the new decade

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I dropped by RS’ Lowell Park today in Kenly, NC, Johnston County.  Lowell Park is the site of the former Lowell Dam that RS shot to dust in 2005 for the NCEEP.  We purchased an additional 17 acres at the site so that we would leave behind something for the community after the removing the dangerous and defunct structure.

The interpretive signs could use a little paint, but otherwise the site is in ship-shape.  We pay an elderly gentleman to maintain the site and he does an excellent job.  There was hardly a cigarette butt to be seen and the grass was mowed as neat as a pin.

Scroll over and click to see full screen:

SwampGate: Purchasing nutrients from a wetland bank prohibited by EEP's own rules

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As an informational update on the brewing controversy concerning the state paying twice for work done once, “Stories from the Field” offers a snippet from the EEP‘s own rule book.  The rule specifically and unequivocally prohibits the dual use of a single mitigation site for wetland and nutrient mitigation, as was done at least once by a private contractor, and perhaps many times by the rule maker themselves:

Ecosystem Enhancement Program:
“Policies, Process, and Procedures Manual,” May 4, 2008

2.0 DEFINITIONS AND PROJECT REQUIREMENTS TO GENERATE RIPARIAN BUFFER MITIGATION CREDITS.

2.9 Wetland and Buffer Mitigation. Wetland mitigation may not overlap with riparian buffer mitigation. When wetland mitigation is implemented in a riparian zone using buffer restoration techniques that could also generate riparian buffer mitigation, a decision must be made as to which type of credit will be claimed from the project. A specific area on a project can generate either wetland mitigation credits or riparian buffer mitigation credits. Portions of a project can be designated as generating riparian buffer mitigation credits and portions generating wetland credit, but these areas cannot overlap.

2.10 Nutrient Offset and Buffer Mitigation. Nutrient offset mitigation is required to be stand alone mitigation in order to generate nutrient offset mitigation. Any area being used for nutrient offset mitigation cannot be used to generate stream, wetland, or buffer mitigation credits. Similarly any area being used to generate riparian buffer mitigation credits cannot be used to generate nutrient offset mitigation.

The Flying Turkey takes more air photos

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When Pam and the kids and I visit our family in Beaufort, North Carolina, I often take the opportunity to hire a small plane at the friendly Michael J. Smith Airport to take photos of nearby RS sites. I did so yesterday and enjoyed nearly perfect conditions.  Here are some pictures of the Bear Creek, Jarman’s Oak and Lloyd wetland and stream mitigation sites. (As regular readers will recall, I flew Bear Creek earlier this month. But I returned this time WITH my stabilized lens).

I also flew the North Carolina Coastal Federation’s North River Restoration Site, about which I have provided some background below.

Note: If you “click through” the photo box you can more easily read captions and navigate the photos.

Enjoy!

Below are some photos of North River Farms, which is being restored by the North Carolina Coastal Federation. This project is near and dear to RS’ heart. RS owned the option to purchase this 6000 acre farm in the 90’s. Determining that the farm had significantly more restoration potential than could be used as mitigation in the watershed (unless Cape Canaveral were relocated to the NC coast), we contacted the NCCF and suggested they take our option and make an application for its restoration to the then newly formed NC Clean Water Management Trust Fund.

The rest is history. The project is now one of the largest coastal restoration projects in the nation. We retained 390 acres within the farm, for which RS was recently awarded a grant from the Natural Resources Conservation Service to restore and protect. Brassgrill and I will blog in the future and tell you more about this project.

RS assists in National Survey of Mitigation Bankers

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The indispensible Ecosystem Marketplace published a second story in a week involving RS.  (Here is the first). This one is a lot drier, but also filled with consequence for and insight into the emerging markets for compensatory mitigation and ecosystem services (a term for another blog).

When I get a chance, I will blog some about the background of the survey, it’s conclusions, and the propects for its continuation.  But, for now, I just wanted to share the link below, and recognize Ecosystem Marketplace for their coverage of these important issues as they develop.

The Katoomba Group's Ecosystem Marketplace

Mitigation Bankers Say New Rule Heightens Old Conflicts: Survey

by Todd BenDor, J. Adam Riggsbee, and George Howard

About the Survey

This article has been adapted from the Executive Summary of A National Survey of Federal Mitigation Regulations and their Impacts on Wetland and Stream Banking. You can download the full report, including the executive summary, above.

It’s been more than a year since the United States enacted uniform procedures for
offsetting lost wetlands across the country, but market participants say “The Rule” has neither calmed the conflicts it was designed to eradicate nor driven business to mitigation banks. The reason, they say, is that regulators are as regionally inconsistent as ever.

20 November 2009 | When the US Environmental Protection Agency and Army Corps of Engineers released their long-awaited regulations for offsetting lost wetlands in March of last year, everyone seemed to agree that “the Rule” – as the regulations are collectively and colloquially known – would encourage the expansion of mitigation banking to provide compensatory mitigation for unavoidable impacts to the nation’s

wetlands.