Squeeeeezing into the box for the Ecosystem Enhancement Program

As a matter of public policy, the use of compensatory mitigation for aquatic resource permitting is properly constrained by watersheds.  In other words, government regulators are obliged to determine an appropriate scale of watershed in which a given restoration site is authorized for use as mitigation, particularly when “banked.”  Choosing the “Service Area,” as the regions are known, should require a careful balance of the availability of high-value mitigation and the need to keep the functions and values of the restored site in proximity to the wetland or stream that is being impacted.

But the question presents itself:  At what watershed scale does the government constrain the mitigation?  Should it be limited to the largest level of watershed — the Major River Basin?  Or should the regulators drill down further into the “Sub-basins,” and require mitigation to occur in watersheds defined by the tributaries to major rivers, the so-called “8-Digit HUCs”?   Or perhaps the government should go even further, and restrict the utility of mitigation to the area draining into the nearest large creek, a so-called “14-Digit HUC”‘?

In North Carolina, as a general matter, the Wilmington District of the U.S. Army Corps of Engineers mandates the Service Area be limited to 8-Digit HUC only.  The Neuse River Basin, RS’ home watershed, has six of these 8-Digit HUCs.  So, in the Neuse River Basin each bank or site will generally service only 1/6 of the land area, more or less, of the watershed.  In all other Corps Districts in which RS works, mitigation is specifically allowable for sale within the immediate and adjacent 8-Digit HUC’s, depending on the type of permit, and the availability of credits from banks in adjacent HUC’s.  (If you like, skip down and see what an 8-Digit HUC looks like.)

RS thinks the Wilmington District is a bit parsimonious in their adherence to an 8-Digits Only Service Area policy.  (Except on a case-case basis.)  RS prefers other Districts’ more liberal policies that allow the flexible utilization of  watersheds depending on circumstance agreed to beforehand. But we agree that 8-Digit HUC’s are a good unit of measure — and generally the minimum necessary — to balance available high-quality mitigation with the public expectation that compensatory mitigation stay close to home.

My beef today, however, is not the Service Area granted private mitigation banks in North Carolina, as discussed above, but a more subtle manipulation of  watershed requirements — one that demonstrably results in lower quality restoration sites.  In this case, however, it is the buyer of the mitigation, the North Carolina Ecosystem Enhancement Program, not the regulators of the mitigation, Corps, EPA, DWQ, etc., that is squeeezzing the boundaries of what restoration can qualify as mitigation.

Thanks for your continued patience as I explain (the arcane).

As some readers will know, the NCEEP is North Carolina’s unique, state-wide, non-regulatory, Fee Program. The NCEEP sells hundreds of millions of dollars of mitigation to the public and the government at government established rates.   The NCEEP is the funnel through which the vast majority of mitigation in North Carolina flows.  The program develops the mitigation sold to the public in two ways.  It produces a “majority-of-the-majority” of the mitigation “In-House,” i.e. the state identifies the land and purchases themselves (~70%). Or, they accomplish the mitigation by conducting a bonded, public, low-bid system called “Full-Delivery” (~30%)


In the Full-Delivery system, companies like Restoration Systems will identify and contract for the purchase of the land privately; and, if awarded, acquire, design, construct and care for the site long term — with all resulting credits accruing to the state.   (And until recently, after five years, the property was required to be transferred to a private land trust with an endowment.  Today the state retains the private sites.)

The rub is this:  The NCEEP has continually narrowed the Service Areas in which a given restoration site will be allowed to qualify as mitigation for the Full-Delivery, low bid system, in which we participate.

In order to properly explain, we must go to the tape:

The figure below is All 17 Major River Basins in North Carolina. This should give you some initial perspective on the landscapes that share raindrops in North Carolina:

All 17 Major River Basins

The next figure is All 54 8-Digits HUCs in North Carolina.  Under the regulated private banking system any mitigation performed in any of these areas is available for use within its individual HUC.

All 58 Eight Digit HUCs

Below is an example of a Major River Basin, the Lumber  River Basin, broken out into its own four unique Eight-Digit HUC’s.  According to the regulatory agencies, mitigation in any one of these areas can apply within the boundaries of each of the individual HUC’s if all other things are equal.

The Lumber River Basin broken out into it’s 8-Digit HUCs

And finally, the ” Targeted Watersheds,” outlined in Red, in which private contractors are forced to locate their mitigation in order to bid for projects — projects that will in turn be used as mitigation in for the entire HUC or more.  Projects outside the red zones are just as useful to the state as those outside of it.

Allowable Full Delivery bid areas within the zone outlined in Red

What is wrong with this picture?   I’ll tell ya.  The NCEEP, a non-regulatory agency, has imposed watershed restrictions on itself  — or, more accurately, its contractors — based on the claim that internal “watershed planning” requires it to be so.  The implicit reasoning is that mitigation in the red is area is better — solely by virtue of occurring in these areas — regardless of whether it is a good site or a bad site.

We believe on a number of levels that this a demonstrably wrong approach to finding the best mitigation.  Allow me to make one rational case.

If you accept that a given watershed (in this case, our friend the 8-Digit HUC), has a discreet number of mitigation and restoration opportunities (think of 100 large farm to flood and plant for wetlands restoration), I will promise you that of those 100 hundred farms with drained wetlands some are “better” mitigation sites than others.

I will not bore you with the details, but trust me here folks.  There are a multitude of variables, technical, social, financial and political — can the properly be purchased. for instance  — that determine what a “good site” is and what a “bad site” is.  The best way to sort it out is to subject the proposed restoration to the private banking mitigation review process.  When properly conducted, this process is commonly agreed to be one of the more painstaking and lengthy multi-agency bureaucratic and technical review processes in the nation, as it is administered by multiple state and federal regulatory agencies with overlapping jurisdictions.

But that multi-agency review does not occur in the case the NCEEP Full-Delivery site approval process.  The NCEEP is the judge, jury and prosecutor.  NCEEP calls the shots on what is is salable to the government as mitigation — or not, as is the case outside the red areas.  The NCEEP refuses to purchase sites outside these zones, despite the fact they are fully compliant with regulations — and the fact that NCEEP regularly works outside the zones themselves.

The way the system works, a great site identified by a private contractor which is entirely compliant, but outside the red zones, can  be excluded from the RFP process in favor of the medium to poor site located in the red zones.  Or worse, it can be sacrificed because NCEEP is working themselves outside the Red Zones.   One of the several net effects of this system is to drive up the price of the land available to the private contractors, who are the forced to compete in narrowest watersheds possible, while protecting the NCEEP from similar competition outside the “planning” areas.

To my final questions:  What magic is there in these small areas outlined in red?  By what criteria — precisely — does the NCEEP judge that two farms, one a “good site” outside the red zones, and the second a “bad site” within the red zone, cannot compete?   What precise methodology justifies cramming private contractors into the red zones to desperately bid against each other for the few available farms in the “approved” areas?   What leads the state to believe that paying more for fewer choices — and ignoring other restoration that is entirely acceptable to the regulatory agencies — is wise when state resources are already stretched to the limit?

There must be some very powerful mojo in those “watershed plans” for the state to make such ham-handed distinctions.  “Stories from the Field” will report back on what we can find out about the mojo of watershed planning.  Maybe we will find out that the mojo is strong — or maybe we find out it is all just smoke.

Comment (1)

HOW CAN IT BE! How on earth can a non-regulatory agency regulate areas where a contractor can and cannot locate a potential site? Would it be that they are saving the good sites for themselves! I would have to say yes. Why work harder to find a site when you can snuff out you competition by cheating?! I do not think the environment has a line in the sand. Just pour a glass of water on the street and tell it that it cannot cross a line! What hypocritical behavior. Hey, I understand rules, but making rules to benefit your agency, well that is just criminal. It kind of reminds me of getting paid twice for the same job! OH, THAT’S RIGHT…. THEY DO THAT AS WELL!