Raleigh News & Observer Dec. 8, 2009
EBX is paid twice for wetlands work
This year,
state environmental officials agreed to pay a Maryland company nearly
$1 million for its work to help rid the Neuse River Basin of tons of
nitrogen, which pollutes drinking water.
Here's the catch for North Carolina taxpayers: The state Department of
Transportation paid $1.8 million for the same work several years ago.
Yet the new deal appears to be legal.
The state Department of Environment and Natural Resources entered into
a $911,000 contract with EBX to remove more than 100,000 pounds of
nitrogen during the next 30 years from the Neuse basin, the water
source for many communities in the region, and to restore a Neuse
tributary.
EBX won the contract with a bid lower than its competitors. The other
contractors soon realized why: EBX was claiming the nitrogen reductions
from two sites created several years earlier in Johnston and Wayne
counties. The two sites were part of $11 million in contracts from the
N.C. Department of Transportation in 2000 and 2002 to replace wetlands
and streams destroyed for road projects.
The $911,000 would not create a new wetland or a patch of vegetation to
absorb nitrogen runoff, which has been linked to fish kills and algae
blooms in one of the nation's most endangered rivers. EBX would collect
the money for administrative work and for continued monitoring at its
existing sites.
State environmental officials approved the payment, saying there were
no regulations to prevent it. EBX officials say their proposal is no
different than someone discovering something newly valuable on their
property and then profiting from it.
State officials call it "additionality." EBX and others in the business
call it "credit stacking." Critics say it smells like double dipping,
and they want the state to stop it.
"That money was supposed to pay to protect our water, and instead it is
going into the pocket of a private company for no environmental
benefit," said Alissa Bierma, the Upper Neuse Riverkeeper.
This may not be the only case. State officials acknowledge that for
years, they have allowed a similar double dip from two other
environmental restoration funds, which could be costing the state
millions of dollars. Those who restore streams in the Neuse and
Tar-Pamlico river basins can collect from two funds - one for streams,
the other for buffers along the streams - for work on the same stretch
of water.
Chaos and controversy
The double-dipping questions represent a tumultuous moment for a state
program that has spent more than $370million since 1997 on
environmental mitigation, which essentially requires those who harm
streams and wetlands through development to pay for restoration or
preservation elsewhere in the river basin. Environmentalists,
developers and companies in the restoration business are upset about
decisions about what qualifies as restoration and how much the state
should charge developers and road builders to pay for it.
The mitigation requirements have caused confusion and controversy.
After a two-hour discussion at a recent state Environmental Management
Commission subcommittee meeting, the chairman, Charles Peterson, a
marine studies professor at UNC-Chapel Hill, said: "I'm sure we're
making progress. I wish I could tell you what it is."
Compensating for damage from development has led to a burgeoning
industry in environmental restoration. Companies purchase sites or pay
landowners for conservation easements on properties that the companies
then restore to a natural state. An example would be digging out a
creek that had been piped or straightened so that it would flow
naturally, and planting vegetation along both sides to prevent erosion
of its banks.
Typically, the value created by such restoration is marketed as credits
that can be bought by developers or by the state. The state Department
of Transportation, for example, is a major customer because it damages
streams and wetlands as it builds new roads.
To help DOT with mitigation, the state environmental agency in 2003
created the Ecosystem Enhancement Program. The program collects fees
from developers and road builders and manages four environmental
restoration funds. It also sometimes hires people to perform
restoration work.
Another division of the Department of Environment and Natural Resources
certifies how much environmental benefit all these restored sites
provide.
Who gets the credit?
The credit stacking occurs because the work sponsored by the four
restoration funds can, in some cases, produce the same results.
Two are federally mandated and require restoration of streams and
wetlands. The other two are required by the state to provide additional
protection for its most endangered waters. One of those requires
restoration of land along streams, while another pays for projects that
absorb nitrogen and phosphorus before they run into streams.
Stream restoration often requires building vegetation buffers along the
banks. Wetlands and buffers can absorb nitrogen and phosphorus.
As a result, the ecosystem program and companies that specialize in
environmental remediation may get paid for two types of restoration on
the same piece of property.
The EBX contract represents the first time the state has paid a company
to absorb nitrogen after the company had been paid for stream and
wetlands restoration at the same site years earlier. Internal
correspondence shows that state officials tried to halt the contract
after a competitor, Restoration Systems of Raleigh, and the Riverkeeper
associations expressed alarm.
The associations, in a letter March 4 to Environment and Natural
Resources Secretary Dee Freeman, said allowing the credit stacking
would result in a "net degradation in water quality."
"This scenario results in a net loss of riparian buffer acreage and
function, violating the intent of the rules ... and cheating the public
out of the water quality benefit they promise," the riverkeepers wrote.
But the ecosystem program's director, Bill Gilmore, said he could not
reject the contract because the state Division of Water Quality had
certified the sites.
John Dorney, a water quality supervisor, said his agency had no other option.
"Our rules are silent on the matter, unfortunately," he said. His
agency has produced a draft rule that would close what he views as a
loophole that led to the payment to EBX. It is expected to be
discussed, along with other proposed changes to the mitigation
requirements, at a meeting Wednesday. For the moment, the state will
not allow overlapping payments for other such projects.
Dorney, however, said he has no plans to prevent the state or private
companies from receiving payments from both the stream and buffer funds
for work at the same site. Dorney said even with the site stacking, the
two programs restore more territory than was lost through development.
But his boss, Freeman, said he wants a full review of allsitestacking.
"I think the case of EBX causes us to pause and look at the entire
issue," he said.
If the state allows the double dip in streams and buffers, it helps EBX's claim to its $911,000 payment from other funds.
"It's the same philosophy," said George Kelly, founder of EBX.
Bierma, the Upper Neuse Riverkeeper, said the state and federal
requirements were not created so that state and private companies could
double dip on one site. Many other states, for example, don't have
state restoration programs and therefore rely on the federal
regulations to keep rivers and wetlands from being gobbled up by
development.
"Having the ability to stack credits is where the fudging starts
happening, and we have a huge potential of losing ecological value
without anyone noticing," she said.
Developers are concerned about credit stacking. They don't know whether
they are being overcharged, or whether the fees are not paying for the
required restoration.
"We're not trying to get out of it," said Lisa Martin, a lobbyist for
the N.C. Home Builders Association. "We want to make sure that it's
fair. If we are paying for this, then we want to make sure that it's
paying for the work that needs to be done."
dan.kane@newsobserver.com or 919-829-4861