The Ecosystem Enhancement Program (EEP) in North Carolina has won awards for its new model of public-private partnership in the realm of wetlands conservation. As the program rounds the corner on its third year, the Ecosystem Marketplace surveys its successes and shortcomings.

Highway construction projects connecting the new businesses, malls and housing that fueled North Carolina's growing economy were screeching to dead ends when they unsuccessfully navigated wetland-protection regulations. Meanwhile, wetlands continued disappearing despite tough regulations designed to protect them.

As these clashes between protecting the environment and promoting the economy accelerate across the nation, solutions embracing the competing priorities have been difficult to concoct. In North Carolina, this impasse pushed environmentalists, government officials and developers to devise a completely new approach.

North Carolina unleashed this approach, named the Ecosystem Enhancement Program (EEP), in July 2003. Hailed as a model for public-private partnerships, the program has sparked enormous enthusiasm, cut costs and won national awards. Now, as the EEP approaches its third anniversary, other agencies and states have begun looking to it for a blueprint they might follow. But the EEP, say many working closely with it, still needs some tinkering before others extrapolate too much.

"We're a young and evolving program," says the program's director, Bill Gilmore "and we're trying to partner with private industry to provide the best return to the state." This requires a collaborative process, he says, that will either collectively succeed or collectively fail.

A Common Goal

Before the (EEP), North Carolina owned most of its road network and had a trust fund earmarked to underwrite future expansion. The Department of Transportation, it seemed, had nearly everything it needed to support the state's thriving economy--everything, that is, except environmental support.

According to Gilmore, up to 40 percent of new-construction-project-missed-start dates were due to problems with wetlands requirements under the Clean Water Act. The Act, designed to protect wetlands serving as nature's cleansing sponges, mandates that, whenever wetlands are destroyed, equivalent wetlands must be restored in the same watershed. Developers, in the business of creating real estate and highways, rather than wetlands, often pay consultants to restore wetlands for them.

Yet reports suggested fewer than a quarter of these wetlands 'mitigation' projects functioned at a level ecologically equivalent to the natural wetlands they were built to replace, and the mitigation expenses of these sub-optimal projects continued mounting. The North Carolina Department of Transportation spent between $40 and $60 million per year on mitigation, transportation department data reveals.

Frustrated by the mess, the regulators and the regulated sat down together to brainstorm fresh solutions. North Carolina's Department of Transportation met in 2001 with the state Department of Environment and Natural Resources, the federal Army Corps of Engineers and 10 other state and federal agencies. After contentious debates, the agencies ultimately decided they would have to work jointly to meet their varied goals and the EEP was born to bring sparring environmentalists and business planners under the same roof.

"It is no secret that the agencies historically did not see eye to eye on a range of policy issues," says Gilmore. "Suddenly watershed-planning specialists working for the environmental agency were asked to work shoulder-to-shoulder with transportation planners."

Under these novel conditions, environmentalists, engineers and urban planners at EEP began revolutionizing wetland mitigation in the United States.

Proactive Mitigation

Unlike wetland-protection programs in most of the United States, North Carolina's EEP insists that new wetlands be built before government development forces destroy existing ones. By addressing environmental impacts proactively, the program clears the path for both economic development and ecological restoration by signaling its level of demand for wetlands years in advance.

"Usually permitting is the thing thought of last yet it ends up holding up progress," explains Lamar Beasley, president of American Wetlands and former deputy chief of the United States Forest Systems "What North Carolina did that's visionary is try to anticipate where mitigation needs will be."

The Department of Transportation now designs seven-year highway construction plans that include future wetlands-damage projections. This enables EEP's partners to look for projects addressing cumulative impacts to watersheds.

Buck Engineering, for example, a firm that received lucrative EEP contracts to design mitigation sites as well as construct them, recently completed work reclaiming former wetlands on Privateer Farm southeast of Fayetteville. Cornfields supported by drainage ditches and dams still dominate much of the 5000-acre farm, but water oaks, green ash and sycamore trees now flourish once again amidst 420 reclaimed acres of native wetland grasses and along meandering streams. And the transformation was completed before highway construction caused any wetland loss.

"This was a radical change," says Gilmore. "We went from project by project mitigation where every road construction project was matched to a precise mitigation site to looking at multiple highway projects accumulated within a watershed, then designed several projects of high quality to meet future demand."

This proactive mitigation also forced a partnership with the private sector. Since environmental impact costs could no longer be hidden among the multitude of expenses associated with highway development contracts, to keep taxes down the new agency outsourced 97 percent of its work to private sector experts such as Buck Engineering. Already, the agency awarded over $80 million in contracts to the wetland mitigation industry, says Gilmore, and is currently advertising another $100 million in contracts.

The partnership also eliminated bureaucratic logjams that bogged down projects. Privateer Farms' wetland recovery, for example, took a year to design, says Buck Engineering President Jim Buck, and another six months to build, meeting the EEP's 18-month design-to-completion timetable.

A Balancing Act

Leaning heavily on private industry, however, also meant bringing in another lobbying group with its own priorities and agenda.

"We're walking a tightrope," says Gilmore, referring to the mixed reception private-sector wetland mitigation firms give the EEP. Those who successfully landed contracts enthusiastically support it; those who have had difficulty negotiating the new EEP landscape expressed reservations.

Among the fans, Jim Buck of Buck Engineering says, "What the EEP accomplished in 30 months is unbelievable. They created a state agency, delivered thousands of acres of restored wetlands and miles of stream restoration. The EEP is one of the best examples of the government responding to what is needed."

Speculative market risk is no longer a concern once contracts are awarded, he continued. While in other states contractors wait years to sell wetland credits, the EEP pays contractors up front for most of their costs. Buck Engineering received 75 percent of its contracted amount when it finished construction in April after 18 months' work. The final 25 percent will be divvied out during the five-year monitoring period.

Although this works for Buck Engineering, it points to a fundamental problem in the EEP's approach, says George Kelly, president of Environmental Banc & Exchange (EBX), who, along with a number of other wetland mitigators, were far more tempered in their evaluations of the program. The EEP, he says, "uses a constrained market approach which can have negative implications to some of the providers."

The EEP skews the market, he argues, by releasing numerous requests for proposals in a single watershed at the same time--as many as 25 in a day. With a limited number of appropriate sites to choose from, contractors wind up approaching the same landowners for options to mitigate damaged wetlands, artificially inflating real estate and increasing contractors' costs. Meanwhile, instead of letting the market decide the value of mitigated wetlands as is done in other states, the EEP sets ceilings on what it will pay per contract, further cutting into contractors' profits.

Worse still, mitigators say, is that their business in North Carolina depends on the whims of a single agency. In other states, contractors rehabilitate wetlands, then sell shares of the site to various developers required to purchase mitigation credits. But here, when the EEP changes its mind about restoring wetlands as it has already done, the expenses contractors fronted searching for appropriate sites, purchasing options to buy and laying out designs are lost.

From Kelly's perspective, quality is sacrificed to meet tight budgets. For example, he says, while watershed associations say larger stream restoration projects involving at least three tributaries offer greater environmental value, the EEP keeps costs down by asking for restoration proposals involving a single tributary.

"I guess the EEP is due recognition as a model of public-private partnerships," says American Wetlands President Beasley, "but with a lot of caveats."

The Bottom Line

Since collaboration between agencies, priorities and the private sector are crucial to the EEP's success, the agency takes critism seriously, says Gilmore. Teamwork is key, he continued, for the EEP to explore new mitigation options offering better economic and environmental returns. The program is considering wetland mitigation projects, for example, that would restore streams in coastal areas and apply engineered solutions to complex storm-water runoff issues in urban areas.

But some of the contractors' complaints, he adds, come as a cost of doing business. The EEP advertised for more work than they wound up contracting for when they learned that the state's fiscal standing was not as strong as anticipated. This is no different, he says, than if General Motors told venders they would order 100,000 windshields, then purchased fewer when the car market crashed.

"Contractors should recoup costs on the frequency that they win projects," he says. "It's the good-old American way."

And as for the bottom line--reducing highway-development delays, increasing the number of functioning wetlands and teaming with the private sector to keep the price tag down--the program, he feels, is already a tremendous success.

Not a single highway project has been delayed because of mitigation during the past 28 months. Miles of wetlands and streams have been reclaimed years before development threatens others. And the EEP saved money on mitigation by leaning on the expertise of private-wetland-mitigation developers.

This visionary program succeeded by marrying typically sparring forces--regulators and the regulated, developers and environmentalists, bureaucracies and entrepreneurs. While conflicts must to be worked out, they also underline the magnitude of what has already been accomplished.

Alice Kenny is an award-winning science writer and a regular contributor to the Ecosystem Marketplace. She may be reached at:

First posted: December 29, 2005