CHAPEL HILL Last week The N&O reported that the state paid twice for an environmental restoration project. A company called EBX sold a site once to the Department of Transportation for stream and wetland restoration credits and then again to the N.C. Ecosystem Enhancement Program for water quality credits. This topic deserves careful consideration, not knee-jerk reactions.
There are several ecosystem markets in North Carolina. Most prominent is wetland and stream mitigation; when developers impact aquatic ecosystems they must compensate by restoring ecosystems elsewhere, or purchase restoration credits from mitigation bankers, like EBX.
There is also a water quality program; developers who increase nitrogen or phosphorus must compensate by restoring riparian buffers that improve water quality, or purchase water quality credits. Carbon markets are likely on the horizon.
The first core issue is that, to our knowledge, no policy or legal precedent constrains how these markets interact. Rather, EBX relied on well-established property law. EBX sold a single, explicitly defined service from property it owned. When a new market emerged, it sold an alternative service. This is no different than selling oil rights from a site from which you have already sold timber; unless the functions of the use of the property interfere with each other, their multiple use, or "unbundling," is perfectly legal.
As such, EBX did not break any laws. The potential for environmental credit unbundling, or double-dipping as critics call it, was known to mitigation bankers and agencies for several years; EBX is likely not the only group, private or state operated, to have taken advantage of it.
Second, the EBX unbundling occurred retroactively by generating nitrogen credits without performing any additional work. The implications of this precedent are problematic and substantial.
The Ecosystem Enhancement Program, with Division of Water Quality approval, knowingly purchased the unbundled credits from EBX during a competitive bid process, meaning that proposals were rejected from projects that, presumably, did not involve unbundling. Also, if retroactive unbundling is allowed, by our estimates the ecosystem program alone could use its existing, already sold mitigation sites and flood the market with 1.1 million pounds of retroactive nitrogen credits; this exceeds all credits generated since the program began in 2001.
Nitrogen pollution could increase for many years, and no new restoration sites would be needed. The flooded market would bottom out credit prices, discouraging private investment in restoration. Simply put: retroactive unbundling makes polluting rivers cheap. Unfortunately, the Ecosystem Enhancement Program and the Division of Water Quality have set the precedent making this possible.
Third, and most problematic, is the ease with which government agencies - state and federal - certify restoration. Under existing rules, restoration projects require minimal monitoring to be deemed successful. Neither fish nor aquatic insect communities, common indicators of stream health, need to actually improve for a stream to be certified "restored."
Similarly, for water quality trading, no actual data are required to show that water quality has in fact improved. We doubt that the Division of Water Quality required EBX to document actual water quality improvement at its restored sites. We also doubt the Ecosystem Enhancement Program collected any data to see if the sites actually benefited water quality, despite spending $1 million in taxpayer money purchasing the water quality credits.
In fact, we would be surprised if data showed the project actually worked: substantial research in North Carolina and elsewhere suggests that it is difficult to show that restored streams have any detectable effect on water quality or biotic integrity measures. Many scientists are increasingly skeptical of the ecological efficacy of stream restoration, particularly in urban and suburban areas.
The state should focus its attention on ensuring that its investments are going into projects with demonstrated ecological benefits. Success criteria for restoration projects should be made meaningful and rigorous. This will increase the cost of restoration, which will in turn increase mitigation costs, which will in turn drive up the costs of impacting streams and wetlands.
That is, increased restoration quality requirements could provide a real economic incentive for developers to avoid impacting these ecosystems in the first place.
EBX's unbundling, or double-dipping, is merely a symptom of a larger problem - a mostly overlooked state environmental restoration program that has emphasized facilitating development rather than actual ecological benefits. The Perdue administration should take a fresh and honest look at what taxpayers have received from their 12-year, $370 million investment in environmental restoration.
Martin Doyle is in the Department of Geography and Institute for the Environment at UNC-Chapel Hill. Todd BenDor is in City and Regional Planning and the Institute for the Environment at the university. Both are GlaxoSmithKline fellows at N.C. State University's Institute for Emerging Issues.