NOTE: EEP Undercurrents is envisioned as a series of periodic newsletters to update readers on the issues and events affecting EEP, its customers and consultants. We welcome your feedback.

May 2009

Uncertain economics complicate outlook

The N.C. Ecosystem Enhancement Program’s objectives always have focused on customer needs – whether the companies, schools, military bases and others come to us for their mitigation needs, or go to the private-sector suppliers to which we outsource our work. 

However, EEP does not and cannot act autonomously.   Along with the necessary coordination with state and federal regulatory agencies in meeting the obligations of our operating and procedural agreements, EEP is in a particularly fluid situation at present because of the downturn in the national and state economic climates.  As a result, the demand for mitigation is being reduced in various and unpredictable ways (see chart below for nutrient offset trends). 

In addition, with the state's current budget situation, EEP is controlling costs and cutting its operational budgets to a minimum.  EEP has met the benchmarks this year of a 10.2-percent reduction in operating costs. All nonessential project-related travel, expenditures and training has been curtailed or eliminated.  Unfilled positions at EEP will remain frozen, and EEP anticipates no increases in administrative costs.

Nonetheless, at EEP we know the need for compensatory mitigation will continue in order to improve and enhance the environment while facilitating responsible economic growth.  EEP staff will adapt to changes in demand while maintaining high regulatory-compliance standards.

Department of Transportation outlook

It should come as no surprise to anyone that the NCDOT is experiencing a financial crunch that is causing its leadership to re-evaluate its program aggressiveness because of the current economic climate. At this time, NCDOT is developing new programming requirements through the prism of three, five, 10 and 20 year transportation plans. As NCDOT’s seven-year Transportation Improvement Program priorities change, also altered are the timing and amounts of mitigation that EEP provides for its NCDOT Stream and Wetland In-Lieu Fee Program partnership.

Each year, EEP presents NCDOT with an updated biennial budget. The amount of these budgets peaked in 2006 and have trended downward since, both because of reduced demand by NCDOT and EEP’s track record of performing well on advance-mitigation projects for NCDOT.

These factors have combined to create a more modest outlook for future mitigation needs through EEP than had been predicted. The result has been a direct impact on EEP’s full-delivery needs and a delay of previously advertised full-delivery RFPs. EEP will continue to work closely with NCDOT to secure revised forecasts of mitigation needs, and will plan to award any full-delivery projects to fulfill these needs as soon as possible.

Our suppliers should be aware that there are other non-NCDOT full-delivery project awards planned. EEP is processing all full-delivery awards (NCDOT and non-NCDOT) through the N.C. Department of Administration and expects to announce some awards in June.

Gov. Bev Perdue and NCDOT Secretary Gene Conti (right) at a stimulus-project groundbreaking in March.

Under the Obama administration’s American Recovery and Reinvestment Act, North Carolina received $735 million for highway and bridge improvements.  While good news for the state, the stimulus spending has not increased EEP’s work load, because the advance mitigation that EEP has stockpiled according to NCDOT forecasts means that mitigation has already been provided for ”shovel ready” road projects. 

Reframing protocols to satisfy new federal rule

In June 2008, new regulations governing compensatory mitigation were established by the U.S. Army Corps of Engineers and the U.S. Environmental Protection Agency.  These rules prescribe specific standards for mitigation banks, in-lieu fee programs and permittees wishing to provide their own mitigation.  EEP operates two in-lieu fee programs that are subject to the new rule and has until June 2010 to revise its operating agreements to gain compliance.  

EEP’s revised operating agreements will include or address three key issues:

  • A Compensation Planning Framework that describes how EEP projects are procured based on watershed planning must be developed and approved by an interagency work group.  Since EEP already uses watershed planning for project delivery, this exercise will largely include capturing existing processes in a format that attends to planning elements described in the rule.
  • A project review process will be developed and formalized.  All new EEP projects will be circulated to an interagency workgroup for review and will also go through public notice procedures. 
  • Additional accounting requirements will be instituted to address rule requirements associated with project credit releases.

EEP is actively working with USACE and EPA to define appropriate program adjustments and anticipates full compliance with the rule by June 2010.

Nutrient Offset pricing revision

Session Law 2007-438 mandated that NCDENR must develop and implement a plan to transition the EEP Nutrient Offset Program from a fee-based structure to a program based on the actual costs of supplying nutrient credits.  The transition is to occur no later than Sept. 1, 2009 and requires the employment of the least-cost alternative for providing nutrient-offset credits, consistent with rules adopted by the Environmental Management Commission for implementation of nutrient-management strategies in the Neuse and Tar-Pamlico river basins. 

Given the level of interest in and complexity of the subject matter, EEP secured the services of the Natural Resources Leadership Institute at N.C. State University to ensure an effective and smooth stakeholder process.  As a first step, NRLI staff interviewed a number of stakeholders from key interest groups (local governments, non profit environmental groups and private sector companies) to gain an awareness of general understanding of the Nutrient Offset Program and the key issues around pricing.  Items identified for further discussion included accountability and transparency, covering costs, geographic equity, geographic application of credits and alternative approaches. 

The stakeholders have been diligently working to understand the mechanics of a proposed actual cost method and are providing input on the detailed model that will be proposed through rule-making.  During the rulemaking process, all interested parties will be given the opportunity to comment.

Improving communication with private-sector partners

EEP values its relationships with private-sector biological, engineering and management firms.  Since the program’s founding in 2003, private-sector partners have played a key role in the development and evolution of EEP’s business policies and procedures.

In August 2008, EEP sponsored a facilitated workshop with contractors and consultants at the request of the N.C. Board of Transportation, addressing topics including invoicing, procedures, scoping, contract negotiation and construction management.  All issues are in queue to be

Kinston, DENR and EEP reps break ground at
Adkin Branch.

processed over the coming months, and new items mutually agreed to be discussed will be similarly addressed.  Also, new executive-committee meetings between ACEC and the NCDENR secretary’s office are in place to keep communication lines open.

EEP also has established new monthly executive-level discussions with the N.C. Environmental Restoration Association that are intended to address policy and procedure improvements, including modifications to the payment-release schedule for full-delivery projects.  NCDENR Assistant Secretary for Natural Resources David Knight and EEP Director Bill Gilmore addressed a gathering of NCERA members in April. 

Finally, in the past six weeks EEP has participated in two public ceremonies to commemorate its partnerships with public-sector collaborators and private-sector suppliers.  The city of Kinston hosted a groundbreaking for the Adkin Branch stream-restoration project, a joint effort among Ko/Florence & Hutchenson, Axiom Environmental, Wolf Creek Engineering, Appalachian Environmental Services and EEP.  And Wayne Community College in Goldsboro dedicated a campus stormwater-retention wetland in the name of the late Michael Regans, a project on which EEP collaborated with the community college, N.C. State University, Tetra Tech and Backwater Environmental.  EEP looks forward to similar public celebrations with its suppliers in the future.

On the Web

EEP launched a major expansion in the program’s online information earlier this year with the posting of tables with links to EEP project documents, detailing the progress of the hundreds of projects across the state. An interactive Web map of EEP projects also is imminent, and in time will include links to project documents. The latest information joins listings of EEP Watershed Planning documents launched last year.

Comments on EEP Undercurrents?

Please contact tad.boggs@ncdenr.gov.