Results of the FHWA Domestic Scan of Successful Wetland Mitigation Programs

North Carolina

Jumping Run is a 70-acre forested wetland and stream restoration mitigation site near
Fort Bragg, NC, in the Sandhills region. North Carolina’s wetland mitigation program has
an active stream mitigation component.
Photo courtesy of Patricia Bacak-Clements, USFWS

Program Contacts

Bill Gilmore
Director, Ecosystem Enhancement Program
NC Department of Environment and Natural Resources
1652 Mail Service Ctr.
Raleigh, NC 27699-1652
Phone: 919-715-1412, Fax: 919-715-2219
Email: bill.gilmore@ncmail.net

Rob Ayers
Environmental Programs Coordinator
FHWA-North Carolina Division
310 New Bern Ave., Ste. 410
Raleigh, NC 27601
Phone: 919-856-4330x116, Fax: 919-856-4353
Email: Rob.Ayers@fhwa.dot.gov

Program History and Philosophy

The compensatory wetland mitigation program in North Carolina is embedded within a fundamentally new initiative, called the Ecosystem Enhancement Program (EEP) (https://deq.nc.gov/about/divisions/mitigation-services). Launched in July of 2003, the EEP represents the merger of the mitigation agents from three governmental agencies - NC Department of Transportation (NCDOT), NC Department of Environment and Natural Resources (NCDENR), and COE-Wilmington District - into one operating body, administered by NCDENR, that coordinates all of the off-site compensatory mitigation needs of transportation infrastructure and other economic development in the State of North Carolina.

Because of the EEP, the expression "wetland banking" is no longer relevant to North Carolina. The State has essentially tossed out traditional approaches for administering wetland and stream mitigation in favor of a statewide strategic plan for ecosystem-based mitigation. The mission of the EEP is to "restore, enhance, preserve and protect the functions associated with wetlands, streams and riparian areas, including but not limited to those necessary for the restoration, maintenance and protection of water quality and riparian habitats throughout North Carolina" (10). An underlying goal of the EEP is to establish a predictable timetable and a common philosophy for mitigation in the State of North Carolina. The price tag for this new business model is considerable: the first biennial budget to NCDOT for EEP was $189 million. However, nearly a decade ago the State of North Carolina experienced a period of unprecedented transportation infrastructure development that demanded a radically new process for mitigation.

NCDOT is responsible for the second largest State-maintained road network in the U.S., assuming ownership and maintenance for more than 78,000 of the State's approximately 101,000 miles of roads. In 1989 the North Carolina General Assembly passed the Highway Trust Fund Act, which mandated the construction of a total of seven outer loops and four-lane divided highways for towns with populations greater than 50,000. While the new Highway Trust Fund was applauded for its economic development objectives, the environmental implications of such an aggressive, statewide infrastructure initiative were not considered. In the years that followed, NCDOT experienced tremendous delays in project delivery, of which more than 50 percent were attributed to inadequate compensatory wetland mitigation: North Carolina is 17 percent wetlands, and transportation projects frequently encountered wetland impacts.

Concurrently, the Federal Highway Administration launched numerous efforts at the national level to advance environmental streamlining as one of FHWA's vital few goals. Eleven States, including North Carolina, were identified as environmental streamlining pilot sites. NCDOT was already forging a significant re-design process, called Merger-01, to improve interagency coordination and process efficiency through the integration of the National Environmental Policy Act (NEPA) and 404 permitting processes. Merger-01 was a response to the massive environmental mitigation challenges posed by the 1989 highway bill and proved especially successful in identifying genuinely unavoidable impacts from transportation projects.

In the early to mid 1990s, wetland banking was not a competitive business in North Carolina, as it is today. Without competitive pricing and uniform success criteria in the banking industry, it was not unusual for NCDOT to pay private bankers large sums of money for wetland banks that either failed or demonstrated poor ecological quality. When the first State-operated banking program, the NC Wetlands Restoration Program (NCWRP), was established in 1997, NCDOT anticipated a timelier, more cost-effective, and ecologically sound solution to its mitigation problems. Unfortunately, the NCWRP became mired in the bureaucratic planning processes associated with operating a banking program to the point that it could not achieve an efficient timetable for the implementation of the high quality wetland mitigation necessitated by the State's aggressive transportation construction program. Frustrations escalated between NCDOT and the resource and regulatory agencies, and it became clear that a virtual "sea change" in the State's approach to mitigation was necessary if real progress was to be made.

In the summer of 2001 an inter-agency task force was organized to examine the procedures of NCDOT, NCDENR, and the COE as they related to permitting transportation projects and associated wetland and stream mitigation. The task force found inefficiencies in the processes of the departments in developing suitable compensatory mitigation and recommended a bold new approach. North Carolina would address the challenge of balancing needed growth with environmental protection by making the State's environmental agency, not its transportation agency, responsible for providing all off-site mitigation to compensate for the unavoidable impacts of transportation projects. In carrying out this mission, North Carolina would base its mitigation on a solid foundation of watershed planning that goes beyond environmental permitting compliance. Furthermore, funding for the program would be invested in advance by NCDOT for environmental protection before damage to wetlands and waterways occurs. In this way, North Carolina can stockpile mitigation units years before they would be needed to clear permitting hurdles for transportation improvements.

The proposal to establish the EEP coincided with NC Governor Mike Easley's directive to improve the environmental ethic of NCDOT and to enhance trust and consensus-building among State agencies through Gov. Easley's One North Carolina initiative. As a result, the highest levels of leadership supported the EEP concept from its inception. Today, all of the agencies assert unequivocally that without this high-level leadership, the massive institutional changes created by the EEP would not have succeeded. The programmatic framework and timetable to establish the EEP was developed in six weeks. FHWA subsequently provided $500,000 to create an EEP policies and procedures manual and begin development of a comprehensive information management system. The program was launched in 2003, and to date, no transportation projects have been delayed due to inadequate mitigation. Moreover, the EEP has preserved a total of 2 million linear feet of stream, 5,800 acres of wetlands, and 20,000 acres of high quality habitat.

Establishing what is in essence a new State agency is not without its challenges. First and foremost was the reassignment of the roles and responsibilities of the agencies involved with mitigation. A Memorandum of Agreement (MOA) was developed to specify the legal authorities for NCDOT, NCDENR, and the COE-Wilmington District. The MOA served ultimately as the regulatory framework for EEP's operations. In addition, a memorandum of agreement was forged between NCDOT and NCDENR to specify EEP's business processes. Educating key mitigation agents and other support staff about the new program philosophy, business plan, and key responsibilities remains an ongoing effort.

Two advisory groups were formed to guide EEP's operations overall. The Program Assessment and Consistency Group (PACG) comprises Federal and State agency officials and technical professionals who review policy decisions made by EEP management, address ongoing issues affecting EEP's operations, evaluate program accomplishments and shortfalls, and help to manage inter-agency process improvements. In this regard, the PACG's role is somewhat similar to an MBRT. The Liaison Council comprises non-governmental mitigation stakeholders. The council provides recommendations on EEP's structure, mission, and operations, and is briefed on progress three times annually.

One of the biggest challenges has been to standardize the process for making projections about impacts in advance. To evaluate and determine project impacts, NCDOT uses several sources of environmental data (e.g., NEPA documents, wetland inventory maps, etc.) from its seven-year transportation improvement plan (TIP), which includes a timetable for project letting. NCDOT provides these projections to the EEP on an annual basis. Of course, as the TIP is modified over time as a result of alternatives analysis and other factors, the impact projections may change, sometimes significantly. These projections greatly influence EEP's costs and budget, and NCDOT continues to improve its processes for generating impact projections.

Site Descriptions and Operation

Haw River mitigation site, a 950-acre conservation corridor that
connects USACE lands with Jordan Lake State Park in Chatham
County, NC, was the first preservation site purchased for the
EEP through a land trust.
Photo courtesy of Patricia Bacak-Clements, USFWS

The first two years of EEP's inception were called the "transition period." The transition period was established in order to allow for an orderly transition from the old method of providing compensatory mitigation to the new EEP method. It was not possible just to stop one day and start the new process the next day. A simple analogy would be trying to change the tires on a moving car. Therefore, EEP made a strategic decision to place an emphasis on preservation during the transition period. The program employs an inter-agency, science-based review process for the selection of appropriate, high quality preservation sites. Throughout the transition period EEP also remained committed to meeting a 1:1 no-net-loss requirement for any wetland impacts from TIP projects let during this time. After the transition period, upon provision of the 1:1 restoration component, EEP can allocate the "surplus" preservation credits, originally obtained during the transition period, to highway projects needing mitigation credits and for which preservation credits can be legitimately applied.

North Carolina is the sixth fastest growing State in the country and anticipates a sharp 30-percent spike in population by the year 2020. In addition to having one of the most extensive State transportation programs in the country, the North Carolina also contains 93 natural heritage aquatic areas of national concern and State'significance, from the mountains to the coast. About 5.7 million acres of North Carolina is wetland. The Coastal Plain contains 95 percent of the State's wetlands. Before colonization by Europeans, North Carolina had about 11 million acres of wetlands. Nearly one-third of the wetland alterations in the Coastal Plain have occurred since the 1950s; most have resulted from conversion to managed forests and agriculture. The Roanoke River flood plain has one of the largest intact and least disturbed bottomland hardwood forests in the mid-Atlantic region. About 70 percent of the rare and endangered plants and animals in the State are wetland dependent. (9) Accordingly, preservation of the State's critical aquatics resources and natural habitats, particularly in the coastal region, is an immediate and vital concern for North Carolina and thus an important objective for the EEP.

With limited staff resources and experience following its 2003 start date, the EEP turned to the Conservation Trust of North Carolina (CTNC), an umbrella network of 22 local and regional land trusts, to assist with identifying critical preservation sites. The partnership has become one of EEP's most immediate success stories. The land trusts have a positive and ongoing relationship with private landowners, as well as robust public education initiatives. As contracting agents to EEP, and in cooperation with the NC State Property Office, the land trusts have been able to negotiate conservation easements and fee-simple land purchases more effectively than the State could have managed on its own. With CTNC's assistance, the EEP has preserved to date a total of 158 miles of stream, 7,500 acres of wetlands, and nearly 35,000 acres of high quality habitat.

The EEP showcased the following two sites for the scan tour:

• Jumping Run Stream and Wetland Restoration Site
  A 70-acre predominantly forested wetland system of Southern Yellow pine and bottomland hardwoods, located in Harnett County in the Sandhills region, adjacent to (and owned by) Fort Bragg Military Reservation. EEP anticipates receiving 65-67 acres of wetland restoration and ~4,530 linear feet of stream restoration credits.
• Haw River Preservation Site
  A 950-acre conservation corridor that connects COE lands with Jordan State Park lands, located in Chatham County in the Piedmont region. Provides 893 acres and 32,000 linear feet of credits. A highly scenic recreation area that also supports habitat for a federally endangered fish (Cape Fear Shiner), rare mussel and dragonfly species, 50 species of nesting birds, and 15 species of warblers. For more information, see www.hawriver.org.

NC folk artist Clyde Jones uses driftwood, tires, and metal
salvaged from the Haw River to create a colorful menagerie
of lawn art. Some of Jones’ work is featured on the grounds
of the Governor’s Mansion.
Photo courtesy of Patricia Bacak-Clements, USFWS

Geographic Service Areas. Mitigation sites are acquired on a watershed basis in accordance with COE's current HUC guidelines. There are 54 8-digit catalog units (as defined by USGS) in North Carolina, and mitigation is generally restricted to the 8-digit catalog unit where the impact occurs. One noteworthy feature of the EEP's mitigation planning is that it is linked directly to the basinwide plans of each of the State's 17 river basins. Per the EEP's specifications, these watershed plans are carefully utilized by the land trusts and other vendors who assist the EEP with acquiring high quality mitigation sites. In addition, vendors who bid on any EEP requests for proposals to design and implement a mitigation plan must demonstrate in their proposals how they will meet the objectives established in the basinwide plans.

Functional Assessment Methodology. Current COE and EPA guidelines are currently being utilized to assess aquatic resource functions. The EEP currently employs a 1:1no-net-loss ratio for wetland restoration, and a 5:1 ratio for preservation of critical streams and wetlands. Preservation sites that are acquired, per Federal guidelines, are only those sites that offer high quality functional habitat and are under demonstrable threat. Furthermore, stream preservation sites generally include the provision of a 300-foot buffer on either side of the stream.

The current measurement for authorized impacts and compensatory mitigation is set in terms of acres (for wetlands) and linear feet (for streams). EEP's goal is to develop or accept a scientifically acceptable and practicable method of measuring authorized impacts to wetlands and streams on the basis of functions lost and compensatory mitigation in terms of functions gained. Teams have been established to develop functional assessment methodologies for streams and wetlands.

Delivery Methods. Through partnerships with biological, engineering and management firms, EEP outsources the bulk of its program needs to the private sector. EEP's philosophy of doing business is based on strategic planning that determines the size, location and result of known or anticipated environmental impacts from transportation-infrastructure improvements and other economic development in the State. Professional services for planning and engineering are sought through the year on an as-needed basis. Watershed planning studies are awarded to professional firms through a qualifications-based selection process.

EEP utilizes the following delivery methods for procuring mitigation sites:

• Design/Bid/Build is the standard delivery method where EEP contracts with a private firm to design the project and then bids out the construction work. EEP selects on-call contractors for engineering and biological services on a two-year cycle. These on-call awards allow EEP to rapidly deploy professional services anywhere in the State.
• Full Delivery involves hiring one firm to deliver the full project (acquisition, design, construction, and monitoring). Full delivery contracts are awarded based on programmatic needs, and contractor selection is value based and considers both technical merit and cost. Full delivery has taken the place of mitigation banks.

Monitoring Protocols. When an EEP mitigation project is awarded, the vendor assumes responsibility for designing, implementing, and monitoring the site. After the monitoring period is complete, the site will be turned over to one of the land trusts to maintain in perpetuity. Because the EEP is still in its start-up phase, no site has yet surpassed the five-year monitoring period. The PACG is in the process of developing environmental monitoring criteria, as well as uniform mitigation success criteria. In the interim, general COE/EPA guidance is being utilized. The PACG discussions have emphasized the need for flexibility in determining what makes a mitigation project successful, particularly as data on the aquatics and habitat functions of the State's 17 river basins and 8 eco-regions become more accessible and as the science of mitigation advances. For example, if one strives to evaluate a mitigation project from an ecosystem perspective, not just a wetland perspective, then, as stated by the COE representative who chairs the PACG, "sometimes replacing a wetland with a wetland is neither the most prudent nor ecologically sound approach."

Accounting Procedures. Developing an accounting process for a program as innovative as the EEP has proven to be a tremendous enterprise. Not only are mitigation sites acquired, designed, and implemented far in advance of transportation impacts, but EEP is required to track mitigation credits by categories and types. The three categories of wetland mitigation in North Carolina are riverine, non-riverine, and coastal marsh, and the mitigation can be in the form of restoration, creation, enhancement and preservation. Since EEP mitigation projects are implemented based on the projected needs for an entire watershed (each of the State's 54 HUC's are tracked independently), the projects are not directly developed for a specific transportation project as with a traditional State DOT mitigation program. EEP, on the other hand, earmarks the necessary assets created by mitigation projects and links them to the transportation project once a permit is issued for the impact and the assets are debited from the mitigation site in EEP's database. Accordingly, once a regulatory agency permits a transportation impact utilizing EEP mitigation, EEP can report what mitigation site the assets came from.

While NCDOT provides EEP with its best professional judgment regarding projected impacts on an annual basis, these numbers can change as a project nears its let date and additional environmental data are obtained. To date, the NCDOT impact projections, by and large, have come in under the original estimates due to the department's ability to avoid and minimize more effectively through the Merger-01 process. However, addressing surplus or shortfall mitigation in its accounting process remains a special area of concern. EEP program expenditures pertaining to NCDOT mitigation projects are funded in advance by NCDOT, and it is the responsibility of NCDOT to reconcile with FHWA any modifications due to changes in transportation project programming. Currently, the EEP is implementing an automated information management system that has been developed through a contract with the Research Triangle Institute. A future addition to the information management toolkit will be a GIS viewer that allows the EEP staff to identify the pertinent functional data related to a mitigation site throughout all of its life-cycle phases.

Maintenance and Management. During the implementation phase of a mitigation plan, a project manager is assigned to the site and is responsible for performing any required maintenance as well as providing an annual status report on the site's functionality to the PACG. With regard to the EEP's high quality preservation sites, once the sites have achieved their operational lifespan and all credits are debited, the land trust associated with acquiring those sites will become the owner and maintainer of the sites in perpetuity. Many of the preservation sites are located in important headwater and water supply areas; as a result, NCDENR's Division of Water Quality plays an integral role in site selection and design in order to consider these factors early in the process. Another opportunity for the EEP is to explore a way to integrate NCDOT's statewide planning process with the local watershed plans. By knowing up front where the most environmentally sensitive resources in the State are located, statewide planning can contribute significantly to the process of "avoiding and minimizing" well before projects are listed in the TIP.

Best Practices and Innovations

• Adoption of an ecosystem perspective. North Carolina bases its mitigation on a solid foundation of watershed planning that goes beyond environmental permitting compliance. An ecosystem approach is used for mitigation activities rather than simply meeting the requirements of individual permits. The mitigation work is funded and initiated in advance of the project impacts. Compensatory mitigation is therefore stockpiled perhaps years in advance of project development and already available to clear permitting hurdles.
• Establishment of trust. The hallmark of EEP is trust. Without critical partner relationships between the governor's office and the secretaries of Transportation and Environment and Natural Resources, North Carolina's program never would have left the ground. Trust is also critical between the State and Federal regulatory agencies because performing according to regulatory mandates is expected from EEP. The formation of the PACG and Liaison Council has allowed the EEP to foster a constructive and dynamic relationship among the members of these groups that can withstand the impacts of personnel changes over time.
• Inclusivity. Contributing to the success of EEP has been the outreach, coordination, and cooperation with all affected parties, including Federal, State and local agencies, non-profit organizations, and the private sector. It is worth noting that in the early days of EEP, the private mitigation bankers were very uneasy with the concept of EEP. EEP appeared to be a direct threat to the continuation and expansion of private mitigation banks. By including the private sector early on, and by explaining and reassuring them that they would still play an integral part (through the full-delivery process), the private mitigation banking industry eventually became supportive of EEP.
• Procurement of funding commitments for organizational development and implementation. When EEP unveiled its two-year budget request of $189 million to the NC Board of Transportation, the policy-setting and project-approval body for NCDOT, a palpable "sticker shock" was evident among the board members. Mitigation costs always had been considered part of the costs of doing business, buried in the details of project costs. Since mitigation costs were not clearly tracked, the State really did not know the true cost of providing mitigation. Now, the State is able to discuss mitigation costs in fact, not in concept.
• Proceeding with the expectation that promoting economic development while also protecting the environment is an achievable goal. Expansion of the transportation infrastructure can lead to increased economic development opportunities. More predictability in the letting schedule of projects provides stability within the construction industry. All of this can be achieved while protecting the environment through EEP's focus of providing programmatic mitigation on a watershed level in advance of anticipated impacts.

Continuing Challenges

• The EEP is essentially a new State agency. It may not be easy to replicate this measure in other areas. The avoidance of agency turf wars was resolved through a memorandum of understanding that detailed the roles and responsibilities of the participatory agencies, although educating staff on those new roles and responsibilities remains an ongoing challenge.
• The cost of the EEP has been high, at nearly $90 million per year for the first two years.
• In their quest to approach mitigation from an ecosystem management perspective, versus a project-by-project perspective, the EEP staff and advisory groups face many complex challenges, including the following:
  • Addressing a shortfall or surplus amount of mitigation in response to projected impacts and/or unforeseen changes and circumstances
  • Linking transportation projects to mitigation sites for accounting purposes
  • Justifying the program expense to government agencies and the general public
  • Recruiting the private sector, including mitigation bankers, into the EEP and providing business incentives for private sector participation
  • Determining whether and how to include preservation as a viable part of the program objectives

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