Telephone 919-967-1450 200 WEST FRANKLIN STREET, SUITE 330 Facsimile 919-929-9421

CHAPEL HILL, NC 27516-2559

Mareh 23,2010

Via U.S. and Electronic Mail

Wilmington District, U.S. Army Corps of Engineers ATTN: CESAW-RG

Todd Tugwell

69 Darlington Ave. Wilmington, NC 28403 todd.

Re: Proposed Ecosystem Enhancement Program In-Lieu Fee Program Instrument

Dear Mr. Tugwell:

Please accept these comments on the Army Corps of Engineers' Agreement to Continue the Operation of North Carolina's In-Lieu Fee Programs Operated by the North Carolina Department of Environment and Natural Resources' Ecosystem Enhancement Program ("Draft Instrument") on behalf of the Southern Environmental Law Center and the Parnlico- Tar River Foundation. I This agreement is the latest in a series of agreements between DENR and the Corps governing DO'l' and in-lieu fee mitigation in North Carolina. It should ensure that mitigation for unavoidable impacts replaces the functions of destroyed streams and wetlands, rather than simply providing an easier permitting path. As with any mitigation, avoidance and minimization must be prioritized, and it is critical that EEP's program be structured to preserve the 404(b)(1) Guidelines' requirements that impacts to aquatic resources be avoided and minimized before compensatory mitigation is considered.

For the reasons outlined below, we recommend either abolishing the EEP in-lieu fee mitigation program and moving more quickly toward a program utilizing mitigation banks as preferred by the federal rule or continuing the EEP program with NCDOT as the signatory and responsible entity under the instrument and the only entity that can utilize EEP to meet mitigation obligations. The key conditions necessary to continue EEP include no advance credits, a full accounting ofunmet compensatory mitigation obligations EEP has assumed, a plan to meet unrnet obligations including funding sources, and enforcement and penalty provisions for failure to meet express commitments in the instrument. These measures are necessary because ofEEP's consistent failure to meet commitments beginning with the WRP and continuing through the 2003 EEP MOA

1 We have a meeting scheduled with representatives ofDENR and EEP on Mareh 29 and reserve the right to supplement these comments with any relevant information obtained from that meeting.

Charlottesville • Chapel Hill • Atlanta • Asheville • Charleston • Richmond • Washington, DC

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and 2007 MOA amendments. Under no circumstance should DENR, DWQ and DCM be signatories to an instrument because of the inherent conflict of interests as regulatory agencies. These agencies should not both require compensatory mitigation and be responsible for its performance.

I. DOT and the Corps Should Be the Only Signatories to an In-Lieu Fcc Program Instrument.

The Draft Instrument should only have DOT and the Corps as signatories. DOT is the primary beneficiary of the mitigation accommodations embodied in EEP. DOT impacts account for the majority ofEEP mitigation projects. DOT alone should retain ultimate responsibility for its mitigation obligations. There must be a clear avenue through a permit to the permittee authorized to impact waters or wetlands and the compensatory mitigation required as a condition of the permit which the permittee is response for providing.

DENR, DWQ, and DCM as signatories to the Draft Instrument have an inherent conflict of interest as regulatory agencies requiring compensatory mitigation for permitted activities and providers of the compensatory mitigation their permits and authorizations require. This conflict can play out in numerous ways that undermine both the regulatory process and requirements and the compensatory mitigation program. First, compensatory mitigation is the least preferred form of mitigation under the 404(b )(1) Guidelines and state regulations. State regulatory agencies with an interest in developing and maximizing a compensatory mitigation program with payments to EEP will more likely compromise on avoidance and minimization, the preferred forms of mitigation. Second, state agencies may compromise regulatory standards to address shortcomings in compensatory mitigation programs. For example, in 2007 DWQ issued guidance allowing double counting of buffer and stream mitigation to enable EEP to meet a shortfall in mitigation obligations at minimal additional cost with a resulting windfall profit to the mitigation provider. Similarly, in 2008 DWQ relaxed riparian buffer mitigation standards to allow EEP and permittees greater latitude in meeting mitigation obligations. See Buffer Interpretation/Clarification #2008-019 (Dec. 3,2008) (relaxing requirements for buffer mitigation). Third, as regulatory agencies with a role in determining appropriate compensatory mitigation, DENR, DWQ, and DCM can direct in lieu payments to EEP instead of preferable on-site compensatory mitigation or completed compensatory mitigation provided by a private mitigation bank. To eliminate this conflict of interest that undermines both the regulatory programs and the overall compensatory mitigation program, DENR, DWQ, and DCM should not be signatories to theMOA.

II. The Compensatory Mitigation Rule Restricts In-Lieu Fee Programs to Improve Accountability and Performance.

As was made clear by the Corps and EPA's initial proposal to eliminate in-lieu fee programs, these programs are inherently less reliable than other sources of compensatory mitigation, such as mitigation banks. The rule's new requirements seek to


address these weaknesses of in-lieu fee programs. The Draft Instrument must fully act on these requirements to ensure that EEP's existing and future mitigation obligations are fully met in a timely manner, with appropriate mitigation.

A. The final compensatory mitigation rule is intended to provide accountability and improve mitigation performance.

The Corps and EPA's compensatory mitigation rule envisions a limited role for in-lieu fee mitigation due to the inherent limitation of those programs in providing effective, timely mitigation. Initially, the rule proposed to phase out in-lieu fee programs due to their spotty environmental record and lack of efficiency. See Compensatory Mitigation for Losses of Aquatic Resources, 71 Fed. Reg. 15,520, 15,530 (proposed Mar. 28,2006). Often, mitigation projects that are to be implemented after their associated impacts "are not undertaken or fail to meet permit conditions" related to acreage and lost functionality. National Research Council, Compensating for Wetland Losses under the Clean Water Act 3 (2001). There is a "greater uncertainty associated with in-lieu fee programs [as compared to private mitigation banks] regarding the final mitigation and its adequacy to compensate for lost functions and services." Compensatory Mitigation for Losses of Aquatic Resources, 71 Fed. Reg. at 15,530. Furthermore, "[b]ecause credits are often sold before the details ... of a specific compensatory mitigation project havc been determined," an in-lieu fee programs' prices typically do not fully cover the costs of implementing mitigation projects. rd. This inevitably leads to a long-term mitigation shortfall.

Although the final rule retained in-lieu fee programs as a mitigation option, it was not without reservation. Commenters noted that:

• "even with significant improvements to in-lieu fee mitigation, mitigation banks would be more likely to minimize project uncertainties and temporal losses of aquatic resource functions;"

• "prices for in-lieu fee credits arc often too low and fail to cover all of the costs necessary to deliver the promised mitigation;"

• "in-lieu fee programs often require fees from multiple permitted projects before they can initiate compensation projects, resulting in substantial delays between permitted impacts and compensation;" and

• "it was not fair for in-lieu fee programs to be allowed to continue to operate with lower or looser standards than mitigation banks and permittee-responsible mitigation. "

73 Fed. Reg. 19,594, 19,599 (Apr. 10,2008). Counterbalancing these concerns were comments stating that in limited circumstances in-lieu fee programs are "the best (01' only) option for compensatory mitigation" in some areas. Id.

Balancing these concerns, the final rule continued in-lieu fcc programs as a separate mitigation options subject to "new requirements ... to improve accountability and performance." Id. at 19,599 - 600. According to Corps and EPA, in-lieu fcc


programs "can fulfill an important role in providing effective mitigation in circumstances where mitigation banks and permittee-responsible mitigation are not practicable." Id. at 19,599. Despite the "improvements to in-lieu fee programs, there will likely be less tcmporalloss of resources associated with mitigation provided by banks than with mitigation provided by in-lieu fee programs," emphasizing the need for rigorous enforcement of the rules to minimize that temporal loss. Id. at 19,600. The new requirements arc "designed to ensure greater accountability and success in providing mitigation to fulfill credit sales in a timely manner." Id. at 19,612.

B. EEl) has historically been unaccountable for significant mitigation shortcomings under documents substantially similar to the draft instrument.

EEP has not been immune from the limitations and shortcomings inherent in inlieu fee programs that underlay the compensatory mitigation rule's demand for increased accountability and success in mitigation. EEP began as the Wetlands Restoration Program ("WRP") in 1998 and was operated pursuant to a Memorandum of Understanding ("1998 MOU") between the Corps and DENR .. The 1998 MOU set a specific timeline that required, starting in year three, a site to be "identified and acquired" and under contract for development within one year of the date WRP received payment. 1998 MOU at 6. A project would then have to be constructed within two years of contracting for development, meaning all mitigation would be constructed within three years of payment for mitigation. Id. WRP stated at the time that it was "committed to providing compensatory mitigation for the majority of wetland impacts in advance of the loss of these wetlands." Id.

In 2001, five years after its establishment, WRP was profiled in the National Academy of Sciences mitigation report with the following conclusion: "Little success of restoration of targeted wetland functions has yet to be quantified on any project." National Research Council, Compensating for Wetland Losses under the Clean Water Act 210 (2001). WRP was absorbed by EEP in 2003. The obligation to meet these timelines continued. See Mem. of Agreement Among DENR, NCDOT, and USACE at (July 22,2003) ("2003 MOA"). EEP relaxed the tirneline in 2007, year nine under the 1998 MOU. See 2007 Amendment to the 1998 MOU at 2. Not only had EEP failed to meet its commitment to providing mitigation in advance of impacts, it could not meet the one-year time frame incorporated into the 1998 MOU. The 2007 Amendment modified that agreement to allow additional time, up to three years, to identify and acquire adequate mitigation sites. Id. at 1-2. The effect of this 2007 MOU was that projects intended to meet mitigation obligations accepted during 2007 would not be constructed for five years following payment.

EEP has similarly failed to meet established deadlines in providing mitigation to DOT. In 2003, the Corps, DENR, and DOT entered a Memorandum of Agreement "to establish the procedures for providing compensatory mitigation" through EEP. 2003 MOA at 1. The 2003 MOA envisioned a compliance schedule under which, after a seven year period, all DOT project impacts would be mitigated by mitigation projects that had


already been constructed and monitored for five years to ensure attainment of the mitigation project's final success criteria. 2003 MOA at 16~18, amended by Amendment No.2 to the 2003 MOA at 3 (2007). In other words, mitigation projects for impacts in 2020 were to have been implemented and constructed before 2015. This was a step in the right direction, as it recognized the importance of pre-impact mitigation. However, this tirneline was subsequently done away with and replaced. Amendment No.2 to the 2003 MOA at 2A (replacing the language of 2003 MOA § X) (2007). The amended timeline eliminated the requirement that mitigation projects actually meet their final success criteria. See 2003 MOA at 18, amended by Amendment No.2 to the 2003 MOA at 2-3 (2007). The amended timeline also relaxed the compliance deadline, requiring only that mitigation projects be constructed "at least two years ahead of the date of permit issuance" for the site. Amendment No.2 to the 2003 MOA at 3 (2007). Finally, the 2007 Amendment only required EEP to complete construction on 75% of DOT projects through fiscal year 2012~13 and reduced advance construction requirements in future years. Id.

This backtracking has continued in the Draft Instrument, removing requirements that EEP construct mitigation projects in advance of DOT projects. This relaxation is best illustrated by considering a project permitted on July 1,2010, the first day of fiscal year 20 1 O~ 11.

• Under the 2003 MOA, EEP would have been required to have mitigation constructed for the project by the end of fiscal year 2007~08 and that mitigation would be required to meet its success criteria by the end of 2012-13.

• Under the 2007 Amendment, EEP would have been required to acquire property and design mitigation plans for the project by the end of fiscal year 2010-11. EEP would have been required to construct 75% of projects by the end of the fiscal year.

• Under the Draft Instrument, EEP would be required to acquire property and design mitigation plans for the project by the end of fiscal year 2010-11. EEP would have to do initial planting by the end of2013-2014.

In other words, because of the relaxation of these standards, mitigation for this example project would not be constructed until the June 2014 under the Draft Instrument. That is four full years after mitigation would have been constructed under the 2003 MOA and one year after it would have met its success criteria and been released for monitoring under that MOA. The initial planting would not take place for almost four full years after the permit was issued and likely several years after impacts OCCUlTed.

These repeated revisions to EEP's governing documents highlight the specific problems that the compensatory mitigation rule identified with in-lieu fee programs: lack of accountability and ineffective mitigation marked by substantial time lag. The Draft Instrument, which would regulate EEP activities in the future, does not address these concerns and, in fact, exacerbates many of the problems that have plagued EEP's efforts to provide effective mitigation. The Draft Instrument must be revised to attend to these weaknesses in EEP's current program to ensure that the in-lieu fee program is primarily a


means of effectively replacing lost environmental functions rather than a service to the regulated industry to speed the permitting process.

III. The Draft Instrument Must be Revised to Guarantee EEP Meets Existing and Future Mitigation Obligations.

The Draft Instrument continues the status quo for EEP, a status quo that has not provided adequate mitigation to compensate for impacts from permitted activities. The compensatory mitigation rule provides an opportunity to shift EEP in a new direction, towards effective, advance mitigation to offset unavoidable impacts to aquatic resources. We recommend the following revisions.

A. Advance credits are unwarranted and should be prohibited.

Advance credits arc "credits from an approved in-lieu fee program that are available for sale prior to being fulfilled in accordance with an approved mitigation project plan." 33 C.F.R. § 332.2 (2009). Any in-lieu fee mitigation program that allows for advance credits "must also contain [in its governing document] a schedule for fulfillment of advance credit sales." Id. Once the mitigation represented by advanee credits has been completed, those advance credits are added back to the total for a given CU. See id. In other words, if a particular CU has 10 acres worth of advance credits for wetlands, and all ten are sold, then that CU can regain its lO acres of advance credit by performing 10 acres' worth of mitigation. Thus, by design, advance credits are continuously replenished by mitigation projects.

Advance credits are not required under the compensatory mitigation rule and should not be granted to EEP based on its compliance history and existing resources. The rule provides that an "in-lieu fee program instrument may make a limited number of advance credits available." 33 C.F.R. § 332.8(n)(1) (emphasis added). The federal rules dictate that the number of advance credits granted to an in-lieu fcc program must be based on three factors: l) the program's compensation planning framework; 2) the program's record of compliance with its mitigation obligations; and 3) the amount of funding the program has available to implement mitigation prior to projected impacts. 33 C.F.R. §§ 332.8(n)(I)(i)-(iii). The Draft Instrument awards substantial advance credits to EEP, failing to reflect either EEP's compliance record or current financial standing.

Historically, EEP has not been able to meet its mitigation obligations within the time frames dictated by its operating agreements. Instead, as discussed above, it has extended those time frames and eliminated standards requiring advance mitigation. Even with those significantly weakened standards and restarts of mitigation time frames, EEP has not met its mitigation obligations. According to EEP's most recent quarterly report to the Corps, it has not met its mitigation obligations on seventeen DOT projects accepted for mitigation. EEP Quarterly Report, Aprill through June 30, 2009, Appx. 1. Included in those overdue mitigation obligations are projects approved as early as 1997. Id. That failed mitigation includes shortcomings in the Cape Fear, Catawba, French Broad, Hiawassee, Lumber, Tar-Pamlico, and Yadkin river basins. Id.


EEP has also failed to meets its mitigation obligations on fifty-five non-DO'I' projects, some dating from as early as 1998. Id. at Appx. L. EEP's mitigation shortfalls are widespread; the agency has not met mitigation obligations in the Cape Fear, Catawba, Chowan, Little Tennessee, Lumber, Neuse, Savannah, Tar-Pamlico, White Oak, and Yadkin river basins. Id. In one project alone, EEP has failed to provide more than 9,000 mitigation units that were required for a permit issued in 1999. Collectively, the agency has failed to provide more than 22,000 mitigation units for which it has accepted rcsponsi bi I ity.

Even if eventually met, these mitigation requirements arc long overdue. The time lag that will continue until this mitigation is constructed and determined to be successful ensures that aquatic resources have been degraded and that the mitigation provided will not offset the environmental impact authorized by the Corps and DWQ in reliance on the provision of this mitigation.

Awarding EEP advance credits under this Draft Instrument will guarantee that this time lag continues in the future and the environment continues to be degraded. Under the advance crediting scheme, "[l]and acquisition and initial physical and biological improvements, including planting, necessary to satisfy the mitigation requirements found in the DA permit must be completed by the end of the third full state fiscal year ... after NCEEP receives payment ... or a permit is issued." Draft Instrument at 12. EEP has repeatedly demonstrated that it cannot meet this standard, meaning that advance credits will result in substantially delayed mitigation - in some cases that delay may exceed a decade - and a resulting significant loss of environmental integrity. Neither DWQ nor the Corps would approve advance credits for a mitigation bank with this record; EEP should not be treated any differently. If EEP were a mitigation bank, it would have been out of business years ago for failing to meet its commitments.

The primary purpose of advance crediting, allowing an in-lieu fee program to obtain resources to initiate mitigation projects, also precludes granting EEP advance credits. Because EEP has been in operation, in some form, for more than 10 years, advance credits are unnecessary to establish the program. In fiscal year 2008~09, EEP accepted payments totaling $7,916,049.50 in its stream and wetland mitigation program. EEP 2009 Armual Report at 8. At the end of fiscal year 2008-09, the agency had more than $20,000,000 in cash, with nearly $10,000,000 unencumbered. Id. at 15. This endof-the-year cash balance suggests that EEP is capable of doing mitigation immediately to provide for future impacts in a manner that ensures timely, appropriate mitigation that reduces time lag. Therefore, unlike a new in-lieu fee program with no financial backing, EEP docs not need advance credits to facilitate its growth.

The funding of DOT mitigation should also preclude the award of advance credits. Unlike non-DOT projects, EEP is regularly paid by DOT to mitigate for future impacts, As noted in EEP's 2008-2009 Annual Report, "NCDO'!' makes quarterly invoice payment to the EEP based on the actual mitigation projects in development


throughout the state to meet all of the NCDOT's present and future anticipated needs." Id. at 7. DOT provides a steady revenue stream for EEP and, due to the nature of DOT planning, impacts to streams and wetlands requiring mitigation can be forecast years in advance. The Draft Instrument recognizes EEP's ability to provide for mitigation before impacts occur, but unreasonably limits that requirement to impacts permitted after July 1, 2013. For DOT projects implemented before July 1,2013, the mitigation project must be completed by the end of the fiscal year following the year the DOT project is permitted. Draft Instrument at 12. Therefore, the Draft Instrument should not allow for any advance credits based on anticipated DOT impacts.

Finally, EEP's records demonstrate that the agency is accepting mitigation obligations it cannot fulfill through advance credits. EEP is accepting those mitigation obligations, then seeking alternative avenues, including the small impact policy described below, to free itself from difficult mitigation situations. Sec, generally EEP Quarterly Report April! through June 30,2009 at 16-37 (describing mitigation obligations EEP has failed to meet, largely due to difficulty of mitigating for certain types of impacts in certain watersheds). If a project proposes impacts that cannot be mitigated, the solution is to deny the permit application, not to award advance credits that will later be satisfied with inappropriate mitigation, if they are satisfied at all. EEP has not demonstrated that advance credits serve any legitimate purpose in the continued operation of the program. Until it makes that initial demonstration, including a demonstration that it has implemented mechanisms to ensure that mitigation will be conducted within fixed time frames, no advance credits should be awarded.

B. Transferring credits between cataloging units under the "small impacts" policy should be disallowed.

It is a central tenet of compensatory mitigation that mitigation done in close proximity to the impact site is most likely to replace the ecosystem function of the lost stream or wetland. Even though other factors may affect the location of a mitigation site, the rule states that "consideration should also be given to functions and services ... that willlikcly need to be addressed at or near the areas impacted by the permitted activities." 33 C.F.R. § 332.3(c)(2)(ii).

The Draft Instrument's proposal to allow EEP to satisfy mitigation requirements in one cataloging unit by using credits from adjacent cataloging units within the same river basin fails to recognize the importance of replacing lost ecosystem values within the vicinity of the impact site. Importantly, the use of these adjacent cataloging units is not based on increased environmental benefit. Instead, the "small impacts" policy is based on the circumstance where cumulative mitigation requirements amount to less than 1,000 linear feet of stream or 3 acres ofwctlands. Draft Instrument at 9.

The "small impacts" policy is contrary to the watershed approach that forms the foundation of the compensatory mitigation rule and defies the rule's intent of forcing inlieu fee programs to function more like mitigation banks. In doing so, the small impacts


policy misses an opportunity to advance stream and wetland mitigation in North Carolina.

First, the small impacts policy is not drafted to promote the watershed approach.

While the watershed approach recognizes that mitigation decisions should consider "the importance of landscape position and resource type of compensatory mitigation projects for the sustainability of aquatic resource functions within the watershed," the small impacts policy does not require any demonstration that mitigation cannot be done within the permitted activity's cataloging unit or that the aquatic resources affected by the activity would be more appropriately offset the degradation caused by the permitted activity. 33 C.F.R. § 332.3(c)(2)(i). Thus, the small impacts policy does not appear to be intended to promote mitigation that better offsets proposed impacts.

Second, by focusing on a single year's permitted activity, the small impacts policy docs not reflect the compensatory mitigation rule's concern regarding time lag that plagues in-lieu fee programs generally or EEP's historical failure to provide prompt mitigation. Rather than viewing small impacts as an administrative burden necessitating borrowing from adjacent cataloging units, EEP should welcome small impacts as an opportunity to provide advance mitigation. As described above, EEP has developed financial resources that should allow it to begin advance mitigation. By using small impacts as an impetus to develop mitigation sites within a cataloging unit, EEP can take a step that will allow it to implement mitigation before impacts occur within certain watersheds and eliminate the time lag that typically occurs with in-lieu fee programs.

C. The Draft Instrument should include specific penalties for failure to meet mitigation obligations.

If the Draft Instrument is to provide greater accountability and performance, as intended by the compensatory mitigation rule, it must include express penalties for failure to meet mitigation obligations. EEP must be held to the timelines provided in the final document and must be penalized for failing to meet those deadlines. IfEEP fails to provide timely, effective mitigation to satisfy the obligations it has taken on, it must (1) forfeit any advance credits awarded to it, (2) mitigate unmet obligations at a minimum of 2:1 ratio to accommodate for the time lag, and (3) submit procedural recommendations to prevent continued violations. This Draft Instrument ignores EEP's existing unmet mitigation obligations and pattern of noncompliance with provisions substantially similar its terms, it should expressly address the likely scenario of continued noncompliance and include measures to deter it.

IV. EEP has undermined the development of mitigation banks as the preferred method of compensatory mitigation.

Over ten years of operation, EEP and WRP have undermined the development of mitigation banks in North Carolina. Mitigation banks are the preferred compensatory mitigation option under the federal rules, and the Draft Instrument will continue to stymie the growth of mitigation banks in North Carolina and frustrate the intent of the federal


rule that banks be the first option for compensatory mitigation. Mitigation banks have stricter requirements to operate. With the exception of a small amount of advance credit once a bank is approved, mitigation banks must generate successful mitigation before selling credits. In-lieu fee programs such as EEP accept payments with a commitment to mitigate that mayor may not be fulfilled based on the track record ofEEP. At this point, we completely dismiss representations and commitments by EEP that the program will eventually generate advance credits given the repeated failure to meet these commitments,

Since mitigation banks are required to generate actual compensatory mitigation before credits can be utilized, regulatory requirements can be better evaluated by agencies and the public. Real compensatory mitigation can be considered in determining whether the impacts of a particular project are offset by the mitigation. In an in-lieu fee program, the mitigation condition in a permit to offset impacts is only an assurance that money will be transferred to a program that may perform unspecified mitigation at some unspecified location. This is hardly a basis for the Corps to make a mandatory determination under the 404(b)(l) Guidelines that a project will not result in significant degradation of waters because of the off-setting compensatory mitigation.

EEP has also undermined mitigation banks by historically charging fees for mitigation that are inadequate to perform the compensatory mitigation required. Unlike mitigation banks, EEP does not operate in a market where mitigation credits are sold by willing buyers and sellers, in which the fees necessarily reflects the cost of adequately performing the compensatory mitigation, EEP operates by regulations which sets fees in advance and has a history ofunderestirnating actual costs. Attempts to increase fees are often opposed by permittees that want to take advantage of EEP as the cheapest option to meet mitigation obligations in permits, and ultimately the public becomes accountable for the costs arising from inadequate fees. EEP has still failed to account for how it intends to cover the mitigation obligation for years of collecting inadequate fees to pay for its assumed responsibilities, and the current public liability for this shortfall, The Corps should demand that EEP state this liability and explain how it intends to meet it before approving any instrument.

The General Assembly has taken one step in prioritizing mitigation banks as the preferred option by requiring permittees other than NCDOT to use mitigation banks instead of EEP if banks are available in the watershed where the impact occurs. Any instrument should continue the direction established by the legislature and limit EEP to mitigation of only NCDOT projects. This will increase the likelihood of establishment and expansion of mitigation banks as the preferred mitigation option under the federal rule.

IV. Conclusion

EEP offers valuable service to the State of North Carolina, particularly in its watershed planning programs, Unfortunately, EEP's in-lieu fcc program has frequently failed to provide effective mitigation and has not been held accountable for those


shortcomings. Since its founding as WRP, the State's in-lieu fee program has not met mitigation performance standards defined in its governing documents, has relaxed those standards, and then failed to meet the relaxed standards. These accountability and performance issues arc the problems that the compensatory mitigation rule was intended to address. Rather than using that rule to redirect EEP, the Draft Instrument continues down the path of too lenient standards that will result in ineffective and substantially delayed mitigation. We recommend revising the Draft Instrument as described above to ensure that mitigation provided by EEP fully replaces the degradation of aquatic resources resulting from permitted activities.

We appreciate the opportunity to submit these comments. Please contact us at (919) 967-1450 if you have any questions regarding their content.


v2f.c!q:-~ t:

Director, NC/SC Office


Staff Attorney


David Knight Bill Gilmore

Sen. Dan Clodfelter Rep. Pryor Gibson


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