March 4, 2009

Secretary Dee Freeman

N.C. Department of Environment and Natural Resources
1601 Mail Service Center
Raleigh, NC 27699-1601

Re: Recent Policy Decisions Regarding Assignment of Nutrient and Buffer Offset Credits
Lower Neuse
RIVERKEEPER®
Larry Baldwin Dear Secretary Freeman,
1307 Country Club Road
New Bern, NC 28562
252-637-7972 The Pamlico-Tar River Foundation (PTRF), Neuse RIVERKEEPER® Foundation (NRF),
252-514-0051 fax and Catawba RIVERKEEPER® Foundation (CRF) are writing to you today to express our
riverkeeper@neuseriver.org
concern over the Division of Water Quality's (DWQ or Division) recent policy decisions
addressing the calculation of both nutrient offset and buffer credits for restoration sites.
Upper Neuse
RIVERKEEPER® The undersigned organizations strongly oppose any policy which allows a single
Alissa Bierma mitigation action to provide multiple credits which offset the same treatment
112 South Blount Street function and believe that such a policy would contradict the intent of the enabling
Suite 103
Raleigh, NC 27601
legislation.
919-856-1180
919-839-0767 fax It is within the intent of wetland and stream impact mitigation to provide the same water
alissa@neusriver.org quality benefits, including a reduction in nutrient loading to the receiving waters, as was
provided by the existing stream or wetland. Therefore, both stream and wetland
mitigation credits have an intrinsic nutrient offset function in addition to their
replacement of equivalent habitat and other ecological function. The use of acreage that
has already offset stream or wetland impacts to obtain riparian buffer or nutrient
offsets results in re-crediting of the same nutrient removal function already allotted
to the existing offset credits, resulting in net degradation of water quality. Any
policy which encourages or allows this type of dual credit assignment contradicts the
Pamlico-Tar intent of the nutrient offset program’s enabling legislation which was designed to support
RIVERKEEPER® the General Assembly’s goal for the reduction of nutrients in the Neuse and Tar-Pamlico
Heather Jacobs Deck Basins. Allow us to explain, in depth, why a policy of dually crediting the same
108 Gladden Street
PO Box 1854 ecological benefit violates the intent and reality of the various mitigation/offset programs
Washington, NC 27889 at work in the State of North Carolina.
252-946-7211
252-946-9492 fax
riverkeeper@ptrf.org State Riparian Buffer Protection Rules

The Tar-Pamlico, Neuse and Catawba River basins all have rules requiring the protection
of or mitigation for impact to riparian buffers. The purpose of these rules is “to protect
and preserve existing riparian buffers…to maintain their nutrient [pollutant] removal
functions,” therefore any mitigation for impact to riparian buffers must include
Catawba mitigation for the lost nutrient removal function (15A NCAC 2B .0233, 15A NCAC
RIVERKEEPER®
02B .0259, 15A NCAC 02B .0243)
David Merryman
421 Minuet Lane, Ste 205
Charlotte, NC 28217-2784 Under these rules, impacts to buffers that require mitigation can be fulfilled via three
704-679-9494 alternatives:
704-679-9559 fax
david@catawbariverkeeper.org
1) Payment of compensatory mitigation fee to Riparian Buffer Restoration Fund
2) Donation of real property, where buffers can be restored
Re: Recent Policy Decisions Regarding Assignment of Nutrient and Buffer Offset Credits 03/04/09

3) Restoration or enhancement of a non-forested riparian buffer

The buffer mitigation must take place the same distance from or closer to the estuary or river as
the impact and as close to the location of the impact as feasible.

Federally-based Stream and Wetland Protection Rules

The objective of the Clean Water Act, and delegation of action to the States, is “to restore and
maintain the chemical, physical, and biological integrity of waters of the United States.”
Pursuant to that objective, for unavoidable stream and wetland impacts, DWQ requires
compensatory mitigation at a minimum of 1:1 ratio for losses of streams and wetlands (for both
404 jurisdictional wetlands as well as isolated wetlands) (15A NCAC 2H .0506(h)). Stream
mitigation for 401/404 impacts requires a minimum 50-foot buffer to assure stream bank
stabilization; this buffer is a required component of 404/401 stream mitigation which
compensates for the loss of nutrient removal function due to the stream or wetland impacts
associated with the project requiring the subject mitigation. Compensatory mitigation can be
achieved via:

1) Project-specific mitigation
2) Mitigation banks
3) In-lieu fee mitigation via EEP

State Nutrient Sensitive Waters Management Strategy & Nutrient Offset Payments

The Tar-Pamlico and Neuse Basins' Nutrient Sensitive Waters Management Strategies both
allow dischargers to provide payment in-leiu of nutrient offsets that cannot be reasonably
accommodated on-site. The nutrient offset in-lieu fee program (NOP) provides both the
private and public sectors opportunities to “purchase” nutrient mitigation to assist them in
meeting compensatory nitrogen- or phosphorus-mitigation requirements for new construction. In
the Neuse basin the NOP is also utilized to offset nutrient impacts from the point-sources. Once
fees are received, the North Carolina Ecosystem Enhancement Program (NCEEP) or private
mitigation bank assumes the responsibility for conducting the required mitigation.

Internal Conflict and Violation of Intent

In January, 2007, DWQ released a buffer interpretation clarification memo relating to stream
restoration and buffer mitigation. This memo has allowed for riparian buffer credit to be
generated from stream mitigation projects. The rationale behind this policy by DWQ is that
stream mitigation and buffer mitigation programs are requirements under two separate laws
(federal clean water act and state buffer law). However, the mitigation of stream impacts (with
associated buffer impacts) requires mitigation of the stream channel and a minimum 50-foot
buffer, so the “credit” generated here includes the buffer. Therefore, if the state or a private
bank utilizes previous stream mitigation projects to generate the buffer credits, an
environmental deficit is created, generating two credits of nutrient removal function from a
single improvement to that function. This scenario results in a net loss of riparian buffer acreage
and function, violating the intent of the rules outlined above and cheating the public out of the
water quality benefit they promise.

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Re: Recent Policy Decisions Regarding Assignment of Nutrient and Buffer Offset Credits 03/04/09

The NRF, PTRF and CRF also have concerns related to the Draft Flexible Buffer Mitigation
rules that would allow “stream and riparian wetland mitigation credit for the construction of
headwater wetlands in subtle stream valleys in the outer Coastal Plain...” (DWQ, 3 Dec 2008).
The division must be careful to separate wetland mitigation credits from buffer or nutrient offset
credits to avoid another scenario of double stacking or double crediting the ecological function
and nutrient removal function of a single mitigation site.

Problems Already Underway

According to our information, in November of 2008, private mitigation bankers

Environmental Bank and Exchange (EBX) were given approval to derive greater than
250,000 pounds of nutrient offsets from a previous DOT compensatory mitigation project.
As we understand the situation, the DOT mitigation project completed by EBX utilized the entire
project to fulfill compensatory mitigation for DOT wetland and stream impacts; the action by
DWQ to then release nutrient offset credits from that same site is certainly re-crediting of the
same ecological and nutrient removal function.

Specifically, the acreage comprising the original “EBX Neu-Con Umbrella Wetland Mitigation
and Stream Restoration Bank” (Neu-Con Bank) restored in or about 2002 with NCDOT funds
designated specifically for compensatory mitigation for unavoidable wetland and stream impacts.
Now, we understand that the Department of Water Quality has approved the use of portions of
this same site for Nutrient and Buffer Mitigation Credit under the auspices of the EBX Neuse
Riparian Buffer Umbrella Mitigation Bank (Buffer Bank). By providing additional offset credits
where no additional offsets were generated, a substantial environmental debt has been
created.

The division's explanation, provided via email, was this:

Environmental Bank and Exchange has three sites that were constructed as stream
and wetland mitigation sites for NCDOT. These sites were constructed between
four and six years ago, and their contractual obligation to DOT was settled. EBX
owns the sites. EBX has submitted a Prospectus and Mitigation Banking
Instrument to operate an Umbrella Bank for buffer and nutrient offset credits at
these sites. Neuse riparian buffer credit will be generated within the first 50 feet
of buffer along the restored streams. From 51 - 200 feet, nutrient offset credit will
be generated. There is no "double-dipping", as it has been decided previously that
404/401 relate to federal regulations, while the riparian buffer and nutrient offset
programs are state programs.

DWQ's rationale and explanation is insufficient to explain how this policy does not re-credit the
same buffer acreage and nutrient removal function already allotted to the existing offset credits,
resulting in net degradation of water quality.

In addition, this response and award of these credits runs contrary to other DWQ nutrient
offset positions. Other division policies work to avoid any double crediting or double dipping.
One such example is the Tar-Pamlico Basin Association (TPBA) trading program. If the TPBA
exceeds its nutrient cap, then a payment is made to the agricultural cost-share program to
implement nutrient reducing BMP's on agricultural land. The agricultural community also has

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Re: Recent Policy Decisions Regarding Assignment of Nutrient and Buffer Offset Credits 03/04/09

the same nutrient reduction requirement; they must first meet their nutrient reduction goals (30%
for nitrogen) before payments from the TPBA can be used for BMPs. In simpler terms, the
agricultural community must meet their offset requirements as well as those of the basin
association. The agricultural community cannot utilize the TPBA funds to meet their nutrient
reduction requirements. Therefore, all offsets are met and an environmental debt has not been
created.

In summary, the Pamlico-Tar River Foundation, Neuse RIVERKEEPER® Foundation, and

Catawba RIVERKEEPER® Foundation are opposed to any policy that creates an
environmental debt where new impacts to water quality occur without any new
corresponding mitigation being performed, including the retroactive award of nutrient off-set
credits from projects previously performed to offset 401/404 compensatory mitigation.
Furthermore, we respectfully request that the Division 1) reassess the January 2007 policy that
provides for both buffer and stream mitigation credit, and 2) provide official clarification of how
and why different types of mitigation credits may be gained from the acreage on which the
mitigation is implemented so that mitigation of a single ecological function results in off-set
credits for only that single function.

We would be happy to arrange a time to discuss this matter in person should you require further
explanation. Please do not hesitate to contact the below signatories with any questions you may
have.

Sincerely,

Alissa Bierma Larry Baldwin

Upper Neuse RIVERKEEPER® Lower Neuse RIVERKEEPER®
Neuse RIVERKEEPER® Foundation Neuse RIVERKEEPER® Foundation

Heather Jacobs Deck David Merryman

Pamlico-Tar RIVERKEEPER® Catawba RIVERKEEPER®
Pamlico-Tar River Foundation Catawba RIVERKEEPER® Foundation

Cc:
Colleen Sullins (NCDWQ)
Bill Gilmore (NCEEP)
Pete Peterson (EMC WQC)

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