1. Department of Environmental Quality Division of Mitigation Services
Proposed Amendments to 15A NCAC 02R
July 13, 2017
Environmental Management Commission

2. What is In-Lieu Fee Mitigation?
Solutions for the Development Community
Assist developers with mitigation requirements
Payment in-lieu of permittee-responsible mitigation
DMS becomes responsible for permit requirements
DMS uses watershed planning to inform project location for highest environmental benefit

3. EEP Private Sector Customers:

4. EEP Public Sector Customers:

5. DMS ILF Programs Present Rate Schedule Over 600 projects
Inventory Overhead
Admin Costs
Project Costs
Land
Design
Construction
Monitoring
Stewardship
Over 600 projects
700 miles of streams
29,000 acres of wetlands,
800 acres of riparian buffer
800 tons of stormwater pollutants
02R rule readoption per  G.S. §150B-21.3A
More tools and data available
Project costs are rising faster than inflation
Regulatory impacts higher than anticipated

6. Forecasted Program Finances

7. Proposed Amendments to Subchapter 02R Rules
Major proposed revisions:
Actual Cost Method (ACM) calculate buffer fees
Modified ACM to calculate stream and freshwater wetland rates
Increase coastal wetland rate commensurate with costs
Minor proposed revisions:
Updated language for watershed planning component
Formatting and technical corrections
Modification to adjustment factor for nutrient fees to address diminishing revenue volume
Modification to consistency determination

8. SECTION .0200 - BASINWIDE RESTORATION PLANS
Proposed Amendments to 02R
Reflect current basinwide restoration planning components
Address public comments
Assessment of watershed conditions
Prioritization of functional improvement for aquatic resources

9. SECTION .0200 - BASINWIDE RESTORATION PLANS
Proposed Amendments to 02R .0301
Clarifies what it means to be consistent with basinwide restoration plans
Current Rule– located within TLW or approved by USACE
Proposed Rule – project demonstrates it advances functional improvement goals of Basinwide Restoration Plan

10. SECTION .0400 - ECOSYSTEM RESTORATION FUND
Stream and Wetland Fees (.0401)
SECTION – RIPARIAN BUFFER RESTORATION FUND
Riparian Buffer Fees (.0601)
Nutrient Offset Fees (.0602)

11. Nutrient Offset ILF Nutrient Offset ILF Program State Laws and Rules
Application Process
Fee Schedule Financing
Uses Actual Cost Methodology to Set Fee Rates
Rates evaluated quarterly
Rates automatically updated annually
Timeline requirements start at payment
Nutrient Offset ILF

12. Actual Cost Method Completed Projects Terminated Projects
Existing Projects in Process
Staff
Supplies
Rent
All Costs Adjusted to Present Day Costs

13. Total Pounds Adjusted to Present Day Values
Actual Cost Method
Total Pounds Adjusted to Present Day Values
Represents true cost of implementing new project
Addresses concerns over regulation changes
Ensures rate will never be below actual cost

14. Actual Cost Method

15. Actual Cost Method
Ensures additional collections are made if historical receipts were below costs
If Actual Costs > Actual Receipts, the gap is distributed to future pounds paid into program

16. 15A NCAC 02R .0602 NUTRIENT OFFSET PAYMENT RATES
Continue using ACM
Minor changes:
Special watershed rates applied when costs exceed rate by 33% (from 40%)
Immediate rate adjustment when program suspends acceptance of payments due to costs
Modification to adjust for the lower and volatile nature of the frequency of payments:
Adjustment Factor shall not comprise more than 60% of overall rate

17. Riparian Buffer ILF Riparian Buffer ILF Program State Laws and Rules
Application process
All customer types
Receipts Based
Uses single statewide fee ($1.16)
Adjusts annually for inflation
Riparian Buffer ILF

18. 15A NCAC 02R .0601 RIPARIAN BUFFER MITIGATION FEES
Actual cost method- ACM
Detailed method
Rate evaluated and adjusted quarterly
2 premium watershed rates
Rates reflect actual project costs
Ensure financial sustainability
Rates responsive to changes in costs

19. 15A NCAC 02R .0601 RIPARIAN BUFFER MITIGATION FEES
Current Rate
Estimated Initial
ACM Rates
Standard Rate Areas
$1.16
$1.06
Randleman Watershed Rate
$2.98
Jordan (Lower New Hope)

20. Statewide Stream & Wetland ILF
Statewide Stream & Wetland Program
1996 Start
All customer types
Application process
Fee schedule financing
Annual updates for inflation
Costs accelerated faster than inflation
Program costs currently exceed receipts
Statewide Stream & Wetland ILF

21. Statewide Stream & Wetland Program
Annual inflation adjustments have ranged from -1.9% to +6.4% since the last time the rates were amended.
Type
Higher Rate
Standard Rate
Stream
$391
$297
Coastal Wetland
$175,323
Riparian Wetland
$71,273
$40,297
Nonriparian Wetland
$51,422
$26,445

22. 15A NCAC 02R .0402 Statewide Stream & Wetland Program Rates
Issues
Last Fee change rulemaking
Costs accelerating faster than inflation
Rates are not reflective of current costs
Rates must keep pace for program to remain viable

23. 15A NCAC 02R .0402 Statewide Stream & Wetland Program Rates

24. 15A NCAC 02R .0402 Statewide Stream & Wetland Program Rates
Simplified Actual cost method- ACM:
Ensure financial sustainability
Allows rates to respond to actual costs
Rate evaluated and adjusted annually
Statewide Rates and Special watershed rates
Eliminates quarter-acre wetland rounding
Simplifies wetland categories in rate schedule
Rates reflect actual project costs from last 3 yrs.

25. 15A NCAC 02R .0402 Statewide Stream & Wetland Program Rates
Watershed
Planning
Inventory Overhead
Administrative Costs
(Staff, Rent, Office Equip., etc.)
Credit Risk / Contingency
Project Costs (including Stewardship)
Program Costs
30%
70%

26. 15A NCAC 02R .0402 Statewide Stream & Wetland Program Rates
70% Total = Project Costs
Total = (1.0/0.7) * Project Costs
Total Costs = 1.43 * Project Costs
Program Costs
Actual Total Costs = 1.43 x Project Costs
Project
Costs (70%)
All Other
Program Costs
(30%)

27. 15A NCAC 02R .0402 Statewide Stream & Wetland Program Rates
Simplified ACM
Actual Project CostsPresentDay means the sum of all Full Delivery and Mitigation Bank Credit Purchase project costs in the three years prior adjusted for inflation.
Costs associated with administrative, watershed planning, operational, and contingency are captured by the coefficient of 1.43 and represent 30% of the total fee calculation.

28. 15A NCAC 02R .0402 Statewide Stream & Wetland Program Rates
Coastal Wetlands
State Program
Wetland Type
Price Range (Present Day)
Virginia ILF
Tidal Wetlands
$429,457 -$644,187
Massachusetts ILF
Saltmarsh
$1,006,515
New Hampshire ILF
$451,542
Proposed Coastal Wetland Rate: $825,000/credit
Payments average 0.25 credits per year
No economies of scale
High coastal land costs
Proposed rate sufficient for single project every 2-4 years
Will allow mitigation to occur closer to impacts

29. Statewide Stream & Wetland Program – Rates (.0402)
Current Rates
(Higher/Standard)
Estimated Initial
ACM Rates
Stream
$391/ $297
$458
Riparian Wetland
$71,273/ $40,297
N/A
Non-riparian Wetland
$51,422/ $26,445
Freshwater Wetland
$67,851
Coastal Marsh Wetland
$175,323
$825,000

30. NC DIVISION OF MITIGATION SERVICES
Questions?
NC Division of Mitigation Services
1652 Mail Service Center
Raleigh, NC
deq.nc.gov/about/divisions/mitigation-services
Department of Environmental Quality