Department of Environmental Quality Division of Mitigation Services

1. Proposed Amendments to 15A NCAC 02R Public Comments and Hearing Officers’ Report January 2018 Department of Environmental QualityDivision of Mitigation Services

2. Public Hearings and Comments Proposed Amendments to 02R Rules • Public comment period- August 15, 2017 to October 16, 2017 • Hearing Officers: Commissioners Wilsey and Whisnant • Two hearings: • Wilmington, September 27, 2017; 4 attendees • Raleigh, October 4, 2017; 1 attendee • No public comments received at hearings • Written comments received from four entities

3. Summary of Public Comments RES, a private mitigation banking company • Strongly supports DMS efforts to base pricing on actual costs • Request DMS consider setting rates specific to each HUC • Request DMS increase transparency for establishing rates through quarterly public comment • Would language in .0202 preclude the use of secondary service areas for banks? BASE and NC HBA, representing development community • Concerned about increasing mitigation credit costs • No comments specific to rule language • BASE prefers the free-market approach to mitigation pricing EDF, environmental non-profit • Strongly supports ACM as a transparent approach to pricing mitigation credits. • Basinwide restoration planning amendments are an improved means of identifying projects • Amendments advance functional improvement goals

4. Response to Public Comments • Rate Structure and Process • Publishing rates for each HUC (>100 different rates) would likely not be supported by majority of customers who favor a simple rate structure. • The “premium rate area” option reasonably addresses regional cost disparities. • The actual cost methods increase transparency by ensuring rates reflect actual costs. • Establishing up to 4 public comment periods per year to comment on the actual cost calculations is not feasible. • Watershed Planning • Section .0202 does not alter the focus of basinwide restoration plans to 8-digit HUCs. • The rule modifications codify in rule the goal to improve functional outcomes. • Mitigation Industry • Staff share concerns with development community on the costs of mitigation. • ACMs do not increase or decrease costs – they result in rates that reflect actual costs. • Rules do not alter developers’ ability to use private banks or permittee-provided mitigation. • ACM allows DMS rates to reflect market pricing.

5. 15A NCAC 02R .0402 (e)(2) Coastal Wetland Rate • DMS staff recommend one revision to the proposed rule language: • 15A NCAC 02R .0402 (e)(2) The initial coastal wetland rate shall be five hundred sixty thousand dollars ($560,000) per credit until sufficient data are available to calculate an actual cost rate pursuant to Paragraph (g) of this Rule. • initial coastal wetland rate reduced from $825,000 to $560,000 • based on the average project cost data from Virginia alone • reasonable prediction of future costs of implementing new projects • considers historical costs of existing projects

6. 15A NCAC 02R Rules • Recommendation: • The proposed amendment, repeal, and readoption of the rules in 15A NCAC 02R as presented in Chapter II of the Hearing Officers’ Report with changes to 02R .0402 (e)(2) in Chapter I on page 9 of the report be adopted by the Environmental Management Commission.

7. NC DIVISION OF MITIGATION SERVICES Questions? NC Division of Mitigation Services 1652 Mail Service Center Raleigh, NC 27699-1652 919-707-8976 deq.nc.gov/about/divisions/mitigation-services *the information contained in this document is accurate to the extent possible Department of Environmental Quality