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Proposed Revisions to Rules Governing the Nutrient Offset Payment Program Presentation to EMC January 14, 2010

Proposed Revisions to Rules Governing the Nutrient Offset Payment Program Presentation to EMC January 14, 2010. Presentation Overview. Nutrient Offset Payment Program Background and History Proposed Rule Revisions Next Steps and Schedule. Services Provided by EEP. Mitigation for NCDOT

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Proposed Revisions to Rules Governing the Nutrient Offset Payment Program Presentation to EMC January 14, 2010

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  1. Proposed Revisions to Rules Governing the Nutrient Offset Payment Program Presentation to EMCJanuary 14, 2010

  2. Presentation Overview • Nutrient Offset Payment Program Background and History • Proposed Rule Revisions • Next Steps and Schedule

  3. Services Provided by EEP • Mitigation for NCDOT • Mitigation for others through In-lieu Fee Program • Nutrient offset program in Neuse and Tar-Pamlico Basins and future additions • Riparian buffer mitigation in Neuse, Tar-Pamlico, upper Cape Fear-Randleman watershed, Catawba and future additions

  4. History of NO Program • 1996-1998 • Legislation and rules establish WRP Nutrient Offset Program • Fee established in 2B .0240 at $11 per pound for Nitrogen in the Neuse • 2001 • First payment received, May 2001 • 2005 • Fee adjustment initiated by DWQ • 2006 • EMC adds Tar-Pamlico River basin at request of stakeholders • EMC sets new fees • Nitrogen $57 per pound • Phosphorus $45 per 0.10 pound • First Tar-Pamlico payment

  5. History of NO Program Cont. August 2006 Session Law 2006-215 • Reset fees to original levels • Required refunds • Commissioned cost study for the ERC 2007 • RTI cost study completed • Session Law 2007-438 • Set New Fees: Neuse >> $28.35 per pound N • Tar Pamlico $21.67 per pound N; $28.62 per 0.10 pound P • Required use of ‘Least Cost Alternative’ • Required transition to actual cost method • Specified geographic constraints • Made provisions for other third party providers

  6. Rule Development and Structure • Enhancement of existing data bases to support calculation of actual cost rates • Stakeholder involvement • 17 stakeholders interviewed • Key interest groups represented in dialogue • Met 4 times from February to June • Proposed Rule Structure • Original rule (2B .0240) proposed to include procedural requirements • New rule proposed for establishment (2B .0274) to contain Actual Cost Method

  7. Proposed 2B .0240 Amendments • Rate formula deleted - addressed in .0274 • Legislated Requirements: • Specifies 8-digit CU restriction • Requires reduction projects in Falls Lake watershed for impacts in that watershed • Establishes guidelines on use of third party providers • Requires DWQ pre-approval of proposed nutrient offset projects • Specifies Jordan reservoir mitigation location requirements • Allows access for future nutrient rule requirements

  8. Proposed 2B .0274 • Sets forth provisions for payment to EEP using Actual Cost Method

  9. Actual Cost Method Objectives: • All costs must be accounted for in the method. • Must be understandable and easy to use. • Must be predictable and equitable. • Rates must change (upwards or downwards) as actual costs change. • Method must be applicable at various geographic scales. • Method must be applicable to either nitrogen or phosphorus offsets.

  10. Actual Cost Method Simple Premise: Actual Costs / Total Pounds = Actual Cost per pound

  11. Proposed Actual Cost Method

  12. Proposed 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 Proposed Actual Cost Method • Represents true cost of implementing new project • Addresses concerns over regulation changes • Ensures rate will never be below actual cost

  14. Adjustment Factor • If Actual Costs are greater than Actual Receipts the difference is distributed to future pounds paid into program • Ensures additional collections are made if historical receipts were below costs

  15. Additional ACM Provisions • General and Special Rates • Adjustment at least annually but more frequently if actual costs are 10% higher than existing rate • In new rate areas where there are no nutrient reduction projects, highest Program rate applies until two projects are at least in design

  16. Current ACM Rates (in pounds)

  17. Current ACM Rates (in pounds)

  18. Next Steps and Schedule • Notice and Public Hearings - February and March 2010 • Hearing Officers deliberate - April 2010 • EMC Consideration - July 2010 • Rules Review Commission - August 2010 • Targeted effective date – September 1, 2010

  19. Questions? NC Ecosystem Enhancement Program 1652 Mail Service Center Raleigh, NC 27699-1652 (919) 715-0476 www.nceep.net

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