State program unable to accept nitrogen offset payments in Jordan Lake area
August 14, 2014 2:17 PM
The North Carolina Ecosystem Enhancement Program, or EEP, is unable to accept nitrogen offset payments in the Jordan Lake watershed at this time, including payments for Upper New Hope, Lower New Hope and Haw sub-watersheds. The current fee schedule is insufficient to support the acquisition or other development of nitrogen offsets to satisfy the regulatory requirements in the Jordan Lake area. As required under 15A NCAC 02B .0240(e)(2), EEP must evaluate the financial, temporal and technical ability of the program to satisfy requests made to the program.
Background information on this recent decision:
The Jordan Lake Rules (15A NCAC 02B .0262 - .0272) describe nutrient offset requirements in the Jordan Lake watershed. In August 2013, Session Law 2013-395 was passed delaying implementation of these rules by three years. Certain delegated municipalities have chosen to continue implementation of the Jordan Lake Rules and associated nutrient offset requirements regardless of the legislative delay.
EEP’s initial (and current) nitrogen offset fees for the Jordan Lake area were set according to rule 15A NCAC 02B .0274. The rule bases actual project costs from the Falls Lake watershed until the EEP has two projects to use as inputs to calculate local fees. It should be noted, however, that land costs and other project variables are more expensive in the Jordan Lake area than in the Falls Lake rate area, and those local costs are not fully reflected in this initial fee for Jordan Lake nutrient offsets. Recent credit procurements have demonstrated actual nitrogen offset costs to be approximately $90 per pound in the Jordan Lake area. The difference between the fee EEP currently collects and the costs to generate nutrient offsets is more than $70 per pound of nitrogen. As such, continued acceptance of fee payments for nutrient credits in the Jordan Lake area would be financially irresponsible and would make the state program insolvent. Therefore, EEP must immediately suspend acceptance of nutrient offset fees for impacts in the Jordan Lake watershed.
By rule, EEP nutrient offset fees are adjusted on a quarterly basis to integrate up-to-date, actual costs of mitigation delivery. The next scheduled adjustment will become effective in October and will be based on these recent actual costs.
We anticipate that EEP will resume accepting nitrogen offset payments in October 2014 following the quarterly fee schedule adjustment provided in 15A NCAC 02B .0274.