A BILL TO BE ENTITLED
AN ACT to establish the division of mitigation services in the department of transportation and require the department of administration to inventory existing mitigation credits held by the state and develop a plan for disposing of unneeded mitigation credits.
The General Assembly of North Carolina enacts:
SECTION 1.  Elimination of Division of Mitigation Services in DEQ. – The Division of Mitigation Services in the Department of Environmental Quality, and all positions within that division, are eliminated. All functions, powers, duties, obligations, and services vested in the Division of Mitigation Services in the Department of Environmental Quality prior to its elimination under this section are vested in the Division of Mitigation Services in the Department of Transportation, as established in Section 3 of this act. The elimination required under this section shall occur no later than August 1, 2017.
SECTION 2.  Elimination of ICI/On‑Site Mitigation Group in DOT. – The Indirect and Cumulative Impacts (ICI)/On‑Site Mitigation Group in the Department of Transportation, and all positions within that group, are eliminated. The elimination required under this section shall occur no later than August 1, 2017.
SECTION 3.  Establishment of Division of Mitigation Services in DOT. – Chapter 136 of the General Statutes is amended by adding a new Article to read:
"Article 21.
"Division of Mitigation Services.
"§ 136‑277.  Division of Mitigation Services; established.
The Division of Mitigation Services is established within the Department of Transportation. The Division of Mitigation Services shall be developed by the Department as a nonregulatory statewide mitigation services program for the acquisition, maintenance, restoration, enhancement, and creation of wetland and riparian resources that contribute to the protection and improvement of water quality, flood prevention, fisheries, wildlife habitat, and recreational opportunities. The Division of Mitigation Services shall consist of the following components:
(1)	Restoration and perpetual maintenance of wetlands.
(2)	Development of restoration plans.
(3)	Landowner contact and land acquisition.
(4)	Evaluation of site plans and engineering studies.
(5)	Oversight of construction and monitoring of restoration sites.
(6)	Land ownership and management.
(7)	Mapping, site identification, and assessment of wetlands functions.
(8)	Oversight of private wetland mitigation banks to facilitate the components of the Division of Mitigation Services. 
"§ 136‑278.  Division of Mitigation Services; purposes.
The purposes of the Division of Mitigation Services are as follows:
(1)	To restore wetlands functions and values across the State to replace critical functions lost through historic wetlands conversion and through current and future permitted impacts. It is not the policy of the State to destroy upland habitats unless it would further the purposes of the Division of Mitigation Services.
(2)	To provide a consistent and simplified approach to address mitigation requirements associated with permits or authorizations issued by the United States Army Corps of Engineers under 33 U.S.C. § 1344.
(3)	To streamline the wetlands permitting process, minimize delays in permit decisions, and decrease the burden of permit applicants of planning and performing compensatory mitigation for wetlands losses.
(4)	To increase the ecological effectiveness of compensatory mitigation.
(5)	To achieve a net increase in wetland acres, functions, and values in each major river basin.
(6)	To foster a comprehensive approach to environmental protection. 
"§ 136‑279.  Division of Mitigation Services; development and implementation of basinwide restoration plans.
The Department shall develop basinwide plans for wetlands and riparian area restoration with the goal of protecting and enhancing water quality, flood prevention, fisheries, wildlife habitat, and recreational opportunities within each of the 17 major river basins in the State. The Department shall develop and implement a basinwide restoration plan for each of the 17 river basins in the State in accordance with the basinwide schedule currently established by the Division of Water Resources in the Department of Environmental Quality.
"§ 136‑280.  Division of Mitigation Services; compensatory mitigation.
(a)	Definitions. – The following definitions apply to this section:
(1)	Compensatory mitigation. – The restoration, creation, enhancement, or preservation of jurisdictional waters required as a condition of a permit issued by the Department or by the United States Army Corps of Engineers.
(1a)	Compensatory mitigation bank. – A private compensatory mitigation bank or an existing local compensatory mitigation bank.
(1b)	Existing local compensatory mitigation bank. – A mitigation bank operated by a unit of local government that is a party to a mitigation banking instrument executed on or before July 1, 2011, notwithstanding subsequent amendments to such instrument executed after July 1, 2011.
(2)	Government entity. – The State and its agencies and subdivisions, or the federal government. "Government entity" does not include a unit of local government unless the unit of local government was a party to a mitigation banking instrument executed on or before July 1, 2011, notwithstanding subsequent amendments to such instrument executed after July 1, 2011.
(3)	Hydrologic area. – An eight‑digit Cataloging Unit designated by the United States Geological Survey.
(4)	Jurisdictional waters. – Wetlands, streams, or other waters of the State or of the United States.
(4a)	Mitigation banking instrument. – The legal document for the establishment, operation, and use of a mitigation bank.
(4b)	Private compensatory mitigation bank. – A site created by a private compensatory mitigation provider and approved for mitigation credit by State and federal regulatory authorities through execution of a mitigation banking instrument. No site owned by a government entity or unit of local government shall be considered a "private compensatory mitigation bank."
(5)	Unit of local government. – A "local government," "public authority," or "special district," as defined in G.S. 159‑7.
(b)	Department to Coordinate Compensatory Mitigation. – All compensatory mitigation required by permits or authorizations issued by the Department or by the United States Army Corps of Engineers shall be coordinated by the Department consistent with the basinwide restoration plans and rules developed by the Environmental Management Commission. All compensatory mitigation, whether performed by the Department or by permit applicants, shall be consistent with the basinwide restoration plans. All compensatory mitigation shall be consistent with rules adopted by the Commission for wetland and stream mitigation and for protection and maintenance of riparian buffers.
(c)	Compensatory Mitigation Emphasis on Replacing Ecological Function Within Same River Basin. – The emphasis of compensatory mitigation is on replacing functions within the same river basin unless it is demonstrated that restoration of other areas would be more beneficial to the overall purposes of the Division of Mitigation Services.
(d)	Compensatory Mitigation Options Available to Government Entities. – A government entity may satisfy compensatory mitigation requirements by the following actions, if those actions are consistent with the basinwide restoration plans and also meet or exceed the requirements of the Department or of the United States Army Corps of Engineers, as applicable:
(1)	Payment of a fee established by the Commission into the Ecosystem Restoration Fund established in G.S. 136‑281.
(2)	Donation of land to the Division of Mitigation Services or to other public or private nonprofit conservation organizations as approved by the Department.
(3)	Participation in a compensatory mitigation bank that has been approved by the United States Army Corps of Engineers, provided that the Department or the United States Army Corps of Engineers, as applicable, approves the use of such bank for the required compensatory mitigation.
(4)	Preparing and implementing a compensatory mitigation plan.
(e)	Compensatory Mitigation Options Available to Applicants Other than Government Entities. – An applicant other than a government entity may satisfy compensatory mitigation requirements by the following actions, if those actions meet or exceed the requirements of the United States Army Corps of Engineers:
(1)	Participation in a compensatory mitigation bank that has been approved by the United States Army Corps of Engineers, provided that the Department or the United States Army Corps of Engineers, as applicable, approves the use of such bank for the required compensatory mitigation. This option is only available in a hydrologic area where there is at least one compensatory mitigation bank that has been approved by the United States Army Corps of Engineers.
(2)	Payment of a fee established by the Commission into the Ecosystem Restoration Fund established in G.S. 136‑281. This option is only available to an applicant who demonstrates that the option under subdivision (1) of this subsection is not available.
(3)	Donation of land to the Division of Mitigation Services or to other public or private nonprofit conservation organizations as approved by the Department.
(4)	Preparing and implementing a compensatory mitigation plan.
(f)	Payment Schedule. – A standardized schedule of compensatory mitigation payment amounts shall be established by the Commission. Compensatory mitigation payments shall be made by applicants to the Ecosystem Restoration Fund established in G.S. 136‑281. The monetary payment shall be based on the ecological functions and values of wetlands and streams permitted to be lost and on the cost of restoring or creating wetlands and streams capable of performing the same or similar functions, including directly related costs of wetland and stream restoration planning, long‑term monitoring, and maintenance of restored areas. Compensatory mitigation payments for wetlands shall be calculated on a per acre basis. Compensatory mitigation payments for streams shall be calculated on a per linear foot basis.
(g)	Mitigation Banks. – State agencies and mitigation banks shall demonstrate that adequate, dedicated financial surety exists to provide for the perpetual land management and hydrological maintenance of lands acquired by the State as mitigation banks, or proposed to the State as privately operated and permitted mitigation banks.
(h)	Payment for Taxes. – A State agency acquiring land to restore, enhance, preserve, or create wetlands must also pay a sum in lieu of ad valorem taxes lost by the county in accordance with G.S. 146‑22.3.
(i)	Sale of Mitigation Credits by Existing Local Compensatory Mitigation Bank. – An existing local compensatory mitigation bank shall comply with the requirements of Article 12 of Chapter 160A of the General Statutes applicable to the disposal of property whenever it transfers any mitigation credits to another person.
(j)	Compensatory Mitigation Procurement Requirement Preferences. – The Division of Mitigation Services shall exercise its authority to provide for compensatory mitigation under the authority granted by this section to use mitigation procurement programs in the following order of preference:
(1)	Full delivery/bank credit purchase program. – The Division of Mitigation Services shall first seek to meet compensatory mitigation procurement requirements through the Division's full delivery program or by the purchase of credits from a private compensatory mitigation bank.
(2)	Existing local compensatory mitigation bank credit purchase program. – Any compensatory mitigation procurement requirements that are not fulfillable under subdivision (1) of this subsection shall be procured from an existing local compensatory mitigation bank, provided that the credit purchase is made to mitigate the impacts of a project located within the mitigation bank service area and hydrologic area of the existing local compensatory mitigation bank.
(3)	Design/build program. – Any compensatory mitigation procurement requirements that are not fulfillable under subdivision (1) or (2) of this subsection shall be procured under a program in which the Division of Mitigation Services contracts with one private entity to lead or implement the design, construction, and postconstruction monitoring of compensatory mitigation at sites obtained by the Division of Mitigation Services. Such a program shall be considered the procurement of compensatory mitigation credits.
(4)	Design‑bid‑build program. – Any compensatory mitigation procurement requirements that are not fulfillable under either subdivision (1) or (2) of this subsection may be procured under the Division of Mitigation Services' design‑bid‑build program. The Division of Mitigation Services may utilize this program only when procurement under subdivision (1) or (2) of this subsection is not feasible. Any mitigation site design work currently being performed through contracts awarded under the design‑bid‑build program shall be allowed to continue as scheduled. Contracts for construction of projects with a design already approved by the Division of Mitigation Services shall be awarded by the Division of Mitigation Services by issuing a Request for Proposal (RFP). Only contractors who have prequalified under procedures established by the Division of Mitigation Services shall be eligible to bid on Division of Mitigation Services construction projects. Construction contracts issued under this subdivision shall be exempt from the requirements of Article 8B of Chapter 143 of the General Statutes.
(k)	Vesting. – The regulatory requirements for the establishment, operation, and monitoring of a compensatory mitigation bank or full delivery project shall vest at the time of the execution of the mitigation banking instrument or the award of a full delivery contract.
"§ 136‑281.  Division of Mitigation Services; Ecosystem Restoration Fund.
(a)	Ecosystem Restoration Fund. – The Ecosystem Restoration Fund is established as a nonreverting fund within the Department. The Fund shall be treated as a special trust fund and shall be credited with interest by the State Treasurer pursuant to G.S. 147‑69.2 and G.S. 147‑69.3. The Ecosystem Restoration Fund shall provide a repository for monetary contributions and donations or dedications of interests in real property to promote projects for the restoration, enhancement, preservation, or creation of wetlands and riparian areas and for payments made in lieu of compensatory mitigation as described in subsection (b) of this section. No funds shall be expended from this Fund for any purpose other than those directly contributing to the acquisition, perpetual maintenance, enhancement, restoration, or creation of wetlands and riparian areas in accordance with the basinwide plan as described in G.S. 136‑279. The cost of acquisition includes a payment in lieu of ad valorem taxes required under G.S. 146‑22.3 when the Department is the State agency making the acquisition.
(b)	Distribution of Funds & Conveyance of Land or Interest. – The Department may distribute funds from the Ecosystem Restoration Fund directly to a federal or State agency, a local government, or a private, nonprofit conservation organization to acquire, manage, and maintain real property or an interest in real property for the purposes set out in subsection (a) of this section. A recipient of funds under this subsection shall grant a conservation easement in the real property or interest in real property acquired with the funds to the Department in a form that is acceptable to the Department. The Department may convey real property or an interest in real property that has been acquired under the Division of Mitigation Services to a federal or State agency, a local government, or a private, nonprofit conservation organization to acquire, manage, and maintain real property or an interest in real property for the purposes set out in subsection (a) of this section. A grantee of real property or an interest in real property under this subsection shall grant a conservation easement in the real property or interest in real property to the Department in a form that is acceptable to the Department.
(c)	Authorized Methods of Payment. – A person subject to a permit or authorization issued by the United States Army Corps of Engineers under 33 U.S.C. § 1344 may contribute to the Division of Mitigation Services in order to comply with conditions to, or terms of, the permit or authorization if participation in the Division of Mitigation Services will meet the mitigation requirements of the United States Army Corps of Engineers. The Department shall, at the discretion of the applicant, accept payment into the Ecosystem Restoration Fund in lieu of other compensatory mitigation requirements of any authorizations issued by the United States Army Corps of Engineers under 33 U.S.C. § 1344 if the contributions will meet the mitigation requirements of the United States Army Corps of Engineers. Payment may be made in the form of monetary contributions according to a fee schedule established by the Environmental Management Commission or in the form of donations of real property provided that the property is approved by the Department as a suitable site consistent with the basinwide wetlands restoration plan.
(d)	Accounting of Payments. – The Department shall provide an itemized statement that accounts for each payment into the Fund. The statement shall include the expenses and activities financed by the payment. 
"§ 136‑282.  Division of Mitigation Services; reporting requirement.
(a)	The Department of Transportation shall report each year by November 1 to the Environmental Review Commission and to the Joint Legislative Commission on Governmental Operations regarding its progress in implementing the Division of Mitigation Services and its use of the funds in the Ecosystem Restoration Fund. The report shall document statewide wetlands losses and gains and compensatory mitigation performed under G.S. 136‑277 through G.S. 136‑281. The report shall also provide an accounting of receipts and disbursements of the Ecosystem Restoration Fund, an analysis of the per‑acre cost of wetlands restoration, and a cost comparison on a per‑acre basis between the State's Division of Mitigation Services and private mitigation banks. The Department shall also send a copy of its report to the Fiscal Research Division of the General Assembly.
(b)	The Department shall maintain an inventory of all property that is held, managed, maintained, enhanced, restored, or used to create wetlands under the Division of Mitigation Services. The inventory shall also list all conservation easements held by the Department. The inventory shall be included in the annual report required under subsection (a) of this section."
SECTION 4.  Ecosystem Restoration Fund. – The Ecosystem Restoration Fund within the Department of Environmental Quality shall be closed and the remaining balance in the Fund shall be transferred to the Ecosystem Restoration Fund within the Department of Transportation, as established in Section 3 of this act.
SECTION 5.  Conforming Change. – G.S. 143‑214.8 through G.S. 143‑214.13 are repealed.
SECTION 6.  Federal Law. – The Department of Environmental Quality and the Department of Transportation shall take all steps necessary under federal law to implement the provisions of this act.
SECTION 7.  Inventory of Mitigation Credits. – The Department of Transportation shall inventory all existing mitigation credits held by the State. In addition, the Department shall develop a plan for the disposal of mitigation credits determined by the Department to be unneeded. The Department shall report the inventory and plan required by this section to the Joint Legislative Transportation Oversight Committee by no later than December 1, 2017.
SECTION 8.  Temporary Rules. – The Department of Transportation may adopt temporary rules to implement the provisions of this act. Any temporary rules adopted in accordance with this section shall remain in effect until permanent rules that replace the temporary rules become effective.
SECTION 9.  Effective Date. – Sections 3 through 5 of this act become effective August 1, 2017. The remainder of this act is effective when it becomes law.