A BILL TO BE ENTITLED
AN ACT to amend laws related to the provision of mitigation services.
The General Assembly of North Carolina enacts:

Cost‑Effective Mitigation
SECTION 1.1.  G.S. 143‑214.9 reads as rewritten:
"§ 143‑214.9.  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 prioritize cost‑effective approaches to compliance with mitigation requirements that maximize the remaining productive uses of public and private lands consistent with the other purposes of this section.
(7)	To foster a comprehensive approach to environmental protection."
SECTION 1.2.  G.S. 143‑214.12 reads as rewritten:
"§ 143‑214.12.  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, streams, and riparian areas in accordance with the basinwide plan as described in G.S. 143‑214.10. 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.
(a1)	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 that acquires a conservation easement or interest in real property appurtenant to a restoration project delivered to the Division of Mitigation Services may transfer the conservation easement or interest in real property to a federal or State agency, a local government, or a private, nonprofit conservation organization approved by the Division of Mitigation Services. 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 approved by the Division of Mitigation Services to acquire, manage, and maintain real property or an interest in real property for the purposes set out in subsection (a) of this section. When a grantee of real property or an interest in real property under this subsection grants a conservation easement in the real property or interest in real property to a federal or State agency, a local government, or a private, nonprofit conservation organization approved by the Division of Mitigation Services, the grant shall be made in a form that is acceptable to the Department.
(b)	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.
(c)	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."

Maximize uses of Riparian buffer
SECTION 2.  Article 21 of Chapter 143 of the General Statutes is amended by adding a new section to read:
"§ 143‑214.7D.  Permitted uses of privately held riparian buffer.
Except as otherwise required by federal law, land within a riparian buffer required to be maintained under a State or local permit or other regulatory approval in which neither the State nor its subdivisions holds any property interest may be used by a property owner to satisfy any other development‑related regulatory requirements based on property size. These requirements  include, but are not limited to, stormwater best management practices (where the Department finds the practice is compatible with the purposes of the riparian buffer), residential density, and nonresidential intensity calculations and yields, tree conservation purposes, open space or conservation area requirements, setbacks, perimeter buffers, and lot area requirements."

revise mitigation services programs
SECTION 3.(a)  The Division of Mitigation Services of the Department of Environmental Quality shall revise its mitigation services programs to focus its efforts on the preservation, enhancement, and restoration of ecological functions rather than on the spatial proximity of mitigation projects.
SECTION 3.(b)  The Environmental Management Commission, with the assistance of the Division of Mitigation Services of the Department of Environmental Quality, shall review and revise the nutrient offset fee for the Jordan Lake Watershed to establish fees for the different sub‑watersheds within the Jordan Lake Watershed that reflect the actual costs of performing the mitigation in the sub‑watersheds.
SECTION 3.(c)  The Division of Mitigation Services of the Department of Environmental Quality shall calculate wetland mitigation fees by multiplying the relevant rates by the number of credits being purchased and shall calculate stream mitigation fees by multiplying the relevant rates by the number of whole credits being purchased. The Environmental Management Commission shall amend its rules to be consistent with this section.

Department of Transportation mitigation Reporting
SECTION 4.(a) The Department of Transportation shall report annually no later than February 1 to the Environmental Review Commission regarding implementation of the 2016 Memorandum of Understanding between the Department of Environmental Quality and the Department of Transportation establishing procedures for the provision of compensatory mitigation by the Department of Environmental Quality's Division of Mitigation Services to offset impacts to waters and wetlands from the Department of Transportation's activities. The report shall include, at a minimum, the following components:
(1)	An update to the portion of the inventory of wetland and stream mitigation credits in State ownership required by section 14.21 of S.L. 2016‑94 to include property or credits acquired and disposed of in the prior calendar year by or on behalf of the Department of Transportation.
(2)	The Department of Transportation's plan and timetable for disposition of surplus wetland and stream mitigation credits. For purposes of this subdivision, surplus wetland and stream mitigation credits are those credits located in areas where there is no current or projected mitigation needs and that were (i) generated as part of a mitigation project built by the Department prior to 2003, but not associated with a mitigation need associated with a particular transportation project; (ii) generated as part of a mitigation project built by the Department for which the projection of mitigation need exceeded actual needs; (iii) acquired incidental to procurement of targeted assets for individual transportation projects; or (iv) the excess credit yield for mitigation projects that generated greater credit yield at project closeout than was anticipated at project initiation.
(3)	An overview of the Department of Transportation's Mitigation Order submitted to the Division of Mitigation Services pursuant to the Memorandum of Understanding.
(4)	A breakdown of credits obtained in the prior year from the Division of Mitigation Services and credits obtained from sources of mitigation other than the Division and a projection of this breakdown for Department of Transportation projects that are prioritized for funding and expected to be let over the next seven years.
(5)	Legal barriers to further disposition of excess credits, along with suggested legislation to address those barriers.
SECTION 4.(b)  This section expires March 1, 2020.

Mitigation Bonding reform
SECTION 5.  The Division of Mitigation Services shall review and revise its bidding and contracting procedures for procurement of mitigation services to include, at a minimum, the following policies:
(1)	Bonding or other financial surety required for the construction of a mitigation project shall reflect only the minimum amount necessary to secure State funds provided through a contract between the Division and a private mitigation provider.
(2)	Post‑construction bonding periods and amounts shall reflect the minimum length of time necessary to determine with a reasonable degree of certainty project success and the reasonably determined level of financial risk to the State from total or partial failure of the mitigation project.
The Division shall report to the Environmental Review Commission regarding the review and revisions required by this section no later than December 1, 2017. The report shall include an explanation of the methodology followed in setting bonding amounts and time lines for procured mitigation projects and a description of any changes made to the Division's procedures as a result of the review required by this section.

STUDY OF STATE‑OWNED PROPERTIES
SECTION 6.  The Department of Administration shall develop an inventory of all State‑owned properties, determine which State‑owned properties would be appropriate for compensatory mitigation to satisfy the compensatory mitigation required of State agencies, and determine whether the stewardship and maintenance of certain State‑owned properties would be more efficiently and effectively administered by private nonprofit organizations such as conservation land trusts. Other State agencies, including the Department of Transportation and the Department of Environmental Quality, shall assist the Department of Administration in the implementation of this section. The Department of Administration shall submit the results of implementing this section to the Joint Legislative Commission on Governmental Operations and the Environmental Review Commission no later than February 1, 2017.
SECTION 7.  Except as otherwise provided, this act is effective when it becomes law.