RICHMOND – Although there has been much discussion revolving around the compensation plan for the Cobbs Creek Reservoir, the State Water Control Board had no discussion at all before approving the plan during a June 17 meeting.

The plan, which Delegate Matt Fariss, District 59, calls an “unprecedented and highly questionable mitigation scheme,” was approved on a five-to-one vote by the board, finding it met all necessary requirements, and delegating the director of the Virginia Department of Environmental Quality (DEQ) to approve any revisions to the plan.

The final compensation plan is expected to cost Henrico in the neighborhood of $18 million dollars.

The permit for Cobbs Creek Reservoir was originally approved in 2007. Included in the permit were conceptual compensatory plans, which have come under question, but remain largely unchanged since they were presented to the board with the permit six years ago.

In a letter addressed to the director of DEQ, Delegate Fariss questioned the compensation plan and asked that his concerns be shared with the water board before their meeting.

DEQ Director David Paylor summarized the letter to the board prior to their vote, saying it contained three or four “philosophical” issues which “encapsulate … the discussions that have surrounded this particular action.”

In all, the 1,117-acre augmentation reservoir will flood approximately 17 miles of stream, 40 acres of wetland and 4.5 acres of open water in northern Cumberland County.

According to state and federal law, Henrico County, which is constructing the reservoir, is required to insure there is “no net loss” of the wetlands and streams that are impacted or destroyed as a result of the project.

The compensation plan approved by the water board contains three mitigation components designed to show how those losses will be offset. It includes: wetland mitigation at Swift Island located up the James River in Buckingham County; mitigation of 75 percent of the stream credits through the Department of Forestry, primarily in the Cumberland State Forest; and mitigation of 25 percent of stream credits at the Swift Island site and through private mitigation banks.

What's the big deal? Henrico's choice to mitigate the majority of the required stream credits in Cumberland State Forest as opposed to buying them on the open market from mitigation banks has raised several concerns.

Mitigation banks restore, create, enhance and/or preserve wetlands and streams. Private and public developers can purchase “credits” from these sites to compensate for unavoidable stream or wetland losses caused by their projects.

For example, the planned compensation site in Buckingham will create mitigation credits to offset the “debt” Henrico will make by inundating wetlands in Cumberland.

Wetlands will be restored and created at the 55-acre Swift Island site located on the east bank of the James River, near Wingina. Currently, the floodplain of the site is being used to grow hay.

Mitigation Through Preservation

The plan approved Monday by the water board allows Henrico to compensate for the 17 miles of stream impacted by the future reservoir – a much larger amount of mitigation needed than the wetland mitigation at Swift Island – through preservation alone in the Cumberland State Forest.

Through the practice of silviculture, state forests are self-supporting, funding themselves by planting, growing and harvesting trees, not unlike an agricultural crop.

According to plan documents, streams within the Cumberland State Forest are currently managed as a “voluntary Streamside Management Zone, which can be logged for timber.” Up to 50 percent of the trees are harvested within that area, the plan explains.

In short, Henrico is paying the Department of Forestry not to harvest any of the trees within a 100-foot buffer area along one or both sides of 58 miles of stream in the Cumberland State Forest.

A report, available from the National Mitigation Banking Association's website, was completed by mitigation bankers last year. The report suggests that the plan does not appropriately or sufficiently compensate for the streams and wetlands flooded by the reservoir by simply preserving additional trees in the state forest.

This was also one of the concerns of Heather Wood, the one board member to oppose the compensation plan. She told The Herald that she did not believe preserving trees in the state forest was an adequate form of compensation.

During Paylor's explanation prior to the board's vote, he addressed this concern, pointing out that Farris writes that mitigating in the state forest is of “dubious value.”

While in the process of determining the value of the credits in the state forest and their adequacy, Paylor said, “I have over and over again, with the staff…asked the question, 'is this precisely what we would require of the private sector?'”

“The answer has always been yes, that this meets all the requirements that we would have of anybody for a permit that was issued at that time,” he continued.

Government Subsidy?

But, that isn't the only concern.

Fariss points out in his letter that the mitigation credits in the state forest will cost Henrico about $100 a credit less than the prices Henrico will have to pay when it buys credits from the open market.

Fariss believes this amounts to a “massive subsidy to the County [Henrico] from the Commonwealth.”

He continues, “Under these circumstances, sound public policy requires that Henrico County be expected to obtain as many credits from the private sector as possible before availing itself of the subsidy provided by the Commonwealth.”

In response, Paylor told the water board that at the time the permit was issued there were no private mitigation credits available.

Since the permit was first approved in 2007, mitigation banking has become prevalent and credits are available on the market.

However, Paylor explained, “It's my view that a permittee needs to be able to rely on the instrument that's issued at the time.”

Wood, the opposing board member, also believes that Henrico should change its approach now that the mitigation landscape has changed.

She explained to The Herald that she fully supports the reservoir project and understands Paylor's statement that the DEQ should stand by the permit instruments. However, now that there are viable mitigation bank options available, she believes Henrico should pursue those options.

She points out that no one has told Henrico they couldn't adjust the plan and buy more of their credits from the mitigation banks now that those credits are available. At the same time, she believes that the mitigation banks should not “jack up” their prices.

Compensation in a state forest is so unique that a special amendment in the state budget was passed this year in the General Assembly and signed into law by the governor to help it move forward. It will cost Henrico nearly $10 million to mitigate in the Cumberland State Forest.

Originally, the amendment would have stopped mitigation in the Cumberland State Forest all together. And some of that language is still present in the final version.

The amendment concludes that in future mitigation projects, public or private, state forests cannot be used to mitigate wetland or stream impacts “until such time as due consideration has been given to the availability of mitigation credits available from private sources.”

Summarizing his concerns regarding what he views as the Commonwealth's subsidizing of Henrico's reservoir project, Fariss concludes his letter, “These difficulties derive entirely from our collective failure as public servants to adhere to our own fundamental principles to refrain from putting the state government in competition with private businesses. In this case, businesses and individuals who have made enormous investments in real mitigation banking facilities in Virginia.”

Final Points

Finally, Fariss raised the concern of sovereign immunity, stating in his letter that he believed that the mitigation plan in the state forest would be unenforceable “in the absence of a waiver of sovereign immunity,” which could allow the federal Environmental Protection Agency and the United States Army Corps of Engineers to take direct action against Virginia.

Although Fariss points to an informal opinion from the Attorney General's office which he says supports his view, Paylor stated that he has also been working closely with the Attorney General's office throughout the process.

He told the board that regarding the documents in the plan that are currently filed, DEQ's attorneys do not have concerns about the approval of the project.

A First

This is the first time a mitigation plan has come before the board for approval, according to Paylor.

Usually, the conceptual plans, such as the mitigation plan, which are parts of a permit, are approved by the board and it is then the job of DEQ staff to review the specifics, determining whether they comply with federal regulations and the board approved permit.

However, when the permit for the reservoir was originally approved by the State Water Control Board in 2007, on the request of one board member, it was amended to have the final compensation plan be brought back before the board for review.

Although the State Water Control Board approved the mitigation plan without discussion, there were some signs of the tensions related to their action.

In addition to the one dissenting vote cast by Wood, vice-chairman William Pruitt recused himself from the discussion and vote, citing “current…and previous business relationships with some of the parties affected by the board's decision.”

Pruitt later told The Herald that while he did not technically have a conflict of interest in the matter, he is currently employed by an organization associated with mitigation bankers, and so did not want to involve himself in the decision.

It's Not Over Yet

However, there are still a few hurdles the plan needs to clear before it gets a green light.

The compensation plan for the reservoir has not yet been approved by the United States Army Corps of Engineers, according to Julie S. Hamilton, who is with the corps.

It must be reviewed by the branch chief, but, according to Hamilton, the Corps is still waiting for one item to be clarified. Once again, it has to do with the issue of mitigation within Cumberland State Forest.

In particular, clarification is required regarding the mineral rights in the state forest, which are owned by the federal government, Hamilton says.

She confirmed that because those rights are owned by the federal government, preservation projects in the state forest could potentially be undercut. Or, perhaps more appropriately, undermined.

However, Henrico believes it is highly unlikely that the federal government will allow a contractor to mine within 100 feet of a stream in the Cumberland State Forest.

For now, things are looking up for Henrico.

Earlier this year Henrico published an invitation for bids for the remaining stream credits in order to purchase them on the open market. At this time, awards to three DEQ approved mitigation banks are pending for those credits, which will equal less than a fifth of the total mitigation credits needed for the project.

Henrico is waiting to award the bids until after the plan is approved by the army corps.

William Mawyer, assistant director of utilities for Henrico County, was all smiles following the water board's decision to approve the plan. “We were pleased with the support of the DEQ staff in preparing the report and pleased to get the approval from the state water control board,” he told The Herald.