Special Reports

State spends $140 million on faulty water projects

First of three parts

State programs intended to offset environmental damage from development have spent roughly $140 million on work that is failing, needs significant repair or is too far away from distressed sources of drinking water.

Dozens of projects launched by the state Ecosystem Enhancement Program and its predecessors have not produced the expected improvements for streams and wetlands, which filter water on its way to lakes and reservoirs. Some projects have damaged water quality by dumping sediment into waterways, a News & Observer investigation shows.

The state also has lost track of some projects. And it paid twice for one, spending about $700,000 extra.

But there is one outcome the state can brag about, and it often has:

Since the start of the latest program, "not one Transportation Improvement Project has been delayed due to a lack of mitigation," Bill Ross, then secretary of the Department of Environment and Natural Resources, wrote in a 2007 letter to a state transportation board member.

DENR oversees the restoration program.

From the program's beginning, getting roads built was the state's primary motivation. In the 1990s, the state DOT had trouble meeting federal rules on offsetting environmental damage from road building, and its roads were being delayed.

North Carolina responded by creating a program that lets developers and the DOT pay fees rather than do the restoration work themselves. The state then finds private companies to restore other degraded waters, seeking to prevent any net loss of streams and wetlands from new highways, shopping centers or subdivisions.

In the Neuse and Tar-Pamlico river basins in the eastern part of North Carolina, state law similarly requires that any development that will introduce nitrogen and phosphorus, which come from fertilizers and animal waste, into the environment pay into a fund for projects that filter the pollution.

These rules for mitigation have spawned a billion-dollar-a-year industry nationwide, with private contractors competing in some states for restoration projects. In North Carolina, more than $400 million has been spent on mitigation in the past 20 years, about 80 percent of it from DOT.

North Carolina has been seen as a leader in this type of work. But records, research and interviews show the restoration efforts often fail to help:

The state and the U.S. Army Corps of Engineers have allowed scores of construction projects to move forward without having the offsetting environmental improvements in the ground. More than 70 restoration projects either finished or will finish a year or more behind schedule, extending the environmental harm. Nine are at least five years late.

More than 30 stream restorations have failed during or after construction, a few of them multiple times, turning what was supposed to be a cleanup into an environmental hazard. The state is spending millions repairing these sites. Often, errors in design or construction are partly to blame, but taxpayers absorb much of the cost.

The state has tied up more than $90 million in 16 restored sites that are far from streams and wetlands damaged by road building or development. Many of the sites are more than 10 years old and were bought and restored when federal rules allowed restorations to be farther away from the environmental damage. Only a small portion of this remote land has been allowed to count as an offset for new development projects.

Research by professors at five North Carolina universities has found little water-quality benefit from stream restorations and numerous cases of severe erosion along restored banks and stream beds. State officials dismiss many of these findings as premature.

State and federal officials do not use improvements in water quality as a measure of success. Instead, they check to see whether restored streams pass a more visual test: Do the banks and beds hold their shape? Are the proper plants growing? Is the wetland too wet or too dry?

Alissa Bierma is the Upper Neuse Riverkeeper, a leader of a nonprofit that works to protect the river and its tributaries. She has seen up close the decline of Falls Lake, a reservoir created by damming the Neuse, despite the state's spending millions on restoration projects.

"It was designed to be a program to produce a better product, and it has utterly failed," she said. The Ecosystem Enhancement Program "needs to be removed."

Bill Gilmore, who directs the program, is a former DOT engineer who says even projects that have needed significant repairs have been better than doing nothing. His staffers are still learning, he said.

"Any emerging program ... you can contrast it withNASA," he said. "Did every rocket that they initially launched from Cape Canaveral go up the way it was supposed to? And what did they do when they didn't go up? They kept learning from their past failures."

A project gone bad

In 2001, the state began to spend $1.5 million to restore a degraded, eroding stream that runs through farmland in southwestern Wake County. Contractors rolled in with trackhoes, fashioning a winding 3,700-foot channel to take Little Beaver Creek on a much cleaner path to Jordan Lake.

But the contractors left the site late in 2005 without planting trees, shrubs and other vegetation to keep the banks in place, records show. They built the channel too wide, and the design produced riffles - shallow areas where rocks break up the water flow - that were too short.

The next year, remnants of Tropical Storm Alberto passed over Wake County, dumping as much as 8 inches of rain. It was too much for the bare, improperly rebuilt creek to handle. The torrent of water chomped into stream banks, shoved heavy rocks out of place and cut around others that had been set into the banks.

The Montana contractors, Envirocon, did return to plant vegetation. But Little Beaver Creek was no longer a restored stream. It was a pollution threat to Jordan Lake, a man-made reservoir that serves as the drinking water source for more than 400,000 residents in Cary, Apex, Morrisville and parts of Chatham County.

One of the lake's biggest problems is an overload of sediment that clouds the water and helps algae grow to harmful levels. When storms hit the tiny, zagging creek, the rush of water peels pieces of red-brown earth from its banks and stream bed. Off the sediment goes toward the lake, just three miles away.

The state restoration program won't fix the storm damage, and the flaws that helped cause it, until later this year. The cost: $323,000 for a redesign and more construction.

Environmentalists were stunned to learn the restoration had gone awry.

"That's just unacceptable," said Joe Rudek, a senior scientist in the Environmental Defense Fund's state office.

Meanwhile, the projects that Little Beaver's restoration was to partly offset are mostly finished: sections of the I-85 Greensboro bypass, a loop in Alamance County, the N.C. 55 bypass in Holly Springs and 10 new subdivisions in Wake, Durham, Chatham, Alamance and Guilford counties.

What happened to Little Beaver Creek is not unique. State records show that more than 30 stream restoration projects totaling more than $30 million have failed over the past decade. That represents more than 30 percent of the stream restorations the state has completed in that time.

In several cases, improper design or construction flaws contributed to the failures, but the businesses that made those mistakes rarely ate the repair costs. None was barred from future work.

Little Beaver Creek is one of two cases in which a contractor was docked. The state chopped $21,750 off Envirocon's contract, less than 10 percent of the repair tab. A company official didn't respond to requests to explain its performance.

Easy for developers

The state restoration program employs 51 people, most of whom work out of the environmental department's massive office building off Capital Boulevard north of Raleigh's Beltline. It spends about $47 million a year.

The program accepts fees to help developers and DOT comply with four environmental initiatives - two federal, two state. They spend the money on federally mandated stream and wetland restorations and on state-required pollution controls. The state rules largely result in the creation of buffers along streams and agricultural ditches.

The state Department of Transportation is by far the biggest customer, paying more than $300 million in tax dollars on restoration fees. Other government agencies have spent at least $27 million.

In a 2007 survey, developers gave the program high marks because it makes it far easier to meet their offset requirements. Smaller developers like it because fees from dozens of small building projects can be used to pay for a much bigger and more cost-efficient restoration project that offsets them all.

"My business is not ... restoring creeks and wetlands," said Andy Ammons, a commercial and residential developer in Wake Forest. "So the more I can just pay a fee to someone, it's a better way to do it."

The fees are assessed based on the amount of stream footage or wetland acreage a project will destroy. But state records show that for several years, the program's feeswere not high enough to offset a typical development's damage, causing delays and pollution.

The state's leadership hasn't helped. During lean budget years, the General Assembly and governor have siphoned $7.6 million from the program to use for other purposes.

The amount of money spent repairing failed projects hasn't helped, either.

A stream restoration at Stone Mountain in Wilkes County, for example, should have been completed in 2006, but it has twice needed major repairs. Those repairs pushed the cost from $864,000 to $1.5 million.

Federal officials soon will accept the Stone Mountain project as effective restoration, but records show that during much of the past decade it has been counted as an offset to allow development. DOT and developers have used Stone Mountain to build three shopping centers and three stretches of highway.

Meanwhile, the project has been a polluter by creating sediment problems.

"It's just compounding the risk," said Geoff Gisler, a staff attorney with the Southern Environmental Law Center.

'Our jaws just dropped'

Some of the restoration problems come from nature and the public. Strong storms have wreaked havoc on some projects. Municipal workers have mowed buffers, and ATV riders tearing through the woods have destroyed them.

Critics of the state program say state and federal officials overlook its flaws because it keeps the road building moving. Martin Doyle, a UNC-Chapel Hill environmental geography professor, was alarmed to hear the program director, Gilmore, boast at a presentation that no road projects had been delayed.

"Our jaws just dropped, hearing that was the metric of success," Doyle said.

State officials boast in their most recent annual report, for 2009, that the program has helped DOT complete more than $5.4 billion in state transportation projects since 2003.

Gilmore acknowledged some of the criticism and flaws. After The N&O started looking into the program, he announced changes to improve accountability and to respond to the problems highlighted by research.

But Gilmore, who is retiring this year, said the program has safeguards to make sure it produces enough protection. He said developers are typically assessed fees to pay for restoration that exceeds the amount of damage developers cause.

"The program was designed to help the environment and help responsible economic development," he said. "They both had to be met in order to do it, and the very reason why the program resides in DENR is because of that commitment to the environment."

One person, 500 sites

A review of operations raises questions about the program's management.

Managers lost track of several projects, including one that had not been visited for several years. Officials also could not readily say how much each project cost or how much has been spent on repairs because the program's financial database tracked individual contracts, not projects. The database, which is being overhauled, also contained numerous errors such as linking spending to the wrong site.

It took several weeks for managers to piece together records that showed the state had spent $5.6 million on abandoned projects, including one in Catawba County written off at a cost of $236,000 because it harbored a hazardous waste site.

Kevin Miller was the state program's research and grants coordinator until he was laid off almost two years ago. He said he was frustrated with the program's lack of accountability and its penny-pinching.

At any given time, he said, one out of four projects was in need of repair. Other staff members raised similar concerns, email shows.

State officials disputed Miller's claims, but an internal "red flag" list shows that the program as of last summer had more than 100 sites needing a total of $3.2 million in repairs. It is not a complete list.

Records show the restoration program has had problems for years but has drawn little attention because state and federal overseers have lacked the resources to stay on top of the situation.

State Division of Water Quality officials say federal grants used to pay people to monitor stream and wetland restorations ran out and have not been replaced.

Meanwhile, the Army Corps of Engineers, the lead federal agency issuing permits for development and for the corresponding environmental protection in streams and wetlands, hired an additional staffer to stay on top of the restoration sites. This came after a 2005 federal Government Accountability Office audit said the Corps lacked effective oversight on mitigation in areas including North Carolina.

Corps officials in North Carolina deny they ever lacked the manpower to keep up with restoration projects, but one of them said the new staffer has a tough job.

"One person, 500 sites," said Scott McLendon, the deputy chief for the Corps' Wilmington District. "You do the math."

Tomorrow: Money flows out of the Triangle.

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