20150636 Ver 1_MBI DRAFT_20150626

MBI Template Version 2 _ Updated 8/8/2013 (replaced DWQ w/ DWR only)

AGREEMENT TO ESTABLISH A MITIGATION BANKING INSTRUMENT IN THE
CAPE FEAR RIVER BASIN FOR RIPARIAN BUFFER AND NUTRIENT OFFSET
MITIGATION CREDITS PURSUANT TO THE JORDAN LAKE NUTRIENT
STRATEGY

I.PREAMBLE

This Mitigation Banking Instrument (“Instrument”) regarding the establishment, use,
operation, and maintenance the Neville Farms Nutrient and Buffer Mitigation Bank Parcel
(“Bank Parcel”) to provide Jordan Lake Riparian Buffer mitigation credit (“Riparian Buffer
Credits”) and Jordan Lake Nutrient Strategy mitigation credit (“Nutrient Offset Credits”) is
made and entered into by and among Watershed Investments NC, LLC, acting as the Bank
Sponsor (“Sponsor”), and the North Carolina Department of Environment and Natural
Resources – Division of Water Resources (“DWR”). This Instrument is in accordance with
15A NCAC 02B .0268,15A NCAC 02B .0240, and the temporary rule 15A NCAC 02B
.0295.

The purpose of the Bank is:

A. To improve water quality through the restoration of riparian buffer habitat,; and

B. To provide mitigation and sell any resulting Riparian Buffer Credits and/or Nutrient
Offset Credits to third parties requiring such mitigation.

II.GEOGRAPHIC SERVICE AREA

A. The Geographic Service Area (“GSA”) is the designated area wherein a
Bank can reasonably be expected to sell Riparian Buffer Credits and/or
Nutrient Offset Credits for impacts due to development activities.

B. The GSA for this Instrument is limited to the Upper New Hope
Subwatershed of Jordan Lake as defined in rule 15A NCAC 02B .0262.

C. Sale or transfer of credits shall be limited to the Upper New Hope
Subwatershed of the Jordan Lake watershed, as defined in Rule 15A
NCAC 02B .0262.

III.AUTHORITIES

A. The Bank will be used to provide Riparian Buffer Credit and Nutrient
Offset Credit in accordance with the requirements in the DWR Authority
document referenced herein as “Attachment A” and attached to this
Instrument.

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B. Projects eligible for utilization of the credits are those requiring
authorization under the requirements of Attachment A.

C. All activities shall be consistent with approved North Carolina (“State”)
statutes and rules for the Jordan Lake Nutrient Sensitive Waters
Management Strategy identified in Attachment A.

IV.ESTABLISHMENT OF NEVILLE FARMS BANK PARCEL(S)

A. Neville Farms Bank Parcel proposed for inclusion under this Instrument
shall require a Bank Parcel Development Package (“BPDP”) be
submitted to, and approved by, the DWR prior to use of the parcel for
mitigation purposes or sale or transfer of any associated credits.

B. Bank Parcel(s) may be added to the Bank at any time upon approval of a
BPDP by the DWR.

V.BANK PARCEL DEVELOPMENT PACKAGE

A. The Neville Farms BPDP shall include detailed information consistent
with the sections below concerning: 1) site location (8-digit HUC is
required); 2) existing conditions; 3) proposed buffer restoration, nutrient
offset and/or stormwater BMP activities; 4) monitoring and maintenance
plans; 5) financial assurances; 6) associated buffer mitigation/nutrient
credit calculations, which shall include credit generation, service area,
and accounting as appropriate for each regulatory authority; and 7)
stream buffer determination letter from DWR (where applicable).

B. In addition to items 1-7 listed in “A” of this section, for each Bank
Parcel, the Sponsor agrees to transfer or assign the conservation
easement and its interests in perpetuity to a qualified holder under N.C.
General Statute (“G.S.”) 121-34 et seq. and 170(h) of the Internal
Revenue Code. The holder shall be a land trust or stewardship program
that will hold and enforce the conservation easement and the interests.
The Sponsor shall choose a land trust or stewardship program that is
accredited by the Land Trust Accreditation Commission and/or has been
approved by DWR prior to the end of the fourth year monitoring period.
A land trust must be certified under 501(c) (3) of the Internal Revenue
Code and must have the qualifications outlined in G.S. 105-130.24 and
G.S. 105-151.12.

Permitting

C. The Sponsor will obtain all applicable federal, state, and local
documentation, permits, or authorizations needed to construct and
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maintain the Bank Parcel. This Instrument does not qualify as, or
substitute for, such documentation, permit or authorization.

Construction

D. The placement of BMPs constructed or renovated to produce Nutrient
Offset Credit must be approved by DWR prior to construction or
renovation.

E. The Sponsor agrees to perform all necessary work, in accordance with
the provisions of this Instrument, to establish, maintain, and monitor
Jordan Lake Riparian Buffers or other riparian areas until Item B (1) and
(2) of Section IX have been satisfied.

F. As-Built Reports: The Sponsor will submit an as-built plan and report
for the Bank Parcel within 30 calendar days after completing the
establishment of the buffer area and nutrient offset area. The as-built
report will describe any deviation from the approved BPDP and will
document the following:

1. Buffer restoration: planting details, invasive species control, monitoring device
locations, vegetation plot locations, photo point locations, surface and
groundwater elevations, as appropriate.

2. Boundary Survey of the conservation easement area including an enumeration of
Comment \[MH1\]:
Fyi, I prefer not referring to
the residential portion of the project as a stormwater
the final mitigation area for buffer and/or nutrient offset mitigation credits in both
BMP because the practice is the same as planting
square feet and acres.
buffers and that it would complicates the monitoring,
bonding, credit release and performance criteria

portion of this instrument.
Operation and Maintenance

G. The Sponsor will provide the DWR with the necessary operation and
maintenance agreements for the buffer restoration area in the BPDP.
These agreements shall be consistent with the standards adopted by the
DWR and must be approved by the DWR prior to the release of any
credits.
Comment \[MBH2\]:
This item looks like it could
pertain to buffers so I left it in and modified the

language.
H. The Sponsor agrees to perform all necessary work to operate and
maintain the Bank Parcel(s) consistent with the operation and
maintenance criteria established in the approved BPDP until Item B (1)
and (2) of Section IX have been satisfied.

I. Requests for deviation from the approved BPDP must be submitted to
the DWR in writing. Written approval from the DWR must be received
prior to implementing any deviation from the approved BPDP.

Monitoring
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J. The Sponsor shall monitor the Bank Parcel as described in the BPDP
until such time as DWR determines that the success criteria described
below have been met. The monitoring period shall be a minimum of five
years.

K. Vegetative Success Criteria: Trees should be planted at a density
sufficient to provide 260 trees per acre after five years. To achieve this
density, approximately 436 (10x10 feet spacing) to 681 (8x8 feet
spacing) trees per acre should be planted initially. A list of character
trees and planting species will be detailed in the BPDP. Native volunteer
species may be included to meet success criteria standards. If vegetative
success criteria are not met, supplemental plantings may be
required. Supplemental plantings will be utilized until the required
densities have been achieved and maintained for five years. Additional
success criteria elements related to diffuse flow, invasive species
management, and pest control are included in the project’s BPDP.

L. Monitoring Reports for Riparian Buffer Credit or Nutrient Offset
Credit (excluding Stormwater BMPs): Reporting criteria of the
riparian buffer restoration shall be based on the Carolina Vegetation
Survey (“CVS”) - EEP Protocol for Recording Vegetation Level 1-2
Plot Sampling Only Version 4.0 or any updated versions of this protocol
in place at the date of acceptance of the BPDP. The Sponsor shall
submit to the DWR an annual monitoring report no later than December
31 of each year for a minimum of five years after the first full growing
season. This report will describe the conditions of the Bank Parcel,
including an evaluation of the success criteria contained within the
approved BPDP. Reports shall contain the following:

1. A U.S. Geological Survey map showing location of the Bank Parcel;

2. A detailed narrative summarizing the condition of the Bank Parcel and all regular
maintenance activities; and

3. Appropriate topographic survey showing location of sampling plots, permanent
photo points, location of transects, etc.; and

4. Monitoring data, including specific vegetative counts and photographs; and

5. A copy of the most recent Bank credit/debit ledgers; and

6. Corresponding verification letters from designated local governments; and

7. Corresponding Mitigation Transfer Certificates

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M.

Contingency Plans/Remedial Actions

N. In the event the Bank Parcel fails to achieve the success criteria
described in this Instrument and the approved BPDP, the Bank Sponsor
shall develop necessary contingency plans in coordination with the
DWR and implement appropriate remedial actions for the Bank Parcel
and the Bank. Depending on the degree of remedial actions required, the
DWR may modify the monitoring period.

Financial Assurances

O. As planned, the Neville project meets the following criteria set out by
the Division of Water Resources in a memo dated 4/2/14 (see
Attachment B) that allow it utilize the performance bond assurance
measures detailed in items P through R of this section:
1. Riparian restoration project is conducted by an approved private
mitigation bank;
2. Project area is 10 acres or less in size;
3. Fencing is not needed as livestock are not present adjacent to the
project; and
4. Project is not seeking stream or wetland mitigation credits.

P. As set out in the Attachment B memo, following approval of the BPDP,
the Sponsor shall provide a Performance Bond from a surety company
that is rated no less than an “A-” as rated by A.M. Best. The
Performance Bond amount shall be 100% of the estimated cost for
implementation of the buffer restoration and/or stormwater BMP project
as described in the approved BPDP, but not less than $50,000.

Q. Alternatively, in lieu of posting the Performance Bond, the Sponsor may
elect to construct the project prior to the first credit release.

R. After completion of the restoration/construction, a separate
Performance/Maintenance Bond will be secured for 100% of the
estimated cost to implement the monitoring and maintenance plan but
not less than $25,000.00. The Performance/Maintenance Bond shall be
in effect for a minimum of five years, and until DWR has released all
mitigation credits to the Bank Sponsor. Upon DWR approval, this may
be lowered each year based on the adjusted cost to complete the
monitoring

VI.CALCULATION OF MITIGATION CREDITS AND CREDIT RELEASE
SCHEDULE

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A. Riparian Buffer Credit may be achieved through restoration,
enhancement, or preservation of the DWR riparian buffer, as defined in
15A NCAC 02B .0267 and per 15A NCAC 02B .0295.

B. Nutrient Offset Credit may be achieved through restoration or
enhancement of the riparian area adjacent to surface water features.
Surface water features do not have to be intermittent or perennial, nor do
they have to be depicted on a USGS, NRCS, or EMC approved map.
However, surface water features must be hydrologically connected and
drain to jurisdictional waters that are either intermittent or perennial.
The width of the restoration area begins at the most landward limit of the
top of bank or the rooted herbaceous vegetation and extends landward a
maximum distance of 200 feet on all sides of the surface water.

C. The mitigation accomplished in the DWR riparian buffer, as defined in
15A NCAC 02B .0267 and per 15A NCAC 02B .0295may be used for
either
Riparian Buffer Credit or Nutrient Offset Credit, but not both and
shall be subject to the same mitigation ratios.

D. Riparian Buffer Credit is defined as one (1) buffer credit per one square
foot or 43,560 buffer credits per one acre.

E. Nutrient Abatement of Restored Riparian Area: The Sponsor and DWR
agree:

F. The following Jordan Water Supply Nutrient Strategy requirements
apply

1. Nutrient offsets can only be provided to offset impacts within the
Upper New Hope Subwatershed of Jordan Lake, as defined in
15A NCAC 02B .0262.

2. Pursuant to the Jordan Trading Rule Item 15A NCAC 02B
.0273(2)(a), load reductions eligible for credit are only those that
exceed reduction needs calculated by applying the strategy
subwatershed percentage reduction goals as provided in 15A
NCAC 02B .0262 (5). For the Haw and Upper New Hope
subwatersheds, this requirement results in a reduction of credits
yielded per acre of restored riparian buffers on agricultural land
when compared with the credits given for agricultural lands in
other river basins. With the project’s location in the Upper New
Hope Subwatershed, nutrient offset credit for the agricultural
portion of the project is 2,169.26 lbs nitrogen and 143.81 lbs of
phosphorus for the agricultural portion of the project. Table 1.0
below lists the generated credits per acre of restored riparian
buffer for each Jordan subwatershed.
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Table 1.0. Generated credit yields for forest buffer restoration by Jordan Subwatershed

Credit Generated (lbs/30 yrs/ac)

Jordan Subwatershed Nitrogen Phosphorus
Upper New Hope 2,169.26 143.81
Lower New Hope 2,273.02 146.40
Haw 2,249.36 143.81

3. Portions the Bank’s restored riparian buffer identified in the
BPDP as located on residential land. Nutrient crediting for these
areas will be approved by the Division and documented in the
BPDP prior to the availability of nitrogen or phosphorus credits
for sale.

4. As required under Jordan Trading Rule Item 15A NCAC 02B
.0273 (2)(d)(i), the party seeking to sale credits must account for
differences in instream nutrient losses between the location of the
reduction need and excess loading reduction being delivered to
the affected arm of Jordan lake. Attachment C provides the
delivered Jordan Lake Total Nitrogen (TN) and Jordan Lake
Total Phosphorous (TP) credit yields per acre of buffer
restoration for the Bank Parcel.

Delivered credits are calculated by applying the delivery factors to the generated
credit yields from Table 1.0 above and are provided in Attachment B.

5. The Bank Sponsor shall report the pounds of nitrogen and
phosphorus credit per acre of restored riparian buffer in their
BPDP for both credits generated at the site of the nutrient
reduction activity and the credits delivered to Jordan Lake. The
Bank Sponsor shall refer to Attachment C for determining
delivered credits in the Jordan watershed.

G. The Sponsor and DWR agree that the methodology and calculations for
determining nitrogen and total phosphorous reduction, including
delivery factors, associated with restoration or enhancement of riparian
areas, shall be fixed as part of the approval of each BPDP, with the fixed
amount not changing during the development or credit release schedule
for each Bank Parcel.

This space left blank intentionally, do not add text to this space.

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H. Credit Release: Upon submittal of all appropriate documentation by the
Sponsor, and subsequent approval by DWR, it is agreed that the
mitigation credits associated with the Bank Parcel will become available
for sale to a third party in accordance with the following schedules:

Table I - Credit Release Schedule for Riparian Buffer and Nutrient Offset Credits (excluding
Stormwater BMPs)
% Credit
Available for
Task Project Milestone Sale
BPDP Approved by DWR, Conservation Easement Recorded* and Financial
1 Assurance Posted 20
Mitigation Site Earthwork, Planting and Installation of Monitoring Devices
2 Completed 20
3 Monitoring Financial Assurance Posted and Approval of As-Built Report 10
4 Monitoring Report #1: Approved by the DWR** 10
5 Monitoring Report #2: Approved by the DWR** 10
6 Monitoring Report #3: Approved by the DWR** 10
Item B (1) of Section IX in this Instrument has been completed and approved by
7 DWR. 5
No remaining credits will be released until Task 7 has been satisfied
8 Monitoring Report #4: Approved by the DWR** 5
Monitoring Report #5: Approved by the DWR** and final site visit by DWR has
9 been conducted 10
Total 100%

* For specification, please see Section VIII in this Instrument
** DWR Approval provided upon a determination that the site is meeting success criteria contained within
the approved BPDP

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I. DWR may modify the credit release schedule based on the information
submitted or the order in which required information is received. DWR
will notify the Sponsor of any modification to the credit release
schedule.

VII.PROCEDURE FOR DEBITING AND CREDITING

A. Available mitigation credits (credits that have been released by DWR
Comment \[MH3\]:
Do I need Division approval
prior to doing this? If so, I’ll state it here.
but not sold by the Sponsor) that are generated within the DWR riparian
buffer, as defined by 15A NCAC 02B .0267 and per 15A NCAC 02B
.0295), can be converted and transferred from Riparian Buffer Credits to
Nutrient Offset Credits and from Nutrient Offset Credits to Riparian
Buffer Credits. Available Nutrient Offset Credits that are generated
outside of the DWR riparian buffer cannot be converted or transferred to
Riparian Buffer Credits.

B. The Bank Sponsor shall obtain verification of nutrient offset need from a
designated local government prior to debiting Nutrient Offset Credits
from the Bank Parcel.

C. The Bank Sponsor shall obtain verification of buffer mitigation required
prior to debiting Riparian Buffer Credits from the Bank Parcel.

D. The Bank Sponsor shall maintain three credit ledgers, if applicable, for
each Bank Parcel under this Instrument: one accounting for buffer
mitigation credits in square feet, one accounting for nitrogen offset
credits in pounds, and one accounting for phosphorus offset credits in
pounds.

E. Each credit ledger shall be submitted on a separate 8 ½in X 11in
spreadsheet with legible font style and font size. At a minimum and
unless otherwise requested by DWR, credit ledgers shall contain the
following information:

1. Bank Details listed in a header: (1) name of the approved
banking instrument as it appears on the instrument document, (2)
sponsor name, (3) bank parcel name as it appears on the BPDP,
(4) DWR project number for the BPDP, (5) date the ledger was
last updated, 6) total credits released to date.

2. Credit Details Table with the following for each credit sale: (1)
date of credit sale, (2) purchaser name, (3) project name and
corresponding HUC, (4) name of designated local government
requiring Nutrient Offset Credits, and/or (5) DWR authorization
number or delegated local government requiring Riparian Buffer
Credits for this project, (6) credits released by DWR to the Bank
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listed in pounds for Nutrient Offset Credits and in square feet for
Riparian Buffer Credits, (7) credits debited/sold from bank listed
in pounds for Nutrient Offset Credits and in square feet for
Riparian Buffer Credits, (8) available credits listed in pounds and
acres for Nutrient Offset Credits and in square feet and acres for
Riparian Buffer Credits.

F. All credit and debit transactions for each Bank Parcel under this
Instrument shall be accurately depicted in the credit ledgers. DWR shall
be notified of each credit sale or credit transfer within thirty (30)
calendar days by electronically submitting an updated credit ledger to
DWR. At a minimum, DWR shall receive a hard copy of updated credit
ledgers along with the corresponding Mitigation Credit Transfer
Certificates (“Certificate”) and all corresponding letters from the
designated local governments twice a year. Notification of all credit
sales shall be provided to DWR until all credits that have been released
have been sold.

G. All credit sales will include a Certificate that will include, at a minimum,
the following information:

1. Bank Details: (1) sponsor Name, (2) name of the approved
banking instrument as it appears on the instrument document, (3)
bank parcel name as it appears on the BPDP, (4) DWR project
number for the BPDP.

2. Credit Details: (1) date of receipt, (2) identify if full or partial
payment, (3 – when applicable) amount of nitrogen credits
purchased in pounds and confirmation from the designated local
government of the amount required, (4 – when applicable)
amount of phosphorous credits purchased in pounds and
confirmation from the designated local government of the
amount required, and (5 – when applicable) amount of Riparian
Buffer Credits purchased in square feet and the confirmation
from DWR or the local government of the amount required.

3. Project Details: (1) project name as it appears on DWR or local
government permits and/or certifications, (2) the sub-watershed
for the Jordan Lake Nutrient Strategy), (3) river basin, (4)
nutrient strategy applicable to the project, (5 – when applicable)
designated local government requiring Nutrient Offset Credits,
and/or (6) DWR authorization number or delegated local
government requiring Riparian Buffer Credits for this project.

H. If the DWR determines that the Bank is operating at a deficit (e.g. the
Sponsor is closing on sales and/or transferring credit that is not
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available), or the Bank is selling credits out of compliance with statutes,
rules or this Agreement, the sale/transfer of credits will immediately
cease, and the DWR, in consultation with the Sponsor, will determine
what remedial actions are necessary.

VIII.PROPERTY DISPOSITION AND LONG-TERM MANAGEMENT

A. Prior to the release of any credits, the Sponsor shall acquire a permanent
conservation easement(s) and/or drainage and access easements for the
Bank Parcel(s) at the County Register of Deed’s office that is sufficient
to ensure protection, operation and maintenance of restored riparian
buffers, other riparian areas, and/or stormwater BMPs for the duration
specified in the approved BPDP.

B. The form of the conservation easement shall be consistent with the
standards employed by the State of North Carolina in the protection of
restored riparian buffers and riparian areas as well as any stormwater
BMPs and shall be approved by the DWR prior to the release of any
credits.

C. The Sponsor shall not grant additional easements, right of ways, or any
other property interest in or to the project areas without prior approval
from the DWR.

D. The Sponsor shall transfer or assign the Bank Parcel’s conservation
easement and all of its interests to a land trust or stewardship fund as
described in Item B of Section V in this Instrument. The land trust or
stewardship will hold and enforce the conservation easement in
perpetuity.

E. In the event that the Sponsor is also the owner of the underlying fee
interest in the property, the conveyance of the conservation easement to
a land trust or stewardship fund must be arranged at the outset of
the approved BPDP.

IX. BANK PARCEL CLOSURE

A. Bank Parcel Closure shall be identified as the event when the Sponsor is
relieved of all of its responsibilities to the Bank Parcel and there are no
mitigation credits left to sell.

B. Bank Parcel Closure shall commence only after all of the following
events have occurred:
1. Transfer or assign the conservation easement and all of its
interests, in perpetuity, to a land trust or stewardship program as
described in Item B of Section V of this instrument.
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2. All five years of monitoring completed and all monitoring
reports submitted and approved by DWR.

3. All credits have been released and debited and updated ledgers
showing a zero credit balance have been submitted and approved
by DWR.

X.GENERAL PROVISIONS

A. Upon the presentation of proper credentials, and during normal business
hours, the Sponsor and the landowner shall grant permission to the
Director, an authorized representative of the Director, or DENR staff, to
enter the property containing the Bank Parcel(s).

B. Amendments: This Banking Instrument may be amended or modified
only with written approval of all signatory parties.

C. Any transfer of the Sponsor’s rights or obligations outlined in this
Instrument or any other agreement referenced in this Instrument to a
third party must be approved by DWR prior to the transfer.

D. Force Majeure: After the sale of all available credits, the Sponsor will
not be responsible for Bank failure that is attributed to natural
catastrophes including but not limited to flood, drought, disease,
regional pest infestation, etc. that are beyond the control of the Sponsor.

E. However, if an event occurs before DWR has released all of the credits,
the Sponsor shall take remedial action to restore the property to its
condition prior to the event, in a manner sufficient to provide adequate
mitigation to cover credits that were sold prior to the occurrence of the
event. Such remedial action shall be taken by the Sponsor only to the
extent necessary and appropriate, as determined by DWR and the
Sponsor.

force majeure
DWR must concur in writing that a event has occurred for this provision to
apply.

F. Oversight: Actions taken by DWR may include, but are not limited to,
the following:

1. Site visits.
2. BPDP review and approval of items listed in Items A and B of
Section V of this instrument.
3. Monitoring Report and/or O&M report review and approval of
items listed in Items G through L of Section V of this instrument.
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4. As-Built Report review and approval of items listed in Item F of
Section V of this instrument.
5. Credit Ledger review and approval of items listed in Item E and
F of Section VII of this instrument.
6. Certificate review of items listed in Item G of Section VII of this
instrument and cross analysis to credit ledgers.
7. Information requests, file reviews and audits

Reports, ledgers, files and other information shall be made available to DWR upon
request, unless otherwise specified in this or any other document.

G. Validity of the Banking Instrument: This Instrument will become valid
on the date of the last party’s signature.

H. Specific Language of Banking Instrument Shall Be Controlling: To the
extent that specific language in this document changes, modifies, or
deletes terms and conditions contained in those documents that are
incorporated into the Instrument by reference, and that are not legally
binding, the specific language within the Instrument shall be controlling.

I. Any disputes over decisions regarding this Instrument, shall be referred
to the Director of DWR for a decision. The Director’s decision is
subject to review as provided in Articles 3 and 4 of G.S. 150B.

J. This Agreement shall be binding upon the parties and is entered into
knowingly, intelligently, and voluntarily.

K. Notices: All notices and other communications which may be or are
required to be given or made by any party to the other shall be in writing
and shall be deemed to have been properly given and received on the
date delivered in person or deposited in the United States mail,
registered or certified, return receipt requested, to the addresses set out
below, or at such other addresses as specified by written notice delivered
in accordance herewith.

If to Watershed Investments, NC LLC : 1630 Weatherford Circle
Raleigh, NC 27604

If to DWR: NC Division of Water Resources – Wetlands Branch
Attn: Nutrient Offset Bank Coordinator
1650 Mail Service Center
Raleigh, NC 27699-1650

L. Applicable Law: This Agreement shall be construed under the laws of
the State of North Carolina.

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SPONSOR NAME

By: Michael Herrmann (Print)

(Signature)

Title:

Date:

NORTH CAROLINA DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES
DIVISION OF WATER RESOURCES

By: (Print)

(Signature)

Title:

Date:

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