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Chapter 16: North Carolina - The Pocosins and Other Freshwater Wetlands



Introduction

Physical Description: North Carolina's freshwater wetlands consist of pocosins, non-alluvial swamp forests, white cedar swamps, Carolina Bays,1 bottomland hardwoods, and wooded swamps. The name "pocosins" means "swamp-on-a-hill" in the Algonquin Indian language. Seventy percent of the nation's pocosins are found in North Carolina, and they comprise approximately 50 percent of the State's freshwater wetlands. Found in the southeastern Atlantic coastal plain, pocosins are nutrient-poor, forested or shrub wetlands that evolved over the past 10,000 years due to blocked drainage and peat accumulation. The depth of the organic material ranges from 8 inches to more than 51 inches. The water table is near the surface from 6 to 12 months each year, and in winter sometimes rises above ground. Water moves slowly as sheetflow across the surface towards the fragile estuary.

Characteristics and Functions: North Carolina pocosins

  • Serve as the last refuge for many upland and floodplain species requiring large blocks of habitat, especially area-sensitive, forest-interior birds and the black bear;
  • Provide important habitat for four federally-listed endangered species and one federally-listed threatened species. Two other State-listed endangered species are also found there;
  • Stabilize estuaries by controlling the rate of freshwater flow thereby regulating salinity. Much of the State's $63 million commercial fishery depends on this estuarine regime;
  • Contain 6 National Wildlife Refuges, 1 national and 2 State forests, 7 State parks, 5 State game lands, and 2 State natural areas. About 18 percent is owned by Federal and State forestry agencies.

Original Acreage: North Carolina is estimated to have had 11.1 million acres of wetlands of which 2.5 million acres were natural pocosins.

Current Acreage: By early 1993, only about 5.0 million acres of wetlands remained in North Carolina. Of the original 2.5 million acres of pocosins, 695,000 acres (31 percent) remained in their natural state. A third of the original pocosin acreage had been totally converted, and 36 percent had been partially altered or was scheduled for development by the owners. (See Figure XVI-1.) Some pocosins that were threatened with development in the recent past have been purchased by or donated to the FWS to become part of the Alligator River National Wildlife Refuge and Pocosin Lakes National Wildlife Refuge. In addition to the pocosins in these two refuges, approximately 363,000 acres of pocosins currently receive some level of protection as natural areas, although some of these have been partially altered.

Figure XVI-1: POCOSIN WETLANDS OF NORTH CAROLINA, 1980

POCOSIN WETLANDS OF NORTH CAROLINA, 1980

Trends: Since the 1950s, forestry and drainage for agriculture have caused a steady decline in North Carolina's wetlands. Between 1973 and 1983, North Carolina lost 1.2 million acres of wetlands, and stood out among all southeastern States with the highest net loss of wetlands. Nearly all the losses were forested and shrub wetlands

Factors Adversely Affecting Wetlands  

To date conversions for forestry and agriculture have had the greatest impact on the area's wetlands. Under current (1988) economic conditions, however, the opportunities for profitable conversion and development of these wetlands for silviculture or agriculture are limited. Using simulation models the Department examined the investment decision to clear and drain undeveloped pocosin wetlands in North Carolina for agriculture or silviculture. The simulations allowed for analyses of the influence of Federal incentives, policies, and programs on the rate of return and riskiness of conversion. The analysis for both forestry and agriculture indicated that the returns to developing pocosin wetlands for these purposes were low even in the presence of sizable Federal incentives and subsidies (Danielson 1988 and Noffsinger, et al. 1987).

Mining the Pocosins for peat, however, poses a serious threat. Although shallow peatlands are suitable for silviculture and agriculture, deep peatlands are not. After clearing, however, the peat can be mined, and the land used subsequently for either tree farms or agricultural crops.

Development has had a number of environmental effects. Wildlife habitat has been seriously fragmented. The remaining "islands" support less species diversity in fewer numbers. Thousands of contiguous acres are required for forest interior bird species and the black bear to survive. Drainage systems interrupt the sheetflow that moves slowly across the wetland surface. Under

natural conditions the runoff rises slowly after storms, often peaking several days after the rain. This process modulates the flow of water and controls the salinity of receiving waters. Nutrients, pollutants, and silt from agricultural runoff are filtered, as well. Once drainage is installed, peak and annual flows increase, and pulses of freshwater containing increased loads of chemicals and sediments are discharged into streams, marshes, and shallow estuarine nursery areas.

Over 90 percent of North Carolina's commercial fish harvest depends on the estuaries. Comparisons show that unaltered areas maintained stable salinity, while areas which received drainage from ditched pocosins and non-alluvial swamp forests had salinity which varied by 100 percent over short periods of time. The altered areas produced fewer shrimp, finfish, and oysters. Other studies have linked agricultural drainage to excessive algal blooms and food chain disruptions. Studies of the Chowan River, which flows into Albemarle Sound, have linked increased nutrient loads from agricultural drainage and point source discharges to excessive algae blooms, subsequent food chain disruptions, and red sore disease problems. In 1976, about 95 percent of the white perch and half of the commercial fish caught in Albemarle Sound was discarded due to lesions.

Forestry: The southern United States has become the wood basket of the nation and is expected to remain so for the next quarter century. North Carolina, situated near the largest United States and European markets, has a transportation advantage over other southern areas. Moreover, the flat, expansive pocosins are conducive to site preparation, plantings, and harvesting. Timber companies own about 44 percent of the remaining undisturbed pocosin lands in North Carolina. Obviously these companies will play a key role in determining the future of these lands. Presently (1988), the forestry industry is depressed, but long-term, worldwide expectations are for growing wood scarcity and increasing timber prices.

Agriculture: Agriculture has been the major factor in wetland conversion in the past, particularly during the mid-1970s, when high farm product prices and increasing cropland values offered large incentives to clear and drain pocosins for corn, soybeans, and wheat. A renewal of large-scale agricultural conversions is unlikely until the agricultural economy improves. In 1981, about 21 percent of remaining pocosins were in the hands of large, corporate, often absentee landowners (Richardson, et al. 1981). The concentration of ownership has decreased recently due to the dissolution of First Colony Farms which had large pocosin landholdings. Although the market has momentarily slowed the rate of conversion, runoff from past conversions continues to degrade wetland quality.

Peat Mining: Peat mining could pose a significant threat to pocosin wetlands in the future, if the economics of peat mining becomes more attractive. Lands that may be considered vulnerable include the 100 square miles of peatland in the Dismal Swamp area, the 40 square miles of peatland in the Croatan Forest, privately owned peatlands on the Albemarle-Pamlico area, and the 350 square miles in the Carolina Bays scattered throughout the coastal region. The ditching and draining of peatlands would contribute to unstable salinity conditions, and the lowered levels of ground and surface water could increase fire frequency.2 Peat oxidation could release nutrients and heavy metals normally bound in the soil, thereby degrading water quality and aquatic habitats. Clearing and harvesting will increase peat erosion causing increased turbidity in surface waters. Reclaiming peat-mined lands for agriculture would further degrade water quality, and permanently destroy wildlife habitat benefits.

Environmental protection for the Pocosins was strengthened with passage in 1986 of fairly restrictive peat mining regulations by the State. Most notably, the regulations require that any peat mining project must include controls that produce runoff which closely approximates that which would have occurred had the site developed naturally to vegetative maturity. While these regulations are forceful in their treatment of discharges and in reducing adverse impacts to water quality, they fail to address mitigation for wetland losses or degradation due to peat mining.

Peat can be mined to produce methanol, electric power, briquettes, and a horticultural soil. If peat is to be a viable source of energy, it must compete favorably with coal, hydropower, wood, and other biomass products. Peat competes well in areas in the U.S. and other countries where the cost of traditional energy sources is high, where high quality peat is available at a relatively low price, and where government has provided subsidies for research, development, and production. The Federal Government sponsored millions of dollars of research on peat and other biomass products for energy between the mid-1970s and early 1980s.

Feasibility studies by the Electric Power Research Institute and by consulting research firms have generally found that North Carolina peat could compete favorably in the production of methanol and electricity. In 1981, peat methanol was found to be competitive at a price of 75 cents per gallon of methanol. Since then, natural gas prices have fluctuated. Between 1981 and 1985, wellhead prices rose nearly 27 percent making peat methanol even more competitive. Natural gas prices have declined since 1985 to just below 1981 levels. In 1983, the cost of producing electricity from coal was found to be 5 to 14 percent higher than from peat at a coastal North Carolina site. Although peat mining for methanol and electric power have not proceeded beyond test stages in North Carolina, State permitting agencies have received several formal proposals.3

Small Water Projects: Small watershed projects to aid agriculture through flood control destroy bottomland hardwood wetlands. Reservoirs are built and channels are dredged, enclosed in levees, snagged, and cleared to prevent flooding and to improve drainage on wet croplands. Channelization, in particular, reduces the functional values of adjacent wetlands by interrupting the water interchange between the stream and the floodplain. Alluvial wooded swamps and bottomland hardwoods suffer from lack of water, and direct wetland loss occurs from spoil placed along the channel. Once a channel is in place, it provides a ready outlet for additional drainage.

The effects of channels are often underestimated. When Joyce Creek in Camden County was deepened by about 2.5 feet, the Army Corps of Engineers projected no significant negative impacts. The project was completed in 1983. Following heavy rains in February, 1984, the area did not flood, while surrounding swamps did. Essentially all of the hydrological interaction between the channel and the 750 acres of adjacent wetlands were eliminated by the project.

Transportation: Between 1984 and 1987, an average of 82 acres per year of mostly bottomland hardwoods disappeared as a direct result of transportation projects. This figure does not include secondary and indirect losses due to the additional development fostered by roadways, e.g., subdivisions. Similarly, it does not include wetland losses that have occurred because the proposed project met the conditions of various nationwide general permits authorized under the Clean Water Act.4 Two transportation-related, nationwide permits which affect wetlands in the Pocosins are Nationwide Permit Number 14 (Minor Road Crossing) and Nationwide Permit Number 26 (Headwaters and Isolated Wetlands). Thus far, planning and mitigation have not adequately stemmed the rate of loss.

Regulation: The 404 regulatory program had a turbulent administrative and judicial history in North Carolina during the past few years. The Corps's jurisdictional decisions5 became controversial, eliciting objections from the FWS and ultimately resulting in two lawsuits being filed by environmental groups against both the Corps and EPA -- the Corps for finding that the wetlands in question were nonjurisdictional and EPA for not exercising its power to overrule the Corps. The courts found against both agencies; for a period of time, EPA took over the responsibility for making pocosin jurisdictional calls; and in January, 1989, the regulatory and resource agencies agreed to a single methodology for identifying wetlands. The program that has emerged from this turmoil appears transformed, and the FWS is optimistic that EPA's and the Corps's current diligence will preclude a recurrence of past problems with jurisdictional decisionmaking. (For a fuller discussion of this history see the subsection entitled "Enforcement of 404" in the next section.)

Concerns remain with other aspects of the 404 program, however:

  • In 1987, the FWS reported a number of apparent wetland fill violations to the Corps. These were never investigated, and the lack of enforcement may have encouraged greater disregard for the law.
  • Frequently, FWS recommendations to the Corps to condition permits, to consider the secondary and cumulative impacts of projects, or to require sufficient mitigation are not adopted.
  • Although agricultural conversions in the Pocosins have decreased in recent years, there has been a countervailing increase in proposals for nonagricultural development. The 404(b)(1) Guidelines, which emphasize water dependency as an important criterion for granting a permit, may have been violated. Housing developments, parking lots, and mobile home courts constructed in wetlands attest to the manner in which the Guidelines have been applied.
  • Finally, the cumulative loss of wetlands under nationwide permits, particularly permits for isolated and limited-flow (headwater) wetlands remains troubling. Headwater wetlands serve important water-quality functions for fish and wildlife. The proportion of wetlands represented by headwater and isolated wetlands in North Carolina is significant, and thus continued losses could have a profound effect on fish and wildlife resources.

Federal Programs and Projects

Several Federal programs provide economic incentives that encourage the loss of freshwater wetlands in North Carolina. These programs relate to silviculture, agriculture, flood control, peat mining, and transportation.

Forest Products Industry

The Forest Service manages national forest lands that contain wetlands, and in the past proposed draining 5,370 acres of the Croatan National Forest (including 2,867 acres of pocosins) for conversion to a loblolly pine plantation. The plans also considered peat mining. In response to negative public comments, the Final Management Plan for the Croatan omitted drainage proposals and banned peat mining. The Fish and Wildlife Service has expressed concern that drainage may be occurring on other National Forests in North Carolina. However, the Forest Service's national policy on wetlands calls for strengthening and clarifying the standards in forest management plans in order to protect riparian areas and wetlands.

Three Federal incentive programs have increased the profitability of forestry on private lands:

  • First, the Federal Government shares the costs of replanting after harvest. In 1986, the Federal Government paid 40 percent of the qualifying reforestation expenses up to a maximum of $10,000 annually per non-corporate private landowner. The Department estimates that in the Pocosins this provision reduces the reforestation costs of an average forest landowner by about $100 for each reforested acre, and increases the rate of return from clearing and draining wetlands for forestry by about 18 percent. In 1987, this subsidy was increased: the percentage of qualifying reforestation expenses paid by the Federal Government climbed from 40 to 50 percent.
  • Second, to encourage replanting, a percentage of replanting costs for corporate and non-corporate landowners (up to a $10,000 limit) can be used as a deduction against current taxable income. This tax code provision is contrary to the general requirement that such costs be capitalized. Thus, the replanting costs can be deducted from current income many years before the revenues are earned from harvesting and selling the trees. The Department estimates that this provision shields about $135 of income from taxes for each reforested acre in North Carolina.
  • Third, prior to passage of the 1986 Tax Reform Act (TRA), 60 percent of net income derived from the sale of long-term assets (capital gains) could be exempted from taxable income. The TRA eliminated this provision.

Subsidies and tax concession are often a two-edged sword, and these for silviculture are no exception. In the Pocosins and a number of other natural areas, these programs and provisions induce forestry and timbering, and alter and degrade the environment. In other areas, however, they induce reforestation which improves the environment.6 Since 1986, a number of conservation groups have argued for reinstatement of the excised tax provisions which made silviculture financially more attractive (Ward, et al. 1989). Theoretically, statutes can be fine-tuned and carefully written to target provisions appropriately. In practice, this is often difficult to effect.7

The Food, Agriculture, Conservation, and Trade Act of 1990 (FACTA) authorized two new programs to encourage forest management for environmental benefits, as well as social and economic benefits. The Forest Stewardship Program, funded by the U.S. Forest Service, provides technical assistance and recognition to landowners engaged in conservation activities on non-industrial, private, forest lands. A companion program also authorized by FACTA is the Stewardship Incentive Program (SIP). This cost-sharing program is a cooperative effort among the U.S. Forest Service, the Agricultural Stabilization and Conservation Service (ASCS), and other agencies. The ASCS accepts applications from landowners and distributes the funds. In North Carolina, the N.C. Forest Service provides the lead on technical assistance. The SIP practices approved for North Carolina include reforestation and afforestation, and riparian and wetland protection and improvement.

Agricultural Programs 

Federal agricultural programs are designed to stabilize agricultural commodity prices and to increase the incomes of growers. In the process these programs reduce the risk and increase the profitability of farming, and historically have provided inducements for wetland conversion. However, legislative reforms in the 1985 and 1990 Farm Bills made it much more difficult for new acreage to qualify for price and income supports, and hence, significantly diminished the incentives in Federal agricultural law to convert wetlands to cropland. (See chapter 3.)

Nonrecourse loans (price supports) are available for corn, wheat, and soybeans, the principal crops grown on newly-converted land in North Carolina. Corn and wheat are also eligible for deficiency payments (income supports).8 Other programs such as subsidized crop insurance and agricultural production loans offer additional subsidies to agriculture.

The Department estimates that in North Carolina, under the economic conditions prevailing during the period 1975-1984, the price and income support programs had only a moderate impact on the profitability of clearing and draining pocosin wetlands, but they significantly reduced the risk and uncertainty of agriculture operations (Danielson 1988). By 1986, as a result of changes in commodity market prices and the farm programs embodied in the Food Security Act of 1985 (FSA), program participation became much more profitable than non-participation. Qualifying newly converted acreage, however, had become more difficult.9 By 1988, the difference in profitability between participation and non-participation had almost disappeared because of market price recovery and phased reductions in price supports and deficiency payments (FAPRI Review 1988).

Effectiveness of Swampbuster: The Swampbuster provision of the Farm Security Act of 1985, as amended denies eligibility for almost all farm program benefits on all acres operated by a grower who either converts a wetland or plants on a converted wetland. Moreover, under USDA's implementing regulations, wetlands converted after enactment to either peat mining or silviculture and then subsequently used for agriculture would be subject to the Swampbuster provisions. Even if the land were sold, the new owner would be ineligible for agricultural program benefits. Thus, it would appear that Swampbuster would reduce wetland conversions to agriculture in North Carolina's pocosins.

Central to Swampbuster's effectiveness, however, is participation in the farm programs. Swampbuster denies farm program benefits to operators who either convert or plant on converted wetlands. Ineligibility for program benefits is the law's only sanction.10 Hence, Swampbuster will not provide much protection for wetlands in areas where program participation is low. Until recently, the Pocosins was such an area. Some large farms in the Pocosins were integrated livestock operations which grew their own grain. As self-feeders who rarely marketed their grain, they had nothing to gain from participating in the farm programs. Under such circumstances, Swampbuster's effectiveness is diluted.

The nature of farming in the Pocosins has changed dramatically in the last few years, however, with some of the largest farms being subdivided and sold. Some pocosins that were previously part of large farming operations have been incorporated into the National Wildlife Refuge System. The large, integrated livestock operations have declined, and recent ASCS data indicate that the participation rate in the farm programs in the Pocosins is now fairly high.11 Thus, with the change in the structure of farming in this region, Swampbuster's effectiveness here should increase. Indeed, in a recent review of Swampbuster's implementation in one county,12 the FWS Raleigh Field Office found Swampbuster was generally functioning well on farms participating in the farm programs.

Commencement of Conversion: The effectiveness which Swampbuster might have had in the Pocosins was dependent in part on the way in which "commenced" determinations were made.

In an effort to make the application of Swampbuster as equitable as possible, Congress provided for some exemptions from the Swampbuster sanctions. Notable among these is the exemption for converted wetlands whose conversion was begun before the date of enactment of the statute (Dec. 23, 1985). Congress intended to permit farmers who had invested "substantial funds" in ongoing or imminent projects to complete the projects and thereby recoup their investments.13 The final rule reflects this intent.

Under the final rule the ASCS is responsible for making commencement determinations, and must consult with the Fish and Wildlife Service on each determination. The ASCS delegated the authority to make the initial commenced determination to the county committees. County committees are composed of local residents, usually farmers, who may find it difficult to make decisions which will adversely affect their neighbors. Consequently, the objectivity of the exemption process may have been compromised by allowing the county committees to make the commencement determinations.

The ASCS reports that in North Carolina, as of October 20, 1992, 359 applications for exemption under the commenced clause, involving 29,030 acres were approved. Upon further review of commenced decisions, 41 approvals were reversed, amounting to 3634 acres. The net outcome was that 318 applications were approved for 25,396 acres in North Carolina. The FWS did not have the resources to adequately monitor and participate in the exemption hearings.

Peat Mining 

The Federal Government promotes the mining of peat for energy by guaranteeing a market, conducting research, and allowing generous tax deductions.

  • The Public Utilities Regulatory Policies Act of 1978 (PURPA) requires that public utilities purchase power from small producers at the utilities' avoided cost.14 This guarantee significantly reduces the risk associated with a new economic venture. In 1986, the North Carolina Public Utilities Commission knew of no regulations or administrative policy restrictions that denied PURPA benefits when wetlands were adversely affected.
  • The Federal Government sponsored millions of dollars of research from the mid-1970s through the early 1980s on peat energy demonstration projects.
  • Because peat is an alternative fuel in the pre-commercial stage, major research, development, and construction cost savings derive from special tax incentives. Of particular importance are those incentives that give peat mining a relative advantage over more traditional energy sources. Peat mining along with other alternative energy sources, for example, qualifies for accelerated depreciation of investment costs.15 The market for peat is also supported by this tax provision, because equipment that generates energy by burning peat is eligible for the rapid write-off. Peat qualifies for a five percent depletion allowance -- a deduction from taxable income related to extraction levels that more conventional energy sources no longer receive. Until recently, research and development tax credits were available for selected basic research expenditures.16 Because traditional energy technology is more developed, the credits probably benefitted peat disproportionately to alternative energy sources.

Enforcement of 404  

With peat mining and forestry posing important threats to the pocosins, and subsidies available for the development of both peat and forestry, much reliance is placed on the efficacy of the 404 regulatory process for protecting the pocosin wetlands. The 404 program has had a turbulent history in the Pocosins during the last decade. Although some recent problems with the program seem largely resolved, a review of the recent history is revealing.

Section 404 of the Clean Water Act addresses the need for Federal permits for the discharge of dredged or fill material in wetlands. While the Corps administers the 404 program, EPA has oversight authority. In the early 1980s, the Corps made some jurisdictional calls which were controversial. The calls involved large areas: 34,000 acres on First Colony Farms and 5,918 acres on White Tail Farms. Both First Colony and White Tail intended to engage in peat mining. The Corps offered EPA the opportunity to make the jurisdictional decisions, but EPA declined the offer.

In both cases the Corps found that the proposed sites were not jurisdictional and that no permit was needed. Both cases resulted in lawsuits.17 In December, 1985, the Federal District Court for the Eastern District found that the Corps' finding in First Colony was arbitrary and capricious, and remanded the case to the Corps for reconsideration. The First Colony situation ultimately was resolved when EPA determined that much of the site constituted wetland subject to Section 404. The White Tail case was resolved by a court-approved settlement, whereby the Government's previous decision that the area was not a wetland was vacated, and EPA agreed to make the wetland jurisdictional call on the property.

In December, 1986, EPA notified the Corps that it was assuming responsibility for jurisdictional calls for pocosin wetlands in 19 coastal counties of North Carolina. EPA retained this jurisdictional authority in the region until 1989, when the Corps and EPA signed a memorandum of agreement (MOA) on geographic jurisdiction to address these issues. Following publication of the MOA, EPA and the Corps agreed that: the Corps would resume pocosin wetland jurisdictional decision-making, EPA would do some advanced identification of wetlands in the area, and the Corps would submit a sampling of its jurisdictional decisions to EPA for review for compliance with the 1989 Manual.18 EPA has found the Corps' decisions to be generally within the MOA's guidelines.

Laws and regulations are subject to interpretation, and the protections which they provide depend upon who is doing the interpreting and enforcement. The Department found that under current economic conditions, the opportunities for profitable conversion and development of pocosin wetlands are limited. The prospective uses for these lands (agriculture, forestry, and peat mining) are also limited, however, and the landowners are unlikely to hold them as wetlands indefinitely. Speculation (both for agriculture and nonfarm purposes) drove farmland prices up during the 1970s. Farmland prices reached a peak in 1982, declined through 1987, but have risen in every year from 1988 through 1993. Prices of land with wet soils are depressed. If farmland prices rise enough, or prices of wet soils fall enough, development for one or more of the above purposes will again become attractive, and an effective regulatory program will be essential.

Water Resources Development 

In North Carolina both the Corps and the SCS build small watershed projects. To a large extent, both agencies have have used increased agricultural production to justify projects. While both programs still exist, current SCS policy prohibits new PL-566 drainage projects which are designed to increase crop production.

Under the Continuing Authorities Program, Congress authorized the Corps to plan, design, and construct certain water development projects without congressional approval in order to respond efficiently to local needs. Activities undertaken range from small beach erosion control to small navigation projects. The Federal Government has paid 100 percent of the costs of the reconnaissance studies, has usually paid 50 percent of the feasibility studies, and has frequently provided the majority of construction costs. The program authorizes small flood control projects (up to $5 million for the Federal construction share) and snagging and clearing for flood control (up to $500,000). The passage of the Water Resources Development Act of 1986, which shifts a greater portion of the financial burden onto local project beneficiaries, has reduced the number of projects in the Southeast, including North Carolina.

The PL-566 program focuses on managing water along streams in watersheds of 250,000 acres or less. PL-566 has brought about 80 multi-purpose dams and over 1,100 miles of channelization to North Carolina. The Federal Government paid for up to 50 percent of the costs allocated to drainage and recreation, while local sponsors provided all land rights for flood control and paid all water supply costs.

In general, the benefits of PL-566 projects are primarily local and private, and as such should not be federally financed. Federal financing distorts the demand for small watershed projects, many of which affect wetlands directly and subsequently induce conversion of additional wetlands. The Department believes, and so recommended in Volume I (USDOI 1988), that water projects should be financed in accordance with the benefit principle of public finance, i.e., local sponsors should bear the costs required to generate local benefits, including any environmental costs, and the Federal Government should pay for legitimate Federal benefits. Increased agricultural capacity, local recreational facilities (especially when privately owned), and flood prevention measures for those who do not take appropriate self-protective actions do not constitute Federal benefits. There must be a broader public benefit extending beyond the goals of legitimate local or State projects for Federal financial support to be warranted.

SCS regulations implementing the Wetland Protection Executive Order prohibit technical assistance that would result in wetland conversion for most types of wetlands, and allow it for exceptions only after an environmental evaluation and only after the land has produced a cultivated crop for at least 3 of the past 5 years. The SCS may assist with structural measures designed for other purposes19 that harm wetlands only if the project sponsor accepts an alternative that avoids or mitigates the wetland loss.

While SCS consults with the FWS on larger projects, on smaller projects the two agencies do not interact. The FWS has expressed concern about the magnitude of losses resulting from these smaller projects where the Corps has not exerted 404 wetland jurisdiction and no third party review ensures adequate mitigation. One solution to this is to have SCS consult with the FWS regarding mitigation whenever SCS offers technical or financial assistance that could result in wetland alteration.

Transportation 

Three key problems have led in the past to wetland losses due to highway construction projects. Two of these involved artificially partitioning projects into small segments which understates cumulative impacts, and the third involved a number of mitigation issues.

For planning purposes on certain highway proposals, the North Carolina Department of Transportation (NCDOT) subdivided large projects into smaller segments. The NCDOT justified this as consistent with the restrictions of logical project termini and independent utility. The FWS maintained, however, that subdividing projects resulted in systematic underestimation of the wetland impacts for entire projects, and decreased administrative efficiency by requiring independent reviews of numerous small segments of the same project. To improve this, Environmental Impact Statements required by the National Environmental Policy Act (NEPA) should not be developed until wetland impacts for entire projects can be quantified and addressed in a single NEPA document.20 North Carolina has subsequently implemented changes in its project development process that require more comprehensive impact analyses.

Second, partitioning a project into smaller units tends to undermine the intent of the 404 process. Partitioning can result in the small segments of a proposed roadway qualifying for approval under the nationwide permits for minor road crossings or headwaters and isolated wetlands. Alternatively, if the project is sufficiently subdivided, each segment will not have a significant effect on the environment, and can qualify for a "categorical exclusion" under the Council on Environmental Quality's regulations for implementing NEPA. Partitioning subverts the rules which were intended to apply to projects which truly have no significant impact on the environment. Although for nationwide permits the Corps must review each highway project to determine that it meets the criteria, in North Carolina the Corps has ruled infrequently against a highway project due to wetland losses. During one 10-year planning cycle of the NCDOT's Transportation Improvement Program, the FWS estimates that over 400 acres of bottomland hardwoods were lost to categorically excluded projects, primarily bridge replacements.21 The Federal Highway Administration (FHWA) and the NCDOT do not include the FWS field office on the mailing list notifying of categorical exclusions.

Mitigation was the third problem area which led to difficulties:

  • Under previous FHWA regulations, wetlands were mitigated on an acre-for-acre basis only, with little onsideration to the environmental functions of the affected wetlands and the uncertainties of obtaining successful mitigation. Further, the FHWA subtracted wetland acreage in a highway right-of-way from the total to be mitigated. This was a questionable practice: narrow strips of land next to a highway can be of less environmental value than the lost blocks of undisturbed wetlands.
  • The NCDOT refuses to assume responsibility for overseeing the mitigation contractor's work. This problem could be resolved if the FHWA would amend its regulations to clarify which agency, the State or the FHWA, has responsibility for supervising mitigation activities.
  • Following mitigation, the transportation agencies offered few assurances that the mitigated wetlands would be properly managed and protected from future development.
  • Often mitigation did not occur because the FHWA determined that the resulting costs would not be a reasonable expenditure of Federal-aid highway funds.
  • Mitigation was further complicated by the restrictions of State law on the NCDOT's ability to mitigate outside of existing rights-of-way. This problem was partially alleviated in 1985 when the State legislature established the NCDOT Wetland Mitigation Bank. The legislature appropriated $500,000 to acquire 1,031 acres of imminently threatened, prime, bottomland hardwoods in the Roanoke River floodplain for use as a mitigation bank.22 The NCDOT Bank is one of the two largest in the country (along with the Tenneco Bank in Louisiana). The NCDOT Bank is designed to provide up-front mitigation, is large enough to accommodate sound fish and wildlife management activities, and serves as a mechanism to offset unavoidable, adverse, wetland impacts and to reduce delays in permit processing.

In April, 1990, the FHWA issued an environmental policy statement, committing itself to fully funding mitigation measures necessary to satisfy Federal law, even where such mitigation requirements exceed those of established FHWA policy. This policy statement, subsequent regulatory changes to the FHWA wetlands mitigation policy, and the 1992 agreement between FHWA, the Corps of Engineers, and EPA have helped to resolve many of the above concerns. (See chapter 5 for a full discussion of these changes.)

Status and Prospects

Intensive, softwood plantation forestry, peat mining, and agriculture represent the major threats to North Carolina's remaining freshwater and forested wetlands. The severity of the threats depends largely on market conditions. The current low price of oil has dampened the interest in developing peat for methanol or for generating electricity. Demand will change, however, if prices for alternative fuels rise, air pollution regulations increase the costs associated with power generation from coal, the demand for farmland rises, or the price of land with wet soils declines. The depressed agricultural economy in the latter part of the 1980s reduced wetland conversions, but commodity markets are cyclical, and the eventual recovery will increase the pressure on wetlands. Legislative reforms in the 1985 and 1990 Farm Bills, however, have made it much more difficult for new acreage to qualify for price and income supports, and hence, have significantly diminished the incentives in Federal agricultural law to convert wetlands to cropland. The forestry industry is also depressed in the 1980s, but long-term, worldwide expectations are for a growing scarcity of wood and increasing timber prices.

Although the Department found that under current (1988) economic conditions, the opportunities for profitable conversion and development of pocosin wetlands are limited, the prospective uses for these lands (agriculture, forestry, and peat mining) are also limited. High farm and nonfarm demand drove farmland prices up during the 1970s. Farmland prices were down in the early 1980s but have begun to rise again. If the difference between farmland prices and wetland prices becomes great enough, development for one or more of these purposes will again become attractive.

In the recent past there have been numerous instances where neither the Corps nor EPA exerted their 404 jurisdictional authority, and as a result, many pocosin wetlands were filled or significantly altered without permits. Further, throughout the early 1980s the Corps did not respond to FWS reports of 404 violations. The absence of corrective enforcement action on large scale projects served to condone infringements. Use of the new wetland methodology for making jurisdictional decisions for the 404 regulatory program23 should preclude a recurrence of past problems with this aspect of the program, but concerns remain regarding the administration and enforcement of several other aspects of 404 in North Carolina.

Swampbuster's effectiveness in forestalling agricultural conversions depends directly upon the rate of farmer participation in the Federal farm programs. Participation rates have increased recently in the Pocosins with a change in the structure of farming in the area. However, Swampbuster applies only to agricultural conversions and not to activities of the forest products industry which owns 44 percent of the remaining pocosins.

With the recent (1986) passage of fairly restrictive peat mining regulations by the State, protection for the Pocosins from mining impacts was strengthened. Most notably, the regulations require that any peat mining project must include controls that produce runoff which closely approximates that which would have occurred had the site developed naturally to vegetative maturity. While these regulations are forceful in their treatment of discharges and in reducing adverse impacts to water quality, they do not address mitigation for wetland losses or degradation due to peat mining. 

Recommendations

  1. Private Incentives:

    Congress should consider enacting legislation which provides incentives for private wetland conservation activities.

    There are a limited number of avenues available to Congress for establishing positive incentives for private conservation, and all of them entail revenue considerations to one degree or another: institute tax concessions; engage in some form of direct payment or cost sharing for conservation practices; and help develop and promote ways for private landowners to capture and market the benefits of wetlands in their natural state. The Federal budgetary problems of recent years have imposed severe limitations on appropriations for non-entitlement programs (conservation included), and resulted in intense competition for the limited funds. Proposals for tax concession (which necessarily reduce revenues) have met with understandable wariness by legislators in part because of the unusual deficit problems and in part because of Congress's reluctance to revisit the tax code so soon after the arduous political struggle to produce the major tax reform of 1986.24 There are no free lunches and no miracle solutions, however. If incentives are to be effective, they must be funded. Although the generic mechanisms for funding are few, the implementing options are numerous, including:

    • Providing inducements for States or localities to base property taxation of wetlands on economic returns in their natural state;
    • Allowing a credit or deduction for wetland property taxes under the Federal income tax code;
    • Developing and promoting markets for hunting leases or other recreational uses, perhaps using State game departments as clearing houses for willing buyers and sellers.
  2. Forestry:

    a. Eliminate Federal cost sharing for reforestation on lands ditched or drained for silviculture.

    Congress enacted the "Swampbuster" provision of the Food Security Act of 1985 to reduce agricultural conversions. That precedent, if applied to silviculture, could significantly reduce the loss of forested wetlands that are drained and converted to pine plantations.

    b. Federal reforestation tax incentives (a 10 percent Investment Tax Credit for reforestation expenses and an 84-month write-off of these expenses) should not be available to any owner who ditches or drains wetlands.

    While these programs serve the purpose of increasing tree plantings, they also encourage the conversion of wetlands. Ineligibility for these programs for wetland violations would reduce the profit from clearing and draining wetlands for growing trees.

  3. Tax Code Provisions Related to Agriculture:

    a. Assess the Federal revenue impact and the effect on the industry of no longer allowing the expensing of clearing and draining costs for tax purposes (whether classified as land conservation and improvement or land development) for any developer/landowner who drains or alters wetlands for any purpose. Such expenses could be added to the cost basis for the property.

    The level of clearing and draining costs has a moderate impact upon economic feasibility of drainage. Until this recommendation is implemented, the Internal Revenue Service should scrutinize expensing closely to ensure that development costs are not being misclassified and expensed as land improvement costs.

    b. Assess the Federal revenue impact and the effect on the industry of no longer allowing depreciation on equipment or other normally depreciable items for tax purposes for that portion of the equipment used for conversion of wetlands.

    The Federal income tax code provides an incentive for pocosin wetland conversion through accelerated depreciation for equipment which landowners or contractors use to clear and drain wetlands. This is an additional influence on the economic feasibility of wetland conversion.

  4. Peat Mining:

    a. Amend the Public Utilities Regulatory Policy Act (PURPA) to make small power producers ineligible to sell power at the utility's avoided costs, as presently required, if the energy resulted from wetlands destruction.

    Peat mining represents a significant future threat to pocosin wetlands in North Carolina. PURPA's requirement that utilities buy power from alternative sources at the utility's avoided cost guarantees a market and a price to the producers. This reduction in uncertainty could spur the development of peat mining unless wetlands are protected.

    b. Assess the Federal revenue impact and the effect on the industry of denying business energy tax credits, depletion allowances, and accelerated depreciation for alternative energy property for projects which will adversely affect wetlands.

    Federal incentives which lower the cost of peat as an alternative energy source can increase the competitiveness of peat and precipitate the loss of thousands of acres of pocosin wetlands.

  5. Wetland permit issues:

    Establish a uniform Federal mitigation policy to be adopted and implemented by all Federal agencies. Such policy should ensure adequate compensation for unavoidable adverse project impacts on wetlands, acknowledge the quality and functional value of the affected wetlands, and incorporate the goal of "no net loss" of wetlands.

    Mitigation means many different things to many different people. To effectively compensate for unavoidable wetland losses, mitigation should preserve comparable wetland values and ensure long-term protection. Implementation of this recommendation should address the transportation and Section 404 problems discussed in this chapter.

  6. Water Resources Development:

    a. When drainage benefits are included among the justifications for a Federal water project and the project will alter existing wetlands, project sponsors should be required to pay 100 percent of the costs incurred to provide the drainage benefits and to provide mitigation necessary to offset the direct and indirect loss of the wetlands.

    In general, the benefits of PL-566 water projects are local and private and, as such, should not be federally financed. Federal financing associated with PL-566 and the Corps' Continuing Authority projects heightens the demand for small watershed projects, many of which affect wetlands directly and induce additional wetland conversion. Secondary wetland conversion is of particular concern in pocosin areas, where small watershed projects may provide the outlets required for private drainage of non-alluvial wetlands.

    b. Whenever Federal technical/financial assistance is provided that will result in wetland alteration, require both consultation with the Fish and Wildlife Service and mitigation for the impacts.

    Consultation with the FWS will help to determine how to avoid wetland losses, minimize the amount and degree of alteration, and compensate for unavoidable losses. Requiring adequate mitigation would replace losses or discourage the landowner from wetland destruction. When only token mitigation is required, the technical assistance program provides a significant Federal incentive for alteration and conversion of wetlands. Disagreements over adequate mitigation at the field level should be forwarded to higher levels for review and resolution.

  7. Transportation:

    a. Require pre-development consultation between the States and the Fish and Wildlife Service on all federally funded highway projects to facilitate better implementation of NEPA procedures and to minimize adverse impacts to wetlands.

    Despite the existence of a framework for early coordination, the FWS sometimes has been unable (due to resource limitations) to participate fully in the planning for federally aided highways. In such cases, the FWS may not get involved until after State agencies have applied to the Corps for 404 permits. Thus, opportunities have been foregone to alert State highway planners and local entities to the presence of wetlands and other environmentally sensitive resources and to advise them about avoiding adverse project effects. With participation by the FWS coming late in the planning period, options for changing the design of projects have been foreclosed or limited.

    In 1988, the FHWA issued a report (prepared jointly with the Corps, EPA, FWS, and NMFS), identifying a variety of practices and techniques for making the early coordination process for federally aided highway projects more effective. Adoption of the procedures identified in the report will go a long way toward solving many of the inadequacies in the consultation process. Congress should encourage the States to implement the proposed procedures, and the FWS will make every effort to utilize these procedures to resolve early on any differences with Federal and State highway agencies.

    b. Encourage the FHWA to amend its regulations to clarify which agency, the State or the FHWA, has responsibility for supervising mitigation activities.

    The NCDOT accepts the commitment to conduct mitigation, but if the work is not completed or is done improperly by the contractor, neither the NCDOT or the FHWA acknowledge responsibility for ensuring that the mitigation is fully performed. This problem could be resolved if the FHWA would amend its regulations to clarify which agency, the State or the FHWA, has responsibility for supervising mitigation activities.


References

Danielson, L. E. 1988. Impacts of Federal Programs on the Degradation of Pocosin Wetlands. Background Report. Office of Policy Analysis, U.S. Department of the Interior, Washington, DC, 60 pp.

FAPRI Review. 1988. Preliminary Analysis for the FAPRI U.S. and World Agricultural Outlook. FAPRI Staff Report #1-89. Univ. of Missouri, Columbia and Iowa State University, Ames (Presented in Kansas City, December).

Laney, R. Wilson. 1988. The Elimination of Isolated and Limited-Flow Wetland in North Carolina. In Proceedings of the Symposium on Coastal Water Resources, American Water Resources Association. Wilmington, NC (May), pp. 243-253.

Noffsinger, R. E., L. K. Gantt and L. E. Danielson. 1987. The Impact of Federal Programs on Freshwater Wetlands in North Carolina with an Emphasis on Pocosins. U.S. Department of the Interior, Fish and Wildlife Service, Raleigh Field Office, Raleigh, NC, 76 pp.

Reed, R. M., L. D. Voorhees and P. J. Mulholland. 1981. Environmental Impacts Associated with Using Peat for Energy. Reprints of the 1981 International Gas Research Conference, U.S. Dept. of Energy, pp. 1048-1057.

Richardson, C. J., ed. 1981. Pocosin Wetlands. Hutchinson Ross Publishing Co., Stroudsburg, PA, 364 pp.

Richardson, C. J., R. Evans, and D. Carr. 1981. Pocosins: An Ecosystem in Transition. pp. 3-19 In C. J. Richardson, ed. Pocosin Wetlands. Hutchinson Ross Publishing Co., Stroudsburg, PA, 364 pp.

Richardson, C. J., R. Evans, and D. Carr. 1982. Status of pocosin wetlands (freshwater evergreen shrub bogs) in coastal North Carolina as of 1980. Map. Integrated Case Studies Program in Natural Resources Analysis, School of Forestry and Environmental Studies, Duke University, Durham, NC.

Richardson, C. J. 1983. Pocosins: Vanishing Wastelands or Valuable Wetlands? Bioscience 33(10): 626-633.

U.S. Department of the Interior. 1988. The Impact of Federal Programs on Wetlands, Vol. I: The Lower Mississippi Alluvial Plain and the Prairie Pothole Region. A Report to Congress by the Secretary of the Interior, Washington, DC.

Ward, Justin R., F. Kaid Benfield, and Anne E. Kinsinger. 1989. Reaping the Revenue Code. Natural Resources Defense Council, New York, NY, 142 pp.


Footnotes

1 Elliptical depressions from 200 feet to 5 miles long which are generally oriented northwest to southeast.

2 Dry peat ignites easily, and once burning, the fire is difficult to extinguish.

3 For example, White Tail Farms applied for permits to mine peat on approximately 5,918 acres in Hyde County to fuel a gasification and cogeneration facility. First Colony Farms proposed mining 15,000 acres in a three-county area south of Lake Phelps for electric power generation. Although in these cases environmental concerns and/or financial problems have delayed or led to termination of the proposed projects, other prospective developers have remained interested.

4 In an effort to manage its workload, the Corps of Engineers has issued several "nationwide" permits -- general authorizations to proceed with proposed activities without full review by the Corps or the resource agencies. This action is in accordance with section 404(e) of the CWA.

5 Findings as to whether proposed development sites are wetlands which fall under the purview of the Clean Water Act, and hence should be subject to agency scrutiny under the 404 process.

6 While reforestation is preferable ecologically to urban development or an unregenerated, timbered-over expanse, commercial pine plantations replace native ecosystems with a greatly simplified biological system, one which is unable to provide the same ecological functions and values as pocosins and wetlands.

7 In the example at hand, tax reform was extremely difficult to achieve, and took its toll in Congress. Reopening the Act presents every interest group with the opportunity to press its particular case. For that reason, Congress has resisted reconsideration strenuously. Now that resistance is showing signs of weakening.

8 Deficiency payments are based on a target price set by Congress. Producers are paid the difference between the target price and the higher of the loan rate (price support) or a 5-month average U.S. market price. For a more detailed discussion, see chapter 3.

9 See discussion in chapter 3 under Commodity Programs.

10 There are additional constraints on wetland conversion under other statutes, notably Section 404 of the Clean Water Act. Recent problems with enforcement of 404 in the Pocosins are discussed below.

11 In three major pocosin counties the participation rate was 55 percent for corn and wheat acreage, slightly higher than participation rates for these crops statewide (50 percent for corn and 40-45 percent for wheat).

12 Bladen County, a county which contains a high number of Carolina Bays.

13 All projects have to be completed by January 1, 1995.

14 The price that the utility would have had to pay for alternative power.

15 Only equipment used to mine peat for energy purposes is eligible for rapid depreciation.

16 The credits expired in 1987.

17 The National Wildlife Federation sued both the Corps and the EPA over the jurisdictional issue in First Colony, and the Southern Environmental Law Center filed similarly against both agencies in White Tail.

18 The Federal Manual for Identifying and Delineating Jurisdictional Wetlands. See Appendix VI-1 for discussion.

19 Other than conversion for cultivation.

20 This would be consistent with the CEQ's NEPA regulations requiring a full analysis of "connected" actions (40 CFR 1508.25).

21 Current language defining bridge replacements or categorical exclusions allows that a bridge may be moved up- or downstream and still qualify for an exclusion. The FWS maintains that building or modifying highway bridges should qualify for a categorical exclusion only if the proposed construction is on the existing bridge alignment, since shifts in alignment may result in wetland losses. The FHWA disagrees with this position. The FHWA/State highway agency decision to use a categorical exclusion on a bridge replacement project is based on a determination that no significant impact will result from the project. Location issues are a component of that decision, but use of the existing bridge site is not necessarily a deciding factor.

22 Technically, this bank does not really "mitigate." Mitigation is the restoration or creation of wetlands as compensation for wetlands destroyed by developmental activities. Mitigation is designed to keep the stock of wetlands roughly constant. The NCDOT Bank provides protection to existing wetlands, and only keeps the stock of wetlands constant if these admittedly threatened wetlands would have been destroyed in the absence of State preservation efforts.

23 1989 Manual. See Appendix VI-1 for update.

24 In the Revenue Reconciliation Act of 1993 (RRA), however, Congress did eliminate a restriction on charitable giving imposed by the Tax Reform Act of 1986. By disallowing the portion of a charitable contribution of property in excess of the adjusted basis (roughly, the original purchase price), the 1986 Act substantialy reduced the privae benefits from conservation donations, especially for those taxpayers subject to the alternative minimum tax (AMT). In the 1993 RRA Congress reinstated the full deductibility of contributions of appreciated property.


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