Nutrient ACM

Nutrient ACM

Pursuant to SL 2007-438 et. seq., on September 1, 2010 the Ecosystem Enhancement Program (Now the Division of Mitigation Services DMS) established nutrient offset rates based on “The Actual Cost Method." The Actual Cost Method (ACM) is a procedure that ensures the DMS Nutrient Offset Payment Program sets rates based on the actual costs of providing nutrient load reduction credits. The ACM was developed through a stakeholder process during which participants contributed significantly to the method itself and the rules that would establish it as the means to set DMS nutrient offset rates. During the development of the ACM, DMS also developed a database that categorizes and stores DMS cost data in a manner that allows for per unit reduction costs to be calculated accurately and efficiently. 

ACM Goals

  • All costs must be accounted for in the method.
  • Must be understandable and easy to use.
  • Must be predictable and equitable.
  • Rates must change (increase or decrease) as actual costs change.
  • Method must be applicable at various geographic scales.
  • Method must be applicable to either nitrogen or phosphorus offsets.

The ACM accounts for all DMS costs associated with achieving nutrient reductions inclusive of contracts with private entities to design and build restoration projects, expenditures for land acquisition and program administrative costs. The method will ensure that revenues and expenditures are in balance.

The ACM begins with a simple equation:
Actual Costs / Total Pounds = Actual Cost per pound
Actual Costs include: completed projects, terminated projects, existing projects in process, and administrative costs (staff, supplies, rent) and all costs are adjusted to present day values.
Total Pounds is also determined using present day values to represent the true cost of implementing a new project, factor in changes in regulations and ensure the rates will never be below actual cost.
In addition, if DMS Nutrient Program’s total costs are greater than the Program’s receipts, an Adjustment Factor is applied to the fee calculation. This ensures that fees are commensurate with the actual costs of the program.

Additional Features

The ACM allows for General and Special Rates to be calculated so that for particular areas, the rate is based on the costs of projects located in that rate area. Currently there are rates for:
  • Neuse River Basin (8-digit hucs 03020202, 03020203, 03020204)
  • Tar-Pamlico River Basin (8-digit hucs 03020101, 03020103, 03020104)
  • Falls Lake watershed (a portion of Neuse 03020201)
  • Jordan Lake watershed
  • Neuse 03020201 exclusive of Falls Lake watershed
The rules require that rates be set using the ACM at least annually. Quarterly adjustments are made if income and expenses for the program show significant discrepancies. In new rate areas the highest Program rate is used as a surrogate until two nutrient reduction projects are available for use in determining the rate for that area.