businessreport.com
In early March, the state’s Coastal Protection and Restoration Authority announced it was soliciting proposals from engineering firms to design the Mid-Barataria Sediment Diversion, an estimated $1.4 billion project to rebuild marshland by redirecting sediment from the Mississippi River into the Barataria Basin south of New Orleans.
The announcement was a big deal for the CPRA. After years of planning for marquee projects like Mid-Barataria, money from the BP Deepwater Horizon oil spill settlement was finally making its way to Louisiana and serious coastal rebuilding could begin.
To underscore the project’s importance to the state, Gov. John Bel Edwards requested in January that the Mid-Barataria project and four others be placed on the federal “dashboard,” a process intended to fast-track the permitting process.
Nevertheless, at a March 15 meeting of the CPRA board of directors in New Orleans, the district commander for the U.S. Army Corps of Engineers told a standing-room-only crowd that permits for the project likely won’t come until 2022. In other words, it will be five years before construction can even begin, much less be completed.
Many in the room were stunned. Earlier estimates had put the permitting timetable at around 2.5 years. The commander from the Corps, Col. Michael Clancy, seemed to sense the collective frustration.
“That may sound like a long way off,” Clancy acknowledged. “But we have a plan, we have a timeline … and everybody is on board and aware of the plan.”
CPRA Chairman Johnny Bradberry wasn’t having any of it.
“Five years is unacceptable,” he said. “We are going to push hard to get that expedited. If you look at where we are that is just not acceptable. The leadership in the Corps knows this. We are going to push every damned day on this.”
Rebuilding Louisiana’s coast is proving to be slow and difficult, not that anyone thought it would be quick or easy. But for years, the coastal effort mostly consisted of planning. Now that there’s a solid funding stream—thanks to the BP settlement and federal offshore oil drilling revenues—there’s real money to put behind the projects. There are also questions about why more projects aren’t shovel-ready.
Part of the reason things are moving so slowly is because of the federal government’s complex, Byzantine permitting requirements. Part of it has to do with challenges acquiring land rights.
But financing these massive projects remains the biggest hurdle. The state has a 50-year master plan containing 120 projects with a collective price tag of at least $50 billion. It has identified just $10.7 billion that it reasonably expects to receive over the next 15 years, and another $8 billion or so over the next 35 years beyond that—totaling about one-third of what’s needed.
Not only is there not enough money, but there’s a cash flow issue. The federal dollars that are coming in from the oil spill settlement, which will go to pay specifically for restoration projects, don’t come in lump sums. Rather, they’re paid out in the form of reimbursement grants, and only a certain amount is available each year. As a result, it’s impossible to bid out an entire construction project that’s expected to cost, say, $500 million, if only $50 million is in the pot today.
That’s why an increasingly frustrated private sector has been brainstorming innovative ways to streamline the permitting process, leverage the existing dollars, and finance the design and construction of projects. One of the ideas on the table is a public-private partnership model that would enable private contractors to finance the design, land acquisition, construction costs and delivery of projects, and then get paid back over time. Some believe it’s a more attractive option than bonding the money because the private sector assumes all the risk and the financing terms are likely better.
Though nothing has been finalized yet, documents and draft legislation are circulating around the state that, if approved, could help address the logjams on both the regulatory and financial fronts.
It’s too soon to say whether these efforts will ultimately prove successful. But those involved with coastal issues are willing to try just about anything. The longer the state waits to get projects underway, the more it will cost in the long run.
“I think we are going to have to be creative about how we bring private dollars into this area or we’re going to struggle to put together the billions of dollars we’re going to need to do it all,” says House Speaker Pro Tem Walt Leger, D-New Orleans. “And it doesn’t take a huge leap to understand that the longer you wait the more it’s going to cost.
FOLLOWING ORDERS
The sobering facts of Louisiana’s coastal land loss have been widely publicized, and the statistics are well known: A football field every 30 minutes, 16 square miles annually and nearly 1,900 square miles since 1930. At this rate, the state will never catch up. But it can do things to help offset the losses.
Last fall, the Water Institute of the Gulf actually quantified the cost of delaying coastal projects. It found that the cost per acre to rebuild marshland doubles over 20 years. The study estimated that the cost of creating 2,000 acres of marsh in West Little Lake, which is in the southern part of Jefferson Parish, jumps from nearly $90 million in 2017 to more than $256 million in 2037. It balloons to nearly $560 million by 2057.
“Delays in construction make projects more expensive as water gets deeper and land degrades,” reads the study.
But it’s hard to get projects moving quickly when there are so many regulatory hurdles to jump through. The Corps, which has jurisdiction over wetlands and the Mississippi River, gets the lion’s share of blame and is a popular whipping boy among those who deal in coastal protection and restoration.
But the Corps doesn’t make the laws. It just carries them out, though plenty would argue it purposely does so at a snail’s pace. The National Environmental Policy Act is one of the particularly challenging laws. NEPA states that before a project like Mid-Barataria can be permitted, an environmental impact statement must be completed showing the project complies with no less than 82 distinct federal laws and executive orders.
Corey Kief, who heads the North Lafourche Levee and Drainage District, has been dealing with coastal projects and the Corps for years. Securing permits has thwarted many needed projects from going forward, he says.
“The single biggest issue is permitting,” Kief says with a thick Cajun accent.
“The Corps is military and they do what they’re told in D.C. If their orders are to eat string beans all day they will eat string beans all day. It’s just the way they are.”
CPRA officials are frustrated, too. Bradberry says his agency is constantly trying to find ways to speed up the Corps’ lengthy permitting review process but concedes it’s just very bureaucratic.
“We don’t think, sometimes, it’s fair, but in their mind it is,” he says. “We are trying to change that. We think we are making some progress.”
But if the sobering estimate on the time it will take to get permits on the Mid-Barataria project is any indication, that progress isn’t too impressive. Clancy says he’s open to ideas, but as the boots-on-the-ground guy in New Orleans he doesn’t have much control over policies developed in the nation’s capital.
“Everyone understands the problem and the importance of getting permits,” he told the CPRA board at its March 15 meeting. “But every agency wants to get their concerns satisfied. … If you have any suggestions (of how we can speed things up) let us know and we’ll pass them along.”
PARADIGM SHIFT
Actually, there is a suggestion that many are taking very seriously: A federal emergency declaration for the Louisiana coast. If granted, it would temporarily waive the NEPA requirements, enabling coastal building projects to go forward before the environmental review process and mitigation work has been completed.
There is a precedent for such a declaration. Following Hurricane Katrina, the state obtained an emergency declaration in New Orleans so that the city’s flood wall system could be rebuilt in a matter of years instead of decades. Some 300 permits were granted in the space of just two years and the work was completed, though the environmental mitigation is still underway today.
Advocates of using this approach along the coast say it’s critical to getting some of the major projects on the CPRA Master Plan to the shovel-ready stage. State Rep. Jerome “Zee” Zeringue, R-Houma, a former executive director of the CPRA, is among those working to make it happen. He drafted a resolution that the Legislature approved earlier this year during the special session supporting the concept of an emergency declaration.
Zeringue points out that many of the environmental regulations holding up coastal restoration projects were designed to protect the environment from, say, a developer trying to build a shopping center in the middle of wetlands, not to thwart an environmental restoration project. He says the intent of the declaration would not be to circumvent important environmental regulations, but to cut the state some slack and recognize the coastal crisis as a legitimate emergency.
“They’re applying the same rules to restoration projects that you’d apply to a commercial development, and it’s a totally different paradigm,” Zeringue says.
“We just want to replicate what we did in New Orleans and relax some of the rules on a temporary basis.”
It’s unclear if or when the state might officially ask for a federal declaration of emergency. U.S. Rep. Garret Graves’ office says several agencies are currently working on the issue.
“If they can get that declaration of emergency then they can really start rolling,” Kief says. “If they don’t get that, nothing else matters because it will take years before they can do anything.”
CRITICAL PATH
While permitting is a major factor in the slow pace of getting projects up and running, acquiring land rights is another. More than 80% of coastal Louisiana is privately owned, and before the state can build a levee or create new marshland, it has to secure right of way, access, or outright ownership of the land or water bottoms.
Sometimes the landowner isn’t interested in cooperating. Sometimes there are multiple owners, questions about clear title or infrastructure issues like pipelines to work around.
The East Timbalier Island Restoration Project is an example. It’s a $100 million barrier island project in the CPRA Master Plan that was supposed to be in the design and engineering phase by fiscal year 2017.
Instead, procurement documents for design haven’t even been issued yet, and the project is running about six months behind schedule because of difficulties acquiring the property needed to do the job.
“The original design had a lot of pipelines running under it,” CPRA Deputy Executive Director Jason Lanclos says. “We’ve been working very well with the oil and gas companies … but you find some companies have changed ownership and you have companies with a lot of infrastructure, so you have to go through programs to remove abandoned flow lines and it’s stuff that takes time. So there are some challenges. This one, specifically, the land rights challenges are immense.”
The CPRA is trying to address land rights issues in general by tackling them earlier in the planning process and budgeting more time for them on the front end. CPRA Executive Director Michael Ellis says the agency is now starting the abstracting and appraisal process sooner than it was in the past, and is being more aggressive and flexible in which property it goes after when planning projects.
“We recognize land rights are a critical path,” he says. “So we’re expediting them.”
Ellis acknowledges the agency didn’t move as quickly getting projects to the design phase as he would have liked during the new administration’s first year in office, in part because of land rights challenges. The agency had projected to spend $459.4 million on design, engineering and construction of projects in fiscal year 2017, but has only spent $185.9 million so far, less than half of what was potentially available. It’s planning to spend an additional $47.7 million before the fiscal year ends on June 30.
In recent weeks, the CPRA has stepped up the process of awarding design contracts. In the first week of March, it awarded engineering and design contracts for three marsh creation projects. It also solicited the proposals for the engineering and design work on the Mid-Barataria project.
The agency anticipates many more contracts will follow. In 2015 and 2016, the CPRA spent some $30 million on engineering and design and $373 million on construction. Between 2017 and 2020, it plans to spend about 10 times that much—an estimated $350 million in engineering and design, and $2.8 billion in construction.
“There is some significant progress being made now,” Ellis says. “I would think the engineering community is getting pretty busy right now.”
IN THE TOOLBOX
Perhaps the biggest impediment to getting projects moving more quickly, however, is money. Yes, it’s starting to flow to the state, but it’s not nearly enough to tackle some of the biggest projects, and, anyway, it doesn’t all come at once, which creates something of a cash-flow crunch.
Over the past few months, executives from major engineering, dredging and industrial construction companies have been meeting privately in New Orleans and Baton Rouge to discuss ways to grease the wheels and get projects moving more quickly. From those discussions has come the idea about requesting the federal declaration of emergency, for instance.
To address the issues on the funding side, one of the ideas gaining traction is the legalization of a public-private partnership model that Gov. Edwards is calling Pay for Success. Technically, it’s an alternative delivery model, under which a single contractor—likely, a team of companies partnering together—would contract with the state to deliver a predetermined amount of restored marshland. The contractor would finance the entire project with funds from private investors, and would handle everything from acquiring land rights and permits to design, engineering and construction.
Part of the beauty of the model is that the risk for the project would transfer entirely from the state to the private sector. The state wouldn’t have to pay for a project until it was delivered, and even then it wouldn’t have to remit the full amount because the contract would be “performance based.” A newly created section of marshland, for instance, would have to stand the test of time and demonstrate its sustainability for several years before the state would have to pay the balance of the bill.
Murray Starkel is an environmental engineer—and longtime friend of the governor—whose Dallas-based firm is in the environmental remediation business and has used this model successfully in other states. He says Pay for Success is an effective way for the state to leverage the money it has today, and he has been working with industry groups to drum up support for the model.
“In our model, you don’t pay anything until it’s done,” Starkel says. “Even then, maybe you’re only paying 50% post construction and then the vendor is still on the hook to make sure it performs, so the risk to the state is much lower.”
Starkel also maintains that Pay for Success is more efficient than a traditional design-bid-build model because private contractors are motivated to complete projects quickly and have more flexibility than the state or the CPRA when it comes to acquiring land rights.
“The government is constrained in what it can do,” he says. “We have much more flexibility in coming to an agreement with land owners. Maybe we even give them an equity stake in the deal.”
Starkel even believes the private sector would be more effective than the state in obtaining permits from the Corps, an assertion that Bradberry and others dismiss. Still, CPRA officials and industry representatives are interested in the Pay for Success model for several reasons, not the least of which is it allows projects to move forward now.
Traditional bonding is another way to leverage the limited coastal dollars, and the CPRA is exploring that possibility as well. But Pay for Success is potentially less costly than bonding because of interest rates and also because the funding streams coming to the CPRA have so many strings attached.
“Niche private capital investments along the lines of Pay for Success legislation may provide a better financing rate to the state than a typical bonding program,” says lobbyist Scott Kirkpatrick, who represents the industry group Coast Builders Coalition. “There is broad interest in the coastal community to explore a variety of financing tools in order to allow the state to use the best tools to advance this work.”
THE TEST OF TIME
Lawmakers will take up a version of Pay for Success legislation during the upcoming session, which begins on April 10, that would enable the model to go forward from a legal procurement perspective. It’s unclear whether the measure will ultimately pass, though legislators whose committees will handle the bill say the more tools the state has to leverage its coastal funds the better.
Some in the scientific community, however, question the state’s entire approach. They say while the CPRA Master Plan projects are not necessarily futile, the agency is racing against the clock in a battle it has little hope of winning.
Bob Jacobsen, a veteran coastal hydrologist, says the scientific community and those working on coastal issues recognize the state will never restore its coastline to the way it once was. Instead, proposed projects have two basic goals: Mitigate hurricane storm surge risks and maintain coastal ecosystem productivity. Jacobsen says these two goals face two big challenges.
First, serious surge reduction and coastal ecosystem productivity are not always compatible. In fact, they are often competing goals. Second, ecosystem projects have long-term uncertainties about their actual ability to build and maintain habitats, and support fisheries and other uses. In fact, Jacobsen says ecosystem projects can really be regarded as experimental.
With larger ecosystem projects facing major land rights, permitting, legal and financial hurdles, it might make sense to shift toward numerous smaller “experiments,” he says. But smaller ecosystem projects have short design lives—often just two or three decades—due to erosion from storms and thus may not be very effective in the long run.
“The real practical question facing our state is: What is the best way to spend our coastal money?” he says. “Is it evacuation/relocation measures to reduce flood insurance premiums, planning large ecosystem experiments that may never be approved, or building small ecosystem projects with a limited shelf life?”
Jacobsen isn’t advocating for the state to abandon its coastal master plan. But he believes it’s time for the public to start asking tougher questions and demanding more honest answers about whether these projects—given the amount of land already lost and the time and money it will take to complete them—are really the best way to spend our limited coastal dollars.
“The question is, does coastal restoration stand on its own merit versus society’s other needs?” he says. “People need to asking their state officials, is this really the right way to do this?”