Common use of Flat Rate Clause in Contracts

Flat Rate. To date the Agreement has used a flat offset rate that was established for Phase II and will continue until updated in Phase IV at $13.15 of nitrogen in excess of the annual cap. This flat rate was based on a report by Research Triangle Institute entitled Cost-Effectiveness of Agricultural BMPs for Nutrient Reduction in the Tar- Pamlico Basin (January, 1995), which included a safety factor and an administrative cost factor. During Phase III parties to the Agreement discussed ways to update the nitrogen offset rate and establish a phosphorus offset rate in a manner that would utilize actual projected load reductions and costs, including uncertainty estimates and associated issues and cost factors as itemized below. During the first two years of Phase IV, the Division shall work in consultation with the parties to develop improvements to the offset rate that address the following issues:  Develop an offset rate for exceedances of the phosphorus cap.  Update cost-effectiveness data developed in the 1995 RTI report.  Add BMPs not addressed in the 1995 RTI report and quantifiable based on current research.  Factor uncertainty into cost-effectiveness estimates.  Project proportionate BMP implementation for the foreseeable future.  Explore the ability to establish single, weighted nitrogen and phosphorus cost- effectiveness values based on proportional use;  Seek to account for spatial distribution within the basin as well.  Revisit the administrative cost factor. During Phase IV parties will develop an updated nitrogen offset rate and establish a phosphorus offset rate that captures the full actual costs of implementing agricultural BMPs under the NC Agriculture Cost Share Program. Parties to the Agreement will work together to develop costs for the following implementation elements to consider when updating offset rates, as applicable:  Design, planning and engineering  Recruitment and outreach by the soil & water conservation district staff  Land costs  Implementation and construction  Operation and maintenance  Inspection costs  Regulatory costs for DWR and DSWC technical assistance and administration Once established, the Phase IV nitrogen and phosphorus offset rates shall be revisited at least once every five years to consider new information and incorporate future updates. To replace the current offset rate with the results of this effort, the Division shall present any modifications to the Agreement to the Commission for approval by January 1, 2017 or as soon as practicable thereafter.

Flat Rate. To date the Agreement has used a flat offset rate that was established for Phase II and will continue until updated in Phase IV at $13.15 of nitrogen in excess of the annual cap. This flat rate was based on a report by Research Triangle Institute entitled Cost-Effectiveness of Agricultural BMPs for Nutrient Reduction in the Tar- Pamlico Basin (January, 1995), which included a safety factor and an administrative cost factor. During Phase III parties to the Agreement discussed ways to update the nitrogen offset rate and establish a phosphorus offset rate in a manner that would utilize actual projected load reductions and costs, including uncertainty estimates and associated issues and cost factors as itemized below. During the first two years of Phase IV, the Division shall work in consultation with the parties to develop improvements to the offset rate that address the following issues:  • Develop an offset rate for exceedances of the phosphorus cap.  • Update cost-effectiveness data developed in the 1995 RTI report.  • Add BMPs not addressed in the 1995 RTI report and quantifiable based on current research.  • Factor uncertainty into cost-effectiveness estimates.  • Project proportionate BMP implementation for the foreseeable future.  • Explore the ability to establish single, weighted nitrogen and phosphorus cost- effectiveness values based on proportional use;  • Seek to account for spatial distribution within the basin as well.  • Revisit the administrative cost factor. During Phase IV parties will develop an updated nitrogen offset rate and establish a phosphorus offset rate that captures the full actual costs of implementing agricultural BMPs under the NC Agriculture Cost Share Program. Parties to the Agreement will work together to develop costs for the following implementation elements to consider when updating offset rates, as applicable:  • Design, planning and engineering  • Recruitment and outreach by the soil & water conservation district staff  • Land costs  • Implementation and construction  • Operation and maintenance  • Inspection costs  • Regulatory costs for DWR and DSWC technical assistance and administration Once established, the Phase IV nitrogen and phosphorus offset rates shall be revisited at least once every five years to consider new information and incorporate future updates. To replace the current offset rate with the results of this effort, the Division shall present any modifications to the Agreement to the Commission for approval by January 1, 2017 or as soon as practicable thereafter.