September 1, 2008
Wetlands Pioneer, Unlikely Steward
By MIKE SAEWITZ
They also have proven lucrative for Viola, the developer who has emerged as the region's leader in a little-known industry that sprang out of environmental protection laws: wetlands restoration.
Viola and his partners have invested millions to buy more than 5,000 acres of farmland and forest in South Hampton Roads and North Carolina. They have planted thousands of trees found in swamps and filled man-made ditches that once drained soils.
Viola's ventures have reaped at least $14 million in revenue by selling "credits" to government agencies and land developers, who in turn use these restored wetlands to offset those they destroy on a construction project elsewhere.
Viola would seem an unlikely wetlands steward. His construction company has been cited for illegally digging drainage ditches, for filling large tracts of wetlands with wood chips and for clearing soggy forests regulated by the federal government. The company has been slapped with at least 10 Clean Water Act violations.
Despite flaps with regulators, governments come to him for wetlands credits so they can build. The North Carolina Department of Transportation and the city of Chesapeake have been among his biggest customers.
His wetlands-restoration operations also have generated a series of deals with the family of former Chesapeake Mayor Dalton Edge. Edge and his relatives sold part of the family's sprawling farm to Viola's companies for about $3 million, and the former mayor later bought back more than a third of the property for $5,000 after it was turned into wetlands.
As Viola pursued what's known as "wetland mitigation banking," the federal government continued to accuse his construction company of major wetlands violations. He has used his wetlands-restoration operation to settle problems with the Environmental Protection Agency and the Department of Justice, according to federal officials.
When the federal government has used the Clean Water Act to stop his firm from building on wetlands - with threats of up to $25,000 in fines per day - Viola sees that as an unfair taking of land without compensation. Politicians should go to bat to get some of Chesapeake's wetlands released for development, he said.
"All of that infrastructure and yet it's going to waste," he said. "The whole Clean Water Act is not right."
Like other longtime contractors and developers, Viola saw Chesapeake's vast tracts of nontidal wetlands - anything from deep swamps to seasonally wet fields or forests - as suitable to meet the city's growth needs.
That was before federal agencies began, in 1989, to enforce a policy of "no net loss" of the nation's wetlands. Essentially, many developers and landowners were now asked to create or restore at least an acre of wetlands for every acre they were allowed to destroy.
For Viola, the new enforcement hit him in the late 1980s while his company was clearing lots to build the Jolliff Woods subdivision in Chesapeake's Western Branch.
Viola was stunned when he was told he might have cleared chunks of federally regulated wetlands, which are considered important because they help control flooding - an especially crucial purpose for an area with so many drainage issues. They also provide animal habitat and filter pollutants.
Around the same time, the EPA ordered Viola's company, Vico Construction Corp., to stop filling wetlands on nearly 300 acres off Military Highway. He fought the action in court and is still upset that the EPA prevented him from developing that land.
If the EPA and other environmentalists were around when this area was settled, a lot of South Hampton Roads would never have been developed, Viola said during a recent interview.
Those experiences gave him an idea allowable under the law: Buy forests and farmlands that were once wetlands, and then convert them back to their natural state. Developers who needed to fill in or disrupt wetlands for a project could offset those losses by buying credits for restored wetlands.
In some cases, it's a one-for-one trade-off: buy and bank 1 acre of restored wetlands for every 1 acre destroyed. Sometimes it's 2 restored acres for every natural 1 acre taken.
In the watershed that serves much of South Hampton Roads, the going rate for 1 acre of restored wetlands - known as a "credit" - eventually hovered between $35,000 and $55,000.
Viola had some prospective clients in mind when he set out on this new business.
What he needed first was land that could be cheaply and reliably converted into wetlands.
Viola read up on wetlands. Looking at aerial photographs of Chesapeake, a consultant told him about a piece of farmland that jutted like a thumb into the Great Dismal Swamp.
It was owned by the family of Dalton Edge, the Chesapeake businessman who later would enter city politics.
At first, Edge was reluctant to sell. But Viola said Edge told him that pieces of the farm were wet most of the year and did not make for good farmland. "Some years he couldn't plant it because it was so wet," Viola said.
Edge sold about 150 acres to Viola's company in January 1995, months before Edge joined the Chesapeake City Council.
Viola and other investors used that first chunk of land to set up White Cedar LLC, the first private wetlands bank in Hampton Roads.
The Edge Farm had perfect soils for wetlands restoration, experts said. All it needed was the type of trees and shrubs that typically grow in the swamp. To bring the water back, Viola's company filled a network of ditches.
"It was and is clearly one of the best sites around," said Doug Davis, a Virginia Beach environmental consultant who specializes in wetlands restoration.
White Cedar bought nearly 140 acres more from Edge in 1996.
Viola's goal was to cover the land with rows of Atlantic white cedar.
For a while, the bank had problems getting the trees and vegetation to grow enough. But in the end, it met federal criteria for wetness and plant growth.
"Is it the 300 acres of white cedar they were shooting for? No," said Steve Martin, an Army Corps of Engineers environmental planner who monitored the site. "But portions of it are now forested wetlands, with a substantial component of white cedar."
To expand, Viola bought more property from the Edge family. The councilman decided to sell another 215 acres in 2003. Edge, who was elected mayor in 2004, agreed to sell the bank 92 acres later that year, another 92 acres in 2005, and 93 acres in 2006, real estate records show.
Viola's companies ultimately would buy a total of 785 acres from Edge and his relatives, who made about $3 million off the sales.
Edge, who finished his mayoral term in June and decided not to run again, has had nothing to do with the operation of these wetlands banks. In 2001, Edge requested an opinion from the commonwealth's attorney on whether his land sales would result in a conflict of interest on council matters related to Viola's bank or other wetlands issues. The attorney said there would be no conflict.
Edge still abstained on at least two dozen votes that involved Viola or his companies.
After White Cedar finished restoring wetlands on the first pieces of land bought from Edge, Viola's company sold nearly 300 of those acres back to Edge's company for $5,000.
By making the sale, White Cedar violated an agreement that required the company to first shop the land to a government agency and then try to donate it to a nonprofit conservation group, federal records show. The Corps of Engineers agreed to for go any action against the company as long as the former mayor protected the property forever. Edge could gain federal and state tax advantages by signing a conservation easement on the land, and he also plans to charge others to hunt there.
"That's a nice deal," said Skip Stiles, executive director of Wetlands Watch, a Norfolk-based advocacy group.
Viola said he hopes Edge gets credits to offset real estate taxes on property that now has a greatly reduced value because it is wetlands.
Edge said the deals were not about the money, pointing out that he had gotten other offers from businesspeople interested in turning the family farm into a golf course or airport. Now, he's agreeing to conserve the land.
He said he wanted the property back because it reminds him of days spent farming with his father. He has options to buy back more of the family farm after it's converted to wetlands.
"If I was in this for the money, I wouldn't be doing what I'm doing," he said. "I'd have sold the property, got myself a condo, and I wouldn't have looked back."
In 2007, Edge purchased 232 acres of cut-over timber land in Greensville County, which surrounds Emporia. After much of it was declared swampland , he successfully petitioned the county this year to lower his tax assessment from $345,800 to $172,500. Edge said he has no plans to create a wetlands bank.
As Viola's first wetlands-restoration company took off, his building company continued to have run-ins with environmental regulators.
EPA spokeswoman Donna Heron said Vico Construction was one of the companies that took advantage of a loophole by using a method called Tulloch ditching, which involves cutting trenches across wetlands but trucking material away to avoid federal regulations for filling wetlands.
Between 1999 and 2003 on sites across Chesapeake, records show the EPA accused Vico of:
* Filling wetlands with wood chips on land intended for a Western Branch school.
* Filling wetlands on construction sites for the Willow Lakes, Mill Creek Harbor and Emerald Woods subdivisions.
* Draining wetlands at the Smith and Lewis farms.
In one of the biggest wetlands cases at the time, Vico was one of several firms accused by the Department of Justice in 2001 of destroying wetlands to clear the way for Edinburgh, a golf course and residential community in southern Chesapeake.
Viola said he was under the impression that Tulloch ditching was completely legal and had been upheld by the courts. He said he notified federal officials before doing each job, and he noted that Corps of Engineers workers were present while his company did the work in some cases.
The EPA visits and violations came without warning, he said.
To Stiles of Wetlands Watch, Vico Construction started to stick out as one of several local companies that were repeatedly accused of wetlands violations. "When you see someone's name time after time on a violation sheet, you can assume that good environmental stewardship is not on the top of their business plan," Stiles said.
As the EPA sought thousands of dollars in fines, Viola was putting the finishing touches on starting a much larger wetlands- restoration bank. John C. Holland Jr., a private landfill owner whose business has had previous federal wetlands violations, signed on as a partner.
The original plan for the Great Dismal Swamp Restoration Bank called for doing wetlands restoration and preservation on 10,000 acres of farmland and forest in Chesapeake and North Carolina.
The sheer size drew letters from critics. The Southeastern Association for Virginia's Environment worried about expanding an industry "which makes a profit from the destruction of wetland resources," according to the group's letter to the Corps of Engineers.
The Great Dismal Swamp Restoration Bank made its first credit sale in June 2003, just six months after White Cedar sold out.
A number of big projects ended up buying credits from the Great Dismal Swamp Restoration Bank. The city of Chesapeake spent more than $450,000 with the bank to offset wetlands losses created by building Moses Grandy Trail.
Some of the bank's biggest customers were Viola's companies, which in some cases withdrew credits to help settle the EPA cases.
Viola felt settling was the prudent thing to do. "I still believe what they did was not right," he said.
To make up for destroying wetlands on the Edinburgh site, Vico and other firms were allowed to break off 160 acres from the land that Viola's wetlands company bought from Edge.
The Corps of Engineers is "generally not concerned" that Viola's construction and development companies are frequent users of his wetlands bank, said Martin, a corps environmental planner. The government just wants the restoration work to be done.
The Great Dismal Swamp Restoration Bank has done a fair amount of restoration work.
On a tract in North Carolina, the group plugged or filled 33 miles of ditches, said consultant Robert "Bud" Needham, a former corps worker .
In 2005 alone, the bank planted 1.5 million trees on its sites, Needham said. On a recent tour of one of them, Needham pointed out bald cypress trees that were the size of lead pencils when they were planted. Now, they are more than 8 feet tall.
Viola cautions that wetlands restoration is not easy money. "It sounds simple, but it's an expensive proposition," he said.
He pointed to about 4,000 acres the bank purchased in North Carolina. The North Carolina Department of Transportation paid at least $3 million for wetlands credits from the site. But the money he took in wasn't enough to pay off his land and restoration costs, he said. Now credits are not selling well in North Carolina.
And the real estate market has hampered credit sales in Hampton Roads.
"It's a risky business," Viola said. "It's not set in stone you're going to make money. When the dust all settles, I think we'll be all right."
When asked about his profits, he said: "We're not losing money."
The market hasn't completely dried out. The Hampton Roads Executive Airport plans to expand a runway and has proposed buying $2.5 million worth of wetlands credits from Viola's bank, records show.
Viola may get even more active in the wetlands-restoration arena. The Great Dismal Swamp Restoration Bank has options to buy more land in Chesapeake.
Last year, Viola donated more than $130,000 and $45,000 worth of equipment to environmental research efforts at Duke University and the University of North Carolina. He plans to give more money this year.
Through all of his experiences with wetlands banking and the EPA, Viola said wetlands laws need to be changed to free up more land in Hampton Roads - and especially in Chesapeake, which is covered with nontidal wetlands that prevent development. "That's the shame of it," he said.
"I am strong on being able to develop property that has the backbone for improvements," he said.
His idea is that wetlands in places such as Western Branch should be allowed to be developed, while land in southern Chesapeake should be devoted to wetlands restoration.
"I'm not against the environment," he said. "For all the taxes we pay, the government should give us some guidance."
Mike Saewitz, (757) 222-5207, [email protected]
Part 2 of 2
To read the first part in the series, go to Pilot Online.com. a local player
Developer Emil Viola, left, has made millions by restoring thousands of acres of wetlands and selling the credits to those who need the offsets, but his building company has been charged with at least 10 Clean Water Act violations. - online
Take an interactive quiz on wetlands restoration and see video of the process at PilotOnline. com. council voting
During his time on Chesapeake City Council, Mayor Dalton Edge abstained on at least two dozen votes that involved Emil Viola or his companies. After White Cedar finished restoring wetlands on the first pieces of land bought from Edge, Viola sold nearly 300 of those acres back to him for $5,000.
Originally published by BY MIKE SAEWITZ | THE VIRGINIAN-PILOT.
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