Trading and Offset Programs in the Chesapeake Bay Watershed

Olivia H. DevereuxDevereux Environmental Consulting, Inc.

Soil and Water Conservation Society Annual Conference

July 29, 2014

Outline• 2010 Chesapeake Bay TMDL

• Opportunities for trades and offsets

• Impact on conservation practice implementation

• Programmatic requirements

• Tools for calculating credits

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2010 Chesapeake Bay TMDL for Nitrogen, Phosphorus, and SedimentThe Bay TMDL expects the Bay jurisdictions to offset all new or increased loads and identifies trading as a potential tool that the Bay jurisdictions could use to implement the Bay TMDL. 07/29/2014 3

Approaches to Meeting the Pollutant Load Caps Under the TMDL

• Permits (CAFO, NPDES)• Nonpoint source controls (agriculture, urban

stormwater, septic)• Water quality trading

– Allow sources that are more efficient at reducing N, P, sediment to sell credits to less efficient sources

– Achieve overall N, P, sediment reductions at lower total cost

– Realize the same benefits as the successful SOx cap-and-trade policy that reduced “acid rain”

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Current Status of Trades• Very few have occurred or are planned within the

Bay watershed• Barriers to successful trades include:

– Limited incentives for non-point sources (esp. agriculture) to participate

– Significant technical and policy details remain unresolved

• Consistency in credit calculations across jurisdictions• Verification• Credit permanence• Additionally• Local water quality protection

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Incentives to Trade for Agriculture and Other Nonpoint Sources

• Financial: – Practices will be implemented anyway to comply with federal,

state, and local laws, regulations and guidelines– Trading can reduce compliance costs– But, cannot trade a cost-shared practice in several state programs

• Environmental benefits: Soil, air, and water quality; excess/insufficient water; and habitat

• Social Benefits:– Encourages dialogue among stakeholders – Fosters concerted and holistic solutions for watersheds with

multiple sources of water quality impairment– Demonstrates commitment to achieving policy objectives07/29/2014 6

Programmatic Requirements• Consistency in credit calculations across

jurisdictions

• Additionally

• Verification

• Credit permanence

• Local water quality protection

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Tools for calculating credits

• Chesapeake Bay Nutrient Trading Tool cbntt.org

• BayFAST.org

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BayFAST Features• Is replicable , consistent, and transparent

– Consistent with the CBP TMDL model• Allows users to set boundaries and land use• Offers an adaptive management approach,

scenario development is iterative• Can accommodate many simultaneous users

– Online with private log in– Private and public scenarios– Users can share scenarios with other specified users

(access control)– County scenarios can be merged for the entire state

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Consistent with the EPA TMDL• Since it is based on the same model used to

determine the TMDL and the allocations, it has internal consistency for loads, geographical scale and sectors

• Other available tools have assumptions that may be different from those used in developing the current TMDL

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Acknowledgements

EPA Region 3

Chesapeake Bay Program

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Extra Slides

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Legal Foundation for Trading to Meet Permit Requirements

• Clean Water Act – requires that any permitted discharge of pollutants include limitations

“necessary to meet water quality standards” established under any federal or state law

• EPA’s implementing regulations– “No permit may be issued…[w]hen the imposition of conditions cannot

ensure compliance with the applicable water quality requirements of all affected states” , and that no permit may be issued “[t]o a new source or new discharger, if the discharge from its construction or operation will cause or contribute to the violation of water quality standards.”

– The regulations further provide that a discharge may be allowed to an impaired water body (or which might cause or contribute to nonattainment of water quality standards) only if there is a “pollutant load allocation” set aside or created to offset the new or expanded discharge, and the discharges contributing to the water quality impairment are on a schedule leading to eventual achievement of water quality standards.

– Any credit which is used to satisfy NPDES permit requirements must be sufficiently “permanent” and otherwise reliable so as to ensure compliance with these requirements.

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Additional Policies• EPA’s 2003 Water Quality Trading Policy• EPA’s 2007 Water Quality Trading Toolkit for

NPDES Permit• EPA’s Technical Memoranda

– Elaborate on EPA’s expectations, set out in the Bay TMDL for the Bay jurisdictions’ offset and/or trading programs.

– Applicable only in the Chesapeake Bay watershed.

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Maryland Accounting for Growth• MDE has in place an Enhanced Nutrient

Removal (ENR) Cap Strategy that allows flow increases at major sewage treatment plants to design capacity, while establishing a nutrient loading cap and wasteload allocations (WLAs) in NPDES permits. The interim and target point source loads were set to allow growth up to the permitted WLAs.

• Maryland’s strategy to account for growth will outline a policy and an implementation strategy to offset new loads.

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