Nutrient Trading and the Chesapeake Bay

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Nutrient Trading and the Chesapeake Bay

• Paul K. Marchetti
• PENNVEST
• February 18, 2008

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PAs Chesapeake Bay Drainage

• Over 50 of the land in PA drains to the
  Chesapeake Bay.
• The Susquehanna River is the largest tributary of
  the Chesapeake Bay, providing 90 of the
  freshwater flow to the upper bay and ½ the total
  flow into the Bay.
• PAs Potomac provides an additional 2 of the
  Bays freshwater flow.

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PAs Chesapeake Bay Timeline

• 1983- Governor Thornburgh signed the 1st
  Chesapeake Bay Agreement
• 1987- Governor Casey signed the 2nd Chesapeake
  Bay Agreement
• 1988- Developed 1st Ch. Bay Nutrient Reduction
  Strategy

• 1996- Issued 2nd Ch. Bay Nutrient Reduction
  Strategy
• 2000- Governor Ridge signed the Chesapeake 2000
  (C2K) Agreement
• 2002- Ch. Bay Nutrient Reduction Strategy Updated
• 2004- Issued revised Tributary Strategy

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PAs Chesapeake Bay Timeline(cont.)

• 2005 Maryland finalized new water quality
  standards
• October - Interim Final Trading Policy Published
  for comment
• December - House Resolution
• 2006- Ch. Bay Tributary Strategy Steering
  Committee Meetings (January- November)
• January - Senate Resolution

• 2006- Strategy Related Activities
• July- PS Alternative Allocation Strategy
  published for comment
• November-draft trading policy, appendix and three
  attachments published for comment
• December- policy, appendix and three attachments
  published as final
• 2007- Continued implementation of PS and NPS
  Strategies
• 2008- Continue implementation

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PAs Tributary Strategy/ Compliance Plan

• Essentially a spreadsheet tabulating over 40
  practices that are known to reduce nutrients and
  that can be credited by the Chesapeake Bay model.
  
• Most of the practices will occur whether or not
  there is a tributary strategy the strategy
  allows us to measure our progress and devote
  resources to target the cost effective practices.
  
• Identifies efforts for agriculture, wastewater
  treatment plants and urban management of
  stormwater and septic systems.

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PAs Reduction Goals
Baseline Load 2010 Cap Goal Load Total Reductions Needed 2005 Progress Load 2005 Reductions Achieved 2005 Reductions Achieved
TN (Mill. Lbs.) 129.6 71.9 57.7 105.6 24 42
TP (Mill. Lbs.) 5.32 2.46 2.86 3.59 1.73 60
Sed. (Mill. Tons) 1.52 1.0 0.52 1.13 0.39 75
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How will PA reach its goals?

• Two Main Elements
• Point source reductions
• 14 N and 22 P
• Sewage Treatment Plants and Industry.
• Nonpoint source reductions
• 86 N and 78 P
• Agricultural and urban BMPs

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Point Source Reductions

• Cap loads on Nitrogen and Phosphorous must be
  placed in NPDES permits that meet downstream
  Water Quality Standards.
• All of the point source nutrient loads were
  distributed among the existing point sources.
• All new development with proposed nutrient
  loading increases must be offset by reductions in
  the watershed.

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New or Expanding Discharge

• New Point Source
• Zero Net Load Options
• Land Application of Effluent With Crop Uptake
• Recycle and Reuse of Effluent
• Load Offsets
• Purchasing Credits (Trading)
• New On-lot Systems
• No New Requirements
• Connection to Existing Point Source
• No New Requirements
• Point Source Decision Whether It Can Meet Its Cap
  Loads

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Nonpoint Source Reductions

• Expand Best Management Practices
• Nutrient management
• Soil Conservation Water Quality Plans
• Animal waste management
• Runoff control
• Forest grass buffers
• Stormwater management

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What is Nutrient and Sediment Trading?

• Nutrient and sediment trading is an approach to
  improve water quality using market mechanisms to
  produce nutrient reductions at lower costs.
• The voluntary trading program is an option for
  point or non-point sources that exceed their
  environmental obligations to earn credits that
  may be sold to others who desire nutrient
  reduction credits.
• Cost per pound ranges from 1 for some
  agricultural practices, to 8-30 for some
  treatment processes, to thousands for some storm
  water controls.

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Who will Trading Work for

• Trading can work for everyone, but its value
  depends on the generator of credits and the
  facility or developer needing the credits.
• Two main groups that we expect to purchase
  credits are developers and wastewater treatment
  facilities.
• There are many options which are limited only by
  creativity, imagination and doing business as
  usual.

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Is trading a long or short-term solution?

• It can be either. Credit generating practices
  have a life span varying from 1 to 15 years.
• Depending on individual needs, credits can be
  generated and purchased to meet requirements for
  both the long and short-term.
• Model agreements will be available like any
  agreement, for operation services or energy
  purchase, length of contracts, price and security
  are negotiated.

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What else should be consider if one is interested
in trading?

• Infrastructure needs in many cases, trading can
  reduce the need for plant upgrades.
• Timing if an upgrade may be needed, but not
  immediate, one may wish to consider trading
  initially to bridge the gap until an upgrade is
  really warranted.
• Uncertainty local nutrient impairments may
  require further reduction in the future trading
  or phased upgrade plus trading lets one wait and
  see.

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What is a credit?

• Credit Unit of Trade.
• Expressed as mass/per unit time (lbs/yr).
• Generated and traded in the same watershed.
• Total phosphorous and/or total nitrogen reduction
  credits.
• Nitrogen and phosphorous reductions TO THE BAY
  beyond baseline and threshold requirements.
• All trading must involve comparable credits
  (nitrogen for nitrogen).

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DEP is responsible for

• Oversight and management of the Pennsylvania
  nutrient and sediment reduction credit program.
• Policy Decisions on issues such as
• Certification
• Verification
• Registration
• May elect to delegate responsibility to Third
  Parties (audits and credit verification).

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Recent Activities

• 37 proposals have been submitted and 27 have been
  certified
• HRG/Milton Regional Sewer Authority, PS Credits
• Mount Joy Borough Sewer Authority, NPS Credits
• Red Barn Trading Company, Aggregator of NPS
  Credits
• Berks County Conservation District, Aggregator of
  NPS Credits
• Chesapeake Nutrient Management, Aggregator of NPS
  Credits
• Bion Environmental Technologies Inc, Aggregator
  of NPS Credits
• Total Credits Certified
• 476,359 N
• 57,996 P
• 129 S

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Recent Activities

• 3 Contracts have been entered into
• 1 Local Project Mount Joy Borough Authority will
  meet compliance through a combination of local
  activities and a partial upgrade.
• 2 Developer Projects Red Barn Trading Company
  signed contracts with developers which will use
  the credits for NPDES permit compliance.

• Additional Projects
• Antrim Township- looking at ways to generate
  credits locally to offset growth pressures.
• Digesters- to process manure to generate credits
  and produce a number of bi-products (concrete
  ash, energy, biomass etc).
• Integrated Water Resources, Source Water
  Protection

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The Challenge

• Point sources want a credit that is comparable in
  certainty, both in price and availability, to a
  physical plant upgrade.
• In order to provide such a credit, we need to be
  able to guarantee that nutrient reductions will
  take place for 20 years at a certain cost.
• In order to this, we need a portfolio of credits
  that can be drawn upon now and in the future.
• To date, no entity has developed such a
  portfolio, but some are starting to move in that
  direction.

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Where to go for more information

• DEPs Chesapeake Bay Website
• http//www.dep.state.pa.us
• KeywordChesapeake Bay
• DEPs Nutrient Trading Website
• http//www.dep.state.pa.us
• KeywordNutrient Trading