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EPA National Forum on Water-Quality Trading July 22, 2003 Chicago, Illinois

Nutrient Trading in Maryland (and Its Neighbors?). EPA National Forum on Water-Quality Trading July 22, 2003 Chicago, Illinois. I say, the time has come. Saving the Chesapeake Bay. Chesapeake Bay Watershed. Slide Courtesy of Lisa Bacon, CH2M Hill. The Chesapeake Bay Program.

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EPA National Forum on Water-Quality Trading July 22, 2003 Chicago, Illinois

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  1. Nutrient Trading in Maryland (and Its Neighbors?) EPA National Forum on Water-Quality Trading July 22, 2003 Chicago, Illinois

  2. I say, the time has come...

  3. Saving the Chesapeake Bay

  4. Chesapeake Bay Watershed Slide Courtesy of Lisa Bacon, CH2M Hill

  5. The Chesapeake Bay Program Historically a Voluntary, Cooperative Effort by: Maryland Virginia Pennsylvania District of Columbia U. S. Environmental Proctection Agency Chesapeake Bay Commission

  6. 1983 Chesapeake Bay Agreement1987 Amendments1992 Amendments2000 Amendments

  7. Restore Living Resources Submerged Aquatic Vegetation, Shellfish, Fish Chesapeake Bay Program Goals(Original) Nutrient Loadings Reduce “Controllable Nutrient Loads by 40% by 2000, and then Hold Them There • Dissolved Oxygen Reduce “Anoxic Volume Days” by Twenty Percent

  8. Maryland Tributary Strategy Approach Nutrient Goals for Ten Subwatersheds For POTWs: Nitrogen Goal of 8 mg/l Annual Average Year-Round Operation 50 Percent Cost Share • For Agricultural & Urban NPS: • Programmatic Goals • No Jurisdictional Specificity No Mass Load Limits No “Cap” Strategy

  9. 2000 Progress

  10. 2000 Progress

  11. 2000 Progress

  12. 2000 Progress

  13. 2000 Progress

  14. Meanwhile, the Scientists and Regulators Have Been Very Busy... Model Improvements New Water-Quality Standards Dissolved Oxygen Clarity Chlorophyll a New Goals

  15. Allocation Methodology First, Selection of Baywide Load Second, Allocation by Major Tributary

  16. Potomac & Above: Susquehanna Potomac Western Shore - MD Eastern Shore - MD Patuxent Lower Tributaries: Rappahannock York James Western Shore - VA Eastern Shore - VA

  17. Allocation Methodology First, Selection of Baywide Load Second, Allocation by Major Tributary Third, Allocation by Major Tributary and State

  18. The Maryland “Four” Maryland Western Shore Maryland Eastern Shore Potomac Patuxent

  19. Allocation Methodology First, Selection of Baywide Load Second, Allocation by Major Tributary Third, Allocation by Major Tributary and State Fourth, Maryland Allocation by Sub-Watershed

  20. The Maryland “Ten” Patapsco/Back River Upper Western Shore Upper Eastern Shore Upper Potomac Choptank Middle Potomac Lower Potomac Patuxent Lower Eastern Shore Lower Western Shore

  21. Allocation Methodology First, Selection of Baywide Load Second, Allocation by Major Tributary Third, Allocation by Major Tributary and State Fourth, Maryland Allocation by Sub-Watershed Fifth, Develop Tributary Strategy

  22. Well? The Necessary Elements Are All in Place

  23. Benefits Drivers Precedents Tools

  24. Drivers Tradable Pollutants - Nitrogen and Phosphorus Readily Measurable and Quantifiable Mainly Far Field Effects Widespread Interest in Trading by POTWs and Others

  25. Drivers Removal Cost Differentials Between Individual Point Sources Removal Cost Differentials Between Point and Nonpoint Sources A “Soft” Cap for Nonpoint Sources A Defined Cap for Point Sources (Enhanced Nutrient Reduction Strategy)

  26. Enhanced Nutrient Reduction Strategy for Point Sources Design Goals: “Limit of Technology” Nitrogen - 3 mg/l Phosphorus - 0.3 mg/l (Annual Average Concentration)

  27. Enhanced Nutrient Reduction Strategy for Point Sources Federal/State Grant Funding Planning 87.5 % Design 75% Construction 50% Calls for Nutrient Trading (In Some Unspecified Manner)

  28. “Load Goal” Annual “Load Goals” Defined for Each POTW Annual “Load Goals” Based on Design Capacity and 4 mg/l Statewide Aggregate Annual “Load Goal” Nitrogen 10.5 Million Pounds Phosphorus 830,000 Pounds

  29. “Load Goal” Based on 4 mg/l and Design Capacity 28 Percent of State Load Allocated to Point Sources

  30. “Load Goal” Based on 4 mg/l and Design Capacity 28 Percent of State Load Allocated to Point Sources

  31. “Load Goal” “Load Goal” Allocation Allocation Cap Individual WWTPs Statewide PS Total Cap Cap and Trade!

  32. Benefits Earlier Nutrient Reductions Lower Overall Capital Cost Lower Annual Capital Funding Needs Demonstrated Beneficial Economics

  33. Benefits Nitrogen Credit Trading in Maryland: A Market Analysis for Establishing a Statewide Framework by Lisa Bacon and Norm Pearson CH2M Hill Water Environment Research Foundation

  34. Trading can save $9 - $12 million/yr vs. the base case Slide: Lisa Bacon, CH2M Hill

  35. Percent savings by tributary:Point-Point Only Slide: Lisa Bacon, CH2M Hill

  36. Percent savings by tributary:Point-Point & Point-Nonpoint Slide: Lisa Bacon, CH2M Hill

  37. Trading could offer savings between 8% and 60% at the tributary level, reducing total cap compliance costs by 19% to 27% for 65 POTWs Bottom line on trading in Maryland (for now): Slide: Lisa Bacon, CH2M Hill

  38. Trading could offer savings between 8% and 60% at the tributary level, reducing total cap compliance costs by 19% to 27% for 65 POTWs • Most cost-effective solution does not involve all POTWs upgrading to the same treatment level Bottom line on trading in Maryland (for now): Slide: Lisa Bacon, CH2M Hill

  39. Trading could offer savings between 8% and 60% at the tributary level, reducing total cap compliance costs by 19% to 27% for 65 POTWs • Most cost-effective solution does not involve all POTWs upgrading to the same treatment level • Capacity to generate a sufficient supply of credits from point and nonpoint sources appears sufficient for robust, successful market Bottom line on trading in Maryland (for now): Slide: Lisa Bacon, CH2M Hill

  40. Trading could offer savings between 8% and 60% at the tributary level, reducing total cap compliance costs by 19% to 27% for 65 POTWs • Most cost-effective solution does not involve all POTWs upgrading to the same treatment level • Capacity to generate a sufficient supply of credits from point and nonpoint sources appears sufficient for robust, successful market • Results depend on willing buyers and sellers and their ability to find each other Bottom line on trading in Maryland (for now): Slide: Lisa Bacon, CH2M Hill

  41. Benefits Earlier Nutrient Reductions Lower Overall Capital Cost Lower Annual Capital Funding Needs Demonstrated Beneficial Economics Potential for Multiple Benefits from a Single Trade

  42. Precedents Similarities to Successful Trading Programs Connecticut Long Island Sound Nitrogen Trading Tar-Pamlico Trading Association Neuse River Compliance Association

  43. Tools A Supportive EPAand aNational Trading Policy An Outstanding Water-Quality Analytical Framework Chesapeake Bay Program Nutrient Trading Framework and Guidelines Viable Trading Program Design Options

  44. Fundamental Issues

  45. Fundamental Issues State Control Versus Market Forces

  46. Fundamental Issues State Control Versus Market Forces

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