Pennsylvania

1
Pennsylvanias Nutrient Trading Program

• Forestry Workgroup Meeting
• November 28, 2006

2
What is Nutrient and Sediment Trading?

• Nutrient and sediment trading is an approach to
  improve water quality using market mechanisms to
  produce pollutant 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.

3
Nutrient Trading Policy and Appendix A

• October 1, 2005 - A Nutrient and Sediment
  Reduction Credit Trading Interim Final Policy and
  Guidelines published in the Pennsylvania
  Bulletin.
• This interim policy may be used to initiate
  trades and will be issued final after
  consideration of public comments.
• Comments were collected until December 31st.
• A revised final trading policy will be issued as
  an integrated package, to include the work of the
  Ch. Bay Tributary Strategy Steering Committee
  workgroups.

4
The program may be used by

• Point sources to comply with a new permitted
  nutrient limit
• Nonpoint sources to implement additional BMPs
  that help reduce nutrient loadings or
• Third parties that need to meet nutrient limits.

5
Trading and Usage of Credits Must be Consistent
with

• Clean Water Act
• Clean Streams Law
• All Federal and State laws
• Local Laws and Regulations

6
What May Be Traded?

• Total phosphorous and/or total nitrogen reduction
  credits
• All trading must involve comparable credits
  (nitrogen for nitrogen)
• Credit Unit of Trade
• Expressed as (mass/per unit time)
• Time must be consistent with compliance
  determined by NPDES permit or other applicable
  requirements
• Shelf life of one year

7
Where Trading May Occur

• Defined Watershed (e.g. Susquehanna or Potomac)
• Defined area with TMDL approval
• And / or other DEP-approved areas resulting from
  commitments such as the Chesapeake Bay Agreement

8
Thresholds of Eligibility For Credit Generation

• Point Source
• Discharge loading limit expressed in an NPDES
  Permit.
• Non-point Source
• Compliance with Act 38 Nutrient Management
  Regulations, Chapter 102 Erosion Sedimentation
  Regulations, Chapter 91.36 (Agricultural
  Operations) when applicable, and Chapter 92
  (CAFOs) when applicable.

9
Threshold Requirements

• 100 Foot mechanical setback is achieved when ONE
  of the following is performed
• Manure is not mechanically applied within 100
  feet of a stream
• There are no surface waters on or within 100 feet
  of the farm.
• Farm uses no manure application and applies
  commercial fertilizer at or below the Penn State
  recommended agronomic rates.
• OR
• 35 Foot buffer is achieved when
• A minimum of 35 feet of permanent vegetation is
  established and maintained between the field and
  the stream.
• Area can be grazed or cropped under a specific
  management plan, and permanent vegetation must be
  maintained at all times. (Permanent vegetative
  buffers 50 or greater in width may qualify to
  generate nutrient reduction credits.)
• OR
• 20 Reduction Option
• A reduction of 20 in the farms overall nutrient
  balance beyond baseline compliance.

10
Quantification and Application of Credits

• Point Source
• Credits calculated through
• Monitoring requirements in NPDES permit
• If not listed in NPDES permit, contact DEP
• Nonpoint Source
• Credits calculated through
• Mass balance methods (preferred)
• Information from sources such as Chesapeake Bay
  Model
• Other measurement methods acceptable to the DEP
  (e.g. monitoring)

11
Trading Ratios

• When calculating credits, trading ratios must be
  considered and used as appropriate.
• Ratios ensure trading is providing desired level
  of pollutant reduction and other water quality
  benefits.
• Applicable trading ratios could include those
  created by the agriculture workgroup and approved
  by DEP, along with a reserve and delivery ratio.

12
Application of Credits

• DEP will establish a reserve pool of credits that
  would be available to compensate for
  unanticipated shortfalls in quantity of credits
  that are actually maintained.

13
DEP will be responsible for

• Oversight and management of the Pennsylvania
  nutrient and sediment reduction credit program.
• Policy Decisions on issues such as
• Eligibility
• Credit certification
• Verification
• Compliance (monitoring and enforcement)
• May elect to delegate responsibility to Third
  Parties (audits and credit verification).

14
Trading Grant Awards

• Strawman Project Implementation - 225,000
• Local Trading Project Initiatives - 350,000
• Credit Generating BMP Implementation Revolving
  Fund Grants - 450,000
• ACRE Ag Compliance Projects - 775,000
• Legacy Sediment Research - 130,000
• Priming the Pump With Nutrient Credits
  Generated From Chesapeake Bay Stream Bank Fencing
  Projects
• These grants were awarded in April 2006.

15
Recent Activities

• Proposals
• 24 proposals have been submitted to DEP looking
  to generate credits.
• 8 proposals have been approved, the remaining are
  still currently being reviewed.
• Trades
• It was announced on Nov. 2nd that Red Barn
  Trading Company signed a sales contract with a
  developer for N and P credits.