Federal Guidance Forthcoming on Water Quality trades


Water Quality Trading got a big boost this week from the EPA and USDA.  This would be a good business for Restoration Systems, and we are already engaged in it to some degree with our riparian buffer restoration projects in the Neuse and Tar-Pamlico basins.


The NCEEP just told me that our Brogden Road riparian buffer restoration site in the Neuse River basin is off-setting nearly 36,000 pounds of Nitrogen input to the watershed!  Developers are paying into the Riparian Buffer Restoration Fund at $11 per pound and NCEEP is providing the abatement by using the Brogden Road  site and others purchased through their Full-Delivery Program.

Water quality trading, like most mitigation programs, is only as good the rules that govern it.  These programs are highly regulated and should be, with appropriate “side-boards” placed around their implementation.  Except for the price of off-sets, which should always be allowed to meet the market demand, most other aspects of water quality trading should be carefully outlined in regulation and closely monitored for compliance in order to obtain the desired outcome.  The point has to be to improve water quality – not punish polluters, create markets for their own sake, or raise new funds for government programs.


(The new initiative was announced in part by Ben Grumbles of the EPA.  I am acquaintance of Ben’s and admired him a great deal when I worked in the U.S. Senate and he was the House Transportation Committee staffer for the Clean Water Act — a big job.  He was one of those invaluable “Hill Rats” who had a large enough brain to actually understand the huge water law he was responsible for and all its moving parts!)




Crunch Time for Water Quality Trading

EPA links on water quality trading



Press Release from USDA and EPA:

USDA, EPA Agree to Offer Incentives For Water Quality Trading Program

            The U.S. Department of Agriculture and the Environmental Protection Agency signed an agreement Oct. 13 to provide incentives for water quality trading between farmers and wastewater treatment plants.  Mark Rey, undersecretary of agriculture for natural resources and environment, and Benjamin Grumbles, EPA assistant administrator for water, met at a Maryland farm to launch the agreement that offers market-based incentives to farmers and ranchers to improve water quality through trading credits earned by reducing water pollution below allowable limits.

Farmers and ranchers who practice conservation measures to improve water quality can benefit from selling credits to an industry looking to purchase credits to meet its discharge limits, according to the two agencies. The challenge is to make these benefits evident to all farmers to encourage their participation, according to Rey and Grumbles.  USDA and EPA officials said farmers can participate in water quality trading by allowing wastewater treatment plants or other industries to earn pollution credits by planting trees, stabilizing streambeds, and reducing erosion on agricultural lands.

The four-page agreement requires the two agencies to coordinate activities, establish national water quality trading parameters, provide guidance to overcome market barriers, and develop a “working” water quality trading pilot program for the Chesapeake Bay.  “The purpose of this agreement is move forward with the use of water quality trading so we have an effective market-based tool to meet EPA’s water quality objectives,” Rey told BNA, following the ceremony.

More Participation in Trading

Grumbles said the agreement would allow more farmers to participate in water quality trading, which until now has been largely limited to point sources such as wastewater treatment plants and other industries.  “One of our high priorities is to increase the number of water quality trades among the agricultural community,” Grumbles said.  EPA’s water quality trading policy was issued in 2003 to find a cost-effective, market-based solution to reduce sediment, nitrogen, and phosphorus runoff, which typically comes from nonpoint sources of pollution, notably agriculture. Excessive nitrogen and phosphorus levels in streams, lakes, and rivers cause algae to bloom, depleting oxygen levels, and in extreme conditions, resulting in hypoxia, or dead zones.  Under the agency’s trading policy, one source, such as a sewage treatment plant, could meet water quality standards for a particular watershed by purchasing credits generated by another source, such as a farm that has reduced pollution by planting riparian buffers or stabilizing stream banks to guard against nutrient and sediment runoff at a much lower cost.  Three years after EPA issued its water trading policy, USDA and EPA officials agree that the absence of a clear definition of terms is preventing the emergence of a full-fledged water quality trading market.

National Parameters to Measure Results

One of the “top” goals of this agreement is to establish national water quality parameters with flexibility for local solutions, Grumbles told BNA.  According to Grumbles, the parameters crafted by EPA and USDA would identify specific measures and procedures to ensure accountability in trades. “Whether it involves trades of nitrogen, phosphorus, or sediment, we can provide some guidelines for measuring results,” Grumbles said.  Currently, there are no standard approaches for quantifying credits gleaned from stabilizing stream beds, reducing sediment loading in streams, and planting trees along river banks, according to EPA. Most of the trades, Grumbles added, are occurring between wastewater treatment plants and other industries.  “We all are excited about this partnership because it will result in standards and procedures that will enable the agricultural community to become more involved,” Grumbles said.

Joint Guidance Forthcoming

Both Grumbles and Rey separately told BNA the agreement “paves the way” for developing downstream guidance and to identify a farm where the two agencies can showcase the “effectiveness” of a water quality trading program. Rey added that USDA is coming out with its own guidance on market-based strategies that would be “available in the next month or two.”  The joint USDA-EPA guidance, which was originally due out in late June, was to offer solutions to remove regulatory barriers to developing water quality trading programs, such as the need to determine whether pollution reductions are comparable between point and nonpoint sources, according to EPA (37 ER 1571, 7/28/06 ).  As the agreement took effect upon signing, Grumbles said staff members of both agencies have begun to draft a work plan that would outline a schedule for when the national water quality parameters and guidance would become available. Grumbles said the agreement takes effect immediately.  Although Rey said no site has yet been identified, Grumbles said the 64,000 square-mile watershed presents numerous possible locations.

The USDA-EPA agreement is available at http://www.epa.gov/owow/watershed/trading/tradelinks.html