Smoke……now Fire!: Chesapeake Bay nutrient trading to take off with new state law

Chesapeake Bay from Space

As readers may know, RS is the nation’s largest retailer of water quality improvement credits.  We operate the country’s first two successful retail nutrient off-set banks which service more than one million people in the upper Neuse River around Raleigh-Durham.

About once a week a stormwater permitee building a parking lot or other impervious surface will purchase nutrient reduction credits from RS’ Neuse River Basin Riparian Buffer and Nutrient Mitigation Umbrella Bank.

This is in contrast to many years of all smoke and no fire with regard to the subject of nutrient trading.  The cost of the coffee and doughnuts at the various seminars concerning such markets has traditionally exceeded the value of all trades nationwide combined.

Take, for example, the depressing “tote boards” that have been established to track the heretofore non-market for nutrient trading.  Here is a good example: The Nutrient Net, god bless ‘em, is perhaps the only market watch tool ever established prior to someone buying or selling the proposed product —  and then no one did.

But as with all things mitigation banking, patience has its rewards. With our partners EarthSource Solutions and the Chesapeake Bay Nutrient Land Trust, RS obtained and controls the “01” and “02” licenses to sell nutrients in the Chesapeake Bay watershed from the Wildwood and Cranston’s Mill Phosphorus reduction banks.

These permits are a unique accomplishment, but will not in and of themselves make nutrient markets take-off.  Just because a product is available does not mean someone will buy it.

Recall that regulatory markets for compensatory mitigation are not natural “organic” markets – they are markets borne of the firm fist of government regulation, enlightened by economics, in the service of superior regulatory outcomes.  In other words, no one wakes up in the morning wanting a “bowl of wetlands.”  The people must be forced to eat their cereal — at market prices.

That’s why we are celebrating the passage Senate Bill 1099 in the Virginia General Assembly and the governor’s signature.  This statute was a final critical component of a framework to finally enable off-site nutrient sales in the Commonwealth.  The law promises to finally make the oft-discussed policy of water quality trading in the Chesapeake Bay a day-to-day regulated practice.

Prior to SB 1099, the long touted Chesapeake Bay Trading Program suffered from a variety of encumbrances that were regulatory, procedural and economic, rather than a lack of commitment on the part of stakeholders and regulators.

Here’s a thumbnail description of the new statue S.B. 1099 used by Virginia’s legislative tracking services:

S.B. 1099:

  • Removes limitations on when permit issuing authorities MAY allow the use of Offsets and specifies certain conditions under which permit issuing authorities SHALL allow off-site options including:

►All sites less than 5 acres of land disturbance

►All sites with less than 10 Lbs of P

►All sites reaching 75% design and or treatment threshold

►All sites demonstrating alternatives have been considered to maximum extent practicable

  • Permittee can select an offsite option except in certain approved pro-rate fee localities (Hanover, Henrico, Williamsburg, and Chesterfield).
  • All permit issuing authorities, other than the approved pro-rata fee localities, must require that the nutrient reductions are in place or acquired prior to land disturbance.  The approved pro-rata localities have a transition period to meet this by July 1, 2014.
  • Pro-rata localities are authorized to acquire Offsets with collected pro-rata fees.
  • Permit issuing authorities SHALL allow the substitution of Offsets for existing nutrient controls when (i) substitution is for less than 10 pounds, or (ii) existing controls are not functioning as planned after attempts at maintenance.
  • Offsets may be used in compliance actions for temporal and permanent deficiencies.
  • Greater locality flexibility with use of Offsets also creates the opportunity for their use for economic development opportunities.

In Virginia, in the past, the lack of off-site options to reduce nutrient loads has resulted in developers meeting their water quality obligation to the bay using a variety of well-intentioned but relatively ineffective on-site controls.

For instance, thousands of commercial and residential sites over the last decade have resorted to the installation of filter boxes to clean up parking lot water run-off.  (These efforts are above and beyond the controls that require storm water detention ponds, which will still be in effect and still result in water quantity retention).

Now imagine, the current approach to on-site pollution control is to make certain the water draining from the site is funneled through a basket of trash and debris. Any filter that is not cleaned daily begins early on to do the opposite of what it was intended to do. Lenser filters are the ones to be relied on!

In Henrico County, Richmond, there are more 1000 of these devices — with more than 9000 individual canisters that must be cleaned or they cause pollution. Unfortunately, cleaning out the parking lot filters falls somewhere below the spic-and-span restroom and spotless hog dog counter in the world of convenience store management.

At long last, however, state and federal policy makers, legislators and regulators seem to have turn the tide in the Chesapeake. This new state law puts the final touches on what promises to be one of the nation’s most robust ecosystem markets.

Water quality improvements will begin to go where they work the best — not hurt the most — in America’s treasured bay.  We at RS and EarthSource Solutions are happy to flame the fire.