In Praise of Nutrient Trading in Virginia

In mid-December Virginia Governor Terry McAuliffe, U.S. Environmental Protection Agency (EPA) Administrator Gina McCarthy and the Secretary of Agriculture all gathered in Fairfax County Virginia to applaud the expansion of the Virginia Nutrient Trading Program to meet the requirements of the U.S. EPA approved and mandated Watershed Implementation Plan. The nutrient trading program is an appealing, flexible and cost effective way to meet and maintain water quality goals. So, let’s back up and explain what is going on.

Volunteers in planting trees to reduce erosion along a stream

The Chesapeake Bay and its tidal waters have been impaired by the release of excess nitrogen, phosphorus and sediment. The EPA mandated a contamination limit called the TMDL (total maximum daily load for nutrient contamination and sediment) to restore the Chesapeake Bay and its tributaries. The TMDL sets a total Chesapeake Bay watershed limits for nitrogen, phosphorus and sediment that was about a 25% reduction from 2011 discharge levels for the six Chesapeake Bay watershed states and Washington DC. The pollution limits were then partitioned to the various states and river basins based on the Chesapeake Bay computer model and monitoring data. Each of the states and Washington DC were required to submit and have approved by the EPA a detailed plan of how they intend to achieve the pollution reduction goals assigned to them. These plans are called the Watershed Implementation Plans, WIPs. The Virginia WIP outlines a series of pollution control measures and strategies on how we are going to achieve and fund the pollution control necessary to meet the EPA mandate.

One of the key strategies was expansion of the Virginia’s successful nutrient trading program. Legislation passed in 2005 created the Chesapeake Bay Watershed Nutrient Credit Exchange Program and provides Virginia’s regulated pollution sources in the Bay watershed with the opportunity to meet required nutrient reductions through trading. The legislation also allows “point sources” like waste water treatment plants to purchase nutrient reductions from “nonpoint” sources like farms to offset new or increased nutrient discharges in excess of established load caps. Until recently the program had primarily been used by waste water treatment plants to offset the additional pollution loads from population growth. The Virginia nutrient trading program is based on the successful cap and trade program that was created to comply with the Clean Air Act’s Acid Rain Program limits for sulfur dioxide.

Virginia has managed to find other ways to utilize nutrient trading to reduce compliance costs for large point and non-point generators of nutrient contamination. The example cited by EPA Administrator McCarthy was the Virginia Department of Transportation (VDOT) who used banked pollution credits generated from farmers implementing Best Management Practices and riparian buffer stream bank plantings to off-set storm water pollution during road construction under increased Federal and State stormwater regulations that would have required building stormwater retention ponds and sediment filters for each construction section. VDOT did install permanent stormwater management infrastructure (using both traditional stormwater management and low impact strategies for the completed road, but using traded credits allowed them to avoid the wasteful building of temporary structures for the construction process yet reduce stormwater pollution on streams during construction.

Waste water treatment plants have predominately treaded among themselves. New expanded waste water treatment plans trade the excess credits that result for years after an expansion until the community “grows” into the plant, while those plants that have outgrown their facilities or need to meet more stringent standards by the credits. Some waste water treatment plants also created multi-year contracts with farmer to install nutrient reduction Best Management Practices during periods before expansion and improvement projects to meet tighter regulation or growth in the population served. There are critics of the program who oppose pollution trading because it allows polluters to buy their way out of controlling their pollution or restoring their degradation. The critics see only that entities are paying to pollute. However, with a growing population only a trading program can provide a framework to offset the inevitable additional pollution loads that come with more people.

Some critics are concerned about the potential for fraud or abuse. However, as you can see in the examples cited above this strategy allows for offsetting a short lived environmental impact without a huge and ultimately wasteful capital expenditure. There are limits to resources including capital, and a trading framework allows for cost effective temporary or longer term solutions. In the examples above in Virginia the permitted entity is required to verify and report the offset credits. Since most permitted facilities are VDOT, public waste water treatment plants and municipalities with storm water permits one hopes their veracity can be depended on to a greater extent and they have the ability to partner with Conservation Districts who have the expertise to evaluate the Best Management Practices in place.

Virginia’s Chesapeake Bay Watershed Nutrient Credit Exchange Program requires a level of Best Management Practice implementation called for in the nutrient tributary strategies to achieve nutrient reductions. You must achieve this level of nutrient reduction (known as the baseline) before you are allowed to generate and sell offsets to potential trading partners. Once the baseline level of nutrient reductions is achieved, additional reductions using approved Best Management Practices or land use conversions are eligible to generate offsets for trading. Cost share dollars can be used to implement the BMPs that achieve the baseline, which must be completed on the entire USDA Farm Services Agency tract before generating tradable credits. The program uses the incentive of earning additional dollars and cost share to further push all farmers to implement Best Management Practices on all their lands.

For a trading program to succeed there needs to be a regular and predictable demand for credits and a fairly straightforward and simple way to obtain the needed credits. Realistically the program will be limited to meeting the compliance needs of county and township stormwater permits, VDOT construction projects and if counties participate in facilitation and mandate the use then for construction projects large and small. The need for credits could be reasonably projected by county staff.

To allow for future population growth there might be a permanent demand for offsets by newer communities. The annual payments, maintenance of Best Management Practices or and use conversions and verifications could be funded by homeowner association fees. Every acre of development requires many more acres of supporting infrastructure development, schools, roads, shopping centers, churches, and public buildings. All this development increases runoff and additional nitrogen, phosphorus and sediment loads from sewer and septic systems and stormwater runoff from pavement and yards. Virginia has plans to “seed” the program to install some eligible credits in the Water Quality Improvement Fund for each watershed. In order for this to work the Conservation Districts in each watershed must have adequate funding, training and incentives. The dollars spent on these programs are the cheapest way to comply with the EPA mandate and cleanup our rivers and streams.


Full disclosure: In another part of my volunteer work I am a Director of the Prince William Soil and Water Conservation District. You should check out all that the Conservation District does at their web site.

CO2 Emissions and Net Generation

Last week the Environmental Protection Agency (EPA) announced the new regulations that the EPA is proposing under the Clean Air Act to cut carbon dioxide emissions from existing electrical power plants. Power plants are the largest single source of greenhouse gas emissions in the United States, but still only account for about 32% of greenhouse gas released in 2012 (and slightly more of carbon dioxide). Greenhouse gases are: carbon dioxide (CO2), fluorinated gases, nitrous oxide and methane (CH4). According to the EPA CO2 represents 84% of mass of greenhouse gas emissions and that the climate models indicate to be the cause of climate change.

The proposed regulations will require power plants to cut their CO2 emissions by 30% from 2005 levels or 18% from 2013 levels on average across the United States by using a combination of strategies. The proposed regulation will have a very limited if any impact on the CO2 concentrations in the atmosphere. If these regulations were implemented and in effect today, the effect would be to reduce overall CO2 emissions of all the nations on earth by about three quarters of a percentage point, and by the time they are actually implemented the impact will be far less as U.S. emissions shrink slightly as China and India grow rapidly. In 2012, the U.S. represented about 16% of world CO2 emissions. These proposed regulations for power plants will not change the fate of the planet.

The approach the EPA is taking is to allocate to each state a CO2 limit. The basic formula for the state limit is a rate:

CO2 emissions from fossil fuel-fired power plants) divided by (state electricity generation from fossil-fuel fired power plants plus certain low- or zero-emitting power sources).

Existing hydropower is excluded from the base calculation, but additional hydropower will be included in the denominator. However the goals for states are very different. For example, the final goal for Virginia is 810 pound of CO2 emitted per net megawatt hours of electricity produce in the state, for Maryland it is 1,187 and for West Virginia 1,620. You may wonder why the targets are different. The existing power plants in the electrical grid and their location determine the basic scale of the numerator. Power and commerce does not stop at state boarders, it moves across state lines. In addition, power plants are built to last generations so the ratio is determined by location of nuclear power plants, coal fired power plant, access to natural gas pipelines to supply natural gas to fire power plants, and history.

Below is data for March 2014 for a few states, the California, New York, and Massachusetts operate versions of cap and trade programs. Of these states only New York generated enough electricity within their borders during March 2014 to satisfy the needs are the state. Those states have become net buyers of electricity. They have outsourced the generation of power and its related CO2 emissions to other states. In addition, it appears that those states have also outsourced much of the industrial sector, importing products from other states and countries. Though I have only listed a few states you can see the pattern, Texas, South Carolina and Pennsylvania are net generators of electricity. Note that the actual capacity of the system is higher; March is a relatively modest demand month (no need for air conditioning).

All data from EIA

Washington DC besides not being a state has no goals from the EPA because it does not generate any power, though the waste water treatment plant at Blue Plaines is expanding its use of generated methane to power the plant as a renewable source of power and looking at the possibility of installing solar panels to supply power to the facility. You can take a look at the data on the U.S. Energy Information Agency, EIA, site to see which states and regions are net generators and which are net users of electricity. Also, you can see by the use of electricity for industry where in the United States we have the most industrial production.

As the  economics writer Robert J. Samuelson recently pointed out in an editorial in the Washington Post that thought we believe that climate change poses a threat to many of the earth’s citizens, we lack the technologies to stop it. The purpose of the EPA regulations seems to be to create the political and economic that fosters the development of technologies that will be needed for mankind to weather the storm and survive. “...But there is no assurance that this will happen, and much time and money may be invested in futile and wasteful efforts.” Both Mr. Samuelson and I are among the supporters of the idea of a carbon tax. Taxing the carbon content of products might be a more direct method to control CO2 generation and more effective method of reducing CO2 production without regulators taking control of a significant segment of the economy and could be applied to imports. Cap and trade schemes have a tendency to export manufacturing and generation. We should all remember when making purchase decisions that when we buy items manufactured in China or India that they were made using the dirtiest coal fired electric power plants on the planet. However, a direct tax must come from the legislature, not regulation. It would certainly generate badly needed revenue for our government that is running at a deficit.

With the CO2 limits imposed on states and management of how to cut them, the EPA is now taking control of the power generation sector of the economy to remake that industry in a less carbon intensive and more efficient vision. These regulations are likely to increase the cost and possibly limit the availability of electricity. These regulations will mark the end of the era of using coal to generate electricity in power plants with the EPA issuing CO2 “budgets” and tightening regulations on other coal burning emissions. Creating regional or national carbon trading market for “carbon credits” has the potential to prevent the reemergence of manufacturing in the United States that has been sparked by cheap natural gas and other favorable conditions. The EPA CO2 regulation for power plants may not be the right plan- my crystal ball is unclear. It is being proposed and will be implemented entirely by regulation without the support of congress as the elected representatives of the American People.

Supply and demand are more balanced on a regional basis, but Texas is still carrying the west

Less Rain Means a Cleaner Bay

Rainfall has been below normal. In the Washington Metropolitan area Virginia, Maryland and the District of Columbia are dependent on the flows of the Potomac River and the Occoquan for their water supply. Potomac River basin has been abnormally dry this year with the eastern shore of Maryland in a moderate drought and river flows below normal. Although the recent rainfall has eased drought in some areas, not enough rain has fallen to raise watershed stream flow to normal levels. Temperatures have been abnormally high and there appears little chance for precipitation in the near term.  But for now, the Interstate Commission on the Potomac River Basin, ICPRB, reports that from a water supply perspective, there is sufficient flow in the Potomac River to meet both the Washington metropolitan area’s water needs and the environmental water flow needs without augmenting river flows by releasing water from the upstream reservoirs. So we can enjoy the clearer flows of the river with little worry or need to conserve water for now.

The ICPRB allocates and manages the water resources of the Potomac River through the management of the jointly owned Jennings Randolph and Little Seneca reservoirs, the Potomac River Low Flow Allocation Agreement and the Water Supply Coordination Agreement adopted in 1982 which designated the ICPRB as responsible for allocating water resources during times of low flow and assist in managing water withdrawals at other times. The ICPRB limits water withdrawals by the local water utilities coordinating Fairfax Water’s utilization of the Occoquan and Potomac and limiting total withdrawals from the Potomac if necessary. In the event that the Potomac River flow at Little Falls is below 700‐million gallons per day the ICPRB releases water from Jennings Randolph and Little Seneca reservoirs to make up the flow and ensure that the saline and freshwater balance necessary to maintain the oxygen levels for oysters, clams and crab populations is maintained. The reservoirs ensure in-stream flows to meet minimum aquatic habitat requirements and the drinking water needs of the region.  

The July 5th Water Supply Outlook from the ICPRB reports that both groundwater and stream flow remain adequate for the short term, but are below normal as rainfall has been below normal for much of the early spring and June. Jennings Randolph (the big reservoir) is full and we are not going to run out of water this year. The good news is that nitrogen and phosphorus contamination in the Chesapeake Bay could fall to the lowest levels since the droughts of a decade ago. The nitrogen and phosphorus contamination in the Bay is correlated with rainfall as seen below and we can enjoy this little preview of what a cleaner Bay might look like.

From the Chesapeake Bay Program 2012

Since the 1970’s large algae blooms have formed in both the Potomac and Upper Bay portions of the Chesapeake Bay watershed each summer. Larger than normal blooms occurred in the upper Chesapeake Bay and its tributaries during August and September 2000 and 2011. These blooms were probably the result of greater than normal amounts of freshwater and nutrients entering the Bay in those years, but there are still factors that need to be studied.  The dead zones form in summers when higher temperatures reduce the oxygen holding capacity of the water, the air is still and especially in years of heavy rains that carry excess nutrient pollution from cities and farms. The excess nutrient pollution combined with mild weather encourages the explosive growth of phytoplankton, which is a group of single-celled algae. While the phytoplankton produces oxygen during photosynthesis, when there is excessive growth of algae the light is chocked out and the algae die and fall below the interface between the warmer fresh water and fall into the colder sea water. The phytoplankton is decomposed by bacteria, which consumes the already depleted oxygen in the lower salt level, leaving dead oysters, clams, fish and crabs in their wake. Thus, the name- dead zone.

In a wedge estuary such as Chesapeake Bay the layers of fresh and salt water are not typically well mixed, there are still several sources of dissolved oxygen. The most important is the atmosphere. At sea level, air contains about 21% oxygen, while the Bay’s waters contain only a small fraction of a percent. This large difference between the amount of oxygen results in oxygen naturally dissolving into the water. This process is further enhanced by the wind, which mixes the surface of the water. Recent heavy wind storms may have increased oxygen levels in various water layers. ICPRB staff scientists will be working with Maryland and West Virginia natural resources scientists to survey algae blooms in the upper Potomac watershed. Researchers will visit numerous sites along the Potomac, its South Branch up to Moorefield, W.Va., the Cacapon River, and the lower Shenandoah River. The summer-long assessment will document the types and extent of algal blooms in this section of the watershed.

While the recent storm brought much damage, the powerful winds that took down trees also served to mix the waters of the Potomac. The waters of the Bay appear clearer than they have in recent years. While drought does improve nitrogen, phosphorus and sediment levels in the Bay in the short run, the cost of drought can be high (agricultural losses and water restrictions) and ultimately droughts end and the rains will come.  The Chesapeake Bay Foundation still judges the Bay to be “dangerously out of balance” despite progress made in the health of the Bay in the past 30 years and this year’s clear waters and healthy shad run. As the Washington Post Reported recently, the District’s 45 miles of Potomac watershed streams and rivers is so tainted with bacteria from the combined sewer overflows that the city prohibits swimming. The waters of the Potomac are the primary drinking water supply for the region they should be clean enough to be safe for swimming and recreation.  The Watershed Implementation Plans from the six states and Washington DC and the $2.6 billion sewage treatment plant upgrade for Washington DC under the Chesapeake Bay TMDL will further improve the waters of the Potomac and the Bay in the next decades. The Maryland, Virginia and the District estimates that it will cost more than $30 billion for them to meet the mandates of the Chesapeake Bay TMDL pollution diet over the next 13 years. Water is not free, it’s just we do not often see many of the costs associated with it. We need to see and understand all the cost of guaranteeing 24/7 access to clean abundant water.