Ohio River Basin Trading Program: Quarterly Update

November 18, 2009 Public Webcast

Jessica FoxProject Managerjfox@epri.com

Audio:

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1-877-789-2085PIN: 7712 Purpose of Webcast

• Quarterly Project Update• Continue Collaborative Framework• Invite Comments and Questions

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1-877-789-2085PIN: 7712 Project Highlights

Last Webcast:• Highlighted WARMF modeling effort• Collaborator in the Spotlight: ORSANCO• Funding Pending

This Webcast:• Funding Executed• Project in the press• Collaborator in the Spotlight: American Farmland Trust• EPRI Complementary Project: Ohio River Ecological

Research Program• EPRI Launching Credit Stacking Research

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1-877-789-2085PIN: 7712 New York Times Series: Toxic Waters

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1-877-789-2085PIN: 7712 EPRI Interests

To establish water quality trading as an economically, socially, and ecologically palatable option for improving the outlook of polluted waters in the Ohio River Basin.

Alexander et al. 2000 Nature V 403

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1-877-789-2085PIN: 7712 Project Collaboration

Electric Power Research Institute

American Electric Power

American Farmland Trust

Hoosier Energy

Hunton & Williams

Kieser & Associates

Miami Conservancy District

ORSANCO

Tennessee Valley Authority

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1-877-789-2085PIN: 7712 Project Area

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1-877-789-2085PIN: 7712 Project Approach

• Addressing the complex issue of water pollution in the Ohio River Basin will require significant collaboration, communication, consensus building, and outreach.

• Project will include the following elements:– Scientifically & Ecologically Defensible – Business Friendly– Regulatory Compliant – Social Benefit

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1-877-789-2085PIN: 7712 Funding

• EPA Targeted Watersheds Grant, Contracting, $1M, with match is $1.3M

• Conservation Innovation Grant USDA/NRCS Grant, Contracting, $297K, with match is $594K

• EPRI Supplemental Project, raised $310K, seeking $500K

Current Funding including match: ~$2M

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1-877-789-2085PIN: 7712 Conservation Innovation Grant

• Grant: $297,778• Coupling Market Infrastructure with Ecosystem Service

Markets: Initial Framework Scoping for an Ohio River Credit Trading Program

• The project will identify the structure, and preliminarily test the function of a specific agricultural credit calculation tools for water quality and greenhouse gas trading in a water quality credit trading market developing in the Ohio River.

• Investigating linking WARMF to USDA/NRCS Nutrient Trading Tool (NTT)

• http://www.nrcs.usda.gov/programs/cig/2009awards.html• 12 month scope

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1-877-789-2085PIN: 7712 EPA Targeted Watershed Grant

• Regional Water Quality Trading Program Design for the Ohio River Basin. Grant: $995,000

• 3 year grant• Phase II proposal, Program design and implementation.• Scope:

– Overall Program Management & Design – Stakeholder Engagement– WARMF Modeling, Verification & Monitoring, Credit

Registry

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1-877-789-2085PIN: 7712 EPRI Supplemental: Credit Stacking

Funded by EPRI Supplemental Project in WQT: American Electric Power, Tennessee Valley Authority, Hoosier Energy, Duke Energy

Phase I: National survey to collect case studies, practices, protocols, and agency perspectives. (funded)

Phase II: Generate “Guiding Principles” for credit stacking. (funded)

Phase III: Propose methodology to agencies and get interagency consensus. (to be funded)

Phase IV: Pilot test methodology in Ohio River Basin.

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1-877-789-2085PIN: 7712 EPRI Press Release

EPRI Wins $1.3 Million in Federal Grants for Water Quality Trading Program

Collaborative Effort Looks to Curb Nitrogen, Phosphorus Discharges in Ohio River Basin

Palo Alto, Calif. – 10/13/2009 - The Electric Power Research Institute (EPRI) announced today receipt of $1.3 million in federal grants from the U.S. Environmental Protection Agency (EPA) and the U.S. Department of Agriculture (USDA) to launch a

regional water quality trading program in the Ohio River Basin.

Water quality trading employs a market-based approach designed to enable facilities facing high pollution control costs to buy reduction credits from another facility or entity with lower pollution control costs. The goal is to achieve the same or even better water

quality improvements more efficiently and at lower costs.

The project will focus on nitrogen and phosphorus discharges from sources within the Basin and is expected to result in cost-effective water quality improvements

throughout the region which includes portions of Illinois, Indiana, Kentucky, New York, Ohio, Pennsylvania, Virginia and West Virginia.

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1-877-789-2085PIN: 7712 Ohio River Basin Trading Project:

Media Summary

EPRI Press Release EPA/USDA Grant Awards issued Oct. 14

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1-877-789-2085PIN: 7712 Project Website Hits

Water & Ecosystems: Ohio River Basin Trading Pilot Project

315365

435542 521

799

200250300350400450500550600650700750800850

May June July August Sept Oct

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1-877-789-2085PIN: 7712 Collaborators Spotlight

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1-877-789-2085PIN: 7712 AFT’s Mission

Stop the loss of farmland and protect it for future generationsHelp farmers and ranchers produce a cleaner environmentMaintain economically sustainable agriculture sector

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Agriculture provides a host of environmental goodsAgriculture can cost effectively improve water quality and mitigate GHG

Opportunity

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1-877-789-2085PIN: 7712 Challenge

Make it in farmers’ economic interests to provide environmental benefits

Develop ecosystem service markets

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1-877-789-2085PIN: 7712 Partners

Project Partner:

Project participants: producers, agriculture groups, state agencies, agriculture businesses, conservation districts…

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Project Vision

Develop a multi-state water quality trading system that improves water quality at a lower cost and creates economic incentives for farmers to adopt conservation practices

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Project Objectives

Engage key agriculture stakeholders in development of the marketUnderstand and address barriers to producers participationEducate producers on the opportunityProduce enough credits from farmers to make market sustainable

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1-877-789-2085PIN: 7712 Significant Demand

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Engaging Ag

Agriculture Advisory Committee Farmer Listening SessionsOutreachMedia

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Challenges

Understanding which BMPs qualifyDetermining baselinesInvolvement of third partiesAddressing trust issuesMarket structures that work for farmersReporting and verificationManaging riskCredit stacking

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Summary

Opportunity for agricultureFarmers initial reaction is positive but they are concerned about regulationNeed ag engaged to address concerns and develop market that works

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Cleaner waterCleaner airFarmers see environmental services as legitimate “crops” and part of their whole farm economic planning

Vision of success

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1-877-789-2085PIN: 7712 Complementary EPRI Work

• 37 Years Old.

• The World’s Longest and Largest maintained freshwater database on effects of thermal discharge from power plants.

• Shining example of what collaboration across shared water bodies can accomplish.

• Managed by Doug Dixon, EPRI

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1-877-789-2085PIN: 7712 Why This Is Innovative

• Cross-industry & agency collaboration: farmers, power plants, wastewater treatment plants, EPA, USDA, etc.

• Ecological Foundations: Use models to inform design, implementation, and adaptive management.

• Multi-state: Include at least 8 states• Uses markets to address intractable ecological issues:

Gulf of Mexico Hypoxic Zone• Multi-media: Water, Air, LandProject will be a model for the rest of the nation on how

to cost-effectively address multidimensional ecological issues.

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1-877-789-2085PIN: 7712 Next Quarter Activities

• Draft Operating Charter• Draft Interstate MOU• Begin Research into Credit Stacking• Start Defining Project Steering Committees

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1-877-789-2085PIN: 7712 Ohio River Trading Project Website

www.epri.com/ohiorivertrading

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1-877-789-2085PIN: 7712 Staying Connected

• Save the Date, Quarterly Webcasts:– February 17, 2010 - 10 am PT– May 19, 2010 – 10 am PT

• Add Yourself to Our Contact List• Send Comments

– E-mail: Ohiorivertrading@epri.com– www.ohiorivertrading.com

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Questions & Answers: If you have a question during the webcast you can…

Type your question to the presenters using the Q&A Feature

We will only have time to answer a few questions

during the webcast, but we will keep track of what is

asked and get back to everyone with the answers

Let us know you have a question

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Jessica Fox, Project Manager

Project e-mail: ohiorivertrading@epri.com

www.epri.com/ohiorivertrading