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Transcript of Water Quality Credit TradingWater Quality Credit … Klang.pdfWater Quality Credit TradingWater...
Water Quality Credit TradingWater Quality Credit TradingWorkshop
By: Jim Klang, PEKieser & Associates
536 East Michigan Ave Suite 300536 East Michigan Ave Suite 300Kalamazoo, MI 49007
Why Trade? TN Reduction Cost Comparisons
Why Trade?Minnesota has:
• Two point-nonpoint permits p p p• One basin overlay point-point permit
Trading allows new NPDES discharge into a fully allocated river
Saves on cost of upgrades for some Rahr Malting, point-nonpoint, costs per
credit ~$3.50 (Feng Fang, JAWRA, 2005) Point point trading costs $2 $13 a credit Point-point trading costs $2 – $13 a credit Small WWTP upgrade costs of $0.5 M WQT
20-year costs ~$10K to $20K
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y $ $
Why Trade?Maryland Intends to accomplish:
• Allow new WWTPs• Allow new WWTPs
• Allow expansion of existing WWTPs• Allow continued growth• Allow continued growth• Offset all loads associated with growth• Create incentives for NPS reductions• Incentives for septic hookups• Avoid high stormwater costs
(All Maryland information provided by:Cy Jones, WRI)
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Water Quality Credit Trading
In this presentation:
Water Quality Credit Trading
p Core principles of regulatory requirements Permit requirements Estimation of credits; generated and
potential demand Discussion on where trading works Discussion on where trading works Types of trading to consider Examples Examples
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Regulatory Authority R i C di “Credit” (e.g., mass per period of time)
Requirements on Credits( g , p p )
• Measurable• Surplus• Real
Or, stated another way:/ f• Accountable / enforceable
• Additional to what is already being done• Equivalent same time same parameter• Equivalent, same time, same parameter
and same location
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Regulatory Authority R i T di Nondegradation / Anti-degradation
Requirements on Tradingg g
Anti-backsliding Standardized methods Credible Address uncertainties
• Point to nonpoint trades must include margin of safety (greater that 1 : 1 offsets)
Address fate and transport Address fate and transport Flexible compliance option: only for Water
Quality Based Effluents Limits (WQBELs)
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NPDES Permit R i f T d
Must be enforceable
Requirements for Trades
Monitoring and reporting provisions Effluent limits
• Conventional treatment requirementsq• Water Quality Credit Trading
Trading by rule reference state rule Trading by permit (special sctions) Trading by permit (special sctions)
• Coverage• Credit calculation estimation methods• Trade Ratio (list not fully inclusive):( y )
– Margin of safety– Net benefit for water resource– Location factors
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Generating a CreditReductions beyond what’s required
Generating a Credit
Point sources (effluent mass limit)• Trade credits created when treatment is beyond
Water Quality Based Effluent Limits (WQBEL)M it i d ti• Monitoring and reporting
– Daily flow and sufficient concentration samplingTrading limits = old mass limit - credits (mass)
Nonpoint sources Nonpoint sources• Monitoring (water quality versus establishment)• Modeling of load reduction• Margin of safety• Margin of safety• Verification, adaptive management
NPDES permit adjustment (point source) Legally binding agreements (nonpoint)
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Legally binding agreements (nonpoint)
Generating a CreditNPDES St t
Reduction beyond what’s required
NPDES Stormwater
Maximum Extent Practicable (MEP) Establish a Storm Water Management Plan
based on Best Management Practicesbased on Best Management Practices• Provides relief from having concentration limits • Must meet TMDL wasteload allocation• Iterative process (plan, monitor, assess, repeat)p (p , , , p )
EPA’s point of view:• If you can generate a credit, then you were not doing
the maximum you could do! Other options for generating credits:
• Accept a mass effluent limit • A flow (volume and rate) trading permit
Flow is not a pollutant (surrogate measure)
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• Flow is not a pollutant (surrogate measure)
Calculating Credit Demand Establish baseline conditions: Technology
B d Effl t Li it (TBEL) t it
Calculating Credit Demand
Based Effluent Limits (TBEL), or past permit Point sources compare requirements
against current performance• Monitoring records (assess several years)• Review daily and/or seasonal variability in flow• Review daily and/or seasonal variability in
concentrations(example, Offset = Peak Load – TBEL)
Nonpoint sources• Monitoring as available• Modeling estimation, Storm Water Management Plan
Adequate margin of safety (MOS) Account for Trade Ratios
Demand = (Offset Estimate * MOS) * Trade Ratio
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Demand = (Offset Estimate MOS) Trade Ratio
Wastewater Minimum R i tRequirements
Total Phosphorus (mg/l)
6
3
4
5
mg/
l)
Tradable
Must Treat
1
2
3
TP (m
Tradable
0
1
Raw Secondary TMDL
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Wastewater Minimum R i tRequirements
Total Phosphorus (mg/l)
6
T
3
4
5
mg/
l)
Must Treat
1
2
3
TP (m
Tradable = 0
0
1
Raw Past Standard TMDL
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Where Trading Works
Regulators willing to work with you
Where Trading Works
Regulators willing to work with you New plant in a capped watershed E i ti f iliti d i li itExisting facilities reducing limitsConventional options costlyConfidence in supply of credits Efficient mechanisms forEfficient mechanisms for
transaction cost management
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Where Trading Works( i d)
Pollutant suitability
(continued)Pollutant suitability
• Persistent in the environment• Cumulative source problemp• Common to buyer and seller• Buyer does not overly dominate loading*• Typical Pollutant Parameters: sediment,
nutrients, temp, D O stressors No bioaccumulative pollutantsNo bioaccumulative pollutants
• Mercury, pesticides, PCBs(Mercury pilot case studies only)
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(Mercury pilot case studies only)
Where Trading Works( i d)
Buyer does not overly dominate loading*
(continued)y y g
Trading can assist permittee cost management, when individual loading is causing most of the impairment if:causing most of the impairment, if:• Meeting effluent limits requires treatment beyond
Biological Nutrient Removal (BNR) technology • BNR implementation significantly reduces theirBNR implementation significantly reduces their
domination of the loading• Remaining treatment costs are very high due to
structural or operation costs and limitationsp Trading assists watershed permitting for
buyers that are barely over loading limits
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Where Trading Works( i d)
Watershed settings
(continued)g
Scale of watershed large enough to provide multiple sources with excess
d ti t ti lreduction potential Will not “cause or contribute” to a water
quality violationquality violation– Local hotspots– Watershed plan in place for water
resource of concern(TMDL, schedule, nondegredation,…)
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Where Trading Works( i d)
Economics (permittee)(continued)
Economics (permittee)• Differences in cost of reduction
significant between buyer and seller• Low transaction cost (mechanisms
existing or have a strong network)d• Trading provisions in place, or 3rd
party acceptance already tested (prevents costly delays from permit(prevents costly delays from permit challenges)
• Adequate watershed understanding*
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g
Where Trading Works( i d)
Adequate watershed understanding*
(continued)q g
Watershed managers who allow trading benefit from:• Trading in a watershed permit format• Trading in a watershed permit format,
providing coverage for multiple sites• Leveraging monitoring programs• Accelerating implementation goals• Leveraging additional assessment tools• Enhanced communication between sectors• Enhanced communication between sectors • Creating a sense of community around
water resource
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Where Trading Works( l d d)
Drivers and compliance uses
(concluded)p
Managing TMDLs, measurable milestones• Negotiation of wasteload allocations
L TMDL li h d l• Longer TMDL compliance schedules• Leverage cumulative source control
Managing future growth under a fully Managing future growth under a fully allocated system
Leveraging variance applications Implementing new water quality issues Implementing new water quality issues
• Nutrient standards• Nondegradation
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g
Types of Trading
Trading can be between
Types of Trading
g Point sources Industries under a pretreatment program Point sources buying from nonpoint sources NPDES nonpoint sources buying from point
or nonpoint sourcesor nonpoint sources Nonpoint sources (voluntary programs)
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Types of Trading( l d d)
Trading permits can be(concluded)
One-Off permits (one buyer, permit contains all coverage provisions, one or more seller)
Performed under state rules Performed under state rules Watershed permits with coverage for multiple
dischargers g Overlay permits (second permit in addition to
traditional permit, providing trading coverage) Facilitated by aggregators, brokers or
middleman
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Water Quality Credit TradingWater Quality Credit TradingWorkshop
Minnesota River Basin Point - NonpointPoint Nonpoint
SMBSC Facility
Dissolved Oxygen Impaired Reach
Rahr Malting Facility
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July 8, 2002 Blue Earth River y ,Eutrophication
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Phosphorus Causing Di l d O P blDissolved Oxygen ProblemsPh hPhosphorus
Increasesalgae
Algae die
OthBacteria use oxygen as they break
Other sources
use Results:
decreased =they break down algae oxygen
(BOD*)oxygen
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MPCA TMDL
Two Types of TradesS I
• Rahr Malting C (1997)
Same Issue• Southern Minnesota
Company (1997)
• Multi-parameters
Beet Sugar Cooperative• (2000)
Multi parameters affecting DO
A i ti ith S il• Phosphorus
• Association with Soil Erosion Protection • Association with Soil
Erosion Protection• Direct BOD/Ammonia
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Rahr Malting CompanyRahr Malting Company
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8 Mile Creek8 Mile Creek
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Rush River SiteRush River Site
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Minnesota River/Cottonwood RiverMinnesota River/Cottonwood River
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Southern Minnesota BeetSouthern Minnesota Beet Sugar Cooperative
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Spring Cover Crops8 832 A i 20058,832 Acres in 2005
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West Fork Beaver CreekWest Fork Beaver Creek
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Lessons Learned
• Individual permit public notice extended on
Point - Nonpointp p
both permits; resolving comments and concernsU d t di th t h d• Understanding the watershed: – High flow BMP contribution to low flow
issuesissues– Geographic discounts– Contributions from different sectors
• Law of large numbers; averaging works best across many sites
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Lessons Learned P i N i ( i d)
• Administrative overhead high
Point - Nonpoint (continued)g
– Accountability Documentation– Door knocking for new sites– Short Best Management Practice life
versus long life or permanent easementsPublic perception concerns– Public perception concerns
• “Buying their way out”• NRCS erosion estimates are overNRCS erosion estimates are over
estimating reality• Local champions are important
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Minnesota River Basin Point to Point (2005)Point to Point (2005)
Pomme de Terre
Minnesota River Basin Phosphorus Permit Coverage
River Watershed
Upper Minnesota River Watershed
MN River Basin from Jordan to Shakopee
MN River Basin Watersheds Upstream of Jordan
Areas Covered By the Permit
Areas Not Covered By the PermitN t C d B P it
Shakopee
Montevideo
River Watershed
Lac Qui Parle RiverW t h d
Not Covered By Permit
Jordan
Mankato
Marshall
Watershed
Blue Earth
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0 25 50 75 10012.5Miles
Minnesota River Basin General Phosphorus PermitGeneral Phosphorus Permit
Ph I A hi 35%Phase I Achieve 35%(2005 – 2010) cumulative reduction
Collect data for useCollect data for use by other TMDLs
Phase II Achieve 51% 2010 – 2015 cumulative reduction
1 /l TP ffl t1 mg/l TP effluent
Adaptive management
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Minnesota River Basin General Phosphorus PermitGeneral Phosphorus Permit
Initial coverage:
40 large continuously discharging WWTF (98% of WWTP loading)
29 smaller continuously discharging WWTF
71 controlled discharge WWTF (ponds)
12 unsewered and untreated communities
Future growth
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Lessons Learned 2008 began reduction requirements
Lessons Learnedg q
14 buyers and 3 sellers Traded (~1/3 of WWTPs required to reduce)
Leveraged other WWTP to upgrade within this permit cycle
Some plants will use trading in the long- Some plants will use trading in the long-term; those that have loadings that are slightly above their allocation
MPCA pleased with current progress
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Water Quality Credit TradingWater Quality Credit TradingWorkshop
Questions