Water Quality Credit TradingWater Quality Credit … Klang.pdfWater Quality Credit TradingWater Quality Credit Trading Workshop By: Jim Klang, PE Kieser & Associates 536 East Michigan

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

August 26, 2009 Water Quality Credit Trading Workshop

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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)


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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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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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


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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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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Questions

Documents

Water Quality Credit TradingWater Quality Credit … Klang.pdfWater Quality Credit TradingWater Quality Credit Trading Workshop By: Jim Klang, PE Kieser & Associates 536 East Michigan