Water Quality Credit Trading

Florida League of Cities2013 Annual Meeting

Overview

• Clean Water Act 101• Complexities of Regulating Nutrients• Water Quality Credit Trading

– New statewide policy– A tool in the toolbox for water body restoration

• Future Policy Modifications?

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Clean Water Act 101• Water Quality Criteria

– Protect “designated uses” of water bodies– Translated into discharge permit limits

• TMDL Program (safety net)– Restoration program– Point and non-point sources allocated pollutant

loads• Discharge Permits

– Wastewater Treatment Plants– Municipal Storm Water Discharges

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Nutrient TMDLS

• Florida already has over 80 nutrient TMDLs– FDEP Numeric Nutrient Criteria Rule approved by

EPA means even more nutrient TMDLs• Significant nutrient reductions for storm water

– Bayou Chico: 30% TN & TP reductions– North Escambia Bay: 35% TP reduction – Hillsborough River (channelized segment): 50% TN

& 60% TP reductions– Lake Dora: 67% reduction in TP

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Complexity of Regulating Nutrients• Citizens have an expectation of healthy natural

rivers, streams, lakes, and marine waters…

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• …but public expectations do not always mesh with scientific, economic, & regulatory realities.

• National Academy of Sciences: Reality Check– Report on Chesapeake Bay TMDL– Public concern ≠ public willingness to pay the price– Disconnect between achievement of a standard &

appreciable water quality improvement– Substantial public commitment and “some level of

sacrifice from all who live and work in the watershed”

Complexity of Regulating Nutrients

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What tools are available to help cities restore water bodies and comply with nutrient load reduction

requirements (i.e. TMDLs) in a cost effective manner?

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Water Quality Credit Trading• TMDL Program (safety net)

– Restoration program– Point and non-point sources allocated pollutant

loads• Water Quality Credit Trading

– Pollutant reductions are environmentally valued in the form of “credits,” which can then be traded on a local “market” to promote cost-effective water quality improvements.

– Goal: better water quality protection for less $$.8David Childs • Hopping Green & Sams

Water Quality Credit Trading• HB 713 (2013)

– Bipartisan Passage– Supporters included the League of Cities,

Southeast Milk, Audubon, and other diverse interests

– Expanded the St. Johns Pilot Program Statewide– Trading is voluntary & completely market driven

• References: – §403.067(9), F.S. – Rule 62-306, F.A.C. (not yet updated)

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Water Quality Credit Trading

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CAFO Storm Water Utility

Economic Solution

$$$

Nitrogen Load

► Water Quality Standards Achieved►Local Government Saves Money

Water Quality Credit Trading• The nitty-gritty

– Credits must be quantifiable & enforceable– Point source credits must be measured– Nonpoint sources can be estimated

• Reasonable assurance• Uncertainty factor

– Location factors may increase credits needed– Creditable actions include…installing treatment

equipment…operational changes…structural nonpoint source management

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Water Quality Credit Trading• Practical & Program Limitations

– Trading will not work everywhere– Need willing buyer and willing seller– Seller must meet its allocation & can only sell its

surplus reductions– Transaction must include a surface water

discharge permit holder– No credit for land use changes that don’t result in

loadings equal to or less than natural conditions– Ongoing nutrient criteria litigation = chilling effect

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Credit Trading 2.0?

• Remove barriers to entry into marketplace– Allow trading in absence of discharge permit– Loosen timing requirements– Enable “mitigation banking” style credit

generation• Expand concept into water supply arena

– Promote land use conversions that restore landscape and promote aquifer recharge

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Discussion

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David W. Childs DavidC@hgslaw.com

Hopping Green & Sams119 S. Monroe StreetSuite 300Tallahassee, FL 32301(850) 222-7500