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Regional Program Priority
Issue Areas
Regional Initiatives
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The
following is a brief summary of the water quality issues, work
to date, and capabilities associated with Water Quality Trading
as a Tool to Improve Nutrient Management:
Numerous water bodies throughout
Region 2 are impaired due to nitrogen and phosphorus. These
impairments result form unregulated nonpoint sources, regulated
point sources that have either minimal or no nutrient controls,
as well as other sources including atmospheric deposition. For
example, in New Jersey, a 1999 USGS statistical analysis of
freshwater stream monitoring data found that at 63% of sampling
stations total phosphorus concentrations resulted from a combination
of both point and nonpoint sources. In response, regulatory
agencies are implementing measures including: comprehensive
watershed programs; TMDLs for impaired water bodies; watershed-based
permitting; and nutrient discharge standards for entire classes
of polluters. These measures can be augmented by trading programs
that optimize the use of scarce resources within a watershed
to achieve pollution reductions at lowest cost, with possible
ancillary environmental benefits. Trading is an incentive-based
approach that can take many forms. It can be initiated by a
regulatory agency establishing an aggregate load allocation
for a group of dischargers, and providing the option for facilities
within the group to either make load reductions within their
facilities, pay for more cost effective reductions at another
facility or, for publicly owned facilities, participate in a
process to allocate available public financing to facilities
that can make least cost load reductions. Trading can also be
carried out through bilateral contractual arrangements between
regulated point sources and unregulated nonpoint sources. The
point sources would provide funding for nonpoint sources to
implement management practices that will effect equivalent pollution
reductions at a lower cost then can be achieved by the point
sources.
There is growing interest in water quality trading throughout
the nation, with numerous projects underway. Also, there are
substantial opportunities for water quality trading, as many
sources contribute to nutrient loadings, control costs can vary
substantially from one facility to another, and allowing one
facility to continue to discharge nutrients in exchange for
reductions at another site does not generally pose public health
or water quality risks (as might be the case with toxic substances).
However, there have been only a limited number of transactions
executed, especially those occurring between point and nonpoint
sources. To attract participants, programs must be structured
to adequately address numerous, often locally-specific, complexities,
including: calculating water quality benefits from point and
nonpoint source load reductions; establishing equivalency factors;
avoiding “hot spots;” and creating a structure for
economically-sound transactions that minimize transaction costs
while assuring stakeholders that water quality improvements
will be achieved.
Region 2 is well suited to test water qualilty trading methodologies,
as many areas contain a mix of rural/suburban land uses. These
include point sources, such as municipal treatment plants, and
nonpoint sources, such as agriculture, residential/commercial
developments and roads. In the case of agriculture, funding
made available through water quality trading programs can also
serve to enhance farm income while providing resources to implement
nonpoint source best management practices. This additional source
of income can help small farms remain competitive.
This regional initiative has been established to aid local stakeholders
to take advantage of trading opportunities. Through this effort,
the LGUs in Region 2 will build capacity by applying research,
education and extension expertise to identify and resolve impediments
and develop and test incentive-based trading methodologies.
The Region 2 Water Quality Program began this initiative in
November 2002 with the review of available literature on trading.
Early in January 2003, with the release of EPA’s Trading
Policy, the regional team met with EPA Region 2 management to
craft a concept plan for the regional initiative. Interest in
water quality trading had been expressed by several organizations
in the region, including in a position paper on “Phosphorus
Management of Agricultural Lands,” by the Agriculture
Committee of the Raritan Basin Watershed Program in central
New Jersey. The Raritan is a 1,100 square mile watershed with
an intensive mix of land uses and a well-established watershed
protection program. In response, the New Jersey Agricultural
Experiment Station (NJAES) provided a grant to the State Water
Quality Coordinator at Rutgers Cooperative Extension to identify
phosphorus point-nonpoint trading opportunities within the Raritan
Basin. The Raritan feasibility study identified 4 sub-watersheds
within the Raritan as potential sites for a point–nonpoint
source trading project.
To further the regional trading initiative, a full day session
on trading was convened during the Region 2 Program annual meeting
in June 2003. The keynote speaker was the Region 3 Program Coordinator
(Tom Simpson, University of Maryland), who presented his experiences
in water quality trading in the Chesapeake Bay watershed. Also
in June, the Region 2 Program aided EPA Region 2 in co-sponsoring
a phosphorous management conference in New Jersey, by facilitating
discussion of trading as an effective management tool. In November
2003, the findings of the Raritan study were presented to stakeholders
during a regional trading initiative meeting. This work highlighted
the role that could be played by the LGUs to advance trading
within Region 2. As a result, the New Jersey Department of Environmental
Protection requested that Rutgers prepare an EPA Watershed Initiative
proposal to develop a water quality trading program for the
Upper Passaic River Watershed in northern New Jersey. Discussions
also have begun among UPR and Cornell faculty and state agency
representatives to develop trading demonstration projects for
those jurisdictions, also as elements of the regional trading
initiative.
The Region 2 Program will test the use of online dialogue and
collaboration to augment face-to-face interactions in engaging
a wide array of stakeholders interested in the trading initiative.
Discussions have begun with OnLine Learning International (OLLI),
a subsidiary of Concord Consortium, a distance learning research
foundation, to develop and test the trading initiative online
dialogue process. The dialogue will engage academics, agency
representatives and other interested parties to address issues
and approaches in support of trading demonstration projects
throughout the region. If successful, ongoing management of
the online process will be maintained by Region 2 Program faculty
and staff, and may be expanded to other Region 2 Program initiatives.
The LGUs in Region 2 bring a wealth of experience in water quality
modeling, BMP design, implementation and evaluation, and the
development of economic models to optimize the use of scarce
resources within a watershed to improve water quality. Our key
partner, EPA Region 2, also brings unique capabilities, having
taken the lead in implementing the Long Island Sound Trading
Program, one of the most successful trading programs in the
nation. Building on the trust and reputation of our land grant
institutions, the Region 2 Program has already convened a broad
stakeholder group to explore trading feasibility in Region 2,
and received a strong charge from the group to move forward
in this area.
Project leads:
Christopher Obropta
Rutgers Cooperative Extension
14 College Farm Road
New Brunswick, New Jersey 08901-8551
Phone: 732-932-9800 x 6209
Fax: 732-932-8644
obropta@envsci.rutgers.edu
Jeffrey Potent
Regional Program Coordinator /US EPA Region 2 Liaison/Senior
Extension Associate Cornell University
US EPA Region 2
290 Broadway, 24th Floor
New York, New York 10007-1866
212 637-3857
212 637-3887 Fax
potent.jeffrey@epa.gov
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