Gulf Plan May Drive EPA Bid For Water Trading In Mississippi Basin

By Erica Martinson
Daily News from INSIDEEPA.COM; June 13, 2008

EPA officials are hoping that the agency’s upcoming action plan for addressing the Gulf of Mexico’s “dead zone” of oxygen-depleted waters could drive a new agency effort to launch a watershed-wide nutrient trading program in the Mississippi River watershed after struggling to develop such a program in the Chesapeake Bay area.

A state-federal Mississippi River-Gulf of Mexico Watershed Nutrient Task Force, which is chaired by EPA water chief Benjamin Grumbles, is scheduled to unveil June 16 in New Orleans a long-awaited action plan for addressing excess nutrient runoff in the Mississippi River watershed.

Excessive levels of nutrients such as nitrogen and phosphorous result in diminished oxygen levels in waters because they increase algal growth — a process known as eutrophication — which eventually lowers oxygen levels. The excess nutrients come from both point sources like wastewater treatment plants and nonpoint sources like stormwater runoff from agricultural land where nutrient-rich fertilizers are used.

EPA and other trading supporters hope that nutrient trading programs can help the Mississippi River Basin states deal with the Gulf of Mexico dead zone by creating incentives for unregulated nonpoint sources, such as agriculture, which discharge the bulk of the watershed’s nitrogen and phosphorus, to reduce the amount of nutrients entering the basin.

EPA officials and other supporters of water quality trading have been struggling to create a water quality trading program for the Chesapeake Bay watershed as a way to limit nutrient runoff in that region. Sources have said, for example, that Pennsylvania’s nutrient credit trading program has been struggling to attract buyers for credits because municipal sewage treatment plants are wary to purchase credits from agricultural sources because of uncertainty over how long the credits will be available.

And last year, Chesapeake Bay states asked EPA to defer discussions of regional interstate trading over concerns that the complexity of allowing trades between state programs that have widely varying rules will hamper the individual state programs, which are just getting under way.

Supporters of water quality trading say a watershed-wide trading approach in the Mississippi River Basin has the potential to be more successful there than in other parts of the country, in part because none of the states in the region have a water quality trading program.

“We believe that the Mississippi River Basin is an ideal candidate” because a regional trading program could be created from scratch, Mark Kieser, senior scientist and principal at Kieser & Associates, a water quality consulting firm, told a June 10 meeting on environmental markets hosted by the Katoomba Group.

Even before the action plan is unveiled, Grumbles has unveiled several new agency measures intended to encourage water quality trading in the Mississippi watershed.

Speaking at the June 10 meeting, Grumbles reiterated that one of his top priorities for the last six months of the Bush administration is to “help move states more and more to the numeric water quality standards for nitrogen and phosphorus,” which he hopes “will boost trading,” as the agency seeks to get nutrient trading markets off the ground in the Mississippi River Basin.

The agency’s focus on water quality trading falls in line, Kieser said, with EPA’s continued push in the Mississippi River region to require tighter nutrient water quality standards in permits, while deciding in previous meetings of the task force to forgo options to create a region-wide total maximum daily load (TMDL). A TMDL is a measure of how much of a contaminant a water body can take before becoming impaired.

“From what we’ve seen . . . water quality standards will create more robust trading than a TMDL,” because numeric standards are likely to result in more stringent effluent limits from wastewater treatment plants than would occur with a TMDL, Kieser said.

States, however, have been generally reluctant to adopt numeric nutrient standards. Last year, after Grumbles made another push for numeric, rather than narrative, criteria, the Association of State & Interstate Water Pollution Control Administrators told the EPA water chief that the agency’s emphasis on numeric criteria fails to address implementation challenges, including states’ position that nutrients differ from other types of pollutants are less amenable to numeric criteria.

Grumbles also announced June 10 that the agency will devote $4.2 million in fiscal year 2009 to grant proposals that will use water quality trading programs to reduce nutrient loads in three Mississippi River watersheds, including the Ohio River, the Upper Mississippi River, or the Lower Mississippi River. EPA says these three watersheds provide the most nutrients to the Gulf.

“This is seed money to grow an innovative solution to nutrient pollution and cut the size of the Gulf of Mexico’s dead zone,” Grumbles said in an announcement.

Kieser, during the June 10 meeting, highlighted challenges to regional trading in the Chesapeake Bay, where an attempt to combine different trading approaches tends to result in “parochialism and institutional push back.” Additionally, state administration changes and reinterpretation of state-level rules “can wreak havoc” on trading markets, he said.

His comments echoed concerns raised by EPA’s inspector general (IG) earlier this year, which urged the agency to adopt a slew of measures to assist Chesapeake Bay states in meeting 2010 water quality goals, including assisting states in developing trading programs. The IG said EPA “needs to develop a formal plan to capture and disseminate lessons learned” from the Bay states’ trading program, especially because the states are using different approaches. And the IG recommended EPA and states develop equivalent and clearly defined units of trades to facilitate future interstate trades.

But Will Baker, president of the Chesapeake Bay Foundation, disagreed with Kieser’s contention that already-formed state programs can act as a barrier to regional cooperation, saying the six-state Bay region is an ideal place for watershed-wide trading. Currently, Maryland, Virginia and Pennsylvania have nutrient trading programs.

Baker also cited plans in the Chesapeake Bay states for a watershed-wide TMDL for nutrients by 2011, as mandated by a previous court ruling. The TMDL could act as an incentive for a multi-state trading market, Baker says. — Erica Martinson