The new development down the street on the banks of my local river is discharging untreated stormwater directly into the river.  This river also happens to be impaired for sediment and bacteria.  This is being done in full compliance with my state’s nutrient trading regulations, even though trades are not supposed to imperil local water quality. How did this come about?

To be clear, I was an early (but cautious) advocate of nutrient trading, especially as an important tool to meet pollutant load goals of the Chesapeake Bay TMDL.  With colleagues at the Center for Watershed Protection, I contributed to a couple of white papers on the topic, led the team that developed West Virginia’s off-site stormwater compliance guidance document (link at end of article), and served on the technical committee assisting Virginia with the regulations for off-site compliance.

The “cautious” part in the lead sentence is that trading is a valuable tool when guided by a regulatory framework that governs the rules of the road.  Such a framework can help determine which sites are eligible for trades and how off-site pollutant reductions are verified.  Among these crucial concerns is how local water quality can be protected when trades are made across a watershed.

In Virginia, the regulatory safeguard for local water quality is that trades should not be in “contravention of local water quality.” However, anecdotal evidence indicates that off-site trades are being used for 50 to 90% of new development projects across the state (especially for small sites and more urban settings), and the contravention clause is deployed very selectively as per state guidance.

I am feeling that the “cautious” part of my support for nutrient trading may be wearing thin.

However, trading remains an important tool.  At the watershed scale, we must continue to find regulatory and market structures that allow for cost-effective pollutant reductions.  Otherwise, we have scarce chance of meeting the TMDL goals.  Everyone knows that BMPs in cities and towns are among the most expensive, so trading allows for the reductions to take place in “cheap BMP” territory, such as farm fields several counties away.  Certainly, streams on rural properties that have been farmed for decades also need some Chesapeake Bay love in terms of restoration, and trading is one of the mechanisms that allows this to happen.

One could also argue that meaningful and verifiable BMPs achieved through a trading program may be superior when compared to a motley crew of very small, urban BMPs at development sites.  A city-bred BMP faces many challenges with design, installation, and maintenance, and performance can suffer.  Trading may allow small BMP load reductions to be bundled together and achieved more effectively elsewhere (however, more recent research indicates that distributed BMPs in an urban catchment ARE having a positive effect).

I believe that Virginia’s efforts to create its trading program were fully cognizant of and responsive to these issues.  I was also convinced at the time that the “contravention of local water quality” clause would give both state and local programs the ability to dictate sites and/or watersheds where trading would not be authorized due to local water quality concerns and issues.  While this is theoretically true, as stated above, trades have become the “go-to” solution for most small sites.  At this point in time, with some exceptions, many local stormwater managers do not feel empowered to exercise much control over this runaway off-site compliance machine (although new interpretations and draft regulatory language may tilt the balance a bit).

Economically, trades are a no-brainer for developers.  At $15-20K per pound of Phosphorus, the off-site Phosphorus reduction is a much better deal than giving up precious developable land to a BMP, not to mention the long-term O&M costs and headaches.  The competitive advantage of off-site credits is perhaps a nod to the industriousness of the nutrient bankers, who have created cost-effective reductions, even in the face of credit regulations, certifications, delivery factor discounts, and credit retirements for the TMDL.

In general terms, I don’t have a problem with this example of the marketplace at work, except for the following major concern.  It may not amount to much pollution at one or a couple of development sites.  However, over the course of time and across the watershed, my local water is getting dirtier in small but certain increments.  This includes when the purchased credits are generated upstream in the larger HUC or river basin, but not on my “branch.”  At some point, someone (taxpayers?) will have to pay a lofty price tag to fix our local waters when they turn into hotspots.  On top of this, we had the opportunity to prevent this form happening in the first place through more judicious application of the trading regulations.  Ouch!

Another subtler aspect of this trading run amuck is that local expertise and innovation with BMPs is diminishing.  We learned the hard way that it takes time to build up a qualified cadre of stormwater designers, vendors, plan reviewers, BMP installers, and maintainers.  It would be shame to lose our stormwater chops because it is now easier to stoke a check to the nutrient bank.

At the recent Low Impact Development conference in Nashville, I heard an interesting presentation from a representative of the Lake Simcoe Region Conservation Authority in Ontario.  They have a newly-minted Phosphorus offset program under the banner of a policy called “Zero Export Target.”  Developments must confirm zero export of Phosphorus through on-site measures and off-site mitigation.  Importantly, the off-site part is at a 2.5X multiplier for the load left over after on-site BMPs are used.  This is an interesting approach.  The presenter indicated that among local developers, only about half are resorting to off-site, as the economics of on-site versus off-site BMPs are fairly evenly matched.

I am not necessarily advocating for a 2.5X multiplier, as that would also make each pound much more expensive to reduce, along with dampened implementation across the watershed.  It does give one pause, though, to see that other programs are certainly taking the “cautious” part to heart.

In addition, it raises the important point that some level of on-site effort (e.g., 75% of the required load reduction achieved on-site before off-site credits can be purchased) is a worthwhile trading program construct, and could help balance the efficacy of off-site credits with at least some level of local water quality protection.  This was originally built into Virginia’s program, but subtle regulatory language made it only one of several options.

At this point, all I know is that if I walk very quietly down by my local river and listen carefully, I can hear a faint cry for help: “what about me?”



Special thanks to trusted colleagues Jacob Dorman, Kip Mumaw, and Joe Battiata for comments on a draft of this blog.

If you are interested in nutrient trading and offsets, the following are just some of the links, mostly for the Chesapeake Bay Watershed.  The last one is for the West Virginia Off-Site Compliance Manual noted in the article.