Soil and Water Conservation Society Virginia Chapter

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Soil and Water Conservation Society Virginia
Chapter

• Market-Based Strategies for Water Quality
  Protection
• CHRIS POMEROY

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Point Source WQIF

• Cooperative/non-regulatory approach
• Started Virginia rolling in the direction of a
  massive treatment technology change-over (advance
  nutrient removal)

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Point Source WQIF

• Localities competed in the grant market for
  available grant dollars
• Water quality benefits
• Cost-effectiveness
• RESULT For a relatively small investment
  (100M), Virginia leveraged a much large response

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HB 2862 / SB 1275 (2005)

• Chesapeake Bay Watershed General VPDES Permit for
  Point Source Discharges of Nitrogen and
  Phosphorus
• Treatment Plant Upgrade Schedules
• Trading Framework

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Virginias Nutrient Credit Trading Framework

• Credit Trading
• Among point sources
• Based on regulatory nutrient caps applicable to
  all point sources
• Virginia Nutrient Credit Exchange Association,
  Inc.
• Offsetting
• Nutrient offsets for increased loads from new or
  expanded discharges
• One driver for nonpoint source trades

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Why Nutrient Trading?

• SPEED Point source compliance ASAP (2011-13?)
• Immediately upgrade subset of 127 significant
  dischargers
• Share the load reductions
• Continue with upgrades after deadline to stay
  below the cap
• COST SAVINGS Save State and Local money on the
  initial reductions for 2011
• EPA estimated potential 20 savings in VA
• Roughly 200M to 400M savings all parties can
  share

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Why Nutrient Trading? (Cont.)

• SUSTAINABLE GROWTH Obtain offsets needed for
  growth beyond 2011
• Wastewater treatment plant expansions must
  offset additional pollutant discharges
• Trading is a means to do this
• Point-Point
• Point-Nonpoint
• Offsets purchased from WQIF

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Virginia Nutrient Credit Exchange Association,
Inc.

• MISSION To facilitate trading by its point
  source members
• FUNDED BY Point Source WQIF (DEQ)
• POWERED BY
• 127 significant dischargers
• Board of Governors
• Implementation Committee
• Technical CH2M HILL
• Legal/Admin AquaLaw

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What Is The Exchange Doing?

• Exchange formation
• Outreach to dischargers
• Trading computer model
• Credit Exchange Policy
• Basin-Level Compliance Plans

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The Exchanges Guiding Principles

• 1 Trading is voluntary
• 2 Benefits for all
• 3 Compliance first (safety first)
• 4 Never forget the CWA base case

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General Approach

• Highly-structured, well-planned program for
  trading in the midst of planning, designing,
  financing, construction 2 billion of new public
  infrastructure
• Convenient and reliable trading mechanism
  (Exchange as aggregator)
• Practical legal structure that promotes
  participation
• Fair and effective pricing methodology
• CREDIT EXCHANGE POLICY

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Types of Participants in Basin-Level Compliance
Plans

• Sellers Agree in advance to supply a certain
  minimum of credits (Class A credits)
• Buyers Agree in advance to purchase a certain
  minimum of credits
• Neutrals Make no buy / sell commitments in
  advance, but are covered by Plan and as such have
  preferred rights to Non-Participants

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The 3-Year Trading Cycle

• Year 1 The Planning Year
• Compliance Plan Advance Commitments/Decisions
• Decision to buy or sell Class A credits
  (including price)
• Decision to participate in year-end Class B
  credit market clearing
• Year 2 The Compliance Year
• Year 3 The Reconciliation Year
• To meet all pre-planned (Class A) credit
  exchanges
• To clear market of surplus (Class B) credits
• To sell surplus credits (if and when needed)

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Other Exchange Features

• Secondary market in Class B credits
• Class A and Class B credit prices
• Incentives for Exchange participation
• Market clearing process
• Credit shortfall resolution procedures

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Soil and Water Conservation Society Virginia
Chapter

• Market-Based Strategies for Water Quality
  Protection
• CHRIS POMEROY