Rally06 4B2

Wetland and Water Quality Trading: Limits and Trade-Offs: 

Wetland and Water Quality Trading: Limits and Trade-Offs Albert F. Ettinger Senior Attorney Environmental Law and Policy Center aettinger@elpc.org Feb. 16, 2006

Legal Framework – TMDLs: 

Legal Framework – TMDLs Under Section 303(d) of the Clean Water Act a total maximum daily load (TMDL) study must be completed for impaired waters NPDES permits cannot be granted that are inconsistent with a TMDL

Legal Framework – 40 CFR §122.4(i): 

Legal Framework – 40 CFR §122.4(i) No permit may be issued: (i) To a new source or a new discharger, if the discharge from its construction will cause or contribute to the violation of water quality standards. The owner or operator of a new source or new discharger proposing to discharge into a water segment that does not meet applicable water quality standards … must demonstrate … (1) There are sufficient remaining pollutant load allocations to allow for the discharge; and (2) The existing dischargers into that segment are subject to compliance schedules designed to bring the segment into compliance with applicable water quality standards.

Legal Framework – 40 CFR 122.44(d): 

Legal Framework – 40 CFR 122.44(d) Each NPDES permit shall include conditions meeting the following requirements when applicable. (d) Water quality standards and State requirements: any requirements in addition to or more stringent than promulgated effluent limitations guidelines or standards under sections 301, 304, 306, 307, 318, and 405 of CWA necessary to: (1) Achieve water quality standards established under section 303 of the CWA, including State narrative criteria for water quality.

Caselaw: 

Caselaw Permit limitations must control all pollutants or pollutant parameters (either conventional, nonconventional or toxic pollutants) which are or may be discharged at a level which will cause, have a reasonable potential to cause, or contribute to an excursion above any State water quality standard, including state narrative criteria for water quality. American Paper Institute v. U.S. Environmental Protection Agency, 996 F.2d 346, 350 (D.C. Cir. 1993).

Trading might be used to comply: 

Trading might be used to comply All of these rules prohibit granting permits when it would cause or contribute to violation of water quality standards. Implementing a TMDL or preventing a NPDES permit from causing or contributing to a violation could be done through wetlands trading in some circumstances

Why Are More Trades Not Occurring? : 

Why Are More Trades Not Occurring? Lack of numeric nutrient standards causes many permit writers not to place limits in NPDES permits Many NPDES permit writers ignore narrative standards prohibiting unnatural algal growth Because there are no numeric standards and narrative standards are ignored, TMDL lists frequently ignore nutrients or place nutrient-impaired waters at the end of the list of water bodies for preparation of a TMDL

Controls should be place on nutrient pollution now: 

Controls should be place on nutrient pollution now Impose permit limits under antidegradation rules – New pollution is not necessary to accommodate important social or economic development under 40 CFR 131.12(a)(2) if it can be avoided through affordable controls Enforce narrative standards as required by law Develop numeric nutrient standards asap

Nutrient Controls: 

Nutrient Controls Nutrient limits are already in place in Great Lakes, in discharges to many other lakes and in discharges to some rivers Illinois just established a 1 mg/L P limit for major new or increasing discharges

Using Wetlands to reduce nutrient loadings: 

Using Wetlands to reduce nutrient loadings Nitrogen farming clearly seems to be a way to reduce nitrogen pollution Jury still out on phosphorus Environmentalists certainly will generally support wetlands restoration

Limits on trading as a solution: 

Limits on trading as a solution Limits based on trading must be as enforceable as other NPDES limits Trading cannot allow segments where water quality standards are violated Trading must benefit the public – it cannot be a zero sum game for the environment particularly if tax money is used for administration of the system

Enforceability: 

Enforceability NPDES permit limits are now reasonably enforceable through discharge monitoring reports (DMRs) filed by the discharger DMRs can be checked by agencies and members of public If there are permit violations, enforcement actions can be brought by U.S. EPA, state agencies and citizens under 33 U.S.C. 1365

Enforceability 2: 

Enforceability 2 How do we detect violations if a discharger has bought a credit? Does monitoring of performance of the wetland credit appear on the discharger’s DMRs? How do we quantify and report the reduction of pollution created by the wetland? Will it be possible to take enforcement action against the discharger if the wetland fails to produce the expected pollution reduction?

Enforceability 3: 

Enforceability 3 Does the wetland operator file a report? Will the wetland operator by legally liable if it fails to perform? Reports on questionable performance of some wetlands mitigation banks (GAO, NRC, ELI) militate in favor of tight controls on trading A substantial multiple of pollution allowed in the trade should be required in trading to account for uncertainty (e.g. 2 units of N reduction for extra unit allowed by the discharger in the permit?)

Cities of Annandale and Maple Lake case (Mn. Sup. Ct.): 

Cities of Annandale and Maple Lake case (Mn. Sup. Ct.) This case before the Minnesota Supreme Ct. illustrates some of the problems with schemes mislabeled as trading P from Annandale/Maple Lake would reach Crow River and Lake Pepin that are on 303(d) list for P Minnesota Pollution Control Agency granted NPDES permit with increased phosphorus loading to cities based on fact that another city, Litchfield, was reducing P loading

Annandale and Maple Lake (contd.): 

Annandale and Maple Lake (contd.) Litchfield reductions were not part of Annandale/Maple Lake permit No approved TMDL for Crow River or Lake Pepin Not claimed that reduction by Litchfield would bring Crow River or Lake Pepin into compliance Appellate Court ruled that Annandale/Maple Lake permit improperly issued 702 N.W.2d 768

Preventing violations of Water Quality Standards (WQS): 

Preventing violations of Water Quality Standards (WQS) We generally cannot allow Peter to be robbed to help Paul Allowing violation of wqs at one site cannot be compensated by pollution reduction at another site or water quality segment For this reason, trading will not work as to toxic pollutants (e.g. ammonia)

Nitrogen: 

Nitrogen Nitrogen may work well for wetlands trading to the extent that the area of concern may be far downstream If protection of Chesapeake Bay, Long Island Sound or the Gulf Dead Zone is the object, nitrogen theoretically could be taken out anywhere between the point source discharge and the Bay, Sound or Gulf

Phosphorus Trading: 

Phosphorus Trading Trading for phosphorus is more problematic Phosphorus has effects on fresh water and location of wetlands taking P out is important This assumes, of course, that wetlands are effective in removing phosphorus

Environmental Benefit: 

Environmental Benefit State water quality protection agencies have very limited budgets which have been falling State agencies cannot be expected to use limited funds to establish trading schemes unless there is going to be a substantial environmental benefit

The Environment must win: 

The Environment must win Either persons benefiting from trading should pay for it through fees or a substantial “fee” should be charged by the state in the form of a much larger reduction being required than 1:1