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Water Quality Trading: A Program Whose Time Has Come (Again)

December 15, 2014

Originally published by Michigan Farm News on December 15, 2014; republished with permission.

On Dec. 3, 2014, the Senate Agriculture Committee held a hearing titled “Farmers and Fresh Water: Voluntary Conservation to Protect our Land and Waters.” Michigan’s own Senator Debbie Stabenow, Chairwoman of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, chaired the meeting. While this article went to press before the hearing was held, panelists from government, farming community and environmental professionals were expected to focus on how farmers – through voluntary conservation practices – could help reduce the amount of nutrients in surface waters throughout the country. 

Nutrient pollution is a serious problem in Michigan, as noted by the approximately two dozen impaired surface water bodies on which the Michigan Department of Environmental Quality (DEQ) has conducted Total Maximum Daily Load (TMDL) studies. These studies calculate the maximum amount of nutrients that the water body can handle and still attain water quality standards, and the amount of nutrients beyond that maximum amount that are being discharged into the water body. The study then identifies the sources of nutrients to the water body, and allocates the nutrient loads among the sources. TMDL studies typically identify non-point source discharges (such as sheet runoff from farm and other land) as contributing a majority of the nutrients, but the DEQ does not have the authority to mandate reductions from those sources. This typically means that the DEQ reduces the amount of nutrients that direct dischargers such as waste water treatment plants are authorized to discharge through discharge permit limitations. Reducing nutrient loads at the end of the pipe, however, is very expensive. Thus, government officials are exploring ways to reduce the nutrient loading from non-point sources.

Across the country, water quality trading is becoming one of the most popular programs that states and regional watershed entities are adopting to help solve this problem. Water quality trading is a market-based approach in which, according to the United States Environmental Protection Agency’s (U.S. EPA’s) Water Quality Trading webpage, there “is a voluntary exchange of pollutant reduction credits. A facility with a higher pollutant control cost can buy a pollutant reduction credit from a facility with a lower control cost, thus reducing their cost of compliance.” Farmers, direct dischargers and surface water bodies can all benefit from this program. It is no surprise that EPA and the USDA released a partnership agreement a year ago this month supporting water-quality trading.

Where is Michigan on this issue? Michigan adopted water-quality trading regulations more than a decade ago. A water-quality trading demonstration project was conducted on the Kalamazoo River in 2000 that focused on reducing phosphorus in the river. Unfortunately, the direct dischargers that were interested in purchasing phosphorus reduction credits from farmers in the Kalamazoo River watershed went out of business or moved out of state. The DEQ did not try to implement the program at any of the nutrient-impaired waters in the state. Even though direct dischargers on water bodies governed by nutrient TMDLs expressed interest in purchasing reduction credits, the DEQ (with almost no public announcement) rescinded the TMDL regulations effective Aug. 27, 2013.

Farmers are now being asked to voluntarily engage in activities that will reduce nutrient loading to water bodies. Apparently in Michigan, governmental officials are not interested in providing a way to allow the market to compensate farmers for such efforts.

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