A Scientifically Defensible Process for the Exchange of Pollutant Credits under Minnesota’s Proposed Water Quality Trading Rules

A Scientifically Defensible Process for the Exchange of Pollutant Credits under Minnesota’s Proposed Water Quality Trading Rules

2009-06

The Minnesota Pollution Control Agency (MPCA) is drafting statewide water quality trading (WQT) rules. WQT is a flexible tool offering a mechanism to achieve additional economic and environment benefits when used in conjunction with traditional command and control approaches. A permitted wastewater treatment plant facing high costs to accommodate new growth or meet more stringent discharge requirements can “trade” for discharge reduction credits generated by another source having lower costs (e.g., an agricultural producer implementing conservation practices). A portion of the reductions traded can be retired to address uncertainty or to create a net reduction of pollutants (nitrogen, phosphorus, sediments) discharged to the receiving water. MPCA has already issued point‐point and point‐nonpoint trading permits. These permits provide the required authority to implement WQT under NPDES program provisions in advance of the current rule development process. The MPCA has recognized that creating trading frameworks within each NPDES permit allows each framework to be renegotiated. This also results in trading implementation differences from site to site and high costs for administration. Permit renegotiation, as has been experienced in the public notice process, expends valuable time and resources limiting the attractiveness of WQT. To simplify and potentially streamline the WQT permit process, MPCA intends the rules to be used to both define a credible WQT program and remove the complications of permit renegotiation. With specific regards to defining credible program options, MPCA hired Kieser & Associates, LLC to develop key elements of a scientifically defensible process for calculating pollutant reduction credits. This report provides a technical foundation for these related elements of Minnesota’s WQT rule development and related Statement of Need and Reasonableness (SONAR). The Kieser & Associates scope of work set forth to achieve these goals included:  Develop an example stepwise calculation process for approvable non‐point source phosphorus credits in Minnesota.  Demonstrate a method of determining appropriate trade ratios (including uncertainty factors) for phosphorus. A series of statistical analyses will be conducted to examine implications of various ratios. Results will reveal the best method to minimize redundant margins of safety.  Create a logical decision tree transferring the stepwise crediting process for phosphorus to other pollutants. To address these tasks, the report describes efforts associated with:  Benchmarking nationally accepted credit estimation methods  Selection of credit estimation methods to use as examples for Minnesota WQT applications  A defensible eight step process based on sound watershed science to develop MPCA’s proposed “uncertainty factor”  Statistical evaluations of trading program options and credit calculation methods to consider for future WQT program rule applications  A narrative outline and flow diagram providing guidance to WQT program managers for using the eight step process for phosphorus, nitrogen and sediment crediting

Minnesota Pollution Control Agency

106

Water Quality & Pollutants
Water Policy

Water quality
Pollutant
pollutant credits

2000-2009

No

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