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Water Quality Trading Rule Development

The Minnesota Pollution Control Agency (MPCA) is developing Water Quality Trading rules.  By June 2008, we plan to develop draft rules that will have statewide applicability and pertain to water quality trading between point sources, between point and non-point sources and potentially between non-point sources. 

The MPCA is interested in exploring trading potential for various pollutants, particularly nutrients, sediment, temperature and cross-pollutant trading opportunities.  An example of the latter would be watershed based phosphorus reductions aimed at correcting an in-stream dissolved oxygen deficiency by reducing the algal loads in the watershed.  Other areas of interest include the potential for reducing excess flows which may contribute to stream bank erosion and evaluation of potential options for other tradable pollutants.

The United States Environmental Protection Agency (EPA) believes that market-based approaches such as water quality trading provide greater flexibility and have potential to achieve water quality and environmental benefits greater than would otherwise be achieved under more traditional regulatory approaches. Market-based programs can achieve water quality goals at a substantial economic savings.  EPA estimates that in 1997 annual private point source control costs were about $14 billion and public point source costs were about $34 billion.  The National Cost to Implement Total Maximum Daily Loads (TMDLs) Draft Report estimates that flexible approaches to improving water quality could save $900 million dollars annually compared to the least flexible approach (EPA, August 2001).  Nitrogen trading among publicly owned treatment works in Connecticut that discharge into Long Island Sound is expected to achieve the required reductions under a TMDL while saving over $200 million dollars in control costs.  Market-based approaches can also create economic incentives for innovation, emerging technology, voluntary pollution reductions and greater efficiency in improving the quality of the nation’s waters.

What is Water Quality Trading?

Water quality trading is a market-based approach to promote the protection and restoration of surface waters in conjunction with other existing voluntary, regulatory and financial assistance programs.  The water quality trading concept is based on the fact that businesses, industries, wastewater treatment facilities, urban stormwater systems, agricultural operations and other watershed sources of pollutants may face substantially different pollution control costs.  Sources facing high pollution control costs may realize substantial cost savings by securing environmentally equivalent, or superior, pollutant reductions by purchasing water quality credits generated by sources with substantially lower pollutant reduction costs.

Depending on the credit generation methods, ancillary benefits such as restored wildlife habitat, wetland creation, stream bank stabilization and carbon sequestration may also result from water quality trading.  These may not have been specifically “purchased” by the buyer in the transaction but might result in ecosystem benefits and, potentially, additional economic benefits for the seller who may be able to sell these credits in other markets.

Water Quality Trading Advisory Committee

Water quality trading rules are being developed in consultation with a diverse Advisory Committee.

• Advisory Committee Members

Meetings

The Water Quality Trading Advisory Committee meets quarterly. The next meeting is scheduled for some time in December 2007. The meeting date and agenda will be posted in this location when it is available.

Meeting Archives

• July 17, 2007
  • Agenda
  • Minutes
  • Presentation
    
    
• April 17, 2007
  • Agenda
  • Minutes
  • Presentations
    • Douglas Hall
    • Mark Keiser
    • Dennis O'Grady
      
      
• February 27, 2007
  • Agenda
  • Minutes
  • Presentation
    
    
• Meeting Attendance (updated after each meeting)

Documents and Links

• Water Quality Trading Links. This document contains links to a variety of water-quality trading information, including federal and state programs, published papers, presentations and trade organizations.

Persons Affected 

The planned rules will affect many sectors whose activities influence Minnesota’s surface water quality and quantity.  These are likely to include, but may not be limited to, individuals, companies, public advocacy groups and governmental entities whose interests involve point source discharges, urban, construction, industrial and agricultural stormwater sources, agricultural drainage management, and other activities that influence surface water quality and quantity.

Statutory Authority

• Minnesota Statutes, section 115.03(1)(e) authorizes the Agency to adopt, issue, reissue, modify, deny, or revoke permits, variances, standards, and rules.
• USEPA Water Quality Trading Policy (2003)

MPCA Staff Contact

• Lisa McCormick, 320-441-6969