|Action||Promulgate new Nutrient Trading Certification Regulations|
|Comment Period||Ends 5/30/2019|
Pursuant to 9VAC25-900-200. Determination of application fee amount, Section B., Parapgraph 3, "Modifications of approved perpetual nutrient credit certifications will be assessed the base fee only unless the modifications generate additional perpetual credits then a supplementary fee based on the number of additional potential nutrient credits of phosphorus will be assessed in addition to the base fee as specified in subdivision 2 of this subsection." Based on the proposed language, it is unclear what constitutes a "modification" to an approved nutrient credit certification. The credit-generating entity will be assessed a fee (base + supplementary) for all potential credits at the receipt of the application per 9VAC25-900-200, B., 2.
Without a clear definition or understanding of what constitutes a modification, it appears possible for approved credit facilities to be charged redundant or duplicative fees for modification reviews. For example, if a land conversion bank proposes 100 acres of land conversion, but the release is split amongst two (2) 50-acre phases, per the current language, the applicant would be assessed a $10,000 fee for the initial application review. Subsequently, the applicant choses to move forward with Phase 2, the applicant would potentially then be assessed another base and supplementary fee of $8,000. The language is vague and should be clarified what comprises a "modification" to a nutrient credit certification.
My comment is that phasing plans, credit release requests, design and engineering plans, and other related requests associated with the continued development and implementation of a nutrient bank should not be considered a modification and therefore not subject to additional fees. Modifications should be relegated to additional credit generating areas, practices, and other changes that were not part of the approved Nutrient Reduction Implementation Plan.
Contech® Engineered Solutions, LLC (Contech) is pleased to provide comments on the Agency’s proposed regulatory action establishing regulations for the Certification of Nonpoint Source Nutrient Credits, 9VAC25-900. This compliance tool has previously been implemented through guidance and codifying rules surrounding the use of nonpoint source nutrient credits should ensure consistent procedures are followed. Program consistency will also help provide additional credibility around the use of this tool as a means to improving water quality. Contech would like to present the following for the Department’s consideration:
We appreciate that the definition of a structural best management practice (BMP) in 9VAC25-900-10 continues to reflect the ability of manufactured treatment devices (MTDs) to participate as a credit generating practice.
It’s important that local water quality not be allowed to further degrade under these regulations. Therefore, we recommend language be inserted within 9VAC25-900-90 that more closely resembles that which is found in the water quality design criteria requirements of 9VAC25-870-63. It states in part, “nothing in this section shall prohibit a locality's VSMP authority from establishing more stringent water quality design criteria requirements in accordance with § 62.1-44.15:33 of the Code of Virginia.” We feel strongly that local programs should be able determine for themselves whether the use of nutrient credits is helpful to their long-term compliance strategy.
We support the long-term operation and maintenance requirements found in 9VAC25-900-120 as all BMPs require maintenance to function correctly.
We support the recordkeeping requirements found in 9VAC25-900-150 as yearly reports will improve the transparency of the program.
Contech appreciates the enormous effort put forth to promulgate these revised regulations. The use of nutrient credits can be an effective water quality compliance tool so long as the appropriate checks and balances are in place. These regulations strive to accomplish that goal and should create additional transparency, consistency, and clarity within the program, which in turn should improve both the implementation of and the public trust in the program. Please do not hesitate to contact me with any additional questions. Thank you once again for this opportunity to provide public comment.
May 30, 2019
Ms. Debra Harris
Virginia Department of Environmental Quality
1111 East Main Street, Suite 1400
P.O. Box 1105
Richmond, Virginia 23218
As a member of the Virginia Mitigation Banking Association, I fully and strongly support the comments submitted by the Association.
In addition, on behalf of Restoration Systems, I wish to further emphasize my support for comments pertaining to two specific proposed regulatory actions.
"Management Area” (Proposed (VAC25-900-10)
There is simply no need to define the Management Area to be so expansive and onerous for the nutrient credit generator, project, and/or land owner. The current process for defining the applicable area of the nutrient generating project has worked well, created a vibrant credit market, and resulted in no adverse water quality or other issues that warrant correcting. Moreover, 100s of millions of dollars have been provided through state and federal cost-share programs to agricultural landowners over the past several decades to reduce nutrient run-off without parallel restrictions on the area of application for those practices. Placing such onerous restrictions on the management area are unnecessary and counter-productive for several reasons, including 1) they would dissuade future practitioners from participating in the program, 2) the propsoed definition is grossly unbalanced compared to how the applicable project area is defined for existing agricultural cost-share programs, and 3) the proposed definition is not warranted based on any documented problems with how the applicable project area is defined under the existing nutrient credit offset program. The determination of the Management Area must remain as currently implemented under the existing program.
Proposed phased release of credits from land conversion. (Proposed sections 9VAC25-900-90 B and 9VAC25-90-120 C and D)
One of the biggest incentives to the current Nutrient Offset Program, especially as it differs from Section 404 Wetland and Stream mitigation programs, is the full up-front release of credits. If there has been any degree of documented adverse impacts from the exisiting release schedule, then an adjustment, possibly with a phased-release, would be warranted. However, no such adverse impacts have been demonstrated. Implementing a phased release schedule, simply for the perceived benefit of providing an additional layer of protection, with no justified need, would do nothing but hamper the continued expansion and benefit of the program while providing no additional benefit or protection to natural resources. The release of credits from land conversion must remain as currently implemented under the existing program.
Thank you for the opportunity to provide comment on the proposed draft regulation.
The City of Roanoke appreciates the considerable effort that the Agency has put forth to further develop the nutrient markets in the Commonwealth, and the potential for cost-effective water quality management that this provides. The City’s Stormwater Utility has comments to several sections in the proposed rules with a list of references at the end of the comments.
9VAC25-900-60 D. The option to acquire nutrient credits for compliance purposes shall not eliminate any requirement to comply with local water quality requirements, including such requirements lawfully imposed by a locality or local MS4.
Does a “local water quality requirement” include an approved local TMDL Waste Load Allocation for an MS4, and can an MS4 restrict the use of nutrient credits on the basis of an existing non-nutrient local WLA (e.g. sediment?). Can the Agency please clarify to provide more explicit provisions for local governments?
9VAC25-900-70. Documents and accessible resources
In this section, credit applicants are directed to three internet resources to assist in developing credits:
First, the link provided for resource 3 returned a “404 – Resource Not Found” error. Second, is this a comprehensive list of technical guidance that credit developers can use? Or is it a non-exclusive list of recommended resources? Either way, it should be clarified in the section header to avoid confusion.
9VAC25-900-90. Nutrient credit release and registration
C. Registration of nutrient credits
2. Where necessary to ensure compliance with local water quality requirements, conditioned as follows:
In this section, there are three scenarios where the exchange of nutrient credits are further conditioned. It is notable that these conditions restrict nutrient exchanges to upstream of the point of discharge only in the presence of a local nutrient TMDL or a local non-nutrient impairment with no approved TMDL. This allows downstream nutrient exchanges in areas with a non-nutrient local TMDL. This allowance creates a scenario where land developers in areas with local non-nutrient TMDLs can forego the construction of on-site water quality BMPs by purchasing credits downstream of the point of discharge. This is problematic for MS4 entities subject to local non-nutrient TMDLs for the following reasons:
The City recommends that nutrient exchanges not be allowed to leave or move downstream of an existing sediment impaired water or a waterway with an accepted TMDL for sediment.
The City objects to the new baseline requirement for MS4s added to the proposed rule in 9 VAC 25-900-100.D.4 which states:
For a nutrient credit-generating project owned by an MS4 permittee, baseline shall only be achieved when the level of nutrient reduction required by the WIP or approved TMDL, whichever is more stringent, is achieved for the entire MS4 service area. MS4 permittees generating credits for exchange outside the MS4 service area shall have an accounting system demonstrating that the exchanged credits are not used to satisfy the MS4 permit requirements.
The City does not object to the second sentence in this new baseline requirement. It is reasonable for an MS4 permittee to demonstrate that any certified credits it generates are not simultaneously transferred to a third party and applied to the owner’s permit. However, the City objects to the requirement in the first sentence for MS4 permittees to achieve full compliance with an applicable WIP or TMDL before they may be eligible to generate credits. That prohibition will serve only to keep many MS4 permittees from being eligible to generate credits for years, even if they are fully in compliance with their respective MS4 permits. This is the only baseline requirement in the proposed rule that is based not on the nature of the credit-generating project, but on the status of the entity that owns the project. The applicable baseline requirement for a nutrient-generating project should be the same if the owner is an MS4 permittee, a locality that is not an MS4 permittee, or any other party.
Governmental entities that own and operate MS4s are rational actors that would not jeopardize their ability to comply with their permits, thereby inviting enforcement action, in order to generate nutrient credits for exchange with third parties. Instead, they will seek to generate certified nutrient credits when it facilitates compliance with their MS4 permit or furthers some other legitimate public purpose. Restricting their ability to generate nutrient credits is unnecessary and may prove counterproductive as it limits transactions that could provide flexible and cost-effective compliance – two key principles of water quality markets (Stephenson and Shabman, 2011). Two examples of the potential use of nutrient credits by MS4 permittees are presented as follows:
Sale of Credits to Fund Nutrient Reductions. MS4 permittees may be able to generate nutrient reductions at costs that are below the market value of nutrient credits. Selling nutrient credits can generate valuable funds that can be used to support the MS4 program and allow the permittee to make the best use of limited MS4 budgets. For example, a permittee may be able to increase the size of a stormwater detention basin or stream restoration project at minimal marginal cost. The permittee could then apply the desired portion of the nutrient reduction to its MS4 permit obligations and sell the remainder as certified credits. The funds from the credit sale could be used to offset a substantial portion of the costs the project. This strategy can be used by MS4 permittees to effectively manage and reduce the per-pound cost of nutrient reductions, thereby allowing greater total nutrient reductions to be achieved with the same budget.
Use of Nutrient Credits to Attract Economic Development. Local governments have many priorities, including fostering economic development to benefit their citizens and increase their tax base. Providing nutrient credits can be an effective way to incentivize prospective new commercial and industrial development. This is especially valuable in more urban environments where onsite nutrient reduction options may be limited or inordinately expensive for new development and redevelopment projects. Many MS4 permittees rely on their general funds to support their stormwater programs and using nutrient credits to attract new development is an investment that ultimately will increase the pool of funds available for their stormwater programs.
There is no reason to believe that local governments and other governmental entities operating MS4s cannot responsibly participate in the credit market while also meeting their MS4 permit obligations. Indeed, as the examples above demonstrate, allowing MS4 permittees to generate credits can aid permittees in meeting their local TMDL reduction goals in a timely and efficient manner.
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Stephenson, K., and Shabman, L. (2011). Rhetoric and Reality of Water Quality Trading and the Potential for Market-Like Reform. JAWRA Journal of the American Water Resources Association, 47(1), 15–28. doi:10.1111/j.1752-1688.2010.00492.x.
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