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Amid Challenges, US EPA’s Work on Water Quality Trading Program Continues

Farming and development groups have joined wastewater agencies in defending the U.S. Environmental Protection Agency (EPA) against threats to the legality of its water quality trading (cap and trade) program—a key part of its Chesapeake Bay clean-up plan (Total Maximum Daily Load or TMDL), finalized back in 2010.  Food and Water Watch and Friends of the Earth filed suit against the Agency on Oct. 3 claiming that the trading scheme violates the Clean Water Act and will worsen water quality in the Bay and nationwide.

All groups are operating under the understanding that EPA will likely use the Bay TMDL “model” in the Mississippi River Basin and in other areas with impaired waterbodies; therefore, every step taken in the Bay will determine how similar programs will be adopted nationwide.

As previously reported, the water quality trading programs in question are to be in place by the end of 2013.  These trading programs appear to have the support of industry, state and agency representatives as well as many environmental groups, mostly because of their potential to manage the costs of the Bay clean-up plan.  Incidentally, two groups that have intervened in support of EPA’s water quality trading programs — American Farm Bureau Federation and National Association of Home Builders — have challenged EPA in a separate lawsuit for “overstepping of its authority” with portions of the 2010 clean-up plan that address nonpoint sources, such as stormwater runoff from farms and development (arguments were heard in federal court on Oct. 4, Middleton District of Pennsylvania). Nonetheless, these groups have gone on record as supporters of the contested water quality trading programs and view them as the only means to keep farming and development growing and keep pace with population growth while still meeting the provisions in the Bay TMDL.

AGC recently participated in a two-day webinar on the water quality trading programs held by EPA, the World Resources Institute (WRI) and the Water Environment Federation (WEF).  The webinars provided a forum for stakeholders (buyers, sellers, brokers, state agencies, etc.) to voice their concerns and perspectives.  Several watersheds already have trading programs, though not as complex as that under development for the Chesapeake Bay, and representatives shared their successes and challenges in implementing their programs.

Water quality trading programs help offset stormwater pollution associated with new development or help facilitate the purchase of water quality credits that would cover additional discharges.  The credits could be sold by a farmer upstream, for example, who installed Best Management Practices to reduce runoff from the farm to a wastewater treatment plant or new development project downstream.

Two important points to consider came up in the discussion during the webinars: first, is the importance of incentivizing farmers to participate in the program; and second, is that credits must be purchased from “upstream” sources and EPA will monitor the trades to ensure compliance. Farms are nonpoint sources of stormwater runoff and, therefore, are not required to obtain NPDES permits for those discharges under the Clean Water Act.  Considering the example above, if farmers do not have an incentive to make improvements and sell credits, then the entire trading program will be hobbled—left up to point sources (typically credit purchasers because improvements are often costly) to trade amongst themselves.  Lack of involvement of the farming community will strain the program and reduce the ability of the program to manage costs.  If there are fewer sources of credits upstream, there would be fewer available credits for businesses downstream.

For more information, read the AGC’s Environmental Observer article published when the Bay TMDL was finalized; or go to EPA’s Chesapeake Bay TMDL website to read the TMDL, fact sheets and other resources.  AGC’s Melinda Tomaino at is tracking this issue.

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