Virginia’s Chesapeake Bay Nutrient Credit Trading Program Glenn Harvey Prince William County Service Authority ExChange Implementation Committee Chair

So, You Want to Trade ? What are you offering? Do you own it? Why do I need it? Principles Fine Print How much? $$

What are you offering? Nutrient credits are -- ?? Wastewater plants: Flow X Concentration Non-point: model defined by land use Non-point: removals expected for various BMP types – midpoint %, range of %, safety factor Time frame: annual, life of BMP Difference between credits and offsets Need firm legislative definitions

Do you own it? Who buys a car or house without Title? Must have legal clarity Touchy subject with environmentalists. Can not be cast as ‘right to pollute’.

Why do I need it? Must have clear legislative / regulatory driver requiring entity to obtain credits or meet Waste Load Allocations. Limited number of sources regulated now. MS4, CAFO and other non-point permits not written around measured, delivered nutrient pounds.

Guiding Principles # 1 – Trading is voluntary # 2 – Benefits for all # 3 – Compliance first (“safety first”) # 4 – Never forget the CWA “base case”

Fine Print Nutrient Credit Services Agreement Entered among Participants & Exchange Based directly on the Compliance Plan & Credit Exchange Policy below Compliance Plan One for each basin Covers all participants Developed together Approved by DEQ Credit Exchange Policy Sets trading procedures Developed together Issued by Exch Board

How Much? Cash Flow & The Bucket Sources of Funds Class A Buyer $4 P / $2 N ExChange Buyer $ 6 P / $ 3 N Outside Buyer $ 8 P / $ 4 N $$ $$ THE BUCKET 90 % 10% Disbursement of Funds Class B Supply B Pool / Total B Credits Class A Supply Pool A Pool / Total A Credits Class B credit price > Class A? “Excess” reverts to Class A fund

Legislative Background Virginia Legislature amended State Water Control Law (S1275, March 2005) Mandated Watershed General Permit Wasteload allocation for significant dischargers Basin-wide compliance schedules (2011) Provisions for non-significants, new facilities Requirements for compliance plans Authorized Nutrient Credit Exchange Authorized trading

Trading Principles Trading is VOLUNTARY Non-participants submit individual plans Trading occurs within 5 river basins Inter-basin trades not allowed Some intra-basin sales restrictions due to regional water quality 10

Credit Price Schedule Compliance Year Class A Price Nitrogen Phosphorus 1 2008 - 2 2009 3 2010 4 2011 $2.00 $4.00 5 2012 6 2013 $2.15 $4.30 7 2014 $2.30 $4.60 8 2015 $2.45 $4.90 The prices for Credits generated during and applied to Compliance Years 2011 and 2012 (i.e., prices for next 5 years, 2008-2012) are firm. Prices shown for 2013 through 2015 are estimates. Price schedule to be updated annually to maintain a firm price for next 5-year period (i.e., in 2008, credit prices for 2013 will be set).

Saves Ratepayer $$$ Lower taxes/rates, same pollutant control Virginia cost savings estimate through 2030: ~~$800 M on $2.2 B program 12

Questions? Glenn Harvey Aqualaw ExChange Web Site gharvey@pwcsa.org 703 393 2063 Aqualaw Chris Pomeroy Chris@AquaLaw.com ExChange Web Site http://www.theexchangeassociation.org Admin@TheExchangeAssociation.org