The Virginia Chesapeake Bay Watershed Nutrient Credit Exchange Program

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ABSTRACT
In 2003, the Chesapeake Bay Program adopted new annual mass load goals for nitrogen and phosphorus entering the Chesapeake Bay and allocated these loads by river basin and state. To help implement and achieve the point source allocations, and at the urging of the Virginia Association of Municipal Wastewater Agencies and the Virginia Manufacturers Association, the Virginia General Assembly passed legislation in 2005 establishing a nutrient trading program. The General Assembly believed that a market-based point-source nutrient credit trading program would: (1) assist in meeting the combined wasteload allocations of the 125 significant point source dischargers more quickly cost-effectively than requiring every one of them to install and operate advanced nutrient removal technology; (2) help accommodate continued economic growth and development; and (3) provide a foundation for establishing market-based incentives to help achieve nonpoint-source nutrient reduction goals.

The statute also directed the State Water Control Board to issue a Watershed General Virginia Pollutant Discharge Elimination System (“VPDES”) Permit for dischargers of nitrogen and phosphorus in the Chesapeake Bay watershed and to develop a regulation governing this permit. The General Permit, when issued, will include a list of the significant dischargers governed by the permit, the nutrient wasteload allocations for total nitrogen and total phosphorus expressed as annual mass loads established by regulation, and a schedule for compliance with the combined wasteload allocations for each tributary (i.e., the aggregate loads of all the dischargers) as soon as possible. It also requires the dischargers to submit a plan for complying with the allocations.

Finally, the legislation authorized creation of the Virginia Nutrient Credit Exchange Association as a private, nonprofit organization comprised of municipal and industrial dischargers. The main purposes of the Exchange are to facilitate nutrient trading among its members and to provide input to the regulatory process.

Since its incorporation in August, 2005, the Exchange has appointed a governing Board and slate of officers, adopted bylaws, obtained grant funding from the state, hired a technical consultant, prepared education and outreach materials, held meetings for prospective members, conducted an intensive data gathering effort, developed a trading optimization model, and produced Compliance Plan Options and Construction Schedule Compliance Report Draft Report (April 2006). This paper describes these activities and the findings of the Draft Report.

INTRODUCTION
In June, 2000, the Chesapeake Bay partners signed Chesapeake 2000, a milestone on the way to restoring the Chesapeake Bay. The Agreement presented a strategic plan to achieve the vision of the Chesapeake Bay as a rich natural resource blessed with abundant living resources and healthy tributary rivers and streams, and as a vital contributor to sustaining strong local economies and the quality of life unique to the Bay region. As a result of Chesapeake 2000, the Chesapeake Bay Program adopted new annual nitrogen and phosphorus loading goals for the Chesapeake Bay watershed in 2003. To further support this vision, Maryland and Virginia also adopted new water-quality standards for dissolved oxygen, clarity, and chlorophyll a.

To implement Chesapeake 2000, Virginia developed and adopted tributary strategies in 2005 for each of its five basins tributary to the Bay – the Potomac/Shenandoah, Rappahannock, York, and James Rivers, and the Eastern Shore. The tributary strategies contain both point and nonpoint components. The guiding principles for the point source strategy in all basins as set forth in the strategies is to: (1) achieve the nutrient reductions necessary to restore the Chesapeake Bay and its tidal tributaries in the timeframe set by the Chesapeake Bay 2000 Agreement; (2) provide for the full use of existing design capacity at each of the significant municipal and industrial wastewater treatment plants; and (3) apply currently available, stringent nutrient technologies at these treatment plants.

Based on these principles, and Bay-wide and local water-quality requirements, Virginia adopted wasteload allocations for nitrogen and phosphorus in 2005 for 125 significant municipal and industrial dischargers (design capacity of 0.5 mgd and above) by amending the state Water Quality Management Plan. The allocations are based on existing design as of 12/31/2010 and nitrogen and phosphorus concentrations that vary by basin, as shown in Table 1.

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