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State Innovation Grants

EPA 2005-2006 State Innovation Grants Competition Pre-Proposals

Project Title: Development of a Water Quality Trading Program Framework in Ohio

State Agency Applicant: Ohio EPA (Individual Proposal)

RCRA/Hazardous Waste: This project is not focused on hazardous waste management or permitting under RCRA.

Project Contact: Paul Novak, Ohio EPA DSW, PO Box 1049, Columbus, OH 43216-1049. Phone: (614) 644-2035. Fax: (614) 644-2745. E-mail: Paul.Novak@epa.state.oh.us.

Other Federal Agency or EPA Involvement: This project is not being executed in cooperation with or funded by another federal or EPA program.

Needed Regulatory Flexibility: Unclear at this time. Coordination with USEPA Region V and HQ will be sought to insure program meets requirements of federal trading strategy.

Ohio EPA Management Support: The Ohio EPA water program chief and Agency Director are aware of and strongly support this project.

Pre-Proposal Project Narrative

To further support use of trading in Ohio to meet our water quality goals, Ohio EPA is requesting funding under this 104(b)(3) grant to support development of a regulatory framework and implementation of a pilot trading program to promote water quality trading.

The framework would include concept papers, administrative rules and any watershed permits necessary to support and promote water quality trading in Ohio. The work under this proposal is directly linked to EPA’s strategic plan – Objective 2: PROTECT WATER QUALITY, Sub-objective 2.2.1 – Protect and Improve Water Quality on a Watershed Basis.

A major cause of water quality impairment in Ohio is the organic enrichment in Ohio streams caused by excessive nutrients. Ohio EPA believes that water quality trading provides an innovative regulatory option that can be used within a watershed to achieve nutrient reduction and our water quality goals. It can reduce pollutant loads more efficiently than other means, such as upgrading existing pollution control facilities. Trading would allow one source to meet its regulatory obligations by using pollutant reductions created by another source that has lower control costs. Over time, this could allow Ohio to achieve water quality improvements more quickly than would otherwise be possible. Trading could also provide ancillary benefits such as restoration of riparian zones and improvement of in-stream habitat. This grant will target priority environmental issues, water quality and nutrients, using an innovative permitting strategy: trading.

Currently, in Ohio, provisions that would allow trading between point sources such as municipal wastewater treatment plants and nonpoint sources such as agriculture are included in the NPDES (National Pollutant Discharge Elimination System) permits for municipal wastewater treatment plants in the Upper Little Miami River Basin.

In the Great Miami watershed, the Miami Conservancy District (MCD) has taken the lead in establishing a water quality trading program. In February 2005, MCD requested Ohio EPA’s concurrence and participation to proceed with the Great Miami River Watershed Water Quality Credit Trading Program. This proposal is still under review by the Agency but we support the concept and efforts of MCD to develop and implement a trading program. This grant proposes to use the MCD trading program as a pilot project to evaluate our trading strategy. To further support and build on these efforts, Ohio EPA has already identified as one of its Agency goals the need to establish a consistent innovative regulatory framework that will promote the use of water quality trading in Ohio.

Project Schedule & Time Frame

Outcomes: As indicated below, the outcomes expected are a reduction in nutrients, increased cost-effectiveness of nutrient removal, and a net improvement in biological attainment.

Ohio EPA requests a 36-month grant project period to accomplish the following (all completion dates are from time of grant award to Ohio):

  1. Output: Development of concept paper(s) that will outline the general principles and needed regulatory changes to establish a trading program
    1. Identify Trading Team members and first meeting (Expected Completion Date: 3 months)
    2. Identify Trading Team charter (Expected Completion Date: 3 months)
    3. Initial draft concept paper(s) (Expected Completion Date: 9 months)
    4. Final concept papers (Expected Completion Date: 15 months)
    5. Authorization to proceed from Ohio EPA Director (Expected Completion Date: 18 months)
  2. Output: Development of Administrative Rules to implement the principles in the concept papers.
    1. Initial draft of Administrative Rules (Expected Completion Date: 21 months)
    2. Public Notice of Administrative Rules (Expected Completion Date: 27 months)
    3. Final Rule package
  3. Output: Development of model permits and permit language to implement the principles in the concept paper(s).
    1. Initial draft of Watershed permit and permit language (Expected Completion Date: 15 months)
    2. Final model Watershed permit (Expected Completion Date: 21 months)
  4. Output: Implement on a pilot basis the establishment of a trading program in the Great Miami River Watershed(s) in cooperation with the Miami Conservancy District.
    1. Agree with Miami Conservancy District (MCD) on the detailed implementation plan. (Completion date: Already done)
    2. Work with MCD to implement the trading program (Expected Completion Date: 36 months)
    3. Attend necessary meetings
    4. Establish Annual Audit Process
    5. Issue any needed Watershed Permits
    6. Evaluate Program Effectiveness – Implement Needed Changes
      1. Amount of nutrient reduction achieved with trading compared to nutrient reduction if no trading program
      2. Compare costs per pound of nutrient removed – trading vs. no trading
      3. Compare biological attainment status of receiving stream using any available data.
      4. Issue final report of findings-needed changes to Ohio Strategy

Establishment of regulatory framework that promotes the use of trading will be readily transferable to other states hopefully allowing them to implement trading programs in a reduced timeframe based on Ohio’s lesson’s learned.

Proposal Budget Summary Page

[Removed by EPA]

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