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Stormwater and Water Quality Trading from 10,000 Feet

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An outlook on stormwater policies, investment needs, water quality trading and market-based instruments

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Stormwater and Water Quality Trading from 10,000 Feet

  1. 1. Stormwater and WQT from 10,000 Feet Outlook on Stormwater Policies, Investment Needs, Water Quality Trading, and Market-Based Instruments NEFSMA Spring Stormwater Symposium March 8, 2017 Seth Brown, PE Founder/Principal | Storm and Stream Solutions, LLC
  2. 2. Overview •National View •Policy / Legal Rulings •Funding/Investment Needs in Stormwater •Innovations in Funding/Financing •Background on Water Quality Trading (WQT) •Examples of WQT •Considerations regarding WQT •WQT and Stormwater/MS4s
  3. 3. National View
  4. 4. National Policy Issues •“Alternative” Stormwater Facts •Policy and Legal Rulings of Note •Funding/Investments Needs in Stormwater •Innovations in Funding/Financing
  5. 5. Stormwater is important…
  6. 6. The Rise of Nonpoint Pollution Source: William Ruckelshaus, A New Shade of Green, The Wall Street Journal, April 17, 2010 Point Source vs. Nonpoint Source Water Quality Impairments 1970 2010
  7. 7. Stormwater is a punk…
  8. 8. Challenge of Stormwater Source (Annual Volume) BOD5 (mg/l) TSS (mg/l) Fecal Coliform (colonies/100ml) Treated Wastewater (11,425 BG) 30a 30a <200a Stormwater (10,068 BG) 0.4-370 0.5-4,800 1-5,230,000 CSO (850 BG) 3.9-696 1-4,420 3-40,000,000 SSOb (10 BG) 6-413 10-348 500,000c Pollutant Concentrations in Municipal Discharges aTypical limit for wastewater receiving secondary treatment/limit for disinfected wastewater bConcentration in wet weather SSOs cMedian concentration (WDNR 2001) Source: Report to Congress on the Impacts and Control of CSOs and SSO (EPA 2004)
  9. 9. Stormwater cannot be fired… It’s too good of a deal for economy It’s too big of a problem for the environment It’s too promising of a value “YOU’RE FIRED, STORMWATER!”
  10. 10. What the Boss Has Said… •He means what he says…literally •$1 trillion in infrastructure investment • Public and private partnerships • Private financing through tax incentives – offset by repatriation revenues • Considering dubious by many… • “use…money to fix America’s water and environmental infrastructure” • Triple the State Revolving Fund programs • Focus on “urban renewal” • Signaled an immediate 10% cut to EPA’s $8.2B budget (half of which is passed on to the states)
  11. 11. What the Boss Has Done… • Proposed budget cuts EPA by 25% • Reduces EPA funding down to lowest level since 1991 • Reduces EPA staff from 15,000 to 12,000 • Reduce Chesapeake Bay funding by 95% • Administrator Pruitt has stressed the importance of SRF and state grants – and that “this is the beginning of the process” • Republican senators have said this budget is “DOA” and that cuts in EPA are “too severe” • Likely outcome – will move back to 10% (more about direction that outcome…) • BOTTOM LINE – will likely place a financial burden on states, who already are strained financially (ECOS) • States may need to address funding/investment gap • States likely to be expected to play a stronger role in regulatory enforcement
  12. 12. Compelling Driver for Change! photo credit James Thomas, from Cleveland Press Collection, Cleveland State University Library
  13. 13. From http://crlazlo2.blogspot.com/ Compelling Driver for Change?
  14. 14. “Only Major Growing Source of Water Pollution” – U.S. EPA NRDC, 2013 Boston Globe, 2013 Forestsforwatersheds.org,2014 Wri.org,2014 Water Quality Impairments Flooding Combined Sewer Overflows Ecological / Public Health Impacts ????? Urban Stormwater Runoff
  15. 15. Clean Water Act •1972 Amendments to Federal Water Pollution Control Act (Clean Water Act) • To restore and maintain the chemical, physical, and biological integrity of the nation’s waters • Two goals established: • Zero discharge of pollutants by 1985 • Water quality that is both “fishable” and “swimmable” by mid-1983 • 1987 CWA Amendments created the MS4 program • Promulgated in 1990 as Phase I program, updated/expanded in 2000 to Phase II program • Attempted establishment of national standard from 2010-2014 – deferred • Still a very young sector, relative to others
  16. 16. Investment Pays Off Investment in Wastewater Sector – Why Not Stormwater? 1972 = 16% raw and 3% tertiary 1978 = 0.6% raw sewage (gone by ‘96) and 19% tertiary ShiftU.S.EPA,2000
  17. 17. Clean Water SRF • Started in 1989 – grew out of Construction Grants program • Revolving funds meant to generate revenues as well as sub- market loans • Each $1M of SRF funding generates: • $930,000 in tax revenues ($100B = $93B in tax revenues) • 16.5 jobs ($100B = 1.65 million jobs) • $2.95M in economic input ($100B = $295B) • Stormwater/green infrastructure IS ELLIGIBLE • 2014 WRRDA bill clarified this • $48M green infrastructure SRF loan in Maryland – to a private entity in a P3 arrangement
  18. 18. Evolution in Stormwater Management Traditional Stormwater Management ConveyCollect Detain Infiltrate Retain Green Infrastructure StormwaterasaResource andanOpportunity
  19. 19. pedshed.net, 2013 Stormwater Infrastructure Has Value! City of Chicago, 2013 City of Philadelphia, 2013 City of Philadelphia, 2013
  20. 20. Then Why Hasn’t It Just “Happened”? NAHB Top 5 List 1. Regulators lack of necessary experience or knowledge 2. Regulatory approval process limits flexibility 3. Green Infrastructure/LID project cost more (real or perceived) 4. Lack of home buyer demand for GI 5. Lack of standardized protocols and specs across jurisdictions
  21. 21. Sustainable Practices: Green Infrastructure Source: Mulvaney, Lanyon, Source: ASLA Infiltration Planter Source: City of Portland, OR Green City Metric (U.N., 2010) – 9 m2 (96.8 ft2) per inhabitant for “proper urban sustainability” City – Actual (Green City Metric Rate) Chicago – 39,000 ac (GCM ~ 6,000 ac) NYC – 22,000 ac (GCM ~ 18,680 ac) DC – 22,000 ac (GCM ~ 1,500 ac) Atlanta – 13,500 ac (GCM ~ 995 ac) L.A. – 16,700 ac (GCM ~ 8,600 ac)
  22. 22. The Rise of the Millennials! VETERANS (1920-43, 67+ YEARS OLD) 50 million – Greatest /Silent Generation Family-Oriented, Loyal, Hard Working, Stable, Reliable BOOMERS (1944-62, 55-71 YEARS OLD) 76 million-Me Generation Personal Growth, Optimistic, Driven, Determined GEN X (1962-79, 36-53 YEARS OLD) 65 million-Slacker Generation Entrepreneurial, Creative, Technology-adept MILLENNIALS (1980-2000, 15-35 YEARS OLD) 83 million-Generation Next Networked, Sociable +Sophisticated, Achievers 0 10 20 30 40 50 60 2005 2010 2015 2020 Generations in the Workplace Veterans Boomers Gen X Millennials iGen iGen (Generation Z) (2000+ <15 YEARS OLD) 79 million Yet to be known…. Boomers Millennials Gen Xers
  23. 23. Millennials Characteristics • Politically independent • Favor “sustainability” over “environmentalist” • More likely to favor alternative/clean energy • More likely to believe that humans are responsible for climate change • More likely to be “car-less” or “car-free” • Prefer urban core areas • Prefer walkable areas near mass transit
  24. 24. Value of Green Infrastructure Economics/Financing/Funding Issues • More experience on cost-effectiveness • More interest in large-scale green investments • We’re finding better ways to pay for it… • Lots of social and other investments interest/capital • Vehicle for urban blight and addressing vacant properties and brownfield sites
  25. 25. Policy Updates and Legal Rulings
  26. 26. Policy and Legal Rulings • MS4 Phase II Remand • 2003 ruling (affirmed in 2014) stated that public comment/review process for permits is too limiting in general permit process • Three options: 1. Write all permit conditions at state level (“traditional”) and receive public input then 2. Write some conditions at state, and some at local level (“procedural”) with a requirement for some public input at local level 3. Hybrid of Options 1 and 2 (“states choice”) – chosen option • Some concerned chosen option looks too much like “status quo”, so appeal by enviro groups is anticipated • Des Moines Drinking Water Case • Nutrients from tile drains causing more expensive drinking water treatment downstream • Des Moines Water Works lost the case – drainage districts have specific service to drain lands for farming
  27. 27. Policy and Legal Rulings • Flow-Based Permits/TMDLs • Accotink Creek, VA flow-based TMDL – EPA lost lawsuit, no appeal • Others have jumped on this ruling • Buckely Airforce Base • West TN Home Builders • Tennessee permit with retention standard repealed by state legislation • Massachusetts Phase II permit has retention standard - lawsuits • Recent EPA document on the impact of flow on downstream waters • Construction General Permit • No major changes from 2011 permit • Homebuilders concerned with transference of permit for multiple property owners (with temporal implications).
  28. 28. Policy and Legal Rulings • Residual Designated Authority • Filed in EPA Regions 1, 3, 9 for categorical application in 2014 by enviro groups – dismissed by all regions • Enviro groups have just re-filed – pending action from EPA now • Railroad Industry Push-Back on SWUs • Norfolk Southern pushed to get railroad infrastructure waived from stormwater utility payments in VA • Others jumping on board in other states
  29. 29. Funding/Investments Needs Innovations in Financing and Project Delivery
  30. 30. We’re Paying A Premium for a Legacy of Outdated, Failing Infrastructure!! Water Infrastructure Grade = D $700 Billion + Loss For Businesses COSTS OVER $ 150 Billion “The heavily engineered, capital intensive, facility- construction solutions that dominated 20th century approaches to water management are no longer sufficient.” America 2050: An Infrastructure Vision for 21st 12 Century America
  31. 31. The Regulatory Context: Stormwater/Wet Weather • Regulated Entities • 7,500 communities regulated municipal separate storm sewer systems (MS4s) in the U.S. • 772 combined sewer systems in the U.S. • Growing interest and public demand for green stormwater infrastructure • Due to expanded urbanized acres & increased localized flooding Clean Watershed Needs Survey • ~$150B* in wet weather/stormwater needs *Extrapolated from information provided
  32. 32. Infastructure Investment Needs • Clean Watershed Needs Survey (CWNS) EPA (2008) • $100B for CSOs / stormwater (60% / 40%) • 67% growth in stormwater from ’04 to ’08 • $25.4B in ‘04 to $42.3B in ’08 – largest growth sector • 7 states reported 85% of needs • NJ ($15.6B), PA ($6B), CA ($3.8B), MD ($3.8B), TX ($3.1B), FL ($2.5B), NY ($1.1B) – what about others? • Other states cited lack of time/budget to document needs or documentation difficulties • CWNS 2012 • $48B for CSOs (with projections for GI increasing) • $19.2B for stormwater (only represents 20% MS4s) ~ $100B? • Perhaps total need of ~$150B in wet weather/stormwater
  33. 33. Value of Green on the Rise • GI being seen as a investment potential • GI showing economic bottom-line value (and bi-partisan – what?!)
  34. 34. Funding/Financing Options/Innovations Source: Bloomberg BNA Daily Environment Report Title: Financing Integrated Stormwater Infrastructure to Improve Community Health, Resiliency Authors: • Dominique Lueckenhoff, U.S. EPA • Seth Brown, Storm & Stream Solutions
  35. 35. Public Funding Options •General Funds •Special Service Tax •Grants •In-Lieu Fees, Permit and Inspection Fees •Stormwater Utilities
  36. 36. Public Funding Options Stormwater Utilities • Becoming increasingly prevalent/common • 1,500 today out of 7,500 total • But still only covers 20-25% of regulated universe • Stormwater programs often still under-funded… • Provides a critical dedicated revenue source that can be leveraged for expanded investment and low-cost financing 18 From Minneapolis-St. Paul Area National average ~ $4/month
  37. 37. Public Financing Options • State Revolving Funds • Lowest public financing available in most instances • Municipal Bonds • Most common form of infrastructure investment in U.S. • Bond ratings can be enhanced through fee securitization • Over 70% of communities have a bond rating lower than “Aaa”
  38. 38. Public Financing Options State Revolving Funds • Many still consider GSI not eligible • Over 95% in EPA Region 3 has gone to wastewater – similar across the country • SRF assistance can: • Reduce costs through enhanced bond rating • Expand investment potential over 10x through leveraging • Generate an additional $6 to $28 billion for GSI investments nationally • Go to private parties
  39. 39. Innovative Financing Options • Water Infrastructure Investment Act (WIFIA) • Based off of TIFIA • Just launched – can greatly leverage investments • Administered by EPA • Property Assessed Clean Energy (PACE) • Form of tax-increment financing • Water infrastructure can be integrated into Clean Energy projects as well • DC PACE includes stormwater, specifically
  40. 40. Private Financing Options •Private Bank Loans • Good for short-term financing •Equity • Not common source of funding for municipal infrastructure projects • Can be helpful in investments in new and emerging technologies
  41. 41. Private Financing Options Socially Responsible Financing • Green Bonds • There is no discernable pricing advantage for green bond designation • “Green” certification can needlessly add costs • Social Impact Bonds • Not a traditional bond (most of the time) • Normally associated with “Pay-For-Success” or “Pay-For-Performance” approach
  42. 42. Project Delivery Frameworks Options • Pay-For-Success (PFS) • Community-Based Public Private Partnerships (CBPs)
  43. 43. Pay-For-Success Model Characteristics • Utilizes “Social Impact Bonds” (SIBs) • Usually focus on “social infrastructure” • Examples: reducing homelessness, reducing asthma-related illnesses, etc. Millennial Action Project, 2014
  44. 44. Pay-For-Success Model Structure / Applications • Premise = level of payment based upon level of “success” • Driven by “Impact Investors” • First project in 2012 to reduce recidivism in NYC • Discontinued in 2015 due to lack of performance • Only water application is DC Water to use GI to retrofit 20 acres of impervious cover for $25M • Issued “Environmental Impact Bonds” (EIBs), Yves Blein, 2017
  45. 45. Pay-For-Success Model Criticisms • “Success” may be: • Difficult to define • The tail wagging the dog • Example: NYC recidivism project • High project risks may drive high ROIs • Some have suggested ROIs above 20% (DC Water project near market rate) • Dubious for high ROIs for social/environmental good • More about financing than project delivery • No/little concern with reducing overall costs – just meet “success” and ROI Penn State, 2017
  46. 46. Municipality CBP3 Entity Private Entity Design/Build Operate/Maintain Traditional P3 Advantages • Reduced project costs • Project delivery time • Transfer of risk • Long term O&M • Shared economic and social goals • Alternative financing Additional CBP3 Advantages • Community is priority • Mixed public/private financing can reduce financing costs • Municipality has high degree of control/input • Reinvestment into project • Aligned interests • Fixed-fee; Performance goals • Integrates program services • Lowers delivery costs • Incentivizes private sector • Lowers procurement barriers • Supports local DBEs • Drives local entry-level jobs Ownership and Control retained by the public partner Provides surety of execution and Adopts shared goals managed through performance metrics Community Based P3
  47. 47. CBP3 Program Platform Characteristics • NOT a traditional P3!! • CBP3 Starts with Community NOT Financing • Adaptable, scalable, flexible • Holistic • Not just a project – it’s a program • Long-term commitment EPA, 2016
  48. 48. CBP3 Program Platform Elements • Enhanced Procurement • Public Control and Target Setting • Co-Permittee/Co-Operator • Design-Build-Operate-Maintain Project Delivery Framework • Fixed-Fee and Performance-Based Contracting • Focus on Operations and Maintenance • Funding/Financing/Guarantees
  49. 49. CBP3 – Current Programs Prince George’s County, Maryland • CBP3 entity (Clean Water Partnership) established in early 2015 • Focus on integrated green stormwater infrastructure • $100M/2,000 impervious acres for initial phase • Total of 15,000 impervious acres to address • Significant cost reductions realized already • Received $48M in SRF financing • Over 2,000 acres in design/development • Pilots in other communities ongoing
  50. 50. CBP3 Planning and Implementation Tools Guide, Publications at: www.epa.gov/G3/ CBP3 Resources
  51. 51. Overview of Water Quality Trading
  52. 52. Background on WQT • Premise of Pollutant/Emissions Trading • Classic view of pollutant trading = “Cap-and-Trade” • Requires: • The establishment of a “cap” or a “baseline” of pollutant emission/level • That transaction cost + purchase cost < upgrade cost • That regulators approve of transaction Firm A Firm B Unused Allowance Exceeded Allowance Firm A sells “credits” of unused capacity to Firm B if cost of purchasing credits < cost of upgrading facility Pollutant “Cap”
  53. 53. Background on WQT • First emissions trading program was 1974 air quality related (VOCs, MO, SO2, NOx, particulates) • Early WQT programs include: • Fox River (Wisconsin) point-point program • Dillon Reservoir (Colorado) point-nonpoint • Limited activity, but led to lower cost outcomes • Interest in WQT stems from success of Air Quality Trading associated with 1990 Clean Air Act Amendments • Generated $2 trillion in benefits and $65 billion in costs – 30:1 B/C ratio • Estimated to prevent 230,000 early deaths annually by 2020 • Official start by EPA in 1996 with publication of WQT policy document • Several states developed rules following this (MI, etc.)
  54. 54. Background on WQT • EPA updated official WQT policy in 2003 • Outlines provisions for credible WQT programs • Identifies purpose, objects and limitations of programs • Allows for states to develop their own programs • Identifies restrictions on watershed-based trading: • Which pollutants are “tradable” • Must be able to meet local water quality standards • How baselines are determined • How to remain in compliance w CWA • Other elements • Trading ratios, etc. • Early estimates by EPA cited potential cost-savings of $900 million due to WQT across the U.S. (more recent estimates cite this at $140- $235M annually (Newburn and Woodward, 2012))
  55. 55. Background on WQT •Considerations in a WQT Program: •Credit life •Baseline •Banking •Limits of Transaction •Verification •Transaction Costs
  56. 56. WQT Programs of Note • Long Island Sound Nitrogen Trading Program • CT DEP provided authorization to use/sell credits • Point-to-point in nature • Has become a model for point-to-point program • Saved an estimated $200M over command-and-control • Great Miami Watershed Nutrient Trading Program (Ohio) • Ag BMPs estimated to be 30 times cheaper than point sources • No baseline for ag practices (anything above status quo) • Trading ratios associated with points sources joining program prior to finalization of program regulations • Excess credits from late-comes used as insurance • Considered successful program (100 trades, <800K lbs of nutrients • Used a reverse-auction process • Encouraged innovation (allowed multiple types of ag BMPs)
  57. 57. WQT Programs of Note • Ohio River Watershed Nutrient Trading Program • Multi-state partnership – largest WQT program in the world • Complex watershed modeling allows for customized trading ratios between buyers/sellers • Only “stewardship” credits available (for corporate sustainability, not regulatory compliance) – may change in future • Focus on “stacking” for ecosystem services as well • Tualatin Creek Thermal Trading Program • Located in Medford, OR • POTWs effluent is thermally loaded – require reduction • Permit allows for riparian restoration and optimized reservoir releases to offset thermal impacts • 2:1 trading ratios – 35 miles of shade enhancement • Costs have saved an estimated $50M
  58. 58. WQT Programs of Note • Tar-Pimlico Basin • Point-nonpoint nutrient credit program • Point sources pay the state based upon collective amount pollutant load exceeded • State uses collected funds to implement ag practices – no trading actually required • Chesapeake Bay Region • Driven by Chesapeake Bay Nutrient/Sediment TMDL • Since 2001, four Ches Bay states developed nutrient trading programs (WV, VA, MD, PA) • 89 of 92 river segments in Bay are impaired – trading cannot result in a violation of TMDL for any segments – constraining • Most have been limited to point-to-point trading • Some states have entered into point-to-nonpoint trading • Nutrient management plans for ag sector driving interest • Purchasing nutrient credits allowed for some land development projects • Critics point out the limited potential for trading due to heavy ag loads
  59. 59. Concerns on WQT •Three Major Challenges of WQT Program • Cited by Tracy Mehan, Former EPA Office of Water Director 1. Ensure trades create environmentally equivalent pollutant load reductions 2. Trading avoids the development of “hot spots” 3. Programs used reliable modeling techniques for calculation of nonpoint source load reductions •Additional concerns include: • Minimize transaction costs • Program enforcement to ensure environmental benefits
  60. 60. Has WQT Delivered? •Mixed opinions on success of WQT: • Programs have “resulted in only limited success” (Newburn and Woodward, 2012) • Point-to-point has been successful, but not point-to-nonpoint source • WQT is not a “market-based” approach at all (Shabman et al, 2013) • WQT has fulfilled it’s promise, with over 70 WQT programs that have existed in the U.S. (Kaiser and Feng, 2005) • Of the WQT programs existing in 2008, 1/3 did not have any trades at all, with others having limited transaction (EPA, 2008)
  61. 61. What Has Limited WQT (Compared to AQT)? • Water is more local than air • Limits the pool of potential buyers/sellers • Is more prone to creating “hot spots” • Includes nonpoint sources, which is more challenging • Transaction Costs – complex arrangements are costly • Trading Ratios – very high ratios due to uncertainty may limit cost efficiency • Regulations - uneven regulatory pressures compared to point source • Verification - more costly to verify and model (this is changing…) • Lack of Cost Heterogeneity - practices can be 65 times less costly than point sources (Bacon, 2005) – without ag, missing major factor for cost heterogeneity • TMDL Process – highly litigious, requires credibility of performance, so may limit demand
  62. 62. Legal Challenges to WQT • Food and Water Watch lawsuit on WQT in Ches Bay in 2013 • Claimed that WQT violated the Clean Water Act • Dismissed due to lack of standing • EPA hadn’t approved of any trades in Ches Bay states • Mississippi River Basin TMDL/WQT • MRB TMDL seen as a gateway to WQT in MRB • EPA petitioned by enviro groups to develop MRB TMDL for nutrients in 2008 • EPA dismissed the petition in 2011 on the grounds that states are working on the issue • Lawsuit filed in 2012 by enviro groups against EPA • Ruling in December, 2016 that sided with EPA • Judge left the door open • “The time may come when EPA no longer reasonably can let states remain in the lead.”
  63. 63. Stormwater WQT and Market-Based Approaches
  64. 64. Stormwater WQT & Market-Based Approaches • The Promise of Stormwater in WQT • Stormwater Trading • Cost-Based Grants • Incentive Programs
  65. 65. Why Stormwater Is Ripe for WQT WRI,2010 Storm- water Retrofits Greenfield Stormwater Management Practices WWTP Upgrades (high-end) Enhanced Nutrient Management Plans WWTP Upgrades (average) Native Oyster Aquaculture Algal Turf Scrubbing Cover Crops Conservation Tillage Grassed Buffers Restored or Constructed Wetlands Stormwater WWTP Agricultural New Practices $200+ $92.40 $47.40 $21.90 $15.80 $7.00 $6.60 $4.70 $3.20 $1.50$3.20 Dollars per pound of annual nitrogen reduction
  66. 66. Potential Cost Savings in Chesapeake Bay RTI, 2012 No Trading In-Basin-In-State Trading In-State Trading In-Basin Trading Watershed-Wide Trading ,2012 Total Point Source Nutrient Control Costs Total Agricultural BMP Costs Total Urban BMP Costs Potential Cost Savings from Trading Millions of Dollars per Year Cost of Achieving Significant Point source and Regulated Urban Stormwater Load Reduction Targets and Potential Cost Savings from Nutrient (In-Basin- State Trading) 0 200 400 600 800 1,000 1,200 1,400 1,600 79% 79% 81% 82%
  67. 67. MS4s in WQT • Virginia has adopted legislation to allow MS4s to purchase credits for MS4 compliance • Virginia DOT purchased $1M of credits for MS4 compliance through forest preservation/protection • Estimated that VDOT could reduce MS4 compliance costs by 50% through WQT • Maryland developing policies in the same context • MS4s would be limited to purchasing nutrients credits for only 50% of obligations
  68. 68. Market-Based Stormwater Frameworks Willamette Partnership White Paper • WQT and MS4s • Can drive onsite adoption of GI private properties • Stormwater fee reduction • Stormwater trading • Stormwater banking • Offsets • In-lieu fees
  69. 69. Stormwater Trading: Washington, D.C. Stormwater Retention Credit (SRC) Program • Not subject to EPA 2003 WQT Policy • 1.2” retention standard (90th percentile storm) • Half on-site required, rest can be purchased through credits or in-lieu fee • Credit buyers in urban core, credit generators in outlying urban districts • Exported retention could lead to social and environmental benefits and economic efficiencies • Other communities interested in this approach • Chattanooga, San Diego, etc.
  70. 70. Stormwater Trading: Washington, D.C. Creation & Certification of SRCs • Generation of SRCs through retention in excess of regulatory requirements or existing retention SRC Ceiling Stormwater Retention Credit SWRv on Site Site without SMPs 1.7” storm 1.2” storm (0.8” for substantial improvement projects) Unregulated Retrofit Sites SRC Ceiling Stormwater Retention Credit Existing Site Retention 1.7” storm Regulated Sites Exceeding SWRv
  71. 71. Stormwater Trading: Washington, D.C. Comparing Stormwater Retention • A: Single 1.2” Storm Retention = 7,739 gal. Annual Retention (’09 rain data) = 280,280 gal. • B: Single 1.2” Storm Retention = 7,739 gal. Annual Retention (’09 rain data) = 440,605 gal. 1.2” retention on site 1 (0.25 ac impervious) 0.60” retention on site 1 0.60” retention on site 2 +57%
  72. 72. Stormwater Trading: Washington, D.C. Flexibility for Regulated Sites *Annual volume retained, based on 2009 rainfall data. **Retention on Site 1 is $3.25/gallon and on Site 2 is $0.65 per gallon. (Based on analysis of the incremental cost to achieve retention, compared to existing District regulations, by Industrial Economics, Inc.) Hypothetical Comparison of Cost Savings from Scenario A vs. Scenario B Scenario A: On Site Only Scenario B: Trading % Change via Trading Estimated Retention Cost** $25,152 $15,087 -40% Annual Vol. Retained* 280,280 gal. 440,605 gal. +57%
  73. 73. • Anacostia watershed market size $3B • District of Columbia, Prince George’s County, Montgomery County • Region is focus for innovation in financing/funding for stormwater/wet weather • D.C. SRC Market • Prince George’s County, MD Community Based Public-Private Partnership (CBP3) • Montgomery County considering CBP3 • DC Water Green Bonds and Pay-For-Success Inter-Entity Trading: Scale Up to Anacostia Watershed?
  74. 74. Cost-Based Grants Big Stick / Big Carrot • 10,000 impervious acres to “green” – CSO consent decree • PWD raised stormwater fees on many non-residential property owners • Credit/rebate of up to 80% provided for onsite retention provided • Findings show ROI is challenging • Project aggregation may help • Stormwater Management Incentive Program (SMIP) and Greened Acres Retrofit Program (GARP) programs launched • Fund retrofits <$100K (SMIP), <$90K and >10 ac (GARP) – Millions in dollars for grants already awarded!!
  75. 75. Stormwater Banking • Similar to other mitigation banking • Public or private parties can engage • Can help attract economic/development activity • Reducing costs associated with stormwater management • Eliminates the risks associated with meeting regulatory obligations • Examples: • Grand Rapids, MI considering this • Wilmington, DE stormwater wetland park
  76. 76. Incentives and Other Options • Incentive = change behavior • Need more stormwater infrastructure on private properties • Often cheaper option, more area available, etc • Cost avoidance • Reduction of stormwater fees • Financial gain • Credits through trading • In-lieu fees • Puts risk on the public sector – less efficient approach • Offset • Determination of equivalent projects can be challenges
  77. 77. Why Stormwater Might Be Challenging for WQT • Requires numeric limits • Differing pollutants of interest (as trading currency) • Is a break from status quo • Exports co-benefits outside of area • Is abstract/difficult to understand and quantify • Regulatory uncertainty logestonelogic, 2015
  78. 78. In the Future… •Awareness of stormwater/wet weather issues will continue •Regulatory pressures will continue as well •Needs will grow in stormwater/green infrastructure •Funding gap will continue •Innovation in addressing stormwater/wet weather needs will grow…likely to include WQT
  79. 79. Info on NMSA •National Municipal Stormwater Alliance (NMSA) •New 501.c.3 focusing on MS4 issues at the national level •Coalition of state/regional MS4 groups •NEFSMA is a member currently •Total of 12 members covering 7 of 10 EPA regions •MOU with Water Environment Federation (WEF) •www.nationalstormwateralliance.org for more information
  80. 80. Stormwater and WQT from 10,000 Feet Outlook on Stormwater Policies, Investment Needs, Water Quality Trading, and Market-Based Instruments NEFSMA Spring Stormwater Symposium March 8, 2017 Seth Brown, PE Founder/Principal | Storm and Stream Solutions, LLC

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