1. PA’s Nutrient Credit Trading
Program
Choose Clean Water 3rd Annual
Conference
June 2012

2. Origins of Trading in PA
• Pfizer Pharmaceuticals: Santo Domingo Creek
restoration
– Voluntary
– 1,300-foot restoration project: $80,000
– Modeling to determine reductions
• Credits:
– 1,381 lbs N/year
– 68 lbs P/year
– 129 tons S/year
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3. Origins of Trading in PA
• Credits transferred from Borough of Lititz
(property owner) to Pfizer (project funder) to
Lititz Watershed Association to retire
• Pennsylvania Environmental Council
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4. Program Timeline:
• 2003- Discussion on the Pfizer Voluntary
Trade began
• 2004- Chesapeake Bay Tributary Strategy
• 2005- Interim Final Policy published in
October
• 2006- Stakeholder meetings. Final Policy,
Appendix and 3 Attachments published in
December
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5. Program Timeline:
 October 9, 2010 - 25 Pa. Code §96.8 (Use of
offsets and tradable credits from pollution
reduction activities in the Chesapeake Bay
Watershed) published as final.
 October and November of 2010 – First
PENNVEST Auctions.
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6. Provisions of 25 Pa. Code §96.8:
• 96.8 (a) Definitions • 96.8 (g) Registration
Requirements for the
• 96.8 (b) Chesapeake Bay water Chesapeake Bay
quality
• 96.8 (h) Use of credits and
• 96.8 (c) Methodology offsets to meet NPDES
requirements related to the
Chesapeake Bay
• 96.8 (d) Eligibility Requirements
for the Chesapeake Bay • 96.8 (i) Water Quality and
TMDLs
• 96.8 (e) Certification
Requirements for the • 96.8 (j) Public participation
Chesapeake Bay
• 96.8 (f) Verification • 96.8 (k) Use of credits and
Requirements for the offsets generally
Chesapeake Bay
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7. 96.8 (b) Chesapeake Bay Water Quality
• Nitrogen, Phosphorous and Sediment
• Chesapeake Bay Watershed
• Credits and offsets, comparable pollutants
• May not be used for technology-based
effluent limits
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8. 96.8 (c) Methodology
• Non-Point Sources: Consistent with
Chesapeake Bay Watershed Model
• Edge of Segment, Delivery ratios
• Other published or peer-reviewed scientific
sources
• Point Sources: Discharge
Monitoring Reports (DMRs)
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9. 96.8 (d) Eligibility Requirements
• Beyond baseline and, if applicable, threshold
• Baseline examples:
– Chapter 102 Erosion and Sedimentation Control
Requirements
– Chapter 83 Nutrient Management
– Point Source: effluent limit in an NPDES permit
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10. 96.8 (d) Eligibility Requirements
• Threshold:
– Manure not spread within 100 feet of a stream; or
– Minimum of 35 feet of permanent vegetation
(buffer); or
– Credits reduced (adjusted) by 20 percent
• Compliance status and history
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11. 96.8 (e) Certification Requirements
• Certification/Verification/Registration
• Certification
– Project details
– How risk will be managed
– 10 percent set-aside for Department’s Reserve
– Tradable Load
– State or Federal Cost-Share
– Farmland Conversion not eligible
– 5 Years 11

12. 96.8 (f) Verification Requirements
• Verification Plan (Section “e”)
– Methods of documentation
– Self-verification or third party
• Credits must be verified before registering
and applying to a permit
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13. 96.8 (h) Use of Credits and Offsets
• Use is authorized through NPDES Permit
Language
• Credits and offsets to be used in basin in
which they were generated, unless otherwise
authorized
• Must be certified, verified and registered
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14. 96.8 (h) Use of Credits and Offsets
• 60 Day Truing-Up Period
• Permittee responsible for enforcing contract
– Uncontrollable or unforeseen circumstances
– Replacement credits
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15. 96.8 (i) Water Quality and TMDLs
• No increase in discharge of pollutants to
compliance point for determining compliance
with water quality standards
• Consistent with assumptions of TMDL
• Comply with anti-degradation requirements
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16. 96.8 (j) Public Participation
• PA Bulletin Notices (Certifications)
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17. Credits and Contracts
• Over 100 proposals have been approved
– over 4 million nitrogen (N) credits and
250,000 phosphorous (P) credits,
cumulative since 2006
• 31 trades
– Definition of trade
– 11 involving PennVEST
– 19 involving NPS generated credits
– 1 industrial discharger (purchaser)
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18. Credits and Contracts
• Successful Auctions have been completed by
PENNVEST since Year 2010
– $2.98 to $4.00 per pound for Nitrogen
– $4.73 per pound for Phosphorous
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19. Brubaker Farms and Mount Joy BA
• Mount Joy Borough Authority was the 1st
wastewater treatment facility to adopt trading
as a means of achieving compliance with
nitrogen limits.
• Mount Joy investigated costs of upgrading its
treatment facility and found that by installing
the first level of nitrogen treatment they could
reduce nitrogen by about fifty percent.
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20. Brubaker Farms and Mount Joy BA
• The second level of nitrogen treatment would
increase the price per pound per year of
treating the remaining pounds of nitrogen
from about $8 per pound to $12 per pound.
• Instead, Mount Joy contracted with a local
farmer and invested in more than 900 acres of
no-till agriculture to meet their permit cap at
a cost of only $3.81 for every pound.
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21. Chesapeake Bay Commission Study
• Completed May 2012
• Report concludes that significant cost savings
can be achieved by using nutrient credit
trading as part of the Chesapeake Bay effort
• Available on the Commission’s website
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22. Next Steps:
• On-going program implementation, with
adaptive management
• EPA Trading Program Review
• Stakeholder meetings
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23. Andy Zemba
Director
Interstate Waters Office
Department of Environmental
Protection
717-772-4785 azemba@pa.gov
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24. PARKING LOT
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25. • Applicable for the • Total phosphorous and/or
Chesapeake Bay Watershed total nitrogen reduction
credits.
• • All trading must involve
Credit = Unit of Trade. comparable credits (nitrogen
• Expressed as mass/per unit for nitrogen).
time (lbs/yr).
• Shelf life of one year (October-
September). • Nitrogen and phosphorous
• Generated and traded in the reductions TO THE BAY
same watershed. beyond baseline and
• Must be certified, verified and threshold requirements.
registered prior to use for
permit compliance.
• Applicable trading ratios that
are being used:
• Edge of Segment;
• Delivery; and
• Reserve.
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26. Certification Verification
•A person who wishes to generate credits shall submit to the Department •A second important procedural requirement and a key component of the
a written request for certification of the pollutant reduction activity. A Department’s certification decision is a review of the ''verification'' plan
request for certification is typically submitted before a person conducts included in the certification request. A verification plan explains how
the pollutant reduction activity. The Department will publish notice of verification will occur. Verification can take a number of forms, but
receipt of a certification request in the Pennsylvania Bulletin for an regardless of the form it must demonstrate that the pollutant reduction
informal 30-day public comment period. During this 30-day period, a team activity was implemented as described in the certification and that other
will review the request for technical acceptability, and consistency with requirements, such as baseline and threshold, are met. The Department is
program requirements. not typically the primary verifier. The Department, however, may conduct
•The Department may only certify the pollutant reduction activity that will verification activities such as monitoring, inspecting sites and performing
generate credits for use to meet permit effluent limits for the compliance compliance audits.
period(s) for which they are certified, verified and registered. And, the
Registration
Department will certify a pollutant reduction activity contingent upon
conditions to ensure that the program requirements will be satisfied. •Verification is a condition of registration. Registration is the Department's
accounting mechanism to track verified credits before they are used to
•Certification serves as the Department's final determination of the
comply with the NPDES permit effluent limits. Credits, however, must be
amount of credits that the pollutant reduction activity may generate. If
addressed in a valid contract for their purchase prior to registration. The
the Department certifies a pollutant reduction activity, the Department
Department publishes notice of registration in the Pennsylvania Bulletin as
will publish notice of the action in the Pennsylvania Bulletin, which begins
an informational item.
a 30-day appeal period.
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27. • A permittee will only be authorized to use credits and offsets through the provisions of its NPDES permit. The permit conditions will require
appropriate terms, such as recordkeeping, monitoring and tracking, and reporting in DMRs.
• Only credits and offsets generated from activities located within the Chesapeake Bay Watershed may be used to meet NPDES permit requirements
related to the Chesapeake Bay. Credits generated in either the Susquehanna or Potomac basin may only be used in the basin in which they were
generated, unless otherwise approved by the Department.
• A permittee shall ensure that the credits that the permittee applies to its permit for compliance purposes are certified, verified and registered, and
that the offsets it applies to its permit for compliance purposes are approved, for the compliance period in which the credits or offsets are used.
• The Department may authorize a period of 60 days or less following the completion of the annual compliance period in an NPDES permit, for a
permittee to come into compliance through the application of credits and offsets to the permit, provided that the credits were registered and offsets
were approved for use during that compliance period.
• A permittee relying on credits to demonstrate compliance with its permit effluent limitations, conditions and stipulations under Chapter 92a shall
attain and maintain compliance with its permit. A permittee is responsible for enforcing the terms of its trade contract, when needed to ensure
compliance with its permit. The Department may waive this requirement where the pollutant reduction activity fails due to uncontrollable or
unforeseeable circumstances such as extreme weather conditions, and timely notice is provided to the Department, if the following apply:
• The failure is not due to negligence or willfulness on the part of the permittee.
• The Department determines that replacement credits will be available.
• The Department determines that the requirements for restoration, protection and maintenance of the water quality of the Chesapeake Bay
will be met due to the requirements of this section, which may include the type of methodologies used when certifying credits, the existence
of an approved legal mechanism that is enforceable by the Department, and the use of a credit reserve.
• A permittee shall document the use of credits and offsets in DMR forms, which the permittee shall submit at the end of each compliance year or as
otherwise provided or required in the permit. Credits may only be used to meet permit effluent limits for the compliance period for which they are
certified, verified and registered by the Department, and offsets may only be used to meet permit effluent limits for the compliance period for which
they are approved by the Department.
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28. 28

29. 3 year- 21,000 N credits exchanged at $3.04 • The Nutrient Credit
Credits Clearinghouse will:
Buyer Seller Exchanged
• Purchase nutrient credits as
PPL EnergyPlus County of Lycoming 9,153 lbs/yr needed to establish a portfolio
LLC (AG generated ) of available nutrient reduction
ElectroCell Technologies
credits; and
(AG generated ) 12 lbs/yr • Sell nutrient reduction credits
City of Lancaster for a set price and time period.
(PS generated) 11,835 lbs/yr
• 2 Auctions were held in the
1 year- 41,000 N credits exchanged at $2.75 Fall of 2010. As a result,
Credits PENNVEST will purchase
Buyer Seller Exchanged
62,000 nitrogen credits for a
PPL EnergyPlus County of Lycoming 3,722 lbs/yr total of $176,590.
LLC (AG generated)
Elizabethtown Borough
(PS generated) 7,369 lbs/yr
City of Lancaster
(PS generated ) 29,908 lbs/yr 29

30. • Credit—The tradable unit of compliance that corresponds with a
unit of reduction of a pollutant as recognized by the Department
which, when certified, verified and registered, may be used to
comply with NPDES permit effluent limitations.
• Offset—The pollutant load reduction measured in pounds that is
created by an action, activity or technology which when approved
by the Department may be used to comply with NPDES permit
effluent limitations, conditions and stipulations under Chapter 92a
(relating to National Pollutant Discharge Elimination System
permitting, monitoring and compliance). The offset may only be
used by the NPDES permittee that the Department determines is
associated with the load reduction achieved by the action, activity
or technology.
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31. Participation in the nutrient credit trading program is voluntary. Those that
may be able to take advantage of the cost-savings of the program are:
• any facility subject to a nutrient or sediment load that is related to restoration
and protection of the Bay, mostly wastewater treatment facilities;
• any farmer who may voluntarily choose to implement nutrient or sediment
reduction measures and thereby earn revenue;
• any developer that seeks to create a new or expanding discharge that must
meet the zero net load; and
• any aggregator that seeks to arrange for the sale of credits generated by
another person, or arranges for the credits to be certified, verified and
registered.
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32. • It can be either. Although all credits are only
good for 1 year and are only certified for 5
years, credit generating practices have a life
span varying from 1 to 15 + years.
• Depending on individual needs, credits can be
generated and purchased to meet
requirements for both the long and short-
term.
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