Farmers in the Conestoga River Watershed, Lancaster County, are using the new NutrientNet tool to bid for nutrient reduction cost-share dollars based on how much the projects will reduce nutrient loadings to the river.

This is another step toward developing a practical water credit trading system that can effectively reduce nutrient and other pollutants at the lowest possible cost in the Chesapeake Bay and other watersheds using market-based tools.

The “reverse auction” project was begun in September 2004 by the Pennsylvania Environmental Council and the World Resources Institute with the help of a $939,734 grant from the NRCS Conservation Innovation Grant Program, in cooperation with the Department of Environmental Protection and the Lancaster County Conservation District.

This summer, technicians from the Lancaster County Conservation District solicited and received bids from qualified farmers in the Conestoga River Watershed for the first of two auctions.

They worked with farmers to outline projects, calculate the baseline loadings and estimated annual phosphorus reductions using the NutrientNet online tool. Phosphorous is a source of impairment to surface water in Pennsylvania and contributes to impairment downstream in the Chesapeake Bay, the Great Lakes and many watersheds.

To calculate baseline loadings, NutrientNet provides online calculation tools including GIS mapping, cropping and livestock information. After an appropriate best management practice is selected, estimated costs and phosphorus reductions are calculated. Reductions are based on efficiencies from the Chesapeake Bay model, and costs are estimated using standard pricing for Lancaster County conservation projects.

Using an online water quality trading tool, NutrientNet, the Reverse Auction ranks bids according to which agricultural best management practices will yield the greatest reduction in phosphorous runoff to local surface water at the lowest cost.

The June Auction will result in the award of approximately $40,000 in cost-share funds for the installation of seven best management practices on six farms within the Conestoga Watershed that will result in annual loading reductions of approximately 310 pounds of phosphorous. Winning BMPs could include animal waste storage systems, roof runoff controls and terraces and waterways for croplands.

The Reverse Auction project provides an example of how Pennsylvania can implement a statewide water quality trading program that includes the purchase of nutrient loading reductions from nonpoint sources like farms and municipal stormwater outfalls.

The Pennsylvania Environmental Council, DEP and other partners are working to develop both a point to point source and point to nonpoint source water quality credit program for use in implementing pollution reduction strategies like the Chesapeake Bay Tributary Strategy.

Under the Chesapeake Bay 2000 Agreement, Pennsylvania is obligated to reduce its respective contribution to the Bay of nitrogen and phosphorous by approximately one-third and sediment by approximately 10 percent versus 2002 estimated loads.

Major wastewater dischargers in the Bay watershed have said their cost for removing a pound of nutrients could be as much as $90, while to get a pound of reduction in nutrients by installing an agricultural best management practice could be as little as $10 to $21.

A water quality credit trading system would allow a wastewater discharger or anyone required to reduce nutrients to “buy” a pound of reduction from a farmer or someone else at much less cost.

The net affect is a much reduced cost for eliminating pollution. (See how credit trading reduced air pollution in a story elsewhere in this Digest.)

In December, the Pennsylvania Environmental Council, DEP and Pfizer completed the first water quality credit trade in Pennsylvania at a project in Lititz Borough, Lancaster County.

For more information, contact Andrew McElwaine, President, Pennsylvania Environmental Council, at 717-230-8044 or by email to: amcelwaine@pecpa.org or visit the NutrientNet website, the PEC/EESI Conestoga River Nutrient Trading Project webpage, and the Chesapeake Bay Nutrient Trading webpage.

8/19/2005