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January 30th, 2013

Pollution Trading: A Marketplace of Bad Ideas

By Scott Edwards

Nutrient pollution trading, which includes nitrogen and phosphorous, has been a hot topic of conversation in the Chesapeake Bay watershed ever since EPA signed off on the controversial practice in its Bay Total Maximum Daily Load (TMDL) at the end of 2010. Trading represents a recent trend that allows for the creation and exchange of credits for the “right” to pollute, instead of enforcing proven regulations that require companies to pollute less.

There are two common rationales offered by pollution trading proponents. First, it allows already existing sources of pollution like power plants and wastewater treatment plants, known as point sources, to purchase credits from farms instead of upgrading pollution control technologies to reduce their discharges. Since paying-off agricultural operations to self-certify that they’re reducing pollution down on the farm is cheaper than installing new equipment at power plants, it saves money — at least, for polluting industries.

Second, trading is also a way to allow for future growth by letting new discharges of pollution into already impaired waterways without first requiring the current sources to reduce their loads. Instead, it allows these new pollution sources to go online if they can find an existing source somewhere (not necessarily in the same waterway) who is willing to claim reductions in their own discharges to offset the new loads.

To date, much of the trading discussion has been theoretical, but as actual trades and offsets begin to take hold in the Bay watershed, illegal on-the-ground practices are becoming evident and it does not bode well for the Bay and local waterways.

Industry’s adherence to Clean Water Act (CWA) permits is the biggest success story in our 40-year effort to clean up our watersheds. Just this week Food & Water Watch filed a lawsuit against NRG Energy after discovering that three of its power plants in the Bay watershed have been exceeding their permit limits by many thousands of pounds of nitrogen each year. Both the company and the Maryland Department of the Environment (MDE) were well aware of these violations but, to date, neither one has taken any steps to make sure the company reduced their discharges to comply with their permit limits.

Instead, with MDE’s blessing, NRG attempted to illegally shift nitrogen discharge credits from one facility to another to try to meet their limits. When that failed, NRG (then known as GenOn) asked MDE to modify its permits to allow the company to secure even more nitrogen credits from farms in Maryland.

What’s happening with NRG shows that, despite oft-repeated assurances from trading supporters that trading can never be used to exceed permit limits, obtaining credits and offsets — instead of implementing technological upgrades to meet discharge limits — is the raison d’etre for point source trading.

Just ask the Electric Power Research Institute (EPRI), an industry-funded nonprofit that has taken the lead in the Ohio River Basin pilot nutrient trading program currently underway. In a 2010 email from EPRI’s Jessica Fox to her liaison at EPA Region V, she complains that there are conflicting messages from the Agency regarding the use of trading to violate permit limits, adding “[t]here is discussion that point sources will be required to meet all limits with technology, eliminating trading as an option.”

Where allowing existing point sources to purchase their way out of permit compliance destroys the CWA technology-forcing permitting program, the Bay future growth “offset” approach is likewise going to destroy local waterways. The West Virginia Department of Environmental Protection recently issued a construction and operating permit for the Mountain Springs wastewater utility. This facility is designed to discharge into the impaired Sleepy Creek, which flows into the Upper Potomac River.

Current CWA regulations are clear: new sources of pollution into impaired waters cannot be allowed unless there are remaining pollutant load allocations to give to the new discharger. Yet the Mountain Springs permit itself recognizes that there simply aren’t any more nitrogen and phosphorus load allocations left to hand out because they’ve all been assigned to existing sources. So they’ve placed zero nutrient discharge limits into Mountain Spring’s permit. Of course, DEP’s zero discharge standard is merely a work of fanciful fiction. Wastewater treatment facilities are designed to discharge nutrients – that’s how they operate.

Under a backwards “build it and credits will come” approach, Mountain Spring’s permit contemplates a “major modification” to the permit as soon as construction is complete and the facility is ready to discharge its nutrients. With the stroke of a pen, the zero discharge limit will be rewritten to a skies-the-limit approach, as the permitted nutrient discharge will be adjusted to match as many pounds of nutrients credits as the facility can track down to offset their discharges. And those offsets need not come from other Sleepy Creek dischargers. They can, and will likely, come from farm operations in Pennsylvania that are nowhere near Sleepy Creek.

That’s the real tragedy of trading and offset programs: transferring credits around the watershed among polluters — from rivers to lakes and from one stream to another — all in the hope of achieving water quality standards hundreds of miles downstream in the Chesapeake Bay makes Sleepy Creek and all of the other Bay tributaries sacrifice zones. Not only is it tragic, its illegal. The Clean Water Act wasn’t enacted to allow our local waterways to be lost in the hope of the achieving downstream water quality compliance. It wasn’t written to allow industries to purchase their way out of permit compliance. And its ultimate goal wasn’t to hoist the white flag when it comes to eliminating pollution from our waterways and hand over our most precious public trust resource to the highest bidder.

Its time to stop pretending that water pollution trading is about improving water quality. As NRG and Mountain Springs clearly show, it’s about making it more convenient for existing sources to pollute more and new sources to decimate our local waterways.

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