INCENTIVE ANALYSIS FOR CLEAN WATER ACT REAUTHORIZATION:

          POINT SOURCE/NONPOINT SOURCE TRADING
            FOR NUTRIENT DISCHARGE REDUCTIONS
                         Office of Water

                             and

                Office of Policy, Planning, and Evaluation

                 U.S. Environmental Protection Agency
                      Washington D.C. 20460
                           April 1992

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INCENTIVE ANALYSIS FOR CLEAN WATER ACT RE AUTHORIZATION:

          POINT SOURCE/NONPOINT SOURCE TRADING
            FOR NUTRIENT DISCHARGE REDUCTIONS
                         Project Officer:

                         Mark Luttner
                         Office of Water
                U.S. Environmental Protection Agency
                      Principal Contributors:

                       Richard Kashmanian
                         Mahesh Podar
              Office of Policy, Planning, and Evaluation
                U.S. Environmental Protection Agency
                          Prepared by:

                      Apogee Research, Inc.
                       Bethesda, Maryland
                           April 1992

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       This report  was  prepared  by  Apogee  Research,  Inc.,  for  the  U.S.
Environmental Protection Agency under Contract 68-CO-0083. Publication does
not signify that the contents necessarily reflect the policies of the Environmental
Protection Agency or any other organization identified in this document.

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                         TABLE OF CONTENTS



EXECUTIVE SUMMARY	  i

I.    INTRODUCTION	   ...  1

     A.    SUMMARY OF THE SURFACE WATER PROBLEM	  2
     B.    OPTIONS AVAILABLE TO ADDRESS REMAINING WATER
            QUALITY PROBLEMS	  4

H. PRINCIPLES OF POINT/NONPOINT SOURCE TRADING: THE ROLE OF
       POINT/NONPOINT SOURCE TRADING IN MEETING WATER
       QUALITY OBJECTIVES	  6

     A.    THEORETICAL CONSTRUCT  	  6
     B.    NECESSARY CONDITIONS	  8
     C.    HOW POINT/NONPOINT SOURCE TRADES ARE IMPLEMENTED .  . 12
     D.    OPTIONAL PROGRAM SCENARIOS    	13
           1.  Point/Point Source Trading   	13
           2.  Point/Nonpoint Source Trading  	14
           3.  Nonpoint/Nonpoint Source Trading	16
           4.  Offsets	17

m.  EXPERIENCE TO DATE IN TRADING PROGRAMS	18

     A.    CASE STUDIES OF EXISTING  TRADING PROGRAMS	18
           1.  Chatfield Basin, Colorado	18
           2.  Cherry Creek Reservoir, Colorado 	19
           3.  Dillon Reservoir, Colorado	20
           4.  Fox River, Wisconsin  	21
           5.  Tar-Pamlico River Basin, North Carolina  	23
     B.    LESSONS LEARNED FROM PROGRAMS
           IMPLEMENTED TO DATE	. . 24
           1.  The Absence of One or More Necessary Conditions Results
                 in Delay of Trading	24
           2.  The Presence of Necessary  Conditions Supports Watershed-Based
                 Water Quality Management and Provides an Administrative
                 Framework for Future Trading   	26
           3.  Costs and Benefits Associated with Point/Nonpoint Source
                 Trading Programs	29

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                   TABLE OF CONTENTS (continued)
IV.  POTENTIAL SCOPE OF POINT/NONPOINT SOURCE TRADING	31

     A.   USING THE WATERBODY SYSTEM TO  ESTIMATE TRADING
          POTENTIAL	31
          1.  Potential Trading Scope in Waterbodies with Current Water
               Quality Problems  	31
          2.  Potential Trading Scope in Waterbodies Not Currently Water
               Quality-Limited  	35
          3.  Limitations of the WBS Data  	37
     B.   ALTERNATE DATABASES EVALUATED FOR ASSESSING THE
           POTENTIAL UNIVERSE OF WATERBODIES FOR POINT/NONPOINT
           SOURCE TRADING	 . 38
V. POINT/NONPOINT SOURCE TRADING UNDER THE CLEAN WATER ACT  40

     A.   BACKGROUND	40
     B.   THE TMDL PROCESS  	40
     C.   THE CLEAN AIR ACT: A TRADING MODEL	41
     D.   ALTERNATIVE APPROACHES FOR CLEAN WATER ACT
          REAUTHORIZATION	42
          1. Guidance	42
          2. Policy	43
          3. Technical Assistance	43
          4. Funding	43

BIBLIOGRAPHY  	44

APPENDICES	45

     A.   NUTRIENT TRADING IN THE DILLON RESERVOIR	  A-l
     B.   NUTRIENT TRADING IN THE TAR-PAMLICO RIVER BASIN	  B-l
     C.   WATER BODY SYSTEM 305(b) DATA: WATERBODIES FOR
           WHICH POINT/NONPOINT SOURCE NUTRIENT TRADING
           APPEARS APPLICABLE NOW	C-l
     D.   WATER BODY SYSTEM 305(b) DATA: WATERBODIES FOR
           WHICH POINT/NONPOINT SOURCE NUTRIENT TRADING
           APPEARS APPLICABLE IN THE FUTURE  	D-l

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             LIST OF TABLES AND MAPS
Percent of Impaired River Miles, Lake Acres, & Estuary Square
 Miles Affected by Nonpoint Source Pollutants	
TABLE 1


TABLE 2    WBS Participants and Non-Participants	32

TABLE 3    Number of Waterbodies in WBS Not Fully Supporting Designated Uses
              That Could Benefit From Point/Nonpoint Source Pollutant Trading   ...  32

TABLE 4    Waterbodies for Immediate Nutrient Trading Consideration by State  ....  33

MAP 1      Distribution of Waterbodies for Which Point/Nonpoint Source Nutrient
              Trading Appears Applicable Now   	34

MAP 2      Waterbodies for Which Point/Nonpoint Source Nutrient Trading
             Appears Applicable in the Future	36

MAP A-l    Dillon Reservoir and its Watershed   	A-6

MAP B-l    Tar-Pamlico Drainage Basin	B-5

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                                                  Point Source/Nonpoint Source Trading
                               EXECUTIVE SUMMARY
       Since 1972,  the  nation  has made  much  progress  in surface water  quality using
technology-based effluent limits to control municipal and industrial point sources.  As EPA and
the states tightened the regulation of point sources (industrial facilities and wastewater treatment
plants), the  relative importance of nonpoint source pollution has increased.  Recent evidence
indicates that nonpoint source pollution -  from both urban and rural sources  - is now the
dominant source of water quality  impairment.   The problem is large:   EPA and  the states
recently identified over 18,000 specific waterbodies that will not attain water quality standards
even if point sources fully implement controls to meet technology-based discharge requirements.
For such waterbodies, solving the remaining water quality problems may require either or both
(1) point source controls that go well beyond technology-based discharge requirements, or (2)
nonpoint source reductions.

       This  report examines effluent trading as  one option to  achieve water quality objectives
at least cost. Although it can take  many different forms, effluent trading in principle allocates
reductions in pollutant loadings across point and nonpoint  sources using  least cost as the
criterion. While several options are discussed, this paper focuses principally on trading schemes
in which  regulated  point sources  are  allowed to avoid upgrading their  pollution  control
technology to meet water quality-based effluent limits  if they pay for equivalent (or greater)
reductions in nonpoint source pollution within their watersheds. This report focuses on nutrient
trading because trading programs to date have dealt with pollutants of this type and because of
the large number of difficult issues specific to trades involving toxic pollutants.

Conditions  for Efficient and Effective Trading Programs

       Several conditions appear necessary  for an efficient and effective point/nonpoint source
trading program.  A  program is considered efficient and effective if it achieves ambient water
quality objectives at the lowest aggregate cost, including point  source controls, nonpoint source
controls, and administrative costs.  Key elements of such programs include:

       •     The waterbody must be identifiable as a watershed or segment;

       •     There  must be a combination of point sources and controllable nonpoint  sources
             that each contributes a significant portion of the total pollutant load;

       •     There  must be a water quality goal for the waterbody that forces action;

       •     There  must be accurate and  sufficient data with which to establish targets and
             measure reductions;

       •     Point  sources,  at  minimum,  must  meet  the  technology-based  discharge
             requirements of the Clean Water  Act;

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                                                  Point Source/Nonpoint Source Trading
              There must be significant load reductions for which the marginal cost (per pound
              reduced) of nonpoint source controls are lower than for upgrading point source
              controls;

              Point  sources must be facing requirements to either upgrade facility treatment
              capabilities or trade for nonpoint reductions in order to meet water quality goals;

              There must be an institutional structure to facilitate trading and monitor results;
              and

              Sufficient  and  effective implementation mechanisms  (including appropriate
              enforcement measures) must be a component of the trading system.
Lessons Learned from Case Studies

       Case studies of three trading experiences to date - Cherry Creek and Dillon Reservoirs
in Colorado;  and Tar-Pamlico River Basin, North Carolina - indicate that the absence of one
or more necessary conditions will result in the delay of trading or will necessitate a shift in focus
of the trading program to facilitate continued pollutant (i.e.,  nutrient) load reductions. These
experiences also illustrate the  importance of other necessary conditions to program planning,
design, administration, and enforcement.  These lessons include:

•      The absence of one  or  more necessary conditions results  in  delay of  trading.
       Specifically, in  two programs, the marginal cost of point source reductions has not yet
       exceeded that of nonpoint source reductions, and point source loads are not yet limiting,
       i.e., actual load is less than allowed load. As a result there is neither economic incentive
       nor need to trade.

•      Where point source loads do not reach levels anticipated, nonpoint source controls will
       have to be more heavily relied upon for nutrient reductions.

•    .  The presence of necessary conditions supports watershed-based water quality management
       and provides an administrative framework for future trading.

•      Total maximum daily or annual pollutant loads provide a practical base against which to
       require and measure load reductions.

•      There must be enough  data and information about pollutant loading and water quality
       effects available to develop water  quality targets and  translate the targets into nutrient
       reduction goals and allowable loads.

•      It is necessary  to have detailed information about point  source facilities in order to
       determine the relationship between  the marginal costs of point and nonpoint source
      controls.
                                           11

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                                                 Point Source/Nonpoint Source Trading
•      A comprehensive basinwide management approach, rather than a focus on point sources
       in isolation, provides opportunities to achieve least-cost pollutant reductions.

•      A comprehensive approach also provides opportunities for targeting reductions to areas
       where they will be most effective and are most needed.

•      The administrative framework for the  trading program is not only important for the
       development of the basinwide approach, but may be critical to achieving desired pollutant
       reductions through trading.

•      Implementation mechanisms (including appropriate enforcement measures) are important
       in creating compliance incentives where economic incentives are absent or fail.

•      The local community, including  environmental organizations,  must support a trading
       program as a method to achieve water quality objectives. Broad-based support is helpful,
       especially among community leaders, environmental organizations, the farm community,
       and industry.

•      If the program involves agricultural BMPs and will be implemented through a cost-share
       program, there must be sufficient farmer demand for funding in excess of the ongoing
       cost-share program to support point/nonpoint source trades in order to supplement, not
       supplant, ongoing  nonpoint source control  efforts.

•      Regulatory requirements that increase the  transaction costs associated with  trading but
       that fail to provide an offsetting value in terms of compliance and enforcement may cause
       a trading program to fail.

•      Trading  ratios that account  for uncertainty  can be established  without  eliminating
       economic incentives to trade.

•      It may be important to build flexibility into the trading program design, as conditions
       may change over the course of the program.
Benefits and Costs of Trading Programs

       The dollar values of costs and benefits of point/nonpoint source trading programs will
vary according to waterbody size, number and type of affected dischargers, and program design.
The cost of project development and administration can be significant, especially for large or
otherwise complex waterbodies.  As an example of partial program costs, point sources at Tar-
Pamlico have agreed to contribute up to $400,000 for the development of an estuarine computer
model of the basin, and have already contributed $150,000 for two additional staff positions at
the agency implementing  nonpoint source reductions.  EPA has contributed approximately
$340,000  to  the  Tar-Pamlico program:   $220,000  for  the year 1  development  of the
computerized nutrient management framework, and $120,000 for program activities related to
nonpoint source  management  in  the Tar-Pamlico  basin.   These planned  and received
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                                                 Point Source/Nonpoint Source Trading
contributions approach $900,000. Additional EPA and state contributions to the program are
expected.

       A comparison of marginal costs for point source load reductions and nonpoint sources
gives some indication of the potential for cost-savings.  At Dillon, it was estimated that further
point source reductions would cost between $860 and $7,861 per pound reduced, while nonpoint
source load reductions would cost between $67 and $119 per pound.  At Tar-Pamlico, extensive
point source upgrades were estimated to cost between $250 and $SOO/kg reduced, while nonpoint
source reductions were priced at $56 per kilogram point source credit for Association members
and $62  for non-members.

       The following principal classes of costs and benefits are common among most trading
programs:

                    Costs                                         Benefits

•     Monitoring and modeling beyond those          •     Direct cost savings to point
       needed under current policy                           source dischargers

•     Permitting costs to establish discharge            •     Improved water quality for
       levels for the "with trading" case                      people, commerce, and the
                                                           environment
•     Government transaction costs associated with
       review and approval of individual trades
Nationwide Potential for Trading

       Estimates developed from EPA's Water Body System (WBS), which is designed to track
state assessments of water quality for surface water using information prepared for 305(b)
reports, indicate that for the near term, the best opportunities are for trading nutrient allocations.
Longer term opportunities may exist for trading pathogen or chloride allocations. Trading for
toxic pollutants appears to be inconsistent with the goals of the Clean Water Act.  The estimates
were  retrieved from the WBS using selection  criteria that closely match those  conditions
identified as necessary for a successful trading program, including the presence of both point and
nonpoint sources.

       The number of waterbodies that could potentially benefit from point/nonpoint source
nutrient trading fall into two general groups:  (1) those that currently are water quality limited
(i.e, identified by the states as "not supporting" or "partially supporting" their designated uses);
and (2) those that are not currently water quality limited. An estimated 943 water quality-limited
waterbodies could  potentially benefit from trading under current conditions.  Most of these
immediate nutrient trading opportunities are in the east, in the mid-Atlantic region, and also in
the Mississippi and Missouri River Valley states.  The five states with the most opportunities
are:  Illinois, 221; Florida, 129; West Virginia, 78; Iowa, 56; and Mississippi, 50. Another 17
waterbodies are not currently water  quality-limited  but  have met all the other necessary
conditions.  At current growth rates, it appears that these waterbodies could benefit from nutrient
                                          IV

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                                                 Point Source/Nonpoint Source Trading
trading at some time in the future. These waterbodies are distributed as follows:  Vermont, 5;
Tennessee,  4; Washington, 3; Mississippi, 2; and Minnesota, West Virginia, and Wyoming, 1
each.
Clean Water Act Implications

      The Clean Water Act does not currently address effluent trading as a means of attaining
water quality standards.   The act does provide a mechanism to facilitate the development and
operation of trading programs:  states are required to establish total maximum daily loads of
pollutants  from point and nonpoint sources  in water quality-limited watersheds.  In order to
increase the visibility of trading as a programmatic  option for states and local governments, the
Clean Water Act could be amended to specifically sanction (or even promote) effluent trading.
In addition, EPA could broaden the options available to states and local governments for meeting
water quality objectives by clarifying the acceptability  of trading, identifying the potential
benefits that can result from trading, and providing assistance to help these jurisdictions establish
workable,  successful trading programs.

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                                                  Point Source/Nonpoint Source Trading
                                I.    INTRODUCTION

       The purpose of this report is to provide information and analysis pertaining to one of the
key  market  incentives ~ i.e., pollution credit trading between  point and nonpoint sources -
being considered during the Clean Water Act (CWA or the  Act) reauthorization  process.
Several bills that would amend the CWA have been introduced in Congress, either in the House
of Representatives or the Senate.  Most of these bills are relatively narrow, focusing on one or
a few aspects of surface water quality.  However, some bills (especially S. 1081) cover multiple
issues.  Some of the bills propose relatively minor changes to the Act, while others represent
significant departures from the existing statute.  While point/nonpoint source trading is  not
specifically  addressed in amendments  introduced to date (nor is it mentioned  in the  Act),
language in both S. 1081 and H.R. 2029 would require EPA to strengthen existing state nonpoint
source management programs.  Point/nonpoint source trading is a potential tool for this program
area.

Current Approach to Attain Water Quality Goals

       The  Clean Water Act  currently  provides  a two-tiered  approach  to water quality
protection.  At a minimum, technology-based requirements limiting pollutant concentrations in
effluents must be attained by all point source dischargers. These requirements take the form of
nationally uniform standards for classes and categories of industries, and a parallel approach for
publicly  owned treatment works  (POTWs) and their indirect  dischargers.   Dischargers  are
required to comply with these effluent limits, but there  is  no direct  incentive for them to take
additional steps to further reduce their discharges or otherwise improve water quality.

       The Act also requires that point sources meet more stringent effluent limitations in certain
circumstances.  States establish  ambient water quality standards that specify  goals for specific
waterbodies.  If technology-based controls are insufficient to protect water quality, water quality
standards serve as the regulatory basis for developing more stringent effluent limitations to be
applied to specific point sources.

Analysis to  Support CWA Reauthorization

       In consultation with numerous other agencies, the U.S. Environmental Protection Agency
(EPA) is preparing analyses of the costs, benefits, and other impacts of selected provisions of
the various amendments  now being considered.  EPA  is also  assessing the extent to which
certain water quality problems can  be addressed  through the application of market-based
approaches that supplement regulatory  approaches.  If the analyses show that market-based
approaches  arc  useful,  the  approaches may be  incorporated  in the  CWA  during  this
reauthorization.

       There are two major categories of reauthorization analyses.   Impact Analyses  are
prepared for proposed  CWA amendments  that  represent new  or expanded surface water
programs that may be costly to implement and/or for which  the water quality benefits  are
unknown or suspected to be small. Incentives Analyses are prepared to help determine whether
application of a market-based approach to surface water problems can efficiently and effectively
supplement a statutory/regulatory approach.


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                                                  Point Source/Nonpoint Source Trading
Purpose of this Analysis

       This incentive analysis is restricted primarily to evaluating the potential for point/nonpoint
source nutrient  trading to supplement existing point source regulation in order to achieve
reductions in nonpoint source discharges and to meet water quality objectives for nutrients. To
the extent that they offer useful lessons for point/nonpoint source arrangements, experiences with
point/point and nonpoint/nonpoint source trading also are presented.  As part of an evaluation
of the potential for nutrient trading, this report  analyzes current programs that incorporate
nutrient  trading between point  sources  and nonpoint sources.   It then  presents  statutory,
regulatory and administrative options that could change the extent to which  this practice is used
in the United States to deal with water quality problems.

       This analysis focuses on trading  to achieve water quality standards for nutrients  for
several reasons.  Nearly all  of the trading experiences to  date have been with trading for only
one type of pollutant - nutrients. Further, nutrients constitute the largest pollutant common to
both point  and  nonpoint sources.   For  the  near  term, nutrient trading presents the best
opportunities for taking advantage of the benefits that a successful trading program can provide.
Analysis of state data (described at length  in Chapter IV)  indicates that a significant number of
waterbodies may meet the necessary requirements for nutrient trading and experience to date
suggests that successful programs can be  crafted.

       Preliminary research  suggests that there may be future potential for trading to supplement
existing point source regulation of such pollutants as pathogens or chlorides. In fact, areas that
undertake nutrient trading may also realize reductions in pathogens from nonpoint sources where
nutrient trades result in additional and/or improved animal waste management practices.

       At the moment there  appears to be little potential for trading to supplement regulation of
toxic pollutants.  EPA is particularly concerned that  many toxic pollutants are persistent and/or
bioaccumulative in nature. The  Agency has long  pursued elimination of such discharges.  To
the extent trading facilitates reductions of toxics, it might be a valuable strategy.  However, the
Agency is not currently investigating applying trading to toxics.

       This report will be considered by the Agency, the Administration, Congress, and other
parties interested in the application  of market-based approaches to environmental problems in
general,  and in  solutions to nonpoint source pollution in particular.  The information in this
report  will be  used  to help  formulate decisions concerning  the potential  inclusion of
point/nonpoint trading principles and/or requirements in the reauthorized CWA.

       The  remainder of this introduction summarizes surface  water quality  problems and
identifies options available to address them.
A.     SUMMARY OF THE SURFACE WATER PROBLEM

       Since 1972, the nation has  made much  progress in surface water quality through a
program of technology-based effluent limits for industrial and municipal point sources.  As EPA
and the states tightened the regulation of point sources (industrial facilities and wastewater

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                                                 Point Source/Nonpoint Source Trading
treatment plants), the relative importance of nonpoint source pollution to water quality has
increased.  Recent evidence indicates that nonpoint source pollution - from both urban and rural
sources ~ is now the dominant cause of remaining water quality impairment. Urban nonpoint
sources include runoff  from industrial sites, commercial development,  and  urban streets.
Principal rural nonpoint sources include agricultural nutrients,  pesticides,  and soils; forestry
operations; and mining.1

       Current federal law encourages  nonpoint source controls in the Clean Water Act, but
these controls are voluntary, not regulatory in nature.  Local nonpoint source regulation varies
across jurisdictions in scope, type of controls required, and strictness of the runoff loading limits
of toxics, sediments, and nutrients.  In the absence of local regulation, compliance generally
remains voluntary.   Nationally, nonpoint sources typically face significantly less stringent
controls than do point sources, except within the coastal zone where states have greater authority
to regulate all activities affecting water quality. Under the Coastal Zone Management Act, states
must review any kind of development within the coastal zone to ensure its consistency with the
state's  coastal  zone management plan  (CZMP).  To  the extent that  runoff resulting from
development fails  to  meet state  CZMP requirements, the state  may  impose a variety  of
requirements including stricter performance standards and or may deny permits if conditions are
not met.

       Table 1 below presents data from the most recent national survey of surface water quality
and indicates the scope of the nonpoint source pollution problem:2
                                      TABLE 1

        Percent of Impaired River Miles, Lake Acres, & Estuary Square Miles
                        Affected by Nonpoint Source Pollutants
Pollutant Sources
River Miles
Agricultural                      61%
Hydrologic/habitat Modification    15%
Storm Sewers/Runoff             12%
Land Disposal                    na
Silviculture                        9%
Construction                       5 %
Lake Acres

   57%
   41%
   27%
   24%
   na
   na
Estuary Square Miles

       18%
        5%
       31%
       19%
       na
       11%
    1 U.S. EPA, National Water Quality Inventory - 1990 Report to Congress, Washington,
D.C. (March 1992).

    2 U.S. EPA, National Water Quality Inventory - 1990 Report to Congress, Washington,
D.C. (March 1992) Tables 1-3, 2-3, and 4-3 on pages 10, 23, and 53, respectively.

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                                                  Point Souree/Nonpoint Source Trading
       Excessive nutrient (nitrogen or  phosphorus)  loading  is a serious pollution problem
attributed to urban and rural runoff.3 High levels of these nutrients accelerate algal growth and
lead to eutrophication and its water quality effects - low dissolved oxygen, fish kills, reduction
in biodiversity, odor, etc.   Where municipal point sources have reduced their nutrient loads
through  pretreatment  and  secondary  treatment,  and in some cases  advanced treatment,
agricultural activities often account for the bulk of the remaining nutrient load. Urban nonpoint
sources of nutrients, such as lawn fertilizers, septic  systems, or stormwater runoff, can also
contribute significant proportions of the nutrient load.   While the runoff from rural areas
contains  natural levels of nitrogen and phosphorus loads, nutrients  in  fertilizers, crops, and
livestock residuals greatly increase rural loading.  Farming and other land-disturbing activities
also release  nutrients  in the soil  and free sediment, further contributing to water  quality
problems.
B.     OPTIONS  AVAILABLE  TO  ADDRESS  REMAINING  WATER  QUALITY
       PROBLEMS

       EPA and the states recently identified over 18,000 specific waterbodies that will not attain
water quality standards even if point sources fully implement controls to meet technology-based
discharge requirements (secondary  treatment for sewage  treatment plants or best available
treatment technology  for industrial  dischargers) because nonpoint source pollution is such a
significant part of the problem there. For such waterbodies, solving the remaining water quality
problems may require the implementation of alternative water quality improvement strategies.
Options to resolve remaining water quality problems include:

       •      Stricter point source controls beyond technology-based discharge requirements;

       •      Significantly reducing nonpoint source contributions; and/or

       •      A combination of controls on both point and nonpoint sources.

       In general, stricter point source controls will be expensive and will not reduce the large
pollution loads associated  with  nonpoint sources.  The relative cost of point versus nonpoint
source control measures is an  important consideration in  choosing among alternative water
quality improvement strategies.  Given the increasing costs of environmental protection and
competing needs for limited financial resources,  future water quality improvement efforts must
consider the efficiency of alternative approaches and use the most cost-effective control methods
to achieve the nation's water quality goals.  To the extent that market incentives drive decisions
about how to achieve specified improvements in water quality, these improvements will be made
in the most economically efficient  manner possible.  Therefore,  strategies combining point
source and  nonpoint  source controls with market-based  approaches  — rather than   strictly
regulatory approaches -- may offer the best opportunities to achieve significant reductions at the
lowest cost.
    3 U.S. EPA, National Water Quality Inventory - 1990 Report to Congress, Washington,
D.C. (March 1992).

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                                                   Point Source/Nonpoint Source Trading
       One non-regulatory, market-based method for achieving environmental quality objectives
is the general concept of "effluent trading." Although it can take many different forms, effluent
trading in principle allows dischargers to allocate discharge  reductions (beyond those required
by technology-based standards) according to relative economic efficiency.  This allocation can
take many forms, including the buying and selling of marketable discharge permits, or one entity
"buying" required discharge reductions by funding (or otherwise arranging  for) controls  to
reduce another discharger's effluent.

       When considered in the broadest possible sense, effluent trading does not necessarily have
to be limited to one type of discharger or even to one type of pollutant.  As a result, there are
numerous potential models for a trading program, including trading between point sources only,
between nonpoint sources  only, and between point sources and nonpoint sources.  An additional
delineation can be made  between  new  sources and old  sources, where new  sources may be
required to trade for reductions from old sources equal to  (or even greater than) the amount they
are anticipated to discharge.  Finally, it is conceivable that trading could be used across pollutant
types, such that a source discharging one type of pollutant that requires control may trade for
a reduction in another type of pollutant that also requires control.  In this  case, trades among
different types of dischargers would be structured to ensure that water quality objectives for all
the types of pollutants involved were being met through the  trading program.

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                                                Point Sourct/Nonpoint Source Trading
     H.  PRINCIPLES OF POINT/NONPOINT SOURCE TRADING: THE ROLE
             OF POINT/NONPOINT SOURCE TRADING IN MEETING
                          WATER QUALITY OBJECTIVES
       In point/nonpoint source trading program, point sources arrange for nonpoint source
controls in  lieu of more expensive plant upgrades that would otherwise be necessary to attain
ambient water quality targets.  Because point source/nonpoint source trading provides a means
of controlling both point and nonpoint source discharges into a waterbody, usually through an
allocation of permissible  pollutant loadings to the waterbody  across all dischargers and
discharges, it generally represents a basinwide approach to controlling total pollution loading.
In contrast, controlling discharges from point  sources only is representative of traditional
regulatory approaches.  Trading is a way to supplement the technology-based requirements of
the Clean Water Act by providing greater flexibility to the manner in which water quality goals
are achieved. It is not a way for dischargers to avoid compliance with their minimum treatment
requirements.

       Currently, nonpoint sources are unregulated under the Clean  Water Act.  Trading
programs can help attain water quality objectives  by reducing nonpoint source discharges. Point
source discharges are  regulated  through National  Pollutant Discharge Elimination System
(NPDES) permits. By  authorizing credits in NPDES permits in return for specified nonpoint
source control efforts, trading  programs can create economically attractive incentives for point
sources to help reduce nonpoint source discharges.
A.     THEORETICAL CONSTRUCT

       The theory underlying point source/nonpoint source trading is based on marginal cost
analysis.4  For each of the variety of methods available to reduce pollutant loading, there is a
specific cost associated with every increment of pollutant reduction (and accompanying increment
of water quality improvement).  The most efficient and effective approach to reducing pollutant
loading requires implementing the least-cost method available for each additional increment of
pollutant reduction.  In a trading program, the lowest marginal cost of controlling both point and
nonpoint sources can only be achieved by providing opportunities for point sources that would
otherwise have to install high-cost technologies to  pay for generally less expensive nonpoint
source controls.

       Nonpoint source  controls will be economically  attractive alternatives  to point source
controls where the  marginal cost of the amount  of nonpoint  source controls  that can  be
exchanged for one unit of point  source reduction is less than the marginal cost of one unit of
point source pollutant reduction.  As the less expensive pollutant control choice,  nonpoint source
    4 There may be some circumstances where the result of marginal cost comparison is not the
sole factor in the decision to trade.  See the discussion of Nonpoint/Nonpoint Source Trading
and Offsets later in this section.

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                                                  Point Source/Nonpoint Source Trading
reductions traded for point source reductions are the most cost-effective control option. Whether
or not the marginal costs for point and nonpoint sources are ever equal depends on technology
costs (both point and nonpoint), local land use, the number of each type of source, and the level
of loading from each, as well as on the trading ratio established for the program.

       The rate at which nonpoint source load reductions may be traded for point source load
reductions - the trading ratio - is part of the marginal cost analysis.  Ratios are determined at
the outset of a trading program and  reflect the volume of nonpoint source load reduction
equivalent to one unit of point source reduction. Under a trading  ratio of 1:1, a credit for one
unit of point source load reduction is obtained by paying for or installing that level of nonpoint
source control which will produce one unit of nonpoint source reduction.  Under a ratio of
greater than 1:1,  more than  one  unit of nonpoint source reduction is necessary to obtain credit
for one unit of point source  load reduction.

       The  trading ratio  may be established at  greater than  1:1  for a  variety of reasons,
including the uncertainty in measuring nonpoint source reductions, both in terms of the amount
of loading reduced for any  given control and  the permanency of the control once installed.
Ratios are also set at greater than  1:1 to offset point source and nonpoint source impacts from
new growth.5

       Despite the potential benefits of trading, point and nonpoint source loadings are imperfect
substitutes for several reasons. Point source loadings are relatively constant, with the exception
of combined sewer systems where loadings  may increase significantly during storm events.
Nonpoint sources are typically spread out within a watershed and loadings are more diffuse and
random than point sources, and are generally more dependent on the weather and topographic
conditions.  Further, there is a greater degree of uncertainty about the effectiveness of nonpoint
source control, especially about the actual reductions achieved and the permanency of those
reductions.  Point source  loadings, while more costly to reduce (in most circumstances), are
more easily monitored and regulated, whereas nonpoint sources are far more difficult to monitor
and are largely unregulated.  Under the Clean Water Act, pollutant abatement responsibility lies
with point sources, despite the fact that nonpoint sources contribute the greater share of nutrient
loadings  in many waterbodies.
    5 High ratios  will decrease the cost-effectiveness of nonpoint source controls  from the
perspective of the  point source (each "credit" becomes more expensive as the ratio increases).
Furthermore, nonpoint source reductions are more difficult to measure than point sources and
the dependence of the  program  on nonpoint source reductions may complicate or hamper
enforcement of water quality standards.  Technological changes or shifting growth patterns may
also make it difficult to structure load allocations and limits in a manner that will continue to
facilitate trading as conditions change.

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                                                 Point Source/Nonpoint Source Trading
B.     NECESSARY CONDITIONS

       EPA has identified several conditions necessary for a successful point/nonpoint source
trading program.6  This report's updated evaluation of existing programs suggests additional
requirements.  In the absence of implementation costs (sometimes referred to as "transaction
costs"), any voluntary reduction in loadings through  trading can be  considered to be an
improvement over the regulatory status quo because presumably a point source discharger would
only fund nonpoint source controls  if the necessary amount was less costly than point source
controls that would reduce the required amount of pollutants.  In practice, however, transaction
costs, including those incurred by government to administer the program, may make trading
inefficient.  The following list of  elements  for a successful program  is predicated  on the
assumption that the objective of trading is to meet water quality objectives through the loading
reductions brought about by the program.  In other words, a sufficient volume of reductions
should be achievable  through trading to make an impact on water quality and obviate the need
for more stringent point source controls. Key elements of successful programs are listed below:
       a.     The waterbody must be identifiable as a watershed or segment;

       b.     There must be  a combination of point sources and controllable nonpoint
             sources that each type of source must contribute a significant portion of the
             total pollutant load;

       c.     There must be a water quality goal for the watershed that necessitates action;

       d.     There must be accurate and sufficient data with which to establish targets
             and measure reductions;

       e.     Point  sources,   at  minimum,  must  meet  technology-based  discharge
             requirements  as required by the Clean Water Act

       f.     There must be significant load reductions for which the marginal cost of each
             pound reduced of nonpoint source  controls (multiplied by the trading rate)
             is lower than  for upgrading point source controls;

       g.     Point sources must be facing  requirements  to  either  upgrade  facility
             treatment capabilities or trade for nonpoint reductions in order to meet water
             quality  goals;

       h.     There must be an institutional structure to  facilitate trading and monitor
             results; and
    6 Kashmanian, Jaksch, Niedzialkowski, and Podar, "Beyond Categorical Limits: The Case
for Pollution Reduction Through Trading," paper presented at the 59th Annual Water Pollution
Control Federation Conference/Exposition, Los Angeles, California, October 6-9, 1986.

                                          8

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                                                  Point Source/Nonpoint Source Trading
              Sufficient and effective implementation mechanisms must  be in place or
              enacted as part of the trading system  (including appropriate enforcement
              mechanisms).
       Many economic, technical, and institutional factors must be considered when designing
a point/nonpoint source trading program.  The necessary conditions indicate that trading wUl not
be uniformly applicable in all watersheds.  Where it is applicable, however, trading offers local
jurisdictions  the potential to reduce their cost of meeting water  quality objectives.  These
identified necessary conditions are described in more detail below.

       a. Identifiable Watershed.  Confining trading to an identifiable watershed or segment
facilitates the management of the trading program by  establishing the boundaries in which
trading is allowed and delineating the area that will be monitored for water quality improvement
as a result of trading.

       b. Sufficient Point and Nonpoint Sources. The water quality problem must result from
both point and nonpoint source pollutant loadings in order for trades to be possible between point
sources and nonpoint sources. A trading system for nutrients is likely to meet these conditions
because  nutrients  are  frequently a  large part of  the  water quality problem for individual
watersheds, and they  are a common constituent of both point  sources and nonpoint sources.7
In a given watershed, for example, if controllable nonpoint sources contribute small loadings,
point sources may not be able to "buy" enough nonpoint source  control meet water quality
standards.  Alternatively, if point sources contribute very small loads, then even under trading
ratios of greater than  1:1 there  is little potential for significant increases in nonpoint source
controls as a result of trading.   Where point sources account  for 20 percent of the load and
nonpoint sources 80 percent, trading under a ratio  of 2:1 could effect a significant impact on
water quality.

       c. Water quality goal.  The water quality objective, frequently expressed as an ambient
water quality standard, pollutant loading reduction target, or total maximum annual load allowed,
provides the basis for determining the alternative loading allowances  for point source dischargers
under a trading program.  The objective and the resulting alternative loading allowances then
serve .as part of the basis for point source dischargers to evaluate the  cost-effectiveness of
additional controls to meet these limits.  It also serves as the base against which reductions are
measured and the effectiveness of the trading approach can be determined.

       d. Accurate and sufficient data. Sufficient and reliable water quality data, pollutant
loading data,  and an  understanding of pollutant effects on water quality are necessary to
determine maximum loadings allowable  to achieve water quality  standards, and to  evaluate
alternative point and  nonpoint  source control strategies.   Modelling  may  be required  to
accurately establish the relationship between loadings and water quality, to allocate  loadings
    7 U.S. EPA, National Water Quality Inventory - 1990 Report to  Congress, Washington,
D.C. (March 1992).

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                                                 Point Source/Nonpoint Source Trading
across different types of sources, and to help determine appropriate trading ratios and pricing
of reduction credits.

      Nutrient pollution is suitable for control through a trading program because it is the total
concentration of nutrients (usually phosphorus or nitrogen, but not often both) in a waterbody
that determines whether there is a risk of eutrophication, and the discharges from both point
sources and nonpoint sources contribute similarly to the pollution problem.  Total watersheds
may be the most appropriate spatial scale to support nutrient trading because adverse effects
from nutrient loadings may not be felt in the immediate receiving  stream, but downstream in a
lake or estuary where nutrient loadings can collect.

      The trading system  must be able to track total discharge levels, point/nonpoint source
trades, and total nonpoint source controls implemented.  A significant amount of planning and
analysis may be necessary  if the relevant regulatory agency does not  already have sufficient
water quality and nutrient loading information to establish appropriate water quality goals and
calculate allowable nutrient loads  that will achieve desired water quality  improvements  or
maintain a given water quality level.  Where such information is not already available, it may
be necessary to develop a water quality model of the proposed trading area to determine the
maximum allowable nutrient loads necessary to meet certain water quality  goals.

      When the necessary  information is at hand, the relevant regulatory agency establishes a
total maximum daily nutrient load (TMDL) designed to achieve a  specified water quality goal.
The TMDL may reflect a reduction over current point source loadings,  and may decrease over
time,  in order to compel water quality improvements.  The TMDL is allocated among point
sources discharging in the waterbody identified for trading, sometimes being expressed in terms
of annual maximum allowed pounds or kilograms of nutrient load.

      e.  Technology-based discharge requirements met.  All point sources must meet and
continue to meet, at a minimum, the technology-based discharge requirements of the Clean
Water Act  (i.e., secondary treatment or equivalent for POTWs; BAT  for industrial sources).
Trading may not result in increased loading  for any individual point source above that allowed
by technology-based controls.

      f. Nonpoint source marginal costs less than point source marginal costs (accounting
for trading ratio).  Nonpoint source controls must be more cost-effective than point source
controls necessary to achieve water quality goals. Otherwise, point source dischargers have no
incentive to trade to achieve loading reductions.  Additionally, because nonpoint source control
effectiveness and costs are site-specific, it is important  for both regulators and potential traders
to have knowledge of the effectiveness of nonpoint source controls  in reducing pollutant
loadings,  in part to establish a correct  basis for marginal  cost  and cost-effectiveness
comparisons, and in part to establish an appropriate trading ratio.

      To facilitate the development of the trading program and trading itself, point sources need
information on the marginal cost per pound  or kilogram to reduce pollutants, and some entity
(Soil  Conservation  Service, Department of the Environment,  local  planning  agency,   or
developers' association) must be able to provide comparative marginal cost  information on best
management practices (BMPs),  for urban, rural and farm nutrient reduction.  Additionally,


                                          10

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                                                  Point Source/Nonpoint Source Trading
wastewater treatment facilities and other point sources may have to conduct engineering studies
to determine  the  marginal cost of additional  reductions.   Nonpoint  source reduction
demonstration projects on farms and in urban areas may be necessary to determine the average
marginal costs of nonpoint source reduction controls.

       g. Point source allocations are limiting. Point source facilities must be under pressure
to further reduce their discharge loads, otherwise there will be no reason to trade.  Further,
trading needs to result in significant reductions in nonpoint source loadings in order for a trading
program to have a significant impact on water quality, and thus reduce the likelihood that point
sources will be required to meet more stringent discharge limits.

       b. Institutional structure.  While trading programs are based on market incentives, they
cannot rely entirely on market forces to result in attainment of water quality standards.  An
organization must take the lead in designing, administering, and monitoring program results ~
to make the market, in effect.  If one does  not exist, or if a division within  the institutional
structure cannot appropriately assume this role, an organization or division must be created that
can.  Because trades affect the permit requirements of point source dischargers, there needs to
be  feedback to  the  agency responsible for  permit  issuance,  review, and  enforcement.
Additionally, if water quality  standards are  not  being  met under a  trading program,  the
implementing agency  needs to be able to revise permit levels, program implementation rules,
and possibly program design.8  To ensure the trading program's  success,  the implementing
organization requires cooperation and coordination from the state, affected local jurisdictions,
other organizations that may facilitate trading  (such as a local conservation district, State soil and
water conservation agency, or the USDA Soil Conservation Service), and the landowners in the
area where nonpoint source controls will be implemented.

       i.  Compliance incentives  and enforcement mechanisms. Effective implementation
mechanisms must be in place to ensure that the gain in cost-effectiveness of pollution reduction
obtained through trading  is not  eroded by lack of clarity  in the regulations or the inability or
failure of point source dischargers to comply with other program or permit requirements. The
strength of the NPDES system is the enforcement potential  created by specified permit levels,
monitoring, and fines. A  program that departs from traditional point source permit requirements
raises compliance concerns if there is the potential for lax  enforcement or a weaker compliance
incentive system.  One party (the point source discharger) is subject to enforcement measures,
yet it may be dependent on the actions of another party (the nonpoint source discharger) to bring
about required reductions.   This  arrangement can create compliance issues under  trading
programs that are  more complex than  under traditional  regulatory approaches.   Careful
    8  Water quality standards may  not be  met for a variety of reasons, including: the load
allowances do not result in the anticipated water quality improvement, or the necessary nonpoint
source controls are insufficient and do not result in the same per pound improvement as would
point  source reductions.

                                          11

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                                                 Point Sourcc/Nonpoint Source Trading
consideration needs to be given to the delineation of authority over trading and the authority over
nonpoint source control implementation.'
C.     HOW POINT/NONPOINT SOURCE TRADES ARE IMPLEMENTED

       When a point source discharger exceeds its allotted nutrient load, it must arrange to fund
one or more nonpoint source control measures that will provide the level of reduction required
to meet its allowance.  In some cases the trading program may require point sources  to fund
more than one unit of nutrient reduction from nonpoint sources for every unit of reduction for
point sources.  Point sources may fund controls implemented by nonpoint .source dischargers
(either directly funding specific projects, or indirectly through funding provided to a nonpoint
source control program), or may implement nonpoint source control measures themselves.10

       There are primarily three options available to provide the opportunity for point  sources
to trade nonpoint source load reductions for point source load reductions:

1.     A point source-contributes a specified amount (based on the trading ratio) per unit of
       reduction needed  into a fund  that  supports best management practices for nonpoint
       sources;

2.     Alternatively, a point source  contracts  with a third party  (e.g., Nonpoint  Source
       Controls, Inc.) to install and maintain the level of nonpoint source control which will
       provide the necessary amount of nutrient load reduction to be credited to  the point
       source; or

3.     Point sources contract directly with a nonpoint source owner (e.g., developer, farmer,
       government agency) to install and maintain the level of nonpoint source control which
       will provide the necessary amount of nutrient load reduction to be credited to the point
       source.

       It would be  administratively difficult for a trading program to offer more than one option;
it is therefore likely that a trading program would provide only one option. Under options 2 and
3 above where the  point source contracts with another party, it may be necessary for the point
source to include monitoring and maintenance provisions in the contract, as well as require the
contractor to post a performance bond against the controls.
    9 As discussed later in Section HI and in the Tar-Pamlico case study, in the Tar-Pamlico
trading program the North Carolina Division of Environmental Management, in the Department
of Environment, Health, and Natural Resources (DEHNR) has final decision- making authority
with regard to the adequacy of nutrient trades and allocations. The Soil and Water Conservation
Commission has final authority with regard to agricultural best management  practice (BMP)
implementation.  In this program point sources trade BMPs for point source loading reductions.

    10 Nonpoint source control obligations may have to be indexed to an established  baseline
because its nutrient removals at nonpoint sources are related to the  amount of rainfall and
topographic conditions.

                                          12

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                                                  Point Source/Nonpoint Source Trading
       The first alternative represents the most institutionalized option. The fund into which
contributions are made could be an existing fund that supports nonpoint source controls, or a
fund could be created specifically for the trading program. The reduction credits would typically
be expressed in dollars per pound,  where the price of the credit would be determined by
multiplying the average marginal cost for nonpoint source  load reduction  by the trading rate.
The other two alternatives represent less structured options, the third being  somewhat ad-hoc in
nature.   Under these options,  the reduction  credit might typically be expressed in pounds
necessary for one pound of nutrient load reduction, and the price per pound might vary across
contractors.

       Depending on the distribution of nonpoint sources in the trading area and their relative
contribution to the water quality problems, a program may focus on urban nonpoint source load
reduction at new development sites and existing urban areas, or on rural nonpoint source load
reduction on farms, or even on  both.

       The regulatory  form for a trade is a dual set of discharge  limits  in  the point source
discharger's permit:  a stringent water quality-based  limit which  is applied (in addition  to
technology-based  requirements)  if point source reductions are the only means available for
meeting water quality standards; and  a less stringent requirement, typically expressed in terms
of pollutant loading allowances,  which is applied when trading is undertaken.  The less stringent
requirements are,  at a minimum, equivalent to technology-based standards.  Re-opener clauses
should be included in permits because wasteload allocations may need to be altered in the event
that water quality standards are not met.  They provide the opportunity to revise total loading
limits or set trading ratios at higher levels.
D.     OPTIONAL PROGRAM SCENARIOS

       To date, three distinct water pollution trading scenarios have emerged (see Section III):
(1) those that permit trades only among point sources (not the primary focus of this paper); (2)
those that permit trades between point sources and nonpoint sources; and (3) those that permit
trades between nonpoint sources.  All are similar in that they allow one source to trade some
level of pollutant loadings with another source in order to receive reduction credits. Under each
type of trading, point sources must continue to meet technology-based requirements and nonpoint
sources must meet any applicable  local or state minimum performance standards.

       The three scenarios may be tailored to regulate existing sources only (with  more strict
or alternative standards applied to new sources), or they may be modified to target new sources.
A fourth scenario,  offsets,  is a form of trading tailored  to  new  sources that can  enable a
waterbody to accommodate  growth without exceeding an established loading allowance. The
scenarios may be used alone, or in combination with one or more of the other scenarios.  They
are described below.

       1.  Point/Point Source Trading

       Under point/point source trading, designated point sources  trade permitted discharge
allowances only among themselves. In this approach, a point source may negotiate with another


                                          13

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                                                  Point Source/Nonpoint Source Trading
point source in the trading area to buy a portion of the other's loading allocation. When point
sources agree to trade, the administrating agency modifies their discharge permits to reflect the
traded  allowances.11

       The marginal  costs of technological  control measures differ among  point sources.
Point/point source trades would therefore be economically attractive if the cost to achieve
reductions through in-plant modifications or facility upgrades was below that required to receive
equivalent reduction credits through funding nonpoint source reductions.  In point/point source
trades, one or more plants would pay another to reduce its loading, thereby reducing the total
loading of the group.  Presumably, the plants might pay for reductions at the plant that could
achieve the lowest pound-for-pound reduction costs until the reduction targets are met or until
the marginal cost of treatment are equalized among the point sources.

       This scenario offers several advantages.  First, it may be relatively simple to calculate
new permits or loading allowances under point/point trading because there are existing permits
to work from.   Second,  the actual  results of point source trades should be relatively certain
simply because it is easier to  monitor point sources than nonpoint sources.  A disadvantage of
this  scenario  (when it is not used in conjunction with point/nonpoint source trading) is  that
reductions may not be achieved at least cost due to the exclusion of nonpoint sources as trading
participants.  Among the four scenarios, this one is the most limiting in its scope because point
sources cannot take advantage of cheaper, and often more abundant, nonpoint source nutrient
reduction opportunities.  This  scenario thus  fails to deal with a large  source of waterbody
impairment — i.e., nonpoint sources.  It does not present a truly comprehensive solution to water
quality problems.

       2.  Point/Nonpoint Source Trading

       Under point/nonpoint source trading, point sources pay  for nonpoint source reductions
(through  contributions to  a  fund  that supports  nonpoint source control installation  and
management) and in exchange receive credits against their load allocations or reduction targets.
Best management practices (BMPs)  reduce pollutant loading from urban and  rural nonpoint
sources.  Trades are cost-effective where the level of nonpoint source pollution control required
to obtain credit for one pound of nutrient reduction is than the cost per pound reduced of facility
modifications or upgrades at POTWs and other point sources.

       Through the TMDL process, a regulatory agency allocates the total load allowance (water
quality-based) among  the point source  dischargers in the trading area.  Each  point source's
nutrient discharge must be less than or equal to its allotment. Under trading, in the event  that
a point source's  actual load exceeds its allowed load, it can offset the difference with nonpoint
source nutrient reduction credits rather than install additional treatment. POTWs and other point
sources receive reduction credits by funding or otherwise arranging for a specified level or dollar
amount of nonpoint source controls. Trading ratios may be set at  greater than one to one to
    11 The program is similar to the bubble concept in the air pollution control programs where
a firm may trade  emissions reductions among  stationary sources within its facility, or with
another facility, to achieve a given level of emission reductions at least cost.

                                          14

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                                                  Point Source/Nonpoint Source Trading
ensure adequate reductions. For example, in areas with significant new growth, the resulting
increases in nonpoint source runoff and point source loadings may warrant setting trading ratios
at greater than 1:1, not only to account for uncertainty about the equivalency of reductions, but
to offset associated increases in new nonpoint sources.

       In point/nonpoint source trading programs,  the group of dischargers may be considered
a single trading-unit for the purposes of trading administration.  A total aggregate allowable load
is established for the group of dischargers and they decide among themselves how to allocate
shares of the total load.  The point sources jointly have to meet the aggregate total discharge
level.  In this type of program, individual plants will have two sets of permit requirements -
a "with trading"  requirement and a "without trading"  requirement, where the "with trading"
allowance is usually  determined by the group of point source dischargers through its allocation
process. Individually, point sources are still subject to technology-based requirements and can
face enforcement penalties in the event that its discharged load exceeds allowed levels and/or
the less stringent requirements result in local  water quality  problems.   This continuing
responsibility provides incentive for the point source to insure that the other "traders" fulfill their
agreements to use effective BMPs.

       Point/nonpoint source trading offers several advantages.   Increasing the classes  and
numbers of trading  partners increases the potential for cost-effective reduction  in  pollutant
loading. This is particularly true where the marginal costs of further point source reductions are
relatively high and  where population growth and development have increased  the relative
contribution of nonpoint sources of pollution.  Including both  point and nonpoint  sources also
tends to force the development of a watershed-wide or basin-wide approach  to  pollution
reduction.  This component provides the opportunity to target reductions to protect and maintain
localized areas of high water quality and improve localized areas of low water quality.  Treating
the discharge community as a single unit can  facilitate pollution reduction accounting  and
permitting.   Where point sources are treated as one unit, public costs may be reduced because
some of the administrative costs associated with allocating the  total allowable load is shifted to
the point sources.

       Despite its advantages,  point/nonpoint trading poses  several  obstacles that must be
overcome in order to have a successful program.   Trading places special responsibilities on
authorizing  agencies,  program  administrators,   the  participating  dischargers,  and  those
implementing  the nonpoint source  controls.  Taking advantage of the opportunity  to  target
nutrient reductions throughout the trading area  may necessitate cooperation and information
sharing between agencies without previous cooperative experiences (e.g.,  regulatory agencies
with water quality authority and farmers' assistance programs).

       There may be some difficulty in establishing effective enforcement.  Point sources may
face the risk of being subject to more stringent effluent limits if nonpoint source reductions fail
to result in the projected  water quality improvement, but they themselves have little recourse to
assure nonpoint source control implementation.  Under the Clean Water Act and other relevant
statutes, nonpoint source reduction programs are voluntary,  incentive-based, and are normally
not enforceable.  Therefore, trading programs involving nonpoint sources may have to rely on
similar mechanisms to encourage buy-in and participation.
                                           15

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                                                  Point Source/Nonpoint Source Trading
       Additionally, due to the differences in point and nonpoint source controls enumerated
earlier, it may be  more difficult to arrive at an appropriate trading ratio, as compared to
point/point source trading.  When trading for nonpoint source controls, some uncertainty about
the consistency and longevity of nonpoint source controls is likely to remain.

       3. Nonpoint/Nonpoint Source Trading

       Nonpoint/nonpoint source trading provides a mechanism to achieve nonpoint source
reductions  beyond  those obtainable through point/nonpoint  source trading.  New nonpoint
sources are occasionally subject to stricter erosion and runoff standards under state and local law
than are existing nonpoint sources.  Where such requirements exist (e.g., for  new  urban
development) nonpoint/nonpoint source trading allows new nonpoint sources to satisfy nonpoint
source control  requirements through a combination  of on-site controls and off-site controls,
affording the new  nonpoint source the  opportunity  to meet its requirements at least cost.
Presumably,  on-site controls will be less expensive than off-site controls up to some level of
control;  at that level, off-site controls will become  relatively cheaper than equivalent on-site
management  practices.  With a trading ratio of greater than  1:1,  it is possible to achieve a
greater level  of nutrient reduction than the regulations for new sources provide at a lower cost
to the new nonpoint source.

       In practice, nonpoint/nonpoint source trading has evolved from the point/nonpoint source
scheme originally adopted  for Dillon Reservoir.   Due to improved operational efficiency of
existing technology, the point sources discharging into Dillon Reservoir did not need reduction
credits. The Dillon Reservoir trading program is now driven by reservoir phosphorus limits and
a desire to offset new nonpoint source phosphorus with reductions elsewhere in the watershed.
The experience at Dillon is described in  more detail in Section III, and in the appended case
study.

       Nonpoint/nonpoint source trading  provides opportunities to achieve water quality goals
at least cost where new nonpoint sources are entering a basin,  where such  new sources are
regulated by  state or local law, and where there is  a sufficient number of existing nonpoint
sources  with  which  to   trade.    In   combination  with point/nonpoint  source  trading,
nonpoint/nonpoint source trading maximizes the opportunities for meeting pollutant loading goals
at the  lowest cost per pound.  The combination also relieves point sources of some of the
financial burden of accommodating growth because it allows point/nonpoint source trading ratios
to be set so  as to  only incorporate a safety/uncertainty  factor.   The nonpoint sources are
responsible for mitigating the additional runoff they generate (see discussion of 2:1 trading ration
in description of Dillon Reservoir program in Section III).

       Nonpoint/nonpoint source  trading does not  entirely  solve  the problems  relating to
uncertainty about the consistency and permanency of  nonpoint source controls, either by itself,
or in combination with one or more other components.  Neither does the nonpoint/nonpoint
source trading program eliminate concerns about the  ability of the organizations that currently
have oversite responsibility for  rural and urban nonpoint  source control installation  and
maintenance as discussed above in the point/nonpoint source trading  description. Despite these
drawbacks, on-site and off-site controls are likely to be better substitutes than point and nonpoint
sources.
                                           16

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                                                  Point Soune/Nonpoint Source Trading
       4. Offsets

       The  use of offsets, alone or in conjunction with other trading scenarios, provides a
mechanism to accommodate new sources and expansions of existing sources without exceeding
the established nutrient loading allowance.   Under an offset provision, new and  expanding
sources must obtain sufficient reductions from other sources to offset the additional loading they
will generate.  Unless point sources are substantially under their loading allowance, and/or
existing nonpoint source loads are relatively low, new sources may face difficulty locating in the
trading area and existing sources  may face difficulty expanding because the loading allowance
for the trading area effects a no-net-increase in loading.  In  fact, in some areas the goal will be
to achieve a net reduction in loading.  Under either policy, growth will not be possible without
offset provisions or without revisions in the aggregate loading allowance and loading allocations.
       Offset ratios are arrived at in a manner similar to that for trading ratios, i.e., a 1:1 ratio
provides an equivalent offset, while a greater than 1:1 provides a safety factor and/or additional
reduction.12  Setting offset ratios  for nutrient loads at  greater than 1:1  would serve  several
purposes. Assuming new or expanded point source offset additional loads with nonpoint source
reductions available under a trading program, a greater than 1:1 offset ratio would incorporate
a safety factor and  account for the uncertainty about the  equivalence of nonpoint  source
reductions.  A greater than even ratio could also help offset additional nonpoint source loading
associated  with  the  growth necessitating additional point source capacity.   Where  new  or
expanding nonpoint sources are required to offset additional loading as a condition of siting or
building permits, the offset  ratio may more appropriately be set at  1:1,  according  to the
substitutability of on-site and off-site nonpoint source controls. For nonpoint sources requiring
offsets, a ratio of greater than 1:1 would likely have the effect of exacting an entry or expansion
premium in the absence of other reasons for a greater than 1:1 exchange rate.

       When designing new or modified point or nonpoint sources, the owner will attempt to
reduce loadings at any cost per  kilogram up to the going rate for a kilogram reduction credit
(reduction cost per kilogram multiplied by  the trading ratio).   New and modified sources thus
meet permit conditions at least cost, using a combination of on and off-site controls.  While
marginal cost analysis applies in most cases where offsets are considered,  it may not  always
apply.  In addition to comparing the marginal cost for on- and off-site reductions, a point source
or nonpoint source may also  consider  the expected return  on investment,  and, under some
circumstances, may be willing to purchase more offsets than marginal cost analysis indicates is
economical because the total return on  investment will cover the additional expenditure.
    12 A trading ratio of greater than 1:1, e.g., 2:1 means that the new source must arrange for
two pounds of load reductions for each pound it will discharge.  Under the Clean Air Act,
offsets must provide a greater than  1:1 counterbalance against new emissions.

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                                                 Point Source/Nonpoint Source Trading
                   EXPERIENCE TO DATE IN TRADING PROGRAMS
A.     CASE STUDIES OF EXISTING TRADING PROGRAMS

       An evaluation of established trading programs confirms the importance of the conditions
this report identifies as keys to the success of trading programs. Three programs have developed
beyond the planning stage:  Cherry Creek Reservoir and Dillon Reservoir in Colorado, and Tar-
Pamlico River  Basin  in North Carolina.  While none of  these programs has  met all the
conditions necessary for a successful trading program,  Dillon Reservoir's has developed into a
successful basinwide nutrient management strategy.  Tar-Pamlico appears to meet many of the
conditions for success, but trading has not yet been  necessary.  A fourth trading program
between point sources has been in place for the Fox River in Wisconsin for ten years, but has
resulted in only one trade. It appears that a fifth program is in the development and planning
stages at Chatfield Basin in Colorado.  Information is presented on each of these programs; as
they provide generally useful lessons for a trading option under the CWA.

       1.  Chatfield Basin, Colorado

       Increased total phosphorus (TP) loading to the Chatfield Basin could greatly degrade the
future water quality of the Chatfield Reservoir,  the surface water body to  which the Basin is
a tributary.   The Chatfield Basin is a 3,000  square mile area that includes portions of six
counties in the Denver Area.  In 1989, a phosphorus effluent limit of 0.2 mg/1 total phosphorus
(TP) was imposed on point source dischargers in one sub-basin. This restriction was anticipated
to be protective of the TP standard until  the year 2000,  after which  time nonpoint source
controls would  be necessary, perhaps coupled with further tightening of point  source limits.
Presently, no nonpoint source  measures have been implemented specifically to control total
phosphorus.   Increasing development pressures in the Chatfield area  will increase TP loads to
the Basin beyond acceptable levels if specific controls are not implemented.

       To investigate the  sources and extent of  the phosphorus loading, a basinwide TP
simulation model was developed to predict monthly and annual loads originating from each of
30 sub-basins from the following sources: groundwater, point sources, developed land use
nonpoint sources, and undeveloped land use nonpoint sources.  The model was developed as part
of the 1991 Chatfield Basin Nonpoint Source Management Program.

       A project is  now  being  proposed  to develop a mathematical  model  to determine
economically optimal wasteload allocations among point and nonpoint sources based on their
respective control option costs.13  The TP simulation model would be incorporated in the
optimization model so that the effects of alternative wasteload allocations on  reservoir loads are
quantified.
    13 Concept for Wasteload Allocation Modeling in Chatfield Basin, Colorado.  Woodward-
Clyde Consultants, January 1992; and personal communication with Bruce Zander, US EPA
Region VTH, March 18,  1992.

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                                                 Point Source/Nonpoint Sou/re Trading
      The results of the optimal allocation model could be used to facilitate a point/nonpoint
source trading program for phosphorus in the Chatfield Basin.   Thus, the model  is being
advocated as a necessary precursor to the trading program, providing marginal cost information
and serving as the basis for determining optimal trading ratios for point and nonpoint source
controls. •

      A number of conditions exist in the Chatfield Basin that would  facilitate a successful
point/nonpoint source  trading program to reduce phosphorus.   In  particular, it has  been
determined that existing facilities contributing to increased phosphorus loads do not have the
capability to significantly reduce discharges without major capital improvements. Although the
State  of Colorado has  generally approved pollutant trading, the administrative framework to
institute a point/nonpoint source trading program in the Chatfield Basin is not fully developed
to date.

      2.  Cherry Creek Reservoir, Colorado

      Several years ago, the Cherry Creek Reservoir in  Colorado was experiencing strong
development pressure and planners anticipated a population increase from 90,000 to  302,000
between 1990 and 2010.M  In 1985, the Denver Regional Council  of Governments (DRCOG)
sought to prepare for the anticipated growth and its effects on water quality by developing a
management plan that would prevent accelerated eutrophication in the  reservoir.   The Cherry
Creek Reservoir is Colorado's most heavily used recreation area with 1.5 million annual visitors.
The surrounding area derives substantial economic benefits from this tourism.

      Phosphorus was identified as the critical pollutant. The Council estimated that  the total
annual loading of phosphorus from both point and nonpoint sources should not exceed 14,270
pounds  in order  to meet  the phosphorus standard of 0.035 mg/L established by the Colorado
Water Quality  Control Commission.  Under growth projections at the  time of program
development, it was anticipated that the critical load of 14,270 pounds would be exceeded by
about 1990.1S

      The Cherry Creek Reservoir trading program was designed to allow point sources to earn
waste load allocation credits by installing, operating, maintaining, and monitoring nonpoint
source phosphorus controls, enabling the  point sources (POTWs) to accommodate population
growth  without expensive in-plant changes.  Because nonpoint source nutrient loading was the
greatest source of phosphorus, urban nonpoint sources were required to reduce their loading by
50 percent  before point sources would be allowed to contribute to  nonpoint source reductions
and trade them for point source waste load allocation credits. Nonpoint source reductions have
not yet  reached 50 percent, nor have total loading limits been exceeded because  the region has
not experienced  the level of growth anticipated.  Consequently, point/nonpoint source trades
have not yet developed.
    14  Denver  Regional  Council of  Governments,  Cherry  Creek  Basin Water Quality
Management Master Plan, September 1985, Table 3.

    15  Denver  Regional  Council of  Governments,  Cherry  Creek  Basin Water Quality
Management Master Plan, September 1985, page 7.

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                                                 Point Soune/Nonpoint Source Trading
       When phosphorus loading does approach the basinwide limit, point source effluent limits
will directly depend on the success of efforts to control nonpoint source loading.  At that time,
if the nonpoint source reduction goal is not achieved, the POTWs will be unable to accommodate
anticipated growth and development and the Colorado Water Quality Commission could reduce
permitted point source effluent limits to compensate for unachieved nonpoint source loading
goals.

       3. Dillon Reservoir, Colorado

       The trading program  for Dillon Reservoir was the first such program established in the
nation.16  It was designed to enable a small reservoir to meet water quality standards despite
increasing levels of urban nonpoint discharges of phosphorus. For the Dillon Reservoir, the cost
of further reducing phosphorus loadings from point sources was relatively high because the four
publicly owned treatment works (POTWs) in the watershed required advanced technologies to
meet stringent water quality  standards.

       A 198417 study of the relative costs of point and nonpoint source control options for
Dillon Reservoir concluded  that appropriate incentives for point sources to trade appeared to
exist;  point sources and the  cost of nonpoint source controls was significantly less than that of
point source controls. The estimated cost per pound of phosphorus removed due to upgrading
POTWs for phosphorus removal ranged between $860 and $7,861 compared to $119 to remove
a pound of phosphorus with  urban runoff controls (based on a demonstration project).18   The
study also concluded that point/nonpoint source trading under a 2:1 ratio would result in an
estimated 51% savings in total annual treatment costs compared to the base case of no trading
(calculated by extending the cost comparison results to the entire drainage basin and incorporated
the assumption of diminishing marginal returns for each additional level of reduction by nonpoint
source controls).

       In 1984, Summit County adopted a point/nonpoint source trading system that allowed the
four POTWs to receive phosphorus reduction credits by funding controls to reduce phosphorus
loadings from existing urban nonpoint sources.  Each of the point sources was allocated a level
of phosphorus loading, based on an overall allocation to point sources and historic individual
point source  loadings.   The program established a 2:1 trading ratio, wherein point sources
received a credit of one additional pound of phosphorus above their allocation for every two
pounds of phosphorus removed from  a nonpoint source that existed before 1984.

       The 2:1 trading ratio was not established primarily to achieve an environmental safety
margin per se, but rather as a result of the potential for additional POTW discharges to be
    16 Kashmanian, Jaksch, Niedzialkowski, and Podar, "Beyond Categorical Limits: The Case
for Pollution Reduction Through Trading," paper presented at the 59th Annual Water Pollution
Control Federation Conference/Exposition, Los Angeles, California, October 6-9,  1986.

    17 Industrial Economics, Inc.,  Case Studies on the Trading of Effluent Loads in Dillon
Reservoir, 1984.  Prepared for the U.S. EPA.

    181983 dollars.

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                                                  Point Source/Nonpoint Source Trading
associated with additional new nonpoint sources.  New growth will contribute new nonpoint
source runoff and increase point source loads; the 2:1 ratio helps offset the increase from new
nonpoint sources.  Furthermore, post-1984 nonpoint sources are subject to strict regulations that
are expected to reduce discharges from these sources by at least half. As a result, one pound
of point source discharge is expected to result in two pounds of new nonpoint source phosphorus
loading in the absence of these strict controls, and less than one pound of phosphorus loading
as a result of the controls.  In order to achieve a net reduction in phosphorus loading, therefore,
two pounds of old nonpoint source phosphorus must be reduced to offset one pound of credited
point source loading and its associated pound of new nonpoint source loading.19

       By 1990, the approach and philosophy of the trading program had changed significantly.
The sewage treatment plants, through improved operating efficiency of existing tertiary treatment
technology,  achieved the highest phosphorus removal capabilities in the nation. In contrast to
the early 1980s, point source discharge is now only 2 percent of total reservoir phosphorus
loading.20 Consequently, the treatment plants, discharging substantially less than their annual
phosphorus allocations, do not face an immediate need for phosphorus credits^ and so havejio
economic incentive to initiate trades at this time.

       Because the need for trading did not materialize, the focus of phosphorus control in the
basin shifted away from the economic incentives of achieving point source reductions through
cheaper nonpoint source phosphorus control. None of the three trading projects were undertaken
by point source dischargers  needing additional phosphorus credits to meet permit conditions.
The trading program in Dillon is now driven by the reservoir's phosphorus limit and a perceived
need to offset new nonpoint sources of phosphorus with phosphorus removals elsewhere in the
watershed - some of the credits generated by trades will  be  used for this purpose.  In effect,
two of the three trades that have developed have been nonpoint/nonpoint source trades to offset
new nonpoint source  discharges to the reservoir, rather than point/nonpoint  source trades to
permit publicly-owned treatment works (POTWs) to receive discharge credits in excess of their
wasteload allocations.

       4. Fox River, Wisconsin

       Although it  is not an example of point/nonpoint source trading,  a point/point source
trading program implemented in Wisconsin provides useful insights for the design and successful
implementation of point/nonpoint source trading  programs.   A description of this program is
included here for that purpose.

       Since 1981, Wisconsin has allowed point sources  (primarily paper mills and POTWs)
along the Fox River to trade effluent allocations.  To date, however, only one trade has occurred
because several features of the program's design have prevented interest in trades between mills
from translating into actual trades.  The single trade involved a paper mill that shut down its
    19 Industrial Economics, Inc., Case Studies on the Trading of Effluent Loads in Dillon
Reservoir, 1984.  Prepared for the U.S. EPA.

    20 Personal communication with Bruce Zander, EPA Region 8, July 25,  1991.

                                          21

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                                                  Point Source/Nonpoint Source Trading
treatment operation and traded its discharge allowance to the municipal wastewater facility that
began receiving the mill's wastewater.

       The  Wisconsin Department of Natural Resources (WDNR)  developed the program
because existing technological controls on biological oxygen  demand  (BOD) were insufficient
to assure compliance with applicable water quality standards.  The Department prepared a total
waste load  allocation and  imposed more stringent limits on what individual sources  could
discharge.   In adopting stricter regulations, the WDNR included a limited program for
cooperative modification of administratively determined waste load limits, allowing point sources
to trade discharge allowances among themselves under certain circumstances.

       WDNR only allows trading  if the facility buying the  rights is new,  is expanding
production,  or cannot meet the discharge limits in its permit even with the use of the required
abatement technology;  trades for which the sole justification is cost savings are prohibited.
Trades are effective for a minimum of one year, but for not more than the amount of time
remaining on the seller's discharge permit (at most, five years).  There is also no guarantee that
discharge allowances which were sold  would be reassigned to the original permit holder after
the sale period, making  the sold allowances temporary rather than permanent.  As a  result
discharge allowances are not freely tradeable, diminishing their value. These restrictions also
create difficulties for the point sources in planning and making capital investment decisions.21

       Numerous administrative requirements also added to  the cost of trades and decreased
incentives for facilities to participate.  WDNR must approve the proposed trades and modify the
permits of the trading facilities. This process can take a minimum of six months.  The lengthy
permit revision process  further reduces the value of the potential discharge allocations.
Additionally, transaction costs from trading  became prohibitively high because there  is no
brokering or banking function.  The administrative approval process is also complicated by the
fact that the pollution problem is not limited to BOD, but includes toxic organic compounds from
paper mill effluents.  Some proposed trades might have led to high local concentrations of toxic
pollutants and may not have passed administrative review.22
    21 The difference between the life of the traded permits (minimum one year, maximum five),
and the normal life of capital investments in treatment facilities reduces incentives for trading.
For example, in considering a trade, a discharger would measure the cost of reduction  credits
over the permit period against the cost of reduction technology over the life of the technology.
If the control technology costs $8 million (present value, PV), and credits cost $5 million (PV)
over the life of the control technology, then the discharger would buy credits. However, if the
discharger  believes technology will  be necessary  in 5  years at  a cost  of $8  million  (PV),
regardless  of whether or  not credits  are purchased, the relevant cost comparison is  $8  for
technology now or $13 million (PV) for credits now and technology  later; here  the discharger
is better off buying the equipment now and  foregoing trading.


    22 The  use of BOD as a surrogate for toxic compounds in the absence of specific effluent
standards for these compounds appears to have the potential to impede the use of BOD trading
programs.

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                                                 Point Source/Nonpoint Source Trading
       5.  Tar-Pamlico River Basin, North Carolina

       A point/nonpoint source trading program has been developed as part of the overall
nutrient management strategy to protect the  water quality of the Tar-Pamlico  River Basin.
Development of the program was a cooperative effort between the Basin Association, a coalition
of publicly owned treatment works (POTWs),  one industrial facility in the basin, state agencies
and environmental groups.  The state agencies with key roles in the program are the Division
of Environmental  Management (DEM)  and  the Division  of Soil and  Water  Conservation
(DWSC).  The DEM is responsible for determining the adequacy of point/nonpoint source
tradeoffs, compliance and surface water quality monitoring, and assisting  in targeting nonpoint
source controls to reduce associated  nutrient loadings to the basin. The DWSC is responsible
for the administration and allocation of funds generated from point/nonpoint trades to implement
nonpoint source controls.

       The trading program adopts a broad approach to point/nonpoint source trading in that the
Association of point source dischargers are considered a single unit for nutrient load accounting
purposes.  Further,  monies generated  by trading go  to a fund, and are  then  dispensed to
implement nonpoint source controls in the basin, rather than being channeled directly to specific
projects. The fund is administered through the existing state agricultural cost-share program that
provides monies to local soil  and water conservation districts to  implement best management
practices (BMPs) that reduce nutrient loadings.

       The Association's annual nutrient loading allowances have been determined for the first
phase of the nutrient management strategy (1991-1994). Annual loading allowances gradually
descend, with  the 1994 amount reflecting a nutrient reduction goal of 200,000 kilograms per
year.   The Association must offset discharges that exceed their total allowance  in any given
calendar year with nutrient reduction credits obtained by making monetary contributions to the
BMP fund.  Nutrient credits are available to the  Association for $56 per kilogram of nutrient.
The credit figure was determined based on a 3:1 trading ratio and an average cost of nonpoint
source controls.  Existing facilities that are not members of the Association which expand their
operations are subject to more stringent  effluent limits, rather than a load allowance. Non-
Association members are eligible to participate in the trading program  at a slightly higher rate;
their effluent limits will be adjusted based upon a rate of $62 per kilogram of nutrient.

       To date, the Association has not reached its allowance  - the 1991  nutrient load was 20
percent below the allowance due to relatively low-cost operational and capital improvements that
were implemented at the POTWs.  This alleviated the need  to make an excess loading payment
or allocate the loading allowance among member facilities.  In the future, however, allocation
of member facilities' loading allowances  or the cost to offset excess discharges will  likely be
based on facilities' permitted  flows  as a percentage of the Association's aggregate permitted
flow.23
    23 Personal communication with Malcolm Green, General Manager,  Greenville Utilities
Commission, and Chair, Tar-Pamlico Basin Association, March 12, 1992.

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                                                Point Source/Nonpoint Source Trading
      The Association's responsibility for offsetting excess discharges ends with its payment
to the BMP fund. The DWSC maintains implementation and compliance authority for BMPs,
relying on local Water and Soil Conservation Districts to work with farmers to ensure proper
implementation and to conduct spot inspections to assure maintenance of BMPs.  The DEM is
the regulating authority for the point source  discharge community, requiring compliance
monitoring and submission of an annual report from the Association detailing nutrient loadings
for each member facility. The DEM also has final decision making authority with regard to the
adequacy  of nutrient  tradeoffs and  allocations.   This authority is exercised  in  DEM's
responsibility for NPDES permitting.  The DEM has the responsibility  to impose strict effluent
limits on the point sources in the program if water quality problems persist or increase because
of (or in spite of) trading.

      The terms agreed to in the nutrient management strategy also call for the development
of a estuarine computer model funded by the Association, and Association minimum payments
to the BMP fund during the first phase in the event that trades do not occur.  The results of the
computer model will be used to establish total  nutrient load targets and identify appropriate
nutrient management practices in Phase II of the strategy, which will begin in January 199S.
B.     LESSONS LEARNED FROM PROGRAMS IMPLEMENTED TO DATE

       Point/nonpoint source trading has not yet been extensively demonstrated in practice. Real
world complexities, such as variations in the  effectiveness of nonpoint source controls,  the
number of point sources, and likely point source load reductions due to operational changes,
make it difficult to estimate the potential impact of trading.  It is clear, however, that  the
"necessary conditions" outlined in  Section II will play a major role in determining whether a
locality can  benefit from developing  a point/nonpoint source trading program (or variation
thereon).

       1.  The Absence of One or More Necessary Conditions Results in Delay of Trading

       Without  exception, the absence of one  or more necessary conditions (as identified in
Section n) has resulted in a delay in trading or necessitated a shift in program design in order
for trading to occur.

•      At Dillon and Tar Pamlico, the marginal cost of point source reductions has not yet
       exceeded that of nonpoint source reductions.  As a  result, there is not yet an
       economic incentive to trade.

       Through operational  changes and minor capital improvements, point sources at Dillon
and Tar-Pamlico were able  to significantly reduce their loadings prior to turning to nonpoint
sources for reduction credits. This opportunity was identified by  engineering studies that were
part of the development of each program.

       At Fox River (a point/point source trading program), the marginal cost of in-plant loading
reductions never exceeded the marginal cost of the tradeable reductions.   Administrative and
                                         24

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                                                  Point Source/Nonpoint Source Trading
transaction costs associated with trading appeared to have played a significant role in increasing
the potential cost of trading above the level where trading might otherwise be viable.

•      At Cherry Creek, Dillon, and Tar-Pamlko, point source loads are not yet limiting,
       i.e., actual load is less than allowed load.  As a result, there is no need to trade to
       offset excess loading.

       As a result of the improvements at point sources at Dillon and Tar-Pamlico, the point
source discharges are below their allowed levels and trading is not necessary.  The Tar-Pamlico
point source  load is currently 13 percent below that allowed.  Over the next several  years,
however,  the allowed  load decreases, potentially  constraining  point  source  discharges,
compelling them to meet their allowed load through improved  treatment or offset their excess
load by funding nonpoint source controls.

       Cherry Creek point source loads have not yet approached allowed loads as a result of
slower than anticipated population growth.  It was originally anticipated that established levels
would be exceeded in 1990.  An additional condition for trading at Cherry Creek has also not
been met (i.e., nonpoint source loads have not been reduced  by 50  percent).

•      At Dillon,  point source  loads are  not  considered  significant.   As a  result,
       point/nonpoint source trading has been delayed, and  the program is now focussing
       on nonpoint source reductions.

       Point  source phosphorus loads at Dillon now account for only 2 percent of total basin
loading. This acts as a constraint to the volume of existing nonpoint source phosphorus that can
be controlled  through trading — there is not point source phosphorous to "leverage" against
existing nonpoint source loadings.  Even under a  hypothetical  zero discharge limit for point
sources, a functioning point/nonpoint source trading program in Dillon would remove only 400
pounds of nonpoint source phosphorus - out of an allocation  of approximately 2,000 pounds -
based on current point source discharges and a 2:1 trading ratio.

       As a result, the Dillon program now focuses  on mitigating new nonpoint source loads
through nonpoint/nonpoint source trading and  offset requirements.   For example,  in  one
completed trade, reductions obtained through nonpoint source controls will be credited to a new
public golf course under an offset program that  requires  any projects  that contribute new
nonpoint source  phosphorus to  obtain equivalent  nonpoint   source  phosphorus  removals
elsewhere.

       In the design stages, it appeared that the necessary conditions for trading  would be met
and trading would begin soon  after the three programs — Cherry Creek, Dillon, and Tar-Pamlico
~ were implemented.  Certainly, the programs meet other important conditions, including:  an
appropriate waterbody with point and nonpoint sources of nutrients, suitable water quality data,
water  quality targets  and established load allowances, technology standards, administrative
framework, and enforcement  mechanisms. At Cherry Creek and Dillon, anticipated population
growth that would have driven point source loads to their limit has not yet materialized.  At
Dillon and Tar-Pamlico, point source engineering modifications unanticipated at the outset of
the program have enabled point sources to stay well below their allocated load.


                                          25

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                                                 Point Source/Nonpoint Source Trading
      2.  The Presence of Necessary Conditions Supports Watershed-Based Water Quality
             Management and Provides an Administrative Framework for Future Trading

      Despite limited trading, the experiences at the programs to date affirm the importance
of the identified necessary conditions that were present in these programs and provide broad and
useful lessons for program planning, design, administration, and enforcement.

•     Total maximum daily or annual pollutant  loads provide a  practical base against
      which to establish and measure load reductions.

      At Tar-Pamlico, annual maximum loads were  established for the point sources, making
it clear when trading will be necessary: when actual loads exceed allowed  loads.  At Dillon,
the establishment of the maximum load was, in some respects, more effective as a proactive
planning tool, rather than as the primary method to improve water-quality limited waterbodies,
because an independent strategy to control nonpoint sources became necessary.

•     Sufficient data and information about pollutant loading and water quality effects
      must be available to develop  water quality targets and translate the targets into
      nutrient reduction goals and allowable loads.

      Both the Dillon and Tar-Pamlico programs illustrate the importance of these conditions,
not only in designing the trading program, but also in establishing a basinwide approach to water
quality planning and management. At Dillon, monitoring data are used in conjunction with the
Dillon Water Quality model to evaluate current control strategies and predict the impact of future
development.   As  modeling capabilities become more sophisticated and monitoring  data
accumulates, the load allocation process can be tailored more effectively to address the water
quality problem.  At Tar-Pamlico, program developers  were able to translate a water quality-
based goal into a nutrient reduction goal and  a declining schedule of allowable point  source
nutrient loading.

      The importance  of accurate and comprehensive data is reflected by  Tar-Pamlico's
investment (supported by significant EPA funding) in a more sophisticated estuarine computer
model to provide information for the next phase of the program, and in Chatfield's investment,
prior to formal consideration of trading, in basin modeling.  The availability of monitoring data
and sufficient models will directly affect the amount of  time required to develop and allocate a
maximum daily load and, if necessary, a trading program.

      A  water quality-based  regulatory  approach,  above  and  beyond  technology-based
requirements is only possible with adequate monitoring data and computer modeling capabilities.
Water quality data and appropriate models must be available to evaluate relative impacts from
point and nonpoint source loads along with the implications of alternative control strategies  to
meet a water quality standard.

•     It is necessary to have detailed information  about point source facilities in order  to
      determine the relationship between the marginal costs of point and nonpoint source
      controls.
                                         26

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                                                 Point Soune/Nonpoint Source Trading
       The engineering evaluation of the dischargers'  facilities showed that the Tar-Pamlico
basin could achieve significant nutrient reductions through relatively simple and inexpensive
POTW modifications.  This is an important condition of the trading program because it provides
the regulator and the regulated community with better information about the types of available
reductions  and  their costs.  It also  establishes an accurate marginal cost basis  for trades,
providing a starting point from which  to develop appropriate nutrient reduction  targets and
reduction credit fees.

•      A comprehensive basinwide management approach, rather than a focus on  point
       sources in isolation, provides opportunities to achieve least-cost pollutant reductions.

       By  including nonpoint  source  load  reductions  as alternatives  for point source load
reductions, load reductions can be achieved at least cost.  For example, at Dillon, the least
expensive in-plant upgrades were initially estimated at $730/lb reduction while nonpoint source
load reductions appeared to be available for slightly over $200/lb (accounting for the 2:1 trading
ratio). At Tar-Pamlico, point source upgrades were anticipated to cost between $50 and $100
million, $250 to $500/kg reduction, while nonpoint source load reduction could be achieved for
$56/kg (accounting for an average 2.5:1 trading ratio).   When trading begins at these two
programs, cost-savings could be substantial.

•      A comprehensive approach also provides opportunities for targeting reductions to
       areas where they will be most effective and are most needed.

       The Dillon  experience illustrates this point.  By considering the relationship between
point,  nonpoint, and  background  sources  of phosphorus  to the  reservoir,  local officials
determined acceptable maximum pollutant loadings to meet an in-lake standard. As a result of
this approach, it was determined mat nonpoint sources pose the greatest threat to water quality.
The consequent shift  in  the focus of the program will  concentrate phosphorus  removal at
nonpoint sources.

       At Tar-Pamlico, the administration of the  trading  program includes instructions to the
agency implementing the nonpoint source load reductions to prioritize installing controls that
have the highest potential and efficiency for nutrient removal.  The program includes institutional
mechanisms to facilitate targeting nonpoint source controls to local trouble spots and provides
for annual report and evaluations.

•      The administrative framework for the trading  program is not only important for the
       development of the basinwide approach, but  may be critical  for achieving desired
       nutrient reductions through trading.

       When trading begins at Tar-Pamlico, it appears that the prospects for success are partially
dependent on close cooperation between multiple control authorities, including a  department
responsible for water quality management and a department responsible for agricultural nonpoint
source control.

•      Enforcement mechanisms are  important in creating compliance incentives where
       economk incentives are absent or fail.
                                          27

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                                                 Point Source/Nonpoutt Source Trading
       At the Tar-Pamlico program, the regulating agency reserves the right to impose strict
effluent limits on point sources participating in trading if local water quality problems persist or
arise as a result of trading.  This is important because in this program, the point sources bear
no direct responsibility for the implementation and maintenance of the nonpoint source controls
installed in exchange for point source load reductions.

•      The local community, including environmental organizations, must support a trading
       program as a method to achieve water quality objectives.

       An unusual coalition of traditional adversaries came together to develop Tar-Pamlico's
nutrient trading program as a creative approach to overcoming water quality problems.  Support
from interested parties, particularly the regulated community, has traditionally been an important
element in successful pollution control programs.

•      If the program involves agricultural BMPs and will be implemented through a cost-
       share program, there must be sufficient farmer demand for funding in excess of any
       ongoing cost-share program to support  point/nonpoint source trades in order to
       supplement, not supplant, ongoing nonpoint source control efforts.

       In  the Tar-Pamlico basin,  the trading program is designed  to achieve specified load
reductions from nonpoint sources in addition to  whatever  reduction  is being brought about
through other nonpoint source control programs (specifically the effect of the existing cost-share
program).  Therefore,  it  would be inappropriate  for the new funding from point  sources to
replace (and thereby reduce) state funding for the existing nonpoint source control programs.

       Additionally, farmers typically participate in voluntary nonpoint source load reduction
programs  to the extent  that it is cost-effective to do so, although profitability is  not the only
criteria that the fanner considers.  Compliance with existing regulations is also an important
factor.

•      Regulatory requirements that increase the transaction costs associated with trading
       but that fail to provide an offsetting value in terms of compliance and enforcement
       may be sufficient to cause a trading program to fail.

       Under some level of regulation, transaction costs and uncertainty about approval of trades
will drive the marginal cost of the reduction credit above that for point source controls, impeding
the development or continuance of a trading program.  Careful  consideration  should be given
to the tradeoff between regulatory constraints on trading and the cost-effectiveness of trading and
provisions that ensure compliance with environmental standards with a minimum of transaction
cost.

•      Trading ratios that account for uncertainty can be established without eliminating
       economic incentives to trade.

       The Dillon program established a trading ratio of 2:1 to account for new nonpoint source
loads,  typically accompanying development, that produce  additional point source  loads that
necessitate trading.   The Tar-Pamlico program  established a 3:1 trading ratio for cropland


                                         28

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                                                Point Source/Nonpoint Source Trading
nonpoint source controls and 2:1 for animal and animal waste nonpoint source controls in order
to provide a safety factor and account for the uncertainty in the effectiveness of the nonpoint
source controls.

•     It may  be important to  build flexibility into the trading program  design,  as
      conditions may change over the course of the program.

      The Dillon program was flexible enough to continue pursuing nutrient load reductions
even after point source reductions were no longer the most necessary and cost-effective option.
The administrative framework was  flexible enough to recognize and manage nonpoint/nonpoint
source trading and an increased dependence on offsets to achieve nutrient reduction goals.

      3.  Costs and Benefits Associated with Point/Nonpoint Source Trading Programs

      While the dollar values of costs and benefits of point/nonpoint source trading programs
will vary across waterbody size and program design,  the categories  of costs and benefits are
common among most trading programs.  One example, is the category  of transaction  costs,
which includes the costs of program development.  These costs can be significant.

      For example,  EPA has contributed a total  of $340,000  to the Tar-Pamlico program:
$120,000 for program  activities related to nonpoint  source management in the Tar-Pamlico
basin, through CWA Section  319 (North Carolina contributed an in-kind match for these funds
at a rate of 60 percent federal, 40  percent state); and $220,000 for year 1 development  of the
computerized nutrient management framework, through a CWA Section  104(b)(3) grant.  Point
sources  participating in the trading program  have agreed to contribute up to $400,000 toward
the development of the hydrodynamic computer-based water quality  model, and have already
contributed $150,000 for additional staff positions at the agency implementing nonpoint source
reductions to coordinate implementation of nonpoint source BMPs through 1994. These planned
and received contributions approach $900,000.

      Additional EPA and state contributions to this program are expected. EPA is expected
to contribute an additional $52,000 in  1992 through Section 319 and the state has requested  an
additional $280,000 through Section 104(b)(3). Finally, Congress appropriated another $400,000
through  a line-item for initiation of pollution reduction strategies as part of the Tar-Pamlico
Nutrient Sensitive Waters  strategy.  EPA's Region IV Office has not yet transferred these funds
to the state.

      Benefits  can be gauged by comparing  marginal costs for point  source load reductions to
those for nonpoint sources.   At Dillon, it was estimated that further point source reductions
would cost between $860 and $7,861 per pound reduced, while nonpoint source load reductions
would cost between $67 and $119 per pound. At Tar-Pamlico, extensive point source upgrades
were estimated  to cost between $250 and  $500/kg  reduced,  while nonpoint source reductions
                                         29

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                                                     Point Source/Nonpoint Source Trading
    were priced at $56 per kilogram point source credit for Association members and $62 for non-
    members.24

          The most common categories of costs and benefits are listed below.

                    COSTS OF POINT/NONPOINT SOURCE TRADING

•      Initial modeling to determine pollutant sources and wasteload allocations.25

•      Permitting costs to establish discharge levels in permits with and without trading ("without" levels
       would be set in the absence of a trading program).

•      Review and approval of individual trades by a control agency.

•      Administration of both trading  and  nonpoint  source control  programs to ensure compliance
       (assuming that nonpoint source control programs would not otherwise be pursued).

•      Cost of negotiating and transacting trades.


                   BENEFITS OF POINT/NONPOINT SOURCE TRADING

•      Direct cost-savings to  the dischargers  from being able to take advantage of lesser-cost pollution
       control options.

•      Providing a greater level  of nonpoint source pollution control than would have occurred in the
       absence of trading.

•      The primary social benefit is the achievement of a desirable level of water quality at least cost.  This
       has positive implications for fishermen, recreational users, commercial and industrial users of water,
       etc.

•      Increased awareness and use of nonpoint source control options, and some degree of regulatory
       involvement in ensuring the effectiveness of nonpoint source controls.
          An additional benefit may be increased emphasis on water quality standards and overall
   basin-wide cooperation in pollution abatement.  Point/nonpoint source trading provides a
   framework and mechanism for instituting a watershed or water-segment approach to water
   quality management and planning.  These types of benefits are not quantifiable from a benefit-
   cost perspective, but in the long run, it will probably result in more sustainable environmental
   protection, thereby producing diverse future benefits that could be quantified.
       24 Actual costs for nonpoint source reduction are approximately $19 per pound on cropland
   and $28 per pound for animal waste; the trading ratios are 3:1 and 2:1, respectively.

       25 This is not necessarily a cost of a trading program because models are needed  for any
   TMDL approach.  Costs for modeling are often site-specific depending on size and complexity
   of the watershed and the number of dischargers.

                                             30

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                                                 Point Soune/Nonpoint Source Trading
        IV. POTENTIAL SCOPE OF POINT/NONPOINT SOURCE TRADING
       While not all waterbodies are likely to fulfill the necessary conditions for implementing
a trading program, it is possible to estimate the universe of waterbodies that could potentially
benefit from trading.  These waterbodies fall into two general groups ~ those that currently have
water quality problems, and those that are likely to develop water quality problems as a result
of rapid growth and associated increases in loadings.  To be likely to benefit from trading, either
type of waterbody must have both point sources and  nonpoim sources contributing to the actual
or potential water quality problem in the waterbody.
A.     USING THE WATERBODY SYSTEM TO ESTIMATE TRADING POTENTIAL

       The data available for evaluating the characteristics  of waterbodies  for policy and
planning purposes is reported in biennial status reports - called Clean Water Act Section 305(b)
reports ~ on the quality of surface and ground waters.  EPA has developed a databank known
as the Water Body System (WBS), designed to track  state assessments of water quality for
surface waters using information prepared for  305(b) reports.  The WBS currently contains
41,733 waterbodies;26 Table 3 identifies the states and  territories that report in the WBS and
those not in the system. One "waterbody" may be an entire creek, river, lake, or estuary, or
a segment or reach of a creek, river, lake,  or estuary (depending  on  each state's reporting
method).  For example, Long Island Sound is  reported as one  data item (one "waterbody"),
whereas the St. Johns River comprises five data items.

       For each waterbody assessed, states provide information on whether waterbodies are fully
supporting their state-defined designated uses and on the general causes and sources of pollution.
These designations are the  only  available  measure  for  identifying  water-quality limited
waterbodies.   Ambient water quality monitoring in specific waterbodies is  the method of
gathering the raw data used by the states to make water quality assessments.   Despite several
limitations of the WBS (detailed below), the WBS provides the only national database to assess
the number of waterbodies that might benefit  from trading.
       1.  Potential Trading Scope in Waterbodies with Current Water Quality Problems

       Several retrievals were made from the WBS to estimate the number of waterbodies in the
country that may benefit from pollutant trading. Retrievals were made for waterbodies impacted
by nutrients, toxics/general (including pesticides, organics, metals, ammonia and pollutants of
unknown toxicity), toxics/metals only, pathogens, and salinity.  As stated  earlier in this report,
toxics trading is not being investigated by the EPA; the two estimates for  toxics were retrieved
and are provided for  illustrative purposes only.  Table 4 presents the potential universe of
    26 The WBS contains  a total of 54,566 waterbodies, but  does  not have assessment
information for 12,833 of them.

                                          31

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                                               Point Soum/NonpoiaS Source Trading
currently water quality-limited waterbodies that could benefit from trading as identified by the
WBS.  An explanation of the selection criteria used for each retrieval follows the table.

                                    TABLE 2
                       WBS Participants and Non-Participants

                   States & Territories In the WBS
      Arizona
      Connecticut
      Delaware
      Dist. of Columbia
      Florida
      Hawaii
      Illinois
      Iowa
      Kansas
      Kentucky
      Maine
      Maryland
      Massachusetts
      Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Jersey
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Vermont
Virgin Islands
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Not in the WBS

Alabama
Alaska
Arkansas
California
Colorado
Georgia
Idaho
Indiana
Louisiana
New Mexico
New Hampshire
New York
Utah
                                    TABLE 3

        Number of Waterbodies in WBS Not FuUy Supporting Designated Uses
          That Could Benefit From Point/Nonpoint Source Pollutant Trading
      Type of Pollutant for Trading

             NUTRIENTS
             TOXICS - GENERAL
             TOXICS - METALS ONLY
             PATHOGENS
             SALINITY
                   Potential Waterbodies benefitting

                                 943
                               1,288
                                 835
                                 835
                                 79
      The universe of water quality-limited waterbodies that might benefit from trading for
various types of pollutants was retrieved from WBS using the following selection criteria:

      1.     State designated uses partially or not supported, or overall use partially or
             not supported; and
      2.     Industrial or municipal point sources present; and
                                        32

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                                                  Point Source/Nonpoint Source Trading
       3a.    For NUTRIENT retrieval - agriculture, or silviculture, or construction,
              or urban runoff/storm sewers, or resource extraction, or land disposal, or
              hydromodification sources present;
       3b.    For all other retrievals -  construction, urban  runoff/storm sewers, or
              hydromodification pollution sources present; and
       4.     For each respective specific pollutant, causal factors of
              a.  Nutrients
              b.  Pesticides, priority organics, nonpriority orgamcs,  total toxics, metals,
                    pollutants designated as  "unknown toxicity", and ammonia
              c.  metals only
              d.  pathogens
              e.  salinity/total dissolved solids/chlorides
       It is estimated that 943 waterbodies could potentially benefit from nutrient trading. This
estimate includes waterbodies  with:   (1) designated uses not supported;  (2) industrial or
municipal point sources present; (3) nonpoint sources including agriculture, urban runoff, and
land disturbing activities; and  (4) nutrients as a causal factor.   Map 1 on  the next page
graphically depicts the distribution of these 943 waterbodies.  Table 5 identifies the number
estimated for each state for which at least one waterbody was retrieved.  An itemized list of
these waterbodies appears in Appendix C.

                                       TABLE 4

              Waterbodies for Immediate Nutrient Trading Consideration
                                       by State
Illinois       221
Florida      129
West Virginia 78
Iowa         56
Mississippi    50
Virginia      49
Tennessee     47
Pennsylvania        45
Maryland           29
Massachusetts       27
Vermont            27
New Jersey          22
North Carolina      22
Connecticut          19
Washington    19
Minnesota     17
Wisconsin     16
Arizona       14
Kentucky      12
Puerto Rico   10
Montana      9
Rhode Island        7
North Dakota        5
Texas               4
Delaware           2
Ohio                2
U.S. Virgin Islands  2
Maine              1
South Dakota        1
Washington D.C.    1
       As  the  list above  and Map  1 indicate,  most of  the  immediate nutrient  trading
opportunities are in the east, in the mid-Atlantic region.  There also appear to be significant
opportunities in the Mississippi and Missouri River Valley  states.  Because the WBS does not
include data for all 50 states, there may be additional waterbodies in which nutrient trading may
be beneficial.

       Trading  is likely to be feasible in only a subset of these waterbodies. This estimate of
943 should be interpreted as a first-cut analysis of waterbodies where trading may be beneficial
now or in the future.  While the waterbodies are currently water quality-limited and have
                                          33

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   DISTRIBUTION OF WATERBODIES FOR WHICH POINT/NON-POINT
      SOURCE NUTRIENT TRADING APPEARS APPLICABLE NOW
                            NORTH DAKOTA 1MNNE8OTA
NUMBER OF WATERBODIES
                        HAWAII
    I-IO
    51-100
             n-a
             101-300
                       21-30
                                 11-50
Waterbodies For Consideration

In WBS« But No Waterbodies For
Nutrient Trading Consideration
Not In WBS

-------
                                                  Point Soune/Nonpoint Source Trading
 nutrient pollution present, they are not necessarily water quality-limited due to nutrients - some
other pollutant may be responsible for this designation. Furthermore, while these waterbodies
have nutrient  pollution and both point and nonpoint sources, they do not necessarily receive
nutrient discharges from both types of sources.  Consequently, all of the 943 waterbodies may
not meet the conditions necessary to benefit from trading.

       To  obtain a  complete set of waterbodies where  nutrient trading may prove to be
beneficial,  it is also necessary to estimate the number of waterbodies that are not currently water
quality-limited for any pollutant, but have met all other criteria for trading.  These waterbodies
were retrieved from  WBS and are discussed below.
       2. Potential Trading Scope in Waterbodies Not Currently Water Quality-Limited

       The WBS contained only 142 waterbodies that are currently not water quality limited and
have point sources.   Of these, 65 had nutrients  as a causal factor; of the 65, only 17 had
nonpoint sources present and could potentially benefit from trading for nutrients. This retrieval
was made using the following selection criteria:

       1.     State designated uses supported or threatened; or
              overall use fully supported or threatened;
       2.     Exclude waterbodies where state designated use is partially or not supported, and
              waterbodies where the overall use is partially or not supported;
       3.     Nutrient loading a causal factor;
       4.     Construction, urban runoff/storm sewers, or hydromodification pollution sources
              present; and
       5.     Industrial or municipal point sources present.

       The map on the next page graphically depicts the distribution of these 17 waterbodies.
The waterbodies that may benefit from nutrient trading in the future are distributed as follows:
Vermont, 5; Tennessee, 4; Washington,3; Mississippi, 2; and Minnesota, West Virginia, and
Wyoming, 1 each.   This analysis retrieved very few  waterbodies that are currently not water
quality limited but that may become water quality limited due to nutrients in the future. This
small number  (17) is largely a result of the fact that there are very few waterbodies in the WBS
that are  not water quality-limited and also have point sources  (only 142 waterbodies out  of
41,733).  Again, the actual number may be higher because the WBS does not contain data for
all states.

       The types of events that could drive these waterbodies to water quality-limited status and
to a situation  where  they could benefit from trading can be grouped into three categories:
population growth, facility aging and/or failure of existing technology, and exogenous factors.
These events could also create circumstances in the group of the 943 currently  water quality-
limited waterbodies that do not receive nutrient discharges from both point and nonpoint sources
such that they  would benefit from trading in the future.

       Population growth will influence the potential  for trading by expanding  the amount  of
nutrient loading and the number of sources.  Since population growth increases  wastewater


                                          35

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            WATERBODIES FOR WHICH POINT/NON-POINT SOURCE

          NUTRIENT TRADING APPEARS APPLICABLE IN THE FUTURE
10

CTl
                                                          3
                                                          >
                                                          t)
     NUMBER OF WATERBODIES
         HAWAII
         1

         4
2

5
Wateibodies For Consideration

In WBS, But No Watertxxlies For

Nutrient Trading Consideration

Not In WBS

-------
                                                  Point Source/Nonpoint Source Trading
volume and greater nutrient loading, it may become necessary to expand existing facilities or
build new ones.  Expansions in industrial and commercial nutrient loadings may also accompany
population growth, resulting in increased point source discharges of nutrients.  New nonpoint
sources and  expansions  of existing nonpoint sources  almost always accompany population
growth.

       Facility aging or failure could result in the need for expensive upgrades in order to meet
technology-based and water quality standards. In lieu of expensive upgrades, it may be possible
in some situations to make less expensive repairs to point sources and permit point-nonpoint
source nutrient trading to meet  established standards.

       Exogenous factors that may result in opportunities for trading include a pattern of severe
weather events and/or land disturbances unrelated to population growth.

       3. Limitations of the WBS Data

       The WBS data  are  limited in several respects that affect  the quality of the estimates
presented above.   Limitations include:   inability  to  link causal  factors with sources;  an
incomplete data  set; counting  segments of the same watershed as separate waterbodies; and
incomplete or missing information about the number of sources.

       It is important to note that the waterbodies cited above were identified solely on the basis
of data defining existing.factors - specifically, the presence of point sources,  nonpoint sources
and the specified type of pollutant.  While selection can be made on the basis of one or  more
causal factors (e.g., nutrients), the fact that a waterbody is selected on the basis of causal factors
and sources does not necessarily indicate that the waterbody is water-quality limited as a result
of the type of pollutant being evaluated. It is also not possible to link the cause of pollution to
the sources of pollution - while both point source and nonpoint source may be present, they may
not both contribute to all pollutant types present.   The estimate, therefore, is most useful as a
guide to the largest number of waterbodies where trading might be feasible, within a limited data
set.

       The indication of potential waterbodies that could benefit from trading is not a complete
representation of the nation-wide potential for two reasons: the WBS does not include all states;
and the data for the participating  states may be incomplete.  Participation in the WBS is
voluntary, so not all states  have data in the WBS. The WBS  currently includes 37 states, the
District of Columbia, two of the four trust territories, and two interstate water commissions, the
Delaware River Basin Commission and the Ohio River Valley Sanitation Commission (see Table
3).

       On the other hand, the  WBS retrieval may  over-report the potential waterbodies for
trading in the participating  states for two reasons.   First, waterbodies are defined in the WBS
as one or more reach segments  which can vary in  size,  (e.g.,  the Peace River in Florida  is 13
separate data items) so many of the "waterbodies" retrieved from WBS  may be segments of the
same waterbody  and units smaller than a watershed.  Second, the WBS cannot link the cause of
pollution (i.e., nutrients) to the sources of pollution so the waterbodies retrieved from WBS may
                                          37

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                                                Point Source/Nonpoint Source Trading
not have both point and nonpoint source contributions to nutrient loadings (neither all point
sources nor all nonpoint sources can be assumed to contribute nutrients).

       The WBS is useful for identifying waterbodies where trading may be beneficial.  It
cannot, however, be used to determine the actual pollution reduction benefits that might accrue
due  to trading.   Important information that is  not available  through  the  WBS includes:
(1) number of point and nonpoint sources in a waterbody; (2) the volume of discharge from each
point or nonpoint source; (3) nutrient and other pollutant loadings from each source; and (4) the
current level or technology employed for treatment.  Once waterbodies have  been identified,
however, it may be possible to use other  sources of data collected on  the state or local level to
determine whether trading is, in fact, a possibility, and what the potential benefits from trading
might be.
B.     ALTERNATE DATABASES EVALUATED FOR ASSESSING THE POTENTIAL
       UNIVERSE OF WATERBODIES FOR POINT/NONPOINT SOURCE TRADING

       Despite the limitations outlined above, the WBS provided the best existing information
for evaluating the potential scope of point/nonpoint source trading. There are other databases
that contain water quality information, but for one reason or another cannot currently provide
information in a form that is usable to estimate the potential trading universe or the benefits from
trading. Other databases investigated are listed below, accompanied by comments about their
primary drawback or limitations.

       RFF National Water Quality Model.  The RFF Model covers individual point source
and nonpoint sources at the county  level.  While the model is useful for  modeling  nonpoint
source runoff from specific land areas, it is not useful for the purposes of assessing a national
estimate of trading opportunities.

       Environmental Data Display Manager (EDDM).   EDDM is not designed to make
global searches for specific water quality characteristics. Consequently, the data retrieved from
EDDM would be highly disaggregated on a site-specific basis and not in usable form for an
estimate of the potential universe of waterbodies. EDDM is an interactive program to retrieve
water quality data on a site-specific basis.  Using EDDM, water quality data can be  retrieved
from STORET and EPA's  Permit Compliance System (PCS) for specific industrial/municipal
dischargers by concentration (minimum, average, or maximum) or loading (average, maximum).
Both permit limits  and discharge monitoring reports can  be retrieved  from  PCS.  Finally,
EDDM provides  five selection criteria to retrieve water quality data:  reach number, NPDES
permit number, reach name and state, city name and state, or STORET station and agency code.
The loading data available in EDDM appears to be from PCS. EDDM does not, however,
include data on state water quality standards, which would be necessary to determine if trading
is, in  fact, potentially beneficial, or the extent of potential benefits.

       STORET. This data base could be used to retrieve ambient monitoring data for selected
waterbodies for  specific  water quality  parameter  codes  representing nutrient discharges.
Although information on ambient water quality can be aggregated through customized STORET
retrievals,  it can be difficult to get such aggregate information from STORET.  Without


                                         38

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                                                 Point Source/Nonpoint Source Trading
information on state water quality  standards for nutrients, aggregate information from the
database may be of limited use in identifying waterbodies that are violating state water quality
standards for nutrients, if such standards have been adopted.

       Permit Compliance System (PCS).  This database includes information about permit
limits and discharge monitoring reports. Information can be retrieved on the basis of specific
industrial/municipal dischargers by concentration (minimum, average, or maximum) or loading
(average, maximum).  Much of the point source discharge monitoring data is  reported as
concentration rather than loadings. To the extent that loading information is incomplete, PCS
is of limited value for a broad nationwide analysis of potential trading.

       Agricultural  Nonpoint  Source  Tracking System (AGTRACK).  AGTRACK can
identify specific waterbodies for which an agricultural impairment was reported in the 1988
section 319 or 305(b) reports.   For those waterbodies, all reported water quality impairments
in addition to agricultural impairments also are cited in AGTRACK.  The major limitations of
AGTRACK are: it provides information only for agricultural impairments;  its coverage and
quality varies from state to state; and it does not contain nutrient loading data (although it does
report  the  contribution of nutrients  to  waterbody pollution in ordinal  categories,  i.e., high,
moderate, slight).

       Section 319 List.  These are state 319 nonpoint source pollution assessment reports.  It
is difficult to compare these lists among the states because each state compiled its list of waters
with nonpoint source impairments in a different way.

       Section 3040) List.  This 304 (1) Long List refers to those waterbodies identified by
states (and approved by EPA) where water quality standards are violated for any pollutant at any
time.  While this list contains those waterbodies with a longstanding pattern of failure to meet
water quality standards, the water quality problem that resulted in a waterbody's appearing on
the 304 list may or may not have resulted in its appearing in the WBS, and it is not clear there
is good translation between the 304(1) and WBS universes.
                                          39

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                                                 Point Source/Nonpoint Source Trading
   V. POINT/NONFOINT SOURCE TRADING UNDER THE CLEAN WATER ACT
A.     BACKGROUND

       The Clean Water Act does not directly authorize (nor does it prohibit) effluent trading.
Nonetheless, existing trading  programs involving nonpoint sources have  not  encountered
difficulty  in being  established in a form  that conforms  to  the  existing CWA regulatory
framework.   The Act does contain provisions that help  programs  to  meet the necessary
conditions for success, and EPA and some  states have taken initial steps to facilitate trading
within their  respective water quality and nonpoint source control programs.

       Both federal regulations and EPA guidance developed to implement TMDLs permit the
use of trading within the initial wasteload/load allocations.  EPA's TMDL guidance explains the
TMDL process for point and  nonpoint  sources,  establishing  the basis  for  point/point,
point/nonpoint, and nonpoint/nonpoint source trading.27
B.     THE TMDL PROCESS

       For those waterbodies where water quality standards have not been met through effluent
limitations, the next step is for states to establish a total maximum daily load  for certain
pollutants "at a level necessary to implement the applicable water quality standards with seasonal
variations and a margin of safety which takes into account any lack of knowledge  concerning
the relationship between effluent limitations and water quality" [§ 303(d)(l)(C)].  States must
also provide a  system  for allocating those maximum loadings among all dischargers in  the
affected waters [40 CFR 130.1 -. IS]. To do this, states establish wasteload allocations (WLAs)
for point sources - the portion of a receiving water's loading capacity (the greatest amount of
loading that a waterbody can receive without violating water quality standards) that  is allocated
to one of its existing or future point sources of pollution — and load allocations (Las)  for
nonpoint sources and natural background (the portion of a receiving water's loading capacity that
is allocated to one of its existing or future nonpoint sources of pollution) in order to determine
the TMDL.  The TMDL  is the sum of all WLAs and Las.

       The TMDL process fulfills many of the conditions necessary for establishing a trading
program - particularly the establishment  nutrient  reduction goals to  achieve a water quality
target and limiting allocations to point sources and nonpoint sources, as well as the need  for
comprehensive data and modeling.

       The regulatory  definition of total  maximum daily load expressly states that  "if best
management practices or other nonpoint source pollution controls make more stringent load
allocations practicable, then wasteload allocations can be made less stringent. Thus, the TMDL
process provides for nonpoint source control tradeoffs"  [emphasis added, 40CFR 130.2(i)].
    27 Guidance for Water Quality-based Decisions: The TMDL Process. U.S. EPA, April 1991.

                                         40

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                                                 Point Souree/Nonpoint Source Trading
       Here, too, the regulations implementing section 303(d) of the CWA approach recognize
trading can be used to achieve water quality standards.  The concept of tradeoffs here refers to
trades  between point source and nonpoint source load allocations as the allocations are being
initially established in the development of the TMDL.  The concept of trading is not explicit in
these regulations; the use of the term "trading" in this context means that additional allocation
shifts could occur after the TMDL was established, and would be a  mechanism to meet the
TMDL in the most cost-effective  manner.   This concept is outlined in Appendix D of the
Guidance for Water Quality-based Decisions: The TMDL Process.2* Without language referring
to trading, and in the  absence of other language elsewhere in regulation or in the CWA, load
allocations under a TMDL  otherwise appear to be fixed. Language referencing trading could
make the variable allocations (i.e., trading) a clearer option to states implementing programs to
meet water quality standards.
C.     THE CLEAN AIR ACT: A TRADING MODEL

       The Clean Air Act contains language in several sections concerning emissions trading that
could be used as a model in the CWA to permit point/nonpoint source trading.  The  most
detailed language is found in § 403(b) (acid deposition).  Here, new language (adopted in the
1990 CWA amendments) specifically states that "allowances allocated under this title may be
transferred among designated representatives of ... affected sources."  Detailed requirements
outlining allowance distribution, trading, tracking and other features of the program are outlined
in the Clean Air Act.  Title IV of the CAA amendments also includes market-based approaches
to regulation.   Language in Title IV permits  utilities achieving emissions levels below  legal
standards  to trade,  auction, or sell emissions allowances to other utilities unable to  reduce
emissions more cheaply.

       More generally, there are  other sections of the CAA that contain language that could be
effective in the context of  the CWA. "Economic incentives such as fees, marketable permits,
and auctions of emissions rights" are included as options for control of standard air pollutants
(i.e., not acid deposition)  in state implementation plans [§ 110(a)(2)(A) and (C)].  Plans for
areas that do  not attain air quality standards may include provisions for "economic incentives
such as fees, marketable permits,  and auctions of emissions rights." In "Serious" and "Severe"
nonattainment areas, states may elect to adopt an economic incentive program that may include
". . a nondiscriminatory system ... of marketable permits"[§  182(g)(3)(C) and (4)(A)].
       The CAA also  contains some language about offsets for  new sources that  may be
applicable to effluent trading, particularly for point/point source and nonpoint/nonpoint source
trading  [for example, see §173(b), (c)].   Under a TMDL,  new sources will not have any
allocation. Thus, authorities may not grant permits to facilities in water quality limited segments
unless  that facility will not  cause  or contribute to the violation of applicable water quality
standards. This approach is  similar to that now applied to the location of new facilities under
the Clean Air  Act, where pressure for new industrial growth results in the imposition of
increasingly stringent requirements on  existing sources in order to permit  new facilities to
      U.S. EPA, April 1991.

                                          41

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                                                Point Source/Nonpoint Source Trading
operate without violation of applicable standards. Under the CAA, if a proposed new source
will increase a facility's cumulative annual emissions above the established amount for a given
pollutant, an operating permit will be denied unless the applicant can buy emissions offsets from
a nearby facility.  This approach could apply to both point source WLAs and to nonpoint sources
Las under the CWA.
D.    ALTERNATIVE APPROACHES FOR CLEAN WATER ACT
      REAUTHORIZATION

      1.  Guidance

      EPA could draft guidance concerning the implementation of trading programs to meet
water quality standards.  Even in the absence of statutory changes, guidance that assists local
agencies to implement trading programs, in addition to that already provided in establishing
TMDLs, might be useful to those jurisdictions that determine that point/nonpoint source trading
could help them to resolve nutrient pollution problems.  Guidance would cover, at a minimum,
the following topics:

      •      The theoretical basis and rationale for trading;

      •      Reference to existing TMDL  guidance and a discussion of the role of a trading
             program in relation to TMDLs;

      •      Data  requirements to  establish  a trading  program, including water  quality
             standards, potential point source reductions under existing technology, wasteload
             allocations, and anticipated nonpoint source reductions;

      •      Program design options, including delineation of the trading area and the potential
             impact of regulatory requirements;

      •      The selection of appropriate trading ratios

      •      Necessary permit requirements,  including meeting CWA  requirements  and
             wasteload allocation regulations;

      •      Monitoring and enforcement of permit requirements;

      •      Nonpoint source control monitoring and implementation;

      •      Community acceptance issues; and

      •      Achievement of water quality standards under a trading program, including the
             need for permit re-opener clauses.
                                         42

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                                                  Point Soune/Nonpoint Source Trading
       2. Policy

       The  Gean Water Act could state that point/nonpoint source trading is an approved
approach to meeting water quality standards.  Alternatively, EPA could proactively establish a
clear policy in the form of testimony before Congress, public addresses made  by Agency
officials, and published articles and reports.

       3. Technical Assistance

       EPA could be required to provide technical assistance to jurisdictions that are considering
implementing a trading program.   Such  assistance  could include:   publications analyzing
examples of existing trading programs; developing models of state and local laws and regulations
that may be necessary to implement a trading program; providing information on types of local
governmental jurisdictions  that can  oversee and implement  trading programs; providing
assistance with water quality  modelling to determine maximum load targets; and providing
assistance with cost-effectiveness evaluations to determine  whether adequate incentives for
trading are  likely to exist.   Again, EPA could proactively pursue this option as resource
constraints allow.

       4. Funding

       Funding for some aspects of implementing point/nonpoint trading programs may be
available under a variety of existing EPA programs, especially training and demonstration grants
available under Section 104(b)(3), Clean Lakes program grants under Section 314,  or nonpoint
source pollution control grants under Section 319. Identification of existing programs, their role
in a trading program, and steps necessary to apply for  funding would be useful to  a local
jurisdiction  that is interested in implementing a trading program.  Another option that could
stimulate point/nonpoint trading programs would be a CWA change that specifically expands the
eligibility of such programs to coverage under the State Revolving Fund (SRF) program.
                                          43

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                                                Point Source/Nonpoint Source Trading
                                 BIBLIOGRAPHY
Denver  Regional Council of Governments. Cherry Creek Basin Water Quality Management
Master Plan. September 1985.

Industrial Economics, Inc., Case Studies on the Trading of Effluent Loads in Dillon Reservoir,
1984. Prepared for the U.S. EPA.

Kashmanian, Jaksch,  Niedzialkowski, and Podar.  Beyond Categorical Limits: The Case for
Pollution Reduction Through Trading (presented at the 59th  Annual Water Pollution Control
Federation Conference/Exposition, Los Angeles, California, October 6-9, 1986).

North Carolina Department  of  Environment,  Health, and  Natural Resources,  Division of
Environmental Management.  Tar-Pamlico NSW Implementation Strategy.  Adopted December
14, 1989; Revised February 13,  1992.

U.S. EPA. Guidance for Water  Quality-Based Decisions: The TMDL Process.  Washington,
D.C., April 1991.

U.S. EPA, National Water Quality Inventory ~ 1990 Report to Congress, Washington, D.C.
March 1992.

U.S. EPA, National Water Quality Inventory - 1988 Report to Congress, Washington, D.C.
March 1990.

Woodward-Clyde Consultants. Concept for Wasteload Allocation Modeling in Chatfield Basin,
Colorado.  January  1992.
                                        44

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                                         Point Soune/Nonpoint Source Trading
                            APPENDICES
A.    Case Study of Nutrient Trading in the Dillon Reservoir

B.  •  Case Study of Nutrient Trading in the Tar-Pamlico River Basin

C.    Itemized List of Waterbodies Currently  Water Quality-Limited For Which
      Point/Nonpoint Source Nutrient Trading Appears Applicable

D.    Itemized List of Waterbodies Currently  Not Water Quality-Limited For Which
      Point/Nonpoint Source Nutrient Trading Appears Applicable in the Future
                                  45

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                           TABLE OF CONTENTS
INTRODUCTION	A-l

BACKGROUND  	A-3
      Economic and Recreational Value	A-3
      Nutrient Problem	A-3
      Nutrient Control Strategy	A-4

IMPLEMENTATION OF NUTRIENT TRADING PROGRAM	  A-7
      Objective	A-7
      Economic Justification	A-7
      Program Details	A-9
      Enforcement and Compliance  	A-10
      Technological Feasibility 	A-ll
      Administrative Framework	A-ll

PROGRAM STATUS  	A-13
      Breckenridge Sanitation District   	A-14
      Frisco Sanitation District	A-15
      Snake River Wastewater Treatment Facility	A-l6

CONCLUSION  	A-18
      Maximum Basinwide Loads  	A-18
      Monitoring  and Modeling	A-19
      Estimating Cost-Savings Attributed to Trading	A-20
      Potential Impact of a Trading Program	A-22
                                    A-i

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               APPENDIX A
NUTRIENT TRADING IN THE DILLON RESERVOIR

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                                                 Point Source/Nonpoint Source Trading
       The engineering evaluation of the dischargers'  facilities showed that the Tar-Pamlico
basin could achieve significant nutrient reductions through relatively simple and inexpensive
POTW modifications. This is an important condition of the trading program because it provides
the regulator and the regulated community with better information about the types of available
reductions  and their costs.  It also  establishes an accurate marginal cost basis for  trades,
providing a starting point from which  to develop appropriate nutrient  reduction  targets  and
reduction credit fees.

•      A comprehensive basin wide  management approach, rather than a focus  on point
       sources in isolation, provides  opportunities to achieve least-cost pollutant reductions.

       By  including nonpoint source load  reductions  as alternatives  for point source load
reductions, load reductions can be achieved at least cost.  For example, at Dillon, the least
expensive in-plant upgrades were initially estimated at $730/lb reduction while nonpoint source
load reductions appeared to be available for slightly over $200/lb (accounting for the 2:1  trading
ratio). At Tar-Pamlico, point source  upgrades were anticipated to cost between $50 and $100
million, $250 to $500/kg reduction, while  nonpoint source load reduction could be achieved for
$56/kg (accounting for an  average 2.5:1 trading ratio).   When trading begins at these  two
programs, cost-savings could be substantial.

•      A comprehensive approach also provides opportunities for targeting reductions to
       areas where they will be most effective and are most needed.

       The Dillon  experience illustrates this point.  By considering the relationship between
point,  nonpoint, and  background sources  of phosphorus  to the  reservoir,  local officials
determined acceptable maximum pollutant loadings to meet an in-lake standard. As a result of
this approach,  it was determined that nonpoint sources pose the greatest threat to water quality.
The consequent shift in  the focus of the program will concentrate phosphorus  removal at
nonpoint sources.

       At Tar-Pamlico, the administration of the trading program includes instructions to the
agency implementing the nonpoint source load reductions to prioritize installing controls  that
have the highest potential and efficiency for nutrient removal.  The program includes institutional
mechanisms to facilitate targeting  nonpoint source controls to local trouble spots and provides
for annual report and evaluations.

•      The administrative framework for the trading  program is not only important for the
       development of the basinwide approach, but  may be critical  for achieving desired
       nutrient reductions through trading.

       When trading begins at Tar-Pamlico, it appears that the prospects for success are partially
dependent on close cooperation between  multiple control authorities, including a department
responsible for water quality management and a department responsible for agricultural nonpoint
source control.

•      Enforcement mechanisms are important  in creating compliance incentives where
       economk incentives are absent or fail.
                                          27

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                                                 Point Source/Nonpoint Source Trading
       At the Tar-Pamlico program, the regulating agency reserves the right to impose strict
effluent limits on point sources participating in trading if local water quality problems persist or
arise as a result of trading.  This is important because in this program, the point sources bear
no direct responsibility for the implementation and maintenance of the nonpoint source controls
installed in exchange for point source load reductions.

•      The local community, including environmental organizations, must support a trading
       program as a method to achieve water quality objectives.

       An unusual coalition of traditional adversaries came together to develop Tar-Pamlico's
nutrient trading program as a creative approach to overcoming water quality problems.  Support
from interested parties, particularly the regulated community, has traditionally been an important
element in successful pollution control programs.

•      If the program involves agricultural BMPs and will be implemented through a cost-
       share program, there must be sufficient farmer demand for funding in excess of any
       ongoing cost-share program to  support point/nonpoint source trades in order to
       supplement, not supplant,  ongoing nonpoint source control efforts.

       In  the Tar-Pamlico basin, the  trading program is designed to achieve specified load
reductions from nonpoint sources in addition to whatever reduction is being brought about
through other nonpoint source control programs (specifically the effect of the existing cost-share
program).  Therefore, it-would be inappropriate for the new funding  from point  sources to
replace (and thereby reduce)  state funding for the existing nonpoint source control programs.

       Additionally, farmers typically participate in voluntary nonpoint source load reduction
programs  to the extent that it is cost-effective to do so, although profitability is  not the only
criteria that  the farmer considers.  Compliance with existing regulations  is also an important
factor.

•      Regulatory requirements that increase the transaction costs associated with trading
       but that fail to provide an offsetting value in terms of compliance and enforcement
       may  be sufficient to cause a trading program to fail.

       Under some level of regulation, transaction costs and uncertainty about approval of trades
will drive the marginal cost of the reduction credit above that for point source controls, impeding
the development or continuance of a trading program.  Careful  consideration should be given
to the tradeoff between regulatory constraints on trading and the cost-effectiveness of trading and
provisions that ensure compliance with environmental standards with a minimum of transaction
cost.

•      Trading ratios that account for  uncertainty can be established without eliminating
       economic incentives to trade.

       The Dillon program established a trading ratio of 2:1 to account for new nonpoint source
loads,  typically accompanying development, that produce  additional point source  loads that
necessitate trading.   The Tar-Pamlico program established a 3:1 trading ratio for cropland


                                          28

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                                                 Point Soune/NonpoiiU Source Trading
nonpoint source controls and 2:1 for animal and animal waste nonpoint source controls in order
to provide a safety factor and account for the uncertainty in the effectiveness of the nonpoint
source controls.

•      It may  be important to build flexibility into the trading program design,  as
       conditions may change over the course of the program.

       The Dillon program was flexible enough to continue pursuing nutrient load reductions
even after point source reductions were no longer the most necessary and cost-effective option.
The administrative framework was flexible enough to recognize and manage nonpoint/nonpoint
source trading and an increased dependence on offsets to achieve nutrient reduction goals.
       3.  Costs and Benefits Associated with Point/Nonpoint Source Trading Programs

       While the dollar values of costs and benefits of point/nonpoint source trading programs
will vary across waterbody size and program design,  the categories of costs and benefits are
common among most trading programs.   One example, is  the category  of transaction costs,
which includes the costs of program development. These costs can be significant. For example,
EPA and point sources at Tar-Pamlico have respectively contributed $500,000 and 400,000 thus
far to the development of an estuarine computer model of the basin,  and point sources will
contribute $150,000 for two additional staff positions at the agency implementing nonpoint
source reductions, and a minimum of $500,000 for nonpoint source reductions even if they do
not require point  source load reduction credits  through  1994.     EPA also  contributed
approximately $453,000 to the Tar-Pamlico program: $400,000 for the development of the basin
nutrient model, and $53,000 for the monitoring and tracking of nonpoint  source pollutants.

       Benefits can be gauged by comparing marginal costs for point source load reductions to
those for nonpoint sources.  At Dillon, it was estimated that further point  source reductions
would cost between $860 and $7,861 per pound reduced, while nonpoint source load reductions
would cost between $67 and $119 per pound.  At Tar-Pamlico, extensive point source upgrades
were estimated  to cost between $250 and $500/kg reduced, while nonpoint  source reductions
were priced at $56 per kilogram point source credit for Association members and $62 for non-
members.24

       The most common categories of costs and benefits are listed below.
    24 Actual costs for nonpoint source reduction are approximately $19 per pound on cropland
and $28 per pound for animal waste; the trading ratios are 3:1 and 2:1, respectively.
                                         29

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                                                Point Source/Nonpoint Source Trading
          COSTS OF POINT/NONPOINT SOURCE TRADING

Initial modeling to determine pollutant sources and wasteload allocations.23

Permitting costs to establish discharge levels hi permits with and without trading
("without" levels would be set in the absence of a trading program).

Review and approval of individual trades by a control agency.

Administration of both  trading and nonpoint  source control programs to ensure
compliance (assuming that nonpoint source control programs would not otherwise
be pursued).
       be pursued)

       Cost of negotiating and transacting trades.
               BENEFITS OF POINT/NONPOINT SOURCE TRADING
       Direct cost-savings to the dischargers from being able to take advantage of lesser-
       cost pollution control options.

       Providing  a greater level of nonpoint source pollution control than would have
       occurred in the absence of trading.

       The primary social benefit is the achievement of a desirable level of water quality
       at least  cost.  This has positive implications for fishermen, recreational users,
       commercial and industrial users of water, etc.

       Increased awareness and use of nonpoint source control options, and some degree
       of regulatory involvement in ensuring the effectiveness of nonpoint source controls.
      An additional benefit may be increased emphasis on water quality standards and overall
basin-wide cooperation in pollution  abatement.  Point/nonpoint source  trading provides  a
framework and mechanism for instituting a watershed or  water-segment approach to  water
quality management and planning. These types of benefits are not quantifiable from a benefit-
cost perspective, but in the long run, it will probably result in more sustainable environmental
protection, thereby producing diverse future benefits that could be quantified.
    23 This is not necessarily a cost of a trading program because models are needed for any
TMDL approach.  Costs for modeling are often site-specific depending on size and complexity
of the watershed and the number of dischargers.

                                        30

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                                                 Point Source/Nonpoint Source Trading
        IV. POTENTIAL SCOPE OF POINT/NONPOINT SOURCE TRADING
       While not all waterbodies are likely to fulfill the necessary conditions for implementing
a trading program, it is possible to estimate the universe of waterbodies that could potentially
benefit from trading.  These waterbodies fall into two general groups ~ those that currently have
water quality problems, and those  that are likely to develop water quality problems as a result
of rapid growth and associated increases in loadings. To be likely to benefit from trading, either
type of waterbody must have both point sources and nonpoint sources contributing to the actual
or potential water quality problem  in the waterbody.
A.     USING THE WATERBODY SYSTEM TO ESTIMATE TRADING POTENTIAL

       The data available for evaluating the characteristics  of waterbodies  for policy and
planning purposes is reported in biennial status reports - called Clean Water Act Section 305(b)
reports -- on the quality of surface and ground waters.  EPA has developed a databank known
as the Water Body System (WBS), designed to track state assessments of water quality for
surface  waters using information prepared for  305(b) reports.  The WBS currently contains
41,733 waterbodies;26 Table  3 identifies the states and territories that report in the  WBS and
those not in the system. One "waterbody" may be an entire creek, river, lake, or estuary, or
a segment or reach of a creek, river, lake, or estuary  (depending  on  each  state's reporting
method).  For example, Long Island Sound is  reported  as one  data item (one "waterbody"),
whereas the St. Johns River comprises five data items.

       For each waterbody assessed, states provide information on whether waterbodies are fully
supporting their state-defined designated uses and on the general causes and sources of pollution.
These designations are the  only  available  measure  for  identifying  water-quality limited
waterbodies.   Ambient water quality monitoring in specific waterbodies is the method of
gathering the raw data used by the  states to make water quality assessments.   Despite several
limitations of the WBS (detailed below), the WBS provides the only national database to assess
the number of waterbodies that might benefit from trading.
       1.  Potential Trading Scope in Waterbodies with Current Water Quality Problems

       Several retrievals were made from the WBS to estimate the number of waterbodies in the
country that may benefit from pollutant trading. Retrievals were made for waterbodies impacted
by nutrients, toxics/general (including pesticides, organics, metals, ammonia and pollutants of
unknown toxicity), toxics/metals only, pathogens, and salinity.  As stated  earlier in this report,
toxics trading is not being investigated by the EPA; the two estimates for  toxics were retrieved
and are provided for illustrative purposes  only.  Table 4 presents the potential universe of
    26 The WBS contains  a total of 54,566 waterbodies, but  does  not have assessment
information for 12,833 of them.

                                         31

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                                               Point Sourcc/Nonpouti Source Trading
currently water quality-limited waterbodies thai could benefit from trading as identified by the
WBS.  An explanation of the selection criteria used for each retrieval follows die table.

                                    TABLE 2
                       WBS Participants and Non-Participants

                   States & Territories In the WBS
      Arizona
      Connecticut
      Delaware
      Dist. of Columbia
      Florida
      Hawaii
      Illinois
      Iowa
      Kansas
      Kentucky
      Maine
      Maryland
      Massachusetts
      Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Jersey
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Vermont
Virgin Islands
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Not in the WBS

Alabama
Alaska
Arkansas
California
Colorado
Georgia
Idaho
Indiana
Louisiana
New Mexico
New Hampshire
New York
Utah
                                     TABLES

        Number of Waterbodies in WBS Not Fully Supporting Designated Uses
          That Could Benefit From Point/Nonpoint Source Pollutant Trading
      Type of Pollutant for Trading

             NUTRIENTS
             TOXICS - GENERAL
             TOXICS - METALS ONLY
             PATHOGENS
             SALINITY
                   Potential Waterbodies benefitting

                                 943
                                1,288
                                 835
                                 835
                                 79
      The universe of water quality-limited waterbodies that might benefit from trading for
various types of pollutants was retrieved from WBS using the following selection criteria:

      1.     State designated uses partially or not supported, or overall use partially or
             not supported; and
      2.     Industrial or municipal point sources present; and
                                        32

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                                                  Point Soune/Nonpoint Source Trading
       3a.    For NUTRIENT retrieval - agriculture, or silviculture, or construction,
              or urban runoff/storm sewers, or resource extraction, or land disposal, or
              hydromodification sources present;
       3b.    For all other retrievals -  construction, urban runoff/storm sewers, or
              hydromodification pollution sources present; and
       4.     For each respective specific pollutant, causal factors of
              a.  Nutrients
              b.  Pesticides, priority organics, nonpriority organics, total toxics, metals,
                    pollutants designated as "unknown toxicity", and ammonia
              c.  metals only
              d.  pathogens
              e.  salinity/total dissolved solids/chlorides
       It is estimated that 943 waterbodies could potentially benefit from nutrient trading.  This
estimate includes waterbodies  with:   (1)  designated uses not supported; (2) industrial or
municipal point sources present; (3) nonpoint sources including agriculture, urban runoff, and
land disturbing activities; and  (4)  nutrients  as  a causal factor.   Map 1  on the  next  page
graphically depicts the distribution of these 943 waterbodies.  Table 5 identifies the number
estimated for each state for which at least one waterbody was retrieved.   An itemized list of
these waterbodies appears in Appendix C.

                                       TABLE 4

              Waterbodies for Immediate Nutrient Trading Consideration
                                       by State
Illinois       221
Florida       129
West Virginia 78
Iowa         56
Mississippi    50
Virginia      49
Tennessee     47
Pennsylvania        45
Maryland           29
Massachusetts       27
Vermont            27
New Jersey          22
North Carolina      22
Connecticut          19
Washington   19
Minnesota     17
Wisconsin     16
Arizona       14
Kentucky     12
Puerto Rico   10
Montana      9
Rhode Island        7
North Dakota       5
Texas               4
Delaware           2
Ohio               2
U.S. Virgin Islands  2
Maine              1
South Dakota       1
Washington D.C.    1
       As  the  list above  and  Map 1  indicate,  most  of the immediate  nutrient trading
opportunities are in the east, in  the mid-Atlantic region.  There also appear to be significant
opportunities in the Mississippi and Missouri River Valley states.  Because the WBS does not
include data for all 50 states, there may be additional waterbodies in which nutrient trading may
be beneficial.

       Trading is likely to be feasible in  only a subset of these waterbodies.  This estimate of
943 should be interpreted as a first-cut analysis of waterbodies where trading may be beneficial
now or in the future.  While the  waterbodies as currently water quality-limited and have
                                          33

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Id
      DISTRIBUTION OF WATERBODIES FOR WHICH POINT/NON-POINT
          SOURCE NUTRIENT TRADING APPEARS APPLICABLE NOW
                                NORTH DAKOTA 1 MINNESOTA
    NUMBER OF WATERBODIES
                            HAWAO
        1-10
        51-100
                           21-10
                                    11-10
                 ioi-m
|  |  Waterbodies For Consideration
    In WBS, But No Waterbodies For
    Nutrient Trading Consideration
    Not In WBS

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                                                  Point Source/Nonpoint Source Trading
 nutrient pollution present, they aze not necessarily water quality-limited due to nutrients - some
other pollutant may be responsible for this designation.  Furthermore, while these waterbodies
have  nutrient  pollution and both point and nonpoint sources, they do not necessarily receive
nutrient discharges from both types of sources.  Consequently, all of the 943 waterbodies may
not meet the conditions necessary to benefit from trading.

       To  obtain a  complete  set of waterbodies where nutrient trading may prove to  be
beneficial, it is also necessary to estimate the number of waterbodies that are not currently water
quality-limited for any pollutant, but have met all other criteria for trading.  These waterbodies
were  retrieved from  WBS and are discussed below.
       2. Potential Trading Scope in Waterbodies Not Currently Water Quality-Limited

       The WBS contained only 142 waterbodies that are currently not water quality limited and
have point sources.   Of these, 65 had nutrients  as a causal factor; of the 65, only 17 had
nonpoint sources present and could potentially benefit from trading for nutrients. This retrieval
was made using the following selection criteria:

       1.     State designated uses supported or threatened; or
              overall use fully supported or threatened;
       2.     Exclude waterbodies where state designated use is partially or not supported, and
              waterbodies where the overall use is partially or not supported;
       3.     Nutrient loading a causal factor;
       4.     Construction, urban runoff/storm sewers, or hydromodification pollution sources
              present; and
       5.     Industrial or municipal point sources present.

       The map on the next page graphically depicts the distribution of these 17 waterbodies.
The waterbodies that may benefit from nutrient trading in the future are distributed as follows:
Vermont, 5; Tennessee, 4; Washington,3; Mississippi, 2; and Minnesota, West Virginia, and
Wyoming, 1 each.   This analysis retrieved very few waterbodies that are currently not water
quality limited but that may become water quality limited due to nutrients in the future. This
small number  (17) is largely a result of the fact that there are very few waterbodies in the WBS
that are not water quality-limited and also have point sources  (only 142 waterbodies out  of
41,733).  Again, the actual number may be higher because the WBS does not contain data for
all states.

       The types of events that could drive these waterbodies to water quality-limited status and
to a situation  where  they could benefit from trading  can be grouped into three  categories:
population growth, facility aging and/or failure of existing technology, and exogenous factors.
These events could also create  circumstances in the group of the 943 currently water  quality-
limited waterbodies that do not receive nutrient discharges from both point and nonpoint sources
such that they  would benefit from trading in the future.

       Population growth will influence the potential for trading by expanding the amount  of
nutrient loading and the number of sources.  Since population growth increases wastewater


                                          35

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          WATERBOI
        NUTRIENT Tl
u>
0»
WHICH POINT/NON-POINT SOURCE
VPPEARS APPLICABLE IN THE FUTURE

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                                                  Point Source/Nonpoint Source Trading
volume and greater nutrient loading, it may become necessary to expand existing facilities or
build new ones.  Expansions in industrial and commercial nutrient loadings may also accompany
population growth, resulting in increased point source discharges of nutrients.  New nonpoint
sources and  expansions  of existing nonpoint sources  almost  always accompany population
growth.

       Facility aging or failure could result in the need for expensive upgrades in order to meet
technology-based and water quality standards. In lieu of expensive upgrades, it may be possible
in some situations to make less expensive repairs to point sources and permit point-nonpoint
source nutrient trading to meet established standards.

       Exogenous factors that may result in opportunities for trading include a pattern of severe
weather events and/or land disturbances unrelated to population growth.

       3.  Limitations of the WBS Data

       The WBS data  are  limited in several respects that affect the quality of the  estimates
presented  above.   Limitations include:  inability  to  link causal  factors with sources;  an
incomplete data  set; counting  segments of the same watershed as separate waterbodies; and
incomplete or missing information about the number of sources.

       It is important to note that the waterbodies cited above were identified solely on the basis
of data defining existing factors ~ specifically, the presence of point  sources,  nonpoint sources
and the specified type of pollutant.  While selection can be made on the basis of one or  more
causal factors (e.g., nutrients), the fact that a waterbody is selected on the basis of causal factors
and sources does not necessarily indicate that the waterbody is water-quality limited as a result
of the type of pollutant being evaluated. It is also not possible to link the cause of pollution to
the sources of pollution - while both point source and nonpoint source may be present,  they may
not both contribute to all pollutant types present.   The estimate, therefore, is most useful as a
guide to the largest number of waterbodies where trading might be feasible, within a limited data
set.

       The indication of potential waterbodies that could benefit from trading is not a complete
representation of the nation-wide potential for two reasons: the WBS does not include all states;
and the data for the participating states may be incomplete.   Participation in the WBS is
voluntary, so not all states  have data in  the WBS. The WBS currently includes 37 states, the
District of Columbia, two of the four trust territories, and two interstate water commissions, the
Delaware River Basin Commission and the Ohio River Valley Sanitation Commission (see Table
3).

       On  the other hand, the  WBS retrieval may  over-report the  potential waterbodies for
trading in  the participating  states for two reasons.   First, waterbodies are defined in  the WBS
as one or more reach segments  which can vary in  size,  (e.g., the Peace River in Florida is  13
separate data items) so many of the "waterbodies" retrieved from WBS may be segments of the
same waterbody  and units smaller than a watershed.  Second, the WBS cannot link the cause of
pollution (i.e., nutrients) to the sources of pollution so the waterbodies retrieved from WBS may
                                          37

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                                                Point Source/Nonpoint Source Trading
not have both point and nonpoint source contributions to nutrient loadings (neither all point
sources nor all nonpoint sources can be assumed to contribute nutrients).

      The WBS is useful for identifying waterbodies where trading may be beneficial.  It
cannot, however, be used to determine the actual pollution reduction benefits that might accrue
due to trading.   Important information that is not available  through  the  WBS includes:
(1) number of point and nonpoint sources  in a waterbody; (2) the volume of discharge from each
point or nonpoint source; (3) nutrient and other pollutant loadings from each source; and (4) the
current level or technology employed  for treatment.  Once waterbodies have  been identified,
however, it may be possible to use other  sources of data collected on the state  or local level to
determine whether trading is, in fact, a possibility, and what the potential benefits from trading
might be.
B.    ALTERNATE DATABASES EVALUATED FOR ASSESSING THE POTENTIAL
      UNIVERSE OF WATERBODIES FOR POINT/NONPOINT SOURCE TRADING

      Despite the limitations outlined above, the WBS provided the best existing information
for evaluating the potential scope of point/nonpoint source trading.  There are other databases
that contain water quality information, but for one reason or another cannot currently provide
information in a form that is usable to estimate the potential trading universe or the benefits from
trading.  Other databases investigated are listed below, accompanied by comments about their
primary drawback or limitations.

      RTF National Water Quality Model.  The RFF Model covers individual point source
and nonpoint sources at the county  level.  While the model is useful for modeling  nonpoint
source runoff from specific land areas, it is not useful for the purposes of assessing a national
estimate of trading opportunities.

      Environmental Data Display Manager (EDDM).  EDDM is not designed to make
global searches for specific water quality characteristics. Consequently, the data retrieved from
EDDM would be highly disaggregated on a site-specific basis and not in usable form for an
estimate of the potential universe of waterbodies. EDDM is an interactive program to retrieve
water quality data on a site-specific basis.  Using EDDM, water quality data can be  retrieved
from STORET and EPA's  Permit Compliance System (PCS) for specific industrial/municipal
dischargers by concentration (minimum, average, or maximum) or loading (average, maximum).
Both permit limits and discharge monitoring reports can be retrieved  from  PCS.   Finally,
EDDM provides  five selection criteria to retrieve water quality data:  reach number,  NPDES
permit number, reach name and state, city name and state, or STORET station and agency code.
The loading data available in EDDM appears to be from PCS. EDDM does not, however,
include data on state water quality standards, which would be necessary to determine if trading
is, in  fact, potentially beneficial, or the extent of potential benefits.

      STORET. This data base could be used to retrieve ambient monitoring data for selected
waterbodies  for  specific  water quality  parameter  codes representing nutrient discharges.
Although information on ambient water quality can be aggregated through customized STORET
retrievals,  it can be difficult to get such aggregate  information from STORET.  Without


                                         38

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                                                 Point Source/Nonpoint Source Trading
information on state water quality  standards for nutrients, aggregate information from the
database may be of limited use in identifying waterbodies that are violating state water quality
standards for nutrients, if such standards have been adopted.

       Permit Compliance System (PCS).  This database includes information about permit
limits and discharge monitoring reports.  Information can be retrieved on the basis of specific
industrial/municipal dischargers by concentration (minimum, average, or maximum) or loading
(average,  maximum).  Much of the point source discharge monitoring data is  reported as
concentration rather than loadings. To the extent that loading information is incomplete, PCS
is of limited value for a broad nationwide analysis of potential trading.

       Agricultural  Nonpoint  Source Tracking System (AGTRACK).  AGTRACK can
identify specific waterbodies for which an agricultural impairment was reported  in the 1988
section 319 or 305(b) reports.   For those waterbodies, all reported water quality impairments
in addition to agricultural impairments also are cited in AGTRACK.  The major limitations of
AGTRACK are: it provides information only  for agricultural impairments; its coverage and
quality varies from state to state; and it does not contain nutrient loading data (although it does
report  the  contribution of nutrients  to waterbody pollution in ordinal  categories, i.e., high,
moderate, slight).

       Section 319 List. These are state 319 nonpoint source pollution assessment reports.  It
is difficult to compare these lists among the states because each state compiled its list of waters
with nonpoint source impairments in a different way.

       Section 3040) List.  This 304 (1) Long List refers to those waterbodies identified by
states (and approved by EPA) where water quality standards are violated for any pollutant at any
time.  While this list contains those waterbodies with a longstanding pattern of failure to meet
water quality standards, the water quality problem that resulted in a waterbody's appearing on
the 304 list may or may not have resulted in its appearing in the WBS, and it is not clear there
is good translation between the 304(1) and WBS universes.
                                          39

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                                                 Point Source/Nonpoint Source Trading
  V. POINT/NONPOINT SOURCE TRADING UNDER THE CLEAN WATER ACT
A.     BACKGROUND

       The Clean Water Act does not directly authorize (nor does it prohibit) effluent trading.
Nonetheless,  existing trading programs involving  nonpoint  sources have  not encountered
difficulty  in  being  established in a  form that  conforms to the existing CWA  regulatory
framework.   The Act does contain  provisions  that help programs to meet the necessary
conditions for success, and EPA and some states have taken  initial steps to facilitate trading
within their respective water quality and nonpoint source control programs.

       Both federal regulations and EPA guidance developed to implement TMDLs permit the
use of trading within the initial wasteload/load allocations.  EPA's TMDL guidance explains the
TMDL process  for point and nonpoint  sources, establishing the basis  for point/point,
point/nonpoint, and nonpoint/nonpoint source trading.77
B.     THE TMDL PROCESS

       For those waterbodies where water quality standards have not been met through effluent
limitations, the next step is for states  to establish a total maximum daily load for certain
pollutants "at a level necessary to implement the applicable water quality standards with seasonal
variations and a margin of safety which takes into account any lack of knowledge concerning
the relationship between effluent limitations and water quality" [§ 303(d)(l)(C)]. States must
also provide a system for allocating  those maximum loadings among all dischargers in the
affected waters [40 CFR 130.1 -. IS].  To do this, states establish wasteload allocations (WLAs)
for point sources ~ the portion of a receiving water's loading capacity (the greatest amount of
loading that a waterbody can receive without violating water quality standards) that is allocated
to one of its existing or future point sources of pollution ~ and load allocations (Las) for
nonpoint sources and natural background (the portion of a receiving water's loading capacity that
is allocated to one of its existing or future nonpoint sources of pollution) in order to determine
the TMDL. The TMDL is the sum of all WLAs and Las.

       The TMDL process fulfills many of the conditions necessary for establishing a trading
program — particularly the  establishment nutrient reduction goals to achieve a water quality
target and limiting allocations to point sources and nonpoint sources,  as well as the need for
comprehensive data and modeling.

       The regulatory definition of total maximum daily  load expressly states  that "if best
management practices or other nonpoint source pollution controls make more stringent load
allocations practicable, then  wasteload allocations can be made less stringent.  Thus,  the TMDL
process provides for nonpoint source control tradeoffs' [emphasis added, 40CFR 130.2(i)].
    27 Guidance for Water Quality-based Decisions: The TMDL Process. U.S. EPA, April 1991.

                                         40

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                                                 Point Source/Nonpoint Source Trading
       Here, too, the regulations implementing section 303(d) of the CWA approach recognize
trading can be used to achieve water quality standards.  The concept of tradeoffs here refers to
trades  between point source and nonpoint source load allocations as the allocations are being
initially established in the development of the TMDL.  The concept of trading is not explicit in
these regulations; the use of the term "trading" in this context means that additional allocation
shifts could occur after the TMDL was established, and would be a mechanism to meet the
TMDL in the most cost-effective  manner.  This concept is outlined in Appendix D of the
Guidance for Water Quality-based Decisions: The TMDL Process.™ Without language referring
to trading, and in the absence of other language elsewhere in regulation or in the CWA, load
allocations under a TMDL otherwise appear to be fixed.  Language referencing trading could
make the variable allocations (i.e., trading) a clearer option to states implementing programs to
meet water quality standards.
C.     THE CLEAN AIR ACT: A TRADING MODEL

       The Clean Air Act contains language in several sections concerning emissions trading that
could be used as a model in the CWA to permit point/nonpoint source trading.  The  most
detailed language is found in § 403(b) (acid deposition).  Here, new language (adopted in the
1990 CWA amendments) specifically states that "allowances allocated under this title may be
transferred among designated representatives of ... affected sources."  Detailed requirements
outlining allowance distribution, trading, tracking and other features of the program are outlined
in the Clean Air Act.  Title IV of the C AA amendments also includes market-based approaches
to regulation.   Language in Title IV permits utilities achieving emissions levels below  legal
standards to trade,  auction, or sell  emissions allowances to  other utilities unable to  reduce
emissions more cheaply.

       More generally, there are other sections of the CAA that contain language that could be
effective in the context of the CWA. "Economic incentives such as fees, marketable permits,
and auctions of emissions rights" are included as options for control of standard air pollutants
(i.e., not acid deposition)  in state implementation plans [§ 110(a)(2)(A) and (C)].  Plans for
areas that do not attain air quality standards may include provisions for "economic incentives
such as fees, marketable permits, and auctions of emissions rights."  In "Serious" and "Severe"
nonattainment areas, states may elect to adopt an economic incentive program that may include
". . a nondiscriminatory system ... of marketable permits"[§  182(g)(3)(C) and (4)(A)].

       The CAA also contains some  language about offsets  for new sources that may  be
applicable to effluent trading, particularly for point/point source and nonpoint/nonpoint source
trading [for example, see §173(b),  (c)].   Under a TMDL, new sources will not have any
allocation.  Thus, authorities may not grant permits to facilities in water quality limited segments
unless  that facility  will not cause or contribute to the violation of applicable water quality
standards.  This approach is similar  to that now applied to the location of new facilities under
the Clean Air  Act, where pressure for new industrial growth results in the imposition  of
increasingly stringent requirements  on existing sources in order to  permit  new facilities to
       U.S. EPA, April 1991.

                                          41

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                                                Point Source/Nonpoint Source Trading
operate without violation of applicable standards.  Under the CAA, if a proposed new source
will increase a facility's cumulative annual emissions above the established amount for a given
pollutant, an operating permit will be denied unless the applicant can buy emissions offsets from
a nearby facility.  This approach could apply to both point source WLAs and to nonpoint sources
Las under the CWA.
D.    ^ALTERNATIVE APPROACHES FOR CLEAN WATER ACT
      REAUTHORIZATION

      1.  Guidance

      EPA could draft guidance concerning the implementation of trading programs to meet
water quality  standards.  Even in the absence of statutory changes, guidance that assists local
agencies to implement trading programs, in addition to that already  provided in establishing
TMDLs, might be useful to those jurisdictions that determine that point/nonpoint source trading
could help them to resolve nutrient pollution problems. Guidance would cover, at a minimum,
the following  topics:

      •      The theoretical basis and rationale for trading;

      •      Reference to existing TMDL guidance and a discussion of the role of a trading
             program in relation to TMDLs;

      •      Data requirements to establish a trading  program,  including water  quality
             standards, potential point source reductions under existing technology, wasteload
             allocations, and anticipated nonpoint source reductions;

      •      Program design options, including delineation of the trading area and the potential
             impact of regulatory requirements;

      •      The selection of appropriate trading ratios

      •      Necessary permit  requirements,  including  meeting CWA requirements  and
             wasteload allocation regulations;

      •      Monitoring and enforcement of permit requirements;

      •      Nonpoint source control monitoring and implementation;

      •      Community acceptance issues; and

      •      Achievement of water quality standards under a trading program, including the
             need for permit re-opener clauses.
                                         42

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                                                  Point Source/Nonpoint Source Trading
       2. Policy

       The  Clean Water Act could  state that point/nonpoint source trading is an approved
approach to meeting water quality standards.  Alternatively, EPA could proactively establish a
clear policy in the form of testimony before Congress, public addresses  made by  Agency
officials, and published articles and reports.

       3. Technical Assistance

       EPA could be required to provide technical assistance to jurisdictions that are considering
implementing  a trading program.   Such  assistance could include:    publications analyzing
examples of existing trading programs; developing models of state and local laws and regulations
that may be necessary to implement a trading program; providing information on types of local
governmental  jurisdictions  that can  oversee  and implement trading programs;  providing
assistance with water quality  modelling to determine maximum load targets;  and providing
assistance with cost-effectiveness evaluations  to determine whether adequate  incentives  for
trading are  likely to exist.   Again, EPA could proactively  pursue this option as resource
constraints allow.

       4. Funding

       Funding for some aspects of implementing point/nonpoint trading programs  may  be
available under a variety of existing EPA programs, especially training and demonstration grants
available under Section 104(b)(3), Clean Lakes program grants under Section 314, or nonpoint
source pollution control grants under Section 319. Identification of existing programs, their role
in a trading program, and steps necessary to apply  for funding  would be useful  to a local
jurisdiction  that is interested in implementing a trading program.  Another option  that  could
stimulate point/nonpoint trading programs  would be a CWA change that specifically expands the
eligibility of such programs to coverage under the State Revolving Fund (SRF) program.
                                          43

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                                               Point Source/Nonpoint Source Trading
                                 BffiLIOGRAPHY
Denver Regional Council of Governments.  Cherry Creek Basin Water Quality Management
Master Plan. September 1985.

Industrial Economics, Inc., Case Studies on the Trading of Effluent Loads in Dillon Reservoir,
1984. Prepared for the U.S. EPA.

Kashmanian, Jaksch,  Niedzialkowski, and Podar.  Beyond Categorical Limits: The Case for
Pollution Reduction Through Trading (presented at the 59th Annual Water Pollution Control
Federation Conference/Exposition, Los Angeles, California, October 6-9, 1986).

North Carolina Department of Environment, Health,  and  Natural  Resources, Division of
Environmental Management. Tar-Pamlico NSW Implementation Strategy.  Adopted December
14, 1989; Revised February 13, 1992.

U.S. EPA.  Guidance for Water Quality-Based Decisions: The TMDL Process. Washington,
D.C., April 1991.

U.S. EPA,  National "Water Quality Inventory - 1990 Report to Congress,  Washington, D.C.
March 1992.

U.S. EPA,  National Water Quality Inventory - 1988 Report to Congress,  Washington, D.C.
March 1990.

Woodward-Clyde Consultants.  Concept for Wasteload Allocation Modeling  in Chatfield Basin,
Colorado. January 1992.
                                        44

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                                         Point Soune/Nonpoiat Source Trading
                            APPENDICES
A.    Case Study of Nutrient Trading in the Dillon Reservoir

B.    Case Study of Nutrient Trading in the Tar-Pamlico River Basin

C.    Itemized List of Waterbodies Currently Water Quality-Limited For Which
      Point/Nonpoint Source Nutrient Trading Appears Applicable

D.    Itemized List of Waterbodies Currently Not Water Quality-Limited For Which
      Point/Nonpoint Source Nutrient Trading Appears Applicable in the Future
                                  45

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                           TABLE OF CONTENTS
INTRODUCTION	A-l

BACKGROUND  	A-3
      Economic and Recreational Value	A-3
      Nutrient Problem	."	A-3
      Nutrient Control Strategy	A-4

IMPLEMENTATION OF NUTRIENT TRADING PROGRAM	 A-7
      Objective	A-7
      Economic Justification	A-7
      Program Details	A-9
      Enforcement and Compliance	 .A-10
      Technological Feasibility  	A-ll
      Administrative Framework	A-ll

PROGRAM STATUS  	A-13
      Breckenridge Sanitation District   	A-14
      Frisco Sanitation District  	A-15
      Snake River Wastewater Treatment Facility	A-16

CONCLUSION  	A-18
      Maximum Basinwide Loads  	A-18
      Monitoring  and Modeling	A-19
      Estimating Cost-Savings Attributed to Trading	A-20
      Potential Impact of a Trading Program	A-22
                                    A-i

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               APPENDIX A
NUTRIENT TRADING IN THE DILLON RESERVOIR

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                                                    Nutrient Trading in Dillon Reservoir
                                   INTRODUCTION

       Point/nonpoint source nutrient trading was developed as part of an innovative nutrient
reduction strategy to prevent eutrophication of Dillon Reservoir, a man-made impoundment 70
miles west of Denver,  Colorado.  Situated in mountainous Summit County, one of the fastest
growing counties in the nation, Dillon Reservoir provides several million dollars of economic
benefits to  the region in addition to over one-half the water supply needs of the Denver Water
Board, owner and operator of the reservoir.1

       When phosphorus  accumulation threatened the integrity of the reservoir in the early
1980s, local officials developed the Dillon  Water Quality Management Plan to protect future
water quality. The plan includes limits on total phosphorus loadings to the reservoir (allocating
the total load among all sources) and the nation's first point/nonpoint source phosphorus trading
program. The trading program was adopted as part of the plan after an economic study  and
erosion control demonstration project showed the greater cost-effectiveness of nonpoint source
controls compared to available upgrades in wastewater treatment.

       Since 1990, however, the approach and philosophy of the trading program has changed
significantly as a result of shifts in economic incentives.  Wastewater treatment plants, through
improved operating efficiency of existing tertiary treatment technology, have achieved some of
the highest phosphorus removal capabilities in the nation.  In contrast to the early 1980s, point
source  discharges  are now only a  small  fraction of total  reservoir phosphorus  loadings.
Consequently, the treatment plants discharge substantially less than  their annual phosphorus
allocations  and  do not face an immediate need to obtain phosphorus reduction credits.  None of
the three trading projects that have been undertaken were initiated by point source dischargers
in need of phosphorus credits to meet permit conditions.

       Because the need for point/nonpoint source trading did not materialized, the focus of
phosphorus control in the basin has shifted away from the economic incentives of point sources
achieving reductions through cheaper nonpoint source phosphorus control. Instead, the trading
program in Dillon has been driven by the reservoir's phosphorus limit and a perceived need to
offset  new  nonpoint  sources  of phosphorus with phosphorus removals elsewhere in  the
watershed.  In effect, two of the three trades that have developed have been between nonpoint
sources to offset new nonpoint source discharges to the reservoir, rather than point and nonpoint
sources to offset point sources'  (POTWs) excess wasteloads.

       The following discussion explains the nutrient problem in Dillon, the cost efficiencies that
initiated the  original  trading  program, and subsequent events that reduced  the need  for
point/nonpoint source trading to mitigate the phosphorus problem.  In 1992, Dillon Program will
undergo its triennial review and new strategies will be analyzed. Though the initial vision of
    ^Fiscal Impact  Statement  on the Assignment of a  Phosphorus  Standard to the Dillon
Reservoir, Segment 3 of the Blue River.  Adopted June 12, 1984; effective July 30, 1984.

                                          A-l

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                                                     Nutrient Trading in Dillon Reservoir
point/nonpoint source trading has yet to emerge as originally intended, a cooperative spirit in
the basin allows growth to continue while maintaining ambient water quality in the reservoir.
                                          A-2

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                                                   Nutrient Trading in Dillon Reservoir
                                   BACKGROUND
       Dillon Reservoir, owned and operated by the Denver Water Board, is located 70 miles
west of Denver in mountainous Summit County (see Map A-l). Throughout the 1970s, Summit
County had one of the highest growth rates in the nation.  Although approximately 60 percent
of the land in Summit County is managed by the U.S. Forest Service2, private lands  in the
valleys are experiencing strong development pressures.
Economic and Recreational Value

       Since its construction in 1963 to meet growing water needs for the city of Denver, Dillon
Reservoir has  become a major recreation center.   Several of Colorado's major ski resorts ~
Copper Mountain, Breckenridge, and A-Basin - surround the reservoir, making it the focal point
for Summit County's recreation-based economy.   During the winter ski  season, the basin's
permanent population of 10,000 swells to over 60,000.

       In 1984, the Northwest Colorado Council of Governments (NWCCOG) estimated that
the reservoir provides substantial economic benefits to the county including $500,000 in direct
expenditures annually from recreationists, $4 million annually in additional sales as a result of
these direct recreation expenditures (usually referred to as "multiplier" effects), and $11 million
in real property value due to location and quality of the reservoir.3
Nutrient Problem

       Population growth and extensive land use changes in the basin resulted in increased
phosphorus loading to the reservoir.  New developments create new phosphorus loads through
greater treatment plant discharge as well as the additional erosion and runoff associated with
developing new sites.   By  the  early  1980s, accelerated algal growth from  the increased
phosphorus transformed the deep blue waters to green and diminished reservoir oxygen levels.
Dillon's  economic value to  the region, threatened  by these changes,  made  its protection
particularly important.

       After the Copper Mountain wastewater treatment plant (one of four dischargers in the
basin) received one of the largest fines levied by EPA for violating its phosphorus limits, EPA
funded a Clean Lakes study of the reservoir.   The  study, completed in  1983,  identified
phosphorus as the primary contributor to Dillon's eutrophication  problem.  Over half the
    ^Recommended Water Quality Management Plan for the Colorado Water Quality Control
Commission. January, 1984.  Submitted for the Summit County Phosphorus Policy Committee
by the Northwest Colorado Council of Governments.

    3See Supra note 1.

                                         A-3

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                                                    Nutrient Trading in Dillon Reservoir
phosphorus entering the reservoir was attributed to precipitation,  ground water and  natural
runoff.   Naturally high "background" levels of nutrients in the reservoir result from spring
snowmelt laden with heavy sediment from the mountain slopes.  Human activities in the basin,
through point and nonpoint sources, further exacerbate the phosphorus problem.

       According to the Clean Lakes study, which  evaluated 1982 reservoir levels, nonpoint
sources contributed over 20 percent of total phosphorus ~ over half of the phosphorus attributed
to human activities.  Sources of nonpoint source phosphorus include runoff from parking lots,
golf courses, ski developments, and construction sites, along with seepage from domestic septic
systems and other diffuse sources.   Regulated point sources, primarily four publicly-owned
treatment works (POTWs) that employ advanced treatment, discharged 18 percent of the total
phosphorus load. These plants handle the wastewater treatment needs of the region. The Snake
River plant in the Keystone area is  managed by  Summit  County;  the  remaining plants -
Breckenridge, Copper Mountain, and Frisco - are part of special sanitation districts created to
provide wastewater treatment for their respective municipalities.

       The Clean Lakes Study concluded that reliance on point source control alone, even at
zero discharge, would be insufficient to prevent reservoir eutrophication if rapid regional growth
continued. Consequently, nonpoint source phosphorus control would be necessary in order to
prevent a sewer tap moratorium that would effectively freeze regional growth and put a cap on
the point source load. All interests in the basin - industry, municipalities, and environmentalists
- were  equally threatened by either growth  restrictions  or continued  degradation  of the
reservoir's water quality.
Nutrient Control Strategy

       In   1983,  faced with  impending  eutrophication  and a  potential regional growth
moratorium, the Colorado Water Quality Control Commission asked local agencies to design a
basinwide phosphorus reduction strategy that would accommodate future development without
degrading Dillon Reservoir's water quality. Committee members, under the leadership of the
Northwest  Colorado Council of Governments, included representatives from the state and
county, six surrounding municipalities, two unincorporated urban areas associated with ski
developments,  three sanitation districts, one  mining company,  the  Denver  Water Board,
environmental groups, EPA officials, and other parties with a significant stake in Dillon's water
quality.4

       The Dillon Water Quality Management Plan is the result of these efforts.  Adopted by
the Colorado  Water Quality Control  Commission in 1984, the plan emphasized point and
    'Point Sources-Nonpoint Sources Trading in the Lake Dillon Watershed:  A Final Report.
Northwest Colorado Council of Governments, p. 4.
                                         A-4

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                                                    Nutrient Trading in Dillon Reservoir
nonpoint source phosphorus controls in order to maintain 1982 water quality conditions.5 In
order to effectively control phosphorus levels in the reservoir, total phosphorus loading from all
sources — background, point, and nonpoint - was limited to the 1982 level of 10,163 pounds,
an  amount considered  acceptable to meet the  reservoir's  0.0074 mg/1  in-lake phosphorus
standard.  Point source dischargers received a share of the total available phosphorus load using
1982 discharge levels as a guide.  The consideration of total basinwide phosphorus loading to
meet an in-lake standard marked a shift from the previous, and more traditional, approach that
allocated phosphorus  based  on reservoir segments, an approach insufficient  to protect water
quality.

       Through the wasteload allocation process, the available point source phosphorus load
(1,510 pounds), was distributed among the four individual dischargers based on total flows in
1983.  At that time, point sources discharged substantially less than their allocations due to new
tertiary treatment technology.   The gap between  actual discharge and  allocated  levels of
phosphorus was expected to allow treatment plants to extend service to a greater population,
thereby allowing regional growth to continue at a time when Summit County was experiencing
one of the highest growth rates in the nation.
    5   Because spring runoff and annual precipitation affect the hydrology of the basin, a wet
year creates a worst-case scenario for phosphorus loadings. The phosphorus concentration and
reservoir volume in a very wet year - 1982 - was used as the hydrologic baseline against which
to measure progress toward achieving phosphorus control objectives.  The point source allocation
remains the same regardless of precipitation, but the nonpoint source contribution is indexed to
flow levels.
                                          A-5

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                                                   Nutrient Trading in Dillon Reservoir
             IMPLEMENTATION OF NUTRIENT TRADING PROGRAM
Objective

       Nutrient trading between point and nonpoint sources was incorporated into Dillon's
foasinwide phosphorus control strategy to encourage the most cost-effective means of preventing
future nutrient loading increases.    It was determined to be the most cost-effective means based
on cost estimates of alternative phosphorus control strategies and the projection that treatment
plants' phosphorus allocations would be exceeded by 1990, restricting the availability of future
sewer taps extended to new developments.   A point/nonpoint source trading program would
give POTWs two options to accommodate loads exceeding their allocation.   They could either
install additional treatment technology to reduce their own phosphorus load  levels (the  only
option available to them in the absence of trading) or maintain their existing levels of treatment
while at the same time controlling existing nonpoint source phosphorus to receive credit toward
their allocation.

       The trading program  provided  a means  to  consider the cumulative impact of all
phosphorus sources,  including the contributions from new developments, which  create  new
phosphorus loads through sewer connections to the treatment plant as well as increased runoff
associated with a change in land use (phosphorus is carried in dissolved form and is attached to
soil particles).
Economic Justification

       Both Summit County and EPA were interested in the relative costs of point and nonpoint
source control options to accommodate point source phosphorus loads in excess of allocations.
In 1982, EPA funded a demonstration urban runoff control project that removed nonpoint source
runoff at a minimum annual cost of $67 per pound.6 Through its Office of Policy, Planning
and Evaluation, EPA funded a study in 1984 that compared nonpoint source control costs to
advanced wastewater treatment technologies in order to estimate the potential cost savings
generated by a trading program.7

       Application of point/nonpoint  source trading  to  Dillon  Reservoir  required several
assumptions regarding future point source loads and available nonpoint source controls. For
    6Initial monitoring data from the project yielded an annual cost of $119 per pound, which
was used for calculations in the economic studies.  However, with additional monitoring data,
this cost was reduced to $67 per pound.  See Point Sources-Nonpoint Sources Trading in the
Lake Dillon Watershed: A Final Report.   Northwest Colorado  Council of Governments,
September 1984. plO.

    ''Case Studies on the Trading of Effluent Loads in Dillon Reservoir.   1984.  Prepared for
Office of Policy Analysis, U.S. Environmental Protection Agency by Industrial Economics, Inc.

                                        A-7

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                                                    Nutrient Trading in JXtton Reservoir
example,  1985  phosphorus  load  calculations  were  based on  facilities'  estimated  service
population and a per  capita phosphorus  loading  factor that  reflected  1981-1982  treatment
capabilities. However, discharge levels in those years were extremely high, due to the fact that
tertiary treatment,  which was already  installed  at the  facilities  and anticipated to reduce
phosphorus  loadings  by  70 percent,  was  not yet  fully  functional.   Consequently,  1985
calculations estimated  point source loads substantially  above allocations — 2,744  pounds
compared to an allocation of 1,313 pounds' - and, hence, a large potential for trading.

       Based on anticipated large point source loads, several treatment technologies reserved for
drinking water purification were the only alternatives considered to achieve the necessary load
reductions. Estimated annual costs for activated alumina, the lowest cost alternative, averaged
$730 per  pound across 'all plants.9  Due to  "lumpiness"  of treatment technologies,  advanced
treatment  at all plants would reduce phosphorus loading substantially below allocated levels.10

       Nonpoint source removal costs were derived solely from the urban runoff demonstration
project. Results from this project were extrapolated to the  entire basin assuming diminishing
effectiveness  - and, as a result, increasing costs per pound - for the smaller,  less desirable
sites.  With  diminishing marginal returns, however, the point source loadings that were
anticipated to exceed wasteload allocations ("excess load") could not be reduced through trading
alone,  thereby requiring a combination of point source upgrades and nonpoint source controls
to achieve the necessary load reduction.

       Using a cost minimization model, treatment plants  in  the  basin would  achieve their
required phosphorus reductions through lower cost nonpoint source controls until the point at
which  the costs of such controls, on a per pound basis, surpassed the least expensive advanced
treatment  alternative.   The least-cost combination  of controls, using the assumptions above,
would require one plant to upgrade its facility, with the balance of phosphorus reductions derived
from nonpoint source controls, at an estimated total annual cost of $241 per pound, a 66 percent
savings (on a per pound basis) over advanced treatment alone.11

       The choice of a trading ratio further affects the maximum load reduction and cost-savings
achieved through trading.  Under a 2:1 trading ratio, for instance, a point source receives  one
    *The initial 1,313 pound allocation, used in calculations, was later raised to 1,510 pounds
in regulations governing the trading program.  See Supra note 2 at p.3.

    'Annual costs (before tax) for all calculations are based on conversion of one-time capital
costs to annual equivalent capital costs using a 10 percent discount rate  and ten year capital
recovery period. Selection of the discount rate was based on Office of Management and Budget
Circular  A-94,  which recommends use of a 10 percent discount rate for analysis of federal
projects.  See Supra note 7 at p.2-2.

    10See Supra note 7 at p.3-10, and Exhibit 3-7.

    "See Supra note 7 at p.3-13, and Exhibit 3-12.

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                                                    Nutrient Trading in Dillon Reservoir
pound of credit for each two pounds of existing (i.e., pre-1984) nonpoint source phosphorus
reduced. Without sufficient nonpoint sources with which to trade, maximum reductions will be
limited to the availability and relative proportion of nonpoint sources.  Additionally, from the
perspective of the point source discharger, the cost-effectiveness associated with nonpoint source
control is less under a higher trading ratio because (assuming a 2:1 ratio) every two pounds of
nonpoint source phosphorus removed results in only one pound credited to the point source
reduction requirement. Therefore, a point source must control twice as much existing nonpoint
source phosphorus as would be necessary in a 1:1 trading ratio (a discussion of the ratio selected
for the Dillon program and its rationale is presented in "Program  Details" below). Using the
assumptions described above,  the least-cost combination of controls necessary to reduce the
excess phosphorus load would result in an annual average cost of $508 per pound of phosphorus
credited to the point source allocation, 30 percent cheaper (on a per pound basis) than advanced
treatment alone.12

       All of the calculations described above assume that dischargers are required to meet the
aggregate point source limit imposed on them, rather than individual wasteload allocation limits.
That  is,  the  least-cost combination  of  controls reflects  the  lowest cost to  the point source
dischargers as a group, not to the individual discharger.  However, the Dillon trading program
is structured such that each discharger must meet its individual limits by either further reducing
its discharge or controlling nonpoint sources in order to maintain existing levels of point source
discharge.  Using the model employed for the initial cost-effectiveness estimates, it is not
possible to develop  comparable estimates for the program implemented at Dillon.13
Program Details

       The trading program developed for Dillon involves the four POTWs in the basin and
nonpoint sources that existed prior to adoption of the plan in 1984.  By granting POTWs credit
for operating and maintaining controls on existing urban nonpoint sources while at the same time
continuing  advanced treatment for phosphorus  removal, additional development can occur
    I2See Supra note 7 at p.3-17, and Exhibit 3-16.  This combination of point and nonpoint
source controls reflects the costs associated with twice as much nonpoint source control as is
reflected in credits.  For instance,  the least-cost combination required 518 pounds nonpoint
source credit, which resulted from the control of 1,036 pounds of nonpoint source phosphorus.

    I3The analysis assumed that there was a limit to the total pounds of possible nonpoint source
reductions.  Further,  the total was estimated to be less than the required point source load
reductions.  For this reason the assumption of a perfectly functioning market was the only basis
for determining which point source dischargers may be able to purchase sufficient credits and
which  will be required to implement facility  upgrades.  In a perfect market, nonpoint source
control "prices" reflect the value to the point source discharger with the highest-cost facility
upgrades.  In fact,  purchase of nonpoint source controls is likely to be on a first-come-first-
served basis, with prices not bid up by individual facilities.

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                                                    Nutrient Trading in Dillon Reservoir
without limiting future sewer taps. Dillon's trading program includes four major elements; they
are described below.

       Baseline.   1982 levels of phosphorus were used as the common basis for measuring
progress in controlling basinwide phosphorus loading.  Water volume was very high that year,
and nonpoint source loads would also have been high.  Point source allocations are based on
1982  loadings, and  nonpoint source reductions  will be indexed to  1982  water volume  and
loadings.

       Trading Ratio. A 2:1 trading ratio, chosen for technical and economic reasons, requires
that a treatment plant control two pounds of phosphorus from an existing nonpoint source for
each pound of phosphorus it discharges above its allocation.  For instance, installation of a
nonpoint source control  device that removes  100 pounds of phosphorus would generate SO
pounds of phosphorus credit toward a point source's total allocation.  Available data indicated
that a 2:1  ratio would offset the increased new nonpoint source phosphorus loading that would
result from new development generated by a one pound credit at the point source. As noted
above, it also represented a 30 percent savings,  on an annual  cost  per pound (of phosphorus
credit) basis, over the cost of meeting phosphorus limits through point source control upgrades
alone.

       Controls on New Nonpoint Sources.  Nonpoint source loads from new development
occurring after the plan was adopted in July 1984  are controlled separately, and cannot generate
phosphorus credits. As part of the plan, local governments are required to adopt regulations that
control nonpoint source runoff from all new developments, resulting in a 50 percent reduction
below  anticipated nonpoint source loadings.  Trading will only be considered in localities with
appropriate land use and erosion control ordinances.

       NPDES Permit.  Each discharger involved in a trade will be given an NPDES permit
that incorporates its phosphorus credit and notes  the party responsibility to operate, maintain,
and monitor the nonpoint control device(s) for  which credit  will  be granted (responsibility
assigned  by  the Water  Quality Control  Commission).   These permits  must contain,  at a
minimum, the following provisions: (1) a record of the point source credit amount and the
original phosphorus allocation;  (2) construction requirements  for the nonpoint source  control
devices; (3) monitoring and reporting requirements for the party responsible for the nonpoint
source controls; and 4) operation and maintenance requirements to assure continuous nonpoint
source control.
Enforcement and Compliance

       When a trade is approved, a treatment plant's NPDES permit is modified to include two
levels of discharge limits - one, considerably  more stringent, in the event that trading is not
used or is not successful,  which  is  equal to discharge limits  required to meet wasteload
allocations and requiring point source upgrades, and one that credits the discharger's wasteload
allocation based on their implementation of successful nonpoint source reduction projects. By


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                                                    Nutrient Trading in Dillon Reservoir
including the trading provision in the permit, nonpoint source management and control are linked
directly to the Clean Water Act enforcement provisions of the NPDES permit.14  If a discharger
does  not achieve the required level of nonpoint source control specified in the permit,  its
allocated load and permit level will automatically revert to the more stringent limits.  For the
plan to be effective, permit conditions must be enforced and violations must be subjected to the
appropriate administrative or criminal procedure.
Technological Feasibility

       Sufficient and reliable water quality data, and accurate modeling are essential to develop
a basinwide water quality protection plan as well as a trading program.  For Dillon Reservoir,
a  computer model developed  as  part  of the Clean Lakes study indicated  the maximum
phosphorus loading that the basin could  accommodate and still achieve the in-lake phosphorus
standard.   Further refinements to  the  Dillon  Water Quality model  will  allow predictions
concerning the phosphorus  impacts of future basin development.

       The Clean Lakes Study assumed  that one pound of total phosphorus discharged from a
point source would have the same water quality impact as  one pound of total phosphorus
discharged from a nonpoint source, and the same impact as discharges from different locations.
This was substantiated in water quality model predictions that were within 5-10 percent of the
observed levels for  1981  and 1982."

       Effective, low-cost nonpoint source control measures are also necessary for a trading
program.   In the Dillon watershed,  the EPA pilot urban runoff facility demonstrated one
potential type of inexpensive nonpoint source control.  Several other options for nonpoint source
control, including connecting subdivisions on  failing septic systems to wastewater treatment
facilities, are also appropriate in the Dillon area.
Administrative Framework

       Regulations by the Colorado Water Quality Control Commission outline the general
program structure for the Dillon trading program. The Commission, appointed by the Governor,
assigns total phosphorus limits and credits, and assigns responsibilities for operating, maintaining
and monitoring all  nonpoint source controls for  which credit is received.  The Northwest
Colorado Council of Governments (NWCCOG) serves as staff to the Summit Water Quality
Committee, and took the lead overseeing development  of the trading program.
    "Clean Water Act, Section 402.

    "Kashmanian, Richard,  et. al,  1987.  An Application of Point Source/Nonpoint Source
Trading: A Case Study of Dillon Reservoir, Colorado. U.S. EPA Office of Policy, Planning and
Evaluation, Staff Paper, p!2.

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                                                   Nutrient Trading in Dillon Reservoir
       Point source regulation lies with the Water Quality Control Division of the Colorado
Department  of  Health through  its  EPA-approved  NPDES  permitting  program.    The
point/nonpoint source trading provisions are incorporated into the NPDES permit by including
both point source discharges and nonpoint source controls in the permit.

       In accordance with Clean Water Act requirements for state-managed NPDES programs,
the Environmental Protection Agency, through  its Region 8 office, reviews all permits for
compliance with Dillon management regulations and water quality standards.  EPA reviews and
approves all trades recommended by the State that conform to regulations and are used to attain
or maintain the in-lake phosphorus standard.16

       Local governments share basinwide water quality responsibilities through the Summit
Water  Quality Committee,  formed by intergovernmental agreement to provide a coordinated
approach to protecting water quality.  The Committee developed the administrative procedures
for credit transactions that were approved by the Water Quality  Control Division.  Its present
responsibilities include: extensive  monitoring of water quality trends in the reservoir, tributary
streams, and nonpoint source controls; identification of sites for nonpoint source control devices;
distribution of phosphorus credits  gained from the nonpoint source controls; and development
of septic tank control programs.
    16Personal communication with Bruce Zander, EPA Region 8, July 25, 1991.

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                                                   Nutrient Trading in Dillon Reservoir
                                PROGRAM STATUS
       The Dillon program became the first operating point/nonpoint source trading program
in the nation after it received state and EPA approval in 1984.  Local officials expected that the
trading program would be a major component of the overall phosphorus control strategy for the
basin due to the impact of rapid growth on point source phosphorus loads.  The trading program
was designed to accommodate new development in the region by bringing control of existing
nonpoint sources of phosphorus under the umbrella of point source regulation.

       However,  several  events in  the late 1980s  diminished  the immediate  need for
implementing trades. In addition to an economic slump in the late 1980s that slowed basinwide
development and corresponding increased levels of point and nonpoint phosphorus loadings, the
POTWs  in the basin  achieved impressive phosphorus load reductions through minor  plant
alterations and improved operating efficiency of existing treatment technology.

       Without resorting to additional, expensive treatment technology, the treatment plants were
able to reduce their discharge substantially below projections. The four POTWs discharging into
Dillon now boast some of the highest phosphorus removal efficiencies in  the  nation.   For
instance, the Snake River Plant, which has won several EPA awards for its phosphorus removal
capabilities, now discharges as little as 20 pounds of phosphorus (at 0.02 mg/1) out of its annual
allocation of 340 pounds.17

       In contrast to the early 1980s, point source loading is now a relatively minor source of
phosphorus to Dillon.  Even with increased flows, combined POTW discharge, with an annual
allocation of 1,510  pounds,  totals less than 250 pounds  out of the annual reservoir limit of
10,163 pounds.18  Even at full buildout of the basin, treatment plants are not expected to reach
their allocations.19  Consequently, point/nonpoint source trading has played only a minor role
in the overall basinwide phosphorus mitigation strategy.   The limit on nonpoint phosphorus
loading, implied by the total basinwide phosphorus load allowed, has proved to  be the major
constraint to future development.

       Although total annual phosphorus loading was only 5,449 pounds in 198920 - 54 percent
of the total phosphorus allowed - nonpoint source phosphorus poses  the most  important
problem. Local officials are developing a phosphorus mitigation policy that will require  new
    "Personal communication with Buck Wenger, Utility Manager,  Snake River Sanitation
District.  July 17, 1991.

    18From 1989 Annual Monitoring Report, Table 9, as cited in  Summit  Water Quality
Committee 1990 Annual Report. February 1991.  Prepared by Lane Wyatt.

    l'See Supra note 18 and Supra note 17.

           note 19, Table 11.

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                                                    Nutrient Trading in Dillon Reservoir
nonpoint sources to offset their phosphorus impact by controlling existing nonpoint sources, in
addition to the stringent controls already required for new developments.  For a program review
in 1992, a new county committee has been formed to evaluate supplements to the current trading
program  along with new strategies to control, nonpoint source phosphorus.21

       To date, only  one point/nonpoint source trade has been completed under the original
regulations.  Two additional nonpoint source control projects have been implemented by point
sources, and are currently being monitored to determine their phosphorus removal capabilities.
These will generate credits  for the treatment plants or others to use in the  future to offset new
nonpoint source loads. The following discussion describes these projects.
Breckenridge Sanitation District22

       In 1988, the Breckenridge  Sanitation District,  which operates the largest of the four
POTWs in the basin,  received 11 pounds of additional phosphorus credit for sewering of the
Lake View Meadows subdivision.  Prior to 1984, the subdivision had been serviced by
individual septic systems, the largest collective source of nonpoint phosphorus entering Dillon
reservoir.

       Available data on septic system phosphorus yields indicated the potential for 22 pounds
phosphorus removal if the homes were connected to the sewer system. Based on the 2:1 trading
ratio, this generated 11 pounds credit to the Sanitation District,  reflecting a total allotment in its
revised NPDES  permit of 675 pounds.

       From an administrative  perspective,  the  completed trade  illustrated that the process
outlined in regulation worked smoothly.  However,  the Sanitation District did not pursue the
trade based on the economic incentives of nonpoint source control, as it currently uses only 15
percent of its phosphorus allocation.  Instead, it applied for credits after the county responded
to requests for sewer connections from a subdivision that had been experiencing septic system
failures.

       Because the sewer project was incorporated  into a planned county road improvement
project, the capital costs attributed to sewer construction were substantially below the county
average.  Of the total $5,600 assessed each lot in the subdivision (including undeveloped lots),
only $700 was attributed to sewer costs. In contrast, the average cost for running sewer lines
to residences located near existing  trunk lines is $4,000 per residence, in addition to a $3,000
    21Personal communication with Lane Wyatt, Northwest Colorado Council of Governments,
July 19, 1991; McKee, July 29, 1991; Wenger, August 8, 1991.

    Personal communication with Bill McKee, Senior Planner, Basin Management, Colorado
Department of Health. July 16, 1991; Milt Thompson, Breckenridge District Manager. July 17,
1991; Rick Pocious, County Engineer, August 12, 1991.

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                                                   Nutrient Trading in Dillon Reservoir
tap fee.23  Although  the  county  financed the entire  project through bonds, Breckenridge
Sanitation District received credits based on the amount of phosphorus removed by converting
existing homes from septic systems to sewer service.

Frisco Sanitation District24

       Frisco is a small mountain community that experienced storm drainage problems.  In
order to counteract stormwater accumulation in two alleys behind Main Street, the Frisco district
built a series of concrete vaults (manholes) that  drain stormwater runoff and settle  heavy
sediment. The first project, built in 1985 to alleviate the drainage problems, also demonstrated
phosphorus removal benefits:  filtering water  through perforated pipes removed 50-70 percent
of phosphorus.

       From this experience,  the district built a second series of vaults to drain a different
section of town and decrease phosphorus loading to the reservoir.   The project qualified for
federal  funds  administered  through the  Clean  Water  Act Section  319  nonpoint source
management program, which provided $38,000 out of a total cost (including monitoring) of
$63,000.  The town of Frisco and the Frisco Sanitation District shared the non-Federal portion
through a combination of cash and in-kind services.

       However, like Breckenridge, Frisco did not need additional phosphorus credits: out of
its current allocation of 341 pounds per year, it uses less than 50 pounds.  On behalf of the town
of Frisco, all credits obtained from the Frisco project will be applied to a planned town golf
course in keeping with a proposed phosphorus mitigation policy that will require any projects
that contribute new nonpoint source phosphorus to obtain equivalent nonpoint source phosphorus
removals elsewhere.25  In effect, the trade is an example of nonpoint/nonpoint source trading,
under the umbrella of a point/nonpoint source trading program.
    ^Lewis, William M., Jr. Methods for Calculating the Value of a Pound of Phosphorus in
the Lake Dillon Watershed for Purpose of Phosphorus Mitigation.  Prepared for the Summit
Water Quality Committee, April 18, 1990.  p.3.  A residential unit on a septic system yields
an estimated 1.4 pounds of phosphorus per year.  Therefore an annualized capital cost per pound
of phosphorus removed by connecting the home to a sewer is $465, not including the tap fee.
Lewis reports a value of $5,000 per pound of phosphorus, which includes the tap fee in the total
cost, and does not represent annualized costs.
«.
    24Personal communication with McKee, July 16,1991; Butch Greene, Plant Manager, Frisco
Sanitation District,  July 16, 1991.

    ^The proposed phosphorus mitigation strategy will require phosphorus reductions equivalent
to a proposed impact of a new project, essentially a 1:1 trading ratio.  Therefore, controlling
one pound of nonpoint source  phosphorus results in a one  pound credit to another nonpoint
source.  This should be distinguished from a 2:1 trading ratio where two pounds of nonpoint
source phosphorus  must be removed to generate one point source pound credit.

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                                                    Nutrient Trading in Dillon Reservoir
       Phosphorus removal capabilities from the project will be determined by  monitoring
incoming and outgoing water. Based on initial results, the project is expected to generate 40-50
pounds phosphorus credit to the Sanitation District in 1994.26   Assuming 50  pounds of
phosphorus removal, the total annualized cost of this project is $10,253, or $205 per pound of
phosphorus.  However,  the federal grant reduces the Sanitation District's cost substantially ~
its $12,500 share of total costs results in an annual cost of $40 per pound.27

Snake River Wastewater Treatment Facility2*

       The county-owned Snake River treatment plant, which services the Keystone area, is also
involved in a nonpoint source control project designed primarily to offset the impact of new
nonpoint source contributions to the reservoir.  As pan of the overall management of Dillon
reservoir, the Denver Water Board, owner and operator of the reservoir, plans to divert a stream
with a high phosphorus concentration into Dillon  reservoir.   In  keeping  with a proposed
phosphorus mitigation strategy for the reservoir, the Water Board has agreed to offset the
anticipated 200 pound phosphorus impact of the stream  diversion with equivalent phosphorus
reductions elsewhere in  the basin.

       The Snake River project, the first nonpoint source control project identified to meet the
Water Board's  offset  objective, will reduce the phosphorus loading from Soda Creek, which
drains the Snake River  district and has the highest phosphorus concentration of any  stream
entering Dillon reservoir.   In order to  reduce  phosphorus loading from  Soda Creek,  the
treatment plant built a discharge structure in April 1991 using the existing road causeway over
the reservoir as a dam to intercept stream flow. When reservoir levels are low, the wall Miters
water entering the reservoir, removing up to 50 percent (75 pounds) of phosphorus under the
best conditions.  After modeling is completed, the Denver Water Board will receive half of the
credits generated from this project.29
    26Again, in this case, the amount of credit received will equal the amount of phosphorus
removed, thus cost calculations reflect a 1:1 ratio between credits received and pounds removed.

    "For consistency with the initial economic study, calculations are based on a 10 percent
discount rate and a ten year capital recovery period.  See Supra note 9.

    28Personal communication with McKee, July 16,1991; Wenger, July 17 and August 8,1991.

    "See Supra notes 24 and 25.  The total amount of nonpoint source phosphorus removed
from this project will result in phosphorus credits shared equally between the Snake River Plant
and the Denver Water Board.

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                                                   Nutrient Trading in Dillon Reservoir
       Project costs for the detention pond totaled $106,000, including a $46,400 grant from
Clean Water Act Section 201 funds administered through the State Water Quality Division.30
The remaining costs were shared by the Snake River plant and the Denver Water Board. The
Snake  River project  comes under the trading program umbrella because of regulations that
require trades to be sponsored by a POTW.  However, like the other treatment plants in the
basin, Snake River uses only a fraction of its phosphorus allocation: 20 out of its allocated 340
pounds.

       Assuming the project removes 75 pounds of phosphorus, total annualized capital costs
would  be $17,251, or $230 per pound.31  However, costs to the treatment plant for its share
of credits are substantially reduced by the federal grant and Denver Water Board contribution,
resulting  in  an annual  cost of $130 per pound.32  These costs do not include operating and
maintenance costs, which will be shared by the Snake River plant and the Denver Water Board.
    30Under Section 201, the Construction Grants program (now phased out), up to 20% of a
state's construction grants money for POTWs could be used for "any innovative and alternative
approaches for the control of nonpoint sources of pollution"  (201(g)(l)(B)). Until Congress
appropriated Section 319 nonpoint source management program money in 1990, Colorado used
part of its 201 allocation to fund nonpoint source projects.

    31See Supra note 30.

    32See Supra note 25.

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                                                    Nutrient Trading in Dillon Reservoir
                                    CONCLUSION
       Dillon Reservoir has frequently been cited as an example of the potential cost savings
generated by a point/nonpoint source trading program.   Indeed, the ease with which Dillon's
completed trades occur illustrates that the administrative framework operates as designed.

       To date, however,  the program has not developed as envisioned  largely due to the
impressive load reductions achieved  by the POTWs.   By achieving some of the highest
phosphorus removal capabilities in the nation, the treatment plants obviated the need for point
source phosphorus  credits  to accommodate future growth.  Although point/nonpoint source
trading now  plays only a minor role in overall basinwide phosphorus management, several
valuable lessons emerge from the Dillon experience regarding the role of trading in basinwide
water quality management.   Particularly important is  the realization that nonpoint/nonpoint
source trading will be necessary in maintaining the water quality of Dillon Reservoir.

Maximum Basinwide Loads

       Primarily, the Dillon experience illustrates the importance of a comprehensive basinwide
management  approach rather than focusing on point sources in isolation.  By considering the
relationship between point, nonpoint, and background sources of phosphorus  to the reservoir,
local officials determined acceptable maximum pollutant loadings to  meet an in-lake standard.
This basinwide planning approach represented a shift from the conventional regulatory approach
which, for the  most part, has been limited to point  source control.  As a result of Dillon's
proactive planning,  1989 phosphorus loads to the reservoir totaled only 53 percent of the critical
load.33

       Several  sections of the Clean Water Act address a comprehensive  approach to water
quality problems where point source control alone is insufficient to meet designated water quality
standards.  Section 302, water quality related effluent limitations,  requires  establishment of
effluent limitations (including alternative effluent control strategies) for point sources that can
reasonably be expected to contribute to the attainment  or maintenance of water quality.34  A
trading program appears to be an acceptable alternative  control strategy.

       Additionally, Section 303, water quality standards and implementation plans, outlines the
total maximum daily load (TMDL) process35 as a mechanism for water quality-based control
actions where technology-based controls alone are not adequate.  A TMDL is the  maximum
amount of a  pollutant that can enter a  water body without violating water quality standards.
    "See Supra note 17.

    *Clean Water Act, Section 302(a).

    "Clean Water Act, Section 303(d); 40 CFR 130.

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                                                    Nutrient Trading in Dillon Reservoir
Recent guidance by EPA explains the role of TMDLs in evaluating the cumulative impact of all
pollution sources, as well as available options for point and nonpoint source control.36

       Although TMDLs can be difficult to establish where multiple sources impair water
quality, this type of integrated basinwide management is essential to control the remaining water
quality problems.  The wasteload allocation experience at Dillon illustrates the multiple factors
that must be considered when allocating the available load.  Where point sources are able to
achieve load reductions substantially below initial allocations, as at Dillon, reallocation may be
necessary to maintain incentives for point/nonpoint source trading.

       Within a comprehensive basinwide management strategy, however, alternative control
measures, such as a trading program, can only be considered when all point source dischargers
are, at a minimum, in compliance with technology-based requirements.  Under the Clean Water
Act, only point sources are subject to federally enforceable controls.37 Therefore, a strategy
that also relies on  nonpoint source reduction to meet water quality  standards must include
assurances that such reductions will occur. At Dillon, this assurance is provided in the NPDES
permit that defines the point source's obligation to build and maintain nonpoint source controls.
Failure to do so would result in a more  stringent point source discharge restriction.

Monitoring and Modeling

       A  water quality-based  regulatory  approach, above and beyond  technology-based
requirements, is only possible with adequate monitoring data and computer modeling capabilities.
Water quality data and appropriate models must be available to evaluate relative impacts from
point and nonpoint source loads along with the implications of alternative control strategies to
meet a water quality standard.

       At Dillon, monitoring data is used in conjunction with the  Dillon Water Quality model
to evaluate current control strategies and predict the impact of future development.  As modeling
capabilities become more sophisticated and monitoring data accumulates, the  load allocation
process can  be tailored to address the water quality problem most  effectively.

       The availability of monitoring data and sufficient models will directly affect the amount
of time required to develop and allocate total maximum daily loads and, if necessary, a trading
program.  In some cases, a TMDL may be more effective as a proactive planning tool, rather
than as  the primary method to improve water-quality limited water bodies, where independent
regulation of nonpoint source control may be necessary.

       The trading program at Dillon was designed to prevent future water quality deterioration
in a rapidly expanding region, rather than to mitigate an existing problem. Local  officials, faced
    ^Guidance for'Water Quality-based Decisions: The TMDL Process.  April 1991.  Office of
Water Regulations and Standards, United States Environmental Protection Agency.

    "Clean Water Act, Sections 301, 304.

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                                                     Nutrient Trading in Dillon Reservoir
with a potentially serious water  quality problem, recognized the need to consider the total
pollution load to the reservoir in  order to maintain an acceptable level of water quality. The
trading program is part of a larger basinwide phosphorus control strategy that also includes
separate nonpoint source control requirements for new developments.
Estimating Cost-Savings Attributed to Trading

       Point Sources. Using an economic rationale, point/nonpoint source'trading is expected
to occur when the marginal cost to control otherwise unregulated nonpoint sources is lower than
equivalent reductions achieved at treatment plants through advanced treatment technology. The
Dillon experience illustrated the sensitivities involved in the initial economic analysis of potential
cost savings.

       The economic analysis  used to project cost savings  attributed  to the Dillon trading
program considered the aggregate discharge limit for all point  sources, rather than adherence to
individual discharge limits. This analysis, which assumes a regulatory "bubble" applied to point
source dischargers,  yields the greatest economic efficiencies, as  the lowest cost control
combination would be evaluated across all dischargers; individual plants would be subject only
to maintaining the aggregate discharge limit,  not necessarily forced to reduce  individual
discharge levels beyond compliance with technology-based regulations.  However, in practice
this type of bubble approach could lead to several enforcement problems, specifically related to
responsibility  and accountability for  violations,  if individual permits did  not reflect  the
requirement to adhere to individual facility wasteload allocations. The Dillon program does not
use this bubble approach, which makes the initial reported cost savings difficult to interpret.

       Additionally, although tertiary treatment had been installed at all the Dillon plants at the
time of the study,  projections of future loads were based on previous discharge levels without
such technology.  Consequently, projected  load levels were inflated.   The true conditions
substantially altered the economic efficiencies underlying the original trading program.

       The Dillon plants were able to further reduce phosphorus loads by increasing operating
efficiency of their existing technologies.   As a result, they achieved phosphorus removal
capabilities even below those predicted  for the advanced treatment alternative recommended in
the study.   As  illustrated at Dillon, the  possibility for low-cost capital improvements and
improved operating efficiency to reduce discharge levels must be considered.  When faced with
a limit on allowable discharge in addition to a maximum effluent concentration, point source
dischargers are  more likely  to look beyond mere  permit compliance to  find more efficient
operating  procedures.   The  appropriate cost comparisons  should evaluate  additional plant
improvements needed  if plants are operating at their highest efficiency, versus the cost of
nonpoint source controls.

       Nonpoint Sources. Effective, low-cost nonpoint source controls are essential to develop
a successful trading program.  However, calculating nonpoint source  control  costs and  the
                                         A-20

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                                                    Nutrient Trading in Dillon Reservoir
potential cost savings attributed to a trading program is a difficult process, as actual nonpoint
source control options vary considerably, both in effectiveness and cost.

       In the original Dillon study, the costs for nonpoint source controls were based solely on
cost efficiencies extrapolated from the type of urban runoff control facility considered most
likely to be used for nonpoint source control.  However, the nonpoint source control projects
actually developed as part of the trading program included several different approaches and none
yet utilize  the type of runoff facility evaluated in  the  study.  In  Dillon, the most significant
opportunity to recover nonpoint source phosphorus is to extend  sewer service to residences
serviced by septic systems, the single largest nonpoint source of phosphorus.  Construction costs
are assessed to homeowners in addition to a sewer tap fee.   All estimates for nonpoint source
control costs are site-specific, based on hydrogeographic conditions.

       Trading Ratio. The choice of a trading ratio further affects the maximum load reduction
and cost efficiencies that can be achieved through trading. At Dillon, the 2:1 trading ratio was
chosen  to  offset the  phosphorus impact associated with new developments, which increase
phosphorus though additional loads to the treatment facility as well  as the runoff associated with
land use changes (even under stringent controls to reduce such runoff). Despite their apparent
simplicity,  as POTW treatment efficiencies improve and as new growth occurs there is a
potential that the initially established trading ratios may need to be revised.  In some cases, it
may be necessary to reevaluate and even increase ratios to ensure that the trading ratio still fully
mitigates runoff from new growth.

       Treatment plants  in the Dillon Reservoir improved their operating efficiency, enabling
them to treat more influent  per pound of phosphorus discharged.   Thus, under improved
efficiencies, a one pound credit represents a larger volume of influent - enabling the sale of a
greater number of sewer taps, and potentially, servicing a greater area of land  ~ than under
initial efficiencies where a pound credit of phosphorus discharge represented a lesser volume of
influent.

       Under improved POTW treatment efficiencies, trades may  not be necessary in order to
sell taps and permit development so long as a plant's loading remains below its permit limit.
As development continues and POTW phosphorus loadings  approach the  limit as a result of
development, a plant operator will have to choose between trading or facility upgrades to enable
the sale of more taps  to permit more development.

       The problem with existing trading ratios appears at the point that POTWs choose to trade
after efficiency improvements and after limits are again being approached.  The trading ratio,
in this case 2:1,  was established based on the original efficiency of the POTWs.  For example,
at the time the existing ratio was established under the old efficiency, a single 2:1 trade enabled
a POTW to sell taps representing a specified acreage of development. Under this 2:1 trade, one
pound of nonpoint source runoff reduction (at existing sources) would offset the one pound of
additional point  source discharge resulting  from the development's sewer  taps,  and the other
pound of nonpoint source reduction (at existing sources) offset the one pound of new nonpoint
source runoff from the same development, following on-site  control.


                                          A-21

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                                                    Nutrient Trading in Dillon Reservoir
       Under improved POTW treatment efficiency, a 2:1 trade would still permit a POTW to
sell the number of taps whose influent would result in an increase of one pound of additional
point source discharge, but the number of taps will have increased.  Suppose that improved
efficiencies enabled the plant to treat influent from twice as large an area as previous efficiencies
allowed, and still discharge a single pound of phosphorus. A single 2:1 trade would now enable
the POTW to sell taps for twice as much land.  A development that is twice as large, however,
will, in most cases have more nonpoint source runoff.  The previous ratio was designed to
mitigate one additional pound of nonpoint source loading, but it will not necessarily mitigate the
runoff from development of twice as much area.   In this scenario, the ratio may need to be
increased to as much as 3:1 to fully mitigate the nutrient loading associated with the additional
growth that is permitted as a result of plant improvements (assuming  that twice as much area
results in twice as much nonpoint source loading).

       As illustrated in the example above, the initial  trading ratio may not  fully offset the
nonpoint source runoff associated with the equivalent acreage the improved efficiency can now
permit.  The opposite argument would hold for improvements  in controls of new nonpoint
sources: the trading ratio could perhaps be revised downward (e.g., from 2:1 to 1.5:1 or 1:1)
rather than upwards. Additionally, improvements in POTW treatment efficiencies may postpone
or avert the need  to trade, as was the case at Dillon Reservoir.

       Federal Subsidies.  Incentives to trade may be enhanced by  the presence of federal
support for nonpoint source control projects.  Limited federal grant money is available for
nonpoint source control projects through the Clean Water Act's Section  319 nonpoint source
management programs.  If a  nonpoint  source control  project receives funding through this
program, the costs to  the point source  participating in the trade will be reduced, therefore
increasing the incentives  to trade.  The Construction Grants Program,38 which  provided funds
for construction and upgrading of publicly owned treatment plants, has been replaced by the
State Revolving Loan Fund, which increases the local share of upgrading treatment facilities.
Potential Impact of a Trading Program

       In order for a  trading program to successfully mitigate a nutrient problem, significant
contributions of phosphorus must result from both point and nonpoint source dischargers.  In
Dillon today, for instance, point sources contribute only 2 percent of total phosphorus,39 which
acts as a constraint to the volume of existing nonpoint source phosphorus that can be controlled
through trading — there is not sufficient volume of point source phosphorus to "leverage" against
existing nonpoint source loadings. Even under a hypothetical zero discharge limit for point
sources, a functioning point/nonpoint source trading program in Dillon would only remove 400
pounds of nonpoint source phosphorus ~ out of an allocation of approximately 2,000 pounds for
point sources -- based on current point source discharge and a 2:1 trading ratio.
    "Clean Water Act, Section 201.

    "See Supra note 17.

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                                                     Nutrient Trading in Dillon Reservoir
       Although point/nonpoint source trading has not yet been necessary at Dillon, the lack of
trading does not obviate the need for a trading program.  Rather, it shows the careful planning
and  analysis necessary to  develop  a trading program  as  one component of an integrated
basinwide management strategy.

       Unless regulatory nonpoint source controls become required, a trading program provides
one method to incorporate nonpoint source control into the regulatory reach of the Clean Water
Act. If initial conditions are not correctly analyzed, however,  the potential for trading to solve
water quality problems could be greatly exaggerated. Nonpoint source control, independent of
a trading program,  may  still be required to alleviate remaining site-specific water quality
problems.
                                          A-23

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                   APPENDIX B
NUTRIENT TRADING IN THE TAR-PAMUCO RIVER BASIN

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                                   Nutrient Trading in the Tar-Pamlico River Basin
                           TABLE OF CONTENTS
 NTRODUCTION ........................................... B-l
 IACKGROUND
      Nutrient Problem  ....................................... B-2
      Existing Controls  .................................... .--: . B-2
      Nutrient Sensitive Waters Designation . . ........................ B-3

 «W IMPLEMENTATION STRATEGY  ............................ B-6

 NUTRIENT TRADING PROGRAM DETAILS   ........................ B-8
      Nutrient Reduction Goal ................................... B-8
      Allowable Nutrient Loading  ................................ B-8
      Trading Specifications .................................... B-9
      BMP Payments ........................................ B-10
      Association's Allocation of Costs and Loading Allowance .............. B-10
      Non-Association Members  ................ ................. B-ll

NSW STRATEGY ADMINISTRATIVE FRAMEWORK  .................. B-12
      Enforcement and Compliance  ............................... B-13

CONCLUSION ............................................ B-15
      Prospects for Success .................................... B-16
      Implementation of BMPs through the Agricultural Cost Share Program  ...... B-16
      Enforcement and Reliability of BMPs  .......................... B-16
      Targeting BMPs for Funding  ................................ B-17
      Lessons from Tar-Pamlico  ................................. B-18
                                    B-i

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                                        Nutrient Trading in the Tar-PamUco River Basin
                                  INTRODUCTION
       North Carolina designated the entire Tar-Pamlico River watershed as Nutrient Sensitive
Waters (NSW) in 1989 after increased sediment and nutrient loads threatened the Pamlico River
estuary's valuable fisheries. Consequently, the Division of Environmental Management (DEM),
part of the Department of Environment, Health,  and Natural Resources, proposed nutrient-
reduction effluent limits for point source dischargers. The Tar-Pamlico Basin Association, a
coalition of wastewater treatment plants in the river basin, and state and regional environmental
groups proposed an alternative two-phased interim  nutrient management strategy.  The strategy
was most recently revised  in February of 1992.

       The strategy includes point/nonpoint source nutrient trading, allowing the Association to
fund less expensive nonpoint source controls, and thus avoid anticipated high compliance costs
associated with  achieving nutrient-reduction  through major  facility upgrades.   Under  the
established rules, it is anticipated that trading will achieve equivalent or better water quality than
would have been achieved under originally proposed effluent  limits.  Phase I of the strategy
establishes the administrative and institutional framework for the implementation of the trading
program.  The state  will hold the Association members jointly  responsible for  achieving an
annual nutrient loading allowance for the entire Association, in lieu of individual plant effluent
restrictions.  Within the nutrient loading allowance, members may allocate individual discharge
levels among themselves.  The Association must offset nutrient discharges exceeding the total
allowable load by funding  nonpoint source reductions in the basin.

       Association-funded nonpoint source reductions will be implemented through the existing
North Carolina Agriculture Cost Share Program, which provides funds to farmers to implement
nonpoint source controls known as Best Management Practices (BMPs).   This arrangement
restricts monies the program receives from the Association to nonpoint source controls within
the Tar-Pamlico watershed.  Association funds will supplement state cost share money already
designated for the Tar-Pamlico  Basin.  There should be ample opportunity to trade nonpoint
source reductions for any point source discharges above the allowable load because a significant
portion of nitrogen and phosphorus loading results  from nonpoint source runoff associated with
agricultural practices that dominate the 5,400 square-mile watershed.

       The Association has  conducted engineering evaluations of its facilities and is  in  the
process  of implementing  operational  and minor capital  improvements  to  reduce  nutrient
discharges, as required by Phase I of the strategy.   This  has allowed its members to avoid
exceeding the loading  allowance maximum for the  first year, averting the need to conduct
nutrient-reduction trading by funding nonpoint source controls.  The agreement does, however,
include a requirement for funding a minimum level of BMPs each year. Despite current loading
below allowable levels, the inclusion of a trading scheme as part of the management strategy has
initiated an effort to gain a better hydrologic understanding  of  the basin,  and its pollution
problems.  The establishment of an administrative  structure  for a trading  program will be
particularly important to achieving water quality objectives in a cost-effective manner in the
event that future nutrient discharge targets are reduced.
                                         B-l

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                                        Nutrient Trading in the Tar-PamUco River Basin
                                   BACKGROUND

Nutrient Problem

       The Tar-Pamlico River Basin encompasses a 5,400 square-mile watershed surrounding
the Tar and Pamlico Rivers and their tributaries. The rivers run through portions of 17 counties
before emptying into the Pamlico River Estuary and Pamlico Sound (see Map B-l). The Pamlico
River Estuary's valuable fisheries are vulnerable to the algal blooms and low dissolved oxygen
that  result from excessive  nutrient and  sediment loading.   In  Tar-Pamlico's estuarine
environment, nitrogen is considered to be the limiting nutrient, determining the existence and
extent of algal blooms, although phosphorus also appears to contribute to localized water quality
problems.

       Point  sources contributing to nutrient loadings in the basin  include publicly-owned
treatment works  (POTWs), and industrial and mining operations discharging into the Tar and
Pamlico Rivers and their tributaries.  In addition,  a substantial  portion of total nutrients is
estimated to result from agricultural nonpoint sources.1

Existing Controls

       Prior to the Environmental Management Commission's (EMC) approval of the Nutrient
Sensitive Waters Implementation Strategy  (described  in the following sections),  no major
nitrogen control measures had been  adopted by the state for the Tar-Pamlico  River Basin.
Despite the lack of regulatory nitrogen control measures, a voluntary program - the North
Carolina Agricultural Cost Share Program — has provided assistance to farmers installing best
management practices (BMPs) to control levels of nitrogen  and  phosphorus in agricultural
runoff.

       The state  did institute a major phosphorus control measure in 1988 - a phosphate ban -
- that resulted in significant reductions in loadings  to  the basin.2  Additional reductions are
anticipated when Texasgulf Industries completes renovations in 1992 that are expected reduce
the plant's current loadings by 90 percent. Agriculture and forested lands are now the primary
nonpoint sources of phosphorus, and are estimated to contribute 60 percent of the total loading.3
    1 Tar-Pamlico River Basin Nutrient Sensitive Waters Designation and Nutrient Management
Strategy. April 1989. Department of Natural Resources and Community Development, Division
of Environmental Management, Water Quality Section, p. 18.

    2 Ibid, p. 18.

    3 Ibid, p. 18.

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                                        Nutrient Trading in the Tar-Pamtico River Basin
Nutrient Sensitive Waters Designation

         In 1989, increasing eutrophication problems and outbreaks of fish diseases prompted
EMC to formally designate the entire Tar-Pamlico watershed as "Nutrient Sensitive Waters"
(NSW).   This designation requires  the identification of nutrient sources,  establishment of
nutrient-reduction goals, and  development and  implementation  of a nutrient  management
strategy.4

       A nutrient budget prepared by the state for the entire basin showed  that the majority of
nutrient loading results from nonpoint source runoff associated with the agricultural practices that
dominate the basin.  Specific point sources found to contribute substantially to nitrogen and
phosphorus loading are POTWs with permitted flows exceeding 0.5 million gallons per day, and
a large Texasgulf Industries phosphate mining operation near the terminus of the Pamlico River.

       North Carolina has not established water quality standards  for phosphorus or nitrogen,
but instead employs chlorophyll a, a plant pigment used by algae to convert sunlight energy into
food energy, as a direct measure of algae growth and an indicator of eutrophication. The state
has  established  water quality  standards  for NSW  designated  waters to  address  isolated
eutrophication problems.

       The basin's designation as NSW and the results of the nutrient budget, prompted the
Division of Environmental Management (DEM) to propose a year-round phosphorus effluent
limit and a seasonally varying nitrogen limit for new and expanding wastewater treatment plants
to mitigate the growing nutrient problem.   The effluent limits proposed by the  DEM were:
2mg/l for phosphorus year round; 4mg/l for nitrogen in summer; and 8mg/l for nitrogen in
winter.5  At that time, both phosphorus and nitrogen effluent levels in the basin  were higher
than the proposed limits.  Total phosphorus effluent  concentrations ranged from 0.7 to  3.35
mg/1, with a basinwide average of 2.25 mg/1. Total point source nitrogen concentrations ranged
from 5.4 to 22.95 mg/1, with a basinwide average of 14.38 mg/1.6  It was anticipated that these
limits would result in the desired water quality improvements.

       Several dischargers, anticipating needed expansions in the future, expressed concern over
the potentially high costs of achieving  the specified limits proposed by the DEM. A preliminary
estimate indicated that facilities in the basin would spend between  $50 and $100 million
    *The state's NSW designation  applies to waters that  are experiencing or are subject to
excessive vegetative growth that impairs the best usage of  the water.

    5 Tar Pamlico River Basin Nutrient Sensitive Waters Designation and Nutrient Management
Strategy,  North Carolina Department  of Natural Resources and Community Development,
Division of Environmental Management.  April 1989 (Report 89-07).

    6 Ibid.

                                         B-3

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                                        Nutrient Trading in the Tar-PamUco River Basin
improving plants to meet the state-proposed effluent limitations.7  These  high cost estimates
reflect the fact that some treatment facilities do not have biological treatment capabilities, and
would face expensive upgrades to meet effluent limitations.
    7  Personal  communication,  Malcolm Green,  General  Manager,  Greenville Utilities
Commission, and Chair, Tar-Pamlico Basin Association, July 31, 1991.

                                        B-4

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                                  Pungo R.      Lake
                                           - Maltamuskeet
Greenville    Washington
                    Durham Cr.

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                                       Nutrient Trading in the Tar-Pamlico River Basin
                       NSW IMPLEMENTATION STRATEGY

       As an  alternative DEM's  proposed nutrient effluent limits,  the  Tar-Pamlico Basin
Association  (a coalition of point  source  dischargers  in  the  basin),  and state and  regional
environmental groups proposed a two-phased strategy  to achieve nutrient-reduction goals.  In
December of 1989, the North Carolina EMC approved the strategy as the formal Tar-Pamlico
NSW Implementation Strategy (the strategy). The strategy provides for, among other things,
a nutrient-reduction trading program during Phase I (1990 - 1994).  In Phase n, beginning in
1995, a long-term nutrient-reduction strategy will be implemented based upon the results of an
estuarine computer model scheduled for completion by July 1993.

       The nutrient-reduction trading program was approved as both an interim strategy until
basinwide permitting becomes effective in the basin in 1995,  and as an integral part  of the
overall strategy.   It offers point sources the option to achieve the desired reduction goal by
paying for lower-cost nutrient-reduction measures in lieu of more costly capital improvements.

       In February 1992, the parties involved formally agreed to the terms of the first phase of
the strategy, including the interim nutrient-reduction trading program.  They are: the DEC; the
North Carolina Environmental Defense Fund; the Pamlico-Tar River Foundation; and the Tar-
Pamlico Basin Association.

       During the first  phase of the strategy, the parties are obligated to a fulfill their role in
number of tasks, which  include the following: development of an estuarine computer model for
the basin;  engineering evaluations  of wastewater  treatment plants  and  implementation  of
operational and minor capital improvements; effluent monitoring of wastewater treatment plants;
and implementation of the  nutrient-reduction trading program.

       The Association is funding the development of the  estuarine computer model scheduled
for completion in  July 1993.  The results  of the model will be used to establish total nutrient
load  targets and identify appropriate nutrient management  practices in Phase II of the strategy.
Specifically, the model will be developed to perform the following functions: assess the relative
importance of nutrients from point and nonpoint sources,  sediments, and atmosphere to algal
growth and oxygen stress; recommend future nutrient target reductions; and  track and target
BMPs.

       The Association  completed engineering evaluations at individual member plants  to
identify operational  or minor capital  improvements that could reduce nutrient  discharges.
Evaluations indicated that most plants met the originally proposed phosphorus limit of 2 mg/1,
while  nitrogen levels  typically exceeded the  originally proposed limits.   However,  the
improvements implemented in response to the engineering evaluations allowed plants to achieve
both sets of proposed limits collectively through  simple  and  inexpensive  changes to current
operations, at a  much  lower cost  than  originally anticipated.  Because only  two  larger
                                         B-6

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                                        Nutrient Trading in the Tar-PamUco River Basin
Association member plants have nitrogen removal capability, they will likely face the bulk of
nitrogen removal burden required under the adopted strategy.8

       Association  members  are responsible for monitoring their phosphorus and  nutrient
loadings and submitting a composite annual report to DEM every March 1 detailing data results
for the previous calendar year. The March 1, 1992 report included monitoring data for the
period January 1 - December 31, 1991. These annual reports will be used to determine the level
of compliance with  the strategy.

       The interim  nutrient-reduction trading program's administrative framework is in place
and annual loading allowances for the twelve-member Association have been set for the calendar
years 1991 - 1994.'  If the nutrient discharges of  Association member facilities exceed  the
loading allowance, they must contribute to the nonpoint source reduction fund. The Association
has not yet initiated trading — funding lower cost  nonpoint source controls to offset discharges
above an allowable load - because the Association's loading has not exceeded its allowance as
specified by the  strategy.   The agreement does, however, include a requirement for funding a
minimum level of BMPs each year.  The ability of the Association to achieve a nutrient loading
level below their specified allowance in the first year of the NSW Strategy (1991) was primarily
a consequence of operational improvements and minor capital investments that members agreed
to implement in response to engineering evaluations.  The Association's 1991 nutrient load was
approximately 13 percent below their loading allowance for that year.10

       Existing non-Association members that expand their operations are subject to the effluent
limitations originally proposed by  DEM.   The  Tarboro plant, a non-Association member,
recently expanded and its new permit reflects these limits. Non-Association  members do have
the option to participate in the trading program, and may  obtain nutrient-reduction credits, but
at a higher cost per  nutrient credit than Association members.  New dischargers are subject to
the most stringent effluent limitations and do not  have  the option to participate in the trading
program.
    ^Nutrient Removal Study, March 1991. Tar-Pamlico Basin Association, Inc. p.5-1.

    'National Spinning, an industrial discharger, is a member of the Association.  However, the
facility's discharges are not incorporated in the calculation of the Association's loading of total
nutrients

    10 Personal Communication with Beth McGee, North Carolina Department of Environment,
Health, and Natural Resources, Division of Environmental Management, March 23, 1992.

                                         B-7

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                                       Nutrient Trading in the Tar-PamUco River Basin
                   NUTRIENT TRADING PROGRAM DETAILS
Nutrient Reduction Goal

      The nutrient reduction goal of the NSW Strategy reflects the nutrient reduction level that
would have presumably been achieved through the originally proposed effluent limits - facilities
expanding their flow capacity to 0.5 million gallons per day or greater would have been subject
to effluent limits for nitrogen and phosphorus.  The originally proposed effluent limits were
calculated based  on concentration limits and projected flows  for three facilities  planning to
expand  before 1995,  and would have resulted in  a total  nutrient  reduction  of 200,000
kilograms.11   Thus, the Association's nutrient reduction goal  for 1994 (the last  year of the
NSW Strategy Phase I) was set at 200,000 kilograms.

Allowable Nutrient Loading

      It was determined that the Association's total nutrient load would reach 625,000 kg/yr
by 1994 in the absence of nutrient loading  restrictions or effluent  limits.12 To  achieve the
Association's nutrient  reduction goal of 200,000 kg/yr,  a declining  schedule of total load
allowances for the calendar years 1991-1994 is incorporated in the NSW Strategy,  culminating
with a maximum load allowance of 425,000 kg in 1994 -  200,000  kg  below the baseline
estimation. The annual loading allowance schedule for the Association is as follows: 525,000
kg/yr in 1991; 500,000 kg/yr in  1992; 475,000 kg/yr in 1993; and 425,000 kg/yr  in 1994.

      Association members include twelve  POTWs, which are  considered a single unit for
nutrient reduction accounting purposes.13  There will be no  new members admitted to the
Association during Phase I (1991 -1994) because annual load allowances were calculated based
on the projected flow and nutrient load of the facilities that were members when the strategy was
    11 Tar-Pamlico NSW Implementation Strategy, December 14, 1989. State of North Carolina
Department  of Environment, Health,  and Natural Resources,  Division  of Environmental
Management, in July 1, 1991 memo from David Harding.  Also, personal communication with
Steve Levitas, Environmental Defense Fund.  June 28,  1991;  Doug  Rader, Environmental
Defense  Fund. July 1, 1991; Steve Tedder,  North Carolina  Division  of Environmental
Management. July 2, 1991.

    12 Based on a projected 1994 flow of 30.555 MOD.

    13 The twelve POTW member facilities include: Belhaven, Bunn, Enfield, Franklin Water
and Sewer Authority, Greenville, Louisburg, Oxford, Pine Tops, Rocky Mount, Spring Hope,
Warrenton, and Washington.  National Spinning is also a member of the Association. While it
may contribute to nonpoint source nutrient  reduction fund, its nutrient discharges are hot
incorporated in the Association's annual loading calculation.

                                        B-8

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                                        Nutrient Trading in the Tar-Pamlico River Basin
approved.   Association  membership  may be  reopened  in  Phase  n  to  other  nutrient
dischargers.14

       The Association's total nutrient load did not exceed its allowance in 1991, averting the
need to obtain nutrient reduction credits through the trading program. Operational improvements
and minor capital investments that members agreed  to implement in response to engineering
evaluations  resulted  in a total  1991 nutrient load approximately  13 percent below  their
allowance.15  However, the Association's nutrient load allowance will gradually decrease over
the next three years of Phase I, as it approaches the 200,000 kg/yr reduction target.  As the
Association's nutrient load approaches and exceeds  its allowance, trading to obtain nutrient
reduction credits and offset discharges above the allowance should become an increasingly cost-
effective means for the Association to maintain compliance.

Trading Specifications

       The trading program provides  the Association the opportunity  to achieve its nutrient
reduction goal by paying for lower cost nonpoint source nutrient reduction control measures as
an alternative to costly plant upgrades.   Within the Tar-Pamlico  Basin,  agricultural best
management practices (BMPs) provide low-cost methods to reduce nutrient loading, and typically
include such controls as grassed waterways and livestock manure treatment lagoons.

       If the Association's total nutrient load should exceed its load allowance in any remaining
years of Phase I, it must offset  the excess discharge by obtaining nutrient  reduction credits
through monetary contributions to the state Agricultural Cost Share Program  for BMPs in the
Tar-Pamlico Basin.  Nonpoint source credit is available to the Association at  a rate of $56 per
kilogram of nutrient per year, and to non-Association members at a rate  of $62 per kilogram of
nutrient per  year — their permitted effluent limits will be adjusted accordingly.16 The BMP
cost equivalent per kilogram of nutrient reduction per year was derived from nonpoint source
control experiences in the Chowan River  Basin.  The cost includes a safety  factor or 3:1 for
cropland BMPs and 2:1  for animal BMPs.

       Nutrient reduction  credits  for BMPs have a useful life  of ten years  unless otherwise
specified by the Department of Soil and Water Conservation under the  trading program.  The
assignment of a useful life to credits assumes that BMPs, funded through  the cost share program
in exchange for nutrient reduction credits, will  effectively  control  nonpoint source nutrient
loadings for ten years.  A monetary contribution to reducing nonpoint source nutrient loading
is therefore recognized in the year the contribution is made, as well as the following nine years.
The implication is that at a credits expiration of life, it will have to be re-purchased or renewed.
    14Tar-Pamlico NSW Implementation Strategy, Revised February 13, 1992.

    15 Personal communication with Beth McGee, North Carolina Department of Environment,
Health, and Natural Resources, Division of Environmental Management, March 23, 1992.

    16 Tar-Pamlico NSW Implementation Strategy, Revised February 13, 1992.

                                         B-9

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                                        Nutrient Trading in the Tar-Pamlico River Basin
The assignment of a ten year useful life to credits is based on the assumption that the trading
program will continue beyond Phase I.

BMP Payments

       To ensure the  availability of funds for agricultural BMP implementation through the
nutrient-reduction trading program, the  Association will make a minimum payment to the
Agricultural Cost Share Program each year. Minimum payments during the Phase I period will
total $500,000. In the event that the Association's annual payment for excess nutrient loading
amounts to less than  the scheduled minimum payment, the  Association will supplement the
annual excess loading payment to account for the difference. The Association will receive credit
for minimum payments and excess loading payments made in  prior years to account for the ten
year useful life of nutrient reduction credits.

       The Association's annual payment to the nonpoint source nutrient reduction fund will be
the greater of: (1) the scheduled minimum payment; or (2) the excess loading payment.  The
calculation for determining the Association's excess loading payment, which takes into account
prior minimum and excess loading payments that were made to the fund in exchange for credits
whose life has not expired, is displayed below.

Excess Loading Payment = [Actual Loading (kg/yr) - Allowable Loading (kg/yr)x$56 (kgfyr)J -
                          [Prior Payments  (minimum and excess loading)]

Association's Allocation of Costs and Loading Allowance

       Basin  Association members have  determined operating  rules  and financial obligations
among the themselves.  Program cost allocations to date have been a function of individual
members' permitted flows, as a percentage  of the Association's aggregate permitted flow.
Because the Association was able to meet their loading allocation in 1991 (525,000 kg) through
operational improvements and minor capital investments, it was not necessary to allocate the
loading allowance among member facilities, nor was the Association required to make an excess
loading payment for that year.  The Association estimated that its total  nutrient loading  level
would  have exceeded  the 1991 allowance by  approximately 38 percent (200,000 kg) if minor
operational and capital improvements had not been made.  Instead, it managed to reduce nutrient
loading to 13 percent below the allowance.17

       As the Association's total nutrient load approaches its declining annual allowances in
Phase  I, allocation of the allowance and/or costs  to offset discharge levels exceeding the
allowance will be  determined  in  the same  manner as  are  program and membership  costs
presently — based on members' permitted level as a percentage of the Association's aggregate
permitted level.
    17 Personal communication with Beth McGee, North Carolina Department of Environment,
Health, and Natural Resources, Division of Environmental Management, March 23, 1992.

                                        B-10

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                                        Nutrient Trading in the Tar-Pamlico River Basin
Non-Association Members

       Existing non-Association member facilities that expand their design flows to 0.5 million
gallons per day or greater are subject to nutrient effluent limits rather than constraints on their
total nutrient discharge levels. They are subject to the effluent limits originally proposed by the
DEM for expanding facilities ~ 2 mg/1 total phosphorus, and 4 mg/1 (summer) and 8 mg/1
(winter) total nitrogen.  These facilities may also participate in the nutrient-reduction trading
program,  subjecting themselves  to less stringent limitations by contributing to the nutrient-
reduction fund. Their effluent limits will be adjusted based upon contributions to the cost share
fund, where 1 kilogram  of reduction credit is available to them at a rate of $62/kg/yr.  A one-
time up-front payment to the fund is required, and calculated as follows:

       BMP Payment($)    =     New Design Flow (MOD) x Excess Nutrients (mg/l)
                                 x $62/kg/yr x Conversion Factor.

where:

       Excess Nutrients      =     (Total Phosphorus Limit - 2 mg/1)
                                  + (Total Nitrogen Limit - 6 mg/l)

       Conversion Factor   =     1382

       New facilities will be subject to effluent permit limitations similar to those originally
proposed by  the DEM.   New facilities with design flows of .05  million gallons per day or
greater are limited to 2 mg/1 total phosphorus.  New facilities with design flows of 0.1  million
gallons per day or greater are limited to 2 mg/1 total phosphorus, and 4 mg/1 (summer) and 8
mg/1 (winter) total nitrogen. New dischargers cannot participate in the nutrient-reduction trading
program.
                                         B-ll

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                                       Nutrient Trading in the Tar-PamUco River Basin
               NSW STRATEGY ADMINISTRATIVE FRAMEWORK

      The success of the NSW Implementation Strategy, and the nutrient reduction trading
program in particular, will require cooperation between several state agencies as well as the
Basin Association.  The Division of Soil and Water  Conservation (DSWC),  part of the
Department of Environment, Health and Natural Resources (DEHNR), is the state's lead agency
for agricultural nonpoint source pollution under the Clean Water Act Section 319, and oversees
the existing  Agricultural Cost Share Program.   Under the cost share program, funds are
allocated to local Soil and Water Conservation Districts which enter into voluntary contracts with
fanners to implement state-authorized BMPs. The program provides funding, instruction, and
technical  assistance to farmers in this effort.  Through  the existing cost share program, the
Division  of  Soil  and Water Conservation (DSWC) will administer  funds generated by the
nutrient-reduction trading program, allocating and targeting them within the Tar-Pamlico Basin.
The DSWC will prioritize funding to BMPs that have the highest potential and efficiency for
nutrient removal.18

      Rather than establish a competing program, contributions from  the trading program will
augment existing nonpoint source controls in the watershed. Consistent with the existing cost
share program, these  funds will cover 75%  of the cost of BMPs. Both the State DSWC and
local Soil and Water Conservation Districts  will have  important roles in BMP  selection,
installation,  evaluation,  and  financial  management  under the cost  share program.   The
Association has already provided  $150,000 to the DSWC for two additional  staff positions.
These employees will begin tracking,  targeting, administering and implementing BMPs.

      The Division of Environmental Management (DEM) maintains responsibility for National
Pollutant Discharge Elimination System (NPDES) permits and appropriate nutrient levels. The
DEM serves as staff to the Environmental  Management Commission (EMC), a 17 member
governing board  appointed by the governor.  In addition to  NPDES permitting, OEM's
responsibilities with respect to the Tar-Pamlico nutrient-reduction trading program include:

      •      final decision-making authority as  to  the adequacy of nutrient  tradeoff and
             allocations;

      •      compliance monitoring;

      •      tracking of nutrient reduction progress;

      •      monitoring surface water quality;

      •      assisting DSWC in choosing small watersheds to target for BMP implementation;

      •      determining funding levels contributed to the BMP fund and the status of BMP
             control; and,
   18Tar-Pamlico NSW Implementation Strategy, Revised February 13, 1992.

                                       B-12

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                                        Nutrient Trading in the Tar-Pamlico River Basin
       •     determining funding levels contributed to the BMP fund and the status of BMP
             control; and,

       •     requiring  individual point sources to remove nutrients where a localized water
             quality problem exists.

       The Basin Association is responsible for meeting its annual nutrient loading allowance
through reduced plant discharges or offsetting excess discharges with BMP funding.  To date,
the Association has agreed to contribute $400,000 for the development of a basinwide nutrient
computer  model which  will serve as the basis for  developing  Phase  n of the  strategy, and
$150,000  for additional staff positions at DSWC to establish a tracking  system for existing and
installed BMPs.

       Contributions from parties other than point sources have been important to administering
the strategy.  EPA has contributed a total of $340,000 to the Tar-Pamlico program: $120,000
for program activities related to  nonpoint source management in the Tar-Pamlico basin, through
CWA Section 319 (North Carolina contributed an in-kind match  for these funds at a rate of 60
percent federal, 40 percent state); and $220,000 for year 1 development of the  computerized
nutrient management framework, through a CWA Section 104(b)(3) grant.  These contributions,
together with those from the point sources approach  $900,000.

       Additional EPA and state contributions to this program are expected.  EPA is expected
to contribute an additional $52,000 in  1992 through Section 319  and the state has requested an
additional $280,000 through Section 104(b)(3).  Finally, Congress appropriated another $400,000
through a line-item for initiation of pollution reduction  strategies as part of the Tar-Pamlico
Nutrient Sensitive Waters strategy. EPA's Region IV Office has  not yet transferred these funds
to the state.

       The approved NSW Strategy  also provides  for the creation of an Ad-hoc advisory
committee to address nonpoint source and related water quality  issues  within the Tar-Pamlico
Basin.   The Secretary of  the DEHNR will appoint  the committee, which  will include
representatives from municipal  dischargers, counties, Soil and Water  Conservation Districts,
environmental groups, DEM and  DSWC, the state  Agricultural Task  Force, and other state
agencies.

Enforcement and Compliance19

       Because Association dischargers are considered one unit,  the nutrient reduction-trading
program will not be successful should  the collective group fail to  meet the annual loading
allowance or offset excess loadings through sufficient BMP funding.  Should the terms of the
Phase I agreement be violated, all existing facilities with  design flows of 0.1 million gallons per
day or greater (which includes all  Association facilities) would be subject to the same effluent
limits as new facilities - total phosphorus of 2  mg/1 and total nitrogen of 4 mg/1 (summer) and
    19Tar-Pamlico NSW Implementation Strategy, Revised February 13, 1992.

                                         B-13

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                                        Nutrient Trading in the Tar-PamUco River Basin
8 mg/1 (winter) - within three years from the date of EMC action following the strategy's
failure.  These limits would be potentially more stringent than the constraints imposed on most
facilities  under the NSW strategy.  The Association, therefore,  faces strong incentives for
compliance and self-enforcement.

      New dischargers will be restricted by an  additional requirement  in the event that
agreement terms are violated.  All new dischargers  will be required to evaluate non-discharge
alternatives as their primary option, and implement a non-discharge system unless they can
demonstrate that it is technically or economically  infeasible.   If implementation of  a non-
discharge system is not feasible, new facilities will  then be subject to the same effluent limits
as those stipulated in the strategy. New facilities with design flows of .05 million gallons per
day or greater will be limited to 2 mg/1 total phosphorus. New facilities with design flows of 0.1
million gallons per day or greater will  be limited to 2 mg/1 total phosphorus, and 4 mg/1
(summer) and 8 mg/1 (winter) total nitrogen.

      The Basin Association is not involved in the implementation of nonpoint source controls
beyond the  point  of providing nutrient reduction  funds to the  cost share program.  The
Association has no responsibility or authority to ensure that BMPs funded through trading are
either implemented correctly or maintained. Furthermore,  it does not have any input as to
specific locations for BMP implementation within the basin.  The DSWC  is responsible for
targeting  and implementing BMPs, and it relies heavily on local Soil and Water Conservation
District officials to make inspections of BMP  projects,  and  work with farmers to  assure
compliance.

      This arrangement relieves the Association from the risk of noncompliance if the BMPs
are not successful in achieving nutrient load targets.  If there is a localized nutrient water  quality
problem,  however, individual members of the Association are at risk of the DEM instituting
more stringent effluent limits on them, regardless of their participation in the Association and
monetary contributions to the BMP fund.
                                         B-14

-------
                                        Nutrient Trading in the Tar-PamUco River Basin
                                   CONCLUSION

       The primary achievements of the Tar-Pamlico nutrient reduction strategy thus far are the
initiation of the estuarine computer model's development from which nutrient reduction goals
can be refined, the design of a trading program that will facilitate the most efficient means of
reducing nutrients to attain established goals, and initial nutrient loading reductions through
operational and minor capital improvements to POTWs.

       The estuarine computer model will establish a meaningful  baseline from which nutrient
loading goals will be established.  The results of the model will serve as the basis for modifying
the nutrient reduction strategy as  factors and conditions change in the future.

       The institutional framework to support point/nonpoint source nutrient reduction trades
is in place.  Under the trading program, Association members, are recognized as a single  unit
and are subject to an agreed upon annual nutrient loading allowance, rather than the effluent
limits that govern non-Association members individually. If the Association exceeds its loading
allowance, it may offset its excesses by funding nonpoint source nutrient reduction controls.

       The terms and allowances of the trading program will apply during an interim period
while the computer model is completed.  However, as the nutrient reduction strategy evolves
into its second  phase, point/nonpoint source  trading  is  expected  to remain an important
component.

       Engineering evaluations of Association member facilities, required under the terms of the
strategy,  revealed that plants could reduce nutrient  loadings  through operational and minor
capital improvements, at a substantially lower cost than originally estimated.   Association
members  implemented most of the recommended improvements, and further benefitted by
joining together  to collectively meet the nutrient loading allowance cap.  The Association
estimated  that its total  nutrient loadings  would have exceeded  the  1991  allowance by
approximately 38 percent if operational and minor capital improvements were not made. As a
result of the improvements, however, the Association's loadings  were 13 percent below their
1991 allowance.20

       In  addition, the establishment of an administrative structure for a trading program  will
be particularly important in achieving water quality objectives in a timely fashion, in the event
that stringent nutrient discharge targets are established as a result  of the nutrient model.
    20 Personal communication with Malcolm Green, General Manager, Greenville Utilities
Commission, and Chair, Tar-Pamlico Basin Association, March 18, 1992.

                                        B-15

-------
                                        Nutrient Trading in the Tar-PamUco River Basin
Prospects for Success

       Overall,  the  nutrient reduction strategy  has  already  achieved  some  degree  of
effectiveness, and shows potential for future improvement of the  water quality in the Tar-
Pamlico Basin.

       The ability of the Association to reduce nutrient loadings below their 1991 allowance
(through minor operational and capital improvements) does not explicitly imply that trading will
not occur  during the first phase of the nutrient reduction strategy. The Association's nutrient
load allowance will gradually decline over the next three years of Phase I, culminating in a
nutrient reduction target of 200,000 kg/yr. If the Association's load approaches, or exceeds its
allowance, trading to obtain nutrient reduction credits or offset discharges above the allowance
will be the most cost-effective method of maintaining compliance with the terms of the nutrient
reduction strategy agreements.

       However, the trading program raises some questions with regard to the implementation,
enforcement and targeting of nonpoint source controls, including the implementation of BMPs
through the  North  Carolina Agricultural Cost Share Program,  enforcement and reliability of
BMPs, and targeting BMPs for funding. The discussion below identifies the potential drawbacks
and possible mitigation strategies.

Implementation of BMPs through the Agricultural Cost Share Program21

       A  potential problem  with the cost share approach is  that farmers will most likely
participate only to the degree that private returns from a conservation investment exceed private
costs.  However, profitability is not the only criteria that will determine fanner participation in
the voluntary program - compliance with other regulations will factor into their decision.

       Cost  share funds cover 75 percent of the average cost of BMPs ~ based on statewide
averages, not individual projects. As a result, some BMPs for some farmers may prove to be
profitable, while others may be more costly to farmers than anticipated.  In adverse economic
conditions, costly BMPs could  be  abandoned.   Insulating  water quality improvement  from
economic  cycles will  be more difficult  when attainment is dependent on potentially costly
voluntary nonpoint source controls.

Enforcement and Reliability of BMPs

       Under the framework of the cost share program, the DSWC relies heavily on local Soil
and Water Conservation Districts to work with farmers to ensure that BMPs are implemented
correctly and maintained.  Even if implemented and maintained correctly, the effectiveness of
    2lNorth Carolina Agriculture Cost Share Program for Nonpoint Source Pollution Control,
May 1987.  North Carolina Department of Natural Resources and Community Development,
Division of Soil and Water Conservation. North Carolina Administrative Code Title 15, Chapter
6, Section 6E.

                                        B-16

-------
                                        Nutrient Trading in the Tar-Pamlico River Basin
nonpoint source nutrient controls is more difficult to measure and monitor than that of point
source nutrient controls.   These factors incorporate a degree of uncertainty about the benefits
derived from BMPs

       The uncertainty associated with funding BMPs poses a risk to Association members.
With no recourse to enforce BMPs, and no guarantee that they will result in the projected water
quality  improvement, Association members are at risk of the DEM instituting and enforcing
more stringent effluent limits.  If this risk is factored into the Association's decision as to how
they can meet the loading allowance, they  may choose  to fund the expansion  of an existing
member facility.  Although  this option may cost more initially, the Association would have
control of the facility's removal capability, and thus greater certainty that water quality standards
would be achieved.

Targeting BMPs for Funding

       While the DEM  can assist the DSWC in choosing small watersheds  to target  for
implementation of BMPs funded through the trading program, it does not have explicit authority
to specify BMP locations (nor does the Association), making it difficult to ensure improvement
of local nutrient levels within the large Tar-Pamlico Basin.

       Just as the DEM takes the lead in regulatory enforcement of point sources, the DSWC
is responsible for  regulatory compliance issues relating not nonpoint source controls.  The
DSWC's responsibilities under the cost share  program, and thus the Tar-Pamlico nutrient
reduction strategy  include targeting, implementing, and  evaluating BMPs.   Implicit in these
responsibilities is the management of the BMP fund reserved for BMPs in the Tar-Pamlico River
Basin.  The DSWC relies heavily on local Soil and Water Conservation District officials to make
inspections of BMP projects, and work  with farmers to assure compliance.

       If local water quality problems arise within the basin, individual point sources may be
subject  to effluent  limits that are more constraining than their  current effluent limits,  or
allocation of the loading allowance as an Association member. DEM maintains the authority to
impose effluent limits on individual point sources if the local situation warrants such action. The
Association's lack of authority to target BMPs and the possibility of stricter effluent limits on
individual point sources present another uncertainty risk to Association members and facilities
interested in  trading independently in that there is no guarantee they will not be subject to
increasing constraints on nutrient discharges.

       Three program modifications could help alleviate this problem.  First, the DEM, in
conjunction with cost share program managers, could develop a list of potential nonpoint source
reduction sites and prioritize them according to the severity of  the nutrient problem in local
waters near the site.  The DSWC would then be obligated to implement BMPs funded with
Association monies at locations where local nutrient problems are  either  severe, or would
otherwise not be corrected.  Second, to help implement the priority list,  the program could
develop incentives for the dischargers and the cost share  program to fund priority sites.  And
third, local Water and Soil Conservation District officials could be required to perform annual
spot checks on all BMPs implemented with funds from the Association, rather than on 5 percent,


                                         B-17

-------
                                        Nutrient Trading in the Tar-PamUco River Basin
which is the standard procedure under the existing cost share program.  These modifications,
however, do not fully  resolve the potential that point source dischargers may incur stricter
permit requirements if anticipated benefits from BMPs are not fully realized.

Lessons from Tar-Pamlico

       The DEM, point source dischargers, and environmental groups will be evaluating the
trading program in the Tar-Pamlico Basin as a trial for future statewide application in North
Carolina. The Neuse River Basin, a neighboring watershed, will begin basinwide permitting in
1993 using only traditional technology-based effluent standards and end-of-pipe controls and
nonpoint source programs. Experiences in the two basins should provide a good comparison of
the benefits and drawbacks of the trading and traditional approach to nutrient reduction.  Even
if water quality conditions in the Tar-Pamlico Basin do not lead to trading in the near future, the
Tar-Pamlico experience to date holds several lessons for other basins in North Carolina and
elsewhere that may be considering point/nonpoint source trading.

       •     An  unusual coalition  of traditional adversaries came  together to develop  Tar-
             Pamlico' s nutrient trading program as a creative approach to overcoming water
             quality problems.   Support from interested parties, particularly the regulated
             community, has traditionally been an important element in successful pollution
             control programs.

       •     The engineering evaluation of the dischargers' facilities  showed that the basin
             could achieve  significant nutrient reductions through simple  and relatively
             inexpensive plant modifications.  This is an important condition of the trading
             program   because  it  provides the  regulator  and the regulated with better
             information about what types of  reductions are available at what cost.  It also
             establishes an accurate marginal cost basis for trades,  providing a starting point
             from which to develop appropriate nutrient reduction targets and reduction credit
             fees.

             Cooperation between  the Association of point sources discharges and the  state
             thus far has benefitted all parties. The terms  of the nutrient reduction strategy
             exempted Association members  from  increasingly stringent effluent limits in
             Phase I  (1991-1994).   The imposition  of these  limits would  have required
             expensive capital  cost  improvements.   In  return   for  this exemption,  the
             Association  agreed   to  evaluate  engineering practices  and   make  minor
             improvements as recommended  by  nutrient  reduction  specialists, fund  the
             development of the estuarine computer model, fund two additional staff positions
             at the  DSWC, and  contribute minimum payments to the BMP fund.   The
             Association's contributions directly benefit the state. These benefits are already
             being realized -  Association members reduced their loadings significantly due
             to operational and  minor capital improvements,  funding for positions  at the
             DSWC  has enabled  them  to begin tracking and targeting BMPs,  and  the
             Association's funding of the estuarine computer model has relieved the state of
             this burden.  The state will realize future  benefits when BMPs  funded by the


                                        B-18

-------
                           Nutrient Trading in the Tar-PamJico River Basin
Association in exchange for nutrient reduction credits (excess loading or minimum
payments) will generate further nutrient reductions in the basin.

Cooperation among state agencies has also facilitated the development of an
effective nutrient management strategy. The DEM and DSWC, both divisions of
the  Department  of  Environment,  Health   and  Natural   Resources,  have
complementary responsibilities in the trading program. The DEM is responsible
for matters  pertaining to the maintenance  of water quality and  regulatory
oversight of sources contributing to water quality degradation.  Although  the
DEM may assist the DSWC in targeting BMPs it does not have the final decision-
making authority in this  determination.   However, the DEM does have final
decision-making authority as to the adequacy of nutrient tradeoff and allocations.
                           B-19

-------
                        APPENDIX C
                WATER BODY SYSTEM 3050) DATA:
WATERBODIES FOR WHICH POINT/NONPOINT SOURCE NUTRIENT TRADING
                  APPEARS APPLICABLE NOW

-------
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4.1
0.8
2.5
1.4
7.5
2.
7.
9.
S.
S.
8.7
4.2
2.
to.
19.
a.
s.
68.
1.
2.
12.
14.
21.
4.
10.
2.
17.
2.4
1.4
H 1.4
M
H
II
II
S
H
S
S
S
s
s
s
s
s
s
s
M
S
s
s
M
II
II
II
II
S
s
H
N
H
II
S
S
s
s
s
s
s
H
3
s
h
n
H
II
M
M
II
II
II
S
M
II

-------
                     H*torBoily System Deport
                     Lit I of HatarBoiJia*
O
 I
DBS
166
167
168
169
170
171
172
17)
174
175
174
177
178
179
180
1B1
182
181
184
IBS
184
187
18B
189
1VO
191
192
19)
194
MS
196
197
198
199
ZOO
201
202
20)
204
205
Z06
207
208
209
ZIO
Zll
ZI2
21)
ZI4
ZIS
Z14
Zll
2IB

IBID
IA Ol-IIEM-0010
IA OI-IIEII-OIDO
IA OI-IIEII-OO'lO
IA 01-UIA-OIOO
IA OI-HPS-OOIO
IA 02-CEO-OOIO
IA 02-CEO-0020
IA 02-CEO-0010
IA 02-CEO-0040
IA 02-CSO-OOSO-L
IA 02-CEO-0110
IA 02-CEO-OS70
1A 02-IOM-OOIO
IA 02-1011-0020
IA 02-IOH-OOSO
IA 02-IOH-OOSO
IA 02-ION-0060
I A 02-IOM-0070
1A 02-10H-0080
IA 02-SIIL-0020
IA OS-SKII-OOIO
IA 05-SKU-OOIO
I A OS-SSK-0020
1A OS-SSK-00)0
IA 04-EOII-0010
1A 04-UOII-0010
1A 04-UOII-OO'iO
IA 04-11011-0060
IA 04-UOII-U070
I A 04-UOIt-OllO
I A 04-UOII-0190
IA 04-BSR-0010
IA 06-BSR-0020
IA 06-FIO-OOIO
IA 04-FtO-OOZO
IA 06-LSR-OOIO
IA 04-LSR-0020
IA 04-LSR-OOSO
IA 04-HEII-OOIO
IA 06-ICII-0020
IA-04-LOII-0010
1A-04-1 011-0020
IA-04-IDK-OOSO-L
IA-04-LOII-0040
IA-04-lllll-OZIO
IA-04-IOII-010U
IA-04-RAC-OOIO
IA-04-RAC-OO'iO
1A-04-RAC-0050
1A-OS-IIUO-OOIO
lA-os-mo-ouzo
IA-OS-IISII-0010
IA-05-IISM-OOZO
lA-os-iisii-onio
„ IA OS-1IIU 0010
HBMAIK
MISSISSIPPI R
MISSISSIPPI R
MISSISSIPPI R
UPPER IOJIA R
IIAPSIP1MICUI R
CEDAR R
CEDAR R
CEDAR R
CEDAR R
CEDAR CALLS UH'UUIIIMItlir
CEDAR R
BLACK IIAIK CR
IOHA R
IOHA R
IOHA R
IOMA R
IOHA R
IOHA R
IOHA R
SHELL ROCK R
MISSISSIPPI R
SKIMK R
SOOMI SKUK R
SCMII II SKUK R
DES milKS R. EASI FK
OES lOIIIES R
OES mints R
OES mints H
OES MOIIIES
BEAVER CR
BOWIE R
BIG SIOUX R
BIG SIIIUX H
HOVO R
FIOVD R
LI HIE SIOUX R
IIIIIE SIOUX R
LllllE SIOUX R
MISSOURI R
tussauiii R
OES mints R
OES MOIIIES H
RED MICK RESERVOIR
OES MOIIItS R
sanii R
IIOMIII H
HACCIMMI R
NACCUIII H. Mini II
HACCOIIII M. 1 UK III
INIUAIIAV M
IKIDAIIAV M
MISmiAUUIIIA R
IIISIIUIIIIIIU R, EAST
inr.iaumniu H, EASI
YlllUU'SOII N
MBCOUH
LOUISA
OIBlMIE
CIAVTOII
AILAIIAKEE
CIIIII01I
LOUISA
HUSCAUIK
HIM
BIACK IIAIK
(HACK IIAIK
FLOVO
BLACK IIAMX
LOUISA
LOUISA

JOIIIISON
I AHA
MARSHALL
FRAIKLIII
FLOVO
LEE

JASPER
sroRV
IMUOLDT
BOUIE
MEBSIER
IIEBSIER
IMBOLOr
POIK
IIAMILIOII
HUOOBURV
sionx
IKMNHMIRV
PIVMOUIII
IIARRISUM
IMJHOIIA
CHEROKEE
FREIMU
MILLS
LEE
HAPEILO
IIAHIOH
HAH 1011
HARREII
POIK
POIK
UHEEHE
SAC
PAGE
PACE
ttuimr
FHEHQHr
CASS
UECAlim
                                                                                         NBTYPE
                                                                                             R
                                                                                            R
                                                                                            M
                                                                                            R
                                                                                            R
 MBSIZE

  87.93
  43.43
  41.05
  14.07
  47.82
  XS.33
  44.49
  48.44
  XX. 93
   I.S3
  48.83
  13.90
  25.XI
  18.37
  19.71
  34.17
  44. IS
  48.43
  X9.XX
  37.11
  S4.24
  32.44
  33.48
  20.40
  42.29
  43.17
  24. SX
  12.28
    3.44
  20.55
  25.14
  64.19
  37.40
  19.42
  XX. SO
  IS.54
  43.41
  S4.X1
  39.43
  34.9X
  48.33
  S4.1X
10400.00
   24.17
   19.48
   28.44
   20.4)
  S4.B8
   19.08
    4.11
   19.28
    S.SI
   54.29
   laisl
II
II
II
M
II
II
H
II
II
II
II
M
II
II
II
II
M
II
II
II
II
II
II
II
II
II
II
II
II
II
II
N
H
M
II
It
II
H
H
N
II
H
 A
II
II
II
II
II
II
II
M
 II
 M
 II

-------
                      >Ulart)o«rr«* R.
EiUiarra* M.
Mill Cr.
Sugar Cr.
Saliiui Br.
Sail fk. Varailioi) R.
Varwilion R.
Grape Cr.
»Ui»sh R.
Maltadi R.
Hakatli R.
SoMiitary Cr.
Mdcwviit cr.
Ullor Cr.
Mauvais* Tarra R.
TrlatoMo Cr.
Killiortlan Cr.
Ti tx4»lu»a. M
10. M
12. M
6. II
4.7 II
7.9 11
14.9 II
0.1 H
1.1 H
SO. 9 II
IB. * M
Sl.S H
11.4 II
4.4 H
B.B M
S. H
7. H
7. II
27. H
B. II
17. II
14. H
7. M
IB. II
45. H
11. II
22. M
22. II
SS. M
S. II
S. II
14. H
I/. M
9. H
IS. M
4. M
1! I:* II

-------
                       IU lot Daily  Syt (•• Huporl

                       Lilt of  HatarBodUs
                       UBS
                                 HBIO
                                            tUIIAIIE
                                                                           IWIVPE
o
 i
en
274
2/7
278
27*
zeo
281
282
281
284
285
286
287
288
28t
290
2*1
2*2
2*1
294
2*5
294
2*7
2*8
2*9
500
101
102
301
104
JOS
sot
107
108
10*
110
111
112
111
114
115
11*
117
118
11*
120
121
122
121
124
12S
12*
127
128
H2
IIDZ2P01
1100$ A
I1001-B
IID01-C
11001-0
I1005-A
IIOOS-B
UDOS-C
I1009-*
UDOf-8
H001-C
ILOOt-0
IIDO«-E
lLDO*-r
ILDIO-*
ILDIO-B
ILOU-A
ILDlt B
I1014-C
IID20-A
1LD20-8
11021-*
HOI1-8
ILD2I-C
IL010-A
IL010-8
ItOlO-C
IID10-0
11D11-A
HDS1-B
I1011-C
IID11-0
UEOA01
UE09-A
IIGBAA01
HGBE01-A
IIGBE01-8
UGBKOS-A
IIC8K05-B
IIGBKOS-C
IIGBKOS-D
UG8K05-E
ILGBK05-F
IIGBKOS-O
ILG8LIO-A
ILGOLIO-B
ILCBIIO-C
ILCBllO-D
ILCB110-E
IICBLIO-F
IlCBllO-0
ILGB110-II
IIGBIIO-I
IL8H:ft
far* Cr.
IllinoU R.
IlliitoU M.
Illinois M.
IllinoU M.
Illinoi* R.
IlliitoU R.
Illinois R.
Illinois R.
Illinois R.
Illinois R.
IllinoU R.
Illinois R.
IlliitoU R.
Illinois R.
IllinoU R.
Illinois R.
Illinois R.
IllinoU R.
Illinoi* R.
Illinois R.
Illinois R.
Illinois R.
Illinois R.
Illinois R.
Illinois R.
Illinois R.
Illinois R.
Illinois R.
Illinois R.
Illinois R.
Illinois R.
Sugar Cr.
Sangaaxnt R.
Rock (><••
Lily Cuclt* Cr.
Lily Cacho Cr.
H. Br. DuPaga
H. Br. DtiPa0a
M. Br. Oifmuo
H. Br. 0>4>ago
H. Br. PuPag*
H. Br. Ot4>ao«
H. Br. DuCka0
E. Br. OtiTaga
E. Br. OiiPaga
E. Br. D>f»o» R
E. Br. Dt4>ag« R
E. Br. Di4>aB» R
OtiPaua R.
Dt4>ago R.
OuPaya R.
DiiPii(ju R.
G'Ja% B:














































R
R
R
R
R
R
R
B
1».2
i. a
8.1
1.1
IS.1
10.4
I.I
1.
10.
0.
0.
9.
1.
S.
1.
I.
8.
14.
1.
10.
I.
tl.
t.
0.
0.
0.
4.
10.
».
t.t
S.
10.
4.
S.
».
14.
.
.
,
.
.

.
.
,
S.
S.
4.
.
.
•
.
.
I.
M
H
H
H
H
H
11
H
H
II
H
H
H
N
H
H
II
N
H
H
N
H
H
H
H
H
1 H
1 H
B M
1 H
1 H
1 H
1 H
7 M
• H
B H
0 H
B M
4 H
0 H
0 H
0 M
4 H
7 H
* II
9 H
1 H
a M
4 H
1 H
* N
4 H
4 H
2 II

-------
                    Ma loi Doily Syttom Rupui t
                    Lilt ol lUUiBodlMt
                    COS
                           HBIO
                                         IUIUIIE
                                                                     IBCOUI
O
I
551
352
353
334
335
334
337
338
339
340
341
342
343
344
345
344
347
348
349
350
351
352
353
354
355
354
357
358
359
340
341
342
343
344
345
344
347
348
349
370
171
372
373
374
375
374
377
378
379
5BO
381
382
383

IIGGOZ-B
IIGJOI
11GKOS
IIGIAOI-A
IIGLA01-B
IIGLOf-A
UG109-B
UCL09-C
II GOO I
UGU02
IIGV01
IIGH02
II GDI -A
ILG01-B
IIG01-C
IIG11-A
I1611-B
IIG11-C
I1G11-0
11G12-A
UGI2-B
IIG2S
IIGSO-A
IIGJO-C
UG50-0
1IG50-E
11G50-F
11G50-0
IIG50-II
ILG50-I
UIIOD04-A
IIIIB004-B
IIIIB004-C
1UIB42-B
1LIICCB05
11IICCC04-B
I1IICC07
uiioi-
IUI01-
UII01-
IUI01-
ILI01-
HIOI-
III01-C
I1IOI-0
HIOI-E
11102
II 184-A
III84-B
11184-C
II 184-0
II IB4-E
IIJIIAC02
U .111*01 -A
JlUoi-B
Hickory Cr.
SaMMlll Cr.
Flan Cr.
AtklUon Cr.
Add! ton Cr.
Sail Cr.
Sail Cr.
Sail Cr.
HilloH Cr.
litdian Cr.
Bull Cr.
Hill Cr.
OotPlain** .
OotPlaina* .
OaiPlaiitat .
OasPlaiita* .
OatPlain**
OatPlaiita*
OatPlaina'
Oosl'laiiia*
OotPlaino*
OaiPlainas .
Ootl'laiiMts
OokPlaiiias
UakPlaiixx .
OosPlaiimft
UocPlaiiio* R.
DosPlaii«oa R.
Ou>PlaiiMi» R.
OntPlitiiMic R.
Door Cr.
lltorii Cr.
lltorii Cr.
L. CaliMol R.
II. fh. II. Dr. Clilo. R.
IliJ IK. M. Br. tliio. R
II. Br. Chicagu R.
L. CaluMt R.
Calunol R.
Cal«*tt>l-Sag Cliaimal
CaltMol-Sag CliaiHuil
llit»iimi|>j>i R.
llissi*ti|>|ti R.
lli*sis«il>|ii R.
llikti»ti|<|ti H.
Ilistiitippi R.
llis»i*ti|>|>i R.
Ilitticsipfii II.
lliisi*ti|>pi R.
Hits itt i|>l>i R.
llii»i»ti|ipi R.
llitii»ai|>|ii R.
llardiiici Oilbli
Canal II
Prat i- to llu I'tMil Cr.
IBI
R
R
R
R
R
H
















































YPE HBSIZ
4.0
7.4
• ••
4.9
*.S
4.1
9.
10.
9.
14.
7.
12.
S.
S.
• .
4.
4.
B.O
4.S
a.o
s.o
s.
9.
4.
7.
2.
0.1
S.I
S.I
s.
17.
11.
a.
a.
17.
25.
10.
R 4.
R 4.
R a.
R 4.
R S.
R 12.
R IS.
R 10.
R 1.
H IS.
R 2.
R 4.
R 21.
R 1.
R 32.
R 9.
H .!:
E MtUlir
II
H
H
M
M
II
H
M
M
M
H
M
N
II
H
N
N
II
H
II
II
II
H
H
H
N
H
II
1 II
N
M
N
M
H
II
M
M
II
H
H
M
M
II
H
M
II
II
II
H
II
H
II
II
i II

-------
                    liiloi Uoily Syslon Report

                    list ol HatorBodia*
                    DBS
                           IBID
                                        IIBIUIIE
                                                               IBCOUI
HBIVPE
                                                                                      IBSIZE
HBUIIT
n
i
00
386
387
388
389
390
3V;
392
393
394
395
396
397
398
399
400
401
402
403
404
405
406
407
408
409
410
411
412
413
414
415
416
417
418
419
420
421
422
423
424
42&
426
427
428
429
430
431
432
413
434
435
436
437
438
IIJHA01-A
1LJII02-B
ILJqAOI-A
ILJRUt-A
UJROt-B
ILJB3-A
UJ83-B
ILJBS-C
ILJBS-D
1LJBS-E
ILJBS-F
1LJBS-0
UJB1-H
IIJ8S-I
ILJBS-J
ILJ83-K
1U83-L
IU8S-H
IlKOt-A
11K04-A
I110D01-A
IllOEOl-B
11103-0
1IIKIB01-A
11II001-A
IllfflOI-B
1III004-B
IIIIJ07-A
11OC04-A
IIOC04-B
IIOC04-C
UOC04-0
UOOL02-E
I100102-F
1100102-0
IIOII01-A
I1OIB01-E
uojoa-c
UOJ08-E
UOJOB-F
UOJ08-0
uojoa-j
I1011-F
I1015-A
UPqE06-B
URDU
II RCA
HUGO
1IRIIA
UflIB 1
11RIB 2
URIJ
IIRIP
Canlaon Cr.
CkliokU Canal
Ii%diait Cr.
llood R.
E. Fk. Mood R.
HittUtippi R.
MUtUiippi *•
IlittUtippi R.
HU»it*i|f>l M.
ltUtU»i|>|il R.
Cltain ol Rock*
MU»U»ippi R.
llUiUclppi R.
HUtUtippl R.
MU»U»ippi R.
HitcUcippi R.
l«U*Utippl R.
HU«U«i|«pi R.
HUtUtippi R.
HixUtipoi R.
Cedar Cr.
Cedar Cr.
MUiittippi R.
Pilot FK.
Crab Orchard Cr.
Crali Orcliard Cr.
Crab Orchard Cr.
Ca*cy Fk.
Riclilaml Cr. -South
RiclilaiMJ Cr. -South
Richlaml Cr. -South
Rir.lilaitd Cr. -South
RiclilaiKl Cr. -South
RiclilaiK) Cr. -South
Ricltlaitd Cr. -South
Sugar Cr.
ScHor Cr.
TOMI Cr.
Crooked Cr.
Crooked Cr.
Croekod Cr.
Crooked Cr.
Katka*kie> R.
4.7 H
a.
19.
t.
0.
II.
11.
S.
0.
9.
a. i
t.
10.
12.
9.
S.
19.
It.
It.
to.
t.
. SI.
14.
f
4
S
•
4.4
1.
.
.1
.(
*
.
.
•
.
.
a
4.
11.
1.
7.
Katkatkia R. * 10.
Itokalor Cr. * 10-
PEPIIE BUREAU L 624.
UniKE Oil PAGE t 14.
CIMHICIIIIt IAGIMNI Oil PACE t tl.
H
H
H
H
n
H
N
H
H
N
H
N
N
H
H
H
N
N
H
N
N
H
N
N
N
II
k N
1 H
r M
1 N
1 H
r. n
S N
1 H
? H
5 H
t H
t H
0 H
4 H
4 H
0 H
4 H
a M
0
4
O
IHIIF COUK L 419.0
HflUI-l IRAIKIIII t 18900.0
RlltO-2 IHAIKllll L 1B900.0
IOIIC I*1E L 3SS.O
siocmi MM • tis.o

-------
o
(O
IliloiUoily !»yt Ion Hupui I
li»l of llatui Uudiaa

OUS    MOID

441    USDZE
442    IIVIO
44S    KY5IOOI02 008
4t4    KV5IOOIOZ-OZO
4'iS    KVSI0020S-OSaiOI
446    KVSIIOIOI-OOSLOI
447    KV5150I01-006101
448    KVS15OZOS-Ooa
4lai&  Rivor
 loiiar Clx>|ilaiJ.  Hivur IliiUII
 Nilok Rivur I li.UI I
 IOMOF tl.oslor  Hivur ItiiUll
 Built Hivur  I I iilaI I
 Go<|u«iilor  Rivar IliiLill
 lut.li H^VCK Roiurvoir
 Bal liwii o  llailiur
 Sciwui it  Ilivnr  Ilitlall
 Met I Hivar  I ti.lal I
                                                                                         WCOUI
                                                                                                            IUIVPE
                                                                                                                                  IIUINIII
1AZEHEU
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HAiiiiisim
IIICIIOIAS
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1IIIUO
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CHIIISIIAII
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SPENCER
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HORCESIER
HOIir ESI ER
SOIIERSET
HICOIIICO
DOHCIIESIER
OOHCIIESIER
TAIOOI
QUEEN AIIIES
IIAHHIHU
BAIIINORE
BAI IIIIOHE
BAI IIIKIMK CIIV
A!IU; AmKliL
i
L
R
R
L
t
L
R
H
R
R
R
R
R
R
R
R
R
R
R
R
R
R
R
R
R
C
R
R
R
R
R
R
R
R
R
R
E
E
E
E
E
R
E
L
R
E
E
E
E
E
L
E
1
1426.00
225. bO
14. BO
25. SO
2940.00
4060.00
159.00 '
40.70
51. SO
25.40
15.80
50.70
4.10
25.90
7.10
10.50
45.10
1.90
2.40
2.70
9.00
19.40
7.40
7.10
O.BO
5.40
2.00
S.IO
15.70
5.70
4.10
1.60
7.90
8.40
1.20
1.90
J.10
2.70
1.50
O.EO
0.85
6.80
10.50
11.50
104.00
I9.0U
126.90
11.40
64.20
12.00
21. 2U
2'itlll.OII
5 1 . 90
10. 911
A
A
II
II
A
A
A
II
II
II
II
H
M
II
II
H
H
II
II
II
II
It
II
II
II
II
S
II
H
II
M
II
M
II
M
M
II
S
S
S
S
S
II
S
A
II
S
S
S
S
S
A
;i
S

-------
                  ll.ilui lluily SytldM Nr|>ui I
                  List of UataiBodies
r>
i
oe s    HBID

494    IIO-OZISIOOS-E-ll
4V7    IIO-OZI1IIOI
498    IIO-OZI1IIOI-E-I1
499    110 02ISII02
500    IIO-021SIIOS
SOI    MD-02I1II05-  -11
SOZ    110-02119998-  -II
SOS    110-02140101-  -II
504    HD-02I40I01-  -II
SOS    MD-02I40I04-  -II
501    IIO-OZI40III-  -11
507    110-02140201
SOS    110-02140101-  -11
BO*    110-02140104-  -11
510    110-02140504-  -11
511    ME 00121L
512    IM07010202004
5IS    11107010204002
514    1110 7010204004
515    III070I020SOOI
614    1110702000*001
617    MM7040001004
510    11107040001011
51*    MH07040002017
520    MN07040002018
521    III070400020I9
522    MI07040002021
521    11107040001017
524    HU0700020I02I
525    III09020I04004
52k    MH09020107002
527    HNIOl7020101J
SZO    MII0170201014
529    IISE002
5SO    IISEOOt
511    HSROOl
5)2    IISR002
511    IISROOS
5S4    riSBOll
5}S    MSROI2
5)4    IISIIOI5
517    IISMOI4
510    IISH017
519    IISR021
540    IISR025
541    IISR027
542    HSR048
541    IISROS1
544    MSR054
545    IISR044
54*    IISR068
547    II5R070
548    IISR071
549    |ISP074
550    ((SHOTS
                                              IUIIAIIE

                                              Ollmr llutl Cliosa|iu*ka Oraiuag*
                                                       IUin«luu Ikxilli lu furry I ai
                                                       IbiiikliiM-lliMilli lo furry liulg
                                                       IUincttiM-l«riy LMuJiiig to Hi.
                                              tloslarn Brandt
                                              Li III* P»UiK«nl Rivar
                                              lonmr Cliacapaok* day
                                              PotuMQ - Sxillt Poll.I  lo lluulll I tidal I
                                              SI. Mary'* Rivui ItitUII
                                              Dioloit Bay
                                              U«lla»KMiiM> Ci«oK Milfoil
                                              Poloiuc/IUr»li»ll Hall  to Cliain Brid^a
                                                    IfcMMicacy Mivar
                                                  l a Pipe Crook
                                              Cottococl««agiia Craok
                                              F1SII R. IK IRIBS
lUCWII

CAIVERT
CAlVtHf
CAIVfHr
AIIIE ARUIOEL
PHIIKE GEORGES
IIUURO
sr IUMVS
sr IMBVS
sr MARYS
sr IURYS
CIURICS
PR1IICE GEORGES
IREOERICK
CARROLL
HASIIIINUOtl
lUIVI'E

  E
  R
  E
  R
  R
  R
  E
  E
  E
  E
  E
  R
  R
  R
  R
  L
                                              BACK BAY Of  BIIOXI IAT FOPPS fERRVI
                                              1IOEIIAIEH  BAYOU
                                              BAKERS CREEK
                                              BIO BIACK  RIVER
                                              BIO BIACK  RIVER
                                              BAIIALA CHEEK
                                              BOdlC CllllfO RIVER
                                              BOGt* CIIIIIO H1VER
                                              PEARL RIVER
                                              PEARL RIVER
                                              PEARL RIVER
                                              PELAIIAICIIIE  CREEK
                                              VOCKAIIOOKAIIV RIVER
                                              LEAF RIVER
                                              OKAIIBBEE  CREEK
                                              OKAIOIIA CREEK
                                              TAILAIIAIA  CRECK
                                              COIOHAIEH  RIVER
                                              DEER CREEK
                                              IEAU OAVHU
                                              BIG SII|fimiER RIVER
                                              ElG SUIfluiEn HlVER
 IIARRISOM
 JACKSON
 nuns
 MADISON
 NARREII
 RAIKIN
 IIII0S
 MADISON
 RAItXIN
 IAIIUERDALE
 COVIHUION
 HASMIIIGION
 BULIVAR
IttKillt

   0.50
  S9.00
  47.70
  18.00
  U.OO
  SB. 90
 779.70
 117.00
  15.40
   4.80
   0.40
  10.00
 14*.00
  77.10
  40.10
7145.00
Ullllll

  S
  II
  S
  M
  II
  H
  S
  S
  s
  s
  s
  II
  II
  II
  II
  A












M
R
N
R
R
R
R
R
R
2.00
0.25
21.20
45. BO
45.80
15.40
28.80
20.40
17.70
45.70
19.10
4.50
50.20
27.10
12.40
27.70
10.40
54.70
108.50
S.SO
47. 50
87.20
S
S
M
II
M
M
M
M
H
M
II
H
H
M
II
II
II
H
II
II
II

-------
               IfeloiBoily System Report
               liil ol IUUiBoJi«t
O
 I
OBS
6*1
S5Z
SSI
554
sss
554
657
ssa
559
640
561
562
541
564
565
566
567
546
669
670
571
572
57S
574
575
576
677
570
5/9
580
SOI
5B2
581
SB4
60S
5B6
567
S66
56*
590
5*1
592
595
594
695
596
697
596
599
600
601
401
60S
m
ieio
nsno76
IISROBZ
IISH066
IISR06*
HSRI02
IISRIOS
MSN 104
II3RIOO
IISR10*.
ItSRIlO
HSR247
IISR272
IISRI4*
MSR469
IISR467
HSR476
MSR47*
IISR464
IISR496
IISR499
IISRSIZ
IISRS15
IISH5I9
IISIROZ
MSI HO 7
IISIR06
MS1H09
IISIR22
III4II006
III4II007
III4IS004
III42BOOS
III 7611001
III 76LJ006
III76U01S
HI76L002
lir 7611001
IIC50206
IICS0101
MCSOS07
IJC3040Z
MCS0407
MC30501
ICI040Z
MCI0606
100607
1C 10400
IICS042Z
IIO0704
100707
MCS07S6
NCS0605
HCS06I1
lEum
ItlllAHE
»UI1 IE OAK BAYUU
VAZOO RIVER
IUCKEVS CREEK
IKK Illl EV CREEK
1CMII CREEK
•RIDGE CREEK
(I All CREEK
MISSISSIPPI NIVEM
MISSISSIPPI RIVEN
MISSISSIPPI RIVER
TAIIGIPAIIOA RIVER
1ALIAIIAIA CREEK
R1VEIIOAIE CM
IIOIICOUIAII CREEK
ESCATAIIPA RIVER
010 IITIIE TAILAIIAKIIIE RIVER
IIAIRSIUI BEIIOIUY
MISSISSIPPI RIVER
IEAF RIVER
1EAF RIVER
VOCWIA RIVER
IRIOUrARV OF MUTE OAK 0AVOU
BIG SUiriOIKR RIVER
BEntlARU BAYOU
ESCAIAIN'A RIVER
ESCAIAin'A NIVER
ESCAIAIU'A HIVER
EDIIAIiUS BAVOII
PRII.RIY ft All CHEEK URAIIIAUE
MISSIMIHI RIVER URAIIIAUE IAKES
UIU SPIIIIIU CREEK OR A IMAGE
limit 1UMGIIE RIVER URAIIIAUE LAKES
BIIIERROOr RIVER IIAIIISIEII
ASIIIEV CREEK URAIIIAGE
IUIIIEMSII RIVER ORAIIIAGE
LIMIEII flAIIIEAO RIVER TRIBIIIARIES
MAIII'JIEM CLARK FORK 1 FLAIIIEAO - BLACKFOOM
RUAIKME 06
TAR-PAIIIICO 01
TAR-PAIILICO 07
IIEUSE 02
HE USE 07
IIIIITE OAK 01
CAPE FEAR 02
CAPE FEAR 04
CAPE FEAII 07
CAPE FEAH 06
CAPE FEAN 22
VAUKIM 04
VAOKIN 07
LUBER 56
BRUAD 05
CAIAIIBA SI
CAIIIdA 14
CAIAlUA 16
NBCOUI IUI
1UIICA


IIOIWOE
LEE
AICORH
Aiconn
HARREII
OE SOIO
1UMICA




JACKSON








HARRISOII 1
JACKSOII 1
JACKSfNI 1
JACKSON
IIAMCOCK
1 EIIIS AIW CLARK
LEIIIS AIIO CLARK
FERGUS
ROSEBUD
MISSOULA .
flAIIIEAO
FlAIIIEAO
SAIIOERS
SAUOENS

















VPE IIOSI2E
19.00
1J2.70
B. 00
6.00
10.50
11.00
S.OO
SO. 90
4.20
41.10
SI. 20
14.40
a. 90
sa.ao
la.oo
14.40
5.50
111.60
9.70
6.60
10.50
0.25
74.70
1 14.40
i 6.90
1 2.90
5.90
2.00
205.60
1O200.2O
174. 60
S500.IO
84.00
101.61
24.40
694.70
12S.20
114.00
444.90
111.90
675.40
699.90
96.40
446.40
67.50
295.40
176.60
S45.60
449.00
175.00
196.00
144.40
R 1761.70
R 24 9. )0
6(19.711
Hum
M
II
II
II
II
II
M
II
II
N
M
II
M
II
II
H
II
M
H
II
II
II
II
II
II
II
II
M
M
A
II
A
II
M
II
II
II
H
II
M
II
II
II
N
II
If
rl
H
M
II
II
II
II
II

-------
                  ll»t«rUoJy SytluM Report
                       of
                  00S
                         1010
                               NBIUIIE
NBCOUI
                                                                                                             MBIVPE
                                                                                                                                    HBUJII r
o
i
•-•
KI
404    IK10BI7
407    IK40104
4oa    IK40501
409    IK50701
410    MO-0902020I-004-L
411    110-09020204-001-S
41!    »IO-Ot020SOI-OOI-S
411    IIO-IOI10IOI-OOI-L
414    110-10110102-004-1
415    IIJ-020IOI01-OIOR
414    IM-020IOI01-010R
417    IIJ-020I0101-140R
4IB    IU-02010IOI-150R
419    IIJ-020S0101-I80R
420    IIJ-020S0104-020R
421    IIJ-02010104-OSOM
422    NJ-020IOIOS-080R
421    NJ-0205010S-100R
424    IIJ-02010105-120R
425    IIJ-020110S-OSOR
124    IIJ-02040IOS-OSOR
127    IM-02040I05-1SOR
i2a    IU-02040105-240R
42*    IIJ-02040202-010R
450    IIJ 02040202-OMJR
4SI    IM-02040202-100II
412    MJ-02040202-110R
413    IIJ-02040202-120R
414    NJ-02040202-I50R
415    IU-02040SOI-OIOR
414    IU-02040I02-010R
417    01164  1
4»    01172 11.8
419    PA-00181-OOI.I-OOO.O
440    PA-00174-000.9-000.0
441    PA-OOI91-004.2-000.0
442    PA-00442-014.4-000.0
44S    PA-00404-OOS.0-000.0
444    PA-00421-004.0-002.0
44$    PA-OOail-071.1-041.4
444    PA-01017-020.4-001.0
447    PA-01024-01S.9-000.t
44a    PA-Ollal-005.4-000.1
449    PA-OIS09-000.2-OOO.O
450    PA-OI4SS-020.2-OOO.4
451    PA-01B44-014.0-000.0
452    PA-01918-002.0-000.2
451    PA-02418-008.0-002.1
454    PA-02774-001.I-OOO.S
4SS    PA-02774-OOI.5-000.0
454     PA-02a48-004.I-OOO.I
457     PA-OSI10-007.4-000.0
458    PA-OIIIO-019.8-011.0
CATAIBA 57
FREIKII BROAD 04
IIIHASSEE 01
IKM 01
OEV1IS LAKE                                 RAMSEY
SlltYEIIIE RIVER                              CASS
RED RIVER                                   6RAMO FORKS
POIIERS IAKE                                 BURKE
LAKE OAIIE
PASSAIC RIVER UPPER
RUCKAMAV RIVER
SAOOIE RIVER
PASSAIC RIVER IWIER
IIACKEIISACK RIVER LOHER
ELIZABEIII RIVER
RAIMAV RIVER
RARIIAII RIVER UPPER
MlUSTOtC RIVER  UPPER
MAR HAM RIVER IIIOOLE
LAIIIUGIU! RIVER
PAUIIIISKILL RIVER LOIK-R
laiSCCMKICOlO RIVER WPER
ASSUJ«»IIK CREEK  IOI«R
INIRIII BMAIICII PtHMttAIKMI CREEK
IIOHIII BUAIKII MAIICIKAS CREEK IOHCR
PtlllSAUKEII CHEEK IIAIIISIEII Al«t SO BRAIKII
COOI'EH RIVER
BIO  IIIBER CREEK
RACCOON CREEK
lUIUSQtMII RIVER
GREAT EGO HARBOR RIVER UPPER
BLAIKIIAMD IEAGLE CREEK IO OMAHA CREEKI    IIAIKOCK

BUCK RUI IUITI IlIMIE BUCK RUII
REP  ClAV CREEK
IIESI BRAIKII RED ClAV CREEK
IIIOOLE BRAIKII Mil IE ClAV CREEK
EAST BRAIKII ClltSIER CREEK
RIOIEV CREEK
SCIKJVIKILL RIVER
PERKIOIIEN CREEK
SKIPPACK CREEK
IlKtlAII CREEK
SHAI*> CREEK
tlAIIATAIIJV CREEK
1ULPEIIUCKEN CREEK
Jackson Cruok
nilie  iiesiuniiiv tRtfK
COOKS Hid
COOKS Ht«i ir.CMMiiRV cue mm
IttSr 0HAIKII IIESIIAIIIIIV CREEK
 lOIIICKINI CMf tK
 IAKE IIOCKAIIIXUtl
                 R
                 R
                 R
                 R
                 LCI!
                 R
                 R
                 LCII
                 LCI
                 R
                 R
                 R
                 R
                 R
                 R
                 R
                 R
                 R
                 R
                 R
                 R
                 R
                 R
                 M
                 R
   81.90
  711.00
  114.00
  409.90
49505.00
   11.50
   48.00
  950.40
  175.70
   S4.00
   41.00
   14.00
   14.00
   44.00
   11.00
   24.00
     8.00
   20.00
   12.00
   27.00
   44.00
   41.110
     5.Ml
   10.00
   18.00
   14.00
   21.00
   24.00
   17.00
   10.00
   18.00
   12. BO
     4.50
N
II
II
II
A
II
II
A
S
II
M
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
M
II
II
II
H
M
H
II
II
H
II
H
H
II
H
II
II
II
II
H
II
II
II

-------
                       lUloilluily SytlcM Ropo! I
                       Lilt of lUUrttodio*
O
 i
i—•
u>
DBS
441
442
44S
444
445
444
447
440
44*
470
471
472
47S
474
475
474
477
470
479
400
401
402
40S
404
405
404
407
400
409
4*0
4*1
4*2
4*S
4*4
4*5
4*4
4*7
4*0
4**
700
701
702
70S
704
705
704
707
700
709
710
711
712
711
III
IIBIO
PA-07070-014. 0-000.0
PA-07S40-02S. 0-000.0
PA-07548-04S.5-050.9
PA-07597-027.
PA-07795-001.
PA-07015-004.
PA-0*491-OI«.
PA-10I94-OI4.
PA-I 1009-01*.
PA-14504-004.
PA-SI020-004.
PA-SS9SS-OI2.
PA-S4025-04B.
PA-S54B2-OSS.
PA-J407I-004.
PA-S49S0-000.
PA-57S7S-002.
PA-S7702-007.
PA-42405-OOI.
PA-49224-101.
PA-52942-007.
PA-50B49-OOB.
PA-5904I-01B.
-000.0
-001. I
-000.0
-000.0
-004. S
-000.0
-000.0
-000. O
-000.0
-005.2
-000.0
-OOJ.4
-000.0
-001.2
-000.2
-000.0
-092.4
-005.1
-000.0
-012.0
PREC0114
PREC01S0
PREE0044
PREE0125
PREEOI44
PREKOI40
PREL0002
PREROI01
PREIIOIOS
PRER0144
RI0001002
RI0004009
RI00040I7
RI00070I9
RI0007020
RI0007025
RI00070S2
SO -POCASSE
1HOSISOIOS029
IIIOS1S0204014
IMU4010I02001
1II040IOI02004
III040IOIOS008
1K040IOI04IIOSSVCII
III060IOI0400I
III060IOI07007
1II060IOI070IO
1II040IOI070I4
III060IOIO702*
11104010107014
i|in60|ojo;oiA
lll040ioi06SIMKIIIUCH
rBIIAIIE

EAST BRAIKII OCIUHARO CREEK
CUIESIOGA CHEEK
CMKSrOG* RIVEN
Hill Cr«ak
Uir. COHESIOGA HIVER
E ad C011ESIOCA RIVEM
quiUapaltilU Cr«*K
Conodoyuinot  Crank
YELLOH CREEK
PliM Crovfc
BEL AIRE LAKE
BEAVER RIVEM
COIIIoqUEIlESSIIIO CREEK
SIIEIIAIIGa RIVER
Bntkh Rin
Uir Brush Rut
Ihovptoit RIII
JACKS Rim
III! Buffalo Cr.uk
CL AH I Oil RIVER
COIIKAUITEE CREEK
AUUIAV CREEK I Uir I
ROCK CREEK
WJEBRAOA UE LAS IAJAS
QUEBRAOA AGUAS CLARAS
RIO LA PI AIA
RIO SAB AIM
CAIO UE SAIIIIACO
CAIW OE SAIIIIAM)
I AGO CIURA
RIO CAIIOVAIIAS
RIO CAIKIVAIIILI.AS
RIO IIIUEIIIU
BHAIKII R  AIM 1HIBS
1EII HUE  R
IIAIII  SUM AIM  IRIBS
SEIKIMK  R
PROV1UEIH.E  R
CIIEEIIIICII BAV  AIIO  COVES
IHMNir  HOPE  BAV
IK  POCASSE
ROCKCASUE CREEK
IIAnPETII RIVER
SOIIIII IIOISIINI  RIVER
BOINIE HESERVUIR
MAIAIKA RIVCR
IM3SV CHtEK
 PIGEINI DIVER
 I II HE PIGEINI RIVER
MESi  PIIUUJ i HUE  I'H.tni RIVER
IIESI PKUN; i HUE  PIUEUI HIVEH
 UIM*:i AS IIESEIIVOIR
 rncirii VHOAO  RIVEN
     \:n tm
                                                                                          )BCIMI
                                                                                                                   UBIVPE
                                                                                                                                IWSIZE
                                                                                                                                          iiiuitr
                                                                                          PROVIOEIKE CO.
                                                                                          PHOVIDEIICE CO.
                                                                                          PROVIDEIICE/KEIir CO. '5
                                                                                          PROVIOEICE CO.
                                                                                          PRUVIOtllCE CO.
                                                                                          Ktlll  CO.
                                                                                          IKMPOIir 4 I1RISIOL
                                                                                          CAIIPBELL
                                                                                          rEIIIRESS
                                                                                          HI I.I IAIISOI
                                                                                          Sill IIVAII
                                                                                          sum VAN
                                                                                          HASIIIIMIUM
                                                                                          JfrlEHSUI
                                                                                          COCKE
                                                                                          SEVIER
                                                                                          SEVIER
                                                                                          SEVIEH
                                                                                          .IffltllSINI
                                                                                          JElrEHSim
R
R
R
R
H
R
R
R
R
R
L
R
R
R
R
R
R
R
R
R
R
R
R
R
R
C/E
C/E
C/E
R
1.
R
R
R
H
R
R
R
Esr
Esr
E
L
R
R
H
L
R
H
H
N
H
H
L
H
.
.
.
.
,
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
•
.
.
4. SO
4. 80
9.40
0.90
7.20
4.00
240.00
S2.40
27.90
S2.40
41.05
7.50
25.50
5.00
4.40
4.30
9. SO
1000.00
4.40
51.70
7.50
4400.00
10. 8O
2.00
12.10
10.70
6. **0
9. SO
JU4IMI.IIO
14.40
||
||
||
M
II
M
II
M
II
H

II
II
H
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
A
II
II
II
II
II
II
II
S
S
s
A
II
II
II
A
II
II
II
II
M
II
A
II

-------
o
 I
H»t«iBotly Sytt*« Report
lilt of H«tarBodia»

OUS    IBID

714    11106010108001  .
717    1II040I020ICAIIEVCR
7IB    TII060I0201FIHSICREEK
719    1II0401020ISECOMOCR
720    1II060I020ISIIKIMGCREEK
721    1II040I020IIII1ROCR
722    III04010201IUCKEVCR
721    11104010201010
724    11104010201025
725    TII040I020I02*
724    1II040102010SS
727    III0401020SBICCR
726    11104010204008
729  .  1II04010207EASIFORKP(M»IARC
710    11104010207011
711    III040I0207014
712    1II040I02070I4
711    IH060l02oaOIS
714    11106020001002
715     III0602000I007
716    11106020001048
717    1II0601000105S
756    11106040005023
719     IIIOBOI0202002
740     UIU80l0201UEAI|CHtEK
741     11108011)201004
742     1IIU80I020SOIO
741     11108010205001
744     IIIOBOI02050IO
745     IIIUBOI02050I2
744     IIIOBOI0208011
747     11(08010209001
74B     11108010209002
749     1X0701
750     IXOB05
751     1X1005
752     1X1004
 751     VAI020400IO-OIE
 754     VAI020700II-OIE
755     VA102070011-OSC
 756     VAI02070011-OSE
 757     VAI020700I1-06E
 756    VAI020700II-07E
 759    V*I020700II-(IOE
 760    VAI020700I1-09E
 761    VAI020BOI04-02E
 762    VAI02000104-05E
 76]    VA1020BOI04-04E
 764    VA102080I04-OSR
 765    VAI020BOI04-IM.H
 766    VAI02000I05-OIE
 767    VAI02080I06-OIE
 768    VAI020BOI06-OIII
 769    VAI02aaOJOa-04E
 770    VA  oioeoioS osfi
IWIIAIIE

IftUlCIHKKV  RIVER
CAIIEV CREEK
MRST CREEK
SECOIIO CREEK
SlimilK) CREEK
111 I HO COEEK
1UCKEV CREEK
fORT KNIUOII RESERVOIR
TCMIESSEE RIVER
II IllE RIVER
TEMKSSEE RIVER
BIU CREEK
RUSSEll CREEK
CAS I FOHK POPLAR CHECK
BEAVER CHEEK
BULIRUII CREEK
IIIIMIS CREEK IICL BUFF At 0 CHECK
OBEI) RIVER  IIKL OllkM CRCCK
lEUftSStE RIVER
S CIIICKAIIAIIGA CR IIKL H  CIIICKAIIAUGA CR
B Kill AIM CREEK
ROCK CREEK
IKSf SAIIOV  CREEK 1ICL IKH.LY YORK HRAIKII
GBIIMI RIVER
CLEAR  CHEEK
S F OB I Oil R fHUI UKill LICK I CR TO BEAVER CR
BEAVER CHEEK
SIMIIII MIIlK  I (INK 10 UEtR RIVER
SIHIIII IIIIIK  FUIIKCO DEEM HIVEH
S.  F.  lUIIKtll UtfcR R.
SUGAR CR
lOOSAIIAICIIIC RIVER
IUOSAIIAICMIC HIVER
 IayIor Bayou uliova  liilal
       liinily /lonor llotl Fork Trinity River
            |> Cliainiol/Sait J*uinlo Niv«r
lltnisloii Sliip CluuuMl
CIIIIICOIEAUUE IUUHSIIEO
 111 ME IIICUIICO RIVER
COAII RIVfH
 Yf<»C(Mlli:O RIVER
CARIIIIttt I OWMI CHEEKS
IMNIIIII BAY  Allll I (MUM IIACIKMIOC CREEK
MAI MIX CHEEK
 INNHIOE CHLEK  i HAV
 CAIIIER CHEEK
 IIIIUAUIA CHECK
 RAPI'AIIAimir.K RIVER  - UllBLIIIIY fOIIIF
 IIIIIIUHtY CllttK
 IIIISMIKi ClltEK
            niviR  - Hcsr pouir
          IIIVER  - IftSI  POHU
 I>AIH*IKCV HIVER
  8A«» NlVfll
  HICK mill CHEEK
tUCUIRI

COCKC
ROAIIE
KI»X
KIIOX
KIWX
KIIOX
KIIOX
KIIOX
KIIOX
BLOtllF
KIIOX
CAIITOEIL
CIAIOORIK
ROAIC
KIKIX
AIWEHSIHI
AIMIERSOII
IWH6AII
IIAIIII I (Ml
II AMI I IUII
Mill: A
FIIAItU.lll
IIEIWV
OVER
CARROLL
HEAKIEV
CAHROI.I.
OYEH
IIAYIIIIUII
IIAOISINI
liAVinnu
SIIEIBY
SHI I BY
JEFFERMNI
IKIMItllSUH
IIAHIIIS
HARRIS
ACCUtlACK
IIORIIHtnCRLAIIO
UMIIIMUEHIAIIO
HOHIIMMUEHI AIIU
HESIIHtllEI AIHI
                                                                                                              ItESIIIIUIEIAIIU
                                                                                                              HESIIIOIIEI AIIO
                                                                                                              LAICASIER
                                                                                                              IIIUUIESEX
                                                                                                              ESSEX
                                                                                                              HICIUMMMI  tllY
                                                                                                              ESStX
                                                                                                              KHKi AINI  qtlEEII
                                                                                                              KIIIG Mill I All
                                                                                                              KIMC Mill IAII
                                                                                                              nut ni;
IUIVPE

  R
  R
  R
  R
  R
  R
  R
  L
  R
  R
  II
  II
  R
  R
  R
  H
  H
  H
  H
  II
  H
  II
  II
  II
  II
  R
  H
  H
  H
  II
  R
  R
  R
  H
  R
  R
   H
   E
   E
   E
   E
   E
   c
   E
   E
   E
   E
   E
   H
   R
   E
   E
   H
   r,
  msizt

   22.40
    5.50
    4.60
    4.40
    1.50
    4.90
    5.00
14400.00
   11.90
   10.ao
   IS.50
    5.00
    4.80
   15.00
   29.90
   IS.10

   24. 10
    9.20
   IH.70
    S.IO
    a.10
   21.40
   20. 10
    9.60
   25.20
   17.10
   19.40
   14.00
   22.70
    8.50
    5.40
   19.00
   11.00
   15'j.OO
   12.00
    4.00
   42. aa
    2.44
    5.16
    5.42
    0.71
   12.19
     1.09
     1.51
     1.27
    0.46
   44.10
   46. 70
   27.90
     2.84
     1.00
   106.SO
    in.01
    11 in
itHJiir

  M
  it
  H
  M
  H
  H
  H
  A
   \
  I!
  H
  M
  II
  II
  II
  II
  II
  M
  M
  II
  II
  M
  II
  II
  II
  M
  II
  II
  II
  II
  II
  M
  II
  II
  II
  II
  M
   S
   S
   S
   S
   S
   S
   S
   S
   S
   S
   S
   M
   II
   S
   S
   II
  II

-------
o
•-•
en
MA loi Ouily Sy»lam Report
LUI of MataiBoJia*

OBS    HBID

771    VAT02060106-07E
772    VAI02060I06-I6E
775    VAIOZ060I06-17E
774    VAIOZ060I09-OIE
77S    VAIUZOaOI09-02E
776    VAIOZ060I09-OIE
777    VAIOZ060I09-OSE
776    VAIOZ060I09-06E
779    VAIOZOepl09-0>E
760    VAIOZ060I09-06E
761    VAI02060I09-09E
762    VAI020601IO-OIE
70S    VAr020601IO-02E
764    VAI02060IIO-04E
70S    VAI02060206-OIE
766    VAI02060206-06E
787    VAI02060206-0IE
768    VAI0208020B-OSE
769    VAI0206020B-OSE
790    VAI02060206-06E
791    VAI02060208-OOE
792    VAIOZOOOZ06-09E
791    VAr02060200-IOE
794    VAI02080Z06-ISE
795    VAIOS010Z01-OIR
796    VAIOIOIOZOZ-OIR
797    VAI010I0202-OZH
798    VAIO10IOZ04-OIII
799    VAIOSOI020S-OIE
600    VAIOSOIOZOS-OSR
601    VAIOI01020S-OSII
B02    VI001
BOS    VIOI6
004    vroi-oi
BOS    VIOI-04
606    VIOS-01
607    VIOI-05
606    VT04-OILOI
eo9    vros-ouoi
610    VIOS-04101
611    VIOS-04L02
612    VIOS-07
6IS    VIOS-OMOI
614    VIOS-09101
615    VI05-IOIOI
816    VI05-IOL02
617     VIOS-II
616    VIOS-IU01
819    VIOO-OI
620    VI08-05
621     VI06-I6
8ZZ     VI09-06
821    VIIO-OI
HBMAIIE

BACK RIVER
LYIIUIAVEII HIVER
BROAD AIIU IlIKIIUflll DAVS
IIIIIUEIIS CHEEK - SAIIOY BOIIINI UHAICII
POCOIIUKE  SUJIIU - SAXIS ISIAIJO
UIIAIItOCK  CREEK HAIlKSIItO
PMMOIEAGIIE CREEK
IIAIWItA CREEK
IICCOIIAIIHICK CREEK
IIASSAIIAUOX  AIHI INIIUARS CREEKS
CIIERRVSIOIIE IIIIEI/CAI'E CIIAIILES HARBOR
ASSAIKHIAII ISIAIIO
PARKER CREEK I IKIUIPKIN BAY
HUG  ISIAIIO  BAV A IHM.KIIOHII  1SLAIIO
PAGAN RIVER
JAIIES RIVER - JAIIESim*! ISIAIIO
JAIIES RIVER - IIAIH'IINI ROAOS
EUZABEIII RIVER - CHAIKV ISIAIIO
ELUABEIH RIVER - LAIUERIS POINf
EASIERII  BRAIH:II IIF EIIZABEIII RIVER
SlMlllltHII UIIAIH.II Of EII2AUEIM RIVER - BERKELV
S(* 11 HE HI I BIIAIK.H UF El I2ADEIII NIVER - IIAVAl VO
SOIIIIIEIIII 6RAIILII 0» ELI2ABEIII RIVER - U.URIIHiE
IUHSMKMIU RIVER
IIOIIUIAV RIVER ISIUUASINI
III ACKMAIER RIVER - OEIOH fMAHKLIN
OIACKIIAIEH HIVER - UMIIOtllE
IAMRAUA  CREEK
IAKE lEL'IIIKtEH A Hill IIIIW LAKE IUAII IttCK AHEAI
I Mill III IAIWINU RIVER
INHIIIftlESr RIVER
CIIIIISUAIISIED HARBOR
IIIIDOERO BAY
llallooiisao Rivar
Ballon Kill Main Slaa
LoMor Otlor Crack
Oupor lUin Slca Ullar Ck.
OIUR CREEK SEC 11 Ml - IAKE CIIANPLAIM
IIISSISQUOI BAV - LAKE CIIAIIPIA1N
IHlRIIIEASr ARM  - LAKE CIIAIIPLAIN
ISLE LAIUIIE - LAKE CIIANPLAIII
Si.  Alliait* Bay Oi««i»M>u«
SI.  ALBAIIS OAV - IAKE CIIAIIPIAIH
IUII EriS BAY - IAKE CIIAIU'IAIII
UINII lir.lUII BAV - IAKE CHAIH'I AIM
IIAIII SECIIUI - lAKt CIIAIU'IAIII
Sliollxii 110 B«y  Oil act Urainaoo
SIIElBIHItlE BAV  - IAKE CIIAIU'LAIII
 Iwiur MiiHMitki Riwur
U|.|>or Hid IliivuutM
Slov/oitk Biraicli - Miiioaiki  Rivar
 lliii-J BraiuJi - Ifiilu Rivar
 LoMor OlluiMfracliuo Rivar
 lh>i>er 01 laiKHioclioo Hivar
 Lwior Olack  Hlvur
HBCOUI

IIAIIPIOtl CIIV
VIRGINIA BEACH CIIV
VIHGIIIIA BEACH CIIV
ACCOIIACK
ACCOIUCK
ACCOIIACK
ACCOIIACK
ACCOIIACK
ACCOIIACK
IIORIIIAIIPIOII
i nut ii Air i oil
ACCOIIACK
ACCOIIACK
MORIIIAHPION
ISLf  OF IIIGIir
JAIIES CIIV
iKironr IIEIIS cuv
IKIHfOIK CIIV
IKNIfOIK CIIV
nanrOIK cuv
IWHtOlK CIIV
CIIESAI'l-AKE CIIV
CHESAPEAKE CIIV
surroiK ciiv
SOUIIIAIIPIOII
sniuiAiii'ioii
SOMIHAIM'IOII
souiiiAiriai
VIHGIIIIA BEACH CIIV
CHESAPEAKE CIIV
CHESAPEAKE CIIV
tUIVPE

  E
  E
  E
  E
  E
  E
  E
  E
  E
  E
  E
  E
  E
 ' E
  E
  E
  E
  E
  E
  E
  E
  E
  E
  E
  R
  N
  R
  R
  E
  R
  H
  E
  E
  R
  R
  R
  R
  L
   L
   L
   L
   R
   I.
   I.
   L
   L
   R
   L
   R
   R
   R
   R
   H
IHJSI/E
10.01
5.44
I. SI
0.12
l/.-il
Z.S9
S.4S
4.0Z
z.ea
6.16
4.5Z
7.66
5.20
16}. 60
2.64
41.11
40.51
11.4)
2.46
1.84
O.Zb
0.67
1.19
9.6Z
428.UO
SB . 00
zos.no
59.10
O.Z8
66.50
20.20
0.64
0.50
104 . 70
20.00
29.70
14.00
4421.00
7998.00
BO 184. 00
26202. OO
2S.OO
2496.no
11)66. UO
ZSSZ.OO
42010.00
S5.UO
ZZ49.00
Zll . OO
IS. 110
Z6.70
95 . 00
16.50
ii. sn
a . on
mui
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
s
II
II
II
II
s
II
H
s
s
H
H
If
N
A
A
A
A
H
A
A
A
A
H
A
II
II
H
II
H
II

-------
                  • larOoily Syttan Report
                  ill  ol tUlarBudias
                        IBIO
                                                                                                  HBCMJM
                                                                       HDIVPE
                                                                                                                                  IUSI2E
O
 I
*-•
at
124
117
128
129
UO
til
tS2
MS
tI4
us
114
IS7
)S8
)S9
140
141
142
14 S
B44
B45
B44
*47
848
849
aso
asi
as2
OSS
as4
ass
856
as 7
asa
as9
840
a6i
862
8bS
864
865
866
867
848
849
870
871
872
87S
a 74
875
874
877
878
879
OflO
VIIO-J4
Vlll-OI
VII2-05
VI 15-08
VII7-OU01
»U -01 -0080
lu-oi-oaoo
lu-oi-suo
lu-oa-ioia
»IA-Oa-9140
IIA-09-1010
IIA-09-1020
HA-09-9240
IIA-10-1010
MA-10-1011
MA-10-1020
MA-22-4045
HA-20-1020
IIA-S4-1020
IIA-S7-1040
HA-S9-10S7
MA-S9-11IO
IIA -54 -1020
m-59-1010
lll-IC-17-242
HI-IC-19-242
III IC-ZOfcISOO-242
III -IC-25-262
HI-IK-Ol-080
lll-IK-02-080
m-iK-os-oao
III -Uf -07-111
HI -111-04-171
III-III-1I-171
tll-UI limoOA-)7l
III -Ul- II 799008-1 71
IK-UI-II79900C-171
III-UI-14-I71
HI -Ul- 17- 171
HI-UH-18-171
IIVKIL 1-22-1 11
IIVKILI-SO-A-lll
HVKIII-81-I1I
HVK-SO
MVK-40
HVK-41
HVK-4I
IIVK-49
MVK-49-A
IIVK-81
HVK-82
IIVKE-2S
IIVKE-S7-B
1 IvK C ~ 2 1
M^jkGx2(
      Black River
loner HilliaM River
I lor Hi Branch Ooarlialcl
(•» I Brandt Pas*iM|>«io
LAKE ItEIII'IIREIIAGOO
(MllfR BEUIUUIIAII BAV
(MilCM BEUIIKillAII BAV
IHIAICOM CREEK
KtlSEV  CREEK
INIItNl IAKE
UUHAIIISII IIAIERHAV AIM  R.
CREEM R.
SAMVER  IAKE
PUYALIUP R.
IIVLCOOS CREEK
PUVAUUP R.
HI I DCAT CREEK
SAIIMI  CR.
PALOUSi R.. S.F.
VAKIIU  R.
CMVSIAL CREEK
SELAII 01 KM
SPOKAIIE R.
CULVIUE R.
tloi Hi  foik Eau Claire River
lunar  Valla* Mivur  lUlurtluicI
Rod  Cottar Rivur
Iriwtiullu Nivor atul l»iJmlla Crunk H*lunliuil
llusl lulu Hiwur
Eat I twin Mivur
Kc-MMiraa Rivar MalurtliuU
Biy Graoii I eke lUltirtliod
MOM I oik Ciouk Malurtluiil
Mill Crack »Ului tlrtiil
           Mivur lUinsltii* llui-lliarn *i4i lta»iit
      i-.in Ilivtir lUintlca Cuiilial ««J> l>a»ii«
Hi»ccMiiiii Hivur lUiitslun ScMilliorn Stlt-batin
l.illlo E«Mi Ploino Rivar
loner Biu tan flttina Rivar
l^i|iar Big Emi Pluitia Hivar IUUr»li«UfclLS CK
 lltll RV
 UAIHEV  RV
 inn SAIUIV  CK
 IMHICI.  fr./IAUNEL CK
 r.AllNUI  (III
           CK





MIATCttl
MIAICai
MIAICOI
KINO
Klin
Klin
Kim
Kiiia
PIERCE
PIERCB
PIERCE
GRAYS HARBOR
ClARK
PALOUSE
VAKIIU
KIIUUS
KITIIIAS
SPOKAItt/SIEVEIIS
SIEVEIIS
EAU CIAIRE
CIIIPPEIIA
OUII
MEHCE
IIAIII lane
iiAiiuniiK
KEHAUftE
6REEII LAKE
inoo
PORIA6E
LIIKUIII
POMIAUE
AOAIIS
POM 1 AGE
IIARAIIIOII
IUMAIIIUI
H1IIUII
KAIIAIIIA
SUIKRS
PUIIIAII
KAIIAINIA
KAIIAMU
KAIIAimA
KAIIAINIA
KAIUINIA
rAVEIIE
fAVEIIE
KAIIAIIIA
ClAV
Iliriifii »s
lllCllllI AS
R
R
R
R
I
EA
EA
RA
RAA
IL
EB
RA
U
R
M
MA
R
R
MA
RA
R
MA
RA
MA
H
R
M
M
H
M
R
R
R
R
M
N
N
N
R
R
L
L
L
R
R
R
R
H
M
N
n
H
R
K
22.00
10.50
Si. 00
se.to
6B47.00
68.5*
SB. 14
S.BO
4.40
6110.00
1.01
SI. SO
SO*. 00
1.00
5.90
9.40
9.20
21.40
2S.SO
12.60
s.oa
0.90
17.40
52. 90
169.00
2U.5U
111.0(1
IZb.OU
I02.au
96. VU
07.20
49. SO
82.00
105.00
ISS.M)
4S.UU
42. 20
197.20
94.00
171. UO
12.00
27.00
2040.00
S.70
S.42
4.71
177.00
10. SO
I.SS
B7.00
104.00
24.40
2.47
zl.ti
II
II
N
H
A
S
S
II
II
A
S
H
A
M
M
H
N
H
N
H
H
II
II
II
II
II
II
II
II
II
II
II
II
II
II
M
II
II
II
II
A
A
A
II
II
II
II
II
II
II
II
II
II
II

-------
              ii.liiU-j-ly  ..yiti'14 Hi-|>orl
              till ul lUluiUodlu*
              DOS
                      IIU10
                                       IIUIIAIIE
                                                                         tecotii
IBIYPE
                                                                                                    MUSIZE
                                                                                                               HUUU r
O
eei
BOZ
081
884
885
686
887
BOB
889
890
891
B9Z
091
094
09S
896
097
098
099
900
901
90Z
901
904
90S
906
907
908
909
910
911
912
911
914
915
91ft
917
918
919
920
9ZI
9Z2
9Z1
9Z4
9ZS
9Zft
9Z7
9Z8
9Z9
910
911
9)2
9)1
m
MVKG-14
IIVKC-S-B
HVKII-10-A
IIVKII-21
IIVKII-ZZ
HVKII-4ft
HVKII-48
IIVKII-S1
IIVMI-ftO
IIVKII-iO-B
IIVKM-frO-K
MVKIB-12
HVKIB-12-B
UVKIB-12-G
MVKie-12-J
nvKiB-12-J-i
IIVKIB-12-K
IIVKIW-22
HVKiia-za
IIVKIB-28-B
MVKIB-ZB-C
IIVKIlB-J-C-l
IIVKIIB-10
IIVKIB-I1
MVKIIB-lft
tlVKIIG-ZS
IIVKP-6
IIVKP-S-A
MVIK
IIVIKII-9
HVH
IIVII-ZI
IIVII-27
UVIIt-lZ-B-5
HVMC-1S
HVIIY-2
IIVU-ZO
»IVU-1-B
HVO-1Z
IIVO-12-L-7-E
IIVO-4
HVO-tl
HVOG-Z
HVOG-J-A
IIVOG-49-E-7
IIVOGII-ft
HVP
IIVH-1
IIVK-ll
IIVP-19
IIVP-20
IIVP-Z1
IIVPC-Z1-A-1
l!vPSB-25-A
CIIEnHV HV
BEIIS CK
MOUSE OR
AltBUCKlE CK
01*11 OOP CK
CHKEIKHUR RV
BIUESIUIE MV
11101*11 CK
EAST HV
PIGtWt CK
CRASSV BR
BHIISII CK
lAUntt CK/8RUSII CK
OAVES FK/BRIISII CK
SUUIII IK/BRUSH CK
GREEII VAUEY/SO fK/BRUSII CK
IWRIII fK/ORUSII CK
BIACKtlCK CK
IUOEIIOUIII CK
NIGIIIMAIIO FK/IIIOEIKHIfll CK
11 f I IIAIU fK/HlOEIIUUIII CK
JUIPIIN; BR
CRAIIE CK
1UUIOII LICK CK
DIIUOII IK
IIUIIAIIU CK
ROCKY IK
riSIIEH BR
111 HE KAIMINIA RV
S04IIII fK/INJUIIES RV
UniNJUGAHElA HV
UIIIMIO CK
1VUAHI RV
CIIHIKY Mtl
unrrAiu CK
SINHIY CK
KAIIAiniA HV
URAPEVIIIE BH
IIUL CK
SIIAIIBtEII BR
GUYAIIOOTIE RV
HAnillSUII Rll
into nv
liff fK/DAVIS CK
BAIir.tR IK/CARIIEU FK
FUIIUES CK
POIUMAC RV
ElKS nil
CACAPUII RV
LI HIE CACAPOII RV
urn 111 en/pinoiuc RV
SOI II || BR/PUIINIAC RV
IHIIUI POIIO Rll
SIMIIII IK/£IMIIII BR I'UIUIAC
JUIUISOJI Mt
HICIMIIAS
FAYEIIE
FAYEIIE
IAVEIIE
fAVEIIE
suviEns
SINIIERS
SUIIERS
MERCER
IIEIICER
MERCER
IIEIICER
MERCER
MERCER
MEHCER
MERCER
MERCER
MERCER
IIEIICER
MERCER
IIEIICER
SINIIERS
IIEIICER
IIEIICER
MERCER
UREEIUR1ER
MIIAHMA
KAIIAHIIA
MUOO
MIRr
I'NESIOI
IURIIMI
IIAHIIHI
I'HESIUI
PHESIUI
IMIESIOI
MASCNI
CABE1L
JACKSOII
JACKSOII
CABELL
BROOKE
CAOELL
CABELL
IOGAII
CABELL
JEFfEHSOII
JEFIEIISOII
IIUHGAII
IIAIIPSIIIRE
IIAIH'SHIIIE
IIAIN'SIIIHE
mnov
iiAimv
LflAiir




























H
M
II
M •
R
R
II
N
M
M
R
M
M
R
R
R
R
N
R
R
R
R
R
R
R
iS
10. 4S
0.17
3.40
ft. 10
IS. BO
144.00
42.00
34.00
10.40
1.70
l.ftO
21. JO
0.00
5.80
7.00
2.00
S.40
7.00
ft.iO
7.80
S.ftO
6. SO
ft. 80
5.00
4.60
21.70
4.06
3. S3
149.00
65.64
17. SO
90.20
130.20
3.00
9.10
4.1*
97.00
3.40
29.34
1.14
1*6.00
l.oo
79.00
2. SO
1.62
4.4S
115.00
4.29
110.00
20.94
7S.7S
05.00
2.09
'in
n
n
n
n
n
n
n
n
H
II
II
II
II
II
II
II
II
H
II
II
II
H
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II
II

-------
           H*l«i6otly Syt (•• Report
           litl ol tUlaiBoJia*

           oos    IIB 10             IIUIIAIIC                      HBCOUI

           15*    IIVPSO-25-C-2     SPRIIIO RIl/SO IIILl  CK       GRANT
           91 /    HVPSB-24-O-a     SIAR 111 I/SO fK/lUUCE CK    CHMir
           »J8    IIVPSB-2B-A-1     BIO RII/JORUAII Nil           CIIAIir
           919    IIVfSB-JJ         DtCOS CK                    PEIKILEIUI
           940    HVS              SIICIIMIOOAII RV               JEffEM^UI
           941    HVS-I            riOIIIIIG SPRIIICS  Nil         JCtfEMSOII
           942    IIVS-2            CATTAIL Ml                  JEFMRSOM
           941    HVS-4            fVllfS Ml                   JEtfEHSOU
IUIVPE
IUSI2E

  2.70
  2.19
  1.71
  2.40
 19.45
  *.4S
  1.44
 10. SO
IUUI1T

  tl
  II
  II
  II
  tl
  II
  II
  M
O
 I
00

-------
                        APPENDIX D
                WATER BODY SYSTEM 305(b) DATA:
WATERBODIES FOR WHICH POINT/NONPOINT SOURCE NUTRIENT TRADING
              APPEARS APPLICABLE IN THE FUTURE

-------
                  tlaturUuily  System Ki'por t
                  List of lutuiboJiat

                  DBS    IU1IO

                    1    IUI07020006003
                    2    IISE001
                    3    MSL009
                    4    11106020001038
                    5    11106020002005
                    6    11108010208012
                    7    1IJ08010208016
                    a    vroj-oj
                    9    Vlll-01
                    10    VI13-02
                    11    VMS-OS
                    12    VM3-04
                    13    HA-08-9J50
                    14    IIA-26-9090
                    15    HA-41-9250
                    16    HVPC-24
                    17    HYBR16010101-059-2
HBNAIIE                                     HBCOUI


BACK BAY OF  B1LOXI IAI UCEAII SPRINGS)    JACKSON
CRYSTAL LAKE                              RANKIN
OECAIUR CREEK                             MEIGS
CANDIES CREEK                             BRADLEY
IIATCIIIE RIVER                             IIAYHOOD
IIA1CIIIE RIVER                             IIAROEMAII
Mid-Main Stow Otlor Crook                  "'A
ll)>l>ar Soutlieni Coiuiuut icut Hivor          Wln|riO|»
ll|)|>or Iliil-Soiilliarii Coiutccl icut  Hivur
IliJ-Soulliarn Coiuieclictit Hivur
Varnori Im|>otiiuliiiaiil
HASIIIMGIOII LAKE                           KIII6
VANCOUVER  LAKE                            CLARK
MOSES LAKE                                GRANT
LOST RV                                    HARDY
HOOORUFF HARHOMS RES                      LINCOLN
TYPE
'/**
E
L
R
R
R
R
R
R
R
R
R
LL
L
LL
R
L
IIUSUE
N/A
6.00
200.00
7.90
30.20
26.60
13.90
34.10
20. bO
21.50
24.00
7.50
22138.00
2858.00
6800.00
26.03
1409.00
KUIftUT
t'lfi
S
A
M
M
II
II
II
II
M
M
II
A
A
A
11
A
a
 i

-------