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Virginia’s Chesapeake BayNutrient Credit Trading

Program

Virginia’s Chesapeake BayNutrient Credit Trading

Program

Glenn HarveyPrince William County Service Authority

ExChange Implementation Committee Chair

Glenn HarveyPrince William County Service Authority

ExChange Implementation Committee Chair

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So, You Want to Trade ?

What are you offering? Do you own it? Why do I need it? Principles Fine Print How much? $$

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What are you offering?

Nutrient credits are -- ??~ Wastewater plants: Flow X Concentration~ Non-point: model defined by land use~ Non-point: removals expected for various

BMP types – midpoint %, range of %, safety factor

~ Time frame: annual, life of BMP~ Difference between credits and offsets~ Need firm legislative definitions

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Do you own it?

Who buys a car or house without Title?~ Must have legal clarity

Touchy subject with environmentalists.~ Can not be cast as ‘right to pollute’.

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Why do I need it?

Must have clear legislative / regulatory driver requiring entity to obtain credits or meet Waste Load Allocations.

Limited number of sources regulated now. MS4, CAFO and other non-point permits

not written around measured, delivered nutrient pounds.

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Guiding Principles

# 1 – Trading is voluntary

# 2 – Benefits for all

# 3 – Compliance first (“safety first”)

# 4 – Never forget the CWA “base case”

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Fine Print

Nutrient Credit Services Agreement Entered among Participants & Exchange Based directly on the Compliance Plan &

Credit Exchange Policy below

Compliance Plan One for each basin Covers all participants Developed together Approved by DEQ

Credit Exchange Policy Sets trading procedures Developed together Issued by Exch Board

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How Much?Cash Flow & The Bucket

Sources of Funds

Class A Buyer$4 P / $2 N

ExChange Buyer$ 6 P / $ 3 NOutside Buyer$ 8 P / $ 4 N

Class A Supply PoolA Pool / Total A Credits

Class B SupplyB Pool / Total B Credits

10%90 %

Class B credit price > Class A? “Excess” reverts to Class A fund

$$ $$ THE BUCKET

Disbursement of Funds

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Legislative Background

Virginia Legislature amended State Water Control Law (S1275, March 2005)

Mandated Watershed General Permit~ Wasteload allocation for significant dischargers~ Basin-wide compliance schedules (2011)~ Provisions for non-significants, new facilities~ Requirements for compliance plans

Authorized Nutrient Credit Exchange Authorized trading

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Trading Principles

Trading is VOLUNTARY~ Non-participants submit individual plans

Trading occurs within 5 river basins~ Inter-basin trades not allowed

Some intra-basin sales restrictions due toregional water quality

Basin # MGDPotomac/Shenandoah 43 405 Rappahannock 22 46 York 11 108 James 39 581 Eastern Shore 5 2

120 1,142

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Credit Price Schedule

Compliance Year

Class A Price

Nitrogen Phosphorus

1 2008 - -

2 2009 - -

3 2010 - -

4 2011 $2.00 $4.00

5 2012 $2.00 $4.00

6 2013 $2.15 $4.30

7 2014 $2.30 $4.60

8 2015 $2.45 $4.90• The prices for Credits generated during and applied to Compliance Years

2011 and 2012 (i.e., prices for next 5 years, 2008-2012) are firm.

• Prices shown for 2013 through 2015 are estimates.

• Price schedule to be updated annually to maintain a firm price for next 5-year period (i.e., in 2008, credit prices for 2013 will be set).

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Saves Ratepayer $$$

Lower taxes/rates, same pollutant control

Comparison of Annual Construction SpendingTrading Case vs. Non-Trading Case

0

50

100

150

200

250

300

350

400

450

500

550

2005 2010 2015 2020 2025 2030YEAR

Mil

lio

ns

of

Do

llar

s (i

n 2

006$

)

Annual Construction $, Non-Trading Case Annual Construction $, Trading Case

Virginia cost savings estimate through 2030: ~~$800 M on $2.2 B

program

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Questions?

Glenn Harvey~ gharvey@pwcsa.org~ 703 393 2063

Aqualaw~ Chris Pomeroy~ Chris@AquaLaw.com

ExChange Web Site~ http://www.theexchangeassociation.org~ Admin@TheExchangeAssociation.org