U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

87–287 PDF 2014

THE ROLE OF WATER QUALITY TRADING IN 

ACHIEVING CLEAN WATER OBJECTIVES 

(113–60) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

WATER RESOURCES AND ENVIRONMENT 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

MARCH 25, 2014 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

Available online at: http://www.gpo.gov/fdsys/browse/ 

committee.action?chamber=house&committee=transportation 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

BILL SHUSTER, Pennsylvania, Chairman 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

JOHN J. DUNCAN, JR., Tennessee, 

Vice Chair 

JOHN L. MICA, Florida 

FRANK A. LOBIONDO, New Jersey 

GARY G. MILLER, California 

SAM GRAVES, Missouri 

SHELLEY MOORE CAPITO, West Virginia 

CANDICE S. MILLER, Michigan 

DUNCAN HUNTER, California 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

LOU BARLETTA, Pennsylvania 

BLAKE FARENTHOLD, Texas 

LARRY BUCSHON, Indiana 

BOB GIBBS, Ohio 

PATRICK MEEHAN, Pennsylvania 

RICHARD L. HANNA, New York 

DANIEL WEBSTER, Florida 

STEVE SOUTHERLAND, II, Florida 

JEFF DENHAM, California 

REID J. RIBBLE, Wisconsin 

THOMAS MASSIE, Kentucky 

STEVE DAINES, Montana 

TOM RICE, South Carolina 

MARKWAYNE MULLIN, Oklahoma 

ROGER WILLIAMS, Texas 

MARK MEADOWS, North Carolina 

SCOTT PERRY, Pennsylvania 

RODNEY DAVIS, Illinois 

MARK SANFORD, South Carolina 

DAVID W. JOLLY, Florida 

NICK J. RAHALL, II, West Virginia 

PETER A. DEFAZIO, Oregon 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

EDDIE BERNICE JOHNSON, Texas 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

TIMOTHY J. WALZ, Minnesota 

STEVE COHEN, Tennessee 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

JOHN GARAMENDI, California 

ANDRE ́ CARSON, Indiana 

JANICE HAHN, California 

RICHARD M. NOLAN, Minnesota 

ANN KIRKPATRICK, Arizona 

DINA TITUS, Nevada 

SEAN PATRICK MALONEY, New York 

ELIZABETH H. ESTY, Connecticut 

LOIS FRANKEL, Florida 

CHERI BUSTOS, Illinois 

(II) 

SUBCOMMITTEE ON WATER RESOURCES AND ENVIRONMENT

BOB GIBBS, Ohio, Chairman 

DON YOUNG, Alaska 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

CANDICE S. MILLER, Michigan 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas, 

Vice Chair 

DANIEL WEBSTER, Florida 

JEFF DENHAM, California 

REID J. RIBBLE, Wisconsin 

THOMAS MASSIE, Kentucky 

STEVE DAINES, Montana 

TOM RICE, South Carolina 

MARKWAYNE MULLIN, Oklahoma 

MARK MEADOWS, North Carolina 

RODNEY DAVIS, Illinois 

MARK SANFORD, South Carolina 

DAVID W. JOLLY, Florida 

BILL SHUSTER, Pennsylvania (Ex Officio) 

TIMOTHY H. BISHOP, New York 

DONNA F. EDWARDS, Maryland 

JOHN GARAMENDI, California 

LOIS FRANKEL, Florida 

ELEANOR HOLMES NORTON, District of 

Columbia 

EDDIE BERNICE JOHNSON, Texas 

GRACE F. NAPOLITANO, California 

STEVE COHEN, Tennessee 

JANICE HAHN, California 

RICHARD M. NOLAN, Minnesota 

ANN KIRKPATRICK, Arizona 

DINA TITUS, Nevada 

SEAN PATRICK MALONEY, New York 

NICK J. RAHALL, II, West Virginia 

(Ex Officio) 

(III) 

(V) 

CONTENTS Page 

Summary of Subject Matter .................................................................................... vi 

TESTIMONY 

Peter A. Tennant, P.E., executive director, Ohio River Valley Water Sanitation Commission, on behalf of the Ohio River Basin Trading Project and 

the Association of Clean Water Administrators ................................................ 8 

James J. Pletl, Ph.D., director of water quality, Hampton Roads Sanitation 

District, on behalf of the National Association of Clean Water Agencies ....... 8 

Richard H. Moore, Ph.D., executive director of the Environmental Sciences 

Network, associate director of academics for the Office of Energy and the 

Environment, and professor in the School of Environment and Natural 

Resources, The Ohio State University ................................................................ 8 

Carl Shaffer, president, Pennsylvania Farm Bureau, on behalf of the American Farm Bureau Federation ............................................................................. 8 

Brent Fewell, Esq., Partner, Troutman Sanders LLP, on behalf of the National Water Quality Trading Alliance ............................................................... 8 

Ann Pesiri Swanson, executive director, Chesapeake Bay Commission ............. 8 

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Peter A. Tennant, P.E. ............................................................................................ 32 

James J. Pletl, Ph.D. ............................................................................................... 37 

Richard H. Moore, Ph.D. ......................................................................................... 44 

Carl Shaffer .............................................................................................................. 52 

Brent Fewell, Esq. ................................................................................................... 60 

Ann Pesiri Swanson ................................................................................................ 69 

SUBMISSIONS FOR THE RECORD 

Hon. Bob Gibbs, a Representative in Congress from the State of Ohio, request 

to include written testimony from the Association of Clean Water Administrators ................................................................................................................... 6 

ADDITIONS TO THE RECORD 

Jessica Fox, technical executive, Electric Power Research Institute, written 

statement .............................................................................................................. 71 

Dr. A. Ann Sorensen, assistant vice president for programs and research 

director, American Farmland Trust, written statement ................................... 86 

vi 


Insert offset folio 1 here 87287.001
vii 


Insert offset folio 2 here 87287.002
viii 


Insert offset folio 3 here 87287.003
ix 


Insert offset folio 4 here 87287.004
x 


Insert offset folio 5 here 87287.005
xi 


Insert offset folio 6 here 87287.006
(1) 

THE ROLE OF WATER QUALITY TRADING IN 

ACHIEVING CLEAN WATER OBJECTIVES 

TUESDAY, MARCH 25, 2014 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON WATER RESOURCES AND

ENVIRONMENT, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, Washington, DC. 

The subcommittee met, pursuant to call, at 3:17 p.m., in Room 

2167, Rayburn House Office Building, Hon. Bob Gibbs (Chairman 

of the subcommittee) presiding. 

Mr. GIBBS. The Subcommittee on Water Resources and Environment of the Committee on Transportation and Infrastructure will 

come to order. 

The first order of business, I would like to welcome our witnesses 

and thank them for being here today. I ask unanimous consent 

that our witnesses’ full statements be included in the record. Without any objection, so ordered. 

At this time, before we start, first of all, I want to apologize for 

votes and getting started about an hour and 20 minutes late. So 

I thank you for your indulgence. 

I want to turn it over to Chairman Shuster for a comment. 

Mr. SHUSTER. I thank the chairman and want to welcome Mr. 

Shaffer from the Pennsylvania Farm Bureau. Thanks for being 

here today, and all of you for coming and testifying. I have a statement that I want to give related to, but different than, the topic 

here today. 

Today the Obama administration released a proposed rule that 

would dramatically expand the Federal jurisdiction over waters 

and wet areas in the United States, and I am sure the Pennsylvania Farm Bureau’s going to be very interested in seeing how this 

progresses. This is another example of a disturbing pattern of the 

imperial Presidency that seeks to use brute force and executive action while ignoring Congress. 

Our concern is that this is going to unilaterally broaden the 

scope of the Clean Water Act and the Federal Government’s reach 

into everyday lives that will have adverse effects on farmers, on 

contractors, on people’s backyards, for that matter. It will impact 

the Nation’s economy, threaten jobs, invite costly litigation, and restrict the rights of landowners, States, and local governments to 

make decisions about their lands. 

This massive Federal jurisdiction grab was the subject of failed 

legislation in the 110th and the 111th Congress. Strong bipartisan 

opposition, I repeat, strong bipartisan opposition, prevented those 

2 

bills from moving forward. Defeated in Congress, now the Obama 

administration is trying to achieve this Federal power expansion 

through a rulemaking. 

This proposed rule supposedly aims to clarify which water bodies 

are subject to Federal jurisdiction under the Clean Water Act, 

which this committee has jurisdiction over, but I am extremely concerned that there are serious flaws with this process. Twice the Supreme Court has told the agencies that there are limits to the Federal jurisdiction under the Clean Water Act and that they had gone 

too far in asserting their authority. 

Now the administration has taken those Supreme Court rulings 

and cherry-picked discrete language from them in an attempt to 

gain expanded authority over new waters rather than heeding the 

directive of the Court. It is the responsibility of Congress, not the 

administration, to define the scope of the jurisdiction under the 

Clean Water Act. 

Regulations of this Nation’s water must be done in a manner 

that responsibly protects the environment without unnecessary and 

costly expansion of the Federal Government. We can continue to 

protect our waters without unreasonable and burdensome regulations on our small businesses, farmers, and families. 

I intend to hold oversight hearings on this issue in the coming 

weeks and to make sure that they are not able to move forward in 

expanded power, because, again, I think that, as Chairman Gibbs 

and I were talking about before, we are not certain what this 

means, but we have got a sick feeling in our stomachs that we 

know what is coming and it is going to affect all Americans in a 

negative way, so we are going to be vigilant and make sure that 

this committee and the Congress keeps its jurisdiction and its constitutional authority as we move forward. 

Mr. Chairman, thank you very much for yielding. 

Mr. GIBBS. Thank you, Mr. Chairman. 

I would just like to make kind of a brief statement on that same 

issue. I haven’t had a chance to delve through the rule, because it 

came out this afternoon, but I think it is nearly 400 pages long, I 

heard, and very concerned about the possible jurisdiction overstretch of the United States Environmental Protection Agency onto 

farmers, landowners, county road ditches, anything you can imagine, and what that impact could have on our economy and ability 

to grow our economy and job creation. 

So, as Chairman Shuster said, we will be looking at that, and I 

am sure we will have some hearings in the near future where we 

can delve through and see what the rule, all says, but we are concerned about the possible redefining the jurisdictions of the waters 

of the United States versus the evaporable waters of the United 

States. 

I will start, by the reason we are here today, here to talk about 

the role of water quality trading and achieving clean water objectives. And I would like to again welcome everybody for coming. 

Today we will hear from several public and private sector stakeholders on the potential use of water quality trading as an innovative market-based mechanism to cost-effectively achieve local water 

quality improvements. 

3 

The quality of our Nation’s waters has improved dramatically in 

the United States since the enactment of the Clean Water Act in 

1972, however, water quality challenges remain and achieving the 

next step in water quality improvement is becoming more difficult. 

Many of today’s remaining water quality problems are more dispersed and removing additional pollutants from private, industrial 

and public wastewater facilities is becoming extremely expensive 

and difficult to achieve. Addressing these remaining water quality 

problems will require new tools and new and innovative forms of 

implementation. 

Water quality trading is increasingly being looked into as an innovative market-based mechanism to cost-effectively achieve water 

quality improvements in some watersheds. The basic theory behind 

trading is that certain pollutant sources in the watershed may be 

able to achieve the same degree of control as others in the same 

area but at a lower cost. Trading programs allow sources at relatively low cost to generate credits by reducing loads in amounts 

greater than what is required of them. These credits can then be 

sold to others for improving the cost to achieve the same reductions 

are ultimately much higher, thus achieving the same or better 

water quality improvement at lower overall cost. 

Water quality trading gained my attention several years ago 

when I was a member of the Ohio House of Representatives and 

assisted in the creation of a successful water quality trading program in Holmes County, Ohio, my home county. 

A local cheese producer in Holmes County was facing a regulatory dilemma with its plans to expand its operations and create 

new jobs. To do so would cause the company to exceed its nutrient 

allowances under their NPDES permit unless it installed prohibitively expensive wastewater treatment. 

To solve the problem, the company partnered with the Holmes 

Soil and Water Conservation District, The Ohio State University, 

the Ohio EPA and local farmers in the watershed to manage nutrient runoff, all of them resolving in a trading program that enabled 

the company to grow and the watershed’s health to improve. This 

was a win-win for both the economy and the environment. One of 

our witnesses today is Dr. Richard Moore, who was a direct participant in creating the program. 

At today’s hearing, we will hear from a variety of witnesses 

about other trading programs around the Nation and the issues 

surrounding water quality trading as a means of improving the environment and reaching compliance under the Clean Water Act. 

And I would just to kind of summarize that, when I said we came 

from 1972 the Clean Water Act, we have come a long ways in this 

country in cleaning up our rivers and our lakes and our streams, 

and especially point source, and I think that the kind of tale goes— 

the first 90 percent is cleaned up, it is that last 10 percent, it is 

hard to clean up, hard to identify and very expensive, maybe as expensive as cleaning up the first 90 percent, and that is why we 

need to look at these innovative programs how we can get there 

and recognize the source, especially in the nonpoint, and look at innovative methods and cost-effective methods and get to the ultimate goal. 

4 

So, I want to thank the witnesses for being here. And I will turn 

my time over to Mr. Bishop, the ranking member of the committee. 

Mr. BISHOP. Thank you very much, Mr. Chairman. And thank 

you for holding this hearing on water quality trading and its potential use in aiding efforts to improve water quality throughout the 

Nation. 

In October of this year, we will celebrate the 42nd anniversary 

of the Clean Water Act. This landmark environmental statute is 

the reason the Nation’s waterways have shown dramatic improvement even as the population has dramatically increased over the 

last 4 decades. 

The successes and failures of the Clean Water Act are both expressed in two simple statements of fact. In 1972, only one-third 

of the Nation’s waters met water quality goals. Today, approximately two-thirds of those waters meet water quality goals, but at 

the same time, we are only halfway there. 

The challenges to addressing these remaining and chronically 

impaired waters are great. It is without question that the Clean 

Water Act is responsible for a tremendous reduction in the 

amounts of pollutants entering our waters from point sources, the 

commercial, industrial and wastewater treatment plants. Where 

the act has been less successful, however, is in addressing pollution 

associated with runoff from urban streets, agricultural sources and 

other similar sources. Addressing these nonpoint source of pollution 

would significantly advance the goals of fishable and swimmable 

waters established over 4 decades ago. 

One concept that has been discussed for addressing chronically 

impaired water bodies is water quality trading, especially when addressing impairment by nutrients or sediment. Proponents of nutrient trading laud its ability to function as a tool in helping reduce 

continuing pollution challenges in our Nation’s waters. In my own 

area of the country, the potential usefulness of nutrient trading is 

being tested to reduce the excessive nitrogen and resulting dissolved oxygen concerns of the Long Island Sound. 

In the Long Island Sound, the neighboring States of New York, 

Connecticut, Massachusetts, Vermont, and New Hampshire, are exploring how nutrient trading can play a role in reducing the nitrogen discharges to the sound and its tributaries. The Long Island 

Sound States both individually and through the New England 

Interstate Water Pollution Control Commission have been evaluating the effectiveness and potential benefits of both point-to-point 

trades among the various Clean Water Act permit holders and 

point-to-nonpoint trades among the various regulated and unregulated discharges of nitrogen throughout the watershed. 

What seems apparent from the first few years of implementation 

is that nutrient trading still holds the promise of achieving potentially greater water quality benefits at a reduced cost, but a significant number of questions must be resolved first. For example, pollution trading proposals must conform to the current regulatory requirements of the Clean Water Act and must not be viewed as a 

way of avoiding or lessening existing pollution control authorities. 

In addition, care must be taken to ensure that the use of trading 

does not in fact make matters worse for localized areas through the 

5 

creation of pollution hot spots or disproportionately affected certain 

populations. 

Also, for a market-based trading program to be most effective, 

there must be an economic driver to add value to both the credits 

and the trades. Under the Clean Water Act, that driver is typically 

created through a rigorous regulatory process that requires local 

water quality standards be achieved. In the absence of such a driver, the market for trading would be more difficult to establish and 

less likely to succeed. 

Finally, Mr. Chairman, because water quality trading involves 

the potential lessening of existing permit obligations of regulated 

discharges, legal questions of water quality trading, credit 

verification, equivalence and enforceability, must be resolved before 

the effectiveness and potential benefit of trading can be properly 

evaluated. 

I look forward to working with you, Mr. Chairman, and this subcommittee to ensure that more is done to improve the quality of 

our Nation’s waters. 

I yield back the balance of my time. 

Mr. GIBBS. Thank you. At this time, if other Members have a 

statement, they can submit it in the written record since we already made our witnesses wait around for 90 minutes. 

Before we get started, I will ask unanimous consent that written 

testimony submitted on behalf of the Association of Clean Water 

Administrators be included in this hearing’s record. Hearing no objection, that is so ordered. 

[The information follows:] 

6 


Insert offset folio 7 here 87287.007
7 


Insert offset folio 8 here 87287.008
8 

Mr. GIBBS. And then also our panelists, since you have written 

testimony, if you could, keep your opening statements to within 5 

minutes or so, that way we will have time for some question and 

answer and give everybody a chance to summarize it, appreciate 

that. 

And today we have six witnesses. And our first witness is Mr. 

Peter Tennant. He is the executive director of the Ohio River Valley Water Sanitation Commission and on behalf of the Ohio River 

Basin Trading Project and Association of Clean Water Administrators. 

Welcome Mr. Tennant. The floor is yours. 

TESTIMONY OF PETER A. TENNANT, P.E., EXECUTIVE DIRECTOR, OHIO RIVER VALLEY WATER SANITATION COMMISSION, ON BEHALF OF THE OHIO RIVER BASIN TRADING 

PROJECT AND THE ASSOCIATION OF CLEAN WATER ADMINISTRATORS; JAMES J. PLETL, Ph.D., DIRECTOR OF WATER 

QUALITY, HAMPTON ROADS SANITATION DISTRICT, ON BEHALF OF THE NATIONAL ASSOCIATION OF CLEAN WATER 

AGENCIES; RICHARD H. MOORE, Ph.D., EXECUTIVE DIRECTOR OF THE ENVIRONMENTAL SCIENCES NETWORK, ASSOCIATE DIRECTOR OF ACADEMICS FOR THE OFFICE OF ENERGY AND THE ENVIRONMENT, AND PROFESSOR IN THE 

SCHOOL OF ENVIRONMENT AND NATURAL RESOURCES, THE 

OHIO STATE UNIVERSITY; CARL SHAFFER, PRESIDENT, 

PENNSYLVANIA FARM BUREAU, ON BEHALF OF THE AMERICAN FARM BUREAU FEDERATION; BRENT FEWELL, ESQ., 

PARTNER, TROUTMAN SANDERS LLP, ON BEHALF OF THE 

NATIONAL WATER QUALITY TRADING ALLIANCE; AND ANN 

PESIRI SWANSON, EXECUTIVE DIRECTOR, CHESAPEAKE BAY 

COMMISSION 

Mr. TENNANT. Thank you, Mr. Chairman. 

Mr. GIBBS. You might want to pull that mic up to you a little 

bit. 

Mr. TENNANT. Thank you, Mr. Chairman. 

Thank you, Ranking Member Bishop. 

Both of you in your opening comments successfully reduced my 

remarks by several minutes with some of the points you made. 

I believe most people are probably aware that our Ohio River 

basin program reached an important milestone just a couple of 

weeks ago with the completion of the first three actual trades. 

These are point-to-nonpoint trades of nutrients, and an event that 

was several years in the making. 

I would emphasize that at this point, it is a pilot program. There 

are many programs represented here today and represented 

through the membership of ACWA, that have been in the business 

longer than we have, and you hit on several of them, the cheese 

factory in your district, which is certainly one of the poster childs 

for successful trading to solve a regional problem, and the Long Island Sound program. 

As you pointed out, as we reach a certain milestone of overall 

achievement of the Clean Water Act goals, the remaining problems 

are extremely challenging. Innovation is called for and new approaches just need to be considered and entered into. 

9 

I would be remiss if I didn’t begin by acknowledging the collaborative leadership and membership of our project. While ORSANCO 

has been a key member bringing State agencies and our other 

stakeholders together, we wouldn’t be where we are today without 

the leadership of the Electric Power Research Institute and specifically Jessica Fox, the project director. They have been working on 

development of this program for about 7 years. 

Some of the other partners, American Farmland Trust, which 

has brought their excellent ties to the agricultural communities to 

the table; Troutman Sanders law firm has been a key part; Market 

Environmental Registry, which runs the actual program that allows you to consummate a trade online; the Ohio Farm Bureau; 

and the University of California at Santa Barbara, which has provided water quality modeling to verify the projected impacts of the 

trades, all key components. What is important is a project this 

massive requires that level and more of collaboration. 

We have chosen to attack nutrients. Nutrients are hard. There 

are two things about nutrients that I typically point out. Whereas 

in controlling toxic pollution, toxics are things that we can say, 

well, they shouldn’t be there. Nutrients are something that we 

can’t say that. Without nutrients, there is no life. It is finding the 

balance, it is finding the right levels, and that has been one of the 

challenges that State agencies and interstates such as ourselves 

have faced for a number of years trying to figure out what is the 

right dose. 

Also, there are multiple sources. You can’t say that, well, if this 

one facility or this one sector would control their problem, every activity can generate nutrients to some degree, but what we have 

found through the trading program is that some nutrients are more 

readily removed than others, and if we work together, we could actually find solutions that are collaborative, that represent cost savings and are in the long run, are effective. 

Again, our project right now is in a pilot phase. We do not have 

regulatory drivers. The companies, the electric utilities that have 

bought the credits are doing so on a stewardship basis. We anticipate somewhere down the road perhaps we will have the regulatory 

structure, the requirements that drive more people to look into the 

program. 

What I am optimistic about is the fact that we have laid the 

groundwork. A number of the things that Mr. Bishop mentioned, 

the challenges, we have wrestled with those, we have figured out 

what we think are pretty good approaches to verify the effects of 

the trades, to set up the equivalency and so forth, and we feel that 

we have a program that can hit the ground—that can expand 

greatly when there are wider drivers. 

So we look forward to it. And, again, thank you for this opportunity to speak to you today. 

Mr. GIBBS. OK. Thank you. 

Our next witness is Mr. James Pletl. I don’t know if I said that 

right or not. 

He is the director of Water Quality Hampton Roads Sanitation 

District. He is also here on behalf of the National Association of 

Clean Water Agencies. 

Welcome. The floor is yours. 

10 

Mr. PLETL. Thank you, Chairman Gibbs, Ranking Member 

Bishop and members the subcommittee. 

Thank you for the opportunity to appear before you today. 

As Chairman Gibbs mentioned, my name is Jim Pletl. I am the 

director of the water quality department for the Hampton Roads 

Sanitation District, or HRSD, in Virginia Beach, Virginia. I also 

serve as the Water Quality Committee vice chair for the National 

Association of Clean Water Agencies, otherwise known as NACWA. 

It is my pleasure to be testifying on NACWA’s behalf today as well 

as the 17 cities and counties in southeast Virginia which HRSD 

serves. 

If there is one thing I would like to leave you with today is the 

understanding that water quality trading has worked for HRSD 

and it has allowed us to meet our nutrient permit limits while saving our rate payers millions of dollars. Our success is something I 

hope we can replicate nationally. 

Here in the Chesapeake Bay watershed, where excessive 

amounts of nutrients in rivers and streams are contributing to low 

dissolved oxygen conditions, the reduction of nutrient loading to 

the bay has been a high priority. Traditionally utilities have relied 

on technology controls and upgrades to reduce the nutrient loadings at the end of a pipe. Though the technology approach can be 

effective, it is often extremely expensive. HRSD will spend over 

$375 million to meet the Bay TMDL requirements through 2017, 

and even more upgrades may be required when the TMDL is revisited in 2017. 

Compliance with nutrient permit limits was accomplished by 

HRSD with expensive plan upgrades, but upgrades were not required at every HRSD facility, because nutrient trading between 

facilities was supported through regulation in Virginia. In 2005, 

the Virginia General Assembly authorized the concept of nutrient 

trading, spurring creation of the Virginia Nutrient Credit Exchange 

Association, which in turn created the framework for nutrient credit trading between watershed facilities, both public and private. 

Trading in Virginia was based on the concept of the nutrient 

credit. One nutrient credit represents 1 pound of nutrients removed 

from a wastewater discharge beyond that required by permit. 

These credits can be applied to other facilities with nitrogen load 

limits within the same water segment or downstream of that segment, allowing those other facilities to comply with their respective 

limits, without expending millions of dollars to fund technology upgrades. This approach provides the same environmental result obtained by upgrading a facility and has allowed HRSD to select and 

upgrade the facilities that will provide the greatest amount of nutrient removal at the lowest cost. 

HRSD currently trades nitrogen and phosphorous credits on an 

annual load basis amongst its 13 facilities across 3 watersheds of 

the Chesapeake Bay. One of the most significant cost saving trades 

for HRSD occurs on the Rappahannock River, where its Urbana 

plant obtains credits from other permitted facilities on this river in 

order to comply with its permit limits. The inability to trade nutrient credits on the Rappahannock River would have cost HRSD customers millions of dollars, but there would have been very little nutrient benefit. 

11 

Despite the availability of nutrient trading, over $2 billion of 

public and utility customer funds are being invested in Virginia to 

upgrade many of the public municipal waste water treatment 

plants. This investment would have been significantly higher without trading, because every facility did not require a treatment technology upgrade with trading available. I estimate the cost to 

HRSD’s customers would have been twice to three times the cost 

so far realized without the ability to trade nutrient credits between 

our facilities. 

HRSD’s experience with trading has been limited to activities 

with other permitted discharges. Trades with nonpermitted sectors 

have not yet been realized in Virginia. Trading with the nonpermitted sectors like crop agriculture has been found to be somewhat 

problematic due primarily to the uncertainty in estimating, measuring and controlling the discharges from these sectors. 

Forty years after the passage of the Clean Water Act, wastewater 

facilities like HRSD around the country are transforming the way 

they deliver clean water services. They are becoming utilities of the 

future, focused on doing more with less and bringing maximum 

value to the rate payers and communities. 

At the heart of this transformation are innovative, market-based 

approaches, like water quality trading, that can stretch rate payer 

dollars while meeting environmental improvement goals; however, 

utilities cannot master this transformation alone. They need the 

support of Congress, which should promote greater adoption of watershed-based solutions. Similarly, EPA should work with delegate 

States to promote viable and flexible trading programs. Doing so 

will give utilities the green light to engage in more nutrient transactions that can yield tangible water quality improvements while 

addressing the affordability concerns of wastewater utilities around 

the country. 

Thank you for the opportunity to appear before you today. I look 

forward to addressing any questions that the committee may have 

regarding my testimony. 

Mr. GIBBS. Thank you. It is always good to hear how you are saving rate payers money. 

Our next witness is Dr. Richard Moore. He is professor of the 

School of Environmental and Natural Sciences at The Ohio State 

University and he is also the executive director of The Ohio State 

University Environmental Science Network and associate director 

of academics at OSU Office of Energy and Environment. 

And it is good to see you again, Dr. Moore. We go way back. And 

we started the trading project there in my home county in Holmes 

County, and it has been a great relationship, so welcome. 

The floor is yours. 

Mr. MOORE. Thank you, Chairman Gibbs, Ranking Member 

Bishop. It is great to be here to talk about this topic. And I am also 

very grateful to my fellow panelists, who we have all come a long 

way in the topic of water quality trading. 

The Alpine Cheese nutrient trading plan is Ohio’s only program 

based on a fully functioning NPDES permit. It is a minor permit 

of 0.14 million gallons per day. Prior to the trading program, the 

company was out of compliance for its phosphorous limits, and 

Ohio EPA put a hold on their permit, which included plans for a 

12 

new plant expansion. Alpine did a partial facility upgrade to 3.2 

milligrams per liter and used water quality trading to reduce its 

concentration to the permit goal of 1 milligram of phosphorous per 

liter of water. Costs were reduced by having the majority of the 

credits earned through 15- to 20-year conservation measures so 

that these were paid for during the first 5 years and subsequent 

permits were in the second year of the second permit, were relatively inexpensive, because they only needed to be maintained. 

The program has documented benefits to water quality. Just 

downstream from the cheese factory, the middle fork of Sugar 

Creek is now in full biological attainment by Ohio EPA standards. 

It is also a program that has not received any Federal funding, and 

paid its own way for staff at the local soil and water conservation 

district office. It grew out of a community-based Sugar Creek 

project centered at The Ohio State University, which teamed up 

with local agencies, such as the soil and water conversation districts, the Ohio Environmental Protection Agency, the Alpine 

Cheese Company, county commissioners, the Ohio Department of 

Natural Resources, the Ohio Farm Bureau, Ohio Department of 

Agriculture, USDA, NRCS, and our local representative, Bob Gibbs. 

Prior to the Alpine Cheese trading program, our research team 

had several small grants from USDA, NSF and EPA to study headwater streams and implement conservation measures. It is also 

part of Ohio State University’s extension outreach funded by the 

Smith-Lever Act. 

The success of the Alpine Cheese nutrient trading plan served as 

a springboard for the creation of the Muskingum River watershed 

water quality trading plan in 2012. We started very small, but it 

spread then to these 21 counties, who all wanted to be part of it. 

I have four specific recommendations for the future of water 

quality trading. One, water quality trading programs in Ohio 

should focus on minor NPDES permit holders. In Ohio, there are 

3,341 active NPDES permits, according to Ohio EPA. About half 

the amount of water treated by NPDES permits comes from minor 

permits which, like Alpine Cheese, have a design flow of less than 

1 million gallons per day. Major permit holders tend to have more 

monitoring and more limits. One of the strongest arguments for focusing on water quality trading on the minor permit holders is, the 

higher cost per gallon of treatment. 

According to Hartman and Cleland, the cost for facility upgrades 

for minor permits is anywhere between two and seven times as 

great as the majors, depending on the phosphorous and nitrogen 

regulatory limits. Because of the high cost of treatment per gallon, 

minor permit holders are able to offer higher prices for nutrient 

credits if transaction costs can be kept low. This is why the Alpine 

plan was so effective even though the cost per credit was relatively 

high. 

At the same time, when trading programs are started to solely 

benefit major permit holders, there is a drive to keep the cost per 

credit low, such as through reverse auctions, in order to match the 

low cost per gallon associated with the mayor permit facility upgrades; however, major and minor permit holders can team up in 

very creative ways. For example, a downstream point source could 

cost share with an upstream point source to conduct their facility 

13 

upgrade upstream, so that they could get below their permit level 

and recoup the cost through a negotiated sale of those credits, and 

there are other ways, too. 

The second point, community-based water quality trading programs at either the HUC 8 level, or county level, provide benefits 

over larger scale programs. We found that the idea of a trusted 

broker is very important, and we think that the soil and water districts are such an entity. Also, there could be trades within the 

same county jurisdiction between—if county commissioners are 

overseeing both the soil and water conservation district budget and 

the county wastewater treatment plan, then it makes sense to combine those two functions. 

A third point is that trading should focus on areas of most impact: headwaters and critical source areas. Studies have shown 

that about half the nitrogen in headwater streams makes it down 

to the fourth order streams. A long-term study in Illinois revealed 

that most of the—during rain events, we have most of the export 

of the nutrients. 

I will stop there. Thank you. 

Mr. GIBBS. Sorry. Did you finish your fourth point, Mr. Moore? 

Mr. MOORE. No. Can I—— 

Mr. GIBBS. Go ahead. 

Mr. MOORE. I have one more point. Thank you. 

My fourth point is that locally based programs are more likely 

to have creative solutions to achieve water quality objectives. In addition to the NRCS approved conservation measures, we could utilize use of our State’s experiment stations more effectively if we 

allow the use of, quote, scientifically proven innovative conservation measures, unquote, and focus more on appropriate suites of 

conservation measures that fit the local ecological zone and local 

farming practices. We have done this both in—the statement of scientifically proven innovative conservation measures was put both 

in the Alpine as well as the Muskingum plans that were approved 

by the Ohio EPA. 

Thank you. 

Mr. GIBBS. Thank you. 

Our next witness is Mr. Carl Shaffer. He is president of the 

Pennsylvania Farm Bureau, I believe a farmer, too. And he is here 

today also on behalf of the American Farm Bureau. 

Welcome. 

Mr. SHAFFER. Chairman Gibbs, Ranking Member Bishop, members of the subcommittee, I want to thank you for the invitation 

to testify here today. 

My name is Carl Shaffer. I am president of Pennsylvania Farm 

Bureau. I raise corn, soy beans and wheat in Columbia County, 

Pennsylvania. I serve on the board of directors and the Executive 

Committee of the American Farm Bureau Federation. 

While Farm Bureau supports the concept of water quality trading, managing nutrients is complicated and any trading system 

must consider this. Farm Bureau has a long history of supporting 

market-based approaches to improving the environment. We encourage States to consider trading to help implement State water 

quality programs, because trading and offsets can reduce costs associated with environmental improvements. 

14 

Pennsylvania has a nutrient trading program in place, but as we 

can discuss further, there is a lack of demand even though farmers 

are generating credits. However, even with that history of support, 

farmers remain cautious of trading programs. The very nature of 

farming is growing a plant or animal for use in the food chain. The 

abstract idea of invisible credits is difficult for many farmers to embrace. 

Trading and offset programs are and should remain creatures of 

State law. And effective trading programs will not occur if EPA or 

States impose too many barriers. There are major scientific, market, regulatory challenges to water quality trading. The Clean 

Water Act leaves the task of controlling water pollution largely to 

the States, but EPA has pressured States to adopt standards and 

criteria based on nutrient levels found in perfect waters. This is 

unrealistic. Even worse, EPA now wants to change the baseline for 

Pennsylvania’s existing trading programs, making it more difficult 

to generate credits. 

If properly designed and implemented, trading can help make 

reaching nutrient water quality standards more affordable. Trading 

assumes market participants have full information about the cost 

and effectiveness of their nutrient reduction options and can instantly, at little or no cost, get information on nutrient credit prices 

and quantities. However, people are faced with limited time, resources, skills and market knowledge. Complex rules and procedures can result in poor buyer or seller participation and defeat the 

purpose of trading in the first place. 

Lastly, it is often assumed that agriculture can supply credits 

less expensively than other sources. Whether or not this is true depends heavily on the trading rules and procedures described previously. 

Farmers are deeply concerned about the environment. We constantly take advantage of new technology and new practices and 

programs as they become available, to grow quality food products 

while protecting our natural resources. 

As I hope my remarks illustrate, the concept of trading has the 

potential to be a useful tool. As a concept, trading can make reaching nutrient water quality standards more affordable and attainable. However, in practice, trading is not always so simple, as regulatory and cost barriers can hinder the implementation of successful trading. 

Again, I want to thank you for the opportunity to provide testimony today. I would be happy to answer any questions. Thank you. 

Mr. GIBBS. Thank you, Mr. Shaffer. 

Our next witness is Mr. Brent Fewell. He is a partner of Troutman Sanders law firm, or LLP. I guess it is a law firm, right? 

Mr. FEWELL. Right. 

Mr. GIBBS. And on behalf of the National Water Quality Trading 

Alliance. Welcome. 

Mr. FEWELL. Thank you. Chairman Gibbs, Ranking Member 

Bishop and members of the subcommittee, thank you for this opportunity to talk about such an important topic. 

My name is Brent Fewell and I am a partner with the law firm 

of Troutman Sanders. I am here today representing the members 

of the new National Water Quality Trading Alliance, which is a 

15 

consortium of leaders with an enduring interest in environmental 

protection. 

I personally have been involved in trading for the better part of 

2 decades, both as an environmental lawyer and also as a former 

EPA water official. And those who know me know how passionate 

I am about this issue, because when done correctly, trading can accelerate the pace of environmental protection. 

We are beginning to see the positive and exciting results of trading in various locations around the U.S., including, Mr. Chairman, 

those affecting your district. And this hearing is about meeting the 

goals of the Clean Water Act, and to that end, I offer a few comments. 

First, we cannot expect 20th century tools to fix 21st century environmental problems. As you mentioned, Mr. Chair, the act has 

been critical to reducing point-to-point source—or point source pollution from end of pipe discharges. As we have heard today from 

the panelists, the success of point-to-point source trading has enabled us to do that in a more cost-effective manner. However, the 

low hanging fruit of pollution reduction has already been harvested 

and the remaining fruit is high in the branches and beyond reach 

unless we develop a new, more effective tool. 

According to EPA, 50 percent of our waters are still impaired, 

and of those, 60 percent comes from nonpoint source pollution, 

those sources that are beyond the reach of the Clean Water Act. 

One option would be to continue to squeeze point sources for more 

pollution reduction or we could approach this problem in a very different manner by taking a landscape-based approach and offering 

incentives for sustainable and lasting solutions. 

Mr. Chair, for over 200 years, we have altered, developed, paved 

over and re-plumbed the hydrology of our watersheds, and we are 

witnessing the consequences of those actions. Solving this problem, 

as we have discussed today, is not going to be easy, it is not going 

to be cheap, and poses significant challenges to communities, cities 

and agriculture as they continue to expand. 

Mother Nature is incredibly resilient and can withstand many insults, but the cumulative impacts of the myriad and diffuse sources 

and inputs in these watersheds will continue to degrade water 

quality and our ecosystems in ways that Government alone cannot 

resolve, which leads me to my second point. 

If we are to accelerate the pace of restoration, we must do so 

with tools like credit trading. It makes little sense to require a factory or sewage treatment plant to install expensive treatment 

equipment if we can accomplish the same goal at a fraction of the 

cost through trading. Some have criticized trading as a scheme to 

rearrange the deck chairs or simply kick the can down the road, 

and I say absolutely not. Trading is no panacea and it will not 

work everywhere, but it is a tool that enables EPA and the States 

to continue to apply the pressure and insist upon moving us all one 

watershed, by one watershed, toward the ultimate goal of cleaner 

water. And if we are to achieve this goal, EPA and the States, 

using all their regulatory authorities and tools, must continue to 

hold us all accountable to meet that end goal. 

Over the last few decades, we have moved from a handful of pilot 

projects financially supported by EPA and USDA to ones that are 

16 

now self-sustaining, credible and making a difference in cleaning 

up our waters. As Joe Whitworth, president of Fresh Water Trust 

is fond of saying, we fix rivers, and indeed they are. He and his 

team are fixing rivers through trading, but not only are they restoring the waters required by the requirements of the act, they 

are doing even more by restoring riparian habitats that provide important wildlife habitat that filter nonpoint source pollution and restore the beauty of these systems. These are additional environmental benefits and social benefits that would not occur through 

traditional approaches. 

My third and final point, Mr. Chair. Today’s trading programs 

are smarter and better. Our investment in these markets are beginning to pay off, but there is still room for improvement. As we 

have heard today, we must continue to insist that these programs 

use best science, are transparent, and that the trades are 

verifiable, credible and enforceable. And that is the important role 

of groups like the new Water Quality Trading Network, not to be 

confused with the alliance, who is helping to clarify the science and 

promote best practices and better approaches. Regulators, too, have 

an important role in ensuring that these markets are working effectively to meet the end goal. 

In closing, if we are to meet the goals of the Clean Water Act, 

Mr. Chair, we must resolve to embrace new and innovative approaches such as water quality trading. I thank you for this opportunity. 

Mr. GIBBS. Thank you. 

And next up, and last witness, is Ms. Ann Swanson. She is the 

executive director of the Chesapeake Bay Commission. 

Welcome. 

Ms. SWANSON. Thank you very much. Chairman Gibbs—thank 

you. 

Chairman Gibbs and Ranking Member Bishop and the other 

members of this committee, I really appreciate this time to come 

before you to testify about the economic potential of the nutrient 

trading program, and very specifically to give some testimony related to our work on the Chesapeake Bay. 

By way of background, because I always think it is important to 

put a speaker into context, the Chesapeake Bay Commission is a 

tristate legislative commission. We are policymakers who operate 

in the general assemblies of Maryland, Pennsylvania and Virginia, 

three of the six States and the lion’s share of the watershed of the 

Chesapeake Bay. Our members are 15 house and senate members, 

as well as 3 of the members representing the Governors of the 3 

States, and 3 citizen members. In total, there are 21 members 

spanning those 3 States of Maryland, Pennsylvania and Virginia. 

The commission, in addition to pursuing legislation in all of those 

three States, frequently conducts indepth research to look at 

emerging policy issues. We tackle everything from blue crabs, to 

land use, to biofuels, and in 2012, the commission turned its attention to nutrient trading. 

I should be clear at this point about the commission. The commission remains neutral on whether it supports or doesn’t support 

trading programs, in that the trading programs ended up becoming 

either law or regulation in the States before we actually had a posiVerDate Aug 31 2005 12:08 Nov 07, 2014 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\WR\3-25-1~1\87287.TXT JEAN
17 

tion on the subject. So instead, we decided to ask two extremely 

fundamental questions about trading. 

The first is, ‘‘what is the potential of nutrient trading to lower 

costs of TMDL compliance?’’ because, remember, in the Chesapeake 

region, we are operating under the largest TMDL in the country. 

So that was one question. Are these cost savings touted real? 

The second question that we wanted to ask was, ‘‘what are the 

critical elements that must be included in the trading program and 

what are some of the constraints that have to be put in place to 

make a trading program acceptable to the people and the living resources in the region?’’ 

To do this work, we turned to RTI International, an international 

independent nonprofit institute that provides research, development and technical services to governments and commercial clients 

as well. They are one of the largest economics firms in the country. 

The second thing that we did that was pivotal, though, was to 

put together a panel of trading experts who then would guide and 

work with RTI. So it wasn’t just an abstract economic study. It was 

grounded by the experts in the region. 

The third thing that we did was, because we are a signatory to 

all the bay agreements and the commission is one of the partners 

of the Chesapeake Bay program, to access the huge watershed 

models that are a part of our region. So the land use data that we 

would use and couple with the economics model was very real since 

that data comes directly from the States. 

Well, we asked and answered those two questions. The first—and 

I should also comment, remember, we were not advocates for trading. Half our members were actually very skeptical on the subject, 

the others were strong supporters. Half were Democrats, half were 

Republicans. Half come from rural areas, half come from urban 

areas. 

In the end, for the first question about the potential, the answer 

was unequivocably, yes, even with the constraints we put onto our 

question. We saw that there were very significant cost savings, particularly if you included the urban sector, particularly the 

stormwater sector, and the cost savings could be anywhere from 49 

to 79 percent. 

We also tried to identify the critical elements, and there were 

four. They are in our testimony and in this report. Bottom line: you 

need a measurable, enforceable pollution cap to drive the trading 

programs forward. You heard about it from other people on this 

panel. 

The second is be sure to include stormwater. Stormwater management is the most expensive thing to pay for. It is also where the 

greatest cost advantage can be in terms of trading. 

The third is protect and never abandon local water quality. We 

prohibited the degradation of local water quality in favor of a distant trade, and even with those constraints, there was anywhere 

from a 49- to a 70-percent cost savings. 

The fourth is we had a 2-to-1 trading ratio and even included a 

38-percent transaction cost, 38 percent. It was one of the highest 

transaction costs we could find anywhere in the country. And we 

did that because we wanted to see if we could require significant 

transparency and verification. Would it still be advantageous or did 

18 

you have to throw things like transparency, verification, local 

water quality to the wind to make the markets work? 

And our study said you don’t have to, that you can require robust 

verification and transparency, you can protect local water quality, 

you can address urban areas, and it can be potentially advantageous, but the devil is in the details, and Carl Shaffer has 

warned of that. And the specifics of those rules are very different. 

We have three States with exceedingly different trading programs, 

all of which have significant advantages. 

So in closing, I would just like to say that this report has all of 

these details along with 56 additional pages of information that I 

could never summarize in 5 minutes. 

I will say that for a commission that was skeptical, we remain 

hopeful that there is great promise. 

Thank you very much. 

Mr. GIBBS. Thank you all. 

And I will start with a few questions here. The first question is 

a common theme here, I think everybody is in agreement that this 

could work if it is set up right. 

Ms. SWANSON. Yes. 

Mr. GIBBS. I think a couple points. The voluntary aspect, instead 

of having a regulatory agency coming in and just, you know, with 

a club and a hammer, it is probably not going to work, but when 

we talk about credits and figuring out how much credit, you know, 

compared to, like, a baseline concept, I will just throw this out to 

anybody that wants to try to start answering, but, you know, how 

do you develop what the credit would be and then? 

For example, you have got one farmer doing no till technology, 

maybe doing cover crops, and another farmer isn’t and you start 

the program, would that farm that has been already implementing 

measures to protect water quality, would he get any credit, or, you 

know, how are we—do we establish a baseline or do we kind of figure out what has been the experience of how you start developing 

the program when you have got some participation, people doing 

the right thing or doing the thing that was more environmentally 

friendly than other people? You know, how do we kind of move forward to start? What has been your experience? Anybody want to 

tackle that? 

Go ahead, Mr. Shaffer. 

Mr. SHAFFER. You are absolutely right on the baseline, and this 

is what became one of the problems. You had a baseline and then 

you added on, say, no tilling would add up credits, cover cropping 

would add up credits, but if you have somebody that is a good steward of the land and already voluntarily doing these things, now 

EPA wants to try to come in and say, OK, this is the baseline after 

you are doing all this, therefore, to go beyond that, the only thing 

left is to idle ground. 

Mr. GIBBS. Yeah. 

Mr. SHAFFER. And that is really not acceptable to agriculture. I 

mean, EPA itself said in its TMDLs probably 20 percent of the watershed in the Chesapeake Bay watershed is going to have to be 

idled to meet these numbers. That is a tough pill to swallow. It 

really is. 

19 

Mr. GIBBS. But Ms. Swanson, you talked about the several different States that totally different—— 

Ms. SWANSON. We do. 

Mr. GIBBS [continuing]. Rules. 

Ms. SWANSON. We do. In the Chesapeake region, first of all, for 

example, let’s look at Virginia. Virginia sets its baseline based on 

practices. There are five practices, for example, that the farmer 

needs to have in place if they are appropriate to that farm, and 

then above and beyond those practices, if a farmer can do more, 

then the ‘‘more’’ is tradable. 

In Maryland, they set a performance baseline. Based on the 

TMDL, Maryland has done the math to figure out the per farm allocation, and if the farm is meeting that allocation, through best 

management practices, then if the farm reduces its pollutant load 

still further, that delta is tradable. 

And so what you are doing is you are setting a baseline. Let us 

say I am a farmer that has already done a lot, a huge amount, 

well, then I will be at baseline. If I do more—say, I install a manure-to-energy facility or something like that, that is really getting 

a lot load more, then I can trade those extra credits. If I am a 

farmer that hasn’t done a lot, well, then I have to get to baseline 

before I can avail myself of trading. And that is how it works, because remember, trading is about additionality. It is intended to do 

more and then be able to trade that ‘‘more.’’ That is how it works 

in our region. 

Mr. GIBBS. OK. How do you factor in what the value of the credit 

will be? Is there a model, or how is it—how do you—you know, 

anybody can—you want to take that? Go ahead. 

Ms. SWANSON. Sure. In our region, we have an enormous suite 

of practices. Each one of those practices is then assigned an efficiency. OK? The way that we have negotiated that efficiency is all 

of the States and EPA work together, we consult with experts, we 

consult with all the scientific literature as well as edge-of-field 

monitoring, and we come up with an efficiency, a pound per acre, 

pound per practice, you know, something like that, and then we determine what that practice is worth. 

So, for example, if you put a cover crop on an acre of land, there 

is a per acre efficiency. In our case, we must have 20 different variations on cover crops, maybe more, you know, so let us say you 

have a rye cover crop, and we know how far it is from the closest 

tributary, because there are all kinds of delivery discounters, but 

then you actually have a number and then you can add up the 

numbers. So if you have 27 acres of cover crops in a certain location, then you know exactly what that is worth. 

Mr. GIBBS. OK. Before I yield to Mr. Bishop, I just have another 

quick question for you, I guess, Ms. Swanson. 

Ms. SWANSON. Yes. 

Mr. GIBBS. Since you are, as you said, operating on the largest 

TMDL watershed—— 

Ms. SWANSON. Yes. 

Mr. GIBBS [continuing]. In the country and there is a lot more 

enforcement mechanisms in there, I guess—— 

Ms. SWANSON. Yes. 

20 

Mr. GIBBS [continuing]. In these others, you know, you hear 

about soil and water maybe being the lead agency working on the 

trading credits, so I am assuming that in the Chesapeake, that the 

EPA has been the lead agency, or who has been the lead agency 

or lead entity? 

Ms. SWANSON. EPA has helped coordinate the Chesapeake Bay 

program, but the Chesapeake Bay program is made up of the six 

States, the Chesapeake Bay Commission and the mayor of the District of Columbia as well. 

Mr. GIBBS. First of all, agriculture ground that is—who is doing 

the verification that these practices are being implemented on—— 

Ms. SWANSON. We are actually working on that right now. 

Mr. GIBBS. OK. 

Ms. SWANSON. In the past, we didn’t have the kind of verification 

that is now required with the TMDL, but in general, we tend to 

be reaching towards our districts, for example, our soil conservation districts, the USDA, or the State department of agriculture. 

They have to be working closely with their water quality agency, 

because their water quality agency ultimately has to sign on the 

dotted line. 

So one of the things we are doing right now is developing what 

is called the verification protocols, and it is a set of rules for 

stormwater and for agriculture and for anything basically that 

wants to be credited in that model, and a similar kind of 

verification will be required of trading. Now, I will say this: when 

a trade is involved, the level of verification goes up—— 

Mr. GIBBS. OK. 

Ms. SWANSON [continuing]. A notch higher than if you are just 

getting credit in the model, and rightly so, because usually the purchasers are going to be permits—permitted groups like waste treatment plants or MS–4s are the buyers, so—— 

Mr. GIBBS. OK. That is helpful. 

Mr. Bishop, I yield. 

Mr. BISHOP. Thank you, Mr. Chairman. And thanks to all of you 

for your testimony. 

One theme that sort of runs through the testimony of many of 

you, if not all of you, is the need for there to be a driver in order 

for a water quality trading market to actually function at an appropriate level, and so I have two questions and I will put it to each 

of you to take a crack at it. 

One, is it possible to have a successful trading program in the 

absence of a driver? And then the second is, if the driver is not a 

regulatory driver, which appears to be the most common or the 

most likely driver, what other drivers might possibly work? So 

whoever wants to start. 

Mr. Moore. 

Mr. MOORE. Yes. 

A good case would be the city of Columbus, Ohio, which has 

problems for its drinking water of high nitrates and treating 

atrazine, enormous expense involved. They don’t—as far as their 

NPDES permit, it is not such a big issue, but it is the drinking 

water issue that really brings them to the table to be able to want 

to fund upstream activities. So that might be one example. 

21 

Mr. BISHOP. OK. Mr. Shaffer, and then Mr. Fewell, we will go 

to you. 

Mr. SHAFFER. Yeah. The idea of a driver is a little deceiving. We 

have a driver in Pennsylvania. It is the TMDL’s put on municipal 

treatment plants, but most of those municipal treatment plants 

were able to attain those numbers, so they don’t need to do any 

trading. There is very few of them that really—there are some 

small ones now that are trading, and I have examples of farmers 

that are doing trading with them, but the majority of them, one, 

the constituents, the rate payers, they would rather see their 

money go towards bricks and mortar, so they want the treatment 

plants upgraded rather than some abstract trading. 

Mr. BISHOP. But in your case, the TMDL is in fact the regulatory 

driver, correct? 

Mr. SHAFFER. Correct. 

Mr. BISHOP. OK. 

Mr. SHAFFER. In my opinion. 

Mr. BISHOP. Yes, yes. 

OK. Mr. Fewell. 

Mr. FEWELL. Yeah, Mr. Bishop, I would argue that some driver 

needs to be there, it could be regulatory, but it also can be a threat 

of a regulatory driver. And EPA under the Clean Water Act does 

allow watersheds and regions to do pre-TMDL strategies if there 

is an implementation plan. 

We understand the challenge with a TMDL is EPA cannot force, 

there is no teeth in the TMDL for EPA. It is really at the State 

level for them to figure out how to achieve the goal of the TMDL. 

But with the concerns and anxiety that comes along with 

TMDL’s, if you can promise a watershed that we will hold off on 

a TMDL if you put in place an implementation plan for your watershed, then we will hold off on a TMDL, and so a pre-TMDL and 

threat of a TMDL may be enough to actually create these markets. 

Mr. BISHOP. OK. 

And Mr. Tennant. 

Mr. TENNANT. Just need to again mention that we have reached 

the point that we have on the Ohio River through—without the 

regulatory driver. Brent might say there is some sense of an impending threat of one, but the credits that have been involved so 

far are based on stewardship concerns and can probably continue 

to some certain point, but his mention of the possibility of a preTMDL type of approach is very intriguing and certainly something 

that I think our project partners would like to think about. 

Mr. BISHOP. Ms. Swanson. 

Ms. SWANSON. So we worked with a very conservative economics 

firm, RTI International, and I want to quote, it says, ‘‘for a nutrient credit trading system to work, the first and most critical requirement is to define a measurable and enforceable cap.’’ And in 

our region, of course, I have mentioned that that is the TMDL. 

What we have seen is in some situations, for example with waste 

treatment plants, in Pennsylvania, most of the waste treatment 

plants have decided to just do it on their own and not trade. They 

don’t want to trade for agricultural credits or other credits, and 

that is very clear. It goes back to market preference. They prefer 

a more predictable situation. However, what we have seen in the 

22 

region is that the MS–4s are much more interested. There is a 

much stronger regulatory driver there than ever before, and we are 

seeing that the expense of controlling a pound of urban stormwater 

is so prohibitively expensive, that they are reaching for trades. And 

if you look, for example, in Virginia, a huge number of the trades, 

more than 75 of the trades, have come from Department of Transportation or stormwater demands to buy credits. 

The other thing that we have seen, and my colleague from the 

southern bay talks about this, is that waste treatment plants are 

trading among themselves located within a bubble permit. 

Mr. BISHOP. Thank you all very much. 

My time has expired. 

Just at the risk of being argumentative, it seems to me that a 

regulation or a threat of a regulation is essentially a distinction 

without a difference, and it is basically the same driver. 

But, Mr. Chairman, I will yield. Thank you. 

Mr. GIBBS. Ms. Edwards. 

Ms. EDWARDS. Thank you very much, Mr. Chairman, and thank 

you to the witnesses. 

I have a particular question, because I have been interested in 

the idea, and NACWA’s been very supportive of using green infrastructure techniques around stormwater management, and I am 

looking at the requirements and I hear Director Swanson talking 

about the importance of, you know, sort of where the market gets 

segregated when it comes to urban stormwater, and so I am trying 

to figure out how it is that water systems can be encouraged to use 

green technologies but still have the ability potentially to trade in 

a marketplace that is actually going to make a difference when it 

comes to the nutrient loads. So help me out. 

Ms. SWANSON. Well, your own sewage treatment plan comes immediately to mind with Blue Plains, and Blue Plains is absolutely 

cutting edge when it comes to this. 

They are asking, particularly in your northwestern quadrant, 

‘‘How do we use green infrastructure in place of very, very substantial, for example, CSO tunnels?’’ They are doing that work right 

now. 

And what they need to do is, of course, they need to find the locations where there is a very real green infrastructure advantage and 

then they need to be applying those efficiencies. They need to 

verify, then, that the load reductions are really happening. 

The other thing I would caution is, for the District of Columbia 

to be a winner, they would always have to be looking for upstream 

advantage so that the river water, when it comes tumbling down, 

is cleaner coming into the city. 

If you were putting in green infrastructure south of the city, then 

the citizens of the District would be a loser. And so that is really 

important to consider geography. 

Ms. EDWARDS. And so, when you would think about creating a 

marketplace in which the significant point source—— 

Ms. SWANSON. Right. 

Ms. EDWARDS [continuing]. Elements would not then—I mean, 

there is a part of their requirement that they can’t get around. 

Ms. SWANSON. Yeah. 

23 

Ms. EDWARDS. So what would then be the incentive to develop 

these other techniques? 

Ms. SWANSON. Well, in my mind, that goes back to an enforceable cap. Because if you didn’t have the District of Columbia being 

forced to do these kinds of upgrades, you wouldn’t have the market 

response and you wouldn’t have these conversations going on at the 

level of earnest that they are going on. 

Ms. EDWARDS. So you don’t think a trading market—and I think, 

Mr. Fewell, if you want to comment, you don’t think a trading market would disincentivize the significant point sources from participating in the marketplace and developing new technologies—— 

Ms. SWANSON. No. 

Ms. EDWARDS [continuing]. Or quite the opposite? 

Ms. SWANSON. No. 

Mr. FEWELL. Yeah. Ms. Edwards, I think there is a great opportunity and I have had some great discussions with George Hawkins 

about ways that DC could save money—taxpayer money. 

And instead of requiring Blue Plains to put in additional treatment costs at tens, if not hundreds, of millions of dollars, give them 

the opportunity to use a fraction of that to go up into the watershed, to put some of these practices on farms, to reduce some of 

the nonpoint source pollution. 

And not only will you reduce nutrients and perhaps achieve their 

compliance obligations much more cost-effectively, you are also 

going to be reducing other things, like, perhaps, you know, other, 

you know, contaminants that flow off of agricultural properties. 

Ms. EDWARDS. Thanks. 

And just a, you know, totally random question: But is there a 

way that you look at things like—you know, within, say, the Potomac region—if we are making greater investments in things like 

transit and other areas that actually then help to, you know, lower 

the nutrient contribution, do those things factor into the trading 

market? 

Ms. SWANSON. In my mind, they should. And—— 

Ms. EDWARDS. But they don’t cover—— 

Ms. SWANSON. Well, but they can. Remember, if you are calculating nutrients—and the chairman asked the question earlier— 

how do you know? How do you know what something is worth? 

Well, if you think that you are doing something, say, related to 

transit that is reducing, say, nitrogen deposition from the atmosphere, then you need to convene a panel that can determine scientifically what that action is worth per pound of effort. 

And then, once you know, it can enter into the trading market. 

But you have to have some scientific basis for the worth of the calculation. It can’t just be made up, you know. 

Ms. EDWARDS. Thanks. 

And thank you, Mr. Chairman. 

I mean, I would really love it if we were able to, from, you know, 

a study standpoint, actually take a look at connecting the way that 

we are thinking about water quality and some of our other responsibilities when it comes to developing our transportation infrastructure to see ways in which we can think of these things as related 

and that we could—I don’t know whether it is a study or something 

else, but figure out what that calculation is, because it could proVerDate Aug 31 2005 12:08 Nov 07, 2014 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 P:\HEARINGS\113\WR\3-25-1~1\87287.TXT JEAN
24 

vide a great incentive for this committee, but, also, a real incentive 

for some of our heavily polluting urban areas to think differently 

about their investments and infrastructure. 

Mr. GIBBS. Mr. Davis, do you have any questions? 

Mr. DAVIS. Thank you, Mr. Chairman. 

Sorry. I got caught looking at my phone. I apologize. 

Thank you very much, everyone, for your testimony. Thank you 

for being here today. Very important issue. 

And I want to thank Chairman Gibbs for holding this hearing. 

And I want to thank Ranking Member Bishop for being here. 

And I am still mad at him for throwing me out in the congressional 

baseball game last year; so, I can’t be nice to him here. I will get 

you back this year, buddy. 

Hey, you know, nobody thought we could have fun at these hearings. Right? You guys can smile. It is OK. 

Mr. Shaffer, I have got a question for you. In your testimony, you 

note that the EPA often focuses more on assigning blame than 

finding solutions. I sense a real disconnect between the EPA and 

the ag community. 

And in the Farm Bill, one of my top priorities was to give farmers a place at the table when it came to EPA regulations, and we 

were successful. Ag now has a voice on EPA Science Advisory Committee. 

I want to know from you, sir, what else can be done to bridge 

the gap between the ag community and the EPA especially on the 

issue of water quality trading? 

Mr. SHAFFER. I think, you know, I would like to turn one of Mr. 

Bishop’s comments around. And Mr. Fewell said it, too. 

Why not implement the threat of more regulation? Why not implement reducing the regulation in return for more nutrient trading, reverse that? 

I think that would be a better way to go and more—definitely, 

from agriculture’s point of view, they would have a lot more interest in that. And so that is one way to do it, that I think. 

But, you know, I know a farmer who does trading with a small 

municipal treatment center, and he gets $40 per acre. Now, $20 is 

for no tilling, and $20 is for cover crop. And that barely—that 

doesn’t cover the cost of those two practices. 

But then you add on $3,000 for third-party verification. It really—it is not that lucrative of a deal. So some way we have to get 

better numbers in there because what they are probably saving, 

that small municipal treatment center, is a lot more than what 

they are putting out for a trading thing. 

So we need to have more demand. And maybe a way to do that 

demand, instead of threaten more regulation, is threaten to reduce 

some regulation in return for more practices. 

Mr. DAVIS. Well, I mean, that actually goes into my next question, that you would consider one of the barriers to the operation 

of the marketplace when it comes to our ag community not wanting 

to take advantage because the cost-benefit ratio is not working out 

for them, as you just said. 

Do you have any examples of some other potential barriers? Or 

does anybody else on the panel want to address this question? 

25 

Mr. SHAFFER. Well, one other barrier, as I said, is the fact that 

EPA keeps moving the goalpost. And every time you think you are 

in a position that you could go out and do some trading, if your 

numbers get changed, you throw up your hands pretty quick. And 

that is counterproductive, very counterproductive. 

Mr. DAVIS. Does anybody want to—you know what? We will go 

left to right. 

Mr. Fewell. 

Mr. FEWELL. ‘‘Fewell.’’ 

Mr. DAVIS. ‘‘Fewell.’’ 

Mr. FEWELL. Thank you. 

Mr. Davis, we talked about it briefly, a little bit about baseline. 

Baseline can encourage trading or it can kill trading. 

And if your baseline is too high and you expect your ag producers 

to reduce 80 percent of their runoff before they can even begin to 

trade, they are not going to trade. There is absolutely no incentive 

whatsoever. 

So there does have to be a look at the baseline. That is number 

one. 

Mr. DAVIS. OK. Thanks. 

Mr. Moore. 

Mr. MOORE. Yes. I would like to build on Mr. Shaffer’s point, and 

that was how to reverse the incentive. 

In Alpine Cheese, one of the conservation measures we use is 

called milk house waste. This is what comes out of a dairy parlor 

when they milk the cows, and it is a mixture of a number of things. 

But it goes through a pipe, usually, into a ditch or a stream directly. 

EPA, when we informed them about that, wanted to fine all the 

farmers immediately. And we were able then to make the argument that, if it comes out of a pipe and if they are going to fine 

the farmers, why not be proactive and then give a better credit 

ratio to those same farmers. 

So we actually got a 1-to-1 ratio on that. It was actually adopted 

by other trading plans as well, and it has been a very successful 

plan. So it makes your point. 

Mr. DAVIS. Great. Thank you. Thank you. 

Mister—— 

Mr. PLETL. One point I wanted to make was in regards to the 

concept of the trading ratio. The trading ratio, if, for example, in 

Virginia, is applied to the point source and nonpoint source 

trades—I will give you an example: If a point source like a wastewater facility needed to come up with a thousand credits or pounds 

of nitrogen, they would have to go to—if they wanted to go to a 

nonpoint source, the nonpoint source would have to remove 2,000 

pounds of nutrients to be able to make that trade. 

You have instantly devalued the nutrient credits that are being 

generated by agriculture by putting that ratio into place. And the 

reason that ratio is into place is because there is concerns and 

fears over uncertainty and measurement and verification of the 

credits that are generated by agriculture. 

I would hold that we should go after that uncertainty, find out 

what it is, measure it, and stop putting these kind of arbitrary 

trading ratios and interfering with these trades because, when you 

26 

do things like the baseline effect and then you add the trading 

ratio on top of that, you will not have trading between point source 

and nonpoint source in Virginia. 

Mr. DAVIS. Great. Thank you all very, very much for being here 

and for your testimony and for your educating us on a very important program. 

I yield back. 

Mr. GIBBS. I want to have a little discussion here. We talk about 

point source and nonpoint source trading and the concern—I think 

you just said it—the verification especially on ag. And maybe, Dr. 

Moore, with experience there in the Alpine Cheese project, in your 

working with about—I don’t know—100 or so Amish farmers, I believe, how did the verification program work? Kind of go through 

the process a little bit. 

Mr. MOORE. Sure. That was one of our roles in the program, actually, to bring different parties together to try to lower the transaction cost on the verification. 

We held a meeting between Ohio EPA, Ohio Department of Natural Resources, and the Holmes County Soil and Water Conservation District. 

I can remember it very vividly. It was in the Entomology Building at Ohio—at OARDC, Ohio Agricultural Research and Development Center. 

What we did is we created an MOU between the Ohio EPA and 

the Ohio Department of Natural Resources because they already 

conduct a verification process for—at the soil and water conservation districts. 

So there is a certain percentage of those that they go back and 

then resample after somebody, you know, has put in a conservation 

major just to verify it. 

So we said, you know, ‘‘Why reinvent the wheel when you have 

already got a system like that?’’ So we were able then to get people 

together and create an MOU. That MOU was also used in other 

trading systems. 

Mr. GIBBS. Yes. 

Ms. SWANSON. One thing I would just caution is, at the end of 

the day, the nutrient credit trading program is about improving 

water quality. And when we did our study, what we saw is that, 

even with transaction costs high, the market can be robust—but 

you need some kind of a driver that really pushes it to that robust 

place—then you can require verification and still have a robust 

market. 

In terms of the trading ratios, in our region, none of our States 

operate on a 1-to-1 ratio. None of them do. Not one of them. 

In Virginia, we have a 2-to-1 ratio for point to nonpoint. But even 

in the other States, there is a 10-percent set-aside or a 10-percent 

retirement. So they are operating at least doing a 1.1 to 1. 

And the reason is because, with nonpoint sources, there never is 

that same level of assuredness and, at the end of the day, it is 

about water quality and making sure that you are improving water 

quality, however incremental that may be. So just keep that in 

mind. 

Mr. GIBBS. Yes. 

27 

Mr. FEWELL. Mr. Chair, can I also emphasize? I think, as Ms. 

Swanson has talked about, this is all about improving water quality, but I think the benefits that I have seen and many of us have 

seen with these trading programs is you are getting folks to actually work together to resolve big, complicated problems. 

So when you have the agriculture community talking with watershed groups, environmental groups and municipal leaders, it is a 

good thing, because people are actually trying to solve big problems, they feel good about it, and it is working in many cases. 

I think Peter can attest to that in the ORB. 

Mr. TENNANT. Yeah. The statement I made in our project video 

that, once you get people sitting around the table talking about our 

problem instead of pointing fingers, you make progress, when we 

all claim ownership and say, ‘‘How can we work together to solve 

it?’’ 

Mr. GIBBS. I guess, in that realm—I know, of course, Dr. Moore— 

you know, that Alpine Cheese project started back in the early 

2000s. And I know Mr. Tennant has a project that is going off and 

others that have been mentioned. 

Is there any policy initiatives that should be—at the Federal 

level that should be addressed or, you know, what hurdles have 

there been that we could look at, that we should look at? 

Because, you know, personally—I think Mr. Bishop is, too—we 

want a program like this to work because we have all got the end 

goal as cleaner water for our water bodies across the country. And 

we don’t want the Federal Government to be an impediment to 

that. But go ahead. You got the gist of my question, I guess. 

Mr. FEWELL. Yeah. Mr. Chair, first of all, you know, having the 

lead at EPA, EPA is definitely committed to doing this, but they 

realize it is going to happen at the State and local level. 

I think one of the biggest threats right now is perhaps zealous 

litigants, those that are opposed to trading that see it as an antithesis to the Clean Water Act. That is a big threat. 

Now, there may be some disagreement on this panel or even in 

this room on whether or not we need some type of authorizing rule. 

I think that that actually—in my personal view, I think that 

would be helpful to have that in place to protect these trading programs for doing the things that they need to do. 

Mr. GIBBS. I guess, just to follow up on that, I want to ask Dr. 

Moore: Has Ohio set up any rules on trading rules? Has that had 

anything—— 

Mr. MOORE. We have formal trading rules in Ohio now. Uh-huh. 

Mr. GIBBS. And, of course, obviously, the three States over here. 

Ms. Swanson does. 

Pennsylvania? 

Mr. SHAFFER. Yeah. We have formal trading rules. And, like I 

said, I still get back to everybody has to be treated fairly or it is 

not going to work. It has to be a win for both sides. 

And if you let the States put that together without EPA interfering in it and setting guidelines and holding their gun at somebody’s head, I think things are just going to work better and that 

is going to be—— 

Mr. GIBBS. This goes back to my old premise of a one-size-fitsall policy out of Washington, DC, is probably not too workable. 

28 

Virginia, The Hamptons? 

Mr. PLETL. Yes. We have got rules for trading in Virginia, quite 

extensive. We have got statute as well as regulation and guidance. 

Mr. GIBBS. OK. So my final thought on this—did I see a hand 

go up? 

Ms. SWANSON. Yes. 

Mr. GIBBS. Go ahead. 

Ms. SWANSON. Just something for your own benefit, Mr. Chairman, is, in the Chesapeake—because we have three such different 

State programs—the EPA is now issuing a series of trading memoranda—technical memoranda—on different aspects of trading in 

which they are issuing guidance to try to get some level of uniformity amongst the different States. 

Certain things related to baseline, offsets, and other issues are 

covered that that EPA is considering when evaluating trading in 

the context of the TMDL. So you may want to look at the suite— 

there is about 12 of them—of technical memoranda dealing with 

trading-related issues. 

Mr. GIBBS. Yes, Mr. Shaffer. 

Mr. SHAFFER. You hit the nail on the head when you said one 

size doesn’t fit all. The topography in Pennsylvania is entirely different than the topography in Maryland or Virginia or Ohio. So 

that is why you have to have the States have the affordability of 

designing their own programs. 

Mr. GIBBS. And I am in agreement. I think the challenge is when 

you have watersheds that go across State lines. And, you know, we 

had some of that with acid rain, I think, years ago, you know, that 

discussion. 

So a broad set of parameters might make some sense as long as 

it doesn’t get too much into details unless States give much flexibility. 

We have been trying to do some of that in some other areas in 

this committee, you know, the relationship between the U.S. EPA 

and State EPAs and how they implement the Clean Water Act, in 

general. 

And it is a challenge that, you know, needs worked on, but, you 

know, I just think that, you know, the States can adopt policies. 

And the other final thought, you know, for this thing to work the 

way it really needs to work, especially when you are trying to address the nonpoint sources, you know, the voluntary aspect, you 

have got a real unique situation, I think, in the—with your TMDL 

issue. 

But a lot of watersheds aren’t at that point yet where they can 

do some things like what was commented earlier, that they head 

off a regulatory hammer and address that and—because, you know, 

the people in the agricultural sector and other sectors, you know, 

want to do the right thing. 

And, you know, our Alpine Cheese is a great example where we 

had a plant that wanted to expand. You know, without doing this, 

they were going to have to leave, close it down. And we cleaned up 

the watershed and we kept the milk producers, dairy farmers, with 

a market. And so it was a win-win. 

So this can be done in a way that it is a win-win situation, but 

you have got to have some common sense and make some sense. 

29 

But it has been great hearing from all of you today. 

And I don’t know if Mr. Bishop—— 

Mr. BISHOP. If I could, Mr. Chairman. 

Mr. GIBBS. Yeah. Go ahead. 

Mr. BISHOP. Just real quick, I think a very important point that 

has been made is the goal here is the net improvement in the overall quality of the water body. 

And that suggests that two pieces of this process require very 

careful attention. One is verification, that is to say, that the credit 

that is being purchased actually exists. And then the second is the 

issue of ratios, as to whether or not a quantity, if you will, of a nutrient at point source is the same as the quality of a nutrient—or 

quantity—pardon me—further away from the body of water that 

you are trying to protect. 

And so I guess my question—and I would ask that whoever answers it to be exceedingly brief—is: Are the mechanisms that we 

currently have in place to deal with verification and ratios—and I 

know they differ from State to State—but are those mechanisms 

adequate or is there some improvement that can be undertaken either by the States or with some incentive from the Feds? 

Yeah, Mr. Shaffer. 

Mr. SHAFFER. One idea I think would be good is to involve the 

soil and water conservation districts and have them as part of the 

verification process, because they already work with the components and it could be where you could pay them a nominal fee to 

have them do the verification instead of a third party that is charging an exorbitant fee. So that is just an idea. 

Thank you. 

Mr. GIBBS. That is exactly what happened in the Alpine Cheese 

example. Some water got involved because of the culture—the 

Amish culture. 

Having people from Chicago or Washington, DC, come out to the 

farms probably wasn’t too amenable and they didn’t have the working relationship and that there was a trust factor there. 

So I think for this to really work, the local, certainly, water people need to be really the facilitators in the agricultural sector. 

Mr. MOORE. Exactly. And just to follow up on that, initially, the 

Ohio EPA had asked if they could do the verifying, and that is 

when we had the MOU. 

But, in addition to that, Soil and Water does go out to the farms, 

and that is acceptable to the farming community because of that 

high level of trust. 

Mr. BISHOP. Dr. Pletl. 

Mr. PLETL. One thing to consider is, when we do TMDLs—and 

that, you know, tends to be the regulatory driver—there is a lot of 

focus on the front end of doing all the calculations and coming up 

with, ‘‘OK. The point sources are going to get this load, and the 

nonpoint sources are going to get these loads.’’ 

But, at that point, the discussion that includes all the parties 

kind of stops. All of a sudden the point sources know what they are 

supposed to do, and the nonpoint sources now are under the gun 

to do things that they, you know, are not prepared to do. 

I would argue that that process of working together on what the 

TMDLs should look like should continue. There should be an open 

30 

discussion of all the members on a watershed of how the best— 

what is the best approach to removing nutrients from that watershed and what is the best way to do it, but at the lowest cost. 

So I think the way that we go about addressing TMDLs is a bit 

outdated and we need to start thinking about more of a community-based approach to addressing these problems instead of ‘‘we,’’ 

‘‘they,’’ and all it does is cause a lot of this between the parties. 

Mr. TENNANT. I am in total agreement with what has been said 

about the verification aspect. I wanted to just say something about 

the ratios. 

In our Ohio River Basin project, we are relying on a water quality model that allows us to equate what is a pound of nitrogen removed in Columbus on the Scioto River, how does that relate to a 

pound of nitrogen removal required at Cincinnati downstream on 

the Ohio River. 

We have that model up and running for about 50 percent of the 

watershed, including pretty much all of the State of Ohio. Where 

we have that in place gives us some degree of certainty about the 

equivalency of the two sides of the trade. We need to extend that 

model to the rest of our watershed in order to be able to go basinwide to include all of our Ohio River watershed. 

Mr. BISHOP. Ms. Swanson. 

Ms. SWANSON. At the expense of bringing up something that 

might be a little bit uncomfortable, you need to consider transparency. All of our States have had to do this since confidentiality 

has traditionally been extended to farmers. 

However, in the situation of a trade, we have had to rethink that 

to determine whether, in cases where a point source of some type 

is buying credits from a farm, did those practices need to be more 

fully disclosed. 

And so, as you pursue trading programs in other areas, keep that 

in mind, because the general public is going to want to know how 

those trades occurred and what are they trading for. Issues of farm 

confidentiality do come up. 

Mr. BISHOP. OK. All right. 

I am sorry. Dr. Moore. 

Mr. MOORE. Yes. I have one thing I would just like you to consider, and that is the TMDLs are normally calculated based on normal summer flows, is typical. 

I mean, they bring other things into consideration, but one thing 

that seems to be quite missing in the analysis are rain events. 

Mr. BISHOP. I am sorry. Are—— 

Mr. MOORE. Rain events or, you know, big storms. 

And most of the phosphorous and nitrogen is actually exported 

during those really big rain events, as any farmer knows, as they 

have seen their soil wash away. 

So, you know, that is something that needs to be addressed, and 

I don’t think we have addressed it enough. 

Mr. BISHOP. OK. All right. Thank you all very, very much. It has 

been a very helpful hearing. Thank you. 

Mr. GIBBS. Thank you, too. 

And I want to thank you all for coming in. It has been helpful. 

And before we close here, I would ask unanimous consent that 

the hearing record be kept open for 30 days after this hearing in 

31 

order to accept other submissions of written testimony for the hearing record. 

Without objection, so ordered. 

And, again, thank you. And that concludes today’s hearing. 

[Whereupon, at 4:46 p.m. The subcommittee was adjourned.] 

32 


Insert offset folio 9 here 87287.009
33 


Insert offset folio 10 here 87287.010
34 


Insert offset folio 11 here 87287.011
35 


Insert offset folio 12 here 87287.012
36 


Insert offset folio 13 here 87287.013
37 


Insert offset folio 14 here 87287.014
38 


Insert offset folio 15 here 87287.015
39 


Insert offset folio 16 here 87287.016
40 


Insert offset folio 17 here 87287.017
41 


Insert offset folio 18 here 87287.018
42 


Insert offset folio 19 here 87287.019
43 


Insert offset folio 20 here 87287.020
44 


Insert offset folio 21 here 87287.021
45 


Insert offset folio 22 here 87287.022
46 


Insert offset folio 23 here 87287.023
47 


Insert offset folio 24 here 87287.024
48 


Insert offset folio 25 here 87287.025
49 


Insert offset folio 26 here 87287.026
50 


Insert offset folio 27 here 87287.027
51 


Insert offset folio 28 here 87287.028
52 


Insert offset folio 29 here 87287.029
53 


Insert offset folio 30 here 87287.030
54 


Insert offset folio 31 here 87287.031
55 


Insert offset folio 32 here 87287.032
56 


Insert offset folio 33 here 87287.033
57 


Insert offset folio 34 here 87287.034
58 


Insert offset folio 35 here 87287.035
59 


Insert offset folio 36 here 87287.036
60 


Insert offset folio 37 here 87287.037
61 


Insert offset folio 38 here 87287.038
62 


Insert offset folio 39 here 87287.039
63 


Insert offset folio 40 here 87287.040
64 


Insert offset folio 41 here 87287.041
65 


Insert offset folio 42 here 87287.042
66 


Insert offset folio 43 here 87287.043
67 


Insert offset folio 44 here 87287.044
68 


Insert offset folio 45 here 87287.045
69 


Insert offset folio 46 here 87287.046
70 


Insert offset folio 47 here 87287.047
71 


Insert offset folio 48 here 87287.048
72 


Insert offset folio 49 here 87287.049
73 


Insert offset folio 50 here 87287.050
74 


Insert offset folio 51 here 87287.051
75 


Insert offset folio 52 here 87287.052
76 


Insert offset folio 53 here 87287.053
77 


Insert offset folio 54 here 87287.054
78 


Insert offset folio 55 here 87287.055
79 


Insert offset folio 56 here 87287.056
80 


Insert offset folio 57 here 87287.057
81 


Insert offset folio 58 here 87287.058
82 


Insert offset folio 59 here 87287.059
83 


Insert offset folio 60 here 87287.060
84 


Insert offset folio 61 here 87287.061
85 


Insert offset folio 62 here 87287.062
86 


Insert offset folio 63 here 87287.063
87 


Insert offset folio 64 here 87287.064
88 


Insert offset folio 65 here 87287.065
89 


Insert offset folio 66 here 87287.066
90 


Insert offset folio 67 here 87287.067
91 


Insert offset folio 68 here 87287.068
92 


Insert offset folio 69 here 87287.069
93 


Insert offset folio 70 here 87287.070
94 

Æ 


Insert offset folio 71 here 87287.071