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93–393 PDF 2015

S. HRG. 113–700 

NUTRIENT TRADING AND WATER QUALITY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON WATER AND WILDLIFE 

OF THE

COMMITTEE ON 

ENVIRONMENT AND PUBLIC WORKS 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

MAY 22, 2013 

Printed for the use of the Committee on Environment and Public Works 

( 

Available via the World Wide Web: http://www.gpo.gov/fdsys 
(II) 

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

BARBARA BOXER, California, Chairman 

MAX BAUCUS, Montana 

THOMAS R. CARPER, Delaware 

FRANK R. LAUTENBERG, New Jersey 

BENJAMIN L. CARDIN, Maryland 

BERNARD SANDERS, Vermont 

SHELDON WHITEHOUSE, Rhode Island 

TOM UDALL, New Mexico 

JEFF MERKLEY, Oregon 

KIRSTEN GILLIBRAND, New York 

DAVID VITTER, Louisiana 

JAMES M. INHOFE, Oklahoma 

JOHN BARRASSO, Wyoming 

JEFF SESSIONS, Alabama 

MIKE CRAPO, Idaho 

ROGER WICKER, Mississippi 

JOHN BOOZMAN, Arkansas 

DEB FISCHER, Nebraska 

BETTINA POIRIER, Majority Staff Director 

ZAK BAIG, Republican Staff Director 

SUBCOMMITTEE ON WATER AND WILDLIFE

BENJAMIN L. CARDIN, Maryland, Chairman 

THOMAS R. CARPER, Delaware 

FRANK R. LAUTENBERG, New Jersey 

SHELDON WHITEHOUSE, Rhode Island 

JEFF MERKLEY, Oregon 

KIRSTEN GILLIBRAND, New York 

JOHN BOOZMAN, Arkansas 

JAMES M. INHOFE, Oklahoma 

JOHN BARRASSO, Wyoming 

JEFF SESSIONS, Alabama 

DEB FISCHER, Nebraska 
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C O N T E N T S 

Page 

MAY 22, 2013 

OPENING STATEMENTS 

Cardin, Hon. Benjamin L., U.S. Senator from the State of Maryland ................ 1 

Boozman, Hon. John, U.S. Senator from the State of Arkansas ......................... 4 

Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma, prepared 

statement .............................................................................................................. 5 

Vitter, Hon. David, U.S. Senator from the State of Louisiana ............................ 6 

WITNESSES 

Shapiro, Michael H., Deputy Assistant Administrator, Office of Water, U.S. 

Environmental Protection Agency ...................................................................... 7 

Prepared statement .......................................................................................... 9 

Responses to additional questions from: 

Senator Cardin .......................................................................................... 19 

Senator Vitter ............................................................................................ 21 

Senator Boozman ....................................................................................... 27 

McGee, Beth, Senior Water Quality Scientist, Chesapeake Bay Foundation ..... 37 

Prepared statement .......................................................................................... 40 

Responses to additional questions from: 

Senator Cardin .......................................................................................... 46 

Senator Vitter ............................................................................................ 47 

Response to an additional question from Senator Boozman ......................... 48 

Hawkins, George, General Manager, D.C. Water ................................................. 73 

Prepared statement .......................................................................................... 75 

Responses to additional questions from Senator Cardin ............................... 82 

Response to an additional question from: 

Senator Vitter ............................................................................................ 82 

Senator Boozman ....................................................................................... 83 

Matlock, Marty, Professor, Department of Biological and Agricultural Engineering, Area Director, Center for Agricultural and Rural Sustainability, 

University of Arkansas ........................................................................................ 84 

Prepared statement .......................................................................................... 85 

Responses to additional questions from Senator Vitter ................................ 90 

Response to an additional question from Senator Boozman ......................... 91 

Bodine, Susan, Partner, Barnes & Thornburg, LLP ............................................. 92 

Prepared statement .......................................................................................... 94 

Responses to additional questions from Senator Vitter ................................ 108 

Response to an additional question from Senator Boozman ......................... 111 

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NUTRIENT TRADING AND WATER QUALITY 

WEDNESDAY, MAY 22, 2013 

U.S. SENATE, COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS, SUBCOMMITTEE ON WATER AND WILDLIFE, Washington, DC. 

The subcommittee met, pursuant to notice, at 2:30 p.m. in room 

406, Dirksen Senate Building, Hon. Benjamin Cardin (chairman of 

the subcommittee) presiding. 

Present: Senators Cardin, Vitter, and Boozman. 

OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, 

U.S. SENATOR FROM THE STATE OF MARYLAND 

Senator CARDIN. Let me welcome you all to the Subcommittee on 

Water and Wildlife. I particularly want to thank Senator Boozman, 

the ranking Republican member of the Subcommittee, for his help 

in putting together today’s hearing. The two of us had a conversation about how we thought it would be helpful to have an open discussion about nutrient trading, to learn more as to how it could be 

a useful tool to help clean up our waters, as well as provide certain 

incentives, particularly to farmers, to help us in meeting our environmental needs. 

So with that in mind, we decided to have this hearing. We have 

two panels, and I want to thank all the panelists for their participation and being here. I am going to ask consent to put my full 

statement into the record. I will just summarize very briefly because I really want to get to the witnesses and to the discussion 

on nutrient trading and how it can work. 

Nutrient pollution is well documented, its harm on our waters 

and our environment. We have had hearings in the Subcommittee 

on nutrient pollution. It comes from nitrogen and phosphorus and 

creates deadly algal blooms. We have dead zones that we know 

about throughout the globe. 

It was interesting, the staff gave me the numbers which I find 

to be shocking. There are over 400 dead zones today, globally. But 

if you go back to 1995, there were about 305. So we have increased 

dramatically just in the last 15, 20 years. If you go back to 1980, 

there were 162 dead zones. And back to the 1960s, there were 49 

dead zones. So we have seen an alarming increase in the number 

of dead zones caused by too much of the nitrogen and phosphorus 

pollutants going into our waters. 

I am particularly aware of this, since one of the dead zones is 

the Chesapeake Bay, which I think the members of this committee 

have heard me talk about on more than one occasion, as to what 
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we need to do to help the Chesapeake Bay. We have been working 

on cleaning up the Chesapeake Bay in a formal way with cooperation among the various States, including the Federal Government, 

for now over 30 years. We have made tremendous progress in 

cleaning up the Chesapeake Bay. 

But we still have tremendous work ahead of us. And the expansion of dead zones is one of the major problems that we have to 

deal with from the nutrients that are going into the Bay that are 

causing these dead zones. They come from farming, they come from 

storm runoff, they come from the way we handle our wastewater. 

All that produces nutrients that go into our waters. So we need to 

deal with all of those issues. 

The largest single source is from farming. And it is one of the 

areas that has the greatest promise for reduction, because the cost 

issues associated with reducing nutrient pollution going into our 

waters from farming are manageable from the point of view of cost 

with some of the things that can be done. So what we are looking 

at is how we can make progress in reducing the nutrient levels in 

the most cost-efficient way. If farmers do more than is required, 

then they could have credits that could be sold in a nutrient trading program which seems to be a win-win situation. Less costly 

ways of dealing with pollutants, a revenue source for farmers, and 

we are all working together. Simple enough. I am sure there are 

more complications than that. 

And that is the reason for this hearing. The reason is to learn 

from the experts how a nutrient trading program could be organized. I know States do have nutrient trading programs. But if you 

are talking about a multiple-State trading program, it gets more 

complicated. And how would that be done, how would we evaluate 

to make sure that indeed we are achieving the reductions that we 

think are right?. How are we dealing with the equity issues to 

make sure that we are not creating zones of pollution at the cost 

of other areas? How do we make sure that we have achieve our objectives in the most cost-effective way, do it in a fair way, and 

make sure that at the end of the day we really have served the 

public interest the way that we should? 

We need a national discussion, my last point on this. States can 

do a limited amount, Maryland can be as aggressive in the Bay as 

any entity could be. But the Bay involves six States and the District of Columbia. You need to have the Federal guidelines on how 

we can work together on these large regional bodies of water, so 

that we can make the type of progress that we need. 

With that, let me turn it over to Senator Boozman, then we will 

hear from our witnesses. 

[The prepared statement of Senator Cardin follows:] 

STATEMENT OF HON. BENJAMIN L. CARDIN, 

U.S. SENATOR FROM THE STATE OF MARYLAND

Good afternoon. Thank you to my colleagues and to our witnesses for your participation today. During the last Congress, this subcommittee held a hearing concerning nutrient pollution and the incredible harm it is inflicting upon our Nation’s 

waterways. The goal of today’s hearing is to explore the potential of market-based 

nutrient credit trading as a tool for addressing that pollution. 

Nutrient pollution from nitrogen and phosphorus has consistently ranked as one 

of the top causes of degradation in some U.S. waters for more than a decade. It results in significant water quality problems including harmful algal blooms, hypoxia 
3 

(low oxygen levels), and declines in wildlife and wildlife habitat. These, in turn, 

harm the fishing, recreation, and service industries that are dependent on the 

health of those waterways. Nutrient pollution is a notable problem throughout the 

Nation, but it is particularly acute in the Chesapeake Bay. 

Excess runoff and discharges of nutrients from farms, paved surfaces, wastewater 

treatment plants, and other sources are responsible for creating the excess algal 

growth that degrades water quality and harms the ecology of impacted water bodies. 

Algal growth in turn fosters aquatic dead zones, destroying fisheries and recreational waterways. There are more than 400 dead zones around the globe today, 

up from 305 in 1995, 162 in the 1980s, and just 49 in the 1960s. The Chesapeake 

Bay contains one of the most famous of these zones. 

In the Bay, in the past two decades, the number of working oystermen has decreased 92 percent. Oystering once supported over 6,000 Maryland families. Today 

only 500 oystermen remain. This is just one example of not only the environmental, 

but also the economic devastation that nutrient pollution can cause. 

Agricultural runoff represents the largest proportion of nutrient pollution and offers the greatest opportunity for achieving meaningful nutrient reduction through 

trading. Nutrient trading may provide a cost-effective market-based mechanism for 

accelerating water quality improvements. As such, it would also have the added 

benefit of incentivizing farmers to contribute actively toward water clean-up efforts. 

With nutrient trading, entities that are able to reduce runoff of nutrients, such 

as nitrogen, below target levels are able to sell their surplus reductions as credits 

to entities facing higher nutrient reduction costs, reducing the overall nutrient load 

in the watershed. Today’s hearing will help us to understand the extent to which 

ongoing nutrient trading programs are effective, and to explore the possible outlines 

of a Federal, interstate nutrient trading framework. 

From our witnesses, we will seek information about what standards of measurement and verification must be in place for a nutrient trading scheme to be reliably 

effective and environmentally sound. Further, we will seek to understand how to 

build fairness into a nutrient trading system, and how to avoid unfairly burdening 

some communities with added pollution. 

To these ends, we have invited two panels of witnesses to today’s hearing. They 

will report on the functions of current State level nutrient trading programs, the 

authorities of the Government to create an interstate trading program, and the challenges of ensuring transparency and verifiability in any program of that sort. 

On our first panel, Mr. Shapiro, Deputy Assistant Administrator of the Environmental Protection Agency Office of Water, will present the EPA’s role in supporting 

current trading programs. He will also discuss the role of nutrient trading in an 

overall water quality improvement strategy. He will address what authorities or resources the EPA has or needs in order to create an interstate trading program or 

to expand trading to other watersheds. Mr. Shapiro will be able to give insight into 

what a federally managed interstate program might entail. 

In the second panel, we will hear from several experts in the field about how an 

interstate nutrient trading program might be beneficial, and the challenges inherent 

in administering such a framework effectively. Our witnesses represent the perspectives of those involved in current nutrient trading programs, those who would be 

potential buyers of credits if an interstate market were to develop, and those who 

have concerns about the potential effectiveness of nutrient trading. We will also 

hear from an academic who has extensively studied market-based approaches to improving water quality. 

The Water and Wildlife Subcommittee has a duty to ensure that the Nation’s 

water quality laws are actually working and producing results. There is an ongoing 

debate about the appropriateness of the Federal role in nutrient reduction. Some 

argue that policing this runoff is an issue best left up to the States. Well, in Maryland, the State has spent $100 million a year over the past decade on nutrient reduction and improving the Bay. In spite of the State’s concentrated efforts, the 

health of the Bay is still diminished. 

The key to the Bay’s restoration lies in recognizing that the Bay is merely the 

most obvious part of a much larger watershed. The Chesapeake Bay’s watershed encompasses six States and the District of Columbia. Maryland’s efforts alone cannot 

address runoff that originates across its borders. We must address the pollution in 

the Chesapeake by dealing with all the pollution in the entire watershed. This is 

a watershed-wide problem and the only real remedy lies in watershed-wide solutions. Thus, the State specific nutrient trading programs currently in existence may 

not be sufficient. A coordinated effort is necessary to restore this national treasure. 

The same is true of other water bodies across the Country, ranging from the Great 

Lakes to the Gulf of Mexico, and from Long Island Sound to San Francisco Bay. 
4 

Today’s hearing will explore whether nutrient pollution can be mitigated by collaborative efforts and a coordinating role for Federal agencies. I want to thank our 

witnesses for joining us today to assist in our efforts to understand and assess the 

possibilities of nutrient trading programs. 

OPENING STATEMENT OF HON. JOHN BOOZMAN, 

U.S. SENATOR FROM THE STATE OF ARKANSAS 

Senator BOOZMAN. Thank you, Mr. Chairman. It really is an 

honor to serve with you on this Committee. We were visiting earlier, this is not the most glamorous work in the world, but it is so 

important. It really does affect so many of our constituents 

throughout America. 

I appreciate your holding the hearing today on nutrient trading 

and water quality, and I do appreciate your efforts for us to work 

together on a bipartisan effort to try and address these very, very 

important problems. We were able to come together and reintroduce legislation to reauthorize the Water Resources Research Act 

last week. Our bill would continue support for water resources research institutes located at land grant universities in each State. 

The work at these institutes continues to be critical for our States 

that seek to implement nutrient trading and other innovative approaches to water quality and quantity challenges. 

The Water Resources Research Act is one of the most effective 

Federal research programs when it comes to leveraging investment. 

Each Federal dollar must be matched with 2 dollars of non-Federal 

support. Back at home we have the Arkansas Water Resources 

Center at the University of Arkansas. Dr. Brian Haggard is the director, and he has performed a lot of work with one of today’s witnesses, Dr. Marty Matlock. 

Today I am eager to hear from each of our witnesses, but I very 

much look forward to Dr. Matlock’s testimony. In our State, people 

across the political spectrum and diverse backgrounds know that 

Dr. Matlock is a go-to expert if you want a fair and impartial assessment of water quality challenges. I also want to thank Mr. 

Shapiro, Dr. McGee, Mr. Hawkins, and Ms. Bodine for being here 

today. I have known Susan for 12 years. When I served on the 

House and was on T&I, she was the staff director of the Water Resources and Environment Subcommittee, kept me straight. So 

again, we appreciate her being here, and I appreciate her expertise. 

Her knowledge and professionalism were well respected by members on both sides of the aisle. Again, I very much look forward to 

your testimony. 

The topic of today’s hearing, nutrient trading, is complicated, and 

it is interesting. Efforts over the last 20 years or so to promote nutrient trading have revealed both significant potential and serious 

pitfalls. On the upside, nutrient trading has the potential to help 

achieve reasonable water quality goals at the lowest possible cost. 

On the downside, landowners and point sources that have witnessed various EPA actions may be skeptical about the long-term 

benefits and costs of participating in nutrient trading programs. 

The lack of cooperative federalism between EPA and the States has 

created a spirit of distrust in many of our communities. Today, I 

believe that these distinguished witnesses may offer us insights on 

ways to promote cost-effective solutions to legitimate water quality 

concerns. 
5 

Finally, I want to acknowledge that Senator Inhofe can’t be here 

today, but I know he has a very serious interest in this subject. So 

I ask unanimous consent that Senator Inhofe’s statement be included in the record. 

Senator CARDIN. Without objection, it will be included. 

[The prepared statement of Senator Inhofe follows:] 

STATEMENT OF HON. JAMES M. INHOFE, 

U.S. SENATOR FROM THE STATE OF OKLAHOMA

As an avid sportsman and water enthusiast, water quality is of particular concern 

to me. And it is to Oklahoma as well. 

Fortunately, Oklahoma is the leader in managing waterway nutrient content levels. The Oklahoma Water Resources Board, Oklahoma Department of Environmental Quality, and the Oklahoma Conservation Commission all work well together 

to pair conservation programs to reduce the number of impaired water bodies 

around the State. 

Knowing how successfully Oklahoma has managed its waterways, I am always 

concerned that EPA is working to set a national standard for nutrient levels across 

the country. While no one will deny the fact that high nutrient levels can cause 

problems, establishing a one-size-fits all policy does not make any sense. 

National standards may be appropriate for toxic substances, but nitrogen and 

phosphorus are naturally occurring in widely varied concentrations. They are necessary components of healthy ecosystems, and different ecosystems will be healthy 

with different water nutrient levels. A fair comparison is the caloric intake of different people. My grandsons who play football and tennis should have a higher caloric intake than I do; it would be silly to set a caloric intake standard that is the 

same for both of us. Similarly, a single number for nitrogen or phosphorus levels 

is not often an accurate indicator the health of the ecological or the water’s quality. 

A national standard for nutrient levels in water bodies could be a disaster if applied in Oklahoma. States should be making decisions about appropriate standards. 

In Oklahoma, having this discretion is of utmost importance because our State is 

so diverse. With so many lakes, we have more shoreline than any other State in 

the country; but the western part of our State is relatively dry, and the eastern part 

of our State gets a lot of rainfall. The soil changes as you move across the State, 

and the land uses do as well. All of these things impact nutrient levels in Oklahoma’s waterways. Knowing this, even having a nationally mandated State-wide 

standard would be inappropriate. Each waterway is unique, and the State of Oklahoma has proven that it is well equipped to consider different waterway factors like 

biology, sunlight, optimal stream substrate, stream flow, temperature, and background water chemistry to determine appropriate nutrient levels and then use conservation programs to manage any pollution problems that exist. 

These efforts have resulted in nutrient loading reductions of between 60 percent 

and 70 percent in Oklahoma’s highest priority watersheds. Many waters have been 

taken off of the 303(d) list of impaired waters, and we’ve been ranked as one of the 

top five States in the Nation for estimated nutrient load reductions due to the implementation of the Clean Water Act’s 319 program. In addition, Oklahoma has established numeric nutrient criteria for some waterbodies since it was the best approach to address nutrient loading in those specific instances. It is this combination 

of approaches that makes Oklahoma successful in addressing nutrients. 

EPA’s decisions to reduce funding for programs that actually work—like the 319 

program and the SRF—in exchange for increased funding for global warming activities, have put a strain on Oklahoma’s ability to expand on the good conservation 

work that has already been done. 

Nutrient reduction credit trading may be an innovative and helpful program to 

help large metropolitan areas with significant point source polluters address their 

problems; while there has been some interest in this concept in Oklahoma, again, 

one size does not fit all and it is not applicable or workable in all instances. To my 

knowledge, there is nothing preventing any State from setting up this kind of arrangement should it so choose. 

But to the extent that we are talking about expanding this type of proposal, we 

need to take it one step at a time, not rush to judgment, and certainly should not 

use it as an opportunity to impose any national nutrient standards or even force 

the States to establish and maintain State-wide standards. 

As I said before, I strongly believe that States should be in the driver’s seat when 

it comes to considering the nutrient levels of their waterways. But States should not 
6 

be forced to impose certain standards, nor should they be required to implement 

credit trading schemes if they will not serve the interest of the State. 

I thank the Chair for allowing the opportunity to make opening statements, and 

I look forward to hearing from the panel. 

Senator BOOZMAN. His schedule, as we all know, has been severely interrupted by the devastation in Oklahoma. I know that 

our thoughts and prayers are with those people that have suffered 

such a tragedy. 

On that somber note, again, I want to thank the Chairman and 

say that I look forward to our witnesses’ testimony today. I yield 

back. 

Senator CARDIN. Senator Boozman, thank you very much. Our 

prayers and thoughts are with the people of Oklahoma. As many 

of us have already said, we are going to do everything we can to 

help as a Federal partner in that regard. 

Senator Vitter. 

OPENING STATEMENT OF HON. DAVID VITTER, 

U.S. SENATOR FROM THE STATE OF LOUISIANA 

Senator VITTER. Thank you, Mr. Chairman. I thank you and the 

Ranking Member of the Subcommittee for this important hearing. 

I will submit my full opening statement for the record as well as 

some questions. 

I just want to underscore what the Ranking Member said. This 

is a pretty new idea. It could offer some potential and benefits. But 

I fully understand if the ag community in particular is skeptical. 

There has been a real attack on ag producers by the EPA in many 

regards. Most recently with the Agency’s release of personal and 

confidential business information of certain operations, and a litany 

of regulations in an effort to expand the Agency’s jurisdiction. 

So there is a high level of distrust. Given that, I think we need 

to fully vet any ideas like this, because there is that natural skepticism. But I want to learn more, and thank you for the hearing. 

Senator CARDIN. Without objection, your statement will be made 

part of the record. 

[The prepared statement of Senator Vitter follows:] 

STATEMENT OF HON. DAVID VITTER, 

U.S. SENATOR FROM THE STATE OF LOUISIANA

Mr. Chairman, I would like to thank you for calling today’s hearing. I would also 

like to thank our witnesses for testifying before us this afternoon. 

Today, we are here to discuss whether nutrient trading can be a cost-efficient 

mechanism to help meet water quality goals. 

In theory, nutrient trading has the potential to provide point sources with the 

flexibility needed to achieve water quality goals in a more cost-efficient manner, 

while at the same time providing incentives to nonpoint sources to reduce their pollution loads. The emphasis on potential savings is important. 

While I support the overall goal of reducing costs associated with meeting water 

quality goals, nutrient trading is a relatively new idea and more information is 

needed to assess the effectiveness of these programs. In practice, programs tend to 

work differently than in theory and we need to make sure that we fully understand 

the risks and rewards before moving forward. This is why we are here today. 

The potential benefits from nutrient trading programs can only be realized if programs are appropriately structured and implemented. Regulators should not impose 

rigorous standards at the outset that would discourage or inhibit States and communities from pursuing nutrient trading options. Rather than a ‘‘one-size-fits-all’’ Federal approach, States should be given sufficient time and flexibility to develop these 

programs and to figure out what works best for local communities. 
7 

I can fully understand if the agricultural community is skeptical. There has been 

a consistent attack on our agricultural producers by the U.S. Environmental Protection Agency (EPA), most recently with the Agency’s release of personal and confidential business information relating to concentrated animal feeding operations 

(CAFOs). A litany of regulations and an effort to expand the Agency’s jurisdiction 

under the Clean Water Act have all led to distrust of our Federal agencies, and in 

particular the EPA. 

I look forward to today’s discussion and learning more about how we might address the scientific and practical obstacles involved in implementing successful nutrient trading programs. 

Senator CARDIN. With that, let me turn to Michael Shapiro, the 

Deputy Assistant Administrator for the Office of Water, United 

States Environmental Protection Agency. Mr. Shapiro, thank you 

very much for your public service, and thank you for being here. 

STATEMENT OF MICHAEL H. SHAPIRO, DEPUTY ASSISTANT 

ADMINISTRATOR, OFFICE OF WATER, U.S. ENVIRONMENTAL 

PROTECTION AGENCY 

Mr. SHAPIRO. Thank you. Good afternoon, Chairman Cardin, 

Ranking Member Boozman and Senator Vitter. 

I am pleased to be here today to discuss water quality challenges 

posed by nutrient pollution and the promise that water quality 

trading tools hold for helping to reduce nutrient pollution in a more 

flexible and cost-effective way. 

I have submitted my full statement for the record, and I will 

summarize it here. 

As you noted, Senator Cardin, nutrient pollution caused by elevated levels of nitrogen and phosphorus is a major threat to clean 

water. It has been extensively documented in the scientific literature and confirmed by monitoring data collected at the Federal, 

State and local levels. States have identified more than 15,000 waters nationwide that have been degraded by excess levels of nutrients. An increasingly troubling result of nutrient pollution is the 

proliferation of harmful algal blooms, where waters are choked 

with algae that produce toxins, that threaten public health, aquatic 

life, food sources and drinking water quality. 

In general, the primary sources of nitrogen and phosphorus pollution in urban and suburban areas are stormwater runoff and municipal wastewater treatment systems. In rural areas, in towns and 

cities continue to be an important contributor, but the predominant 

sources are waste from agricultural livestock activities and excess 

fertilizer from row crops. 

EPA recognizes the Nation’s significant nutrient pollution challenge and is committed to finding collaborative solutions that protect and restore our waters and the health of the communities that 

depend on them. To reaffirm EPA’s commitment to partner with 

States and collaborate with stakeholders to reduce nitrogen and 

phosphorus loadings to the Nation’s waters, Acting Assistant Administrator Nancy Stoner sent a memorandum to EPA’s 10 regional offices in March 2011. The memo lays out a framework for 

guiding EPA’s work with States and stakeholders to achieve nutrient reductions. 

EPA recognizes that States need room to innovative and respond 

to local water quality needs and that one-size-fits-all solutions to 

nitrogen and phosphorus pollution are neither desirable nor necessary. 
8 

An approach with significant potential to help reduce nutrient 

pollution is water quality trading. EPA has promoted and supported the concept of water quality trading as an innovative approach for achieving water quality standards with flexibility and 

economic efficiency. Water quality trading allows one source to 

meet its regulatory obligations by using pollutant reductions created by another source that has lower pollution control costs. 

In 2003, EPA published a water quality trading policy which sets 

the stage for our State partners to include trading as a flexible 

compliance pathway for Clean Water Act permitted sources. As 

outlined in the policy, EPA believes that water quality trading and 

other market-based programs should be consistent with the Clean 

Water Act; that water quality trading should occur within a watershed or a defined area for a total maximum daily load, or TMDL, 

where such has been approved; that nutrients and sediments are 

pollutants most amenable to trading; and that the baselines for 

generating pollution reduction credits should be derived from and 

consistent with water quality standards established by the States 

or tribes under the Clean Water Act. 

The trading policy supports trading among point sources, such as 

municipal wastewater treatment plants, industrial facilities and 

municipalities covered by stormwater permits, as well as between 

point sources and non-point sources, such as farmers and other 

landowners. In the latter circumstances, EPA believes that it is important that these non-point sources have clear baselines for pollution contributions, such as what would be allocated under a TMDL, 

and that the pollution reductions that take place are clearly measured and documented. 

In addition to the Agency’s 2003 trading policy, the EPA has developed a toolkit for water quality trading that can help identify 

possible approaches that States, the regulated community and 

other sources can use to encourage water quality trading. In addition, the EPA has supported States’ trading efforts through grants. 

We have held workshops on water quality trading and offer online 

training for States, tribes and other interested parties. The EPA is 

also working closely with the Department of Agriculture to help agricultural producers participate in trading programs. 

Water quality trading programs are in various stages of implementation across the Country. There are a few very noteworthy 

cases, such as the Connecticut example, where 79 municipal wastewater plants trade among themselves to meet nitrogen reduction 

targets for the Long Island Sound. There are other programs that 

have been developing within the Chesapeake Bay. All of the States 

that contribute to the Bay and are covered by the TMDL are planning to use offsets, which is a form of trading, to deal with new 

growth. And several have developed trading programs that are designed to assist point sources and allow both point to point as well 

as point to non-point source trades. 

This concludes my statement. I will be happy to answer any 

questions you might have. 

[The prepared statement of Mr. Shapiro follows:] 
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Senator CARDIN. Thank you very much for your testimony. 

I take it from your testimony that it is the Administration’s position that nutrient trading is a tool that is available, that can be 

used under the Clean Water Act? 

Mr. SHAPIRO. That is correct. 

Senator CARDIN. So the legal authority for that, you believe, is 

clear? 

Mr. SHAPIRO. We believe that it is consistent with the Clean 

Water Act. Obviously the type of trading and the conditions under 

which it is done would affect its acceptability under the Clean 

Water Act. But we believe properly constructed trading is absolutely consistent with the Clean Water Act. 

Senator CARDIN. And there are many States moving forward 

with various types of trading programs that you have mentioned. 

In the Chesapeake watershed, I believe Pennsylvania was the first 

to proceed with non-point source, and dealing with trading in that 

regard. What is the role for the Federal Government in the strategy for a multi-jurisdictional body of water, such as Chesapeake 

Bay? What do you see the role for the EPA or the Federal Government in facilitating or coordinating how nutrient trading is done or 

whether it should provide further incentives for the effectiveness of 

nutrient trading? 

Mr. SHAPIRO. Senator, as you know, EPA has had a very active 

role in developing the Total Maximum Daily Load, the TMDL 

framework, which is the kind of construct for achieving water quality improvements in the Bay watershed. We did that collaboratively with the seven Bay jurisdictions. The framework in that 

TMDL document lays out trading as it is clearly allowable and 

often a desirable component of State programs to achieve the nutrient reductions that are needed. 

We don’t necessarily see that EPA would lead an effort to develop an interstate trading program. But if the States that are participating in the work on the Bay are interested in it and believe 

that there are some opportunities to move forward, we will be 

happy to work with them, provide technical support as well as 

other forms of support to ensure that an interstate trading program would be effective and would be able to meet the requirements of the TMDL. 

Senator CARDIN. So today, if the States of the Chesapeake watershed wanted to set up an interstate trading program, it could do 

that, they have the authority to do that currently under the Clean 

Water Act and the implementation of the plans? They could do it 

without, they don’t need additional guidance from the Federal Government in order to set that up? 

Mr. SHAPIRO. We would want to work with them very closely to 

make sure that as they move forward the training program they 

are developing continues to meet the requirements of the Clean 

Water Act and the pollutant reduction goals of the TMDL. But yes, 

we believe they have the authority to do that. The TMDL as well 

as the Clean Water Act would allow them to proceed in that direction. 

I don’t want to overstate the ease by which that could be done. 

It would be a challenging institutional effort to work across different State programs, try to align State programs in a way that 
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a purchaser in one State and a seller in another State could do that 

effectively, meeting the requirements of both States as well as continuing to stay within the scope of the TMDL. 

So it would be, I think, a challenge, but it is certainly something 

that can be done. 

Senator CARDIN. I know there is concern by the individual States 

that without some direct guidance from the Federal Government 

that is a challenge to try to organize an interstate trading program. 

There is also the concern as to how you do this in a fair manner 

that, yes, we have TMDLs as the overall goal, but how do we ensure that the different sectors are being treated fairly? 

This is the point that I think Senator Vitter and Senator 

Boozman mentioned earlier about the concern of agriculture, they 

want to make sure that this is not just a way of asking the agriculture sector to do more than their fair share in cleaning up 

Chesapeake Bay watershed. 

How do the States move forward with that, without some additional guidance from the Federal Government on interstate trading 

programs? 

Mr. SHAPIRO. I think the basic kind of fairness issues that you 

referred to in terms of the allocations, they are called load allocations in the TMDL, have already been decided upon by the individual States. EPA did not dictate specific controls, nor could we, 

for non-point sources, such as agricultural communities. We, working with the States, established load allocations and each State has 

developed its proposal, which we have reviewed, for achieving those 

load allocations, including contributions that they would be gaining 

from the agricultural sector as well. 

A trading program wouldn’t change what I called earlier baseline 

allocations. A trading program would merely set up rules, either 

within a State, as has already been occurring, or across States that 

would allow a farmer who wishes to reduce pollution further than 

what is already allocated in the State’s implementation plan, that 

increment of reduction that would provide them a vehicle for selling that increment to someone who finds it more expensive to control their pollution. 

So it does not change the basic equities of the allocation. It merely creates some vehicles to harness the economy to work more effectively for the environment. 

Senator CARDIN. Let me just mention one other concern that has 

been brought to my attention from the agricultural community, and 

the reason why they believe that Federal action may be necessary 

for an interstate nutrient trading program. They don’t know what 

the market will bring. There is no certainty as to what the values 

will be of the credits. You are asking primarily farmers under nutrient trading to do more, because that is usually the area where 

you look at where you can get the most credits. Without the Federal Government providing some assurance that there will be a 

market for the credits, there is a concern as to whether this in fact 

will work in the real world. 

Do you share that concern and do you see a role for the Federal 

Government in perhaps providing more certainty as to the market 

parameters of a nutrient trading program? 
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Mr. SHAPIRO. Well, a couple of points in response. First, it should 

be obvious but I want to make it clear, no one would be forcing 

anyone to participate in a trading program. A farmer could elect 

to wait to see what other people do. They could just decide it is not 

worth their attention. 

And so it is not that we are saying farmers or anyone else has 

to make investments in producing what are referred to as credits, 

nutrient reductions in excess of their requirements. It is something 

they can elect to do. And as in any market, someone who is making 

a market-based decision is facing some degree of uncertainty. You 

don’t know that there will be guaranteed demand for your product, 

although some trading programs can be set up in a way that allows 

the transaction to occur before any investment is really made. 

There are State programs, I think Virginia is an example, that 

has encouraged the creation of pools of credits ahead of the market, 

and therefore provided some facilitation to the market. There are 

other kinds of strategies, I think, that we could work with the 

States to identify that might lower the degree of uncertainty and 

facilitate other aspects of trading activities. But at the end of the 

day, it is a market and it is going to be ultimately subject to some 

degree of uncertainty as markets are. Someone comes up with a 

new whiz-bang wastewater treatment plant technology that reduces the cost of removing nutrients at wastewater treatment 

plants by a factor of 10, nutrient reduction might be much easier 

to do than trading. 

So those are uncertainties. But I think overall we believe that 

the studies we have looked at indicate that there is a substantial 

savings that can be achieved today by encouraging trading, especially point to non-point source trading, and that there will be a 

market. But the design of the institutions and the structures 

around the trading program is an important element that can help 

ameliorate some of the uncertainties that farmers might face. 

Senator CARDIN. Senator Boozman. 

Senator BOOZMAN. Thank you, Senator Cardin. 

I would like to follow up. I think the certainty issue really is a 

major issue. Let’s consider a small rural wastewater treatment facility that faces a choice on the one hand, participating in a nutrient trading program, and then on the other, purchasing the technology, the control technology. If they purchase the control technology they would have the feeling that they have acquired something tangible, and as we know, these are expensive propositions. 

An EPA permit writer that comes back to review their permit in 

5 to 10 years will see the technology as a real asset, making it 

quantifiable improvements. However, if they instead choose to purchase an offset from a large municipal wastewater treatment plant, 

the results may be quantifiable, but the offset purchaser may not 

feel like they truly have something to show for their investment. 

I think that this can be overcome and can be addressed through 

a well-structured trading program developed at the State level in 

cooperation with EPA. 

Can you talk about that? What does EPA do in these kinds of 

situations to provide assurances that the permit recipients, that 

these cost-effective options will be recognized on an ongoing basis? 
35 

Mr. SHAPIRO. Well, in the case you are talking about, it would 

be a point source to point source trade, which means some of the 

uncertainties that we deal with in a non-point situation wouldn’t 

be present. And the trade would be reflected in the permits of the 

two facilities. As you know, and this is the point I think you were 

making about uncertainty, under the Clean Water Act, permits are 

on a 5-year cycle. They come up for renewal. I think as long as the 

effluent limits are being met and the load allocations under the 

TMDL are being met, there would be no Federal basis for forcing 

a change in the situation. 

I think that some of the uncertainty that a small plant might 

face at some point in time is that as, if population, for example, 

grows, at some point a larger facility may feel like it needs to use 

more of its capacity to meet its own population demands, in which 

case at some point the smaller facility might lose the opportunity 

to continue to purchase credits. That is one of the uncertainties. 

There are certainly ways of, through contractual arrangements, 

dealing with those uncertainties. It is not something that the Federal Government necessarily could commit to in terms of locking 

people into certain permit conditions. 

Senator BOOZMAN. Regarding participation from agriculture, 

would you support arrangements that would enable, for example, 

USDA and State conservationists to take the lead in verification of 

best management practices being implemented by non-point 

sources? 

Mr. SHAPIRO. We want to work very closely with the Department 

of Agriculture. We are working very closely with them. I can’t 

speak to the details of the specific arrangement you just mentioned, but certainly those are the kinds of options we would want 

to look at. We realize that they have a lot of expertise, they have 

field capacity to support it. Again, though, these are largely programs that are going to be implemented by the States, so the working relationships would be, in our view, largely relationships between the Department of Agriculture or the local or the State agricultural agencies and the State regulatory agencies that have the 

implementation responsibility for the TMDL. EPA would not routinely be doing the direct verification and implementation in that 

kind of a situation. 

Senator BOOZMAN. Good, thank you. These are things that again, 

in talking to the farm community, come up. 

Another thing, do you believe that onsite water quality monitoring would discourage participation by non-point sources? Just 

having, again, the onsite come out to your place? 

Mr. SHAPIRO. Well, again, we talk about some of the uncertainties that we are dealing with and trying to give predictable, defined 

credits to non-point sources. And in order to do it in an effective 

way, there has to be some ability to verify that the activities that 

are committed to under the trading arrangement are absolutely 

being implemented. One way of doing that in some cases is not necessarily the right approach in all cases. In some cases, it is to do 

onsite or nearby water quality monitoring. Other types of 

verification include making sure that if a certain buffer strip, for 

example, has been committed to as part of the agreement, that 
36 

buffer strip is actually there, that it is being maintained over time 

and so forth. 

So there are a variety of arrangements that could be developed 

to verify particular non-point source control approaches. But onsite 

monitoring in some cases might be the most effective in terms of 

actually demonstrating the ongoing effectiveness of a particular 

type of technology. 

Senator BOOZMAN. Right. You mentioned in your testimony that 

Virginia’s program is phased, requiring point sources to trade 

among themselves before they begin trading with landowners. Do 

you have an opinion on that? Do you see any merit one way or the 

other? 

Mr. SHAPIRO. Well, EPA doesn’t have a strong opinion. I would 

say that Virginia is out ahead, but like a lot of States they are still 

relatively new at implementing major trading programs. As indicated earlier, trading between point sources is a little bit easier because of the fact that everyone is under a permit already, they 

have a monitoring history, they have what is called a waste load 

allocation, which is a particular requirement under the TMDL. 

So the job of figuring out the trades and verifying them is a little 

bit easier. It is a good way of getting a program working and starting. And then adding non-point sources to the program a little bit 

later gives you the chance to have the basic machinery in place as 

you are dealing with some of the more challenging issues. 

But I think you will be hearing later about some of the work that 

has been done in Virginia. It does look like people have put a lot 

of thought into creating pools of credits from non-point sources. 

Again in Virginia, even though that piece of the program is a point 

to point, growth has to be handled through offsets with non-point 

sources, or not has to, but it can be handled through non-point 

sources. So there already is a mechanism for doing some trading 

in Virginia for offsets. 

Senator BOOZMAN. And very quickly, final thing, what can EPA 

do to help the States that are looking at this situation? What kind 

of resources can you all offer a State that is looking at the Virginia 

model or some other model? Are there particular resources that 

EPA can help in that regard? 

Mr. SHAPIRO. Well, some of the grant funding that has been 

made available to States under our Section 106 Clean Water Act 

funding, under Section 319, which is specifically for non-point 

source planning and control, as well as some of the money that has 

been made available specifically through the Chesapeake Bay program and resources for implementation can be used by States to 

develop some of these tools and processes. So there are resources 

already available. 

As I indicated, we are also willing and able to provide technical 

assistance to States, especially in dealing with novel issues that 

may come up. We feel that we have an important stake in the 

TMDL, in the Chesapeake Bay TMDL succeeding, and in it succeeding in a way that is as effective and efficient and beneficial to 

the communities involved as possible. So we want trading to work. 

We think it, as I indicated earlier, we think it is an important tool, 

an important element of successful undertaking in the Chesapeake 

Bay. So we are willing to provide technical assistance as we can. 
37 

Senator BOOZMAN. Thank you. 

Senator CARDIN. Just for clarification, did you say Virginia does 

permit non-point trading? 

Mr. SHAPIRO. For offsets. It is my understanding that they current allow that for offsets. That is the issue of dealing with new 

growth. If you are a developer coming in or you are expanding an 

existing development, the pollution associated with that, if there is 

runoff caused by your site or other activities that lead to increased 

nutrient pollution, that has to be offset. One way of achieving those 

offsets is to, at least in the tributaries to the Bay specifically, is by 

purchasing offsets from non-point sources. 

Senator CARDIN. From non-points, they can purchase from nonpoints? 

Mr. SHAPIRO. Yes, sir. 

Senator CARDIN. Thank you very much for your testimony. We 

appreciate it very much. 

Mr. SHAPIRO. Thank you. 

Senator CARDIN. The second panel, let me introduce them and invite them up. We have Dr. Beth McGee, who is the Senior Water 

Quality Scientist for the Chesapeake Bay Foundation; Mr. George 

Hawkins, the General Manager of D.C. Water; Dr. Marty Matlock, 

Professor, Department of Biological and Agricultural Engineering, 

Area Director, Center for Agricultural and Rural Sustainability, 

University of Arkansas; and Ms. Susan Bodine, Partner, Barnes & 

Thornburg. Welcome, all. 

Senator Boozman has already acknowledged two members of our 

panel. We appreciate all four of you being here. Your full statements will be made part of the Committee record, and we will start 

with Dr. McGee. 

STATEMENT OF BETH McGEE, SENIOR WATER QUALITY 

SCIENTIST, CHESAPEAKE BAY FOUNDATION 

Ms. MCGEE. Good afternoon, Mr. Chairman, Ranking Member 

Boozman. Thank you for inviting me on behalf of the Chesapeake 

Bay Foundation to participate in today’s hearing. 

You have my written testimony, and what I would like to do is 

build upon Mr. Shapiro’s testimony and draw from our experiences 

in the Chesapeake Bay watershed. You have heard that we have 

a Bay-wide TMDL in the Chesapeake Bay for nitrogen, phosphorus 

and sediment. The States and jurisdictions are relying on nutrient 

trading to achieve and maintain the pollution limits that are called 

for in the TMDL. 

I want to emphasize this issue of maintain. It came up in the 

last comments from Mr. Shapiro, which is that the trading markets 

are likely going to involve not only trading among existing sources, 

but the market will also probably come from new sources that are 

going to need to offset these new loads. 

So critics of nutrient trading will argue that trading allows point 

sources to pay to pollute, that trading may lead to localized water 

quality hot spots, that the reductions might not be real or 

verifiable. CBF shares some of this skepticism. But we actually believe that there is a way to design it and implement trading programs in a way that ensures that they are cost-effective and environmentally beneficial. 
38 

The key to success is to have the necessary safeguards in place. 

These include things like a standardized process to evaluate permits to ensure that they don’t result in degradation of local water 

quality, third party verification of credit-generating practices, a 

transparent process so that the public can have access to information about trades, and review and provide comments on them. 

The Bay States have actually worked on trading programs for 

nearly 10 years now. Unfortunately, they evolved independently 

and for that reason, there are very significant differences among 

the State trading programs within the Chesapeake Bay. EPA is developing technical memoranda that will help level the playing field 

and provide some regulatory certainty. But we think there are 

other reasons why a trading program hasn’t really taken off in the 

Chesapeake, and Congress might be able to help here. 

The most costly and challenging aspect of implementing the Baywide TMDL will be reducing stormwater pollution. That is the 

most expensive thing that we need to do. And because of this high 

cost of compliance, the trading experts actually say that is probably 

where the demand is going to come from. It is going to be the local 

governments holding stormwater permits. 

A recent study by a group called RTI International found that 

local governments with stormwater permits could save, and this is 

within the Chesapeake, could save millions of dollars if they purchased credits to meet at least a portion of their pollution reduction 

targets. However, they face several challenges. For one thing, most 

local governments don’t have the resources or staff time to figure 

out how trading could actually work for them. There are pretty significant legal, technical and policy issues that need to be identified 

and overcome. 

Congress has provided some support for addressing these issues 

through the Conservation Innovation Grant Program in the Federal Farm Bill. In addition, I mentioned that EPA’s technical 

memoranda that they are developing for the Chesapeake Bay 

should help provide some regulatory certainty. But in particular, 

we think the technical memoranda dealing with urban stormwater 

sources should specifically clarify that stormwater permittees can 

trade. Right now, the policy that is governing point source trading 

is the Permit Writers Water Quality Trading Tool Kit. From our 

read of that, it is really geared toward more traditional point 

sources and not stormwater permittees. 

As we have talked about, farmers are viewed as the likely sellers 

in nutrient trading markets, because the cost of reducing pollution 

from agriculture tends to be cheaper than from other sources. That 

said, and we have heard a little bit about this, there are a variety 

of reasons why agricultural producers aren’t stepping up to the 

plate on trading. Some of it is, quite frankly, just a lack of knowledge about the trading programs. Some of it is lack of knowledge 

about what conservation measures they need to implement on their 

farm in order to participate, and whether that might change over 

time. There are concerns about third party verification, concerns 

about data privacy. And we have also heard that farmers, quite 

frankly, don’t want to be viewed as allowing someone else to pay 

to pollute. 
39 

Again, Congress has helped in this regard by providing funding 

to the Conservation Innovation Grant Program that is helping 

overcome some of these obstacles. So we urge Congress to continue 

their support for this program and others like it. We also encourage them to continue to encourage EPA and the USDA to work together on nutrient trading. 

Last, I want to highlight that Federal programs like the Clean 

Water Act Section 319 program, the Clean Water State Revolving 

Loan Funds, the conservation programs in the Federal Farm Bill, 

are really important for trading. They are going to help farmers get 

up to the compliance level they need to be in order to participate 

in these markets. 

So with that, I would encourage this Committee to increase its 

support for these programs and extend thanks to Chairman Cardin 

for his leadership on this issue. While trading is developing 

throughout the Country, there are a lot of eyes on the Chesapeake 

region. So we really need to do it right here. 

With that, I will end and thank you and take questions at the 

end. 

[The prepared statement of Ms. McGee follows:] 
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Senator CARDIN. Thank you, Dr. McGee. 

Mr. Hawkins, welcome back to the Committee. 

STATEMENT OF GEORGE HAWKINS, GENERAL MANAGER, D.C. 

WATER 

Mr. HAWKINS. Good afternoon, Chairman Cardin, Ranking Member Boozman. My name is George Hawkins. It is a delight to be 

back before you again to speak about nutrient trading. 

I have the honor and pleasure of being the General Manager of 

D.C. Water, which among other things, like responding to a sinkhole at 14th and F this morning, runs the Blue Plains Advanced 

Wastewater Treatment Plant, which is the largest advanced wastewater treatment plant on Earth. 

I sit before you fundamentally because of a remarkable success. 

It is the success of the point source discharge program under the 

1972 Clean Water Act Amendments that has generated the need 

for today’s hearing. That success risks failure today, or what I 

would say is grasping defeat from the jaws of victory. Let me put 

the point in very clear terms. Take nitrogen removal, what we are 

speaking of today. Blue Plains, the largest facility in the Country 

doing this kind of work, which serves both the District, 70 percent 

of Montgomery County, Prince George’s County in Maryland, Fairfax, Loudon and Arlington County in Virginia, removed nutrients 

from 14 milligrams per liter to 7.5 milligrams per liter up to the 

year 2000. That is equivalent to 7.3 million pounds of nutrients for 

a cost, remarkably small, of $16 million. 

The next phase of our reductions was for 7.5 milligrams per liter 

to 5 milligrams per liter. So now two and a half additional milligrams per liter, for $130 million. So one-third the level of protection for 10 times the price. 

What we are currently undertaking at Blue Plains is reducing 

nutrients one more milligram per liter, 1.1 actually, from 5 milligrams per liter to 3.9. That is equivalent to 1.2 million pounds of 

nutrients in a year, at the cost of $1 billion. Let me say that again, 

$1 billion. The price of removing a pound of nutrients at Blue 

Plains has risen 600 times since we started this work originally. 

That by itself should justify a look at what is most economically efficient. 

If you compare the sources for nutrients to the Chesapeake Bay 

by State, the District of Columbia is 1 percent of the nutrient load 

to the Chesapeake Bay. If you do it by source, agriculture, runoff 

from land and air deposition is 80 percent of the nutrient load to 

the Bay. Blue Plains, the largest single point source, is 2 percent. 

Put these numbers in comparison, the billion dollars we are 

spending currently at Blue Plains is allocated between the District 

of Columbia, Maryland and Virginia. In fact, because of flows coming to the plant, 60 percent is borne by constituents in Maryland 

and Virginia, including some of yours, Senator, perhaps yourself, 

and 40 percent is borne by District residents, which together is just 

about 2 percent of the nutrient source for the Bay. 

So that means $400 million is being spent by D.C. ratepayers 

today, now, to reduce less than 1 percent of the nutrients to the 

Bay, and $600 million, because a larger percentage of the flow 

comes from our suburban customers, are paying for slightly more 
74 

than 1 percent, totaling 2 percent. And I don’t have the facts in 

front of me, but you compare the expenditure of our ratepayers, 

hundreds of millions of dollars, to reduce less than 1 percent in 

each case of the nutrients to the Bay, and it raises three fundamental questions. 

First in equity, I just finished the eight rate hearings I do in the 

District regarding our rate increases. I had to have police officers 

go with me to a number of them. Because the rates have gone so 

high for our ratepayers, many of whom are fixed income, low income, unemployed from throughout the city. Costs to urban ratepayers are not conjecture, they are not perhaps in the future, they 

are not requirements that might come to a farm someday, they are 

right now, and they are enormous. Our rates have doubled over the 

last 4 years. 

Second is economic. The rate curve that we are on and the cost 

of reducing at Blue Plains is so great that we are spending a billion 

dollars of public funds for such a small outcome. On a straight economic basis is that a rational expenditure of public funds? 

And third, is it a sound investment fundamentally on an environmental basis? Blue Plains is 2 percent of the source to the Chesapeake Bay. We are spending a billion dollars to remove a fraction 

of that 2 percent. Our engineers do not know how we would get to 

zero discharge, but they tell me with enough money they could do 

it. But the question of whether or not, if we did get to zero, 98 percent of the source of nutrients to the Chesapeake Bay would still 

exist despite that enormous expenditure. 

So the notion, would Blue Plains and D.C. Water be interested 

in a trading program where we could get better reductions at lower 

costs? Absolutely yes. Every question here that has been asked is 

a legitimate one. We would want certainty to know that we are not 

going to have ratcheted down in the future what we paid in the 

short run. 

And the second is that we want to know everybody has skin in 

the game. If D.C. ratepayers have spent hundreds of millions of 

dollars in reductions, even if it is less expensive than the next 

treatment increment at D.C. Water, spending money to reduce 

someone else’s pollutants on top of it if they don’t also have skin 

in the game would be a challenge to sell to our ratepayers here at 

home. 

Nonetheless, I think the economic, environmental and equitable 

potential of trading I think requires that it be on the agenda and 

why this hearing is exactly the right step today. Thanks very 

much. 

[The prepared statement of Mr. Hawkins follows:] 
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Senator CARDIN. Thank you, Mr. Hawkins, for your testimony. 

You are the person who can make a wastewater treatment plant 

sound very exciting. We very much appreciate that. 

[Laughter.] 

Senator CARDIN. Dr. Matlock. 

STATEMENT OF MARTY MATLOCK, PROFESSOR, DEPARTMENT 

OF BIOLOGICAL AND AGRICULTURAL ENGINEERING, AREA 

DIRECTOR, CENTER FOR AGRICULTURAL AND RURAL SUSTAINABILITY, UNIVERSITY OF ARKANSAS 

Mr. MATLOCK. Thank you, Honorable Chairman Cardin, Ranking 

Member Boozman, distinguished members of the Committee, Subcommittee and diligent staff for this great opportunity to testify on 

this very important issue. 

I have been chasing nutrients around watersheds for 20 years, 

trying to identify sources, trying to find solutions, trying to measure their impacts. It is a very difficult and complex process. I have 

worked with ag producers, with industries, with municipalities, 

with our regional EPA, State and local agencies, to try to understand and find a better way. Mr. Hawkins was very eloquent in defining our opportunities and our challenges economically. 

Through this process I have come to believe that if we are to 

achieve increased productivity from the land and prosperity from 

the land, and improve water quality for future prosperity, we have 

to find a better way to manage our nutrients. We all live in watersheds. We all contribute to the problem. The nutrient problem belongs to all of us. So should the solutions. We all should have skin 

in the game, as Mr. Hawkins said. 

So in the past, our approach to reducing undesirable outcomes 

has been focused on top-down management, finding the polluters 

and making the polluters pay. It has been very effective, history 

shows that. But it is not going to work here, it hasn’t worked here. 

EPA has been trying for 20 years to find a better way to define nutrient trading strategies. Many of those strategies have been effective at some level. But we have not been able to replicate them 

well, because they are all context-specific. 

So I believe that our challenge today is largely associated with 

uncertainty in the trading process. The fact is that the participants, especially land-based producers, agricultural producers, 

have high uncertainty about engaging in trading processes, high 

uncertainty associated with the regulatory risks that are associated 

with participating, and then our point source discharges, the permitted discharges, have equal uncertainty, or maybe even greater, 

because they are the ones with the regulatory sword over their 

heads, as it were. 

Those uncertainties dramatically inhibit our ability to innovate 

our strategies. So again, I will close fairly quickly, because much 

of what I have in my written statement has already been covered. 

But it is my judgment the primary barriers to uncertainty can be 

reduced through collaborative and innovative and flexible strategies. But it is going to require collaboration at the Federal level, 

not just State and local level. 

Thank you. 

[The prepared statement of Mr. Matlock follows:] 
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Senator CARDIN. Thank you very much for your testimony. We 

appreciate it very much. 

Ms. Bodine. 

STATEMENT OF SUSAN BODINE, PARTNER, BARNES & 

THORNBURG, LLP 

Ms. BODINE. Thank you, Chairman Cardin, Ranking Member 

Boozman. Thank you for inviting me. And thank you for holding 

this hearing. 

You have heard the testimony from all the witnesses. Everyone 

here, I think, supports trading. And that is a good thing. 

In my written testimony, I did spend a section talking about the 

legal authority for trading under the Clean Water Act. I am not 

going to repeat that here. But I do want to say that that authority 

has been challenged in a pending lawsuit, and I am sure you are 

aware of that. On that issue, I am not going to go into the legal 

details, but I do want to talk a little bit about the policy issue behind a challenge to trading. I think Mr. Hawkins was most eloquent about the potential for trading in terms of cost savings and 

some of the numbers involved. And they are enormous, and the potential for savings is enormous as well. There are studies, in the 

context of the Chesapeake Bay, there are studies that the Chesapeake Bay Commission has done on cost and cost savings as well 

as the University of Maryland School of Public Policy has done and 

I have cited those in my written testimony. 

But for the people who oppose trading, I can only imagine that 

they believe that they will get greater water quality improvements 

without trading. That is just a fundamentally misconceived notion. 

Because of the cost that Mr. Hawkins spoke about, and the cost of 

implementing something like the Chesapeake Bay TMDL. If you 

can’t make this more affordable, it will be unachievable. And if 

water quality standards are unachievable, the Clean Water Act 

provides a mechanism for changing them. 

So if people manage to get a court to agree that trading isn’t allowed, the ultimate result won’t be increased water quality, it will 

be a lowering of standards through use attainability analyses. So 

that policy issue I think is important to bear in mind when people 

are talking about whether trading is viable or not. I think all your 

witnesses here agree that it is viable. So that is important. 

In my testimony I do address some of the issues, some of the barriers I think you have raised. And there are concerns about issues 

like what is the baseline, what are the verification practices. And 

also what the expectations are in terms of instant results. I want 

to talk a little bit about that. Senator Cardin and Senator 

Boozman, I think you both talked a little bit about certainty. Mr. 

Matlock talked about certainty. There is a concern I have heard actually in the context of Maryland about shifting baselines, moving 

the goalpost, more regulatory programs coming on board that 

change the baseline. And that is a concern. 

There is a question about how programs establish baselines and 

whether they can be flexible so that there is at least a certainty 

that, for example, an agricultural producer that undertakes conservation measures will in fact generate a credit that they can later 
93 

sell. But if the baseline keeps changing because the regulations 

keep changing, that may not be the case. 

We have heard concerns about privacy. Senator Vitter alluded to 

a concern that has arisen recently about EPA releasing personal 

identifiable information about farmers. That type of activity only 

raises the distrust. There is a distrust from the agricultural community of regulators. 

On the issue of verification, it is certainly better to have ag community people deal with ag community people, whether it is an 

NRCS, or whether it is the soil and water conservation districts, 

those organizations are involved in trading programs at various 

levels. That certainly gives a level of comfort. 

Monitoring I think was raised. Mr. Matlock talked about onsite 

water quality monitoring. One issue I wanted to raise with monitoring is the privacy issue of whether somebody is going to come 

onsite if it is a farm. But the other issue is something that is even 

more important; water quality monitoring is very expensive. When 

you are talking about non-point source reduction, monitoring is 

best done at a watershed basis. There has been a lot of good work 

done by Dr. Deanna Osmond down at North Carolina State University. She has written a book on this; she has given a lot of talks 

on this issue. Her point is that the monitoring is best done on the 

watershed basis. They have shown some really good, significant results down in North Carolina. 

Finally, I want to address the role of Congress. Having this hearing today is important to show congressional support for trading. 

That helps States with their programs and helps EPA support the 

programs. I would caution against legislation that would dictate 

any details of trading, because as you have noted, there is an enormous variety. EPA’s 2003 policy, as well as the Permit Writer’s 

Tool Kit, allow that and acknowledge that there is room for a great 

deal of variety. So I want to caution against any legislation that 

would tell States how to do trading. 

But as Dr. McGee pointed out, the 319 program funding is very 

valuable. Senator Boozman, you talked about your land grant college. The land grants have been tremendously helpful in addressing nutrient issues. In fact, for Iowa’s nutrient reduction strategy, 

all the technical aspects of that strategy were performed at no cost 

to the State; but it was performed by the land grant college. 

So funding the land grants, like in the legislation you are introducing, as well as funding for what is called the CEAP program, 

Conservation Effects Assessment Project, in NRCS, is important. 

The CEAP program does watershed scale monitoring, the kind of 

monitoring that can demonstrate the success of conservation practices. To continue to support that also is tremendously important. 

Thank you. 

[The prepared statement of Ms. Bodine follows:] 
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Senator CARDIN. Ms. Bodine, I just want to underscore a point 

that you made, and I think it is a very valid point. That is, Mr. 

Hawkins’ cost of getting that last percent down and how much that 

is of the overall game plan on nutrient reduction. He didn’t talk 

about how difficult it was for him to get all the financing, but it 

was not easy. 

With cost benefit analysis becoming so much in the spotlight, we 

will not be able to sustain those types of investments for that type 

of growth in the future. But those who believe that we are going 

to get that type of reduction in the future, we are not. 

I would point out to Mr. Hawkins, I am sure he agrees with this, 

that storm runoff is our No. 1 growth area of problems. We have 

to deal with storm runoff. And the investment being made at Blue 

Plains is an incredible infrastructure improvement to deal with 

storms, basically, so you have the flow that doesn’t overflow and 

cause the nutrients to go untreated into our waters and streams 

and rivers. So the trade off is important. But I think you are absolutely right, we are not going to be able to sustain that kind of investment going forward for that type of marginal gain. So we have 

to look at other ways to be able to accomplish this. 

I want to ask Dr. McGee and perhaps Ms. Bodine, you specifically mentioned the evaluation process, third party transparency, 

you mentioned doing it local and making sure that there is credibility. Can you both elaborate a little bit more how the evaluation 

process should be supported by EPA, supported by us to make sure 

that in fact, the credits are there, that the progress is being made? 

What do you mean by independent third party? What do you mean 

by transparency? 

Ms. MCGEE. Sure. I think EPA’s role in this is to establish what 

verification looks like, does it include photographs, how often 

should that be done, what should the documentation look like. I 

don’t think right now they have a role in doing the verification. 

When we say third party verification, we are talking about an 

independent person, not associated with the government. Senator 

Boozman said something about conservation districts or USDA employees. We would not support that, but the reality is that third 

party verifiers who know farms are probably retired from those organizations. So what we are looking for is an independent third 

party to come in and verify on a farm that yes, I did plant those 

trees and here is the documentation, here are the photographs and 

that would all be set by EPA. 

Another layer of verification would be that the State regulating 

entity would be doing some spot checks on that verification. So 

they wouldn’t necessarily be going out to every farm, but they 

might check 10 percent of them, or a certain percent of the farms, 

sort of verifying the third party verifier, if you will. So that is, 

when we talk about verification, that is what our intention is. 

Senator CARDIN. Ms. Bodine, would the farmers think that is a 

positive step? 

Ms. BODINE. I would suggest that it is not really EPA’s role to 

get into that level of detail, to establish what is a specific State 

verification process. And the States do have different approaches. 

In Maryland, for example, the State Department of Agriculture 
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does go out and inspect 10 percent of the trades. And the trades 

also do require an annual third party inspection. 

You have programs, for example, in Pennsylvania where you 

have aggregators, like the Red Barn Trading Company that testified before this Subcommittee a number of years ago. They serve 

as a verifier. They aggregate credits. But they can also be a verifier 

on the other side and interact. 

My point is that there are different models out there and that 

one model isn’t necessarily better than the other. Yes, the BMPs 

have to be in place, there is no dispute on that. 

I know I am over your time. There is another kind of verification, 

I just want to make sure you distinguish between the two. One is 

that the conservation practices are taking place. The other is the 

shift in water quality. That is a programmatic verification; that is 

not an on-farm, onsite verification. It is the ambient water quality 

that gets monitored over time, whether it is through the CEAP program or whether it is through the State’s ambient water quality 

monitoring. That is at a programmatic level and not on a trade by 

trade level. 

Senator CARDIN. Mr. Hawkins, you can respond to that. I was 

going to ask you. 

Mr. HAWKINS. Very quickly, and I certainly understand that we 

want flexibility with States. But at an enterprise that might be 

purchasing credits, I think a bottom line, uniform, you at least 

must do these three steps. There might be additions that States 

ask, so that when we are buying in the market, we know that no 

matter where we are buying from, or where the credits are coming 

from, there is going to be uniform baseline of how we establish that 

we know we are getting the credit we think we are buying, if we 

are purchasing them, rather than needing to verify any particular 

place that there is a baseline that we can count on across a multiState Bay. 

Senator CARDIN. That is the question I was going to ask. You 

have to deal in an interstate program, located in the District. 

Mr. HAWKINS. Correct. 

Senator CARDIN. There is not enough in the District, you are 

going to need to have multiple jurisdictions that you have to deal 

with, which requires, I think, some degree of Federal role. 

Mr. HAWKINS. To me, it is not one way or the other. The advantage of some baseline uniform system is across the board why 

many, in my judgment, environmental programs have succeeded or 

failed. You get economies of scale, you get consistency of purpose, 

you get a professional group that can go from one place to another 

and know that there is a common set of steps that can be taken. 

Nonetheless, in a particular State or with a particular agricultural 

industry, it may be modified in addition to that. But knowing there 

is a baseline, so if you are buying on the market, you have confidence that where the credits are coming from, you know that 

there is a core that you can rely on, I think it would be important 

for the purchaser of the credit. 

Senator CARDIN. I agree with that. Dr. Matlock, did you want to 

add? 

Mr. MATLOCK. What we are talking about here is watershed level 

adaptive management, where we have the flexibility to evaluate 
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what works, implement it, change what doesn’t work, but do it 

without penalty, do it transparently, do it in the open, eyes open. 

Ms. Bodine laid it out very effectively, I think, you cannot manage 

practices, you have to manage outcomes. The outcomes are water 

quality. If the water quality is getting better, we are doing things 

right. Let’s figure out what is working best and keep doing it. Let’s 

fix what is not working so well. 

If the water quality is not getting better, we have to change 

something. So we have to have flexibility for that sort of adaptation 

in our process. Monitoring should be focused at the watershed 

level, not at the farm level. There are a number of reasons for that; 

it is too expensive, it breeds uncertainty, you are chasing ghosts all 

the time, because what happened yesterday won’t happen tomorrow. And trying to find causality is just difficult, if not downright 

impossible. It is better to manage process and measure outcomes. 

Senator CARDIN. Let me ask one final question. That deals with 

hot spots. You have mentioned that. What can be done to prevent 

those that are making the efforts, don’t want to be responsible for 

areas that are subpar, even though you may meet the TMDL 

standard, you may meet the overall standard. But how do you 

avoid the criticisms that you are letting polluters off the hook and 

affecting some communities much more adversely than we should? 

Ms. MCGEE. I will take the first shot at that and others can hop 

in. Under the Clean Water Act, there are provisions both in the 

regulations and the law that says a permit cannot be issued that 

will cause or contribute to the degradation of water quality standards. Theoretically, it is there. How that is done, I think is the 

challenge. How would a permit writer who is going to issue permits, whether it is Mr. Hawkins’ plant or an urban stormwater 

area, when they see a credit in a permit, how are they going to 

evaluate that, what does that look like? 

We are actually hopeful that EPA, they have provided some guidance in their Tool Kit, but we think more clarity needs to be given 

in that regard, there needs to be sort of a stepwise process. You 

would look, for example, at local impairments, local problems with 

waters and how that might affect your ability to trade. So we think 

one way to do it is to lay out a very methodical process, so that 

is transparent and then people can evaluate it for themselves. 

Senator CARDIN. Ms. Bodine. 

Ms. BODINE. I agree with Dr. McGee, a localized impairment of 

water quality is not allowed under the statute. But I would say 

that I think that this hot spot issue, when you are talking about 

nutrients, is a bit of a red herring. Hot spots, when a pollutant is 

a bioaccumulative toxic, yes, hot spots are an issue. Nutrients, 

though, you have to remember, are already so variable. The effect 

of nutrients in particular water bodies is variable with respect to 

temperature, water velocity, habitat. The issue that you would 

have a local hot spot as a result of a trade I personally view as 

highly unlikely. And it would have to be an extreme situation that 

a permit writer would be able to identify. So I know it is being 

thrown out there as a concern, but I would suggest it is not as big 

a concern as perhaps it is being portrayed. 

Senator CARDIN. Thank you all very much. Senator. 

Senator BOOZMAN. Thank you, Mr. Chairman. 
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Mr. Hawkins, you mentioned that you are in a situation to go 

from five to four and it is going to cost you a billion dollars. And 

yet it has really become very, very questionable that you are going 

to get a billion dollars’ worth of bang for the buck in that reduction. 

Is that correct? 

Mr. HAWKINS. Measuring the value of the pounds is a harder 

question to answer. There is no question that the cost per pound 

of removal has gone up. 

Senator BOOZMAN. But when you put that in relation to the watershed, you mention the 1 percent, 2 percent affecting, when you 

put that billion dollars in relation to what five to four is actually 

going to do to the watershed, if you figure that out, it is really pretty minimal, isn’t it? 

Mr. HAWKINS. It is easy to argue that you could spend half as 

much money and get twice as much reduction. 

Senator BOOZMAN. That is my point. A billion dollars is a lot of 

money. And there is no assurance that they might not come back 

a few years from now and say, you need to go from four down to 

three or two or whatever. But to take that billion dollars and then 

again put it with all kinds of other projects that would directly relate to the watershed, working with Dr. McGee or whoever, that to 

me makes no sense at all. And that is the problem, I mentioned 

the uncertainty, Dr. Matlock mentioned the uncertainty, and you 

live with this every day, Mr. Hawkins. 

How do you, and you guys can chime in, Dr. Matlock and Mr. 

Hawkins, if we talk about a wastewater plant doing some sort of 

trading scheme or whatever, how do you get some certainty in the 

system through maybe going to a new permitting system? How do 

you get where they can do that? 

The other thing is, I would say, in hearing your testimony, I 

know you come from the perspective of the large district, and you 

have a tremendous job to do, and you are doing a great job with 

it. But the scenario that you are giving is going on all over America. It might not be a billion dollars, but if you live in a town of 

1,500 and it is $10 million, it is a big deal. 

So we have to get a handle on this. There has to be some sort 

of common sense and scientific backing as those decisions are 

made. That is a whole different topic. 

But talk to us about how, if we enter into this game, you and 

Dr. Matlock, how do you come up with some new permitting system so you can have some certainty, so you are not going to come 

back and essentially not only perhaps do your trading scheme, and 

then again the demand, it should go down to four to three, with 

the trading scheme, and you have all this other stuff in place, too? 

Mr. HAWKINS. It is a great question. In our judgment at D.C. 

Water, by the way, you are exactly right, proportional to the community, ours happens to be quite large, but the cost relative to 

smaller towns may be just, per capita, the same kind of extremely 

high cost for protections at the margin. That is an issue, and I 

agree with Senator Cardin that at some point the public rebels and 

all of a sudden does not support any longer which is otherwise such 

a positive step, which is what Blue Plains has done for the last 4 

years. It is an enormous success. We all should celebrate it. 
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As I have said, the best bass fishing in the Potomac River is 

downstream from our plant. 

[Laughter.] 

Mr. HAWKINS. That is amazing. But the question, and this is 

what it goes back to, where I think we all agree that having a system with rules set up that are understandable and clear, it is why 

at least at the moment, absent having seen something otherwise as 

a potential prejudicer, if there is a baseline system, the Federal 

Government doesn’t necessarily have to run it. But that there are 

some baseline circumstances that we know will be firm and certain 

across the watershed, even with watershed monitoring, a well-run 

watershed association, I agree with that approach, there could be 

flexibility in each State. 

And that does call for some principles that are established, that 

are very clear from the onset. I don’t think the market will work. 

We wouldn’t want to put ratepayer money into the market unless 

we are certain that we can count on those reductions wherever 

they may be coming into the future. That is going to be the market 

rules, as opposed to what we can or can’t do. 

Senator BOOZMAN. Dr. Matlock. 

Mr. MATLOCK. So the common thread here is that there needs to 

be some baseline ‘‘thou shalt nots’’ on the landscape. There are 

standard practices that are acceptable for agricultural producers, 

whether it is row crop, animal ag, specialty crop, et cetera. We all 

understand those in the ag community very well. 

We also understand that the Pareto principle works. Sometimes 

90 percent of our problems come from 10 percent of our landscape. 

So we have tools to evaluate where our problem children are, as 

it were. That sounds paternalistic, it is not intended that way. 

Probably a poor choice of phrase. But we understand where the 

biggest possible impacts could be met through implementation and 

intervention with the landowners’ and ag producers’ participation. 

So we need a set of baseline practices, the first three or four tiers 

of activity that must be certain. You turn the manure spreader off 

when you go across the creek. There are some things you can do 

that just make sense. And all good producers know that. We need 

some level of assurance that those practices are being implemented. 

But you can’t do that through a command and control system. 

Part of this is just helping each other become better neighbors 

through more transparency and higher communication and understanding. Frankly, the monitoring will tell ultimately where the 

problems persist. Monitoring at the watershed level, not at the 

edge of field level, because it is just too expensive. But you can cascade up to the field level if you have persistent problems in an 

area. 

So you can have triggers for engagement. So simple threshold 

triggering of response system, which is consistent with adaptive 

management strategies, makes sense. That way you start with a 

broad stroke, broad approach within the watershed and then you 

focus where you need to, as you need to. Because the other challenge we have, as you alluded to and Mr. Hawkins responded to, 

is the targets may change. Because our watersheds are always 

changing. And as our targets change, and today we are trying to 
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hit 37 parts per billion total phosphorus in the Illinois River in 

Oklahoma and Arkansas, it might be 20 next year. We have to 

have the tools to adapt there too. 

Senator BOOZMAN. Let me ask Dr. Matlock and Ms. Bodine about 

a lot of our States have narrative nutrient criteria. Is it possible 

to do a trading program to set it up in a State like that and have 

the narrative nutrient criteria of water quality? 

Ms. BODINE. Definitely yes. Most States still have narrative criteria. EPA has been pushing States to adopt numeric and some are 

resisting that. So water quality based effluent limitations are based 

on meeting water quality standards. That is a determination that 

is made in the receiving water, in the river or stream, in the ambient condition of the river or stream. Even outside of trading today, 

yes, water quality based effluent limitations are placed in permits, 

where they interpret the narrative. EPA has models that would 

support the interpretation of a narrative into a number, and then 

it becomes simply a number that could be traded. 

The other way of looking at it, though, is in determining whether 

or not you need a limitation on that plant, because you only have 

a water quality based effluent limitation if the discharge has a reasonable potential, and I am using all kinds of Clean Water Act terminology here, but a reasonable potential to contribute to a violation of a water quality standard. And if that reasonable potential 

is removed because you have trading, because the nutrients are 

being addressed elsewhere, then that is another way you can address it in the context of a narrative as opposed to a numeric water 

quality standard. 

Senator BOOZMAN. Dr. Matlock. 

Mr. MATLOCK. Yes, echoing what Ms. Bodine said, yes, narrative 

criteria can be effective in a nutrient trading framework for establishing some end point. But ultimately you have to have some end 

point and that ultimately goes to something you can measure. So 

whether it is algal biomass accumulation or whether it is turbidity 

or some other surrogate for that narrative criteria, ultimately it 

goes to a number. Because we manage for numbers. Otherwise it 

is too subjective. 

Senator BOOZMAN. Anybody that knows, what is the ratio of 

States now that have narrative versus a numeric? Do we have any 

idea? Half or two-thirds? Aha, I have stumped the panel. 

Ms. BODINE. You have stumped us. But many more States have 

narratives than have numeric standards. And you have seen the 

controversy in Florida over numeric standards. 

Senator BOOZMAN. Thank you, Mr. Chairman. 

Senator CARDIN. Let me thank all of you. This has been an extremely helpful panel in understanding the technical and the practical problems. My local paper today had headlines concerning 

water rates locally. It is becoming more and more a political issue. 

One of my first introductions to the people of Smith Island, which 

is about 350 people that live on the last inhabitable island in the 

Chesapeake Bay was how we were going to take care of their water 

needs. And we did. But Mr. Hawkins, my guess is that the costs 

there are about the same per capita as what you were dealing with 

to get that marginal progress made. 
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So we have a responsibility to find the most efficient ways to accomplish our objectives. I think that is what the public is demanding. We are going through a lot of budget debates, but they want 

us to do our job in the most cost-effective way. 

I understand the suspicions that are out there, and that is why 

I think the Federal Government does have a responsibility to give 

the predictability that you all are talking about, so that you know, 

A, that the results will be there and B, that the market is fair and 

that people want to participate, because it is the right thing and 

it is going to create a fairer system and a more cost-effective system. 

Our States are doing it, and I think EPA is cooperating and it 

is working. But as has become apparent by the testimony today, we 

can make this more effective. I think that is what this hearing has 

helped us focus in on. I thank you all for your participation. As I 

mentioned already, Senator Boozman and I are working very closely together to try to see where we can work in a non-partisan way 

to advance a good policy. This is one area that we will certainly be 

looking at. 

Before we adjourn, without objection, we will introduce statements from the Virginia Conservation Network, Conservation 

Pennsylvania, the National Association of Clean Water Agencies 

and the Chesapeake Bay Nutrient Land Trust, LLC. We have 

statements for the record from all those groups that will be included in the record. Thank you.The Subcommittee is adjourned. 

[Whereupon, at 3:52 p.m., the Subcommittee was adjourned.] 

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