BMP Auctions, a Market Based 

Approach to Improving Water Quality

John Leatherman

Professor

Office of Local Government

K-State Research and Extension

FRRCC Tour

September 9, 2008

Josh Roe,

Watershed Economist,

Office of Local Government

K-State Research and Extension

Craig Smith

Graduate Research Assistant

K-State Research and Extension
Issue

• Adoption of BMPs is critical for 

restoring/protecting water quality

• Many cost-share & incentive programs in 

place

• Many producers still choose not to 

participate and/or adopt BMPs

• Why is this the case?

• How can we increase BMP adoption 

rates?
K-State Study

• Data from 136 producers from KS and 

several surrounding states

• Full survey results and discussion:

Journal of Soil and Water Conservation -

September/October, 2007
Why do some producers choose not to participate 

in conservation programs?

Low Payments

15%

Government control / Lack 

of flexibility

36%

Paperwork

19%

Hassle

11%

Education unavailable

4%

High penalties

2%

Complicated

13%
Summary of Findings

• Many producers uncomfortable with govt. control 

over their land-use decisions

– Conservation Programs should limit the amount of 

restrictions placed upon enrollees

– More flexibility

• Increasing payment levels could increase 

participation, but was not a major factor
Market-based Approaches

• Much interest in market-based approaches

• NRCS Strategic Plan (2005-2010) lists 

“Market-Based Approaches” as one of 

three overarching strategies

• Success in Air Quality Trading

• Concepts now being applied to Water 

Quality Trading

• One hybrid-type approach used in Kansas: 

BMP Auction
Possible Alternative – BMP Auctions

• Producers submit bids to supply the watershed 

with WQ improvements 

• Bids are ranked by amount of WQ improvements 

generated per dollar

• Producer who offers WQ improvements at 

lowest price is contracted with first

• Process repeated until a predetermined point is 

reached

• BMP auctions identify and purchase the most 

cost-effective WQ improvements for a specified 

budget
BMP Auction - benefits

• Several benefits to coupling a BMP Auction with 

flexible implementation funding:

– Funds can be targeted to highest impact investments 

and exceed limits of existing programs

– Producers offered flexibility of choosing alternative 

BMPs that work best for their operation and name 

their price

– Apply stakeholder input & science to guide change in 

the watershed

– Provides valuable insights into the incentive levels 

required to adopt BMPs

• Guide future policies and investments
Kansas BMP Auctions

• Pomona Auctions:

-Round #1 in 2007, 24 bids received for 

$19,062 in total

-Round #2 in 2008, 21 bids received for 

$39,508 

• Marais des Cygnes Targeted Watershed Grant 

– Simultaneous Kansas and Missouri Auctions

• Upper Arkansas, Toronto, Tuttle Creek, Pomona 

round #3, Eagle Creek
K-State Watershed Manager

Determining the optimal number 

of BMPs
Watershed Management in the 

Past

• 3 main assessment activities took place

– Models predicted pollutant loading from 

various parts of the watershed

– Identified BMPs that could reduce pollutant 

loading

– Cost estimates may have been given for 

some of the BMPs 

• Information was provided in a 

disaggregated form – difficult to use for 

making management decisions
Watershed Management in the 

Future

• 3 assessment activities (modeling, BMPs, and 

costs) are brought together allowing 

comprehensive evaluation of alternative 

management plans

• Evaluate economic & environmental effects of 

plans

• Evaluate combinations of BMPs

• Optimize plans to achieve the greatest “bang for 

the buck”

• Calculate annualized and investment costs

• Calculate potential cost-share payments and outof-pocket investment costs
K-State Watershed Manager

• Developed to optimize soil and nutrient 

loss reduction, it can approach the 

problem in two ways:

• Determine the optimal amount of BMPs to 

install to reduce a given amount of loss.

OR

• Maximize the amount of soil and nutrient 

loss reduction given a set budget.
•User friendly spreadsheet.

•Does require at least mid-level watershed modeling.

•Utilizes powerful optimization techniques.
Thank You!

Josh Roe

roe@ksu.edu