Washington, D.C., August 9, 2012 —Representatives from Ohio, Indiana, and Kentucky signed a groundbreaking trading plan at a ceremony in Cincinnati today that will launch interstate water quality pilot trades in the Ohio River Basin. Water quality trading is a market-based approach to achieving water quality goals for nutrients such as phosphorus and nitrogen cost-effectively through programs that allow permitted emitters to purchase nutrient reductions from another source, such as agriculture.
The plan will serve as the basis for the three states to implement pilot trades beginning in 2012 through 2015. Although some states have adopted trading policies or rules to govern trading within their jurisdictions, this is the first time that several states have come together to develop or implement an interstate trading program where all states operate under the same rules and a water quality credit generated in one state can be applied in another.
The Electric Power Research Institute (EPRI) is leading the research effort with support from American Farmland Trust (AFT); Hunton & Williams LLP; Kieser & Associates, LLC; and the University of California at Santa Barbara. The pilot project is also receiving regional support from the Ohio Farm Bureau Federation and the Ohio River Valley Water Sanitation Commission; federal support from the U.S Environmental Protection Agency and the U.S. Department of Agriculture Natural Resources Conservation Service (USDA NRCS); and industry support from American Electric Power, Duke Energy and Hoosier Energy.
“This trading plan is a win-win for utility companies, agriculture, and ultimately, consumers and the environment,” said AFT President Jon Scholl. “For farmers, water quality trading creates opportunities to work within their communities to implement conservation practices that improve water quality and protect and enhance valuable farmland soils.”
“Trading provides point sources with a cost-effective option for meeting nutrient reduction targets and has the added benefits of improving water quality, restoring wildlife habitat, reducing greenhouse gas emissions and top-soil losses, improving soil health on farms, and providing financial support for farmers and local counties,” said Jessica Fox, senior scientist for EPRI’s Water and Ecosystems Program and the project director. “These ancillary benefits may not otherwise be achieved solely through installation of on-site technologies for managing nutrient reductions at power plants or other industrial facilities.”
The trading plan reflects the input of over 150 Ohio River Basin producers, Soil and Water Conservation District (SWCD) staff and agricultural professionals. A 16 member agricultural stakeholder advisory committee provides additional guidance for the project. The members span six states in the basin and include State Conservationists, a president of a State Farm Bureau, crop consultants, staff from the State Departments of Natural Resources, Departments of Agriculture and commodity groups, farmers, SWCD Board members and a USDA Agricultural Research Service scientist. Hosted and staffed by AFT and the Ohio Farm Bureau Federation, they have held regular monthly meetings since October 2011 to provide valuable insights and input as the draft interstate water quality trading plan, crediting protocol and other support materials emerged.
“Strong participation from the agricultural community is essential to developing a water quality trading market that works for both buyers and sellers,” said Rick McLellan, senior vice president, commercial, The Mosaic Company, and board member, The Mosaic Company Foundation, a project funder. “Mosaic is driven by our mission to help the world grow the food it needs, and we’re committed to protecting critical water resources through conservation agriculture, watershed restoration and nutrient stewardship. We appreciate that the water quality trading framework is advancing sustainable agriculture practices and shared success in water management.”
The water quality pilot trades will take place in up to 16 counties in Ohio, Kentucky, and Indiana, and are expected to engage at least three power plants and up to 30 farms implementing agricultural conservation best management practices on up to 20,000 acres. Nutrient reductions are expected to total approximately 45,000 pounds of nitrogen and 15,000 pounds of phosphorus annually. At full-scale, the project could include up to eight states in the Ohio River Basin and would potentially create credit markets for 46 power plants, thousands of wastewater facilities and other industries, and approximately 230,000 farmers.
Over the next two years, SWCD staff in the three states will be reaching out to farmers to see if they are willing to participate in the pilot trades. The process will be simpler than what farmers are used to with state and federal incentive payments because of the valuable input from agriculture in the trading plan. The SWCDs involved include Boone, Mason, Carroll, Gallatin, Bracken and Lewis counties in Kentucky, Columbia, Jefferson, Mahoning, Morgan and Washington counties in Ohio, and Ripley, Switzerland, Ohio, Dearborn, and Wayne counties Indiana.
More information is also available at www.farmland.org/ORB or http://wqt.epri.com/