Accounting for Growth Primer

As previously reported by Conduit Street, the Maryland Department of the Environment (MDE) is working on regulations for an Accounting for Growth (AFG) Policy that will require new development to offset the water pollution it generates.  The AFG Policy will have a significant effect on how counties will be able to grow and develop.  This article is designed to provide a primer on the AFG Policy.  More detailed articles in the future will discuss specific aspects of the AFG Policy.  Portions of this article are derived from comments made by Frederick County Sustainability and Environmental Resources Manager Shannon Moore to the MACo Legislative Committee on July 10.

What is AFG?

The federally mandated Chesapeake Bay Total Maximum Daily Load (TMDL) has assigned Maryland water pollution targets for nitrogen, phosphorous, and sediment.  In turn, the State has given each county its own set of similar targets to meet the Bay TMDL.  Additionally, many local waterways have their own TMDLs for specific pollutants.

However, the Bay TMDL targets mainly account for current water pollution sources and existing development.  The AFG Policy is designed to address water pollution caused by new growth and development.

The AFG Policy will require new growth to offset its nitrogen, phosphorus, and sediment pollution in order to remain compliant with the Bay TMDL pollution targets.  Offsets can be accomplished through direct onsite or offsite mitigation, buying credits through a nutrient credit trading process, or by paying a fee-in-lieu.

MACo May 15 AFG Comments to Stormwater Association

How will the AFG Policy be implemented?

The AFG Policy will take place through the regulatory process of MDE and not through statute or the legislative process of the General Assembly.

MDE has been holding stakeholder workgroup meetings since 2012 and the meeting process is nearly complete.   The workgroup’s last meeting is expected to take place on July 19.  MACo has been part of the ongoing workgroup process.  The workgroup includes representatives from various State agencies, counties, municipalities, homebuilders, commercial builders, environmental groups, Smart Growth advocates, agriculture, and the private sector.

MDE expects to finalize the AFG regulations by December of 2013.  Counties will likely need to have their final AFG ordinances and regulations adopted by December of 2014.

How have MACo and the counties been represented?

MACo has three members as part MDE’s stakeholder workgroup:  Shannon Moore,  Talbot County Planner Sandy Coyman, and Harford County Council Member Mary Ann Lisanti.  Additionally, representatives from Washington and Baltimore Counties and MACo staff are part of the workgroup’s technical support subcommittee.

MACo also has its own Watershed Implementation Plan (WIP) technical workgroup that has been working on the issue.  Its membership includes interested counties spanning from Western Maryland to the Eastern Shore.  Many of the county AFG workgroup members also participate in the MACo WIP Technical Workgroup.

MACo has also previously submitted comments on the broad principles that should be contained within the AFG Policy.

October 1 2012  MACo Comments on AFG Policy

July 23 2012 Preliminary MACo Comments on AFG Policy in WIP Workgroup Memo

What is MACo’s position on the AFG Policy?

MACo’s position is to have an AFG Policy that prevents new water pollution to either the Bay or locally impaired waterways in manner that is cost-effective and minimizes negative county economic impacts. The AFG Policy should not eliminate economic development activity in rural areas, make redevelopment and infill in urban areas impractical, or incentivize conversion of active farmland land to urban uses.

Counties should have the option to limit nutrient credit trading geographies and have a right of first refusal on use of fee-in-lieu payments.  Counties should also have the option to assume the ongoing operation and maintenance responsibilities for offset practices, but these costs should not be mandated on the counties by the State.

What are some of MACo’s Concerns with the AFG Policy?

1. Workgroup Consensus Not Being Reflected in Final Regulations

The stakeholder workgroup is advisory and MDE is not bound to accept the workgroup’s recommendations.  There have been circumstances where MACo and other stakeholders (sometimes the entire workgroup) have reached a consensus that MDE has resisted.  For example, the entire workgroup reached a consensus on what activity would trigger the AFG offset requirements – the size of the disturbed area in combination with practices that would increase pollutant loads.  However, MDE proposed that a change in land use should also be part of the applicability trigger.  This in essence would generate a need for expensive offsets where no additional pollution occurs and intrudes on the local land use decision process.

MDE has also proposed unilaterally taking excess wastewater treatment plant capacity from local governments and applying the reductions to satisfy statewide stormwater goals.  These credits could otherwise be used by local governments to meet their own goals until capacity is needed or sold temporarily in the marketplace to make the market more competitive.  The workgroup resisted this proposal.

2. Counties Required to Guarantee and Maintain Offsets in Perpetuity

MDE initially advocated that counties have to take on perpetual obligations for “definably permanent” pollution offsets after the 30 year life of a credit in the trading market.  The stated reason for the proposal was to allow for the use of more temporary offset practices (thus creating a broader trading market)  while still complying with a United States Environmental Protection Agency (EPA) policy for permanent offsets.  This would cause counties to have to take on significant long-term financial responsibilities for total replacement costs and operations and maintenance of practices after 30 years.

However, EPA’s Senior Policy Advisor on the Chesapeake Bay has noted that EPA had not thought that far ahead on this issue and would look at the overall strength and effectiveness of the State and local programs as opposed to mandating such a bright line policy.

MACo has strongly resisted this proposal, arguing that local governments should have an option to act as a guarantor, but should not be mandated to do so.

3. Stormwater Runoff Pollution Must Be Reduced to the Level Produced By a Forest With No Accounting for the Level of Pre-Development Pollution Generated By a Piece of Land

Some workgroup stakeholders have strongly advocated that EPA will require growth to offset its entire load to a forested condition regardless of pre-development load. However, EPA’s Senior Policy Advisor on the Chesapeake Bay has noted that EPA did not have a hard and fast position on what starting credits would comprise the baseline for a site, versus what would constitute a new load.  In many instances using a forest baseline would result in nutrient reductions beyond those generated by the new growth and substantially increase the cost for new growth.

MACo has argued that since the policy is about offsetting water pollution from new growth, developers should have to account for any new pollution added to a land post-development, with some modifications for the development of active farmland, redevelopment, and infill.

4. Availability and Cost of Credits

No trades have occurred to date in the state’s agricultural nutrient trading market, and stakeholder workgroup has considered a fee-in-lieu cost of between $2000 and $3000 for each pound of nitrogen to be offset, which is annualized over 30 years.  However, the final fee-in-lieu cost may be higher.  MACo is concerned that a lack of tradable credits could hamper the development of a robust trading market while a prohibitively high fee-in-lieu could stifle any new growth in the absence of a strong market.

Conclusion

The AFG Policy will have far-reaching impacts on both the State and local government and will set the tone for future growth and economic development in Maryland.  Some stakeholders believe the AFG policy could ultimately have greater county impacts than the septic system tiers, Best Available Nitrogen Removal Technology (BAT) requirement for septic systems, or PlanMaryland.  MACo understands the need to address water pollution created by new growth and will continue to work with MDE and other stakeholders to craft a responsible and practical solution.

MACo will provide further information as the stakeholder workgroup finalizes its draft report.

MACo thanks Frederick County Sustainability and Environmental Resources Manager Shannon Moore for her extensive contributions to this summary, and for advancing the county views on these issues.

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