Where Are We on Nutrient Credit Trading & AFG?

INTRODUCTION

The “Aligning for Growth” (AFG) policy (known as “Accounting for Growth” prior to the Governor Larry Hogan Administration) will determine how new development must mitigate or offset the water pollution it generates in order to remain in compliance with the Chesapeake Bay Total Maximum Daily Load (TMDL). Nutrient credit trading will allow local governments to address their water pollution goals in a more flexible, efficient, and cost-effective manner by buying or selling credits from nutrient mitigation projects. Both of these policies are critically important to counties but have a complicated and intertwined history. This article outlines the past, present, and potential future of these policies, and the actions MACo has taken on both issues.

MACo has been supportive of nutrient credit trading and argued that it is an important and necessary tool for counties to meet their water pollution reduction goals under both the Bay TMDL and Municipal Separate Storm Sewer System (MS4) permits. MACo has also raised specific concerns about how the AFG policy should work. (Note: Maryland is required to implement an AFG policy under its Watershed Implementation Plan.)

There have been three attempts to create an AFG/nutrient credit trading policy:

1. ORIGINAL MDE PROPOSAL (2012)

In 2012, the Maryland Department of the Environment (MDE) proposed an AFG policy that included nutrient credit trading. Developed largely internally, MDE’s proposal was criticized by MACo, the environmental community, and the development community for lack of stakeholder input. In response to the criticism, MDE withdrew its proposal and began holding preliminary stakeholder meetings throughout 2012.

In its submitted comments, MACo addressed the following issues regarding AFG: (1) simplicity and transparency; (2) flexiblity; (3) offset loads; (4) credit options and fee in lieu; (5) verification and enforcement; and (6) cost. MACo also expressed concern that a potential lack of tradable credits could hamper the development of a robust trading market. The initial stakeholder meetings and feedback resulted in the formation of a Workgroup on Accounting for Growth in Maryland in 2013.

MACo Comments on Accounting For Growth Policy 2012-10-01

2. WORKGROUP ON ACCOUNTING FOR GROWTH IN MARYLAND (2013)

The Workgroup on Accounting for Growth in Maryland was active from January to July of 2013 and attempted to create full AFG and nutrient credit trading policies. The Workgroup included representatives from various State agencies, counties, municipalities, homebuilders, commercial builders, environmental groups, Smart Growth advocates, agriculture, and the private sector. MACo representatives included: Frederick County Sustainability and Environmental Resources Manager Shannon Moore, then-Talbot County Planner Sandy Coyman, and then-Harford County Council Member Mary Ann Lisanti. MACo Legal and Policy Counsel Les Knapp was a substitute member and also served with representatives from Washington and Baltimore Counties as part of the Workgroup’s technical support subcommittee.

The Workgroup issued a final report in August of 2013. Despite vast differences in starting positions, the Workgroup largely reached consensus in the area of nutrient credit trading. The only major split in opinion regarded trading geographies – with local governments supporting statewide trading unless a local water segment was subject to a nitrogen, phosphorus, or sediment TMDL (in which case any offsets/trades must occur within that local geography). MACo also supported county flexibility to limit trading geographies to an even smaller scale if necessary.

Despite the overall consensus on trading, several key unresolved issues regarding the AFG policy kept the report’s recommendations from being implemented. MDE again considered taking unilateral action, but suspended its efforts due to the 2014 election cycle.

Final Report of AFG Workgroup (2013-08)

3. MARYLAND WATER QUALITY TRADING ADVISORY COMMITTEE (2016)

Discussions about nutrient credit trading and AFG were temporarily halted after the change in Administrations from Governor Martin O’Malley to Governor Larry Hogan. However, in January of 2016, MDE created the Maryland Water Quality Trading Advisory Committee to again take up the issues.

The Advisory Committee separated the trading and AFG issues and first worked on creating a nutrient credit trading policy among different water pollution sectors (agriculture, nonpoint sources like stormwater, and point sources like wastewater treatment plants). County members include: (1) Erik Michelsen, Anne Arundel County Department of Public Works; (2) Shannon Moore, Frederick County Sustainability & Environmental Resources Office; (3) Jim Caldwell, Howard County Office of Community Sustainability; (4) Lisa Feldt, Montgomery County Department of Environmental Protection; and (5) Les Knapp, MACo. A sixth rural county representative will be added shortly.

MACo and the county representatives, in conjunction with municipal representatives, jointly submitted recommendations specifically dealing with the unique trading needs for MS4 stormwater purposes. In May, the Advisory Committee suspended its meetings from May to September in order to allow MDE to process and incorporate the significant feedback received from the participating stakeholders. The Advisory Committee will resume meeting in September to review the proposed trading practices and will then move on to developing an AFG policy.

One final sidenote: MDE introduced legislation during the 2016 Session (HB 325) that would have allowed MDE to use monies from the Bay Restoration Fund Wastewater Account to purchase nutrient credits. MACo joined with other stakeholders in reluctantly opposing the bill as premature, given the just starting work of the Advisory Committee.

MACo & Local Government Comments on MS4 Trading Principles (2016-05-18)

MACo Testimony on HB 325

CONCLUSION

MACo will continue to work with the Administration and key stakeholders on both the AFG and nutrient credit trading policies. If you have additional questions or want more information, please contact Les Knapp at lknapp@mdcounties.org or 410.269.0043.

USEFUL LINKS

Prior Conduit Street Coverage of AFG

Prior Conduit Street Coverage of Nutrient Credit Trading