Developing a Water Quality Trading Framework Dustin Miller, Attorney, Nyemaster Goode P.C.

1. #IowaLeague18 Developing a Water Quality Trading Framework Dustin Miller, Attorney, Nyemaster Goode P.C. Handouts and presentations are available through the event app and at www.iowaleague.org.

2. Numeric Nutrient Criteria Clean Water Act Point Source Total Maximum Daily Loading Concentrated Animal Feeding Operation Total Phosphorus Total Suspended Solids Watershed National Pollutant Discharge Elimination System Environmental Protection Agency Water Quality Water Quality Standards Publically Owned Treatment Works Total Nitrogen Hydrologic Unit Code Nonpoint Source Turbidity Iowa Department of Natural Resources

3. Iowa Nutrient Reduction Strategy • Focused on Nitrogen and Phosphorus to the Mississippi River • Final Draft Released in January 2013 • Total Reduction Goal: 45% for Non-Point Source (NPS) and Point Source (PS) • Integrated Strategy • Non-Point Source: Science Assessment for NPS agricultural producers with voluntary implementation of conservation practices • Point Source: Technology Assessment for major wastewater treatment facilities • Estimated Cost • NPS: Initial Investment Costs range from $1.2 to $4 billion • PS: Capital and operation costs over 20 years of approximately $1.5 billion • Water Quality Trading Included in Final Draft and Annual Updates

4. Water Quality Trading • 2003 EPA Water Quality Trading Policy • Allows a Point Source to Purchase "Credits" to Reduce Pollutants More Cost Effective Than with Technology at the Plant • Previously Solely Compliance Driven with Numeric Nutrient Criteria or TMDL • Too Restrictive and Limited Success • Updated Language in the INRS in 2016 to reflect efforts of the Iowa League of Cities

5. Iowa League of Cities’ Efforts • 2014 USDA NRCS Conservation Innovation Grant • 2015 USDA NRCS Conservation Innovation Grant • Technical Advisory Committee • Storm Lake and Dubuque Pilot Trades • Early Adoption Letter • Housing of NRE

7. Iowa Nutrient Reduction Exchange (NRE) • Utilize Motivations • Environmental benefits, flood mitigation, source water protection, economic development, habitat development, nutrient reduction, increased production • Data Points • Watershed, permit number, project name, funding source, practice type, install data, term of practice (years), type of credits generated (N, P, sediment, etc.), credit calculation method, verifying entity, monitoring, pollutant reductions, ancillary benefits • Track Multi-Benefit Investments • Provide Incentives for Investment • Improved ratios, environmental excellence, longer term schedules, etc.

8. NRE Incentives • If/when the point source is subjected to water quality-based nutrient limits in its NPDES permit, DNR will provide compliance flexibility to the extent allowed by law (e.g., net-addition, longer-term compliance schedule if demonstrated to be necessary; a 1 to 1 trade ratio for projects with quantified performance developed pre-compliance; preferred access to credits if more demand than supply). • The verified reductions may be applied by the point source as an offset against its new or expanded loading (i.e., in a growth scenario). • DNR will provide official recognition through some kind of “environmental excellence” program, along with any discretionary incentives that DNR is legally authorized to provide (e.g., reduced agency inspections, streamlined permit processing, reduced monitoring, reduced paperwork). • If/when the point source demonstrates that additional technology-based reductions are not feasible, DNR will provide an option allowing the point source to achieve equivalent reductions through the NRE. • In situations where other sources join together in a watershed plan, then the affected point sources will be eligible for a “bubble” or watershed permit that enables them to trade between themselves and other sources for compliance with watershed-wide nutrient reduction goals. • If the State adopts a formal water quality incentive program in the future with a different baseline, then DNR will waive the programmatic baseline for up to two NPDES permit cycles in connection with voluntary projects that are initiated and maintained before the formal program is adopted. • SRF applications for Sponsored Projects may receive priority scoring if they anticipate registering projects into the NRE.

9. NRE Next Steps • Process • NPDES permit integration (DNR) and practice application submittals (ISU and DNR) • Incentives • Evaluation of regulatory authority and potential for use • Database • USACE RIBITS Iowa Pilot – ensuring an easy to use electronic application submittal process • NRE placement • Evaluation of NRE placement in rule or policy • Nutrient Load Reduction Model • Evaluation and implementation of a specific model or models for load reduction estimates. • Streambank Stabilization

10. Questions? Dustin Miller Attorney at Nyemaster Goode P.C. dmiller@nyemaster.com (515)883-0925 Robert Palmer General Counsel & Director of Government Affairs robertpalmer@iowaleague.org (515)720-4148