Nitrogen Credit Trading – EPA Region 1

February 22, 2018 | Author: Anonymous | Category: Business, Finance
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Nitrogen Credit Trading – EPA Region 1 (State of Connecticut) (Point Source to Point Source Trading)

Background & Problem: 

Very low dissolved oxygen levels (< 2 mg/l) in Long Island Sound off the shore of Connecticut due to excess nitrogen loading, mostly from point sources – see map below.



Western Long Island sound has the most problems; nitrogen sources in eastern Connecticut have less impact per pound of nitrogen discharged than sources in western Connecticut because of attenuation during transport through Long Island Sound.



A comprehensive water quality/hydrodynamic model (LIS-3) identified six nitrogen management zones (see map above) based on drainage basin boundaries and political jurisdictions; nitrogen reduction targets were developed for each zone.



A nitrogen TMDL was approved by EPA in 2001, which provided a total nitrogen (ammonia nitrogen, organic nitrogen, nitrite, and nitrate) wasteload allocation; TMDL strategy is to reduce overall nitrogen loading to Long Island Sound 58.5% by 2014 (based on 1990 loadings); TMDL goal is for D.O. levels of 5.0 mg/l in the Long Island Sound surface waters and 3.5 mg/l in bottom waters.

Approach: 

Connecticut Department of Environmental Protection (DEP) determined that the TMDL goal would be achieved by reducing nitrogen loadings from 79 POTW’s; each is required to achieve a 70% level of nitrogen reduction, despite possible different actual nitrogen contribution (unequal distribution of responsibility versus impact).



State funding was available to finance construction of nitrogen removal at POTWs.



Nitrogen credit trading is defined as the sale of nitrogen credits (a pound of nitrogen) created by a point source as a result of the reduction of nitrogen in excess of that source’s

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permit limits and the purchase of credits by a different point source to meet the reduction limits of that source’s permit in lieu of providing additional treatment. 

For trading equivalency, since nitrogen sources throughout the state of Connecticut have different impacts on water quality, normalized exchange ratios were developed (like an exchange rate for currency); all loadings are traded on the equivalent basis.



The state believed there could be significant cost saving through trading. Public Act No. 01180 was passed in 2001, establishing a framework for a Nitrogen Credit Exchange, directed by the Nitrogen Credit Advisory Board.

Trading Program Elements (point source to point source): 

The geographic area encompassed by the trading program is the state of Connecticut.



A general permit was issued to all 79 point sources, establishing annual nitrogen discharge limits (annual mass loading), along with monitoring and reporting requirements.



Local water quality management objectives cannot be compromised by the trading activities.



For each facility to be in compliance with the general permit, the annual mass loading of total nitrogen must be less than or equal to its discharge limit OR it must secure equivalent nitrogen credits equal to the amount the facility exceeded the annual discharge limit in accordance with the Nitrogen Credit Exchange.



Trades are to take place once a year; the DEP sets the price of an equivalent nitrogen credit by March 31st of each year; facilities must purchase equivalent nitrogen credits by July 31st of the same year. The price per pound discharged each day is expected to range between $2.00 and $30.00 between 2002 and 2014.



Credits can be banked for no more than 1 year.



EXAMPLE – credits exchanged between New London (in eastern CT, needs to purchase credits) & Norwalk (in western CT, has excess credits) in 2003. Assume the price per pound of nitrogen is $2.00. Zone

POTW

Equivalency Factor

2002

Total Nitrogen (pounds/day) 2003 2004 2005 2006

2014

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New London

0.18

770

717

6

Norwalk

1.00

1433

1333

653 1215

568

472

386

1057

878

718

Credits exchanged would apply a 0.18 exchange factor, e.g., if New London needed to remove 100 pounds of nitrogen per day to meet their 717-pound/day limit, they would need to buy 18 pounds of nitrogen per day of Norwalk’s excess. Over the course of a year, New London would have to spend: (100 pounds/day) * 0.18 * 365 days * $2.00/pound = $13,140 Benefits of the trade are that New London could use the exchange to defray the cost of its own nitrogen removal project over the short run and that Norwalk recoups some of the costs associated with excess nitrogen removal.

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