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Trading water pollution

Every summer, water sitting above thousands of acres of sediments in Long Island Sound loses most of its oxygen. Lobsters, flounder and other bottom-dwelling animals either die or migrate east, where conditions are not suffocating.

When Christine Todd Whitman, director of the Environmental Protection Agency, launched the nation-wide Water Quality Trading Policy on Jan. 13, she cited Connecticut as a prime example of what can be achieved under the new policy. The state has trimmed $200 million from the projected cost of restoring oxygen to Long Island Sound by allowing sewage treatment plants to trade rights to pollute.

Connecticut Department of Environmental Protection staff prepare to launch a rosette sampler into Long Island Sound. The sampler measures real-time temperatures, salinities and dissolved oxygen concentrations and grabs water from the surface and near the bottom of the Sound. Lab analyses later quantify the amount of nitrogen in the water, a key parameter that will help managers determine whether a novel trading program is improving water quality in the Sound. Photo courtesy of CT Department of Environmental Protection.

“Water quality trading fits management like a glove,” says Paul Stacey, a Connecticut Department of Environmental Protection (DEP) environmental analyst who led the development of the state’s trading program. He says the program offers both flexibility and efficiency. Critics argue, however, that trading may create local water problems in the rivers that feed the Sound and restricts the public’s participation in managing its water resources.
Although the trading program has evolved over the past decade, the first trades will take place this summer. Plants will be able to purchase the right to discharge nitrogen into the watershed at a price tentatively set at $1.65 per pound of nitrogen removed per day.

Nitrogen is a nutrient and, at low levels, important for sustaining the growth of algae that form the base of food chains. However, at the high concentrations found in the western portions of Long Island Sound, the algae grow too quickly. When they die, they sink to the bottom of the Sound; their decomposition drives oxygen out of the water. In the summer, the relatively cool waters at the bottom of the Sound do not mix with the warmer, well-oxygenated surface waters and this stratification intensifies the oxygen depletion. Oxygen concentrations routinely go below 5 milligrams per liter, violating both New York’s and Connecticut’s state water quality standards.

The Long Island Sound Study, initiated by Congress in 1985, has determined that lack of oxygen is the most pressing problem threatening the health of the Sound — a water body that generates more than $5 billion annually in the regional economy from recreation and commercial fishing.

The majority of nitrogen comes from sewage treatment plants that discharge treated waste into the Sound’s tributaries. Connecticut plants alone dumped more than 6,600 tons of nitrogen into the watershed in 2002. As mandated by the Total Maximum Daily Load (TMDL) policy under the federal Clean Water Act, Connecticut began a plan two years ago to cut nitrogen discharges from 79 publicly owned treatment plants by 64 percent over 13 years.

In June 2001, the Connecticut General Assembly created a new permitting system that forms the backbone of the trading program designed to help Connecticut meet its TMDL requirements with minimum cost. All the sewage treatment plants fall under a single general permit, and only the aggregate of the plants must meet the 64 percent reduction in pollution. An individual plant can meet its allotted reduction by purchasing credits generated from other treatment plants that have exceeded their discharge requirements.

The closer a treatment plant is to the Sound, the stronger an impact it has on water quality. As nitrogen travels downstream, it adsorbs to sediments, converts to gas emitted to the atmosphere and washes out into the Atlantic Ocean. Therefore only a fraction of the nitrogen from distant plants actually makes it into the western portion of the Sound. Stacey’s research indicates that discharges from the Farmington plant along the Farmington River (over 87 miles from Long Island Sound) have only 18 percent as much of an impact on oxygen levels as discharges from the Norwalk plant, which sits less than two miles from the Sound.

The general permit accounts for geographical differences by establishing trading ratios. For example, the permit requires the Farmington plant to reduce its nitrogen discharge by 25 pounds per day over the next year. But Farmington can also meet that goal by purchasing 4.5 pounds of nitrogen credit from the Norwalk plant, because those two alternatives will have the same impact on the Sound. The ratios give plants sitting near the Sound an economic incentive to upgrade their facilities and create nitrogen credits, and they encourage distant plants to purchase credits, Stacey says. The total cost of meeting the TMDL goes down because distant plants do not invest large amounts of money in reaching marginal gains in nitrogen reductions.

Yet Nancy Stoner, director of the Clean Water Project with the Natural Resources Defense Council, cautioned in a 2001 report to DEP that the structure of the trading program could create problems. Treatment plants that purchase the right to pollute may deteriorate local water quality in bays and harbors of the rivers that feed the Sound. “To prevent nutrient ‘hotspots,’ the DEP should review and approve only those trades that will not compromise local water quality,” she wrote.

Stoner also criticized the general permit system, arguing that it gives a municipality the right to purchase credits without consulting residents who may prefer the plant to reduce nitrogen discharges. She advocated an individual permitting system that would “enable local citizens in each of these communities to provide views on the program and to inform decision makers about potential localized water quality effects.”

The new EPA nationwide policy will facilitate the development of trading programs like the one in Connecticut by providing states and tribes with a template to follow. Paul Faeth, an economist at the World Resources Institute, an environmental think tank, sees promise in the plan. He investigated the potential for trading in Michigan, Wisconsin and Minnesota — all states facing nutrient and sediment pollution. In each case, he found “cost savings of between 63 and 82 percent to meet or exceed environmental targets, compared to specific mandates on point sources.”

Greg Peterson


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