Great Lakes Trading Network

Conference Call Summary

October 15, 1999

 List of Participants:

  • Susan Austin, San Francisco Tradable Loads Program
  • Dave Batchelor, Michigan DEQ                                                   
  • Judy Greenwald                                                                                                   
  • Cy Jones, Chesapeake Bay                                                 
  • Jim Klang, Minnesota Pollution Control Agency  
  • Mary Anne Lowndes, Wisconsin DNR
  • Jim Pinkham, Fox-Wolf Basin 2000
  • Rhonda Sandquist, McKenna & Cuneo LLP
  • Claire Schary, US EPA-Region 10
  • Mike Tenenbaum, Kieser & Associates

GLTN Conference Call

I. Welcome and Introductions

Several participants joined in the first few minutes of the call at approximately 1:30 p.m. 

Dave introduced Mike Tenenbaum of KIESER & ASSOCIATES (now taking over the work Keith Sikkema had been performing), Judy Greenwald and other network members joining the call as well as the agenda for today.

Agenda:

  • Program Updates
  • Discussion of EPA comments
  • Trading outline - how to finish it
  • Trading conference

The general conversation soon turned to the proposed EPA regulations.

II. EPA Proposed Regulations

EPA’s proposed regulations would have to be perceived as recognition by EPA that there is nothing in the CWA that bans permitting in impaired waters before a TMDL is done.  If permits can be issued, trading between sources that would provide for net improvement in water quality conditions should therefore be allowed.  We should view this as a positive statement and “a good thing.”

Anti-degradation component

·         EPA is proposing 1.5:1 ratio. Michigan has already proposed a 2:1 ratio for trades.  The application of anti-degradation requirements to impaired waters has been applied to maintain existing water quality in Tier 1 and Tier 2 waters.  Trying to establish net-reduction requirements for impaired waters may not be the best fit in anti-degradation.  Outcomes of this approach are unknown.

·         Would EPA require an additional 1.5:1 on top of any ratio set by any state, making EPA ratios be multiplied for high offsets by point sources?  All agreed that any state already having a reduction strategy in place that is equal to or greater than the proposed EPA strategy should not have to add EPA’s ratio on top of their existing requirements.  Rather, EPA should defer to it. To do otherwise would be punitive and place that state at a competitive disadvantage to other states. We would not be in favor of such an additional offset. 

·         In the Kalamazoo project trading was not to be allowed for any unpermitted points sources. Citing of new facilities would have to go through the required permitting process.  A conscious effort was made to distinguish between existing facilities and newly proposed facilities in how they were treated.

·         If a loading cap was in place and progress (in the form of reductions) was being made toward this cap, would the offset requirement make sense in areas where such progress is being made?  From a trading perspective, it is appropriate that if you allow trading in impaired waters you must see water quality improvements.  The concept in and of itself of making a net-loading reduction to improve water quality or to accommodate growth is environmentally solid. 

Discussion then moved to the concept of making a net-load reduction. 

·         Cy explained that, since Chesapeake’s voluntary program and reductions are already being imposed and achieved, the prospect of a multiplier effect it would seem cause for concern. 

·         It was noted that traditionally, the NPDES program had been geared to point sources only.  While we appear to have defined how this is going to further effect point sources, we have not yet defined how non point sources are to be held to some level of measure.  The whole crux of proposed changes does tend to place this more into the point source arena, which appears to be counterproductive to our whole basin planning approach.  The basin planning approach would have each segment of society reduce whatever contributions they can.  Some will be greater reductions than others depending upon what is feasible, but contributions from all will result in significant load reductions.

An overview of what the proposed EPA regulations are and their intent was requested.

·         Judy G. asked if the regulations speak to the concept of “netting”.  She pointed out that, with air, most offsets/reductions have been achieved internally by finding unpermitted sources at permitted facilities, without trading.  A trading program is not needed to achieve offsets in air quality. In the Clean Air Act, netting applies to PSD in attainment areas where significant deterioration is prevented.  The situation for “netting” is that you have an attainment status and if a new use comes in you have to assure that air quality for that particular contaminant will be maintained or improved.  Dave understands that the proposed EPA regulations for water apply to impaired waters or non-attainment areas.  He does not see that a point source would be prohibited from obtaining offsets internally.  His belief is that if a point source were to achieve significant internal reductions by augmenting internal processes or elimination of an outfall that once they go through a permit modification they could use the reductions as an offset.

·         The proposed regulations do not distinguish between netting in attainment areas and offsetting in non-attainment areas.  Nor do they preclude a point source from achieving its offsets internally.

·         Questions arose with regard to more than one outfall and the desire to increase loading from one point but not the other.  The way the regulations are written the language says they must obtain reductions from another point source or a non-point source.  If both are under one permit is the 2nd “another point source” or the same point source?  This question needs to be resolved.

·         Judy is the first one to raise this question (which is a fair one) that the proposed regulations do not address or speak to.  Few point sources have 2 or more discharge points.  Municipalities in general do not but iron, steel, chemical manufacturing, pulp and paper and a few others do have more than one point. How will this apply to them?  What if all points fall under 1 permit?

Dave next asked others to describe in 2-3 sentences what they believe EPA’s proposed regulations are trying to do. 

·         Our need to draft suggested language on trading and send it to EPA was noted since proposed regulations seem more narrowly focused than broader trading programs.

·         The suggestion was made that our continued general discussion would get folks more familiar with concepts and approaches and then allow us to look at how and what comments the network should prepare and provide to EPA.

·         SUMMARY:  These regulations are very complex and pervasive; they fundamentally touch, sometimes very subtly, almost every aspect of the CWA and regulatory programs that are in place today. This is an effort by EPA to facilitate the implementation of TMDLs by allowing permits to issue in impaired waters for new or increased uses pending the development of a TMDL.  The regulations collectively establish the requirements for that to happen.  Most notable is the offset ratio we have been discussing.  This concept is drawn from the clean air act... if you have non-attainment there is nothing in the CWA that bans permitting for new or increased uses.  This approach is believed to be EPA’s effort to respond to environmentalists’ pressures and the realities of TMDL implementation, recognizing their limited staff and state resources.  EPA can continue to issue permits but if issued in impaired waters there must be reasonable and further progress toward attainment or restoring the designated uses in these impaired waters.  They are establishing the anti-degradation trading ratio as the mechanism to define reasonable progress and to provide that net loading reduction.  These are embodied in anti-degradation policy (40 CFR 131).  Changes to permit requirements (40 CFR 122,4,j) propose that if a point source provides offsets it must have its permit modified and, if these offsets are from a NPS, they will be incorporated into the permit for the new or increased use.  This makes the point source responsible for the non-point source as well.  That is the only mechanism provided in the EPA regulations that will allow permitting and offsetting to occur.

·         The proposed changes to the TMDL regulations are viewed by some as “horrendous”.  EPA has significantly changed the scope and requirements for submission of TMDL’s.  Important features are:

(1)     EPA will now require that TMDL’s must have implementation plans submitted when the TMDL is submitted for approval.  This is a fundamental change from what has been done. 

(2)     EPA proposes to establish authority (for EPA) to come into states and take control to act on permits that have expired but are being administratively continued in impaired waters for which a TMDL has not been developed if the state does not act within 90 days.

(3)     EPA is attempting to establish authority to come in and issue NPDES permits at the EPA level in states where TMDL’s have been established and approved but for which the states have not yet issued permits that embodied the wasteload allocations.  Again, within 90 days.

(4)     EPA is fundamentally changing its definition of sources.  It is proposing to add existing dischargers.  The implications are there in particular to encompass animal feeding operations and Phase II storm water discharges (sources). 

It was noted that, even though several participants have spent considerable time with the proposed regulations, new elements came out of today’s discussions that they and their colleagues have missed.

·         Rhonda noted changes in 303(d) listing criteria will now include waters on the list that are impaired solely by discharges from NPS sites and from aerial deposition.  Difficulties are created if one is discharging to these waters, especially with no TMDL in place.  It is likely that a TMDL would not be effective in resolving these problems anyway.  The scope of that proposal component, to add such sites to the list, could be significant to many segments.  Further, one can currently get removed from the 303(d) list when a TMDL is implemented.  The proposed language is that you do not get removed from the list, you only get moved to another portion of the list until you have complied with the water quality standard  (i.e., the TMDL has been implemented and you are in compliance with that standard).  Concern was expressed for those areas where a TMDL is in place and being implemented.  They would remain under this veiled threat and uncertainty without knowing the implications of still remaining on the list.

·         Another issue is the expansion of sources of data used.  There is a strong preference, in the evaluation of whether something should be listed, for the use of “monitored data” as opposed to evaluated data.  While it is easy to concur with that, we have all seen instances of some monitored data that is just plain lousy.  Some people just scoop up water in a Mason jar and consider it monitoring.  QA/QC for such data should be included; currently it is not.

·         Rhonda asked Dave what Michigan’s approach to implementation of TMDL plans has been.  Dave noted the approach is to develop TMDL plans and then to implement through water quality management plans that include reasonable assurance criteria such as stakeholder agreements with the Agency.  Rhonda responded that most of their implementation plans have been specific to each TMDL.  Since those TMDL’s that have been completed are for specific nutrients that are sensitive because of the location of those discharges or they are for metals there are no statewide implementation plans.  Rather the TMDL’s are incorporated into the state and regional water quality plans. 

·         Cy pointed to the Rehobeth Bay Delaware TMDL experience, adopted last year, as an ironic point source defense of having that requirement.  The nutrient impairment TMDL of the inland bays simply says: 1) to systematically eliminate all 8-10 point source dischargers, 2) achieve NPS reductions 65-85% depending on tributary to the inland bays, 3) 20% reduction in atmospheric deposition.  Methods to achieve all of these will be determined and pollution control strategies to be developed later.  That is the entire TMDL.  The point sources are still wondering how this happened, since they again take the hit first and the others will be done “later”.  It is inconsistent for the TMDL to say that we’ll figure all of the mechanisms for achieving these reductions out later except for point sources, and we’ll decide right now that they should all have zero discharges.  This took place even though all the point source loadings were trivial in comparison to non-point sources.   This is a flawed approach and just plain bad public policy to have the TMDL duck all the tough problems.  If you do not do the pollution control strategy as part of the TMDL there is no way to know the impacts of the actions both environmentally and especially economically.  Cy sees the requirement of EPA to include implementation plans along with the TMDL as a type of protection for point sources.

·         Rhonda agreed noting that they did look at whether allocations were achievable as well as their economic impact.  If people are to buy into a program for a TMDL they do need to know what the impacts of such agreement will entail, both short and long term including the cost feasibility and options considered.

·         It was agreed that the TMDL regulations contain a process/criteria for what constitutes an approveable implementation plan.  In fact, there is quite a list of things to be included for a plan to be approveable.  Of particular importance, all of us on the network should look closely at the revisions for how stakeholders are now involved.  The old regulations contain guidelines for early stakeholder involvement and participation while the new regulations do not contain the same discussion and speak more of a formalized public review process.  This could result in TMDL’s being prepared by regulators in-house, with no public in-put, until time for public review.  This is not desirable at all.  We should encourage more citizen involvement and participation throughout the development of the TMDL, even though it may be more difficult and time consuming.  One member commented that from the Fact Sheets put out by EPA one would think there is more citizen input.  If you look closely though, the comments for stakeholder review are all after something has been prepared.  No effort is being presented for all concerned parties to sit down at the table as a group to help develop the concepts. No one else had seen this point either.  Could this new EPA language be in response to comments that requiring stakeholder groups or consensus building is overly burdensome and that all the law requires is public notice and comment and an opportunity for a hearing under APA?  More comments are needed to increase stakeholder participation throughout the process rather than just in administrative reviews.  This is a significant concern as expressed by all on this call.

·         The discussion turned to timing issues proposed in the new regulations.  No one really knows if EPA is prepared and capable to step in within 90 days and act on regulations.  Comments from the group indicated doubt.  Discussion took place on renewal of permits and approaches on how these transpire.  Concern was expressed that many environmental administrators around the country could return program responsibilities back to EPA.

·         Jim in MN asked if anyone had seen a similar experience with TMDL’s.  EPA has right to deny a state TMDL and then step in and issue one under their own development within 30 days.  Does EPA have this right on all permits?  No, but they do have the right to veto. What kind of TMDL could EPA actually develop in 30 days that would be effective?  Most likely they would have the entire burden placed on point sources.  It was pointed out that 30 days is stated in the statute so that EPA really has their hands tied...they would like more time too.  They may only have time to make minor modifications to the proposed TMDL.  Discussion continued for a bit longer on aspects of the same issue.

·         DISCUSSION MOVED TO GLTN comments to be provided to EPA. Rhonda and Dave have not yet provided material to the group, but this is not a problem since the deadline for comments has been extended to December 22nd.  Due to pressure from Congress, the date may be extended another 30 days as well.  Dave has prepared trading comments that he is willing to share with anyone in the group but he needs to reaffirm that the GLTN group wants to submit comments to EPA with regard to trading on these proposed regulations.  The answer is yes; the group wants to submit comments.  Rhonda will take Dave’s materials and integrate Cy’s then get all back to Dave for review. Jim and Mary Anne requested to receive comments from Dave too.  Once integrated, comments will go out to all.

III. Opportunity for Project Updates

No one had new information to provide at this time.

IV. The Water Quality Trading Outline was to be written by Dave and Cy (group consensus). Anyone having suggested revisions to the last outline brought to the group should get them in to Dave ASAP.  He wants to incorporate and finalize this draft.  Is anyone else willing to draft particular sections?  Maheesh was to do EPA-Based Framework for Water Quality Trading.  If he does not, Dave will use the existing summary.  If no further comments by mid-November, we will go with what we have.

V. GLTN Conference Update

TITLE: Markets for the New Millennium

Dates: May 18-19, 2000

Location: Holiday Inn O-Hare International, Chicago

Target Audience: EPA, State, Environmental Groups, Agriculture, Industry and Municipalities.

Purpose: to provide information about various programs within the GLTN; compare and contrast approaches and results.  Presentations will focus on goals, drivers, barriers, solutions, and lessons learned and key issues for water quality trading.

Poster sessions (12) are anticipated including one for each GLTN trading program.  No registration fee has been proposed.  Lunch will be provided to the first 200 registrants.

Copies of letters as sent to the proposed speakers have been provided to network members.  We will also solicit feedback from the attending audience on the crosscut analysis that might be applied to a transferable trading framework.

Solicited speakers appear to be moving into place. Copies of letters sent to several potential speakers were provided to members of the group.  They now include Paul Faeth (WRI), Mark VanPuttan (NWF), Chuck Fox (EPA), and Robin Savage (ASWIPCA. Sponsors to date include WRI, ASWIPCA, NWF, GM, and MDEQ.  No monetary contributions expected from sponsors other than to provide for their participants, attendance and help with distribution of pre-conference materials.

Discussion followed on our needs for getting the conference organized and who might assist in particular areas. The following breakdown resulted.

Area                                          Needs                                                     People Providing Assistance

Speakers                                    Invite & maintain contact                   Dave, Allison

Brochures                                  Content, design, printing                    K&A, Dave

Distribution                               Mailing, web-site, e-mail                     Mike T., Cy, Jim C.

Registration                              Accounts receivable @ FORUM Mike T., Dave B., Susan B.

Exhibits coordination              Contact, needs for booth                    Bruce (?), Mary Anne, Claire

Speakers “hospitality room”  Schedule GLTN members to host   Dave B., other (?)

Liaison with hotel                    Any that arise                                Susan B.

Entertainment                         Who and What Costs                   Mike T.

Elements of our discussion included the following.  When the brochure is finalized, the intent will be to have K&A secure printing and charge to an account at the FORUM for Greater Kalamazoo (administrative arm of the Kalamazoo grant project).  Approximately 2000 flyers were projected.  However, this could be lowered significantly by publicizing in professional periodicals and journals, posting and establishing hotlines on numerous web sites and networking through such organizations as WERF, EPA, state agencies, environmental groups, ASWIPCA, agricultural and industrial groups. 

Cy volunteered to assist with distribution.  It is suggested that a registration form on the web be a fill-in, print out and mail hard copy with fee (if any) to accompany the form.

Exhibits should focus on a trading project within any of the GLTN participating states.  Bruce will be asked to take on the organization of exhibitors along with Mary Anne and Claire.  The point was made that getting conference information into a journal/periodical could require at least three months, if not more lead time.

Agreement was reached that a nominal registration fee of $50-75 per person was not out of line and would help provide us with a more realistic count for attendees.  It is generally less likely that registrants with a financial commitment cancel as much as those with no money involved.  What would these funds go to?  Meals, entertainment, back to funding agency were all mentioned as possibilities.  Further discussion will take place as needs and costs are developed.

A budget is needed.  Draft budget will be prepared by Dave B. and available within one week of today.  Roughs of other concerns should be ready by November 15, 1999.  It was decided that a conference call dedicated to the spring conference only should be held on November 23, 1999 at 1:30 to 3:30, followed by another GLTN conference call in early December.  This brought us to the end of our business and therefore, the end of the conference call.

Prepared by:          Michael Tenenbaum