Arkansas cities propose rules to regulate 'pollution credit' trade between between companies

Posted: October 29, 2017 at 4:28 a.m.

A group of four Northwest Arkansas cities has proposed the first regulation for the state's nutrient trading program -- a mechanism for groups to reduce water pollution through the trading of pollution credits.

The Nutrient Water Quality Trading Advisory Panel will vote later this year on the proposed regulation, which outlines how the Arkansas Department of Environmental Quality director should decide whether credits can be traded and how the trading could be overseen. Approval would start the process toward adopting the regulation at the Arkansas Department of Environmental Quality, though it would require further governor's office and legislative review.

Some members expressed concern during a panel meeting Monday that the regulation was too vague and would prevent people who opposed a certain trade from being able to appeal its approval on regulatory grounds, and would consequently harm oversight by giving too much leeway to the trading groups.

"If the director makes a decision, I don't know how I appeal the decision without a regulatory basis of, 'You didn't file x, y, z in your permit,'" said Larry Lloyd, Beaver Water District chief operating officer and a panel member.

Allan Gates, a Mitchell Williams attorney representing the four cities, said the regulation was intentionally vague in order to encourage more groups to participate. The generality of the regulation also would allow the department to take different tacks toward future trade proposals, in the event the department allowed a trade and then decided later that trades could be done better in the future.

"I think the better thing will be for us to at least take baby steps and try it out," Gates said.

Too many nutrients, such as nitrogen and phosphorus, can cause algae and harm fish.

Nutrient trading essentially works like this: An entity that contributes nutrients to a body of water through discharge or runoff from its land can elect to trade nutrient credits with another entity that contributes nutrients in the same watershed. So if a wastewater treatment plant's operators were concerned about staying within their limits of allowed nutrients, they could ask a factory that is under its limits to trade nutrient credits. The factory would be subjected to lower limits because it would have traded away its excess nutrient allowance to the wastewater treatment plant, and the wastewater treatment plant would be allowed to discharge more.

Arkansas has narrative nutrient standards for water bodies, not specific measurements, but permit holders are subject to nutrient limits.

The regulation proposed by Fayetteville, Springdale, Rogers and Bentonville -- the group of cities that call themselves the Northwest Arkansas Nutrient Trading Research and Advisory Group -- would require trade applicants to provide the state with "evidence" that the trade will not negatively affect water quality and a description of how the applicant will verify and document its activities.

"So what evidence is that?" asked Nicole Hardiman, a panel member and executive director of the Illinois River Watershed Partnership. "What is the minimum evidence required for the department to be able to make a decision? That's my concern."

Panel member Jimmy Mardis, a Denali Water Solutions employee and the previous environmental director at Tyson Foods, asked how nonregulated trade partners -- farms or other entities that do not discharge directly into the water -- would be overseen under the nutrient trading program.

Gates said they would be overseen by their trade partner that has a permit. If the Department of Environmental Quality or people who comment on a specific trade proposal were opposed to that arrangement, the department could find another mechanism to oversee the trade, he said.

Members of the Nutrient Water Quality Trading Advisory Panel voted Monday to make an official decision on the proposed regulation the next time they meet, which will be by teleconference later this year.

Panel members had been wary to vote Monday, with Lloyd and others stating they did not feel prepared to decide.

The program has yet to be set up after a 2015 Arkansas Legislature act allowed the state to establish a program.

Nutrient trading programs across the country have been used to limited extents, the U.S. Government Accountability Office reported earlier this month.

Discharge limits and difficulty measuring the potential reductions of trading with nonpoint sources have kept potential participants from engaging in nutrient trading, the report said.

The report examined the 19 nutrient trading programs, located in 11 states, that existed as of 2014 after U.S. Sen. Sheldon Whitehouse, D-R.I., requested it.

Most trading was done in only three states -- Connecticut, Pennsylvania and Virginia -- and most indirect contributors of nutrients did not trade at all, the report said.

The U.S. Department of Agriculture, business groups and some conservation-minded nonprofits have touted the potential of nutrient trading programs to improve water quality and help permit holders meet regulatory limits.

Some opposition to trading programs has emerged elsewhere.

In 2015, the environmental group Food and Water Watch issued a report on nutrient trading that said it allows "previously accountable pollution dischargers to hide behind pollution credits and discharge without any real limits."

The group also expressed concern that the pollution levels of farms were "unverified and uncertain."

Food and Water Watch and another environmental group, Friends of the Earth, sued the U.S. Environmental Protection Agency in 2010 over allowing nutrient trading in the Chesapeake Bay watershed. The suit was dismissed for a lack of standing.

Metro on 10/29/2017