Nutrient Credit Trading in the Chesapeake Bay

A Cooperative and Innovative Approach to Improving Bay Water Quality

Background:
The Commonwealth of Virginia's proximity to the Chesapeake Bay provides its citizens with numerous commercial,
recreational and environmental benefits. With that proximity, however, comes the complex responsibility to improve
and maintain the water quality of the Bay and its numerous tributaries. To that end, Virginia has recently improved its
comprehensive stormwater program aimed at reducing nutrients that are negatively impacting Bay water quality.

In addition, the U.S. Environmental Protection Agency ("EPA") has implemented a Total Maximum Daily Load, or
"TMDL" for these same pollutants to the Bay. The TMDL, also known as a "pollution diet", set limits to the amount of
nutrients that can be transported to the Bay from various sources in its watershed. This TMDL advances the goals for
improving the health and regional economy of the Chesapeake Bay as laid out in President Obamas 2009 Executive
Order.
Virginia's Nutrient Trading Program:
To address the complex and large-scale effort of reducing nutrients to the Bay, Virginia has implemented a multifaceted approach to its regulatory stormwater and TMDL programs. One of the more innovative cornerstones of
Virginia's approach is centered upon nutrient trading. This program is legislatively supported, administered by the
Department of Environmental Quality ("DEQ") and effectively combines both public and private sector resources in an
efficient and cost effective effort to reduce pollutants to the Bay.
The concept of nutrient trading is similar to other types of environmental markets, such as wetland and stream
mitigation banking, that have operated successfully in Virginia for many years. Landowners and farmers implement
projects on private lands that result in a reduction of nutrients entering the Bay and its tributaries and submit these
reductions to DEQ for approval. In turn, these nutrient reductions generate nutrient credits that the landowner can
transfer to permit applicants to meet state and local water quality permit requirements.
Private investors have created nutrient credit banks in every major Virginia tributary flowing to the Chesapeake. In
addition to nutrient benefits, these banks advance other goals such as habitat, stream buffers and land preservation.
Nutrient credits are also being used by private developers, localities and other public entities, thereby enhancing the
economy by fostering more cost-effective development.
VDOT Implementation:
After a two year interagency effort between the Virginia Department of Transportation ("VDOT") and DEQ, in 2013
VDOT implemented a first of its kind nutrient trading program. For certain types of road construction projects, VDOT
now meets state water quality requirements through the procurement of nutrient credits from state-certified private
credit banks. Credits are purchased in accordance with VDOT procurement regulations and are evaluated through a
combination of low cost and credit delivery assurance.
By purchasing nutrient credits and reducing the cost to the Virginia taxpayers for permit compliance, VDOT has
become a pioneer of innovative, market-based approaches in transportation and infrastructure development. In

addition, federal agencies including EPA and USDA have provided consistent support of the launch and
implementation of this program, which provided a much needed component to ensure that the private market, credit
purchasers and Virginia officials fully embraced the program.

Benefits:
Cost Effectiveness
Expenses related to environmental protection have become a significant portion of many transportation projects.
However, nutrient credits frequently cost VDOT 30-50% less than other, more traditionally engineered pollution
reduction practices such as manufactured treatment devices and onsite Best Management Practices ("BMPs"),
thereby stretching the states road construction budget. In fact, a recent study sponsored by VDOT concluded that,
based on historical data, using nutrient credits would result in an average cost savings of approximately 50%
compared to the more traditional pollution reduction approaches.
In 2014, VDOT validated these cost-effectiveness studies through actual credit purchases. To date, VDOT has
procured nutrient credits for over 50 projects statewide, at an estimated cost savings of $____________. As a result
of this program, VDOT, and by extension the Virginia taxpayers, will continue to save substantial amounts of money
while improving the water quality of the Bay and realizing the related economic and environmental benefits.
Private Investment with Public Benefit
The funding to implement these nutrient reduction practices and generate nutrient credits has come solely from private
investors and landowners. No state or federal funds are used in the generation of nutrient credits, reducing the
reliance on tax-payer generated public funds. Further, their use provides economic benefits to developers, state and
local tax bases, and environmental benefits beyond the nutrient reductions.

SupporttotheAgriculturalCommunity

Virginia's nutrient trading program has generated a new revenue stream for participating landowners and farmers.
This additional income opportunity helps to keep working lands working while increasing the ability of the agricultural
community to contribute to environmental stewardship.

https://www.youtube.com/watch?v=ucBFVeq-vds&feature=youtu.be