PROPOSED RULEMAKING
[ 25 PA. CODE CH. 96 ]
Water Quality Standards Implementation
[40 Pa.B. 876]
[Saturday, February 13, 2010]The Environmental Quality Board (Board) proposes to amend 25 Pa. Code Chapter 96 (relating to water quality standards implementation) to read as set forth in Annex A. The amendments would codify the Department's existing guidance entitled ''Final Trading of Nutrient and Sediment Reduction Credits—Policy and Guidelines'' (No. 392-0900-001, December, 2006) as it relates to the Chesapeake Bay (''Nutrient Credit Trading Policy''). That policy provides a cost-effective means for facilities subject to meet new limits for nitrogen, phosphorus and sediment to meet those limits by working with other facilities or with nonpoint sources, or both. It helps the Commonwealth achieve its Chesapeake Bay nutrient reduction goals from the agriculture sector, provides a source of revenue to farmers and other property owners while advancing the restoration and protection of the water quality of the Chesapeake Bay.
This proposal was adopted by the Board at its meeting of November 17, 2009.
A. Effective Date
These amendments will go into effect upon publication in the Pennsylvania Bulletin as final rulemaking.
B. Contact Persons
For further information contact Ann Smith, Program Analyst, Water Planning Office, P. O. Box 2063, 2nd Floor, Rachel Carson State Office Building, Harrisburg, PA 17105-2063, (717) 772-4785, or Douglas Brennan, Director, Bureau of Regulatory Counsel, P. O. Box 2063, 9th Floor, Rachel Carson State Office Building, Harrisburg, PA 17105-2063, (717) 787-7060. Information regarding submitting comments on this proposal appears in Section J of this preamble. Persons with a disability may use the AT&T Relay Service by calling (800) 654-5984 (TDD users) or 800 654-5988 (voice users). This proposal is available electronically through the Department of Environmental Protection (Department) web site (http://www.dep.state.pa.us).
C. Statutory Authority
The proposed rulemaking is being made under the authority of The Clean Streams Law (35 P. S. §§ 691.1—691.1001; the Federal Water Pollution Control Act (33 U.S.C.A. §§ 1251—1387); and 40 CFR Part 122 (relating to EPA administrative permit programs: the National Pollutant Discharge Eliminatioon System).
D. Background and Purpose
The Chesapeake Bay is polluted from nutrients (and sediment) and in 2005, new water quality standards under the Federal Clean Water Act to address this pollution came into effect. To meet these new requirements under Federal law, the Environmental Protection Agency (EPA) and the affected states developed a maximum nutrient load, or ''cap load,'' for each major tributary. As a result, approximately 200 municipal sewage treatment plants and others discharging nutrients to this Commonwealth's Bay tributaries must cap those discharges or they will be in violation of the downstream water quality standards, under Federal and State law.
In January 2006, the Department initiated an intensive stakeholder process related to these new legal requirements. First, it refocused and expanded the standing Chesapeake Bay Advisory Committee of the Department, to include local government associations, the agricultural community and multiple associations. This Committee was tasked with discussing the wide variety of issues surrounding the Commonwealth's compliance strategy and to consider various approaches to meeting the Federally driven water quality obligations.
After receiving input through a series of meetings held over a 9-month period, the Department developed a revised plan to address the new legal mandate. The plan included new permitting requirements for sewage treatment plants and other ''point sources'' governed by the Federal National Pollutant Discharge Elimination System (NPDES), new regulations controlling agricultural run-off and the Nutrient Credit Trading Policy.
The Nutrient Credit Trading Policy was actually one of several compliance alternatives provided to NPDES permittees required to reduce their effluent discharges, under the Department's plan. The other compliance alternatives identified for NPDES permittees were: implementation of nutrient reduction treatment technology, retirement of existing onlot septic systems, wastewater reuse and land application. Nutrient trading provides those sewage treatment plants with options that have the potential to reduce compliance costs substantially. For example, in 2008 Fairview Township decided to use credits to meet its nutrient reduction obligation, and in so doing announced a cost savings of approximately 75%. Mount Joy Borough Authority investigated costs of upgrading and found that by installing the first level of nitrogen treatment they could reduce nitrogen by about 50% for about $8 per pound but in order to reach their cap loads an additional upgrade would increase the price to about $12 per pound. Instead, Mount Joy contracted with a local farmer and invested in more than 900 acres of no-till agriculture to meet their permit cap at a cost of only $3.81 for every pound reduced.
The Department's nutrient credit trading program is built upon the core elements prescribed for any valid trading program. For example, credits can only be generated for nutrient reductions above and beyond those required for regulatory compliance. There are also caps on the total tradable credits for ''nonpoint sources'' at the excess level available in the watershed from best management practices beyond those needed to meet compliance goals.
Since the publication of the interim final policy and as of August 2009, the Department has received 73 proposals that have been submitted for review to generate nutrient reduction credits in the Chesapeake Bay watershed, mostly, but not exclusively, by farmers. Of those, 45 have been approved, for a total of 1,651,336 nitrogen credits and 174,086 phosphorous credits. After subtracting the credits that have already been purchased or those that were generated in a previous compliance year, a total of 1,536,597 nitrogen credits and 171,541 phosphorous credits are available for sale.
The Department and its partners continue to seek enhancements to its nutrient trading program. For example, PENNVEST has been authorized by the EPA as well as by the PENNVEST Board to invest up to $50 million to facilitate the nutrient credit trading program. It recently approved a $7 million loan to a technology provider for a project at a large dairy and poultry farm in Lancaster County. PENNVEST is also studying the possibility of providing an exchange role to facilitate the use of credits by sewage treatment plants. Further, the Department regularly meets with stakeholders to improve the trading program.
The Department has consulted with a number of boards and committees throughout the process of developing the Nutrient Credit Trading Policy, and most recently, this proposed rulemaking. The Department has also presented the proposed rulemaking to the Water Resources Advisory Committee (WRAC), once in June and again in July with a revised draft in response to comments. The WRAC endorsed, with provisions, the proposed rulemaking package at its July meeting and it was presented to the Agricultural Advisory Board (AAB) at the meeting on August 19th where very few comments or concerns were raised. The proposed rulemaking and preamble reflect the comments made by the WRAC during the July meeting. At the request of AAB, the Department will provide an additional presentation during the public comment period.
The EPA supports credit trading generally, having published a National policy in that regard in 2003, and a detailed NPDES permit writer's manual on the subject in 2007. The Department has conferred with the EPA on this program for the past several years, and the EPA agrees with the approach. There are no Federal regulations for nutrient credit trading, although there are several air quality-related trading programs administered by the EPA and other states, including the Commonwealth.
The Commonwealth has been leading the way Nationally in developing its nutrient trading program and it is one of the first programs in the country to have both nonpoint sources and point sources utilizing a nutrient credit trading program. Harnessing market forces can be an effective way to achieve environmental regulatory goals at less expense than traditional command and control regulations. Market-based programs such as trading provide incentives for entities to create credits by going beyond any statutory or regulatory obligations.
The proposed rulemaking will provide clear and certain standards for nutrient credit trading in this Commonwealth and thereby support the Department's efforts to implement its Nutrient Credit Trading Program.
E. Summary of Regulatory Requirements
Definitions (§ 96.8(a)). The proposal adds a number of definitions to Chapter 96 to clarify various new terms. Most of the definitions were taken from the Nutrient Credit Trading Policy, with slight revision in some cases based on the Department's experience in implementing the program since the policy was finalized, and also based on comments from stakeholders.
General provisions (§ 96.8(b), (h) and (j)). The proposal contains several subsections with overarching provisions. Subsection (b) sets forth the core concepts and basic requirements of the trading program. Subsection (h) contains provisions regarding the interaction of this section and important provisions elsewhere in this title regarding protection of water quality. Subsection (j) makes it clear that this proposed rulemaking is not intended to foreclose the use of credits or offsets in other contexts outside of their use to comply with the nutrient and sediment cap loads for the Chesapeake Bay.
Methodology for calculating credits and offsets (§ 96.8(c)). Much of the methodology for establishing the water quality standards for the Chesapeake Bay, and determining effectiveness of various activities to meet those standards, is based on scientific work done by the EPA. This includes the use of several complex models and the scientific research related to them. Subsection (c) identifies those models and that research, and establishes them as a basis for the Department's decisions regarding, among other things, the amount of reductions (and therefore credits) to assign to a given pollutant reduction activity. These models and the related research are an ongoing effort and the language of this subsection allows for the use of subsequent versions of the models and more current research.
An important provision in this subsection is paragraph (2), which allows the Department to use pollutant removal efficiencies, edge of segment ratios and delivery ratios that are approved by the EPA, in calculating credits. The removal efficiencies represent average nutrient and sediment reduction performance capabilities for various ''best management practices'' (BMPs) at farms. They undergo extensive peer review by a technical review team managed by the EPA Chesapeake Bay Program. Recommendations are then reviewed by the EPA Chesapeake Bay Program committee and subcommittee process. These efficiencies change with the science of the models and related research. Current BMP efficiencies are accessible on the Department's Nutrient Credit Trading web site: (http://www.dep.state.pa.us/river/Nutrient%20 Trading.htm).
The edge of segment and delivery ratios are used to identify the fate and transport of nutrients and sediment from their initial creation at a certain location to the Bay. For example, a pound of nitrogen reduced to cropland in the upper reaches of the Susquehanna has much less impact than a pound reduced near the border with Maryland. The delivery ratio accounts for that difference.
At the WRAC meeting in July, the Department was asked to solicit comment on the application of delivery ratios to permit limits, when used in the trading program. Therefore, the Department is soliciting comments on whether delivery ratios should be applied to permit limits when trading is chosen as the compliance option.
Eligibility requirements (§ 96.8(d)). This subsection describes the various requirements for a source to be able to generate credits for use under the proposed regulation. There are two components. First, the generator shall meet ''baseline'' requirements, which essentially are the legal requirements that apply to that operation.
The second requirement is ''threshold.'' This requirement is defined as either a 100-foot manure set back, a 35-foot vegetative buffer or a 20% adjustment made to the overall reduction. It provides an added level of nutrient and sediment reductions that would not necessarily be accomplished without the financial incentives of trading. Threshold therefore adds to the nutrient reduction benefits for the Bay, especially from the agriculture sector.
Therefore, only after demonstrating (1) compliance with the applicable legal requirements (baseline); and (2) achieving an additional set of pollutant reductions (threshold), can a person begin to generate credits or offsets (by further reductions) under this proposal. The Department has received numerous proposals for the generation of credits that achieve these requirements and has approved many of them.
Certification, verification and registration (§ 96.8(e) and (f)). These subsections describe the procedural requirement that the Department has in place to ensure that credits and offsets are calculated correctly and accomplish pollutant reductions.
The first step is ''certification,'' which is typically done in advance of any pollutant reduction activities. In reviewing these requests, the Department evaluates detailed requests for approval of credit and offset-generation activities, for the purpose of assigning a specific number of credits to the activity. A person may want to have his proposed pollutant activities certified to obtain from the Department the number of credits or offsets which can be expected prior to completing the activity.
The number of credits assigned would have applied all appropriate adjustments such as the reserve and delivery ratios with particular attention being paid to the requirements of subsection (c) (methodology). The result is a letter from the Department indicating the amount and types of certified credits or offsets, which in the case of credits the generator can then use to market them.
A second important procedural requirement and a key component of the certification decision is a review of the ''verification'' plan submitted by the proponent of the credits or offsets, followed by actual verification. This plan is required by § 96.8(e)(4), and it is also a condition of ''registration,'' the final step, under § 96.8(f)(2)(iii). Verification can take a number of forms, but it must demonstrate that the pollutant reduction activities were implemented as described in the proposal that was certified. The Department may also conduct other verification activities, in addition to those in the plan submitted by the generator, under § 96.8(f)(2)(iv).
The final procedural step in these subsections is ''registration,'' under § 96.8(f). This is the Department's accounting mechanism to track verified credits and offsets before they are used to comply with the NPDES permit effluent limits for the Bay.
The Department will not register credits or offsets for persons who demonstrate a lack of ability or intention to comply with the requirements of this section, Department regulations or other relevant requirements. See, § 96.8(d)(4) and (6) and (f)(3).
Use of credits and offsets (§ 96.8(g)). The provisions described within this Preamble apply to persons generating credits and offsets. This subsection addresses the obligations of persons who use them to meet permit requirements. This underscores that the use of credits and offsets only applies to the nutrient and sediment effluent limits in NPDES permits for the purposes of restoration and protection of the water quality of the Chesapeake Bay. See, § 96.8(g)(1) and (2) This language is not intended to limit the Department's existing authority to allow the use of credits or offsets in other contexts. See § 96.8(j).
Credit and offset failure is addressed in § 96.8(g)(5). There are several factors that come into play with this issue. First, it is important that credits and offsets generate real reduction in pollutant loads delivered to the Bay. In addition, the one sector most likely to purchase credits, the sewage treatment plant operators, has expressed concern over purchasing credits and then later being subject to enforcement action by the Department if the credits are not accepted due to credit failure. This subsection seeks to address both concerns.
Two key components of this subsection are ''the Department determines that replacement credits will be available,'' and ''the existence of an approved legal mechanism that is enforceable by the Department.'' Examples of these are the use of the credit reserve, a dedicated credit reserve for a particular project, financial guarantees under legal instruments such as escrows, and a Clean Streams Law ''credit generation'' permit.
Water quality and TMDLs (§ 96.8(h)). This proposal is aimed at protecting and restoring the water quality of the Chesapeake Bay. However, there may be local water quality issues that can affect a decision on a credit or offset proposal. This would be most likely if the receiving waterbody at the location where the credits or offsets will be generated is listed as ''impaired'' through the Department's formal listing process under the Clean Water Act. There are also local antidegradation requirements that are part of the Commonwealth's water quality regulations. This subsection makes it clear that those and other existing regulatory requirements take precedence over any decisions made under this proposal.
Public participation (§ 96.8(i)).The Department is committed to a transparent process in the implementation of its trading program. Therefore, the proposal would codify the current process of publishing notice in the Pennsylvania Bulletin whenever (1) a credit or offset proposal is submitted and is administratively complete; and (2) whenever the Department makes a final decision on certification.
F. Benefits, Costs and Compliance
Benefits
Harnessing market forces can be an effective way to achieve environmental regulatory goals at less expense than traditional command and control regulations. Market-based programs such as trading provide incentives for entities to create credits by going beyond any statutory or regulatory obligations. The proposal will provide clear and certain standards for nutrient credit trading in this Commonwealth and thereby support the Department's efforts to implement its nutrient credit trading program.
Compliance Costs
The proposed rulemaking does not create any new compliance requirements. It is essentially a voluntary program that provides economic incentives for increased pollutant reductions beyond those required by law now.
Compliance Assistance Plan
While there are no new compliance requirements in this proposal, the Department has an active and comprehensive outreach and education effort. For example, the Department meets with a core group of stakeholders periodically to update them on recent developments and to discuss ways to improve the program. Department staff will continue to attend public meetings of various kinds to describe the program and assist with its use by interested persons.
Paperwork Requirements
There are no paperwork requirements as that term is normally used, because this is a voluntary program. The proposal does contain requirements for submittal of certain information, as seen in § 96.8(e). However, the cost of these requirements would normally be returned through revenue earned in the sale of the credits, or avoidance of more expensive compliance methods if credits or offsets were not used.
G. Pollution Prevention
The Federal Pollution Prevention Act of 1990 (42 U.S.C.A. §§ 13101—13109) established a National policy that promotes pollution prevention as the preferred means for achieving state environmental protection goals. The Department encourages pollution prevention, which is the reduction or elimination of pollution at its source, through the substitution of environmentally-friendly materials, more efficient use of raw materials, and the incorporation of energy efficiency strategies. Pollution prevention practices can provide greater environmental protection with greater efficiency because they can result in significant cost savings to facilities that permanently achieve or move beyond compliance. This proposal is essentially a pollution prevention incentive program, as described previously in this preamble.
H. Sunset Review
This proposal when final will be reviewed in accordance with the sunset review schedule published by the Department to determine whether the regulation effectively fulfills the goals for which it was intended.
I. Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on February 3, 2010, the Department submitted a copy of this proposal to the Independent Regulatory Review Commission (IRRC) and the Chairpersons of the House and Senate Environmental Resources and Energy Committees (Committees). In addition to submitting the proposed amendments, the Department has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the Department. A copy of this material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, IRRC may convey any comments, recommendations or objections to the proposal within 30 days of the close of the public comment period. The comments, recommendations or objections shall specify the regulatory review criteria that have not been met. The act specifies detailed procedures for review of these issues by the Department, the General Assembly and the Governor prior to final publication of the regulations.
J. Public Comments
Written Comments—Interested persons are invited to submit comments, suggestions or objections regarding the proposal to the Environmental Quality Board, P. O. Box 8477, Harrisburg, PA 17105-8477 (express mail: Rachel Carson State Office Building, 16th Floor, 400 Market Street, Harrisburg, PA 17101-2301). Comments submitted by facsimile will not be accepted. Comments, suggestions or objections must be received by the Board by March 15, 2010. Interested persons may also submit a summary of their comments to the Board. The summary may not exceed one page in length and must also be received by the Board by March 15, 2010. The one-page summary will be provided to each member of the Board in the agenda packet distributed prior to the meeting at which the final regulation will be considered.
Electronic Comments—Comments may be submitted electronically to the Board at RegComments@state.pa.us and must also be received by the Board by March 15, 2010. A subject heading of the proposal and a return name and address must be included in each transmission.
JOHN HANGER,
ChairpersonFiscal Note: 7-451. No impact; (8) recommends adoption.
Annex A
TITLE 25. ENVIRONMENTAL PROTECTION
PART I. DEPARTMENT OF
ENVIRONMENTAL PROTECTION
Subpart C. PROTECTION OF
NATURAL RESOURCES
ARTICLE II. WATER RESOURCES
CHAPTER 96. WATER QUALITY STANDARDS IMPLEMENTATION § 96.8. Use of offsets and tradable credits from pollution reduction activities in the Chesapeake Bay watershed.
(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context indicates otherwise:
Aggregator—A person that arranges for the sale of credits generated by another person, or arranges for the credits to be certified, verified and registered.
Agricultural operation—The management and use of farming resources for the production of crops, livestock or poultry, or for equine activity.
Baseline—
(i) The compliance activities and performance standards which must be implemented to meet current environmental laws and regulations related to the pollutant for which credits or offsets are generated.
(ii) The term includes allocations established under this chapter, in a TMDL or similar allocation, for those pollutants.
BMP—Best management practice—
(i) Schedules of activities, prohibitions of practices, maintenance procedures and other management practices to prevent or reduce pollutants to surface waters of this Commonwealth.
(ii) The term includes treatment requirements, operating procedures and practices to control plant site runoff, spillage or leaks, sludge or waste disposal or drainage from raw material storage.
(iii) The term also includes riparian buffers, soil and slope stabilization measures, control of fertilization practices, and other actions and measures designed to reduce erosion and runoff of soil, sediment and pollutants from the land surface during precipitation events; or to reduce the contamination of groundwater with pollutants that may affect surface waters.
(iv) The term includes BMP measures developed under this title to reduce pollutant loading to surface waters.
Certification—Written approval by the Department of the use of a proposed or implemented pollutant reduction activity to generate credits or offsets, before those credits and offsets are verified and registered by the Department to be used to comply with NPDES permit effluent limitations.
Credit—The tradable unit of compliance that corresponds with a unit of reduction of a pollutant as recognized by the Department which, when certified, verified, and registered by the Department, may be used to comply with NPDES permit effluent limitations.
Credit reserve—Credits set aside by the Department to address pollutant reduction failures and uncertainty, and to provide liquidity in the market.
DMR—Discharge monitoring report.
Delivery ratio—A ratio that compensates for the natural attenuation of pollutants as they travel in water before they reach a defined compliance point.
Edge of segment ratio—A ratio that identifies the amount of land-applied pollutants expected to reach the surface waters at the boundary of a Chesapeake Bay Watershed Model segment through surface runoff and groundwater flows from nonpoint sources within a watershed segment.
Nutrient—Nitrogen and phosphorus.
Offset—The nontradable unit of compliance that corresponds with a unit of reduction of a pollutant as recognized by the Department which, when certified, verified and registered by the Department, may be used to comply with NPDES permit effluent limitations.
Pollutant—Nutrients and sediment.
Registration—An accounting mechanism used by the Department to track certified and verified credits and offsets before they may be used to comply with NPDES permit effluent limitations.
Reserve ratio—A ratio that is applied to the pollutant reductions generated, which establishes the credits to be set aside for the Department's credit reserve.
Threshold—Activities and performance standards beyond baseline compliance which are required by the Department before credits or offsets will be certified.
Tradable load—The amount of pollutant reductions determined to be the projected future pollutant load which is the difference between the total reductions theoretically possible from maximum implementation of reduction activities, and the reductions associated with a level of reduction activities identified by the Department as reasonably attainable.
Trade—A transaction that involves the sale or other exchange, through a contractual agreement, of credits that have been certified, verified and registered by the Department.
Trading ratios—Ratios applied by the Department to adjust pollutant reductions when certifying credits or offsets for a pollutant reduction activity, to address uncertainty, water quality, reduction failures or other considerations. These ratios may include a delivery ratio, an edge of segment ratio and a reserve ratio.
Verification—Implementation of the verification plan contained in a certification as required by the Department, prior to registration of the credits or offsets for use in an NPDES permit to comply with NPDES permit effluent limitations.
(b) Chesapeake Bay water quality.
(1) Credits and offsets may be used to meet legal requirements for restoration, protection and maintenance of the water quality of the Chesapeake Bay.
(2) Credits and offsets must be generated only from pollutant reduction activity that has been certified, verified and registered by the Department under this section.
(3) Credits and offsets may be used by permittees to meet effluent limits for nitrogen, phosphorus and sediment expressed as annual loads in pounds contained in NPDES permits that are based on compliance with water quality standards established under the Federal Water Pollution Control Act (33 U.S.C.A. §§ 1251—1387), specifically for restoration, protection and maintenance of the water quality of the Chesapeake Bay.
(4) The use of credits and offsets must involve comparable pollutants. For example, nitrogen credits or offsets may only be used to meet nitrogen effluent limits.
(5) The use of credits and offsets must comply with legal requirements under applicable laws and regulations, including the requirements of this section.
(6) Credits and offsets may not be used to comply with technology-based effluent limits, except as expressly authorized by Federal regulations administered by the EPA.
(c) Methodology.
(1) The Department may use any of the methods contained in this subsection when calculating and certifying credits and offsets.
(2) Credits and offsets may be calculated by use of pollutant removal efficiencies for BMPs, and edge of segment and delivery ratios addressing fate and transport of pollutants, approved by the EPA Region III Chesapeake Bay Program Office for use with the Chesapeake Bay Watershed Model Version 4.3 or any subsequent versions.
(3) The Department may rely on results from the following modeling tools, as amended or updated, to approve other pollutant removal efficiencies for BMPs:
(i) Science Algorithms of the EPA Models-3 Community Multiscale Air Quality (CMAQ) Modeling System, Atmospheric Modeling Division, National Research Laboratory, U.S. Environmental Protection Agency, EPA/600/R-99/030, (Daewon Byun and Kenneth L. Schere, 2006).
(ii) EPA Watershed Model (Donigian et al. 1994; Linker 1996; Linker et al. 2000).
(iii) EPA Chesapeake Bay Hydrodynamic Model (Wang and Johnson 2000).
(iv) EPA Estuarine Water Quality Model (Cerco and Cole 1993, 1995a, 1995b; Thomann et al. 1994; Cerco and Meyers 2000; Cerco 2000; Cerco and Moore 2001; Cerco et al. 2002a).
(4) The Department may rely on the methods, data sources and conclusions in the following EPA documents, as amended or updated:
(i) Technical Support Document for Identification of Chesapeake Bay Designated Uses and Attainability. EPA 903-R-03-004. Region III Chesapeake Bay Program Office, Annapolis, Maryland (2003).
(ii) Technical Support Document for Identification of Chesapeake Bay Designated Uses and Attainability-2004 Addendum. EPA 903-R-04-006. Region III Chesapeake Bay Program Office, Annapolis, Maryland (2004).
(iii) Chesapeake Bay Program Analytical Segmentation Schemes: Revision, decisions and rationales, 1983-2003. EPA 903-R-04-008. CBP/TRS 268/04. Chesapeake Bay Program Office, Annapolis, Maryland ( 2004).
(iv) Chesapeake Bay Program Analytical Segmentation Schemes: Revision, decisions and rationales, 1983-2003—2005 Addendum. EPA 903-R-05-004. CBP/TRS 278/06. Chesapeake Bay Program Office, Annapolis, Maryland (2005).
(v) Setting and Allocating the Chesapeake Bay Basin Nutrient and Sediment Loads: The Collaborative Process, Technical Tools and Innovative Approaches. EPA 903-R-03-007. Region III Chesapeake Bay Program Office, Annapolis, Maryland (2006).
(vi) Summary of Decisions Regarding Nutrient and Sediment Load Allocations and New Submerged Aquatic Vegetation (SAV) Restoration Goals. April 25, 2003, Memorandum to the Principals' Staff Committee members and representatives of the Chesapeake Bay headwater states. Virginia Office of the Governor, Natural Resources Secretariat, Richmond, Virginia.
(vii) The 2002 Chesapeake Bay Eutrophication Model. EPA 903-R-04-004. U.S. Army Corps of Engineers, Engineer Research & Development Center, Environmental Laboratory (Cerco, C.F., and Noel, M.R., 2004).
(viii) Ecosystem models of the Chesapeake Bay Relating Nutrient Loadings, Environmental Conditions and Living Resources Technical Report. Chesapeake Bay Program Office, Annapolis MD (Kemp, MW., R. Bartlescn, S. Blumenshine, J.D. Hagey, and W.R Boynlen, 2000).
(ix) Ambient Water Quality Criteria for Dissolved Oxygen, Water Clarity and Chlorophyll a for the Chesapeake Bay and Its Tidal Tributaries. U.S. EPA 2003b. EPA 903-R-03-002. Chesapeake Bay Program Office, Annapolis, Maryland.
(5) For credits and offsets generated from point sources, the Department may rely on the information supplied by permittees in the DMR when calculating and certifying credits and offsets.
(6) When calculating and certifying credits and offsets, the Department may rely on additional methods, data sources and conclusions contained in the Pennsylvania Agronomy Guide published by Pennsylvania State University, and the Pennsylvania Technical Guide published by the Federal Natural Resources Conservation Service. The Department may also rely on other published or peer-reviewed scientific sources.
(d) Eligibility requirements for the Chesapeake Bay.
(1) General. To generate credits and offsets, the generator shall demonstrate a reduction in pollutant loads beyond those that are allowed under applicable baseline requirements, and any threshold established by the Department.
(2) Baseline requirements to generate credits or offsets.
(i) For nonpoint sources, baseline shall be the current requirements in regulations applicable to the sources at the location where the credits or offsets are generated, and the pollutant load associated with that location. For agricultural operations, this includes compliance with the erosion and sedimentation requirements for agricultural operations in Chapter 102 (relating to erosion and sediment control), the requirements for agricultural operations under § 91.36 (relating to pollution control and prevention at agricultural operations) and the requirements for agricultural operations under Chapter 83 Subchapter D (relating to nutrient management), as applicable.
(ii) For point sources, the baseline shall be the pollutant effluent load associated with effluent limitations contained in an NPDES permit based on the applicable technology-based requirements, or the load in a TMDL or similar allocation, whichever is more stringent.
(3) Threshold requirements to generate credits or offsets.
(i) An agricultural operation must meet one of the following threshold requirements at the location where the credits or offsets are generated. For the purpose of this subparagraph the term ''surface water'' means a perennial or intermittent stream with a defined bed or bank, a lake or a pond.
(A) Manure is not mechanically applied within 100 feet of surface water. This threshold can be met through one of the following:
(I) There are no surface waters on or within 100 feet of the agricultural operation.
(II) The agricultural operation does not mechanically apply manure, and applies commercial fertilizer at or below agronomic rates contained in the current Penn State University Agronomy Guide published by Pennsylvania State University.
(B) A minimum of 35 feet of permanent vegetation is established and maintained between the field and surface water. The area may be grazed or cropped under a specific management plan provided that permanent vegetation is maintained at all times.
(C) The overall amount of pollution reduction is adjusted by at least 20%, which is to be applied during the calculation of the reduction amount when the credits are certified by the Department.
(ii) The Department may establish other threshold requirements necessary to ensure the effectiveness of the use of credits and offsets to meet legal requirements for restoration, protection and maintenance of the water quality of the Chesapeake Bay.
(4) Compliance status. Persons currently not in compliance with, or who lack the ability or intention to comply with, any of the following are not eligible to generate credits or offsets, or to use credits or offsets to meet permit effluent limits:
(i) Department regulations, permits, schedules of compliance or orders.
(ii) Any law or regulation that addresses pollution of waters of this Commonwealth.
(iii) Contracts for the exchange of credits.
(5) Other requirements. The Department may establish other eligibility requirements to ensure the effectiveness of the use of credits and offsets to meet legal requirements for restoration, protection and maintenance of the water quality of the Chesapeake Bay.
(6) Failure to meet eligibility requirements. If the Department determines that a person no longer meets the eligibility requirements under this section, it may take appropriate action such as prohibiting the person from participating in any trading under this section and denial of requests for certification and registration of any credits and offsets.
(e) Certification requirements for the Chesapeake Bay.
(1) General. All credits and offsets must be certified by the Department before they may be applied to meet permit effluent limitations. Certification will serve as the Department's final determination of the appropriate amount of credits approved by the Department. Certification must be followed by verification and registration of the credits and offsets prior to their use to meet permit effluent limits.
(2) Request for certification. Persons who wish to have credits or offsets certified by the Department shall submit a request in the format required by the Department.
(i) The request must contain information sufficient to demonstrate the following:
(A) The location where the pollutant reduction activity will be implemented will meet applicable eligibility requirements under subsection (d), and will continue to meet those requirements throughout the applicable period of time described in the request.
(B) The pollutant reduction activity must meet acceptable standards for construction and performance, including operation and maintenance, for the applicable period of time described in the request.
(C) The calculation requirements of this section have been met.
(D) The implementation of the pollutant reduction activity must be verified to the extent acceptable to the Department, as described in a verification plan that meets the requirements of paragraph (4).
(ii) The request must contain the following additional information:
(A) A detailed description of how the credits or offsets will be generated, including calculations, assumptions and photos.
(B) A map illustrating the locations of the proposed activity.
(C) Details on the timing of credits or offsets, such as generation and delivery, any phase-in period and the time frame for sale and use towards permit effluent limits.
(D) The water quality classification under Chapter 93 (relating to water quality standards), and any applicable impairment listings under section 303(d) of the Federal Water Pollution Control Act (33 U.S.C.A. § 1313(d)), for the nearest receiving stream segment.
(E) Information on any source of funding used to pay for any portion of the pollutant reduction activity, including the dollar amount and any conditions and restrictions regarding the use of those funds towards the generation or sale of credits or offsets.
(F) A description of how risks of failure of the pollutant reduction activity shall be managed, such as the use of financial guarantee mechanisms, contractual arrangements, permits, insurance products and reduction of the concentration of projects in a particular sub-watershed.
(G) A description of any preservation and conservation easements on lands where the pollutant reduction activity is to be implemented.
(H) Notations on documents submitted in the request which the person submitting the request claims to be confidential business information or a protected trade secret that are protected from disclosure by law, and a justification for the claims.
(I) The names of the persons submitting the request and other participants involved in the pollutant reduction activity.
(J) Professional qualifications of the persons who completed the calculations, conducted the baseline and threshold determinations and otherwise contributed to the technical merit of the request.
(K) Contact information for the persons submitting the request.
(3) Calculation requirements. The following credit and offset calculation requirements apply:
(i) All calculations must be approved by the Department.
(ii) The calculations must demonstrate that the pollutant reductions will be achieved from the activity proposed or implemented to generate credits and offsets for the applicable period of time.
(iii) The pollutant reductions must be expressed in pounds per year.
(iv) The calculations used must be based on methodologies that the Department determines are appropriate under subsection (c).
(v) The Department may establish other calculation requirements necessary to ensure that the use of credits and offsets are effective in meeting water quality requirements, and to address uncertainty for reasons such as unforeseen events which may disrupt pollutant reduction activities. The criteria may include the need to use trading ratios, risk-spreading mechanisms and credit reserves. These calculation requirements may reduce the amount of credits and offsets which will be certified for a pollutant reduction activity by the Department.
(vi) The annual sum of all credits certified from nonpoint sources may not exceed the applicable tradable load calculated by the Department. The tradable load for the Chesapeake Bay Watershed is 5.7 million pounds of nitrogen per year and 396,800 pounds of phosphorus per year, unless otherwise revised by the Department.
(vii) If State or Federal funds are used to cost-share any portion of the pollutant reduction activity contained in the request for certification, the Department may allow the portion of the credits or offsets paid for by State and Federal funds to be available for certification, unless restrictions have been placed on the funds by the provider of the funds.
(4) Verification plan. A request for certification must contain a verification plan.
(i) The verification plan must include the methods for credit and offset verification, such as the documentation of the implemented pollutant reduction activity, sufficient to allow the Department to verify that the qualifying reduction efforts approved were properly implemented during the applicable compliance period.
(ii) Verification plans may include the following methods, subject to approval by the Department:
(A) Self-verification by the person responsible for implementing the pollutant reduction activity.
(B) Third-party verification.
(5) Certification by the Department. The Department will certify credits and offsets when it has determined that the requirements of paragraphs (1)—(4) have been met.
(i) Certifications may be made contingent on conditions that will ensure that the requirements of this chapter will be satisfied.
(ii) Credits and offsets must only be used to meet permit effluent limits for the compliance period for which they are certified, verified and registered by the Department under this section.
(iii) Requests for certification for multiple compliance periods may be approved by the Department, but they must be verified and registered separately for each compliance period.
(f) Registration requirements for the Chesapeake Bay.
(1) General. All credits and offsets used to comply with effluent limitations in NPDES permits must be registered by the Department before they may be applied to a permit to meet the effluent limitations.
(2) Registration requirements. The following registration requirements apply:
(i) Credits and offsets must be certified under the provisions of subsection (e).
(ii) Credits must be addressed in a valid contract which ensures that the requirements of this section will be met. The Department may require submittal of trade contracts, establish basic contract elements and require approval of trade contracts before registration.
(iii) The credits and offsets must be verified prior to registration. The following applies to verification:
(A) Verification must be conducted as described in the verification plan as approved by the Department in the certification.
(B) Verification must ensure that the pollutant reduction activity has been implemented as described in the certification, and that other requirements such as baseline and threshold are met.
(C) The Department may conduct other verification activities such as monitoring, inspections and compliance audits, to further ensure that the pollutant reduction obligations are being met.
(iv) The Department will assign a registration number for reporting and tracking purposes.
(3) Failure to implement. The Department will not register credits and offsets if the person who generates the credits has not implemented, or who demonstrates a lack of ability or intention to implement, operations and maintenance requirements contained in the certification or the verification plan, or otherwise to implement the requirements of this section. The Department will not register credits and offsets submitted by an aggregator that is currently not complying, or demonstrates a lack of ability or intention to comply, with this section.
(g) Use of credits and offsets to meet NPDES permit requirements related to the Chesapeake Bay.
(1) Permittees will only be authorized to use credits and offsets through the provisions of their NPDES permit. The permit conditions will require appropriate terms such as recordkeeping, monitoring and tracking, and reporting in DMRs.
(2) Only credits and offsets generated from activities located within the Chesapeake Bay watershed may be used to meet NPDES permit requirements related to the Chesapeake Bay. Credits generated in either the Susquehanna or the Potomac basins may only be used in the same basin unless otherwise approved by the Department.
(3) Permittees shall ensure that the credits and offsets that they apply to their permits for compliance purposes are certified, verified and registered by the Department under this section for the compliance period in which they are used.
(4) The Department may authorize a period not to exceed 60 days following the completion of the annual compliance period in an NPDES permit, for a permittee to come into compliance through the application of credits and offsets to the permit provided that the credits and offsets were registered during that compliance period.
(5) Permittees are responsible for enforcing the terms of their credit and offset contracts, when needed to ensure compliance with their permit. The Department may waive this requirement where the pollutant reduction activity fails due to uncontrollable or unforeseeable circumstances such as extreme weather conditions, and timely notice is provided to the Department, if the following apply:
(i) The failure is not due to negligence or willfulness on the part of the permittee.
(ii) The Department determines that replacement credits will be available.
(iii) The Department determines that the requirements for restoration, protection and maintenance of the water quality of the Chesapeake Bay will be met due to the requirements of this section, which may include the type of methodologies used when calculating the certified credits, the existence of an approved legal mechanism that is enforceable by the Department, and the use of a credit reserve.
(5) The use of credits and offsets must be identified in DMR forms, which will be submitted at the end of each compliance year or as otherwise provided by the Department in the permit. Registered credits and offsets shall only be used to meet permit effluent limits for the compliance period for which they are certified, verified and registered by the Department under this section.
(h) Water quality and TMDLs.
(1) Use of credits and offsets under this section will be allowed only where surface water quality will be protected and maintained as required by applicable regulations including this chapter and Chapter 93, Department permits and schedules of compliance and orders.
(2) Use of credits and offsets under this section must ensure that there is no net increase in discharge of pollutants to the compliance point used for purposes of determining compliance with the water quality standards established by the states of Maryland and Virginia for restoration, protection and maintenance of water quality of the Chesapeake Bay.
(3) Where a TMDL has been established for the watershed where the permitted activity is located, the use of credits and offsets under this section will be consistent with the assumptions and requirements upon which the TMDL is based.
(4) Use of credits and offsets under this section will comply with the antidegradation requirements contained in Department regulations.
(i) Public participation. The Department will publish a notice in the Pennsylvania Bulletin of the receipt of administratively complete requests for certifications of credits and offsets, and the Department's final determinations regarding those requests. This notice is not required to follow the requirements of § 92.61 (relating to public notice of permit application and public hearing).
(j) Use of credits and offsets generally. Nothing in this section precludes the Department from allowing the use of credits and offsets to be used to meet permit limits in areas other than those established for restoration, protection and maintenance related to the water quality of the Chesapeake Bay.
[Pa.B. Doc. No. 10-277. Filed for public inspection February 12, 2010, 9:00 a.m.]
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