Water Pollution Credit Bill Has Promising Future

A bipartisan group of legislators and interest groups ranging from the Dairy Business Association (DBA) to Clean Wisconsin is supporting a bill authored by Rep. Joel Kitchens and Sen. Robert Cowles that seeks to improve the effectiveness and economic viability of water-quality practices on farms.

At a March 19 hearing for SB-91 in the Senate Committee on Natural Resources and Energy, Cowles, who also chairs the committee, said the bill would create a market-based solution to address both point sources of pollution (wastewater treatment plants, industrial plants) and nonpoint sources of pollution (farms, urban runoff). The proposed program would be the first of its kind in the nation.

Here is how the program – which modifies an existing, but underused Department of Natural Resources program – would work: Farms could implement practices that reduce nutrient runoff that pollutes waterways. This reduction would generate credits that would be sold to a third-party broker. Point sources of pollution within the same watershed – such as municipal water-treatment plants, cheese factories or paper mills – could then purchase those credits from the third party to achieve their required pollution limits instead of implementing expensive upgrades to achieve small nutrient reductions.

“Since nonpoint sources are not required to employ nutrient-management practices unless cost share is available, trading is one way to ensure that water quality things are done,” said Cowles. “The economic threat the dairy industry faces makes it economically challenging to employ nutrient-removal technologies.”

Under this program, farms would have another revenue stream to encourage implementing practices that improve water quality. Meanwhile, taxpayers and manufacturers would have a way to avoid treatment and filtration upgrades that are not cost-effective.

Shawn Pfaff, a lobbyist for the DBA, said the same dollar amount invested on farms to improve water quality would have a much greater impact than multi-million-dollar upgrades to a wastewater treatment plant.

Although large manufacturers and municipalities can often absorb the cost for water-treatment upgrades, this bill is targeted at smaller communities that may face massive costs for small benefits in pollution reduction. In 2017, the Village of Ephraim considered supporting a letter that opposed stricter rules for phosphorus at municipal water-treatment plants, citing a multi-million-dollar upgrade that would be required to reduce its nutrient discharge.

The program is set up so that a 1.2-unit reduction in pollution on a farm will create one credit for trade, meaning there will be a net benefit in pollution reduction.

Steve Rowe, CEO of Newtrient, an Illinois-based manure-management firm, said his original research in the Wisconsin River Valley indicated that costs to reduce pollution at water-treatment and manufacturing plants would be 10 times more than the same reduction on farms and nonpoint sources. Under the 1.2-to-one cost ratio, it would often be more cost-effective to purchase credits through this program, which are available thanks to even greater pollution reduction elsewhere in the watershed.

Although the trading program already exists, it doesn’t allow for a third-party group to manage it. Cowles and Kitchens believe this third party will be more effective at brokering trades between farms and industrial or municipal treatment plants, which often have trouble communicating about and organizing trades that can be complex.

Rep. Kitchens said municipal water-treatment plants in Door and Kewaunee counties would welcome the program – especially smaller communities that may face expensive upgrades. At the same time, producer-led watershed groups such as Peninsula Pride Farms would have another incentive for its members to implement conservation practices on their farms.

Kitchens added that the upcoming Total Maximum Daily Load study for the Ahnapee River and other nearby waterways will help the region quantify its nutrient loading and reduction.

“There have been billions – I mean billions – spent at paper mills and municipal treatment plants,” Cowles said of the Green Bay area. “And the lower bay has still got a problem. We have to go after nonpoint [pollution]. We all see it in algae-filled lakes.”As of Pulse press time, the bill had not yet been scheduled for a vote in the Senate Committee of Natural Resources and Energy.

Example of the Water-Pollution Credit

Although the practices that would generate water-pollution credits and the costs for such credits are still unknown, here is an example – using simple numbers – of how the program is supposed to work.

A farm in southern Door County begins using cover crops that will reduce phosphorus runoff by 1,000 pounds per year. The DNR determines this practice is worth 1,000 water-pollution credits. The farm sells those credits to the third-party clearinghouse for $100,000.

Then the Village of Forestville realizes it must reduce the phosphorus discharge at its wastewater treatment plant by 500 pounds per year to comply with its permit, and the cost to upgrade the treatment facility to achieve this reduction will be $700,000.

The village goes to the third-party broker to purchase 500 of the credits that were generated by the nearby farmer for $75,000 (after the private third party takes its cut). Although the village is not reducing its phosphorus discharge, it applies those credits toward its allowable limit and complies with its permit.

In the end, the deal has reduced phosphorus pollution by an additional 500 pounds per year, saved Forestville taxpayers $625,000, and provided that farmer with $100,000.