Watershed-Based Trading & The Law: Wisconsin's Experience

Acknowledgements

This report was prepared for Fox-Wolf Basin 2000 by Amy B.F. Tutwiler and Paul Kent of Davis & Kuelthau's law offices in Madison, Wisconsin. If you have questions about the legal content of this report, the authors invite you to contact them by clicking on one of the names above or by calling them at (608) 280-8235. We would welcome you to share any other comments or feedback you may have about the report.

Executive Summary

In recent years, there has been growing interest in developing watershed-based trading as a regulatory tool to meet water quality goals. The incentives driving that interest are generally twofold. On one level, wastewater treatment operations are increasingly looking for cost-effective alternatives to expensive capital investments in their plants in order to meet treatment demands. On a second level, society is seeking ways to correct ongoing water quality degradation that cannot be exclusively addressed by treatment plants. Research shows that 40% of the nation's waters remain unsafe for fishing and swimming, and a major source of the problem is nonpoint source runoff. Trading is widely viewed as a win-win option to cooperatively meet both demands.

Understanding how parties to a watershed-based trading program are currently regulated is an important first step to evaluating what incentives and disincentives to trade each party brings to the bargaining table. This document summarizes the regulation of the two likely trading parties-point sources and nonpoint sources. Point sources include municipal and industrial wastewater treatment plants that discharge treated wastewater into surface waters at a discrete point. In contrast, nonpoint sources of pollution are comprised of a vast array of land use activities, from farming to road building and construction, that cause polluted runoff into our waters.

Point sources are heavily regulated under the Clean Water Act's wastewater discharge permit program, referred to in Wisconsin as the WPDES Program. Under that permitting system, point sources are required to meet a variety of discharge limitations based on available treatment technologies and water quality needs. Permittees are also subject to rules that prohibit or restrict degradation of waters beyond existing water quality standards. WPDES permits are issued for five (5) year terms through a public review process. Permit terms are enforced through monthly self-monitoring and independent inspection authority retained by the Department of Natural Resources (DNR). Violation of permit terms subjects permittees to civil and criminal penalties.

Contrasted with the stringent regulation of point sources is the incentive-based, largely voluntary regulation of nonpoint sources. For purposes of regulation, nonpoint sources are divided into two general groups, agricultural and nonagricultural sources. At the outset, it is important to keep in mind that this area of regulation, for both groups, is currently very dynamic, particularly here in Wisconsin, and is evolving at that time of this writing. Still, a strong flavor of the historically voluntary regulatory approach in this area remains in developing regulations, particularly for agricultural sources.

With respect to agricultural nonpoint sources, the Clean Water Act largely addresses nonpoint source pollution through planning and grant programs to be administered at the state level. One exception to this general statement is the regulation of large animal feeding operations, which, if large enough, are regulated as point sources under the WPDES program. With respect to voluntary programs, Wisconsin's primary nonpoint effort has been the Priority Watershed Program, which prioritized nonpoint source impaired waters and encouraged use of better land management practices in those watersheds. That program is now being phased out.

A more stringent approach is applied nonagricultural nonpoint sources, largely urban sources. The primary source of urban runoff, stormwater, is regulated as a point source under the CWA. At present, EPA requires stormwater permits for medium and large municipal sewer systems and those located in watersheds of concern or priority. A second phase of the stormwater permitting program is scheduled for October, 1999. In the second phase, more than 3,500 municipalities will be impacted by the federal stormwater rules. In addition, the rules will extend permitting requirements to construction sites of one acre or more. Urban nonpoint sources are also subject to state erosion control standards for construction.

The State is currently drafting nonpoint performance standards for both agricultural and nonagricultural nonpoint sources, which are being viewed as the primary state regulatory tool to address nonpoint source runoff. The proposed performance standards are generally being drafted as best land management practices (BMPs). For urban sources, the nonpoint standards will be mandatory. The agricultural performance standards, however, will only be enforceable if cost-sharing is available. In some cases, nonpoint sources are also subject to county ordinance controls. In addition to such controls are a number of soil erosion and other conservation programs, at both the state and federal levels, to encourage runoff control.

Another regulatory program that is important to the watershed trading effort is the federal mandate on states to develop total maximum daily load requirements (TMDLs) for waters not expected to meet water quality standards under existing controls. TMDLs are designed to assess the total pollutant load a receiving water can assimilate, which load is then to be allocated among wastewater sources and background conditions, with some allocation made to create a margin of safety. TMDLs thus regulate point sources and nonpoint sources. Watershed-based trading may provide a tool for sources to meet more stringent limits expected to result from the TMDL analyses.

The different approaches used to regulate point sources and nonpoint sources provide different incentives and disincentives for each type of trading party. On balance, point sources are interested in trading if it offers a cost-effective alternative to expensive capital investments in their wastewater treatment plants. At the same time, the trading concept for water controls is so new - and so many questions have yet to be answered - that many permittees will be discouraged by the uncertainties. In the absence of enforceable standards, nonpoint sources do not have a financial incentive to enter into trades. And yet, trading may offer those sources funding to install BMPs to improve their operations.

Integrated into this network of motivations are state and federal guidelines that trades must meet. EPA published a draft watershed-based trading framework that sets out eight general principles, largely restrictions, for trading. In Wisconsin, the Legislature passed a statute authorizing the DNR to implement one or more pilot trading programs. The Wisconsin statute allows a variety of types of trades, although it limits the trade length to five (5) years and requires that the trade result in improved water quality.

Wisconsin currently has three (3) pilot trading programs in place in the following areas: (1) Fox-Wolf Basin; (2) Red Cedar Watershed; and (3) Rock River Basin. The pilot efforts are generally separate and are advancing at different rates dues to such factors as the size of the basin involved and discharge limitations to which permittees in the pilot area are subject. This report also summarizes other states' trading efforts, highlighting the point source trades in place in Minnesota.

I. Background on Water Quality Control Programs

Consideration of watershed-based trading should be prefaced on a basic understanding of the federal and state laws that address water quality. The primary law regulating water quality is the Federal Water Pollution Control Act, commonly referred to as the Clean Water Act and analogous state laws. In Wisconsin, there are state laws in addition to the Clean Water Act that impose water quality controls.

The Clean Water Act divides the sources of water pollution into two categories, point sources and nonpoint sources. The regulatory scheme is vastly different for these two categories. Parties interested in trading between point sources and nonpoint sources most understand these differences and each party's incentives and disincentives to trade.

1. Point Source Regulations

The Clean Water Act was primarily designed to regulate point sources of water pollution, particularly through a wastewater discharge permit program. Through authority provided by Congress, EPA has delegated its authority to implement and enforce the discharge permit program to those states with adequate programs to carry out the obligations of the Clean Water Act.[1] Wisconsin has been delegated such authority and operates the State's wastewater discharge permit program.[2] Wisconsin's permit program, referred to as the Wisconsin Pollution Discharge Elimination System (WPDES), is codified at Wis. Stats. ch. 283. Wisconsin's permit program is generally modeled after the federal program, the National Pollutant Discharge Elimination System (NPDES); although, in some ways is more comprehensive than the federal system.[3]

EPA retains supervisory authority in two regards: (1) EPA may withdraw approval of the state program if it finds it to be inconsistent with the requirements of the Clean Water Act; and (2) EPA retains the right to review and object to individual state-issued discharge permits to ensure consistency with its policies.[4]

1. The WPDES Permit Program

The WPDES permit program only regulates discharges of pollutants from point sources. A point source is generally defined as a discharge from a discrete point, such as a ditch, channel, container or vessel.[5] The term "pollutant" is broadly defined to include among other things, sewage, chemical wastes, biological materials, dirt, discarded equipment and heat.[6] The length of a discharge permit is limited to five years.[7] Typical point sources include municipal wastewater treatment operations, i.e. "publicly owned treatment works" or POTWs, and industrial wastewater treatment plant discharges.

The WPDES program imposes two types of limits on the discharge of a variety of pollutants. The first type of limit is known as a categorical limit because the standards are established for a variety of specified industry categories.[8] These standards are based on what technology can achieve. The second type of limit is a water quality based limit. Water quality based limits are based on what the receiving waters can withstand and continue to support its designated use. Most streams must have water quality that supports indigenous fish and aquatic life, but streams designated as exceptional or outstanding resource waters must meet more stringent standards.[9] Water quality based limits are usually expressed as a numeric limit for individual chemicals or pollutants in the effluent stream.[10] In addition, most permits include a whole effluent toxicity (WET) test which tests the toxicity of the effluent as a whole. These tests are performed by subjecting specified vertebrate and invertebrate species to the effluent.

New and increased discharges of a regulated pollutant are subject to additional restrictions, referred to collectively as anti-degradation rules.[11] The level of restrictions imposed on a discharge by the anti-degradation rules depends on how the receiving waters are designated.[12] For waters classified in the highest quality categories, outstanding resource waters and exceptional resource waters, no degradation is allowed, while very limited degradation is allowed for waters in other categories.[13]

2. Implementation and Enforcement

The permitting process involves opportunities for public participation. The draft permit is subject to public notice and comment. Interested persons may also request a public hearing.[14] The permittee is responsible for reporting discharge information monthly to the DNR. The DNR also retains independent inspection authority. If a permittee is not in compliance with the permit terms it may be subject to civil and possibly criminal penalties for violating a permit term and is liable for environmental damages caused by such violation.[15]

2. Nonpoint Source Regulation

The second major category of wastewater dischargers are nonpoint sources, which generally consist of land use activities that typically do not discharge pollutants at a discernable point. These sources are not as readily identifiable nor as simple to control as point sources. Nonpoint pollution is caused by both agricultural and nonagricultural sources. In the case of agricultural runoff, common sources of pollution are sediment, pesticides and nutrient runoff from farm fields and farm animal waste. Nonagricultural sources include runoff of sediment, pesticides, and nutrients from urban lawns; sediment from construction sites; and oil, grease and heavy metals from streets, highways, rooftops and parking lots. Runoff from storm events is the most common way in which pollutants are transported to the waters.[16]

Nonpoint sources are regulated in much different ways than are point sources. Moreover, this area of regulation is currently very dynamic as the State undergoes a redesign of its nonpoint programs and the federal programs make several changes as well. Many of these regulatory changes are currently evolving and much of the detail about future programs has not yet been determined. Thus, this discussion addresses the existing regulatory approaches and makes some forecasts about the direction of changes in the nonpoint regulatory area.

Unlike the command and control permit approach to point source regulation, the majority of nonpoint source controls over the years have consisted of recommendations and incentives, such as planning agencies and grant funding. The reason for this less stringent regulatory approach is explained by several factors. First, nonpoint pollution is more difficult to control because of its dispersed nature. Instead of technical "end of pipe" solutions, nonpoint sources require changes in behaviors and practices involving land use. A second major factor is that instead of a few discernable points, there are thousands of individuals, farmers, small businesses and others who contribute to nonpoint pollution. Issuing individual permits to every such source is not feasible. A final factor is that individual nonpoint sources are typically not able to bear the cost of regulation as easily as large industrial or municipal point sources. These and other reasons have resulted in the general lack of comprehensive and enforceable nonpoint source mandates in the Clean Water Act.

The Clean Water Act does address nonpoint pollution, but indirectly. When first enacted, Section 208 of the Clean Water Act required that states develop area-wide waste treatment management plans (208 Plans) for areas having substantial water quality control problems.[17] The water quality control plans developed under Section 208 often serve today as a planning tool for state programs. In later amendments to the Clean Water Act, Congress also specifically mandated that states develop nonpoint source management programs.[18] As a result, instead of a uniform federal program implemented by states that characterizes the point source programs, nonpoint programs are state driven and vary considerably from state to state.

There are two exceptions to this general rule. First, the development of TMDLs is expected to control nonpoint and point sources. This is discussed in Section I.C. below. Second, some nonpoint activities have been defined as point sources in order to bring them under the control of the discharge permit authority. For example, runoff from large animal feeding operations and stormwater from larger and medium municipalities are treated as point sources even though they are nonpoint in nature.[19] The following summary describes the current programs as well as the expected future changes in those programs.

1. Agricultural Nonpoint Source Regulations

The primary agricultural nonpoint control programs comprise a matrix of regulations, guidance, planning, control projects and support programs required under DNR and the Department of Agriculture, Trade and Consumer Protection (DATCP) regulations. The programs are primarily administered at the county level through county land conservation departments (LCDs). The USDA Natural Resources Conservation Service (NRCS), other federal, state and local agencies also provide assistance with nonpoint programs. Most of these programs are voluntary or have a cost-sharing requirement that limits enforceability to those who can obtain funding.

1. Permitting Programs for Large Livestock Operations

One exception to the general statement that nonpoint programs are voluntary is the regulation of some larger animal farming operations (AFOs), through the wastewater discharge permitting authority under the Clean Water Act.[20]

On the federal level, AFOs are regulated if they fall within the meaning of a confined animal feeding operation (CAFO), which is defined as a facility confining 1,000 or more animal units or confining 300 animal units and causing pollutant discharge into waters.[21] Facilities can also be designated CAFOs under a process that looks at the extent to which the facility is polluting nearby waters.[22] EPA is currently expanding its policy guidelines to recommend further oversight of large animal feeding operations and set performance expectations for those operations.[23] The strategy calls for all AFOs to voluntarily develop comprehensive nutrient management plans (CNMPs). EPA recommends that the CNMP address techniques for feed management, manure handling and management, land application of manure and land management.[24]

Wisconsin has a similar animal waste program.[25] Like the federal program, the State requires WPDES permits for livestock operations over 1,000 animal units in size.[26] The permits generally consist of design and management standards for animal waste storage facilities. Subject to significant funding constraints, DNR also currently runs a complaint-driven system (the so-called Notice of Discharge program) designed to addresses significant manure discharges at operations that are otherwise not regulated.[27] Upon complaint, the DNR will issue a Notice of Discharge to landowners found to be causing significant discharges.[28] The landowner is then generally provided cost-share funds through DATCP to install the recommended corrective actions.

2. Animal Waste Prohibitions and Performance Standards

In 1997, the State identified four animal waste activities that are to be prohibited in addition to those activities regulated under Chapter NR 243.[29] The prohibitions are part of an on-going state effort to redesign the current nonpoint program and to develop nonpoint performance standards for both agricultural and nonagricultural sources. The agricultural standards are required to address animal waste management (including but not limited to the four statutory prohibitions), nutrient management and cropland sediment delivery.[30] The State is attempting to develop uniform standards that would apply statewide as well as targeted standards for areas of particular water quality concern. The enforceability of the new performance standards will be limited by a statutory requirement that cost-sharing for the performance standards must be available to the facility owner or operator. The cost-sharing requirement, however, does not apply to facilities or practices in place after October 14, 1997.[31] The State's goal is to have the draft nonpoint source water quality rules available for public hearing by Spring 2000.

3. County Land and Water Resource Plans and Regulations

In keeping with the practice of looking to counties to administer nonpoint source programs, in 1998 the Legislature mandated that LCCs develop and implement land and water resource management plans to minimize soil erosion.[32] The plans must generally include an inventory of the county's topography, watersheds soil types and land uses.[33] Counties must also estimate the area's rate of soil erosion and must then develop goals and a long-term strategy for controlling erosion.[34]

While far from certain, the general sense is that the expected nonpoint source performance standards, as well as other nonpoint programs, will primarily be implemented through the land and water resource plans. Local governments, including counties, are authorized to enact livestock operation regulations that are consistent with the state performance standards.[35] Local governments may not, however, adopt regulations that are more restrictive than state performance standards, unless the local government can demonstrate to the satisfaction of the DATCAP or DNR that the regulations are necessary to achieve water quality standards.[36] Nonetheless, it appears the Legislature makes an exception to this preemption rule for regulation of manure storage facilities, which may apparently be subject to more stringent local requirements.[37]

4. Priority Watershed Program

Until the nonpoint program redesign effort, the primary state nonpoint source program has been the Nonpoint Source Water Pollution Abatement Grant Program,[38] commonly referred to as the Priority Watershed Program.[39] The Program was designed to encourage the use of nonpoint source controls to improve water quality in watersheds [40] showing the greatest nonpoint source impairments.[41] Since the program began about 20 years ago, 86 watershed and lake projects have been selected from 330 large-scale watersheds identified in the State and 24 of those 86 projects have been closed or completed. To date, the Program has befallen to substantial budget shortages and the decision was made to end selection of new projects.[42] Nonetheless, the Land and Water Conservation Board has committed to funding the remaining selected projects through completion.[43] Although it is now being phased out, it is useful to have a general understanding of the Priority Watershed Program both because it is an important chapter in the State's nonpoint source control efforts and because a number of priority projects will receive funding into the future.

Under the Program, projects are implemented to identify and improve water quality in those watersheds and lakes of high or medium priority concern, particularly those polluted by nonpoint sources. When the Program began, DNR identified priority watersheds and lakes in most need of nonpoint pollution abatement through the area-wide water quality plans originally developed under the Clean Water Act. A plan was written for waters identified as high or medium priority to address nonpoint sources in the subject watershed and to prescribe controls, referred to as best management practices (BMPs) designed to reduce pollution runoff. Plans were approved by the Land and Water Conservation Board (LWCB).[44]

The projects are designed to be implemented by the counties for a period of ten to 12 years, and are entirely voluntary except for discharges within areas defined as critical sites, in which case participation in the abatement program is compulsory.[45] Landowners whose properties are identified as significant sources of pollution runoff are offered cost-share agreements to implement the prescribed BMPs. Through cost-sharing grants to governmental units or landowners, DNR reimburses up to 70 percent of the costs of each practice.[46]

When first started, the program focused on agricultural projects. In the mid-1980s, several watershed projects in the Milwaukee River basin were selected as part of an initiative to work with municipalities on matters such as stormwater management and construction site erosion control.[47]

5. Coastal Nonpoint Pollution Control Program

Another federal program that regulates both agricultural and urban nonpoint activities is the Coastal Nonpoint Pollution Control Program under the Coastal Zone Act Reauthorization Amendments (CZARA).[48] The Program is jointly administered by the Environmental Protection Agency (EPA) and the National Oceanic and Atmospheric Administration (NOAA).[49] The CZARA is implemented through guidance to the states, compliance with which is made a condition for receiving federal funding. The CZARA requires that certain nonpoint source controls be implemented in designated coastal areas, including controls on animal waste and cropland erosion.[50]

In Wisconsin, the areas affected by the CZARA generally include counties in the Great Lakes Drainage Basin, less the area upstream of Lake Winnebago.[51] Those in the Upper Fox and Wolf River Geographic Management Unit (GMU) are not currently subject to CZARA requirements.[52]

6. Other Agricultural Nonpoint Programs

In addition to the programs noted above, there are a wide variety of other nonpoint source-related programs. Shoreland zoning ordinances [53] and requirements under Chapter 30 of Wisconsin Statutes were among the earliest programs [54] designed to minimize erosion and runoff into navigable waters.[55]

In addition, nonpoint sources are also regulated under the State Soil and Water Resource Management (SWRM) Programs, which include the Soil Erosion Control Program (SEC), the conservation compliance provisions of the Farmland Preservation Program (FPP),[56] the Wind Erosion Control Program, the Nutrient/Pest Management Program, the Agricultural Clean Sweep Program and the Sustainable Agriculture Program.[57] Counties manage these programs for the DATCP by staff hired through grant funds under SWRM provided to County Land Conservation Committees (LCCs).[58] In some areas, agricultural practices are also subject to local ordinance requirements, which are sometimes much stricter than state mandates.[59]

There are also a variety of conservation programs that can have an impact on nonpoint source pollution and many of which offer cost sharing to landowners. At the federal level, such programs include the Conservation Reserve Enhancement Program (CREP),[60] the Environmental Quality Incentives Program (EQIP), the Wetland Preservation Program (WRP), the Wildlife Incentives Program (WHIP), the Farmland Protection Program, and the Partners for Fish and Wildlife Program. At the state level, programs include the Stewardship Incentive Program, the Forest Crop Law Program, Wood Land Tax Law Program, Managed Forest Law Program and Forestry Incentive Program.

2. Non-agricultural Nonpoint Regulations

Nonpoint source programs for nonagricultural sources basically entail regulation of urban stormwater, including erosion control measures. Unlike most of the current agricultural standards, the erosion control and stormwater requirements are generally enforceable. The reader is advised that, as with the agricultural nonpoint programs, the nonagricultural programs are also evolving right now.

1. Municipal and Industrial Stormwater Management

In 1987 amendments to the Clean Water Act, Congress revised the Act to require EPA to issue permits for stormwater deemed to be point sources, beginning with the most contaminated stormwater discharges first.[61] Applying the federal requirements, Wisconsin currently regulates industrial stormwater discharges for specified industrial categories and regulates medium and large municipal sewer systems and those located in watersheds of concern or priority.[62]

Municipal permits typically include the following: (1) A showing of adequate authority to control pollutants discharged to the subject stormwater system; (2) a storm sewer map; (3) a list of industrial sources by watershed; and (4) a description of management plans and practices and the development of a management plan during the permit term. Industrial stormwater regulations divide affected industries into one of three separate tiers. The timing and scope of discharge restrictions varies for each tier.[63] Industrial permits generally require the implementation of a storm water pollution prevention plan (SWPPP) and includes monitoring and inspection requirements.[64]

The second phase of the federal stormwater requirements is currently underway. In 1998, EPA published draft Storm Water Phase Two regulations.[65] The final rules were slated to be released in October. The Phase Two regulations will impact more than 3,500 municipalities nationwide.

2. Stormwater Management for Construction Sites of Five Acres or More

Construction of five acres or more is a type of industrial activity that is currently subject to special requirements under federal and state law. Persons developing more than five acres must submit a notice of intent to be covered by a general permit prior to beginning construction. Under Phase II, the construction sites down to one acre will be subject to regulation. Basically developers must manage their sites in accordance with Best Management Practices. In Wisconsin, DNR has incorporated the Wisconsin Construction Site Best Management Practice Handbook as part of its permit requirements.[66]

3. Erosion Control for Building Sites

The Department of Commerce (DOC) administers the Construction Site Erosion Control Program, which includes erosion control standards for one and two-family dwellings and commercial public buildings and buildings that are places of employment.[67] Counties and municipalities have the option to adopt and enforce the state dwelling code and the DOC enforces the code in the remaining municipalities.[68] The DOC is currently revising proposed construction site erosion control regulations that were developed pursuant to a memorandum of understanding between the Department of Industry, Labor and Human Relations (DILHR), a predecessor agency to the DOC, and the DNR.[69]

4. New Urban Nonpoint Performance Standards

In addition to the current stormwater regulations, the state nonpoint redesign effort includes the development of performance standards for nonagricultural sources, e.g., urban sources. State legislation requires that the DNR develop performance standards designed to achieve water quality standards for those sources.[70] Unlike the analogous agricultural performance standards, however, the nonagricultural standards do not predicate enforceability on the availability of cost-sharing.

Performance standards are currently being developed to address a variety of parameters, primarily focusing on sediment and phosphorus for construction sites, new development and existing development. The standards are expected to use best management practices to achieve compliance, and enforcement will likewise involve ensuring that best management practices are properly implemented. Like the agricultural standards, the details of implementation have not yet been worked out and so the future impact of these standards is quite uncertain.

3. Total Maximum Daily Load Requirements

A more recent element of the Clean Water Act permit program that is important to watershed-based trading is a requirement that states develop total maximum daily loads (TMDLs) for water bodies that are not meeting or are not expected to meeting applicable water quality standards with existing enforceable control strategies.[71] A TMDL is basically a process that requires states to determine the maximum loading of a given pollutant that a receiving water, watershed or basin can tolerate. Section 303(d) of the Clean Water Act requires that states identify and develop a list of those waters within state boundaries that are not meeting water quality standards; the so-called 303(d) list.[72] For each of the listed waters, states are then required to develop TMDLs for the limiting pollutants.

Once the TMDL "ceiling" has been developed, the state must apportion that total load among point sources, nonpoint sources, natural background and a margin of safety, including considerations for future growth and feasible reductions from current sources.[73] Proposed amendments to the TMDL process also emphasize the need to establish implementation plans that control point and nonpoint sources of pollutants.[74] In addition to implementing the federal TMDL program, Wisconsin has an existing rule that allows the DNR to calculate a maximum loading for a water body affected by multiple dischargers.[75]

1. Overview of Trading Authority

Watershed-based trading presents a unique and challenging opportunity to integrate the very different regulatory approaches used to address point and nonpoint discharge sources for the advancement of water quality. More and more, point sources are seeking cost-effective alternatives to expensive capital-intensive changes to treatment operations required to meet permit requirements. In addition, society is looking for solutions to address ongoing water quality impairments. According to the recently published federal Clean Water Action Plan,[76] 40% of the nation's waterways remain unsafe for fishing and swimming.[77] One of the major areas of concern is nonpoint source runoff.[78] Wisconsin's DNR estimates that about one-half of the lakes and streams within assessed watersheds are degraded by nonpoint sources.[79] Watershed-based trading potentially offers a needed tool to more effectively address remaining water quality concerns.

Although trading offers unique potential, the differences in regulatory approach between the point and nonpoint programs discussed above need to be considered. A summary of key program differences relevant to trading are summarized in Table 1 below:

Table 1. Summary of Point Source and Nonpoint Source Regulatory Approaches

Summary of Point Source and Nonpoint Source Regulatory Approaches
Areas of Difference	Point Source		Nonpoint Source
Primary Regulatory Authority	Federal - CWA		Individual state laws, some Federal CWA programs
Regulatory Mechanism	Permits		Economic incentives, some performance standards
Standards	Numeric water quality limits, categorical limits		Best management practices
Enforcement	Mandatory		Voluntary, with some mandates

The differences between programs do not preclude trades between point and nonpoint but they make such trades difficult to implement, and they make the incentives for trading very different between such sources. Some incentives and disincentives are summarized in Table 2 below for point sources and nonpoint sources.

Table 2. Point Source and Nonpoint Source Incentives and Disincentives

Point Sources
Incentives	Disincentives
Cost-effective option to new treatment	Uncertainty of new technique (implementation costs)
May allow discharge where otherwise precluded by anti-degradation or TMDL	Limits on duration of trade
	Regulatory acceptance/limits
	Obligations for enforcement of BMP not clear

 

Nonpoint Sources
Incentives	Disincentives
Additional economic incentive for implementing BMP	May provide cost-share dollars and force implementation of unwanted BMP
	Reporting and program costs may be more than other programs, e.g. CREP
	Unfamiliarity with interested trading parties

2. EPA Trading Guidance

Due in part to the recognition of continuing water quality problems, and in response to President Clinton's regulatory reform efforts,[80] EPA issued a draft guidance or framework for watershed-based trading.[81] The Framework sets forth the following eight (8) principles or requirements for a trade:

1. Trading participants meet applicable Clean Water Act technology-based requirements.
2. Trades are consistent with water quality standards throughout a watershed, as well as anti-backsliding and other requirements of the Clean Water Act, other federal laws, state laws, and local ordinances.
3. Trades are developed within a TMDL process or other equivalent analytical and management framework.
4. Trades occur in the context of current regulatory and enforcement mechanisms.
5. Trading boundaries generally coincide with watershed or waterbody segment boundaries, and trading areas are of a manageable size.
6. Trading will generally add to existing ambient monitoring.
7. Careful consideration is given to the types of pollutants traded.
8. Stakeholder involvement and public participation are key components of trading.[82]

In general, EPA appears to be strictly adhering to these draft principles. For instance, EPA applied several of the principles in a letter to the State of Michigan commenting on the State's proposed water quality trading program rules.[83] With respect to Principle One, certain aspects of the Michigan draft rule contemplated allocation of trading credits to meet technology-based limits.[84] EPA responded that credits may not be used to comply with technology-based limits.[85] Similarly, Michigan drafted its rule to allow open trading in watersheds not meeting water quality standards, regardless of whether a TMDL had been completed. EPA responded that permittees are mandated by law to meet water quality based limits in the absence of a completed TMDL or similar analysis.[86]

Similarly, pursuant to Principle Two, EPA states in both the Draft Framework and its comments to the Michigan rule that nonpoint source controls required under the CZARA are not available for trading.[87] This limitation is significant because many of the CZARA requirements are much more stringent than state requirements and thus, those agricultural controls are not available for trading. For instance, in the area of animal waste, the CZARA mandates that the same animal runoff storage requirements that Wisconsin applies to facilities of 1,000 or greater animal units must be applied to facilities with as few as 98 animal units and even imposes storage requirements for facilities with as few as 28 animal units.[88]

3. State Trading Authorization

In Wisconsin, the Legislature authorized the DNR to administer one or more pilot trading projects in the State.[89] The authorizing legislation allows trades to occur by agreement directly between the permittee(s) and the party(ies) removing the pollutant load, either a point or nonpoint source, or by agreement with the DNR or another state governmental entity.[90] The DNR is limited by the statute to authorizing trade agreements that are no longer than five (5) years in length and that improve water quality.[91]

1. Trading Efforts In Wisconsin

The Wisconsin DNR has authorized three pilot trading program in the State: (1) The Fox-Wolf Basin Project; (1) the Red Cedar; and (3) the Rock River Partnership. The DNR is treating each pilot separately, and thus, DNR is treating any trading guidelines developed within a pilot program as unique to that pilot. The following is a general summary of each pilot program.

1. Fox-Wolf Basin http://www.fwb2k.org/hotstuff/hotstuffintro.htm

The Fox-Wolf Basin is a 6,400 square mile drainage area located in northeast Wisconsin. The Basin is made up of the Wolf, Upper and Lower Fox River sub-basins, which ultimately drain to Green Bay and Lake Michigan. Basin stakeholders, headed by Fox-Wolf Basin 2000, expressed interest in watershed-based trading in part due to ongoing phosphorus problems in the Basin. A 1988 Remedial Action Plan (RAP) for the Lower Green Bay/Fox River area identified phosphorus as a pollutant of concern for the Basin, as did a study by Fox-Wolf Basin 2000's predecessor, Northeast Wisconsin Waters for Tomorrow (NEWWT).

As a result of the RAP, dischargers within the Basin were required to treat their effluent to meet a 1.0 mg/L limit for phosphorus, and a goal was set to reduce that limit to 0.3 mg/L at some time in the future. Basin stakeholders view watershed-based trading as a potentially cost-effective tool to reduce phosphorus levels further. Under the leadership of Fox-Wolf Basin 2000, Basin stakeholders are working through the trading process, and thus far, have researched the economic and legal aspects of trading and have established a network with other parties interested in trading.

2. Red Cedar http://clean-water.uwex.edu/lowerchip/redceder.htm

The Red Cedar Watershed is located in west central Wisconsin. The watershed comprises a 1,500 square mile drainage area. Like the Fox-Wolf Basin, the Red Cedar Watershed receives excessive phosphorus loadings, which cause severe algal blooms in two lakes within the Watershed, Tainter and Menomin Lakes. The Watershed is subject to a goal to reduce phosphorus loadings to the Watershed 50%. The sources of phosphorus to the Watershed are estimated to be made up of 93% nonpoint sources and 7% point sources.

A Red Cedar Steering Committee, made up largely of local stakeholders, had a modeling and monitoring process completed for the Watershed. At present, one discharger, the City of Cumberland, is considering an approach to address their phosphorus discharge restrictions through trades with nonpoint sources within the surrounding area, referred to as the Prairie Farm Flowage. The DNR set the trading area restriction as one of several trade framework restrictions specifically for the Red Cedar pilot. Other trade framework restrictions include: (1) Dischargers may only trade to meet phosphorus requirements; (2) trades are subject to a 2:1 ratio; and (3) the discharger is responsible for transacting the trade directly with the removing sources.

Under the proposed Cumberland trade, in addition to the above restrictions, the City's effluent discharge will be subject to an influent and effluent phosphorus cap. In addition, any agricultural sources with which the City trades must meet the animal waste prohibitions required by Wis. Stat. § 281.16(3), commonly referred to as the AWAC prohibitions. Cumberland is under a time line to execute a trade agreement by October 2000 and to ensure that removal practices are installed by October 2001. A copy of the DNR's letter to Cumberland setting out the conditions for a trade are attached in Appendix 5.

3. Rock River http://clean-water.uwex.edu/rrp

The Rock River Basin is located in south central Wisconsin and comprises a 3,777 square mile drainage area. Like both the Fox-Wolf Basin and the Red Cedar Watershed, phosphorus is a pollutant of concern within the Basin. In 1996, DNR and Basin stakeholders formed a partnership, the Rock River Partnership, through a memorandum of understanding (MOU) between the parties. The MOU contemplates that the DNR will explore the option of watershed-based trading within the Basin.

The pilot allows dischargers to trade to meet phosphorus effluent restrictions. Under the pilot, DNR granted those point dischargers active in the Partnership a delay of the State's phosphorus effluent limitations under Chapter Wis. Admin. Code Ch. NR 217 within their permits. Chapter NR 217 generally requires that dischargers meet a 1.0-mg/l phosphorus limit. Participating dischargers have until approximately April 2000 to begin pursuit of a trade, after which time they must enter into a compliance schedule to incorporate phosphorus removal into their treatment processes. A copy of the standard permit trading language is attached in Appendix 6.

In 1998, the Partnership, primarily through a subgroup of dischargers, the Rock River POTW Watershed Group, contracted to have the entire Basin modeled to assess the relative sources of phosphorus, as well as to conduct monitoring of the Basin for approximately two years. In the meantime, Partnership members have been working through subgroups to develop a trading framework. One product of that effort has been a list of issues that arise in developing a trading structure, as well as suggested responses to each issue for the Rock River Pilot. That issues list is attached as Appendix 7.[92] Some of the primary issues with which the workgroup grappled are summarized in Table 3 below.

Table 3. Structuring a Trade: Some Basic Issues

Structuring a Trade: Some Basic Issues
	How each type of trade would be executed and enforced and by whom.
	What effluent parameters point sources would be allowed to address through trading.
	Where trades within the project area may occur and the relative positions of the trading partners within the project area.
	Whether the five year limitation on trade length would discourage trades and how to address any disincentive created by the limitation
	How the success of a trade, and the pilot, would be measured.
	Whether or how trading credit could be received for nonpoint source best management practices required or funded by other programs.
	How the trading parties will meet the EPA reasonable assurance standard.

2. Other States' Trading Efforts

A review of other states' watershed-based trading efforts shows a limited number of executed trades. Although our search was not exhaustive, we reviewed the progress of several states, including those understood to have active trading programs, including Colorado, Minnesota and North Carolina. A summary of our review can be found at the end of this section in Table 6.

One common feature found among all the more developed trading efforts is that the trading programs are being developed within a TMDL or analogous discharge cap. That cap typically subjects point source discharges to new or additional restrictions that may be met in part or in full through some sort of trade. As summarized in Table 6, we also learned something about how some states are addressing nonpoint pollution through programs that may or may not incorporate trading in one form or another.

An useful illustration of an actual trade comes from Minnesota, which has one of the most developed trading programs in the country. One of the most significant trades to date involves the Rahr Malting Company. By way of background, historically the Rahr Malting company discharged its wastewater effluent to the Blue River public treatment works plant, which discharges its treated effluent into the lower Minnesota River. Approximately ten (10) years ago, the State completed a TMDL analysis on the River for oxygen demand. Rahr Malting recently constructed its own wastewater treatment plant, which also discharges into the lower Minnesota River. The Company's plant, however, was precluded by the TMDL analysis from adding any additional oxygen demand in the form of carbonaceous biological oxygen demand (CBOD₅), into the River system. To address this constraint, Rahr Malting negotiated a permit with Minnesota that allows it to discharge some CBOD₅ in exchange for completely offsetting that discharge through trades. Under the permit, Rahr is subject to the schedule shown in Table 4 for implementing nonpoint load reduction projects over the five-year course of its permit.[93]

Table 4. Rahr Malting's Schedule to Achieve Nonpoint Controls

Rahr Malting's Schedule to Achieve Nonpoint Controls
Date		Nonpoint Load Reduction		Cumulative
December 31, 1997 December 31, 1998 December 31, 1999 December 31, 2000 Permit Expiration Date		0 units 30 units 30 units 30 units 60 units*		0 units 30 units 60 units 90 units 150 units
* The Permittee has accepted a phosphorus limit of 2 mg/l instead of the 3 mg/l limit MPCA would otherwise propose at this time. Due to this, a 30 unit credit may be applied to the cumulative load reduction during the year 2001 and subsequent years provided the Permittee's phosphorus limit remains 2 mg/l or less. In addition, up to 10 units of the phosphorus credit may be used in either 1998, 1999, or 2000 for permit compliance purposes to satisfy any shortfall in the year's nonpoint source load reduction requirement. The Permittee has accepted a year-round CBOD5 limit of 12 mg/l instead of the limit MPCA would otherwise propose at this time of 12 mg/l CBOD5 from June through September and 25 mg/l CBOD5 from October through May. Due to this, a 30-unit credit may be applied to the cumulative value for the year 2001 and subsequent years provided the Permittee's year-round CBOD5 limit remains 12 mg/l or less.

Rahr Malting has committed $250,000.00 to CBOD₅ nonpoint source load reduction projects. The Rahr permit requires the Company to spend the full amount within the five years. If the total load reduction of 150 pounds is achieved for less, the time period for expending the funds is then extended to ten (10) years.[94]

The permit lists the types of projects that may be implemented to obtain load reduction credits and requires that Rahr submit proposed projects for approval to Minnesota's environmental agency, the Minnesota Pollution Control Agency (MPCA).[95] The permit also requires Rahr to submit an annual nonpoint load reduction monitoring report to verify compliance with its CBOD₅ discharge limitation and compliance with the nonpoint load reduction schedule.[96] The terms for calculating credits for individual projects are set forth in a separate document, entitled "Nonpoint Source Trade Crediting Calculations" and attached to the Rahr Permit in Appendix 8.

Minnesota recently entered into a similar trading arrangement with Southern Minnesota Beet Sugar Cooperative Process Plant, which discharges its effluent to Beaver Creek, a tributary to the Minnesota River.[97] Like Rahr, the Cooperative is constructing a new wastewater treatment plant and also like Rahr, is restricted by the same TMDL for oxygen demand. In the case of the Cooperative, it must trade to offset its phosphorus discharges. Similar to the Rahr permit, the Cooperative's permit requires that it meet a schedule to achieve phosphorus reductions through nonpoint projects. That schedule is summarized in Table 5 below and the terms of allowable trades are set forth in the permit and in an attachment to the permit entitled "Phosphorus Trade Crediting Calculations."[98]

Table 5. Southern Minnesota Sugar Cooperative's Schedule to Achieve Nonpoint Source Pollutant Reductions

Southern Minnesota Sugar Cooperative's Schedule to Achieve Nonpoint Source Pollutant Reductions
Due Date	Requirement
1/31/2000	The Permittee shall achieve and maintain MPCA-approved phosphorus trade reduction active credits of at least 2600 pounds (1180 kilograms) per year and submit a report: due on January 31, 2000.
11/30/2000	The Permittee shall achieve and maintain MPCA-approved phosphorus trade reduction active credits of at least 5200 pounds (2350 kilograms) per year and submit a report: due on November 30, 2000.
11/30/2001	The Permittee shall achieve and maintain MPCA-approved phosphorus trade reduction active credits of at least 7800 pounds (3530 kilograms) per year and submit a report: due on November 30, 2001.
11/30/2002	The Permittee shall achieve and maintain MPCA-approved phosphorus trade reduction active credits based upon the mean of the mass of phosphorus discharged through outfall SD005 in the second and third hydrologic years of this permit, as follows: if the mean is less than or equal to 3000 pounds/year, 7800 pounds/year (3530 kg/year) of credits are required; if the mean is greater than 3000 and less than 4000 pounds/year, this mean times 2.6 credits are required; and if the mean is greater than or equal to 4000 pounds/year, 10,400 pounds/year (4700 kg/year) of credits are required. The Permittee shall submit a report: due on November 30, 2002.
11/30/2003	The Permittee shall achieve and maintain MPCA-approved phosphorus trade reduction active credits based upon the mean of the mass of phosphorus discharged through outfall SD005 in the second, third and fourth hydrologic years of this permit, as follows: if the mean is less than or equal to 4000 pounds/year, 10,400 pounds/year (4700 kg/year) of credits are required; if the mean is greater than 4000 pounds/year, this mean times 2.6 credits are required. The Permittee shall submit a report: due on November 30, 2003.

Other states with active trades, reflect similar TMDL-driven programs. However, states are experimenting with a variety trading approaches. A summary of selected state efforts and contacts is set forth in Table 6 below.

Table 6. Other States' Trading and Related Programs

States/Project	Contact Information	Related State Statutes/ Agreements / Permit Conditions	Status Summary
CA - South San Francisco Bay	CA EPA - State Water Resources Control Board (SWRCB) (Sacramento) General (916) 657-1247 John Ladd Office of Legislation/Division of Water Quality (916) 657-1016 Craig M. Wilson Office of Chief Counsel (916) 657-2403 SF Bay RWQCB (510) 622-2300	None.	San Francisco Bay
CO - Boulder Creek	Greg Parsons - CO Dept. of Public Health & Environment Water Quality Control Division (303) 692-3585		Boulder Creek
CO - Chatfield Basin	Greg Parsons	None drafted.	Chatfield Basin
CO - Cherry Creek Basin	Rhonda Sandquist (Counsel to CCBWQA) (303) 634-4000; Cynthia Paulson, Ph.D. (Watershed cons.) (303) 743-5400; Cherry Creek Basin Water Quality Authority Great Lakes Trading Network (GLTN)	Statutes authorizing and empowering the Cherry Creek Basin Water Quality Authority. (A quasi-municipal corporation and political subdivision of State) Co.Rev.Stat. §§ 25-8.5-101, et seq. (1989) Basic Elements of TMDL and Colorado Water Quality Management Master Plan for basin: 5 Colo. Code Regs. 1002-19, § 4.2.2(11)(1992) Phosphorus Limits: 0.5 mg/l total p as a daily maximum concentration or 4.02 mg/l total p as a 30-day average concentration and land application restriction: cannot discharge a 30-day flow-weighted average concentration of 1.0 mg/l total p Draft Permit: None drafted.	Cherry Creek
CO - Dillon Reservoir			Dillon
CT/NY - Long Island Sound	Robert (Bob) J. Norwood (Engineer of Water Pollution Control, CT Dept. of Environmental Protection - DEP) (860) 424-3746	Comprehensive Conservation and Management Plan (CCMP) adopted by CT & NY Gov. & USEPA Reg. Admin.; Components of program are being prepared for regulatory and statutory adoption along with TMDL and Wasteload Allocation (WLA) Annual reduction limits will be established through a "Watershed Permit" issued to each state under NPDES program and permit authority of the State. The permit will establish total N limits for all dischargers within the state and will be reduced each year from 2000 to 2015 until goal is met. Watershed Permit will be reissued every 2 years.	Long Island Sound
MD - Chesapeake Bay PA - VA - Dt. Columbia - Chesapeake Bay Commission -	MD Department of Environment- 410/631-3000. Tom Simpson - Office of the Sec. MD Dept. of Ag. (410) 841-5865 Allison Wiedeman - Chesapeake Bay Program US EPA (410) 267-5733	Chesapeake Bay Agreement (1983)	Chesapeake Bay
MI - Kalamazoo	David Batchelor, Program Specialist Surface Water Quality Div. MI Dept. of Env. Quality (517) 373-2677	No permits drafted. A draft service agreement describing the trading terms for a potential trade is attached in Appendix 11.	Kalamazoo
MI - statewide trading program		The State is currently drafting statewide water quality trading regulations. (Draft attached as Appendix 3.) (Part XXX. Water Quality Trading - Draft #17)	Michigan
MN - Rahr Malting	Bruce Henningsgaard - MPAC (651) 296-9289 (Wrote Rahr Malting Permit); Jim Klang (MPAC) (651) 296-8402 (Calculates credits awarded for individual trade agreements.)	None 150 lbs of CBOD5 per day but phosphorus limit is 2 mg/l Permit attached as Appendix 8.	Rahr
MN - Sugar Beets	Jim Klang	The issued permit requires that it meet a schedule to achieve phosphorus reductions through nonpoint projects. Permit attached in Appendix 9.	Sugar Beets
NC - Tar Pamlico	Rich Gannon (919) 733-7015 NC Dept. of Environment and Natural Resources NC Division of Water Quality NC Environmental Management Commission		Tar Pamlico

1 33 U.S.C. § 1342(b). Under 33 U.S.C. § 1377, Indian tribes can seek treatment as a state for purposes of administering the Clean Water Act on reservation lands.

2 Memorandum of Agreement between the EPA and Wisconsin Department of Natural Resources (DNR), dated February 4, 1974.

3 For instance, unlike the federal program which regulates only surface water discharges, the State regulates discharges to all waters of the State, including groundwater. Wis. Stat. § 283.01(20). See P. Kent, Wisconsin Water Law: A Guidance to Water Rights and Regulations (University of Wisconsin - Extension, Cooperative Extension, University of Wisconsin-Stevens Point 1994).

4 33 USC § 1342.

5 33 U.S.C. § 1362(14); Wis. Stat. § 283.01(12).

6 33 U.S.C. § 1362(6); Wis. Stat. § 283.01(13).

7 Wis. Stat. § 283.53(1).

8 Wisconsin's categorical limits are contained in Wis. Admin. Code chs. NR 220-297.

9 Wis. Admin Code chs. NR 102 and NR 104.

10 Wis. Admin. Code chs. NR 105 and NR 106.

11 Wis. Admin. Code ch. NR 207.

12 Wis. Admin. Code § NR 102.10-102.13.

13 Wis. Admin. Code §§ NR 207.03 and 207.04.

14 Wis. Stat. §§ 283.39 and 283.49.

15 Wis. Stat. §§ 283.87 and 283.91. Citizen suits may be also brought with respect to federally enforceable permit conditions. See 33 U.S.C. § 1365.

16 Draft, Nonpoint Redesign Report: Introduction (May 1999), p. 1.

17 CWA § 208, 33 U.S.C. § 1288.

18 CWA § 319, 33 U.S.C. § 1329.

19 33 U.S.C. § 1362(14); Wis. Stat. § 283.01(12).

20 33 U.S.C. § 1362(14); Wis. Stat. § 283.01(12).

21 40 C.F.R. Part 122, Appx. B. The term "animal unit" is defined in the regulations.

22 40 C.F.R. § 122.23(c).

23 See USDA, EPA, Unified National Strategy for Animal Feeding Operations, Federal Register (March 9, 1999).

24 USDA, EPA, Unified National Strategy for Animal Feeding Operations (March 9, 1999), p. 7.

25 Wis. Admin. Code Ch. NR 243. Municipalities may also enact ordinances to regulate livestock operations and manure storage facilities, subject to the provisions of Wis. Stat. §§ 92.15 and 92.16 respectively.

26 State regulations use the term "large animal feeding operation" to define regulated facilities. See Wis. Admin. Code § 243.04(13).

27 Wis. Admin. Code § NR 243.21.

28 Wis. Admin. Code § NR 243.23.

29 Wis. Stat. § 281.16(3).

30 Wis. Stat. § 281.16(3)(d).

31 Wis. Stat. § 281.16(3)(e).

32 Wis. Stat. § 92.10; Wis. Admin. Code § ATCP 50.12.

33 Wis. Admin. Code § ATCP 50.12(2).

34 Wis. Admin. Code § ATCP 50.12(2).

35 Wis. Stat. § 92.15(2).

36 Wis. Stat. § 92.15(2) and (3)(a).

37 Wis. Stat. § 92.16.

38 Created by Chapter 418, Laws of 1977.

39 The program is authorized under Wis. Stat. § 281.65 and administered under Wis. Admin. Code ch. NR 120.

40 A watershed is generally the land that contributes runoff water to a stream or lake.

41 Wis. Stat. § 281.65(2)(a) and Wis. Admin. Code § NR 120.02(5).

42 Based on anticipated funding levels, the last of the remaining 62 projects are expected to be completed in 2009. Currently, 60 of those remaining projects are in the implementation phase.

43 Wisconsin Legislative Fiscal Bureau, Informational Paper #65: Nonpoint Source Water Pollution and Soil Conservation Programs (January 1999), p. 8.

44 Created by Wis. Stat. § 15.135.

The LWCB is charged with developing recommendations and advising the DATCP and DNR on matters concerning land and water conservation and nonpoint source water pollution abatement. With respect to the Priority Watershed Program, in addition to approving plans, the LWCB identifies priority watershed and lake projects, oversees an evaluation of the program and assists in resolving program concerns See Wis. Stat. § 92.04.

45 The program was initially voluntary and then Wis. Stat. § 281.65 was later revised by 1993 Act 166 to require that projects selected after mid-August 1993 identify critical sites. Critical sites are those sites within the watershed that are critical to achieving the plan's water quality goals. Wis. Stat. § 281.65(4)(g)8.am and Wis. Admin. Code § NR 120.02(11).

46 Funds from the Clean Water Act § 319 nonpoint source management program requirements support state agency program staff. The state finances 70 to 100% of the project planning and implementation administrative costs of the designated management agencies through local assistance grants. Draft, Nonpoint Redesign Report: Introduction (May 1999), p. 2.

47 Selection of Milwaukee River Basin projects was required by 1983 Wis. Act. 416 and the basin was defined to include the Kinnickinnic River through 1989 Wis. Act 366.

48 The Federal Coastal Zone Management Act is codified at 16 U.S.C. §§ 1451 to 1465. The Reauthorization Amendments are codified at 16 U.S.C. § 1455b.

49 See the EPA website, Office of Water, at http://www.epa.gov/owow/nps/coastnps.html.

50 U.S. Environmental Protection Agency, Office of Water, Nonpoint Source Pollution Control Program: Guidance Specifying Management Measures for Sources of Nonpoint Pollution in Coastal Waters, EPA-840-B-93-001c (January 1993). The Guidance can be accessed from EPA's website at http://www.epa.gov/owowwtr1/NPS/MMGI/index.html

51 See map attached as Appendix 1. Telephone discussion with Jim Baumann, Special Assistant to Bureau Director, Bureau of Watershed Management (August 4, 1999).

52 Ibid.

53 County shoreland zoning is required for all unincorporated areas in the State according to state standards under Wis. Admin. Code ch. NR 115. Cities and villages may enact such ordinances as set forth in Wis. Admin. Code ch. NR 117. Wetlands within shorelands are given special protection under this program.

54 There are a variety of permit requirements for activities in or near navigable waters under ch. 30. The most widely used provision to control erosion is Wis. Stat. § 30.19 which regulates grading or land disturbance activity of 10,000 square feet or more on the banks of navigable waters.

55 For a fuller discussion of these programs, see P. Kent, Wisconsin Water Law: A Guide to Water Rights and Regulations, UW-Extension, 1994.

56 Wis. Stat. § 91.75.

57 See Wis. Stat. ch. 92 and Wis. Admin. Code ch. ATCP 50.

58 LCCs are created and empowered by Wis. Stat. §§92.06 and 92.07.

59 The existence of more stringent local requirements raises the trading question that frequently arises as to whether (or how) parties should receive trading credits for implementing conservation practices that are required, such as by local ordinance, or that would be implemented through another incentive program. This and other trading-related issues are outlined in the summary of Wisconsin's pilot trading program in this report.

60 See 7 CFR § 1410.50(b).

61 33 U.S.C. § 1342(p); Wis. Stat. § 283.33.

62 40 C.F.R. Part 122; Wis. Admin. Code § NR 216.02.

63 Wis. Admin. Code ch. NR 216, subch. II.

64 Wis. Admin. Code § NR 216.28.

65 63 Fed. Reg. 1635.

66 See Wis. Admin. Code § NR 216.46.

67 Wis. Stat. §§ 101.1205, 101.60 and 101.70; § Comm 21.125.

68 Wis. Stat. §§ 101.65 and 101.76.

69 Wisconsin Legislative Fiscal Bureau, Informational Paper #65: Nonpoint Source Water Pollution and Soil Conservation Programs (January 1999), p. 16. When finalized, the regulations will be codified at Wis. Admin. Code ch. Comm 65.

70 Wis. Stat. § 281.16(3).

71 33 U.S.C. § 1313(d)(1)(C); 40 CFR Part 130.

72 CWA § 303(d), 33 U.S.C. § 1313(d).

73 33 U.S.C. § 1313(d)(1)(C); Great Lakes Initiative Advisory Committee (Wisconsin), Total Maximum Daily Loads: Opportunities for Wisconsin to Use TMDLs to Advance Watershed/Basin Approaches to Achieve Water Quality Standards and Goals (May 8, 1996), p.3.

74 See 64 Fed. Reg. 46011-46055 (August 23, 1999). Although EPA has continued to defend its authority to regulate nonpoint sources through the TMDL process, agricultural groups are challenging that authority. American Farm Bureau Federation v. Marcus and Browner (U.S. District Court for the Northern District of California, No. C99-1828).

75 Wis. Admin. Code § NR 106.11.

76 Published February 1998.

77 Clean Water Action Plan, p. i. The Clean Water Action Plan and the remarks of President Clinton and Vice President Gore are posted on the Internet at http://www.cleanwater.gov. Copies of the publication may be ordered from EPA's clearinghouse, the National Center for Environmental Publications and Information, P.O. Box 42419, Cincinnati, Ohio 45242; 1-800-490-9298 (toll-free) or 513-489-8695 (fax). Ask for publication EPA-840-R-98-001.

78 Ibid.

79 Wisconsin Legislative Fiscal Bureau, Informational Paper #65: Nonpoint Source Water Pollution and Soil Conservation Programs (January 1999), p. 1

80 See Reinventing Environmental Regulations, Clinton Administration Regulatory Reform Initiatives (March 16, 1995).

81 EPA, Draft Framework for Watershed Based Trading, EPA 800-R-96-001 (May 1996).

82 EPA, Draft Framework for Watershed Based Trading, p. 2-4.

83 See Appendix 2.

84 See Appendices 2 and 3.

85 See Appendix 2, comments, p. 1.

86 See Appendix 2, comments, p. 3.

87 EPA, Draft Framework for Watershed Based Trading, p. 2-5. (Click here for an explanation of CZARA.)

88 Wis. Admin. Code §§ NR 243.04(13) and NR 243.12; EPA, Guidance Specifying Management Measures for Sources of Nonpoint Pollution in Coastal Waters, EPA-840-B-93-001c (January 1993), Chapter 2, Factsheet.

89 Wis. Stat. § 283.84 (1997), Appendix 4.

90 Wis. Stat. § 283.84(1m), Appendix 4.

91 Wis. Stat. § 283.84(1m)(a) and (c), Appendix 4.

92 Also contained in Appendix 7 is a revised response to the downstream trading issue, Issue #16. See point number 3 in e-mail from DNR's Kenneth G. Johnson.

93 Rahr Malting NPDES/SDS Permit, MN 0031917 issued January 8, 1997 (Rahr Permit). The permit is attached as Appendix 8.

94 Rahr Permit, paragraph II.A.2.b.3., page 8.

95 Rahr Permit, paragraph II.A.2.b.4., page 8. See Appendix 8.

96 Rahr Permit, paragraph II.B.1., page 9.

97 Southern Minnesota Beet Sugar Cooperative NPDES/SDS Permit MN 0040665, issued April 7, 1999 (Cooperative Permit). Part of the permit is included as Appendix 9. (Editor's Note: At this time, we are only able to provide the "Phosphorus Trade Crediting Calculations" portion of the permit online. To inquire about the hard-copy document, please contact the Minnesota Pollution Control Agency.)

98 Click here to read the "Phosphorus Trade Crediting Calculations" portion of the permit online. To inquire about the full hard-copy permit document, please contact the Minnesota Pollution Control Agency.)

99 The Great Lakes Trading Network can be located on the Internet at http://hyperforum.wri.org/nutrading/h2otrade/index.html. If prompted, enter the following information: Username: nutrading; Password: nonpoint.