Abstract

A community-based, 2.5-year water quality trading demonstration project targets implementation of voluntary nonpoint source management measures to reduce phosphorus and sediment loading in selected reaches of the Kalamazoo River. A portion of the nonpoint source phosphorus reductions may be used by the National Pollutant Discharge Elimination System permitted point source dischargers to accommodate growth and operational flexibility and to comply with water quality based effluent limits through the project's point/nonpoint trading framework. Water quality in the Kalamazoo River is improved through surplus reductions from unregulated nonpoint sources traded at a 2:1 ratio. Two pounds of phosphorus must be reduced by an nonpoint source for each pound of phosphorus used by a point source. The result is a net loading reduction and water quality benefit greater than that achieved by point source controls alone. The project identifies, demonstrates, and monitors the environmental and economic benefits of watershed-based phosphorus trading between point and nonpoint sources.

An ad hoc, multidisciplinary steering committee directs and oversees the project through regular meetings, agreements, and reporting. Participants represent environmental, industrial, municipal, private, and agricultural sectors as well as state and local regulatory agencies. Communications with many affiliated groups provide outreach and nonpoint source partner solicitation. Interagency partnerships established between committee members serve to promote, design, implement, and evaluate nonpoint source controls. This institutional framework was transferred to the proposed water quality trading rules developed by the state of Michigan. Service agreements between nonpoint source project partners and the steering committee provide direct accountability without permits for installation and maintenance of nonpoint source controls. Background or baseline levels of nonpoint source loadings are established through calculations, monitoring, or modeling protocols prior to any on-site improvements. Phosphorus reductions and credits generated are evaluated and approved by the steering committee before they are banked or used.

Early attempts to identify agricultural nonpoint source sites in the project area did not provide the anticipated numbers of participants because of misperceptions of actual agricultural nonpoint source contributions, and several agricultural operations had already implemented conservation practices. Outreach and networking with agricultural organizations and establishing trust with growers resulted in two agricultural partners implementing sustainable operational and management changes for their farms. Phosphorus and sediment loading reduction were also achieved by streambank restoration at sites with severe erosion.

This project demonstrates that trading can improve water quality, provide incentives for voluntary nonpoint source reductions, and facilitate implementation of community-based watershed initiatives. The project has shown that partnerships work better than prescriptions. Institutional arrangements are established to leverage agency resources and traditional agricultural subsidy programs. Direct nonpoint source accountability is established without requiring point sources to assume responsibility for nonpoint source reductions and without nonpoint source permitting. The project identifies policy issues and technical design elements vital to the design of a statewide water quality trading program in Michigan.