Phosphorous Credit Trading in the Cherry Creek Basin: An Innovative Approach to Achieving Water Quality Benefits
Table of Contents
Executive Summary
1.0 Introduction
1.1 Purpose and Objectives
1.2 Background
1.3 Description of the Authority and Other Key Players
1.3.1 Parks
1.3.2 Water Quality Control Commission
1.3.3 Water Quality Control Division
1.4 Trading - Why Now?
1.5 Report Overview
2.0 Trading Program Description
2.1 Basin Water Quality Objectives/Framework (Drivers)
2.1.1 Reservoir Standards
2.1.2 TMDLs
2.1.3 Cherry Creek Basin Water Quality Management Master Plan
2.2 Overview of Authority Pool Trades
2.2.1 Authority Pool
2.2.2 Steps to Trading
2.2.2.1 Step 1 - Quantifying Project Removals
2.2.2.2 Step 2 - Evaluating PRFs
2.2.2.3 Step 3 - Awarding Credits to Dischargers - The "Trade"
2.2.2.4 Step 4 - Re-evaluation of Trade Projects
3.0 Technical Basis for Trading
3.1 Introduction
3.2 Controls to Reduce Watershed Loadings
3.2.1 Baseline Best Management Practices
3.2.1.1 Definition of Baseline
3.2.1.2 Baseline BMP Performance Goals and Objectives
3.2.2 Pollutant Reduction Facilities
3.2.2.1 Characteristics of PRFs
3.2.2.2 Description of Existing PRFs
3.2.2.3 Tier 1 PRFs - Current Trading Program
3.3 Existing Monitoring
3.4 Removal Effectiveness
3.4.1 Evaluation of Existing Monitoring Data
3.4.2 Percent Removal Estimation Procedure
3.4.2.1 Initial Steps
3.4.2.2 Removal Efficiency Estimation
3.5 Trading Ratios
3.5.1 U.S. EPA's Perspective on Trading Ratios
3.5.2 Basis for Ratios Used in the Cherry Creek Trading Program
3.5.2.1 Institutional Uncertainty-
3.5.2.2 Scientific Uncertainty
3.5.2.3 Net Loading Reduction
3.5.2.4 An Additional Margin of Safety
3.5.3 Calculating Trading Ratios for Existing PRFs
3.5.4 Overview of Trade Ratios
4.0 Economic Basis for Trading
4.1 Introduction
4.2 An Overview of the Authority's Financial Structure
4.2.1 Revenues and Sources
4.2.2 Expenditures and Obligations
4.3 Non-Trading Phosphorus Reduction Options
4.3.1 Non-Trading Control Options at Cherry Creek POTWs
4.3.2 Non-Trading Control Options at Cherry Creek Nonpoint Sources
4.4 Pollutant Load Reduction Options Under a Trading Program
4.4.1 PRF Construction, Operation, and Maintenance Costs
4.4.2 Other Trading-Related Costs
4.5 Economic Issues in Design and Implementation
4.5.1 Cost Recovery in Credit Prices
4.5.2 Equity and Fairness Perceptions
4.5.3 Pricing Tiers
4.5.4 Credits: Attached to Specific Projects or Not
4.5.5 Credit Purchases: Paid for All at Once or Over Time
4.5.6 Revenue Stability
4.5.7 Economic Incentives and Credit Market Demand/Supply
4.6 Credit Pricing: Analysis and Results
4.6.1 Pricing and Payment Alternatives
4.6.2 Advantages and Disadvantages of Pricing Alternatives
4.6.4 Pricing and Payment Alternatives Selected for Further Evaluation
4.7 Economic Benefits of Trading
4.8 Preliminary Conclusions and Recommendations
4.9 Finalizing a Pricing and Payment System
4.10 Maintaining the Ability to Make Adjustments as the Trading Program Evolves
5.0 Trading Program Approvals and Implementation
5.1 Net Water Quality Benefit
5.2 Accountability/Monitoring and Oversight
5.2.1 Accountability
5.2.2 Monitoring and Oversight
5.3 Program Approvals
5.3.1 DRCOG
5.3.2 Water Quality Control Division
5.3.3 Water Quality Control Commission
5.4 Phasing and Implementation of Trading
5.4.1 Phases I and II
5.4.2 WQCD Approval of Initial Project
5.4.3 Trading Guidelines
5.4.4 Credit Prices
5.5 Trades Completed
6.0 Key Lessons Learned From the Cherry Creek Basin Trading Project
and Alternative Approaches Used By Others
6.1 Overview
6.2 Cherry Creek - A Summary of the Key Elements
6.2.1 Collaboration Among Entities with Diverse Interests
6.2.1.1 Limited Programs and Issues
6.2.1.2 Collective Commitment to Water Quality Goals
6.2.1.3 Balancing of Voting Power
6.2.2 Improved Relations with Regulatory Agencies
6.2.2.1 Parks
6.2.2.2 Water Quality Control Commission
6.2.2.3 Water Quality Control Division
6.3 Other Trading Programs - A Summary of the Key Elements
6.4 Patterns and Insights from Examination of Trading Programs
6.4.1 Kalamazoo River-WERF Demonstration Project
6.4.2 Long Island Sound, Connecticut-WERF Demonstration Project
6.4.3 Tampa Bay, Florida
6.4.4 Tar Pamlico, North Carolina
6.4.5 Lake Dillon, Colorado
6.5 Trading Program Comparison Matrix
6.6 How to Identify Trading Opportunities
APPENDIX A Cherry Creek Basin Water Quality Authority
Water Quality Trading Guidelines