Round Two for Virginia’s Proposed Nonpoint Source Nutrient Credit Certification Regulation

The Virginia State Water Control Board (“Board”) recently approved a revised proposed regulation for the certification of non-point source nutrient credits (“NSN Credits”).  The regulation now moves to the Governor’s office for final review before being issued for public comment (“Proposed Regulation”).  The Proposed Regulation, to be issued pursuant to Va. Code § 62.1-44.19:20 of the State Water Control Law, establishes the framework for nutrient credit usage in Virginia.  It reflects recent efforts to strengthen an earlier version of the Proposed Regulation on this topic, including a more detailed and substantial approach to eligibility and certification of NSN Credits to be traded in Virginia’s nutrient credit marketplace.

Nutrients are nitrogen and phosphorous, which, when discharged in wastewater and stormwater, can adversely affect water quality.  While point-source discharges typically occur from discrete conveyances like pipes and ditches, non-point sources of nutrients involve sheet-flow stormwater runoff or other sources not regulated as point-sources, such as crop and pasture lands and residential lots.  The ability to use NSN Credits offers an increasingly valuable and significant alternative for dischargers of wastewater and stormwater with nutrient loads.  Municipalities, certain industries, and developers can utilize NSN Credits to offset nutrient loads in their respective wastewater and stormwater discharges and apply them to help meet nutrient limits in their wastewater and stormwater permits.  The earlier version of the Proposed Regulation published over two years ago garnered many comments, but other factors have shaped NSN Credit issues since then as well.  Such factors include evolution of State and federal water protection planning and nutrient management and reduction practices, newer nutrient management strategies, innovation in technology and nutrient reduction tools, and experience with a burgeoning nutrient credit market.  In particular, the Chesapeake Bay Total Maximum Daily Load’s increasingly stringent requirements for point-source discharges and increasing pressure to address loadings from non-point sources have sharply accelerated the need – and related market-based opportunities – for NSN Credits to offset these loadings.

The Proposed Regulation addresses several key aspects of agency certification of NSN Credits and assurance of their eligibility and viability for use by others.  These aspects include (a) NSN Credit certification and registration procedures; (b) calculation of the nutrient reduction factor associated with a particular NSN Credit, which depends on the nutrient reduction method used to generate the Credit; (c) the duration of NSN Credit certification (perpetual or for a set period of time) and the retirement of NSN Credits once used or expired; (d) reasonable assurance that the NSN Credits are actually generated as certified; (e) reporting and recordkeeping obligations; (f) compliance audit and inspection processes and authority; (g) requirements to comply with local water quality standards even if NSN Credits are applied against nutrient loadings; (h) public notification of use of NSN Credits as part of a discharge permit condition; and (i) allowances for other requirements as the Board deems necessary and appropriate.  The Virginia Department of Environmental Quality (“DEQ”) would serve as the implementing agency under the Proposed Regulation.

As the issues have evolved, the Proposed Regulation has in turn changed from the earlier proposed version and includes several new or different provisions, including: (i) clarification that the Proposed Regulation would only apply to NSN Credits that will be registered on Virginia’s Nutrient Credit Exchange; (ii) inclusion of municipal separate storm sewer system (“MS4”) service areas within the definition of “management area” to clarify that the entire MS4 service area is required to meet applicable urban baseline determination requirements before an MS4 may generate nutrient credit; (iii) certification and use of NSN Credits generated in tandem with stream or wetland mitigation credits; (iv) addressing “innovative practices” that don’t squarely fall within nutrient management practices approved by the Chesapeake Bay Program or listed in Virginia’s best management practices clearinghouse; (v) specification of a five-year maximum period for term NSN Credits (those other than perpetual); (vi) more specific provisions for perpetual NSN Credits; (vii) certain exceptions from financial assurance obligations; (viii) aligning NSN Credit review for land-conversion projects with 2016 statutory amendments; and (ix) other changes based on DEQ’s experience to date in certifying NSN Credits under its statutory authority.

The Proposed Regulation indicates that the certification process and NSN Credit verification and assurances are evolving to keep pace with a growing market and increasing and critical need for NSN Credits to help regulated wastewater and stormwater dischargers meet ever tightening nutrient load and permit limits.  All stakeholders should carefully monitor the public comment process as it unfolds.

Revised Proposed 9 VAC 25-900, Certification of Nonpoint Source Nutrient Credits; Tentative Agenda and Draft Minutes of meeting of the Virginia State Water Control Board (July 19, 2017), available at http://townhall.virginia.gov/L/ViewMeeting.cfm?MeetingID=26286.