Designing a Municipal Sediment Credit System for Wissahickon Creek

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The Legal Intelligencer featured an article on PEC's innovative system for using market-based incentives and innovative BMPs to achieve regulatory stormwater requirements as quickly and cost-effectively as possible.
March 18, 2010

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By Kenneth J. Warren and Mindy Lemoine
The Wissahickon Creek is one of our region's treasured streams. Meandering from its headwaters in upper Montgomery County through Valley Green to its confluence with the Schuylkill River in Philadelphia, the creek provides recreational, aesthetic and ecological benefits. Despite its charm, however, the creek faces several challenges.

A significant portion of the flow in the upper section of the creek comes from discharges from wastewater treatment plants. Even after performing mandated treatment, the plants discharge nutrients and other pollutants into the creek. In addition,
land development, installation of impervious surfaces, and other activities occurring within the Wissahickon Creek watershed increase the volume and rate of stormwater runoff. This runoff carries sediment, nutrients and other pollutants to the creek and the extraordinary volume erodes the banks in every storm. As a result, Pennsylvania has listed the creek as impaired for both sediment and nutrients, and the EPA has established a total maximum daily load (TMDL) allocating the creek's assimilative capacity for nutrients and sediment among dischargers.

To meet the challenge of implementing the TMDL and attaining environmental improvement in a cost effective manner, the Pennsylvania Environmental Council (PEC) obtained funding from the EPA to design the Wissahickon Creek Municipal Sediment Credit System. The PEC proposed to employ market mechanisms in a coordinated approach with legal authorities such as permits. The approach advocated by PEC and its project leaders would achieve the TMDL and reduce sediment loadings in the shortest practicable time frame at the lowest cost while ensuring that the municipalities can bear
the burden of compliance.

After months of study, the PEC issued its report on the Wissahickon Creek Municipal Credit System in February 2010. The PEC report proposed "a system that promotes and supports choosing the most cost-effective stormwater control measures while achieving multiple environmental, economic and social benefits and encouraging multi-municipal cooperation."

A key tool to implement the sediment credit system is the NPDES permit issued to each municipal separate storm sewer system (MS4). Apart from the city of Philadelphia, the 15 suburban municipalities within the Wissahickon Creek watershed are part of the EPA's Phase 2 MS4 program and are required to secure NPDES permits. The EPA's TMDL regulations applicable to all dischargers provide that permits must be consistent with the assumptions and requirements of the wasteload allocations in the TMDL.  Consequently, limiting pollutant loadings by imposing permit conditions is a principal
way to eliminate the existing stream impairments.

In some instances, it is simple for the state permitting agency to translate the wasteload allocations into numeric permit limitations. In contrast, when the sediment originates in stormwater runoff from numerous land developments and other
municipal sources, as in the case of the Wissahickon sediment TMDL, implementation can be particularly complex.

MS4s are governed by Section 402(p) of the Clean Water Act, which requires MS4s to achieve reductions to the maximum extent practicable through use of best management practices (BMPs). Thus, unlike industrial dischargers, which are ordinarily governed by numeric limitations and control their own properties, municipalities must BMPs to address runoff often originating from sources outside of properties owned by the municipalities. In light of Section 402(p), notwithstanding the existence of a TMDL, permitting authorities ordinarily place BMP requirements and not numeric limitations in MS4 permits.

Identifying the appropriate permit conditions required the PEC to review the draft general permit (PAG-13) that the PADEP issued in March 2009. The draft PAG-13 requires each municipality choosing to secure state approval through the permitby-
rule process to implement six mandatory control measures, i.e. BMPs. For those pollutants covered by a TMDL, the draft permit requires the municipality to submit a stormwater management plan and implement two additional BMPs. Municipalities may evidence their election to be covered by the general permit by filing a notice of intent (NOI). These municipalities must satisfy all of the terms of the general permit. Alternatively, a municipality willing to undertake the administrative burdens may secure an individual permit.

PEC recognized a main shortcoming of the draft PAG-13 permit: its failure to establish a level of effort that would achieve compliance. By affording a menu of BMP choices without mandating a specific level of effort, the draft permit allows municipalities to choose the least expensive BMPs, regardless of their effectiveness. Thus, the draft general permit might not achieve the objective of moving as soon as possible to achieve the reductions necessary to meet water quality standards. Furthermore, specifying the required level of effort would provide certainty to the municipalities because it would
allow them to plan for and implement a clear, financially achievable goal.

To design a credit system with a better chance of reducing sediment loadings to the creek, PEC decided to use volume of stormwater retention as a surrogate for sediment. This choice avoids the difficulty of measuring sediment loadings. Establishing a specific quantity of required additional runoff retention capacity that each municipality must create during the first five-year permit cycle would provide certainty to the municipalities and lay the groundwork for a trading regime. If each cubic foot of stormwater retention capacity is deemed to constitute one sediment credit, the municipalities will have a
common currency to trade amongst themselves. Furthermore, managing a volume of stormwater is a task that municipal staff can comfortably perform as part of their typical land development management activities.

The PEC's recommended approach translates the statutory standard applicable to MS4 discharges, "maximum extent practicable," into a specified quantity of stormwater retention based on the known relationship between stormwater runoff
and sediment loadings. It facilitates an effective market-based system by establishing a numeric level of control as a trigger for trading. It also encourages but does not mandate cooperation among municipalities.

Faced with a regulatory mandate, each municipality could submit a stormwater TMDL plan to PADEP that would select the specific measures that the municipality would use to achieve the required reductions. But to save administrative expense, municipalities could draft a common plan and even create a municipal authority or other method of inter-municipal cooperation. Joint submissions and management plans would promote consideration of trading among the municipalities.

Ideally, a regulatory agency, in this case PADEP, would establish the level of control required. As of the date the PEC's report was released, the PADEP was not prepared to set a number for the required level of control. In the absence of PADEP guidance, the PEC examined how aggressively reductions could be obtained. The PEC has estimated the cost of fully implementing the sediment TMDL in the Wissahickon Creek to be between $106 million and $230 million. Without very significant federal or state funding, it is unrealistic to expect municipal taxpayers to shoulder that burden in only one or a
few five-year NPDES permit cycles. As the PEC report noted, if the costs to implement the TMDL are immediate and severe, and the future benefits are diffuse, political support for raising the necessary monies will be absent.

Consequently, the PEC sought to develop a reduction target that the municipalities and the PADEP could both embrace. The report recommends that 267,064 cubic feet of new stormwater retention volume be used as the target for the first fiveyear cycle. The PEC envisions that this capacity, in combination with the other BMPs required by the PADEP permit, would create a quantifiable sediment load reduction within the first permit cycle. The PEC's report includes a template based on this figure for use by the municipalities in preparing the Stormwater TMDL Control Plan  required as part of the NOI

The PEC found three additional elements to be important. First, the total reductions mandated by the PADEP must be divided amongst the municipalities in the same ratio as their waste load allocations in the TMDL. This would create an equitable rather than equal division of reduction burdens. Second, the menu of permissible control measures must be agreed upon. Those specified in the draft PAG-13 permit include the following: establish and protect riparian forest buffers, disconnect impervious area from MS4 system, plant trees, construct recharge/infiltration facilities, naturalize or modify
existing basins for extended detention or infiltration, restore stream banks or construct green infrastructure. The PEC proposed that each of these control measures be permissible in the first permit cycle with the exception of restoring stream
banks, a control measure which does not directly affect stormwater volume.

Finally, the PEC understood that because land values and other factors differ among municipalities, creation of stormwater retention is less expensive in some municipalities within the watershed than in others. By allowing trading contracts between the municipalities, it would be possible for a municipality with high costs to purchase sediment credits from a municipality with low costs, i.e., to implement stormwater retention within a neighboring municipality's boundaries. This market mechanism approach would reduce the overall cost of sediment reduction.

Additional requirements of the draft PAG-13 permit, like virtually every other NPDES permit, are evaluating permit compliance and monitoring. The PEC has chosen to separate these issues. Compliance will be based on a determination by an engineer that the required stormwater retention capacity had been constructed according to good engineering practices. A municipality would thus know that if it designed, built and maintained stormwater retention in accordance with good engineering practices, it would be in compliance with the law notwithstanding the actual sediment reduction achieved.

Monitoring the impact on the Wissahickon Creek is assigned as a responsibility of the PADEP. The PEC recognized that not only is monitoring for sediment difficult, the results are variable depending on numerous factors including storm events.  Municipal governments would face a steep learning curve to initiate a monitoring program. Therefore, the PEC recommends that the PADEP assume the responsibility of monitoring stream impact and establishing a new credit requirement in each five-year permit cycle.

The Wissahickon Creek Municipal Credit System is an innovative approach to controlling sediment loading carried by stormwater runoff. The PADEP will consider the PEC's proposal as the PADEP finalizes the PAG-13 and approves municipal stormwater management plans within the Wissahickon watershed.

KENNETH J. WARREN is a shareholder in the environmental practice group at Hangley Aronchick Segal & Pudlin and assisted in the preparation of the PEC report discussed in this article. He is a former chair of the American Bar Association Section of Environment, Energy, and Resources.

MINDY LEMOINE is a watershed program manager with Pennsylvania Environmental Council and served as a principal author of the PEC report discussed in this article. She is an employee of EPA Region 3, on a three-year Interagency Personnel Agreement at PEC.

Donald Curley, P.E., Ph.D., A.I.C.P. is a civil engineer and planner, and a principal author of the PEC report discussed in this article.