With requirements around the nation growing fast to reduce stormwater sediment or nutrients into streams, lakes and reservoirs, water quality credit trading programs are seen as a significant opportunity for home builders and developers to reduce the cost of stormwater management regulations.

In its efforts to push the environment to the top of national priorities, the Obama Administration has been intent on increasing the use of Low Impact Development (LID) for controlling stormwater from new development.

A number of new national stormwater rules are expected to be proposed next year to address impaired waters and new LID requirements.

In many areas of the country, home builders are already feeling the bite of more stringent water quality standards by states and localities, which will be required to develop thousands more of such programs over the next several decades.

Water quality trading programs have appeared on the landscape in a number of states to help achieve water quality goals in a cost-effective manner, reducing the financial impact of stricter water quality standards.

These programs provide options under which traders can participate on a voluntary basis to lower their costs.

Builders Not Included

Many of these programs address stormwater discharges such as those that can occur during home building activities. In states like Pennsylvania, some developers are already water quality trading participants.

However, most home builders do not have the option of participating in trading because their stormwater permits are short in duration, much shorter than the normal five-year permit for publicly owned treatment works (POTWs) which — along with agriculture — constitute the bulk of trading participants.

NAHB has been working with the water trading community to come up with ideas that would enable home builders to participate in the trading programs under development.

On its website, the Environmental Protection Agency describes water trading and its advantages.

The agency calls it “an innovative approach to achieve water quality goals more efficiently.

“Trading is based on the fact that sources in a watershed can face very different costs to control the same pollutant.

“Trading programs allow facilities facing higher pollution control costs to meet their regulatory obligations by purchasing environmentally equivalent (or superior) pollution reductions from another source at lower cost, thus achieving the same water quality improvement at lower overall cost.”

Trading Stormwater Retention Credits

In those areas of the U.S. where developers have been able to participate in state water quality credit trading, the programs are generally small and focused on a particular state watershed or a body of water that is impaired.

And there seems to be few existing programs where a home builder with a short-duration stormwater permit can purchase credits to lower a project’s costs.

However, for the first time, a major U.S. city — Washington, D.C. — is considering trading stormwater retention (volume) credits.

Since one of the new federal stormwater rules expected to be proposed in 2012 may impose quite strenuous water retention requirements, this type of trading program would greatly benefit cities such as Washington that are installing LID stormwater measures and also help builders and property owners who might want to generate and sell stormwater retention credits under such a trading program.

Chesapeake Bay, Ohio River Basin Lead the Way

New trading programs for the Chesapeake Bay Total Maximum Daily Load (TMDL) and the Ohio River Basin are among large trading programs now being developed that may provide helpful models for other areas.

Both programs will be bigger in scope than anything tried before, and both are in response to nutrient reduction mandates that will be difficult to achieve without trading programs.

Spanning eight states, the Ohio River Basin trading program is being put together by a collection of partner organizations to improve the hypoxic (low oxygen) zone in the Gulf of Mexico.

The program is being developed to sell credits for nitrogen and phosphorous discharges, and greenhouse gas emission reductions.

Home builders are not being considered as trading participants in the program at this time.

Details of the program are available from the Electric Power Research Institute (search on its site for Ohio River Basin).

Under the Chesapeake Bay TMDL, large portions of six states and all of Washington, D.C., face a strict new rule to reduce nutrients and sediments into the bay.

Although water quality trading will be critical to lowering the costs of what is expected to be the most expensive water quality rule ever developed, the affected states have just begun to consider the advantages of trading.

Creation of a robust trading program for the bay clearly faces many hurdles, but without trading it will be extremely difficult to meet some of the requirements under the new rule.

Seeking Builder Feedback

The EPA, the states and NAHB have all endorsed the market-based concept of allowing permit holders to purchase water quality or water quantity credits generated from stormwater best management practices on farms or other properties in order to comply with stormwater regulations.

NAHB is seeking feedback from home builders who are currently participating in a water quality trading program or others interested in discussing the potential of trading as a way to reduce costs and provide regulatory flexibility to home builders.

To respond, or for more information, email Glynn Rountree at NAHB, or call him at 800-368-5242 x8662.

Are You Ready for a Visit From the EPA? 

“Storm Water Permitting: A Guide for Builders and Developers,” available through BuilderBooks.com, provides a starting point for builders and developers to use in locating and understanding storm water permitting requirements.

The publication has been prepared to help builders comply with the U.S. Environmental Protection Agency's stormwater requirements, and includes information on state permitting programs and more than 50 of the most commonly used Best Management Practices.

Also included are tips on compliance, including how to handle visits from inspectors.

To view or purchase this guide online, click here, or call 800-223-2665.