PRINTER'S NO. 3994
No. 2654 Session of 2008
INTRODUCED BY HANNA, HERSHEY, STURLA, BARRAR, BELFANTI, BUXTON, CAPPELLI, CLYMER, CONKLIN, DALEY, DePASQUALE, GEORGE, GOODMAN, HALUSKA, HARHAI, HESS, JOSEPHS, KORTZ, KULA, LONGIETTI, MAHONEY, McILHATTAN, R. MILLER, M. O'BRIEN, READSHAW, ROCK, SIPTROTH, STERN, SWANGER AND THOMAS, JUNE 18, 2008
REFERRED TO COMMITTEE ON AGRICULTURE AND RURAL AFFAIRS, JUNE 18, 2008
AN ACT 1 Establishing the Fair Share Nutrient Reduction Program; 2 providing funding for wastewater treatment plants and 3 agricultural operations to meet nutrient reduction mandates; 4 creating a Nutrient Reduction Trading Board and Program and 5 providing for its power and duties; providing for an increase 6 in the Resource Enhancement and Protection Program; and 7 providing supplemental funding for the Department of 8 Agriculture and the State Conservation Commission. 9 The General Assembly of the Commonwealth of Pennsylvania 10 hereby enacts as follows: 11 Section 1. Short title. 12 This act shall be known and may be cited as the Fair Share 13 Nutrient Reduction Plan Act. 14 Section 2. Legislative findings. 15 The General Assembly finds and declares as follows: 16 (1) The Federal Water Pollution Control Act (62 Stat. 17 1155, 33 U.S.C. § 1251 et seq.), Chesapeake Bay 2000 18 Agreement and total maximum daily load watershed water
1 quality plans are mandating wastewater treatment facilities 2 and farmers reduce nitrogen and phosphorus discharges going 3 into Commonwealth streams and rivers. 4 (2) In the Chesapeake Bay Watershed alone, 184 5 wastewater treatment facilities will be required to upgrade 6 treatment systems at an estimated cost of more than 7 $1,000,000,000, and the Department of Environmental 8 Protection has estimated the cost to farmers of complying 9 with reduction mandates to be nearly $600,000,000. 10 (3) In order to meet the mandates, local wastewater 11 treatment facilities will have to dramatically increase their 12 cost of service to ratepayers. If no help is provided by 13 State government, rate increases, will exceed 100% in some 14 communities. Farmers, who cannot pass along costs through 15 increased prices for farm commodities, will face crippling 16 increases in operating costs. 17 (4) Technical assistance provided to farmers by county 18 conservation districts, the State Conservation Commission and 19 the Department of Agriculture is vital to the success of 20 reducing nutrient and sediment losses from agricultural 21 sources. State budget allocations to these agencies have 22 fallen well behind maintenance level, at a time when their 23 services are most needed by farmers. 24 (5) One promising tool to reduce the cost of compliance 25 with these mandates for both wastewater treatment facility 26 operators and farmers is the Nutrient Credit Trading Program. 27 However, potential users of the program have identified flaws 28 that present significant risks for participation by buyers 29 and sellers of credit alike, which have had the effect of 30 inhibiting the level of credit generation needed to make the 20080H2654B3994 - 2 -
1 program a viable nutrient reduction option while allowing for 2 future growth and development. 3 (6) Federal and State Government, local wastewater 4 system ratepayers and farmers must all do their fair share to 5 finance the costs of measures necessary to meet nutrient 6 reduction mandates and support their successful 7 implementation, because the environmental and economic 8 benefits of clean water will accrue to all citizens of this 9 Commonwealth. 10 Section 3. Definitions. 11 The following words and phrases when used in this act shall 12 have the meanings given to them in this section unless the 13 context clearly indicates otherwise: 14 "Agricultural nutrient and sediment reduction project." A 15 project undertaken in conjunction with an agricultural operation 16 to establish, implement or improve a best management practice 17 recognized by the Environmental Protection Agency or the 18 Department of Environmental Protection to reduce the levels of 19 nitrogen, phosphorus or sediment entering surface water or 20 groundwater from farms in this Commonwealth. The term includes 21 design, construction, reconstruction, erection, equipping, 22 expansion, improvement, installation, rehabilitation, renovation 23 or repair of infrastructure, buildings, structures, equipment 24 and fixtures to facilitate nutrient or sediment reduction. 25 "Authority." The Pennsylvania Infrastructure Investment 26 Authority. 27 "Best management practice." A practice or combination of 28 practices recognized as effective and practical in the 29 management or reduction of nutrients or sediment to protect 30 surface water or groundwater, considering technological, 20080H2654B3994 - 3 -
1 economic and institutional factors. 2 "Board." The Nutrient Reduction Credit Trading Board. 3 "Commission." The State Conservation Commission. 4 "Conservation district." A public body as defined in and 5 created under the act of May 15, 1945 (P.L.547, No.217), known 6 as the Conservation District Law. 7 "Department." The Department of Environmental Protection of 8 the Commonwealth. 9 "NPDES." The National Pollutant Discharge Elimination System 10 established under the Federal Water Pollution Control Act (62 11 Stat. 1155, 33 U.S.C. § 1251 et seq.) 12 Section 4. Agricultural Nutrient Reduction Program. 13 (a) Establishment.--The Agricultural Nutrient Reduction 14 Program is established to provide financial assistance in the 15 form of single-year or multiyear grants or tax credits for 16 agricultural nutrient and sediment reduction projects and to 17 provide tax credits for legacy sediment remediation projects in 18 this Commonwealth. 19 (b) Dedication to Conservation District Fund.--In addition 20 to any appropriations annually made, a total of $10,000,000 21 annually shall be deposited in the Conservation District Fund 22 from funds transferred under subsection (f). Money to be 23 deposited under this section shall be distributed by the 24 commission to conservation districts for their use in 25 undertaking activities as defined in the act of May 15, 1945 26 (P.L.547, No.217), known as the Conservation District Law. The 27 commission shall adopt criteria and procedures for allocation of 28 money deposited under this subsection to conservation districts. 29 (c) Financial assistance for agricultural nutrient and 30 sediment reduction projects.--For fiscal years 2008-2009 through 20080H2654B3994 - 4 -
1 and including fiscal year 2012-2013, a nonlapsing appropriation 2 of $15,000,000 annually shall be made to the commission for the 3 purpose of awarding grants to farmers for agricultural nutrient 4 and sediment reduction projects. Grants to be provided by the 5 commission for any agricultural nutrient and sediment reduction 6 project shall not exceed 50% of the cost of the project, except 7 that no more than $150,000 in total grants may be awarded to a 8 single agricultural operation. 9 (d) Resource enhancement and protection tax credit.--For 10 fiscal years 2008-2009 through and including fiscal year 2012- 11 2013, a total of $35,000,000 in tax credits annually shall be 12 made available to eligible applicants in accordance with the 13 provisions of Article XVII-E of the act of March 4, 1971 (P.L.6, 14 No.2), known as the Tax Reform Code of 1971, for agricultural 15 nutrient and sediment reduction projects and for legacy sediment 16 remediation projects. Authorization for tax credits and the 17 extent and limitation of eligibility, receipt and transfer of 18 tax credits shall be as provided in Article XVII-E of the Tax 19 Reform Code of 1971. 20 (e) Administrative expenses.--The commission may annually 21 dedicate not more than $350,000 of funds provided under 22 subsection (c) for administrative expenses incurred by the 23 commission in awarding grants and authorizing tax credits under 24 subsections (c) and (d). 25 Section 5. Wastewater treatment plant nutrient reduction 26 program. 27 (a) Establishment.--The Wastewater Treatment Plant Nutrient 28 Reduction Program is established to provide financial assistance 29 in the form of single-year or multiyear grants to municipalities 30 or municipal authorities to construct, expand or improve the 20080H2654B3994 - 5 -
1 nutrient reduction capabilities of wastewater infrastructure and 2 which are subject to new nitrogen and phosphorus limits imposed 3 in NPDES permits issued after January 1, 2008. 4 (b) Application.--A municipality or municipal authority may 5 submit an application to the authority requesting financial 6 assistance for a nutrient reduction project. The nutrient 7 reduction project may be a proposed project, a project currently 8 under construction or a project completed within three years 9 prior to the effective date of this section. The application 10 shall be on the form required by the authority and include or 11 demonstrate all of the following: 12 (1) The name and address of the applicant. 13 (2) A statement of the type and amount of financial 14 assistance sought, provided that the amount does not exceed 15 50% of the cost of the nutrient reduction project. 16 (3) A statement describing the nutrient reduction 17 project, including a detailed statement of the cost of the 18 nutrient reduction project. 19 (4) A financial commitment from a responsible source for 20 any cost of the nutrient reduction project in excess of the 21 amount requested. The financial commitment may not be in the 22 form of a grant from a Commonwealth agency. 23 (5) Proof that the wastewater system is required to 24 reduce nutrient discharges and that the wastewater system has 25 a current NPDES permit limiting pounds of nitrogen or 26 phosphorus in its discharge. 27 (6) Confirmation through plans certified by a 28 professional engineer registered in this Commonwealth that 29 the nutrient reduction project is designed for the necessary 30 upgrades to remove nutrients. 20080H2654B3994 - 6 -
1 (7) Information regarding current user rates and a 2 projection of how rates may be impacted as a result of the 3 addition of the nutrient reduction project. 4 (8) Any other information required by the authority. 5 (c) Review and approval of grant application.-- 6 (1) The authority, in conjunction with the department, 7 shall review the application to determine all of the 8 conditions under the subsection (b) are met. 9 (2) The authority shall conduct, as part of the 10 application review, an affordability analysis to determine if 11 current and future user rates meet affordability criteria 12 established by the authority. 13 (3) Upon being satisfied that all program requirements 14 have been met, the authority may approve the application 15 consistent with all of the following: 16 (i) The grant may not exceed $10,000,000 per 17 nutrient reduction project. 18 (ii) The aggregate amount of grants awarded under 19 this subsection shall not exceed $500,000,000 over a 20 seven-year period. 21 (iii) The authority has received notice from the 22 Secretary of the Budget that the nutrient reduction 23 project satisfies the Federal tax status requirements of 24 any bonds used to fund the grant. 25 (4) The authority shall make a determination of the 26 completeness of an application within 30 days of its receipt. 27 If the authority deems the application complete, it shall 28 render a decision on funding the application within 60 days 29 of the receipt of the completed application. 30 (5) An applicant shall, within 30 days of a 20080H2654B3994 - 7 -
1 determination by the authority that the application was 2 deficient, provide to the authority the necessary information 3 to complete the application. The authority shall not be 4 required to make a determination under paragraph (3) if the 5 applicant fails to provide the required information. 6 (6) If the authority approves the application, the 7 authority shall notify the applicant of the amount approved 8 and enter into a contract with the applicant. 9 Section 6. Implementation schedule for Chesapeake Bay 10 Watershed. 11 (a) Establishment.--The department shall establish a 12 multiphased nutrient reduction compliance schedule for 13 wastewater treatment facilities required to reduce nutrient 14 levels within the Chesapeake Bay Watershed that meets the 15 following requirements: 16 (1) All plants identified by the department with flows 17 over 400,000 gallons per day which are not presently under 18 annual nutrient load limits as part of their operating permit 19 shall be given annual nutrient load limits based upon an 20 average of 6 mg/l total nitrogen and 0.8 mg/l total 21 phosphorous at the annual average design flow of each 22 wastewater treatment facility. 23 (2) In an effort to achieve nutrient reduction 24 compliance levels, a three-tiered compliance schedule shall 25 be used. Wastewater treatment facilities shall be placed in 26 one of three tiers to ensure all facilities will be deemed in 27 compliance over a seven-year period beginning on July 1, 28 2008, and ending June 31, 2015. 29 (b) New construction.-- 30 (1) A new wastewater treatment facility, where 20080H2654B3994 - 8 -
1 construction commences on or after January 1, 2008, shall 2 meet nutrient load limits based upon an average of 4 mg/l 3 total nitrogen and 0.3 mg/l total phosphorus at the annual 4 average design flow. A new system constructed to the limits 5 in this section shall make a one-time monetary assessment to 6 the nutrient reduction credit bank as established under 7 section 7(d)(3). The assessment contribution shall be 8 determined by the board. The assessment shall, at a minimum, 9 be based upon the difference in the treatment level between 4 10 mg/l of nitrogen and 0.3 mg/l of phosphorus and the zero net 11 discharge limit applied to new facilities through the 12 department under the strategy. 13 (2) The purchase of nutrient credits shall be recognized 14 as an alternative method to meet the zero net discharge limit 15 applied to new facilities that do not meet the criteria of 16 this section. The purchase of nutrient credits shall also be 17 recognized as an alternative method to meet the zero net 18 discharge limit applied to expansion of existing plants. 19 (3) In the event of an addition, expansion or 20 modification to a wastewater treatment facility, the mass 21 discharge limits contained in this subsection shall apply 22 only to the increase in the annual average design flow, 23 resulting from the addition, expansion or modification. 24 (c) Limitation.--Nothing in this section shall be construed 25 to prohibit the right of appeal to NPDES permit conditions by a 26 permittee. 27 Section 7. Nutrient Reduction Credit Trading Program. 28 (a) Establishment.--The Nutrient Reduction Credit Trading 29 Program is established within the authority and is designed to 30 enhance the nutrient reduction credit trading program 20080H2654B3994 - 9 -
1 established by the department by adding an alternative method of 2 nutrient credit trading. 3 (b) Board.--The following shall apply: 4 (1) The Nutrient Reduction Credit Trading Program Board 5 is established. The purpose of the board shall be to manage 6 and provide oversight to the Nutrient Reduction Credit 7 Trading Program. 8 (2) The board shall consist of the following: 9 (i) The Secretary of Environmental Protection, or a 10 designee. 11 (ii) The Secretary of Agriculture, or a designee. 12 (iii) The executive director of the authority, or a 13 designee. 14 (iv) One representative from county conservation 15 districts appointed by the commission. 16 (v) One representative from municipal authorities 17 representing wastewater treatment facilities chosen by 18 the Pennsylvania Municipal Authorities Association. 19 (vi) One representative of the housing industry 20 chosen by the Secretary of Environmental Protection from 21 a list submitted by the Pennsylvania Builders 22 Association. 23 (vii) One water quality engineer appointed by the 24 chair of the Joint Legislative Air and Water Pollution 25 Control and Conservation Committee. 26 (viii) One representative from the agricultural 27 sector appointed by the Secretary of Agriculture. 28 (ix) One representative from an environmental 29 organization representing an environmental organization 30 appointed by the Secretary of Environmental Protection. 20080H2654B3994 - 10 -
1 (x) Three representatives of local government; one 2 representing boroughs, one representing townships and one 3 representing cities. These representatives shall be 4 chosen by their respective Statewide organizations. 5 (xi) One representative from the Pennsylvania 6 delegation to the Chesapeake Bay Commission appointed by 7 members of the Pennsylvania delegation to the commission. 8 (xii) One representative from the United States 9 Department of Agriculture's Natural Resources 10 Conservation Service appointed by the State 11 Conservationist of this Commonwealth. 12 (c) Chairperson.--The board shall elect a chairperson from 13 among its members. 14 (d) Powers and duties.--The board shall adopt policies and 15 implement programs necessary to manage the Nutrient Reduction 16 Credit Trading Program and shall have the following specific 17 duties and responsibilities: 18 (1) The board shall purchase nutrient reduction credits 19 from wastewater treatment facilities, agricultural or other 20 sources. Credits shall be available for purchase only after 21 department certification that nutrient and sediment 22 reductions have occurred or will occur upon implementation of 23 the proposed nutrient reduction project. The board shall 24 cooperate with the department and the Department of 25 Agriculture, or their agents, to verify credits from 26 wastewater treatment facilities, agricultural and other 27 sources. 28 (2) The board shall offer for sale nutrient reduction 29 credits to wastewater treatment facilities, developers, 30 municipalities, nonpoint source entities and others required 20080H2654B3994 - 11 -
1 to meet nutrient reductions. 2 (3) The board shall establish a nutrient reduction 3 credit bank to provide for the purchase and sale of credits 4 within the Nutrient Reduction Credit Trading Program. The 5 board shall establish procedures and set monetary assessments 6 to generate a system of nutrient credits that can be used by 7 wastewater treatment facilities and others to reach 8 compliance with nutrient reduction requirements identified by 9 the department and to allow for new growth. Nothing within 10 this paragraph prohibits the private purchase and sale of 11 credits within the trading market. 12 (4) (i) For wastewater treatment facilities, the board 13 is authorized to establish phased payment schedules, 14 provided the payment amounts will fund all annual 15 reductions that are necessary to meet nutrient reduction 16 requirements identified by the department. For new 17 facilities, the payment amounts shall be sufficient to 18 fund all necessary annual reductions, given the 19 facility's design flow and connection schedule, so that 20 zero net discharge requirements are met. The bank shall 21 use these funds to provide grants to the agricultural 22 sector to support projects that will implement the 23 highest value nutrient reduction best management 24 practices. Preference will be given to those nutrient 25 reduction best management practices that provide the 26 greatest nutrient reductions for the least amount of cost 27 and that, once implemented, generate credits on a 28 continual annual basis. 29 (ii) Excess credits generated from the transactions 30 shall be made available for purchase by wastewater 20080H2654B3994 - 12 -
1 treatment facilities, upon request, if needed, to meet 2 nutrient effluent limits. 3 (5) The board shall offer for sale excess credits held 4 by the bank as set forth under paragraph (3), but shall hold 5 a minimum percentage of credits as a reserve balance to 6 offset any failures or loss of nutrient reduction credits 7 within the bank. In addition to this reserve, the board shall 8 hold a minimum percentage of credits in reserve for new 9 growth. The board shall set these reserves at percentages it 10 deems necessary, but in no instance shall the reserve for new 11 growth be lower than 5% of all credits held by the bank. 12 (6) The board shall process credits on a continual 13 basis. The board shall establish and update, as necessary, 14 the selling price of nutrient reduction credits and post the 15 information regarding cost and methods of purchasing and 16 selling credits on the Internet website. The board shall post 17 on the Internet website a list of those projects that have 18 been certified to generate credits by the department. 19 (7) The board shall establish overall time frames for 20 the use of nutrient reduction credits purchased through the 21 bank necessary to meet the compliance requirements 22 established by the department. The board shall develop and 23 implement a process that allows credits to be purchased in 24 advance of when they may be needed to ensure compliance with 25 the requirements established by the department. 26 (8) The board shall establish a technical subcommittee 27 to provide technical assistance to entities proposing credit 28 generating projects. Members of the subcommittee shall be 29 appointed by the board and shall have appropriate technical 30 training and experience. One of the members of the 20080H2654B3994 - 13 -
1 subcommittee shall be a representative from the Water 2 Planning Office in the department who has demonstrated 3 familiarity with the department's nutrient reduction credit 4 trading program. The subcommittee shall conduct a technical 5 review of such proposals consistent with the department's 6 existing guidance on credit proposal reviews, and make a 7 recommendation regarding credit certification. Proposals that 8 have undergone technical review by the subcommittee and are 9 recommended by the subcommittee for certification shall be 10 submitted by the board to the department for review. For such 11 proposals, the department shall render a decision on the 12 proposal within 60 days of receipt of the submission from the 13 board. Proposals on which the department fails to act within 14 this time period are deemed approved. 15 (9) The board shall establish procedures to allow the 16 nutrient reduction credit bank to act as a clearinghouse and 17 make available information on the availability of nutrient 18 reduction credits from public and private sector 19 organizations other than the nutrient reduction credit bank. 20 (e) Regulations.--The authority, the department and the 21 Department of Agriculture may jointly develop regulations as 22 necessary to implement the provisions of this act. The 23 regulations shall be promulgated in accordance with the act of 24 June 25, 1982 (P.L.633, No.181), known as the Regulatory Review 25 Act. 26 (f) Administration.--The authority shall provide all 27 necessary administrative and technical support to the operation 28 of the Nutrient Reduction Credit Trading Program and the board. 29 The authority is authorized to acquire staff, enter into 30 contracts to assist in administration of the bank, provide 20080H2654B3994 - 14 -
1 technical assistance to entities proposing credit generating 2 projects and provide other necessary technical and 3 administrative support to the board. 4 Section 8. Funding sources. 5 Programs established under this act shall be funded through 6 an interfund transfer from The State Stores Fund. The Secretary 7 of the Budget shall transfer from The State Stores Fund an 8 amount of $170,000,000 annually for fiscal years 2008-2009 9 through 2010-2011, $120,000,000 annually for fiscal years 2011- 10 2012 through 2012-2013, and $70,000,000 annually for fiscal 11 years 2013-2014 through 2014-2015. 12 Section 9. Effective date. 13 This act shall take effect immediately. F10L27BIL/20080H2654B3994 - 15 -