THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY HANNA, BEYER, BRENNAN, CARROLL, CONKLIN, DALEY, EVERETT, FLECK, GRUCELA, HALUSKA, HESS, HORNAMAN, KULA, MAHONEY, McILVAINE SMITH, MELIO, MILLARD, MILLER, MURT, M. O'BRIEN, ROCK, SIPTROTH, STERN AND SWANGER, APRIL 22, 2009

REFERRED TO COMMITTEE ON AGRICULTURE AND RURAL AFFAIRS, APRIL 22, 2009  

AN ACT

Establishing the Fair Share Nutrient Reduction Program;

providing funding for wastewater treatment plants and

agricultural operations to meet nutrient reduction mandates;

creating a Nutrient Reduction Trading Board and Program and

providing for its powers and duties; providing for an

increase in the Resource Enhancement and Protection Program;

and providing supplemental funding for the Department of

Agriculture and the State Conservation Commission.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Short title.

This act shall be known and may be cited as the Fair Share

Nutrient Reduction Plan Act.

Section 2.  Legislative findings.

The General Assembly finds and declares as follows:

(1)  The Federal Water Pollution Control Act (62 Stat.

1155, 33 U.S.C. § 1251 et seq.), Chesapeake Bay 2000

Agreement and total maximum daily load watershed water

quality plans are mandating wastewater treatment facilities

and farmers reduce nitrogen and phosphorus discharges going

into Commonwealth streams and rivers.

(2)  In the Chesapeake Bay Watershed alone, 184

wastewater treatment facilities will be required to upgrade

treatment systems at an estimated cost of more than

$1,000,000,000, and the Department of Environmental

Protection has estimated the cost to farmers of complying

with reduction mandates to be nearly $600,000,000.

(3)  In order to meet the mandates, local wastewater

treatment facilities will have to dramatically increase their

cost of service to ratepayers. If no help is provided by

State government, rate increases will exceed 100% in some

communities. Farmers who cannot pass along costs through

increased prices for farm commodities will face crippling

increases in operating costs.

(4)  Technical assistance provided to farmers by county

conservation districts, the State Conservation Commission and

the Department of Agriculture is vital to the success of

reducing nutrient and sediment losses from agricultural

sources. State budget allocations to these agencies have

fallen well behind maintenance level at a time when their

services are most needed by farmers.

(5)  One promising tool to reduce the cost of compliance

with these mandates for both wastewater treatment facility

operators and farmers is the Nutrient Credit Trading Program.

However, potential users of the program have identified flaws

that present significant risks for participation by buyers

and sellers of credit alike, which have had the effect of

inhibiting the level of credit generation needed to make the

program a viable nutrient reduction option while allowing for

future growth and development.

(6)  Federal and State Government, local wastewater

system ratepayers and farmers must all do their fair share to

finance the costs of measures necessary to meet nutrient

reduction mandates and support their successful

implementation, because the environmental and economic

benefits of clean water will accrue to all citizens of this

Commonwealth.

Section 3.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Agricultural nutrient and sediment reduction project."  A

project undertaken in conjunction with an agricultural operation

to establish, implement or improve a best management practice

recognized by the Environmental Protection Agency or the

Department of Environmental Protection to reduce the levels of

nitrogen, phosphorus or sediment entering surface water or

groundwater from farms in this Commonwealth. The term includes

design, construction, reconstruction, erection, equipping,

expansion, improvement, installation, rehabilitation, renovation

or repair of infrastructure, buildings, structures, equipment

and fixtures to facilitate nutrient or sediment reduction.

"Authority."  The Pennsylvania Infrastructure Investment

Authority.

"Best management practice."  A practice or combination of

practices recognized as effective and practical in the

management or reduction of nutrients or sediment to protect

surface water or groundwater, considering technological,

economic and institutional factors.

"Board."  The Nutrient Reduction Credit Trading Board.

"Commission."  The State Conservation Commission.

"Conservation district."  A public body as defined in and

created under the act of May 15, 1945 (P.L.547, No.217), known

as the Conservation District Law.

"Department."  The Department of Environmental Protection of

the Commonwealth.

"NPDES."  The National Pollutant Discharge Elimination System

established under the Federal Water Pollution Control Act (62

Stat. 1155, 33 U.S.C. § 1251 et seq.).

Section 4.  Agricultural Nutrient Reduction Program.

(a)  Establishment.--The Agricultural Nutrient Reduction

Program is established to provide financial assistance in the

form of single-year or multiyear grants or tax credits for

agricultural nutrient and sediment reduction projects and to

provide tax credits for legacy sediment remediation projects in

this Commonwealth.

(b)  Dedication to Conservation District Fund.--In addition

to any appropriations annually made, a total of $10,000,000

annually shall be deposited in the Conservation District Fund

from funds transferred under section 8. Money to be deposited

under this section shall be distributed by the commission to

conservation districts for their use in undertaking activities

as defined in the act of May 15, 1945 (P.L.547, No.217), known

as the Conservation District Law. The commission shall adopt

criteria and procedures for allocation of money deposited under

this subsection to conservation districts.

(c)  Financial assistance for agricultural nutrient and

sediment reduction projects.--For fiscal years 2008-2009 through

and including fiscal year 2012-2013, a nonlapsing appropriation

of $15,000,000 annually shall be made to the commission for the

purpose of awarding grants to farmers for agricultural nutrient

and sediment reduction projects. Grants to be provided by the

commission for any agricultural nutrient and sediment reduction

project shall not exceed 50% of the cost of the project, except

that no more than $150,000 in total grants may be awarded to a

single agricultural operation.

(d)  Resource enhancement and protection tax credit.--For

fiscal years 2008-2009 through and including fiscal year

2012-2013, a total of $35,000,000 in tax credits annually shall

be made available to eligible applicants in accordance with the

provisions of Article XVII-E of the act of March 4, 1971 (P.L.6,

No.2), known as the Tax Reform Code of 1971, for agricultural

nutrient and sediment reduction projects and for legacy sediment

remediation projects. Authorization for tax credits and the

extent and limitation of eligibility, receipt and transfer of

tax credits shall be as provided in Article XVII-E of the Tax

Reform Code of 1971.

(e)  Administrative expenses.--The commission may annually

dedicate not more than $350,000 of funds provided under

subsection (c) for administrative expenses incurred by the

commission in awarding grants and authorizing tax credits under

subsections (c) and (d).

Section 5.  Wastewater treatment plant nutrient reduction

program.

(a)  Establishment.--The Wastewater Treatment Plant Nutrient

Reduction Program is established to provide financial assistance

in the form of single-year or multiyear grants to municipalities

or municipal authorities to construct, expand or improve the

nutrient reduction capabilities of wastewater infrastructure and

which are subject to new nitrogen and phosphorus limits imposed

in NPDES permits issued after January 1, 2009.

(b)  Application.--A municipality or municipal authority may

submit an application to the authority requesting financial

assistance for a nutrient reduction project. The nutrient

reduction project may be a proposed project, a project currently

under construction or a project completed within three years

prior to the effective date of this section. The application

shall be on the form required by the authority and include or

demonstrate all of the following:

(1)  The name and address of the applicant.

(2)  A statement of the type and amount of financial

assistance sought, provided that the amount does not exceed

50% of the cost of the nutrient reduction project.

(3)  A statement describing the nutrient reduction

project, including a detailed statement of the cost of the

nutrient reduction project.

(4)  A financial commitment from a responsible source for

any cost of the nutrient reduction project in excess of the

amount requested. The financial commitment may not be in the

form of a grant from a Commonwealth agency.

(5)  Proof that the wastewater system is required to

reduce nutrient discharges and that the wastewater system has

a current NPDES permit limiting pounds of nitrogen or

phosphorus in its discharge.

(6)  Confirmation through plans certified by a

professional engineer registered in this Commonwealth that

the nutrient reduction project is designed for the necessary

upgrades to remove nutrients.

(7)  Information regarding current user rates and a

projection of how rates may be impacted as a result of the

addition of the nutrient reduction project.

(8)  Any other information required by the authority.

(c)  Review and approval of grant application.--

(1)  The authority, in conjunction with the department,

shall review the application to determine all of the

conditions under the subsection (b) are met.

(2)  The authority shall conduct, as part of the

application review, an affordability analysis to determine if

current and future user rates meet affordability criteria

established by the authority.

(3)  Upon being satisfied that all program requirements

have been met, the authority may approve the application

consistent with all of the following:

(i)  The grant may not exceed $10,000,000 per

nutrient reduction project.

(ii)  The aggregate amount of grants awarded under

this subsection shall not exceed $500,000,000 over a

seven-year period.

(iii)  The authority has received notice from the

Secretary of the Budget that the nutrient reduction

project satisfies the Federal tax status requirements of

any bonds used to fund the grant.

(4)  The authority shall make a determination of the

completeness of an application within 30 days of its receipt.

If the authority deems the application complete, it shall

render a decision on funding the application within 60 days

of the receipt of the completed application.

(5)  An applicant shall, within 30 days of a

determination by the authority that the application was

deficient, provide to the authority the necessary information

to complete the application. The authority shall not be

required to make a determination under paragraph (3) if the

applicant fails to provide the required information.

(6)  If the authority approves the application, the

authority shall notify the applicant of the amount approved

and enter into a contract with the applicant.

Section 6.  Implementation schedule for Chesapeake Bay

Watershed.

(a)  Establishment.--The department shall establish a

multiphased nutrient reduction compliance schedule for

wastewater treatment facilities required to reduce nutrient

levels within the Chesapeake Bay Watershed that meets the

following requirements:

(1)  All plants identified by the department with flows

over 400,000 gallons per day which are not presently under

annual nutrient load limits as part of their operating permit

shall be given annual nutrient load limits based upon an

average of 6 mg/l total nitrogen and 0.8 mg/l total

phosphorous at the annual average design flow of each

wastewater treatment facility.

(2)  In an effort to achieve nutrient reduction

compliance levels, a three-tiered compliance schedule shall

be used. Wastewater treatment facilities shall be placed in

one of three tiers to ensure all facilities will be deemed in

compliance over a seven-year period beginning on July 1,

2009, and ending June 30, 2016.

(b)  New construction.--

(1)  A new wastewater treatment facility, where

construction commences on or after January 1, 2009, shall

meet nutrient load limits based upon an average of 4 mg/l

total nitrogen and 0.3 mg/l total phosphorus at the annual

average design flow. A new system constructed to the limits

in this section shall make a one-time monetary assessment to

the nutrient reduction credit bank as established under

section 7(d)(3). The assessment contribution shall be

determined by the board. The assessment shall, at a minimum,

be based upon the difference in the treatment level between 4

mg/l of nitrogen and 0.3 mg/l of phosphorus and the zero net

discharge limit applied to new facilities through the

department under the strategy.

(2)  The purchase of nutrient credits shall be recognized

as an alternative method to meet the zero net discharge limit

applied to new facilities that do not meet the criteria of

this section. The purchase of nutrient credits shall also be

recognized as an alternative method to meet the zero net

discharge limit applied to expansion of existing plants.

(3)  In the event of an addition, expansion or

modification to a wastewater treatment facility, the mass

discharge limits contained in this subsection shall apply

only to the increase in the annual average design flow,

resulting from the addition, expansion or modification.

(c)  Limitation.--Nothing in this section shall be construed

to prohibit the right of appeal to NPDES permit conditions by a

permittee.

Section 7.  Nutrient Reduction Credit Trading Program.

(a)  Establishment.--The Nutrient Reduction Credit Trading

Program is established within the authority and is designed to

enhance the nutrient reduction credit trading program

established by the department by adding an alternative method of

nutrient credit trading.

(b)  Board.--The following shall apply:

(1)  The Nutrient Reduction Credit Trading Program Board

is established. The purpose of the board shall be to manage

and provide oversight to the Nutrient Reduction Credit

Trading Program.

(2)  The board shall consist of the following:

(i)  The Secretary of Environmental Protection, or a

designee.

(ii)  The Secretary of Agriculture, or a designee.

(iii)  The executive director of the authority, or a

designee.

(iv)  One representative from county conservation

districts appointed by the commission.

(v)  One representative from municipal authorities

representing wastewater treatment facilities chosen by

the Pennsylvania Municipal Authorities Association.

(vi)  One representative of the housing industry

chosen by the Secretary of Environmental Protection from

a list submitted by the Pennsylvania Builders

Association.

(vii)  One water quality engineer appointed by the

chair of the Joint Legislative Air and Water Pollution

Control and Conservation Committee.

(viii)  One representative from the agricultural

sector appointed by the Secretary of Agriculture.

(ix)  One representative from an environmental

organization representing an environmental organization

appointed by the Secretary of Environmental Protection.

(x)  Three representatives of local government; one

representing boroughs, one representing townships and one

representing cities. These representatives shall be

chosen by their respective Statewide organizations.

(xi)  One representative from the Pennsylvania

delegation to the Chesapeake Bay Commission appointed by

members of the Pennsylvania delegation to the commission.

(xii)  One representative from the United States

Department of Agriculture's Natural Resources

Conservation Service appointed by the State

Conservationist of this Commonwealth.

(c)  Chairperson.--The board shall elect a chairperson from

among its members.

(d)  Powers and duties.--The board shall adopt policies and

implement programs necessary to manage the Nutrient Reduction

Credit Trading Program and shall have the following specific

duties and responsibilities:

(1)  The board shall purchase nutrient reduction credits

from wastewater treatment facilities, agricultural or other

sources. Credits shall be available for purchase only after

department certification that nutrient and sediment

reductions have occurred or will occur upon implementation of

the proposed nutrient reduction project. The board shall

cooperate with the department and the Department of

Agriculture, or their agents, to verify credits from

wastewater treatment facilities, agricultural and other

sources.

(2)  The board shall offer for sale nutrient reduction

credits to wastewater treatment facilities, developers,

municipalities, nonpoint source entities and others required

to meet nutrient reductions.

(3)  The board shall establish a nutrient reduction

credit bank to provide for the purchase and sale of credits

within the Nutrient Reduction Credit Trading Program. The

board shall establish procedures and set monetary assessments

to generate a system of nutrient credits that can be used by

wastewater treatment facilities and others to reach

compliance with nutrient reduction requirements identified by

the department and to allow for new growth. Nothing within

this paragraph prohibits the private purchase and sale of

credits within the trading market.

(4)  (i)  For wastewater treatment facilities, the board

is authorized to establish phased payment schedules,

provided the payment amounts will fund all annual

reductions that are necessary to meet nutrient reduction

requirements identified by the department. For new

facilities, the payment amounts shall be sufficient to

fund all necessary annual reductions, given the

facility's design flow and connection schedule, so that

zero net discharge requirements are met. The bank shall

use these funds to provide grants to the agricultural

sector to support projects that will implement the

highest value nutrient reduction best management

practices. Preference will be given to those nutrient

reduction best management practices that provide the

greatest nutrient reductions for the least amount of cost

and that, once implemented, generate credits on a

continual annual basis.

(ii)  Excess credits generated from the transactions

shall be made available for purchase by wastewater

treatment facilities, upon request, if needed, to meet

nutrient effluent limits.

(5)  The board shall offer for sale excess credits held

by the bank as set forth under paragraph (3), but shall hold

a minimum percentage of credits as a reserve balance to

offset any failures or loss of nutrient reduction credits

within the bank. In addition to this reserve, the board shall

hold a minimum percentage of credits in reserve for new

growth. The board shall set these reserves at percentages it

deems necessary, but in no instance shall the reserve for new

growth be lower than 5% of all credits held by the bank.

(6)  The board shall process credits on a continual

basis. The board shall establish and update, as necessary,

the selling price of nutrient reduction credits and post the

information regarding cost and methods of purchasing and

selling credits on the Internet website. The board shall post

on the Internet website a list of those projects that have

been certified to generate credits by the department.

(7)  The board shall establish overall time frames for

the use of nutrient reduction credits purchased through the

bank necessary to meet the compliance requirements

established by the department. The board shall develop and

implement a process that allows credits to be purchased in

advance of when they may be needed to ensure compliance with

the requirements established by the department.

(8)  The board shall establish a technical subcommittee

to provide technical assistance to entities proposing credit

generating projects. Members of the subcommittee shall be

appointed by the board and shall have appropriate technical

training and experience. One of the members of the

subcommittee shall be a representative from the Water

Planning Office in the department who has demonstrated

familiarity with the department's nutrient reduction credit

trading program. The subcommittee shall conduct a technical

review of such proposals consistent with the department's

existing guidance on credit proposal reviews, and make a

recommendation regarding credit certification. Proposals that

have undergone technical review by the subcommittee and are

recommended by the subcommittee for certification shall be

submitted by the board to the department for review. For such

proposals, the department shall render a decision on the

proposal within 60 days of receipt of the submission from the

board. Proposals on which the department fails to act within

this time period are deemed approved.

(9)  The board shall establish procedures to allow the

nutrient reduction credit bank to act as a clearinghouse and

make available information on the availability of nutrient

reduction credits from public and private sector

organizations other than the nutrient reduction credit bank.

(e)  Regulations.--The authority, the department and the

Department of Agriculture may jointly develop regulations as

necessary to implement the provisions of this act. The

regulations shall be promulgated in accordance with the act of

June 25, 1982 (P.L.633, No.181), known as the Regulatory Review

Act.

(f)  Administration.--The authority shall provide all

necessary administrative and technical support to the operation

of the Nutrient Reduction Credit Trading Program and the board.

The authority is authorized to acquire staff, enter into

contracts to assist in administration of the bank, provide

technical assistance to entities proposing credit generating

projects and provide other necessary technical and

administrative support to the board.

Section 8.  Funding sources.

Programs established under this act shall be funded through

an interfund transfer from The State Stores Fund. The Secretary

of the Budget shall transfer from The State Stores Fund an

amount of $170,000,000 annually for fiscal year 2008-2009

through 2010-2011, $120,000,000 annually for fiscal year

2011-2012 through 2012-2013, and $70,000,000 annually for fiscal

year 2013-2014 through 2014-2015.

Section 9.  Effective date.

This act shall take effect immediately.