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Senate of Pennsylvania
Session of 2013 - 2014 Regular Session


Posted: April 30, 2013 11:32 AM
From: Senator Elder A. Vogel, Jr.
To: All Senate members
Subject: Competitive Bidding - Low-Cost Watershed Nutrient Reduction
In the near future I intend to introduce legislation that will enable opportunities to comply with Federal nutrient management requirements.

Historically, the state has been subjected to costly mandates from the EPA for clean water activities. The Susquehanna watershed is currently under a Total Maximum Daily Load (TMDL) requirement from the EPA. The existing approach to addressing Bay nutrient reduction issues is not driven by cost effectiveness, and we cannot sustain those reductions economically. The existing approach mandates high cost, low value solutions for nutrient reduction such as wastewater and storm water upgrades.

In March of 2012, a Chesapeake Bay Commission (CBC) study titled “Nutrient Credit Trading for CB---An Economic Analysis” (http://www.chesbay.us/Publications/nutrient-trading-2012.pdf) concluded that verified nutrient reductions from agriculture would significantly reduce Chesapeake Bay nutrient TMDL compliance costs. Moreover, in January 2013, the PA Legislative Budget & Finance Committee (LBFC) issued a report and projected that a competitively bid verified nutrient procurement program would reduce nutrient compliance costs by up to 80% (http://lbfc.legis.state.pa.us/reports/2013/77.PDF). The report focused on large scale agricultural projects as the primary source of low cost large scale nutrient reductions.

This legislation implements the findings in the CBC and LBFC Reports.

Competitive bidding (as an alternative to the current system of sector allocation supported by a government distribution of funds) would be open to all sources, public and private, as well as regulated and unregulated, and would be designed to attract low cost solutions and those projects that can produce verified nutrient reductions. The end result will be that overall federally mandated compliance costs will be significantly reduced while Pennsylvania’s local communities will benefit from improved public health, long term cost avoidance to meet drinking water standards and economic growth from activities including growth in agriculture and increased freshwater recreation such as fishing and boating.

Under the bill, the competitive bidding process would be implemented by the DEP and PENNVEST. The DEP would be tasked to forecast unmet reductions in regulated materials, subject to a TMDL reduction requirement, in future water years. PENNVEST would act as the conduit for issuance of the bids based on the DEP’s forecast for verified reductions in regulated materials like nutrients that pollute our watersheds. Bids would be scored based on cost and environmental and recreational benefits to the Commonwealth like ancillary reductions to freshwater resources. PENNVEST would enter into long-term contracts with the winning bidders.

The bill also requires the LBFC to look at long-term options to fund the bidding program if and when required since initial funding may come from existing budgetary funds. That report would be due in six (6) months. Under the bill, no bid can be issued until funding is identified.

Please contact Michael Rader at 787-3076 if you have any questions.

Introduced as SB994