(This page left intentionally blank.) Wabash River Watershed Water Quality Trading Feasibility Study Final Report September 2011 Prepared for U.S. Environmental Protection Agency Targeted Watershed Grant WS-00E71501-0 Prepared by Conservation Technology Information Center With support from Tetra Tech, Inc. Kieser & Associates, LLC CTIC would like to thank our project partners for their support: Agri Drain Corporation Duke Energy Indiana Association of Soil and Water Conservation Districts Indiana Farm Bureau Indiana Soybean Alliance Purdue University Extension Contents 1. Introduction .................................................................................................................................. 1 1.1 What is a WQT Market Feasibility Analysis? .................................................................................... 1 1.2 What is the Purpose of the Wabash River Watershed WQT Market Feasibility Analysis? ............. 2 1.3 What Does This Report Contain? ..................................................................................................... 3 2. Understanding the Wabash River Watershed ................................................................................. 3 2.1 Relationship of the Wabash River Watershed to the Gulf of Mexico .............................................. 3 2.2 Overview of Nutrient Sources and Loadings in the Wabash River Watershed ............................... 4 3. Feasibility Analysis Summary ......................................................................................................... 5 3.1 Drivers and Incentives for Trading ................................................................................................... 5 3.2 Suitable Pollutants for Trading ........................................................................................................ 8 3.3 Watershed Considerations ............................................................................................................ 10 3.4g Timin ............................................................................................................................................ 10 3.5 Geographic Scope for Trading Analysis .......................................................................................... 11 3.6 Potential Credit Buyers and Sellers ................................................................................................ 15 3.7 Potential Credit Demand ............................................................................................................... 20 3.8 Potential Credit Supply .................................................................................................................. 43 3.9 Potential stakeholder participation ............................................................................................... 58 4. Putting It All Together – Market Analysis and Trading Considerations .......................................... 60 4.1 Pollutant Loads .............................................................................................................................. 60 4.2 Regulatory Drivers ......................................................................................................................... 60 4.3 Trade Ratios ................................................................................................................................... 60 4.4 Baselines ........................................................................................................................................ 71 4.5 Supply Side Credit Generation ....................................................................................................... 73 4.6 Differences in Control Costs .......................................................................................................... 78 4.7 Other Trading Considerations ........................................................................................................ 85 5. Next Steps for Water Quality Trading in the Wabash River Watershed ........................................ 91 5.1 Outreach and Education ................................................................................................................ 91 5.2 Prioritized Subwatershed for Future Analysis ............................................................................... 92 5.3 Trading Program Frameworks ....................................................................................................... 93 5.4 Conclusion ...................................................................................................................................... 94 Appendix A: Letter to Illinois EPA from USEPA ................................................................................... 95 Appendix B: Wabash River Watershed TMDL Reduction Summaries and Wasteload Allocations (WLAs) ......................................................................................................................................... Appendix C: Characterization of Wabash River Nutrient Loads ........................................................... Appendix D: Compilation of Nonpoint Source Analysis Technical Memos ........................................... Appendix E: Point Source Survey Results ............................................................................................ Cited References ................................................................................................................................ Final Report – September 2011 Page i Tables Table 1. Nutrient Breakpoints by Ecoregion Under Consideration by IDEM (from Selvaratnam, S. and J. Frey 2011) .............................................................................................................................. 6 Table 2. Summary of Nutrient Criteria Development Progress for U.S. EPA, Ohio, Minnesota, and Wisconsin ......................................................................................................................................... 7 Table 3. Eight‐digit HUCs in the Wabash River Watershed across Indiana and Illinois. ............................. 14 Table 4. Number of facilities with NPDES permits in each 8 digit HUC of the Wabash River watershed ...................................................................................................................................... 15 Table 5. Tippecanoe County’s 2007 Conservation Tillage Data1................................................................. 19 Table 6. Estimated existing nutrient loads from permitted NPDES facilities in the Wabash River watershed. ..................................................................................................................................... 20 Table 7. Changes in pollutant loads and resulting credit demand under different TN permit effluent scenarios .......................................................................................................................... 23 Table 8. Changes in pollutant loads and resulting credit demand under different TP permit effluent scenarios .......................................................................................................................... 26 Table 9. Summary of CWNS information for all facilities in the Wabash River watershed. ....................... 29 Table 10. Indicators associated with advanced treatment facilities in the Wabash River watershed. ..................................................................................................................................... 29 Table 11. Summary of treatment type by HUC. .......................................................................................... 30 Table 12. Summary of 2008 CWNS permit information for facilities in the Tippecanoe and Driftwood watersheds. .................................................................................................................. 31 Table 13. Permit limit summaries for facilities in the Driftwood and Tippecanoe watersheds. ................ 32 Table 14. Summary of facility type and flows for WWTPs included in Driftwood and Tippecanoe nutrient removal analysis .............................................................................................................. 33 Table 15. Summary of ENR treatment levels and assumptions for WWTP upgrade simulations .............. 34 Table 16. Color coding of ENR treatment levels for Tables 17‐23 .............................................................. 35 Table 17. 0.05 MGD activated sludge ENR upgrade options and costs ...................................................... 36 Table 18. 0.05 MGD lagoon ENR upgrade options and costs ..................................................................... 36 Table 19. 0.3 MGD activated sludge ENR upgrade options and costs ........................................................ 37 Table 20. 0.3 MGD lagoon ENR upgrade options and costs ....................................................................... 38 Table 21. 0.75 MGD activated sludge ENR upgrade options and costs ...................................................... 39 Table 22. 2.5 MGD trickling filter ENR upgrade options and costs ............................................................. 40 Table 23. 5 MGD activated sludge ENR upgrade options and costs ........................................................... 42 Table 24. Total Nitrogen Exported at the Mouth of 8‐Digit HUC Watersheds, Independent of Upstream Watershed Loading