The North Carolina Environmental Management Commission (NCEMC) recently refined its innovative approach to managing nutrient loading from point-source dischargers in the Neuse River Basin. See adopted amendments to 15A NCAC 2B .0234. The Neuse has been nutrient impaired and classified as Nutrient Sensitive Waters for many years. Following major fish kills in the Neuse River estuary in the summer of 1995, the NCEMC began work on a revised and comprehensive nutrient management strategy for the basin, which was adopted in 1997 and which includes point-source loading limits, riparian buffer protection, stormwater management requirements, mandatory agricultural best management practices, and nutrient management training and planning. The NCEMC’s recent action to revise and update the point-source component of the strategy was taken in order to address EPA concerns about the enforceability of the rule’s collective loading limits for groups of dischargers and to correct significant mathematical errors in the original allocation of nitrogen loads.

The rule establishes a total wasteload allocation for all point sources in the basin of 1.64 million pounds of nitrogen per year delivered to the estuary. The rule then assigns “discharge allocations” to point sources by category. These discharge allocations are actual nitrogen loading amounts at the point of discharge and were calculated using transport factors to derive an acceptable loading levels based on the target wasteload allocation at the estuary. The categories include the following:

Each discharger within each group is assigned an individual discharge allocation and equivalent estuary allocation based on its percentage of the total permitted flow for the group. Effective Jan. 1, 2003, each discharger with a permitted flow greater than or equal to 0.5 MGD will be subject to a nitrogen permit limit equal to its discharge allocation and a phosphorus limit of 2 mg/L (the P limit applies to dischargers > .05 MGD above Falls Lake Dam).

Perhaps the most interesting features of the rule are its provisions establishing point-point and point-nonpoint trading options for existing dischargers. The primary means for point-point trading is through membership in a “group compliance association” authorized by the rule. (One such association, the Neuse River Compliance Association, was formed under the earlier version of the rule.) The revised rule provides that any such association shall be issued an NPDES limit which establishes a total nitrogen allocation for the association and its members. Members of the association may reallocate their individual estuary allocations among themselves on an annual basis. Moreover, association members are exempt from meeting individual permit limits for total nitrogen so long as they remain members of the association and the association remains in compliance with its permit. In addition, if the association exceeds its nitrogen limit in any year, it may avoid enforcement action by making offset payments to the North Carolina Wetland Restoration Fund (NCWRF) to fund reduction of nonpoint-source nitrogen loading. (Although the rule does not expressly address the issue, presumably one existing discharger may permanently convey some or all of its nitrogen allocation to another discharger.) An additional benefit of membership in an association is avoidance of a more stringent phosphorus limit upon expansion.

The rule requires new dischargers and dischargers expanding beyond currently permitted flows to do the following:

As indicated by the requirement that they attempt to obtain estuary allocation from other dischargers, new and expanding dischargers have a point-point trading option. In addition, the rule provides such dischargers a point-nonpoint trading option. They may acquire nitrogen allocation by making an up-front payment to NCWRF in the amount of 200 percent of the per pound rate for thirty years, which equals $660 per pound.

The trading components of the rule provide a very flexible and cost-effective approach to dealing with the increasingly serious problem of nutrient impairment. Since 1995, EPA has strongly supported the development of water quality trading programs by states and tribes to restore or maintain water quality. In its water quality trading policy, EPA states that “Water quality trading is an innovative approach that offers greater efficiency in achieving water quality goals on a watershed basis.” Trading is being explored, developed or implemented in a number of watersheds across the country, including the Tar-Pamlico River Basin in North Carolina where a trading program has been in place since 1990. The Neuse River Basin NSW rule for point sources should provide an instructive model for use in other river basins.