The State of Michigan is developing a statewide water quality trading program.  This initiative began in 1995 with a feasibility study that looked at the regulatory, environmental and economic aspects of nutrient trading among and between point and nonpoint sources.  This study was completed in July 1997 and lead to the establishment of a Water Quality Trading Workgroup, a watershed-based demonstration project and a series of conferences to provide information and obtain public input in the process.

The Water Quality Trading Workgroup (Workgroup) was established in 1998 by the Surface Water Quality Division to provide the department with recommendations and draft rules for a voluntary trading program.  This was completed in August of 1999.  The Workgroup recommendations and draft rules have been adopted by the department and the Governor's Steering Committee for Market-Based Environmental Programs (Steering Committee).  Formal rulemaking began in January 2000.

Public notice of the proposed Part 30. Water Quality Trading Rules was first published in the 1999 Michigan Register, MR 12, dated January 31, 2000. The first of two public hearings was held on March 15, 2000. Michigan United Conservation Clubs presented testimony at that hearing. A second public hearing was held on June 7, 2000, because notice of the first hearing was defective. Public notice of the second hearing was published in the 2000 Michigan Register, MR 6, dated June 7, 2000. Notice was also published in The Mining Journal (May 18, 2000), the Lansing State Journal (May 17, 2000), the Observer & Eccentric Newspaper (May 18, 2000) and the Michigan Department of Environmental Quality Calendar (June 5, 2000). The record was held open until June 14, 2000. All comments received between January 31, 2000 and June 14, 2000 were included in the public record.

Comments were received from 7 entities, 5 of which represent state and national environmental organizations and the United States Environmental Protection Agency (EPA). Lists of commentors and those who attended the March 15 and June 7, 2000 public hearings are attached.

There is broad-based support for nutrient trading on a watershed basis, the requirements for the generation of credits and the use of trading ratios to provide a net water quality benefit and the use of discount factors to address site-specific conditions. Environmental groups also support the enhanced enforcement, mandatory program evaluations and monitoring and citizen petition provisions in the proposed rules. Agricultural organizations and agencies support the framework for agricultural participation and accountability.

Environmental groups generally oppose trading that involves "toxics" and cross-pollutant trading. Strong concerns were expressed regarding the proposed level of public participation, a lack of monitoring and enforcement and nutrient trading in impaired waters prior to the development of total maximum daily loads (TMDLs).

Several commentors made recommendations deemed necessary for successful implementation of the program, including: the need to establish a permanent source of funding, preparation of a technical support/guidance manual and providing public information and education through workshops and presentations.

The Public Hearing Report is being finalized.  This document will provide a summary of all comments received and changes that are being made in response to public input.  The Public Hearing Report and revised rules will be posted on this website when they have been approved by the department.   

The Kalamazoo River Water Quality Trading Demonstration Project was completed in June 2000.  This project is nationally recognized as a highly successful innovative program built on partnerships and voluntary local initiatives.
  The project demonstrated how trading can occur, improved water quality and provided information to help design the state water quality trading program.  The Water Environment Research Foundation (WERF) will publish a final report in the near future.   The regulatory issues, barriers and solutions and lessons learned from this project are highly transferrable to other water quality trading programs across the country.   Funding for the project was provided by the Kellogg Foundation, Crown Vantage Paper Company, WERF and the Great Lakes Protection Fund. 

The Great Lakes Trading Network (GLTN) was created to maximize the regional impacts of the Kalamazoo Project and create an information clearinghouse for trading projects and programs being implemented across the Great Lakes region.  The scope of the GLTN has continuted to expand since it's kickoff conference in Kalamazoo in May 1998.  Today, the GLTN is widely recognized as the national forum on water quality trading programs. It includes representatives from most of the active and developing programs in the country, the National Wildlife Federation (NWF), the United States Environmental Protection Agency (EPA) and several EPA program offices, the World Resources Institute (WRI), state regulatory agencies, agricultural representatives, consultants and local watershed groups.  The GLTN has discussed and documented key policy and regulatory issues, and the goals, barriers, solutions and lessons learned from the trading programs that are represented on the network.

The GLTN also reviewed and commented on EPA's proposed revisions to 40 CFR 122, 123, 124, 130 and 131. 

On May 18 and 19, 2000, the GLTN held the first national water quality trading conference "Markets for the New Millennium - How Can Water Quality Trading Work For You?". Mr. Richard Sandor, Ph.D., Environmental Financial Products, Ltd. was the keynote speaker and the moderator was Mr. G. Tracy Mehan III, Director of the Office of the Great Lakes. Other speakers included Ms. Roberta Savage, Association of State and Interstate Water Pollution Control Administrators (ASIWPCA), Mr. Mahesh Podar (EPA), Mr. Charles Kruse (Missouri Farm Bureau), Ms. Kari Dolan (NWF) and Mr. Paul Faeth (WRI). Presentations and papers were made on Michigan's Trading Program, the Chesapeake Bay Nutrient Trading Program, the Cherry Creek Reservoir Watershed Phosphorus Trading Program, the Long Island Sound Program, the Kalamazoo Project, the Fox Wolf 2000 Program and TMDL Trading in the Lower Boise River. Feedback in discussion among participants was provided through panel discussions and breakout sessions. The conference was co-sponsored by the WRI, General Motors Corporation, EPA, NWF and the ASIWPCA. The conference has been acclaimed very successful and was closed with strong support for maintaining and expanding the GLTN after the Kalamazoo Project has been completed.  Today, a dedicated website is being developed.  It should be online within one month.  Efforts are also being pursued to secure permanent funding for the GLTN.