A WASTEWATER TREATMENT PLANT NEEDS TO LIMIT its discharges of nitrogen and phosphorus to meet the Environmental Protection Agency's limits on nutrient runoff in the Chesapeake Bay. The idea behind nutrient trading is that the plant can save money by paying a farmer to reduce his nutrient runoff by the required amount. But the farm might be located some distance away from the treatment plant. As a result, this nutrient trade could create a "hot spot" of excess nutrients near the treatment plant that might harm water quality and aquatic life there. That's why some people oppose nutrient trading in the Chesapeake region.

But whether — and where — "hot spots" would be created remains to be seen. The Chesapeake Bay Program office, which represents the EPA and its state partners, did an analysis in 2012 concluding that a substantial amount of nitrogen trading could occur across the entire Bay watershed without risking water quality in local areas. The reason has to do with how the EPA set up the nutrient target levels for the estuary, the so-called TMDLs or Total Maximum Daily Loads. The EPA divided the Chesapeake's watershed into 92 segments and figured out the amount of nutrients in each segment that would ensure that water quality was acceptable throughout the tidal portions of the Bay watershed.

But the EPA set these limits conservatively. In most of the 92 segments, the limits are lower than they need to be to achieve satisfactory water quality in those segments (as measured by dissolved oxygen, for example.) This is especially the case in the upper portion of the Bay's tributaries like the Potomac River. The EPA set each segment's limit to protect water quality not only in that segment but also in the main channel of the Bay — an area roughly from the Patuxent River's mouth to the Potomac's. That stretch is home to the Bay's persistent, low-oxygen dead zones, which are created there by the interplay of excess nutrients and physical conditions, like high salinity. The TMDLs mandate particularly low nutrient limits in those segments to achieve acceptable water quality, and the limits in all 92 segments were designed conservatively to accomplish that goal.

All of this opens the door to water quality trading. The buffer built into the TMDLs for local segments means that a sewage treatment plant could buy nutrient reduction credits to avoid having to reduce its own nutrient discharges — but the purchase might not impair water quality in that segment.

In a memorandum issued this year, the EPA suggested ways for state authorities to evaluate and regulate nutrient trades to ensure that local water quality is protected. For example, the risk of creating a hot spot would be lower if the seller of a nutrient reduction credit, such as a farmer, were located upstream of the buyer, the EPA said. (The reduction in nutrients by this farmer would tend to reduce the load of nutrients near the plant — an effect that would not occur if the farmer were located downstream of the plant.)

If nutrient trading in the Bay "caught on fire" and many trades occurred, the Chesapeake Bay Program would need to examine the effects of individual trades on local water quality, says Rich Batiuk, the program's associate director for science, analysis, and implementation.

"Models are not perfect, but they are part of our accountability system, and we could confirm for ourselves and those involved in the trades that there was not, in fact, an impairment on that local water quality," Batiuk says. "We think we've got the tools in place to understand the relative influence of those trades" on local nutrient amounts.