The Hogan administration has agreed to retool its bid to jump-start Maryland’s nutrient pollution trading program after hitting a speed bump in Annapolis.

The Clean Water Commerce Act, one of Gov. Larry Hogan’s legislative priorities this year, ran into stiff opposition from environmentalists and local government officials after he unveiled it at the start of the Maryland General Assembly last month. With the bill in trouble, administration officials have agreed to amend and limit it to address critics’ complaints, giving it a better shot at passage.

As introduced, SB314 would have let the Maryland Department of the Environment take up to $10 million from the Bay Restoration Fund, now being spent on wastewater treatment plant upgrades, and use the money to buy nitrogen and phosphorus reduction “credits.” The bill didn’t offer any other details, except to say it would be done “in support of the state’s efforts to restore the health of the Chesapeake Bay.” 

MDE officials had explained before the Assembly session that they wanted to use the funds to pay for various nutrient reduction projects, and then award credits from those reductions to the local jurisdictions where the work was done. In that way, officials said, they hoped to help establish a price for nutrient reduction credits, and create a market for the state’s nutrient trading program. As envisioned under the still-to-be-finalized trading program, a farmer, for instance, might earn marketable pollution reduction credits for voluntarily curtailing runoff from his fields, and a municipality needing to meet regulatory requirements to reduce its stormwater pollution might purchase those credits because they’re less expensive than retrofitting storm drains.

But environmentalists complained the bill was vague and premature, because the administration has yet to release regulations for its trading program. They also objected to paying farmers out of the Bay Restoration Fund because they already get substantial state financial assistance for pollution reductions. Local officials likewise opposed to diverting money from the Bay Restoration Fund, saying it is still needed for wastewater treatment plant upgrades.

The Bay Restoration Fund gets revenue from the $60 annual “flush fee” that every household pays and has been used to finance overhauls of the state’s 67 largest wastewater treatment plants. Those upgrades are scheduled to be completed in 2018. At the end of last year, the fund had a balance approaching $900 million. But local officials note that many smaller sewage plants also need improvements, and a separate bill is pending to make those a funding priority.

On Tuesday, as Hogan’s bill got its first legislative hearing before the Senate Education, Health and Environmental Affairs Committee, administration officials informed lawmakers that after negotiations with various stakeholders they had drafted several amendments to address critics’ concerns.

The amendments spell out more clearly how the funds may be used — for the reduction of pollution loads to waterways, with no further reference to “credits” that might be marketed.

If the amendments are approved, the bill would still take up to $10 million from the fund, but only after all wastewater and other eligible projects had been funded. The proposed revisions would also rule out paying for any nutrient reductions on farms, limiting its focus to urban and suburban projects.

The amendments also specify that the pollution-reduction funding would sunset after four years, and that any projects awarded money would be the lowest cost, determined through a competitive process.

Finally, the administration proffered that a group of public and private stakeholders would be consulted on the development of regulations to determine how the funds would be awarded.

Asked by lawmakers what kinds of projects might get funding, supportive witnesses suggested it might go toward new approaches to stream restoration and stormwater retrofits, among others.

“This bill is all about cost-effective solutions,” Environment Secretary Ben Grumbles told committee members. “It’s not in lieu of or in place of public funding that goes into other sectors as well as the wastewater treatment plants. It’s not in lieu of regulations or enforcement. It’s a great example of a collaborative effort to build environmental bridges and new partnerships.”

Grumbles said administration officials had worked out the amendments in consultation with stakeholders, including the Chesapeake Bay Foundation.

Alison Prost, the CBF’s Maryland director, said the environmental group originally objected to the “open-ended nature” of the bill. The Bay Restoration Fund has been underwriting treatment plant upgrades that yield “measurable, impactful” reductions in nutrient pollution, she said, and the foundation didn’t want to see that effort weakened in pursuit of speculative gains.

If lawmakers approve amendments circumscribing and focusing the program on pollution reductions and not trading credits, she said, “we think it’s worth a try to see if new practices can happen on the ground.”

After testifying, Grumbles said that even with the amended limitations, he still hoped to use the funding to foster innovative, performance-based approaches to cleaning up the Bay. And though the bill fails to spell out how cost-effectiveness or innovation would be determined, he said those issues would be hammered out in consultation with stakeholders.

“I still hope it will help inform our nutrient trading policy,” Grumbles added. He said he hopes to finalize the year-long development of the trading policy by summer, then issue regulations.

Prost, though, said she didn’t see the amended legislation doing anything for trading, because it would be focused simply on funding pollution reductions in urban and suburban communities. Many of them can use the help, she said, because reducing stormwater pollution is proving to be very costly and difficult.

“We are so far behind in the urban-suburban sector,” she said, that we need to try something.”

Other opponents — including county and municipal officials and Ann Swanson, executive director of the Chesapeake Bay Commission — who had not seen the amendments until shortly before the hearing, said they needed to review them before saying whether their objections no longer applied.

“We’ll see what comes of it,” Prost said of the bill. In any case, she added, “It’s in a better place than it was.”