Pennsylvania, which is badly lagging in meeting its Chesapeake Bay cleanup goals, may become the first state to rely heavily on the private sector to help solve its pollution ills.Cattle gather at a milking carousel on a farm in Lancaster County, PA. Reducing nutrient pollution from cattle manure and poultry litter is a major challenge, and Pennsylvania legislators are considering a bill that would let them pay private companies to help do the job. (Ad Crable)

After 5 years of failed attempts, a bill is moving forward that would pay private companies, joint farmer ventures and potentially other organizations to reduce nutrient pollution in Bay drainage portions of the state. The bill passed the state Senate on June 26 and may soon come to a vote in the House of Representatives.

Backers are seeking $100 million over five years to support the Pennsylvania Clean Water Procurement Program. Under the bill, the state would run a competitive bidding process that would guarantee winning contractors a set price for each pound of nutrients kept out of streams and groundwater.

The idea is to encourage innovation and new technologies to spur nutrient reductions in the state. The approach opens the door for private companies that have touted their manure-reduction technologies. One, Bion Environmental Technologies, has heavily pushed the bill and promises to launch a “next generation” manure digester.

But critics fear steering public money to private enterprise would come at the expense of on-the-ground nutrient control measures, such as planting streamside buffers.

Previous versions of the bill were criticized for requiring local governments to pay into the fund and for their potential to send a considerable amount of restoration money to large private companies, rather than farmers.

The current bill does not require payments from local governments. And it uses a pay-for-performance model, in which companies or organizations receive payments only after the nutrient reductions are verified.

Critics of a Pennsylvania bill that aims to pay for the reduction of nutrient pollution worry that it will reduce funding for on-farm conservation practices, like planting forest buffers along streams. Forest buffers can be highly effective at reducing runoff and also improve stream health and aquatic habitats. (Dave Harp)

Amendments have been made to the bill to make sure the program involves owners of smaller farms, whether they opt to develop their own system or participate in a larger one. For example, 20% of winning bids must be set aside for small farmers.

That could take many forms. For example, county conservation districts or ag consulting groups could help farmers collectively commit to conservation practices on their farms.

Backers also hope this will encourage so-called “transition agriculture,” through which farmers would adopt farming methods with less environmental impact. For example, a dairy farm could feed its cows by allowing them to graze on grass, rather than rely on growing corn with fertilizers, thus reducing the application of nutrients. Or, milk could be produced organically without the use of synthetic fertilizers.

In all cases, farmers could collect money from the state for using more environmentally sound practices.

A leap forward or a small step?

The bill has drawn support from groups and legislators on both sides of the aisle. That includes the Chesapeake Bay Commission, which consists of legislators from Pennsylvania, Virginia, Maryland and the District of Columbia. Five of Pennsylvania’s seven representatives to the commission endorse it.

“The bill has changed significantly from early drafts,” said Ann Pesiri Swanson, the commission’s executive director. “At this point, it really is a program designed to look at the best, most cost-efficient ways to reduce nutrients.

Gov. Tom Wolf, who had previously opposed the bill, seems open to it with some changes.

The measure comes as the state and its legislators feel the heat for falling greatly short of the nutrient reductions required by the federal government under the Bay’s “pollution diet.” Pennsylvania’s continually lagging performance leaves it facing possible federal sanctions and even lawsuits from other Bay states and environmental groups.

No one claims the legislation will bail out Pennsylvania from a seemingly insurmountable nutrient-reduction goal. But many see it as a way to help close the gap. Pennsylvania’s most recent Bay cleanup plan says that it would need to spend an estimated $324 million more each year to meet its nutrient reduction goal by 2025.

If adopted, the bill would be a dramatic change of pace for the state, which until now has tried to tackle its massive nutrient problems the same way as other states in the Bay watershed: through wastewater treatment plant improvements and traditional conservation techniques, such as tree plantings, streamside buffers and other on-farm conservation practices.

But many questions remain.

Who pays?

Advocates hope to pass the bill with $20 million in startup money and find a dedicated source of funding next year for the additional $80 million that backers are seeking. But no one is sure where the money would come from in a state with several years of pinched budgets.

Poultry litter from chicken farms is a mix of chicken waste and bedding materials that can be used in some systems to process manure and produce electricity or  natural gas. These chickens are among the 2 million laying hens on Kreider Farms in Lancaster County, PA. (Ad Crable)

Pennsylvania legislators so far have shown little interest in putting up additional funding for the Bay cleanup, and it is unclear where they would find $100 million for the proposed program.

Critics fear the program would siphon away money that has long gone to help farmers put conservation practices in place on their farms — practices that also benefit wildlife habitat, reduce stormwater runoff and combat flooding.

The Chesapeake Bay Foundation takes a dim view of the bill for that reason. Spokesman B.J. Small said in a statement that “decades of research” show that the most cost-effective, successful practices for reducing pollution in the Bay and its rivers are those that reduce nutrients and also deliver benefits for wildlife habitat and reduce flooding.

“These include practices like forested stream buffers, cover crops on farmland, soil nutrient management techniques, conservation tillage, urban tree planting, rain gardens and others,” Small said.

The state Department of Environmental Protection, which would implement the program, supports cost-effective nutrient reductions but is “not in favor of legislation that steers funding to one or two companies at the expense of funding to the small farms that need it,” said spokeswoman Elizabeth Rementer.

There’s no assurance in the bill that funds would not be drawn from current conservation programs, but bill backers say that’s an unwarranted fear. “It has been made very clear that this should be new money and not repurposed money, so it won’t drain best-management practice funding,” said Marel King, the Chesapeake Bay Commission’s Pennsylvania director.

The Pennsylvania Farm Bureau said in a statement that while more funds are needed to help farmers with best management practices, it endorses the bill to “support the establishment of a competitive bidding process that encourages technology, innovation and cost reduction.”

Former DEP secretary David Hess is a vocal critic and worries that the bidding will lock in a higher cost for nutrient reduction compared with current conservation programs.

“Existing programs [for conservation practices] have proven very successful,” Hess said. “With Pennsylvania not putting [enough] resources into supporting best management practices, I think the last thing they want to do is design a system that would make taxpayers buy the most expensive form of reduction.”

Other environmental groups have not taken a clear position. “The bill is not as terrible as it once was but it’s still not the bill to save us all. We need more funding for best-management practices,” said Ezra Thrush of PennFuture.

The Pennsylvania Environmental Council, which had been highly critical of the legislation in previous years, said it would not be taking a position on the bill until all amendments are made.

A better way?

The bill specifies that the funds cannot be used to pay for nutrient reductions that already receive government funding. Otherwise, it sets no limits on who can participate, as long as they can prove before the bidding process that they can verify nutrient reductions.Bion Environmental Technologies hopes to create a manure-to-energy system that would treat poultry litter at Kreider Farms in Lancaster County, PA, shown here. (Ad Crable)

Private companies with manure treatment technologies are leading contenders for the contracts — and one of them, Bion Environmental Technologies, authored the original bill. The U.S. Environmental Protection Agency has approved the manure-treatment technology that the New York-based company uses as one of 18 whose nutrient load reductions would count toward Pennsylvania meeting its Bay cleanup goals, said EPA spokesman Roy Seneca.

Treatment technologies usually produce some form of energy, such as electricity or natural gas. They also create a nitrogen-rich ash byproduct that can be used as fertilizer and sold for a variety of uses. It’s easier to transport than manure, so operators may have greater interest in selling to growers in far-flung locations. If placed on fields, the concentrated form could save the farmer from having to purchase commercial fertilizer and prevent overfertilizing the fields with manure.

Still, largescale private manure-treatment operations have struggled with technical and financial challenges. So far, none has been successful in Pennsylvania or other Bay states, even with subsidies and startup loans.

The Pennsylvania bill, which proposes paying for related nutrient reductions, could be a game changer. And the pay-for-performance model reduces risk for the state: It puts upfront costs on private industry and requires verifying the amount of nutrients kept out of fields, streams and the air.

It’s much harder to measure the amount of nutrients arrested by traditional conservation practices. And some of the bill’s proponents say that the traditional approach simply has not gotten the job done.

“It is about government waste on a massive scale,” said Dom Bassani, Bion’s chief executive officer.

Is technology up to the challenge?

Bion has sunk $100 million into its nutrient-reduction technology in the last 29 years but has had little success in getting states to pay for it.

The company’s only project in Pennsylvania was a large facility operated by a Bion-founded subsidiary on a Lancaster County farm. But the facility on Kreider Farms was shuttered after 18 months for financial reasons, when the state did not commit to the long-term purchase of nutrient credits.

Nutrient credit or “trading” systems are created so that a polluter can offset its impact by paying for pollution reductions elsewhere. While the Kreider facility was operating, the company expected a credit-trading market to develop among sewage plant operators and municipalities seeking to offset sewer and stormwater pollution. But they largely chose to do the work themselves instead of paying for credits.

The Kreider project’s operators defaulted on a $7.8 million state startup loan, which has never been repaid. That remains a sticking point for some opposed to the bill, who view it as a bailout for Bion. Bassani said the subsidiary, not Bion, bears responsibility for the loan.

If the bill passes and Bion gets a contract, the company said it would spend $60 million to $65 million to build a more advanced facility at Kreider Farms to handle poultry litter from the farm’s 2 million chickens and possibly others in the region.

“There is no case that can be made on how you shouldn’t be doing this,” Bassani said of the bill to allow private enterprise to the table. “No other state has adopted this, but no other state has Pennsylvania’s problems.”

The Annapolis-based EnergyWorks Group also hopes to have a winning bid under the program.

“You’ve got to attack the problem in a broad way, but we need to start looking at a way that is most cost effective and gives us some certainty about how to reach the long-term objectives,” said EnergyWorks president Patrick Thompson

In 2013, EnergyWorks built a $30 million facility on Pennsylvania’s largest poultry farm. It produces electricity by burning poultry litter, and the company says it annually eliminates more than 5 million pounds of nitrogen from getting into the environment. The process also produces a feed supplement for dairy cattle — when it is operation. The plant has only run intermittently and loses money for the company.

A report by the Pennsylvania Legislative Budget and Finance Committee concluded in 2013 that advanced technology could achieve the Chesapeake Bay cleanup mandates 80% more cheaply than traditional best-management practices.

That’s difficult to prove at this point. Bion has said it can treat manure for $10–-$13 a pound. Nutrient credits sold in Pennsylvania’s modest nutrient trading auctions have sold for less than $3 a pound, but they are subsidized by taxpayers through grants or funds from environmental groups.

Ron Kreider, CEO of the massive Kreider Farms, whose family farm has won awards for its green infrastructure, says the time has come to invest in something new.

“This new legislation would let livestock agriculture play a significant role in reducing environmental impacts in a very cost-effective manner like current best-management practices don’t do,” he said.