Nature of Activity: The Michigan Department of Environmental Quality is implementing a pilot, watershed -based trading program for the Kalamazoo River. The program aims to improve water quality in the area in a cost-effective manner, as well as to inform development of a statewide Michigan water quality trading rule. A fund administered by the project’s steering committee has been used to support installation of nonpoint source control measures by some farmers in the watershed. These and additional measures to be implemented generate credits that are available for purchase by point sources or others that may need them to comply with water quality-based effluent limitations. None of the credits generated thus far have yet been purchased. The fund is financed by grants and by matching contributions from the point source dischargers in the watershed. Receipts from credit sales will be added to the fund.

Environmental Problem: Nuisance algae conditions in Lake Allegan are the basis for development of a TMDL.

Pollutant(s) / Pollution Type(s): Phosphorus

Trade Types: Point/nonpoint.

Stage of Implementation: Discussions began in 1996. The project is now under way – three farms have started to install BMPs. No point sources have yet bought credits from the central fund. The demonstration is scheduled to be completed by June, 2000.

Relation to TMDL: A TMDL for Lake Allegan is under development.

Number of Potential Participants: In addition to the nonpoint sources already implementing the BMPs, the Kalamazoo POTW and a number of paper companies are potential point source participants. Additionally, a number of local not-for-profit organizations such as the Forum for Kalamazoo County, Kalamazoo River Partners, Kalamazoo Environmental Council, and a host of State, local, and federal governmental agencies are involved.

Trading Ratios: 2:1 (or 4:1, see innovative aspects.)

Estimated Cost Savings: Unknown

Available Written Information: A brief report is available from the Michigan Department of Environmental Quality, a full report by the MI DEQ and the Water Environment Research Foundation is expected soon, and another report is expected from the Great Lakes Protection Fund in June, 2000.

Innovative Aspects: Two levels of credit exist for reductions from agricultural sources depending on the nature of baseline practices. A distinction is made between farmers whose practices fall short of generally accepted agricultural management practices (GAAMPs), i.e., basic practices expected of farmers, and farmers whose practices are already at or better than GAAMP. Farms that already implement GAAMPs or more and choose to implement new pollution control measures would receive one pound of credit for every additional two pounds reduced (a 2:1 ratio). Farms that have not yet implemented GAAMPs would receive one pound of credit for every four pounds reduced (a 4:1 ratio). The program aims for BMPs that are sustainable, profitable, and highly tailored to each farm.

Obstacles: There was debate over establishing the baseline from which to calculate credits generated by farming operations – current practices, BMPs or GAAMPs?

Web Sites: Kalamazoo River http://www.epa.gov/surf2/ahr/75/

Kalamazoo http://www.epa.gov/surf2/hucs/04050003/

Contact: David Batchelor, MI DEQ, (517) 373-2677, batcheld@state.mi.us