Ohio Water Quality, TMDL's, and Agriculture

Ohio Environment Report, November 18, 2004

(http://aede.osu.edu/people/sohngen.1/OER/index.htm)

Brent Sohngen

State Specialist, Environmental Economics, OSU Extension

AED Economics

Ohio State University

614-688-4640

Sohngen.1@osu.edu

It is well known that water quality has improved in Ohio over the past 20 years.  In the most recent 5 – 10 years, however, additional improvements in water quality have been harder to achieve (Figure 1).  Despite setting the goal in 1994 that 75% of Ohio streams meet water quality standards by 2000, and a more recent goal that 80% of streams meet water quality standards by 2010, in reality, it seems ever more difficult to achieve water quality improvements. 

If you think about it, the goal that 80% of the waters in the state attain water quality standards by 2010, it is really astounding.  Today, approximately 55% of streams in the state meet water quality standards.  Achieving this goal would require a 50% improvement over today's situation (or that an additional 25% of the state's streams come into attainment).  Between 1988 and 2004, the proportion of streams meeting water quality standards rose at a rate of 3% per year.  To achieve the 2010 goal we would have to double this rate of improvement in water quality – to 6% per year.

Is it possible to achieve this goal?  Numerous federal and state programs are being undertaken (i.e. recent stormwater Phase II and animal feeding operation permit processes; efforts to eliminate combined sewer overflows; and additional restrictions on point sources; to name a few), and they provide some hope.  Most hope, however, appears to be pinned on the Total Maximum Daily Load (TMDL) process, which potentially will isolate the most important factors influencing water quality in impaired watershed of the state.  When reviewing the TMDL's that have been conducted so far, two issues become clear.  First, large load reductions are proposed for all pollution sources, but in particular nonpoint sources.  Second, when considering nonpoint sources, the TMDL's rely heavily on voluntary incentive programs in their implementation plans. 

It is thus useful to take a closer look at the TMDL process so far, and to assess the implications this process has for nonpoint sources of pollution in Ohio, and for Ohio water quality policy.  To do so, this article focuses mainly on agriculture, a sector that has been highlighted in many TMDL's written to date.  As argued in this article, the broad goals this state has set for water quality improvements may be possible over a longer time horizon than 2010, but to make forward progress, several new policy directions could be embraced.

Figure 1: Trend in proportion of Ohio waters that support aquatic life uses according to the Ohio Environmental Protection Agency (1988 – 2000 data compiled from section 305(b) reports;  2002 and 2004 data compiled from the Ohio Integrated Report on Water quality available from http://www.epa.state.oh.us/dsw/document_index/305b.html). 

Ohio's TMDL Program

Ohio's TMDL program began in the late 1990's as a reaction to several lawsuits (including letters of intent to sue) that suggested the federal and state governments were not following the 1972 Federal Water Pollution Control Act (the Clean Water Act) because they had failed to implement the TMDL requirements.  The TMDL program requires, briefly, an evaluation of water quality in Ohio's watersheds, an evaluation of the sources of pollution loads, an estimate of the maximum loads possible to meet water quality standards, an allocation of potential load reductions for the sources within the watershed, and an implementation plan.

Over the past several years, the Ohio EPA has geared up its TMDL process so that now there are 11 complete TMDL's, 5 in review, and 14 more under development.  The completed TMDL's are revealing.  Table 1 presents a review of the load reductions suggested by the modelers for point and non point sources of pollution.  For most of the TMDL's, the range in load reductions results from differences in sub-watersheds (for several TMDL's, load reductions are defined for specific periods of the year).  What is most startling is that in many cases, the recommended reductions are well above 50%.  These represent incredibly large pollution load reductions.  Most of the reductions are proposed for nonpoint sources (including development and agricultural uses) – where regulations over water quality are sparse.  If these TMDL results are correct, local watershed groups and citizens will have many years of work and effort in front of them to meet water quality standards.

Table 1: Review of Pollution Load Reductions Proposed in Completed TMDL's in Ohio.

(For original reports, see http://www.epa.state.oh.us/dsw/tmdl/index.html).  For most watersheds, the range indicates variation across sub-watersheds, although in several regions, the range indicates different load reductions for different times of the year.

The TMDL reports also describe how the load reductions will be implemented.  The implementation sections of the reports are typically relegated to the back of the reports, and are usually very short.  There are some notable exceptions, for instance, the Mill Creek – Scioto River Basin TMDL report provides fairly detailed discussions for each sub-watershed describing how different sources will be controlled.  In most of the reports, where point source loads are the primary issue, existing regulatory approaches are clearly identified as the primary method to meet the goal, and where nonpoint sources are identified, the reports are less clear on how reductions will be obtained.  The lack of clarity on nonpoint sources is not un-expected – there are few clear regulatory mechanisms available to use.

It is not obvious (or evident from history) that traditional regulatory approaches work best.  But it is true that agencies have little leverage, save for financial incentives, to bring nonpoint sources of pollution to the table to address pollution issues.  The TMDL reports address this issue by indicating widespread hope that voluntary incentive programs, such as the Ohio EPA section 319 program or the USDA Farm Bill programs for agriculture, will provide the necessary financial assistance to meet the TMDL goals.  Nearly all of the reports, whether they directly mention these sources of funding or not, imply that load reductions from agriculture will be accomplished through application of existing voluntary incentive programs. 

In summary, the TMDL results so far seem to be saying the following: Large pollution reductions are required in many Ohio watersheds, these reductions are skewed towards nonpoint sources of pollution, and for the most part, we anticipate relying on existing voluntary incentive programs to address the nonpoint sources.  The next section takes a look at some of these programs in the agricultural arena. 

The Role of Voluntary Incentive Programs in Agriculture

To get a sense for the role that voluntary incentive programs for agricultural pollution abatement – or conservation – in Ohio could potentially play, examine how much money is available.  Table 2 summarizes funding from different sources.  Since 1996, the funds available have risen around 9% per year.  Most of the increase results from increases in the USDA programs due to the 2002 Farm Bill.  Another source of approximately $15 million is available annually from the Water Pollution Control Loan Fund of the Ohio EPA, however, these are low interest loans that must be repaid, and therefore are only partly direct subsidies like the other programs.

Table 2: Estimates of annual contributions to voluntary incentive programs by Federal, State, and Local agencies.

¹ Estimates of the USDA Farm Bill programs provided by USDA personnel

² Section 319 funds available for watershed projects provided by Ohio EPA

³ CRP and CREP funds provided by the Farm Services Agency, USDA.  Ohio contribution is estimated as 25% of total annual funds.

⁴ Other sources include local sources of funding for watershed protection.

Table 2 tells only part of the story for agriculture.  For instance, the values in the table over-estimate the actual funds farmers receive because some programs, such as the Ohio EPA Section 319 Program, also are used for non-agricultural, nonpoint source pollution control.  On the other hand, the values also under-estimate the actual annual costs for agricultural pollution control.  A recent survey by Hua et al. (2004) indicates that the cost-share programs pay only about 25% of the costs of actually installing and operating the practices on agricultural land. Thus, the private costs of best management practice installation and operation in Ohio are far higher than the public costs.  Based on the results of Hua et al. (2004), private and public costs could be as high as $200 million per year. 

Clearly these existing, large annual expenditures are not enough to fix pollution problems – even with their apparently substantial multipliers in terms of private spending.  The current crop of TMDL's implies that substantial additional reductions in nonpoint sources of pollution are required to achieve water quality goals.  In some agricultural watersheds, the reductions necessary to achieve water quality standards could be as large as 95%.  To meet the specific goals of the TMDL's, or the broad goals of cleaner water, Ohioans, farmers and non-farmers alike, will have to spend significantly more money.

Consider the example of grass waterways, filter strips, and wooded buffers along streams.  These are believed to be important practices that can be used to abate pollution from agricultural production.  They are widely cited in the TMDL documents as appropriate practices to reduce pollution loads. 

Current estimates suggest that large amounts of land in Ohio already are devoted to these practices.  Results from the Hua et al. (2004) survey described above show that approximately 5% of farmland on large Ohio farms (defined as more than $50,000 in annual sales) is utilized for grass waterways, buffers, etc.  Large Ohio farms control around 9.1 million acres of farmland (or more than 75% of total farmland) according to the 2002 Agricultural Census.  This suggests that at least 470,000 acres of land are devoted to waterways and buffers in the state, already. Using the average rental rate for CRP land in 2004 to approximate the opportunity costs of this land, the annual costs of owning and maintaining existing grass waterways and buffers is approximately $39 million per year. 

Meeting the goals of TMDL's will require more than this existing effort.  Economics – the dismal science – tells us that enrolling new acres will be at least as expensive as the acres already enrolled in buffer programs For instance, the average CRP rental rate in Ohio in 2002 was around $81 per acre per year, and in 2004 it rose to $84 per acre per year.  Acres enrolled in the CREP program in NW Ohio, the newest component of CRP, cost $152 per acre per year.  Suppose conservatively that expanding the area of grass waterways and buffers by 25 – 30% in Ohio (an additional 117,500 - 141,000 acres statewide) would meet the TMDL requirements.  This would cost an additional $10 - $21 million per year.  The higher end of the range would essentially double the current expenditure for the CRP program.  Can we afford doubling the CRP program in Ohio?

How Will We Achieve our Water Quality Goals?

It is difficult to get around the fact that meeting the goals of the Clean Water Act will be costly – whether that money is spent publicly or privately.  Does this mean that we should do nothing?  Of course not, but I do argue below that several adjustments to state policy could be undertaken to better align efforts in the state with benefits that could be achieved. 

First, the 80% goal of water quality attainment by 2010 could be re-thought.  After looking at the TMDL results so far, where large load reductions are suggested for many streams or watersheds that currently do not meet attainment, one has to question whether the goal is achievable.  The problem with the goal is not the endpoint, but the timeline.  In 1994, the goal was 75% attainment by 2000, and between 1994 and 2000 we moved from 46% to 55% of streams meeting water quality standards.  Perhaps improving by 8 – 10 percentage points per decade for the next 30 years would be more realistic, and attainable?  Setting lofty goals is a good idea, but setting unattainable goals, in this case a short timeline, may be counter-productive.  

Second, when setting goals, clear benefit cost analysis should be conducted.  I'll start with the costs.  The TMDL plans so far finalized make almost no mention of costs or timelines for meeting load reductions, particularly from nonpoint sources.  It is bad policy to ignore costs because costs matter to tax-payers and to people who ultimately have to implement the policies.  Costs could be included in TMDL's by taking more time to develop implementation plans.  For instance, those writing the plans can approximate the costs by (a) specifying particular implementation alternatives; (b) estimating the costs of the alternatives; (c) analyzing potential and likely sources of federal, state, and local funding; (d) assessing the level of local cooperation and willingness for private individuals to undertake costs on their own; and (e) estimating the time it takes to implement the alternatives analyzed.  The current TMDL's lack clarity on implementation, and they provide no realistic assessment of the costs.  Careful analysis of costs within TMDL watersheds could not only help locally, but it could also illuminate the timeline for meeting our state-wide goals.

Third, no cost estimate should be presented without also presenting benefit estimates.  Currently, beyond a few studies, we have little information on what value society places on clean water in Ohio.  From the studies we do have, it is clear that society values cleaner water more in some places than in others.  Collecting and using information on the benefits of water quality improvements can help us direct limited funds more efficiently to fix existing problems in a lasting way.  Note that in this regard, the TMDL program has made some progress by targeting modeling efforts earlier in the process towards watersheds with a lower proportion of streams meeting water quality standards.  However, we need to take this rationale several steps further by trying to better align the benefits of water quality improvements with expenditures for specific programs. 

For those who are squeamish about using economic measures for water quality targeting, note that the real reason to use them is to make the trade-offs more clear, and to use information on trade-offs in the decision-making process.  There are many ways to accomplish the goal of making trade-offs explicit, and there are many decision processes available to help society better align the benefits of water quality improvements with expenditures.  Whatever decision processes or criteria policy-makers use, difficult choices must be made and funds must be targeted.  It also needs to be stressed that using benefit cost criteria to help make decisions on the timing and targeting of funds differs from the current situation only insofar as different targeting choices will be made.  We already make choices about where to spend limited resources on water quality improvements.  The consequence of these decisions is an uneven distribution of water quality across the state.  This issue will not change if benefit cost criteria are adopted.

Fourth, we should re-evaluate our funding mechanisms and how we apply them at the state level.  With limited resources, one way to show water quality improvements is to target more resources to smaller areas.  For the section 319 program rather than giving out many smaller grants that are targeted to fairly large areas, we could change the requirements of that program to allow larger chunks of money to go to more tightly defined watersheds.  The TMDL process provides some detailed information on sub-watersheds, and this information can potentially be used by watershed groups to more carefully direct funds geographically within their own focus areas.

Fifth, Ohio should implement water pollution trading throughout the state.  Water pollution trading would set targets for pollution loads for each source of pollution, and then let the sources determine whether to change their technology, or to pay someone else to reduce the load.  Pollution trading usually sounds like a horror story to environmentalists, agencies, and sometimes industries, but it is one way to limit the costs of pollution abatement while ensuring actual improvements in water quality.  The TMDL process provides us with an opportunity to use modeling to direct trading programs at a distinctly local level.  Using trading, we can set realistic caps on pollution loads for particular time periods and actually meet them.  Pollution trading is a practical and pragmatic alternative to another decade of missing water quality targets.  Historically in environmental policy we have missed numerous opportunities at practical solutions to pollution because business and environmental interests saw reasons to gain by waiting.  These reasons all disappeared, but the environmental impacts did not.  With water pollution trading we have an opportunity to make real impacts on water quality over time.

Finally, planning remains the most important local effort we can undertake.  Every one of the steps suggested above requires strong, participatory state and local planning processes.  Large amounts of effort are going into planning water quality projects at the state and local level.  State agencies need to continue supporting these efforts by expanding resources available for planning grants, by expanding resources available for local leaders to learn about planning processes and decision-making, by expanding resources available to write implementation plans for TMDL's, by making implementation plans more central in the TMDL documents, and finally by continuing to push local governments to support these efforts. 

For More Information on Environmental Issues in Ohio, please visit the Ohio Environment Report.

Copyright 2004 by Brent Sohngen.  All rights reserved.  Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies.