Can Maryland Pay Pennsylvania to Clean the Bay?

One of the problems that I see with getting Pennsylvania to live up to it's EPA appointed share of cleaning up Bay is incentive. Having no shoreline along the Bay, Pennsylvania's incentive amounts to what it takes to clean the Susquehanna River to a tolerable state, which still passes plenty of nutrients on to the Bay. While not nothing, it is insufficient for them to be particularly motivated to take actions that cost a lot of loot, or, more particularly, cost their farmers a lot of profit and/or yield. Having Maryland and Virginia chip in to help Pennsylvania makes a lot of sense, since they reap most of the benefit, but the question of the mechanism has eluded me. However, this article in WaPoo has a suggestion: A new way to pay for the Chesapeake Bay by Michael Curley

Lately there have been bad feelings between Pennsylvania and Maryland over Pennsylvania’s failure to fully address its pollution problems in the Susquehanna River, one of the main feeders of the bay. Pennsylvania’s problems stem from its agricultural sector, where nutrient runoff from the many farms along the Susquehanna winds up downstream in the bay. Maryland Gov. Larry Hogan (R) has demanded that the state’s attorney general sue Pennsylvania and sue the U.S. Environmental Protection Agency to force Pennsylvania to do its job.

As noted above, Maryland’s CWSRF cannot make loans to farmers in Pennsylvania. Furthermore, the problem with loans is that they have to be repaid. The usual recipients of CWSRF loans are wastewater treatment facilities called publicly owned treatment works (POTWs). Making loans to POTWs is usually no problem. POTWs have thousands of customers to absorb the loan payments. A $500,000 loan to a POTW requires about a $25,000 annual payment. If the POTW has more than 25,000 customers, that’s less than $1 per year per customer. But if the CWSRF made the same loan to a farmer for an agricultural nutrient reduction project, the farmer — alone — would have to repay the $25,000 — every year! That’s probably a good reason the politicians in Pennsylvania are dragging their feet.

What can be done? Is there a new way to pay for the bay?

Yes. There are two things that need to be done to get money to the farms in Pennsylvania to fix their runoff into the bay.

The Chesapeake Bay Commission is an agency created by Maryland and Virginia in 1980. Pennsylvania joined in 1985. The commission was formed by an interstate compact under Article I of the U.S. Constitution, which requires the consent of Congress. Unfortunately, the commission does not have the fiscal powers to make loans in the participating states. But it could.

The three states could ask Congress to amend the Chesapeake Bay Commission compact, or they could ask Congress to create a new agency that would have lending powers.

So, an interstate agency with fiscal powers is one way to get money from Maryland to Pennsylvania to support the bay. But why? Why would anyone in Maryland pay to help Pennsylvania meet its legal obligations?

Iowa’s CWSRF pioneered a process that could be adopted in Maryland to make interstate payments truly painless. For lack of a better term, the process could be called “adoption.” In Iowa, a POTW was facing a major tightening of the terms and conditions of its National Pollutant Discharge Elimination System permit. The equipment upgrades necessary to remove the additional nutrients would have cost the POTW and its customers millions of dollars. Instead, the POTW identified an upstream farmer who could undertake a runoff-reduction project on his farm that would remove more nutrients at a fraction of the cost. After much negotiation, the concept worked. The state agreed to give the POTW credit for the nutrient reductions from the upstream farm project in return for the POTW’s paying for the project. So, the happy ending is that the nutrients got removed from the river, and it didn’t cost the farmer a penny.

This could be done right here for the Chesapeake Bay.

Maryland POTWs could be given credit for the nutrient reductions caused by projects upstream on farms in Pennsylvania. This would require a lot of cooperation among Maryland POTWs, Maryland regulators and the farm community in Pennsylvania. But there’s no reason it couldn’t work. After all, painless cooperation is better than lawsuits. And the waters in Pennsylvania flow into the same bay that the POTWs serve.

Is this the answer? I don't know; I'm not a financial guy, but at least someone else is thinking about it.