1. CHESAPEAKE BAY PROGRAM EXECUTIVE COUNCIL GUNSTON HALL ▪ LORTON, VA ▪ JULY 9, 2012 1 Strategies To Meet Infrastructure Finance Goals Christopher D. Pomeroy

2. 2 3-Part Point Source Strategy in Virginia Shared Financial Commitment –Partial grant funding for Wastewater Plant upgrades Innovative Regulation –One Watershed General Permit for all dischargers Market-Based Flexibility –Flexible permittee-led trading with accountability

3. 3 1. Shared Financial Commitment: Water Quality Improvement Grants Role of the Commonwealth of Virginia –Fund Grants Program through State Budget –Use cash (% of budget surplus, if any) or debt as needed –Reimburse Localities for set % of construction costs Role of Locality (WWTP Owner) –Plan, design and construct facility upgrade –Operate facility to meet nutrient performance standards –Finance local share (~ 50% to 75% of total project) usually with 20 to 30-year debt

4. 4 Shared Financial Commitment: Investment History A Reliable State-Local Partnership –16-year track record (1998-2013) State Contribution of $744 Million through FY13 –Average of $47 million per year –FY13 Budget adds an above-average $88 million Locality Contributions (est.) –State grants leveraged ~ $1.5 billion in local funds –Over $2 billion (total) invested

5. 5 2. Innovative Regulation Watershed General Permit (WGP) –A single permit covers all wastewater treatment plants –Focuses on “significant” facilities first WGP Set a Common Schedule for All Facilities –Set effective date of Jan. 1, 2007 –Set compliance deadline of Jan. 1, 2011 –Supports stable, predictable regulatory climate WGP Authorized Use of Trading for Compliance

6. 6 3. Market-Based Flexibility: Point Source Nutrient Trading Participant-Run Trading Program –Exchange Assn & Members create 5-year trading plan –Member-operated Exchange facilitates most trades –DEQ has oversight authority, but no direct role in trades Outstanding Results –75 Owners, 110 Facilities, and 100% compliance –246,000 N and 77,000 P credits traded and used in 2011 –Total credit value of $1.9 million for 2011

7. 7 Stakeholder Perspective on Keys to This Success Reliable financial partnerships Willingness to change old regulatory models Predictable rules that focus on the big picture Appropriate flexibility for implementation details Long-term stable regulatory climate

8. THANK YOU FOR MORE INFORMATION Christopher D. Pomeroy chris@AquaLaw.com www.AquaLaw.com (804) 716-9021 8