INDIANAPOLIS — Five Southeast Indiana Soil and Water Conservation Districts are breaking new ground in the field of water quality trading.

The SWCDs in Dearborn, Ohio, Ripley, Switzerland and Wayne counties are participating in pilot testing of a large U.S. water quality trading program. Water quality trading is an approach to achieve water quality goals for nutrients such as phosphorus and nitrogen cost effectively.

In this pilot program, farmers will be paid with private dollars to install best management practices to reduce the runoff of phosphorous and nitrogen. The nutrient reductions will be sold as credits to permitted facilities that may need them to meet regulatory compliance obligations.

Among the conservation BMPs farmers may be installing include: cover crops, nutrient management, vegetative filter strips, grass waterways, livestock exclusion, forage and biomass planting, heavy use area protection and conservation tillage.

The leadership demonstrated by these first SWCDs in Indiana to test the program will help pave the way for Hoosier farmers to voluntarily participate in the water quality trading market in the Ohio River Basin once it is fully established by 2016.

The states of Indiana, Ohio and Kentucky signed an interstate trading agreement in August 2012. Even before that, SWCD supervisors in these five southeast Indiana counties unanimously approved motions to participate in the project and sent letters of support to the program manager, the Electric Power Research Institute.

District leaders recognized that water quality trading could be a win-win situation in fulfilling mutual goals of soil conservation and water quality, breaking new ground for water quality.

“The early recognition from the SWCD supervisors of the potential importance of this market and their willingness to step up will pave the way for agricultural producers to benefit from this alternative source of private cost-share money,” said Darrell Nicholson, U.S. Department of Agriculture Natural Resource Conservation Service area conservationist in Indiana.

Indiana’s state conservationist, Jane Hardisty, also is a supporter of the program.

“This project will complement the work of NRCS and the Indiana Conservation Partnership,” she said. “It provides another opportunity for producers to implement a system of conservation practices that increase soil health on their land, benefiting both soil and water quality.”

The SWCDs help producers in their counties submit applications. If accepted, they will sign agreements with the individual SWCDs to implement the practices and maintain them for five years in exchange for the cost-share assistance.

The trading agreement serves as the basis for the three states to implement pilot trades beginning this year through 2015. Although some states have adopted trading policies or rules to govern trading within their jurisdictions, this is the first time that several states have come together to implement an interstate trading program where all states operate under the same rules.

As part of the partnership, the state Department of Agriculture is the lead agency for Indiana on the project and has contracted with the EPRI and the five SWCDs.

The SWCDs also are working with the American Farmland Trust, one of the project’s collaborators, to recruit farmers to participate in the early pilot trades and calculate how many pounds of nutrients their proposed practices may reduce.

They are helping the project collaborators learn what works and what doesn’t in executing these trades. The project pays producers up to 75 percent of the cost of implementing agricultural conservation practices that reduce the loading of nitrogen and phosphorus in watersheds.

The project is looking for a range of different practices to test based on the amount of nutrient reductions per dollar spent. Considerations include the extent to which additional environmental benefits – such as carbon sequestration or wildlife habitat — are produced, whether priority concerns for the SWCD or state agencies are being met and whether producers are willing to participate in media events or outreach to other producers.

During the pilot trading period, eight to 15 Indiana producers will implement practices that will keep 66,000 pounds of nitrogen and 33,000 pounds of phosphorus out of the Ohio River Basin. More information can be found at http://wqt.epri.com.