Incentivizing Phosphorus Reduction in the Kalamazoo River Watershed via Novel Reverse Auction Program

Breakout session on Tuesday, February 11, at 10:30 a.m.

Supported by the US EPA's Great Lakes Restoration Initiative, this 4-year collaboration between Delta Institute, Allegan Conservation District, and Michigan Farm Bureau was designed to reduce phosphorus runoff to Lake Michigan from agricultural fields through a performance-based incentive program.

Speaker: Lucas Chamberlain, Delta Institute

1. INCENTIVIZING PHOSPHORUS REDUCTION IN THE KALAMAZOO WATERSHED VIA NOVEL REVERSE AUCTION PROGRAM Lucas Chamberlain, Delta Institute

2. 2 Introduction Program Overview Funders & Partners Geography Eligible Participants & Practices Reverse Auction Framework Verification & Results Lessons Learned & Next Steps Q&A agenda Project Sign at Participating Farm. Source: Allegan Conservation District.

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4. 4 Participating farmers were paid to adopt cover crops and conservation tillage. Contracts are awarded through a “ reverse auction ”, which allowed participants to Select conservation practices Select fields Set their price Goals: Reduce phosphorus runoff by 5,000 lbs. Promote use of cover crops and conservation tillage on up to 6,600 acres. Demonstrate a market-based funding solution for conservation. Duration: 2020 - 2024 the basics

5. 5 Funded by the US EPA’s Great Lakes Restoration Initiative Focus Area 3: Nonpoint Source Pollution Impacts on Nearshore Health. I mplement systems of conservation practices on farms to reduce nutrient losses into waterways. Allegan Conservation District (Michigan) Field prioritization, P runoff modeling, practice verification, and farmer outreach Michigan Farm Bureau Farmer outreach FUNDING & PARTNERS

6. 6 Program GEOGRAPHY Kalamazoo River Watershed (MI) Area of Concern (US EPA, 1987) Seven subwatersheds Allegan, Barry, Kalamazoo, and Van Buren County. US EPA. (October 6, 2023). Kalamazoo River Area of Concern. https://www.epa.gov/great-lakes-aocs/kalamazoo-river-aoc Image Source: Delta Institute

7. 7 Participants Landowners or operators w/ legal authority to make decisions about soil conservation practices. Soil Conservation Practices (USDA NRCS) Cover crops, No till or Strip till, Combination of the above practices if appropriate. Fields Had not had the selected practices implemented on them within the past year. Within prioritized subwatersheds No perennial crops or hay/alfalfa fields. Program ELIGIBILITY Image Sources: USDA – NRCS, Allegan Conservation District. NO TILL COVER CROPS

8. 8 Farmers were paid per field . “Pay for Performance” Farmers were encouraged to work with program staff to model and estimate phosphorus reduction potential to inform bids. Farmers set bid for $/acre needed to adopt practice. Agreement Lengths: 1-2 years. reverse auction framework Jones NW field X $25/acre 81.2 109.27 / year $18.57 Jones 1

9. 9 ESTIMATING PHOSPHORUS REDUCTIONS Field Scale Great Lakes Watershed Management System (MSU) estimates phosphorus loading reductions assuming a transition from conventional farming to no till with cover crops. Fields with steep slopes that are at higher risk for erosion were expected to result in greater reductions . Image Source: Delta Institute

10. 10 Program staff estimated reduction in phosphorus runoff for each field. Bids were ranked by the cost per pound of phosphorus reduction . The most cost-effective bids (under the max price) were all funded at the same rate. How bids were selected

11. 11 Photo documentation was obtained each year of the contract. After Spring planting to verify tillage practices After Fall harvest to verify cover crops Practice VERIFICATION NO TILL COVER CROPS

12. 12 Three auctions: Winter 2020, Summer 2021, and Winter 2021. The reduction goal was met on less acreage than initially planned. program RESULTS   Number of Awarded Producers Acres of BMPs Enrolled Total Acres (including uplands) Estimated Phosphorus Reduction (lbs. per year) Final Auction price per lbs. phosphorus Payments Auction 1 3 503.46 1,137.60 2,513.60 $26.44/lb. $66,352.76 Auction 2 Auction 3 3 478.04 932.80 3,036.98 $30/lb. $86,599.95 Total 5* 981.50 2,070.40 5,452.74 n/a $152,952.71

13. 13 COVID-19 Limited Engagement Overcome by utilizing social media ( two paid posts reached an estimated 6,250 people and gained 153 engagements over a period of 21 days) Competition w/ Other Cost Share Programs $30/acre on a maximum two-year agreement, compared to $52.17/acre on at least a three-year agreement through USDA’s Environmental Quality Incentives Program (EQIP). Agreement Length Can This Program be Scaled? LESSONS LEARNED

14. 14 Soil Health Appraisals Proof-of-concept approach to incorporate measurements of soil health into the farm real estate appraisal process. 15 farms in IL and MI were appraised using a modified Sales Comparison Approach. Each landowner received a free appraisal and a comprehensive soil health report. Soil health was able to be analyzed as a potential adjustment within the Sales Comparison Approach. Soil testing showed evidence that tillage and “business-as-usual” management may degrade soil health. investigating other incentives for farmers

15. 15 Soil health appraisals Example of sales sheet with measurements of soil health represented individually as indicator values and as a metric. Source: Compeer Financial. Soil Health Index Soil Health Report from the IL Soil Health Appraisal Pilot Program. Source: Delta Institute Appraisal report from the IL Soil Health Appraisal Pilot Program. Source: Delta Institute

16. QUESTIONS