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Duke, American Electric Buy in Nutrient Pollution Auction

March 11 (Bloomberg) -- Duke Energy Corp. and two other coal-burning electric utilities bought $90,000 worth of credits in a pilot program designed to reduce fertilizer-laden runoff from farmland.

Participating farmers agreed to plant cover crops, erect silt fences or find other ways of keeping 4.5 tons of nitrogen and phosphorous from washing into the Ohio River basin, said Christopher Mahoney, a spokesman for the Electric Power Research Institute, a program sponsor.

Because air-pollution controls at coal-burning power plants capture nitrogen, utilities want to see if a nutrient market might help nitrogen disposal, Jessica Fox, director of the program for the EPRI, said today in a telephone interview. The Ohio River program may be a template for others, she said.

“We sold credits for $10 per pound,” Fox said. “That’s an accurate price signal for maintaining the burden of the program.”

The targets are fish-killing algae and excess nutrients that cost tourism $1 billion annually, according to U.S. Environmental Protection Agency estimates. Excess nutrients in the Ohio River contribute to a “dead zone” in the Gulf of Mexico the size of Connecticut, according to the EPA.

Duke, based in Charlotte, North Carolina, American Electric Power Co. in Columbus, Ohio, and Hoosier Energy Rural Electric Cooperative, based in Bloomington, Indiana, will retire their initial credits and not trade them, according to Fox. The EPA and U.S. Department of Agriculture also provided funding.

To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net

To contact the editors responsible for this story: Randall Hackley at rhackley@bloomberg.net Stephen Cunningham, Jasmina Kelemen

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