First Milk Nutrient Offsetting Project

In 2005 First Milk was served a notice by Dŵr Cymru Welsh Water (DCWW) informing that the Merlins Bridge Sewage Treatment Works (STW) could not treat industrial effluent as DCWW was required to release treatment capacity for housing developments, estimated at 3000 homes, proposed within the sewerage catchment.  As a result industrial effluent produced at the First Milk Merlin’s Bridge Cheese processing plant, at Haverfordwest, would no longer be able to be treated at Merlins Bridge STW (see Figure 1). The effective date of this notice was November 2014 and by this deadline all infrastructure was to be removed from the STW site.  First Milk would have to find an alternative plant or method for treatment of the effluent produced, if the plant was to continue producing cheese.

An application for a new permit was submitted to the Environment Agency in 2005 to treat and discharge effluent into Merlin’s Brook.  After a 12 month period the application was refused due to an unacceptable nutrient load entering the brook.  From 2006 and to 2011 progress towards a solution was stalled.

In 2011 another revised discharge application was submitted by First Milk to the Environment Agency, following the rejected proposals previously submitted.  During the application determination period the Environment Agency, Countryside Council for Wales (CCW) and the Forestry Commission merged to form the Natural Resource Wales (NRW).  Negotiations between First Milk and NRW resulted in a proposal whereby treated effluent could be discharged directly into the Cleddau River providing that there was no overall increase in nutrient in the Cleddau.  The reason for this decision was that Cleddau was deemed to be “nutrient full”.

The idea of asking First Milk dairy producers to offset the nutrient load from the cheese plant to be sent to the Western Cleddau was conceived. In practice this required that the nitrate, phosphorus and suspended solids produced at the factory was offset by the milk producers, through instigating nutrient efficiency and improved management practices on farm. The tender undertaken in 2005 to identify a supplier to erect a new effluent treatment plant was revisited and an allowance of a 20% increase in capacity expansion at Merlin’s Bridge cheese factory was factored in.  Following First Milk board approval the new effluent plant construction phase started in December 2013 and the work was completed and the plant commissioned in November 2014.

The main aim of the nutrient efficiency project was to safeguard the continued production and expansion of the cheese processing plant at Merlins Bridge, Haverfordwest, and maintain 93 full time and 30 tanker drivers’ jobs at the plant.  It would also provide a continued valuable outlet for 200 dairy farms within the area for the milk produced and continue to produce value added dairy product in West Wales. The approach would also avoid the need to tanker raw milk considerable distances to be processed in England.

The project would also be beneficial in enabling the economic and planned urban and industrial development along the Cleddau catchment, and help raise awareness amongst the farming fraternity of the potential to save purchased nutrients and reduce nutrient losses on farm through improved management practices.

The concept for this development was initiated by both First Milk and NRW in looking at the potential for nutrient offsetting as a mechanism of enabling the Cheese plant at Haverfordwest to continue to operate. Another driver was the need to look at the concepts of offsetting and changing management practices required to manage the other planned industrial and housing development in the area which would increase the nutrient load required to be treated at the DCWW effluent plant at Merlins Bridge and disposed within the Cleddau catchment.

The sustainability programme increased in profile within the business in 2012 with the release of the First Milk Sustainability Report. The main focus at this time was to look at the cow to the consumer chain and consultants were recruited at the time to identify the potential target areas.  The First Milk Sustainability Report sets gaols for 2020 with 5 main workstreams, one of which is the Wheels, Yields and Deals programme of which nutrient efficiency is one aspect (see Figure 3).

The Nutrient Efficiency programme in Pembrokeshire started in October 2012 and has evolved through a programme of knowledge transfer workshops, nutrient planning and the use of measures to control the release of nitrate, phosphorus and sediment to the environment.  The effectiveness of the mitigation measures employed at the farm level was calculated by a nutrient management tool called Farmscoper (Figure 4).

First Milk has invested both time and financial commitment over the past 3 years and will continue to do so in future years, to ensure that the momentum of both the Eco-offsetting model and nutrient efficiency programme is maintained.  The farmer engagement process has included workshops and roadshows where knowledge and information is shared with other farms and agricultural specialists such as nutrient management advisors (Figure 5).  This work is still ongoing.

For the permit compliance purposes, there are requirements to show offset methodology, benchmarking/baseline status, timeframes, monitoring, auditing, evidence collection and validation, contingency plans and data collation methods.  A plan to gather, store and validate information has been agreed with NRW.  In summary, compliance data is held at the farm and by First Milk.

A farm pack includes field data sheets which summarises the management of each field on the farm, an agreed plan of which mitigation measures will be deployed and a summary report of how the mitigation measures will reduce the nutrient load at the individual farm and as a group (Figure 8).  The group assessment allows the farm to see how it is performing against the other farms and can be viewed as a key performance indicator (KPI.)  Each farm holds a records file of the agreed mitigation measures employed at the farm and the required evidence such as certificates, photographs and receipts etc.  The reports and activities are checked twice per year for each farm in this study.  These farm packs are open for inspection by NRW as part of the permit compliance assessment.

NRW is also able to view all data held centrally by First Milk and then select a number of farms to audit.  A summary is available to show the combined impact of all the mitigation measures deployed at the participating farms.

There is risk that some farms will move from First Milk or drop out of the nutrient efficiency scheme and to reduce this risk, a contingency measure is to have 10% more farms than is estimated to be required to deliver the nutrient and sediment offset.  The required offset target is set by First Milk and the target figure is generated by monitoring the effluent quality and quantity as discharged at the treatment works.

In April 2015 the average nitrate reduction is 1125 kg per farm at an average rate of 7.47 kg/ha.  The maximum nitrate savings is 12.3 kg/ha.

This effluent plant development is a classic virtuous circle, land-based offsetting project whereby the waste produced (nitrates, phosphorous, sediment) in processing milk is offset by dairy farmers (producers of the milk) changing management practice to enable savings in nutrient losses on farm. In this instance the milk producers, as the owners of the creamery within the Cooperative framework are both the buyer and seller (as the instigators of the nutrient efficiency measures). As such there is no requirement for a broker. If however the nutrient efficiency programme undertaken by the farmers located in the area was to exceed that required as an offset for the industrial treatment plant, then the opportunity may arise that First Milk could become a seller of credits for nitrate phosphorus and sediments. These savings are measured in kilograms (kg).

It is worth noting the data for other parameters are also collected as part of the nutrient efficiency programme such as greenhouse gases, faecal indicator organisms (FIOs), pesticides, energy, water and biodiversity units. These parameters are not required as part of the permit compliance returns but are included as a benchmark activity for future reference. It is possible that the collection of data, beyond that as required for the permit compliance, may prove of value for future offsetting programmes. An example would be the reduction in FIOs for the protection of bathing water.

This programme follows the principle of “Upstream Thinking” as developed by South West Water to improve the water quality of a potable supply (Upstream Thinking – South West Water). In this initiative, land management activities within a catchment were encouraged to improve the water quality abstracted as a potable supply, with funding based on reduced water treatment costs. The use of the programme released £1.9 million funds from OFWAT between 2010 and 2015.

The participants within the project comprise of First Milk Ltd, Natural Resources Wales, First Milk dairy producers, Kingshay Trust and ADAS.

The inception of the project was instigated by Simon Matthews of First Milk in conjunction with Paul Gibson of Natural Resources Wales. Initially the potential to offset nitrate, phosphorus and sediment loading produced at the cheese factory was discussed together with proposed figures for maximum effluent loadings of nitrates, phosphorous and sediment from the plant to the Cleddau. Further discussions with local Natural Resources Wales staff enabled the project to be taken to the next stage.

The Kingshay Trust were contacted to help First Milk in their delivery of nutrient planning on farm and helping to facilitate the recruitment of 40 First Milk dairy farmers to participate in the project. Following a series of farm meetings and visits approximately 30 farms were identified who would be willing to participate in the project.

The ADAS “Farmscoper” tool (developed for DEFRA) was chosen as a method of calculating initial farm nutrient loadings within a catchment. Farmscoper also calculated potential savings in nutrient losses where farms would undertake mitigating measures to enable losses to be monitored and reduced.

ADAS were then contracted by First Milk to undertake independent audits of the data on all of the participating farms using “Farmscoper” and initial data submitted by Kingshay Trust. The audited data would then be submitted to Natural Resources Wales who would then undertake their own audit to check the authenticity and accuracy of the data. This approach checks that the nutrient losses calculated fall under the maximum allowed under the waste permit allowed for First Milk to dispose into the Cleddau.

First Milk would monitor the effluent load disposed into the Cleddau from the treatment plant, and would thus provide accurate data as to the annual load. It is thought that the new effluent treatment plant would provide a more efficient filtration system which would enable the effluent to be disposed into the Cleddau with considerably lower nutrient loading than those disposed of previously through the older DCWW treatment plant.

Challenges

Numerous barriers have had to be overcome in developing the new waste treatment plant and to initiate the nutrient offsetting project. These include:

• Additionality:  The implementation of the Nitrate Vulnerable Zone (NVZ) ruling could have an impact on this study as the one parameter of PES is that of “additionality” i.e. delivering more than is required by best practice and legislation. The NVZ regulations would require farms to reduce the risk of nitrates losses to the river and some of these measures would be statutory requirements. At present the establishment of the NVZ candidate sites is to be released imminently.
• Planning:  Planning and obtaining permission on environmental issues has proven to be painstakingly slow with change of staff and personal opinions differing from one individual to another amongst some of the competent authorities involved within the planning process. Duplication of environmental impact assessment reports was required incurring significant additional cost to First Milk together with considerable delays in the planning process. Permission to obtain access to the Cleddau was also fraught with difficulties as 5 different landowners needed to be contacted and permission secured.
• Professional input:  Securing land contracts and wayleaves/rights of way should be undertaken by a professional land agent with professional discretion to undertake the negotiations.
• Farmer engagement and monitoring:  Dairy farmers were interested in the project but did not want more inspections or farm visits by public body staff as a form of “snooping” on what was happening on farm. It was felt that an independent auditor was required with “expertise” in understanding “Farmscoper”, to move the project on to the next stage and to give guidance to the farmers as to the measures which they would be committing to undertake to help offset nutrient losses on farm. The benchmarking of data from farms would help give better understanding of the project and losses to the participating farmers, hence a better “buy in” to the project.

Possible Resolutions

The common problem associated with planning issues is that where several different public bodies are involved, they do not regularly talk together on commonality or joint bordering issues. When joint planning meetings occur with several public bodies with applicants, accurate notes should be taken and action points on who does what, and by when, in order that there a joint agreement is taken on the way ahead to simplify the whole process.

This would minimise the timescale involved in the planning process and avoid changes in opinions or other actions or plans required to be undertaken by the applicant.

Avoiding duplication of reports for public bodies should be stipulated from the outset e.g. the same ecology report required which is acceptable to NRW, other statutory consultees and the local authority planning departments.

It would be advantageous if for a project of this size, in terms of capital expenditure and with a socioeconomic and environmental profile, to have a process team. This might be a virtual team spanning several difference organisations and interested parties where each has a clearly defined role and responsibility. Professional organisations or people with the relevant knowledge and experience of how to deal with planning, environmental, technical, and systems expertise should be employed from the outset to give guidance and advice as to taking projects forward with the minimum amount of disruption.

It is important to make contact with the staff or personnel that deal with the application and understand the issues behind the process so that technical issues are dealt with from the beginning. This was felt to be better handled following the formation of NRW in Wales to bring together the Countryside Council for Wales, Forestry Commission and the Environment Agency.

No credit valuation has been undertaken to date on the project as this is the first permit which has been granted in Wales by NRW on offsetting nitrates, phosphorous and sediment nutrients on land. However the average nitrate saving has been quantified for farms at 7.4 kg/ha. First Milk has undertaken their own economic assessment of the project – mainly on the effluent plant returns as this was a “must-have development” if the plant was to remain viable in the future.  The calculations in-house were deemed commercially sensitive and confidential, and hence not available for this case study.

In the absence of actual data Table 1 shows the guide treatment costs for removal of nitrates at 2 different sized treatment works as an indication of scale.  It is likely that the First Milk treatment work will fall within the lower parameter.

The modern effluent treatment plant offers considerable savings to First Milk with the potential to reduce the level of nutrient loading of the effluent disposed into the Cleddau. It offers further scope (with additional investment to the internal drainage system of the Merlins Bridge site) to recycle a large amount of the water contained in the effluent, which can be used within the plant to help reduce the plant’s water footprint.  The aim would be to operate a closed loop water system with the majority of recovered water used for cleaning activities.  The estimated cost of water is between £1 and £1.20 per m³ and is anticipated to increase over time.

The participating farmers received nutrient plans following soil sampling undertaken by Kingshay trust. The nutrient plans identify potential savings which can be achieved in purchased nutrients and helps balance the use of organic nutrients produced on farm together with the purchased fertiliser requirements.  Reductions in nutrients use and cost savings can be deduced from the nutrient planning reports but this information is not readily available. The cost of the commercial merchant figures for fertiliser price (17 March 2015) is seen in Table 2.

The Farmscoper tool which has been used to model the farm activities and the potential savings for each farm offers unit savings in both financial terms (£) and in weigh (kg) for each parameter, including biodiversity units, pesticide use, faecal indicator organisms and greenhouse gas emissions.

For this project only nitrate, phosphorus and sediment losses are returned back to NRW as part of the permit compliance criteria and the total offset for the treatment plant.  Other parameters such as impact of the mitigation measures has on  greenhouse gases, biodiversity units and faecal indicator organisms can support the First Milk sustainability programme for the group.

The project is in its first year of inception and the mitigation report is due in November 2015. First Milk keeps detailed figures of effluent loads and disposals into the Cleddau and early indications show that the new treatment plant is performing better than anticipated. Hence the nitrate, phosphorous and sediment losses from the plant should be less than the permit threshold values.

There is the opportunity in the future to look at the value of this eco-banking project in terms of giving participating farmers a return on the value of their nutrient reductions which have been offset on farm. This would be from First Milk’s viewpoint a potential to return a higher milk price to the farmers which would reward them for remaining as First Milk suppliers and securing the future of the Merlin’s Bridge cheese plant, which produces prize winning cheeses and employs a significant number of people within the area.

The farmers participating in this project and the mitigation measures chosen as part of the nutrient efficiency programme are on voluntary basis and this is common with other PES schemes. If there is a financial incentive to join this scheme by either changing the milk price as received by the farmer or offering a payment for instigating a specific measure, then the uptake within the farming community may increase.

The study has revealed that there are several mitigation activities that are particularly effective as reducing the nutrient load to the river such as those relating to arable crops. There is potential to encourage the increase in the production of arable crops in specified targeted areas where water quality or habitat loss is of prime concern.

The First Milk initiative has taken a considerable amount of staff time in developing the project from its initial inception in 2011 to participation, build, and commissioning the new effluent plant in 2014. The project has been driven by financial and regulatory needs of maintaining and developing the First Milk Merlins Bridge site, which has been the most important factor behind the original idea. The full cost of this work and the installation of the treatment works is not known.

The indicative value for nitrate savings is estimated 7.4 kg/ha and this saving is currently on target to meet the permit condition.

A large number of barriers have needed to be overcome in developing the whole project, with planning and site development regulations proving to be the most difficult ones to undertake.

The project has involved a large amount of financial investment by First Milk with a considerable amount of additional staff time required to discuss the eco-setting requirements and the need to draw in outside consultancy help in developing the relationship and farmer involvement. The full cost of this work is not known.

A close relationship has been formed between First Milk and NRW as this project is one of the first in Wales to be developed within a sensitive water catchment area utilising farmers to manage land as an offsetting measure. This has proven beneficial to both organisations with the permit nutrient load values found to be a “Can do” approach on both sides.

The ADAS “Farmscoper” programme was chosen as the monitoring method of assessing nutrient losses on farm by First Milk and NRW, as an independent tool capable of giving a baseline figure at project inception and losses reduced during the project duration following mitigating measures adopted by participating farmers on their farms.

An independent impartial experienced organisation was also required to audit the data to provide both parties with the information which would enable the permit nutrient load to be monitored on farm following farmers adopting mitigating measures and recording data on farm.