SB 737
Department of Legislative Services
Maryland General Assembly
2021 Session
FISCAL AND POLICY NOTE
Third Reader - Revised
Senate Bill 737 (Senator Rosapepe, et al.)
Education, Health, and Environmental Affairs Environment and Transportation and
Appropriations
Comprehensive Conservation Finance Act
This bill makes changes to a broad variety of existing programs related to environmental
conservation and natural resources management and expands opportunities for agencies to
obtain private investment and financing for State environmental projects, including
conservation efforts, restoration projects, and the installation and repair of green and blue
infrastructure. The bill also alters existing and establishes new State policies for
several related programs and establishes a new workgroup, commission, and task force.
The primary agencies that are affected are the Maryland Department of Agriculture
(MDA), the Maryland Department of the Environment (MDE), and the Department of
Natural Resources (DNR), but there are changes to procurement and contracting
opportunities for additional agencies. The bill takes effect July 1, 2021. Provisions
related to a new task force terminate June 30, 2023, and provisions related to a new
commission terminate June 30, 2024.
Fiscal Summary
State Effect: Near term impacts are primarily operational and are not necessarily expected
to have a significant fiscal impact. Some of these operational impacts are discussed below.
Overall, since most of the bill’s financing changes are permissive, the bill is not expected
to have a direct fiscal impact on State agencies. Any indirect impacts, for example, the
effects on overall State project costs, cannot be predicted. However, the bill may encourage
additional private investment in affected projects.
Local Effect: Overall, a reliable estimate of the bill’s impact on local finances cannot be
made at this time. However, local governments could benefit from the expansion of funding
opportunities for certain local projects, as discussed below.
Small Business Effect: Potential meaningful.
 Analysis
Bill Summary:
Maryland Department of Agriculture
MDA may not limit or prohibit, through any cost-share agreement, a participant in MDA’s
Maryland Agricultural Water Quality Cost-Share Program (MACS) from participating in
and receiving compensation from greenhouse gas (GHG) markets, carbon credits, or soil
carbon programs, if the purpose of the compensation is to achieve additional conservation
benefits that are consistent with the State’s Chesapeake Bay conservation goals.
MDA is authorized to enter into partnerships (through formal contracts or memoranda of
understanding (MOUs)) with private sector organizations that have experience in carbon
offset markets or other programs to (1) create statewide or regional partnerships to
minimize the costs and maximize the benefits of voluntary enrollment of farmland into
carbon offset markets and (2) assist private landowners with the aggregation of projects to
make the projects more saleable in carbon offset market programs.
Maryland Department of the Environment
Commission on Environmental Justice and Sustainable Communities
The bill requires the Commission on Environmental Justice and Sustainable Communities
(CEJSC) to recommend options to the Secretary of the Environment for ensuring that MDE
is making progress in advancing the human right to safe, clean, affordable, and accessible
water for consumption, cooking, sanitation, health, and recreation purposes.
Water Infrastructure Assets
The bill authorizes MDE, upon an investigation or examination of a water infrastructure
asset pursuant to current law, if MDE determines that (1) the water infrastructure asset is
unsafe, needs repair, or should be removed because it is unsafe and not repairable and
(2) the water infrastructure asset is a priority for removal to improve fish passage or is a
priority for small hydroelectric power plant installation, to take actions to repair, remove,
or retrofit the asset consistent with MDE’s objectives, as specified. More specifically, MDE
is authorized to (1) partner with the asset owner and an organization that provides resources
and expertise to plan, design, or finance changes to further MDE’s objectives, as specified,
or (2) prioritize the use of “environmental outcomes” arising from the repair, removal, or
retrofit of the water infrastructure asset in any environmental mitigation program identified
by MDE.
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MDE must provide notice to the Maryland Industrial Development Financing Authority
(MIDFA), for the purpose of securing specified financial assistance, of any water
infrastructure asset identified as a priority for small hydroelectric power plant installation
pursuant to the bill and the intended repair, retrofit, or removal measures identified.
Maryland Water Quality Financing Administration
The bill renames MDE’s Maryland Water Quality Financing Administration to be the
Maryland Water Infrastructure Financing Administration. The bill also defines several
terms, including “blue infrastructure,” “environmental outcome,” and “green
infrastructure.” “Blue infrastructure” is a water-based natural element or engineered
element, and “green infrastructure” is a land-based natural element or engineered element,
that is designed to mimic or enhance the function of a natural element that (1) absorbs and
filters pollutants; (2) protects communities from flooding or storm surge; (3) reduces
erosion; or (4) sequesters carbon. An “environmental outcome” is a commodity that is
modeled or directly measured as a single, quantifiable, and certified unit of improvement
to the environment, including a nutrient or carbon benefit.
The bill establishes that it is the policy of the State that the maintenance and repair of source
watersheds, including the conservation and restoration of forests and the installation and
maintenance of blue or green infrastructure that contributes to improved water quality, is
eligible for the same forms of financial assistance as other water collection and treatment
infrastructure.
Maryland Water Quality Revolving Loan Fund: The bill expands the authorized uses of
the guarantee authority under the Maryland Water Quality Revolving Loan Fund
(WQRLF) by (1) repealing the restriction that WQRLF may guarantee only local
government financing for all or a portion of the cost of a wastewater facility and
(2) authorizing WQRLF to be used to provide loan guarantees for similar revolving loan
funds established by municipal corporations and intermunicipal agencies without
restriction. The bill specifies that the current authorization to use WQRLF funding to
establish a linked deposit program to promote loans for controlling nonpoint sources of
pollution and protecting the quality of the water of the State includes loans for forest
restoration or the conservation of forest land by fee or easement. The bill also authorizes
WQRLF funding to be used:
 to provide loans for the protection of source water areas or Chesapeake and Atlantic
Coastal Bay watersheds through property acquisitions or easements;
 to establish a sponsorship program that allows a local government to serve as the
primary borrower and receive a loan for a publicly owned treatment works project
at a reduced interest rate if the loan also includes financing for a sponsored nonpoint
source project managed by an organization;
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 to serve as a guarantee for long-term pay-for-success contracts, green bonds, or
environmental impact bonds by any public, private, or nonprofit entity for the
purchase of certain environmental outcomes;
 to support long-term or permanent green infrastructure projects carried out in the
Susquehanna River Watershed by an organization agreed to by the management
committee of the Chesapeake Bay Program Partnership;
 to establish master lease purchase agreements with State agencies to support
projects that enhance water quality on State lands; and
 to support multi-year initiatives authorized under Title 8, Subtitle 2A of the Natural
Resources Article (which governs the Chesapeake and Atlantic Coastal Bays 2010
Trust Fund (2010 Trust Fund)) that also involve funding from the 2010 Trust Fund.
Maryland Drinking Water Revolving Loan Fund: The bill also makes changes to the
statute governing the Maryland Drinking Water Revolving Loan Fund (DWRLF). The bill
specifies that, for loans made at or below market rates from DWRLF, loan terms may not
exceed 30 years after project completion, or, with respect to disadvantaged communities,
40 years after project completion; under current law, the maximum loan term is generally
20 years. The bill also specifies that all loans will be fully amortized on the expiration of
the term of the loan; under current law, all loans are fully amortized within 20 years after
project completion.
The bill specifies that the current authority to use DWRLF funding to establish a linked
deposit program in accordance with State law and the federal Safe Drinking Water Act
(SDWA) includes loans for (1) controlling nonpoint sources of pollution and protecting the
quality of State waters; (2) protecting or acquiring forests or wetlands by fee or easement;
or (3) restoring forests. The bill also authorizes DWRLF funding to be used:
 to establish a sponsorship program that allows a local government to serve as the
primary borrower and receive a loan for a publicly owned water supply system at a
reduced interest rate if the loan also includes financing for a sponsored nonpoint
source project managed by an organization;
 with respect to any federal funds deposited in DWRLF, to prioritize support for local
governments, community water systems, and other eligible partners, as specified;
 to support multi-year initiatives authorized under Title 8, Subtitle 2A of the Natural
Resources Article that also involve funding from the 2010 Trust Fund; and
 to provide financial assistance to disadvantaged communities (as defined in SDWA)
in the form of planning or design phase grants.
The bill also clarifies the authorized uses of funds in DWRLF to include uses authorized
or required by relevant provisions of SDWA.
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Finally, the bill requires the Water Infrastructure Financing Administration, in creating an
intended use plan for DWRLF, to prioritize opportunities to provide assistance to
disadvantaged or environmental justice communities and to support innovative financing
partnerships to address environmental justice issues, as defined. This includes through
investment in (1) water infrastructure loans designed to ensure fairer and more just
opportunities to improve community health through better water service; (2) specified
municipal consolidation efforts; (3) toxic lead service line replacement; and (4) green
infrastructure that meets certain standards.
New Green and Blue Infrastructure Policy Advisory Commission
The bill establishes the Green and Blue Infrastructure Policy Advisory Commission to
advise the Secretary of the Environment, the Bay Cabinet, and local government officials
on ways to facilitate and accelerate the scale and pace of implementation of green and blue
infrastructure projects in the State, including a number of listed projects. The Secretary of
the Environment must ensure that, to the extent practicable, the commission’s membership
reflects the geographic, racial, gender, and cultural diversity of the State. Commission
members may not receive compensation but are entitled to reimbursement for expenses.
The commission must meet at least three times a year and study and make
recommendations on a number of action items related to green and blue infrastructure
projects, including (1) ways to prioritize green and blue infrastructure projects through
State permitting processes; (2) changes to local development policies and regulations that
would facilitate the timely review and approval of such projects; (3) ways to phase-in life
cycle costing requirements for long-term monitoring and repair of State and local
government-funded green and blue infrastructure projects; (4) strategies and policies to
prioritize these projects that meet certain goals, as specified; (5) policies to allow State and
local governments to attract sources of private capital investment and to maximize public
sector funding for these projects; (6) circumstances in which volunteer-based green and
blue infrastructure projects should be prioritized because of cost-saving benefits; (7) best
practices for streamlining the procurement and financing process for environmental credit
buyers at the local level; and (8) other policies to achieve an increased scope and scale of
ecological restoration. The commission must report its findings and recommendations to
the Secretary of the Environment, the Governor, and the General Assembly by January 1
annually. The commission terminates June 30, 2024.
New Task Force on State and Local Government Accounting for Natural Capital
The bill establishes a Task Force on State and Local Government Accounting for Natural
Capital to assist State and local governments to take full advantage of Government
Accounting Standards Board accounting standards to obtain necessary financing to scale
up the installation and maintenance of blue and green infrastructure and other conservation
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and restoration projects capable of contributing to a net reduction in the use of public
funding while improving community health and resilience. MDE and the University of
Maryland Environmental Finance Center must provide staff for the task force. Task force
members are not entitled to compensation but are entitled to reimbursement for expenses.
The task force must (1) document the extent to which specified accounting standards have
been adopted in the State, identify any barriers to the adoption of the standards, and make
recommendations regarding the increased adoption of the standards; (2) compile an
inventory of institutions that support natural capital and make specified related
recommendations; (3) make recommendations regarding public accounting and auditing
practices that could help State and local governments to better quantify and value natural
capital alongside traditional asset accounting; (4) develop a communications plan that
describes natural resources as natural capital assets, as specified; and (5) study and make
recommendations on any other matter the task force considers to be relevant and timely.
The task force must report its findings and recommendations to the Governor and the
General Assembly by September 30, 2022. The task force terminates June 30, 2023.
Department of Natural Resources
DNR is authorized to enter into partnerships (through formal contracts or MOUs), with
private sector organizations that have experience in carbon offset markets or other
programs to (1) create statewide or regional partnerships to minimize the costs and
maximize the benefits of enrolling private and public lands into carbon offset markets and
(2) assist private landowners with the aggregation of projects to make the projects more
saleable in carbon offset market programs.
The Secretary of Natural Resources is authorized to purchase environmental outcomes
through intergovernmental agreements with other states from long-term or permanent
projects located in the portion of the Susquehanna River Basin that lies within other states
if the purchase meets certain requirements.
DNR may not prohibit or limit, through any contract, easement, or agreement, a participant
in a program administered by DNR from participating in and receiving compensation from
GHG markets, carbon credits, or soil carbon programs, if the purpose of the compensation
is to achieve additional environmental outcomes that are consistent with the State’s
Chesapeake Bay conservation goals.
Ecosystem Services and Specified Easement Requirements
The bill establishes that “ecosystem services” includes (1) climate resilience; (2) carbon
sequestration; (3) the provision of wildlife habitat; (4) contributions to forest health; and
(5) the protection or restoration of wetlands.
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Maryland Environmental Trust: An easement approved by the Maryland Environmental
Trust (MET) may allow for the potential of economic return from the protection,
management, maintenance, or improvement of ecosystem services provided by the
property, so long as MET determines those uses do not impair or interfere with the
conservation values and purposes of the easement and are otherwise consistent with MET’s
policies related to ecosystem services.
Rural Legacy Program: An easement that is acquired under DNR’s Rural Legacy Program
may allow for the potential of economic return from the protection, management,
maintenance or improvement of ecosystem services provided by the property, so long as
DNR determines (1) those uses affirmatively increase the conservation attributes of the
property beyond the requirements of the easement and (2) any credits that are created, as
specified, are used only to mitigate offsite environmental damage in a priority funding area
or in a manner the DNR determines to be consistent with the applicable local
comprehensive plan and State and local objectives for land protection.
Forest Conservation and Carbon Sequestration
New Workgroup: In support of the State’s sustainable forestry goals, DNR must convene
a workgroup to (1) make recommendations regarding the creation of a statewide initiative
to implement forest carbon sequestration offset projects on public and private forest lands;
(2) facilitate the enrollment of forest lands in carbon sequestration markets; (3) assist
participants in the Woodland Incentives Program to participate in carbon sequestration
markets; and (4) recommend methodologies to allow groups of landowners to jointly
develop and enroll carbon offset projects. By July 1, 2024, DNR must b