CHESTERFIELD, Virginia (From The Chesterfield Observer) -- Last week, Tranlin Inc. announced that it was moving forward with its $2 billion paper mill in eastern Chesterfield by hiring a global engineering company to help it with designing the facility and obtaining about 20 environmental permits.

But one of the permits that Tranlin, a subsidiary of China-based Shandong Tranlin Paper Co., will need to secure involves a complicated and somewhat untested system of trading pollution credits for nutrient contamination allowed into the Chesapeake Bay and surrounding waters.

Called the Chesapeake Bay Watershed Nutrient Credit Exchange Program, the system involves setting maximum limits for nitrogen and phosphorous that can be emitted by 121 so-called "point sources" on the bay and its estuaries, including the James River, where the pulp mill will be located.

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At high enough levels, nitrogen and phosphorous can disturb sensitive fishing grounds and aquatic ecosystems, causing toxic conditions such as algal blooms, which can lead to oxygen depletion and "dead zones" where fish cannot live.

The program, says Allan Brockenbrough, a permit manager at the Virginia Department of Environmental Quality (DEQ), was created in 2005 to clean up the Bay and surrounding waters "as quickly and as cheaply as possible."

To achieve that goal, maximum loads for nitrogen and phosphorous that can be emitted were established for tributaries including the James, York, Potomac and Rappahannock rivers. In the Chesterfield area, for example, Dominion Virginia Power's power station near the Tranlin site, an Altria facility in Chester and DuPont's sprawling Spruance plant, along with wastewater treatment facilities for local municipalities, all were given parameters for how much nutrient pollution they can emit.

For the system to work, however, there must be a limit on the number of credits doled out to known polluters. They can be traded, however, if the allocated credits go unused by the companies or municipalities who have received the credits.

The scheme has been used before nationally to reduce sulfur dioxide air pollution that can cause acid rain. It has been proposed as a way to curtail carbon dioxide air pollution.

Tranlin, which is expected to emit nitrogen and phosphorous into the James, must line up sufficient "credits" with polluters before it can apply for a permit from DEQ. It's unknown how many nutrient credits Tranlin will need, but multiple sources tell the Observer the company's need is significant.

Finding out how many credits are available is relatively simple. The DEQ website lists detailed information about which sources emit nitrogen and phosphorous into the Chesapeake Bay watershed, how much is permitted and how much the sources are over or under the goal. The data is updated periodically.

"Tranlin could potentially trade with anyone upriver from Hopewell," says Brockenbrough. That would include Dominion, Altria, DuPont or Honeywell, which operates a large chemical plant in Hopewell, he says. The credits can be purchased with cash or other tender "for whatever the market will bear," Brockenbrough says.

Some say that it will be difficult for Tranlin to do so. "There is some question whether Tranlin will get sufficient credits" to be able to apply for the permit, says Peggy Sanner, a senior attorney with the Chesapeake Bay Foundation's Virginia office.

One well-placed source, who spoke on the condition of anonymity, says that Tranlin presented an unforeseen problem when the nutrient cap and trade program was set up a decade ago. Although the program is supposed to be flexible enough to allow for new industries, it wasn't designed to accommodate a facility the size of Tranlin's paper mill, which is expected to employ 2,000 on an 850-acre site near the intersection of state Route 288 and Interstate 95.

John Stacey, senior vice president at Tranlin, doesn't see a problem. "Our schedule is not impacted by the credits," he says.

Brockenbrough says that obtaining such credits is certainly possible, but "it will be a test of the program," adding, "what Tranlin needs to do is convince someone to sell them the credits."

Obtaining the credits is just one hurdle for Tranlin, which is in the process of changing the company's name to Vastly. It needs other permits and has yet to acquire the largest, 650-acre portion of the site where it plans to build. Another issue is planning and funding a new interchange at Interstate 95 and Willis Road to accommodate extra vehicular traffic at the plant site.

On Sept. 28, Tranlin announced it has contracted with Jacobs Engineering Group of Pasadena, California, to handle preliminary design and permit coordination at the plant.

Robert Burnley, senior adviser to Jerry Z. Peng, chairman and chief executive of Tranlin, said in a press release that Tranlin and Jacobs will work over the next 18 to 20 months with state and federal regulators "to prepare for operations meeting or exceeding all environmental standards." Burnley was director of the Virginia Department of Environmental Quality from 2002 to 2006.

One day last week, there seemed to be activity at Tranlin's construction shed at the end of Willis Road. The company recently added a large red-and-white "no trespassing" sign saying that the area near the shed was "restricted to employees of Tranlin Inc. and invited guests."