Technical Abstract: This study presents a framework for analyzing environmental policy for remediation of salmonid habitat and water quality. The focus is on agricultural land use and nonpoint source pollution, but the techniques can be applied to a wide variety of environmental policy questions. The method consists of nonparametric production models using data envelopment analysis, nonparametric regression surfaces to link optimized production to geographic regions, and the Soil and Water Assessment Tool simulate the physical environment. We apply the method to the evaluation of an input tax on nitrogen fertilizer on non irrigated wheat and barley farms in the Columbia River Basin, and find a large variation in the cost of nitrogen reduction in surface water. We conclude that to be effective, such a tax must be targeted at specific watersheds. The method is capable of simulating many non-point source pollution policies, including taxes, alternative tillage practices, and regulation.