Degraded groundwater, impaired swimming, fishing, algae and weed problem are often associated with eutrophication from phosphorus (P) loadings in surface and groundwater. The concentrated growth of poultry industry and over application of litter on pasture lands may lead to excessive nutrient loadings in surface and groundwater. The Cooperative Extension Service recommendation suggests that no poultry litter should be applied if the soil test P exceeds 300 pounds per acre, irrespective of the marginal costs and benefits associated with one more unit of litter application on that piece of land. The objective of this paper is to model the economics of P loadings from poultry litter and analyze the policy implications of Cooperative Extension Service's recommendation on quantity restriction on litter applications with empirical evidence. The results indicate that there exists significant difference in the marginal values of soil between different soil series, indicating that the permit system can achieve the target at a lesser cost. In particular, the society as a whole can gain $2.7 per acre by allocating the litter to soil series 16 instead of soil series 20, provided that the contribution towards groundwater contamination from these two acres are the same.