Water Quality Trading Network Will Seek To Promote Consistency Among Programs

By Amena H. Saiyid

Jan. 17 --A coalition of government officials and representatives of environmental advocacy groups has set up a national network on water quality trading that will show how water quality improvements can be achieved at a lower cost through market-based approaches than by installing controls at wastewater treatment plants, industrial facilities and power plants.

Launched Jan. 14, the network aims to provide options and recommendations to improve consistency, innovation and integrity across trading programs.

The Environmental Protection Agency's water quality trading policy, issued in 2003, is essentially is a cap-and-trade program, with the total maximum daily load allocations for nonpoint and point sources serving as the cap against which various sources trade pollutant credits. These allocations are then incorporated into NPDES permits for point sources.

The EPA policy allows point source dischargers such as publicly owned water facilities or power plants to pay nonpoint sources such as farm operations to reduce certain pollutants such as nitrogen and phosphorus. States such as Oregon are using this scheme to trade credits earned through maintaining or lowering water temperature or meeting dissolved oxygen or ammonia limits.

According to the network overview, there are a variety of trading programs operating across the country at the state and local levels.

The national network will provide a single forum for consolidating principles and practices of trading programs that worked and lessons from programs that failed. It also will offer a venue for federal and state environmental, agriculture and water officials to hold a “dialogue” with representatives of regulated sectors, including municipally owned wastewater utilities and power plants, environmental groups and landowners.

The network will release two white papers this spring. The first paper will consolidate a range of options with pros, cons and issues based on experiences of existing water quality trading programs to consider in building a trading program. The second paper will attempt to establish a common set of principles and best practices to assist trading programs.

The Oregon-based Willamette Partnership--a coalition of conservation, city, business, farm and science leaders in the Willamette River basin--and the environmental advocacy group World Resources Institute will serve as the network coordinators to the participants--American Farmland Trust, National Association of Clean Water Agencies, Association of Clean Water Administrators, National Association of Conservation Districts, Chesapeake Bay Foundation, the Freshwater Trust, Electric Power Research Institute (EPRI), the Ohio Farm Bureau Federation, Environmental Defense Fund, Troutman Sanders, Kieser & Associates, LLC, the US Water Alliance, and the Maryland Department of Agriculture.

Opportunity to Learn

Alexandra Dunn, ACWA executive director, told Bloomberg BNA Jan. 17 that state and interstate officials represented by her group signed onto the network because “we want to expose our regulators to as much information about successful trading as we can as well as provide them with opportunities to learn from unsuccessful efforts.”

Trading has to be incorporated into the Clean Water Act National Pollutant Discharge Elimination System permitting programs that 46 delegated states are delegated to run with EPA oversight.

The network was launched two days after network participant EPRI released “Case Studies of Water Quality Trading Being Used for Compliance with National Pollutant Discharge Elimination System Permit Limits”. The report by EPRI provided a snapshot of how water quality trading programs are incorporated in 18 NPDES permits. The report found “a dichotomy” in the way water quality trading is authorized and used in the permits.

The report found that permit holders weren't applying credits toward NPDES permit obligations for reasons ranging from the nascent nature of the trading program to a lack of a regulatory need to use the credits.

EPRI also found variation in the types of permit holders who sought to incorporate trading, and also how trading was incorporated in the permits. The group also found that most of the permit holders seeking to use trading as one scheme for complying with permit obligations are wastewater treatment plants.

EPRI, which is a nonprofit that conducts research and development on electricity generation, delivery and use, is a partner itself in a pilot interstate trading project in the Ohio River Basin among farmers, power plants and wastewater utilities that is yet to begin trading.

To contact the reporter on this story: Amena H. Saiyid in Washington at asaiyid@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com