Title: Chesapeake Bay
1- Chesapeake Bay
- Water Quality Trading
2- What is Water Quality Trading?
- Voluntary exchange of pollutant reduction
credits. - Sources with higher pollutant control costs may
purchase pollutant reduction credits from
sources with lower control costs. - How are Trading and Offsets Related?
- Trading is the economic activity used to purchase
sufficient pollutant loadings to offset a
facilitys excess discharge. - Trade Economic
- Offset Pollutant
3What is Being Traded?
- Pollutant Reduction Credits
- A unit of pollutant reduction needed by a buyer
usually measured in pounds equivalent. - Generated by a point source (regulated)
over-controlling its discharge. - Generated by a non-point source (unregulated)
from the installation of best management
practices beyond those required for baseline.
4Baselines for Credit Generators
- A source that wants to sell pollutant reduction
credits must first meet a baseline level of
discharge.
Point Source Pre-TMDL -WQBEL in
permit TMDL -WQBEL in permit which is consistent
with the TMDL wasteload allocation (WLA)
Non-point Source Pre-TMDL -State and local
requirements and/or existing practice TMDL -TMDL
load allocation (LA)
5Trade Ratios
- In most cases, pollutant credits are not
generated on a 11 basis. Rather a trading ratio
is used to normalize differences between the
sources discharges. - There are four types of trade ratios
- Delivery or Location Ratios
- Account for fate and transport, pollutant
attenuation - Equivalency Ratio
- Account for different forms of the same pollutant
(e.g., total vs. dissolved nitrogen) - Uncertainty Ratio
- Account for uncertainty about the actual volume
of credits produced (generally seen with PS-NPS
trading) - Retirement Ratio
- Accelerate the rate of water quality improvement
6When Can Trading Not Occur?
- Trading cannot be used to meet technology-based
effluent limitations. - Trades cannot cause nonattainment of an
applicable water quality standard. - Trading cannot cause an exceedance of a cap
established under a TMDL.
7EPAs New Dischargers and Offsets Rulemaking
- Will address the appropriate use of offsets to
compensate for new discharger loadings both prior
to the issuance of a TMDL and where a TMDL is in
place. - Potential schedule
- -March 2012 Options Selection
- -Summer 2012 Proposed Rule/Public Comment.
8The Chesapeake Bay TMDL and Tradings Role in
Meeting its Goals
- The question is what can be done in the interim?
- In Section 10 and Appendix S of the Chesapeake
Bay TMDL established on December 29, 2010, EPA
states it will use the full scope of its
authority to ensure offsets and trades for
nitrogen, phosphorus, and sediment are fully
consistent with the Clean Water Act, its
implementing regulations and NPDES permits. - Unlike the Clean Air Act, under the Clean Water
Act EPA lacks clear authority to establish
requirements for water quality trading programs.
Thus, the offset appendix provides EPAs
expectations for water quality trading in the
Chesapeake Bay under the new TMDL
9The Chesapeake Bay TMDL and Tradings Role in
Meeting its Goals
- Appendix S (Offsets) outlines the minimum common
elements for the Chesapeake Bay jurisdictions
offset and trading programs. - Authority
- Offsets Baseline That any point or non-point
source generating a credit has implemented
practices or met any reductions necessary to be
consistent with the Bay TMDL allocations. - Minimum Controls That any point or non-point
source using a credit has implemented certain
minimum controls (e.g., a discharger using a
credit will meet on-site any relevant minimum
technology based standards or secondary treatment
standards).
10The Chesapeake Bay TMDL and Tradings Role in
Meeting its Goals
- Eligibility
- Credit Calculation and Verification Ensuring
that credits are quantified using appropriate
metrics and are verified to ensure that they are
producing the expected reductions. - For example, accounting for uncertainty of source
reductions due to factors such as practice
efficiencies related to the use of BMPs, a lack
of required reporting compared to other sources,
and/or lack of regulation of the source by
federal, state and/or local regulations. - This process also entails verifying the credit
was and continues to be generated, via
monitoring, inspection, reporting or some other
mechanism. - Issue is the scope of information gathering and
inspection authority (non-point sources vs. point
sources).
11The Chesapeake Bay TMDL and Tradings Role in
Meeting its Goals
- Safeguards Including in the basis and record
for any offset, safeguards to ensure that the
entire delivered load is accounted for and that
water quality will be protected. - Safeguards include restricting the use or
generation of offsets by an unpermitted point
source or a source in noncompliance with its
NPDES permit. - Additionally, EPA and states must ensure temporal
consistency between the period when a credit or
offset is generated and when it is used.
12The Chesapeake Bay TMDL and Tradings Role in
Meeting its Goals
- Certification and Enforceability Designating
the process to be used and responsibility for
credit/offset certification and ensuring the
enforceability of permits and offset
transactions. - Must ensure an NPDES permittee remains
accountable for meeting the water quality based
effluent limits in its permit. After all, CWA
Section 309 enforcement provisions do not apply
to non point source credit generators.
13The Chesapeake Bay TMDL and Tradings Role in
Meeting its Goals
- Accountability and Tracking Developing
accountability and tracking system(s) that are
holistic and focused on performance outcomes
while providing maximum transparency, operational
efficiency, and accessibility to all interested
parties. - The systems should include the NPDES permit
number or other identification of the purchaser
of the offset or credit, where and when the
credit was generated, and documentation of
agreements between parties to the offset
transaction.
14The Chesapeake Bay TMDL and Tradings Role in
Meeting its Goals
- Nutrient-impaired Segments Ensuring that
offsets in nutrient-impaired water segments
result in progress toward attainment of WQS in
the impaired segment and do not lead to
exceedances of WQS elsewhere. - Credit Banking Articulating whether aggregation
and/or banking of offsets is permissible under
the jurisdictions program and, if so, under what
circumstances these will be allowed and the
procedures for such activity. -
15The Chesapeake Bay TMDL and Tradings Role in
Meeting its Goals
- EPA intends to maintain regular oversight of
jurisdictions offset and trading programs
through periodic audits and evaluations. - EPA will report its findings to the respective
jurisdiction. - First such review of jurisdictional offset and
trading programs will take place in calendar year
2011. - Expectation is that the findings of this review
will inform offset and trading provisions
included in the jurisdictions Phase II Watershed
Implementation Plans (WIPs).
16Bay Jurisdictions Existing Trading Programs
- Jurisdictions with existing water quality
trading statutes, regulations and/or policies - Maryland ,Pennsylvania, Virginia, West
Virginia - Jurisdictions that do not have water quality
trading statutes, regulations and/or policies - New York, Delaware, District of Columbia
17Review Legal and Technical Considerations
- Baseline that any PS or NPS generating a credit
has implemented practices or met any reductions
necessary to be consistent with the Bay TMDL
allocations. - Minimum controls any PS or NPS using a credit
has implemented certain minimum controls. - Credit calculation and verification ensure
credits are quantified using appropriate metrics
and verified to ensure they produce the expected
reductions. - Concerns exist about the scope of CWA Section 308
and how it applies to nonpoint sources.
18Review Legal and Technical Considerations
- Safeguards
- Restrict the use or generation of offsets by an
unpermitted PS or a source in noncompliance with
its NPDES permit. - Ensure the entire delivered load is accounted for
and water quality will be protected. - Accountability and tracking holistic and focused
on performance outcomes while providing maximum
transparency, operational efficiency, and
accessibility to all interested parties. - Certification and enforceability ensure an NPDES
permittee remains accountable for meeting the
WQBELs in its permit. - CWA Section 309s enforcement provisions do not
apply to NPS credit generators.
19Review Legal and Technical Considerations
- Nutrient-impaired Segments ensure that offsets
in nutrient-impaired water segments result in
progress toward attainment of WQS in the impaired
segment and do not lead to exceedances of WQS
elsewhere. - Credit Banking articulate whether aggregation
and/or banking of offsets is permissible under
the jurisdictions program and, if so, under what
circumstances these will be allowed and the
procedures for such activity.