Transcript OCIR’s Agenda

Chesapeake Bay
Water Quality Trading
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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 facility’s excess
discharge.
 Trade = Economic
 Offset = Pollutant
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What 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) overcontrolling its discharge.
 Generated by a non-point source
(unregulated) from the installation of best
management practices beyond those required
for baseline.
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Baselines 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)
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Trade Ratios
• In most cases, pollutant credits are not
generated on a 1:1 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
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When 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.
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EPA’s 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.
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The Chesapeake Bay TMDL and Trading’s
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 EPA’s “expectations” for water quality
trading in the Chesapeake Bay under the new TMDL
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The Chesapeake Bay TMDL and Trading’s
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).
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The Chesapeake Bay TMDL and Trading’s
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 (nonpoint sources vs. point sources).
•
•
•
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The Chesapeake Bay TMDL and Trading’s
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.
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The Chesapeake Bay TMDL and Trading’s
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.
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The Chesapeake Bay TMDL and Trading’s
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.
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The Chesapeake Bay TMDL and Trading’s
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 jurisdiction’s program and, if so, under what
circumstances these will be allowed and the procedures for such activity.
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The Chesapeake Bay TMDL and Trading’s
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).
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Bay 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
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Review: 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.
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Review: 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 309’s enforcement provisions do not apply to NPS
credit generators.
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Review: 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 jurisdiction’s program and, if so,
under what circumstances these will be allowed and the procedures
for such activity.
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