[Federal Register Volume 61, Number 28 (Friday, February 9, 1996)]
[Notices]
[Pages 4994-4996]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-2920]



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ENVIRONMENTAL PROTECTION AGENCY
[FRL-5419-9]


Effluent Trading in Watersheds Policy Statement

AGENCY: Environmental Protection Agency.

ACTION: Notice of intent.

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SUMMARY: EPA's Assistant Administrator for Water, Assistant 
Administrator for Enforcement and Compliance and Assurance and General 
Counsel hereby give notice of an Effluent Trading in Watersheds Policy 
Statement. This Policy Statement is a result of President Clinton's 
``Reinventing Environmental Regulation'' (March, 1995), which listed 
effluent trading in watersheds as one of the twenty-five high priority 
action items. The Policy Statement discusses the benefits of trading, 
presents an explanation of different types of effluent trading, and 
outlines how EPA will encourage trading.

DATES: This action is effective February 9, 1996.

 
[[Page 4995]]

ADDRESSES: Environmental Protection Agency, Office of Water (4102), 401 
M Street SW., Washington, DC 20460.

FOR FURTHER INFORMATION CONTACT: Mahesh Podar, Director, Policy and 
Budget Staff, Office of Water, at the address given above; telephone 
202/260-7818; Email address [email protected]@in. The Policy 
Statement may also be accessed on the EPA Office of Water Home Page on 
the Internet at the following address: http://www.epa.gov/OWOW.

SUPPLEMENTARY INFORMATION:

    Authority: Clean Water Act, 33 U.S.C. 1251 et. seq.
Robert Perciasepe,
Assistant Administrator for Water.

Effluent Trading in Watersheds Policy Statement

Purpose

    In response to President Clinton's Reinventing Environmental 
Regulation (March 1995), EPA strongly promotes the use of effluent 
trading to achieve water quality objectives and standards. This 
statement communicates EPA's policy on effluent trading in watersheds, 
discusses the benefits of trading, presents an explanation of several 
types of effluent trading, and outlines how EPA will be encouraging 
trading. This policy is Agency guidance only and does not establish or 
affect legal rights or obligations. It does not establish a binding 
norm and is not finally determinative of the issues addressed. Agency 
decisions in any particular case will be made by applying the law and 
regulations on the basis of specific facts when permits are issued.

Policy

    EPA will actively support and promote effluent trading within 
watersheds to achieve water quality objectives, including water quality 
standards, to the extent authorized by the Clean Water Act and 
implementing regulations. EPA will work cooperatively with key 
stakeholders to find sensible, innovative ways to meet water quality 
standards quicker and at less overall cost than with traditional 
approaches alone. EPA will assure that effluent trades are implemented 
responsibly so that environmental progress is enhanced, not hindered.

Benefits

    EPA's support of watershed-based trading is anchored to a strong 
commitment to achieve and maintain water quality standards. EPA 
believes that trading is an innovative way for community stakeholders 
(e.g., regulated sources, non-regulated sources, regulatory agencies 
and the public) to develop more ``common sense'' solutions to water 
quality problems in their watersheds. Effluent trading potentially 
offers a number of economic, environmental and social benefits:
    Economic Benefits:

--Reduces costs for individual sources contributing to water quality 
problems.
--Allows dischargers to take advantage of economies of scale and 
treatment efficiencies that vary from source to source.
--Reduces overall cost of addressing water quality problems in the 
watershed.

    Environmental Benefits:

--Achieves equal or greater reduction of pollution for the same or less 
cost.
--Creates an economic incentive for dischargers to go beyond minimum 
pollution reduction and also encourages pollution prevention and the 
use of innovative technologies.
--Can reduce cumulative pollutant loading, improve water quality, 
accommodate growth and prevent future environmental degradation.
--Can address the broader environmental goals within a trading area, 
e.g., ecosystem protection, ecological restoration, improved wildlife 
habitat, endangered species protection, etc.

    Social Benefits:

--Encourages dialogue among stakeholders and fosters concerted and 
holistic solutions for watersheds with multiple sources of water 
quality impairment.

Explanation of Different Types of Effluent Trading

    Trading supplements the current regulatory approach. It is a method 
to attain and/or maintain water quality standards, by allowing sources 
of pollution to achieve pollutant reductions through substituting a 
cost-effective and enforceable mix of controls on other sources of 
discharge. As the Agency improves its understanding of the 
opportunities afforded by watershed-based decision making, EPA will 
provide information for additional forms of trading.
    To take advantage of trading, a point source must be in compliance, 
and remain in compliance, with applicable technology-based limits. 
Intra-plant trades must also have a technology-based floor, while the 
technology floor for pretreatment trading is determined by the 
categorical standards. EPA expects that most trades will be covered by 
Total Maximum Daily Loads (TMDL) or similar watershed-based 
analysis.1

    \1\ A TMDL provides the water quality analysis and planning 
process for determining the specific pollution reduction that are 
necessary to attain or maintain water quality standards. Under 
section 303(d) of the CWA, States establish TMDLs for impaired 
waters. The TMDL process includes legal requirements for public 
participation and implementation through NPDES permits.
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    The items to be traded are the pollutant reductions or water 
quality improvements sought. Under trading, a source that can more 
cost-effectively achieve greater pollutant reduction than is otherwise 
required would be able to sell or barter the credits for its excess 
reduction to another source unable to reduce its own pollutants as 
cheaply. To ensure that water quality standards are met throughout a 
watershed, an equivalent or better water pollutant reduction would need 
to result from a trade. Below are proposed definitions for several 
different types of effluent trading approaches. These definitions are 
preliminary and do not reflect the full range of feasible trades:
    Intra-Plant Trading: A point source is allocated pollutant 
discharges among its outfalls in a cost-effective manner, provided that 
the combined permitted discharge with trading is no greater than the 
combined permitted discharge without trading in the watershed.
    Pretreatment Trading: An indirect industrial point source(s) that 
discharges to a publicly owned treatment works arranges, through the 
local control authority, for additional control by other indirect point 
sources beyond the minimum requirements in lieu of upgrading its own 
treatment for an equivalent level of reduction.
    Point/Point Source Trading: A point source(s) arranges for other 
point source(s) in a watershed to undertake greater than required 
control in lieu of upgrading its own treatment beyond the minimum 
technology-based treatment requirements in order to more cost-
effectively achieve water quality standards.
    Point/Nonpoint Source Trading: A point source(s) arranges for 
control of nonpoint source discharge(s) in a watershed in lieu of 
upgrading its own treatment beyond the minimum technology-based 
treatment requirements in order to more cost-effectively achieve water 
quality standards.
    Nonpoint/Nonpoint Source Trading: A nonpoint source(s) arranges for 
more cost-effective control of other nonpoint sources in a watershed in 
lieu of installing or upgrading its own control. 

[[Page 4996]]


How EPA Will Be Encouraging Trading

    EPA is developing a framework for watershed-based effluent trading, 
as well as information exchange workshops, and limited technical 
assistance for trading projects in specific areas. Watershed-based 
trading will be implemented on a voluntary basis under existing Clean 
Water Act (CWA) authorities. There will be substantial public outreach 
effort to obtain stakeholders' recommendations and insights on draft 
portions of the framework prior to implementation.
    Finally, while EPA believes that the potential of trading is 
largely untapped, the usefulness of trading will depend on the site-
specific water quality conditions in any given situation. The framework 
will describe situations which EPA believes are most appropriate for 
watershed-based trading, and those that are generally inappropriate.
    EPA plans to distribute a draft trading framework in February, 1996 
and hold a series of stakeholder meetings. For more information call 
Mahesh Podar at (202)260-7818, fax (202)401-3372 or send an Email 
message to [email protected] or [email protected].

Experience to Date

    Trading is being explored, developed or implemented in a number of 
watersheds throughout the country. Some examples are below:

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         Project/Location                    Focus                              Type of trading                 
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Fox River, WI....................  BOD, nutrients...........  Point/point.                                      
Dillon Reservoir, CO.............  Phosphorus...............  Point/nonpoint; nonpoint/nonpoint.                
Boulder Creek, CO................  Ammonia, nutrients.......  Point/nonpoint.                                   
Tar-Pamlico, NC..................  Nitrogen, phosphorus.....  Point/nonpoint.                                   
Arkansas Nature Conservancy......  Wetlands.................  Nonpoint/nonpoint.                                
Maryland Nontidal Wetlands.......  Wetlands.................  Nonpoint/nonpoint.                                
Iron and Steel...................  BOD, TSS, zinc, and lead.  Intra-plant.                                      
Rhode Island electroplaters......  Metals...................  Pretreatment.                                     
Chehalis River Basin, WA.........  BOD......................  Point/nonpoint.                                   
Boone Reservoir, TN..............  Nutrients................  Point/nonpoint.                                   
Wicomico River, MD...............  Phosphorus...............  Point/nonpoint.                                   
Honey Creek Watershed, OH........  Phosphorus...............  Point/nonpoint.                                   
South San Francisco Bay, CA......  Copper...................  Point/point.                                      
Long Island Sound, NY............  Dissolved oxygen.........  Point/nonpoint.                                   
Cherry Creek, CO.................  Phosphorus...............  Point/nonpoint; point/point.                      
Tampa Bay, FL....................  Nitrogen, TSS............  Point/point; point/nonpoint; nonpoint/nonpoint.   
Chatfield Basin, CO..............  Phosphorus...............  Point/nonpoint.                                   
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[FR Doc. 96-2920 Filed 2-8-96; 8:45 am]
BILLING CODE 6560-50-P