Water Quality Trading Rules

Yes. The terms water quality credit trading, water quality trading, thermal water quality trading, pollution trading, and effluent trading are all used interchangeably. DEQ describes its program as “water quality trading” because the EPA specifically uses this term in their 2003 Trading Policy.

Trading allows DEQ and stakeholders to look at a watershed holistically, and to ask how efforts to improve water quality can be undertaken to best protect watershed health. This is important, since the best opportunities for improving water quality and watershed health are not always located at point source outfalls. There may also be ancillary benefits to trading such as the restoration of riparian areas and wildlife habitat and lower costs.

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​The following parameters are currently represented among existing or planned water quality trading programs around the country: ammonia, biological oxygen demand, dissolved oxygen, mercury (between “indirect” dischargers that discharge their wastewater to sewage treatment plants), nitrogen, phosphorus, sediment, selenium, and temperature.

Across the U.S., a variety of successful trading models exist, ranging from single-party, single-transaction projects, to multi-party, multi-transaction programs.  Some of these programs focus on a single pollutant, while others focus on two or more pollutants. 

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In general, DEQ supports trading when it is likely to result in one or more of the following:

• Ancillary benefits such as the creation and restoration of wetlands, floodplains and wildlife habitat.
• Reduced costs to implement TMDLs or comply with water quality-based requirements.
• Offsets of new or increased discharges resulting from growth or expansion.
• Long-term improvements in water quality through the purchase and retirement of credits.

DEQ anticipates that the majority of opportunities for trading in Oregon will involve temperature.  DEQ has already allowed trades that involve riparian shade restoration to improve stream temperatures, flow augmentation, and trading of BOD and ammonia between wastewater treatment plants.  DEQ is hoping to expand its trading program to include nutrient and sediment trading as well as trades involving aquatic habitat and floodplain restoration to reduce the impacts of warm stream temperatures.

DEQ does not anticipate trades involving bacteria and toxics. Bacteria levels in water quality are measured because bacteria are a surrogate for disease-causing organisms that could threaten public health. DEQ does not consider it reasonable to encourage trades involving such surrogates.  DEQ recognizes that trading programs for some toxics may provide incentives for reducing the presence of these constituents in the environment beyond what can be achieved through current regulations.  However, DEQ acknowledges the unique ecological risks and analytic challenges associated with such pollutants and therefore, such trades are not being considered at this time.

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Circumstances favorable to water quality trading include the following:

1. There is a "driver" that motivates facilities to seek pollutant reductions, such as more stringent permit limits.
2. Some sources can control pollution less expensively than others.
3. There is something to trade. When all sources in a watershed are required to reduce pollutant loads by a large margin, opportunities for trading are reduced.
4. Watershed stakeholders and the state regulatory agency are willing to try an innovative approach and engage in trading design and implementation issues.

Where watershed circumstances favor trading, establishing a trading program can be a powerful tool for achieving pollutant reductions faster and at lower cost.

​All specific trading proposals will be evaluated by DEQ on a case-by-case basis. The recommendations in the directive are guidance to staff regarding appropriate circumstances and possible approaches through TMDL development, TMDL implementation plans and permits to facilitate water quality trading in Oregon. Trading proposals that are consistent with this directive can result in approval and subsequent implementation with minimal oversight by DEQ personnel.

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In recent years a coalition of conservation, city, county, business, farm and scientific leaders called the Willamette Partnership has formed to increase the pace, scope and effectiveness of conservation in the Willamette Basin. The Partnership works with multiple stakeholders, helping to develop bold new market-driven tools to reduce the cost and conflict of compliance with regulations while delivering broader environmental benefits.

The work of the Willamette Partnership has added to the understanding of water quality trading. The Partnership is actively exploring the development of ecosystem markets in the Willamette Basin.  They have recently completed an EPA Targeted Watershed Grant that included the development of a framework for an ecosystem marketplace, credit trading and banking that meets specific TMDL objectives for reducing temperature in the Willamette River.