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EPA Releases Innovative Approach to Cleaner Water -- 11 Pilots Receiving More than $800,000 in Funding

Release Date: 01/13/2003
Contact Information:

Contact: John Millett 202-564-7842/

(01/13/03) U. S. Environmental Protection Agency (EPA) Administrator Christie Whitman today announced a new Water Quality Trading Policy to cut industrial, municipal and agricultural discharges into the nation’s waterways. The trading policy seeks to support and encourage states and tribes in developing and putting into place water quality trading programs that implement the requirements of the Clean Water and federal regulations in more flexible ways and reduce the cost of improving and maintaining the quality of the nation's waters. The policy will help increase the pace and success of cleaning up impaired rivers, streams and lakes throughout the country.

“The Water Quality Trading Policy I am announcing today recognizes that within a watershed, the most effective and economical way to reduce pollution is to provide incentives to encourage action by those who can achieve reductions easily and cost-effectively,” said EPA Administrator Christie Whitman. “Our new Water Quality Trading Policy will result in cleaner water, at less cost, and in less time. It provides the flexibility needed to meet local challenges while demanding accountability to ensure that water quality does improve.”

"Trading can be a cheaper answer to solving water quality problems in the United States and around the world," said Paul Faeth, managing director of World Resources Institute. "It creates a win-win solution for everyone involved and the new policy will allow states and others to take advantage of the newly created conservation innovation grants program in the 2002 Farm Bill."

“The States recognize the short and long term benefits of the approaches by EPA and are pleased that the Agency has formalized an effective Trading Policy. The Association of State and Interstate Water Pollution Control Administrators (ASIWPCA) is enthusiastic about the potential for trading or exchanging pollutant credits. The process outlined by EPA provides greater flexibility to the States in addressing extremely complex pollution problems; can result in significant cost savings; provides an opportunity to regulate pollutants on a watershed basis; and accelerates pollutant reduction efforts,” said Roberta (Robbi) Savage, Executive Director of ASWIPCA.

"This policy will provide market-based incentives to encourage America's farmers, ranchers and woodlot owners and operators to do even more to maintain and improve the quality of our environment," said Natural Resources Conservation Service Chief Bruce Knight. "The conservation programs in the 2002 Farm Bill will help farmers and ranchers improve water quality."

Whitman noted that the agency is providing more than $800,000 in fiscal year 2002 funding support for technical and other support for 11 trading projects around the country. A list of the 11 pilots is attached.

"Trading can be an important tool for states like Connecticut as we clean up our waters. Working with New York, Connecticut has spearheaded the efforts to keep the Long Island Sound clean. This assistance from the EPA will help Connecticut to continue to improve the Sound's water quality," said Connecticut Governor John G. Rowland.

Water quality trading uses economic incentives to improve water quality. It allows one source to meet its regulatory obligations by using pollutant reductions created by another source that has lower pollution control costs. The standards remain the same, but efficiency is increased and costs are decreased. Under the policy announced today, industrial and municipal facilities would first meet technology control requirements and then could use pollution reduction credits to make further progress towards water quality goals.

In order for a water quality trade to take place, a pollution reduction "credit" must first be created. EPA’s water quality trading policy states that sources should reduce pollution loads beyond the level required by the most stringent water quality based requirements in order to create a pollution reduction "credit" that can be traded. For example, a landowner or a farmer could create credits by changing cropping practices and planting shrubs and trees next to a stream. A municipal wastewater treatment plant then could use these credits to meet water quality limits in its permit.

Joining Whitman at today’s press conference were: Bruce Knight, Chief, Natural Resources Conservation Service, U.S. Department of Agriculture; Paul Faeth, Executive Vice President and Managing Director, World Resources Institute (WRI); Thomas Morrissey, Director of Planning and Standards, Connecticut Department of Environmental Protection and Immediate Past President, Association of State and Interstate Water Pollution Control Administrators; and Thomas R. “Buddy” Morgan, General Manager, Water Works and Sanitary Sewer Board, Montgomery, Al., and Board Vice President of the Association of Metropolitan Sewerage Agencies.
The policy could save the public hundreds of millions of dollars by advancing more effective, efficient partnerships to clean up and protect watersheds. The policy encourages incentives to maintain high water quality where it exists as well as restoring impaired waters. In addition, the policy describes provisions of credible trading programs that are consistent with the Clean Water Act and federal regulations.

An independent study of three watersheds in Minnesota, Michigan and Wisconsin looked at the cost of controlling phosphorous loadings.(World Resources Institute 2000) This study found that the cost of reducing phosphorous from controlling point sources - traditional pipe-in-the water dischargers regulated by the Clean Water Act - to be considerably higher than those based on trading between point and non-point sources which are not regulated by the Clean Water Act.

For more information log on to EPA’s Trading website at

Water Quality Trading Projects

In addition to releasing its final policy on water quality trading, EPA is supporting 11 trading projects to address a range of water quality challenges across the country. EPA supplied over $800,000 in fiscal year 2002 funding support and EPA Regional offices are providing technical and other support to the projects.

Trading to Reduce Nitrogen Loads in the Chesapeake Bay Watershed - Conestoga River, PA. A project to reduce nitrogen loads in a Chesapeake Bay tributary and strive for additional environmental benefits such as creation of habitat.

Create an Electronic Marketplace for Nutrient Trading in Chesapeake Bay. Develop an internet-based board of trade for nitrogen trading in the Chesapeake Bay watershed, with the potential to be adapted for other watersheds.

Outreach on Trading to the Agricultural Community. Through a partnership with the National Association of Conservation Districts, provide information to extension agents and agricultural producers on the concept, mechanics and potential benefits of water quality trading.

Trading to Reduce Selenium Loads to the Lower Colorado River. Develop trading framework aimed at reducing high selenium levels in tributaries to the Lower Colorado River requiring a Total Maximum Daily Load (TMDL). Selenium loads in the tributaries come from point sources and (mainly) nonpoint sources such as irrigation flows.

First-Year Assessment of Nitrogen Trading in Connecticut. Evaluate the first year’s implementation of a trading program among 79 wastewater treatment plants to meet a nitrogen TMDL in Long Island Sound. Project will assess nitrogen reductions achieved, the utility of a watershed permit used for the 79 facilities, and the potential for expanding the program to include nonpoint sources.

Trading to Reduce Impacts from Urban and Agricultural Runoff near Montgomery, Alabama. Project to explore trading’s potential to reduce sediment pollution and create additional environmental benefits in the Coosa and/or Tallapaloosa Rivers.

Pilot Feasibility Assessment of Trading to Reduce Mercury Loads to the Sacramento River. The Sacramento Regional Wastewater Treatment Plant has a National Pollutant Discharge Elimination System (NPDES) permit that requires the plant to develop a proposal for reducing mercury discharges to the watershed from sources that are either not regulated or cannot be readily controlled. This pilot project supports the Sacramento Regional Country Sanitation District’s efforts to assess the feasibility of achieving net reductions in mercury loadings through such offset actions.
Increasing In-Stream Flow in the Upper Charles River Watershed, MA. This project seeks innovative ways to address problems of water quality and reduced in-stream flow in the Charles River by exploring the option of wastewater treatment plants taking actions upstream to increase groundwater recharge and decrease stormwater runoff in lieu of increasing treatment capacity downstream.

Evaluate Feasibility of Reducing Acid Mine Drainage in the Cheat River, WV. This stakeholder-driven project will assess the potential for trading to achieve greater reductions in acid mine drainage pollution than would be achieved under current NPDES permits through actions to abate drainage from abandoned mines. Project outcomes will be tied to improved ecological conditions in the Cheat River.

Nitrogen Trading in the Neuse River Basin, NC. Establishment of operational guidelines for a trading program to reduce nitrogen loads from a group of wastewater treatment plants to meet a TMDL.

Pilot Trading Framework for State of Wisconsin. Development of a trading framework that the State may use to guide development of future nutrient trading programs in Wisconsin.