1. Water Quality Reduction Trading Program Draft Rule Language Policy Forum January 29, 2015 1

2. Presentation Objectives Provide clarity on eligibility and required components of a trading plan. Ensure common understanding of definitions. Review content and structure of draft rule. 2

3. Your Assignment Do the rules provide the certainty necessary to facilitate and encourage trading? Do the rules limit or overly encumber trading opportunities? Do the rules omit any essential components necessary for successful trades? 3

4. 340-XXX-0001 Purpose and Policy Statements (1) Purpose. Establish and implement a trading program as directed by 2001 legislature (ORS 468B.555) (2) Policy. Implement program consistent with state and federal regulations. Net reduction in pollutants Minimize administrative and technical requirements 4

5. 340-XXX-0003 Pollution Reduction Trading Objectives Objectives drawn from EPA 2003 WQT policy More cost effective way to implement TMDLs as well as offset new or increased pollutant loads in waters that fully support uses Achieve greater long-term environmental outcomes than attainable through existing regulations 5

6. 340-XXX-0005 Definitions Baseline – later today Credit and Trading Ratios - March 5 Trading Area, Trading Framework, Trading Plan, Trading Project, Water Quality Benefit, Water Pollution Reduction Trading 6

7. 340-XXX-0005 Definitions (3) Trading Area: A watershed or other geographic area defined within a TMDL, Trading Framework, or Trading Plan where water quality trading is authorized. (4) Trading Framework: A description contained in a TMDL water quality management plan, independent state water quality management plan, department order, Commission order or rule, that identifies the pollutants authorized for trading; the trading area; and the method to be used to determine trading credits 7

8. 340-XXX-0005 Definitions (5) Trading Plan: A plan that describes the design, implementation, maintenance, monitoring, verification and reporting components of one or more trading projects and that the department issues as a permit condition, water quality certification, water quality management plan, or stand-alone order. (6) Trading Project: The site-specific implementation of a trading plan. 8

9. 340-XXX-0005 Definitions (8) Water Quality Benefit: The environmental improvement that can reasonably be attributable to BMPs installed at a site. (9) Water Pollution Reduction Trading or Trade: the use of water quality benefits generated at one location for compliance with water quality-based requirements at another location within a trading area. 9

10. 340-xxx-015(1) Water Quality Parameters Eligible for Trading. (a) DEQ may authorize trading for: temperature, sediment, dissolved oxygen, biological oxygen demand, chemical oxygen demand, pH, and nutrients (b) DEQ may authorize trading for other water quality parameters, except persistent or bio- accumulative toxics, on a case-by-case basis 10

11. 340-xxx-015(2) Water Bodies Where Trading May Occur (a) High quality waters. DEQ may authorize trading to maintain water quality including projects designed to accommodate new or increased pollution loads. (b) Water quality limited waters. DEQ may authorize trades for water bodies that are water quality limited but not subject to a TMDL; before or while a TMDL is being developed; or as part of a pollution control plan other than a TMDL issued pursuant to state law. 11

12. Regulatory Mechanisms for Trading (1) NPDES Permitting (a) Permits: (b) Compliance Schedules. (c) Permit Variances. (2) Water Quality Certifications. 12

13. 340-xxx-0020 Trading Frameworks (1) DEQ may establish trading frameworks in any TMDL water quality management plan, or in an independent state water quality management plan, or by a separate order of the department, or commission rule or order. The trading framework must specify those pollutants that are subject to trading, the trading area, any priority areas, and how water quality benefits will be quantified. (2) A trading framework may be established only after an opportunity for public notice and comment. 13

14. 340-xxx-0025 Requirements of a Trading Plan (1) A water pollution reduction trade must be proposed as part of a trading plan. (2) If a previously authorized trading framework exists, and is applicable to the trading project, a trading plan must be consistent with the trading framework. A trading plan may reference components in the trading framework. 14

15. 340-xxx-0025 Requirements of a Trading Plan (3) A water quality pollution reduction trading plan must identify the following components and how they were derived or calculated: (a) Baseline. (b) Trading area. (c) Credits needed to meet water quality-related requirements. (d) How credits will be quantified (e) Duration of credits. (f) How water quality benefits will be generated (g) Trading ratios. (h) How credits will be verified. (i) Monitoring and reporting requirements. 15

16. 340-xxx-0025 Requirements of a Trading Plan (2) DEQ may approve applications for water quality pollution trades that contain all the components and information required by this rule and that meet the Objectives in OAR 340- xxx-0003 16

17. 340-xxx-0035 Requirements for Trading Areas Trading areas may be established in trading frameworks or developed and included in a trading plan on a case-by-case basis. If a trading area is developed on a case-by-case basis, the area must be consistent with any applicable TMDL water quality management plan, or independent state water quality management plan. 17

18. 340-xxx-0045 Quantification of WQ Benefits DEQ may estimate the water quality benefits of a trading project on estimated values for specific types of BMPs, modeling specific to the trading framework or project, or monitoring. 18