AB 113

This bill creates a system for buying and selling water pollution credits through

a central clearinghouse.

Under current law, the Department of Natural Resources administers a

program for trading water pollution credits between sources of water pollution.

Under the program, DNR may authorize a person (permit holder) who holds a water

pollution discharge elimination system (WPDES) permit or a storm water discharge

permit to discharge a pollutant above the levels authorized in the permit if the permit

holder enters into an agreement with another party under which the other party will

reduce water pollution. The agreement must result in an improvement in water

quality, and the increase and reduction in pollutants under the agreement must

involve the same pollutant or the same water quality standard and occur within the

same water basin.

Under this bill, DNR may authorize a permit holder to discharge a pollutant

above the levels authorized in the permit if the permit holder purchases credits from

a clearinghouse that has contracted with the Department of Administration. The

purchase of credits must result in an improvement in water quality, and the increase

and reduction in pollutants under the agreement must involve the same pollutant

or the same water quality standard and occur within the same area, as determined

by DNR. That area must be the largest area possible within this state to facilitate

implementation of the water pollution trading program while achieving water

quality standards and any federally approved total maximum daily load allocations.

The bill also allows DNR to authorize a permit holder to discharge a pollutant above

the levels authorized in the permit if the permit holder enters into a contract with

a third party that works with other sources of water pollution to reduce the amount

of water pollution that those other sources cause.

The bill requires DOA to solicit vendors to operate as the single clearinghouse

in this state for the purpose of buying and selling water pollution credits. The

department may not contract with a clearinghouse unless the clearinghouse has

established certain policies and procedures specified under the bill. Under the bill,

the term of a contract between DOA and a clearinghouse is five years.

Under the bill, the clearinghouse that contracts with DOA must generate

credits by entering into agreements with parties to reduce pollution; maintain a

bank of credits; sell credits to any person; establish and maintain a centralized

registry of credits generated and sold in this state; and maintain an Internet-based

platform to facilitate the location of potential buyers, available credits, and other

information that will facilitate credit transactions. Credits must be generated with

the clearinghouse at a ratio of one credit for every 1.2 units, at a minimum, of

pollution reduction. When the clearinghouse contracts with a party for pollution

reduction activities, the clearinghouse must also seek to minimize transaction costs,

maximize the performance of the pollution reduction activities, and reduce the