Buying and selling water pollution credits through a central clearinghouse. (FE)

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 overall amount of pollutants introduced into the applicable area.

The bill also allows DOA to contract with the clearinghouse to further the implementation of any adaptive management, multidischarger variance, water quality trading, or future market-based water quality programs in this state.