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Environmental Law Update: LDEQ Begins Regulatory Process to Create Water Quality Trading Program

Beaux Jones -  Posted on by Baldwin, Haspel, Burke & Mayer

Act 371 of the 2017 Regular Legislative Session, which was signed by Gov. John Bel Edwards on June 23, 2017, set out the framework for the Louisiana Department of Environmental Quality (LDEQ) to establish a Water Quality Trading Program (‘WQT Program”). In late 2017, LDEQ began the lengthy regulatory process to promulgate final rules to develop and establish such a program.

A water quality trading program is a voluntary, market-based solution to improve water quality through the trading of credits generated by best practices at other point or non-point source discharges. The credits are generally purchased by water quality permit holders with high effluent control costs from facilities who either have low effluent control costs or have made technological investments leaving them with discharges far below their permit limits. WQT Programs are regulatory offshoots of the Clean Water Act and stem from EPA’s 2003 National Water Quality Trading Policy. There are currently at least fourteen states around the country with a version of WQT; Louisiana will be number fifteen. Although there are several possibilities for how a WQT Program can operate, the most straightforward example is where one facility generates credits by discharging less of a particular pollutant than its permit allows, and those credits can then be purchased by a facility in the same watershed to offset its discharge and meet its permit limits. Both the buyer and the seller of the credits are required to meet certain baseline effluent limitations before the credit system comes into play. Participation in a WQT Program does not change permit conditions, it just gives permittees options to either meet their permit requirements or to potentially monetize their best practices.

As a first step in the regulatory process, LDEQ published a draft guidance document “Louisiana Water Quality Trading Guidance Draft, December 20, 2017,” which is open for public comment until February 28, 2018. There will also be a public stakeholder meeting at LDEQ in Baton Rouge on January 23, 2018, to present and receive comments on the draft guidance document.

As a recent article by Tristan Baurick in The Times-Picayune | detailed, the proposed WQT Program has not been met by unanimous applause. Critics argue that “credit trading is a slippery way for polluters to circumvent clean water rules.” Notwithstanding such criticism, LDEQ seems poised to develop a WQT Program, and the cleanliness or lack thereof for a particular waterway ultimately rests with the regulatory and permit limitations established by LDEQ within which a WQT Program can exist. Facilities with a LPDES (Louisiana Pollutant Discharge Elimination System) Permit, as well as agricultural operations with non-point source runoff, should all monitor the Louisiana WQT Program’s development as it presents new opportunities to meet permit conditions and to monetize current best practices.



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