Document ID: EPA-HQ-OW-2019-0415-0001
Agency: epa
Document Type: Notice
Title: Water Quality Trading under the National Pollutant Discharge Elimination System Program
Posted Date: 2019-09-19T04:00Z

[Federal Register Volume 84, Number 182 (Thursday, September 19, 2019)]
[Notices]
[Pages 49293-49297]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20324]

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ENVIRONMENTAL PROTECTION AGENCY

[EPA-HQ-OW-2019-0415; FRL-10000-02- OW]

Water Quality Trading Under The National Pollutant Discharge 
Elimination System Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notification, request for comment.

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SUMMARY: The Environmental Protection Agency (EPA) is requesting 
comment on policy approaches for addressing ``baseline'' issues in 
watersheds with EPA-approved Total Maximum Daily Loads (TMDLs) where 
policy makers would like to pursue water quality trading as a 
regulatory option for National Pollutant Discharge Elimination System 
(NPDES) permit compliance. These policy approaches may also be of 
interest to stakeholders pursuing market-based water quality 
improvement programs outside of the NPDES permit program.

DATES: Comments must be received on or before November 18, 2019. A 
combined in-person and online listening session will be held at EPA 
Headquarters in Washington, DC on October 21, 2019, from 12 p.m. to 5 
p.m. EDT.

ADDRESSES: The listening session will be held at the following 
location:
     US EPA Headquarters, William Jefferson Clinton East 
Building, Room 1153, 1201 Constitution Avenue NW, Washington, DC 20004;
     The online listening session will be accessible at https://www.epa.gov/npdes/nonpoint-source-baselines-water-quality-trading.
    To register for the listening session, go to: https://www.epa.gov/npdes/nonpoint-source-baselines-water-quality-trading.
    Submit your comments, identified by Docket ID No. EPA-HQ- OW-2019-
0415, at https://www.regulations.gov. Follow the online instructions 
for submitting comments. Once submitted, comments cannot be edited or 
removed from Regulations.gov. The EPA may publish any comment received 
to its public docket. Do not submit electronically any information you 
consider to be Confidential Business Information (CBI) or other 
information whose disclosure is restricted by statute. Multimedia 
submissions (audio, video, etc.) must be accompanied by a written 
comment. The written comment is considered the official comment and 
should include discussion of all points you wish to make. The EPA will 
generally not consider comments or comment contents located outside of 
the primary submission (i.e., on the web, cloud, or other file sharing 
system). For additional submission methods, the full EPA public comment 
policy, information about CBI or multimedia submissions, and general 
guidance on making effective comments, please visit https://www.epa.gov/dockets/commenting-epa-dockets.

FOR FURTHER INFORMATION CONTACT: Amelia Letnes, Office of Wastewater 
Management, Water Permits Division, Mail Code 4203M, Environmental 
Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460; 
telephone number: (202) 564-5627; email address: letnes.amelia@epa.gov.

SUPPLEMENTARY INFORMATION: This supplementary information section is 
organized as follows:

I. General Information
II. Background
III. Nonpoint Source Baselines for Water Quality Trading
IV. Request for Comment

I. General Information

A. Does this action apply to me?

    Entities potentially affected by this action are: Authorized NPDES 
states, territorial, and tribal programs; municipal and industrial 
point sources; and nonpoint sources of pollution. This table is not 
intended to be exhaustive; rather, it provides a guide for readers 
regarding entities that this action is likely to affect.

                             Table I-1--Entities Potentially Affected by This Action
----------------------------------------------------------------------------------------------------------------
                                                                                Examples of potentially affected
                                   Category                                                 entities
----------------------------------------------------------------------------------------------------------------
The Environmental Protection Agency..........................................  The Environmental Protection
                                                                                Agency when acting as a
                                                                                permitting authority, conducting
                                                                                oversight, and enforcing
                                                                                permits.
State, Territorial, and Indian Tribal Governments............................  States and territories authorized
                                                                                to administer the National
                                                                                Pollutant Discharge Elimination
                                                                                System (NPDES) permitting
                                                                                program (permitting
                                                                                authorities); states,
                                                                                territories, and Indian tribes
                                                                                that provide certification under
                                                                                section 401 of the Clean Water
                                                                                Act (CWA); states, territories,
                                                                                and Indian tribes that own or
                                                                                operate treatment works.
Municipalities...............................................................  Publicly Owned Treatment Works
                                                                                (POTWs), municipal separate
                                                                                storm sewer systems (MS4s), or
                                                                                other municipal entities
                                                                                required to apply for or seek
                                                                                coverage under an NPDES
                                                                                individual or general permit.

[[Page 49294]]

 
Industry.....................................................................  Facilities required to apply for
                                                                                or seek coverage under an NPDES
                                                                                individual or general permit.
Nonpoint Sources.............................................................  Facilities that are not required
                                                                                to apply for or seek coverage
                                                                                under an NPDES individual or
                                                                                general permit but may generate
                                                                                pollutant reduction credits.
----------------------------------------------------------------------------------------------------------------

    If you have any questions regarding the applicability of this 
action to a particular entity, consult the person listed under FOR 
FURTHER INFORMATION CONTACT.

B. Public Listening Session

    i. Public Listening Session: The EPA will hold a public listening 
session to hear feedback from interested members of the public on the 
issues and concerns of which the Agency should be aware concerning the 
issues presented in this document. The public listening session will 
include the ability to make a statement either in person or online in 
addition to any official comments. All official comments must be 
submitted in writing at https://www.regulations.gov/. The public 
listening session will begin with the EPA providing a brief background 
on the water quality trading issues discussed in this document, 
followed by an opportunity for the public to provide supplemental input 
on these issues. The EPA is asking that oral statements be limited to 
three minutes or less. The listening session will begin at 12 p.m. EDT 
and continue until all those wishing to speak have had a chance to make 
statements, or until 5 p.m., whichever comes first. A transcript of 
oral remarks made during the listening session will be at https://www.epa.gov/npdes/nonpoint-source-baselines-water-quality-trading and 
included in the docket for public review.
    ii. Additional Information and Public Meeting Registration: Prior 
to each listening session, the EPA will post any relevant materials to 
the following website: https://www.epa.gov/npdes/nonpoint-source-baselines-water-quality-trading. Information posted to the website will 
include any handouts that may be provided at the meeting as well as a 
web link that participants may use to register for the listening 
session in advance. Advance registration is not required but is 
requested so that the EPA can ensure there is sufficient space and time 
allotted for those who wish to participate. The listening session will 
continue until all speakers in attendance have had a chance to make 
statements, or the listed end time, whichever comes first. If you 
choose not to pre-register to speak, it is recommended that you arrive 
at the start of the listening session to register in person to ensure 
the opportunity to participate.

II. Background

    The EPA strongly supports market-based mechanisms to accomplish its 
mission to protect human health and the environment. Market-based 
mechanisms include water quality trading, an approach that promotes 
water quality improvements at lower cost than more traditional 
regulatory approaches. The Agency has long interpreted the CWA to allow 
pollutant reductions from water quality trading and offsets to achieve 
compliance with CWA regulatory requirements including water quality-
based effluent limitations (WQBELs). Neither the CWA nor the EPA's 
implementing regulations explicitly address water quality trading. In 
the absence of explicit statutory language or regulations, the EPA has 
provided guidance for permitting authorities and stakeholders to 
consider when developing market-based programs, including water quality 
trading. However, the EPA is aware that despite its efforts to support 
these types of programs, they have not been implemented to their 
fullest potential. In response, the Agency is exploring ways to expand 
the implementation of water quality trading and other market-based 
mechanisms to accomplish water quality improvements.
    In 2003, the EPA issued its Water Quality Trading Policy \1\ (2003 
Policy). The 2003 Policy included recommendations for permitting 
authorities and stakeholders to consider when developing water quality 
trading programs. The Agency issued the Water Quality Trading Toolkit 
for Permit Writers in 2007 and updated it in 2009 \2\ (2009 Toolkit) to 
expand on the 2003 Policy and provide real-life examples. The EPA 
understands that some permitting authorities and stakeholders have 
viewed the 2003 Policy and 2009 Toolkit as having the force and effect 
of law or regulation, i.e., mandating certain actions or outcomes and 
containing standards or requirements with which a market-based program 
must conform. The Agency wants to clarify that the 2003 Policy and the 
2009 Toolkit do not mandate specific actions, outcomes or requirements; 
but rather provide non-binding and non-mandatory recommendations and 
guidance for permitting authorities to consider when establishing and 
implementing water quality trading programs for NPDES permit 
compliance.
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    \1\ This document is available at https://www.epa.gov/sites/production/files/2016-04/documents/wqtradingtoolkit_app_b_trading_policy.pdf.
    \2\ This document is available at https://www.epa.gov/npdes/water-quality-trading-toolkit-permit-writers.
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    In the intervening fifteen years since the release of the 2003 
Policy, nonpoint source pollution reduction technologies and practices 
have improved. Research has provided better information on the 
performance of many best management practices (BMPs). Mapping and 
modeling efforts have become more robust. Capabilities for evaluating 
resources at the edge-of-field and at the landscape scale have 
improved. In-stream and other monitoring approaches have expanded our 
understanding of the resources we are working to protect. These 
advances have created an opportunity for the Agency to reconsider and, 
if appropriate, update and expand its recommendations for policy makers 
considering implementing market-based mechanisms, including water 
quality trading.
    As a first step to modernizing its approach to market-based 
programs, the EPA issued ``Updating the Environmental Protection 
Agency's (EPA) Water Quality Trading Policy to Promote Market-Based 
Mechanisms for Improving Water Quality'' on February 6, 2019 (2019 
Memorandum). The 2019 Memorandum reiterates the EPA's strong support 
for water quality trading; promotes the adoption of market-based 
programs to incentivize the implementation of technologies and 
practices to reduce nonpoint source pollution; provides additional 
guidance and policy options to stakeholders for developing and 
implementing market-based programs; and promotes increased investment 
in conservation actions. To achieve these goals, the 2019 Memorandum 
identified six market-based principles:

[[Page 49295]]

    (1) States, tribes, and stakeholders should consider implementing 
water quality trading and other market-based programs on a watershed 
scale.
    (2) The EPA encourages the use of adaptive management strategies 
for implementing market-based programs.
    (3) Water quality credits and offsets may be banked for future use.
    (4) The EPA encourages simplicity and flexibility in implementing 
baseline concepts.
    (5) A single project may generate credits for multiple markets.
    (6) Financing opportunities exist to assist with deployment of 
nonpoint source land use practices.
    This document is the next step in modernizing the EPA's approach to 
market-based programs and water quality trading and focuses on the 
fourth principle in the 2019 Memorandum--simplicity and flexibility in 
implementing baseline concepts. The EPA's interpretation of the 2003 
Policy, as provided in the 2009 Toolkit, recommended that individual 
nonpoint sources were to make their portion of the reductions 
identified in a TMDL as the ``load allocation,'' called the 
``baseline,'' before nonpoint source pollution reduction activities 
could generate credits or offsets. In many TMDLs, the load allocation/
baseline is not an insubstantial portion of reductions necessary in the 
watershed; achieving this level of reduction may be costly and a 
barrier to entry to a trading or offset market. The EPA is seeking and 
will consider comments on proposed recommendations related to baselines 
for nonpoint sources in watersheds covered by a TMDL.
    The EPA is proposing to provide additional guidance on several of 
the market-based principles identified in the 2019 Memorandum. This 
proposal seeks comment on additional draft guidance related to nonpoint 
source baseline issues and presents a variety of tools and approaches 
that could be used to develop and implement nonpoint source trading 
baselines. Lastly, the EPA is seeking comment on other topics addressed 
in the 2003 Policy and the 2009 Toolkit that should be clarified, 
updated, or otherwise modified to be consistent with the 2019 
Memorandum.

III. Nonpoint Source Baselines for Water Quality Trading

    The EPA has developed and is seeking comment on a variety of policy 
options regarding nonpoint source baselines for water quality trading 
in areas with a TMDL. These options can be used individually or 
combined in a single program. Some of these options would be changes to 
existing policy, while others offer additional clarification.

A. Definition of Baseline

    As previously noted, neither the CWA nor the EPA's implementing 
regulations address water quality trading generally, or the specific 
issue of nonpoint source baselines. In the absence of explicit 
statutory language or regulations, the EPA provided guidance for 
permitting authorities and stakeholders to consider when developing 
market-based programs, including water quality trading.
    As described above, the 2003 Policy and 2009 Toolkit recommended an 
approach to defining a nonpoint source baseline in a watershed where a 
TMDL has been approved or established. That approach could lead to 
substantial upfront costs for nonpoint sources despite no regulatory 
requirement mandating those reductions. The baseline portions of the 
2003 Policy were seen by some stakeholders as confusing, complex and 
restrictive, creating a barrier to entry for point source-nonpoint 
source trading in watersheds where a TMDL has been approved by the EPA. 
Another concern is that expecting a nonpoint source to meet a pollutant 
reduction baseline derived from a TMDL load allocation before the 
nonpoint source can generate tradable credits may be inconsistent with 
the definition of baseline in the 2003 Policy. This is because load 
allocations on their own are not legally enforceable pollutant control 
``requirements.'' As a result, such load allocation baselines should 
not be considered to be ``requirements'' that must be met by the 
nonpoint source prior to being able to generate credits for sale into a 
market. The EPA is seeking comment on the above concerns and whether 
the following proposed baseline definition revision would provide 
clarity and flexibility to states and tribes to define a nonpoint 
source baseline and ensure that market-based programs and water quality 
trading may be implemented in watersheds with EPA-approved TMDLs.
    The EPA is considering whether to include the language below in an 
updated policy memorandum on water quality trading.

B. Baselines for Water Quality Trading

    The EPA recommends that pollution reduction credits that are 
applied to water quality-based effluent limitations in NPDES permits be 
derived from and comply with all applicable water quality standards and 
be consistent with the assumptions and requirements of wasteload 
allocations in applicable EPA-approved TMDLs, consistent with 40 CFR 
122.44(d)(1)(vii).
    For point source-nonpoint source trading, where a TMDL has been 
established for the particular waterbody, the EPA recommends that 
nonpoint sources be allowed to generate credits for any pollutant 
reductions the nonpoint source makes that are not included in the 
assumptions that support the TMDL load allocation. Under this revised 
baseline definition, any such pollutant reductions would be immediately 
available for use by point sources as credits.
    The EPA seeks comment on whether this language provides the clarity 
necessary to support market-based programs, including water quality 
trading, and whether there is other language that may provide greater 
clarity or regulatory certainty. The EPA intends that, in watersheds 
where a TMDL has been approved by the EPA, this definition of 
``baseline'' would allow for individual nonpoint sources to generate 
pollutant reduction credits for any pollutant reduction above existing 
practices, provided there is a reasonable assurance that the overall 
load allocation will, over time, be met. Stated differently, nonpoint 
sources may not need to apply pollution controls to meet a baseline 
derived from a load allocation before pollutant reduction credits could 
be generated. This option is intended to encourage stakeholders to make 
progress towards meeting water quality standards while allowing credits 
to be generated without unnecessary delay.
    This approach assumes that: (1) The TMDL, its implementation plan 
or other documentation describes plans to achieve the TMDL's load 
allocation, and (2) the reductions that a nonpoint source makes to 
generate credits are in addition to reductions described in such plans 
to achieve the load allocation. If the state, territory, or tribe 
desires increased certainty that the overall load allocation will be 
met under this approach, it might provide a greater level of detail in 
its implementation plan to ensure a greater commitment to achieving the 
load allocation. Policy makers and permitting authorities may conclude 
that modifying a TMDL implementation plan may be necessary to provide 
additional flexibility to prioritize specific areas of the watershed 
for reductions; to describe a specifically-identified pollutant 
reduction project (such as the Dixie Drain Phosphorus Removal Facility 
in Idaho); \3\ or to

[[Page 49296]]

implement other watershed-wide plans for meeting the TMDL.
---------------------------------------------------------------------------

    \3\ For additional information on the Dixie Drain Phosphorus 
Removal Facility see https://www.livboise.org/initiatives/dixie-drain.
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    In most cases, the EPA assumes that point source-nonpoint source 
water quality trading would represent a relatively small portion of the 
total loadings under a TMDL. The EPA solicits comment on the potential 
environmental and policy impacts--positive or negative--of the proposed 
change to the nonpoint source baseline definition at large volumes and 
over larger geographic areas. The EPA solicits comment on the proposed 
language and the assumptions articulated above, and on whether 
pollutant reductions used to generate credits could also be used to 
achieve a TMDL load allocation.

C. Incremental Baseline

    As described above, the EPA is requesting comments on additional 
recommendations to provide additional flexibility for permitting 
authorities whereby nonpoint sources may not need to apply pollution 
controls to meet a baseline derived from a TMDL load allocation before 
pollutant reduction credits could be generated. Alternatively, 
permitting authorities might consider an incremental approach. An 
incremental baseline approach divides nonpoint source reductions into 
(1) immediately available tradeable credits, and (2) reductions 
assigned towards meeting the load allocation. The state, territory, or 
tribe would identify the appropriate ratio between the two types of 
reductions.
    This ratio could be directly aligned with the reductions 
anticipated in the TMDL load allocation, or it could be based on an 
alternate policy goal. The concept could be analogous to a mortgage 
payment divided between principal and interest. Some of the pollutant 
reductions would be applied to meeting the load allocation and some of 
the pollutant reductions would be applied to generate credits.
    Variations on an incremental approach could address alternate 
policy goals by establishing a variable percentage on bases such as:
     Creating incentives for nonpoint source reductions in 
certain areas of a watershed;
     A nonpoint source's existing BMPs; or
     A community's ability to pay.
    Under these variations, some nonpoint sources might generate more 
credits than others based on factors such as geography, existing BMPs, 
or availability of trading partners.
    As in all trading scenarios, a point source would need to make 
sufficient reductions to meet its WQBEL. This can be through onsite 
controls (a non-trading approach), through the purchase of credits 
(water quality trading), or through a combination of the two 
approaches. If there are insufficient credits immediately available, 
this approach might, where appropriate, be coupled with a compliance 
schedule as described below. The EPA solicits comment on the 
incremental baseline approach described in this document and if it 
could be a useful tool for policy makers and permitting authorities to 
implement market-based programs, including water quality trading.

D. Compliance Schedules

    Where the appropriate criteria under 40 CFR 122.47 are met, a 
permitting authority has the discretion to include a schedule of 
compliance with a WQBEL in an NPDES permit. Under this policy option, a 
permitting authority might consider including a compliance schedule in 
the permit to account for the time it would take for a nonpoint source 
partner to generate sufficient pollutant reduction credits or offsets 
to achieve compliance with the NPDES permit WQBEL. For example, an 
NPDES permit might provide a schedule for a point source permittee to 
arrange for a nonpoint source to install BMPs necessary to generate 
pollutant reduction credits sufficient to offset reductions required by 
WQBEL. A compliance schedule would need to specify the achievement of 
these reductions ``as soon as possible'' (see 40 CFR 122.47(a)(1)). 
While the types of activities/BMPs leading to nonpoint source pollutant 
reductions during the compliance schedule might differ in a trading 
scenario from those undertaken by a point source in a non-trading 
scenario, the regulatory requirements for a permittee to qualify for 
and the authority to establish a compliance schedule would remain the 
same under either scenario.
    The EPA solicits comment on whether the use of compliance schedules 
could be a useful tool for policy makers and permitting authorities to 
implement market-based programs, including water quality trading.

E. Water Quality Standard (WQS) Variances

    A WQS variance is a time-limited designated use and criterion for a 
specific pollutant(s) that reflects the highest attainable condition of 
a waterbody during the term of the WQS variance. A WQS variance is a 
WQS that is subject to review and approval by the EPA under section 
303(c) of the CWA. States and tribes might consider whether in 
appropriate cases, a WQS variance might be used to support a market-
based program, including water quality trading.
    A WQS variance might be appropriate in those circumstances where it 
is not clearly known how or if a point source can buy enough pollutant 
reduction credits from nonpoint sources to meet its WQBEL. In that 
circumstance, a WQS variance might be designed to ensure that at the 
end of the WQS variance, enough pollutant reduction credits would be 
generated by nonpoint sources to meet the point source's WQBEL, based 
on the terms of the WQS variance.
    For example, a state, territory, or authorized tribe might identify 
in the WQS variance a quantifiable interim effluent condition that 
reflects the greatest pollutant reduction achievable (40 CFR 
131.14(b)(1)(ii)(A)(2)) by a combination of point source control and 
funding of nonpoint source reductions. The state, territory, or 
authorized tribe might collect funds from the point source(s) to pay 
for nonpoint source reductions needed to achieve the highest attainable 
condition in the WQS variance. Alternatively, the point source might 
enter into binding agreements with nonpoint sources directly. In this 
situation, the reductions made to achieve the highest attainable 
condition could first be credited to the point source, and then applied 
to the nonpoint source load allocation.
    As another example, the point source might be able to identify and 
fund implementation of nonpoint source reductions as part of the 
adopted and legally binding pollutant minimization program (PMP) that 
would be a required part of the highest attainable condition under 40 
CFR 131.14(b)(1)(ii)(A)(3) (where no additional feasible pollutant 
control technology can be identified). In this case, the point source 
maintains an existing level of treatment, and the activities necessary 
to achieve nonpoint source reductions would be part of the adopted PMP. 
At the WQS variance reevaluation period (which is required at least 
every five years for any WQS variance longer than five years), the 
state, territory, or authorized tribe would determine if there are 
additional nonpoint source reduction activities to incorporate into the 
permit.
    The EPA solicits comment on whether the use of WQS variances in 
this context could be a useful tool for policy makers and permitting 
authorities to implement market-based programs, including water quality 
trading.

[[Page 49297]]

F. Alternative Approaches to Disaggregation

    Generally, TMDL load allocations are identified very broadly, 
covering entire sectors, or even having a single load allocation for 
all nonpoint sources in the watershed. The EPA recommends that states, 
tribes, and territories consider whether it is appropriate to apply 
these broad load allocations uniformly across the watershed or, 
instead, apply it differentially to nonpoint sources on a geographic 
basis or some other basis within the watershed to maximize water 
quality improvements. Examples of options that policy makers and 
permitting authorities may consider include:
     Reductions of nonpoint source pollution at certain 
locations within the watershed will result in reductions sufficient to 
meet the TMDL load allocation (e.g., at the headwaters of streams or 
along the shoreline of the impaired waterbody). Under this scenario, 
because the entire load allocation would be met by reductions in a 
certain segment of the watershed, nonpoint sources in other areas of 
the watershed could be free to generate credits immediately because 
reductions from those sources are not needed to meet the load 
allocation.
     A group of nonpoint source pollutant reduction practices 
will meet the load allocation and any pollutant reduction activities 
beyond those practices are eligible to generate credits. This option 
addresses equity concerns that might prevent early actors from making 
early reductions.
     Specific nonpoint source sectors (e.g. agriculture, 
silviculture, rangeland) may need different levels of reductions to 
meet the overall load allocation.
     A treatment facility installed on a polluted waterway 
segment (as was done in Idaho on the Dixie Drain) may make sufficient 
reductions through wastewater treatment to achieve the load allocation.
    The EPA recommends that any alternate approaches that states decide 
to adopt should be clear, transparent, and demonstrate that the overall 
planned reductions in the watershed are sufficient to meet the overall 
TMDL allocations for the watershed. The EPA solicits comment on whether 
these are viable and appropriate options and whether additional or 
alternate approaches may also be appropriate.

G. In-Lieu Fee Program

    An in-lieu fee program might allow NPDES permitted facilities to 
meet their WQBELs by paying into a state, territorial, or tribal fund 
specifically allocated for nonpoint source pollutant loading 
reductions. The state, territory, or tribe might use this funding, 
possibly combined with other state, territorial, tribal, or federal 
funds, to implement nonpoint source BMPs in the relevant geographic 
area. In-lieu fee programs might be based on a payment of a uniform 
fee, or payment of varying fees (established in increasing tiers) to:
     Incentivize onsite as well as offsite reductions;
     Provide equity for early actors;
     Address affordability;
     Address geographic disparities; or
     Address any relevant environmental justice concerns.
    The in-lieu fee could be set at a level slightly higher than 
necessary for the state, territory, or tribe to fund the BMPs needed to 
generate the required credits to cover the administrative costs of 
running the program, insure against risk, and enhance overall 
environmental benefit.
    To ensure water quality protection and progress towards meeting 
TMDL goals, the state, territory, or tribe could use these funds to pay 
nonpoint sources to implement pollutant reductions or to support other 
activities that would reduce overall nutrient loading in the TMDL 
watershed. A reverse auction model could maximize reductions per 
dollar. In a reverse auction, the buyer (the state, territory, or 
tribe) could offer a price it would pay for a specified pollutant 
reduction, and whomever is willing to produce that reduction (the 
credit) accepts the offer. If the offer is not sufficient to cover 
credit generation costs, generally no one would make a bid, and the 
buyer would offer a higher bid until it has found a willing generator 
of a sufficient amount of credits. This approach could keep costs down 
and offer flexibility if the true cost of credit generation rises.
    The EPA solicits comment on the concept of an in-lieu fee program 
and whether it could be a useful tool for policy makers and permitting 
authorities to implement market-based programs, including water quality 
trading. The EPA also solicits comment on examples of existing in-lieu 
fee programs that are used to achieve environmental improvements and if 
there are specific programmatic components that may enhance water 
quality improvements.

IV. Request for Comment

    The EPA is considering modifying or clarifying existing EPA policy 
and guidance on water quality trading to remove unnecessary barriers 
and better support market-based mechanisms, including water quality 
trading, consistent with the 2019 Memorandum. The EPA is requesting 
comment from states, tribes, stakeholders and other members of the 
public on all aspects of this document. In particular, the Agency is 
requesting comment on:
     The proposed approaches described in Section III of this 
document, including preferences between the approaches and the 
recommended mechanisms to implement those approaches;
     Other policy ideas or enhancements that could help promote 
or facilitate market-based programs to improve water quality; and
     Other aspects of the 2003 Policy and the 2019 Memorandum 
(including potential conflicting or ambiguous policy advice) that may 
benefit from additional policy or clarification from the EPA.

    Dated: September 4, 2019.
David P. Ross,
Assistant Administrator, Office of Water.
[FR Doc. 2019-20324 Filed 9-18-19; 8:45 am]
 BILLING CODE 6560-50-P