Offset White Paper
Legal Authority for Offsets – Allowed When Used in Conjunction with TMDLs
Offsets generally refer to independent abatement efforts by a discharger designed to remove a certain amount of pollutant discharge from other existing sources to compensate for the discharger’s own discharge. In a situation where a TMDL has been established for a waterbody, offsets are permissible.
Unlike technology-based effluent limitations, WQBELs can be adjusted to be consistent with a TMDL. While the Clean Water Act’s anti-backsliding provisions would ordinarily prohibit the State from changing a discharger’s requirements to allow a less stringent effluent limitation, section 402(o) contains an express provision applicable when a TMDL is in place. 33 U.S.C. § 1342(o). Specifically, if a water is impaired, existing WQBELs may be relaxed consistent with a TMDL if “the cumulative effect of all such revised effluent limitations based on such total maximum daily load or waste load allocation will assure attainment of such water quality standard. 33 U.S.C. § 1313(d)(4)(A)(i).
Federal regulations bolster these provisions. Under the regulations, WQBELs must be “consistent with the assumptions and requirements of any available waste load allocation…” 40 C.F.R. § 122.44(d)(1)(vii)(B). However, federal regulations do not require WQBELs to be equivalent to available waste load allocations. Accordingly, as long as the cumulative effect of all WQBELs for NPDES-permitted discharges to a water is consistent with the assumptions and requirements of an applicable TMDL, DEQ may adjust the WQBELs using any mechanism designed to achieve attainment of water quality standards. An appropriately structured offset program would satisfy the requirements of the federal regulations. This is true even for new sources, where the TMDL demonstrates there are sufficient load allocations available through the use of offsets or other measures. 40 C.F.R. § 122.4(i)(1).
To avoid a claim than an NPDES permit utilizing offsets is inconsistent with a TMDL, DEQ should consider incorporating pertinent details of the offset provisions into the TMDL implementation plan. Where the exact details of the offset plan are not known at the time of adoption, DEQ could retain some flexibility in translating waste load allocations into effluent limitations by including a provisions such as the following in the implementation plan:
While individual WQBELs must be consistent with the assumptions and requirements of the available waste load allocations, load allocations, and the TMDL, individual WQBELs need not be equivalent to the corresponding allocations as long as the cumulative effect of all WQBELs assures attainment of water quality standards quantified by the TMDL. 33 U.S.C. § 1313(d)(4)(A); 40 C.F.R. 122.44(d)(1)(vii)(B). As such, offsets or other similar mechanisms will be an options available to dischargers to help them achieve their waste load allocations.
Offsets and Non-Point Sources
TMDLs can recognize and incorporate offsets or trading mechanisms that address non-point source discharges. TDMLs must identify and assign allocations to all sources of pollution, including load allocations to non-point sources and other non-NPDES discharges. 40 C.F.R. § 130.2(i). In appropriate circumstances (e.g. where load allocations can be calculated and enforced), offsets may be credited to non-point source abatement. Federal regulations explicitly authorize such tradeoffs: “if Best Management Practices (BMPs) or other non-point source pollution controls make more stringent load allocations practicable, then waste load allocations can be made less stringent.” 40 C.F.R. § 130.2(i).
Conclusion and Take-Away
This approach may be particularly useful for facilities using intake water contaminated by background pollutants that discharge to impaired waters (where no mixing zones are available). In these situations, the applicable TMDLs will involve watersheds impaired by a blend of point and non-point sources, where non-point sources likely predominate. Because NPDES permits must contain effluent limits and condition consistent with the requirements and assumptions of the wasteload allocations in the TMDL, 40 CFR § 122.44(d)(1)(vii)(B), it is important for these TMDLs to state that a basic assumption of the TMDL is that water quality standards will not be attained unless non-point sources of pollution are controlled. The TMDL should go on to identify offset programs as a critical component of the plan to attain water quality standards.
Under this approach, waste load allocations (WLA) can be set for point sources such that those sources have the opportunity to choose between two options to meet the WLA. Sources may choose to implement technology or process-based changes to meet their end-of-pipe concentration-based effluent limits derived from the WLA. Or, in the alternative, sources may choose to engage in an offset program where they meet their mass-based wasteload allocation by conducting approved non-point source control actions. Under this scenario these sources would still need to meet some to be determined baseline concentration-based effluent limits at the end of pipe (technology-based limits or other to be determined limit). As long as the cumulative effect of the offsets and the concentration-based effluent limits assures attainment of water quality standards, this type of program will be consistent with the Clean Water Act.
For these programs to work, it will be critically important for the TMDL program to identify ways to quantify the pollutant load avoided or removed by the offset program. There is already considerable research for DEQ to draw upon in this regard from other states: i.e. the California mercury TMDLs, etc… Additionally, the NPDES permits should contain comprehensive monitoring requirements so that water quality improvements from offset programs may be documented. Lastly, it will also be important for DEQ to draft enforceable offset requirements into the NPDES permits of facilities choosing to use the offset approach.
Draft Offset Policy
This Policy will describe the requirements that must be met before any NPDES permit may be issued to discharge toxics in amounts that exceed waste load allocations specified in a TMDL. It will also describe the factors that must be considered in determining the appropriate offset amount for any given offset proposal.
General Principles
1. Offset projects must result in a net environmental benefit in the watershed.
2. Dischargers must implement pollution prevention measures before qualifying for an offset. Dischargers will not be allowed to avoid the responsibility to perform at the highest level feasible.
3. Dischargers may be allowed to offset a portion of a specific toxic in their discharges if, after the effective date of the applicable TMDL, their discharge level exceeds their waste load allocation.
4. DEQ may issue a permit allowing a new or additional discharge of a toxic only from a new facility or an expansion of an existing facility, and only when offset consistent with this Policy. In all other circumstances, even when authorizing an offset, DEQ may not allow the mass or concentration of the toxic in an existing discharge to increase beyond present amounts.
5. Offsets for individual dischargers will be established in individual NPDES permits.
6. Dischargers should make an effort to locate their offset project near the discharge it is offsetting; however, if demonstrated to not be practical, a project not in the vicinity of the
discharge may be considered.
7. Offsets must not allow a discharge to result in disparate localized impacts.
Principles Affecting the Offset Amounts
Offset amounts granted to individual dischargers should always involve an offset ratio of greater than 1:1, defined as the ratio of off-site toxic reduction proposed divided by the proposed exceedance of their TMDL-specified wasteload or load allocation. DEQ shall also take into account at least the factors listed below.
1. Offset ratios will be based upon:
a. The degree to which a discharger fails to meet its wasteload or load allocations; the ratio should be greater as the magnitude of the exceedance of the wasteload or load allocation increases;
b. The projected cost savings from performing an offset;
c. The expected length of time before the discharger complies with the wasteload or load allocation; the ratio should be greater for longer compliance schedules.
2. The types of projects that could qualify as offset projects include, but are not limited to: restoration of watersheds affected by toxics; stream bank stabilization; mass removal; mine remediation; removal of toxic contaminated sediments in impoundments; reduction of atmospheric deposition from local sources upwind of the discharge point; collection and appropriate disposal of toxics and objects containing toxic from the public; and removal of legacy toxics.
Principles Affecting Implementation of Offsets
1. DEQ shall review the individual offset amounts and projects at a frequency to ensure that the assigned offset is appropriate to the discharge and receiving water quality.
2. NPDES permit offset requirements must be fully enforceable. Enforcement actions should be taken, for example, if the discharge mass exceeds the offset-adjusted mass or concentration limits or if the offset is not completed.
3. Dischargers will be responsible for implementing offset projects and monitoring to demonstrate that the offset project is contributing to attainment of water quality standards. All such data must be readily available to the public. Monitoring should demonstrate that the project is meeting its stated objective of removing a specific load of toxics and not creating or contributing to disparate local impacts.
4. DEQ shall consider request(s) to complete offset project(s) as part of the normal NPDES permit(s) renewal cycle(s) or at its discretion.
5. Offset projects may not be approved if the toxic reduction to be achieved by the offset project is already the responsibility of some other party. An exception to this principle is for offset projects on public land where the public agency did not cause the toxic pollution.