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Water Quality

Water Quality Trading


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Frequently Asked Questions (FAQs)

What is water quality credit trading?

Water quality trading is an innovative program that allows facilities that discharge wastewater to a stream or river to meet regulatory obligations by:

  • Purchasing equivalent or larger pollution reductions from another source; or
  • Taking action to protect or restore riparian areas, wetlands, floodplains, and aquatic habitat to reduce the impact of pollutants.

Trading is based on the fact that sources in a watershed can face very different costs to control the same pollutant. Trading programs allow facilities facing higher pollution control costs to meet their regulatory obligations by purchasing environmentally equivalent (or superior) pollution reductions from another source at lower cost, thus achieving the same water quality improvement at lower overall cost.

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Is water quality credit trading the same as pollution trading?

Yes. The terms water quality credit trading, water quality trading, thermal water quality trading, pollution trading, and effluent trading are all used interchangeably. DEQ describes its program as “water quality trading” because the EPA specifically uses this term in their 2003 Trading Policy.

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What are the benefits of water quality credit trading?

Trading allows the Department of Environmental Quality (DEQ) and stakeholders to look at a watershed holistically, and to ask how efforts to improve water quality can be undertaken to best protect watershed health. This is important, since the best opportunities for improving water quality and watershed health are not always located at point source outfalls. There may also be ancillary benefits to trading such as the restoration of riparian areas and wildlife habitat and lower costs.

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What guidance and information has the Department developed with respect to trading?

The Department has developed an internal management directive for Water Quality Credit Trading. The guidance may be viewed on the Department’s web page dedicated to water quality trading information: http://www.deq.state.or.us/wq/trading/trading.htm.

The Water Quality Trading internal management directive represents DEQ’s current directions to staff on acceptable water quality trades between and among point sources and nonpoint sources.

This policy document is based in part on the EPA 2003 Water Quality Trading Policy, discussions with EPA Region 10 staff, and DEQ's experiences with trading to date.

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When was the water quality trading internal management directive developed?

The original Water Quality Trading internal management directive was issued in January 2005. In recognition of the fact that trading is an evolving area for DEQ, in April of 2008 the DEQ Water Quality Program formed an internal Water Quality Trading Workgroup. The group was tasked with developing trading policies and procedures as well as a consistent message regarding trading for the benefit of DEQ staff and external stakeholders. This effort was completed in 2009. Internal management directive revisions in 2012 included the addition of Medford wastewater treatment plant permit and trading program language as well as the USDA nutrient tracking tool as a method to quantify some nutrient trades.

Updates and revisions to the internal management directive are made to reflect DEQ’s experience and new information regarding water quality trading from EPA and other states across the U.S.  Draft regional recommendations released by the Willamette Partnership in August 2014 include much of this information and may be used to inform future revisinos to the internal management directive. DEQ anticipates revising this document from time to time as our understanding of water quality trading continues to improve with experience in Oregon and elsewhere.

The specific purpose of the revised internal management directive is to provide DEQ staff with a consistent framework for evaluating trades.  By identifying key features of acceptable trades, the revised IMD is also intended to encourage the development of new kinds of trades.  It is meant to expand the opportunity for potential trades by defining concepts, explaining eligibility and describing specific trading scenarios that the DEQ anticipates and generally supports.

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What can be traded?

The following parameters are currently represented among existing or planned water quality trading programs around the country: ammonia, biological oxygen demand, dissolved oxygen, mercury (between “indirect” dischargers that discharge their wastewater to sewage treatment plants), nitrogen, phosphorus, sediment, selenium, and temperature.

Across the U.S., a variety of successful trading models exist, ranging from single-party, single-transaction projects, to multi-party, multi-transaction programs.  Some of these programs focus on a single pollutant, while others focus on two or more pollutants.  A good source of information about trading can be found on the Environmental Trading Network, a national clearinghouse for water quality trading projects.

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What kind of trades will be considered in Oregon?

In general, DEQ supports trading when it is likely to result in one or more of the following:

  • Ancillary benefits such as the creation and restoration of wetlands, floodplains and wildlife habitat.
  • Reduced costs to implement TMDLs or comply with water quality-based requirements.
  • Offsets of new or increased discharges resulting from growth or expansion.
  • Long-term improvements in water quality through the purchase and retirement of credits.

DEQ anticipates that the majority of opportunities for trading in Oregon will involve temperature.  DEQ has already allowed trades that involve riparian shade restoration to improve stream temperatures, flow augmentation, and trading of BOD and ammonia between wastewater treatment plants.  DEQ is hoping to expand its trading program to include nutrient and sediment trading as well as trades involving aquatic habitat and floodplain restoration to reduce the impacts of warm stream temperatures.

DEQ does not anticipate trades involving bacteria and toxics. Bacteria levels in water quality are measured because bacteria are a surrogate for disease-causing organisms that could threaten public health. DEQ does not consider it reasonable to encourage trades involving such surrogates.  DEQ recognizes that trading programs for some toxics may provide incentives for reducing the presence of these constituents in the environment beyond what can be achieved through current regulations.  However, DEQ acknowledges the unique ecological risks and analytic challenges associated with such pollutants and therefore, such trades are not being considered at this time.

1 The EPA Trading Policy may be viewed at: http://www.epa.gov/owow/watershed/trading/tradingpolicy.html 

2  Section 303(d) of the federal CWA requires each state to develop a list of water bodies that do not meet standards, and to submit this list to the U.S. Environmental Protection Agency (EPA) every two years. The resulting list is referred to as the "303(d) list." It may be accessed at http://www.deq.state.or.us/wq/303dlist/303dpage.htm.

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Generally, when is water quality trading an option?

Circumstances favorable to water quality trading include the following:

  1. There is a "driver" that motivates facilities to seek pollutant reductions, such as more stringent permit limits.
  2. Some sources can control pollution less expensively than others.
  3. There is something to trade. When all sources in a watershed are required to reduce pollutant loads by a large margin, opportunities for trading are reduced.
  4. Watershed stakeholders and the state regulatory agency are willing to try an innovative approach and engage in trading design and implementation issues.

Where watershed circumstances favor trading, establishing a trading program can be a powerful tool for achieving pollutant reductions faster and at lower cost.

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How are potential trades evaluated?

All specific trading proposals will be evaluated by DEQ on a case-by-case basis. The recommendations in the directive are guidance to staff regarding appropriate circumstances and possible approaches through TMDL development, TMDL implementation plans and permits to facilitate water quality trading in Oregon. Trading proposals that are consistent with this directive can result in approval and subsequent implementation with minimal oversight by DEQ personnel. 

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Have any water quality trades been authorized in Oregon?

DEQ has authorized trading programs in the Tualatin River watershed involving dissolved oxygen and temperature. The permit authorizes trading for oxygen-consuming parameters between the two treatment plants (point-point trading) as well as arranging for the creation of thermal load credits through riparian plantings (point-nonpoint trading).

These trades are authorized under permit numbers 101141-101144 issued to Clean Water Services (CWS). CWS is a sewerage and stormwater special service district located in Washington County. The permits include trades for oxygen-demanding substances (ammonia and BOD) and temperature. The permits may be viewed at http://www.deq.state.or.us/wq/wqpermit/cwspermit.htm.

The final case study report for the CWS trade may be accessed at: http://www.deq.state.or.us/wq/trading/docs/wqtradingcasestudy.pdf.

The City of Medford NPDES permit issued in 2011 includes provisions for water quality trading. Permit language and the thermal credit trading plan can be found at http://www.deq.state.or.us/wq/trading/trading.htm.

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Describe the Tualatin River subbasin trading program for temperature.

The TMDL for the Tualatin River subbasin developed Waste Load Allocations for Clean Water Services advanced wastewater treatment facilities. Treatment options for meeting the WLAs are limited. Technologies for cooling the effluent on-site, such as shading the treatment units or installing mechanical refrigeration would either be inadequate, very expensive or both. Trading provides an alternative. Via trading, CWS will be allowed to trade their thermal load by a combination of the following actions:

  • Improving riparian shade along the river and its tributaries, e.g., planting trees and vegetation along the stream banks. Ancillary benefits to planting trees include improved habitat for wildlife and reduced bank erosion.
  • Augmenting flow. By increasing base flows in the Tualatin, the travel time of the river is reduced, which reduces the amount of heating by solar radiation.
  • Using reclaimed water (effluent) for irrigation. It should be noted that reuse of the reclaimed water is not strictly speaking a "trade"; it is simply a means by which CWS can reduce its thermal load to the river.

Other mechanisms, such as hyporheic exchange flows, may also be available.

The permit issued to CWS in March of 2004 required them to submit a plan showing how they will use these various mechanisms to reduce their impact to meet the temperature standard. The permit and the temperature management plan that CWS subsequently developed may be viewed at: http://www.deq.state.or.us/wq/wqpermit/cwspermit.htm.

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Describe the BOD/ammonia trading program that was negotiated with Clean Water Services.

Clean Water Services operates two advanced wastewater treatment plants that discharge to the Tualatin River basin, and both are allowed to discharge a certain amount of BOD and ammonia. Under the terms of the new permit, CWS will be able to shift a small portion of the combined load that can be discharged from both plants, between the two plants in order to improve their operational flexibility while maintaining water quality. Extensive analysis has been done to determine how much pollutant shifting can occur without causing water quality standard violations. Based on this analysis, permit limits were developed that vary with instream flow and temperature conditions.

The permit may be viewed at: http://www.deq.state.or.us/wq/wqpermit/cwspermit.htm.

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What is the Willamette Partnership?

In recent years a coalition of conservation, city, county, business, farm and scientific leaders called the Willamette Partnership has formed to increase the pace, scope and effectiveness of conservation in the Willamette Basin. The Partnership works with multiple stakeholders, helping to develop bold new market-driven tools to reduce the cost and conflict of compliance with regulations while delivering broader environmental benefits.

The work of the Willamette Partnership has added to the understanding of water quality trading. The Partnership is actively exploring the development of ecosystem markets in the Willamette Basin.  They have recently completed an EPA Targeted Watershed Grant that included the development of a framework for an ecosystem marketplace, credit trading and banking that meets specific TMDL objectives for reducing temperature in the Willamette River. To find out more about the Willamette Partnership, visit their website a: http://willamettepartnership.org.

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Where can I find out more about water quality trading in Oregon?

Additional information, links to the US EPA website, and other related resources can be found on the DEQ Water Quality Trading web page: http://www.deq.state.or.us/wq/trading/trading.htm.

DEQ staff can also be contacted for additional information:

  • Dennis Ades, DEQ alternative compliance program analyst, can be reached at (503) 229-5886, e-mail

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[print version]

For more information about Water Quality Trading contact Ranei Nomura by phone at 541-686-7799 or by email.

Oregon Department of Environmental Quality
Headquarters: 811 SW Sixth Ave., Portland, OR 97204-1390
Phone: 503-229-5696 or toll free in Oregon 1-800-452-4011
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