One of the challenges in building water quality trading programs is the lack of a common vocabulary, which hinders communication and development of shared understanding among multiple stakeholders. Don’t worry—we’ve compiled a glossary of those terms here.

One of the challenges in building water quality trading programs is the lack of a common vocabulary, which hinders communication and development of shared understanding among multiple stakeholders. Don’t worry—we’ve compiled a glossary of those terms here.

303(d) List: The list of impaired and threatened waters (stream/river segments, lakes) that the CWA requires all states to submit for U.S. EPA approval every two years on even-numbered years.

4b Alternative: See Alternative to a TMDL Scenario.

401 Certification: As described in 33 U.S.C. § 1341(a)(1), when a federal permit or license applicant plans to undertake any activity (including facility construction or operation) that may result in any discharge into navigable waters, it must obtain a 401 certification. The certification must come from the relevant state and certify that the discharge will comply with select provisions of the CWA.

Active Trading Program: See Trading Program.

Adaptive Management: A systematic approach for improving natural resource management, with an emphasis on learning about management outcomes and incorporating what is learned into ongoing management.[1] Adaptive management in water quality trading programs may focus on improving program operations, quantification methods, and overall program effectiveness.

Additionality: In an environmental market, the environmental benefit secured through the payment is deemed additional if it would not have been generated absent the payment provided by the market system.[2]

Aggregator: A third party that collects pollutant reduction credits from several producers to sell in bulk to permitted industrial and municipal facilities.

Alternative to a TMDL Scenario: See Total Maximum Daily Load.

Antibacksliding: As defined in CWA sections 303(d)(4) and 402(o) and 40 C.F.R. § 122.44(l), unless falling under a relevant exception, a reissued permit must be as stringent as the previous permit.[3]

Antidegradation: As defined in 40 C.F.R. § 131.12 and relevant state rules and implementation guidelines, these policies ensure protection of existing uses and of water quality for a particular waterbody where the water quality exceeds levels necessary to protect fish and wildlife propagation and recreation on and in the water. Antidegradation also includes spe­cial protection of waters designated as outstanding national resource waters. Antidegrada­tion plans are adopted by each state to minimize adverse effects on water.[4] See also Tier 2 Antidegradation Review.

Attenuation (pollutant): The change in pollutant quantity as it moves between two points, such as from a point upstream to a point downstream.

Banking (of credits): Credits generated in the present are used to offset a future discharge outside of the credit life.

Baseline (General Nonpoint Source Control Authority): The level of pollutant reductions a state expects nonpoint source landowners to achieve, as derived from general nonpoint source control authority, prior to trading. Some states may have general, broad authority to control nonpoint source pollution,[5] which can be used to establish trading baseline levels for state trading guidance, frameworks, or particular trading plans.

Baseline (Regulatory Requirements): The level of pollutant load associated with specific land uses and management practices that comply with stated requirements in applicable, state, local, or tribal regulations.[6] These regulations are typically affirmative water quality obligations or non-disturbance regulations (e.g., all farms must have nutrient management plans in place, or riparian vegetation may not be actively disturbed).

Baseline (TMDLs): The level of pollutant reductions a TMDL and/or a TMDL implementation plan expects specific nonpoint sources to achieve. A single nonpoint source’s baseline requirement from a TMDL is derived from the nonpoint source’s LA (if a nonpoint source falls under an aggregate LA, then a portion of that LA should be assigned to each nonpoint source).[7]

Baseline (Trading): The combined pollutant load and/or BMP installation requirements that must be met prior to trading. At a minimum, all individual nonpoint sources must meet existing state, local, and tribal regulatory requirements. Where a TMDL exists and it establishes, through the TMDL and/or the TMDL implementation plans, requirements that differ from existing state, local, and tribal requirements, then the requirements stemming from TMDL LAs and/or TMDL implementation plans will supplement the existing regulatory requirements. Where general nonpoint source control authority exists in a state, a state can rely on this authority to set or supplement its trading baseline level.

Base Year: The date after which implemented BMPs become eligible to generate credits.

Best Management Practices (BMP): BMPs include, but are not limited to, structural and nonstructural controls and operation and maintenance procedures. BMPs can be applied before, during, and after pollution-producing management activities to reduce or eliminate the introduc­tion of pollutants into receiving waters.[8]  BMPs can consist of land management practices and in-stream improvements (e.g., in-stream restoration actions or in-stream flow augmentation).

BMP Guidelines: A document that defines:  A) an approved quantification method, B) the appropriate pre-project site condition to use for calculating the reduction, C) installation and maintenance quality standards, and D) ongoing performance standards to ensure that each BMP is consistently achieving the desired water quality improvements.

Buyers: Buyers of credits include any public or private entity that chooses to invest in water quality credits and other similarly quantified conservation outcomes. Buyers typically buy credits to meet a regulatory obligation. Eligibility criteria for buyers are described in Section 3.1.

Calibration (modeling): Adjustment of model parameters to better match local conditions, ideally using measured water quality data and BMP site performance metrics representative of the geographic area in which the model will be applied.

Clean Water Act (CWA): 33 U.S.C. § 1251 et seq.

Certification: The formal application and approval process of the credits generated from a BMP. Certification occurs after project review and is the last step before credits can be used toward a compliance obligation.

Compliance Obligation: The total number of credits that a regulated entity must hold in its compliance ledger at particular points in time. In the case of NPDES permittees, this obligation is based on a calculation as to the facility’s exceedance over its effluent limit, as adjusted by trading ratio(s) (and where applicable, other policy obligations, such as a reserve pool requirement).

Compliance Schedule: As defined in 33 U.S.C. § 1362(17) and 40 C.F.R. § 122.47, a compliance schedule is a schedule of remedial measures included in a permit or an enforce­ment order, including a sequence of interim requirements (e.g., actions, operations, or mile­stone events) that lead a permittee to compliance with the Clean Water Act and regulations.[9]

Credit: A measured or estimated unit of pollutant reduc­tion per unit of time at a specified location,[10] as adjusted by attenuation/delivery factors, trading ratios, reserve requirements, and baseline requirements.

Credit (Ex Ante): Issued based on projects that have received a favorable project site screening but have not yet been implemented.

Credit (Ex Post): Issued after a project has been implemented, reviewed, and certified.

Credit Contract Period: The duration of a contract between a regulated entity and a project developer (this is relevant where a regulated entity enlists an outside party to fulfill trading plan obligations).

Credit Life: The period from the date a credit becomes usable as an offset by a permittee (i.e., its “effective” date), to the date that the credit is no longer valid (i.e., its “expiration” date).

Credit Stacking: See Stacking (Credit).

Critical Period: The period(s) during which hydrologic, temperature, environmental, flow, and other conditions result in a waterbody experiencing critical conditions with respect to an identified impairment.

Delivery Ratio: See Trading Ratio (Delivery).

Designated Management Agencies (DMA): As defined in 40 C.F.R. § 130.2(n), an agency identified by a water quality management plan and designated by a state to implement specific control recommendations.

Designated Uses: As defined in 40 C.F.R. § 131.3(f) and 40 C.F.R. § 131.10, designated uses are those uses specified in water quality standards for each waterbody or segment whether or not they are being attained. As defined in 40 C.F.R. § 131.10(a), examples of designated uses include public water supply, protection and propagation of fish, shellfish, and wildlife, recreation, agriculture, industrial, and navigation.

Designee: A person or entity who has been officially chosen to do something or serve a particular role.

Direct Monitoring: See Quantification Method (Direct Monitoring).

Discharge Monitoring Report: A periodic water pollution report prepared by point sources discharging to surface waters of the United States and the various states. Point sources collect wastewater samples, conduct chemical and/or biological tests of the samples, and submit reports to a state agency or the U.S. EPA.

Discharge Point: The point at which a point source adds/discharges a pollutant (as defined in 33 U.S.C. § 1362(6)) into a navigable water (as defined in 33 U.S.C. § 1362(7)). A discharge of a pollutant is defined in 33 U.S.C. § 1362(12).

Effectiveness Monitoring: Systematic data collection and analysis to determine progress of a given water quality trading program (or other implementation strategies) toward the achievement of water quality standards or other program goals. Effectiveness monitoring provides the basis for adaptive management.

Effluent Limit: As defined in 33 U.S.C. § 1362(11), an effluent limit means any restriction established by a state or U.S. EPA on quantities, rates, and concentrations of chemical, physical, biological, and other constituents which are discharged from point sources into navigable waters, the waters of the contiguous zone, or the ocean, including schedules of compliance. See also Water Quality-Based Effluent Limitation (WQBEL), and Technology-Based Effluent Limit (TBEL).

Equivalency Ratio: See Trading Ratio (Equivalency).

Exceedance: The difference between a facility’s load discharge and its effluent limit.

Hold the Line: See Interim Limits.

Hotspot: See Localized Impact.

Interim Limits: In a pre-TMDL scenario, some states impose more stringent limits on point sources based on the reasonable potential analysis required by 40 C.F.R. § 122.44(d)(1)(ii) (on the theory that even a miniscule addition of the pollutant causing the impairment will contribute to the continuation of this impairment). These interim limits are Water Quality Based Effluent Limits (WQBELs) and, as such, can serve as the impetus for water quality trading. If a state does not impose stricter limits in a pre-TMDL scenario, then permittees are allowed to “hold the line.”

Interim Permitting: See Interim Limits.

Leakage: In environmental markets, leakage means that environmental improvements are happening in one location at the expense of increasing environmental degradation somewhere else.

Ledger: A service or software that provides a ledge function for tracking credit quantities and ownership; accounting summaries that cover primarily transactional information. See also Registry.

Load Allocation (LA): As defined in 40 C.F.R. § 130.2(g), this is the portion of a receiving water's loading capacity that is attributed either to one of its existing or future nonpoint sources of pollution or to natural background sources. Load allocations are best estimates of the loading, which may range from reasonably accurate estimates to gross allotments, depending on the availability of data and appropriate techniques for predicting the loading. Wherever possible, natural and nonpoint source loads should be distinguished.

Localized Impact: A localized concentration of pollution that causes a violation of water quality standards at a particular location. In assessing potential near-field impacts, agencies should also consider whether trading will comply with the Endangered Species Act and other species and habitat protection laws; and whether or not near-field discharges addressed through trading will degrade groundwater in violation of any applicable state water quality regulations.

Location Ratios: See Trading Ratio (Delivery).

Look-Back Period: The time period preceding the implementation of a permittee’s trading plan during which landowners may take credit for installed BMPs. A look-back period is intended to adjust for a market failure that disincentivizes early action by landowners.

Mixing Zone: As authorized by 40 C.F.R. § 131.13 and implemented according to state law, the area where wastewater discharged from a permitted facility enters and mixes with a stream or waterbody. A mixing zone is an established area where water quality standards may be exceeded as long as acutely toxic conditions are prevented and all designated uses, such as drinking water, fish habitat, recreation, and other uses are protected.

Modeling: See Quantification Method (Modeling).

Municipal Separate Storm Sewer System (MS4) Permit: A conveyance or system of conveyances (including roads with drainage systems, municipal streets, catch basins, curbs, gutters, ditches, man-made channels, or storm drains): (i) Owned or operated by a state, city, town, borough, county, parish, district, association, or other public body (created to or pursuant to state law) including special districts under state law such as a sewer district, flood control district or drainage district, or similar entity, or an Indian tribe or an authorized Indian tribal organization, or a designated and approved management agency under section 208 of the Clean Water Act that discharges into waters of the United States. (ii) Designed or used for collecting or conveying stormwater; (iii) Which is not a combined sewer; and (iv) Which is not part of a Publicly Owned Treatment Works (POTW) as defined at 40 CFR 122.2 (As defined in 40 CFR 122.26(b)(8)).

National Pollutant Discharge Elimination System (NPDES) Permit: As defined in 33 U.S.C. § 1342.

Near-Field Impact: See Localized Impact.

Nonpoint Source: Diffuse sources of water pollution, such as stormwater and nutrient runoff from agriculture or forest lands. See 40 C.F.R. § 35.1605-4. U.S. EPA guidance describes a nonpoint source as  “includ[ing] pollution caused by rainfall or snowmelt moving over and through the ground and carrying natural and human-made pollutants into lakes, rivers, streams, wetlands, estuaries, other coastal waters and ground water. Atmospheric deposition and hydrologic modification are also sources of nonpoint pollution.”[11]

Nutrient Management Plan: Plan developed for a specific agriculture operation that outlines principles and practices for managing the amount (rate), source, placement (method of application), and timing of plant nutrients and soil amendments.[12]

Offset(s): 1) (noun) Offsite treatment implemented by a regulated point source on upstream land not owned by the point source for the purposes of meeting its permit limit; 2) (noun) Load reduc­tions that are purchased by a new or expanding point source to offset its increased discharge to an impaired waterbody. This second use is the more common use of offset. (Note: U.S. EPA considers both types of offsets to be trading programs); 3) (verb) to compensate for.[13]

Payment Stacking: See Stacking (Payments).

Permittee: Any entity with a discharge approved or pending approval under state- or federally-issued permit (e.g., NPDES permit). This document focuses on point source permittees seeking or granted permission to purchase water quality credits as a means of permit compliance.

Persistent Bio-accumulative Toxics: See Toxics (Persistent Bio-Accumulative).

Point of Concern: The point at which the greatest deviations from a particular water quality standard occurs, as identified through appropriate watershed-wide modeling (usually in a TMDL).

Point Source: As defined in 33 U.S.C. § 1362(14), this means any discernible, confined and discrete conveyance, including but not limited to any pipe, ditch, channel, tunnel, conduit, well, discrete fissure, container, rolling stock, concentrated animal feeding operation, or vessel or other floating craft, from which pollutants are or may be discharged. This term does not include agricultural stormwater discharges and return flows from irrigated agriculture.

Post-Project Performance: The estimated or measured pollution load associated with the post-project site conditions.

Post-Project Site Conditions: The necessary data to quantify post-project water quality benefit through an assessment of actual or anticipated site conditions after project installation. Post-project site conditions may be assessed via a site visit and/or interpretation of remote data.

Post-TMDL Scenario: See Total Maximum Daily Load.

Pre-Determined Pollution Reduction Rates: See Quantification Method (Pre-Determined Pollution Reduction Rates).

Pre-Project Site Assessment: The process of developing and documenting the information necessary to input the needed data into water quality benefit quantification methods. This may include a site visit and/or interpretation of remote data. A pre-project site assessment includes, at the least, an assessment of pre-project conditions and an assessment of anticipated post-project conditions.

Pre-Project Performance: The estimated or measured pollution load associated with the pre-project site conditions.

Pre-Project Site Conditions: The necessary data to quantify pre-project water quality benefit through an assessment of site conditions prior to project installation. Pre-project site conditions may be assessed via a site visit and/or interpretation of remote data.

Pre-TMDL Scenario: See Total Maximum Daily Load.

Program Administrator: The organization responsible for the operation and maintenance of a water quality trading program. Specific responsibilities of a program administrator may include: defining credit calculation methodologies, protocols, and quality standards; project review; and credit registration.[14]

Project: One or more BMPs or other activities, that, taken together, are proposed for generating credits on a single site.

Project Design and Management Plan (Operation and Maintenance Plan): The document that details A) how the proposed credit-generating actions will be designed and installed to meet BMP guidelines, including a description of the proposed actions, installation practices, anticipated timelines, restoration goals, and anticipated threats to project performance; and B) how the project developer plans to maintain/steward the practice or action for the duration of the project life, keep the practice or action consistent with BMP guidelines, and report on that progress.

Project Developer: Any entity that develops credits, whether that entity is the permittee, a contractor of the permittee that develops or aggregates credits, or a landowner developing credits on a permittee’s behalf.

Project Life: The period of time over which a given BMP is expected to generate credits. Typically, the project life is also the minimum project protection period.

Project Protection Agreements: The enforceable agreements to protect BMPs at the project site, which may include leases, contracts, easements, or other agreements. Project protection agreements must cover the credit life and should run with the land to ensure the project will not be affected if ownership changes. Ideally, these protections will also mitigate against proximate disturbing land use activities.

Project Protection Period: The duration of the project protection agreement, which at a minimum must cover the credit life.

Project Review: The process of confirming that a credit-generating project has completed certain elements that should help ensure the project provides the water quality benefits it promises. Specifically, confirmation that project site BMPs or credit-generating activities and credits conform to the applicable quality standards required by a program administrator or regulator. This process includes: (1) an administrative review for the completeness and correctness of documentation; (2) technical review for the completeness and accuracy of quantification; and (3) confirmation of project implementation and/or performance.

Project Review (Initial): The first project review, usually in the first year of project implementation.

Project Review (On-going): Project reviews in subsequent years of the project life.

Project Review Entity: A state regulatory body, a qualified third party, or a permittee that performs the project review function.

Project Review Plan: The portion of a permittee’s trading plan that describes the proposed methods of project review, what information is reviewed and when, who conducts project review, qualification requirements for project reviewers, and the project reviewer’s protections against conflicts of interest. The project review plan should also clarify whether and when on-site inspection should occur.

Project Review Protocol: The document that provides the standardized, specific guidance on the review and assessment of credit-generating actions and BMPs and credit calculation methodologies under a water quality trading program.

Project Site (Project or Site): The location at which BMPs are undertaken or installed.

Project Site Screening (Site Screening or Site Validation): The initial site screening process through which a project developers receive confirmation that their proposed projects are likely eligible to produce credits, based on the information available at that time.

Proportional Accounting: The generation of multiple credit types where a project site performs more than one distinct environmental benefit on non-spatially overlapping areas.[15] Although multiple credit values are produced, the sale of one credit has a corresponding reduction in the proportion of all other credits.

Protocols: Step-by-step manuals and guidelines for achieving particular environmental outcomes. Protocols include the actions, sequencing, and documentation necessary to generate credits from eligible BMPs.

Public Conservation Funds: See Public Funds Dedicated to Conservation.

Public Funds Dedicated to Conservation: Funding targeted to support voluntary natural resource protection and/or restoration with a primary purpose of achieving a net ecological benefit through creating, restoring, enhancing, or preserving habitats.[16] Examples include Farm Bill Conservation Title cost share and easement programs, U.S. EPA section 319 grant funds, U.S. Fish and Wildlife Service Partners for Wildlife Program, and state wildlife grants. Public loans intended to be used for capital improvements of public wastewater and drinking water systems (e.g., State Clean Water Revolving Funds and USDA Rural Development Funds), bond-backed public financing, and utility stormwater and surface water management fees from ratepayers, are not public funds dedicated to conservation.[17] Public funds dedicated to conservation are often referred to as “cost share” and/or “matching funds.”

Publicly Owned Treatment Works (POTW):  A treatment works which is owned by a State or municipality. This definition includes any devices and systems used in the storage, treatment, recycling and reclamation of municipal sewage or industrial wastes of a liquid nature. It also includes sewers, pipes and other conveyances only if they convey wastewater to a POTW Treatment Plant (As defined in 40 CFR 403.3).

Quality Standards (BMP): The necessary specifications associated with a particular credit-generating activity or BMP that ensures that the estimated ecosystem service benefits at a project site are actually achieved through implementation.

Quantification Method: Scientifically-based method for determining the load reduction associated with a given credit-generating activity or BMP. Quantification methods can be grouped into three general types: pre-determined rates/ratios, modeling, and direct monitoring.

Quantification Method (Pre-Determined Pollution Reduction Rates): Standard modeled values based on the best available science that is used to calculate water quality improvement.

Quantification Method (Modeling): Mathematical and/or statistical representation of processes driving changes in water quality, based in science, used to estimate the water quality benefits provided by the credit-generating activities. Modeling is also frequently used to predict attenuation of pollutants.

Quantification Method (Direct Monitoring): Sampling and analysis of both water chemistry (e.g., river turbidity or temperature) and surrogates for water quality (e.g., eroding stream banks or shade from riparian vegetation) used to measure the realized water quality benefits of BMPs and credit-generating activities.

Registration (of Credits): The process of assigning a unique serial number to a verified and certified credit, and uploading the credit (and accompanying documentation) to a publicly available website.

Registry: See Ledger. A ledger that includes more project-specific information. Credit registries may act as a mechanism for public disclosure of trading project documentation.

Regulated Entities: Entities regulated under the Clean Water Act. Typically, these entities are regulated via permits, but may also be regulated under operating licenses or judicial/administrative consent decrees.

Regulatory Baseline: See Baseline (Regulatory Requirements).

Report (Annual Compliance): Annual reports that aggregate the details of individual site performance reports into a comprehensive summary of overall trading plan performance. These reports may be required as special conditions in permits.

Reserve Pool: A collection or bank of unused credits that is available to compensate for unanticipated shortfalls in the quantity of credits that are actually generated.[18]

Reserve Ratio: See Trading Ratio (Reserve).

Retirement Ratio: See Trading Ratio (Retirement).

Site Conditions (Post-Project): The characteristics and conditions of the project site that are measured or are anticipated to be present after the implementation of a BMP or action and assuming the project site continues to be managed as planned.

Site Conditions (Pre-Project): A description or measurement of site conditions prior to implementation of the BMP action, used to calculate the current input level of a pollutant (in default unit of trade) from the project site into the waterbody.[19]

Site Performance (Post-Project): The pollutant load (measured or anticipated) that will enter a waterway, as calculated by the relevant quantification method’s interpretation of post-project conditions.

Site Performance (Pre-Project): The modeled pollutant load that is entering a waterway, as estimated by the relevant quantification method, from a site prior to installing a BMP or action.

Site Screening: See Project Site Screening.

Site Validation: See Project Site Screening.

Stacking (Credit): The generation and sale of more than one kind of credit from the same action on the same area of land, at the same time.[20]

Stacking (Payments): The use of multiple funding sources to support a credit-generating project. Payment stacking is most often discussed in the context of water quality trading when public funds dedicated to conservation are used to fund BMPs or credit-generating activities.

Stewardship Funds: The funding necessary to maintain project sites for the duration of the credit life. Project developers must demonstrate adequate stewardship funding is in place before credits can be verified. Stewardship funding instruments often include performance bonds, restricted accounts, insurance, or other similar docuomentation.

Technology-Based Effluent Limit (TBEL): As described in 33 U.S.C. § 1311(b)(1)(A)-(B), a permit limit for a pollutant that is based on the capability of a treatment method to reduce the pollutant to a certain concentration. TBELs for publicly owned treatment works (POTWs) are derived from the secondary treatment regulations (40 C.F.R. Part 133) or state treatment standards. TBELs for non-POTWs are derived from national effluent limitation guidelines, state treat­ment standards, or on a case-by-case basis from the best professional judgment of the permit writer.[21]

Tier 2 Antidegradation Review: As part of a Tier 2 Antidegradation program, States and Tribes can identify procedures that must be followed and questions that must be answered before a reduction in water quality can be allowed to “high quality” waters—water bodies where existing conditions are better than necessary to support CWA § 101(a)(2) "fishable/swimmable" uses. In no case may water quality be lowered to a level which would interfere with existing or designated uses.

Total Maximum Daily Load (TMDL): As defined in 33 U.S.C. § 1313(d)(1)(C), and 40 C.F.R. § 130.2(i), as well as in relevant state regulations. A TMDL is the calculation of the maximum amount of a pollutant a waterbody can receive and still meet applicable water quality standards (accounting for seasonal variations and a margin of safety), including an allocation of pollutant loadings to point sources (waste load allocations (WLAs)) and nonpoint sources (load allocations (LAs)).[22]

  • Alternative to a TMDL Scenario: A regulatory environment in which a state uses alternative pollution control requirements instead of implementing a TMDL. Under this alternative, states must provide adequate documentation that the required control mechanisms will address all major pollutant sources and establish a clear link between the control mechanisms and water quality standards (e.g., a 4b rule).[23] A state may provide for the use of water quality trading in a 4b watershed plan or strategy.
  • Pre-TMDL Scenario: A regulatory environment in which a waterbody has been listed as impaired but is not yet covered by an approved TMDL.
  • Post-TMDL Scenario: A regulatory environment in which a TMDL serves as the primary structure and driver for a trading framework or plan. NPDES permits are written to meet the assumptions of the TMDL WLA, and the resulting WQBEL serves as the immediate driver for a trade. States may also have additional requirements surrounding trading in the context of a TMDL.

TMDL Implementation Plans: The management plans designed to implement the waste load and load allocations assigned to entities in the TMDL. In some states, a TMDL implementation plan is required in order to translate LAs into baseline requirements.

Toxics (persistent bio-accumulative): Persistent bio-accumulative toxics (PBTs). PBTs are chemicals that are toxic, persist in the environment and bioaccumulate in food chains and, thus, pose risks to human health and ecosystems. PBTs include aldrin/dieldrin, benzo(a)pyrene, chlordane, DDT and its metabolites, hexachlorobenzene, alkyl-lead, mercury and its compounds, mirex, octachlorostyrene, PCBs, dioxins and furans, and toxaphene.[24]

Tracking: The process of following the status and ownership of credits as they are issued, used, retired, suspended, or cancelled.

Trading Area: A geographic area within which credits can be bought and sold. A trading area should be defined ecologically where a pollution reduction in one part of a watershed can be linked to a water quality improvement at a point of compliance. Trading areas can also be defined to reduce the risk of localized water quality impairments or localized impacts.

Trading Baseline: See Baseline (Trading).

Trading Guidance: A state’s statute, rule, policy, guidance, or other documents articulating how WQT should occur within that state.

Trading Framework: Watershed-level documents that contain details of trading processes and standards.

Trading Plan: Permittee-level trading details; the specific incorporation of trading elements into a permit or other binding agreement. A permittee’s trading plan may incorporate the terms of relevant state-wide trading guidance or a watershed trading framework by reference, or it may include all specific details within the permit itself.

Trading Program: The general term used to describe the approach to trading taken by a state agency and/or WQT stakeholders; the full range of policies supported by a state. Active trading programs have completed approved program designs and/or have completed transactions.

Trading Ratio: A trading ratio is a numeric value used to adjust available credits for a seller or credit obligation of a buyer based on various forms of risk and uncertainty. Ratios are applied to account for various factors, such as watershed processes (e.g., attenuation), risk, and uncertainty— both in terms of measurement error and project performance, ensuring net environmental benefit, and/or ensuring equivalency across types of pollutants.

Trading Ratio (Delivery): The factor applied to pollutant reduction credits when sources are directly discharging to a waterbody of concern that accounts for the distance and unique watershed features (e.g., hydrologic conditions) that will affect pollutant fate and transport between trading partners.[25]

Trading Ratio (Equivalency): The factor applied to pollutant reduction credits to adjust for trading differ­ent pollutants or different forms of the same pollutant.[26]

Trading Ratio (Retirement): The factor applied to pollutant reduction credits to accelerate water quality improvement. The ratio indicates the proportion of credits that must be purchased in addi­tion to the credits needed to meet regulatory obligations. These excess credits are taken out of circulation (retired) to accelerate water quality improvement.[27]

Trading Ratio (Reserve): A type of uncertainty ratio in which credits are held in “reserve” and then used to account for uncertainty and offset failures in project performance.

Trading Ratio (Uncertainty): The factor applied to pollutant reduction credits generated by nonpoint sources that accounts for lack of information and risk associated with BMP measurement, implementation, and performance.[28]

True-Up Period: NPDES permits with trading can include provisions that allow buyers a window of time at the end of the compliance period to purchase needed credits. Because a facility may not know year-to-year the exact amount of credits needed for compliance, a true-up period can reduce risk to regulated sources of overbuying or under buying credits in any given year. May also be referred to as a “reconciliation period”.

Uncertainty Ratio: See Trading Ratio (Uncertainty).

Units of Trade: The quantity of tradable pollutants, typically expressed in terms of pollutant load per unit time, at a specified location (e.g., lbs/year at the point of concern).

Validation (Model): An iterative process through which to test the capabilities of a calibrated model to reproduce system behavior within acceptable bounds; the process through which results from credit quantification methods are assessed relative to evaluation criteria. Often, validation includes the comparison of model results with measured data, sensitivity analyses, and uncertainty analyses. Validation may also include a comparision with other model outputs, literature values, and/or expert judgement.

Variance: As authorized by 40 C.F.R. § 131.13 and implemented according to state law, a variance is a time-limited change in the water quality standards for a particular regulated entity, typically limited to three-to five-year duration, with renewals possible.

Verification: See Project Review.

Waste Load Allocation (WLA): As defined in 40 C.F.R. § 130.2(h), this is the portion of a receiving water's loading capacity that is allocated to one of its existing or future point sources of pollution. WLAs constitute a type of water quality-based effluent limitation.

Wastewater Treatment Plant (WWTP): see Publicly Owned Treatment Works, but is not necessarily publicly owned.

Water Quality Benefit: The environmental improvement directly attributable to BMPs installed at a site. Determining water quality benefit is the first step in determining the credits available for sale (it must be reduced by applicable attenuation or modeling factors, baseline factors, or ratios). One way water quality benefit may be calculated is by subtracting the modeled post-project performance from the modeled pre-project performance.

Water Quality Criteria: As defined in 40 C.F.R. § 131.3, water quality criteria are elements of state water quality standards, expressed as constituent concentrations, levels, or narrative statements, representing a quality of water that supports a particular use. When criteria are met, water quality will generally protect the designated use.

Water Quality Standard: As defined in 40 C.F.R. § 131.3(i), Water quality standards are provisions of state or federal law which consist of a desig­nated use or uses for the waters of the United States and water quality criteria for such waters based on such uses. Water quality standards are to protect the public health or welfare, enhance the quality of water, and serve the purposes of the Clean Water Act.

Water Quality Based-Effluent Limitation (WQBEL): As described in 33 U.S.C. § 1312(a), a WQBEL is an effluent limitation determined by selecting the most stringent of the effluent limits calculated using all applicable water quality criteria (e.g., aquatic life, human health, wildlife, translation of narrative criteria) for a spe­cific point source to a specific receiving water for a given pollutant or based on the facility’s waste load allocation from a TMDL.

Watershed Plan: A TMDL-like regulatory strategy for managing and improving an impaired waterbody established by regulators before a TMDL is promulgated, or if a TMDL is not otherwise pursued for a watershed.

[1] See Byron K. Williams, Robert C. Szaro, & Carl D. Shapiro, Adaptive Management: The U.S. Department of the Interior Technical Guide, pp. v & 1 (U.S. Department of Interior, 2009), available at

[2] Willamette Partnership ECAS 2013, supra note 198, at p. 48 in Appendix B.

[3] See 2007 U.S. EPA Toolkit for Permit Writers, supra note 21, at p. Glossary-1 in Glossary.

[4] See id. at p. Glossary-2 in Glossary.

[5] See, e.g., Revised Code of Washington § 90.48.080 (2014) (“It shall be unlawful for any person to throw, drain, run, or otherwise discharge into any of the waters of this state…”) (emphasis added). Washington Department of Ecology authority to regulate nonpoint sources under this law was recently upheld by the Washington Supreme Court. Lemire v. Washington, 178 Wash.2d 227 (Wash. 2013). Likewise, all dischargers are subject to regulation under California state law. California Water Code § 13260(a)(1) (2014). On the other hand, the federal CWA definition of “point source” specifically excludes “agricultural stormwater discharges and return flows from irrigated agriculture.” 33 U.S.C. § 1362(14).

[6] See 2007 U.S. EPA Toolkit for Permit Writers, supra note 21, at p. 8 in “Water Quality Trading Scenario: Point Source-Nonpoint Source Trading.”

[7] See id. at p. 7.

[8] 2007 U.S. EPA Toolkit for Permit Writers, supra note 21, at p. Glossary-2 in Glossary.

[9] Id.

[10] See 2007 U.S. EPA Toolkit for Permit Writers, supra note 21, at p. Glossary-2 in Glossary.

[11] U.S. Environmental Protection Agency, Nonpoint Source Program and Grants Guidelines for States and Territories, p. 7, note 2 (2013), available at

[12] See Natural Resources Conservation Service, Conservation Practice Standard: Nutrient Management, Code 590, pp. 6-­7 (2012), available at

[13] 2007 U.S. EPA Toolkit for Permit Writers, supra note 21, at p. Glossary-4 in Glossary.

[14] See Willamette Partnership ECAS 2013, supra note 198, at p. 8.

[15] See WP & TFT 2014, supra note 206, at § 5.3.1.

[16] See Oregon Interagency Recommendations on Public Funds, supra note 204.

[17] See Willamette Partnership ECAS 2013, supra note 198, at p. 15.

[18] 2003 U.S. EPA Trading Policy, supra note 2, at p. 1612.

[19] See Willamette Partnership ECAS 2013, supra note 198, at p. 50 in Appendix B.

[20] See WP & TFT 2014, supra note 206, at § 5.3.2.

[21] See 2007 U.S. EPA Toolkit for Permit Writers, supra note 21, at p. 27.

[22] See id., at p. Glossary-5 in Glossary.

[23] See 2006 Integrated Reporting Guidance, supra note 63, at pp. 53-56.

[24] See U.S. Environmental Protection Agency, Multimedia Strategy for Priority Persistent, Bioaccumulative, and Toxic (PBT) Chemicals, (2011), available at Notable PBTs are prioritized by EPA’s Canada-United States Binational Toxics Strategy. Id. See also 2003 U.S. EPA Trading Policy, supra note 2, at p. 1610 (EPA did not originally support trading of persistent bioaccumulative toxics).

[25] See 2007 U.S. EPA Toolkit for Permit Writers, supra note 21, at p. Glossary-3 in Glossary.

[26] See id.

[27] See id., at p. Glossary-5 in Glossary.

[28] See id., at p. Glossary-6 in Glossary.