Chapter 7

      Trading pretreatment limits within POTWs' service areas is a positive step toward developing common sense solutions to water quality problems. In the PVSC service area, an effluent trading pilot project offered a flexible means to implement and enforce local pretreatment limits. However, can trading programs be instituted at other POTWs? What groundwork must be established? What serves as the foundation for such a project?

      Establishing an effluent trading program is not restricted to those agencies with an EPA- or State-approved industrial pretreatment program (considered delegated local agencies, or DLAs). POTWs not having an approved industrial pretreatment program may also establish a trading program. Many of these agencies, however, do not have a sufficient number of industrial permittees, nor do they have the personnel necessary to develop such a program. As a result, non-DLAs wishing to establish an effluent trading program should consult with their Approval Authority prior to instituting a trading program.

      Although PVSC was a good candidate for the pilot project due to its diverse and large number of industrial permittees, there is no "magic number" of permittees a POTW should have in order to establish a trading program. Special circumstances, such as a shared need among permittees for similar treatment facilities, or complementary needs (e.g., Permittee A over-treats for copper but needs more zinc treatment, while Permittee B over-treats for zinc but needs more copper treatment) make trading appropriate for even a very small POTW. However, a program generally has a better chance to succeed if there are more industrial permittees - more permittees means more potential trading partners, both buyers and sellers. Any POTW interested in a trading program may find it worthwhile to first determine if the number and diversity of its industrial permittees would support a successful program. Even where there is no current need for trading, a POTW could establish the trading framework within its rules and regulations for possible future consideration.

      The ability of POTWs to incorporate trading as part of their activities relies on many issues, including:

• having technically-sound, defensible local pretreatment limits;
  
  
• incorporating trading into its rules and regulations or sewer use ordinance; and
  
  
• having or establishing a strong pretreatment enforcement program.

      Because trading only applies to local limits, developing technically-sound, defensible local limits is a core element in establishing an effluent trading program. With technically-sound limits, POTWs can more easily address questions regarding the appropriateness and/or adequacy of any existing local limits, the basis for limits, and whether limits ensure the POTW's compliance with its own operating permit criteria.

      Under federal regulations at 40 CFR 403.8(f)(4), POTWs are required to develop local pretreatment limits or demonstrate that such limits are not necessary. They are also required to re-evaluate local limits once every five years in accordance with 40 CFR 122.21(j)(4). The local limits must protect the treatment plant from pass-through and interference, and must enable the treatment plant to comply with the remainder of its environmental criteria (e.g., biosolids quality, worker health and safety, quality of receiving waters, etc.).

      When developing local limits, POTWs must determine their maximum allowable headworks loading (MAHL), and, subsequently, the maximum allowable industrial loading (MAIL). With this information, a POTW can utilize different allocation methods and can allow trading to occur, provided the MAIL is not exceeded. Disbursement of available MAIL has generally been achieved utilizing a uniform allocation methodology (i.e., the same concentration limit for all industrial permittees). These concentrations are then incorporated into the POTW's sewer use ordinances or rules and regulations and included, where appropriate, within the control mechanisms (i.e., permits) issued to the industrial permittees. It is important to note, however, that a trading program can be established regardless of whether the limits within the rules and regulations or sewer use ordinance are concentration-based or mass-based.

      Another important factor in establishing an effluent trading program is the incorporation of proper legal authority into local agency rules and regulations or sewer use ordinances. At a minimum, the legal authority to establish a trading program must:

• enable a POTW to allow buying and selling among its permittees;
  
  
• require POTW review and approval of documentation relative to the transactions (excluding portions of the contracts that contain monetary information);
  
  
• allow POTWs to modify the discharge permits of participating parties; and
  
  
• detail the criteria of trading actions (minimum trading quantities and increments, usable quantities/banking, number of trading partners, etc.).

      A modification to include this legal authority into the rules and regulations or sewer use ordinances may be considered a "substantial modification" under 40 CFR 403.18, and may require Approval Authority review.

      While an effluent trading program allows a user to meet its required effluent limits without necessarily having to install pretreatment upgrades, a regulatory perspective must also be considered: What happens if a facility is in noncompliance with its discharge limits? The answer lies in the development of a strong enforcement program to adequately deter noncompliance similar to what is in place without trading. A strong pretreatment enforcement program may result in both the delegated local agencies and the industrial permittees seeking alternative methods for achieving compliance. This may generate more interest in developing effluent trading programs.

      While local limits, legal authority, and enforcement constitute major components of establishing a trading program, other factors must also be considered for those POTWs contemplating such a program. Some of these include:

• having the personnel/resources to initiate the permit modifications necessary to reflect the trade, including complying with the public notice requirements;
  
  
• determining the pollutants to be traded;
  
  
• determining the role of the local agency with respect to the trading activities (e.g., identifying potential trading partners, acting as brokers);
  
  
• understanding the industries and the types of discharges entering into the collection system; and
  
  
• being accountable to the Approval Authority to ensure proper implementation and enforcement of any modified limits.

      POTWs have discretionary authority with respect to establishing an effluent trading program within their sewer service areas. Through the PVSC pilot, the necessary measures and factors to be considered when developing a trading program have been identified, and the stumbling blocks relative to moving the program from theory to implementation have been documented. As such, other POTWs wishing to establish a trading program will greatly benefit from the lessons learned from this pilot.

TOP OF PAGE

Last Revision: March 9, 2000
http://www.epa.gov/emergingstrategies/njcip/etdoc/chapter7.htm