The Bush administration yesterday announced plans to allow industrial polluters to purchase "credits" from lesser polluters to bring them into compliance with the Clean Water Act.

The proposed National Water Quality Trading Policy, announced by Environmental Protection Agency Administrator Christine Todd Whitman, is similar to a market-based system that has operated for years under the Clean Air Act to limit the threat of acid rain.

The new policy uses economic incentives to enforce water quality regulations. It would allow industrial, agricultural and wastewater treatment plants and operations to meet their regulatory obligations by purchasing offsetting credits from facilities in the same watershed that have exceeded their mandated water quality standards or from non-regulated farms that have helped clean up water.

A dozen states, including Michigan and Connecticut, have experimented with water pollution credit trading, but the EPA program would make such trading a national policy over the coming year or two. The administration and other advocates say it is a cost-effective alternative to traditional regulations that require industry to install expensive anti-pollution equipment.

The new policy was unveiled three days after the administration issued new guidelines and launched a new rulemaking process that may eventually remove as many as 20 million acres of the nation's wetlands from federal protection from industrial pollution or unlawful development. The rulemaking was prompted by a 2001 Supreme Court ruling denying federal protection to certain isolated and non-navigable waterways and wetlands, but critics say the administration is attempting unnecessarily to broaden the impact of the ruling.

The administration recently announced another move to reduce federal oversight of a key Clean Water Act anti-pollution program and instead "trust states" to clean up more than 20,000 dirty rivers, lakes and estuaries. It also has issued new guidelines specifying steps developers may take to replace or restore destroyed wetlands that puts much greater emphasis than before on protecting larger watersheds than trying to hold the line against future net losses of marshes, swamps and bogs.

Whitman said at a news conference at the National Press Club that the administration is "very intent on protecting the nation's watersheds," adding that "our new water quality trading policy will result in cleaner water, at less cost, and in less time."

But environmental groups including the Natural Resources Defense Council, the National Wildlife Federation, American Rivers and the Sierra Club charged that Whitman and the administration are systematically undermining progress under the Clean Water Act.

"The cumulative effect of these policies is very damaging," said Nancy Stoner, director of the NRDC's Clean Water Project. "It's really Christmas all over again for corporate polluters."

Environmental groups were divided over the water pollution trading proposal: The World Resources Institute, an environmental policy group, hailed the plan as a "win-win" for industry and the environment. But dozens of groups and activists signed a letter urging the EPA to postpone the new program until there are adequate safeguards to ensure measurable water quality improvements and to prevent even limited trading in the toxic pollutants most likely to create toxic "hot spots" in rivers and lakes.

Environmentalists are particularly concerned that the administration intends to forge ahead with the new trading program while delaying a program known as Total Maximum Daily Load, which requires states to address pollutants in diffuse runoff from lawns, streets and farms as well as concentrated pollution from smokestacks and drainpipes.

The Clean Water Act was passed in 1972 -- after the Cuyahoga River caught fire in Cleveland -- with the goal of eliminating discharge of pollutants and to "restore and maintain the chemical, physical, and biological integrity of the Nation's waters." The overall act focused heavily on forcing factories and sewage plants to upgrade their anti-pollution technology.

Yet nearly one-third of major industrial facilities and government-operated sewage treatment plans have significantly violated pollution discharge regulations during 2000 and 2001, according to a study by the U.S. Public Interest Research Group. Moreover, 45 percent of the nation's water bodies are still impaired by sediments, nutrients and microorganisms from industrial and agricultural runoff that is not directly regulated, according to studies.

"We know now that the biggest challenge remaining to us is non-point source [or diffused] pollution," Whitman said. "This trading program is one of the best ways to get at it."

Similar to Clean Air Act program, the plan "will result in cleaner water, at less cost, and in less time," says EPA Administrator Christine Todd Whitman.