INDIANAPOLIS | A critical water quality rule designed to head off controversies like the one that dogged BP's Whiting Refinery expansion last summer should be in place by this time next year, Indiana's top environmental regulator said Wednesday.

Indiana Department of Environmental Management officials told a legislative committee that study groups are sorting through a half-dozen issues crucial to crafting a new antidegradation policy. The rule would spell out the circumstance in which the state could allow increased pollution discharges into Lake Michigan and other "outstanding state resource waters."

"I think we are on our way to getting that type of document in place," said Rae Schnapp, water policy director for the Hoosier Environmental Council.

IDEM Commissioner Thomas Easterly said if the committees of business, environmental and municipal leaders remain on track, a draft rule should be ready by year's end, and a final policy could be adopted by mid-2009.

The push for a new antidegradation policy began in December, when an independent review concluded that the current rule made it nearly impossible for Indiana to defend its decision to grant a more lenient wastewater permit to the BP refinery.

"The rule wasn't clear," Easterly said after Wednesday's hearing. "There were many people in the public -- and that's part of what you saw in the uproar -- that believed that because of antidegradation (standards), absolutely no new or increased discharges are allowed ever, and that's not true."

The uproar last summer, which included a formal rebuke by the U.S. House, eventually led BP to agree to hold the line on Lake Michigan pollution as it moves ahead with a $3.8 billion expansion of the Whiting plant. The refinery is being fitted to process heavier crude oil extracted from Canadian tar sands.

The antidegradation study groups are working to decide issues such as how to determine whether a permit seeker has considered all available pollution controls and the criteria for evaluating socioeconomic concerns, including job creation, when vetting a proposed pollution increase.

Easterly said water permit renewals for five Lake Michigan steel refineries owned by ArcelorMittal and U.S. Steel are on hold until IDEM can determine whether they will be subject to the new antidegradation rule. That includes a permit for U.S. Steel Gary Works proposed last year.