Orange County Is Home Base to Smogbusters : Environment: A score of Southland entrepreneurs pioneered the science of reducing air pollution at utility and industrial plants and have built their expertise into thriving businesses.

TIMES STAFF WRITER

Inside a nondescript office building in Irvine, Energy and Environmental Research Corp. engineers putter about a cavernous laboratory, fiddling with an angular, tube-filled, 10-foot-high plexiglass model.

They watch closely as smoke- and helium-filled bubbles swirl through the structure, mimicking the behavior of gases inside a power-plant boiler and yielding valuable clues to the mysteries of pollution formation.

Similar work is under way in office parks across Southern California. EER is one of a handful of small but highly regarded local firms that, together with major research programs at UC Irvine, make the area--particularly Orange County--a national center of expertise in certain air pollution control techniques.

"These companies as a whole stand at the cutting edge of technology, not only nationally but internationally," said Scott Samuelsen, professor of mechanical and environmental engineering and director of the combustion laboratory at UCI. "In other places there's a lab or two or a company or two, but this is really unique."

And for all of these enterprises--whose expertise lies in reducing the quantities of smog-causing nitrogen oxides (NOx) produced by utilities, refineries, and factories--business is booming as regulatory authorities adopt ever-more-stringent pollution restrictions. The new Air Quality Management Plan for Southern California means more work locally, and renewed concern about acid rain is bringing new business nationally.

The AQMP rules are "having a very significant impact on our business, and the future impact will be even greater," said M. N. Mansour, founder and president of Applied Utility Systems Inc., a Santa Ana company that specializes in industrial applications of NOx-reduction methods.

"Business certainly seems to be picking up," echoed Lawrence J. Muzio, co-founder of Fossil Energy Research Corp., a Laguna Hills firm involved in the development of basic anti-NOx technologies. "There's more interest in the environment, and we've profited from the new legislation."

In certain respects, it is only natural that Southern California companies would be leaders in air pollution control. The area has the worst smog problem in the country, and local utilities--including Southern California Edison Co., Southern California Gas Co., and the Los Angeles Department of Water and Power--have long been leaders in finding ways to cut emissions from power plants, the biggest stationary sources of pollution.

But to understand why Orange County, specifically, became the world center for NOx-control technology, one has to look at the history of two firms, Dynamic Science and KVB. Together, they gave birth to an alphabet soup of air pollution firms: EER, AUS, FERCO, Energy Systems Associates, Energy Technology Consultants, and Sierra Environmental Engineering.

The story begins in the 1960s with the unlikely link between power plant emissions and the aerospace industry. A group of engineers working at Dynamic Science, a Marshall Industries subsidiary that had recently moved from Monrovia to Irvine, were using NASA computer models developed from research on vaporization to analyze combustion processes inside rocket engines.

It became clear in the course of the research that the formation of nitrogen oxides was dependent on how quickly and at what temperature fuels were burned. Using the same computer models, the combustion process in a commercial boiler could be analyzed with an eye toward modifications that would reduce the amounts of these gases produced.

At about the same time, Southern California Edison and the Los Angeles Air Pollution Control District--the predecessor of the South Coast Air Quality Management District--were zeroing in on the link, first discovered at CalTech, between nitrogen oxides and smog.

NOx, which refers collectively to nitric oxide and nitrogen dioxide, occurs naturally any time heated nitrogen and oxygen come in contact with one another--in other words, any time there is a fire. When it is released into the air, it reacts with other elements and sunlight to form ozone, the main ingredient in photochemical smog. (Nitrogen dioxide also poses a health hazard in itself, and contributes to acid rain.)

Dynamic Science researchers, including James R. Kliegel, Bernard P. Breen, Stephen Kerho and Nick Bayard de Volo, realized that they had found a useful commercial application for their work. "What we did was to understand that the production of nitric oxide in a utility flame could be lowered by two to three times without adding any equipment, and that was a very important thing for the utilities," recalled Kliegel.

Kliegel, who was president of Dynamic Science, sought to arrange a buyout of the small division from Marshall Industries in 1970, in conjunction with employees and a company called Ultrasystems. The parent company's response was to fire him.

So he and his colleagues started a firm called KVB. And the new company quickly emerged as the worldwide leader in NOx emissions control.

"They were the original air pollution company in the L.A. basin, and perhaps the country, in terms of reducing emissions of nitrogen oxides, improving boiler efficiency, and developing the standard emissions monitor," noted George Offen, a scientist with the Palo Alto-based Electric Power Research Institute, an industry organization that has been an important source of funds for pollution researchers.

The critical technologies included development of two-stage combustion processes and the use of exhaust gas recirculation to lower flame temperatures and thus reduce NOx formation. While many of the modifications were in themselves relatively simple, they required additional work to assure that boilers continued to operate safely and efficiently.

A key stimulus to KVB's growth was a set of stringent emissions standards imposed by the Air Quality Management District in the early 1970s: The regulations virtually required operators of large boilers--utilities, oil companies, and other big industrial firms--to implement anti-NOx modifications.

"They were very stringent rules, requiring a reduction of 80% in NOx emissions," recalled Bayard de Volo, who now heads Energy Technology Consultants in Irvine.

Breen, the B in KVB and now president of Tustin-based ESA, tells with pride how KVB successfully modified the Los Angeles Department of Water and Power's Scattergood 3 unit to meet the requirements, thus saving the utility from abandoning a $100-million project. Breen said KVB technologies implemented in the 1970s reduced the production of NOx in the Los Angeles area by 300 tons to 400 tons per day.

At its peak, KVB employed 250 people and had a wide range of contracts from utilities, industry and public and private research organizations. But personality conflicts and the desire of some of the founders to get their money out put strains on the company, former KVB people said, and the firm was sold in 1978 for $7 million to New Jersey-based Research-Cottrell.

In the meantime, Dynamic Science was purchased by Ultrasystems, and later the combustion research branch was spun off and became EER. While KVB had focused on industrial applications of NOx-control technologies, EER kept its focus on basic research, thriving primarily on government- and industry-sponsored research and development projects, explained Blair A. Folsom, vice president at EER.

The founders stayed with KVB immediately following the sale, but eventually a clash of cultures led to the departure of nearly all the executives and key engineers. By 1983, KVB was moving out of NOx-control engineering and into manufacturing emissions monitoring equipment, which is its primary business today.

Meanwhile, the air pollution control business as a whole was in a trough. The early years of the Ronald Reagan Administration, with its combination of recession and cuts in Environmental Protection Agency funds, were not a profitable time.

"A lot of this work was really phased out during the Reagan Administration," lamented Robert Hall, chief of the combustion research branch at the federal Environmental Protection Agency. "In the mid-1970s, the budget for NOx research was about $15 million--now it's $300,000 to $500,000."

But that didn't stop the KVB veterans from forming their own companies. In 1981, Breen founded ESA, which now employs about 50 people divided between its Tustin headquarters and an office in Pittsburgh. In 1984, Mansour launched AUS--which has grown to 15 people--and Bayard de Volo started ETEC that same year.

Also in 1984, Richard E. Thompson and Lawrence J. Muzio founded Fossil Energy Research, which--like EER--has more of a basic research and technology bent than do ESA or AUS, which focus on applied engineering. The next year, George L. Moilanen, a refugee of both KVB and ESA (he said he still owns a piece of the latter) founded Sierra Environmental Engineering, also an applied engineering firm.

Some of companies struggled at first, but they are beginning to find their footing. "There was no work then," Moilanen said of the time when he started his company. "But it has come back even stronger than it was. This is the business of the 1990s in this basin."

Samuelsen of UCI agreed that there was a plateau in the early 1980s. And while UCI maintained strong programs throughout the period, the university is now making further efforts to capitalize on its expertise with a new, interdepartmental center for combustion and propulsion science and technology.

Contributors to the new center include the renowned atmospheric chemist F. Sherwood Rowland, who discovered the environmental damage caused by chlorofluorocarbons.

And the town-and-gown links between UCI and local air pollution firms are growing as well. In the past several years, the university has teamed with local firms several times to bid on research contracts, Samuelsen said. An ESA official sits on the board of the combustion research lab, and Muzio of FERCO is an adjunct professor at the university. UCI engineering students often go to work for the local companies.

The link with the university may become even more important for local industry in the future. Technologies for NOx reduction have in recent years moved beyond basic boiler modification to include more elaborate techniques, such as injecting ammonia or other compounds into boilers and exhaust gas streams to absorb NOx before it reaches the atmosphere.

"The easy stuff has been taken care of," said Anthony Occhionero, research manager at Southern California Gas. The new AQMP rules call for NOx emissions from 60 large boilers and 114 gas turbines in the South Coast area to be cut from 44.4 tons per day to 15 tons a day by the end of the decade, and meeting those standards will in some cases require far more sophisticated techniques than are commonly used today.

That could be a mixed blessing for local companies. As pollution control becomes an ever more important consideration in the design and construction of boilers, the major manufacturers--all located in the East--are doing more of the emissions control engineering for both new and existing plants in-house rather than sub-contracting to specialized pollution engineering firms.

Japanese companies, moreover, may have a competitive edge in extremely effective--and very expensive--technologies which fall under the umbrella of catalytic reduction. Some local air pollution engineers fear that the biggest boiler operators--utilities and oil companies--will be required to use the expensive Japanese technologies, and thus freeze out local firms.

But Mansour, for one, observed that industrial firms that operate smaller boilers and face new but less severe restrictions will all be scrambling for technical assistance over the next several years. His company has formed a joint venture with a British firm to expand its capabilities. And the local air pollution control industry works for clients outside Southern California that can still benefit from the simpler NOx-reduction technologies. Nationally, a great deal of work today focuses on cutting the huge quantities of NOx produced by coal-burning power plants, which are virtually banned from the South Coast air basin.

NOx accounts for about 30% of the acid rain problem, and utilities produce 30% of all NOx. Coal-burning power plants account for 75% of all utility-produced NOx, according to pollution studies.

EER has contracts worth $30 million under the Department of Energy's huge clean coal technology program, and much of ESA's work is for coal-burning utilities in the Midwest. Both companies have major offices in the East and Midwest.

Samuelsen suggested that local companies stand to gain from the national movement toward standards as strict as those which prevail in Southern California. "They are postured to respond to national needs," he said.

Even if Orange County's NOx specialists maintain their edge in a growing business, however, don't look for them to build empires. Not only is the niche relatively small, but most of the founders consider themselves scientists or engineers first and entrepreneurs second. They would much rather talk about in-furnace sorbent injection then return on equity.

Certainly, the local firms are competitive. Brimming with professional pride, the owner/engineers say their neighbors really aren't doing the same type--meaning the same quality--of work that they are.

But they cooperate a great deal, and form something of a club. Stephen Kerho, a KVB founder who lives in Mission Viejo and works with a Bay Area KVB spin-off called Electric Power Technologies, said the Environmental Protection Agency's biannual NOx conference "is like old home week."

And in reflecting on the glory days of KVB, when an engineering fraternity ran its own, successful company and solved some important problems, many share George Moilanen's sentiment, almost unheard of among successful entrepreneurs: "I would have been just as happy to have worked the rest of my career and retired there."

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