NEWS ANALYSIS : AQMD Plan for Blue Skies Turns Hazy : Smog: Agency struggles to save the proposal that has been criticized by business and environmentalists.

On a spring day in 1989, the Southland’s powerful smog-fighting agency launched a bold effort that was supposed to accomplish what no one had dared promise before: making the nation’s foulest air safe to breathe.

At the time, the South Coast Air Quality Management District was ready to embark on more than 100 anti-smog rules, from the mundane to the futuristic, outlined in its 20-year blueprint for blue skies.

But last year, the program was suspended. All new rules targeting industrial pollution were put on hold, this time so the AQMD could pursue an innovative, pro-business approach that allows companies to exchange pollution credits while cleaning the Southland’s air. The idea was widely hailed as a more economical and realistic way to achieve the same goal.

Now, though, that much-touted proposal--called RECLAIM--is in trouble.

Under assault by many key business groups as well as environmentalists, AQMD Executive Officer James M. Lents and his team are struggling to save the proposal three weeks before the agency’s board convenes a two-day hearing to debate it.

“Unless staff and those working on it in the business community recognize the very strong-flying red flags, RECLAIM is dead,” said longtime AQMD board member Norton Younglove, considered a bellwether of the board. “If the vote were held today, I don’t think it could muster the votes necessary.”

If the pollution trading plan fails, the air quality agency will have lost much of the last three years in its fight against smog in Los Angeles, Orange, Riverside and San Bernardino counties.

When Lents and his staff crafted the Regional Clean Air Incentives Market (RECLAIM), they not only suspended new smog control rules, but gutted their enforcement office and stuck their vulnerable necks out when they are already a favorite target of the Legislature.

At stake is more than just another feud between the AQMD, local businesses and environmentalists: Smoggy cities across the nation, as well as the Clinton Administration, are looking at the four-county Los Angeles Basin to lead the way in molding an improved, economically sound way to combat air pollution.

“Politically, they are in bad shape if it fails. They are overselling all their proposals, but if nobody’s buying, what do you have?” said one longtime official involved in air quality issues. “They’ve promised so much, they’ve hyped so much, that if Lents doesn’t get something out of RECLAIM, his credibility is on the line.”

Instead of the AQMD’s time-honored but irksome approach of prescribing exactly how each industry must combat smog, the new proposal relies on economic forces and incentives. Its goal is to cut costs and increase flexibility for industries while eliminating the same amount of pollution as traditional rules.

The program also has a political motive: to deflect the huge backlash against the AQMD waged by the Southland’s business community--as well as many state legislators, who are debating several bills that would gut the agency’s power and independence.

Ironically, RECLAIM is now being lambasted by many of the same business groups that pushed the concept in the first place.

Under the proposal, each company would be allocated a number of credits for the amount of two smog-causing gases they can emit. Those that find ways to cut emissions below their limits can sell pollution credits to others that have difficulty complying. The intent is that a market would emerge for buying and selling the credits, and the profits would encourage businesses to slash their pollutants even more.

In general, the largest polluters--the oil refineries, power utilities and major aerospace firms--stand to gain because they could save millions of dollars a year. But some smaller, less-polluting businesses complain that they will wind up spending more than they would on traditional smog control because they would be encumbered by more than 1,000 pages of rules and expensive pollution monitoring requirements.

“Certainly the district is under attack from all sides. What’s ironic is the business community is speaking with so many voices when it was their grand idea in the first place,” said John White, a legislative consultant for the AQMD and Sierra Club in Sacramento.

Lents remains optimistic that the proposal will win the board’s support during the Sept. 9 and 10 hearings. But if it fails, he said, unyielding critics in the business community are to blame. Many opponents, he said, are simply using the assault as a delay tactic because their real hope is that the AQMD will not require them to clean the air at all.

Calling RECLAIM a cheaper and easier way to clean up the area’s smoggy skies, Lents stresses that it was fashioned cautiously, with the advice of leading economists, business leaders and environmentalists. The AQMD estimates that RECLAIM would cost about half as much as the traditional pollution rules but concedes that most of the savings goes to the big polluters.

“I think we will get the program,” Lents said, “and in the end, when it comes down to it, all the companies that are in it will decide they want it.”

The proposal has already been scaled back enormously. It would apply to just 460 polluting companies in the four-county region out of an estimated 30,000. Originally, 2,800 would have been affected, but the program now focuses on only two of the region’s three worst pollutants. The AQMD hopes to expand it to cover most Southland businesses.

Much of the industry assault on RECLAIM has been directed by the Gas Co., which would stand to lose because many industries would find it cheaper to switch from gas to electric power.

Gas Co. officials say they want RECLAIM abandoned because they worry about the impact on the overall economy. They estimate that it would mean a 12-fold increase for some small businesses in costs of monitoring their emissions.

Criticism comes from groups as varied as the Orange County Chamber of Commerce and the Concerned Citizens of South-Central Los Angeles, which fear that the plan will scare off new businesses.

“I hear people call it a great experiment, but frankly we think the livelihood of people that operate in this basin is too great to be treated like a great experiment,” said Anne Smith, vice president of the Gas Co., who called RECLAIM unfixable.

Environmental groups also oppose the plan, calling the rules unenforceable. They worry that RECLAIM will become an unwieldy paper exercise that fails to clean the air.

“No amount of tinkering will cure these fundamental flaws,” said one of the plan’s staunchest critics, Jim Jenal of Citizens for a Better Environment.

Attorney Robert Wyman, who represents 20 large Southland industries--including oil companies that stand to benefit from RECLAIM--believes that a flurry of last-minute refinements will brunt the criticism by opponents.

Consensus-building meetings are being held almost daily, and Lents said revisions are expected that will appease some businesses’ concerns about the costs.

Most of the AQMD board’s 12 voting members are skeptics when it comes to RECLAIM. Many are unwilling to vote for a program opposed by small businesses.

“If specific concerns were adequately addressed, I would have guessed it had at least nine positive votes,” said Younglove, who represents the Riverside County Board of Supervisors. “But I have seen an erosion of that in the past couple months, so at best it is 50-50.

The most likely result, Younglove said, is that the board will order its staff to design a new strategy, perhaps a year down the road, that would incorporate some of the good points of RECLAIM.

In the meantime, the board would have to revert to its traditional method of adopting individual rules that target each source of pollution, from industries’ boilers to the fuel they use.

“If RECLAIM goes down, it won’t be that much of a blow,” said Tom Eichhorn, AQMD communications director. “We’ve become convinced over the years in this market-based approach, but it’s not the only way to go. We can meet the clean air mandates this way or the other way.”

But critics say the “other way” would be slow going. AQMD board members, who are predominantly Republicans, have shown a strong aversion in recent years to adopting rules that force industries to install costly smog control equipment while the economy is ailing.

Even the oil companies and Southern California Edison, which would stand to benefit from RECLAIM, have not publicly endorsed it because they are holding out for more concessions.

“I see us at the one yard line in terms of resolution of some of these issues,” Wyman said. “We’ve gone 99 yards, but that last yard is always the toughest.”

Recipe for RECLAIM Under the AQMD’s proposed Regional Clean Air Incentives Market, 460 companies in the four-county Los Angeles Basin would be assigned maximum volumes of two pollutants--nitrogen oxides and sulfur oxides. Hydrocarbons--the region’s most plentiful pollutant--were eliminated from the plan because of the difficulty in measuring them. But if RECLAIM is adopted, the limitations could be phased in later.

* Nitrogen oxides (NOx)--These gases from cars and industry cause the whiskey-brown haze that dirties the air in Southern California. They also combine with hydrocarbons to form ozone, a lung-scarring gas that is the most hazardous air pollutant in the region. Power plants are a major industrial source of NOx.

* Sulfur oxides (SOx)--Emitted by cars and such industries as chemical plants and oil refineries, these fumes can react in the atmosphere to impair visibility and form acid deposits. They can cause respiratory problems, especially in children.

* Hydrocarbons--These highly reactive gases are released during incomplete combustion of petroleum products. Sources include auto exhaust, oil refineries, and manufacturers that use paint and solvent. They react with NOx in sunshine to form ozone. Many hydrocarbons are carcinogenic.