Anti-Smog Plan Praised, Jeered as Hearings Begin : Environment: Hours of testimony reveal bitter divisions over pollution-trading concept. Stakes are high for air quality and the state’s economy.

In a bruising, daylong battle of accolades and rebukes Thursday, a proposal to replace the Southland’s traditional approach of fighting smog with a novel pollution-trading strategy was called everything from “world-class” to “unworkable” and “frightening.”

About 40 business leaders paraded before the South Coast Air Quality Management District board at its Diamond Bar headquarters for more than five hours in a relentless and divisive first round of hearings for the precedent-setting proposal called RECLAIM.

The fate of RECLAIM is pivotal in determining how the nation’s smoggiest region will clean its air over the next decade. A second day of hearings will be held today, and the board will hear final testimony Oct. 15, when a vote is expected.

Developed after three years of work by economists, business leaders and air quality experts, the pollution market plan has been touted by the AQMD as being able to eliminate 75% of industrial emissions while cutting the costs of traditional smog control in half.

“For the first time in history, a large, multiple-industry, market-based approach is proposed to achieve air quality standards,” AQMD Chairman Henry W. Wedaa, a Yorba Linda city councilman, said in opening remarks Thursday. “Business, government and environmental leaders from around the world are watching, because they know that if RECLAIM succeeds, it will open a new chapter in restoring our environment.”

With RECLAIM--Regional Clean Air Incentives Market--the usual, individual smog rules would be scrapped for about 400 companies. Instead, each would each be assigned an annual limit on the nitrogen oxides and sulfur fumes they could release into the air, based on past emissions. The limits would decrease each year, cutting emissions by 75% by 2003.

The companies could choose their own techniques for reducing pollution, and firms having trouble meeting their targets would be able to buy right-to-pollute credits from others that managed to cut emissions beyond their limits. The goal is to give businesses a financial incentive to clean the air.

The concept of a free-market approach to cleaning up industrial pollution was originally supported by virtually everyone, but now businesses are feuding over the details.

Endorsements at Thursday’s hearing came from the region’s most influential industries and largest polluters: Southern California Edison Co., Arco, Mobil, Texaco, Unocal, Chevron, Shell, Hughes Aircraft Co., Northrop Corp., Rockwell International, TRW, Lockheed, California Portland Cement and Allied Signal Aerospace Co.

Support also came from Gov. Pete Wilson and the U.S. Environmental Protection Agency.

“You would provide a true economic incentive to reduce pollution--an extraordinary change,” said James Strock, Wilson’s secretary of the environment.

But opponents also made a strong showing Thursday, not so much for their size but for the diversity of industries they represent. Among them were the Gas Co., 3-M Co., Edgington Oil Co., Yeager Construction, Fontana Paper Mills, several asphalt businesses, some small defense firms, and such business groups as the Greater Riverside Chamber of Commerce and a coalition of ethnic businesses.

“RECLAIM will be the straw that breaks the economic backs of many,” said Gary Peterson of Edgington Oil Co., a Wilmington refinery that filed for bankruptcy last year. “It will require many companies to curtail their activities.”

Environmentalists also oppose RECLAIM, but for different reasons. They believe that the program would delay smog cleanup because companies’ starting pollution limits for 1994 are greater than today’s emissions.

The stakes are high for both air quality and the area’s struggling economy. The targeted firms are the largest sources of industrial pollution, and the AQMD has suspended other smog-control efforts, hoping to expand the program to encompass thousands of businesses.

Slicing Into Smog

Under its innovative smog-trading proposal, the AQMD would set pollution limits for about 400 businesses in Southern California that are large sources of nitrogen oxides and sulfur. The limits would decline each year, resulting in a reduction of 75% by 2003. Companies able to cut emissions beyond their limits would be able to sell pollution credits to others. This chart shows the region’s 12 greatest sources of nitrogen oxides and their AQMD allocations.

TONS PER YEAR

1994 2000 2003 Chevron USA 2,822 1,038 752 California Portland Cement Co. 2,210 543 393 L.A. Dept. of Water and Power 1,901 326 236 (Long Beach plant) Arco 1,853 996 722 Mobil Oil 1,851 716 519 Southern California Edison 1,763 485 352 (Long Beach plant) Union Oil Co. 1,518 530 384 Texaco Refining Inc. 1,499 478 346 Southern California Edison 1,270 376 273 (Redondo Beach plant) L.A. Dept. of Water and Power 820 147 106 (Los Angeles plant) Southern California Edison 742 185 134 (El Segundo plant) Unocal Oil Co. 646 204 148

SOURCE: South Coast Air Quality Management District