Green Tape : Environmental Technology’s Reality Falls Short of Hype

If business success were a popularity contest, environmental technology would be a winner. The industry is trumpeted by the likes of Vice President Al Gore and Gov. Pete Wilson. Its growth seems inevitable, and few would quibble with its aims: It’s not every business that can claim it’s out to save the planet.

But for local companies, the reality doesn’t quite match the hype. Turning environmental technology into a new, green engine for job growth in California is tougher than it looks.

“We are hampered tremendously by being here,” complains Inderjit Sabherwal, president of Ensotech Inc., a toxic-waste cleanup firm in Sun Valley. Due mostly to frustration with state enforcement of rules governing soil and water cleanup, Sabherwal said, he is considering moving his 20-year-old business out of California.

The Southland has scores of environmental businesses--those that prevent, detect, monitor and clean up pollution or offer green alternatives to activities that harm the environment. Thanks to strict pollution laws--and to armies of unemployed engineers--the Los Angeles area is home to the nation’s second-biggest concentration of environmental technology companies in the country.

But for many of those companies, the going is tough.

Although a few giant concerns--from Fluor Corp. in Irvine to Lockheed Corp. and Rockwell International’s Rocketdyne unit in the San Fernando Valley--are in the business, most of the companies are small. Their expansion is limited by an array of obstacles, from lack of capital to inconsistent enforcement of environmental laws. The recession has also taken a toll.

For example, five years ago, Sabherwal says, his company had annual sales of $5 million and a staff of 60. Today, sales have dropped to $4 million and staff has dropped to about 30. He blames the recession in part, but says, too, that the state is slower than it used to be in pressing companies to clean up toxic waste.

Michael Uziel of Enviropro Inc., a Chatsworth firm specializing in hazardous-waste cleanup, says sales have fallen off in the last three years, to about $3 million. The Clinton presidency and state programs aimed at fostering the industry have been of little help, he says.

Owen W. Dykema, a 65-year-old former Rocketdyne engineer who has spent the last 15 years honing his invention for burning coal without producing acid rain, is just about out of money. He’s still searching for that elusive investor he needs to bring his product to market.

Many of these business people are particularly rankled by regulatory problems. Common themes are the slow pace of state approvals for cleanup and excessive testing requirements.

Before a company such as Ensotech can remove and treat, say, lead-tainted dirt, complicated negotiations must be conducted with the agency in charge--usually the state Department of Toxic Substances Control or regional water quality boards. Local fire departments, water districts or county health departments often have to sign off, as well.

Sabherwal tells the story of his company’s efforts to dispose of piles of oil-contaminated dirt scraped from lands owned by a San Diego public agency. After more than a year of inconclusive talks, the client finally loaded the soil on a train bound for a landfill in Utah, where hazardous-waste statutes aren’t as tough.

James M. Strock, California secretary of environmental protection, says enforcement of state regulations has been steady. But he acknowledges problems with cleanup approvals. “In California, we have the highest environmental standards in the world,” Strock says. “But we also have one of the most convoluted permitting systems.”

Another reason many companies are having trouble is that, as the industry has matured, market growth has tapered off. At the same time, competition has increased.

The competitive atmosphere has created an arms race of innovation, as companies struggle to meet client demands for cheaper and quicker ways to clean waste. But they run into roadblocks because they lack the capital needed to develop and market new products.

Uziel, for instance, has spent $350,000 developing a method of cleaning tainted soil by shooting microwaves through it. He thinks the technique could drastically cut the costs of cleaning up petroleum and other toxins. But he must find a partner, because he can’t afford the $3 million he says it would cost to market it himself.

Heavy government involvement in cleanups discourages private investment, according to Don Hichens, general partner with Liberty Environmental Partners. The San Francisco-based firm is one of only about half a dozen U.S. venture capital firms that specialize in funding environmental technology.

Air-pollution technology has been somewhat more successful in drawing investment because of California’s long track record with strict air pollution standards, ample room for innovation and support from government agencies.

For the most part, investors prefer putting their money behind market-driven pollution products, such as recycling and prevention technology, Hichens says. An example of preventive technology is Rocketdyne’s new $1.3-million aqueous cleaning facility, scheduled to open in Canoga Park in November. The operation uses ultrasound waves, rather than polluting solvents, to remove grime from engine parts.

Still, innovation is more likely to come from small start-up firms than from big defense companies or engineering firms, says Hichens. And there are many such companies around.

Working from a tiny office in his West Hills home, for example, Dykema spends his days hunting for a foreign partner with the means to test and market his technology.

His idea, first developed at Rocketdyne, is to smolder coal in a fuel-rich chamber before burning. The gas mix and temperature are manipulated so that polluting compounds such as sulfur form a solid. The remaining coal is relatively sulfur-free and can be burned without releasing the chemical into the air, he says.

Dykema’s plan requires a $30-million retrofit of 17-story coal-burning plants. Although a small-scale prototype of such a boiler has been built, the method has never been tested in a full-sized utility plant, Dykema says. With just $10,000 left in his business’s bank account, Dykema says, he’ll give up by year’s end if he doesn’t find a partner.

What the environmental industry “really excels at is getting to the point where I am,” he says. “Where we really fall down is getting from here to the market.”