AQMD Moves to Overhaul Power Plant Emission Rules
In a move to keep the lights on and the skies blue, air quality officials on Friday took the first steps toward overhauling how they regulate emissions from power plants.
The changes planned by the South Coast Air Quality Management District are a compromise that gained general support from both environmentalists and business groups.
The changes came after charges by power producers, small businesses and the new administration in Washington that clean-air regulations are worsening California’s energy crisis.
They are almost certainly just the first in a series of fights that regulators anticipate as business groups, supported by a sympathetic federal government, push for an easing of California’s environmental rules.
On Thursday, President-elect George W. Bush called for relaxing California environmental regulations to alleviate the energy crisis.
On Friday, the region’s chief air quality regulator defended the state’s rules.
“We need to ensure the program operates properly so that the power producers don’t wrongfully blame air quality regulations for the scarcity of electricity. You can have adequate power production and clean air,” said Barry Wallerstein, executive officer of the AQMD.
Last year, power companies dramatically increased production from dirty, old boilers and turbines to try to make up for California’s power shortages. Forty of the 93 generating units operating in Los Angeles, Riverside, Orange and San Bernardino counties have no pollution controls.
The result was 600 more tons of smog-forming pollution spewed into the air last summer than in 1999. Though it is a large increase, the change is only about a 3% boost in the region’s total emissions, about 70% of which come from cars and trucks, not factories.
The new rules, which still require final approval, would allow power plant operators to continue that higher level of emissions in the short term. In return, over the next two years the generating companies would have to install costly pollution control equipment that they have resisted for a decade.
To implement the policy, power plants would be taken out of a free market for emission credits that are the economic lifeblood of 364 of the Southland’s biggest manufacturers and oil refiners.
The market program, known as RECLAIM, was launched in 1994 at the urging of business groups.
The program gives each facility in the Los Angeles region a certain number of pollution credits. Companies that do not use all of their allotments can sell credits to firms emitting more than their limits.
Each year, the total amount of allowable pollution is reduced by 8%. The idea is that, as the overall limit tightens, the free market will lead companies to find the least costly ways of reducing pollution.
This past year, however, power producers gobbled up two-thirds of the credits, leaving other companies with soaring prices.
A credit for one ton of nitrogen oxide gas traded for an average of $45,000 last year--more than 10 times the price in 1999. At one point, a one-ton credit fetched $105,000, according to the AQMD.
Total business expenditures for pollution credits last year amounted to about $70 million, according to air quality officials. Business groups say the figure was much higher.
Regulators say businesses sought the program and then failed to purchase sufficient credits when they were abundant and cheap. And many firms did not take steps to reduce emissions and their dependence on credits.
But faced with a market in chaos, regulators said it was important to change the rules to keep the overall program from collapsing.
By taking power plants out of the market for the next three years, they hope to free up credits for other companies and ensure that power plants can operate without fear of being shut down or paying hefty fines for violating regulations.
In the last four months, companies operating electricity-generating plants in Huntington Beach, Ventura, San Bernardino and the San Fernando Valley have been forced to pay multimillion-dollar fines for producing excessive pollution.
By 2003, the power companies will be required to install advanced cleanup devices on boilers and turbines that cut pollution by 90%. That requirement has been imposed by the AQMD as part of its authority to enforce the requirements of the federal Clean Air Act.
“The direction to power producers is clear: Install pollution control equipment now,” said Carol Coy, deputy executive officer for the AQMD.
To provide additional flexibility, power producers and companies still in the RECLAIM market that violate clean-air regulations would be able to avoid buying credits by paying into a special account. Regulators would be able to use money in that account to fund clean-air projects across the region.
Moreover, businesses would be allowed to generate extra credits if they reduce exhaust from ships, trucks and cars. Cleaning up tailpipe exhaust as a way to help ease regulations on power plants is an approach favored by Gov. Gray Davis.
Bob Wyman, a Los Angeles attorney whose Regulatory Flexibility Group represents major aerospace and oil firms, said companies are exploring ways of installing fuel cells on barges used in ports and cleaner engines for trash trucks as a way to cut diesel exhaust.
“It’s important to have decisive action to show RECLAIM is not adversely affecting the power crisis,” Wyman said.
Some of the proposals were met with skepticism by the U.S. Environmental Protection Agency and environmentalists.
Gail Ruderman-Feuer, senior attorney for the Natural Resources Defense Council, warned that allowing businesses to clean up cars and trucks in exchange for credits would reduce their incentive to clean up their own emissions.
“That is one big hole in the program. It’s time to require these facilities to install the best available controls,” she said.
