Discovery of Major Flaw Forces Smog Plan Overhaul : Air: Program could allow pollution to increase over next 10 years. Revelation is a blow to AQMD effort.

The Southland’s air-quality agency is overhauling a project touted as its most aggressive smog-fighting effort of the decade after the startling discovery that it could increase pollution for the next 10 years.

The data is a major embarrassment to the South Coast Air Quality Management District, which has spent more than two years developing the proposal to expand RECLAIM, its groundbreaking pollution-trading program.

In fact, the finding deals the sweeping smog proposal such a serious setback that AQMD officials, who are struggling to revamp it this month, are not sure it can be salvaged.

Targeting about 1,400 aerospace firms, print shops, furniture makers and other manufacturers in the Los Angeles basin, the RECLAIM expansion had been billed as the AQMD’s last big push toward cleaning up the region’s industrial sources of smog.

The intent was to set strict annual limits to slash use of products containing volatile organic compounds--petroleum-based gases found in an array of paints, solvents, inks and other industrial chemicals. VOCs, or hydrocarbons, react with nitrogen oxides to form ozone, the Southland’s predominant air pollutant.

In RECLAIM, the companies are supposed to cut their emissions annually or buy credits sold or traded by other companies in a “smog exchange.” Rather than reduce its own pollution, for example, a metal-plating company could buy the unused portion of another company’s allowed annual emissions.

But a recent analysis by the AQMD staff shows that the proposed measure would let emissions from firms in the program rise an average of 71% in 1996 compared with 1993--adding as much as 24 tons of hydrocarbons to the air daily. Total pollution from the companies would be allowed to remain above current amounts until 2005.

“It’s outrageous,” said Gail Ruderman Feuer, an attorney for the Natural Resources Defense Council. “This program as currently proposed is worse than no program at all.”

AQMD Executive Officer James Lents called the measure unacceptable in its current form, and said it even has a “high probability” of being illegal under state and federal clean-air laws.

“The biggest thing we’re concerned about is the potential for backsliding,” Lents said. “There could be incentives for some companies to actually switch back to more polluting paints and solvents.”

Many Southland business owners say they are shocked by the new data, and worry that revised pollution limits will be more stringent than the original ones that they already consider onerous. They fear that lower limits could prevent them from expanding their businesses as the economy recovers.

“This was a bombshell,” said Gerald Bonetto of the Printing Industries of California, which represents several hundred businesses that would be regulated under RECLAIM.

“The district is in a very embarrassing and difficult position and I’m not sure how we will resolve this,” he said. “Perhaps there is a way to somehow make this palatable to everyone. If not, then I think the whole thing gets unraveled.”

The mistake came in the AQMD staff’s starting pollution allocations, a critical calculation that establishes how much each company can emit for decades to come.

The air agency based the allocations on either 1989 or 1990 pollution levels at each manufacturing plant, letting each company choose which year. But the staff failed to note that total emissions from companies in the program have dipped more than 40% since then, largely due to the recession and the major downturn in the aerospace industry.

The error threw off the allocation scheme for the next 10 years. For example, the 1996 allocation of 52 tons of pollutant per day compares with 1993’s actual 28 tons. The AQMD says the 1996 figure was an inadvertent over-allocation of 42%.

Because the starting limits are so high, companies could revert to using more polluting chemicals through 2005, but then would have to cut their emissions in half between 2005 and 2010.

“We can’t wait until 2010 to have clean air,” Feuer said. “We’re breathing the air today.”

The AQMD staff had intentionally built in some over-allocations to avoid freezing the businesses at recessionary manufacturing levels and to give them about three years before they would have to lower emissions. But the staff never intended to allow pollution to remain the same, or get worse, for a decade.

“This could easily be the program’s death knell because industry may refuse to close the gap,” Feuer said.

Virtually every business in the program is anxious about where its limits will wind up. Companies involved include Douglas Aircraft in Long Beach, Steelcase Inc. in Tustin, Avery Dennison in Monrovia, and the Los Angeles Times with plants in Los Angeles, Costa Mesa and Chatsworth.

“We dealt with the district in good faith and now this is a last-minute piece of information after we’ve been talking, negotiating, and giving on allocations in the first place,” said Bonetto of the printing industry group.

Robert Wyman, a Los Angeles attorney who represents major aerospace industries and other manufacturers, said the commotion over the allocations has eclipsed the good news--that pollution from manufacturing has dipped considerably since 1990.

Although the recession is behind much of the 42% decline, many businesses also switched to lower-polluting waterborne coatings, inks and solvents.

The current RECLAIM plan, Wyman said, should remain intact because it does accomplish its 2010 goal of cutting the emissions in half.

“I view it not as a problem, but a success story,” he said. “The problem is people are looking at this over a narrow sliver of time, not over a 20-year time horizon.”

The pollution-trading approach behind RECLAIM has been hailed by many businesses and environmentalists as a more flexible and cheaper way to clean up smog than the traditional process of setting and enforcing dozens of individual anti-smog rules for each firm.

But if the pollution limits are revised to lock industries into the lower emissions they produced during the recession, Wyman said the already precarious support for RECLAIM “would disappear.”

“1993 was probably the lowest emissions in the last 40 years in the manufacturing sector because of the degree of the recession,” Wyman said. “I’m not sure it is appropriate to say emissions should never go up even a little bit.”

But Lents said letting the largest industrial emitters slide for 10 years is unacceptable in a region that still suffers the nation’s worst air pollution. He said it would unfairly put more of the smog cleanup burden on other industries.

AQMD officials are considering five options to narrow the gap in allocations. One idea, unpopular with industry, is to make the starting point for all the involved companies 1990, when the recession began, instead of letting them choose between that year and 1989, when emissions were higher. Another is to ban trading of the over-allocated credits.

But Lents said unless a viable solution is found, the AQMD might have to revert to adopting dozens of individual rules for industries--an unpalatable option to an AQMD board with several new members with a conservative, anti-regulation ideology.

The board, which originally was scheduled to consider the program for adoption in December, has delayed action until March.