Relaxed Air Rules Choke an Industry

DURHAM, N.C. â€”  Cormetech Inc.’s state-of-the-art manufacturing plant makes big pollution-control devices that clean millions of tons of smog-producing nitrogen oxides from the smoke that billows out of power plants.

But on Friday, like all Fridays these days, most of the factory’s machines were still. Since June, the Durham-based company has cut its workforce and production by more than half and shrunk its workweek from seven days to three or four.

Business is very slow for companies like Cormetech. And it is about to get even slower, industry experts say.

The Bush administration on Wednesday announced a relaxation of the Clean Air Act’s requirement that older facilities install modern pollution-control devices when they modify their plants in ways that significantly increase emissions.

The new policy was the second step of the administration’s reform of the “new source review� portion of the Clean Air Act, and it had been in the making for two years. The prospect of this reform had already weakened the market for pollution-control equipment, experts said.

Industry representatives, state officials and environmentalists agree that under the new rule, coal-fired power plants, the nation’s biggest polluters by far, will rarely if ever trigger this requirement to install pollution-control devices.

“It looks like we will have a lot of lean years here,� said David Foerter, executive director of the Institute of Clean Air Companies, which represents 80 firms that produce pollution-control devices.

The companies that belong to the trade group, which account for a third of the industry, booked about $1 billion in sales in 2001. In 2002, sales fell to $800 million, and in the first half of this year revenues plunged to $75 million.

“Orders for the future are almost nonexistent,� Foerter said. “It’s like falling off a cliff.�

Companies did not expect these to be tough times.

Just a few years ago, it looked like aggressive enforcement would make all the dirtiest, pre-1970-vintage plants clean up, said Robert McIlvaine, an industry analyst. Starting in 1999, the Clinton administration brought lawsuits against 51 power plants as well as a number of refineries and wood-processing plants.

Many of the refineries settled and have started cleaning up. But the power plants, a much bigger market for pollution-control companies, balked.

Some of the biggest polluting utilities had signed agreements in principle in 2000, but after the Bush administration took office and launched its reforms, those potential agreements stalled. A few utilities have reached agreements with the government, but most opted to go to court.

The administration’s new policy makes it easier for electric utilities, refineries and manufacturing plants to update or repair their facilities without having to install modern pollution-control devices as part of the process.

The idea is to give industry greater flexibility to modernize its plants without being penalized for it financially. Some utilities, for example, say they have been reluctant to install advanced steam turbines that let them make more power from less coal -- a clean-air benefit in itself -- because doing so might force them to install costly new pollution-control equipment.

But environmentalists warn that the change allows dirty industrial facilities to keep polluting. Their chief concern is coal-fired power plants.

Thirty-three years after the Clean Air Act was passed, the majority of coal-fired electricity generators in the U.S. still have not installed pollution-control devices, industry officials said.

They’re responsible for the lion’s share of the pollution from the power industry, whose emissions account for a quarter of the nitrogen oxides and two-thirds of the acid-rain producing sulfur dioxides emitted nationally.

The effect of the new policy might be limited in California, which has led the nation in requiring pollution controls. The California Air Resources Board considers its new source review program very effective at forcing industrial polluters to install new control equipment. It plans to fight to keep using its own program.

California is one of the few parts of the country without coal-fired power plants, and the rest of its industrial facilities are cleaner than in most states. Cormetech was busy retrofitting gas boilers in California in 1993 and 1994, years before it did similar projects in the East.

For companies like Cormetech, air pollution control is a potentially massive market that has never been fully realized.

Business had been strong for Cormetech in recent years, because the company was busy helping some older coal-fired power plants reduce emissions of nitrogen oxides. But that work is almost completed, said Fred Maurer, Cormetech’s president.

Maurer said his company is still turning a profit, but it has not been easy. In addition to the layoffs and cutbacks, Cormetech recently cut costs by moving office staff out of a downtown office building and into its plant in a leafy industrial area about 20 miles from Durham.

“Right now people are downsizing and just trying to hold on,� Maurer said.

Cormetech produces huge honeycomb-shaped ceramic filters known as selective catalytic reduction machines.

To reduce nitrogen oxide emission by as much as 90%, ammonia is added to exhaust before it flows through the honeycombs. A chemical reaction turns most of the gas into water and nitrogen. It can cost a plant $40 million to $50 million to install one machine.

Maurer remains optimistic. It’s not as if regulation of plant emissions is disappearing; Congress is weighing legislative proposals that would require power plants to reduce pollution.

Republicans and Democrats support the general concept, but the Bush administration and Senate Democrats have very different ideas about how deep the cuts in pollution should be, and most Washington observers see little chance of a bill passing this session.

Even with the Bush Clear Skies plan, which is the least aggressive, industry experts believe that about half the nation’s coal-fired power plants would be retrofitted with pollution controls, up from about a third now, Foerter said.

And even without such a bill, there are regulations in the works that could require deep reductions.

But the pollution-control industry worries that these regulations, like past regulations, will be delayed for years by legal challenges.

Jeffrey Holmstead, the assistant Environmental Protection Agency administrator for air programs, said that if the president’s plan were to pass, about 85% of electricity from coal-fired power plants would come from plants with advanced-control technology.

Even if it does not pass, Holmstead believes that the market for pollution-control equipment will be good.

“There is a misperception that somehow the new source review is the only program that requires people to install technology controls,� he said.

But many local and state officials charged with cleaning up the air believe that the new administration policy will make it much easier for industries to avoid updating.

Said S. William Becker, executive director of the State and Territorial Air Pollution Program Administrators and the Assn. of Local Air Pollution Control Officials: “We are very concerned it will postpone the achievement of our health-based standards, and the public should be outraged.�