Clean air leader pitches emissions credit plan

At a time when industrial development is booming across much of South Louisiana, the persistent struggle to meet federal ozone standards in the Baton Rouge area could force expansions or new projects to grind to a halt.

But Baton Rouge Clean Air Coalition leader Mike McDaniel believes he’s come up with a solution to both reduce air pollutants and allow industrial business to grow.

It’s a tough balance to strike. The long-standing ozone problem in East Baton Rouge, West Baton Rouge, Iberville, Ascension and Livingston parishes — and the accompanying federal restrictions on industry — means that any new development must be offset by an actual reduction in overall emissions of pollutants.

Traditionally, this would be done by purchasing emission reduction credits from the emissions “bank” administered by the state Department of Environmental Quality. Companies earn the credits when they voluntarily reduce pollutants below current levels.

Those credits, however, are now at a premium. The few companies that hold credits are holding onto them in case they’re needed for future expansion.

McDaniel envisions creating more flexibility with the bank by allowing companies to pay for projects outside their facilities but that also reduce the ozone-causing pollution in the area. In exchange for investing in those outside projects, the industry would receive “credits” to expand or build facilities that would release some pollutants, although less than the reductions they sponsored.

Industry leaders are intrigued by the concept.

“It is a very big concern, especially here in the five-parish area,” said Richard Metcalf, director of environmental affairs with Louisiana Mid-Continent Oil and Gas Association. There’s the possibility of having enough credits in the Baton Rouge region for maybe two more big projects, and then it’s done unless something changes, he said.

Dan Borne, president of the Louisiana Chemical Association, agreed.

“It’s high on everybody’s list. The one thing that could really slow things down,” he said about the lack of emission credits. “The real wildcard out there is where the new ozone standard is set.”

Both said McDaniel’s proposal is one of several ideas being talked about to try to keep industrial growth a possibility in the ozone nonattainment area while looking ahead to expected tougher standards coming down soon from the federal government. Other options include perhaps requiring use of a lower vapor pressure gasoline in the area or even allowing different regions to trade credits, as is being done in Texas between Houston and Dallas, Metcalf said.

The proposal does raise concerns for some environmentalists that allowing companies to get credits for doing projects outside of their own plants will reduce the incentive to continue reducing pollution inside the facilities.

“Industry needs to reduce their emissions on site. If they want to do these off-site projects that is great, but it should not be a substitute for additional control projects at industrial facilities themselves,” Marylee Orr, executive director of the Louisiana Environmental Action Network, wrote in an email. “This proposal could be an opportunity for facilities to buy their way out of on-site emission controls.”

Ozone isn’t a pollution that is released. It is the result of a chemical reaction when volatile organic compounds and nitrogen oxides from industry, cars and other sources combine in the air during a hot and sunny day. When there is little wind to dissipate this ozone, it can accumulate to cause breathing and other health problems.

The emission reduction credit bank was created in August 1994, one response to the Baton Rouge five-parish area falling out of compliance with federal ozone standards. Significant progress has been made since then. The region meets the current standard, although the official paperwork from the U.S. Environmental Protection Agency hasn’t been finalized so the area is still officially in “non-attainment.”

But even if the Baton Rouge area was given a new EPA designation, that likely wouldn’t last for long. Tougher ozone standards to be proposed later this year by EPA will put Baton Rouge out of attainment again.

It’s very likely the capital region won’t be alone, and other Louisiana metropolitan areas will shift to being out of compliance under the new standards. That would mean new industries in other regions would need to start using emission credit banking.

In a non-attainment area, any industry wanting to build from scratch or expand operations has to follow a tougher set of rules. That includes ensuring a greater reduction in pollution than they propose to release, said Bryan Johnston, senior environmental scientist in the DEQ air permits division. To do that, a start-up facility needs to purchase credits from another facility that has voluntarily reduced pollution releases and obtained credits. For an expansion, a facility could reduce current emissions to receive credit. All of that is run through DEQ’s emission reduction credit bank.

For example, a company that wants to build a facility that would release 100 tons of volatile organic compounds would need to purchase and prove reductions of 110 tons of volatile organic compounds.

Up until now, the generated credits have always come from existing facilities reducing their pollution releases on site. Some companies used infrared cameras that helped show sources of normally invisible leaks of ozone-causing pollution. Tightening up operations or simple repairs helped reduce ozone spikes that plagued the Baton Rouge area for several summers. DEQ also employed another tactic, calling “ozone action days” where the agency would alert industry and communities about weather conditions that looked favorable for ozone formation. On those days, industry voluntarily postponed certain activities that had potential to release ozone-causing air emissions until the weather improved.

At this point, most facilities in the Baton Rouge area have already tackled the relatively easy fixes. “We’ve not only picked all the low fruit, but we’ve picked off the top fruit as well,” said McDaniel, a former secretary of DEQ who has been working on ozone reduction for decades.

His proposal would direct companies to projects outside their facilities, and still require the business to sponsor a greater amount of lower emissions elsewhere than they will end up emitting at the facility.

Possibilities could include a company purchasing natural gas buses for school districts or providing electrical hookups at truck stops to stop truck idling during required, and lengthy, mandatory rest periods.

“The beauty of it is every one of these (transactions) is going to ratchet down the emissions,” McDaniel said. “We’re ultimately going to have cleaner air.”

The industries could propose projects themselves or outside organizations could float ideas that would be listed on DEQ’s website, he explained. Any project would need to be approved by DEQ and be accompanied by proof that the reductions in the project are real, enforceable and would last for an extended period of time.

For industry, the benefit would likely be in not only getting access to credits for expansion or construction, but also in moderating the price for these credits.

It used to cost thousands of dollars per ton for a credit, but now that is up to $30,000 or $40,000 per credit.

“That sounds bad, but there’s a company in Houston who paid $300,000 per ton,” McDaniel said.

“Right now the dilemma is no matter how much you want to pay for them, practically, they’re not available,” he said about the five-parish area around Baton Rouge. Johnston, with DEQ, said the state agency is currently reviewing the proposal.

He said the lack of available credits in the bank has been a relatively recent phenomenon in the last year. Currently, 21 facilities of 87 qualifying facilities in the five-parish area are holding credits in the bank, Johnston said. The credits can be held for 10 years, but then must either be sold, used or lost.

“Ultimately our goal is to reduce ozone concentrations,” Johnston said. If the department’s review of McDaniel’s proposal shows that would be an outcome, it’s possible that the department could start drafting a new rule that would incorporate the changes. That proposed rule would go through a public comment period and be submitted to EPA for approval, he said.

Follow Amy Wold on Twitter, @awold10.