Pollution Trading Program Outlined : Air quality: Complexity of AQMD’s plan draws groans from both environmentalists and businesses.

Eight months after the South Coast Air Quality Management District approved the first emissions trading program to clean up the Southland’s notorious urban air pollution, the district finally explained Wednesday how the program will work, laying out a plan of complex regulations and stiff penalties.

Ending a long period of mystery for business and the environmental community alike, the board unveiled 14 regulations to implement the controversial trading program, called RECLAIM. But while some of the mystery is gone, a great deal of confusion remains.

“Some of the best minds in the country on air quality issues (are) working on this,” said Peter E. Jonker, manager of policy and planning for environment and safety at the Southern California Gas Co. “These are the experts, and we’re having trouble understanding it.”

The regulations will be amended three or four times before they are finally adopted by the district’s board, probably in March. But they provided the first concrete glimpse of the plan--which is a model for the nation--beyond mere concepts and desires.

“We’ve known all along what they (the district) wanted to do conceptually,” said Lucille Van Ommering, associate air pollution specialist for the California Air Resources Board, which will exercise its approval power over RECLAIM in July. “What we’ve never been able to do is . . . plunk it down on paper and say how it will work.”

The plan, approved by the AQMD board last March, calls for an estimated 2,000 major polluters in Los Angeles, Riverside and Orange counties and the non-desert portions of San Bernardino County to be issued a share of overall emissions of three major pollutants based on past production levels. The share is basically a company’s allotment of pollutants and is based on the company’s past performance.

The three offenders include nitrogen oxides and hydrocarbons, which interact in sunlight to form ozone, a strong lung irritant and the major ingredient of urban smog. In addition, the market would trade sulfur oxides, a component of acid rain, acid fog and the fine dust that obscures views and carries toxic particles deep into the lungs.

The value of the shares would be reduced over time, forcing a cleanup. And the program would provide a financial incentive for companies by allowing those that bring their emissions below mandated levels to sell their credits to other companies that do not clean up as fast.

The actual practices--introduced Wednesday to a crowd of several hundred businesses, regulators and environmental groups in a technical and sometimes eye-glazing 2 1/2-hour presentation--include the following main provisions:

* Who: A catalogue of 2,000 companies that each produce four tons or more a year of one of the three major pollutants. That list has long been known, but the district Wednesday formally identified those eligible to join the trading program. That plan includes brokers, who could buy pollution credits for speculation purposes, and environmentalists, who could buy the credits and “retire” them, basically keeping any company from using them and speeding the air quality process.

* How trades will occur: The regulations point to a program that will work more like a real estate “multiple listing service” than a stock exchange or commodities brokerage. The AQMD will maintain a public list that will show who is holding credits. The list will be updated every two days.

* Fees: Although dollar figures will not be outlined for several months, a fee schedule was introduced. Among the fees would be one that would require payment by even those who merely hold the credits for speculation purposes and do not use them.

* Enforcement: In the most controversial development of the day, the district outlined a complicated strategy to keep companies from cheating and causing the beleaguered area’s pollution troubles to escalate.

The district will set a cap of how much pollution a company can spew into the atmosphere each year, basically their share of pollution credits. While the credits have a year’s life, the company must report quarterly to the AQMD how much they have emitted in that three-month period. The quarterly report must come by three days after the quarter’s end.

Companies that exceed the annual cap, basically using up more than their share of pollution credits without buying any more, are subject to administrative penalties for the first time. The fine would be $500 per violation per day per source (i.e. piece of equipment). Currently, civil penalties can hit $25,000 per violation per day, but they are rarely imposed.

In addition, if a company exceeds its limits in two different years, its credits are revoked and it must either stop operating or start over and buy credits on the market.

This complex web elicited groans Wednesday from environmentalists and business representatives alike. To Joel M. Schwartz, staff scientist for the Coalition for Clean Air, the enforcement plan outlined is “all well and good as far as it goes on paper. But that’s what we’ve had all along--promises from the district to ensure real emissions reductions.”

What is lacking, Schwartz contends, is a monitoring system that can catch offenders. One has been proposed but the actual workings have not been spelled out, he said. “There isn’t anything there yet,” Schwartz said. “All the district has is a small computer demonstration system” for monitoring.

Robert Wyman, an attorney representing a coalition of 20 businesses, called the enforcement measures “Draconian” because of the three-day reporting requirement and punishments including revocation of permits, or trading credits.

In addition, Wyman contends that companies will have to hoard their credits in case of emergency, because the district will not allow companies involved in RECLAIM to apply for variances for more time to meet emissions goals.

What the 64 pages of proposed rules did not spell out were some of the more controversial measures facing companies that take part in the groundbreaking RECLAIM program. The district did not announce a rate at which emissions must be reduced, but rather suggested three possible approaches.

The plan did not deal with how to keep businesses in the Southland. And it did not discuss in detail so-called baselines--the crucial emissions levels at which a company begins its pollution-reduction efforts. Depending on how baselines are set, companies that have already made strides at lowering emissions could be punished for their efforts.

“What is in the proposed rules is very incomplete and preliminary,” Wyman said. “There’s a lot of errors. That’s expected. There will be hundreds of refinements” before the regulations are finally adopted.