THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Thursday, May 2, 1996 TAG: 9605020410
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY SCOTT HARPER, STAFF WRITER
LENGTH: Medium: 100 lines
Virginia Power was a major player this year in a uniquely American experiment in environmental protection - allowing people to buy and sell the right to pollute the air with sulfur dioxide, a key component of acid rain.
Now in its fourth year, the annual acid rain auction at the Chicago Board of Trade drew bids from curious investors, coal companies and even school children, who gathered pennies to buy a chunk of sulfur dioxide that might have been sold to polluters.
Virginia Power had other plans. The local utility paid $5.3 million for the right to pump 83,000 tons of sulfur dioxide into the sky during 2002 and 2003. That's about $64 per ton of emissions, or the price of a trendy pair of sneakers.
In discussing their largest purchase ever at the Chicago auction, utility officials said this week that the pollution credits will help them comply with tough federal environmental regulations that take effect in 2000.
Under the national Clean Air Act, Virginia Power must cut its annual smokestack emissions of sulfur dioxide by more than half by the turn of the century - from an estimated 300,000 tons a year to 143,000 tons, said Leo Meyer, the utility's allowance program manager.
Actually, Virginia Power, like other acid rain producers, only has to show such reductions on paper when it submits an anti-pollution portfolio to the U.S. Environmental Protection Agency. The portfolio can include real reductions or those bought at the auction.
With the auction credits in pocket, the utility ``is starting to look pretty good'' in its race to meet clean-air rules or face federal sanctions, Meyer said.
Other proposed reductions are more tangible, such as burning more low-sulfur coal at Virginia Power's eight coal-fired power stations, including two in Chesapeake and Yorktown, and the installation of pollution scrubbers on smokestacks at other power plants, Meyer said.
The utility already has spent $140 million on a scrubber at the huge Mount Storm power station in West Virginia. The project has decreased sulfur dioxide emissions by an estimated 50,000 tons a year, said Ken Blackwell, a Virginia Power spokesman.
Acid rain results when fuels that contain sulfur, such as coal and oil, are burned. Power plants and automobiles are chief sources. While the damage resulting from acid rain has been highly disputed, most scientists agree that over time, it injures forests and turns lakes and streams more acidic.
In Virginia, Shenandoah National Park suffers from some of the highest sulfur dixoide counts in the country. And in Richmond, car dealers are known to warn prospective buyers that paint chips are attributable to acid rain and can be fought by frequent waxing.
The idea of buying and selling acid rain credits, as if they were pork bellies or other commodities, has troubled many environmentalists and citizen groups since the first public auction was held in 1993.
They wondered if dirty companies would simply buy their way out of trouble by purchasing credits and skipping more expensive plant improvements.
But the EPA cites statistics that show how sulfur dixoide levels have reduced faster through market incentives than through strict government mandates.
And in the wake of such progress, many environmental groups have either acquiesced to the program or are outright applauding it. One big fan is the Environmental Defense Fund, a national watchdog group.
``It's an absolutely fail-safe program,'' said Joseph Goffman, a senior attorney with EDF's office in Washington.
His reasoning is simple: Pollution credits can only be sold when a utility or industry cuts its emissions by more than what the government requires.
For example, if a company in Montana is mandated to cut its sulfur dioxide emissions by 10,000 tons but installs a technology that reduces them by 30,000 tons, that company would have 20,000 tons to sell or bank for future use. The leftover 20,000 tons could then be bought by a utility in Virginia, an industry in Texas or a classroom of children in New York.
``When someone buys (a credit), you know someone else somewhere has reduced more than they were supposed to,'' Goffman said. ``You're never going to sell more than what already has been reduced. You can't lose.''
Nancy Summers, of the Virginia Consortium for Clean Air, is not convinced.
While Summers sees the national benefit of the program, she notes that troubled regions still could suffer from heavy acid rain if big polluters in a region buy credits instead of investing in factory improvements.
``The bad guys are going to buy credits to save themselves from upgrading,'' she said. ``There isn't any mechanism to protect hurt areas.''
For Virginia Power, the credits will likely stave off expensive improvements at older power plants, which include the Chesapeake and Yorktown stations, both of which were constructed in the 1950s, utility officials said.
The plants contributed 29,681 tons and 23,316 tons of sulfur dioxide in 1995, respectively, according to Virginia Power statistics.
But Meyer said Chesapeake and Yorktown were probably too small to install big-dollar scrubbers on anyway. Still, he said, ``(The credits) will allow us to push off scrubbers elsewhere for a couple years. . . . It buys us some time and certainly saves us some money.'' by CNB