Alcoa's Pollution Solution: Buy the Road and Move It

Aluminum company expects to avoid $35 million in scrubber costs

ALUMINUM Company of America (Alcoa) had a problem. Its smelter south of Rockdale, Texas, was belching emissions over a nearby public road and the Environmental Protection Agency said it had to stop. To cut the emissions to an acceptable level with pollution-control equipment would be highly expensive.

What to do? Alcoa decided to privatize the road and build the public a new one farther away.

Local residents and regulators approved this finesse of a regulatory technicality. The state road passes through a greenbelt owned by the company where no one lives. But emissions modeling standards set by the EPA and recently applied to the smelter would have forced Alcoa to act as if someone lived every 328 feet along the 2.4 miles of state road.

The potential savings from the solution is huge. A scrubber might cost $35 million to buy and even more each year to operate. But building a new road will cost Alcoa just a few hundred thousand dollars, says C. L. Green, Texas environmental manager for the metals giant. Once the new road is built, Texas will deed back the existing one to Alcoa.

Alcoa has six aluminum smelting plants in the United States. With eight lines of production, Rockdale is its largest, as well as the biggest in the country. Alcoa spokesmen declined to say how much the Rockdale smelter produces. But the company leads the US in aluminum output at 1.3 million metric tons annually.

Officials in rural Milam County, where Alcoa's Rockdale operation is located, hope they have prevented a devastating loss of jobs and tax revenue. ``We needed to work out a solution,'' says Roger Hashem, chairman of the commissioners court and chief financial officer for Milam County. ``Some of the residents thought that this is just big industry trying to impose their will. That's not true. They really had a need.''

SO did Milam County. Some 850 county residents are Alcoa employees. They earn an average of $55,000 yearly, Judge Hashem says. The $1.2 million Alcoa pays in taxes are 40 percent of the county budget. Alcoa also pays $4.7 million in taxes to the Rockdale school district - 65 percent of the district's income. The company spends $11 million a year in Milam County. And an Alcoa foundation last year donated $400,000 to local causes like the fire department. Therefore, a shutdown of the 41-year-old plant would have a ``drastic impact'' on Milam County residents, Hashem says. As it is, the plant idled one-quarter of its production in July. Alcoa says it will cut another one-eighth of production next month.

``Our fuel costs put us behind the eight ball,'' says Hal Reagan, a spokesman for Alcoa's Rockdale operation. The smelter, Alcoa's costliest to operate, burns lignite mined on its 30,000-acre site. That is more expensive than the hydropower other smelters have access to, Mr. Reagan says.

With the industry battered by low prices, this is a bad time to be the highest-cost producer. Aluminum needs to sell for $0.80 per pound for the business to be profitable, says Al Posti, an Alcoa spokesman in Pittsburg. Russian production of aluminum used to be absorbed by the Soviet military but now is being sold abroad. That drove the price for one pound of the metal to a record low of $0.46 in November.

``The Russians were going to put American workers on the unemployed line because they were dumping on the world market,'' says Stewart Spector, publisher of The Spector Report, an aluminum industry newsletter.

However, Russia, the US, and four other aluminum-producing nations recently struck an informal agreement to reduce production. As of Wednesday, the price of aluminum at the London Metals Exchange had risen to $0.58 per pound - still well below its peak of more than $1 in the late 1980s.

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