When the nation's first program of pollution trading was launched here five years ago, proponents from Los Angeles to Washington proclaimed the idea (a.k.a. "smog marketing") the most ambitious, free-market experiment of its kind. It just might be, they said, the most cost-effective way for industries to take Windex to the nation's dirtiest skies.
Now, with several states following the blueprint, and the Clinton administration promoting similar practices worldwide, a first-of-its-kind lawsuit here is bringing the controversial theory into question.
With hundreds of local residents complaining of chronic maladies, two California-based advocacy groups are suing five oil companies for not cleaning up emissions at area refineries.
The environmentalists have also joined the NAACP Legal Defense Fund to file a federal civil rights complaint. The groups allege that emission-trading initiatives subject specific minority communities to disprop- ortionately high levels of airborne toxins.
"This could certainly put the brakes on an experimental practice that not only the US but several foreign countries have been rushing into," says Larry Berg.
Mr. Berg, founding director of the Jesse Unruh Institute of Politics, was the lone dissenting board member of the South Coast Air Quality Management District (AQMD) when the pollution-trading program was approved in 1992. "Win or lose, the lawsuit will force an imperative nationwide public debate that should have ensued before the idea became public policy in the first place," he says.
The idea behind pollution trading is to give each business a certain number of pollution "credits." A business can pollute until it uses all its credits, but if it wants to continue polluting, it must buy credits from other firms or earn credits by reducing pollution in other ways.
The five oil companies named in Wednesday's lawsuit - Chevron Corp., Unocal Corp., Tosco Corp., Ultramar Corp., and GATX Corp. - earned credits by buying and scrapping old, high-polluting cars. The credits allowed them to forgo emission controls on their tankers that load and unload fuel in San Pedro and El Segundo.
But such emissions from a single tanker can exceed 20 tons and include dangerous materials, says Communities for a Better Environment (CBE), the key complainant in the case. Denny Larson, a ranking staff member for CBE, notes that the suit was filed only after four years of repeated attempts to get the companies to alter their practices. Now, CBE wants the United States Environmental Protection Agency (EPA) to scrap the current pollution-trading program in the entire Los Angeles region.
According to CBE's chief attorney, Richard Drury, the pollution-trading scheme unfairly impacts residents in the San Pedro and Wilmington areas. The cars which were bought and scrapped reduced smog levels in the entire Los Angeles region, but the emission "pay back" - the release of vapors from tanker fuel exchanges - directly impacts only one community, he says.
"The effect of car scrapping is therefore to transfer the evenly distributed auto pollution into a toxic hot spot that disproportionately affects the San Pedro/Wilmington community, which is 85 percent minority," Mr. Drury says.
Spokesmen for the oil companies are hesitant to comment pending further examination of specific charges. But Jeff Callender, spokesman for Tosco Oil, says the charges are "false and misleading. We never relied on emission-reduction credits to operate [one specific] marine terminal," he says. "It remains our policy to comply with the US Clean Air Act and other regulations that apply to our operations."
In public meetings that took place after the lawsuits were filed, Barry Wallerstein, an AQMD official who designed parts of the pollution-trading program, called for technical assistance in seeing what could be done to limit community impact. But he stopped short of calling for an end to the practice.
The EPA, too, says it is investigating the lawsuit allegations with an eye on learning lessons for programs now being started in states such as Michigan and Illinois.
"We have been reviewing this south coast trading rule for some time and take the issues of the complaint very seriously," says Felicia Marcus, the EPA's Western regional administrator. "We need to explore every avenue, including creative, market-based programs like emissions trading [to make sure] that disproportionate adverse impacts do not occur in particular communities. That's the challenge here."
The US Department of Justice is weighing its options on the civil rights aspects of the case, according to spokeswoman Lee Douglas, but has not yet taken a stand. But national environmental groups are adding their voices to trumpet the growing number of pollution cases nationwide that unfairly affect minorities. That list could skyrocket, they say, if pollution trading - to which this is the first legal challenge - is allowed to continue.
"Nationally, pollution trading is the buzzword of the day, every air agency in the country wants to adopt it," says Gail Ruderman-Feuer, senior attorney for the Natural Resources Defense Council. "This is the first time a community group is using the civil rights laws to say, 'We've had enough.' "