Inland Power Project Mired in Pollution Reduction Dispute

By Published On: December 13, 2003

San Jose?based Calpine refuses to budge on postponement of air pollution offset credits for its 670 megawatt power project slated for Riverside County, even though the California Energy Commission insists it has to procure the scarce credits before the plant is certified. A vote next week by the South Coast Air Quality Management District (SCAQMD) may break the standoff by making it easier for Calpine to buy nitrogen oxide reduction credits for its Inland Empire power project. ?There is no guarantee that the NOx offsets will be available, no matter how much money they have,? said Chris Davis, commission spokesperson. Credits are available only ?in small chunks? from some of the 300-plus industrial facilities in the SCAQMD?s regional clean-air incentives market (RECLAIM) program, he added. For months, the CEC staff has insisted that the Warren-Alquist Act requires Calpine to nail down NOx credits before the commission sites the Inland power plant. It pointed to the half-dozen projects in Southern California the commission certified since 2001 that lined up the credits prior to being permitted. Calpine, on the other hand, asserts it need not buy the scarce NOx offsets until it begins constructing the plant and that commission staff are acting outside their authority. The air district?s RECLAIM program is an emission-reduction trading scheme that seeks to lower levels of air pollution from factories and power plants. However, during the energy crisis, the district temporarily removed existing generating facilities from RECLAIM because the plants, which stalled on pollution-control installations, drove the price of NOx credits into the stratosphere. That seriously jeopardized other businesses operating under RECLAIM, such as smelters. New power projects are covered by the trading program. In a vote scheduled for November 7, the district is expected to approve putting the existing plants back under the pollution-trading program. Assuming the plants return to the program, more NOx credits will be available because the facilities? owners installed long-overdue emission-control technology. ?The plant cleanups significantly reduce emissions, making more credits available to the RECLAIM market,? said the district?s spokesperson. Calpine has acquired less than 10 percent of the requisite NOx emission offsets but will be buying particulate matter and carbon monoxide emission-reduction credits from the district?s Priority Reserve program. The South Coast district, which exceeds health standards for NOx pollution, has no NOx credits to sell. New stationary pollution sources must buy RECLAIM trading credits every year equal to the level of dirty air emissions from those who have NOx credits and are willing to sell. ?Thus, the applicant cannot guarantee that it will be able to find and purchase the necessary [credits] unless it either purchases them or purchases an option to purchase them at a later time,? CEC staff?s October 27 analysis states. Calpine?s attorney argued that there are no advance purchase requirements and the company need only seek permission from the air district prior to beginning operation of the power plant. In addition, although there are no ?guarantees? that the needed credits will be available, ?there is no reason to question that [credits] will be available when needed,? stated Greggory Wheatland of Ellison, Schneider & Harris. Wheatland said he had ?no personal knowledge? of the price Calpine may need to pay to buy the NOx offsets. The South Coast air district was accused at the end of September of mismanaging the decade-old RECLAIM program by two environmental groups. A September 29 filed in the U.S. District Court in Los Angeles alleges the district failed to require quarterly reconciliation reports from RECLAIM-covered factories to ensure actual pollution output did not exceed the program emission allotment.

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