“The Gordian Knot is a legend associated with Alexander the Great. It is often used as a metaphor for an intractable problem….” Wikepedia.
Call it a “Gordian Knot”, a “Catch-22” or whatever else your favorite phrase may be for a problem with no seeming solution: the South Coast Air Quality Management District (and, as a result, a good deal of area business) is caught up in a seemingly intractable problem.
Within the SCAQMD jurisdiction (covering several Southern California counties, including Los Angeles County), a business cannot run equipment that causes air pollution without obtaining a permit from the AQMD. In many instances, such a permit cannot be issued without the business securing Emission Reduction Credits-i.e., credits that “offset” the amount of “new” pollution business’ machine is adding to the atmosphere. To assist the business, therefore, AQMD has stored up its own “internal” credits, or offsets, which are available for the business’ use.
Recently, however, a State Court has ruled that the way AQMD has been issuing these “internal” offsets violates the California Environmental Quality Act, or “CEQA”. Therefore, a permit moratorium exists until AQMD figures out how to comply with CEQA. During this moratorium, the internal AQMD offsets are no longer available to the business—which means that the permit the business needs to run the equipment cannot be issued unless the business goes out into the market and purchases the emissions credits.
But there is a limited market for such credits, and they can be very expensive. A recent AQMD “Fact Sheet” says that “Credits on the open market are unaffordable, with estimated costs of $234,000 for a gas station, $1.6 million for a tortilla fryer and oven, and $115 million for a landfill gas to energy project.”
So the average business can’t operate without a permit-- but cannot get a permit because of the moratorium on AQMD-issued credits-- and cannot purchase credits in the market because they are too expensive. The result, per the AQMD’s “Fact Sheet”—“more than 1,200 permits are on hold, with potentially over 3,000 existing permits representing over 2,000 facilities in further jeopardy, which will have to be revoked.” And there you have it—regulation in California has reached such a ridiculous height that many businesses within the AQMD’s jurisdiction will simply not be able to operate no matter what they try to do.
You wonder why the State has 11.5% unemployment with the number rapidly climbing?
To attempt to cut through this Gordian Knot, State Senator Roderick D. Wright (D-Compton, Gardena, Inglewood, South Bay) has introduced Senate Bill 696. This legislation, if enacted, would allow AQMD to issue at least a limited amount of internal “offset” credits to permit smaller businesses, essential public services and certain power generation to go forward without CEQA compliance—i.e., effectively reversing the State court to some extent.
SB 696 would not apply to all manufacturers; but enactment of the legislation would at least be a start to reversing the disastrous regulatory course the State is on in the middle of a deep recession. Of course, given the State’s Budget problems, who knows when the Legislature will actually gat around to paying serious attention to this bill.
To learn more about SB 696, you can read the bill by going to http://www.sen.ca.gov/, clicking on “Legislation” and putting in the number of the bill.
This article was originally published as one of my weekly columns for The Valley Vantage, Las Virgenes Enterprise and Warner Center News papers.
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Posted by: Senior Financial Planners | August 19, 2009 at 10:40 AM
California environmental laws seem progressive, but they are rarely effective.
Posted by: Joe | August 04, 2009 at 08:31 AM