Robbing to pay - Alcoa and Air Quality Concerns in Texas

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Robbing to pay

Did Alcoa -- whose outgoing chairman will likely be the Secretary of the

Treasury -- Bush-whack environmental concerns in Texas?

After President-elect W. Bush nominated Alcoa chair O'Neill as

his Secretary of the Treasury, the Pittsburgh businessman was lauded by the

press as an environmentalist and an agreeable moderate. He's lectured on the

importance of protecting the environment -- the Post-Gazette recently quoted

him saying that it would be wrong to " tolerate the creations of new things

that are insulting to the environment " -- and once proposed a gas tax said

to have made many business leaders nervous. Last summer, he disclosed that

Alcoa had disbanded its political action committee (PAC) in 1996, winning

accolades for his good-government orientation. " What's going on with

corporate financing [of political campaigns] has reached well beyond a

reasonable limit, " O'Neill told Fortune. " Some people said we'd have a

problem with access [to lawmakers]. That hasn't been the case. "

It would seem not: The company O'Neill headed for 13 years is one of the

most controversial polluters in the President-elect's home state of Texas.

And that's thanks in part to loopholes in state environmental laws critics

say were protected by the politically connected law firm representing Alcoa

on environmental issues. The firm was among the largest contributors to

Bush's presidential campaign at the time the fate of those loopholes was

being decided.

As Texas' air quality began deteriorating in the 1990s -- it later became an

issue in Bush's presidential campaign -- a loophole enjoyed by Alcoa and

other firms became a knotty issue. In 1971, Texas had " grandfathered in "

existing industrial plants by exempting them from newly-enacted

environmental standards. Today, 800 of those grandfathered plants are still

operating, producing roughly one-third of the state's industrial pollution.

Among them is an Alcoa-owned aluminum smelter fueled by three power plants

burning dirty, high-sulfur coal in Rockdale, near Austin. These plants

account for about 10 percent of Texas' grandfathered emissions.

" The plume of pollution and the sulfur smell comes right over this place.

People who live here breathe it every day, " says community activist

Brown, president of a 900-family group called Neighbors for Neighbors that

protests the facilities' operations.

The battle has included a rally of more than 100 in Austin, and a women's

relay march across the state, protests against Alcoa to which Brown says

Bush responded only by form letter. " We were a little puzzled by his

disregard, but now we maybe see why. "

In Brown's neck of east Texas, where he says folks are generally rural,

Republican and conservative, people felt Bush turned on them, says Brown.

" We were naturally a little shocked and disturbed when Bush appointed

O'Neill. We hear O'Neill's a moderate guy. But to us, that's irrelevant. "

Initially, Alcoa directed questions about O'Neill to the Bush transition

team, which declined comment except to say that O'Neill was " no longer CEO

of Alcoa. "

In response to questions about the company's Rockdale operations, Alcoa

spokesperson Joyce Saltzman said, " Alcoa's Rockdale Operations [are] in full

compliance with all national and statewide air quality standards and other

regulations. ... Alcoa's Rockdale facility operates legally and is strictly

regulated for ... pollutants such as particulate matter and sulfur dioxide

by state and federal agencies. Were Rockdale permitted in 1971, it would

still meet today's permitted emissions levels. "

Despite how that may sound, that doesn't mean that Alcoa's Rockdale meets

today's standards for aluminum smelters or power plants, says

Crimmins, a spokesperson for the state's environmental agency. " They have

operated legally, but they haven't operated as if they had been permitted.

They can't argue they're as clean as an aluminum smelter built today. "

Arguably, they need to be, and soon: The federal Environmental Protection

Agency has designated all of Texas' major metropolitan areas as being in

" nonattainment " or " near nonattainment " of clean air standards, and Texas

will face sanctions if it doesn't clean up by 2007. Two key pollutants are

nitrogen oxide, a component of smog, and sulfur dioxide, which causes acid

rain.

Given that threat, activists were incensed at how, in 1996 and 1997, a move

by the Texas environmental agency to close the grandfather loophole became

merely a voluntary emissions-reduction program in which Brown says, " Bush

basically let the companies write their own legislation. "

The idea of a voluntary program was Bush's, says Ralph Márquez, a

commissioner of Texas Natural Resources Conservation Commission (TNRCC), the

state's environmental agency. As Márquez tells it, he took the issue of

grandfathered industrial pollution to the source -- the companies

themselves. " The approach of our agency has been to engage the regulated

community, " he says, " not to surprise them and get in conflicts and have to

fight in court or in the legislature. " When he told Bush that the TNRCC was

looking into the grandfather loophole, " Bush says, '. Can it be done

voluntarily?' I said, 'Yes, sir, this can be done voluntarily.' "

So, the TNRCC invited 14 representatives of the biggest grandfathered

polluters -- including Alcoa -- to meetings held between Dec. 1996 and the

summer of 1997. Neither the public nor anyone from the environmental

community was invited, says Altman, director of Austin's Sustainable

Environment and Economic Development Coalition (SEED). Márquez acknowledges

the meetings were conducted without public input, but says that when the

grandfather issue arose, he decided, " I'm going to go to the people who have

to solve it. " Altman says the minutes from some of these meetings were

obtained only with a Freedom of Information Act request filed by SEED.

The group devised a voluntary reduction proposal, and then set up an

industry-citizen committee, heavily weighted with industry representatives

who quickly gave their imprimatur to the industry draft.

" We thought it was a dog and pony show, but we didn't know how much " before

receiving the minutes to the meeting, Altman says.

The plan eventually reached the Texas legislature -- along with a loophole

allowing Alcoa to maintain the same emissions of sulfur dioxide in exchange

for reductions in nitrogen oxide. This loophole in fact extended an earlier

one, which allowed the Rockdale plant to emit more sulfur dioxide than any

other grandfathered plant. According to an August 1999 monthly Texas

Observer, in the 1970s a special exemption was stipulated for " fossil-fuel

fired steam generators located in Milam County which began operation prior

to 1955. " And, the Observer reported, " Only one source meets that

description: Alcoa's Rockdale smelter. "

The Rockdale plant's three coal-burning furnaces are still spewing sulfur

dioxide, and Márquez says the potential for pollution reduction is uncertain

given the 1950s-era technology: " We said [to Alcoa], 'We know you are not

ready to make full reductions, but can you make a down payment?' " Márquez

says reducing smog-causing nitrogen oxide is the key to getting the cities

into compliance; reducing sulfur can come later, as it will have to if the

EPA's deadline is to be met.

Meanwhile, as Alcoa was preserving its loophole, a bill deregulating the

electricity market did close similar grandfather exemptions for power

plants -- including the top grandfathered polluter. Alcoa's Rockdale

furnaces will now be the state's leading source of grandfathered pollution.

How did Alcoa pull this off?

Follow the money, says Robin Schneider of the watchdog group Public Research

Works. Schneider's group analyzed the campaign gifts of the 100 largest

grandfathered pollutants to members of the Legislature, Lieutenant Governor

Rick and, of course, then-Governor W. Bush. They also analyzed

contributions to Bush's presidential campaign, which began precisely when

the voluntary pollution bill was being debated in the Legislature. If Bush

had not been running for president, those contributions would have been

illegal; Texas law prohibits giving money to state officials during the

legislative session.

Commensurate with O'Neill's skepticism of campaign contributions, Alcoa

executives can be comparatively modest givers. In March 1999, for example,

only $1,000 was given to the Bush campaign by an Alcoa board member, a

modest sum compared with other companies like utility giant Enron -- another

grandfathered polluter -- which gave $25,000 during the same month.

Recently, a Washington D.C.-based campaign financing watchdog group, the

Center for Responsive Politics, reported another Alcoa employee donated

$100,000 to the Bush-Cheney inaugural committee.

However, Bush's biggest contributor to the presidential campaign during that

month was Alcoa's law firm, Vinson & Elkins -- the firm that the Texas

Observer reported won Alcoa its sulfur dioxide loopholes. In fact, according

to Federal Elections Commission data analyzed by the Center, the $201,350

contributed by the firm made it Bush's second-biggest supporter. According

to a 1999 story in the Boston Globe, three Vinson & Elkins attorneys -- Joe

, Marinis and Whilden -- pledged to raise $300,000 for

the candidate. Vinson & Elkins has six lobbyists registered with the Texas

Ethics Commission. Michele Gangnes, a lawyer and member of Neighbors for

Neighbors who happens to be a lawyer, says, " Vinson & Elkins is considered

the most powerful law firm in the state. "

Alcoa is by no means Vinson & Elkins' only client with matters before the

Legislature. (Enron is another.) Alcoa declined to respond to questions

about campaign financing or Vinson & Elkins. And Vinson & Elkins did not

return three requests for comment placed over three days.

The firm is known for its effective representation of corporations in

environmental matters. Its Web site recounts a number of success stories

that would make tree-huggers toss their tofu. For example, when one client

was hit with a criminal complaint alleging 17 counts of violation of state

air standards, the Web site boasts, lawyers " reduced [a] case to a single

count for which the client ... paid only a modest fine. "

In May 1999, Marinis told the Austin-American Statesman that there's nothing

wrong with such donations: " We don't consult our clients about political

contributions. " And indeed, people give to campaigns for many reasons,

including status-seeking and ideological affinity. But campaign finance

researcher Schneider remains wary: " Alcoa doesn't have a PAC anymore; they

seem to rely on their law firm to do it for them. "

As for the plant's neighbors, Brown says, " People here are really pissed

off. To us, it just looks real unsavory. "

writer: JULIE MICKENS