Draft Transcript by Jim Stewart

Session I: AQMD Charter - Legal Mandates

Nell Soto, SCAQMD Board Member; Councilmember, City of Pomona

Welcome to this first, and I hope, annual summit of business and environmental leaders. I know that many of you have a history of air quality debate, but I ask you check that history at the door. Today we are seeking consensus solutions.

My family has been in California for 7 generations, yet it is within my lifetime that Southern California has become known as the "Superbowl" of smog throughout the world. Smog is to L.A. what Hollywood is to California.

Smog costs our economy money. One study done for the AQMD has stated that we will save our economy $9.5 billion in annual health costs when we achieve our clean air goal. Smog also has indirect impacts, such as keeping tourists away, reduces our quality of life and causes the loss of needed business investment.

1. We need the SCAQMD.

2. We need to improve our thinking to improve our air.

I represent the LA County eastern cities hard hit by recession. There are misconceptions of our Air District impact on our economy. However, it is important for the District to be flexible in dealing with our impact on business. There have been some recent state laws that have tied the hands of SCAQMD. In 1977 California created SCAQMD in order to comply with the Federal Clean Air Act.

Our area continues to be in violation of Clean Air standards. Last year we had 141 days in violation and 23 smog alerts.

One of the reasons I sit on the SCAQMD board is that I have a moral responsibility to my six children and 14 grandchildren and great grandchildren who breathe this air along with the rest of us. We all have a responsibility to present and future generations. The average children and youth under age of 15 have 15% reduced lung capacity as a result of breathing our air. Every day three additional deaths occur in L.A. County because of smog. And it will not get any better if there is no Air District with sufficient business and community support.

By the year 2000, there will be 30 million people living in the South Coast Air Basin. The smog would be much worse without SCAQMD. No one wants to have increased disease and mortality, yet no one wants more unemployment or to increase cost of doing business in an already over-regulated environment.

As an elected official, I must answer to the voters of the eastern cities of the county and to the voters of Pomona (and I just got re-elected to the City Council).

People will suffer if we do not act. Our future is now, it is those of us here in this room who must respond. When I was elected to the AQMD, I pledged to hold this conference. I invite you to join together to seek out common ground from which we can move forward, generating ideas for action. Let us come out of this meeting with a hope for and commitment to the future.

John Michaels, Chairman of the Board, SCAQMD.

I want to thank the sponsors, underwriters, speakers, staff and all of you present here this morning. The diversity of the panel represents most of the interests in Southern California that link the economy with clean air efforts. I want to thank Nell Soto for her leadership in making this conference happen.

Moderator Warren Olney, host of "Which Way L.A." radio program.

Thank you for all your interest in trying to reconcile the goals of protecting the environment and having a viable economy. About 100 years ago my great grandfather worked with John Muir to found the Sierra Club. However, he supported the building of a dam to create a reservoir for water for San Francisco, while John Muir opposed it. In the meantime, my grandfather supported Muir. So my heritage is genuine ambivalence on these issues.

Congressman Jerry Lewis [from Washington, DC on videotape]

Few issues are as important as those of this conference. As the author of AB250 which established SCAQMD in the mid 1970s, I recognized we were embarking on a bold new venture to coordinate and regulate clean air efforts in the Southland. We were also creating a model for the toughest air quality standards in the country. The SCAQMD was charged with creating realistic regulations regarding stationary and mobile sources. In those days it was politically easier to point one's finger at stationary sources. Yet we all knew that cars are the major cause of our air quality problems.

In the past twenty years we have made remarkable progress. Emissions from stationary sources have largely been eliminated. Significant improvements have been made in automobiles. The air we breathe is cleaner. Still we have a long way to go. Today, pressure mounts on all of us to squeeze every last percent of emission control from our clean air efforts.

Competitive forces continue to affect our decisions. What was true in the 1970s is still true today. Inspection and maintenance are at the heart of continued progress. I would urge us to look at trains, planes, trucks and automobiles as well, working carefully to ensure that our efforts are not overly expensive in terms of dollars or jobs lost.

Over the years we have seen that partnerships work. Future success in clean air efforts and maintaining a healthy economy will rely on all of us maintaining a spirit of partnership. We may disagree from time to time, but as economic, social and political leaders, we must communicate with one another.

I look forward to working with each of you towards a new century committed to cleaner air and a healthy economy in the nation and the state.

Robert Presley, Former State Senator.

History of the SCAQMD: Prior to 1976 each county had own air pollution control district, so there was no coordination on a regional basis. Everyone said that Los Angeles County was producing smog which was winding up in Riverside and San Bernardino Counties. In 1976 a bill was passed creating the SCAQMD.

But by 1987 it was apparent that the board was not being sufficiently aggressive toward cleaning up the air. At that time, the Board issued a permit for a tire burning plant in Rialto, one of the smoggiest places in the U.S. It was said to be a clean enterprise, but people were not convinced. So in 1987, we restructured the Board and gave it additional authority. We placed one Supervisor and one city representative from each of 4 counties, plus one appointee from the State Senate, one from the Assembly, and one from the governor. The next year we had to split Los Angeles County and gave them 2 city representatives.

The bill gave SCAQMD authority regarding both transportation, and indirect sources. Most of the efforts since then have been to weaken the SCAQMD Board, but it is still relatively strong. I believe that the members of the Board have been doing a good job. In the 1990 recession, the Board did well to balance the concerns of the economy and environment. They are reasonably non-controversial and working well.

Felicia Marcus, Regional Administrator, Region IX, USEPA.

To maintain both a healthy economy and a healthy environment is one of the most challenging opportunities for our time. Protection of public health is paramount on everyone's mind, but so is the challenge of a healthy economy. The real challenge is how to do it. It is not just a technical or a public policy challenge, but a challenge to our human skills as well.

We are poised against the backdrop of an approach that has been adversarial. It has been enforcement and regulation driven ("command and control"). It developed that way because the initial approach was against a backdrop of the environment -- "yes or no." There has been continual frustration that we are not going faster, yet there has been considerable progress in these 25 years, particularly in the South Coast District, which has been a model for the nation.

Concern in the business community, combined with the recession, makes us try to achieve our environmental goals in a more economical manner. The dilemma is that we have come a long way, but we still have a long way to go to guarantee that the people in this area breathe the same clean air that is guaranteed to all other Americans in the Clean Air Act.

The answers lie in collaboration between Federal, state, business and environment communities. During the last two years the Federal government has been stepping in to set clean air standards for the community. We came in feeling that the answers lie at the state and local level. We tried to foster consensus at the state and local level, helping you come up with solutions that make sense for the community. This has been the largest consensus-based outreach program the Federal government has ever tried. The key is consensus at state and local levels to develop a State Implementation Plan (SIP) in cooperation with the Federal government to achieve the clean air goals and ease a disproportionate burden on this area.

George Deukmejian, Former Governor (who signed the Clean Air Act for Southern California).

I have been a lawyer providing services to clients who are having trouble dealing with environmental regulations. I know environmental issues have cost businesses many billions of dollars. Hopefully, we are coming out of the recession, but we know that during the recession, many decisions were made to move jobs out of Southern California, partly because of the regulatory atmosphere in Southern California.

We need to first look at the Clean Air Act Amendments of 1990. I suggest that Congress reexamine the entire Title V program to allow States with existing permit programs to have greater leeway in enhancing those programs to meet the goals of the act. The health and safety code requires that every District to be in compliance. We need to reuate the quality of the scientific information to see if all the State standards are really necessary for the health of the residents, especially considering the strict Federal standards.

Some practical steps need to improve communication between the regulators and the regulated businesses to improve the level of compliance. For example, the Health and Safety Code provides for compliance assistance programs for small businesses. The SCAQMD program to have staffers identify rules applicable to those businesses, assist them in filling out the forms and conduct no fault inspections of the facility is excellent. It should be expanded to all businesses. I recommend that the results of compliance audits not lead to violations as long as prompt steps are taken to remedy the deficiencies within an appropriate time, unless they pose a recognizable and imminent threat to the health or environment for violations that had been previously disclosed.

James Strock, Secretary for Environmental Protection, California EPA.

We need mandates because they lead to environmental improvement. We need to set baseline levels for various pollutants. But we should not undercut California by allowing other parts of the country to escape meeting these levels. The mandates ought to focus on achieving the standards but not dictate the process on the specific ways people achieve the standards. We need to look at relationships between various parts of the government. Our system relies on a Federal baseline that is exceeded by the state and by some localities within the state. Our entire national program depends on the success of the SCAQMD for our entire national position.

Paul Horcher, Assemblymember.

From when I first I talked with Dr. Lents in 1990, the SCAQMD has changed. In the legislature we try to achieve a balance, we don't want to sacrifice the economy for the environment or vice versa. I salute Dr. Lents for achieving that balance. We know the environment is important. I have proposed the "rubbernecker" bill to keep people from slowing down for accidents (which causes a lot of air pollution).

Grace Napolitano, Assemblymember

The impact on cities of air quality standards makes it necessary for them to work harder and smarter to protect their populace. Sitting on the Transportation Committee, I deal with issues of Federal EPA and SCAQMD. I believe we need to listen more. The state, federal and local agencies have not coordinated with each other. We need to share what we all have in common, which is to strive for the good of the people that we serve. Women elected officials are more concerned with these issues, because we are concerned with our families, children and grandchildren.

I am for strict air pollution guidelines, because that determines the future of our children, but I am also for assisting our local economy to survive, so that our children will have something through which they can make a living. Together we will find the middle ground to achieve our goals.

In the Transportation Committee, when we heard about the Federal requirements that are being imposed on California, we found they were based on tests that had been done in Canada and not in California. We need to know where the regulations are leading. I am committed to the health of my constituents and all Californians.

Marvin Braude, Councilmember, City of Los Angeles and member of the SCAQMD Board.

When the SCAQMD was created, it was given the task to solve something that the rest of us could not solve. It was supposed to create a new kind of regionalism that would work. The charge was: "You go ahead and tell people how to run their businesses, change their lifestyles and keep the environmentalists at bay."

The first task was to make it fair and participatory. The SCAQMD had workshops with business, labor, and environmentalists. They had hearings, committees, outreach to small business and they made it work. Neither the Federal or state government can make the SCAQMD work without the cooperation of the local governments and the people in the communities. When the people and businesses rose up, we asked for more time, we made revisions. The task is enormous. We have not solved the problem of regionalism -- if we had we would not need the SCAQMD.

The SCAQMD issued regulations, a "command and control," approach which became onerous. We told industrialists that we did not want to regulate them, we asked them to solve the problem, but that often did not work. So we asked the scientists what was reasonable, and we set standards. We asked businesses to meet those standards within three years, but they could do it any way they chose.

Then we discovered a new tool, the market mechanism, RECLAIM. We are telling industry, here is an envelope for you. If you reduce your pollution by more than 5% per year, you can get certificates you can sell. This seems to be the most progressive market experiment going. This is the most effective substitute for the command and control approach. We also have learned how to get the business, government, labor and environmentalists around one table and work things out.

We must work together to support and nourish the SCAQMD and make it work, or else there is the possible withdrawal of Federal funding for highways, etc. The SCAQMD is like democracy, if there is a better way to do it, let's use it that way, but until that new way appears, let's get behind the SCAQMD and make it work.

Paul Richards, Councilmember, City of Lynwood; President, L.A. County Division, League of California Cities

When Ms. McGillicuddy has a problem, she first calls City Hall, or her council person. And it is up to local government to respond to her.

Our goals as cities are:

1. Maximizing local revenue: so we want businesses in our community.

2. Minimize loss of revenue: so we try to keep businesses from leaving.

3. Maximizing jobs for local residents: so we want new businesses.

4. Minimize loss of jobs: so we try to keep businesses from leaving.

5. Maintenance of apparent health standards., e.g. we don't want businesses emitting visible "smoke" or odors. People want to know what the trucks are carrying through our community.

Recommendations:

1. Nobody should be able to attract a business away from my community for free, somebody should pay for the cost to my community of a business moving out.

2. Agencies need to work with localities to help retrain people for new jobs and help replace lost businesses.

3. Funding should go to help local government to respond to apparent health issues.

Terry Dipple, President, San Gabriel Valley Council of Governments; Councilmember, City of San Dimas

Hopefully we can walk away from this meeting with new ideas for how we can work together to solve these problems. The San Gabriel Council of Governments was formed to pool our resources so we can have a greater impact on regional issues, such as air quality and transportation. In my opinion, these issues are being worked on in a vacuum in Sacramento and Washington DC, without the benefit of local government input. The problem is that people are not aware of a new mandate until are they suddenly have to start paying more to register a new car, or to drive on the freeway, etc. We want to be part of the solution, we want to take local people's case to the State and Federal governments. We don't want others to decide our destiny.

SGVCOG is developing new strategies to improve air quality and provide opportunities to further economic development, mobility, and other local goals. These programs may include market incentives, advanced transportation technologies, including alternatives to Regulation 15, as well as other collaborative approaches to local objectives. We want to impact the Federal Implementation Plan (FIP) and State Implementation Plan (SIP). We need flexibility at the local level. We appreciate the SCAQMD offer for local participation in the decision-making process.

We want to eliminate the FIP and work with Governor and State legislature on the SIP to ensure the air quality and local economic objectives are adequately addressed.

Questions and Answers:

Felicia Marcus: Relative to Title V, exempting the State of California was intended in the House, but the language was eliminated in the Senate. We are trying to figure out a way to work with local people to make the transition as easy as possible.

George Deukmejian: We ought to aim at compliance with existing laws, without punishing businesses that want to operate in the state. They recognize value of clean air for themselves and their employees, but there has been an adversarial relationship between job creators and the regulators. California has led the way for the rest of the nation, but the Federal government has come in with a heavy hand, even when we had Republican Presidents.

Today, we should look at how to balance clean air and a good strong economy. We should have the different regulatory agencies talking to each other, to eliminate the overlap of unnecessary rules and regulations. We should give a business an opportunity to get in compliance, so business will feel welcome here and want to stay here.

Felicia Marcus: The real challenge is getting the agencies together with business and environmentalists. We are doing this on an industry by industry basis in six industrial sectors, so we can talk about real problems. For example, we have a representative from the electronic industry, labor, AQMD, environmental community, etc. talking about on how we can relieve regulatory burdens in exchange for an industry commitment to achieve real environmental quality improvements.

The agencies have talked with each other, but we need to have the business and environmental people also present to have a real discussion about real problems and gain confidence that the solution can work.

I believe we have fixed the FIP. You understand our role has to be a backstop, but we're trying to be a friendly "800-pound gorilla." The local work on the SIP has allowed the FIP to be responsive to the local needs. The Federal role is to set national standards to make a level playing field. We are well on the way to the elimination of the FIP, so the state plan should be implemented.

Dr. Lents: There is redundancy between Federal and state regulations, e.g. Federal and local permitting systems, which should be eliminated. The Federal EPA should move only where it is not practical for us to regulate.

We have a system of no-fault inspections for small business, but it is not needed for large businesses because they have environmental protection staff equivalent to my staff, and it would not a good use of public money to provide those services to large businesses.

Ray Remy: This session is a continuation of a good dialogue, as we have all the representatives here necessary to achieve a consensus. Business sees air quality issues as one of the factors of doing business here, but they take pride that we have improved air quality every year, which helps the quality of life.

Denny Zane: There has been a heightened appreciation for stimulating the local economy, but it is wrong to point a finger at clean air regulations as responsible for the recession. Clean air is a precondition for a healthy economy. We can be globally competitive, if we have the courage to stay the course, but we must be flexible and open for change as necessary.

Q. (Bob Rush, Rosemead Mayor): What effect will the Federal bill on regulatory "taking" of private property have on air quality?

Felicia Marcus: The "takings" bill that passed in the House is only related to property, and should have no impact on air quality.

Q. (Rockwell): I want to hear more of the Governor's suggestions.

George Deukmejian: The most important thing necessary to create a good climate in this state for those who live and work here is to create more jobs. The reductions in defense expenditures have impacted the revenues to local and state governments. We should encourage business to do voluntary audits, and when they find they are not in compliance, the regulatory agencies should assist them to come into compliance, so they do not feel it is expensive to operate here.

I commend SCAQMD and Dr. Lents for a change of attitude. But it is expensive for big businesses to get in compliance, and pay the lawyers to defend themselves. For example, if you do not make a timely request for a variance on Rule 15, then you can be found in violation. I believe that if someone is tardy, they should be not punished, but should be assisted to come into compliance. Let us reach out to the job creators, give them reasonable time to get in compliance, make them feel wanted in this state.

You could assess a fee on larger business for the service of providing environmental assistance, but that would be less money than they would have to pay now for attorneys and consultants.

Q. (Laurie Bacon, Sierra Club): I ask the State and local governments to support the businesses that are positive for the environment, and do not bring in a lot of pollution and waste. We want environmental and economic sustainability over the long term.

Paul Richards: A Lynwood steel company wants to relocate, they want a firm to buy their plant, but the site needs remediation. It is not easy at the local level. We know every community is not well suited for every activity. We want commerce rather than industry, we want businesses rather than parks to get revenue. Maybe some industries should locate in another state because more appropriate there. What if a business moves to Missouri, there could be a Federal way to get resources back to the community left behind, so everyone wins.

Strock: The land use and siting questions are local issues. There is a problem if the State gets into the land use issue. We are concerned about the superfund sites. We work very hard to speed up permitting for high technology businesses. The State does market development zones in recycling, waste, etc. We have a new program certifying environmental technologies. The State has a close alliance with the environmental technology industry overall to help solve these issues.

Q. (Carlos Pouras, Citizens for a Better Environment): A critical issue for the environment and economy is environmental justice. There are voices not represented here, we need to see the impact of pollution on the different populations. I believe that reformulated fuels and RECLAIM have disproportionately affected people by creating environmental hot spots. We need to consider this as we move ahead.

A. Felicia Marcus: The environmental justice movement is challenging us to include community participants in the work we do. We also want to ensure the environmental justice people are represented on the sector discussions. I have found involving the people from the community and giving them the technical resources to participate in the technology discussions, as we have done in superfund issues, is good public policy-making.

On my first day of work, the people working on reformulated gas asked for speed up with permitting. We need to consider the people who live next to the new facilities. Environmental justice helps us to do better civics, and to prioritize what we do. Some people have been focused on carcinogens, but the focus on lead especially helps minority communities.

A. Dr. Lents: We don't see any possibility of RECLAIM causing local hot spots. We are concerned that local toxics are most impactful on the minority community.

Session II: Achieving Clean Air Goals and Maintaining a Competitive Economy

Nell Soto: This conference is out to frame the issue of achieving clean air goals and a competitive economy. We want to build a consensus on how we can do this. This next session will provide an overview of clean air activities and related economic issues from a broad spectrum of speakers. We will look at health impacts, and related costs of smog, and get input from business, labor, construction, and AQMD staff working on streamlining regulations. We hope they will point to where we can address the realties together.

Dr. Russell Sherwin, Professor of Pathology, USC School of Medicine

The facts are hard to grasp, I would need at least a 1 hour lecture on each of the topics of health, the adverse effects on health, the disease from smog, etc.

One problem is that the word "cancer" is a meaningless term, it could point to anything from a wart-like thing to something very serious. Another issue is the different levels of regulations Federal, State, County, etc. But the bottom line for the community is health. The difficulty is defining this. We have an ecology problem at the cellular level.

Key Questions:

1. Does smog injure the lung? Yes, we see harm to the lungs.

2. What role does smog play in lung injury and disease? We believe ozone in polluted air has played some role in causing, promoting, facilitating and or exacerbating lung disease. But remember that we're talking about more than just smog. There are also other factors, such as sandblasting buildings, which spreads dangerous silicon dioxide dust. There are also cigarette smoke, toxic fumes in buildings, sensitizing agents, etc.

3. What is the nature of lung injury? The problems include emphysema, holes in tissue, loss of reserve lung tissue. The problem is no one is looking at the beginning of emphysema. There are not accurate diagnoses in the early stages, we need more data.

Chronic obstructive pulmonary disease (COPD) has been rising very sharply from 1950 to 1990 and is still rising rapidly. The emphysema rate has been falling because physicians haven't been making the diagnosis, just lumping it all into COPD, which includes bronchitis, bronchial asthma, etc.

4. What is the rate of decline of lung functioning? The chart shows the desired condition is the A line which indicates you have plenty of reserve capacity at age 95. Curve B shows you run out at age 95, on line C you run out at 60, but on line E you run out at age 30.

We have looked at lungs of 200 people age 14 - 25 who died in homicides or car accidents and we found many holes in the lungs. We found a 14 year old with large destruction of the lung. There was damage in 15% of lung volume, but it affects all of the lung. We found of 158 cases, 27% have severe lesions, but there is slight inflammation in all of them. So all adults in Los Angeles have some emphysema. We are trying to extend this type of research to compare with other cities with less ozone.

There may be some bias in our study, in that most of these cases are coming from poor socio-economic conditions where there may be poor health care, substance abuse, especially smoking, toxicants and illicit drugs, which could be facilitating but not requisite co-factors. We have found severe lung disease among non-smokers in our sample.

If we assume these youth are a representative sample, all those living in Los Angeles area can expect a high incidence of incapacitating lung disease and increased susceptibility to other disease. There is a convergence of animal and human data that tell us ozone is involved.

1. Mortality: The number of deaths are just the tip of the iceberg.

2. Morbidity: There is considerable respiratory sickness.

3. Morbility: This is the biggest problem. This means a vulnerability to disease. It is clear that those young people have serious disease (even though is it not visible except through an autopsy) and will lose life expectancy.

How can we minimize adverse health effects? Make sure you vaccinate your kids and yourself, use good health practices, control home air pollution, stop burning wood and trash, etc.

The movie showed function human lungs, immediately after being cut out from the autopsies. It showed how human health depends on ecology at a cellular level. It shows how practically everything you breathe goes right into the lung cells and affects them.

Denny Zane, Executive Director, Coalition for Clean Air.

I grew up in the smog, but I am proud of the progress we have made so far. We're about half way to the goal, but the current regulations will only get us to the 25 yard line. This is an extraordinary period of opportunity. If we persevere, we will see that our children will breathe clean air.

We must resist the pressures to kill the efforts to protect the environment. The question has been raised as to whether there is a systematic negative effect on our economy from air quality regulations. Studies by RAND, the Center for the Continuing Study of the California Economy and the Policy Institute have clearly stated that our economic problems do not derive from our air quality regulations, but from other factors such as the decline in defense spending.

Clean air is a necessary condition to a healthy economy. The cost of bad air, as seen in poor health, less tourism, declining student and work performance, has a far more important effect on our economy that any of the regulatory schemes.

Our clean air strategies are creating new opportunities for economic development and more jobs. As we learn to link our transportation strategies and local community development, we can demonstrate that the environment and economy are vital allies for a healthy future. We cannot have a healthy economy, if we allow our air quality to deteriorate.

Our fundamental priorities must include:

1. Maintain the ULEV and ZEV programs of the CARB. The auto industry is about to launch a major campaign to pressure the state to give up the these programs.

2. Recognize that the diesel engine is the most fundamental problem. The NOx emissions from diesel engines now exceed those from autos, and the proportion is increasing. We need to advance alternative technologies in our heavy-duty sector, such as natural gas.

Michael Fitts, Senior Project Attorney, Natural Resources Defense Council (NRDC)

The health effects remind us that our investment in air quality is for the vulnerable populations, the children (there are 2.5 million children), the elderly, and anyone with pulmonary or heart diseases. These vulnerable populations are paying for dirty air with their comfort, their health and lost years of life. There may be some uncertainties as to the precise amount of health risk, but should the burden of doubt be placed on these vulnerable populations?

We are tracking four major pollutants, but there are others, such as toxics, all of which have cumulative effects.

From the economic perspective, we have to remember that economics is not divorced from the human welfare. We are ultimately talking about what makes life worth living. Without health you don't have much. Clean air promotes a healthy economy, in the 1980s we had the highest economic growth rate in the US.

With all the population growth over the past 25 years, what would it be like to live in Glendora now if we had not implemented clean air regulations? In fact, clean air regulations have permitted us to grow. The air still needs to be cleaner, but we have benefited from the regulations.

The NRDC supports the concept of flexibility, of finding cheaper ways to reduce emissions, but not at the cost of the vulnerable populations that are paying with the lost years of their lives.

The vast majority of future reductions must come from mobile sources. There are solutions, but it takes a consensus, it all takes all of us working together. We must support the ZEV mandate, as well as technological advancement, as the single most important factor in reducing the cost of getting clean air. Inspection and maintenance programs are crucial. We are concerned about the reductions in funding for them, because they provide the biggest results for the money in achieving clean air.

Dr. James Lents, Executive Officer, SCAQMD

We have made great progress in reducing ozone over the past 40 years, even as the population has grown. We also have seen a decrease in particulates and CO. But the South Coast Basin is still the worst in the country for ozone, PM10, and CO. The worst pollution of ozone and PM10 are in Glendora and Riverside (but the sources are in L.A.). However, the worst CO is in Lynwood.

The main sources of ozone and PM10 are: on-road vehicles - 58%, off-road vehicles (airplanes, boats, and trains) - 14%, commercial - 12%, industry and manufacturing - 16%.

We need to address the off-road problems without disadvantaging Los Angeles. We have made a lot of progress in cleaning up the gasoline-driven autos, but it looks like we may need some electric and natural gas vehicles to deal with the mobile sources.

We could make more progress in the consumer area. We have made some progress with spray paints and barbecue fluid. Some of these are relatively easy to clean up with a little research.

Ray Remy, President, Los Angeles Area Chamber of Commerce.

Everyone agrees we need improvement in air quality, but the Clean Air Act is a very unforgiving bill. It says you shall achieve the national standards regardless of costs. The County Board of Supervisors is concerned with very difficult budget choices, varying from prenatal care to intensive care units in hospitals. The range of choices affects the daily lives of everybody. The budget has to be balanced against a shortage of resources to meet all sorts of needs. The people who were involved in these lung analyses were killed by violent acts. It shows we need more law enforcement. Clean air is an important good, but there are a lot of other important goods, we have to balance one against the other.

This community has a competitive disadvantage with other communities, we have to have national standards to ensure a level playing field.

The cumulative effects are important. I agree that air quality regulations by themselves drive very few businesses out of Southern California, but it is a factor influencing where businesses will invest and expand. The SCAQMD has become more business friendly over the past several years, but they were prodded heavily. There were fees and permits that increased at a too-rapid rate. Regulation 15 has been suspended, but when it was originally imposed it was very burdensome.

We need to look at demand-responsive transportation. Indirect source review is a direct incursion into land use issues.

The original FIP was an economic disaster, but we joined with the Coalition for Clean Air to talk about the FIP and made improvements. The business and environmental community can and have to work together, as shown in how the Bay Delta Oversight Council is bringing urban, agriculture, the environmental community, government and business together to find a solution to our statewide water supply problems. Air quality issues cannot be solved in a vacuum and they cannot be driven by a single purpose.

Ruben Jauregui, Latin Business Coalition

Today we're talking about motherhood and apple pie issues. No one would be adverse to looking at health and the risks we take just living here. The price for our pollution will be paid by us, our children and grandchildren. We have a vested interest in seeing that the goals are met. But we have to address priorities -- if business cannot exist in the environment, then we have to go elsewhere to live.

Mike Lewis, Chief Consultant, Construction Industry Air Quality Coalition.

People demand from public agencies three things: accountability, dependability (reliability), and objectivity. I think we have drifted away from these in the air quality arena, because of four reasons:

1. We have abandoned science for emotion.

2. We have replaced technology with politics.

3. We regulate behavior, not smokestacks.

4. We have substituted paper results for real achievement.

In short, rather than basing our results on irrefutable, empirical evidence, we have been hiding behind the apron strings of legal mandates which themselves have little basis in or scientific underpinning. We write the rules first and then back into the justification by doing the analysis later. The result is we say we cannot reach our objectives technologically, therefore we have to regulate behavior in order to achieve the desired results. A public policy that says you can buy a car that pollutes, but you can only drive it four days a week, or you can buy a widget factory with state of the art technology, but you can only make ten widgets, is a policy that will fail.

When we say that the best pollution control is not enough, and we have to limit production or control behavior in order to meet our goals, then we are only flogging ourselves because we have not yet produced the technology to meet our objectives. Perhaps we should accept what is currently available technologically until something better comes along, rather than economically punish ourselves while the best minds are working on the problem.

One example from SCAQMD was a CEQA document they distributed that said if you use these guidelines you will be air quality friendly. When MWD applied it to a construction project, result was it took 14 months instead of 4 months, and cost several millions more than it was supposed to (and I believe may have contributed more pollution because of the longer time the construction equipment was running).

We need to do three things:

1. The SCAQMD needs to stick to identifying what can be done technologically, using engineers and not planners and social scientists.

2. We need to create a blue-ribbon scientific panel to provide objective, independent determination of an empirical basis for our regulatory development. We need to develop a real emissions inventory as opposed to the paper inventory we have been using for years.

3. We need a directly-elected Board of SCAQMD, more responsible to their constituency.

These things will help to get credibility and make genuine progress in achieving clean air.

Jim Wood, Secretary-Treasurer, Los Angeles County Federation of Labor, AFL-CIO.

When this conference was first mentioned to me, I saw it as an abstraction that we would sit around and talk about air quality and health. Shortly after that I found I have a diagnosis of lung cancer. I had always thought I was immune because I took care of myself and had avoided smoking.

I was introduced to the AQMD rules by the Paintmakers Union (which is made up of primarily Latino workers in the East Los Angeles area). Those men and women were terrified they would lose jobs that had provided them and their families with some semblance of security. They were fearful they would be unemployed and lose their health and retirement benefits. This is as frightening as a diagnosis of lung cancer. When you take that pink slip home, you are taking home an equally bad forecast for the future.

Let us never forget that these regulations are about people's lives. People's lives are directly related to how they make a living. I am fortunate that I have a health plan, created by union agreements that protect me. But if I had lost my job, where would I go for help? This prospect can be as damaging to a person as a diagnosis of cancer.

We workers ask that the AQMD pay attention to the needs of those paintmakers and the impact of the regulations if they cause a pink slip. Before you shut down the diesel truck driver, tell him what he is going to drive so that he can continue to make a living. Bring me an engine that can compete with the diesel truck engine and we will make and use it.

None of us want to end up with a diagnosis of lung cancer, but we want a partnership that will allow us to experience life opportunities with health care, a decent job, and a future that is better for everybody.

Nick Nikkila, Director of Economic Development/Business Retention, SCAQMD

In 1992, the SCAQMD started an economic development and business retention (EDBR) program because we were interested in the jobs of our friends and neighbors. We knew that the only way we could achieve the air quality standards in this Basin is through a "tough love" type of program, and we need public support for that. We want to prevent people from losing their jobs.

Through our partnership with Cal/EPA, Department of Commerce and Trade, and the Southern California Edison Business Retention Program, we have helped keep over 12,000 jobs here that otherwise would have left and we have created over 3,000 new jobs.

We are the only regulatory agency in the nation that has created an EDBR program. We have learned where there are roadblocks in our policies that disallow new technology to be phased in. We have learned the power out there that helps drive innovation and economic development.

Antonio Villaraigosa, Assemblymember

I am not prepared to give up caring for our environment. I do not accept the jobs blackmail arguments from business with respect to environmental cleanup. We agree we have done a lot to regulate stationary sources, and now we need to look at mobile sources which are over 60% of our pollution.

Mr. Remy said that he agreed that air quality regulations haven't driven out business. A Southern California Edison study found the major reasons for businesses leaving were quality of life, public safety, traffic, schools, and infrastructure, while regulations were way down the list.

There has been a lot of fast-growing job opportunities from making the clean-up technology that we are now exporting around the world. There have also been many positive benefits on health and productivity from the cleanup that has gone on. There are a lot of opportunities for creating a common ground to move ahead.

Luncheon Speakers

James Strock, Secretary for Environmental Protection, California EPA

It is clear we need to reconcile the economy and environment. But the only way we can do anything on the environment is through the economy. The adopting of environmental standards brings economic and environmental benefits.

I believe we have to do better on the new technology issues.

We hope the State Implementation Plan (SIP) will be the final plan. But the FIP or SIP will not clean up the air, it is what you do in your daily work that will do that.

Other countries often take our standards and apply them, but no one is adopting the superfund or FIP process, and that is a warning to us. On the other hand, the RECLAIM program is being looking at worldwide. If it works, it will get worldwide application.

Our advanced transportation technology is highly important. The reconciliation of environment and economy is important internationally.

I carry a map showing the world population trends. Urbanization going up very fast, especially in Latin America, but motorized vehicles are going up even faster.

We need to move ahead to new technology or we cede our leadership to somebody else. We need to clean up the environment. Governor Wilson is fully committed to this, don't hesitate to call on us for help.

Antonio Villaraigosa, Assemblymember

When you hear the arguments on both sides, you see that there is a lot of gray out there, it is not just black and white.

Let's focus on the opportunities to clean up the air. I will fight against any effort to gut SCAQMD. I'm not clear the Board should be elected. We should focus on incentives, the carrot approach in changing behavior, such as tax credits, deductions to spur technologies, etc.

As a former member of MTA board, I helped to guarantee that MTA will now purchase clean vehicles only, we ought to reward actions like that.

General Motors has the Impact electric vehicle which is a very good auto, but during the test the GM guy kept telling me the ZEV mandates are no good.

I recognize that Democrats have been a part of the problem, and I want to learn from all of you to come up with some creative solutions to these issues. Let's look at the Edison study that showed that business is not leaving because of regulations, but because of quality of life.

You see that what made California great was our investment in our youth, in the schools and universities, but now we're not doing that anymore. Government has a big responsibility for the future of California.

Questions and Answers:

Q: (Bob S.) I am a physician from the Riverside area, and I would like Dr. Lents to address the fact that pollution in the Riverside area from the ozone and PM10 is severe and our people are suffering from the ill effects of that pollution. We have heard that there about 300 extra deaths per year in our area from those two pollutants. The off-road vehicles emissions especially are not under control. What can we do about this?

A: Dr. Lents: You are right when you say that the ozone and PM10 problems are worse in the eastern end of the Basin, because the formation of smog is a chemical process that takes some time to develop. Therefore the worst problems are occurring over the Inland Empire. We held a Health Conference last week, and some researchers for the Cal/EPA reported a epidemiological study that found 200-500 people die early in the Inland Empire from the PM10 levels. There is a requirement in the present Clean Air Act that we develop a plan to show how over the next decade we are going to deal with that problem Our Board is committed to forming a panel to produce the most scientifically credible way to come up with this. We will seek testimony to help us form the plan to address the PM10 issue.

Q: What about controlling emissions from off-road vehicles, ships and airplanes?

A: Dr. Lents: That is a very difficult balancing act. American Airlines has pointed out they will do something about their ground operations and how they schedule flights. We are hoping some similar things can be worked out with other airlines. We are working with the port area to see what can be done there. But we need USEPA to produce national standards that don't disadvantage Los Angeles. Congress asked them to produce aircraft standards in 1987, but they still have not set those standards. We need to ask USEPA to write national standards on the types of oil ships can burn in our ports.

Q: (Carol Fass) The AQMD literature says costs 0.5% to meet air quality regulations, but it costs us 11% in our industry, chrome plating.

A: Dr. Lents: The cost varies from industry to industry. The average cost is about 0.5%. Some are below that and some are above that.

Q: (Barbara Kanesberg, SK Solutions): We have talked about pollution control, but there could be more done in pollution prevention. Rather than add more controls, it would be better to give positive incentives to manufacturing engineers to make the changes.

A. Denny Zane: Yes, we need to be giving stronger incentives to not only improve processes in the short run, but creates a continuing ethic of prevention. We build into our future planning that we are going to improve our relationship to our environment. But we also need a regulatory scheme that make demands. Both approaches are necessary.

A. Mike Lewis: If the objective is to get pollution out of the air, why do we say it is OK to pollute, but you can buy your way out (or buy the permission to pollute from somewhere else). Let's get at the smokestack and the tailpipe or wherever the pollution is coming from. It seems we are punishing some people because technology doesn't exist to solve their problems and rewarding others where technology can help.

A. Dr. Lents: One of the biggest failures in the control of air pollution (the command and control approach) was to think an all-seeing government can foresee all the ways to reduce pollution. But every industry is different, even two furniture finishing manufacturers are different. Let the industry find out the cheapest ways to reduce pollution. Businesses are smarter than we are, once they are incentivized.

Q: Could we have every business shade their parking lot, so it doesn't add additional heat to the urban landscape?

A. Grace Napolitano: Yes, trees are important to keep the air cleaner. We need to consider greenery in any development growth.

I recommend businesses get involved in the process, I tell them this is your economy, too. If they are hurting, they should approach me and I will call Dr. Lents office and ask for help for them.

Q: (Carlos Pouras): Pollution prevention is crucial, and we need to capitalize it. Pollution control technology is available for metal finishing, but small businesses need the capital to install the technology. Would it be possible to leverage the last 10% of pollution clean-up and channel that money back to small businesses which are less capitalized?

A. Mike Hertel: RECLAIM is designed to do that and I have some comments on how to do it better. At Edison, we have an inside company, SCE Envest, which capitalizes energy retrofits of buildings. We charge them on their monthly bill to get our money back, which they pay from their cost savings. There should be economic value to these environmental investments.

Q: (Jack Levo, SCE Business Retention): How do we compete with products from other states and other countries when there are not environmental regulations there?

A. Denny Zane: There are many factors that determine the competitiveness of a region and a product, including a high quality workforce, the latest in technologies, etc. The improvement in environmental impact usually improves efficiency, which reduces costs. In addition, regions can attract more business when they improve quality of life. The RAND and other studies have shown that air pollution is far more of a burden on our economy than the costs cleaning it up.

A. Grace Napolitano: California is ahead, but other states are looking to implement California air quality standards, so they will soon not have an advantage over us. Some businesses who left California are realizing they left a good thing. Some are returning.

Q: (Neil Garcia, Sinclair) The real problem in California is the reduction in defense spending. What are all these scientists going to do? Our company is a member of CALSTART. The issue, as we see it, is how can we take an environmental problem and turn it into a product with a worldwide market -- to see it as an economic opportunity. We shouldn't take an isolationist viewpoint.

I am concerned that MTA just announced it is cutting back its rail system by $120 billion, and the result will be increased air pollution and congestion. The projections by the year 2010 are average speeds on the freeways of 10 mph at rush hour We are concerned about the cut back from 220 miles to 95 miles of rail. Will this result in increased bus and train fares? Who will use it? We have a proposal for a low cost rail system. Is the AQMD interested in such a proposal?

A. Dr. Lents: Yes, the SCAQMD is interested, but we would need to look at it in cooperation with other agencies. We are starting a task force with SCAG to look at how market incentives could address the transportation problem.

Q. (Deb Redman, SCAG): We seem to be substituting technological responses for political courage. I am concerned by the projections of all the billions of people of the world wanting cars. Whether they are ZEV or LEV, the natural resources required alone will create huge problems. Can we come together to revision our economic theory to allow less consumption to be seen as some kind of gain? Our public policy should be that we cannot consume so much. Our current economic tools reward consumption, so a lower GNP is seen as an economic failure. We need to address the behavior changes required in society toward lower consumption.

A. Grace Napolitano: I remember when Ford Motor Company said we couldn't produce a catalytic converter. US auto makers said we couldn't build small cars, but the foreign manufacturers went ahead and did it. I believe the political mandates are helpful. For example, I just drove the alternative fuel vehicle and found it is great. I drove the electric vehicle on the freeway and it was fine. I said, "Where can I get one?" But the big auto companies again say they can't do it. Let's say together that we all want the electric vehicle and we will get it. The electric vehicle is the solution for California, but we are just working on little band-aid measures now.

Session III: Advancing Technology Through Market Forces

Grace Napolitano, Assemblymember

I have 11 grandchildren, and I am very concerned with what we are leaving our children and their future offspring.

Everything has costs and benefits, relative to the community (our people), the environment (our habitat) and business (our economy). Any specific program, policy or regulation requires considering the relevant costs and benefits and making wise and effective tradeoffs. We must consider the fairness, relevancy of policy, plausible alternatives, teamwork and cooperation in the implementation, real human factors (health, well-being and jobs) and overall sustainability. In each of these areas, it is vital that government and business communicate effectively and understand one another completely.

What does a cost/benefit analysis tell us about environmental and air quality issues?

1. Businesses often experience high costs in implementing environmental standards. Some business people I have talked so say that it is about 15%. Some estimate the national costs of implementation at approximately $130 billion per year. We must pursue methods of reducing the impact of implementation and seek to improve the manner in which government promotes higher environmental standards. New technology, developed through both state sponsorship and free market forces, represents the possibility to reduce implementation costs.

2. The implementation of state and federal environmental regulations substantially benefit:

a. human beings and their physical quality of life.

b. the future sustainability of our society and economy (an entirely oil-based society cannot survive indefinitely).

c. the economy itself through job creation and export growth.

Dr. Hall of Cal State Fullerton estimates that if all the state and federal regulations are implemented, the savings in health, agriculture and recreation would be $20 billion per year.

Government incentives are crucial in enticing businesses to invest research and development money in new environmental technology, such as alternative fuel vehicles (both electric and gas). Without such incentives and targets, the status quo is likely to be maintained, risking the future sustainability of our society and economy. New technologies developed publicly and privately, increase the health of our people and sustain our society, but new technology is the basis for future environmental industry, bringing new jobs, increased exports world-wide and economic growth.

Two years ago I visited a Montebello facility that could recycle up to 95% of an auto tire without producing pollution. They wanted to begin, but ran into a stone wall. They were told it would take 10 years to get all the permits required to operate in Los Angeles County. They found in San Bernadino County it would take 5 years. We started placing phone calls, and are hoping to speed it up. We need to assist new enterprises. This can also help to expand exports to other countries.

Doug Henderson, Executive Director, Western States Petroleum Association

The principles our industry has created to meet the goals of our customers in Southern California include:

1. We embrace the need for SCAQMD to establish goals, standards and milestones for our industry in these areas. Our industry had been confrontational, but we now see we need to become part of the solution. We need to help the SCAQMD and CARB to meet the goals and standards they have set. We have the technological skills to reduce emissions from our plants and our products. We are proud of the progress we have made. Dr. Lents has a thankless job of trying to meet all the competing interests. We have devoted a tremendous amount of resources to helping find the best marriage of fuel and auto technologies to meet the state standards. Many millions of dollars went into tests to find the best fuel formula to meet California's needs. To date, our industry has spent $7 billion to reconfigure our refineries so our products meet California standards. Emissions will be reduced substantially next year in California with the introduction of CARB Phase II gasoline.

We sell 84 million gallons of petroleum products in California every day. To replace those with cleaner products is a huge task. We are committed to providing clean, affordable, abundant, reliable fuels.

We are against mandates for certain technologies and the use of government money to subsidize certain technologies or solutions. We believe government decisions are not as good as decisions the market makes. In the past our industry supported government incentives for the oil shale industry and that was a great failure. We have learned the markets don't function well when there are subsidies that artificially promote one technology over another.

In 1996, the toxic emissions from every tailpipe in California will be reduced by 30% by the introduction of the CARB Phase II gasoline. This is equivalent to taking 8 million cars off California roads. It has become popular to bash our industry. We hope you will help us.

Pete Jonker, Director of Governmental Affairs, Southern California Gas Company

The petroleum industry has been the beneficiary of hundreds of billions of government subsidies, we in the gas industry would like the same treatment. The Gas Company has 45,000 miles of pipe in the ground and we aren't moving. Therefore, the economy of this area is very important to us.

Mobile sources are the biggest contributor to our pollution. There are virtually no control measures for stationary sources in the new State Implementation Plan, because most of the stationary sources are already at the level of 99% control or better. The controls are at the level of BACT, or better. When you are at 99% control, the market forces cannot work. The only alternative is for these industries to leave. We believe that RECLAIM is not the way to go, because it presents a huge barrier for the economic revitalization of this area since new industries moving in don't know what their costs will be. They might move to another area where there is "command and control" so they will know exactly what their costs are.

USEPA is working on an open market trading rule, which is better than RECLAIM because it will include non-permitted sources and mobile sources in the trading system.

Mobile sources are the biggest part of the problem. We would like 1-2% of the market for mobile sources, because the use of natural gas reduces emissions. There is a dedicated natural gas vehicle built by Chrysler that has emission that are less than 10% of the state standards for ultra low emission vehicles. Natural gas has even more impact on diesels.

Mike Hertel, Manager of Environmental Affairs, Southern California Edison Company

I believe markets offer new ways for us to reduce costs of reducing pollution. Last year Southern California Edison saved $10 million in capital expenditures as a result of RECLAIM. In the next five years we will save $45 to $50 million in capital as we meet our obligations to reduce our emissions 80% over the next decade.

Last week President Clinton said he wanted EPA to produce a rule to encourage states to come into market trading for both air and water pollution. There are some ways to increase the viability of markets. We suggest RECLAIM should:

1. Embrace emissions credit banking to accelerate technology development. Credits now expire in one year, but if you could bank them, you could afford to invest in new technologies that may take more than one year to implement.

2. Provide bonus credits for the behavior you want. The USEPA issues bonus credits for SO2 pollution, by deducting a small amount from everyone's credit and passing it out to companies that invest in energy conservation and demand side reductions . These bonus credits provide us $200,000 per year that we can use to reduce our rates.

3. We need to reduce reporting and monitoring requirements. For example, it cost us $6 million in computer facilities to monitor our emissions, in order to qualify to save $10 million from RECLAIM.

John Cox, President, Southern California Economic Partnership; Councilmember, City of Newport Beach.

The Southern California Economic Partnership is focused on advanced transportation technology. The Partnership is made up of some 25 representatives of the business community, including Edison, Gas Company, ARCO, plus Denny Zane from the Coalition for Clean Air.

The purpose of the Partnership is to provide a marketplace for advanced transportation technology. For example, Westinghouse has a new electric engine that costs $1,800 in mass production (a conventional petroleum engine costs $2,300). Some estimate that it will cost as much as 15% less to operate an electric vehicle than a conventional one.

We are developing an EV model city, a laboratory to uate the behavior of a consumer using an EV in a normal day to day environment, to see how far he goes, where he charges, how frequently he charges, etc.

We are also looking at a natural gas city, super shuttles, telecommuting, and ITS (Intelligent Transportation Systems). ITS includes more advanced traffic signalization, automated highways, electronic toll collection, better bus location, etc. New products include laptop computers with maps of the city and built-in positioning that provide data on traffic accidents. A guidance system in Britain costs $150 per year and saves an estimated 2 hours per week of commute time because people can avoid congestion.

Local governments are addressing these issues. For example, Long Beach and Pasadena made pedestrian-friendly areas that have economic benefits as well as reducing pollution. Newport Beach helped Rockwell by changing the General Plan for their site to help them expand to build more semiconductors that can help us with guidance systems.

Phil Van Amburg, Director of Communications, CALSTART

We have always had mandates. One mandate was that "Thou shall not kill." Now we have the mandate the "Thou shall not poison each other's lungs. Since 70% of pollution from tailpipes, cleaning that up is a huge market place. Advanced hardware and software have made it possible for Honda to make gasoline vehicles that meet ULEV standards.

We're bringing in people with high skills and we're collaborating better, especially through sharing costs and risks. The need is high because the number of vehicles in the world will double in the next 20 years. We also project double the miles driven per year per car in the US. Some 84% of NOx is from mobile sources. We have to make drastic reductions to meet Federal standards.

CALSTART involves 120 participants across the state. They have good technologies that can clean the air and make transportation work better. We project the creation of 11,000 jobs by 1999. There is a huge export potential.

Gary Conley, President, Los Angeles County Economic Development Corporation

Economy is about real companies doing real things. Clean air technology is great for the region, but sometimes in ways that we cannot even predict.

Examples of 3 companies in the Venture Capital Forum last week:

* AVCON, Inc. makes a magnetic bearing that replaces traditional ball bearings, will reduce friction, and increase the efficiency in an electric vehicle or a gasoline driven car.

* Summit Valley Technology has developed an adhesive system which means you don't need toxics to produce circuit boards.

* Virtual Computer Corporation can add completely separate CPU in your existing personal computer, which gives a personal computer many characteristics of a supercomputer. If you put that in an electric auto, it will improve performance.

There are enormous opportunities for new technologies in California that may have environmental impacts that we cannot predict.

Dr. Alan Lloyd, Chief Scientist, Technology Advancement Office, SCAQMD

Our office's mission is to look for the best technology and to develop, demonstrate and commercialize technology through public-private partnerships. We have been able to leverage $4 for every dollar that is generated from the $1 added to vehicle registration fees.

We have seen complaints from the odor of reformulated fuels from other states, but not from Southern California because of our vapor recovery systems. The petroleum industry is developing a cleaner fuel in partnership with us. We would like to see ZEVs. We are pleased that the ULEV standards have already been met by Honda with gasoline, and by Chrysler with natural gas.

We have funded fuel cells technology. We are working with Congressman Berman, bringing in 3 new fuel cell manufacturing companies. Clean Air Now is working on hydrogen technology. The Japanese world energy network is looking at hydrogen as the ultimate solution. In the US we have 1 car for every 2 people. It is 1 car per 1000 people in China and other populous countries of Asia, but growing.

We need to clean up diesel vehicles.

We are looking at dry cleaning methods that will not attack the ozone layer, and we are studying zero emission paints. We are testing processes to ensure they are economically viable and then help get them into the market place. We will continue to work with you to develop better products and procedures.

Questions and Answers:

Q: (Tom Berry, Texaco): We were run out of your state 2 years ago when our project was rejected. We are concerned about working with the other agencies to improve permitting procedures. How can we make mitigation work for other socio-economic impacts? For example, we had a project in the high desert, but it was hard to find emission sources there for mitigation. We tried to do trading of emissions credits. It was not possible at that time, but now it is. But there is still a head tax, a water tax, and intangibles that you can't recover your costs on.

A. Dr. Lents: The SCAQMD made changes in the permitting process faster than other regulatory agencies. [Many of them are under Jim Strock and he is working on that issue.]

We are trying to develop some recommendations to jointly work better with other agencies. We are looking at more trading options.

A. Gary Conley: Los Angeles is working on improving the permitting process. The State is doing some one-stop permitting. We are seeing improvements in the regulatory process. We will work with you to help any company to come into the Southern California market.

Q: (Art Rangel, City of Downey) Relative to what the regulatory agencies are doing, a manufacturer of vehicles in our city was burned out, but it was hard for us to help him get back up and running. Because of the loss of jobs, we have become more customer-friendly. This company is making zero emission buses. CALSTART has helped him develop a prototype school bus, but he is being courted by other states to move there. I am helping get the CALPERS retirement system to putting some money into new technologies.

Q. (Paul Staples, Clean Air Now): A Los Angeles Times article says the petroleum industry has spent a lot of money to stop hydrogen. Why doesn't the petroleum industry get together with others to move to hydrogen?

A. Doug Henderson: We are not against hydrogen or electric cars. We just don't want the government to make decisions that will artificially tilt the market in ways that will not suit our customers. We think our products are clean, reliable, and abundant.

Q. (Warren Olney): How is it that government incentives are bad?

A. Doug Henderson: It is not good when the government decides which are the best technologies. The market can decide those things efficiently and well.

A. M ike Hertel: It is appropriate for the body politic to make rules that protect itself. There are going to be mandates. And the government has not always failed in its choices of supporting technology, for example the support of railroads.

A. Henderson: We are supposed to be finding ways to get clean air most efficiently, but not to manage technologies by supporting some and locking out others.

A. Jonker: There is a case before the California Public Utilities Commission, called LEVOII, in which the Commission will decide how much the rate payers are going to pay for the infrastructure for electric and gas vehicles. If the PUC finds that this proposal will benefit the rate payers, we can charge the rate payers to build the infrastructure. We are asking for 12cents a month per customer for the next 6 years to build an infrastructure of service stations for natural gas vehicles.

Q. Grace Napolitano: Is this like the tax to support roadside emergency phones that don't work? I want to stop the add-ons, 2cents for this and that. I do not want open-ended assessments.

A. Pete Jonker: We are fighting a large enemy, the oil industry, who is trying to keep us out of this business. All we want to do is get our foot in the door.

A. Gary Conley: I would like my 12cents put into buying the gross polluting autos that are causing so much pollution.

A. Bill Van Amburg: There have been some $123 billion of incentives have been put into the oil industry since World War I. But we have never put into the economic equation the societal cost of products, such as the pollution-causing cars we are driving.

A. Doug Henderson: Let's have the government give businesses a tax credit if they are willing to make the investment in environmental technologies.

Q. (Carlos Pouras): How do you make this all relevant to the ordinary person, especially those least empowered, the lower income community? How about these people who do not have the funds to get the new technology? We should be retraining auto mechanics to have clean cars in the lower income communities.

A. Grace Napolitano: The sale of gasoline now generates sales tax for the cities. But the alternative fuels will mean less tax money for money for road repair, etc. We need to look at how we're going to fund roads, etc.

Q. (Bruce Mayer, Rosemead) Some 25 years ago, I went to a symposium on smog because my kids could not breathe the air. We were told that there were electric vehicles and natural gas vehicles coming soon. I want to know what is still going to prevent the adoption of these new technologies?

A. Grace Napolitano: Special interests and politics.

A. Pete Jonker: There are tens of thousands of vehicles running on natural gas now, including some shuttle busses at LAX. There are 60 natural gas fueling stations now operating in Southern California.

A. Bill Van Amburg: One of the economic disadvantages that have prevented electric vehicles is the cheap price of gasoline, but now we are being incentivized, we're running into an air brick wall of pollution, and health effects. The oil and auto industries are trying to stop it, but I believe we are moving ahead.

A. Doug Henderson: The problem is the consumers don't want other fuels. For example, consumers rejected reformulated gasoline. There was a price concern even though it actually dropped 2cents a gallon.

A. John Cox: We have been hearing that an EV is too expensive, but an engine for an electric vehicle costs less than that for a gasoline vehicle and the maintenance is half that of an gasoline vehicle. The one major obstacle is the oil industry infrastructure, because the consumer wants to find it easy to purchase natural gas.

A. Michael Fitts: There is a danger, in the present political climate, of not addressing the issue. The problems are not in the pricing structure. If we lose the political will to clean up the air, if we lose the stiff mandates, then we will not see the technologies emerge. It is necessary for those here to let the political leaders in Washington, DC know that it would be bad to tear down the mandates that are the basis for the progress so far.

Q. I read that the Petroleum Association funded a group to attack hydrogen and natural gas. I say, let's end tax credits for oil and gas depletion, let's stop spending billions to send the fleet to the Persian Gulf and let the price rise to the true market level.

A. Doug Henderson: Those tax credits have been ended for years. We did not ask for the Persian Gulf War.

Q. (Judy Hathwick, Mayor LaHabra Heights): I want to see all of you succeed, because I want your competition to benefit me as a consumer. What about incentives to encourage people to change? We should provide many options to people.

Q. (Morey Faith, Sierra Club): 1. We currently have an economic system that doesn't consider the costs of pollution. 2. We have accounting practices that discourage research and development and encourage short term profits. We don't have a permanent R&D tax credit. 3. We need to help new industries start up.

A. Mike Hertel: The RECLAIM system does internalize the costs of NOx and SOx. Edison will pass the reduced cost of the electricity from RECLAIM on to the consumer.

Q. (Faith): But the key is mobile sources.

A. Mike Hertel: We are trying to begin to look at including the mobile sources in RECLAIM.

Conclusion:

Warren Olney: Today we have talked a lot about immediate and long term action. The staff have been writing notes from this meeting and will follow it up with a report.

Dr. Lents: 1. "Only a fool doesn't listen to the critics." My senior staff has taken notes and will prepare a report.

2. We have a mostly new Board. They are concerned with jobs, but none have said anything about scrapping the environmental controls.

Nell Soto: The exchange of ideas is what I wanted and I am glad it happened. You will be getting a consensus summary of this Summit. We could produce another one in the next 4-5 months. Let's force some of these factions to meet the concerns of the community.