Monday, July 21, 2008


Climate Report Cites Role of Cheney's Office

U.S. News: Climate Report Cites Role of Cheney's Office
Siobhan Hughes. Wall Street Journal. (Eastern edition). New York, N.Y.: Jul 21, 2008. pg. A.3

Full Text (619 words)
(c) 2008 Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.

WASHINGTON -- Bush administration officials agreed that greenhouse gases could endanger the public and should be regulated under clean- air laws, but later reversed course amid opposition from Vice President Dick Cheney's office and the oil industry, a congressional report said.

The report, by the U.S. House Select Committee on Energy Independence and Global Warming, offers a look at the breadth of Bush administration support for regulations before such plans abruptly stopped. The report draws heavily on an interview with a former Environmental Protection Agency official who had told Congress that Mr. Cheney's office tried to censor federal testimony on the danger of global warming. It is also based on confidential interviews with EPA staff and documents subpoenaed from the EPA.

"This is the dysfunctions and motivations of the Bush administration laid bare," Chairman Ed Markey (D., Mass.) said in a statement.

The White House rejected the committee's findings. "Chairman Markey's report is inaccurate to the point of being laughable," said White House spokesman Tony Fratto.

For months, Congress has been investigating a series of decisions by EPA Administrator Stephen Johnson, including stopping California from regulating motor-vehicle greenhouse-gas emissions. Previous congressional reports showed that Mr. Johnson originally sided, at least in part, with EPA staff on several matters, including the idea that greenhouse-gas emissions pose a danger to the public and should be regulated. But the latest report suggests that Mr. Cheney's office came to play a key role in interagency discussions.

Megan Mitchell, a spokeswoman for Mr. Cheney's office, disputed the report. "I don't accept their premise," she said. The latest report said the oil industry argued against regulatory action and had the support of Mr. Cheney's office. In the end, the report said, the Bush administration backed off regulation. "Frankly, that's ridiculous," Ms. Mitchell said.

Jason Burnett, a former EPA associate deputy administrator who played a key role in coordinating the agency's climate-change activities, told the House committee that people in Mr. Cheney's office and the White House Office of Management and Budget felt regulations would hurt President George W. Bush's legacy. Mr. Burnett didn't return a phone call seeking comment.

The report said F. Chase Hutto III, Mr. Cheney's energy adviser, argued against new regulations, along with unidentified individuals from Exxon Mobil Corp. and the American Petroleum Institute. It also said that Mr. Bush's deputy chief of staff, Joel Kaplan, and Energy Secretary Samuel Bodman, Transportation Secretary Mary Peters and Commerce Secretary Carlos Gutierrez had originally endorsed an EPA finding that greenhouse-gas emissions endanger public welfare and should be regulated under the Clean Air Act.

Earlier this month, those officials signed a letter saying that the Clean Air Act isn't an appropriate vehicle for regulating greenhouse- gas emissions.

Energy Department spokeswoman Angela Hill said that Mr. Bodman "has not reversed course" and that the department considers the Clean Air Act fundamentally ill-suited to effectively regulating greenhouse-gas emissions.

Brian Turmail, a spokesman for Ms. Peters, said that she "was involved in an intellectual process to explore whether the Clean Air Act was an appropriate vehicle for regulating fuel-economy standards. The decision was 'no.' You shouldn't confuse engaging in an intellectual exercise with supporting the idea."

A Commerce Department spokeswoman didn't respond to a request for comment. American Petroleum Institute spokeswoman Karen Matusic said it isn't unusual for the group to meet with federal agencies "on areas of mutual concern," and that it has repeatedly said it doesn't believe the Clean Air Act is appropriate for regulating greenhouse-gas emissions. Exxon spokesman Alan Jeffers said he didn't know who made the company's case, but that "it's not a secret what our views are." He said Exxon believes the Clean Air Act isn't the appropriate way to regulate carbon emissions.

Saturday, May 05, 2007


Households Would Need New Bulbs

Households Would Need New Bulbs
To Meet Lighting-Efficiency Rule

May 5, 2007; Page A1

WASHINGTON -- Manufacturers and environmentalists are hammering out a nationwide energy-saving lighting standard that, if enacted by Congress, would effectively phase out the common household light bulb in about 10 years. That in turn could produce major cuts in the nation's electricity costs and greenhouse-gas emissions.

The new standard is expected to compel a huge shift by American consumers and businesses away from incandescent bulbs to more efficient -- but also more expensive -- fluorescent models, by requiring more light per energy unit than is yielded by most incandescents in use. The winner, at least in the near term, likely would be the compact fluorescent light bulb, or CFL.

Whatever rule is proposed by the groups would likely be incorporated into energy legislation passed last week by the Senate Energy Committee that the full chamber is set to debate by the end of the month, committee aides say. This bill, the Democrats' first major energy initiative since taking control of Congress in January, calls for new efficiency standards for appliances and motor vehicles and mandates the use of more alternative fuels, such as ethanol, by 2022.

[Fluorescent Bulb]

While the move could face resistance from some consumer groups and from low- and fixed-income constituencies, Energy Committee aides say there is bipartisan support in Congress for a new lighting standard.

"Congress should do all it can to encourage industry and consumer groups to work with government in setting standards for energy-efficient products, including light bulbs and new lighting technologies," said Sen. Jeff Bingaman, a New Mexico Democrat who is chairman of the panel.

Fluorescent bulbs have been around for years and are known to be more economical over the long run, but consumers have shown a clear preference for the softer and more easily adjusted glow of incandescent bulbs, which also carry a much cheaper sticker price. Now, there is push toward using regulation to force adoption of the more energy-efficient product.

The Senate panel estimates a shift from the standard tungsten filament incandescent bulb and other relatively inefficient forms of lighting would save $18 billion in electricity costs every year. Because 50% of the nation's electricity comes from coal-fired power plants, this would also reduce demand equivalent to that currently met by 80 coal-fired power plants. Burning coal releases pollutants including carbon dioxide, which scientists think is accelerating climate change, and mercury, which can damage the nervous systems of small children.

The move away from the current incandescent bulb, invented by Thomas Edison in 1879, would create at least an $8 billion market for more-efficient lighting, analysts say. There are four billion electric light sockets in the U.S., most of them in homes, and some would be filled with CFLs, which use 75% less energy and can last more than six times as long, according to industry estimates. Manufacturers expect over the next decade to provide consumers with other choices as well, since CFLs don't work as well in applications such as reading lamps.

"It's the right thing to do," says Randall B. Moorhead, vice president for the North American affiliate of Royal Phillips Electronics NV of the Netherlands. "But we're also hoping we'll make some money. It's not entirely altruistic."

The three biggest light-bulb makers, Philips, General Electric Co. and Osram Sylvania, a unit of Germany's Siemens AG, have more efficient lighting products in development. GE is the biggest seller of compact fluorescent lights in the U.S. In February, the Fairfield, Conn., company announced it would be introducing an incandescent bulb that will be comparably efficient to CFLs and would likely meet standards now being discussed. Manufacturers also are re-engineering light-emitting diodes that are currently too pricey for the consumer market but will likely fall in price over time.

One reason bulb makers are willing to negotiate a new federal standard is that a half-dozen states, led by California and Texas, are weighing bans on incandescent bulbs. Australia, Canada and the European Union are also considering phasing out such lights.

"If there are all these intrastate regulations, it will become tough as a skunk to get these things to work. It becomes very challenging to the retailer," says Richard Upton, president and chief executive of the American Lighting Association, which represents lamp makers and retail-lighting showrooms in the U.S. and Canada.

The talks on establishing a new nationwide standard include the bulb makers, the lighting association, the Alliance to Save Energy, the American Council for an Energy Efficient Economy and the Natural Resources Defense Council, among others. They have been under way since March, after Phillips declared that incandescent bulbs should be phased out within 10 years.

"I think we're half to two-thirds of the way there," says Noah Horowitz, a senior scientist with the Natural Resources Defense Council. He predicts the result will be a two-stage federal standard that will require bulbs that use 30% less electricity within five years and bulbs that are 75% more efficient within 10 years. The talks are also aimed at standards that would remove the least-efficient street lights and fluorescent lights that are used in offices.


The resulting sharp cut in electricity demand would be the quickest and most effective energy curb in this year's energy bills, says Bill Prindle, acting executive director for the American Council for an Energy Efficient Economy. Noting that electricity consumption is scheduled to increase by 20% by 2020, Mr. Prindle says new "clean tech" energy forms such as alternate fuels and advanced wind power won't begin to reduce emissions until energy demand is cut. "We have to do both," he says.

GE's Earl Jones, senior counsel for the company's consumer and industrial business, says the goal is to agree on efficiency standards that reduce greenhouse gases and cut energy consumption, but also "satisfy basic consumer interest in the quality of light in their home and at work."

"The winners will be the manufacturers whose technology can deliver the highest lumens without compromising quality of light," Mr. Jones said. A lumen is a measure of light.

Shifting to compact fluorescent light bulbs will be more expensive for homeowners at the outset. Incandescent bulbs can be bought as cheaply as 25 cents, but compact fluorescent bulbs can cost between $2 and $3. However, because the more-expensive bulbs use much less electricity and last far longer, they can pay for themselves in as little as six months, depending on usage, says Jeff Harris, vice president for the Alliance to Save Energy, a coalition of business, government, environmental and consumer leaders that advocates efficiency policies that minimize costs to society and consumers. In addition, the prices of compact fluorescents are falling. But it isn't known whether CFLs will be more economical or efficient than future technologies.

There are other drawbacks that have limited the more efficient bulb's market penetration. Aside from lighting quality, compact fluorescent bulbs include a tiny amount of mercury that would require their disposal through recycling programs. According to Mr. Moorhead of Philips, CFLs only fill an estimated 6% of American sockets.

GE and Osram, in weighing the details of a new standard, need to ensure that they have enough time to retrofit their incandescent-light factories to make more energy-efficient lights. Philips doesn't have any incandescent factories in the U.S. CFLs, which are much more labor intensive, are mostly manufactured in China.

Source: Wall Street Journal


Climate Economics

Climate Economics

Fight Over Who Pays for Emission Curbs
May 5, 2007; Page A4

A new United Nations report is the latest sign that the global-warming debate is moving beyond science to hardball economics, dividing nations and industries in a scramble over how the cleanup bill will be divided -- and how big it will be.

Amid mounting political and public pressure to curb global-warming emissions, companies and governments are reaching general consensus on what technologies need to be deployed and how much it could cost. Now a battle is heating up over the details.

The News: A new U.N. report says the world can curb global-warming emissions over the next several decades without significantly crimping global economic growth.

The Background: The report was issued by the U.N.'s Intergovernmental Panel on Climate Change, an international panel of scientists.

Outlook: A clean-up would reduce global economic output 3% below the level it would otherwise reach in 2030.

The report issued Friday by the United Nations' Intergovernmental Panel on Climate Change, an international panel of scientists, says the world can meaningfully curb global-warming emissions over the next several decades without significantly crimping global economic growth. But that would require sweeping changes to the global energy system -- and the cost would hit some sectors much harder than others.

"There's not a win-win here," says Ray Kopp, a senior fellow at Resources for the Future, a Washington-based think tank studying global-warming policy. "Somebody gets hammered and somebody doesn't."

The U.N. report says reducing greenhouse-gas emissions enough to avoid the worst consequences of global warming could reduce projected global economic output in 2030 by as much as 3% below the level it would otherwise reach that year. Whether that is a significant economic drag is a matter of dispute.

Bush administration officials argue a 3% reduction in the global economy in 2030 would be too severe. It is "something that we probably want to avoid," James Connaughton, chairman of the White House Council on Environmental Quality, said Friday. He said the effects could fall unevenly across the economy, causing some factories to move abroad and particularly hurting lower-income Americans. He said the administration supports emission-reduction measures it believes can be made at lower cost.

Officials who led the U.N. report played down the cost. "It's not an order of magnitude that cripples the economy," said Bert Metz, a Dutch researcher and co-chairman of the report.

Jonathan Pershing, director of the climate and energy program at the World Resources Institute, a Washington-based environmental think tank, said the potential cost to the economy "suggests you want to be pretty careful" in designing the emission-reduction system. "But if you do this right, it's not going to break the bank."

Reducing emissions to the levels studied in the U.N. report would cost between $20 and $100 for every ton of carbon dioxide, the main global-warming gas, that is kept out of the atmosphere, the report says. That is the price companies would have to pay either to curb their own emissions enough to comply with a cap or to buy emission "credits" on a trading market that pay someone else to do the cleanup.

Prices are approaching those levels already in parts of the world where emission caps are in place. In Europe, which in 2005 imposed a carbon cap on itself, a credit allowing the bearer to emit a ton of CO2 next year is trading today at about $25.

The rise in prices envisioned in the U.N. report is broadly in line with what many are predicting by 2030. Consultant McKinsey & Co. estimated in a January study that greenhouse-gas cuts approximately as stringent as those surveyed in the U.N. study would cost as much as $40 a ton of avoided CO2.

Both the U.N. and McKinsey studies assume the world attacks global-warming emissions in the most economically efficient way. For instance, the U.N. study assumes the cuts come from across geographic regions and economic sectors, spreading the costs broadly. If that doesn't happen, the costs would rise. Currently, the world's two biggest global-warming emitters, the U.S. and China, haven't accepted emission caps.

Another question is what sectors of the economy cough up the bulk of the emission cuts. Like most studies, the U.N. report says that improving the energy efficiency of buildings and cars can produce significant emission cuts while actually saving money. That is because the extra initial investment in, say, home insulation or a more fuel-efficient auto engine can more than pay for itself in lower electricity bills or fewer trips to the gas pump.

But that assumes consumers will be willing to wait many years to recoup the extra up-front costs. In reality, many consumers don't keep their houses or cars that long. So the government also would have to dangle incentives to consumers or mandate that car makers lift mileage.

"A carbon price that gets a lot to happen in other sectors of the economy does not make much happen in transport," explains Robert Socolow, a professor at Princeton University focusing on climate change. He says a carbon cap that imposes a $30-a-ton price for CO2 emissions raises the retail price of a gallon of gasoline by about 30 cents -- not enough to prod many people to go out and buy a more-efficient car.

In Europe, the carbon cap has fallen on utilities and manufacturers, largely because targeting a relatively small number of large power plants and factories is easier than targeting millions of cars and trucks. In the U.S., many heavy-emitting companies now say they think a federal emissions cap is all but inevitable. That is why utilities are lobbying particularly hard to shape the details of any cap.

One is Duke Energy Corp., based in Charlotte, N.C. James Rogers, Duke's chief executive, said in an interview earlier this year that the company already has "made a lot of investment decisions in recognition of the fact that we're going to live in a carbon-constrained world." But he said it remains far from clear how high the cost of avoiding each ton of CO2 emissions will climb. For planning purposes, he said, over the life of potential power plants, "I've used $7.50 to $30" a ton.

Write to Jeffrey Ball at

Thursday, May 03, 2007


As Its Population Declines, Youngstown Thinks Small

As Its Population Declines,
Youngstown Thinks Small

Rather Than Trying
To Grow, Ohio City
Plans More Open Space
May 3, 2007; Page A1

YOUNGSTOWN, Ohio -- Hanging next to city planner Bill D'Avignon's desk is a giant map of this city, divided into neighborhoods. One is Oak Hill, a gritty enclave just south of downtown. The neighborhood, once densely populated, has lost 60% of its population in recent decades and is dotted with abandoned buildings and empty lots.

Faced with the devastation of Oak Hill and other depressed pockets of the city, Youngstown is trying an unusual approach: Allow such areas to keep emptying out and, in some cases, become almost rural. Unused streets and alleys eventually could be torn up and planted over, the city says. Abandoned buildings could be razed, leading to the creation of larger home lots with plenty of green space, and new parks.

[go to map]1

Youngstown, a former steel-producing hub, has been losing residents for years as a result of the closing of most of its steel mills. But rather than struggle to regain its former glory or population, it has adopted an economic-development plan that boils down to controlled shrinkage. By accepting the inevitable, the city says it can reduce its housing stock, infrastructure and services accordingly.

The plan is still in its early stages. As a first step, Mr. D'Avignon and other city planners have divided Youngstown into 127 neighborhoods, and labeled them as stable, transitional or weak. Now they're working on a customized plan for each one, noting which corners need street signs, which sidewalks need to be repaired and which buildings need to be demolished. The goal is to craft plans for about 30 neighborhoods a year.

Another goal is to wipe away the most obvious blight. The city estimates it will take about four years to bulldoze the biggest eyesores, including about 1,000 abandoned homes and several hundred old stores, schools and other structures.

"The vision is still evolving, but the ultimate result will be to create more open space where there used to be part of the city," says Mr. D'Avignon.

Talk like that would be considered blasphemy in most cities, where officials are taught to promote growth and development and fight against population decline. Accepting that a city is going to shrink goes against conventional wisdom that a bigger city means more jobs, more taxpayers, more revenue, better education, and better services -- in essence, a higher standard of living.

Youngstown Mayor Jay Williams3 explains the strategy behind the plan to scale down the town.

"It's un-American. It seems like you're doing something wrong if you're not growing," says Hunter Morrison, director of the Center for Urban and Regional Studies at Youngstown State University, who worked with the city to come up with its strategy. But he says the idea is "not really about growth or shrinkage, it's about managing change."

Controversial Approach

The approach is controversial. Encouraging and accepting the hollowing out of neighborhoods will, by default and design, hit Youngstown's poor and minority residents the hardest. About 45% of Youngstown's residents are black, another 5% Hispanic, and the blight is heavily concentrated in minority neighborhoods, which are slated for the biggest makeovers.

"You always have to ask yourself: 'What areas are going to be abandoned?'" says John Russo, who teaches labor and working-class studies at Youngstown State. "And most of those are the African-American parts of the city."

Youngstown has promised not to force anyone to move, which has helped allay some fears in minority neighborhoods.

Others think the idea could be a hard sell. "You have to be skeptical, because it's really hard to do something like this," says Frank Popper, a Rutgers University land-use planner who studies regions with population declines. "The one thing you always run up against is that Americans don't want to be told about decline."

The Oak Hill neighborhood in Youngstown, Ohio

Youngstown, which has lost half its population since the 1950s, says it needs a radically different approach to halt decay. It's pointless to try to revive certain neighborhoods, the city's leaders argue, since the exodus of residents often makes those areas unpleasant and dangerous places to live, leading to further decline.

"The concept of trying to grow out of economic malaise is just not realistic for us," says Mayor Jay Williams, 35 years old. One of his first official acts after being elected in 2005 was to apply surplus money to demolition in the city.

Although Youngstown is one of the first cities to openly embrace this philosophy, the idea of planning to get smaller is gaining consideration around the world. Earlier this year, the University of California, Berkeley, held a symposium called "The Future of Shrinking Cities" that attracted 100 people from five continents.

In parts of eastern Germany, the government has earmarked some $3.4 billion for tearing down communist-era prefabricated apartment blocks and replacing them with green space, partly in response to an exodus of residents to the West.

European cities are more experienced with the phenomenon of shrinking urban centers, having endured centuries of war and famine that caused many of the region's great cities to fluctuate in size over time.

A Berlin-based "Shrinking Cities" project, partly funded by the German government, compiles research about urban-population loss. The group says that during the 1990s more than a quarter of the world's large cities saw population declines, mostly in industrial regions such as eastern Germany and the U.S. heartland, but also in Japan, Russia, and China, where people are moving from remote cities to booming coastal centers.

[Jay Williams]

"The issue is most visible in cities that are concentrated in a single industry, like steel," says Philipp Oswalt, an architect who heads the German project. Indeed, a similar pattern is now being repeated in a host of other Midwestern cities, including smaller ones such as Muncie, Ind., and Flint, Mich., which have seen huge shutdowns of auto-related plants and subsequent population declines.

Population loss can manifest itself in unexpected places and for a variety of reasons, says Mr. Oswalt. Paris, for instance, has a vibrant center, but is surrounded by rings of industrial suburbs where, in some cases, population is falling. New Orleans was radically downsized in a matter of hours by a hurricane and floods.

The German group has put together a traveling art exhibit on the topic, with works from more than 200 artists in 12 countries. One film profiles a suburban family moving the remains of a loved one from a city cemetery to a nearby township. A painting depicts a neighborhood scene where little remains but a utility pole surrounded by children's toys. The exhibit recently opened in Cleveland after a run in Detroit, two cities grappling with population declines.

Few cities have adopted a plan like Youngstown's. The city is a classic "hole in the donut" community -- increasingly empty in the middle, but with growing suburbs.

In 1950, Youngstown's population stood at 168,000. The steel industry was booming and city leaders envisioned Youngstown growing to a quarter of a million people by the end of the century. New neighborhoods were laid out on the fringes of the city in anticipation of growth.

A Tailspin

But by the 1980s, the steel industry had gone into a tailspin as producers faced an influx of lower-priced, foreign-made steel. Today, only a single large steel mill is left and the city's population has wilted to about 80,000. Most of the mills have been torn down.

Like other Midwest cities, Youngstown tried to find other big employers to replace steel. City officials lured both a state "supermax" prison and a for-profit prison. Other efforts, including redeveloping about 450 acres of former steel-mill sites into industrial parks, have been successful, but not the job-creating dynamos that steel was.

[Youngstown, Ohio]
A neighborhood on the north side of Youngstown, Ohio

Youngstown is bisected by the Mahoning River, a meandering waterway once lined with the mills. The city has made some headway in recent years, sprucing up downtown buildings, while Youngstown State -- located not far from downtown -- has invested in new buildings and landscaping. But population continued to decline and abandoned buildings blighted entire city blocks. Property- and income-tax revenue fell, and delinquencies rose.

In 1999, city officials decided they had to come up with a new master plan. The task was assigned to Mr. Williams, then a city planner and now mayor.

"We came up with a simple concept," he says. "This will be a smaller city, but that doesn't have to be a bad thing."

He doesn't mean physically smaller. Youngstown will never reduce its overall footprint, he says, because political boundaries are too deeply ingrained. Lopping off neighborhoods would likely prompt litigation from residents who don't want to lose city services. Meanwhile, neighboring suburbs aren't that interested in annexing Youngstown's problems.

'Clean and Green'

But within the city, which sprawls out over 35 square miles, there are sizable areas that can be shifted to other uses, Mr. Williams says. He envisions large blocks of green space throughout the city. The theme of the master plan is to make Youngstown "clean and green," he says.

The mayor has sharply increased the city's annual budget for demolition -- to $1.5 million this year from $320,000 in 2005. Youngstown is filled with properties that have been essentially abandoned by owners who failed to keep up tax payments. The city places liens on the properties it clears, to cover the cost of demolition, and recently shifted to a policy of trying to negotiate with owners to gain control over such parcels. These blurred ownership lines are one of the reasons the city expects it will take years to reshape many neighborhoods. "At this stage, we're focused on clearing decades of blight that had built up," says the mayor.

Tearing things down is relatively easy and is done by many cities. Much tougher is figuring out creative ways to use vacant land and getting residents to accept a new vision for what it means for their city to prosper.

With this in mind, Youngstown in late 2005 asked a group of urban planners to come up with design ideas, focusing on the Oak Hill neighborhood. Planners canvassed the neighborhood, asking residents what they would like to see. The answers surprised them.

Many city planners, for instance, favor creating dense developments. But many Oak Hill residents told them something very different.

"They said that the one thing they liked was that their area was becoming less dense -- that there was more space between them and their neighbors," says Terry Schwartz, an urban planner from Kent State. They weren't eager to see new housing built either, since many long-time residents fear new units are almost certain to be low-income housing.

Joseph Jennings, a 74-year-old retired steelworker, has lived in Oak Hill since he came to Youngstown in the 1950s from West Virginia to work in the mills. He says he likes the idea of reshaping his neighborhood so it's less crowded. "It'd help hold up the value of the property and make people more willing to invest," he says. "It's a good thing to spread things out -- that's the way people like to live nowadays anyway."

He built his house nearly 30 years ago, buying a double lot so he would have room for a two-car garage. He notes there are a number of empty lots on his street today.

Norma Stefanik, an urban designer who lives in one of Youngstown's most desirable neighborhoods, on the city's north side, says more attention should be paid to basics -- such as using existing building codes to pressure landowners to do a better job of maintaining their properties. "A lot could be done just by going after the people who are letting their properties decline," she says.

Rufus Hudson, an African-American councilman who represents Youngstown's largely minority east side, knows the areas slated for emptying out are mostly occupied by minorities. But he says the city can't continue to serve an infrastructure built for a much more densely populated city. "Our population has fallen steadily," he says, "but we still have 535 miles of roads that have to be kept paved and plowed."

The forces of demographics are doing much of the clearing for the city. Mr. Hudson estimates that within a decade, about 10% of the residential streets in his district will be empty enough to allow them to be closed.

The city has told residents that it will stop investing resources to redevelop certain areas. City officials say there are many places where streets could ultimately be dug up, street lights taken down, and sidewalks removed in order to create green spaces where there were once densely settled blocks.

While it doesn't have specifics yet, the city says it expects certain vacant land to be turned into parks or community gardens. Another idea, already taking place to a limited extent, is to take empty parcels on blighted streets and sell them for small amounts to remaining residents -- so homeowners who have decided to stay would be allowed to expand their yards or even rebuild their houses to spread out over more than one lot.

The day-to-day task of planning for a smaller Youngstown is handled by Mr. D'Avignon, director of the city's Community Development Agency, who works out of an office in a converted post-office building downtown. "We have to break the downward cycle," he says, noting that many people in Youngstown's stable neighborhoods are hesitant to invest in their homes, because they worry that the blight will eventually engulf them. "There's a mindset in Youngstown that says, 'It's coming my way, the blight is moving this way.' We have to put a stop to that."

Write to Timothy Aeppel at

Friday, March 09, 2007


Ethanol Tariff Loophole Sparks a Boom in Caribbean


Ethanol Tariff Loophole
Sparks a Boom in Caribbean

Islands Build Plants
To Process Brazil's Fuel;
Farm Belt Cries Foul
March 9, 2007; Page A1

PORT OF SPAIN, Trinidad -- Surrounded by ramshackle watermelon stands and burning sugar-cane fields, Texas oil man Ron White shows off the site for his next big investment: a planned $20 million ethanol processing plant. His company, EthylChem Ltd., is just one of a rush of new Caribbean enterprises trying to serve the suddenly booming U.S. ethanol market.

[Ron White]

These biofuel entrepreneurs won't actually make ethanol from Caribbean sugar cane, even though sugar makes the best base for the fuel. Instead they'll just import it from ethanol powerhouse Brazil, and process it here. Then they'll try to cash in on the islands' sweet tariff status: an exemption from a 54-cents-a-gallon U.S. tariff on ethanol processed anywhere else. "Avoiding the tariff -- that's the economics of our business," says Mr. White.

As President Bush meets Brazil's president, Luiz Inácio Lula da Silva, today in São Paulo to promote a loose alliance to encourage more production of ethanol and other biofuels, the Caribbean ethanol industry illustrates how U.S. energy policy and trade policy can stand at odds.

A top energy priority of Mr. Bush is to end a U.S. "addiction" to foreign oil partly by encouraging alternative sources such as ethanol, which can be made from sugar, corn or other agricultural products. (See related article on page C5). But the U.S. tariff, which Mr. da Silva has been lobbying unsuccessfully for Washington to remove, damps the supply in order to protect prices for U.S. corn growers in Farm Belt states.

A tortured route around the tariff goes through the Caribbean Basin. There, two dozen small countries are exempted as part of a 24-year-old trade agreement from near the end of the Cold War, designed to combat communism by feeding the U.S. dollar into their poor economies. Even that tariff exception -- which requires entrepreneurs like Mr. White to jump through legal hoops while risking losses from volatility of supply and demand in Brazil and the U.S. -- is under attack.

Jamaica is home to more and more ethanol installations. Above, storage tanks and, inset, cooling towers at an ethanol plant in Kingston harbor run by ED&F Man of London.

U.S. farm-state lawmakers want to close the loophole. Sen. Charles Grassley of Iowa, the ranking Republican on the Senate Finance Committee, last year accused a Trinidad ethanol business of unfairly harming U.S. farmers. Last week he asked the president in a letter to refrain from using taxpayer dollars to encourage foreign ethanol production, as intended by the planned agreement with Brazil, the second-largest ethanol producer after the U.S.

Caribbean ethanol businesses also are in some danger from the opposite camp, which wants to drop ethanol tariffs generally. That would wipe out the Caribbean advantage. Mr. Bush's brother, former Florida governor Jeb Bush, has forged a coalition of American and Brazilian ethanol interests called the Inter-American Ethanol Commission to lobby to drop the tariff. At times Mr. Bush and his cabinet members have indicated interest, though given the farm-state objections it's unlikely to be removed any time soon.

In a world without trade barriers -- and trade politics -- Brazil would be ethanol king, and the U.S. would be importing Brazilian fuel far more heavily, stoking production further in turn. With efficient sugar-cane production and chemical processing, Brazil can produce ethanol for as little as 80 cents a gallon, less than half the price of U.S. ethanol producers, who mainly convert corn to make the fuel. Sugar cane is a better raw material for ethanol because it ferments more quickly into alcohol. But the 54-cent tariff, on top of the cost of shipping to the U.S., wipes out much of the price advantage. There are exceptions: In the summer of 2006, the U.S. price spiked enough that Brazilian producers that reacted quickly made money exporting large quantities to the U.S., despite the tariff.

Encouraging more imports of foreign ethanol would drive down prices and likely boost the American market further. While the 54-cent tariff early on encouraged the U.S. domestic industry, now it has become counterproductive, contends Robert Howse, a trade expert at the International Food & Agriculture Trade Policy Council, an advocacy group sponsored largely by agricultural companies. "If we wanted to achieve the energy goals in the U.S. we would disassemble a lot of the protectionist policies," he says.

[Growing Thirst]

The Caribbean sugar industry is so antiquated that it can't produce the fuel competitively from its own cane fields. Instead, Caribbean companies take on a middle step in the production process: They dehydrate the ethanol from its original state, then ship it to U.S. refiners, which add gasoline to make the fuel useable in American cars.

The dehydrating meets the U.S. requirement that products be "substantially transformed" in Caribbean Basin countries, if they don't originate there, to escape tariffs. Such techniques to satisfy trade rules often are controversial: In the 1980s and 1990s, Caribbean Basin countries ran afoul of U.S. apparel makers when they started finishing low-cost apparel from Asia and sending it on to the U.S., skirting trade barriers aimed at the Asian products.

U.S. farm-state lawmakers like Sen. Grassley say that merely siphoning water from ethanol shouldn't qualify Caribbean firms for tariff breaks. "It's subterfuge," he says.

The Caribbean tariff exception originates in a Reagan Administration agreement called the Caribbean Basin Initiative in 1983, between the U.S. and most countries with Caribbean coastline, plus El Salvador, not geographically in the Caribbean Basin but seen then as vulnerable to communism.

Nations in the group were awarded incentives to increase local production of ethanol and given duty-free access to the U.S. equal to 7% of the U.S. ethanol market. That trade preference is currently worth $600 million. A U.S. International Trade Commission study says that ethanol was Jamaica's leading export to the U.S. under the initiative in 2004, the most recent year for which those data are available.

As the U.S. appetite for ethanol grows, and total consumption swells, so will the volume of Caribbean exports that can enter the U.S. duty-free. This year, the 7% rule means the nations in the agreement can export about 350 million gallons of dehydrated ethanol duty-free. Next year that's estimated to grow to 420 million gallons. If the U.S. manages to meet President Bush's goal of using 35 billion gallons of alternative fuels, up from six billion gallons last year, the Caribbean Basin nations' 7% slice would probably top two billion gallons.

So investors are lining up at Caribbean Basin ports. In Trinidad, Angostura Ltd., better known for its bitters and rum products, started processing ethanol in 2005. In El Salvador, U.S. agricultural giant Cargill Inc. is producing the fuel as part of a joint venture. In Jamaica, two ethanol processors are up and running, with two more ready to start production this year. Another is trying to line up backing from U.S. venture capitalists. In Haiti, an idled ethanol dehydration plant has attracted renewed attention. Projects also are in the works in Guyana, the Dominican Republic and Aruba.

[From the Field to the Pump]

So many players are entering the Caribbean market that the ethanol exporters may produce more than the duty-free allotment -- meaning some shipments would have to pay tariffs after all. "The Caribbean is heading to 397 million gallons" capacity this year, or almost 50 million gallons above the estimated cap for 2007, warns Jeffrey Tuite, managing director of London-based ED&F Man Holdings Ltd., which operates an ethanol dehydrator outside Kingston, Jamaica. "We're looking at a quota race. Then it will be first come, first served." In 2006 about three-quarters of the fast-rising quota was produced, up from less than half in recent years.

Smart operators can do extremely well, especially if they time market swings properly. But that's no simple task. Despite the bravura of the dehydration crowd, fat profits are hardly guaranteed, given price fluctuations in energy markets. "We've always referred to [Caribbean] plants as 'fireflies,' for the way they turn on and off whenever the price window fails to open in their favor," says Manfred Wefers of Coimex Trading Co., one of Brazil's largest ethanol traders. Demand for ethanol is so strong in Brazil that no more than 20% of the fuel production is exported, and sometimes at prices that are too high for Caribbean dehydrators to make any profit. On the other end, sometimes the U.S. price rises so high Brazilian producers can make a profit bypassing the Caribbean step.

Along a seafront highway east of Kingston, a relic known as Jamaica Ethanol Processing Ltd., which is ED&F Man's subsidiary on the island, has made money despite relying on ancient equipment. Some of the storage tanks, originally built to hold petroleum for Royal Dutch Shell, are still clad in brick masonry, a defense rushed into place against Axis submarine missions in the 1940s. The boilers were built in the 1980s, but look a lot older as they sputter and squirt steamed ethanol through creaking pipes. The little plant employs 30 people to run round-the-clock shifts dehydrating "wet" ethanol, mostly from Brazil.

The business works, managing director Erwin Jones says, because the company has learned to lock in prices for "wet" ethanol when it's cheap, and pounce on opportunities to ship far from Jamaica when the price of dehydrated ethanol spikes.

On the southern tip of Trinidad, Angostura's ethanol subsidiary, Trinidad Bulk Traders Ltd., wasn't profitable last year -- because its 50-million-gallon-a-year dehydration plant couldn't get enough fuel from Brazil. But Curtis Mohammed, an Angostura general manager, says he's confident of profits this year, and is doubling annual capacity. He says the revenue generated from the ethanol business will be funneled back into Angostura's rum business, which has taken a hit in recent years from increased prices for raw materials like molasses.

EthylChem's Mr. White says the years he spent calculating risk as a sales representative for Exxon Mobil and other refiners should help in the ethanol business -- although sometimes his calculations worked out poorly. In 1999, he became president of Global Octanes Corp., a small Texas company that manufactured methyl tertiary-butyl ether, called MTBE, which oil refiners were using at the time to reduce air pollution and comply with environmental regulations. It looked like a growing business -- until MTBE was discovered to contaminate ground water. Global Octanes folded in 2003, after California banned MTBE, and in 2005 Congress failed to give liability protection to its refiners, effectively ending the business. Mr. White took a course to become an insurance salesman.

Before he started going door-to-door, however, the 62-year-old entrepreneur met Patrick Johnson, a Texas businessman familiar with the Caribbean ethanol business, which was getting a boost from the failure of MTBE. He joined Mr. Johnson's EthylChem on Trinidad, whose economy is built on petroleum, natural gas and petrochemicals. Trained labor was abundant, as was the energy to run an ethanol dehydration plant.

The pair cobbled together a small number of investors from Trinidad and the U.S. and hired a Houston investment banker to scour for more funds. They found a Trinidad bank willing to kick in construction financing and are working on a deal with a second bank overseas. Mr. White is telling investors they can expect returns on investment of between 30% and 50% when the initial debt is paid down. He figures he can reduce the risk of not getting enough Brazilian supply, if necessary, by reversing the business model and charging Brazilian producers to dehydrate their ethanol and avoid the tariffs, without EthylChem buying the fuel.

In 2004, Petrojam Ltd., Jamaica's state-owned oil company, put together a joint venture with Brazil's Coimex Trading to process ethanol for the U.S. market. At the time, Petrojam executive Winston Watson recalls, ethanol was selling for about $1 a gallon in Brazil and U.S. buyers were paying between $2 and $2.20 a gallon for dehydrated fuel. "Our break-even number was about $1.50 or $1.60," says Mr. Watson.

But last year, Brazilian ethanol export prices soared to $1.60 a gallon as Brazilian ethanol makers fed their growing domestic market for flex-fuel cars, which can run on either gasoline or ethanol. At the same time, the U.S. purchase price for dehydrated ethanol dropped below $2 a gallon, as American ethanol makers improved productivity. "We didn't lose money," Mr. Watson insists, but acknowledges that the plant still isn't running at full capacity.

Ultimately, says Karl James, chairman of Jamaica's Petrojam Ethanol Ltd., and leader of that country's Sugar Industries Association, Caribbean producers must learn to produce ethanol from the abundant sugar cane on the islands, either for the U.S. or other energy-thirsty markets. But few Caribbean players are in any position to convert sugar production to capitalize on ethanol.

In many parts of the Caribbean, the sugar-cane industry is rotting. The governments of Trinidad, St. Kitts and Barbados have already decided the sugar sectors of their islands are not worth further investment. They'd rather use their islands' limited land for tourism and retirement real estate, figuring that even with the booming ethanol demand, there isn't enough growing space to make modernizing worthwhile. Rum distillers like Trinidad's Angostura and Jamaica's Appleton Ltd. now reach all the way to Fiji for molasses to import for their spirits.

But Angostura's Mr. Mohammed wants to encourage sugar-cane production in the Caribbean Basin in Guyana. And Jamaica hopes the sale this year of five government-owned sugar-cane estates will lead to a renewal of the sugar business there for ethanol production. Authorities are encouraged that among the prospective bidders at this summer's auction are Brazil's Coimex Trading and India's Dhampur Sugar Mills Ltd., both big ethanol traders.

Write to Lauren Etter at lauren.etter@wsj.com1 and Joel Millman at joel.millman@wsj.com2

Friday, February 02, 2007


Wal-Mart Wants Suppliers, Workers to Join Green Effort

Wal-Mart Wants Suppliers,
Workers to Join Green Effort

February 2, 2007; Page A14

Wal-Mart Stores Inc. Chief Executive Lee Scott called on the retailing giant's suppliers and employees to aid its green campaign, including a request that suppliers eventually eliminate nonrenewable energy from their processes and products.

[Lee Scott]

For the past year the company has been expanding its environmental push even as its sales growth has waned and it has faced persistent criticism over its wages and health benefits. But Mr. Scott's remarks yesterday in London marked Wal-Mart's first formal call for suppliers to decrease their use of nonrenewable energy such as that generated by burning coal or gas. Wal-Mart pledges to eventually power its operations entirely with renewable energy sources such as wind and solar energy.

Mr. Scott issued the call while introducing a campaign he christened "Sustainability 360." In another aspect of the campaign, Wal-Mart will ask its 1.35 million U.S. employees this year to make commitments of their own, such as biking to work or encouraging friends to buy energy-efficient light bulbs.

Among the initiatives Mr. Scott outlined, prodding suppliers off nonrenewable energy could have the largest commercial ramifications. Wal-Mart, with an estimated $350 billion in sales last year, buys goods from more than 60,000 suppliers globally.

"Just think about this: What if we worked with our suppliers to take nonrenewable energy off our shelves and out of the lives of our customers?" Mr. Scott said, according to a transcript of the speech, at an executive seminar hosted by the University of Cambridge and Prince Charles.

Some suppliers, such as General Electric Co., already are working with Wal-Mart to promote products such as energy-efficient light bulbs. Osram Sylvania, a unit of Siemens AG, produces 30 types of energy-efficient, compact fluorescent light bulbs.

In another facet of the campaign, Wal-Mart will encourage its employees to adopt what it calls Personal Sustainability Projects this year. The program encourages Wal-Mart employees to embrace a cause in areas such as environmental sustainability or personal health, like starting an in-store recycling program or organizing weight-loss or smoking-cessation support groups.

Some Wal-Mart employees have yet to hear about the program. Ada McBride, a greeter at a Wal-Mart in Apopka, Fla., said she would like to see the retailer "focus on wages," but she anticipates the new initiative will be well-received by employees. It could be viewed favorably by conservation groups, too, especially if it gains widespread participation.

"While we are not familiar with the details of this effort, any program that can engage over a million people in working for a healthy and sustainable environment is good news," said Bob Perciasepe, chief operating officer of the National Audubon Society.

As it expands its green initiatives, Wal-Mart is struggling on another front: perpetuating its sales growth. The retailer in recent years has increasingly pushed into denser urban and suburban markets in the U.S. Subsequently, its same-store sales -- sales at stores open at least a year -- have steadily diminished. Those measures reached rare lows with a 0.5% gain in October and a 0.1% decline in November. Wal-Mart anticipates reporting a gain of 1% to 2% for January.

Write to Kris Hudson at kris.hudson@wsj.com1

Wall Street Journal, 2 Feb. 2007

Tuesday, January 30, 2007


How Politics Influenced A Big Clean-Up Deal

January 29, 2007


How Politics Influenced
A Big Clean-Up Deal

Tiny Start-Up Wins
Border Sewage Contract;
A Meeting With Cheney
January 29, 2007; Page A1

IMPERIAL BEACH, Calif. -- As Tijuana has boomed, fueled by industrial expansion, something else has also surged: the flood of raw sewage the Mexican border city sends gushing downhill into neighboring California. Less than 60% of the city's sewage is being treated at all, and that only to minimal levels, leaving tons to flow into the canyons and surf of Southern California.

To stem this growing mess, the American government has chosen an unusual solution. Without any competitive bidding, the U.S. gave Bajagua LLC, a start-up company with no experience in treating waste water, sole authority to build and operate a treatment plant in Mexico.

[slideshow promo bajagua]1
Scot Paltrow
Imperial Beach

The tale of Bajagua's success in getting the contract involves, among other things, well-timed campaign contributions to local members of Congress and other political figures. The firm also enlisted people with crucial connections as lobbyists. And when that didn't prove enough, Bajagua obtained backing from Vice President Dick Cheney and the White House, which cleared away opposition by federal agencies, several former senior federal agency officials say.

The Bajagua plan ("Bajagua" is a contraction of the Spanish "baja," for Baja California, and "agua," water) has prevailed even though, when it was first proposed in the late 1990s, it faced opposition from all of the relevant federal agencies. Records show that the State Department, the Environmental Protection Agency, the Justice Department and the Clinton White House's Office of Management and Budget dismissed the proposal as inadequate and impractical, and said it would violate existing law and treaties. Opponents of the plan say it won't stop the main causes of the waste and garbage flowing across the border.

An ocean beach sign in Imperial Beach, Calif.

Bajagua's tale shows how plans for federal public-works projects could be diverted by a small group of lawmakers, who were able to push contracts toward big campaign contributors. It also highlights the political difficulties posed by the pollution flowing into the U.S. from burgeoning Mexican border cities.

Recently, the project's backers have missed important deadlines, and officials are questioning whether the company has taken vital steps it claims already were achieved, including obtaining commitments for financing, essential permits and land. The federal government's contract with Bajagua calls for cancellation if the plant isn't built and running by September 2008, leaving the company only 19 months to build and open a plant. As a result, U.S. and Mexican officials have begun to express concern about whether it can succeed. Bajagua's principals say they are on track.

In an unusual step, the U.S. committed itself without appropriating money for the plant, and the final cost isn't known. The federal agency in charge estimates the total cost to the U.S. will be between $580 million and $780 million.

Coastal southern San Diego County lies at the bottom of a drainage system that originates in Baja California mountains in Mexico, feeds into the Tijuana River flowing through the heart of Tijuana and down into the ocean at Imperial Beach, Calif. As it passes through Tijuana, the river picks up raw human waste, battery acid, old tires, household garbage and toxic chemicals. From hilltop squatter settlements surrounding Tijuana, meanwhile, more sewage flows directly down canyons into San Diego County.

Beaches as far north as northern San Diego County are affected, but Imperial Beach, a favorite California surfing spot, has borne the brunt of the pollution. All or parts of the beaches along Imperial Beach and the estuary just to the south of it were closed for 198 days in 2006, according to the San Diego County statistics. The pollution causes health hazards, a weakened local economy, low home prices and harm to endangered wildlife, according to public-health experts, local business owners and others.

Raw sewage and garbage flow from hilltop slum neighborhoods in Tijuana, Mexico, across the border into the U.S. via Smuggler's Gulch canyon, after rain on Nov. 27.

In the dry season, a system of special drains often catches the waste flowing through the Tijuana River (which would be dry without waste water) as well as the sewage running down the canyons. These pump the waste to a treatment plant in San Ysidro, Calif. But the drains are overwhelmed in the November-to-April rainy season and sometimes in the dry season too.

The problem was obvious on a late November day, when the San Diego-Tijuana area had its first rain of the season. After only a few tenths of an inch of rain, the raw sewage flow was too much for a drain in the river bed. Water covered with floating garbage and white foam from detergent, and filled with raw human waste, washed into the Tijuana Estuary on the U.S. side, soon reaching the ocean. Health officials closed the beach at the mouth of the Tijuana River.

Justin Jeter has surfed around the landmark Imperial Beach pier for 20 years and says he can't resist going in when the surf is up. But he adds that lately he has suffered frequent sinus and ear infections, which, like many surfers, he attributes to the pollution.

A recent study in the journal Applied and Environmental Microbiology by Richard Gersberg, professor at San Diego State University's Graduate School of Public Health, and colleagues documents high levels of hepatitis A virus and human intestinal viruses in ocean water off the mouth of the Tijuana River and at the Imperial Beach pier after seasonal rains.

The pollution also affects the estuary, a 2,531-acre wildlife reserve, sandwiched between the border and Imperial Beach, through which the Tijuana River empties into the ocean. Joy Zedler, an ecology professor who has studied the estuary, says polluted sediments from Tijuana have eliminated clams, sand dollars and fish species from the estuary and adjacent waters. Endangered birds, such as the light-footed clapper rail, have been harmed, and plants native to the estuary killed off, including a rare species of pickleweed.

Once a sleepy border town, Tijuana is now Mexico's fourth-largest city, with a population of more than 1.3 million. About 2,000 people on average arrive daily to stay. Tijuana's growth stemmed from maquiladora plants -- foreign-owned plants allowed to import materials and export finished goods duty-free -- and more recently the North American Free Trade Agreement and growing cross-border trade.

With the city's flat land used up, hundreds of thousands of new dwellings eat up the surrounding steep hillsides so quickly that whole new neighborhoods appear in days. Even in many legal developments, the dwellings aren't connected to sewers or running water. Instead, plastic pipes run from indoor latrines, dumping raw waste into the dirt roads. The outflow etches gullies in the roads and flows into the Tijuana River or down the hillsides to the estuary on the U.S. side.

The municipal sewage system is leaky. A reporter driving one day in the city's center during the dry season saw a geyser of sewage shooting up from around a manhole cover and running down the street.

Tijuana has a sewage treatment plant of its own on the coast just south of Tijuana that receives 25 million gallons of raw sewage daily. It treats 17 million gallons to a "primary" standard before dumping it into the surf. Only solids are filtered out, not toxic chemicals, heavy metals and other dangerous stuff. The rest of the sewage is spewed untreated directly into the ocean.

The U.S. has long recognized that Mexico was unlikely to pay all the costs of treating sewage that washes north of the border. Under treaties, agencies in both countries work together on sewage and other issues. The U.S. agency is the International Boundary and Water Commission, an El Paso, Texas-based arm of the State Department.

In the 1990s the commission built the San Ysidro plant, on the U.S. side of the border. It takes in 25 million gallons per day of Tijuana sewage, treats it to a primary stage, then sends it through an 11-foot-wide pipe before discharging it in the ocean 3.5 miles offshore.

That partly treated discharge falls far short of U.S. Clean Water Act standards. In response, the IBWC intended to expand treatment at the plant. It acquired land and planned to increase capacity in steps.

Then Bajagua entered the picture. The small company was established solely to try to build a plant in Mexico under a U.S. government contract to address the Tijuana waste problem.

[Enrique Landa]

It grew out of a partnership in the 1990s between James D. Simmons, a former San Marcos, Calif., city councilman who runs a consulting business, and Enrique Landa, a Rancho Santa Fe, Calif., architect-turned-entrepreneur and son of a Mexico City architect. Messrs. Landa and Simmons had put together packages of permits which they sold to construction companies to build a waste-treatment plant in Sonora state in Mexico, and to upgrade treatment at a Mexico City plant.

Mr. Simmons says Mr. Landa's travels in northern Mexico, where he saw an acute shortage of usable water and waste treatment, led him to the idea of building a Tijuana treatment plant. (Through a Bajagua spokesman, Mr. Landa declined to be interviewed.) The two men concluded that they could make money by treating waste, eventually, to cleaner standards and selling the reclaimed water.

Under Bajagua's plan to build a plant in Tijuana, 25 million gallons a day of raw sewage would continue to flow to the San Ysidro plant on the U.S. side where, as now, it would be treated only to primary standards. Then new pumps and pipes would send it back uphill into Mexico to the new Bajagua plant.

After treating the sewage there, Bajagua would send it downhill again, through yet another set of new channels, where it would cross the border a third time, to San Ysidro. Then it would be shunted into the ocean through the existing pipe. Eventually, the Bajagua plant would also treat an additional 34 million gallons of sewage directly from Tijuana, to be sent across the border to the ocean pipe.

The idea of a U.S.-funded treatment plant in Mexico ran counter to an agreement the U.S. had with Mexico committing to build treatment facilities on its own side of the border.

A 1999 environmental-impact statement prepared by the Environmental Protection Agency and the IBWC called the Bajagua plan "not a feasible alternative." It said the plan wouldn't expeditiously meet the goal of additional treatment -- which it said could be accomplished at the San Ysidro plant.

A big criticism, then and now, was that no plan addressed a key source of pollution: the millions of gallons of Tijuana sewage that don't go into any sewer system at all.

Engineers who evaluated the Bajagua plan, including Michael L. Evans, a senior IBWC engineer at the time, concluded that it was unnecessarily costly, because the same sewage would ping-pong across the border three times before being discharged into the ocean.

Bajagua executives say their plan makes sense because the San Ysidro plant has limited room for expansion and faces local opposition. They also say Bajagua would be reimbursed in annual increments only after its plant is up and running. "The only way we get paid back is if we build it, it works and it operates to standards," says Mr. Simmons.

The commission and other federal agencies reviewed Bajagua's plan, and rejected it.

[Bob Filner]

But that wasn't the end. Local members of Congress blocked the IBWC's plan to expand the San Ysidro plant and pushed the Bajagua alternative. Democratic Rep. Bob Filner, whose district includes the San Ysidro plant, and Republican Rep. Brian Bilbray, from a nearby district, in 2000 sponsored a bill promoting Bajagua's plan. A draft of the bill actually named Bajagua as the firm to do the work. When some lawmakers complained, the sponsors changed to wording that they hoped was so specific it would make Bajagua the only possible choice.

"We basically wanted one company," Mr. Filner says. "So we had to find a way to do it within the law."

From 1996 through 2005, Bajagua officials and their immediate relatives gave more than $56,000 in campaign contributions to Mr. Filner, federal campaign records show, more than to any other candidate in that period. Mr. Filner says he supported Bajagua because he considers it the best solution and his constituents wanted the plant in Mexico. "I'm doing this for my district, not for Enrique [Landa] who is my friend," he says.

The Clinton White House opposed the bill. The Office of Management and Budget stated, "Its approach raises serious foreign policy and legal concerns and will hinder our ongoing efforts to address the region's wastewater treatment needs." But after some amendments, and facing strong congressional support, Mr. Clinton signed it. The bill paved the way for a new treaty with Mexico that would allow the Bajagua project.

Even Congress's backing wasn't enough to overcome opposition by the IBWC and other federal agencies. Arturo Duran, IBWC commissioner in 2004 and 2005, says he had reservations because "it's not normal to sole-source to a company a contract for hundreds of millions of dollars. It's not how the federal government operates."


With progress at a standstill, the California Water Quality Control Board in 2001 sued the IBWC, as owner of the San Ysidro plant. The suit led to a federal court order to bring the plant's discharge up to less-toxic "secondary" standards by September 2008.

It took intervention from the White House and Republican Rep. Duncan Hunter of Southern California to turn events to Bajagua's favor.

On Oct. 14, 2002, Bajagua's Messrs. Simmons and Landa traveled to Roswell, N.M., where Vice President Cheney appeared at Republican fund-raisers. After a public rally, Mr. Cheney met privately with a small group of big contributors at the home of a local Republican backer, energy executive George Yates, Mr. Yates says.

Mr. Simmons says he and Mr. Landa went in response to an invitation received in the mail to the fund-raiser. "Dick Cheney attended that, I got to shake his hand, and had my picture taken, and that was the end of it," he says.

But the next day Mr. Simmons sent a letter on Bajagua stationery to the vice president, expressing gratitude "that you could spend some time with us in Roswell." It added, "I appreciate the opportunity I had to briefly introduce the Bajagua Project to you and your staff." Mr. Simmons also gave a five-page "Bajagua Project Briefing" to Catherine Martin, a top adviser to Mr. Cheney.

In early 2003 -- Bajagua officials say they can't recall the date -- Matthew Simmons, then a lobbyist for Bajagua, met with a Cheney aide about the project in the vice president's offices. (Mr. Simmons, a former legislative director for Rep. Hunter, isn't related to James Simmons.) Other lobbyists hired by Bajagua include James R. Jones, former U.S. ambassador to Mexico.

On Sept. 4, 2003, Bajagua representatives including James Simmons met with officials of the White House's Council on Environmental Quality, which oversees executive branch environmental policy, Bajagua says. The same day Rep. Hunter met with James Connaughton, chairman of the environment council, to press for support of Bajagua, according to emails by IBWC officials disclosed on the Web site of William Weaver, a University of Texas at El Paso professor.

Public records show that Bajagua spent $585,000 on lobbying from 2001 through the first half of 2006.

Beginning in 2003 the White House pressed the relevant federal agencies to embrace the Bajagua project, according to interviews, a report by the Project on Government Oversight, a Washington, D.C.-based nonprofit organization, and email messages and documents posted on Mr. Weaver's Web site. At the Justice Department, a staff attorney who had backed the IBWC's opposition to Bajagua on legal grounds was replaced by a political appointee who reported to then-Assistant Attorney General Thomas Sansonetti, a longtime friend of Mr. Cheney. Staff at the IBWC who had opposed the project were overruled or moved aside, say Mr. Evans and other former IBWC staff.

Lea Anne McBride, a spokeswoman for Mr. Cheney, declined to respond to questions about the vice president's role in the Bajagua case. "The bottom line is that the vice president does not issue government contracts," she said.

In 2004, Rep. Hunter pushed through amendments to the 2000 law that favored Bajagua, further exempting it from normal restrictions on federal contracts. In 2005, the IBWC chose Bajagua as the sole "preferred option" for additional treatment of Tijuana sewage.

The 2002 thank-you letter from Bajagua to Mr. Cheney praised Rep. Hunter, chairman of the House Armed Services Committee, as "our champion." Before the encounter at the fund-raiser with the vice president, Rep. Hunter had received a total of $4,000 in campaign contributions from Messrs. Simmons and Landa and a Bajagua lawyer. Two days after the meeting, he received another $1,000 each from Mr. Landa's brother and sister-in-law.

Bajagua spokesman Craig Benedetto says timing of the contributions was "coincidental." He says Rep. Hunter had no role in arranging access to Mr. Cheney.

Mr. Hunter's spokesman said the congressman "doesn't specifically recall coordinating a meeting" with Mr. Cheney, but "it would be entirely appropriate for the vice president to be involved in such a meeting" given the importance of the sewage issue.

Concerning the Bajagua campaign contributions, he said, "Congressman Hunter does what he thinks is right for the nation and in the best interest of the San Diego community. This project is no exception." Rep. Hunter has announced he is running for president in 2008.

Meanwhile, Rep. Bilbray, the other sponsor of the 2000 law, received $2,500 in contributions from Bajagua-related individuals. He lost his seat in the 2000 elections and soon went to work as a lobbyist. He represented Mr. Benedetto's public-relations firm to lobby on behalf of Bajagua, for which he received $35,000, records show.

In December 2001, less than a year after Mr. Bilbray's term ended, he testified before the House Water and Environment Subcommittee at a hearing on progress under the 2000 Bajagua-related law. He didn't disclose that he was a Bajagua lobbyist.

Mr. Bilbray says he didn't violate lobbying rules, which forbid a former lawmaker to appear before, or even communicate with, members of Congress to try to influence them on anyone else's behalf for a year after leaving office. He says he testified at the hearing "just representing myself as an author" of the 2000 law.

Last year, Mr. Bilbray was reelected to Congress, taking the seat vacated by Randy Cunningham, now in federal prison for soliciting bribes from federal contractors. Bajagua-related individuals gave Mr. Bilbray $6,850 in campaign contributions.

The cost to the government of the Bajagua project remains unknown. Bajagua and the commission missed a March 2006 deadline to negotiate an agreement which would have set the financial terms. The U.S. would reimburse the company's investment, with an added percentage of profit over 20 years once the plant opens.

Although Mr. Simmons says Bajagua's hopes for big profits lie in selling treated sewage someday as "reclaimed water," U.S. and Mexican officials say Bajagua hasn't submitted any plans for an additional plant to produce the water and has no land or approvals to build one. It isn't clear whether Bajagua legally could sell reclaimed water.

IBWC Commissioner Carlos Marin says Bajagua has missed deadlines for the Tijuana plant. Bajagua insists that, as required, it has arranged for financing. Mr. Simmons says flatly: "We have a commitment from Citibank to finance the project." But the IBWC says Bajagua hasn't given it any documents supporting the claim. Mr. Marin says, "We don't have any proof" of financing. Also, California denied Bajagua a permit it was required to obtain by September 2006 to discharge treated waste into the ocean. Bajagua is appealing.

Bajagua also was to have reached an agreement by September 2006 to purchase land. Mr. Simmons recently said Mexico would be announcing the specific site "in a few weeks." But José de Jesús Luévano, an official at the IBWC's Mexican counterpart, says the government has no intention of selling land to Bajagua. He says a lease is under discussion between Mexico and the company, but any announcement is months away.

Mr. Marin admits doubts about whether Bajagua will meet the 2008 deadline. "The more time that passes, that's getting a little bit leery," he says. Yet the IBWC has put all its eggs in Bajagua's basket. Failure would mean years before any alternative could be in place. Mr. Marin acknowledges that the IBWC has no backup plan.

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