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January 1, 2008

CLEARING THE AIR

Even with significant progress over the past decade, North America's steel and aluminum industries face harsher scrutiny—and policies—in the days ahead.

On the banks of Cleveland's Cuyahoga River, at the southern edge of Lake Erie, ArcelorMittal’s 950- acre, integrated steel mill sits smack in the middle of neighborhoods with close to 35,000 people. Seventeen of the city’s public schools are located within a 2-mile radius of the plant. Eight different companies have owned the 90-year-old mill, including LTV, which closed it in 2002. International Steel Group (ISG) reopened it, and Mittal Steel—now ArcelorMittal—paid $4.5 billion for ISG, along with the plant, in April 2005.

illustration by Curtis Parker

Since 2002, ArcelorMittal reports approximately $125 million has been spent at the Cleveland works on various environmental projects. The plant, with a 3.8-million-ton capacity, puts out no more than one-third of the air contaminants permitted by Maximum Achievable Control Technology (MACT) federal regulations, the company says.

And yet the surrounding communities, led by the aggressive Ohio Citizen Action group (OCA), are unimpressed. They have declared the plant a severe threat to public health and mobilized nearly 400 of the city’s doctors and nurses, and tens of thousands of others, in a tenacious grassroots effort to force ArcelorMittal to do far more about its air pollution. Issues raised by OCA are in part responsible for the current investigation by the Region 5 U.S Environmental Protection Agency (EPA) office—encompassing Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin—into whether the plant has systematically underreported its air contaminants.

The same scenario is playing out all over Canada and the United States. Metals companies say they comply with the rules set forth by government and regulatory agencies, but environmental activists and, in some cases, the EPA itself, say those regulations—and the companies they cover—don’t go far enough to reduce emissions.

Opposing Views

Research continues to establish new links between a wide variety of environmental contaminants and adverse health effects in the general population. As a result, environmental groups and the EPA have called for a progressive tightening of air and water standards. Industry, including metals producers, often challenges the conclusions of this research and argues that sharply upgrading pollution controls may be unachievable, far too expensive for the minimal health impact they might have, or both. Nevertheless, new federal standards are being developed for ozone, fine particles and toxic chemical emissions, among others.

The major controversies these days focus on greenhouse gases (GHGs), which many scientists believe contribute to global warming, and how to control them. The electric power and metals industries, for instance, say reducing intensity—the volume of greenhouse gas emissions per unit of production—is the best method, while others call for a tax, a cap and trade market for these pollutants, or an absolute cap on GHGs. In addition, just how low that cap should be and whether emissions trading systems—curbing output through economic incentives for companies—are appropriate remain subjects for debate.

No matter the outcome of those debates, changes are in the works. In Canada, environmental regulatory power likely will shift away from provincial governments and toward the federal government in Ottawa. In Washington, a more heavily Democratic Congress and a new president of the same party could mean more stringent environmental rules. If so, those rules will almost certainly mean North American metals companies will be forced to do more over the next several years, despite their steady progress complying with existing environmental regulations and sharply reducing air and water pollution since the 1970s.

Impressive advances have indeed been made. The industry takes recycling very seriously, which reduces waste, increases manufacturing efficiencies, and therefore slashes its use of energy and output of GHGs per ton of production. The entire mini-mill phenomenon of recent decades—mini-mills now produce more than half of North American steel—is built around more cost- and energy-efficient electric arc furnaces that reuse old steel to make new steel products.

The steel industry is particularly proud of its performance to date on GHGs. It has cut “its energy intensity per ton of steel shipped by approximately 29% between 1990 and 2006,” the American Iron and Steel Institute (AISI) noted in a spring 2006 announcement. This reduced industry CO2 emissions per ton shipped by 17% in that period. AISI concluded, “Compared to the Kyoto Protocol’s call for an average 7% reduction in greenhouse gas emissions between 1990 and 2012 … the American steel industry has already surpassed the Kyoto target by more than 240%.”

AISI estimates that in a typical year, the industry directs more than 15% of its capital expenditures to “environmental facilities.” The result? “Air and water emissions are 90% lower today than 10 years ago,” it says. The Steel Manufacturers Association (SMA), which represents the mini-mills, points out that they, too, have made significant improvements to reduce contaminants. Mini-mills, by their nature, produce sharply less pollution than typically older integrated mills. While the average integrated mill puts out nearly 40 pounds of particulates per ton of steel, SMA reports an EAF mill produces 0.3 pounds per ton. At the same time, the average integrated mill produces 44 pounds of carbon monoxide per ton, while the mini-mill emits just 4 pounds per ton of steel produced.

“The progress has been incredible,” says Joseph Cooksey, president and CEO of Ambient Air Services Inc., an air-quality consulting firm in Starke, Florida. A more than 20-year industry veteran, Cooksey says that while control technologies such as bag houses and scrubbers have improved, the biggest part of the cleanup has come from improvements in process engineering. “When the gaseous emissions of CO [carbon monoxide] and NOx [oxides of nitrogen] are minimized, the electrical and chemical energy required per ton of steel are also minimized,” he says. “And these plants on average are putting out less than half the particulates and carbon monoxide they were 10 or 15 years ago.”

For the future, Cooksey and other industry experts say air emissions, including fine particulates, NOx, SO2 (sulfur dioxide) and the 180 toxics classified as Hazardous Air Pollutants from integrated and mini-mills, will only get cleaner. “We see so many of these plants with bag houses, scrubbers and precipitators that are being replaced by the far more efficient newer technology,” Cooksey says. “For many [mills], it isn’t worth spending the money trying to maintain [older bag houses] anymore.”

A case in point: As 2007 wound down, United States Steel told a public hearing of its plans to upgrade its Granite City, Illinois, works with a new state-of-the-art cogeneration boiler and a heat recovery coke battery. The new boiler replaces 10 that were built in the 1920s and produces less pollution than the antiques. It also produces enough high-pressure steam to replace some of the purchased electricity used to run the plant and enough low-pressure steam for several in-mill processes. More than 120 people attended each of two hearings on the plant. No one spoke in opposition.

The Canadian steel industry has its own “record of success,” says Ron Watkins, president of the Canadian Steel Producers Association in Ottawa. Total GHG emissions were down about 20% from 1990 to 2005, GHG intensity per ton was down 24% in the same period, and energy intensity improved more than 15%, he says. Benzene was cut 75%, NOx was down by a third, and SO2 was reduced 76%. “We have made great progress in the absolute reduction of emissions on a pollutant-by-pollutant basis,” he says.

Praise for such progress has come from some unlikely sources. Just four years ago, at an annual meeting of the Metals Service Center Institute and, separately, AISI, Denis Hayes, one of the founders of Earth Day in 1970, conceded, “I have to say the steel industry as a whole is doing better than I realized. You have cleaned your smokestacks by 95% since 1970. You are recycling more steel cans than aluminum cans. I didn’t think that was possible.”

The aluminum industry, for its part, has worked successfully to improve the energy efficiency of its plants and consequently reduce GHG emissions. It signed the Voluntary Aluminum Industry Partnership with the EPA in 1995 and has exceeded its goals since then. It has halved the amount of electricity needed to produce a ton of aluminum and pushed the can recycling rate to more than 50%. The industry has managed a “combined direct carbon emission intensity reduction from primary aluminum facilities of 53% from 1990 to 2010,” the Aluminum Association reports.

The industry’s biggest gun, Alcoa, reports it is on target to reduce greenhouse emissions 25% below 1990 levels by 2010. It says it has made “considerable progress” reducing some of its other emissions, most notably NOx and volatile organic compounds by more than a third.

Water Gauge

Water pollution has been a nagging, although somewhat easier problem for the industry and government enforcement officials. The metals industry, of course, uses large quantities of water in its processes, but has taken steps to capture and mitigate the impact of much of the higher volume toxics in its effluent. There remain significant problem areas, such as the United States Steel plant in Gary, Indiana, on the southern shore of Lake Michigan. But the Montreal-based Commission for Environmental Cooperation, which gathers and collates emissions data from the United States, Canada and Mexico, says water pollution dropped on average 20% to 40% in the primary and fabricated metals sectors between 2000 and 2004, the latest years for which such numbers are available. It is noteworthy, too, that the steel and aluminum trade groups do not mention water pollution problems in their most recent annual environmental policy statements.

Yet despite all efforts, critics and environmental activists say it’s simply not enough. Currently, the Region 5 EPA office is embroiled in a bitter pollution fight at the United States Steel Gary plant. The dispute centers on polluted water, and both the EPA and a battalion of environment groups, including the Natural Resources Defense Council, call the Gary plant the worst offender in this dreary area. United States Steel rejects that label, claiming the plant is almost in total compliance with the requirements of EPA’s National Pollutant Discharge Elimination System permit.

Here, as in many places, the feds had delegated water pollution control to the state. But the Indiana Department of Environmental Management (IDEM) failed to renew or revise a permit that by law should have been issued in 1999. IDEM proposed a new permit last year—not the first such permit proposal—resulting in a delay that the EPA and the Natural Resources Defense Council say allowed the plant to increase its water contamination. The proposed permit also gave United States Steel another five years to comply with pollution limits that had been an industry standard in other places for years.

Indiana, the EPA says, was going to ignore limits on toxins ranging from cyanide and nitrates to lead, nickel and chromium that would have been flushed into Lake Michigan, Chicago’s source for drinking water. Public complaints, not to mention the threat of litigation, were sufficient to motivate the EPA to step in, refuse to rubber-stamp the Indiana permit and hold a public hearing last December. EPA’s letter opposing IDEM’s delayed permit said the company could not be allowed another five years to limit several potentially deadly pollutants, including lead, cyanide and chromium.

United States Steel said it could not comment while the permit process is underway.

Across Lake Michigan and over the border, Canada’s steel industry—despite a strong environmental record and public relations effort to remind citizens that steel is the most recycled material in the world—faces equally strong public skepticism about its efforts and an unprecedented series of government proposals to attack GHGs and pollutants on a broad scale. Traditionally, the regulation of air emissions in Canada has principally been undertaken at the provincial level. Provinces continue in that role, and some are introducing new measures to address GHGs and pollutants. But in 2007, the federal government in Ottawa, weaker than the U.S. version in Washington, introduced a new set of proposals to regulate both forms of air emission at the federal level.

This would impose a new range of environmental regulations on industries like electric utilities, oil and gas, chemicals and steel that are perceived as leading contributors to global warming. The new plan sets targets to reduce GHG intensity by 25% by 2015. Canada has apparently agreed with the steel, aluminum and other industries that reducing intensity is the preferred method of control. Environmentalists and, indeed, the Kyoto Accords, call instead for an absolute cap on GHG emissions, although there is considerable discussion about how low that cap should be.

On both sides of the border, the aluminum industry also watches with some alarm the increasing efforts of federal, state and provincial environment officials to reduce GHGs and air and water pollution from power plants, which will increase the cost of electricity. Aluminum companies have publicized their strong recycling record and dramatic reductions in the use of electricity in its manufacturing, but the industry remains among the biggest customers of polluting electric utilities.

Backseat Status

Understandably, the metals industry is somewhat taken aback by this renewed environmental activity. It has had a relatively easy time of it on the environmental front for the last eight years, with a sympathetic ear in the White House and a global shift in environmental consciousness. Environmental groups have successfully called attention to global warming, GHGs and the full range of climate change issues. But the result is some national groups spend less time on more traditional pollutants like sulfur dioxide and nitrogen oxide, says Eric Schaeffer, former director of the EPA’s Office of Regulatory Enforcement and currently director of the non-profit Environmental Integrity Project, which monitors the EPA and its enforcement programs. “And toxic discharges to water from industrial plants have not been on the short list of priorities for EPA enforcement.”

In addition, President Bush’s lack of support for federal involvement in pollution control has given the metals industry, and most others as well, some breathing room. Regional EPA offices that took an aggressive attitude toward local polluters have at times encountered opposition from the political managers of EPA’s program offices.

Government policy toward trade issues during the Bush administration, the manufacturing threat from China and the industry’s own wave of bankruptcies and consolidations have also pushed environmental concerns, if not out of sight, at least to one side.

That will almost certainly change if Democrats occupy the White House and more of Congress after the next election. “There is nowhere to go but up,” says Ann Alexander, senior attorney in the Chicago office of the Natural Resources Defense Council, who is working on United States Steel’s Gary case. “You never know, but I would like to think that some of the regressive tendencies will change.”

Last May, Schaeffer’s organization issued an analysis of the failings of federal enforcement in recent years. “Over the past five years under the Bush Administration’s EPA and Department of Justice, environmental violators have been less likely to face court actions, be subject to criminal investigation, or pay civil or criminal penalties,” he said. With a Democrat-controlled Congress and the possibility of a Democrat in the White House, activists such as the Natural Resources Defense Council, the Environmental Integrity Project, Environmental Defense and the Sierra Club hope for a climate change in Washington. “We are looking for a new sense of purpose,” says Ed Hopkins in the Sierra Club’s Washington, D.C., office.

How the controversies in Cleveland and Gary play out also may significantly impact the metals industry. OCA could force a new look at pollution monitoring and legal compliance, especially at steel and aluminum plants in urban areas. “We have children and adults with serious health problems from this plant,” says OCA’s Cleveland Area Program Director Liz Ilg. “They use formulas, not testing the worst polluting furnaces, to measure compliance. They don’t know what they are really putting out, and compliance means very little when we have a community with these kinds of health problems.” ArcelorMittal declined to discuss the Cleveland plant dispute, other than to say it is in compliance with federal law.

What's Next?

An early sign of whether a Bush-less Washington will produce a new environmental regulatory regime could be the GHG debate. Canada’s decision to embrace industry-backed intensity improvements might find ready acceptance in the United States. It has political appeal, since it allows the industry to cut some emissions while improving manufacturing efficiencies that cut production costs.

But GHG regulation is unlikely to stop there. Some economists would like to tax carbon emissions of all kinds to recognize their true costs to society and offer industry an additional incentive to reduce them. Environmentalists and the Kyoto Accords call for a cap on GHG emissions. But environmental groups in particular say any cap, to be effective, would have to be far more restrictive than any now being discussed.

Several bills pending in the U.S. Congress call for a cap on GHG emissions, with provisions for an emissions trading system that would let corporations buy and sell emissions allowances. The EU has begun such a trading system, and there is another fledgling market operating in Chicago. Corporations have seen this as a way to claim they are doing something to stop global warming while making money trading pollution credits at the same time. Economists and environmentalists have criticized both markets. Because of intense industry lobbying, trading permits are free or too cheap to work as a meaningful emission control incentive, critics say, so the markets function primarily as a source of revenue, without reducing GHGs.

Likewise, most environmental groups and Kyoto supporters argue that intensity improvements are meaningless as long as total emissions from polluting industries are allowed to grow. “When, as with global warming, total emissions must be cut, calling for intensity reductions is a smokescreen,” says William Chameides, dean of Duke University’s Nicholas School of the Environment and global warming expert for Environmental Defense. Industry growth will cancel out any gains from intensity improvements, he argues. And even the industry agrees that unless standards are put in place in China, India and other low-technology steel-producing countries, intensity improvements in the United States will have insufficient impact on global warming.

Creating workable global pollution initiatives, rather than wrestling industry to the ground, will be the biggest challenge for any administration’s efforts on GHGs.