WASHINGTON -- Makers of emission controls, whose profits are driven by the 1990 Clean Air Act's tough standards, fear the proposed rollback of air quality regulations could jeopardize their industry.
Executives of companies like Baltimore's Environmental Elements Corp. are worried that customers will delay multimillion-dollar orders while they wait to see whether Republicans in Congress follow through on promises to revamp the Clean Air Act with an eye toward loosening regulations.
Just last week, Virginia's Gov. George F. Allen and two other GOP governors told members of Congress they want an overhaul of clean air laws and asked for greater flexibility in enforcing federal guidelines.
Some legislators, like House Republican Whip Tom DeLay of Texas, have called for an outright repeal of the legislation, which was signed into law by President George Bush in 1990.
U.S. Environmental Protection Agency Administrator Carol M. Browner urged Congress last week not to tamper with the Clean Air Act, saying the Clinton administration would be willing to give the states more flexibility in meeting the standards.
Demands like those of Mr. DeLay alarm executives at companies that make scrubbers, catalytic converters and other devices that filter emissions from sources of air pollution ranging from cars and trucks to factories and power plants.
"This adds yet another level of uncertainty," said F. Bradford Smith, president and chief executive officer of Environmental Elements. "We need things to get stable."
Environmental Elements has already been battered by the recent recession and a slowdown in orders from utilities, a major source of revenue.
Over the last three years, as sales declined, Environmental Elements cut its Baltimore work force by 25 percent. It now has about 325 employees, all but 100 of whom work out of the company's beige brick headquarters on Koppers Street in Southwest Baltimore.
Environmental Elements doesn't manufacture its products at the Baltimore location. Instead, the systems -- which can loom as large as an office building -- are built and assembled by subcontractors both in Maryland and across the country.
The Clean Air Act controversy signals a rising battle here over not only the future of federal regulatory policy but over just what the government's wider role in protecting the environment should be. The 1990 law has its origins in the Clean Air Act of 1970, which first imposed standards for a wide range of toxic emissions.
GOP leaders say they want to make it harder for Washington to impose new environmental regulations on industry, arguing the rules choke off economic growth and cost jobs.
Many in the new Republican Congress say it's time to rethink other prominent environmental laws, including the Endangered Species Act and the federal Superfund law.
Big companies often oppose these kind of wide-ranging environmental rules as well. But government regulations play a large part in driving demand for pollution-control technology and small changes in the law can have a ripple effect throughout the industry.
Even if the Clean Air Act isn't rewritten, though, all the talk of change has left manufacturers of emission controls in limbo, as buyers put new orders on hold.
"The easiest thing to do in a capital project is delay," Mr. Smith said. "Companies do not voluntarily spend capital on air pollution controls unless they are assured that everybody in their industry is going to have to do it."
Putting off even one contract can have a sizable effect on Environmental Elements' bottom line. A single order typically ranges from $3 million to $10 million at the company, which had revenues of $72.6 million last year, down from nearly $95 million in 1991.
Mr. Smith has watched his firm's stock drop from $16.50 a share when it went public in 1990 to yesterday's close of $3, up 12.5 cents from Friday. Last year, the company reported a loss of $6.8 million, or 99 cents a share.
"We anticipated very significant market increases as a result of the Clean Air Act, but new demand did not materialize," he said. Faced with a stagnant market at home, Environmental Elements has turned its attention abroad, looking to Asia and Eastern Europe for growth.
Even before November's elections, there was uncertainty about
environmental rules. Last February, Environmental Elements saw a large project canceled despite months of planning after the Environmental Protection Agency decided to alter existing rules.
Mr. Smith's troubles are not unique. Nationally, other manufacturers of emission controls are reporting a slowdown in new orders as states delay enforcement of federal guidelines.
California's Wahlco Environmental Systems Inc., another maker of air pollution controls, has already cut back projected revenue for 1995 by 15 percent to 20 percent because of the uncertain regulatory environment.
"We have undoubtedly seen a tremendous extension of deadlines at the state level," said Wahlco's president, Henry Huta.
Last year, Houston Lighting and Power delayed a multimillion-dollar contract with Wahlco as Texas regulators gave companies more time to meet new standards for air quality.
Stock prices of emission-control makers have also been under a cloud. "The change in Washington is definitely a negative," said Steve Kohl, an analyst who follows the air pollution control
industry for Raymond James & Associates in St. Petersburg, Fla. "There is no question it's holding these stocks back."