November 2010

 

President’s Message:  November General Election is Big Win for Republicans and for Texas Business
TCC President & CEO
Hector L. Rivero

The 2010 General Election resulted in a huge win for Republicans and for Texas business.  Governor Rick Perry led the way with a big win over former Houston Mayor Bill White by 13%.  This was a major victory for the chemical industry.  As mayor, Bill White told industry representatives that he would rent the U-hauls to move the chemical industry out of Houston.  White would have been devastating to Texas business and the Texas economy.  The Texas Chemical Council was one of the first association endorsements for Governor Perry.  All statewide seats remained Republican including key Texas Supreme Court races.

Out of 27 Congressional races on the ballot, Republican challengers defeated two long-time incumbent Congressmen.  In CD 17 (Waco), Republican Bill Flores defeated 18-year Democratic Congressman Chet Edwards.  In CD 27 (Corpus Christi), Republican Blake Ferenthold defeated 26-year Democratic Congressman Solomon Ortiz, Sr.  Texas also stands to gain 4 new Congressional seats in next year’s Congressional redistricting.

The biggest story was the Texas House of Representatives where Republicans picked up 22 seats and strengthened their majority from a one-vote majority (76-74) to a dominant 99-51 majority (the largest Texas Republican majority since reconstruction).  The Texas Senate remains 19-12 Republican.  With a strong majority in both the House and Senate, Republicans have an opportunity to protect Texas business in all important tax policy debates, the Sunset review of the Texas Commission on Environmental Quality, and numerous tort reform challenges.

Despite a pro-business Legislature, the upcoming legislative session promises many difficult challenges ahead for lawmakers and for the chemical industry next year.  TCC is reaching out to all the new state legislators and looks forward to providing industry education and expertise to these new members of the Texas Legislature. 




EPA Plans Late-December Release for New Ozone Standard

Though the Obama administration was initially expected to issue stricter smog standards this summer, U.S. Environmental Protection Agency (EPA) now says it may not be ready to release a final rule until New Year’s Eve.

EPA is currently reconsidering the George W. Bush-era changes to the National Ambient Air Quality Standards for ground-level ozone, also referred to as smog. A final decision is now scheduled to come by Dec. 31, the agency told a federal court.

“Completing this rulemaking has taken longer than anticipated,” the filing says. “EPA expects that this process will take an additional two months.”

It is the second time EPA has taken an extension on the ozone standard. This summer, as the August deadline neared, the agency told the court it was planning to issue a final rule “on or about the end of October.”

Some close observers suggested that the agency would wait until after the election to avoid a political backlash. The revision process has prompted a war of words between businesses, which would need to spend billions of dollars on new pollution controls, and advocacy groups, which are urging EPA to issue rules that protect the public from respiratory problems and heart disease.

A coalition of public health and environmental groups launched an ad campaign last week that accused “big polluters” of “dumping millions of dollars into a lobbying war against America’s clean air laws.” They were responding to political pressure from industry groups, which say the Obama administration should not have second-guessed the Bush-era decision at a time of economic hardship.

“These regulations are going to slow down business expansion and our economic recovery and keep more Americans unemployed than would otherwise be the case,” said Howard Feldman, director of regulatory and scientific affairs at the American Petroleum Institute.

During the previous administration, EPA chose a limit of 75 parts per billion (ppb), down from the previous level of 84 ppb, but the Obama administration has signaled that it would issue stricter standards. In January, EPA proposed setting the standard between 60 and 70 ppb and refused to implement the 75 ppb standard.

“EPA is working hard to finalize an ozone standard that is based on what the science tells us about this threat to Americans’ health,” said EPA press secretary Brendan Gilfillan in a statement last month. “We will announce the final rule as soon as it is ready – this is an important and complex rulemaking and EPA is working to ensure we get it right.”

Texas Sunset Commission Releases Staff Report on TCEQ

The Texas Sunset Advisory Commission has released its Staff Report on the Texas Commission on Environmental Quality.  The 121-page report can be found here.  The next Sunset Advisory Commission public hearing is on December 15th & 16th and will include testimony on TCEQ, among other state agencies.

TCEQ Exec. Dir. Vickery Speaks at TCC/ACIT Annual Meeti
Mark Vickery

Mark Vickery, Executive Director of the Texas Commission on Environmental Quality (TCEQ), was the keynote speaker at the Texas Chemical Council and Association of Chemical Industry of Texas’ Annual Meeting on October 14th in Houston, with nearly 200 attendees. The event’s sponsor was The Lubrizol Corporation.
  
Vickery, who oversees the second largest environmental government agency in the world behind the U.S. Environmental Protection Agency (EPA), discussed the need to change TCEQ’s relationship with EPA, which has become severely strained since the Obama administration took power in 2009.

Citing a litany of permitting issues, Vickery said the two agencies “needed a fundamental change to the framework and foundation by which they operate.” He suggested it might be time for a Clean Air Act reauthorization process in Congress.

Regarding the current Sunset Advisory Commission review of TCEQ and other agencies like the Public Utility Commission, Railroad Commission and Water Development Board, Vickery listed a variety of issues to be covered, including: compliance history; water utility rate-making; water rights; complaints and public participation process; cumulative effects; permits by rule; and air permitting.

Vickery said the agency expected the Sunset Advisory Commission staff report in mid-November, with the public hearing scheduled on December 15th and 16th.

Vickery also covered two of the biggest issues that TCEQ and EPA are at odds about: Texas’ Flexible Permit Program and the federal greenhouse gas regulations.

The Flexible Permit Program has been in place since 1994, when TCEQ predecessor Texas Natural Resources Conservation Commission (TNRCC) submitted its proposed rule package to EPA for approval. Texas has operated the program with tacit federal approval for nearly 16 years.

Vickery said that his agency had met with EPA for nine months, with the federal agency claiming the permits in question were not federally enforceable. He discussed EPA’s four-step process for de-flexing permits that would “ultimately bring the certainty needed by companies.”

But Vickery said, “We (TCEQ) still support the program, and are actively challenging the EPA’s disapproval of the program.” He predicted that some permit holders would soon reach an agreement that would allow a de-flex process. Indeed, one permit holder announced an agreement with EPA several weeks later.

Finally, Vickery addressed the looming federal regulations regarding greenhouse gases, and mentioned several legal challenges by Texas, other states and trade associations, especially on the EPA’s greenhouse gas “Tailoring Rule.” 

He said, “Texas is the poster child for cleaner air. We have such a good story to tell, with dramatic emissions cuts among regulated industry and citizens.”

TCC Committees recognize Volunteers for Outstanding Service

At its Annual Meeting on October 14th, TCC committees presented 2010 awards for outstanding service to key committee volunteers:

The TCC Air Conservation Committee recognized Judy Bigon of ExxonMobil.  The TCC Outreach Committee’s Outstanding Service Award was presented to John Koegel of Dow Chemical.  The TCC Tax Committee recognized John Nichols of Dow Chemical. And the TCC Occupational Safety Committee elected to recognize its TCC staff liaison, Mike McMullen for his outstanding service and support to the committee.  McMullen recently resigned from TCC to pursue new career opportunities and spend more time with his young family.

Sen. Cornyn Holds Industry Roundtable with TCC, Other Groups

TCC Vice President and General Counsel Christina Wisdom attended a roundtable discussion with U.S. Senator John Cornyn on October 21st to discuss state and federal environmental issues.  The event was held at Ventech Engineers’ facility in Pasadena.

The group discussed proposed greenhouse gas regulations, ozone standards, and the differences between EPA and the State of Texas in various permitting disputes.

Wisdom said, “The Texas chemical industry is facing many regulatory challenges from EPA, notably the proposed 8-hour ozone standard and the upcoming greenhouse gas regulations.  We need our representatives in Washington to stand up for and protect the Texas economy and Texas jobs.”  She also thanked Senator Cornyn for his active interest in the issues and long-time support of the Texas chemical industry.
 
In addition to Sen. Cornyn and Wisdom, other roundtable participants included Luke Bellsnyder (Texas Association of Manufacturers), Chad Burke (Economic Alliance – Houston Port Region), Jim Griffin (East Harris County Manufacturers Association), Russell Hamley (Greater Houston Associated Builders and Contractors), Bill Hammond (Texas Association of Business), Deb Hastings (Texas Oil and Gas Association), Bob Mitchell (Bay Area Houston Economic Partnership), Alex Mills (Texas Energy Alliance), Jeff Moseley (Greater Houston Partnership), Jim Peppe (National Association of Manufacturers), Kevin Stanley (Ventech Engineers), and Toy Wood (Greater Houston Builders Association).

TCC Names Daniel Womack as New Director of Government Affairs

TCC is pleased to announce the appointment of Daniel Womack as the new Director of Government Affairs.  Womack comes to TCC from the Texas Commission on Environmental Quality (TCEQ) where he served as Executive Assistant to TCEQ Commissioner and former Chairman, Buddy Garcia. 

Daniel also has extensive legislative experience having worked as Communications Director and Policy Analyst under State Senator Troy Fraser (R-Horseshoe Bay) and as a Legislative Aide to Senator Buster Brown (R-Lake Jackson).  Senator Fraser was recently appointed as the new Chairman of the Senate Natural Resources Committee.

“I am very excited about Daniel Womack joining the TCC team,” said TCC President Hector Rivero. “Daniel has great skills and the right experience that will prove to be a tremendous asset to the Council.”

Womack will join the Council in November and will have responsibility for legislative and regulatory activities.  He will also assist with TCC and ACIT industry communications.  Womack has a Bachelors in Business Administration from Belmont University in Nashville, Tennessee. 

Please join us in welcoming Daniel Womack to the TCC.

Kathleen Hartnett White: The EPA’s Anti-Prosperity Agenda

Kathleen Hartnett White was commissioner and chairman of the Texas Commission on Environmental Quality (TCEQ) from 2001 to 2007 and is senior fellow and director of the Armstrong Center for Energy and Environment at the Texas Public Policy Foundation.

On Labor Day, President Obama pledged to “keep fighting every single day, every single hour, every single minute to turn this economy around and put people back to work.” If job creation is such an overarching priority, the president might take a closer look at the recent barrage of job-suffocating actions from his Environmental Protection Agency (EPA). The president might also look at Texas, where job creation and environmental improvement have occurred simultaneously and at a pace far above the national average.


Kathleen Hartnett White 
 

   
Texas has been the engine of the current economic recovery, creating more than half of net job growth across the country in the last twelve months. From 2000 to 2009, while Texas created more jobs than all the other states combined, it simultaneously lowered its ozone levels 22 percent; the nation as a whole lowered its ozone level only 8 percent. Houston, which had long been vying with Los Angeles for the title of the most ozone-polluted city in the country, achieved the federally required ozone standard last year. In fact, all Texas urban regions met the federal standard except Dallas/Fort Worth, which exceeded the standard by only one part per billion. Stringent but targeted controls, cutting-edge science, innovative technology, billions of dollars invested by the state and private industry, and the volunteer efforts of thousands of Texans drove the improvements in air quality. The state designed and implemented the undertaking largely in cooperation with EPA.

Since January 2009, however, EPA has behaved more as a “fearsome master” than as a partner with states and businesses. Giving short shrift to the restraints the Constitution places on federal action, EPA has begun to serially invalidate the air-quality rules through which Texas implements the federal Clean Air Act (CAA). In July 2010, EPA disapproved the 16-year-old Texas Flexible Permitting Program, under which more than 120 of the state’s major industries, including most refineries, currently operate. The program imposes tight facility-wide emission caps while providing plant operators some operational flexibility.

EPA considers the program insufficient, and thus believes permit holders to be in violation of the CAA and potentially subject to enforcement. This legal limbo freezes business decisions and obstructs job creation. Affected businesses include Motiva, whose planned $3.5 billion oil refinery would create thousands of new jobs. “Regulatory uncertainty is the enemy of economic development,” commented an executive for Valero Energy Corporation. “If you can’t estimate the value of the project, you don’t make the investment.”

Over most of its 40-year history, EPA has strengthened environmental standards in a relatively incremental manner, allowing some measure of balance between environmental and economic needs. Using this strategy, the agency has effected much genuine environmental improvement. But for today’s EPA, no economic impact is too onerous. The agency is issuing edicts of unprecedented scope at breakneck speed, and with little justification and few identified benefits.

New environmental rules threaten entire sectors of the economy, such as coal-fired power plants, which now provide 50 percent of the electricity generated in the U.S. If, as President Obama has repeatedly declared, the goal is truly “to end the era of fossil fuels in our generation” — although no viable alternatives exist — EPA is blazing the path.

Consider EPA’s new emission standards for industrial boilers, just one of more than 25 rules promulgated under the CAA in the last 18 months. Unions for Jobs and the Environment, a coalition of major labor unions, formed to oppose this and other new EPA mandates. In comments on the boiler rule, the United Steelworkers noted: “Tens of thousands of these jobs will be imperiled. In addition many more tens of thousands of jobs in the supply chains and in the communities where these plants are located also will be at risk.”

The sheer number of recent EPA actions is staggering. EPA’s boldest moves, though, have been to revise federal ozone standards and implement new greenhouse-gas regulations. These rules will impact industries and small businesses across the country on a scale that could drive the lion’s share of the U.S. manufacturing base to foreign countries. With its many energy industries and energy-intensive manufacturing industries, Texas will be disproportionately harmed.

According to the Congressional Research Service, the new ozone standard will likely designate 650 of the nation’s 3,000 counties, including sparsely populated Brewster County in the remote Big Bend area of Texas, as “non-attainment areas” — which EPA defines as “areas of the country where air pollution levels persistently exceed the national ambient air quality standards.” Texas could go from two non-attainment areas to ten. EPA estimates that the new ozone standard could cost as much as $90 billion, which would make it the most expensive EPA rule ever.

But EPA’s finding that CO2 and other greenhouse gases are “pollutants” wins top honors for reckless bureaucratic overreach. Under the CAA, businesses that emit pollutants have to — among other requirements — obtain what are called Title V permits. By EPA’s own estimate, regulating CO2 as a pollutant would increase the number of required Title V operating permits from 12,000 to more than 6 million. EPA estimates a permitting cost for the private sector at $49 billion over three years, on top of the $21 billion per year for the agencies that issue the permits.

To avoid this disaster, EPA simply changed federal law without troubling Congress about it. Recognizing that the full legal impact of actually treating CO2 as a pollutant under existing law would be “absurd” and “infeasible,” and would “adversely affect national economic development,” EPA simply rewrote the law to narrow the scope of impact to larger facilities. The law mandates regulation of sources that emit 100 tons or more of pollutants. Instead of drawing the reasonable conclusion that using the CAA to regulate CO2 as a pollutant is absurd, EPA simply raised the statutory 100-ton threshold to 100,000 tons.

Executive-branch agencies are subservient to Congress and can’t simply rewrite their enabling statutes. For this reason, the “Tailoring Rule” is vulnerable to legal challenge. EPA nevertheless declared that states must begin regulating CO2 and other greenhouse gases according to the “Tailoring Rule” by Jan. 2, 2011. If states are unwilling or legally unable to meet this deadline, EPA will assert a Federal Implementation Plan over the state. This fisted hand is not the EPA of decades past.

Through at least eight lawsuits against EPA, Texas has refused to acquiesce. As the Texas attorney general recently wrote to EPA, “Texas has neither the authority nor the intention of interpreting, ignoring, or amending its laws in order to compel the permitting of greenhouse gases.” To avoid “tangible injury” and “irreparable harm” to the Texas economy, including 167 major construction projects that are currently planned, Texas recently asked for an emergency stay of the Tailoring Rule, arguing that the rule violates explicit provisions of the CAA which recognize “constitutionally protected states’ sovereign interests.”

The cost of compliance with EPA regulations already impedes economic growth and thus job creation. A study by the Small Business Administration concluded that in 2008, environmental compliance cost the U.S. $281 billion. Small businesses, which provide half of all private-sector jobs, bear the largest regulatory burden, at a cost of $4,101 per employee. EPA’s new rules could vastly increase an already crippling cost.

Texas has shown how environmental improvement and economic growth can coexist. Prosperity is a prerequisite for environmental quality — an endeavor so expensive that it remains a wild luxury for most of the world. EPA’s radical new agenda promises little environmental gain for all the crippling uncertainty it is already inflicting on our economy.




Impact of Congressional Election on Federal Climate Change Policy

Now that Republicans have won control of the U.S. House of Representatives, senior congressional Republicans now plan to launch a blistering attack on the Obama administration’s environmental policies, as well as on scientists who link air pollution to climate change.

The GOP’s fire will be concentrated especially on the administration’s efforts to use the Environmental Protection Agency’s authority over air pollution to tighten emissions controls on coal, oil and other carbon fuels that some scientists say contribute to global warming.

The attack, according to Republicans, will seek to portray the EPA as abusing its authority and damaging the economy with needless government regulations.

In addition, GOP leaders say, they will focus on what they see as distortions of scientific evidence regarding climate change and on Obama administration efforts to achieve by executive rule making what it failed to win from Congress.

Senator John Rockefeller, a Democrat representing West Virginia, is pushing for a vote during the “lame duck” session of Congress planned for mid-November that would suspend Environmental Protection Agency regulation of greenhouse gases, including those emitted from burning coal, for two years. Rockefeller says a two-year pause is needed to give the coal industry time to perfect clean technologies.

Passage would prevent EPA from regulating pollution from large factories and utilities starting in January. Of 100 senators, 47 voted in June to permanently strip EPA of its power to regulate greenhouse gas emissions.

If a vote isn’t staged during the post-election session this year, Rockefeller will have more Senate colleagues next year, especially Republicans, who would vote with him.

In Rockefeller’s home state, the two candidates running to replace the late Senator Robert Byrd had both campaigned against federal climate legislation.

If the curbs on EPA were to pass Congress, Obama could veto the bill.

Now that Republicans have taken control of the House of Representatives, they will likely try to stop EPA regulation of carbon by explicitly banning the use of EPA funds to administer such regulations. Annual EPA funding bills that Congress writes would be the avenue. Appropriations bills usually begin moving through the House around March or April.

Republicans could target other pending EPA Clean Air Act rules too, such as one setting limits on smog-producing ozone.

Renewable Electricity Standard legislation has bipartisan support and is being pushed by Senate Energy and Natural Resources Committee Chairman Jeff Bingaman, a Democrat, as a measure that could demonstrate Congress’ ability to do something for the environment, even with more Republican lawmakers.

The aim is to require big electric utilities to generate 15 percent of their power from renewable sources, such as solar, wind, geothermal and hydroelectric by 2021.

While environmentalists back the legislation, critics say it would barely put a dent in the overall carbon emissions blamed for global warming. Nevertheless, an RES bill could fit nicely into Obama’s latest energy and environment strategy that aims to set new policies in place "in chunks" rather than through comprehensive legislation.

Bingaman, who in September told Reuters that comprehensive climate control legislation is dead for years, could push for an RES vote in the lame duck session if he has enough support.

Chemical Earnings Engine May Roar in Third Quarter, Beyond

Industry analysts have predicted a robust third quarter earnings season for chemical producers and continuing strength into the fourth quarter.

After a recent blip down in world stock markets last week, sparked by China’s quarter-point hike of a key interest rate, as well as continuing fears in the U.S. about the consequences of an ongoing investigation into improper foreclosures, industrial stocks including chemicals bounced back.

According to Hassan Ahmed, analyst at investment advisory firm Alembic Global Advisors, the widespread chemical sector rally points to an overall strong Q3 for the chemical industry. Analysts will likely boost profit estimates, or companies will surprise to the upside – or both.

Many commodity chemical and polymer markets have remained tight or have tightened further during Q3 – a trend that remains in effect. During the financial and economic crisis of 2008-2009, companies cut back on capital expenditures and shut down marginal production facilities, leading to some of the tight markets we see today, said Ahmed.

And since the crisis, we've had steady demand growth, led by China, without a double-dip recession. Plus, the expected impact of the flood of Middle East capacity has not manifested itself. Markets have so far been able to absorb the additional capacity, and start-up delays have made the flood more of a trickle.

And for all Treasury Secretary Tim Geithner’s talk of not devaluing the U.S. dollar, it is not this office that controls monetary policy. That’s the domain of the U.S. Federal Reserve, whose chief, Ben Bernanke, is poised to unleash an estimated $1 trillion of funds into the economy with purchases of debt securities – otherwise known as quantitative easing.

This will hand US chemical producers two gifts – greater pricing power as money creation puts upward pressure on commodity prices, and a weaker U.S. dollar, providing an earnings tailwind for those with significant exports and foreign operations.

Meanwhile, many chemical companies have much stronger balance sheets today after cutting costs, shutting down plants and emerging from bankruptcy. This, combined with tremendous operating leverage bodes well for their long-term prospects.

While the threat of a potential slowdown in the Chinese economic expansion, another potential U.S. mortgage crisis and European austerity measures are not to be dismissed, the overall balance of forces tilts towards a continuing global economic recovery.

State Senator Joan Huffman Speaks at ACIT Mid-Coast Meeting


Senator Joan Huffman and
Gary Hockstra, Dow Chemical-Freeport
 

The ACIT Mid-Coast Region held a breakfast meeting on October 6th at the Dow Chemical facility in Freeport, which brought over 150 attendees.  The guest speaker was State Senator Joan Huffman (District 17), who gave a preview of the upcoming 82nd Legislative Session. 
    (photo, caption of Huffman speech)

Event sponsors included:
•    AXion Logistics
•    Conex International
•    Dow Chemical
•    Industrial Design & Construction
•    Innovative Cleaning Solutions
•    Refractory Construction Services
•    Training & Development Systems

ACIT Houston Ship Channel Region Golf Tournament a Success
 

The ACIT Houston Ship Channel Region’s Golf Tournament – held at the Timber Creek Golf Club on October 21st – brought 112 players and the following sponsors:
 
•    A Box 4 U
•    Aggregate Technologies
•    Alpha Technical Services
•    AMCHEM, Inc.
•    AmeriTrac Railroad Services
•    Bayer MaterialScience
•    BIC Alliance
•    DeLane’s Ad Specialties
•    Industrial Safety Training Council
•    Infinity Construction Services
•    Innovative Cleaning Solutions
•    Kaneka Texas
•    Miken Specialties
•    ODIN Industrial Demolition & Asset Recovery
•    Primatech
•    RMT, Inc.
•    Safway Services
•    Shaw Maintenance and Construction
•    Sunbelt Supply
•    The Mundy Companies
•    Turner Industries
•    Vapor Point

Upcoming TCC & ACIT Events

December 8th – ACIT South Texas Economic Outlook Luncheon to be held at the Flint Hills facility in Corpus Christi.  Click here for more details.

February 24, 2011 – Mid Coast Reverse Trade Show at the Lake Jackson Civic Center. Click here for more details.

March 8, 2011 – Legislative Dinner at Sullivan’s Restaurant in Austin, sponsored by The Mundy Companies.

March 9, 2011 – TCC/ACIT Chemical’s Day at the Texas State Capitol.

June 6 -9, 2011 – TCC/ACIT EHS Seminar at Moody Gardens in Galveston.

All 2010 TCC and ACIT events are now listed on the website.



 

Upcoming Member Events

For a listing of TCC & ACIT Member promotions and events, please click here.  

(These events are not organized or endorsed by TCC or ACIT.)