President’s Message: Texas Legislature Adjourns with no School Finance Deal; Gov. Perry Calls Special Session

TCC President & CEO Hector L. Rivero

And just like that, as if it never left (it didn’t), the Legislature is back in town.

If it seems as if it was just yesterday that the 2011 legislative session adjourned, that's because it did. Texas legislators concluded their 82nd biennial lawmaking meeting Monday after 140 days of discussion and debate.

In the end, Sen. Wendy Davis’ (D-Fort Worth) last-minute filibuster of a key school finance reform bill Sunday night dashed any hopes that lawmakers would avert a special session.  Republicans on Monday failed to muster the four-fifths vote it would have taken in the Senate to resurrect the bill, without which the budget – the only piece of legislation lawmakers are constitutionally required to pass – didn’t balance.

So without a last-minute deal, the Texas Legislature gaveled the 82nd session closed on Monday, followed quickly by Gov. Rick Perry calling legislators back for a special session that began the next morning (May 31st).

Gov. Perry, who determines the agenda of special sessions, then directed the Legislature to consider the school finance bill, which would reduce the amount owed to school districts by $4 billion, and a Medicaid measure.

Senate Finance Chair Steve Ogden (R-Bryan) said Democrats should have been careful what they wished for, particularly when Sen. Davis opened the door to a special session by running out the clock on the school finance bill with a late Sunday filibuster.

Texas Legislature Passes TCEQ Sunset Bill; Sends to Gov. Perry

The Texas legislature has passed the TCEQ Sunset Bill (HB 2694), which reauthorizes the Texas Commission on Environmental Quality (TCEQ).  The bill now goes to Gov. Rick Perry for his signature.

Passage of the bill concludes a long review process which included a self-evaluation by TCEQ, a substantial review by the Sunset Advisory Commission staff and members, and months of debate and negotiations by state lawmakers during the legislative session which ended on Memorial Day.

In addition to continuing the agency for 12 years, the bill also contains key changes to compliance history and the contested case hearing process that TCC was instrumental in negotiating.
 
On compliance history, the bill caps the final penalty at 100% of the base penalty after using the compliance history components as penalty enhancements. It also specifies that the use of Notices of Violation (NOV) in compliance history can only be used for one year from the issuance date of the NOV (as opposed to using NOVs for five years under the current practice).
 
With respect to contested case hearings, the bill requires the TCEQ Executive Director to participate as a party in contested case hearings, prohibits state agencies from contesting a permit issued by the TCEQ and makes necessary changes in the discovery process for contested case hearings.
 
Additionally, the bill makes changes to the Executive Director’s ability to temporarily suspend water rights in periods of drought or other emergency. During this time of prolonged drought, this language is important to many of TCC’s members that have senior water rights.
 
The passage of this bill is not only a success for our industry, but also shows that the agency has made tremendous strides over the last 10 years. When TCEQ went through this process back in 2001, it was very contentious and fiercely debated. While this session had its cantankerous moments, it was a much better process due to work done by the agency since 2001. TCEQ should be congratulated for enduring the sunset process and coming out of it a better agency.
 
TCC would like to again thank the bill author Rep. Wayne Smith (R-Baytown) and Sen. Joan Huffman (R-Southside Place) for their hard work and effort on this important legislation. We would also thank Rep. Warren Chisum (R-Pampa), Rep. Dennis Bonnen (R-Angleton), Rep. Kelly Hancock (R-North Richland Hills), Sen. Troy Fraser (R-Horseshoe Bay) and Sen. Glenn Hegar (R-Katy) for their strong support throughout the legislative process.

Texas Lawyer Wants Foreign Pollution Addressed

A Houston lawyer has filed a petition with the Texas Commission on Environmental Quality (TCEQ) seeking a relaxation of rules governing air-borne pollution that he says compel Texas businesses to pick up the tab for foreign polluters.

Attorney Jed Anderson said states should not be forced to make deeper cuts in smog-forming emissions to meet federal limits because of wind-borne pollution from places such as Mexico.

“It's important to push for cleaner air, but we need to do it in a way that is just and fair,” said Anderson, who filed the petition last month. Anderson said he filed the petition on his own and not on behalf of the energy industry.

TCEQ has 60 days to respond to the petition. If the agency agrees with Anderson, it could ask the U.S. Environmental Protection Agency to revise the rules.

Federal law gives states the primary responsibility for assuring that the air is safe to breathe. The law allows an exception if foreign pollution is the only reason that an area does not comply with smog limits, but that would likely be difficult to prove.

Chemical Plant Security Bill Wins U.S. House Committee Approval

Rep. Gene Green  (D-Houston)

The U.S. House Energy and Commerce Committee has approved legislation by Rep. Gene Green (D-Houston) to extend the government program aimed at preventing terrorist attacks against U.S. chemical facilities.

The program requires plants carrying high volumes of certain dangerous chemicals to design security plans aimed at preventing attacks and to prepare sites to cope with any such attacks. The security plans usually include restricting the facility’s perimeter and screening all items and people going in and out of the facility, and staff training and education for different scenarios.

The plans must be approved by the U.S. Department of Homeland Security, and the program covers more than 4,000 facilities.  The legislation passed would extend the program – originally established in 2007 – to 2018.

In a key change, the committee adopted a proposal sponsored by Green, whose Houston district has the highest concentration of chemical facilities nationwide, which would allow a company’s workers to work at its various plants without separate background checks for each facility.

In the 33-16 committee vote approving the measure, Green voted for the bill – going against the majority of his party. He said that although the bill wasn’t perfect, “we need some surety the (program) will continue to be funded. Year-to-year extensions don’t offer safety assurances, job security or guarantees to people in the chemical industry that their investments in safety are wise,” he said. “Overall, the safety of these chemical facilities far outweighs any political debate,” Green concluded.

Rep. Henry Waxman (D-CA), and top Democrat on the committee, voted against the bill and unsuccessfully pushed an amendment that would mandate the use of safer chemicals and technologies to lessen the effects of possible terror attacks. It would also give site workers a say in developing site security plans.

The bill gained support from chemical industry executives in March, but opponents included labor unions and environmental organizations that complained the legislation doesn’t require the use of safer chemicals and technologies or allow site workers a role in creating security plans.  They also criticized it for exempting certain chemical facilities.

U.S. EPA May Scrap Unneeded Rules Through Regulatory Review

The U.S. Environmental Protection Agency (EPA) is planning 31 regulatory reviews, including how to improve estimates of industry costs, after scrapping a definition of milk as oil that forced farmers to meet petroleum-spill rules.

The EPA’s April decision to exclude the dairy industry from rules on oil spills is an example of the kinds of changes the agency seeks, Cass Sunstein, director of the White House Office of Information and Regulatory Affairs, said in an interview. The exemption will save farms and milk factories $146 million a year, according to a White House fact sheet.

President Barack Obama has ordered agencies to eliminate regulations that stifle job creation.

The U.S. Chamber of Commerce, the biggest U.S. business lobby, said the EPA effort falls short because the agency failed to re-examine the rules considered most onerous for companies.

“About 20 new rules have come out in the last year-and-a- half and the review doesn’t really address any of those and they are the ones that will have the most impact on the economy,” Bill Kovacs, the chamber’s senior vice president of environment, technology and regulatory affairs, said today in an interview. “It doesn’t seem they will take on the tough issues.”

The Washington-based chamber has said Obama’s EPA is issuing more major rules, or those costing industry at least $100 million, than any administration in at least three decades.

Kovacs said he didn’t understand why the EPA didn’t include its rule on emission limits for industrial boilers in its review. The EPA said last month that it will delay the new boiler standards so it can make changes.

The EPA said that its regulatory review would include re-examining the cost estimates of five rules. A goal of the project is to determine whether any “systematic biases” exist in EPA cost projections developed before a regulation is issued, the agency said. The EPA didn’t identify which five rules would be studied.

House Republican lawmakers and Representative Jim Matheson, a Utah Democrat, are pushing legislation that would require an interagency analysis of some EPA regulations.

The EPA’s review includes a proposal to eliminate a mandate in some states for vapor-recovery systems at gas stations, which the agency said would save about $670 million during the next 10 years. The EPA will also consider changes to obligatory labeling for hazardous materials.

The EPA led U.S. agencies in complaints when more than 200 U.S. businesses and industry groups responded to an invitation from the House Oversight and Government Reform Committee to identify federal rules to investigate. Of 111 measures cited by companies, 57 were issued by the EPA, according to copies of the letters obtained by Bloomberg in February.

The agency declined to give a cost estimate of how much money may be saved as a result of the regulatory reviews.

“It’s not possible to predict cost savings for each review before the agency has had the opportunity to review the underlying science, technology and/or economics,” the EPA said in a statement.

Chemicals, Oil and Gas: Recovery… Is Thy Name Shale Gas?

Could shale gas energize the economy? Possibly: “The production of natural gas from shale formations has rejuvenated the natural-gas industry,” states the U.S. Department of Energy’s Energy Information Administration (EIA) in an April 4, 2011, statement.

Shales’ production also boosted domestic chemicals, says Kevin Swift, chief economist for Washington, D.C.-based American Chemistry Council (ACC): “The current surge in oil prices has helped competiveness in the U.S. because overseas competitors use crude for naptha, whereas here in the U.S. feedstock is natural gas.” 

Swift cites Central Appalachia’s Marcellus Shale Play formation as contributing to the current favorable situation: “After Hurricane Katrina, natural gas cost $10 per million BTU (British thermal unit). Now, natural gas is about $4 per million BTU.”

In recent years, the intersection of three factors created the economic viability of shale gas, according to the Department of Energy’s Office of Fossil Energy and National Energy Technology Laboratory. Those include advances in horizontal drilling, advances in hydraulic fracturing (also called fracking), and rapid increases in natural gas prices.

Reliability also makes natural gas an attractive energy source. “Eighty-four percent of the natural gas consumed in the U.S. is produced in the U.S., and 97 percent of the gas used in this country is produced in North America,” explains the Department of Energy. “Thus, the supply of natural gas is not dependent on unstable foreign countries and the delivery system is less subject to interruption.”

Presently, 11 major shale-gas plays – formations containing significant volumes of natural gas and having similar geologic and geographic properties – exist under the continental U.S.

“Estimates from multiple sources suggest a vast resource of technically recoverable shale gas,” according to Rayola Dougher, a senior economist with Washington-based American Petroleum Institute (API). For example, in March 2011, EIA estimated 827 trillion cubic feet (Tcf) of potentially recoverable natural gas.

Forecasts change, though. “Over the past decade, as more shale formations have gone into commercial production, the estimate of technically and economically recoverable shale gas resources has skyrocketed,” notes EIA in its recently published Annual Energy Outlook 2011.

Further, “many shale formations (particularly, the Marcellus Shale) are so large that only a portion of the formation has been extensively production tested,” EIA states, adding technical advances could lead to more productive and less-costly well drilling and completion.
Gigantic promise

The Marcellus holds gigantic promise. Extending over approximately 95,000 square miles and six states, the formation contains 1,500 Tcf of natural gas and potentially could produce 3,000 cf per day per well, according to EIA. 

“Fully developed, the Marcellus Shale has the potential to be the second largest natural gas field in the world . . . Converted to British thermal units, the natural gas found in the Marcellus could be equivalent to the energy content of 87 billion barrels of oil, enough to meet the demand of the entire world for nearly three years,” said Timothy J. Considine, Robert Watson and Seth Blumsack, professors at The Pennsylvania State University, in a 2010 assessment.

“It’s the potential that new technologies [such as horizontal drilling] have enabled us to go places that we could never before. And there’s shale gas all over the nation. It’s changing the way we look at our country,” said API’s Dougher.

Shale gas is a “once-in-a-lifetime opportunity” for U.S. manufacturing, said Bayer Corp. CEO Gregory Babe. The chief executive of Bayer AG’s North American division said shale gas could play a critical role in bringing U.S. manufacturing back to its former glory.

For chemical manufacturers such as Bayer, the new abundance of natural gas has created energy pricing predictability. The chemicals industry is a large consumer of natural gas, both as a raw material and energy supply.

“Predictability in energy prices has always been one of the things we’ve clamored for,” Babe says. “Predictability allows us to plan appropriately, allows us to make decisions about where to site a plant – either in the United States or outside of the United States.”

Texas Manufacturing Activity Increases in May

Texas factory activity increased in May, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 8 to 13 with 27 percent of respondents noting output increased from April.

Other measures of current manufacturing conditions also indicated growing activity, although the pace of new orders slowed. The capacity utilization index edged up from its April level, while the shipments index held steady at a reading of 8. The new orders index moved down from 4 to 1, with the share of manufacturers reporting increased order volumes falling from 30 percent to 22 percent. The growth rate of orders index turned negative after six months of positive readings. For all indicators, there was a significant rise in the percentage of firms noting no change from the prior month.

Perceptions of general business conditions were mixed in May. The general business activity index declined from 11 to –7, its first negative reading in eight months. However, more than three-fourths of respondents said activity was unchanged from April. The company outlook index fell from 10 to 3, with 16 percent of respondents saying their outlooks were improved from the prior month compared with 13 percent saying their outlooks had worsened.

Labor market indicators reflected more hiring and longer workweeks. The employment index came in at 12, with the share of manufacturers adding workers reaching its highest level this year. The hours worked index jumped up from -1 in April to 13 in May.

Prices climbed again this month, although at a reduced rate, and labor costs continued an upward trend. The raw materials price index retreated from 57 to 43, suggesting input prices rose but at a slower pace than in April. The finished goods price index fell from 24 to 9, its lowest level this year. About 60 percent of respondents anticipate further increases in raw materials prices over the next six months, while 32 percent expect higher finished goods prices. The wages and benefits index rose from 16 to 19, although the great majority of respondents noted no change in labor costs.

Expectations regarding future business conditions were less optimistic in May. The future general business activity index was 8, its lowest reading since September 2010, and the future company outlook index also fell to an 8-month low. Future indexes of manufacturing conditions also fell in May, but remained in solid positive territory.

The Dallas Fed conducts the Texas Manufacturing Outlook Survey monthly to obtain a timely assessment of the state’s factory activity. Data were collected May 17–25, and 93 Texas manufacturers responded to the survey. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month.

ACIT Houston Ship Channel Region Hosts Crawfish Boil

The ACIT Houston Ship Channel Region’s Crawfish Boil was held on May 12th at Bridge Water in Baytown.  There were 163 registrants and we would like to thank the following sponsors: 

ACIT Golden Triangle Region Holds Golf Tourney

The ACIT Golden Triangle Region held their Golf Tournament on May 13th at the Bayou Din Golf Club in Beaumont.  Special thanks goes to Chuck Britten of Total Safety US for providing barbecue for our lunch.  76 players participated in the tournament, and the winners were Cody Guy of Sunbelt Safety, Steve Breaux of BASF, Mark Netterville of BASF, and Dustin Yu of MRES.  Tracy Williams of Johnson Controls won the longest drive competition, and Troy Crow of Ohmstede Industrial Services had the closest-to-the-hole.
 
ACIT would like to thank the following sponsors: 

Upcoming TCC & ACIT Events

June 6-9th – TCC/ACIT EHS Seminar at Moody Gardens in Galveston.  While online registration is closed, you can still attend and register in-person, on-site.

June 9th – TCC/ACIT Awards Banquet at Moody Gardens in Galveston. While online registration is closed, you can still attend and register in-person, on-site.

June 24th – ACIT South Texas Region Golf Tournament. Click here for details.
 
August 18-19th - SMRP MaRS Conference is requesting panelists for day two of their seminar.  Click here for more information.

August 19th – ACIT Mid Coast Golf Tournament. Details to follow.

September 7th – ACIT South Texas Reverse Trade Show. Details to follow.

All 2010 TCC and ACIT events are now listed on the website; go to: http://www.acit.org/categories/Events/

Upcoming Member Events

June 28th – ioMosaic is hosting a Facility Siting Workshop in Houston.  HAS BEEN CANCELED.

For a listing of TCC & ACIT Member promotions and events, please click http://www.acit.org/categories/Events/Upcoming-Member-Events/.
(These events are not organized or endorsed by TCC or ACIT.)