President's Message:
Season’s Greetings and Wishes for a Prosperous 2012

TCC President & CEO Hector L. Rivero

From the Texas Chemical Council family to your family, we wish you a safe, healthy and happy holiday season.

For 2012, we hope for a strong economy that produces new investment, jobs and widespread prosperity for our industry.

And to the member companies of TCC, we hope for strong profits and offer our thanks for your capital investment, the thousands of Texans you employ, providing great products, serving customers well, and being good corporate citizens.

And finally, we wish for a huge helping of integrity, wisdom, courage and selfless leadership for our elected officials at all levels of government; that they support policies that nurture business prosperity and meet the needs of their communities.

Happy Holidays!

EPA Unveils Revised Rules for Industrial Boilers

The Environmental Protection Agency (EPA) proposed revised air pollution regulations for industrial boilers and incinerators last week that offer industry more flexibility, a response to critics who mounted an opposition campaign to the original rules.

The agency said that the revised regulations, which would require facilities to install technology to reduce harmful air pollutants like mercury and soot, would only apply to about 1 percent of the country’s boilers.

The so-called “maximum achievable control technology” (MACT) standards will offer major public health benefits, according to EPA, including preventing 8,100 premature deaths and 5,100 heart attacks a year starting in 2015.

And agency officials said they would impose a minimal cost on the industry. The revised regulations are 50 percent less costly than rules proposed in 2010 that industry has blasted as overly burdensome, according to EPA.

“With this action, EPA is applying the right standards to the right boilers,” Gina McCarthy, assistant administrator for EPA’s Office of Air and Radiation, said in a statement. “Gathering the latest and best real-world information is leading to practical, affordable air pollution safeguards that will provide the vital and overdue health protection that Americans deserve.”

The agency said that it made a number of changes to the rules in an effort to respond to industry concerns.

From EPA’s statement: “EPA is proposing to create additional subcategories and revise emissions limits. EPA is also proposing to provide more flexible compliance options for meeting the particle pollution and carbon monoxide limits, replace numeric emissions limits with work practice standards for certain pollutants, allow more flexibility for units burning clean gases to qualify for work practice standards and reduce some monitoring requirements.”

EPA issued revised final regulations for boilers and solid waste incinerators in February under a court-ordered deadline. The final rules were more lenient than draft standards issued by the agency last year, which industry groups had called unworkable. EPA then opened up a reconsideration process on the revised final standards.

The regulations had come under fire from industry groups, Republicans and some centrist Democrats, who argue that the rules will impose a massive burden on the economy. The House voted in October to delay the implementation of the rules.

The American Chemistry Council, an industry group, offered reserved praise for the standards.
“We appreciate EPA’s thoughtful consideration of these rules and willingness to make sensible changes,” ACC President Cal Dooley said in a statement. “While we need to review the rules for technical details, it appears that improvements have been made.”

Power Plant Shutdowns, Delays Could Mean Future Blackouts

Last winter’s rolling blackouts in Texas and the summer’s near-blackouts could occur again in the coming year if extreme weather stresses the power grid more than normal, the state’s grid operator said last week.

The Electric Reliability Council of Texas, which oversees much of the state’s power, released projections grid reliability over the coming years. ERCOT says rolling blackouts like the ones we had last winter remain a possibility. The report includes a list of energy projects that it expected to be online by now, but are still on hold, adding to the state’s power crunch.

A coal plant that was supposed to come online east of Waco will not be generating power, according to the council. An accident at the Sandy Creek coal plant during a commissioning test has caused damage to equipment that will keep the plant offline until the spring of 2013, says ERCOT CEO Trip Doggett. “We just learned of that in the past few weeks,” he says, “that was a significant surprise.” What exactly happened at the plant? “I don’t have intimate details there,” Doggett said, noting that they had been told about it during the past few weeks.

Because of the Sandy Creek delay, ERCOT will not have access to over 900 megawatts of power for the Texas grid by next year, “which is a very significant chunk of our reserve that we were expecting to be available,” said Doggett.

On top of the Sandy Creek delay, two other coal plants run by Luminant, Monticello 1 and 2 in Northeast Texas, shut down in September, citing upcoming EPA emissions rules. The EPA said at the time that they had worked with Luminant to reach a “no-shut down, no layoff solution.” “It is unfortunate that company leadership rushed to a decision that needlessly puts their workers’ jobs at risk,” Gina McCarthy, the EPA’s air quality chief, said in a statement. “It’s not EPA’s role to tell private companies what business decisions to make, but we firmly believe that there are better alternatives for Luminant.”

The Luminant shutdown and Sandy Creek delay mean steep cuts to the grid’s reserves, putting them 2600 MW short of their goal. Ideally, ERCOT would like to have a 13.75 percent reserve margin of electricity to protect it from rolling blackouts on high energy use days, but the council is projecting next year’s reserves will be closer to 12 percent for 2012. “The magnitude of this drop was not expected,” Doggett said. “If we have the same weather and same outage patterns this summer, just the absence of those two [Luminant] units would result in rotating outages.”

Another reason for the revised estimates of power reserves has to do with weather. “The demand forecast in this report — with normal weather — has increased because normal weather looking back for the last fifteen years now includes last summer, the hottest on record,” Doggett said. “It’s raised the definition of “normal weather” for the forecasting.”

Another of the delayed projects affecting ERCOT’s projections is the 720-acre Pflugerville Solar Farm, which plans to produce 60 megawatts of power once it’s up and running. That’s enough for about 40,000 homes, according to the company. It was due to start generating electricity at the end of this year, but those plans have been pushed back. Why the delay?

The group behind the farm, RRE Austin Solar, says that they still need someone to sign a Power Purchase Agreement with them, a contract saying they will buy the electricity once it’s online. “Once we find somebody to purchase the power and secure that [agreement], construction can begin immediately depending on their needs and power could be ready for sale within 12 months,” said Valerie Harkins, project developer for the company.

But even if those 60 megawatts were already flowing into the Texas grid, they would do little to help the state avoid projected rolling blackouts. During the biggest day of power use last summer, the state used 68,369 megawatts of electricity at its peak.

Kavulla: How the EPA is Killing America’s Energy Industry

Travis Kavulla

Energy is a factor in everything we do, an input in everything made in the modern economy. When energy prices rise, so in tandem does the cost of virtually everything; and if energy prices rise only for America or a particular state, as is the case when cost is tied to a new environmental regulation rather than anything fundamental in an energy resource’s supply, the difference between the cost of production in our nation or a state and the cost for an economic rival elsewhere grows.

So at a moment when national competitiveness, middle-class wages, and the U.S. economy in general are points of worry, the extravaganza of rules lately unleashed against electric utilities by the Environmental Protection Agency is profoundly inopportune. Among the regulations the EPA has decreed during the Obama administration, there are rules to address mercury, sulfur, and particulate emissions, the intake of water, and the disposal of coal ash, as well as vague matters such as “visibility.”

The rules overlap with one another and, with implementation dates clustered in the next few years, they will unleash a cascade effect leading to the decommissioning of many low-cost power plants, the expensive retrofitting of around a hundred more, and a crunch on utilities, which will struggle to get all of this done at roughly the same time with the little specialist labor that exists to do it.

The cost of complying with this panoply of rules is considerable. A paper by FBR Capital Markets predicts an all-in cost potentially exceeding $80 billion, most of it hitting the electric-utility industry. That number does not count the cost in stranded or impaired investments for plants that will be shut down before they have reached the end of their useful life -- which in total are estimated to have around 45 gigawatts of generating capacity, enough to power between 20 and 30 million homes.

Pres. Barack Obama in the past two months has been sending mixed signals about the EPA’s rules bonanza. The administration suspended an EPA ozone rule, equivocated about the Cross-State Air Pollution Rule, which affects 31 states and has led Texas regulators to forecast blackouts, and delayed the release of greenhouse-gas rules to next year.

Yet there are plenty of varyingly ineffectual, grandiose, and economically damaging regulations President Obama could walk back were he serious about convincing America that his love affair with the regulatory state was all just a thoughtless swoon.

Were there an award for the regulation most laughably out of whack with the moment’s national economic priorities, the winner would be the Regional Haze Rule, often called the Visibility Rule. Resurrected from rulemaking purgatory in 2009, after the financial crisis, it requires that visibility in “national airsheds” such as national parks, wildernesses, and certain Indian reservations be improved on bad days and not deteriorate on the days with the greatest visibility.

Why is there a visibility rule in the first place? As the EPA’s website explains, the rule was necessary because “visual range has decreased from 140 miles to 35-90 miles” in the West, meaning that “many visitors aren’t able to see the spectacular vistas they expect.”

This is pretty rich to those living in the West, whose “spectacular vistas” are more likely to be obstructed by wildfires of natural origin than by man’s emissions. Does a norm that the EPA has proclaimed cease to be meaningful if Mother Nature routinely negates it?

The rule neatly demarcates what’s important to the EPA, with “spectacular vistas” on one side and, on the other, the usual culprit: manufacturing and power plants, in this case those that emit particulate matter that blows willy-nilly into parklands. On balance, one would think -- one would hope -- this would be a clear victory for what is called in EPA parlance “the emitter.” But don't hold your breath. Rather than treating matters like this as a balancing act of environment versus economy, the rote assertion of green-jobs ideology has become that the environment is the economy. That a generator or engine or boiler will always be to some degree at odds with nature seems a concept lost on this administration. The EPA is scheduled to take action this or next year to force recalcitrant states into compliance with the Visibility Rule.

An even more harmful rule that is ripe for revision and delay is the mercury regulation effected by the Utility Maximum Achievable Control Technology (MACT) standards. This, at least, is a rule intended to mitigate a real pollutant, and is in part being implemented by federal court order. But the Utility MACT is overzealous. Modern coal-burning technology produces a small amount of mercury. If you filled up the Astrodome with 30 billion ping-pong balls, representing the parts emitted when low-sulfur coal is burned, and painted black those balls that represented mercury, then you would have only 27 black balls. Many states have already adopted stringent controls, so that, at Montana's large Colstrip facility, which hosts four power plants that supply the northwestern United States, you would have only three black ping-pong balls. Put in a more scientific way, the cleaner varieties of coal produce less than one pound of mercury for every trillion BTUs. At this rate of occurrence, it is difficult even to measure mercury emissions -- let alone control them. Yet the EPA says it will finalize the rule by the middle of December.

The EPA is also steaming ahead with the Coal Combustion Residuals rule, another pillar of the agency’s regulatory overkill. This rule has been written and awaiting the EPA go-ahead for a year. It threatens to treat the ash produced when coal is burned as a hazardous material that may be deposited only in certified hazmat landfills. Coal ash does not meet any existing EPA definition of a hazardous material, and hazmat landfills are in short supply. Coal plants produce a lot of ash -- 10 million tons of coal produce 1 million tons of ash when burned. If ash is to be treated as a hazardous waste on par with battery acid, there is simply no way coal plants, which still account for half of America's electrical generation, can remain online. The rule was issued this spring, but Obama, if he chose to, could save ratepayers billions by withholding final approval.

The Visibility, the Utility MACT, the Coal Combustion Residuals, and other rules in the EPA's regulatory bouquet are ostensibly about public health, but their coalescence at this particular moment is enough to inspire justified suspicion that, really, they are a subterfuge to take coal-fired generators offline or, at least, make it much more expensive to use coal to produce electricity. Indeed, Steven Chu, before he became energy secretary, declared that “coal is my worst nightmare.”

Greens have long been annoyed that coal and coal-fired electricity are so cheap, and that renewable forms of energy are so expensive. Renewables already are made artificially cheaper through mandates to buy green energy such as the Renewable Portfolio Standards, which 29 states have adopted, as well as direct subsidies such as the federal Production Tax Credit for Renewable Energy, which pays producers $22 per megawatt-hour of green energy (regardless of whether it is delivered at a peak-demand time on a hot summer afternoon, or in the dead of night).

Even with the mandates and subsidies, renewables in many places are not competitive. So has come a push to make conventional forms of generation more expensive. Greens have long argued that coal-generated electricity would not be cheap if only all of the negative externalities were reflected in the price the end-user pays for electricity or manufactured products. That's a difficult thing to bring about, of course, because when you push up prices of electricity, a particular energy-using process merely will migrate to locales where externalities are still external and energy is cheaper. These rules certainly will certainly abet that trend.

The fate of the rules is unclear. There is reason to believe some will be delayed, or never implemented, because of fierce political opposition in swing states such as Ohio, Indiana, and Pennsylvania, home to large coal fleets. But more than being a sword of Damocles hanging over the heads of utilities with existing coal plants, the rules are an embodiment of regulatory uncertainty, rightly a watchword of our ailing economy. The mere threat of the rules has rendered nearly impossible the construction of new coal plants in the United States. Ironically, this keeps older and dirtier coal plants online and suspends many investments. Society is kept in limbo, courtesy of the EPA.

If the EPA is going to kill off the industry, then it ought to dispense with the tortuous waiting game and just get it over with. The status quo is the worst of both worlds. Industry is paralyzed and, meanwhile, plans for what to do with the clean, low-sulfur coal deposits of the Powder River Basin, America’s most promising coal play, now revolve around exports to China, a nation every bit as determined as our EPA is ambivalent. In effect, the EPA is not lessening pollution in the world; it is merely exporting it, and our economy along with it.

Travis Kavulla is a former associate editor of National Review, is chairman of the Montana Public Service Commission, the state's utility-regulating body.

INEOS Names Possible Sites for EO Investment; Two in Texas

INEOS Oxide has nominated three sites – two in Texas – on the U.S. Gulf Coast as possible locations for its planned 500,000 ton/year ethylene oxide (EO) and derivatives capacity investment, INEOS said on Friday.

The Switzerland-registered chemicals major also said that operation of its new deep-sea ethylene terminal at its Zwijndrecht facilities in Belgium is expected to start in 2012, as planned.

INEOS said that it would choose between Plaquemine in Louisiana, Battleground in La Porte, Texas and Chocolate Bayou, also in Texas, in a detailed study for the EO, glycol (EG) and derivatives plants.

“The work we have done since March has reaffirmed that the U.S. is the obvious location for INEOS Oxide to consider its next expansion,” said INEOS Oxide CEO Hans Casier.

“It is a market we know well, where INEOS Group already has a well-placed manufacturing presence that is capable of taking full advantage of competitively priced feedstock,” he added.

The advent of shale gas has given the U.S. access to relatively cheap ethane and there are projects planned by a number of companies to add new cracking capacity for the production of ethylene.

“We are very excited about the project, which will be of a world scale size of at least 500,000 tons/year of EO with appropriately sized glycol and derivative units,” Casier said.

“The Battleground, Chocolate Bayou and Plaquemine sites have proved to be front runners in the screening study carried out so far. We envisage making a decision on the final location early next year and proceeding with detailed engineering. Start up of the new complex is foreseen at the end of 2014.”

INEOS is a major importer of ethylene in Europe, with an annual requirement of close to 1.5m tons/year. The new ethylene terminal in Belgium will allow the company to tap into deep-sea ethylene supplies and will meet the bulk of that requirement.

Training Gap Faces U.S. Manufacturing

The Massachusetts Institute of Technology (MIT) recently hosted the second of four regional meetings that the White House asked Susan Hockfield, president of MIT, and Dow Chemical CEO Andrew Liveris, to host in order to get feedback from business leaders, academics and state and federal government officials on how best to improve the nation’s manufacturing base.

Hockfield and Liveris run the steering committee for the Advanced Manufacturing Partnership (AMP), which President Obama kicked off earlier this year.

Hockfield opened the meeting with a Federal Government panel including the heads of the National Science Foundation, the Department of Commerce, the Defense Advanced Research Projects Agency (DARPA), and the Department of Energy.

The AMP committee presented data indicating improvement over the past few years in manufacturing job growth. But the more somber news, in the longer trend, shows the arrows pointing in the other direction.

According to the official conference briefing document, ten years ago, the U.S. “enjoyed a trade surplus in advanced technology manufactured goods. Today, that category accounts for an $81 billion annual trade deficit, meaning that we are buying back technologies that, in many cases, we invented.”

The AMP hopes to help business leaders and state economic agencies reverse that trend. Two more meetings are planned over the next few months to target and encourage investment in new technologies that can generate long-term domestic manufacturing jobs.

Experts noted that at a key developmental stage education, we are not encouraging our kids to work with their hands. However useful short term programs to help businesses train local workers to work on promising technologies right now, we are going to be haunted by the specter of graduating more Americans who just don’t have the exposure to science, technology, engineering and mathematics the U.S. will need for long-term competitiveness in high-tech manufacturing.

Michael Casper, the CEO of UltraSource, Inc., in New Hampshire, which specializes in Thin Film Manufacturing Services, said the AMP’s goal of helping to provide training solutions to companies that have an urgent need for qualified specialists is important, but it wasn’t enough.

“In the short term, we have nowhere near enough capable workers in the U.S., so we have limited options,” he said. “We must therefore fight to find the best employees we can and help them improve through training and feedback. This is a place for community colleges and local schools to help out and it represents a great opportunity for industry and academia to collaborate. The faster we can do this the better.”

But for the future, said Casper, the country needs to get its fiscal house in order, “and put a lot of new practices in play that will support real sales growth or we will continue to see our national financial security erode. K-12 and college education curricula need to speak to the criticality of jobs and real sales growth as a means of supporting our country. This is a big area that has to be thought out — no silver bullets here that I can think of.”

Jill Becker is CEO of Cambridge NanoTech, which specializes in the delivery of multiple-application ultra thin films created by Atomic Layer Deposition, a branch of chemistry she mastered while working toward her Ph.D. at Harvard. Most of the highly-skilled people her company requires have advanced degrees.

But even for high tech manufacturers that don’t require Ph.Ds from their technicians, training is a big issue. Of course, companies can pay to get the workforce they need, she said, “but they would have to pay them more [than offshore technicians], which would cut into their bottom line, and not make them competitive.”

“Who makes technicians these days? I mean, I was shocked that there are no shop classes anymore in high school,” she said.

And to hear from MIT professors that they’re getting students who’ve never picked up a soldering iron? “I just don’t know what to say about that.” Coming from Germany as a child, Becker was used to a society where technical schools were as respectable as the major universities.

“Bring back the shop classes,” she said. “We make gym mandatory; make shop class mandatory.” Not so much so people can fix their own cars, but so that teachers and administrators can discover the students who have an aptitude for craftsmanship–who can go on to become the future homegrown innovators the U.S. economy needs. Otherwise, domestic firms will remain dependent on imported specialists.

“And how can you guarantee that they won’t leave?” she said.

When a questioner from the floor asked Becker whether she would be outsourcing her manufacturing overseas five years from now, she was blunt. “We will be manufacturing here in Massachusetts… otherwise I won’t be running the company anymore.”

DHS Pledges to Ease Regulatory Burden of CFATS

The Homeland Security Department intends to make compliance with Chemical Facility Anti-Terrorism Standards (CFATS) easier with online tools and increased communication, said DHS official Jennifer Cannon at a chemical industry event in Los Angeles.

Cannon, the acting compliance section lead of DHS’s Infrastructure Security Compliance Division, described an enhancement of the online Chemical Security Assessment Tool where, once a facility revises its Top-Screen information, the tool will automatically ask if the facility would like to request a re-determination of compliance.

When the user clicks the request, the tool automatically displays and populates the re-determination form and allows the user to attach documentation. Cannon spoke at an event sponsored by the Chemical Industry Council of California and ADT Advanced Integration.

Cannon said DHS hopes the tool, which she characterized as simple “one-stop shopping,” will be available by the end of 2011. She also touted a new FAQ page that details the re-determination process “cradle to grave.”

Providing documentation can cut the time ISCD needs to process the re-determination in half, she added. A facility that no longer possesses chemicals of interest and documents their removal can become unregulated more quickly, she noted.

ISCD has received criticism that it does not provide enough feedback while facilities are developing their site security plans, Cannon said, pledging to communicate more with facilities during the process.

“We realize the process needs change and it’s a vision of the directors to get that process moving forward,” she said.

She noted that ISCD has not issued any penalties so far and sees them as a last resort. The agency reaches out to delinquent facilities by phone and sends compliance officials in person to help with CFATS compliance and to avoid penalties, she said.

Ross: Chemical Fear Mongering Goes into Overdrive

Dr. Gilbert Ross

The debate on “reforming” the 1976 Toxic Substances Control Act (TSCA) has recently emerged before the U. S. Senate Committee on Environment and Public Works. Eagerly anticipated by a wide variety of environmental groups, whose common raison d’être is essentially a deeply held fear of chemicals in our environment, they are now chomping at the bit at the prospect of tightening our already restrictive chemical safety laws.

Now most of us would probably admit to an innate fear of something — snakes, heights, clowns, whatever. But over the years, well-funded environmental groups have relied upon our instinctual fears for our children’s safety in order to manipulate the public, the media, and legislators to react emotionally rather than objectively to unfounded theories of chemical threats.

Decades ago, such irrational fear of chemicals was not so widespread, due to a general lack of scientific knowledge. Over time, though, the scientific community has amassed a plethora of information on thousands of substances in commerce and common use. Today, the public’s fear of chemicals is no longer driven by a lack of information but rather by a surplus of misconceptions espoused by politically-motivated activists masquerading as public health advocates.

We are thus being led to believe such false notions that all chemicals are unsafe, that many consumer goods are dangerous to human health, and that chemical exposure — no matter how minute — causes cancer.

Using well-coordinated media campaigns and well-oiled PR machines, environmental groups have fostered a fear of chemicals as their vehicle of choice for driving support for chemical regulatory reform. If you’re looking for an example, no group has been more overt in its attacks against chemicals than the Natural Resources Defense Council (NRDC), which has been working on overdrive to exacerbate an already exaggerated public fear of chemicals:

In October, the NRDC released what they loosely termed a “study,” alleging that “flawed assumptions and outdated risk assessment methods” exposed seafood lovers in the Gulf to 10,000 times the FDA-designated levels of chemical contamination. To ensure the utmost alarm, the report cited pregnant women and children as the most at risk, and seized upon the lingering outrage over the BP oil spill. Of course, the FDA and Gulf state public health agencies responded angrily to this completely fabricated scare.

The NRDC foments public fear by disseminating junk science allegations claiming that the plastic hardener bisphenol-A is linked to obesity, reduced “sperm quality,” and “endocrine disruption.” One of the favorite tactics used by these groups is conflating the mere presence of a substance with toxicity; thus, when they claim that “95% of Americans have BPA in their body,” their intent is to convey a health threat, which is in fact non-existent.

Most egregiously, the NRDC recently released another so-called study, this time asserting that chemicals were to blame for 42 disease clusters in 13 states. Their “senior scientist” used this farce to testify before the Senate, calling for tightening TSCA regulation “to protect public health,” of course.

We at ACSH believed that this allegation would not stand up to scientific inquiry, and we commenced an investigation into the evidence basis of these chemical outbreaks. Our response, entitled Chemophobia Cluster at the Natural Resources Defense Council, uses the principles of sound science to refute the NRDC claims. The NRDC, like their comrades in the environmental extremist movement, has no compunction about distorting the scientific process and misleading Congress, the media, and the public.

If these professional fear mongers get their way, the system will be re-configured such that chemicals are presumed to be harmful until proven “safe,” no matter the weight of evidence or experience.  This approach would surely bring about stringent and unnecessary restrictions on many widely used chemicals that are completely safe and vital to our standard of living.

Take the group of chemicals known as phthalates, which are already being targeted by a multi-pronged chemical regulatory action plan at the EPA. They are mainly used as plasticizers — additives that enhance the durability and flexibility of plastic in life-saving medical devices, wires and cables, and hundreds of other consumer items. Given that phthalates have been used commercially and studied vigorously for more than fifty years, the attack on these chemicals illustrates the illusory nature of the alleged threat promulgated by NRDC and its ilk. That’s certainly no way to bring about reasonable change in chemical regulation to better protect public health.

We should not allow fear engendered by public-relations savvy zealots to dictate chemical policy in Washington — or anywhere else, for that matter. We will all be the worse for it if they do.

Dr. Gilbert Ross is the Executive Director and Medical Director of the American Council on Science and Health (ACSH) in New York.

Upcoming TCC & ACIT Events

January 17, 2012 – South Texas Joint ACIT/ABC Economic Outlook Luncheon at the Ortiz Center in Corpus Christi. Details to follow.

February 15, 2012 – Mid-Coast Joint ACIT/ABC Luncheon at River Place in Freeport. Details to follow.

February 23, 2012 – ACIT Houston Ship Channel Reverse Trade Show at the Pasadena Convention Center. Click here for details.

March 28, 2012 – Golden Triangle Reverse Trade Show. Details to follow.

April 19, 2012 – ACIT Houston Ship Channel Clay Shoot. Details to follow.

Upcoming Member Events

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.)