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Winter 2010 OCMA News |
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Winter 2010 OCMA News |
WINTER 2010 OCMA NEWS The Sierra Club and Friends Undeclared War on U.S. Manufacturing It’s not enough that Ohio metal casters and their suppliers as well as other manufacturers in the U.S. economy are fighting for their fiscal lives, it appears that they have an additional adversary that has apparently declared war on American manufacturing without a formal declaration. A number of recent legal decisions on cases brought by the Sierra Club and their friends have brought about the possibility of environmental regulations that pretty much preclude “making things” in the U.S. One of those legal challenges was so outrageous that the only reasonable conclusion is that these organizations just don’t want manufacturing in America. Don’t believe it? Keep reading! Start Up, Shutdown, and Malfunction (SSM) Clean Air Act Exemptio
For more than fifteen years, metal casters and other manufacturers have been exempt from specific emission standards under Section 112 (d) during periods of start-up, shutdown, and malfunction. It seems only reasonable to allow this exemption given the difficulty to control air emissions during these operational procedures and especially so during a malfunction. Obviously, someone at USEPA must have been using some common sense when they formulated this exemption. However, the Sierra Club did not see the common sense involved or just did not care and in a 2008 decision, the United States Court of Appeals for the District of Columbia vacated two provisions in USEPA’s Section 112 allowing the exemption during SSM. Although industry groups sought a rehearing of the Court’s decision, the Court denied their request in July 2009. On August 5, 2009, USEPA filed a motion seeking a 60-day stay of the effective date of the Order. On August 6, industry intervenors filed a motion to stay the effective date of the Order pending their appeal of the decision to the U.S. Supreme Court. On October 16, 2009, the DC Circuit Court of Appeals issued their mandate and the industry petitioners filed a request for a review of the decision to the U.S. Supreme Court. At this point in time, it is impossible to predict whether the U.S. Supreme Court will accept the industry group’s petition and whether the decision could be reversed. USEPA has indicated that once the mandate is ordered, the exemptions will become null and void for those SSM operations that were exempt under the general provisions of Section 112. This means that most area source foundries will be required to meet their permit emission limits even during startup and shutdown procedures and when malfunctions occur. MACT sources have a window of continued exemption because there is a specific exemption written into the MACT standard that is not affected by the Sierra Club decision. However, USEPA has indicated that it has every intention to remove these specific exemptions given the Court’s determination. It appears as if common sense doesn’t exist inside the “Beltway” any longer. Metal casters and other manufacturers will now be forced to determine what levels of emissions occur during SSM and amend their air permits to take these emissions into consideration. OCMA Vice President of Environmental Affairs Ryan Burke will be apprising OCMA area source foundries of their options once the “smoke has cleared”. National Ambient Air Quality Standards for Ozone
In 2008 during the Bush Administration, USEPA proposed a more restrictive NAAQS for Ozone reducing it from 0.08 to 0.75ppm. Both OCMA and AFS commented on the proposed standard arguing that the 0.08 ppm standard was protective of human health and a more restrictive standard was sure to make U. S. metal casters less competitive. When USEPA ignored the comments of OCMA and AFS and many other manufacturers and set the new standard at 0.75 ppm, the American Lung Association, Environmental Defense Fund, Natural Resources Defense Council et al. filed suit against the USEPA claiming that the NAAQS for Ozone was set too low. The “new USEPA” under the Obama Administration agreed with the plaintiffs in American Lung Association v US EPA and in September 2009 decided to reconsider the final NAAQS for ozone standard. USEPA proposed that the new standard should be set at a lower level within the range of 0.60 to 0.70 ppm. To provide some perspective on the impact of this lower range, consider that the 0.075 standard would have had 32 of Ohio’s 88 counties in non-compliance with the standard. According to Ohio EPA’s Chief of the Division of Air Pollution Bob Hodanbosi, if the standard is set at 0.70 ppm 47 of 49 monitors will exceed the standard and if the standard is set at 0.65 ppm, all 49 monitors will exceed the NAAQS for ozone standard. Considering that the ozone reading at Glacier National Park in Montana is 56 ppm and 64 ppm at Craters of the Moon National Park in Idaho, guess what chance any of Ohio’s 88 counties would have of meeting the new standard if it is set at 65 ppm or less?! Of course, nonattainment has its costs. Counties that are in non-attainment may be subject to additional air permitting controls and oversight as well as possible production limitations for manufacturers in the county. OCMA and AFS are in the process of composing comments for this proposed standard, but the best that we can hope for is a standard of 0.70 ppm that will have serious ramifications for Ohio metal casters and other manufacturers. USEPA Regulating Green House Gases (GHG) under the Clean Air Act (CAA) With the likelihood of Congress reaching agreement on climate change legislation HR 2454 American Clean Energy & Security Act becoming even more remote, the prospect of the USEPA regulating green house gases (GHG) under the Clean Air Act (CAA) becomes ever more likely. Although the Clean Air Act was designed to handle conventional air pollutants like lead, PM, and sulfur dioxide, the US Supreme Court has held that the USEPA is required to regulate these gases under the CAA if it found those gases posed a threat to public health and welfare. In December 2009, USEPA did indeed hold that these gases threatened public health and welfare and the Agency is using its newfound authority to draft new fuel-economy rules for cars and light trucks. The fuel-economy rules for cars and trucks are expected in March 2010. Once those rules are proposed, USEPA is then legally obligated to begin the process of regulating stationary sources too. It is anticipated that the first wave of regulations would involve the prevention of significant deterioration program. Anyone who wanted to build a new power plant, factory or foundry – or upgrade an existing facility – would need to apply for a state permit and adopt “best available control technology” (BACT) for greenhouse gas emissions. Who knows what the Agency may designate as BACT for controlling GHGs. The appropriate technologies would be decided on a plant-by-plant basis. However, the environmental litigation team is waiting to pounce if the USEPA does not require extreme measures. For example, a quote from David Bookbinder, Sierra Club chief climate counsel, “No one in their right mind is going to propose a new coal-fired plant after this”(emphasis added). It would appear from the prospects of USEPA regulating GHG under the CAA that U.S. manufacturing will be facing enormous challenges. Not only will it be subject to the vagaries of USEPA regulation, but also, it will most likely be facing critical electricity shortages in the not too distant future. We can only hope that the American people begin to realize that extreme environmental views can be as dangerous to our economy and way of life as extreme political views from overseas. OCMA Meeting Explores Important Issues The more than fifty (50) OCMA members attending the January 28th meeting heard from a former Ohio Speaker of the House who has always been a friend of business and manufacturing, a natural gas expert about new developments that promise “a game change” in the natural gas market, and a humorous, forthright perspective on prospective health insurance reform in Congress from the health insurance association leader. If you missed it, keep reading and try not to miss our next meeting.
Ohio Senator Jon Husted, (R-Kettering), former Speaker of the House, was the luncheon speaker. Senator Husted announced that he is the endorsed candidate from the Republican Party for the upcoming election for Secretary of State and asked for OCMA member support. Key points of his presentation are outlined below: 1. He is running for Secretary of State for two important reasons. He would like to have jurisdiction over the election process to prevent episodes of election cheating, as was seen last election with the actions of ACORN. More importantly, the Secretary of State sits on the Apportionment Board along with the Governor and Auditor to re-draw both state and congressional districts after the results of the 2010 census are divulged. Typically, the party holding a majority of seats on the Apportionment Board have drawn these districts to their benefit and seen successful election outcomes as a result. 2. He is running on his record as Speaker of the Ohio House when the Ohio General Assembly passed the most conservative budget in history, enacted tort reform, school choice, and warded off the potentially disastrous Healthy Family Initiative which would have provided seven days of paid sick leave to all Ohio workers. The campaign is expected to cost approximately $4-5 million and he asked for OCMA member support. He stated that depending on the outcome of the November elections, business could be on the offense creating a more business friendly environment in Ohio or on defense attempting to save the tort and tax reform initiatives enacted by the Ohio General Assembly when the Republicans held both houses. 3. Senator Husted believes that the Apportionment Board should not have the overwhelming power to dictate future election results through gerrymandering and manipulation of the process. He has introduced a resolution in the Senate that would reform the process and provide for more competitive districts where the number of Republican and Democrat registered voters would be more equal, leading to more moderate candidates. The present process has certain districts that have not been competitive for years and the candidates of these districts are usually more extreme in their views. 4. Reflecting on the announcement that Ohio had won the competition for light rail funding from the Federal government, Senator Husted commented that this was a perfect example of what is wrong with our economy and the federal government’s efforts to stimulate job growth. He argued that the rail program is sure to cost more than projected, have fewer riders than projected, and take longer to get off the ground than promised. This type of “command and control” spending is exactly what is wrong today. Federal bureaucrats, not by the market, determine the spending for light rail. He suggested that if the federal government gave Ohio $400 million without strings, it is very unlikely that the rail project would be our first priority. He belittled the likelihood that sports fans and businesspersons would be using the rail for transportation given the schedules that have been announced. 5. This “command and control” governing results in corruption and selection of vendors/grantees based upon political connections, not on capabilities, price, and value. He described this scenario as “crony capitalism” where political connections are more important than market selection. After hearing the Governor’s State of the State address, Senator Husted suggested the most intelligent action for a businessperson to make was to “hire a lobbyist” so that they could get some of the government largess. 6. This country has “gotten off track”. Our government is borrowing funds from China, Japan, Iran, and Venezuela to try to create jobs in America. Government needs to shrink and minimize its participation in the market. Right now, government bureaucrats are deciding what action needs to be taken rather than business owners and consumers. Giving one last example, he discussed a recent competition for federal education money under a federal “Race to the Top” program. To apply for the federal grant, the local school board, school superintendent, and local education union must sign off on the application. In Dayton, the union refused to sign off because the application required performance evaluation!
Jon Airey, Vorys, Sater, Seymour & Pease, presented “2010-A Gas Market in Transition”. Several major developments will have a “game-changing” impact on the natural gas market over the next twenty years. Key points are presented below: 1. In 2009, storage of natural gas reached record levels with record gas supply deliverability a result. Moreover, the addition of new U.S. shale production resulted in record natural gas reserves. However, operating rig count in 2009 was far below that needed to replace deliverability. Although the huge excess supply was available in November 2009, a cold snap in December and January brought storage levels back to normal. The lesson here is that record storage levels can be very short-lived given unusual cold weather patterns. 2. History has shown that when the operating drill rig count falls below 1100, natural gas production fails to keep up with demand. As a result, price increases and deliverability suffers. Projections at this time indicate that only 600-800 drilling rigs will be operating in 2009-2010, causing a significant reduction in natural gas production. Given the volatility of the weather and the diminution of the record storage levels, this could lead to an erratic market this year. 3. A major development in the industry is the addition of enormous natural gas reserves from gas shale wells. According to the BP CEO in an interview at Davos, unconventional gas (shale gas) is transforming the U.S. energy marketplace. It is a complete “game changer” that will affect the U.S. market for the next 100 years. Supporting this comment, Mr. Airey indicated that natural gas shale reserves in the U.S. in 2006 were estimated at 215 tcf (trillion cubic feet). By 2009, those estimates had risen to 742 tcf. A major shale basin affecting the Ohio market, the Marcellus basin, is located in Pennsylvania, Ohio, Kentucky, and West Virginia holding more than 250 tcf. 4. New drilling technologies have made exploration of these shale basins viable. Using horizontal drilling where the initial drill is to a 10-12,000 foot level and then drilling continues sideways. According to industry information, approximately 40% of all drilling rigs are now horizontal rigs. Although there have been a number of environmental concerns about horizontal drilling, studies have shown that concerns about ground water etc. are unfounded. 5. In 2007, approximately 16% of U.S. natural gas consumption came from imports from Canada, Mexico, and overseas. Now with the surge in domestic reserves, imports are expected to account for approximately 5-6% in the future. Similarly, less than five years ago, concerns about natural gas shortages led to anticipated increases in liquid natural gas imports. Several LNG stations were built and capacity grew to 15-18 bcf per day. Now liquid natural gas imports are expected to be less than 1-2% of consumption with import levels of about 1 bcf per day. 6. In the 1950’s, electricity usage grew at an annual rate of nearly 10%. In the 1970’s by more than 7% and in the 1990’s by approximately 2.4%. Despite all of the new electricity using modern devices, electricity usage is expected to decline with growth of approximately 1.0% from 2010 thru 2035. Presently, approximately 33% of electricity generation uses natural gas as its fuel source. By 2035, that number is expected to by closer to 46%. Capacity additions for electricity from 2008 to 2035 will be made up of natural gas (46%) and renewables other than nuclear and hydro (37%). 7. While it is always difficult to predict future prices of natural gas, it has been particularly difficult the last several years. From 2003 to 2005, gas prices moved in a narrow range from $3.50-8.00 mcf. However, in 2005 & 2006, hurricane activity caused prices to jump erratically from $6 to $16 mcf. The year 2008 featured a sharp decline from mid-year at $14 mcf to $6 mcf. Prices in 2009 were stagnant at the bottom of the range from $2-6 mcf. It is possible that 2010 will bring continued low rates, but it is not likely. Increased demand from economic growth, the reduced number of drilling rigs, and a colder than normal winter are likely to conspire to raise prices significantly. 8. However, a major development could put a damper on much higher natural gas prices. The Rocky Mountain Express pipeline bringing natural gas from Colorado to Central Ohio in 2010 will have a significant affect on natural gas prices in the area. The pipeline’s capacity of 1.8 bcf covers 82% of Ohio natural gas consumption in a year! This new supply should flatten price differentials over time.
Kelly McGivern, CEO, Ohio Association of Health Plans (OAHP), provided her professional insight concerning health care legislation in Congress. Despite more than a year of debate and wrangling, the health care reform initiative appears no closer to resolution. The key points of her presentation are outlined below: 1. First off, why do individuals not have health insurance? A large number of persons cannot afford health insurance especially those working for small business. A second group cannot get health insurance usually because of health problems or pre-existing conditions. Lastly, there is a large group of individuals who do not wish to purchase health insurance because they are young and think that they will not need it. 2. The goals of the health care reform package as outlined by President Obama are as follows: > Lower costs: 3. Congress has passed two separate bills. The House bill, over 2,000 pages in length, adds 37 million new individuals to the health insurance rolls. The Senate bill also about 2000 pages in length would only cover an additional 31 million persons. Both plans would fail to attain universal coverage leaving nearly 20 million individuals without health insurance coverage. 4. In working with the Obama Administration and Congress to secure health insurance reform, the industry agreed to a number of insurance reforms. They included: > Guarantee coverage for all; 5. The industry agreed to these insurance reforms as long as the health insurance legislation included these elements: > Individual mandate – all adults would be required to
obtain health insurance; 6. Health insurance industry opposition to the public option was grounded in the fact that the federal government presently administers two insurance plans; Medicaid and Medicare. Both are going broke and both are paying less than the cost of services provided. Health service providers are increasingly refusing to take Medicaid and Medicare patients. 7. Despite this dismal record, the health care reform legislation calls for its greatest expansion in health insurance Medicaid coverage by expanding the eligible participants to childless adults earning less than 130-150% of the poverty level. The proposals also call for reduced Medicare payments and the elimination of Medicare Advantage programs. 8. A concern of the OAHP with the proposed legislation is the high level of essential benefits that must be provided by the health insurer for minimum coverage. All preventive procedures, prescription drugs, mental health coverage, and more. A state can add additional benefits, but only, if the state is willing to pay for them. The legislation also limits deductibles and co-pays allowed. 9. If the legislation were to pass, would it meet the goals outlined above? > Universal Coverage – even if the legislation were enacted
as presently written, anywhere from 13-14 million American citizens
and 7 million immigrants would still not be covered. 10. With the future of health care reform up in the air, Kelly gave her best guess of the outcome. The Democrats may choose to use the reconciliation process to pass some type of bill but that process can only address financial or tax issues. It is unlikely that the House will accept the Senate bill so some type of scaled back bill is more likely. The tealeaves are very unclear. 11. Whether either of these bills pass, the need for some type of reform is necessary. The status quo is unacceptable and unsustainable. The health insurance industry intends to continue supporting insurance market reform and an overhaul of health care administration. Reform should cover all Americans, reform should make health care more affordable for working families and small businesses, and reform should put the health care system on a sustainable path. Lastly, these goals should be pursued on a bi-partisan basis. ENVIRONMENTAL UPDATE
OCMA Vice President of Environmental Affairs Ryan Burke, OSCO Industries, Inc., presented the environmental report. He reiterated a comment from the October that "there has been a big change in Washington, DC with USEPA being much more amenable to the desires of the key environmental groups". The next four years could prove to be very challenging for our industry. Key issues are outlined below: Area Source Rule for Iron & Steel Foundries · The semi-annual compliance report was due January 30, 2010, this dealt primarily with pollution prevention management practices. A template was drafted and sent to all affected OCMA members by email. · Foundries covered by the area source rule were required to be in compliance with the mercury management rule by January 4, 2010. Notification of compliance is required by February 3, 2010. Templates for notification were sent out to affected foundries by email. Lead NAAQS · Final rule was issued on November 12, 2008, effective January 12, 2009, with an emission threshold of 1.0 tpy. The National Resource Defense Council (NRDC) petitioned for review of the rule in 2009 and in July 2009, USEPA granted a petition for reconsideration. A revised rule was issued in December 2009, and lowers the emission threshold to 0.5 tpy. Comments on the rule were due at USEPA before February 16, 2010, and OCMA did submit comments. However, the 2008 rule remains in effect. · Environmental compliance personnel should check their TRI. Some companies re-filed when it was changed to 1.0 tpy. Review could determine if there is a basis to lower emissions below 0.5 tpy. Startup, Shutdown, Malfunction (SSM) Vacature · In December 2008, the United States Court of Appeals for the District of Columbia Circuit issued a decision setting aside provisions of the Clean Air Act which exempt sources from the requirement to comply with emission standards during periods of startup, shutdown, and malfunction. The Court has not issued a final order to implement their decision and until they do the exemption remains in effect. Additionally, industrial petitioners have filed a Petition for a Writ of Certiorari with the Supreme Court of the United States. · MACT or major sources will not be immediately affected even if the final order is issued. USEPA plans to remove the exemption from the major source rule and this will take some time. · However, foundries covered by the iron & steel area source rule will be affected when emission limits become effective on January 2, 2011. During periods of SSM, such as raising a cupola lid during melt out, companies will no longer be exempted from emission limits and compliance problems are expected. We will keep you informed about developments on the SSM issue. Green House Gas (GHG) Reporting Rule · The reporting rule applies to all foundries emitting 25,000 metric tons of CO2 equivalents and or 30 million BTU’s. · Affected foundries are required to start data collection on January 1, 2010. January 28, 2010 is the deadline for extension application for installation of monitoring equipment. · By April 1, 2010, monitoring equipment should be installed and calibrated. Also, the monitoring plan should be in place. On December 31, 2010, the monitoring equipment extension ends. · A certificate of representation that designates the facility contact is due by January 29, 2011. · March 31, 2011, the first data collection report is due. Green House Gas (GHG) Tailoring Rule · Comments on the USEPA Tailoring rule were due December 28, 2009. Both AFS and OCMA provided comments. A special thanks to Craig Schmeisser, Sage Environmental Consulting LLC, who did a majority of the work for both sets of comments. · The proposed Tailoring rule would include more sources than the GHG reporting rule due to discrepancies such as actual versus potential emissions and short tons versus metric tonnes. · Very rough estimates of production required to meet the definition of “major facility” due to GHGs: > 45,000 metric tons for cupola; · The proposed rule sets the level for Prevention of Significant Deterioration (PSD) at between 10,000 and 25,000 tons of GHG emissions. This rule will mean more Title V’s and more PSD reviews. The rule will be reviewed in six years and the limit could be lowered if USEPA determines that the current proposed levels are not effective. · GOP Senator Murkowski (Alaska) is attempting to pass a resolution that would block USEPA from regulating GHG’s. Climate Change/Cap & Trade Legislation · AFS Washington Office is working to have foundries included in the EITE Rebate Provisions in H.R. 2454. This EITE rebate stands for energy-intensive and trade-exposed industries and the rebates would be provided to covered industries to cover their direct (purchasing carbon credits) and indirect costs (increase in electricity prices) of complying with the cap-and-trade program. · At this point, iron foundries have been deemed eligible, but aluminum does not meet the energy intensive criteria and steel foundries do not meet the required level of trade exposure. Beneficial Reuse Update
John Kurtz, Kurtz Bros., Inc. provided the report. · USEPA continues to prepare the much anticipated guidance document for using foundry sand in beneficial reuses including agricultural and horticultural applications. It is now anticipated that the guidance document will not be available until Summer 2010. · Ohio EPA has promised that they are working on a second draft of beneficial reuse rules and will release them for comment in the near future. Energy Report Larry Boyd, Energy Industries of Ohio (EIO), provided the report. Highlights are outlined below: · New program, Ohio Center for Industrial Energy Efficiency (OCIEE), has received funding with the goal of providing funds to manufacturing facilities to improve their energy efficiency. It is cooperative effort with the following participants: > Energy Industries of Ohio (EIO) (Program Manager) · The program has five components: · OCIEE training program will contain the following: > Deliver DOE Best Practices Training for: · Assessments/Implementation is a three-part process: > Envinta One-2-Five Management Evaluation; · Envinta One-2 Five Management Evaluation o Free of charge to the company; Ohio Energy Office pays the license
fee; · Management Plan/Technical Assessment is based upon a proposal from a for-profit consultant. There will be a management plan for critical elements and a technical assessment of plant-wide opportunities for energy savings. The DOE Energy Savings Assessment will be merged into the plant-wide assessment. It is a cost-shared program with company responsible for 50% and Ohio Energy Office responsible for the remainder. · Upon completion of Phases I & II participating companies will engage in cost-shared implementation projects. If it is a current program, OCIEE will provide 25% of the cost up to a maximum of $50,000. If it is a new program, OCIEE will provide 50% of the project cost up to a maximum of $250,000. The cost share applies to any one or more projects up to the maximum amount for a period of 2 years. · Other energy efficiency financial assistance is available from the Ohio Air Quality Development Authority (OAQDA) Advanced Energy Fund. This fund will provide funds for industrial (non-coal) projects with awards ranging from $50k to $2 million. Their website is http://ohioairquality.org/advancedenergyprogramdetails.asp. · If your company is interested in applying for the OEIEE program, please contact Larry Boyd, EIO, at (216) 323-1898 or boyd@energyinohio.com
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