WINTER OCMA NEWS

OCMA & AFS TAKE THEIR SHOT: COMMENTS ON THE USEPA IRON & STEEL FOUNDRY MACT PROPOSAL ARE SUBMITTED

OCMA Vice President for Environmental Affairs Kurt Braun, Ford Motor Company Cleveland Castings Operations Presents the OCMA game plan for stopping the USEPA proposal on the Iron & Steel MACT

As outlined in the Fall OCMA News, the USEPA proposed Iron & Steel Foundry MACT has triggered both anger and disbelief in our industry. Despite industry efforts through the AFS MACT Task Force to educate the USEPA about the potential impact of the MACT standard on struggling foundries, our suggestions apparently fell on deaf ears. The USEPA MACT proposal would impose significant economic burdens upon existing foundries and could, if adopted, make it prohibitively expensive to expand or site a new foundry in the United States.

In its efforts to block the USEPA proposal, OCMA hit the ground running. On January 10, 2003, OCMA Vice President for Environmental Affairs Kurt Braun, Ford Motor Company, Cleveland Casting Operations, convened an emergency meeting of the OCMA Environmental Affairs Committee at the Ashland Casting Solutions office in Dublin, Ohio. More than fifty (50) representatives of OCMA member foundries and suppliers attended the meeting. Representatives from Keramida Environmental Inc. and RMT, Inc. explained the requirements of the proposed standard while comments and ideas expressed by committee members were captured. The Committee recommended to the OCMA Board of Trustees that OCMA submit comments on the proposed standard by the February 21, 2003, deadline. The OCMA Board of Trustees voted to affirm this recommendation on January 23, 2003.

It was agreed that the OCMA comments would be compared to and combined with the AFS Ad Hoc Committee’s comments to form the final OCMA comments. The AFS draft comments were received the week of February 10th and the OCMA comments were drafted, reviewed, and made final before the February 21, 2003 deadline.

OCMA Vice President for Environmental Affairs Kurt Braun provided the leadership and expertise required for the compilation of the OCMA comments. We would also like to give special recognition to Jeet Radia, Keramida Environmental Inc. and Craig Schmeisser, RMT, Inc. for their extraordinary efforts. Finally, the following individuals from OCMA member companies provided important assistance to our efforts to significantly alter the USEPA proposed Iron & Steel Foundry MACT:

         Chuck Cooper, Ashland Casting Solutions
         Bart Pinson, Honda of America Mfg., Inc.
         Jim Schifo, Keramida Environmental, Inc.
         Ralph Showman, Ashland Casting Solutions

Economic Impact

As shown in Table 1 the USEPA estimated an annual impact of $21.7 million dollars per year. For reasons provided in the follow section AFS is estimating the proposed rule will have an economic impact of $300.4 million per year. The striking differences in cost estimates are most notable in the scrap selection program, baghouse replacement of cupola venturi scrubbers, cost associated with core binder process changes, installing baghouses on pouring stations, installing baghouses on electric induction furnaces/scrap preheaters and costs associated with the electronic recording, handling and archiving of data. We believe that our cost analysis is more realistic and provides a better estimate of the economic impact that the proposed rule will have on our industry. (AFS Comments)

Metal castings are found in 90% of U. S. manufactured products. The MACT proposals threaten the profitability of major source producers to such a degree that there is reason to believe that wholesale closures and consolidation will take place. The cost barriers created by the proposed MACT standard are so extreme that new production in the U. S. is jeopardized. If this is not an adverse impact on the U. S. economy, what is?

OMB should review the economic impact of the proposed MACT standard because the proposed MACT if implemented, could destabilize the iron and steel casting industry. A significant reduction in iron and steel casting capacity will occur if the proposed standard becomes a final rule. The MACT proposal would affect iron and steel casting capacity as outlined below:

Foundries with the ability to reduce production so that their potential HAP emissions are below the MACT cutoff will do so. The compliance costs of MACT are so great that enduring those costs would more than likely make these operations no longer competitive in the global market. These foundries will enter into agreements with state EPAs to maintain production at lower than capacity levels under a federally enforceable permit. This will materially impact the potential capacity of the U. S. iron and steel casting industry. More importantly, for the first time in history, these foundries will not be able to ramp up production to meet the cyclical needs of the U. S. economy when the economy is in a strong growth mode. They will be constrained by the federally enforceable limits.

Foundries required to comply with the MACT standards will, on the margin, reduce capacity of the iron and steel industry. For example, the tremendous capital cost of retrofitting cupolas with high cost baghouses will cause some companies to shut down those cupolas rather than sink enormous capital into them. This reduction in capacity will make it more difficult to increase production to meet the needs of the U. S. economy at the high point of economic growth. This lack of capacity will cause shortages, higher prices, and economic disruption in the manufacturing sector.

A natural response to the shortage of domestic production will be increasing dependence of U. S. manufacturers upon foreign suppliers. Under these circumstances foreign producers will become increasingly important to the U. S. economy. (OCMA Comments)

Scrap Selection and Inspection Program

The USEPA is proposing to require foundries to implement a scrap selection and inspection program…. the proposed rule requires that a foundry should restrict the presence of free liquids, oils, greases, painted parts, plastic parts, lead components and galvanized materials. The foundry must prepare written specifications that include the restrictions of these materials and share them with its scrap vendors.

The USEPA estimates that the only economic affect on the in industry results from the work hours required to implement the scrap selection and inspection program….the USEPA estimates that the proposed scrap selection and inspection program will have an economic impact of $1.13 million per year.

The AFS believes that the scrap selection and inspection portion of the proposed rule will have a profound and significant impact on the foundry industry…..

To restrict the use of these common types of scrap would have a detrimental impact on the foundry industry. The foundry industry would need to switch to a clean grade of scrap or pig iron or require that these common grades of scrap under go further cleaning, processing and refining prior to melting. Each of these options would be expensive and could possibly lead to regional scrap shortages. It is conservatively estimated that the impact of the scrap selection provision would increase the cost per ton of scrap by $20 per ton.

The total annual impact to the industry is estimated at $122.4 million. (AFS Comments)

Scrap Preheaters

Scrap preheaters must achieve a 98% reduction by weight in VOC emissions or no more than 20 ppmv of VOC. VOC CEMS is not a viable means to monitor this process, and may not be even possible to measure the 98% reduction during scrap preheating. Burning natural gas alone produces more VOC than 20 ppmv.

The agency here again admits they have no data. No actual organic HAP emissions data from a direct flame scrap preheater was used to establish the emission limit. There was no data on emissions that could function as a surrogate for organic HAP. Absent data, the Agency bases the emission limit on the argument that they have 20 years of experience with a similar technology, incineration, used not in foundries but other non-specified industrial applications. (AFS Comments)

Capture and Ventilation Requirements

The proposed rules would require that a capture and ventilation system that maintains a face velocity of 200 feet per minute be maintained at each emissions source subject to an emissions limit. AFS believes that it is arbitrary and capricious to impose a single uniform standard on emission sources that are significantly diverse. In addition, AFS believes that such a requirement has no underlying MACT floor determination, presents an entirely unnecessary burden for some sources, fails to consider the ancillary energy and environmental impacts, and fails to account for variable operating conditions. (AFS Comments)

Small Business Impact

USEPA identified twenty (20) of sixty-three (63) companies as possibly being small companies affected by the proposed standard. The actual number of companies affected by the proposed rule is closer to one hundred (100) and it is likely that several of the approximately forty (40) additional companies can be classified as small companies. Additionally, the USEPA analysis does not include small businesses supplying services and consumables to the affected iron and steel foundries. The analysis appears to assume that the iron and steel foundries covered by MACT will not choose to close their operations rather than expend tremendous capital to comply with the standard. In many states such as Ohio, Michigan, Indiana, Illinois Wisconsin, Alabama, etc. the cost of the pollution control equipment to comply with the proposed MACT could exceed $10-30 million. If just one of these operations makes a decision to close the foundry rather than make these expenditures, the impact upon small businesses supplying both services and consumables would be devastating.

The MACT standard affects scrap suppliers by mandating scrap inspection programs and by imposing enormous compliance costs on the foundries. Both of these factors are certain to have a significant impact upon these small businesses. The scrap inspection program may force foundries to change their supply requests in a manner that will materially affect the operations of scrap dealers. A scrap inspection program of this magnitude will have a devastating impact upon the scrap supplier, perhaps, causing them to close.

It should be pointed out that it is not necessary for an iron or steel foundry to close for the MACT proposal to have significant impact upon small businesses. A large number of iron and steel foundries will very likely make a decision to enter into a federally enforceable permit that will limit their production and therefore their potential emissions. The planned cap on foundry production will significantly affect many small businesses supplying these foundries. This will be the first time in U. S. history that a significant number of medium-sized foundries will be purposely holding back on production, limiting the potential revenues of these many small suppliers. This is clearly an impact not considered in the USEPA analysis.

The manner in which the impact of the proposed rule is measured is fundamentally flawed especially as it applies to small businesses. The analysis makes no effort to measure the difficulty if not the impossibility of a small business to finance a multi-million dollar expense for a non-productive investment. The potential cost of compliance to retrofit a cupola now using a wet scrubber with a high tech baghouse is more than $2 million. To not address the difficulty of a small business to obtain that type of capital in addition to the normal capital demands for a highly capital intensive business is disingenuous.

The USEPA analysis makes no apparent effort to determine how the increased costs imposed upon U. S. iron and steel foundries will exacerbate the tremendous inroads already being made by Chinese iron and steel casting companies. The economic equilibrium model is not prepared to measure this impact. The analysis suggests that the additional costs will increase overall foreign foundries profits by $1 million. Chinese casting companies are presently making inroads of more than this magnitude without factoring in the additional costs imposed by the proposed standard. To suggest that the foreign producer impact will be this insignificant is hard to accept. (OCMA & AFS Comments

   MEETING UPDATE

 

Approximately fifty (50) OCMA members attended the OCMA meeting held on January 23, 2003, in Columbus. David Hansen, Public Policy Managing Director, Ohio Manufacturers’ Association (OMA) David provided the members with a review of the November election results and how they could affect Ohio manufacturing. He also provided an extensive summary of important issues facing the Ohio General Assembly this year. The key points of his presentation are summarized below:

1. The reelection of Evelyn Stratton and election of Maureen O’Connor to the Ohio Supreme Court was clearly the most important outcome of the November elections. It is now believed that business efforts to achieve tort reform and improvements in the Ohio Workers’ Comp system will be more successful. He warned however, that it could take years to “undo” the harm caused by the previous Court.

2. He summarized the elections as a big victory for the Republican Party with increased majorities in both the House and Senate. However, he warned that there appears to be a growing “knowledge gap” between the new legislators and manufacturing businesses. Few of the new legislators are familiar with the manufacturing sector. He pointed out several exceptions including Jim Raussen (R-Springdale) and OCMA-supported Mary Taylor (R-Uniontown).

3. To address this growing problem, the OMA has instituted a new program, Legislative Dialogue, whereby a member facility will host a tour for their local legislator. OMA members in the district are also invited. The end result is usually a good education for the visiting legislator.

4. OMA has also established the Prosperity Project, www.ohioprosperity.com, as a tool to facilitate communication between OMA companies and policymakers. The Ohio Prosperity Project is a non-partisan, joint effort between Ohio’s employers and state and local non-profit business organizations to encourage more informed participation in the governmental process. Some member companies have also use the Prosperity Project to communicate important issues to their employees.

5. Important legislative victories in 2002 included the enactment of S.B. 105 and S. B. 120. S. B. 105 sponsored by Senator Jay Hottinger (R-Newark) establishes a five-year statute of limitations for environmental laws. S. B. 120 replaces joint and several liability with a modified proportionate liability system.

7. For the first time, OMA has joined with other significant business organizations including the Ohio Chamber of Commerce, NFIB, and Ohio Business Roundtable to identify a consensus set of public policy priorities. Those priorities are Business Climate, Economic Development, Education Reform and Workforce Development, and the State Budget. These priorities have been presented to Governor Taft.

8. Business Climate: To improve the business climate in Ohio the outdated, anti-competitive tax system must be changed. The current system hinders capital investment. Additionally, the rising cost of health care must be addressed. The 20% increases in health insurance costs cannot continue. Finally, tort and workers’ comp reform are needed to encourage business growth and investment.

9. Economic Development: The Governor’s Third Frontier proposal may be very good however, the business community in general needs a more pro-business environment including less mandates and less regulation. New research on product development should be targeted to practical and commercially viable projects. Public research entities should work with private research organizations to ensure that the resulting research meets these goals.

10. Education Reform and Workforce Development: Ohio must fully implement the federal No Child Left Behind Act and its measures for strengthening accountability for improved education results. Ohio should continue efforts to fix the current fragmented and overly bureaucratic approach to workforce development. Workforce development should be truly employer driven and there should be more oversight of local government programs.

11. State Budget: The budget deficit represents a spending problem not a shortage of state revenues. Medicaid expenditures are out of control. Problem stems from the fundamental inadequacies of the present system. During the economic growth in the 1990’s income and sales tax revenues skyrocketed and state legislators spent the money. Now the economy has stalled, the tax revenues have declined, but the state wants to continue to spend. In Michigan, state & local spending cannot exceed the growth in personal income. That provision has prevented Michigan from facing an enormous budget deficit.

12. Under Ohio’s tax system manufacturers are carrying an unfair burden. The current tax code was written in 1932 when capital was fixed and Ohio was primarily a manufacturing state. Today’s code has not been changed to reflect the prevalence of a new “service economy”. The state sales tax should be broadened to capture significant service industry growth.

13. Facing a potential $3.5 billion deficit for FY 2003-04, the Taft Administration is assessing whether business tax credits should be reduced or eliminated. The Administration is contemplating removing tax credits for purchases of pollution control devices and auditing other previous tax credits. The OMA will fight any efforts to reduce or eliminate these tax credits.

14. The current budget deficit represents an opportunity for the Taft Administration to enact needed tax reform—changing the Ohio tax structure to reflect today’s economy, not the one that existed in 1932. A tax system that rewards capital investment is needed. The Governor should engage in tax reform rather than making piecemeal efforts to balance the budget.

Copies of David Hansen’s slides are available from the OCMA office. Please call or e-mail your request.

David Strayer, The Payne Firm, Inc., presented “Corporate Sustainability: A Value Centered Approach”. David was “pinch-hitting” for John Payne, Principal, who took sick the night before the meeting. Highlights of his presentation are presented below:

1. Corporate Sustainability is not for everybody. However, many multi-national companies are examining the value of corporate sustainability compared to reacting to the command and control model driven by government regulation. Under a “Reactive Compliance Model”, corporate response normally follows a triggering event, stakeholder outcry, media explosion, and government intervention. This is a model of inefficient corporate governance.

2. An important aspect of Corporate Sustainability is Transparent Corporate Governance. The standards of Transparent Corporate Governance are evolving, but generally include; sustainability reporting, Corporate Social Responsibility (CSR), and the requirements laid out in the recently enacted Sarbanes-Oxley legislation. Transparent Corporate Governance has several discussion points including: 1) How can transparent governance help the company make better decisions; 2) what are our stakeholders’ expectations; and 3) What are the risks?

3. He gave an example of a company in Cuyahoga County that had spent an inordinate length of time and resources trying to obtain a permit that affected the Cuyahoga River. Local environmental groups had thwarted the company in its efforts. However, once the company questioned the environmental groups about their opposition they discovered that the groups were only interested in canoe access to the river. This was not a problem for the company. Without direct communication with these stakeholders, the solution to their opposition may have never been found.

4. A proactive example of a company adopting Corporate Sustainability is Volvo. Volvo made a voluntary commitment to vehicle safety. As a result, Volvo has benefited from advantageous branding, obtaining a competitive advantage among safety-conscious buyers, is less affected by government auto safety regulations, and has carved out a solid market share.

5. However, another example of a proactive company with not so good results is Nike. Nike made a grand announcement of their adoption of Corporate Sustainability. Unfortunately, Nike has received a significant amount of “bad press” lately for not following through on its promises.

6. Why Corporate Sustainability? Corporate Sustainability is becoming increasingly popular as the umbrella under which a company can address an increasingly complex set of stakeholder concerns that can have a direct effect on your business’ performance, competitiveness, and even survival.

7. A very large proportion, perhaps 75-80%, of the value of Corporate Sustainability is from the integrated approach to communicating with stakeholders including regulatory agencies.

8. One of the benefits of Corporate Sustainability is increased competitiveness. A company engaged in Corporate Sustainability has a competitive advantage in the marketplace for those consumers looking to buy environmentally friendly products.
9. How Do I Start? Corporate Sustainability is definitely not a “one-size fits all” proposition. The following steps will help start to begin design of a custom program:

Organizational awareness;
Baseline mapping;
Future vision;
Opportunities identification and prioritization.

10. Make working your plan an integral part of your management strategy and business operations:

Progressive implementation based upon your priorities;
Considering short and long-term economic benefit;
Look to build on short-term success.

David Strayer’s complete PowerPoint presentation is available from the OCMA office by e-mail.

ENVIRONMENTAL UPDATE

OCMA Vice President for Environmental Affairs, Kurt Braun, Ford Motor Company, Cleveland Casting Plant presented the environmental report. Copies of Kurt's outline are available from OCMA upon request. Key issues are outlined below:

Iron and Steel MACT Standards (See first page story)

· The Iron & Steel Foundry MACT was published in the Federal Register on December 23, 2002. The sixty-day comment period ends on Friday, February 21, 2003. The standard as proposed contains both items that were expected and several surprises that were both unexpected and unwanted.

· The OCMA Environmental Affairs Committee met on Friday, January 10, 2003, to discuss the proposed standard. More than fifty (50) OCMA members attended. Representatives from Keramida Environmental Inc. and RMT, Inc. explained the requirements of the standard while comments and ideas expressed by committee members were captured.

· The purpose of the meeting was to:

· Communicate the status and timing for the Iron & Steel Foundry MACT;
· Communicate the requirements of the Iron & Steel Foundry MACT;
· Develop OCMA comments on the MACT;
· Recommend actions and future tasks to the OCMA Board of Trustees.

· Our committee comments will be compared to/combined with the AFS MACT Ad Hoc Committee comments to form OCMA comments, pending Board of Trustees approval.

· Recommended actions and tasks from the Environmental Affairs Committee meeting:

1. OCMA should submit comments on the proposed Iron & Steel Foundry MACT;

2. OCMA should hold a Part II workshop as a follow-up to our successful Part I workshop. The workshop should provide a detailed review and present methods to ensure compliance with the MACT standard. The workshop should also provide information on how to avoid the standard (small sources).

3. Schedule next committee meeting/conference call in early February 2003.

· The purpose of the comments will be as follows:

1. Bring change in the proposed rule;
2. Ensure every method to affect the proposed standard is utilized;
3. Act as a placeholder for potential court action (note: court action cannot address any “new” items.)
· Anticipated timing:

· Official Proposal of Rule: December 23, 2002;
· Close of Comment Period: February 21, 2003;
· Promulgation of Standard: August 2003
· Compliance with Requirements; August 2006.

Summary tables of the MACT Standard Requirements were handed out with the OCMA meeting materials. These guides are available from the OCMA office. Please call or e-mail to request.

New Members: Miller and Company LLC

Join Us This Spring

The next OCMA meeting on Thursday, April 10, 2003, will be a tour of the GM-Powertrain-Defiance facility highlighting the new lost foam operation. For more information, contact Russ Murray at 614-876-5100.

EMTEC Report

Nick Cannell, EMTEC, has come to the rescue. Previously, updates of the OCMA website were covered by Buycastings.com. However, Buycastings.com terminated their support of the OCMA website last year. Since that time OCMA has chosen not to update the website in order to conserve financial resources. Nick has volunteered to provide the expertise needed to update the website at no charge to OCMA. Nick learned how to use the software just so he could assist OCMA. Our deepest gratitude to Nick.

Congress Continues Funding of ARS Research on Foundry Sand

As the OCMA News was going to press, we received good news from Roger Szemraj, Chief of Staff, Congresswoman Marcy Kaptur’s office. He indicated that the omnibus spending bill approved by the House and Senate conference committee included approximately $300,000 funding for the Agricultural Research Service (ARS) to continue its foundry sand research. The ARS has received more than $750,000 so far to evaluate the beneficial uses of foundry sand in agricultural and horticultural applications. This is clearly the most money ever appropriated by Congress to study the beneficial use of spent, non-toxic foundry sand. The industry owes a great debt to Congresswoman Marcy Kaptur and her staff, especially Roger Szemraj.

Never Give Up, Never Ever Give Up

If reading about the proposed USEPA Iron & Steel Foundry MACT standard does not make you a little, or a lot, hot under the collar, you can stop reading now. However, if you are sick and tired of having the federal government’s foot on your neck as you try to compete in today’s global economy, take heart. The MACT standard proposal actually sets the stage for a metal casting offensive. This proposal is so off the mark, it would be funny if it wasn’t so dangerous. We cannot shirk our shoulders and say “what can we do about it”. We cannot give up. We must continue to stand tall and speak out with the hope that we will finally be heard.

The AFS Government Affairs Conference will be held March 30-April 1, 2003, at the J. W. Marriott Hotel. The conference includes for the first time ever, a White House Briefing with high level Bush Administration officials. This is your opportunity to let them know the potential impact to the U. S. economy if the metal casting industry is not preserved. Also Tony Snow, host of Fox News Sunday will be a key speaker. The conference presents you with an opportunity to join with fellow metal casters and to meet with your congressional leaders to express your concerns about government action that affects you and your ability to stay in business. The Ohio delegation will be leading the way, join us!

Photos courtesy of Ric Babcock, G & C Foundry.