Preview Newsletter
ACC PM 3/20
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(ACC Mentioned) AFPM: Consumer Spending to Boost Chemicals
Mar 20, 2015 | ICIS Chemical Business
By Al Greenwood
The US chemical industry should grow by 4% this year – its best rate in years – because key end-use markets will either continue to expand or start to recover. However, not all end-use markets will prosper this year. -
(ACC Mentioned) Resin Prices Continue Downward Slide
Mar 20, 2015 | Plastics News
By Frank Espositio
The plastic resin market may not be known for its limbo dancers — but buyers continue to look at prices and sing out: How low will they go? -
(ACC Mentioned) Market Outlook: Panama Canal Expansion to Facilitate More US Polymer Exports
Mar 20, 2015 | ICIS Chemical Business
By Joseph Chang
The major expansion of the Panama Canal by 2016 could be a boon for the US petrochemical sector as it prepares to ramp up exports of polymers following a massive wave of ethylene and derivatives capacity coming on line in 2017-2018. -
(ACC Mentioned) Feinstein Introduces Bill To Protect People From BPA
Mar 20, 2015 | Environmental Working Group
By Shannon Van Hoesen
Sen. Diane Feinstein, D-Calif., introduced a bill yesterday that would help protect Americans from the toxic chemical bisphenol A, known as BPA, the Environmental Working Group said in a statement today. -
Feinstein, Leahy Reintroduce BPA Food Labeling Bill
Mar 20, 2015 | E&E - Greenwire
By Sam Pearson
Two Democratic senators yesterday reintroduced a bill that would require manufacturers to put new warning labels on food packaging that contains a controversial plasticizer and would commission a new safety study of the chemical. -
Q&A: Shimkus to Move Bills on Yucca, Coal Ash, TSCA
Mar 20, 2015 | BNA
Rep. John Shimkus (R-Ill.), chairman of the House Energy and Commerce Subcommittee on the Environment and the Economy, told Bloomberg BNA's Anthony Adragna in an exclusive March 18 interview that he has a busy congressional session planned. Immediate priorities include moving legislation on the management of coal ash and reforms to the Toxic Substances Control Act by the House's summer recess. -
Five Couches Without Flame Retardants You Can Buy Right Now
Mar 20, 2015 | Environmental Working Group
By Nicole Oliver
Do you know that your couch may be toxic to you and your kids? A weak federal chemical safety law and poorly designed state fire safety standards fail to protect Americans from thousands of dangerous chemicals like flame retardants. -
Cyberattack Database Could Speed Insurance Protection, Experts Say
Mar 20, 2015 | E&E - Energywire
By Peter Behr
A national database of losses from cybersecurity attacks could accelerate development of insurance coverage protecting companies against data breaches and potential damage to individuals and infrastructure, insurance experts told a Senate subcommittee yesterday. -
(ACC Mentioned) Reshoring and TCO
Mar 20, 2015 | Supply Demand Chain Exchange
By HARRY MOSER AND MILLAR KELLEY
Reshoring is the most direct solution for many of the hottest supply chain issues. Drastically shortened lead time dramatically reduces the complexity of monitoring all levels of a global supply chain and the importance of longer-term forecasting. Shorter distance and lead-time also dramatically improve inventory turns and reduce the risk of supply chain disruption. Increasingly, companies are using Total Cost of Ownership (TCO) or similar sourcing metrics and seeing that these benefits are, in many cases, achievable without sacrificing profitability. -
'Stay Tuned,' Senate Leader Says on Exports
Mar 20, 2015 | E&E - Energywire
By Jenny Mandel
After a year of studies, the time is coming to address a decades-old ban on exporting crude through legislative action, according to the chairwoman of the Senate Energy and Natural Resources Committee. -
Obama Cracks Down on Fracking
Mar 20, 2015 | The Hill - E2 Wire
By Timothy Cama
The Obama administration is setting new standards for the controversial hydraulic fracturing process, the first federal efforts to crack down on the practice that has largely been behind the oil and natural gas boom of recent years. -
Fracking Rules Unveiled by Obama Administration
Mar 20, 2015 | The Wall Street Journal
By Amy Harder and Daniel Gilbert
The Obama administration on Friday issued comprehensive rules for hydraulic fracturing, a move that also seeks to set a national standard for a patchwork of state regulations governing controversial drilling practices that have helped fuel a domestic oil and natural-gas boom. -
U.S. to Set Fracking Standards on Federal Land
Mar 20, 2015 | Reuters
By PATRICK RUCKER AND VALERIE VOLCOVICI
The Obama administration on Friday is due to unveil rules for oil companies that frack on federal land, included beefed-up safety measures, but won't likely require strict oversight as environmental groups want, according to sources. -
'BLM Fracking Rule' Release Expected Today
Mar 20, 2015 | E&E - Energywire
By Mike Soraghan
Advocates in the oil and gas industry and the environmental community are expecting to see long-awaited rules for hydraulic fracturing and drilling on federal land today. -
Interior Unveils BLM Frack Rule -- FracFocus in, Waste Pits Out
Mar 20, 2015 | E&E - Greenwire
By Phil Taylor and Mike Soraghan
The Obama administration released its final rule today for drilling and hydraulic fracturing on federal land, its biggest foray yet into the divisive issue many call "fracking." -
Dems Say they want To Regulate Fracking, Not Ban Iit
Mar 20, 2015 | E&E - Energywire
By Mike Soraghan
The House Democrats leading the charge to regulate drilling and hydraulic fracturing say they don't want to ban "fracking." -
Laurence Tribe, Obama's Legal Mentor, Attacks EPA Power Plant Rule
Mar 20, 2015 | Politico
By Erica Martinson
Opponents of the President Barack Obama’s climate change plan are bringing out the heavy artillery, turning to a former hero of the green movement to lay out a legal plan to bring down EPA’s upcoming rules to cut carbon dioxide emissions from power plants. -
McConnell Climate Campaign 'Way Outside the Bounds' -- Top Obama Aide
Mar 20, 2015 | E&E - Greenwire
By Robin Bravender
President Obama's senior climate adviser thinks Senate Majority Leader Mitch McConnell's campaign for states to ignore pending power plant rules is way out of line. -
US Diplomat Optimistic on Global Climate Pact
Mar 20, 2015 | The Hill - E2 Wire
By Timothy Cama
The United States’ envoy for climate change told a Chinese audience he is optimistic that world leaders will come to a deal on climate. -
(ACC Mentioned) STB Reauthorization Bill Would Change Freight-Rail Policies
Mar 20, 2015 | Progressive Railroading
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(ACC Mentioned) Congress Urged to Pass Freight Rail Policy Improvements
Mar 20, 2015 | Environmental Protection Online
The “Surface Transportation Board Reauthorization Act of 2015” was presented yesterday by U.S. Senate Committee on Commerce, Science & Transportation Chairman John Thune (R-S.D.) and Ranking Member Senator Bill Nelson (D-Fla.), which urges improving the efficiency of the Surface Transportation Board (STB). -
Environmentalists Play 'Whac-A-Mole' to Stall Crude-By-Rail Projects
Mar 20, 2015 | E&E - Energywire
By Ellen M. Gilmer and Blake Sobczak
When an oil company's expansion plans for Pacific Northwest crude by rail suffered a major setback last month, environmentalists spread the news just as quickly as they could Google "Skagit County Hearing Examiner."
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(ACC Mentioned) AFPM: Consumer Spending to Boost Chemicals
Mar 20, 2015 | ICIS Chemical Business
By Al Greenwood
The US chemicals industry is ready for a good year as low oil prices further stimulate consumer demand and boost national GDP growth
The US chemical industry should grow by 4% this year – its best rate in years – because key end-use markets will either continue to expand or start to recover. However, not all end-use markets will prosper this year.
The decline in oil prices has caused a sharp drop in oil rig count, which will lower demand for oilfield chemicals. The decline could leave some companies with high-cost inventory on their books.
Meanwhile, the strengthening dollar will make exports more expensive – although US producers will likely maintain their feedstock advantage.
Overall, the prospects are good for the industry, according to the American Chemistry Council (ACC), which put out the forecast for 4% growth for the chemical sector, excluding pharmaceuticals.
This year’s growth rate compares with 2.4% in 2014, 2.7% in 2013 and 1.9% in 2012, says Martha Gilchrist Moore, senior director, policy analysis and economics, for the ACC. The outlook for the US chemical industry is so strong because the overall economy will also grow. ACC expects US GDP to rise by 3.2% this year, says Gilchrist Moore. The latest estimate for US GDP growth from the International Monetary Fund (IMF) is even higher, at 3.6%.
A good part of that growth will come from spending from consumers, who are enjoying higher wages and employment as well as lower fuel prices, explains Gilchrist Moore. “The overall net [effect] of a virtuous cycle is going to kick in.”
Like others, Gilchrist Moore expects US consumers will spend some of the money they save on fuel. However, consumer spending is not the only bright spot in the US economy. New home construction could hit a milestone this year. ACC expects housing starts to reach 1.2m, the highest since 2007 – although still below the peak of 2.07m in 2005.
Housing is crucial because so much chemistry goes into construction, from polyvinyl chloride (PVC) to paints and coatings as well as synthetic fibres. ACC estimates that each new home built represents some $15,000 worth of chemicals.
Automobiles, another major chemical end-use market, should continue to perform well in the US. The automobile industry began recovering early from the recession and this year, ACC expects light-vehicle sales to reach 16.9m.
Like housing, automobiles are an important chemical end market, and ACC estimates each vehicle contains an average of $3,500 worth of chemicals. These include acrylonitrile-butadiene styrene (ABS), polycarbonate (PC) and nylon; paints and coatings; and styrene-butadiene-rubber (SBR) in tyre production.
OILFIELD CHEMICALS CHALLENGED
However, the US chemical industry will still face some challenges this year. Falling oil prices have caused a sharp decline in rig counts. That, in turn, has lowered demand for oilfield chemicals. In the US, February contract prices for triethylene glycol (TEG) fell 11.5% in part because of lower demand for the use of the product in the oilfields.Moody’s Investor Services has warned that the decline in oil prices could also slow down demand for proppants, which can be coated with epoxy or phenolic resins.
Falling oil prices have also caused prices for downstream chemicals to fall. This led to destocking at the end of 2014, as several chemical companies noted during their recent earnings calls with investors. These Consumer same companies confirmed, however, that destocking has ended and order patterns have returned to normal.
Other oil-related threats remain, however. Companies could be stuck with inventories that were built up when prices were high, notes Pam Schlosser, US chemicals leader for PricewaterhouseCoopers (PwC). Companies could also be locked into long-term contracts obligating them to buy fuel and feedstock at earlier, higher prices, she adds.
In some cases, the decline in prices has eroded some of the margins of US-made products. Naphtha prices have fallen with oil, reducing costs for foreign producers, who overwhelmingly rely on it as a feedstock. US companies rely heavily on natural gas liquids (NGLs) for feedstocks. Prices for these, however, have also declined, and Gilchrist Moore says the US has maintained its cost advantage, even if margins have eroded.
Low oil prices have not slowed down one of the biggest trends in the chemical industry, the construction of large-scale petrochemical plants by companies. So far, no company has pulled plans for new chemical capacity, Gilchrist Moore says. While Sasol halted plans for a gas-to-liquids (GTL) plant, this was a fuel project.
Ultimately, low oil prices could benefit the chemical industry. They will lower shipping costs for chemicals and finished products. For companies that rely on oil-based feedstock, they could also see their costs decline. Most important is the wide-spread expectation that low prices will act as an economic stimulus, boosting GDP and, subsequently, demand for chemicals.
BENEFITS FROM LOW OIL PRICES
CEOs such as Andrew Liveris of Dow Chemical and Peter Huntsman of Huntsman Corp have said repeatedly that demand for their products will ultimately increase because of the stimulus caused by low oil prices. ACC shares this view as well.In addition to reducing costs, benefitting consumers and stimulating the economy, low oil prices should also restrain inflation, ACC said in its year-end report on the chemical industry.
Low oil prices could also benefit the industry in more obscure ways. Earlier this year, Charles Shaver, CEO of Axalta Coatings Systems, said low fuel prices will encourage people to drive more. As people drive more, they have a greater likelihood to get into car wrecks, he said. That, in turn, would increase demand for coatings from body shops. Higher mileage could also increase demand for oil and fuel additives as well as tyres, the main end market for SBR.
Another big trend this year is the strengthening of the US dollar. Like oil prices, the strong dollar has given chemical companies a mixed bag of benefits and costs. During the recent earnings season, several companies reported foreign-exchange charges they attributed the appreciation of the dollar.
In time, the strong dollar could erode the feedstock advantage that US producers have enjoyed against their foreign competitors. Such currency-driven effects on trade, however, typically take time, says Gilchrist Moore. So far, ACC has not seen the stronger dollar disrupt exports.
The same would go for US chemical imports, which would become cheaper and provide those companies with a benefit.
Nonetheless, the US is a net chemical exporter once pharmaceuticals are excluded, according to ACC. That trade surplus likely reached $37bn in 2014. The strong US dollar could erode that surplus.
Chemical ceos are optimistic for M&A
The same factors that are benefitting the chemical industry should encourage more merger and acquisition (M&A) deals in the sector, notes Pam Schlosser of PwC. The outlook for the US automobile sector, the housing industry and consumer spending all bode well for deals.“All of the macroeconomic indicators would show that it should be a strong year,” she says.
PwC’s recent CEO sentiment survey also points to a strong 2015. Among the CEOs in the chemical industry, 72% said there were more growth opportunities now than there were three years ago, according to PwC. For the first time in several years, the US was in the top market for growth, at 53%, ranking slightly above China.
“If chemical CEOs feel more optimistic about growth opportunities, then clearly they are thinking about organic and inorganic growth,” Schlosser believes. “M&A will still be a strategic lever for chemical CEOs.”
Activist shareholders, a prominent trend in 2014 M&A – will likely continue both for chemicals and for US companies as a whole, Schlosser says. She would not comment about specific companies, in keeping with PwC policy, but 2014 saw several prominent companies having to deal with activist shareholders. Dow Chemical contended with Daniel Loeb’s Third Point and DuPont with Nelson Peltz’s Trian Fund Management.
However, not all of these activist shareholders will result in contentious fights, Schlosser says. For example, two funds, Corvex Management and Soroban Capital Partners, raised their stakes in Williams and released a letter outlining ways to improve the company. Williams later reached an agreement and appointed two activist investors to its board of directors. No proxy fight ensued.
Meanwhile, WR Grace is spinning off its construction-materials segment with no activist pressure.
Overall, 2014 was a strong year and 2015 should build on that momentum. Corporate balance streets are strong, leaving companies with built-up cash to pursue deals. At the same time, financing costs remain low.
Peter Young, president of investment bank Young & Partners, has estimated that 2014 closed with at least $40bn worth of completed deals, with nearly 90 transactions exceeding $25m.
Chemical companies as well as private-equity firms will continue to look for deals. The biggest upcoming deals include DuPont’s spin-off of Chemours, which will include the company’s titanium dioxide (TiO2) and fluoropolymer segments. DuPont should complete the spin-off in mid-2015, and Chemours’s stock will trade on the New York Stock Exchange (NYSE).
Dow is carving out its chlorine, chlorinated organics andepoxy resins businesses, preparing them for a sale, a joint venture or a spin-off in what could be several deals. Dow expects to have signed agreements in place by the second quarter of 2015.
Among buyers, private equity firm SK Capital Partners is targeting chemical carve-out or orphan businesses with its new $1bn fund. SK Capital has built a portfolio of chemical assets that includes butadiene (BD) and C4 specialties producer TPC Group, nylon producer Ascend Performance Materials, liquid sulphur dioxide producer Calabrian and Aristech Acrylics.
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(ACC Mentioned) Resin Prices Continue Downward Slide
Mar 20, 2015 | Plastics News
By Frank Espositio
The plastic resin market may not be known for its limbo dancers — but buyers continue to look at prices and sing out: How low will they go?
North American prices for polyethylene and polystyrene fell again in February, along with prices for nylon 6 and 6/6 and polycarbonate. Prices for PVC and PET bottle resin were flat for the month after falling in January, while polypropylene broke the trend by seeing a slight price increase in February, due in part to short-term supply issues.
The driver behind these plunges, of course, is the global oil market. Oil prices affect petrochemical prices, even though natural gas is the more commonly used feedstock in North America and the Middle East. West Texas crude oil prices were near $47 per barrel in late trading March 12, continuing their slide from over $100 a barrel seen as recently as mid-2014.
PE’s February drop of 5 cents per pound marked the fourth consecutive month that North American prices for that material have dropped, with the quartet of plunges totaling 16 cents. Prior to this streak, the regional PE field hadn’t seen a single price decline in two years.
Market watchers told Plastics News that March could see an additional PE price drop. U.S./Canadian PE sales didn’t get off to a great start in January, according to the American Chemistry Council, with low density PE sales down more than 2 percent, high density PE sales off by more than 8 percent and linear low density PE sales swooning more than 12 percent compared to the same month in 2014.
Pricing challenges continue to confront the PS market, where prices now have dropped for six straight months, most recently falling 2 cents per pound in February. The six-month slide has brought regional prices for the material down by a total of 23 cents per pound.
The PS price slump has been tied into prices for benzene feedstock, which have lost around 60 percent of its value between August and February, dropping from $5.06 per gallon to $2.01. PS also broke slowly from the gate in 2015, with January sales down more than 4 percent.
Price declines in nylon and PC also were feedstock-related as both materials are expected to benefit from strong automotive market demand in 2015. Nylon 6 resin prices slipped a total of 7 cents per pound in the first two months of 2015, with nylon 6/6 and PC resin prices sliding 8 cents per pound in that period as well. Automotive uses account for 40 to 50 percent of North American nylon resin demand.
Regional prices for PVC and PET bottle resin held their ground in February, leading producers of those materials to hope that the worst of their recent slides are over. PVC prices had fallen a total of 7 cents per pound in the three-month November-January period. PVC makers are hoping for improved results in 2015, after 2014 demand fell almost 2 percent. A gain of almost 3 percent in domestic sales of the material in 2014 was wiped out by a drop of more than 10 percent in export sales.
PET bottle resin prices in the region decreased by an average of 16 cents per pound in the three-month November-January span — including a 5-cent January dip — before not moving in February. Supplies of imported PET also have been affected by labor situations at docks on the U.S. West Coast, which have reduced supply availability.
Some global PET feedstocks are seeing their markets solidify, leading market watchers to be apprehensive about predicting further price drops. Demand for PET bottle resin, however, continues to be damaged by a long-term downward U.S. trend in consumption of carbonated soft drinks, the largest end use for the material.
Polypropylene, on the other hand, saw prices take an unexpected 1-cent per-pound increase in February. Prices had plummeted a total of 20 cents in the previous two months as feedstocks swooned. The slight February uptick was the result of production limits at plants operated by Ineos Group and Phillips 66.
PP sales charged hard into 2015, surging almost five percent vs. the same month in 2014. Domestic sales for the month grew almost 6 percent, even as export sales slumped more than 20 percent.
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(ACC Mentioned) Market Outlook: Panama Canal Expansion to Facilitate More US Polymer Exports
Mar 20, 2015 | ICIS Chemical Business
By Joseph Chang
The major expansion of the Panama Canal by 2016 could be a boon for the US petrochemical sector as it prepares to ramp up exports of polymers following a massive wave of ethylene and derivatives capacity coming on line in 2017-2018.
The Panama Canal expansion would allow for larger containerships to pass through – up to around 13,000 TEU (20-foot equivalent units) versus about 5,000 TEU currently. A TEU is based on a 20-foot long intermodal container box.
“This could reduce the cost to serve Asia from the US. As new volumes come online, the West Coast ports can’t handle them,” said Paul Bjacek, head of chemicals and natural resources research at consultancy Accenture.
The US is in the midst of an unprecedented building spree for petrochemical plants as a result of the shalegas boom. There are already six new ethane crackers under construction amid expansions of existing crackers that will bring on around 8.1m tonnes/year of ethylene capacity, or 33% of the current base.
These crackers will come with derivative facilities, primarily polyethylene (PE). And much of the new capacity will be targeted for export.
Today, around 70% of US PE exports go through ports on the US Gulf Coast – a figure that has been steadily rising since 2000 when it was in the low to mid-50% range, according to statistics compiled by Accenture.
One benefit of an expanded Panama Canal would be that more containers would likely arrive from Asia to US Gulf Coast ports, alleviating a consistent shortage of such containers.
“More incoming traffic from Asia will likely be diverted from US West Coast ports to East and Gulf Coast ports, which are closer to consumer markets. Arriving freight will largely be consumer goods and as a result, there will be greater container availability at these ports. This will solve the shortage and will help in exporting,” said Kevin Swift, chief economist of the American Chemistry Council (ACC).
“The Panama Canal expansion will affect US chemical trade flows. It would just make it easier to ship large volumes of resin from the US Gulf Coast to Asia,” he added.
“The expansion allows larger ships to transit the Panama Canal to serve the Port of Houston. This likely would increase the availability of containers for exports from Houston,” said a spokesperson with ExxonMobil Chemical.
“The expansion is expected to improve canal transit times with the potential to improve overall delivery time to Asia Pacific customers,” the spokesperson added.
ExxonMobil Chemical is building a new 1.5m tonne/year ethane cracker in Baytown, Texas, along with two polyethylene units of 650,000 tonnes/year each that can produce metallocene linear low density PE (mLLDPE) and LLDPE.
However, Dow Chemical, which is also building a 1.5m tonne/year cracker in Freeport, Texas, along with downstream PE and other products, said the Panama Canal expansion “will not have a major impact on potential exports”.
On the US Gulf Coast, the Port of Houston is also undergoing a major expansion that will allow for containership sizes of up to around 8,000 TEU versus a current 5,000 TEU, noted Accenture’s Bjacek.
“Producers are so focused on building plants but they need to also focus on making sure local port infrastructure is working at its best, and where to put some of their facilities such as those for packaging,” he said. “For past capacity expansions, producers didn’t have to think about it – the system took care of it. But with all the new capacity coming on, it’s more critical at this point in time.”
The Port of Houston Authority is investing on infrastructure improvements “to ensure that the Port of Houston can accommodate the advent of larger vessels and increased cargo resulting from the pending Panama Canal expansion in 2016, as well as the expected future demographic growth in the region,” it states on its website.
It expects to commit $275m for various capital projects in 2015 related to terminals, railroads, channel development, building renovations and information technology.
For polymer exports coming out of the US Gulf Coast, a system may develop of “feeder” ships in the 4,500-5000 TEU range making “milk runs”, feeding Panama scale ships in deeper water ports in the Caribbean or Mexico, noted Bjacek.
The other option is to ship plastic pellets by rail to the US West Coast ports for product to be shipped to Asia.
“Railroads also trying to be competitive to the West Coast,” said Bjacek. “There are lots of options. Producers have to be on top of them and also make sure they have the right infrastructure.”
Another intriguing option involves building a cracker and derivative PE plants on the West Coast of Mexico if a pipeline were to be built from the US to the region to transport natural gas. This would enable easier exports to Asia.
“There is talk of more pipelines from the US to Mexico to move natural gas and NGLs (natural gas liquids). Perhaps, one day, there would be a future potential for a petrochemical export facility on the West Coast of Mexico that would help monetise US gas,” said Bjacek.
Mexico itself has a deficit of PE which will only partly be filled with the oncoming 1.05m tonne/year cracker and PE plants in Coatzacoalcos, Mexico, being built by Braskem Idesa. That project, called Ethylene XXI, is expected to be completed by Q4 2014.
“There is talk of more pipelines from the US to Mexico to move natural gas and NGLs (natural gas liquids). Perhaps, one day, there would be a future potential for a petrochemical export facility on the West Coast of Mexico that would help monetise US gas,” said Bjacek.
In January 2015, a consortium of Mexico’s Carso Energy, Energy Transfer Partners and US-based MasTec won a $767m contract to build a 230 kilometre pipeline running from Texas to northern, central and Western Mexico through Chihuahua state. The pipeline is expected to be complete by 2017.
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(ACC Mentioned) Feinstein Introduces Bill To Protect People From BPA
Mar 20, 2015 | Environmental Working Group
By Shannon Van Hoesen
Sen. Diane Feinstein, D-Calif., introduced a bill yesterday that would help protect Americans from the toxic chemical bisphenol A, known as BPA, the Environmental Working Group said in a statement today.
“BPA is an endocrine disruptor that has no place in our food or food packaging,” said Sonya Lunder, EWG senior analyst. “We are grateful for Sen. Feinstein’s leadership on making sure disclosure and safety measures are in place to better protect people from this dangerous chemical.”
The insides of most food cans manufactured in the U.S. are coated with epoxy made with BPA, a synthetic estrogen that can disrupt the endocrine system and has been linked to a number of serious health problems including cancer, infertility, early puberty and diabetes. Epoxy readily breaks down and leaches BPA into any food or drink it touches.
Feinstein’s BPA in Food Packaging Right to Know Act would require cans and other food containers made with BPA to bear a clear warning label. The bill would mandate a safety review of BPA in food.
Last year, the U.S. Food and Drug Administration said that the ubiquitous presence of BPA in canned food and beverages is too slight to endanger human health. Manufacturers of canned goods and their lobbyists applauded the FDA’s assertion, and the American Chemistry Council launched a media campaign to promote it.
“It is unfortunate that the FDA is ignoring an enormous amount of scientific evidence that points out the dangers of BPA,” Lunder said. “Hundreds of independent scientists disagree with the agency, which persists in relying on flawed, outdated and inadequate methods for assessing the toxicity of hormone disruptors. This is why Sen. Feinstein’s right to know bill is so important to Americans who want to reduce their exposure to BPA.”
EWG is calling on Congress to act quickly to pass the BPA in Food Packaging Right to Know Act. In the meantime, people can limit their exposure to BPA by avoiding canned foods when possible or choosing canned foods labeled BPA-free. See EWG’s Guide to BPA for more information and tips.
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Feinstein, Leahy Reintroduce BPA Food Labeling Bill
Mar 20, 2015 | E&E - Greenwire
By Sam Pearson
Two Democratic senators yesterday reintroduced a bill that would require manufacturers to put new warning labels on food packaging that contains a controversial plasticizer and would commission a new safety study of the chemical.
Called the "BPA in Food Packaging Right to Know Act," S. 821 would require companies to add a label on food packaging containing bisphenol A, or BPA, informing consumers: "This food packaging contains BPA, an endocrine-disrupting chemical, according to the National Institutes of Health."
The bill would also direct the Department of Health and Human Services to complete a revised safety standard for food containers containing BPA and evaluate alternatives to the chemical.
Attributing the warning to the National Institutes of Health appeared to be an addition to the bill compared with a similar version put forward in 2013. Sens. Dianne Feinstein (D-Calif.) and Patrick Leahy (D-Vt.) failed to win support for the plan in the previous session of Congress, and the chemical industry has strongly opposed attempts to restrict the use of BPA.
"Consumers deserve to know if the items they frequently purchase at the grocery store could expose them and their families to BPA," Feinstein said in a statement. "This straightforward bill would simply require packaging that contains BPA to be labeled, so consumers can make the best decisions for their families."
Leahy said in a statement the bill's intent is to stimulate businesses to shift to safer chemicals by helping customers learn more about BPA.
The NIH's National Toxicology Program found in 2008 that BPA could "possibly" affect human development and reproduction, and that the chemical caused developmental changes in animals (E&ENews PM, Sept. 3, 2008).
The chemical industry has disputed the NTP's findings and has campaigned to highlight reports by the U.S. Food and Drug Administration and the European Food Safety Agency that BPA does not pose a health threat to consumers. However, California regulators have listed BPA as a reproductive toxicant under the state's Safe Drinking Water and Toxic Enforcement Act of 1986, or Proposition 65, citing the NIH's report (E&E Daily, Dec. 22, 2014).
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Q&A: Shimkus to Move Bills on Yucca, Coal Ash, TSCA
Mar 20, 2015 | BNA
Rep. John Shimkus (R-Ill.), chairman of the House Energy and Commerce Subcommittee on the Environment and the Economy, told Bloomberg BNA's Anthony Adragna in an exclusive March 18 interview that he has a busy congressional session planned. Immediate priorities include moving legislation on the management of coal ash and reforms to the Toxic Substances Control Act by the House's summer recess. Shimkus also plans to visit the Yucca Mountain site in early April with House colleagues and move legislation on nuclear waste management this session. Although the House and Senate are in contact about most of these priorities, Shimkus said they are not coordinating on them and will have to resolve differences in conference committees. Concerned about the EPA Clean Power Plan, the Illinois Republican said he is intrigued by the idea of legislation that would delay enforcement of regulations until legal challenges had been exhausted, but he said he has no immediate plans for a bill like that.
Interview with Rep. John Shimkus (R-Ill.), chairman of the House Energy and Commerce Subcommittee on the Environment and the Economy
Bloomberg BNA:
You've been called everything from a pro-Yucca Mountain “fanatic” to “the enemy” of the proposed nuclear waste repository in Nevada. What do you make of those attacks?
Shimkus:
When people resort to personal attacks and name-calling, there must be some truth in the message. And, I mean, I'm fine.
Bloomberg BNA:
You'll be leading a congressional trip to the site in early April. How many people will attend, and what do you hope to accomplish through that?
Shimkus:
We really don't know the number. A lot of folks would be coming, but they've already committed to a deepwater tour with [House Majority Whip] Steve Scalise (R-La.). That's a great tour to go see an oil rig in the Gulf, so I can't blame them.
The trip is very important for people to really see how far away the mountain is from Las Vegas, to see how far away the mountain is from the government property line and how it's a mountain in a desert.
Bloomberg BNA:
What would you like to get done on Yucca this year, and what are your options for doing that?
Shimkus:
There's some authorization language that has to be addressed, and that's what we hope to move. Those [issues] have been well-vetted.
I know I have got some enemies in the state of Nevada, but I have some friends. I've been to Yucca Mountain twice—once when it was an operating Department of Energy facility and once when it was closed. And, I'm telling you, Nevada was receiving a lot more revenue when it was open than when it was closed.
The other thing is my friends from Nevada like to spin is the story that this stuff is going to come down the [Las Vegas] strip. That's just crazy talk. But we'd like to work with them to identify routes, to build rail spurs, to build interchanges, to be able to get the spent nuclear fuel—or the Defense waste—safely, to a secure location.
It'd be great if they'd be helpful in identifying that location. They don't have to be supportive, but this represents a lot of federal money and jobs for the state of Nevada. This is a long-term commitment of billions of dollars to the state of Nevada, and we're not trying to be mean or abusive. We're just trying to follow the law.
Bloomberg BNA:
Some Republicans in the Senate have said Yucca is only part of the solution and that there may need to be other facilities. Is that something you agree with?
Shimkus:
We've had a lot of discussions in the bicameral nature of our legislative process where, if you look at right now, you have about 7,000 metric tons [of nuclear waste] already, and that's what Yucca is certified for. And we're still generating it, right? So the question is, will there need to be another long-term geological repository? That's part of that debate.
I really believe in the process of moving bills and going to conference. If the Senate comes through with a bill that addresses some of those concerns, we'll move a bill that addresses our concerns, and we'll see where we can meet the middle.
Bloomberg BNA:
Does the shift of Sens. Harry Reid (D-Nev.), a long-time opponent of Yucca, and Barbara Boxer (D-Calif.), critical of some Toxic Substances Control Act reform efforts, into the minority help the chances of getting bills done this year?
Shimkus:
I was very fortunate to be over on the Senate side just before they had their hearing. To the credit of the senators involved—that's really Sens. David Vitter (R-La.) and Tom Udall (D–N.M.)—they have done the work needed in their process to have a bipartisan bill. Not just a bipartisan bill that's defined as one Democrat, but a bipartisan bill that's defined as a lot of Democrats. And that's really important to their process.
So I'm optimistic that Leader McConnell can move a bill like that.
Bloomberg BNA:
Have you looked at the bill itself? What do you make of it?
Shimkus:
Well, I think it's similar to what they were working on in the last Congress. I think they made a few tweaks. Sen. Udall is a good friend of mine. He is an unabashed supporter of ensuring that the health and protections are in there for the communities. No one questions that.
So, we'll have to move our bill and we'll have to see where we can go. But they've done a ton of work and I want to give them credit for that.
Bloomberg BNA:
What other sorts of priorities are you pushing this year in your subcommittee?
Shimkus:
Well, we've already done an algae bloom bill that we passed by suspension. Now, we're moving on to coal ash provisions, which the markup is next week in subcommittee.
Following that, we're already starting on the TSCA process, internally, and that'll be the next schedule item. We'd like to see both those bills definitely out of committee, and I'd like to see them off the floor of the House, by the summer break.
Once they get out of my committee, the workload goes down a little bit and then we can start dealing with some language on nuclear waste.
Bloomberg BNA:
And, in terms of TSCA, is this something that can get done this Congress? Is this the best opportunity for reform?
Shimkus:
Absolutely. This law hasn't been touched—except for a court case—since 1976. No one thinks it's working. So, you got to believe we can fix it. Maybe not in total, but at least do a better job than we're doing now. And I think that's what is bringing the bipartisan group together—it can't be worse than what we already have.
Bloomberg BNA:
But Sen. Boxer retires in two years. She's obviously been a big obstacle in getting TSCA reform done. Would it be easier to get something done after she's left?
Shimkus:
In this business, you don't delay for a future Congress, not knowing what that Congress would look like.
Bloomberg BNA:
What about the prospects of coal ash legislation in the Senate? Do you think the bill you will pass in the House can attract enough Democratic support over there?
Shimkus:
The other thing I've learned—it's been a fun experience—is how to deal with certain bills with the other chamber. I've talked with Sen. [John] Hoeven (R-N.D.). He knows what we're doing.
Sometimes you've just got to move a bill. I got a schedule. I got a clock. He knows what we're doing. We're in close conversation. But then it'll be upon their shoulders to do whatever they need to do and how they need to do it.
TSCA is one where we've been working very closely. We know exactly kind of what the Senate has been doing and they know our direction. Them moving first with the hearing and the bipartisan bill is very helpful to us and appreciated.
On nuclear waste, you've got [Sen. Lisa] Murkowski (R-Alaska) involved and trying to decide what kind of bill to move and how. And we'll let her do that while we do our thing. Those are probably more separate. I think staff knows what's going on.
Bloomberg BNA:
Is that process working where you operate in your own orbits and then converge later on?
Shimkus:
I taught government. I still believe in the system. How a bill becomes a law is you don't pre-conference bills, I mean, by the book. You can, but let's do our work.
I believe you can change and modify things as you go through the process. When we start moving these bills officially, you'll hear gnashing of teeth and the statement will be, ‘This will destroy the world' one way or the other. And the reality is that's just the first bite—subcommittee. And you get the next bite—full committee. Then you probably get the next bite on the floor. Then you got to go to conference, you can change it again. If the president would decide to get involved in negotiations, he may through his comments to the conference committee decide to tweak things.
So, we got to move a bill to get this thing started. On all three of those issues. We're working hard and it's enjoyable to try to legislate.
Bloomberg BNA:
What else can we expect from the full committee on the EPA Clean Power Plan?
Shimkus:
I don't know that answer.
Bloomberg BNA:
What do you make of this strategy that states should just say no to complying with the rules? Leader McConnell has advocated for it.
Shimkus:
I find it interesting. I'm intrigued. I don't know much about it. I'm not a lawyer. I'm not a constitutional scholar.
There are a couple of issues: forcing states into regional compacts and crediting each other for their generation or lack of generation [of greenhouse gas emissions], or the issue of having the federal government come in and make that decision if you decide not to.
If they go that direction [of forcing a federal plan] or a court case where you still have to comply with the rules and the regulations at the time, that's concerning.
Bloomberg BNA:
That's true of a lot of these regulations, where people have to comply before the court cases are decided.
Shimkus:
I was thinking about this in the hearing. Why not write—the president has to the sign the bill, that's why—why not write a bill that says let's let the court decide before we enforce the rules?
Bloomberg BNA:
No plans for something like that?
Shimkus:
That's why you have hearings. But the reality is, would the president sign that bill? Probably not.
Bloomberg BNA:
There's been some talk from Senate Environment and Public Works Committee Chairman James Inhofe (R-Okla.) and House Energy and Commerce Committee Ranking Member Frank Pallone (D-N.J.) about moving a brownfields reauthorization bill this year. Would you support something like that.
Shimkus:
I'd be excited. Ranking Member Pallone and I have a great relationship. Anytime you can try to reach out and find some common ground to move an issue like that—he's from New Jersey, so he's got a lot of facilities—to get property in the condition to be used rather than sitting idle, that's got to be something everybody would support. The devil is always going to be in the details.
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Five Couches Without Flame Retardants You Can Buy Right Now
Mar 20, 2015 | Environmental Working Group
By Nicole Oliver
Do you know that your couch may be toxic to you and your kids? A weak federal chemical safety law and poorly designed state fire safety standards fail to protect Americans from thousands of dangerous chemicals like flame retardants.
Ten years ago, the U.S. Environmental Protection Agency and health advocates forced flame retardant chemicals called polybrominated diphenyl ethers, or PBDEs, from the market. These chemicals were showing up in people’s bodies, and research suggested that they disrupted hormone signaling and children’s developing brains and nervous systems. In 2008, EWG testing found that toddlers’blood contained nearly three times the levels of PBDEs of their parents’ bodies.
While most PBDEs are no longer used in couches, the broken federal chemical law allows other potentially problematic chemicals to be substituted. Last year, EWG teamed up with Duke University scientists to look at concentrations of these alternative fire retardants in more than 20 mothers and children. The urine of every mother and child tested yielded evidence of exposure to TDCIPP, a cancer-causing fire retardant. In fact, when the participants’ bodies were tested for a chemical biomarker left when TDCIPP breaks down, the study found that the children’s bodies contained five times the amount of the chemical in their mothers. In the most extreme case, a child had 23 times the level measured in the mother.
Here’s the bad news: The Toxic Substances Control Act is a badly broken federal law that allowed this to happen.
Now for the good news: Thanks to a key policy change in California fire safety standards, mainstream furniture manufacturers like Pottery Barn and Ikea now produce sofas and sectionals without flame retardant chemicals. Suddenly consumers can choose from a multitude of fire retardant-free furniture options.
Even more good news: As of January 1 of this year, furniture manufacturers must label products they want to sell in the state of California, clearly indicating whether each piece contains flame retardants. These revolutionary changes will take the guesswork – and the chemicals – out of sofa shopping.
Make sure your new couch doesn’t contain fire retardants
While the manufacturers listed below have eliminated chemical flame retardants from products manufactured after January 1, 2015, they may still sell their 2014 stock (with the exception of Room & Board). It’s important to visit the store or call customer service to confirm that the couch you purchase has the new label and was manufactured in 2015. The new label should read: “The upholstery materials in this product contain NO added flame retardant chemicals.”
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Cyberattack Database Could Speed Insurance Protection, Experts Say
Mar 20, 2015 | E&E - Energywire
By Peter Behr
A national database of losses from cybersecurity attacks could accelerate development of insurance coverage protecting companies against data breaches and potential damage to individuals and infrastructure, insurance experts told a Senate subcommittee yesterday.
Ben Beeson, vice president for cybersecurity and privacy with the Lockton Cos., a global independent insurance broker, said the scarcity of actuarial data quantifying cybersecurity losses is holding back growth of coverage, particularly for critical infrastructure industries. Understanding the risk to utility equipment such as turbines, for example, "is very challenging" and "frankly ambiguous for the insurance industry," he said.
"There is a real linkage between improved cybersecurity and potentially the growth of the insurance market itself," Beeson said. The better that cyber risks are quantified, the easier it will be for the industry to extend coverage to companies that maintain a strong cyberdefense culture, he said.
"More data can help drive that," he told the Senate Commerce, Science and Transportation Subcommittee on Consumer Protection, Product Safety, Insurance and Data Security. Insurance industry representatives are discussing creation of such a clearinghouse with the Department of Homeland Security, Beeson noted.
Catherine Mulligan, senior vice president for Zurich North America's Management Solutions Group, agreed that a clearinghouse could speed up development of coverage. "The breaches are really outpacing the usual time ... for an insurance product to develop," she said.
"Insurers are generally not in the business of guessing" when they assess risk and extend coverage, she said. "Without the data to back it up, that is impossible."
There is a lot of activity -- and confusion -- in creating cybersecurity insurance products, particularly as the coverage expands from traditional data breach issues to potential physical damage to infrastructure systems and resulting injuries to individuals, the subcommittee was told.
Cybersecurity coverage written last year totaled $1.5 billion to $2 billion, with one major company reporting a 32 percent increase over 2013. However, that is a fraction of the $1 trillion North American insurance market, Beeson said. The annual total could grow to $5 billion by the end of the decade, but at the same time, some insurers and reinsurers are pulling back because of the uncertainty surrounding threats and vulnerabilities, Mulligan said. A misnomer
"The term cyber insurance is a misnomer," Mulligan said in her prepared testimony. "One cyber event can trigger multiple types of claims, for multiple insureds within one company, and even cause physical damage to a manufacturer or utility. The lesson can be boiled down to the simple fact that the scope of the challenge is too broad to be solved by the private sector alone. Not all losses from a cyberattack will be or even could be covered by an insurance policy."
"There is no standard insurance policy language for cyber insurance," Beeson said. The Insurance Services Offices Inc. (ISO), which issues standard liability policy language, recently published cyber coverage terms. "But I know of no insurer that has adopted the ISO policy terms or has plans to do so in the near future," Beeson said.
The witnesses supported action by Congress to create a standard requirement covering how companies notify victims of cyber breaches. There are separate standards in 47 states, plus the District of Columbia and two U.S. territories, noted Hartford, Conn., attorney Michael Menapace, who is also an adjunct professor at Quinnipiac University School of Law. A single standard would reduce company costs and improve consumer protection, he said.
"A single federal standard that replaces the current patchwork" would be an improvement, he said.
Panelists also endorsed current proposals to improve the sharing of cybersecurity threat information between government and companies, and among companies.
Several praised the creation of a voluntary framework of cybersecurity best practices by the National Institute of Standards and Technology as a starting point for insurance underwriting standards. "The framework provides the tool that is needed to help boards of directors understand [the threat] in laymen's term," Beeson said.
But Ola Sage, chief executive of e-Management, a small business information technology and cybersecurity service provider in Silver Spring, Md., offered a cautionary message to the subcommittee. Her firm took out cybersecurity insurance last year. This year, initially, it was informed the policy wouldn't automatically be renewed, and when it was, the premium jumped by 12 percent.
"We were stunned, confused and frustrated," she said. After a year of using the NIST framework and investing in cybersecurity tools, "it was discouraging to be rewarded with an increase in our premiums."
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(ACC Mentioned) Reshoring and TCO
Mar 20, 2015 | Supply Demand Chain Exchange
By HARRY MOSER AND MILLAR KELLEY
Reshoring is the most direct solution for many of the hottest supply chain issues. Drastically shortened lead time dramatically reduces the complexity of monitoring all levels of a global supply chain and the importance of longer-term forecasting. Shorter distance and lead-time also dramatically improve inventory turns and reduce the risk of supply chain disruption. Increasingly, companies are using Total Cost of Ownership (TCO) or similar sourcing metrics and seeing that these benefits are, in many cases, achievable without sacrificing profitability.Reshoring Background
Data from the Reshoring Initiative shows that offshoring of U.S. manufacturing is now in balance with reshoring. Since 2003, new offshoring is down by 70 to 80 percent and new reshoring is up by 1,500 percent. The most important accomplishment is that the net-loss of 100,000-plus manufacturing jobs each year has ended. New reshoring is now balancing new offshoring at about 40,000 manufacturing jobs/year, resulting in the first neutral year of offshoring job loss/gain in the last 20—the bleeding has stopped!
As of October 2014, about 170,000 manufacturing jobs have been brought to the U.S. from offshore (400,000 total jobs when including the manufacturing multiplier effect of approximately 1.4). That job gain is the result of both new reshoring—the return of manufacturing work that was previously produced offshore—and FDI (Foreign Direct Investment) in the manufacturing sector. These trends represent about 25 percent of the total increase in U.S. manufacturing jobs since the low in February 2010[1]. For the economy, the continued challenge is to bring back another 3-4 million manufacturing jobs that are still offshore. Meeting this challenge requires that the positive trends that are already bringing work back, such as rising costs offshore and lower energy costs at home, continue. Additionally, the U.S. can improve its competitiveness, in the following manner:
First, in the short to medium term, use of TCO (Total Cost of Ownership) or similar comprehensive metrics—getting companies to recognize all of the benefits of local production and adopt a more comprehensive total cost analysis—is the most effective action to accelerate the return of manufacturing and balance the trade deficit. Increased use of TCO, alone, could cut the trade deficit by 25 percent and bring back one million manufacturing jobs. This requires educating companies to use TCO, and is entirely under the control of our society and corporate culture. Detailed, objective reporting on reshoring successes is a necessary element to motivate companies to reevaluate offshoring.
Second, in the longer term, to get the other 75 percent requires improved competitiveness with political and societal actions: tax reform, currency/tariffs, skilled workforce expansion, etc. All involve politics, most are cultural and endemic. Currency/tariffs are subject to WTO rules, and are influenced by other countries’ actions. There must be much more progress on these fronts in decades to come than there has been in the past.
Ideally, it is best to do both sets of actions. We should be enthusiastic about reshoring as an important element of the manufacturing renaissance but not optimistic about the renaissance until all companies are using TCO for their sourcing decisions and the longer-term actions are being implemented.
Implications for Supply Chains
Here is a list of important supply chain and related issues and how each is mitigated by local sourcing, especially in a developed country. These advantages should be enough to motivate companies to reevaluate offshoring to see whether the overhead, risk and strategic benefits of reshoring now offset the, typically higher, domestic cost of goods sold.
As manufacturing returns from offshore, regional/industrial clusters will continue to evolve, requiring ongoing adaptation of supply chains. Knowing how reshoring/FDI and supply chains mutually influence one another can help supply chain professionals set up infrastructure in anticipation of and in support of a continued trend toward localized manufacturing.
By reshoring, companies can more easily respond to customers’ changing needs, minimize supply chain disruptions and eliminate the larger production runs and inventories associated with long distance offshoring. Shorter supply chains provide the agility needed for mass customization. Localization shortens supply chains and positions manufacturing near engineering and customers, which gives companies better flexibility to respond and customize quickly.
Reshoring can be an important part of a lean strategy. W. Edwards Deming wrote
“End the practice of awarding business on the basis of price tag. Instead, minimize total cost.”[2] The impact of offshoring on each of the Seven Toyota Wastes is described in the table below.
When manufacturing is moved next to engineering, companies can improve design, eliminate waste, improve quality and increase productivity, often making a better product more easily and at a lower cost. When productivity is increased, it makes the product easier to reshore by reducing the U.S. manufacturing and total cost vs. offshore. In many cases companies find that, although the production cost is lower offshore, the total cost is higher, making it a good economic decision to reshore manufacturing to the U.S.
In order to help companies objectively decide where to manufacture, the not-for-profit Reshoring Initiative offers a free Total Cost of Ownership Estimator™ to calculate the real P&L impact of reshoring vs. offshoring. In 2013 the Department of Commerce created the ACE Tool (Access Costs Everywhere) to promote reshoring and greater use of TCO analysis. The most recent addition to ACE is the cost differential frontier (CDF) tool, which allows companies to quantify the potential savings derived from reducing lead-time.
Trending Now
Currently, the top industries reshoring, by number of jobs, have been transportation equipment, electrical equipment, computer products, fabricated metal products and wood products. | Share | Share | Share | Share
Reshoring is the most direct solution for many of the hottest supply chain issues. Drastically shortened lead time dramatically reduces the complexity of monitoring all levels of a global supply chain and the importance of longer-term forecasting. Shorter distance and lead-time also dramatically improve inventory turns and reduce the risk of supply chain disruption. Increasingly, companies are using Total Cost of Ownership (TCO) or similar sourcing metrics and seeing that these benefits are, in many cases, achievable without sacrificing profitability.
Reshoring Background
Data from the Reshoring Initiative shows that offshoring of U.S. manufacturing is now in balance with reshoring. Since 2003, new offshoring is down by 70 to 80 percent and new reshoring is up by 1,500 percent. The most important accomplishment is that the net-loss of 100,000-plus manufacturing jobs each year has ended. New reshoring is now balancing new offshoring at about 40,000 manufacturing jobs/year, resulting in the first neutral year of offshoring job loss/gain in the last 20—the bleeding has stopped!
As of October 2014, about 170,000 manufacturing jobs have been brought to the U.S. from offshore (400,000 total jobs when including the manufacturing multiplier effect of approximately 1.4). That job gain is the result of both new reshoring—the return of manufacturing work that was previously produced offshore—and FDI (Foreign Direct Investment) in the manufacturing sector. These trends represent about 25 percent of the total increase in U.S. manufacturing jobs since the low in February 2010[1]. For the economy, the continued challenge is to bring back another 3-4 million manufacturing jobs that are still offshore. Meeting this challenge requires that the positive trends that are already bringing work back, such as rising costs offshore and lower energy costs at home, continue. Additionally, the U.S. can improve its competitiveness, in the following manner:
First, in the short to medium term, use of TCO (Total Cost of Ownership) or similar comprehensive metrics—getting companies to recognize all of the benefits of local production and adopt a more comprehensive total cost analysis—is the most effective action to accelerate the return of manufacturing and balance the trade deficit. Increased use of TCO, alone, could cut the trade deficit by 25 percent and bring back one million manufacturing jobs. This requires educating companies to use TCO, and is entirely under the control of our society and corporate culture. Detailed, objective reporting on reshoring successes is a necessary element to motivate companies to reevaluate offshoring.
Second, in the longer term, to get the other 75 percent requires improved competitiveness with political and societal actions: tax reform, currency/tariffs, skilled workforce expansion, etc. All involve politics, most are cultural and endemic. Currency/tariffs are subject to WTO rules, and are influenced by other countries’ actions. There must be much more progress on these fronts in decades to come than there has been in the past.
Ideally, it is best to do both sets of actions. We should be enthusiastic about reshoring as an important element of the manufacturing renaissance but not optimistic about the renaissance until all companies are using TCO for their sourcing decisions and the longer-term actions are being implemented.
Implications for Supply Chains
Here is a list of important supply chain and related issues and how each is mitigated by local sourcing, especially in a developed country. These advantages should be enough to motivate companies to reevaluate offshoring to see whether the overhead, risk and strategic benefits of reshoring now offset the, typically higher, domestic cost of goods sold.
As manufacturing returns from offshore, regional/industrial clusters will continue to evolve, requiring ongoing adaptation of supply chains. Knowing how reshoring/FDI and supply chains mutually influence one another can help supply chain professionals set up infrastructure in anticipation of and in support of a continued trend toward localized manufacturing.
By reshoring, companies can more easily respond to customers’ changing needs, minimize supply chain disruptions and eliminate the larger production runs and inventories associated with long distance offshoring. Shorter supply chains provide the agility needed for mass customization. Localization shortens supply chains and positions manufacturing near engineering and customers, which gives companies better flexibility to respond and customize quickly.
Reshoring can be an important part of a lean strategy. W. Edwards Deming wrote
“End the practice of awarding business on the basis of price tag. Instead, minimize total cost.”[2] The impact of offshoring on each of the Seven Toyota Wastes is described in the table below.
When manufacturing is moved next to engineering, companies can improve design, eliminate waste, improve quality and increase productivity, often making a better product more easily and at a lower cost. When productivity is increased, it makes the product easier to reshore by reducing the U.S. manufacturing and total cost vs. offshore. In many cases companies find that, although the production cost is lower offshore, the total cost is higher, making it a good economic decision to reshore manufacturing to the U.S.
In order to help companies objectively decide where to manufacture, the not-for-profit Reshoring Initiative offers a free Total Cost of Ownership Estimator™ to calculate the real P&L impact of reshoring vs. offshoring. In 2013 the Department of Commerce created the ACE Tool (Access Costs Everywhere) to promote reshoring and greater use of TCO analysis. The most recent addition to ACE is the cost differential frontier (CDF) tool, which allows companies to quantify the potential savings derived from reducing lead-time.
Trending Now
Currently, the top industries reshoring, by number of jobs, have been transportation equipment, electrical equipment, computer products, fabricated metal products and wood products.
The most commonly cited reasons for reshoring are lead-time, quality, automation/productivity, rising offshore wages, currency variation, skilled workforce and government incentives.
Sixty percent of reshoring is coming from China, where wages have been rising at more than 15 percent a year. The Midwest and Southeast are the strongest regions for reshoring, with South Carolina and Michigan leading the pack.
Other factors are helping, too. Walmart’s commitment to source an additional $250 billion in U.S. products through 2022 is having a large impact. We estimate this program could add 300,000 U.S. manufacturing jobs. The U.S. shale gas and oil boom is also playing a key role. The American Chemistry Council has identified more than $136 billion in announced capital expenditures driven by the boom. Much of this investment will be made in equipment manufactured in the United States.
Reshoring is not just a U.S. phenomenon. The economic benefit of producing near the consumer is universal, applying to all countries. The reshoring trend has begun and seen a recent up-tick in Western Europe, and other regions that saw manufacturing go offshore in the past.
Replacing imports should become more of a focus than expanding exports. The U.S. trade deficit in goods equals about 25 percent of our manufacturing output—we can balance the trade deficit by substituting domestic production for imports. In doing so, we will increase U.S. manufacturing employment by 3 to 4 million jobs and overall U.S. employment by 6 to 9 million jobs due to the manufacturing multiplier effect.
Reducing imports, is more cost effective than increasing exports because U.S. factories are about 30 percent more price competitive here than when exporting, for example, to China.
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'Stay Tuned,' Senate Leader Says on Exports
Mar 20, 2015 | E&E - Energywire
By Jenny Mandel
After a year of studies, the time is coming to address a decades-old ban on exporting crude through legislative action, according to the chairwoman of the Senate Energy and Natural Resources Committee.
"When I mentioned last year that 2014 would be the year of the report, it seems clear to me that it was exactly that," Chairwoman Lisa Murkowski (R-Alaska) said yesterday at the start of what she said was the seventh congressional hearing on the issue in just over a year.
Noting that more than a dozen groups have published analyses of the possible implications of lifting the crude export ban, she continued, "The year of the report is coming to an end. While I continue to believe the administration retains extensive authority, explicitly delegated to it by previous Congresses in statute, it is also appropriate for us to consider our legislative options. So ... just stay tuned here."
Robert Dillon, a spokesman for the committee, said later that Murkowski's language does not mean there is a firm timeline for when or even whether oil export provisions will be forthcoming. "We've not made a decision yet on whether ... oil exports are going to be part of that process," he said in reference to broad energy legislation that the committee has started work on.
Dillon said Murkowski intends to develop the measure with four major sections: energy efficiency, infrastructure, supply, and accountability and reform. The text of individual sections will be presented publicly and be debated in committee before moving to the Senate floor, he said, noting that Murkowski intends to emphasize process and transparency.
The Senate legislation would mirror a similar energy measure being advanced in the House (E&E Daily, Feb. 6).
But while Murkowski clearly articulated her support for oil exports, ranking member Maria Cantwell (D-Wash.) was more focused on safety issues around transporting crude oil by rail.
"We currently do not have the regulations on the books to safely transport this product," Cantwell said in opening remarks. "I am going to be working for further measures to make sure we get those standards in place."
Later, Cantwell pressed Jeff Warmann, the head of Monroe Energy, a refining business owned by Delta Air Lines, and Charles Drevna, head of the American Fuel and Petrochemical Manufacturers group, on the safety hazard posed by higher-volatility crude blends traversing the country by rail.
"The problem is that we've gotten so cavalier that it's OK to have two to three derailments per day, no matter what the commodity is," Drevna said. "Just to be clear, I'm not OK with that," Cantwell shot back, calling for more regulation. Refinery capacity concerns a 'misconception'
The committee leaders' remarks set the tone for a panel dominated by testimony that greenlighting foreign oil sales would support U.S. allies abroad even as it helped an important domestic industry and lowered gasoline prices at the pump by increasing global supplies.
Speakers from ConocoPhillips, energy industry consultancy IHS and the Center for a New American Security testified that exporting domestically produced oil would support U.S. geopolitical objectives, as well as economic interests.
But Warmann and Drevna expressed reservations about the prospect of expanding crude exports. Drevna conditioned support on a more expansive rewrite of federal laws around shipping and other federal rules that he said put domestic refiners at a disadvantage compared with their foreign competition, and described as a "key misconception" the idea that U.S. refineries cannot process the levels of light, sweet oil coming up from the new domestic shale plays.
"The questions are driven by a key misconception that the existing refining configurations are ill-suited to absorb more light, sweet crude," Drevna testified. "In reality, however, U.S. refiners have plenty of room to accommodate new, domestic supplies of light crude oil, with additional capacity to further grow U.S. production. ... There are other reasons policymakers may choose to lift the export ban, but current refining capacity should not be one."
Warmann maintained that the export ban plays an important role in U.S. energy policy, protecting the liberalized U.S. oil market from competitors who play on different terms. "There is no free trade in the international crude market," Warmann told lawmakers. "The purpose of the export law is as important today as it was when it was enacted."
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Mar 20, 2015 | The Hill - E2 Wire
By Timothy Cama
The Obama administration is setting new standards for the controversial hydraulic fracturing process, the first federal efforts to crack down on the practice that has largely been behind the oil and natural gas boom of recent years.
The first major fracking standards only apply to drilling on leased federal land and land owned by American Indian tribes, which account for less a quarter of the country’s oil production and 17 percent of its gas. The vast majority of fracking happens off federal land, regulators said.
The long-awaited rules from the Interior Department’s Bureau of Land Management (BLM) are meant in part to ease public fears about the highly controversial practice that involved pumping fluids miles underground to extract of oil and gas from small pockets in rock.
Environmentalists have said for years that certain aspects of the fracking process can pollute waterways, groundwater, air and soil while posing serious threats to human health. To make matters worse, drillers have used substances like formaldehyde, boric acid, benzene and xylene, and the industry has resisted calls to disclose the chemicals they use.
The rules announced Friday set standards for well construction to minimize the risk of groundwater or other contamination, strict requirements for disposal of the fluid that flows back out of the well and a mandate to publicly disclose the chemicals drillers use in their wells.
The regulations immediately encountered resistance from oil and gas drillers.
The American Petroleum Institute (API) charged that federal regulators are forcing them to comply with two sets of standards, since they’re still subject to state regulations. The double regulation could hamper the country’s energy renaissance, the group said.
“A duplicative layer of new federal regulation is unnecessary, and we urge the BLM to work carefully with the states to minimize costs and delays created by the new rule to ensure that public lands can still be a source of job creation and economic growth,” Erik Milito, director of upstream operations for API, said in a statement.
Federal regulators are largely prohibited from regulating fracking on private and state land, since the practice was exempted a decade ago from federal water and air pollution laws.
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Fracking Rules Unveiled by Obama Administration
Mar 20, 2015 | The Wall Street Journal
By Amy Harder and Daniel Gilbert
The Obama administration on Friday issued comprehensive rules for hydraulic fracturing, a move that also seeks to set a national standard for a patchwork of state regulations governing controversial drilling practices that have helped fuel a domestic oil and natural-gas boom.
The rules apply to a small percentage of oil and gas drilling on federal land—11% for gas and 5% for oil—because most hydraulic fracturing, known as fracking, occurs on private or state land that isn’t subject to federal oversight. But their impact is expected to be felt more broadly with state regulators and companies viewing them as a minimum for oversight requirements.
“Current federal well-drilling regulations are more than 30 years old and they simply have not kept pace with the technical complexities of today’s hydraulic fracturing operations,” Interior Secretary Sally Jewell said in a written statement.
Fracking, which involves blasting a slurry of water, sand and chemicals into a well, has been key to unlocking vast reserves of oil and gas across the U.S. Qualms about its environmental impact, especially its potential to contaminate drinking-water supplies, have made it controversial. More than 90% of new land-based wells in the U.S. involve the process, according to the Interior Department.
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U.S. to Set Fracking Standards on Federal Land
Mar 20, 2015 | Reuters
By PATRICK RUCKER AND VALERIE VOLCOVICI
The Obama administration on Friday is due to unveil rules for oil companies that frack on federal land, included beefed-up safety measures, but won't likely require strict oversight as environmental groups want, according to sources.
The standards have been in the works for more than three years and gone through several drafts with environmentalists and the energy industry fighting over its scope.
Hydraulic fracturing, or fracking, a controversial process that involves pumping water, sand and chemicals into a well to extract oil or gas. Environmentalists say fracking poses health risks.
Interior Secretary Sally Jewell said on Tuesday the long-awaited rules will be unveiled by the Bureau of Land Management "in the next few days" and address comments submitted when a draft of the rule was first proposed in 2012. An announcement was expected at 11:30 a.m. EDT (1530 GMT).
The rule is expected to require energy companies to reinforce boreholes and otherwise prevent leakage and provide data on the cocktail of chemicals that helps extract crude oilout of the ground. The rules will add transparency to the practice, long shrouded by companies, which are reluctant to reveal "trade secrets," environmentalists say.
But the proposal is expected to be limited in scope, according to sources, applying to federal onshore leases, roughly 23 percent of total U.S. production, according to recent figures from the Energy Information Administration.
The plan addresses three issues: disclosure of the contents of fracking fluids, rules on how to dispose of the liquids and standards for constructing the wells themselves.
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'BLM Fracking Rule' Release Expected Today
Mar 20, 2015 | E&E - Energywire
By Mike Soraghan
Advocates in the oil and gas industry and the environmental community are expecting to see long-awaited rules for hydraulic fracturing and drilling on federal land today.
Commonly referred to as the "BLM fracking rule," the final rule would update regulations about drilling and "fracking" on land managed by the Bureau of Land Management, Forest Service and other federal land, and tribal land.
It is expected to include rules on public disclosure of chemicals used in fracturing on public land, well construction standards and water management.
On Tuesday, Interior Secretary Sally Jewell, who oversees BLM, said the rule would be released within days (E&ENews PM, March 17). She said she expects objections from environmentalists and industry, but "I think most Americans would call them common sense."
Key questions are whether the Obama administration will decide to use the privately run FracFocus registry for chemical disclosure and if it will require fluids released after drilling to be stored in closed tanks, rather than pits.
Advocates are also watching to see if the rule exempts the well stimulation technique of acidizing and allows companies to verify the integrity of a group of wells by testing a single "type well," rather than all of them.
Environmentalists and some Democrats are also urging BLM to require companies to disclose chemicals before they are used to fracture a well -- rather than afterward, as proposed by BLM -- so that landowners are capable of monitoring potential changes in groundwater.
It would affect roughly 3,400 wells that are hydraulically fractured each year. BLM has estimated that it would add between 0.04 and 0.13 percent to the cost of each well.
Some environmentalists have also warned that BLM has failed to evaluate the impacts of its fracking rule under the National Environmental Policy Act, a sign that groups may explore legal challenges should the rule fall short of their expectations.
Industry groups have fought the proposal, calling it a federal overreach into state regulatory affairs that would cost companies up to $346 million annually and further discourage drilling on public lands, where production has already fallen behind nonfederal lands.
But they have praised BLM's proposal to use the industry-backed FracFocus as a platform for disclosing fracking chemicals and to allow a state "variance" process to be used when state or tribal regulations meet BLM standards.
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Interior Unveils BLM Frack Rule -- FracFocus in, Waste Pits Out
Mar 20, 2015 | E&E - Greenwire
By Phil Taylor and Mike Soraghan
The Obama administration released its final rule today for drilling and hydraulic fracturing on federal land, its biggest foray yet into the divisive issue many call "fracking."
The rule, announced by Interior Secretary Sally Jewell, offered something for each side in the divisive debate.
The rule keeps industry-backed FracFocus as a means of disclosing fracturing chemicals and allows a state "variance" process to be used when state or tribal regulations meet the Bureau of Land Management's standards, as industry had hoped. Yet it all but bans pits at well sites, requiring wastewater to be stored in metal tanks.
"This updated and strengthened rule provides a framework of safeguards and disclosure protocols that will allow for the continued responsible development of our federal oil and gas resources," Jewell said in a release. "It is absolutely critical the public have confidence that transparent and effective safety and environmental protections are in place."
The rule was challenged in court within an hour of its announcement. The Independent Petroleum Association of America (IPAA) and Western Energy Alliance (WEA) filed suit to block it this morning in U.S. District Court in Wyoming.
Oil and gas companies have called the regulations overreach since they were first proposed, while environmental groups have grumbled that the administration is going too far in placating the industry. Those themes continued in initial reactions today.
The environmental group Earthworks described the rule as "some concrete steps that will curb some problems with fracking on public lands, but still falls short of the protections Americans deserve."
The American Petroleum Institute (API), the industry's biggest trade group, criticized the rule as "one more barrier to growth" on federal lands, where the growth in oil production has failed to keep pace with the production boom in shale plays on private lands in states such as Texas and North Dakota.
"A duplicative layer of new federal regulation is unnecessary," said Erik Milito, API's director of upstream operations. "We urge the BLM to work carefully with the states to minimize costs and delays."
Commonly referred to as the "BLM fracking rule," the regulations update regulations about drilling and "fracking" on land managed by BLM, the Forest Service and other federal land, and tribal land. The rule would affect roughly 3,400 wells that are hydraulically fractured each year.
Jewell said current rules were developed more than 30 years ago, long before the advances in fracturing and horizontal drilling that have spurred a boom in domestic oil and gas production.
On a teleconference with reporters this morning, Jewell emphasized that while she personally fracked wells in Oklahoma as a petroleum engineer more than 30 years ago, modern hydraulic fracturing is "increasingly complex" and involves deeper wells, higher pressures and increased horizontal drilling.
The final rules will act as a federal backstop in states whose fracking regulations fall short of BLM's standards. Jewell said states such as Wyoming and Colorado have regulations that may be more stringent than BLM's and could therefore supplant the new BLM regulations.
BLM has oil and gas leases in 32 states, but 13 states have regulations addressing hydraulic fracturing, said Interior Assistant Secretary for Land and Minerals Management Janice Schneider. Administration officials also said about 11 percent of the fracturing in the country occurs on public lands. Hill battles ahead
BLM's draft fracking rules in May 2013 garnered 1.4 million comments from oil and gas groups, states, conservationists, and other stakeholders, Interior said.
The rules, first proposed in 2010, are being released as the oil and gas industry is reeling from low oil prices and pleading with Congress to lift a ban on exporting crude.
Green groups have been frustrated with Obama's "all of the above" strategy and the accommodations it has included for drilling. But facing no more elections, Obama has signalled a somewhat harder line with the industry (EnergyWire, Jan. 15).
Administration officials were careful to emphasize what the rule does not do -- it doesn't extend past federal lands and minerals, and it doesn't shift regulation of drilling away from state agencies.
"Ultimately, this is an issue that is going to be decided in state capitals and in localities, as well as within the industry," Obama's senior adviser, Brian Deese, said today at a breakfast hosted by The Christian Science Monitor in Washington, D.C.
Industry prefers regulation by state agencies, which are usually also tasked with promoting development. Environmental groups generally prefer regulation by federal agencies, which often have more protective missions.
But regulation by cities and counties has emerged as possibly the biggest regulatory concern as residents petition local officials to use their zoning power.
The rule may also trigger skirmishes in Congress.
Senate Environment and Public Works Chairman James Inhofe (R-Okla.), a leading supporter of the industry, introduced a bill yesterday along with 26 other GOP senators that would allow only states to regulate hydraulic fracturing on federal land.
"This top-down regulation is duplicative, burdensome and, ultimately, a direct attack on American energy production," said Sen. Steve Daines (R-Mont.), one of the co-sponsors.
Such legislation went nowhere in past years when Democrats controlled the Senate. But it could gain traction now that both chambers are in Republican hands.
Democrats this week rolled out a suite of proposed restrictions on drilling and fracking that they've dubbed the "Frack Pack." Hot-button issues
Environmental and open government groups have criticized FracFocus, a privately managed website run with industry money, for putting needless restrictions on the information it releases.
Jewell defended BLM's decision to use FracFocus.org, saying BLM has been given some say in how the site is run. She also noted that the group that administers it recently announced planned changes to address the criticism. The changes have not yet been implemented (EnergyWire, Feb. 27).
"We feel like we have an appropriate seat at the table," Jewell said.
Kornze said cost was a consideration, too, since an Energy Department advisory board estimated it would cost BLM $25 million to establish its own chemical disclosure database.
Environmentalists and some Democrats had also urged that companies also be required to disclose fracturing chemicals before they are used to fracture a well so that landowners are capable of monitoring potential changes in groundwater.
The regulation does not include such provisions. It also won't cover "acidization," another well-stimulation technique more commonly used in California.
Green groups also wanted BLM's rule to put some sensitive landscapes in the West off limits to drilling and to impose drilling setbacks from homes and public drinking water supplies, but BLM has said such steps were outside the purview of its fracking rule.
Some environmentalists have also warned that BLM has failed to evaluate the impacts of its fracking rule under the National Environmental Policy Act, a sign that groups may explore legal challenges should the rule fall short of their expectations.
The bill requires that all "produced water" be stored in above-ground tanks, although it says there will "very limited exceptions" in which lined pits can be used.
Schneider said most companies are already using above-ground tanks rather than lined pits to store water that returns to the surface during fracking. For those companies that aren't, complying with BLM's rule would add $5,500 per operation, she said.
But companies have pushed back against such requirements in some public lands states. New Mexico in 2013 rolled back its "pit rule," ending the requirement to use steel tanks (EnergyWire, Nov. 14, 2013).
David Hayes, who served as Interior's deputy secretary during President Obama's first term and is now a senior fellow at the liberal Center for American Progress, said the final rule improves upon BLM's earlier draft by requiring more secure storage of wastewater and strengthening chemical disclosure requirements, while maintaining flexibility for states that have stronger well standards in place.
"Amid this rapidly changing energy landscape, it is vital that safety practices keep pace with advancing technologies and that the public have confidence that drilling is being done as safely as possible," Hayes said. "These standards are a big step forward toward safer drilling practices on America's public lands."
BLM officials say the regulations also require companies to submit more detailed information on the geology, depth and location of pre-existing wells to lower the risk of cross-well contamination, commonly called "frack hits" (EnergyWire, Aug. 5, 2013). Industry lawsuit
Industry groups met with White House regulatory staff at least six times last fall to urge them to scrap the rule or at least significantly overhaul it. Today, they offered the faintest of praise with their condemnation.
Kathleen Sgamma, vice president of government and public affairs for Denver-based Western Energy Alliance, said enabling state and tribal regulations to trump federal regulations would be a "key improvement," but "that would be the opposite of this administration's regulatory philosophy, so I'm not optimistic."
One WEA-backed study in summer 2013 found that BLM's draft fracking rules would cost an average of $96,913 per well to implement, which is nearly 20 times higher than BLM's estimate at the time. More than half the cost derived from the requirement to conduct cement bond logs, which verify the integrity of the cement surrounding well pipes. Environmentalists said WEA's study greatly exaggerated the rule's cost.
Interior's Schneider described the cost to industry as "modest."
BLM estimates the final rule will cost less than one-fourth of 1 percent of the cost of drilling a well, based on the Energy Information Administration's average per well cost of $5.4 million.
The industry groups which filed suit, IPAA and WEA, say the rulemaking was arbitrary and capricious in imposing steep costs for oil and gas operators without commensurate environmental benefit. They also argue that certain geologic disclosure requirements are illegal because they require operators to disclose confidential business information.
The complaint says Interior's regulations are "a reaction to unsubstantiated concerns" and asks the court to strike them down.
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Dems Say they want To Regulate Fracking, Not Ban Iit
Mar 20, 2015 | E&E - Energywire
By Mike Soraghan
The House Democrats leading the charge to regulate drilling and hydraulic fracturing say they don't want to ban "fracking."
"I support fracking," Rep. Diana DeGette (D-Colo.) said flatly at the beginning of a conference call with reporters yesterday about a suite of bills she and her colleagues call the "Frack Pack."
Reps. Jared Polis (D-Colo.) and Matt Cartwright (D-Pa.) expressed similar sentiments. Polis said local communities should decide, and Cartwright cited the increased supply of natural gas made possible by new production methods as a stopgap source of energy while the country moves to cleaner sources.
The exception may be Rep. Jan Schakowsky (D-Ill.), who has co-sponsored legislation to ban hydraulic fracturing on federal land. If there isn't better regulation, she said, there might need to be a ban.
"There is good reason to think about, if these protections can't be implemented, that we ban it," Schakowsky said.
The reintroductions come as the Obama administration prepares to release new rules for drilling and fracking on Interior Department lands (EnergyWire, March 18).
The four House members held a conference call to announce introduction of the bills along with Margie Alt, executive director of Environment America.
Alt's group does want to ban fracking. But "until then," she said, "we must do everything we can to protect the families living on the frontline of fracking."
But there is no drive on Capitol Hill to ban fracking or drilling, and there is little appetite for the Democrats' drilling regulation bills in a Congress controlled by Republicans. DeGette's "Fracturing Responsibility and Awareness of Chemicals (FRAC) Act" didn't get a hearing when Democrats controlled Congress.
Earlier this year, the Senate rejected similar legislation to undo a provision environmentalists call the "Halliburton loophole" on a 35-63 vote (EnergyWire, Jan. 29).
Some industry groups contend that no matter what the lawmakers say, the long-term goal of the environmentalists pushing the bills is to end domestic oil and gas production.
"It's part of a two-step strategy: Give the federal government the power to shut down oil and gas development across the country, and then lobby the federal government to shut down oil and gas development across the country," said Simon Lomax of Energy In Depth, an initiative of the Independent Petroleum Association of America.
Sen. Bob Casey (D-Pa.) is the Senate sponsor of the "FRAC Act," which would repeal the Halliburton loophole and allow U.S. EPA to regulate hydraulic fracturing.
In yesterday's call, Cartwright said he'd come directly from introducing his "Focused Reduction of Effluence and Stormwater runoff through Hydrofracking Environmental Regulation (FRESHER) Act" in the House. The legislation would increase regulation of drilling under the Clean Water Act, including provisions on stormwater runoff.
Polis is sponsoring the "Bringing Reductions to Energy's Airborne Toxic Health Effects (BREATHE) Act," which would require emissions from multiple related wells to be aggregated to determine their total pollution.
Schakowsky's "Safe Hydration is an American Right in Energy Development (SHARED) Act" would require baseline testing of drinking water sources before drilling and fracking start, in order to document any contamination.
Oil and gas producers have fought any suggestion of increased federal regulation of fracking for years.
The 2005 exemption has become known as the Halliburton loophole because Halliburton Co. had lobbied for the exemption while Dick Cheney ran the company. As vice president under President George W. Bush, Cheney touted it in the energy plan he shepherded for the Bush administration.
It's not clear what repealing the exemption would do. EPA had never broadly regulated fracking before the exemption passed, though it had complied with a 1997 federal appeals court order to require Alabama to regulate it. Without the 2005 exemption, environmental groups might have been able to expand the precedent into other states through litigation.
Deep underground injection of oil and gas waste into thousands of wells across the country is covered by the underground injection control (UIC) provisions in the drinking water law.
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Laurence Tribe, Obama's Legal Mentor, Attacks EPA Power Plant Rule
Mar 20, 2015 | Politico
By Erica Martinson
Opponents of the President Barack Obama’s climate change plan are bringing out the heavy artillery, turning to a former hero of the green movement to lay out a legal plan to bring down EPA’s upcoming rules to cut carbon dioxide emissions from power plants.
Legal lion Laurence Tribe, a Harvard Law professor who taught constitutional law to President Barack Obama, has entered the fight against EPA’s Clean Power Plan, accusing his former student of “burning the Constitution” in the effort to combat climate change.
Since submitting scathing comments on the pending Clean Power Plan rule to EPA in December on behalf of Peabody Energy — the world’s largest private sector coal company – Tribe, who represented Al Gore in Bush v. Gore, has become the darling of anti-EPA Republicans.
Tribe, appearing on Tuesday before the House Energy and Power Subcommittee and along with prominent Hunton & Williams partner Allison Wood, laid out one legal argument after another that opponents can use in the upcoming court battles to prevent EPA from implementing the greenhouse gas rules it plans to finalize this summer.
“You know, I’ve cared about the environment ever since I was a kid. And you know, I taught the first environmental course in this country, and I’ve won major victories for environmental causes. But I’m committed to doing it within the law,” Tribe said.
“Burning the Constitution should not become part of our national energy policy,” he added.
Tribe’s appearance this week in the House and his dogged opposition the Obama administration’s climate plan rankled greens who have considered him part of their movement.
“Laurence Tribe must not have been sworn in over a Bible today before testifying before Congress, because if he had been, that Bible would have burst into flames after his phony testimony about EPA’s legal authority to set standards for unlimited carbon pollution from power plants,” said David DiMartino, adviser to the Climate Action Campaign. “
“But I guess we shouldn’t be surprised— a wad of coal industry money burning a hole in your pocket can make you do strange things,” he added.
Sen. Mitch McConnell (R-Ky.), one the EPA’s fiercest critics, lauded the “iconic” Tribe’s appearance in the House in a Facebook post late Tuesday, saying it proves that “the legal basis for this regulation is flimsy at best.”
Democrats on the panel turned to Richard Revesz, director for the Institute for Policy Integrity at New York University Law School, to counter the Tribe and Wood.
One key legal issue centers on EPA’s authority to regulate greenhouse gases from the nation’s existing power plants under Clean Air Act section 111(d). Opponents argue that because power plants emissions of hazardous air pollutants are regulated under section 112, the law precludes EPA from regulating power plants under section 111.
But EPA and its supporters argue that the House and Senate never reconciled conflicting amendment language in the 1990 Clean Air Act Amendments, and the agency should be given commonly afforded legal deference to decide the right path forward.
That issue could be handled in a trio of cases that the D.C. Circuit Court of Appeals will hear next month. Or the court could turn the plaintiffs away since the rule isn’t final – a common response, but opponents are hoping for more.
“There are many attorneys in Washington, DC, and around the country making large sums of money advising clients on which version the” law is correct, Rep. Gene Green (D-Tx.) noted at the hearing.
If the case ultimately makes it to the Supreme Court, “I don’t think the court would accept the agency’s interpretation. I think the statute is too clear … The fact that greenhouse gases is a terrible problem doesn’t give a blank check to any agency to rewrite the law,” Tribe said.
Tribe doesn’t concede that there are conflicting requirements in the U.S. Code, and called the argument “fantasy” in his extensive 60-page written testimony. And he and Resvesz — who both have several states and utilities backing on their side — don’t even agree on what the Supreme Court has previously said.
“The Supreme court has never said anything that raises any questions about the value of the Clean Power Plan,” Ravesz argued.
But Tribe pointed to a footnote of the Supreme Court’s 2010 ruling in AEP v. Connecticut as backing his argument. That ruling preempted citizens from suing a state over failing to regulate greenhouse gases under the reasoning that EPA has the power to regulate greenhouse gases.
The footnote says there is an exception: “EPA may not employ [Section 111(d)] if existing stationary sources of the pollutant in question are regulated under the national ambient air quality standard program, [in sections 108 or 110], or the ‘hazardous air pollutants’ program, [in section 112].”
In this case “existing stationary sources” means power plants. And in 2012, EPA regulated hazardous air pollution from power plants under section 112 of the act.
“Footnote 7 is subject to more than one interpretation,” Resvesz argued, pointing to the Justice Department’s arguments in an upcoming court case. “I believe that [Tribe] is wrong, EPA believes that he is wrong, and we’ll find out – this issue will be argued extensively on April 16 before the DC Circuit.”
Rep. Morgan Griffith (R-Va.) sought to score a “gotcha” moment at the hearing, but missed the mark: He noted that because a prior administration once conceded in court that it could not regulate power plants under both sections 111 and 112 of the Clean Air Act and did not appeal the particular issue to the Supreme Court — so “have they conceded the point and they now are thrown out on their backside?” for legal reasons, he asked.
Tribe didn’t give him what he was hoping for though, saying that under that previous case, New Jersey v. EPA, only New Jersey could make that claims. New Jersey is not one of the states suing to stop EPA’s Clean Power Plan.
“EPA is free to make these arguments. I just think that are wrong and will lose,” Tribe added.
On April 16, the appeals court will hear arguments in Murray Energy v. EPA, covering a trio of cases that opponents hope will stop the agency before it releases a final rule this summer.
But Tribe and Williams made clear that the EPA makes it past that hurdle, they’re ready with new legal arguments, many of them with a constitutional bent designed to appeal to the Supreme Court.
Subcommittee Chair Ed Whitfield (R-Ky.) called the constitutional issues “troubling,” and charged the proposed plan with tipping the balance towards “federal dominance over state electricity systems.”
Tribe argued that the proposed rule would give allow the federal government to overtake control of energy regulations, which would violat the Tenth Amendment provisions that say the federal government only has powers conferred to it by the states or the people via the Constitution. The EPA can’t give states a “Hobson’s choice” by forcing them to adopt unpopular policies or face unpopular federal control, he said.
The uncertainty surrounding EPA’s federal plan is countered by the recent Supreme Court ruling in NFIB v. Sebelius, which struck down forced expansion of Medicaid eligibility, Tribe said. The EPA, which distributes more than a third of its budget to the states, could easily use the Clean Power Plan to threaten states with cuts to other types of grants — the same type of action the high court turned away from in NFIB.
Tribe, much to the chagrin of some more liberal members of the committee and on the panel, also argued that the proposed rule could violate the Fifth Amendment’s “takings” clause, by unfairly saddling coal-fired power plants with the costs.
The Harvard professor would not be limited there: he also argued that EPA’s view of the Clean Air Act “raises grave constitutional questions under Article I, Article III, and The Separation Of Powers.”
If EPA is allowed to choose its interpretation of whether it may regulate power plants under section 111(d) and 112, the agency would essentially be making laws itself, according to Tribe.
“EPA is attempting an unconstitutional trifecta: usurping the prerogatives of the States, Congress and the Federal Courts all at once,” he said.
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McConnell Climate Campaign 'Way Outside the Bounds' -- Top Obama Aide
Mar 20, 2015 | E&E - Greenwire
By Robin Bravender
President Obama's senior climate adviser thinks Senate Majority Leader Mitch McConnell's campaign for states to ignore pending power plant rules is way out of line.
McConnell "is going way outside the bounds of the position that he was elected to," White House senior adviser Brian Deese said today at an event in Washington, D.C., hosted by The Christian Science Monitor. "I think that we all would be better served if he and others spent less time trying to lecture states about what they should be doing."
The Kentucky Republican has been prodding states to ignore EPA's proposed rule to cut down on power plants' greenhouse gas emissions, contending that it's legally vulnerable and likely to be tossed out in court (E&E Daily, March 20).
Deese said today that red and blue states alike are already focusing on how they can get in line with the rule and suggested that the plan's critics in Congress spend "more time trying to actually get some constructive things done," like "confirm a highly qualified attorney general nominee." The delayed Senate confirmation of Obama's attorney general pick, Loretta Lynch, has frustrated White House officials and Senate Democrats.
Deese -- who took over former White House counselor John Podesta's climate portfolio last month -- also rejected claims today that the administration's forthcoming climate change rule is "burning the Constitution."
Obama's Harvard Law School mentor and noted constitutional scholar, Laurence Tribe, made waves earlier this week when he told House lawmakers that the climate proposal released by EPA last summer represented a "breathtaking power grab" by the Obama administration.
"EPA is attempting an unconstitutional trifecta: usurping the prerogatives of the states, Congress and the federal courts all at once," Tribe said. "Burning the Constitution should not become part of our national energy policy" (Greenwire, March 17). But Deese said today that the Obama administration's executive actions are on firm legal ground.
"This is an agenda that actually lands squarely within well-established legal precepts, not only in the Clean Air Act, but in the Clean Water Act and under our foundational environmental laws," he said.
He added that the administration plans to keep rolling out executive actions in the environmental arena.
"I think if you look at the agenda around reducing greenhouse gas emissions, reducing carbon pollution and encouraging the clean energy economy, this is a place where we have a very aggressive agenda, and most of the actions that we are pushing forward are actions that we can move forward through the executive space," Deese said.
The core of the administration's agenda is slashing greenhouse gas emissions from the power sector under the White House's Clean Power Plan, Deese said. The administration is also issuing a new rule today governing hydraulic fracturing on public lands (see related story).
Beyond that, he said, in the areas of clamping down on methane emissions and boosting energy efficiency, "we have a lot more to do through rulemaking." Set sights higher than 'one pipeline'
Deese yesterday echoed Obama's calls to move beyond the contentious debate surrounding the proposed Keystone XL oil pipeline.
Asked during a White House press briefing yesterday whether Obama has grown more pessimistic about the project, Deese said, "I think the president has reinforced and you've heard in the president's comments on this issue is his view that we all should be setting our sights substantially higher than the debate around this one pipeline."
Obama used his State of the Union address in January to criticize lawmakers for zeroing in on Keystone XL (E&E Daily, Jan. 21).
Deese yesterday stressed to reporters that the State Department is moving ahead with its own review of the pipeline.
"There's a process that's ongoing and it's going to resolve itself around Keystone that we are not getting into or commenting on," he said. "Separate from that process, the president thinks it's very important that we have not only a discussion about doing something more aggressive on infrastructure but Congress actually starts moving and showing a commitment to do so."
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US Diplomat Optimistic on Global Climate Pact
Mar 20, 2015 | The Hill - E2 Wire
By Timothy Cama
The United States’ envoy for climate change told a Chinese audience he is optimistic that world leaders will come to a deal on climate.
At a speech in Beijing Friday, Todd Stern emphasized the advantage that he says China and the United States have in the negotiations thanks to their own agreement announced last year, the Associated Press reported.
He said negotiators as a whole have “a greater level of convergence on some very important structural issues” when compared with the last attempt at a global deal in 2009.
“I think we’re on the same page on some issues, not every issue probably,” Stern said, referring to the U.S.-China joint announcement to cut emissions announced in November. “But we are working I think in a closer and more cooperative basis than we ever have before.”
China said in that deal that its carbon emissions would peak in 2030.
Stern said he has not gotten any indication that China wants to push that deadline forward.
“We didn’t have any sense from within the [Chinese] government that there were views on their readiness to announce 2025 or 2020,” he said, according to AP.
He also said officials in the U.S. and China had not agreed on when or if China’s emissions would decrease after 2030.
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(ACC Mentioned) STB Reauthorization Bill Would Change Freight-Rail Policies
Mar 20, 2015 | Progressive Railroading
U.S. Sens. John Thune (R-S.D.) and Bill Nelson (D-Fla.) yesterday introduced a bill that would reform and reauthorize the Surface Transportation Board (STB).
The proposed Surface Transportation Board Reauthorization Act of 2015 (S. 808) would reform the STB and "streamline" its procedures, according to a press release issued by Thune's office. The STB has federal regulatory jurisdiction over certain economic issues for freight railroads, including the rates they charge shippers.
Although the STB has been "working diligently" to ensure rail service delays experienced by shippers and businesses in South Dakota and other states last year don't occur again, the service "crisis" highlighted inefficiencies in the agency, said Thune.
"Oversight efforts have identified causes of wasteful and unnecessary delays in adjudicating cases that harm rail shippers, freight operators, and ultimately consumers who pay higher costs," he said. "These reforms will help make the STB a more efficient, effective, and accountable agency for the benefit of shippers and railroads alike."
The legislation would expand STB membership from three to five members and allow them to discuss pending matters without issuing a public meeting notice, but with later public disclosure. In addition, the bill would allow the board to initiate some investigations — not just respond to complaints — and require it to create a database of complaints and prepare quarterly reports on them.
Moreover, the bill would change the case review process by requiring the STB to set timelines for stand-alone rate cases and report on a rate case methodology. The bill would codify an arbitration process for certain rate disputes and complaints.
Thune is chairman of the Senate Committee on Commerce, Science and Transportation; Nelson is the committee's ranking member.
The American Chemistry Council (ACC) yesterday endorsed the Thune-Nelson bill, saying it would "make the STB a more efficient, effective agency and promote a more equitable approach to resolve freight rail issues."
"The bill reflects many of the improvements that are supported by ACC and a large number of other groups representing a wide range of U.S. manufacturing, agricultural and energy interests. This bill will promote a more competitive environment for freight rail service and improve how the STB operates," according to the ACC's prepared statement.
The bill is a modified version of a measure that Thune introduced last year with now-retired U.S. Sen. Jay Rockefeller (D-W. Va.). That bill was opposed by the Association of American Railroads and supported by numerous rail shipper groups, including the ACC. -
(ACC Mentioned) Congress Urged to Pass Freight Rail Policy Improvements
Mar 20, 2015 | Environmental Protection Online
The “Surface Transportation Board Reauthorization Act of 2015” was presented yesterday by U.S. Senate Committee on Commerce, Science & Transportation Chairman John Thune (R-S.D.) and Ranking Member Senator Bill Nelson (D-Fla.), which urges improving the efficiency of the Surface Transportation Board (STB).
“Chairman Thune and Ranking Member Nelson have carefully crafted a smart and significant proposal that reflects the input of numerous stakeholders and responds to the growing support for modernizing the STB. The bill reflects many of the improvements that are supported by ACC and a large number of other groups representing a wide range of U.S. manufacturing, agricultural and energy interests. This bill will promote a more competitive environment for freight rail service and improve how the STB operates,” said Cal Dooley, ACC president and CEO, in support of the proposed bill.
“The railroad industry has undergone dramatic changes since the STB was created and Congress last passed major freight rail legislation. We need to update the STB’s policies so the Board is better equipped to deal with today’s freight rail challenges, including ongoing service problems and growing rate issues. The reasonable reforms in this bill help fulfill that goal by addressing specific issues, such as streamlining the STB’s overly burdensome rate review standards, providing reasonable arbitration procedures to resolve rate disputes, and allowing the STB to be more proactive in resolving freight rail issues. Moreover, the legislation will allow both railroads and shippers to thrive, while encouraging the growth of the U.S. economy.”
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Environmentalists Play 'Whac-A-Mole' to Stall Crude-By-Rail Projects
Mar 20, 2015 | E&E - Energywire
By Ellen M. Gilmer and Blake Sobczak
When an oil company's expansion plans for Pacific Northwest crude by rail suffered a major setback last month, environmentalists spread the news just as quickly as they could Google "Skagit County Hearing Examiner."
The little-known local office about an hour north of Seattle holds the keys to land use in the area, and environmental attorneys saw it as the best shot to stall a rail extension considered critical for the delivery of crude oil to a nearby Shell Oil Co. refinery, but potentially disastrous for nearby estuaries and communities.
The effort was successful: After environmental groups appealed a county-level permit for the rail project, Skagit County Hearing Examiner Wick Dufford sent the proposal back to the drawing board, ordering local officials to conduct an in-depth environmental impact statement to consider the broad effects of increased crude-by-rail throughout the county.
"The environmental review done in this case assumes that the whole big ball of federal, state and local regulations will somehow make the trains safe. And that if an accident happens, the response efforts described on paper will result in effective clean up, so that no significant adverse effects are experienced," Dufford wrote. "There is no proven basis for such conclusions."
The decision was an incremental but significant victory for environmental groups, sending a signal to industry that its increasing reliance on railed-in crude could face formidable hurdles.
Skagit County is just one piece of a larger plan to expand crude-by-rail across the country to better connect refineries and ports with prolific oil plays like North Dakota's Bakken Shale. The use of rail to deliver crude oil has skyrocketed in recent years, rising from 9,500 tank cars of crude in 2008 to nearly 500,000 carloads in 2014, according to industry data. Projects in Washington and other refinery hubs aim to expand facilities and extend rail spurs to handle even more crude deliveries.
Shell spokesman Curtis Smith said the company is "confident that we can satisfy any remaining issues associated with the project" to add rail capacity to its Puget Sound Refinery in Skagit County.
"This project is critical to the refinery, the hundreds of employees and contractors who depend on Shell, and the regional economy," he said. "We do not feel it should be held to a different standard than the crude-by-rail projects of the neighboring refineries that have been approved."
Smith added that "we all share the top priority of safety."
But the new reality of crude-by-rail traffic has environmentalists on edge. Oil train derailments in Illinois, West Virginia, North Dakota and other places have led to fires, spills and, in one case, lost lives. A 2013 crude-by-rail explosion in Lac-Mégantic, Quebec, killed 47 people, prompting regulators in the United States and Canada to review the inherently piecemeal rules governing crude-by-rail transportation.
The federal government has authority over certain details, such as standards for tank cars used to haul crude. But most expansion plans and related environmental concerns are left to local agencies situated along oil routes. The result is a hodgepodge of permitting decisions by local authorities following varying state laws, while a team of environmental lawyers challenges expansion projects one by one.
"It's a little bit like Whac-A-Mole because there isn't a big permitting scheme," said Earthjustice attorney Kristen Boyles, who represented six environmental groups in the Skagit County appeal. "It makes it difficult and makes it frustrating for the public." State laws in play
So far, the Whac-A-Mole approach is working well for environmentalists.
After three oil refineries in Washington went unopposed in building facilities to receive rail shipments of crude oil, Boyles said environmentalists and community advocates began tracking local land-use agencies more closely.
Earthjustice and the Quinault Indian Nation successfully challenged two proposed crude projects in Grays Harbor County, southwest of Seattle, leading a review board to vacate permits and require additional environmental and public health studies. A third Grays Harbor project is also preparing a comprehensive environmental review.
The next project on environmentalists' radar is in Vancouver, Wash., just across the Columbia River from Portland, Ore., where Savage Cos. and Tesoro Refining and Marketing Co. have proposed building a new terminal to transfer railed-in crude oil to marine tankers bound for West Coast refineries. The Sierra Club, ForestEthics and several other groups earlier this month moved to intervene in the state agency review process for the project, citing major threats to the Columbia River and public health.
The key to all of these challenges is Washington's State Environmental Policy Act (SEPA). Similar to the National Environmental Policy Act, SEPA requires government agencies to conduct a broad environmental impact statement for any major actions that may significantly affect the environment.
For projects in Skagit County, Grays Harbor and now Vancouver, state and local officials considering challenges look to SEPA to determine how rigorous environmental review must be, based on whether projects are expected to have major impacts. To Dufford, the Skagit examiner, the answer is plain.
"Unquestionably, the potential magnitude and duration of environmental and human harm from oil train operations in Northwest Washington could be very great," he wrote.
Down the coast in California, environmentalists have an even stronger tool: the California Environmental Quality Act. Considered the gold standard in state-level environmental protection laws, CEQA has already proved useful in halting a crude-by-rail expansion project in Sacramento.
In Kern County, a team of environmental attorneys is also relying on CEQA to appeal construction permits for the Bakersfield Crude Terminal, a project that would ultimately receive 200 tank cars of crude oil per day. The local air quality board labeled the construction permits as "ministerial," bypassing CEQA review, which is required only for projects considered discretionary. A hearing is set for next month in Kern County Superior Court.
Earthjustice attorney Elizabeth Forsyth, who is representing environmental groups in the Bakersfield case, said the state environmental law has been powerful in slowing down the rapid rise of crude-by-rail operations.
"In California, we have CEQA, which is a strong tool," she said. "You can't hide from the law. You can't site your project out in some town that you think won't oppose you." Unified strategy?
Still, the one-at-a-time approach to opposing crude-by-rail growth is undoubtedly slow-going, and progress comes bit by bit.
Boyles noted that Earthjustice attorneys from Washington to New York frequently strategize to "unify" the issues and make broader advances. On tank cars, for example, environmental groups have come together to press the Department of Transportation to bolster safety rules.
"That at least is some place where you could get improvements that could affect every one of these proposals," she said.
But for expansion projects, the effort must still be localized.
"You have this giant sudden growth of these sort of projects, and that's the best we can do at this point to review each of them and comment," said Forsyth, the California lawyer, who said the end goal is to empower local agencies to control whether proposals move forward and to mitigate the impacts when they do.
Though labor-intense, advocates say the approach has paid dividends. Projects that would have otherwise flown under the radar are now under rigorous review, and industry players no longer have the option of expanding facilities quietly and without public comment.
"If you hadn't had these citizens challenging these projects," Boyles said, "they'd be built already; they'd be operating already."
The delays have set back refiners seeking to use rail to tap price-advantaged domestic crude -- particularly in California.
"The West Coast is a very challenging environment," noted Lane Riggs, executive vice president of refining operations at Valero Energy Corp., which has faced staunch environmentalist opposition at a proposed oil-by-rail terminal in Benicia.
Riggs said in a January conference call that "we're still pretty optimistic we'll get the permit" for the 70,000-barrels-per-day unloading terminal at its refinery there, although he added that "timing at this point is a little bit difficult."
Facing pressure from concerned locals and the Natural Resources Defense Council, Benicia officials last month opted to require updates to the rail project's draft environmental impact review, further delaying a project that was originally scheduled to come online in 2013.
A Phillips 66 crude-by-rail proposal in San Luis Obispo County, Calif., has encountered similar pushback. If approved, the project would add five 80-car oil trains per week to the region's track network. The potential for more crude-by-rail shipments has drawn opposition from several local city councils and regional politicians, despite Phillips 66's pledge to use only newer-model tank cars (EnergyWire, Jan. 27).
Some town leaders have also separately taken action against railroads bringing oil traffic through their neighborhoods, although federally pre-emptive laws leave cities vulnerable to legal challenges (EnergyWire, March 19). 'Business as usual'
Local, often environmentalist-driven opposition is seen as "business as usual" within the refining industry, according to Charles Drevna, president of the American Fuel and Petrochemical Manufacturers.
"This is just another extension of the environmental playbook to try to obfuscate and delay," said Drevna, whose trade group represents the largest U.S. refiners. "We've been dealing with that for years, and we're going to continue to be dealing with it."
While Drevna said he doesn't see lawsuits "holding up any of the plans" for refiners to improve access to North American oil production, environmentalists chalk up each slowdown to a victory.
In New York, a plan to expand a key crude-by-rail conduit to East Coast refiners has been held in limbo for over a year at the Port of Albany, owing to an environmentalist lawsuit and closer public scrutiny.
The proposal by fuel logistics firm Global Partners LP would have added a boiler room to an existing facility to process heavier crude from Canada. But advocacy groups including Riverkeeper have challenged the company's operating air permit, calling for more review by New York's Department of Environmental Conservation (EnergyWire, Jan. 13, 2014).
"All of the actions we've taken with Earthjustice and others have really ground to a halt DEC's repeated approvals of these minor modifications," said Kate Hudson, watershed program director for Riverkeeper. "We have not seen tar sands. ... The river has been spared that threat for a year-plus, at this point.
"We certainly have no regrets," she said.
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