Preview Newsletter
ACC AM May 12
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(ACC Mentioned) Out Of The Doldrums: A Look At The Materials Sector
May 11, 2015 | Seeking Alpha
Indeed it is a beautiful thing to see; changing economic conditions causing an asset to reduce in value through the vagaries of the markets and then, after several months of consolidation, the asset, industry or sector, emerge with some level of price improvements. Now, as these changes occur, driven by base fundamentals, one has to determine... -
(ACC Mentioned) Strong US Chemicals Growth Fuels $800 Million Offer For Quality Distribution
May 11, 2015 | JOC
By William B. Cassidy
Call it good chemistry: Low energy prices and rising U.S. chemical output made Quality Distribution a very attractive acquisition target for Apax Partners. The $37-billion private equity firm last week said it will pay $800 million, including the assumption of debt, for the $992-million bulk trucking and logistics company. -
(ACC Mentioned) Sasol, Lyondell Basell, Phillips 66 - Best Buys In Petrochemical Sector
May 11, 2015 | Seeking Alpha
The petrochemical industry in the US, in a crisis only a couple of years ago, is currently going through a period of an active resurgence. The shale boom in natural gas production was accompanied by a boost in production of hydrocarbon feedstock such as ethane and propane. As a result, the chemical industry worldwide was shaken up and ... -
(ACC Mentioned) LyondellBasell To Seek Additional 3-Cent/Lb Hike On Us June PP
May 11, 2015 | Platts McGraw Hill Financial
By Pavel Pavlov
LyondellBasell subsidiaries Equistar Chemicals and Mexico City-based Basell Poliolefinas plan to increase June polypropylene prices by 3 cents/lb ($66/mt) in addition to any change in feedstock pricing, the companies said Monday in a letter to customers obtained by Platts. Equistar and Basell Poliolefinas will adjust PP prices in ... -
(ACC Mentioned) Withdraw Fragrance-Free Safer Choice Label, Work With Us, Trade Associations Tell EPA
May 12, 2015 | BNA Daily Environment Report
By Pat Rizzuto
The Environmental Protection Agency should withdraw the Fragrance-Free Safer Choice label it released in March and engage with interested parties on the fragrance-free and labeling issues, trade associations recently told the agency. “We strongly encourage EPA to withdraw the ‘fragrance-free safer choice’ label and to issue such a label only... -
(ACC Mentioned) Minnesota Ban On Fire Retardants Would Be Toughest In Nation
May 11, 2015 | Minneapolis Star Tribune
By Abby Simons
St. Paul fire fighters Chris Parsons, President of Minnesota Professional Fire Fighters, and Pete Gutzmann monitor a couch fire set at a training facility to demonstrate how flame retardants release dangerous chemicals. Firefighters want flame retardants phased out, but their effort has stalled in the Minnesota House. -
(ACC Mentioned) Deal In Works To Ban Certain Fire Retardants
May 11, 2015 | TwinCities.com-Pioneer Press
By Christopher Magan
Members of the Minnesota House commerce committee struck a deal Monday on a ban of four chemical fire retardants some experts fear are responsible for a dramatic rise of cancer in firefighters. That’s a claim opponents of the bill say has little solid evidence to back it up and more study is needed. State Rep. Jeff Howe, R-Rockville, the ... -
California Adds BPA to List of Reproductive Toxicants
May 12, 2015 | BNA Daily Environment Report
California's Office of Environmental Health Hazard Assessment said it has added bisphenol A to the Proposition 65 list as a reproductive toxicant. The published notice follows the May 7 determination by the office's scientific advisory panel that valid testing has linked the chemical to female reproductive toxicity (90 DEN A-4, 5/11/15). -
Advisory Board to Review IRIS Analyses June 8
May 12, 2015 | BNA Daily Environment Report
Draft scientific critiques of the Environmental Protection Agency's draft conclusions concerning the human health effects of ammonia; inhaled ethylene oxide, a sterilizer; and trimethylbenzenes, components of gasoline, will be reviewed by the agency's Chartered Science Advisory Board on June 8, according to a Federal Register... -
Categorisation Of Edcs Would Hit Biocides Market, Says Cefic
May 11, 2015 | Chemical Watch
By Carmen Paun
The adoption of criteria for identifying endocrine disrupting chemicals (EDCs) based on a system of categorisation could mean important biocide and pesticide active substances are excluded from the market, say trade bodies. The EU Regulations on biocidal products and plant protection products both state that active substances identified as... -
NY Dem Takes Aim At Nuclear Plant After Oil Spill
May 11, 2015 | The Hill - E2 Wire
By Devin Henry
A long-time foe of a nuclear power plant in New York is taking aim at it again after an oil spill there over the weekend. A Saturday night transformer explosion and fire at the the Indian Point power plant may have spilled oil into the Hudson River, according to the Journal News. The fire was eventually contained, and it didn't pose a threat... -
(ACC Mentioned) Flood Of Shale Gas Spilling Into Communities Across America
May 12, 2015 | Forbes (in Hellenic Shipping News)
Not many years ago, the U.S. steel industry found itself losing ground. U.S. Steel Corp., the country’s largest producer, still had billions of dollars in revenue, but had posted large losses for three consecutive years. Meanwhile, China was offering cheaper labor and an abundance of the raw materials used to make steel. As a result, the World... -
(ACC Mentioned) Judges Appear Skeptical Of Industry Push To Weaken EPA's NHSM Policy
May 11, 2015 | InsideEPA
By Suzanne Yohannan
Appellate judges during May 11 oral arguments appeared skeptical of industry arguments seeking to broaden exemptions under EPA's non-hazardous secondary materials (NHSM) rule to include third-party transfers of such materials, but the judges also pressed environmentalists on whether imposing stricter air emission standards under... -
Localities Can Block Fracking With Zoning, Virginia Attorney General Says in New Opinion
May 12, 2015 | BNA Daily Environment Report
By Jeff Day
Local governments in Virginia are allowed to use zoning authority to prohibit hydraulic fracturing for extracting natural gas, Virginia's attorney general said in the non-binding opinion letter. The opinion by Virginia Attorney General Mark Herring (D) differs from one issued in 2013 by his predecessor, Ken Cuccinelli (R). -
Shell Gets Conditional Approval for Its Plan To Explore for Oil in Arctic Offshore in 2015
May 12, 2015 | BNA Daily Environment Report
By Alan Kovski
A plan by Royal Dutch Shell Plc to explore for oil this summer in the Chukchi Sea received conditional approval May 11 from the Bureau of Ocean Energy Management. Shell still must obtain permits from other federal agencies, including a drilling permit from the Bureau of Safety and Environmental Enforcement, as well as state regulatory... -
Obama Advances Shell’s Bid To Drill In Arctic Waters
May 11, 2015 | PoliticoPro
By Elana Schor
The Obama administration placed a politically risky bet on Shell, granting a crucial approval on Monday to allow the oil giant restart its troubled Arctic offshore drilling plan despite fierce resistance from green groups. The Interior Department’s move sharply escalates a confrontation with environmentalists that began when Shell scrapped its last... -
Feds Greenlight Arctic Drilling
May 11, 2015 | The Hill - E2 Wire
By Timothy Cama
The Obama administration gave its stamp of approval Monday to Royal Dutch Shell’s plan to drill for oil and natural gas as soon as this summer in the Arctic Ocean north of Alaska. The Interior Department’s Bureau of Ocean Energy Management (BOEM) approved the drilling plan, drawing intense criticism from environmental groups that say the... -
Huckabee: Lift Oil Export Ban, Use Renewables
May 11, 2015 | The Hill - E2 Wire
By Devin Henry
Republican presidential candidate Mike Huckabee says the United States needs to lift its ban on crude oil exports, encourage more energy production on federal lands and embrace renewable energy in order to "completely transform the balance of world power." Huckabee detailed his energy platform on Monday, according to the Texas Tribune... -
Window Narrows For FERC To Suggest Reliability Tools
May 11, 2015 | E&E News PM
By Rod Kuckro and Emily Holden
Time is running short for the Federal Energy Regulatory Commission to weigh in on how to address reliability concerns arising from state compliance with U.S. EPA's Clean Power Plan, although the industry seems to be coalescing around tools that might be needed. One FERC watcher thinks EPA will send the plan to the White House Office of Management... -
Senators Ask EPA To Delay Biomass Use In ESPS Until GHG Method Adopted
May 11, 2015 | InsideEPA
By Dawn Reeves
As EPA faces continuing criticism over its methods for estimating greenhouse gas (GHG) emissions from biomass, two Democratic senators are asking the agency to delay until 2020 its plan to allow states to use biomass as a renewable energy resource for complying with its GHG rule for existing power plants, saying the delay will give ... -
Judges Appear Wary of Overturning EPA Rules on Nonhazardous Secondary Materials
May 12, 2015 | BNA Daily Environment Report
By Anthony Adragna
Industry and environmental groups urged a federal appeals court May 11 to overturn an Environmental Protection Agency regulation exempting certain nonhazardous secondary materials—including used tires and coal refuse—from stricter air pollution requirements when burned in boilers or solid waste incinerators ... -
Industry Appeals NEPA Ruling Over Combustion Impacts From Mined Coal
May 11, 2015 | InsideEPA
By Bridget DiCosmo
An energy company is urging the U.S. Court of Appeals for the 10th Circuit to overturn a district court ruling that said the Obama administration erred by not considering mercury emissions from coal combustion and other adverse impacts in its National Environmental Policy Act (NEPA) review of a proposed coal mine expansion. -
Opponents Of NEPA Climate Guidance Hoping For Republican White House
May 12, 2015 | E&E Daily News
By Hannah Northey
Manufacturers and lobbyists yesterday said it may take a Republican in the White House to reverse draft federal climate guidance that they believe will stall new gas pipelines and export terminals. Republicans are unlikely to muster enough support to block the Obama administration's new plan for how federal agencies should integrate... -
Coal Billionaire Running for W.Va. Governor
May 12, 2015 | E&E Daily News
By Manuel Quiñones
Billionaire coal mine owner James Justice yesterday announced he is running for West Virginia governor as a Democrat, promising to help turn the state around from its decades-old troubles. Justice is the second candidate and second Democrat to formally declare his intention to run in what could be one of the top gubernatorial contests... -
As Crude-by-Rail 60-Day Challenge Clock Begins, API Sues, Others Consider Options
May 12, 2015 | BNA Daily Environment Report
By Rachel Leven
The clock is ticking for railroads, energy companies, public interest groups and others to sue the Transportation Department over its final rule governing shipment of crude oil by rail, and so far only one group has challenged the rule. The American Petroleum Institute filed a lawsuit against the rule May 11, and several other industry and public... -
New Rules On Oil Trains Draw Flak From Firefighters, Too
May 11, 2015 | The Sacramento Bee
By Curtis Tate
Lawmakers and environmental and industry groups criticized the federal government’s new safety measures for oil trains when they were announced earlier this month. Now another group has expressed disappointment in the new rules: Emergency responders. They’re among the first in danger when a fiery derailment happens.
Industry and Association News
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Full Text of Stories Below
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(ACC Mentioned) Out Of The Doldrums: A Look At The Materials Sector
May 11, 2015 | Seeking Alpha
Indeed it is a beautiful thing to see; changing economic conditions causing an asset to reduce in value through the vagaries of the markets and then, after several months of consolidation, the asset, industry or sector, emerge with some level of price improvements. Now, as these changes occur, driven by base fundamentals, one has to determine whether to jump on this emerging wave and ride it until it crashes unto shore. One such case is the Materials sector. After being punished for the rout in the commodity markets, the Materials sector is benefiting from looser monetary policy emerging from China, improving yield inputs and farmer profitability, and a healthy chemical industry environment among other things. This is being reflected in the Materials sector's performance relative to the S&P 500, as well as the other sectors in the S&P 500 Index from a total return basis. Investors seeking to take a position in the Materials sector based on it emerging from the doldrums should consider the Materials Select Sector SPDR ETF (NYSEARCA:XLB).
Quite recently China's central bank ratcheted up its support for growth with a 1% cut in the reserve requirement ratio (RRR). The cut frees up significant new funds to lend, and will likely provide an additional boost to its equity markets. The move takes the RRR to 18.5% and will free up about 1.2 trillion Yuan (U.S. $194Bn) in funds for banks to lend. Looser credit conditions or fiscal stimulus should succeed in reversing the trend in construction and industrial activity. For commodities such as copper and iron ore, China accounts for nearly 100% of demand growth over the past decade and now consumes roughly half of the global output. Thus, any stimulative effects in China should spur commodity demand as well as products in the Materials sector.
Although still well below recent highs, corn, wheat, and soybean prices did rebound nicely during the 4th quarter of 2014, restoring some farmer profitability. Moreover, yield-improving chemicals are usually the last items to get cut from a farmer's budget. Analysts think that the U.S. farm economy and crop markets are generally mature, with cultivation of corn being the largest use for agricultural chemicals. According to the USDA, farmers planted 90.6Mn acres with corn in 2014. USDA forecasts for the 2015 planting season are for 89 corn acres, citing current corn prices, improved inventory levels, and record yields. Analysts also think that basic crop rotation practices and favorable economics for soybeans will slightly increase soybean acres in the coming year to about 84.6. Total acreage plantings for eight major crops are expected to drop by 3.8 acres to 254.7 acres in 2015, according to the USDA. Analysts state that much of the growth in global nutrient use should continue to come from developing countries in Asia and Latin America, as these regions' rising populations and income levels boost the demand for grain. It is expected that fertilizer and seed companies will focus more on these markets in the coming years.
Fertilizer producers remain optimistic about the long-term fundamentals, based on the rising consumption of meat around the globe and general affordability of fertilizers relative to grain prices. Natural gas, which is a major component of production costs for nitrogen producers, is considerably lower in price than the historical averages, and prompted a large number of fertilizer companies to explore capacity expansion opportunities in North America.
In other industries in the Materials sector, analysts expect the business environment for the chemical industry will remain healthy. According to data from the American Chemistry Council (ACC), chemical production in North America has been on an upward trend since December 2008, at a very slow pace. Recent data for the U.S. show that output has been mixed, with strong comparisons versus the prior year in consumer products, synthetic rubber, inorganic chemicals, and other specialties (non-coatings), and weak comparisons in man-made fibers and agricultural chemicals. For industrial gases, global volume trends improved, including higher volumes in North America due to improving demand from manufacturing customers as well as contributions from the recent start-up of new plants.
The Chlorine Institute reported that YTD chlorine production was up 2.2% from the same period a year ago. Chlorine is widely used to manufacture polyvinyl chloride (PVC) resins, organic chemicals, and titanium dioxide, as well as for water treatment, disinfection and other applications, according to the American Chemistry Council. This should bode well for the commodity chemicals. The output of co-produced caustic soda rose to 34,448 tons per day (t/d) in February from 34,829 t/d in January, but was also up from 28,964 t/d in October. YTD production was up 1.4% from the same period last year. Caustic soda is used in the bleaching in wood pulp and water treatment, oil refining, alumina production and textiles, according to the ACC. Also total production of all chemicals in North America was up 4.1% YTD on the basis of a 3-month moving average through March, and globally was up 2.8% through February. Especially strong growth in China, Belgium and Canada helped to drive the global average higher. Things are indeed going well for the Materials sector.
Currently, the S&P 500 Materials Sector Index is standing at 19.63, which is above the 1-Year, 3-Year and 5-Year averages, which signals that the sector is historically overvalued. Similarly, the S&P 500 Index is also trading above its historical average P/Es, with its current P/E being at 18.69 times, which is above the 1-Year, 3-Year and 5-Year averages. This is as result of the overall interest rate environment. With U.S. yields near historical lows, investors are prepared to pay a premium for U.S. equities, elevating the current P/E of the Materials sector and the S&P 500 Index overall.
Table 1 - Current P/Es Vs. Historical Averages As At 8th May 2015
Investors should focus on XLB for capital appreciation given the underperformance in dividend yield relative to the SPDR S&P 500 Trust ETF (NYSEARCA:SPY).Table 2 - XLB Dividend Yield Vs. S&P 500 As At 8th May 2015
For months, utilizing a price momentum model, the Materials sector has been identified as a laggard relative to the benchmark, the S&P 500 Index, as well as its peers, the other sectors within the S&P 500 Index. But quite recently, almost 2 weeks now, the Materials sector moved from a lagging position to a neutral position. The table below illustrates the top leader and laggards in the S&P 500, which were identified by looking at the total returns over various time frames as well as the relative strength versus the S&P 500 Index.
Table 3 - Total Returns Of S&P 500 Sectors Over Various Time Frames As At 8th May 2015
From solely a relative strength perspective, the Materials sector remains a laggard.
Chart 1 - S&P 500 Relative Rotation Graph As At 8th May 2015
As such, the final price momentum model indicates that the Materials sector moved from Laggard to a Neutral position. The sector is highlighted in red, which suggests that investors should be slightly underweight. Before, the Materials sector was outright underweight. This is all relative to the S&P 500 Index.Table 4 - Leaders And Laggards In The S&P 500 Over Various Time Frames As At 8th May 2015
Given the positive fundamentals and price movements in the Materials Sector, investors should consider a position in XLB.
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(ACC Mentioned) Strong US Chemicals Growth Fuels $800 Million Offer For Quality Distribution
May 11, 2015 | JOC
By William B. Cassidy
Call it good chemistry: Low energy prices and rising U.S. chemical output made Quality Distribution a very attractive acquisition target for Apax Partners.
The $37-billion private equity firm last week said it will pay $800 million, including the assumption of debt, for the $992-million bulk trucking and logistics company.
Quality Distribution and its subsidiaries, bulk trucking firm Quality Carriers and intermodal tank operator Boasso America, increased revenue 2.8 percent in the first quarter to $207.3 million, largely driven by the company’s expansion in chemical logistics.
Although U.S. chemical production slowed in March, it remained more robust than U.S. manufacturing in general, and was up 4.1 percent year-over-year, according to the American Chemistry Council. That followed a 4.2 percent year-over-year increase in the ACC’s U.S. Chemical Production Index for February. Those gains by the index signal growth in chemical production creating opportunities for Quality Distribution.
Chemicals and chemical products such as resins and plastics are used in practically every type of manufacturing, which helps sustain a broad-based expansion in output.
“The company operates in an industry that is expected to grow at rates greater than the general economy primarily due to the resurgence of the petrochemical industry resulting from the chemical renaissance taking place in North America,” the company said in documents filed last week with the U.S. Securities and Exchange Commission.
The transport operator’s chemical logistics revenue rose 5.7 percent in the first quarter, excluding fuel surcharges. Intermodal revenue, linked to chemical production, was up 9.7 percent. Oil-field-related energy business declined 13.3 percent, the company said.
Quality is trying to shift its energy logistics business away from drilling work, severely affected by the steep drop fuel prices, toward steadier post-production activity.
Meanwhile, lower U.S. energy costs attract more chemical manufacturing. In March, Sasol broke ground on a $9 billion ethane cracker and derivatives complex in Westlake, Louisiana, that will triple the South African company’s U.S. chemical output capacity.
When it opens in 2018, the petrochemical complex will use U.S. ethane to manufacture a diverse variety of commodity and specialty chemicals for markets worldwide.
That means more chemical transportation demand for companies such as Quality.
“Apax supports our strategy and is committed to helping us continue our pursuit of strategic growth in our chemical and intermodal businesses while managing the current market conditions in the energy industry,” Gary Enzor, chairman and CEO of Quality Distribution, said in a statement. “They will bring financial resources and expertise that will assist us as we expand” through internal investment and acquisitions, he said.
“Having followed Quality for several years, we have been impressed with the strategy and vision articulated by the Company’s management team,” said Ashish Karandikar, a Partner on Apax’s Services team. “As the leading logistics platform in the bulk chemical transportation industry, Quality is well positioned to take advantage of both organic growth opportunities and strategic acquisitions while benefiting from the financial and operational flexibility of operating as a private company. We look forward to partnering with Quality’s management team as they pursue the company’s next phase of growth.”
Quality has a 40-day window to seek another buyer, though it would have to pay its way out of the Apax partners deal. Beating the $800 million offer won’t be easy.
Quality also sees Apax as an avenue to growth. Presently, the company said it is “constrained” from pursuing some “compelling acquisition opportunities.” With Apax, Quality will have “the increased financial flexibility we need to continue to grow.”
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(ACC Mentioned) Sasol, Lyondell Basell, Phillips 66 - Best Buys In Petrochemical Sector
May 11, 2015 | Seeking Alpha
The petrochemical industry in the US, in a crisis only a couple of years ago, is currently going through a period of an active resurgence. The shale boom in natural gas production was accompanied by a boost in production of hydrocarbon feedstock such as ethane and propane. As a result, the chemical industry worldwide was shaken up and lead to the loss of competitiveness for European and Asian petrochemical companies.
In 2008, none of the members of the American Chemistry Council (ACC) planned investing in the country. Today, as US petrochemical plants are benefiting from the cheap supplies of natural gas, the ACC lists 110 new investment projects for the US, worth more than $77 billion.
At the dawn of the shale boom, gas drillers were mainly focused on methane gas. However, due to lower margins of methane gas production, they shifted their focus to production of shale oil and the so-called "wet gas" (natural gas that contains the hydrocarbon feedstocks, e.g. butane, propane and ethane). An alternative to "wet gas" is naphtha, a component of oil. Some petrochemical companies, including European, primarily run on naphtha, which is much more expensive than "wet gas".
In general, petrochemicals are petroleum products refined from crude oil and natural gas. They are mainly used in the production of petrochemical derivatives such as formaldehyde, polyvinyl chloride, acetic acid and epoxy resins among others.
The growing demand of petrochemicals from major end use industries such as transportation, chemical, construction and packaging is expected to drive the petrochemical industry globally.
The US has become the major segment of earnings for many petrochemical companies. For some of them the US accounts for 80% of earnings.
Now let's turn to petrochemical companies that we consider the best buys right now.
Sasol Limited is a South-African energy company. Petrochemical products account for 60% of company's revenue. Sasol has production and refining facilities in South Africa, Europe, North America and Asia.
Sasol has moderate valuation metrics with P/E at 7.36 and P/B of 1.6. EV/T12M EBITDA stands at 4.12. Based on company's current profitability it has a decent upside potential.
Also, there is a bonus of 2.95% dividend yield.
Sasol has a strong balance sheet with debt/capital standing at 13%. Company has $3.5 billion in cash and equivalents, which covers company's total debt of $2.4 billion. Total debt/T12M EBITDA is also very low - 0.43.
Lyondell Basell is the US petrochemical giant, which has gone from bankruptcy in 2009 to profits the next year. Lyondell Basell's case illustrates how the industry of petrochemicals in United States has transformed in recent years.
The company had a loss of $2.8 billion and negative FCF of $1.5 billion in 2009. Now, it enjoys a profit margin of 9%, while normalized 5Y ROE reached 39.75%.
As Sasol and Phillips 66, Lyondell Basell has a high dividend yield of 3%.
Lyondell Basell is a little more leveraged than Sasol, but still has debt /capital of 46% and total debt/T12M EBITDA ratio of 1.05.
Phillips 66 is a downstream energy company. It was split off ConocoPhillips and in 2012 its stock started trading on NYSE. Now its operations are mainly concentrated in gas condensates and petrochemicals.
The company has a very attractive dividend yield of 2.74% with a 42.35% 1Y net growth in dividend yield. Phillips 66 is paying dividends since 2012, when dividend yield was a modest 0.85%.
Phillips 66 has low levels of debt with debt/capital at 28.3% and total debt/T12M EBITDA at 1.95.
Conclusion
What lies ahead for the booming industry of petrochemical production in the US? Will the current boom eventually go bust? In reality, this industry tends to oversupply as with rising prices for natural gas and crude oil drilling companies start building up production. Also, cheap crude oil prices make naphtha cheaper, which puts prices of ethylene and other petrochemical derivatives under pressure. Crude oil prices must keep below $70 a barrel for a longer term horizon in order to consider naphtha as a serious threat to a booming petrochemical industry in United States.
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(ACC Mentioned) LyondellBasell To Seek Additional 3-Cent/Lb Hike On Us June PP
May 11, 2015 | Platts McGraw Hill Financial
By Pavel Pavlov
LyondellBasell subsidiaries Equistar Chemicals and Mexico City-based Basell Poliolefinas plan to increase June polypropylene prices by 3 cents/lb ($66/mt) in addition to any change in feedstock pricing, the companies said Monday in a letter to customers obtained by Platts.
Equistar and Basell Poliolefinas will adjust PP prices in alignment with any published change in the US Gulf Coast polymer-grade propylene contract price from May to June and tack on an additional 3-cent/lb increase, the letter said.
The increase will be in addition to all previously announced increases.
May pricing for polypropylene and propylene remained unresolved Monday afternoon, with expectations in the markets of a 1-cent decrease in the PGP settlement.The company is the fifth producer to announce a June increase in the past week.
ExxonMobil Chemical announced a 4-cent/lb increase Friday, Formosa Plastics announced a 3-cent increase Wednesday, while Pinnacle Polymers announced a 3-cent/lb increase May 4.
Also on Wednesday, US Total Petrochemicals and Refining said it will enact the remainder of its 5-cent/lb margin increase announced in late January. The industry has already accepted a 2-cent/lb margin increase in April, which means Total's 5-cent/lb margin expansion will be a 3-cent/lb increase in pricing for June deliveries, sources said.
In late April, Ineos was the first producer to announce the 3-cent/lb increase for June deliveries.
PP contracts in the US closely follow PGP contract pricing. A majority of contracts remain on monomer-plus formulas, although producers, including Formosa Plastics and Total Petrochemicals, have been moving away from such a feedstock-heavy formula, sources said.
Platts last assessed homopolymer injection contract prices for April at 57-58 cents/lb delivered-railcar and fiber pricing at 59-60 cents/lb for fiber grades, down 4 cents from March.
In market activity, homopolymer polyethylene was last assessed Monday for export at $1,378-$1,400/mt FAS Houston.
Spot PGP was last assessed Friday at 40 cents/lb delivered, up 1 cent week on week. April contracts settled at 43 cents/lb delivered, sources said.
In industry data, PP production slipped 8.06% to 1.38 billion lb in April from 1.501 billion lb in March, American Chemistry Council preliminary data showed Friday.
The ACC data brings preliminary year-to-date polypropylene production to 5.554 billion lb, a gain of 201 million lb from 5.353 billion lb at the same point last year.
That amount brings year-to-date US polypropylene total sales and captive use volumes to 5.613 billion lb, the data showed, up 378 million lb from the 5.235 billion lb in the first four months of 2014.
With the April production capacity pegged at 1.524 billion lb and total production at 1.38 billion lb, the preliminary run rate for the month is at 90.5%, a drop of 4.5 percentage points from March's 95% run rate. -
May 12, 2015 | BNA Daily Environment Report
By Pat Rizzuto
The Environmental Protection Agency should withdraw the Fragrance-Free Safer Choice label it released in March and engage with interested parties on the fragrance-free and labeling issues, trade associations recently told the agency.
“We strongly encourage EPA to withdraw the ‘fragrance-free safer choice’ label and to issue such a label only after documenting the human health and/or environmental need to do so and noticing the public, providing a full opportunity for comment,” wrote Debra Phillips, a vice president with the American Chemistry Council, in recent comments the council submitted to the EPA.
Private-sector certification programs criticized the agency's expansion of what used to be called the Design for the Environment program into a labeling program.
The labeling program inappropriately competes with independent, voluntary third-party programs, Green Seal and UL LLC, once known as Underwriters Laboratories, told the agency.
Five trade associations, three health advocacy groups, Green Seal and UL commented on the EPA's Fragrance-Free Safer Choice label, one of several the agency released in March (43 DEN A-15, 3/5/15).
The three health advocacy groups—the Children's Environmental Health Network, American Lung Association and American Thoracic Society—submitted a joint comment urging the agency to make more stringent the criteria companies would have to meet in order for their products to qualify for the EPA's fragrance-free label.
Comments were due May 5 on three issues:
• the Fragrance-Free Safer Choice label;
• the name—Safer Product Labeling Program—that the EPA is using for the labeling responsibilities of what used to be called its Design for the Environment (DfE) program; and
• revisions the agency announced to the criteria, or “standards,” that companies must meet if they want their cleaning or other chemical-based products to bear an EPA Safer Product label.
The EPA sought comments in a March 6 Federal Register notice (80 Fed. Reg. 12,171).
‘No Notice,’ Cleaning Institute Says
Interested and affected parties were excluded from the process the agency used that resulted in its release of the Fragrance-Free Safer Choice label, several trade associations said.
The EPA held webinars and invited comment on designs it was considering for the Safer Product labels generally (150 DEN A-3, 8/5/14).
“No notice to the public and no opportunity to comment or offer input into the development of ‘fragrance-free’ criteria and label was extended to stakeholders,” wrote Kathleen Stanton, director of technical and regulatory affairs for the American Cleaning Institute.
The absence of public participation in the standards that companies must meet for their products to bear the fragrance-free label is a departure from EPA's usual practice of including interested parties, she wrote.
Institutional cleaning products were a key focus of the DfE label, which has now been revised and renamed as the Safer Choice Label, meaning the institute is among the trade associations that have long worked with EPA's program.
Inaccurate, Fragrance Association Says
Statements the EPA included in its revised standards are inaccurate with respect to fragrance chemicals, wrote Jennifer Abril, president of the International Fragrance Association of North America (IFRA NA).
Abril asked the EPA to withdraw a statement in its revised standards.
EPA's statement, “we know that many fragrance materials may be associated with sensitization and allergenic responses and lack toxicological data,” is inaccurate and appears to reflect the EPA's acceptance of “biased and unsubstantiated claims about the lack of safety surrounding fragrance materials,” she wrote.
Timothy Serie, an attorney with the American Coatings Association, and Stephen Wieroniey, who works on health, safety and environmental affairs for that association, submitted for a second time a concern the coatings and other trade groups raised as the agency developed its Safer Choice Label.
The word safer on EPA's label implies that products without the label are less safe or even dangerous, Serie and Wieroniey wrote.
The label violates guidance the Federal Trade Commission has issued about claims that can be made on products in the marketplace, they wrote.
DfE's Original Intent Supported, Not Labeling
Green Seal and UL said they supported the original intent of the EPA's Design for the Environment program.
“When the DfE was first launched, it was designed to be a collaborative effort between the government and industry to use more environmentally-friendly chemicals. This collaboration provides great value,” wrote Ann Weeks, vice president for global government affairs at UL.
The expanded labeling program, however, directly competes with private sector programs offered by third parties such as Green Seal and UL, wrote Arthur Weissman, president and chief executive officer, for Green Seal.
The labeling program conflicts with guidance issued by the Office of Management and Budget (Circular A-119) that instructs government agencies first to turn to private sector, voluntary standards in lieu of government programs whenever possible, both Weeks and Weissman wrote.
Cal Dooley, president and chief executive officer of the American Chemistry Council, made a similar argument in 2014. “Is it the appropriate goal of government to put a label on a product it decides is more environmentally safe?” he asked (44 DEN A-18, 3/6/14).
In 2014, the EPA received more than 1,700 comments on four proposed label designs. Many public comments and some states supported the proposed phrase “Safer Choice” (229 DEN A-4, 11/28/14).
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(ACC Mentioned) Minnesota Ban On Fire Retardants Would Be Toughest In Nation
May 11, 2015 | Minneapolis Star Tribune
By Abby Simons
St. Paul fire fighters Chris Parsons, President of Minnesota Professional Fire Fighters, and Pete Gutzmann monitor a couch fire set at a training facility to demonstrate how flame retardants release dangerous chemicals. Firefighters want flame retardants phased out, but their effort has stalled in the Minnesota House.
Minnesota legislators are on the verge of approving the nation’s most restrictive use of flame-retardant chemicals in furniture and an array of household items such as textiles, mattresses and children’s products.
State firefighters have been pushing for legislation that would phase out the use of 10 such chemicals, saying they are ineffective in slowing the spread of fire and contain toxins that are sickening responders. Monday’s compromise, reached among the firefighters, the Minnesota Chamber of Commerce and chemical companies, would phase out the manufacture and sale of four commonly used flame retardants.
The deal comes a week to the day after firefighters filled hallways at the Capitol decrying what they called the “slow death” of the original bill, which had sailed through the Senate but had not even gotten a hearing in the House.
Minnesota Professional Fire Fighters union President Chris Parsons expressed mixed emotions about Monday’s compromise.
“We are leaving off the list six carcinogenic flame retardants, so in that regards I’m not pleased about it,” said Parsons, a St. Paul fire captain. “But does it move the conversation further, does it get us closer to our goal? Yes. In the meantime will firefighters continue to be exposed? That I’m not happy about.”
Susan Shaw, director and founder of the Marine & Environmental Research Institute, testified before a House Committee on Monday that “firefighters inhale, ingest, and absorb hundreds of toxic, carcinogenic chemicals during every phase of firefighting — suppression, knockdown/ventilation, and cleanup.”
A professor at the State University of New York at Albany, Shaw told the panel that young firefighters are developing aggressive cancers at an earlier age than the general population. “Cancer is a looming personal catastrophe for each and every firefighter,” she said.
The initial 10-chemical ban was opposed by the Chamber, the American Chemistry Council and the North American Flame Retardant Alliance, a coalition that said the proposed ban was too broad. Similar legislation to ban fire retardants has passed in Oregon, Maine and Vermont, but was narrower in scope.
“It’s important to remember that when you start talking about chemical regulation and specifically flame retardants, that one size does not fit all.” Tony Kwilas, director of environmental policy at the Minnesota Chamber of Commerce, told the panel.
Robert Simon, vice president of chemical products and technology for the American Chemistry Council, points to studies that showed flame retardants did not make smoke more toxic, and prove that flame retardants slowed the spread of fire by minutes. Regardless of whether flame retardants are present, he said, smoke and other fire byproducts are naturally dangerous.
The House Commerce and Regulatory Reform Committee, after hearing Monday’s testimony, passed the modified bill, which is expected to be approved by the full House and Senate.
Cancer concerns
Firefighters have been arguing nationally that flame retardants, while initially thought to hold great promise for slowing the spread of deadly fires, have failed to prove effective while, they contend, contributing to their profession’s increased cancer rates.
Nationwide, cancer attributes for half of line-of-duty deaths among professional firefighters. St. Paul fire Capt. Steve Shapira, who has served 17 years, last year was diagnosed at 46 with non-Hodgkin lymphoma.
“Cancer has changed my entire world,” said Shapira, a married father who is now on sick leave and is battling with the city of St. Paul to receive workers’ compensation. “Not one aspect has not been affected.”
Rep. Jeff Howe, R-Rockville, a former firefighter who sponsored the bill, said negotiations were a drawn-out debate that ultimately focused on which chemicals were most dangerous, and which are still in use.
“I don’t think anybody’s really happy in this group, which probably means it’s close to pretty good legislation, and I think it’s as far as we can get this time,” Howe said.
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(ACC Mentioned) Deal In Works To Ban Certain Fire Retardants
May 11, 2015 | TwinCities.com-Pioneer Press
By Christopher Magan
Members of the Minnesota House commerce committee struck a deal Monday on a ban of four chemical fire retardants some experts fear are responsible for a dramatic rise of cancer in firefighters.
That’s a claim opponents of the bill say has little solid evidence to back it up and more study is needed.
State Rep. Jeff Howe, R-Rockville, the chief sponsor of the bill in the House, pulled six other chemicals out of the legislation to win a consensus. The bill does requires the state health commissioner and fire marshal study the danger of other fire retardants.
The St. Paul and Minneapolis fire departments are also taking part in a nationwide study of the dangers of flame retardants.
“Before we ban something, we need to have that data,” Howe said, calling the bill a first step. He expressed confidence he could win support of his colleagues in the Republican-led House as the session enters its final days. “We’ll get it done.”
The legislation originated in the DFL-controlled Senate where it passed on a 59-2 vote in April. It will phase out the use of some flame retardants in children’s products, furniture and mattresses.
State Sen. John Marty, DFL-Roseville, said he disappointed the bill was watered down, but pleased they could agree to something.
“Our firefighters deserve better than this, but this is a significant step forward,” said Marty, who plans to accept the changes when the bill makes it back to the Senate. “This is one of those cases when it is late in the session and we will take what we can get.”
It passed the House Commerce and Regulatory Reform Committee on a voice vote Monday, but must make a stop in the Rules and Legislative Administration Committee before heading to a floor vote.
St. Paul Fire Capt. Steve Shapira testified to committee members about his recent diagnosis with non-Hodgkin’s B-cell lymphoma, which he believes was caused by the roughly 500 fire scenes he worked on during his career. Shapira is suing the city of St. Paul over the denial of a workers’ compensation claim.
“I don’t think it goes far enough, but this is a good start,” Shapira said of the compromise. “Clearly we could go further and do more.”
Susan Shaw, a professor in the department of public health at the State University of New York-Albany, said there is strong, but circumstantial evidence the widespread use of chemical flame retardants has led to increased cancer rates in firefighters. The chemicals are in things like carpet and couch cushions and when ignited they give off hazardous smoke and soot that can be absorbed through a firefighters’ skin.
Cancers of the blood, respiratory and digestive systems have risen dramatically as the use of fire retardants have increased, Shaw testified. Cancer is now the cause of 56 percent of career firefighter job-related deaths.
Critics of the bill argue there is little solid evidence that fire retardants cause elevated cancer risk and more study is needed. They noted that fire retardant chemicals are used in different ways that can impact what is released during combustion.
“There is not a one-size-fits-all when it comes to the chemical application of flame retardants,” said Tony Kwilas, director of environmental policy for the Minnesota Chamber of Commerce.
Chemical industry scientists also disputed testimony from bill supporters that fire retardants only add a few seconds of protection from fire. Robert Simon, of the American Chemistry Council, said fire retardants were an important tool in fire suppression and delay the combustion of many household products.
“The bottom line is they do work,” Simon said.
State Rep. Sarah Anderson, R-Plymouth, noted that wood, vinyl siding and many other construction materials also give off carcinogens when they burn. She asked if lawmakers would be back to consider banning building homes out of wood or concrete to avoid cancer.
Bill supporters countered that the difference between materials like wood and fire retardant chemicals is a matter of scale. There are exponentially more chemicals in modern household goods and furnishings then there were 50 years ago. Those chemicals, especially fire retardants, make firefighting much more hazardous.
“For firefighters, this is our office, this is where we punch a clock and do our business,” said Chris Parsons, president of the Minnesota Professional Fire Fighters union. “We don’t get to go home until the fire is out.”
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California Adds BPA to List of Reproductive Toxicants
May 12, 2015 | BNA Daily Environment Report
California's Office of Environmental Health Hazard Assessment said it has added bisphenol A to the Proposition 65 list as a reproductive toxicant. The published notice follows the May 7 determination by the office's scientific advisory panel that valid testing has linked the chemical to female reproductive toxicity (90 DEN A-4, 5/11/15). Bisphenol A, commonly known as BPA, is widely used to make polycarbonate plastics and epoxy resins. The state office now must determine if exposure to products containing BPA warrants consumer warnings required under Proposition 65—the Safe Drinking Water and Toxic Enforcement Act of 1986.
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Advisory Board to Review IRIS Analyses June 8
May 12, 2015 | BNA Daily Environment Report
Draft scientific critiques of the Environmental Protection Agency's draft conclusions concerning the human health effects of ammonia; inhaled ethylene oxide, a sterilizer; and trimethylbenzenes, components of gasoline, will be reviewed by the agency's Chartered Science Advisory Board on June 8, according to a Federal Register announcement scheduled for May 12 publication. In draft critiques released May 7, the SAB's Chemical Assessment Advisory Committee found the EPA's draft health effects assessments to be generally well-founded, but that improvements could be made (90 DEN A-3, 5/11/15). The Chartered SAB must review the draft critiques before they can be sent to the agency. The ammonia, ethylene oxide and trimethylbenzenes assessments were prepared by the EPA's Integrated Risk Information System (IRIS) program, which analyzes human health effects of chemicals and the doses at which health hazards could occur. The meeting announcement is available at https://s3.amazonaws.com/public-inspection.federalregister.gov/2015-11448.pdf. To register for the meeting, contact Thomas Carpenter by phone at (202) 564-4885 or at carpenter.thomas@epa.gov.
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Categorisation Of Edcs Would Hit Biocides Market, Says Cefic
May 11, 2015 | Chemical Watch
By Carmen Paun
The adoption of criteria for identifying endocrine disrupting chemicals (EDCs) based on a system of categorisation could mean important biocide and pesticide active substances are excluded from the market, say trade bodies.
The EU Regulations on biocidal products and plant protection products both state that active substances identified as EDCs are excluded from the market. However, the criteria for identifying EDCs have yet to be agreed and the European Commission has consulted on a number of options.
Speaking at a press briefing held by the European Chemical Industry Council (Cefic) on Monday, Raf Bruyndonckx, its biocides manager, said that “depending on the criteria, the biggest concern that we see is with categorisation, because it can cast a wide net on the substances”.
The briefing was timed to fall the day before the Commission roundtable to brief members of the European Parliament on the impact assessment regarding the development of EDC criteria (CW 26 March 2015).
If adopted, the categorisation would classify EDCs according to three categories: endocrine disruptors;suspected endocrine disruptors; andendocrine active substances.
But the chemical industry has come out strongly against it, arguing that it would lead to the banning of substances for which the evidence is not sufficiently strong to prove they are EDCs (CW 22 January 2015).
If the categorisation option is chosen, some 15% of biocidal substances could be excluded from the market, said Mr Bruyndonckx.
Similarly, the European Crop Protection Association (Ecpa) says the categorisation option would lead to the banning of 50 to 80 pesticide active substances. Some of these, such as triazole-based pesticides, are widely used and lack alternatives, Ecpa director general, Jean-Charles Bocquet, told the same briefing.
However, if criteria take account of the potency of substances, the loss could be narrowed to some 20-25 substances, said Mr Bocquet.
In a reference to the sixteenth century founder of toxicology, Cefic director general, Hubert Mandery, said "if potency is not acknowledged, Paracelsus is dead. If the dose does not make the poison anymore, science is in trouble.”
Mr Mandery also said the EDC debate could "impair" the EU-US negotiations for a Transatlantic Trade and Investment Partnership (TTIP) if not done "prudently" (CW 28 April 2015).
A study of the impact assessment by the Commission’s directorate general (DG) for health is looking at how some 700 chemicals would fare against the four policy options being considered. The results are expected this autumn. A second study of the impact assessment, analysing the socio-economic impact of each of the options, is due to by autumn 2016.
The Commission’s legal proposal for EDC criteria is expected by the end of next year, with adoption and entry into force foreseen for 2017.
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NY Dem Takes Aim At Nuclear Plant After Oil Spill
May 11, 2015 | The Hill - E2 Wire
By Devin Henry
A long-time foe of a nuclear power plant in New York is taking aim at it again after an oil spill there over the weekend.
A Saturday night transformer explosion and fire at the the Indian Point power plant may have spilled oil into the Hudson River, according to the Journal News.
The fire was eventually contained, and it didn't pose a threat to the public, and the company that owns the facility reported the incident under the lowest possible federal emergency classification. But officials acknowledged that they will need to clean up oil that had spilled from the plant during the event.
"There is no doubt that oil was discharged into the Hudson River," New York Gov. Andrew Cuomo (D) said, per the Journal News. "Exactly how much, we don't know. That will be part of an ongoing investigation."
In response, Rep. Nita Lowey (D-N.Y.) released a statement saying the Nuclear Regulatory Commission should not renew Indian Point's license to run its nuclear reactors.
"We are extremely fortunate that a catastrophic scenario did not unfold, and I urge officials to conduct a swift and thorough investigation," she said in a statement. "I remain deeply skeptical that Indian Point's continued operation is in the best interests of families and businesses in our densely-populated region."
Lowey has long opposed Indian Point, which is about 40 miles from New York City.
In 2011, she toured the facility with the chairman of the NRC and Rep. Eliot Engel (D-N.Y.), who also opposes the plant, and she battled with Republicans over the plant at a congressional hearing in 2012. She has introduced two bills related to the plant this session, according to her office: one to create emergency preparedness grants for nuclear facilities and another to require more stringent NRC evaluations for re-licensing power plants.
One of Indian Point’s two reactors is due to be re-licenced this year.
Entergy, the company that operates Indian Point, said it is still investigating the incident and that there is "little to no evidence of any environmental impact observed in the river as a result of this event."
"We have an obligation to be as precise as possible before estimating what may or may not have been released to the water," Jerry Nappi, an Energy spokesman, said in a statement. "Entergy takes all potential environmental issues very seriously, which is why we took immediate action to put protections in place on the river following this event."
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(ACC Mentioned) Flood Of Shale Gas Spilling Into Communities Across America
May 12, 2015 | Forbes (in Hellenic Shipping News)
Not many years ago, the U.S. steel industry found itself losing ground.
U.S. Steel Corp., the country’s largest producer, still had billions of dollars in revenue, but had posted large losses for three consecutive years. Meanwhile, China was offering cheaper labor and an abundance of the raw materials used to make steel. As a result, the World Steel Association reported that Chinese production of steel increased 57 percent between 2007 and 2013, while American production during that time period declined by 11 percent.
But then came the domestic shale gas boom, which has put the American steel industry back in the business of making pipes for drilling rigs and new pipelines.
The steel industry’s resurrection has been punctuated by developments like U.S. steel titan Nucor Corp.’s $750 million investment in an iron-ore facility in St. James Parish, Louisiana. The company opened the facility in 2013 to strip oxygen from iron ore — an energy-intensive manufacturing process that in an earlier era had left the United States for global regions that could power the plants more cheaply. When fully operational, the plant will be one of the most productive steel-making facilities in the world, generating around 2.5 million tons per year.
“We believe the shale gas revolution is a game-changer for energy intensive industries and the entire manufacturing sector,” says Katherine Miller, a Nucor spokeswoman. “Low natural gas prices are spurring new manufacturing investment and creating jobs.”
Indeed, more than $120 billion in domestic manufacturing investment has been announced, says Miller. That is expected to create 1 million new jobs by 2035, according to PriceWaterHouseCoopers.
While the levels of reserves have been adjusted downward, generally speaking the United States is still awash in shale gas, with some geologist estimating that shale production will remain active for decades. And that’s good news for Nucor and other manufacturers, which will continue to see relatively inexpensive natural gas prices — all made possible because of hydraulic fracturing, a controversial drilling technique that allows access to gas deposits that not long ago were too hard to retrieve.
The good fortune is compounded because developers are able to make use of both “dry” natural gas and the “wet gas” that is separated from it. Those so-called natural gas liquids are comprised of such chemicals as butane, ethane, methane and propane — all of which can serve as the foundation for finished goods that are consumed domestically and exported around the globe.
“It does take my breath away,” said Andrew Liveris, chief executive officer of The Dow Chemical Company, in a speech. “Ninety-five percent of everything you touch needs these building blocks.”
The combination of abundant and inexpensive natural gas supplies is encouraging both domestic and foreign companies to set up shop in the United States. Freeport, Texas, for example, is now home to brand new ethylene and ammonia plants, which rely on a steady flow of natural gas, launched by two of the largest global chemical producers: America’s Dow Chemical Co. and Germany’s BASF.
But Freeport is just a snapshot of the manufacturing investment flowing into the Gulf Coast. Dow alone plans to spend $4 billion in the region, according to Leveris. Meanwhile, companies like South Africa’s Sasol Ltd. and Taiwan’s Formosa Plastics Corp. are acquiring the necessary permits to expand their presence in Louisiana and Texas, respectively.
But the benefits tied to the shale gas boom aren’t isolated to the Gulf Coast.
In Pennsylvania, petrochemical facilities — the engines behind the multi-billion dollar plastics and synthetics industry — had been underutilized until shale gas was found in the Marcellus region. According to the U.S. Energy Information Administration, three-fourths of the country’s natural gas production is occurring there, which has transformed the area. Now, such facilities there are modernizing and expanding.
“Shale gas and energy have changed the whole manufacturing dynamic,” says Chad Moutray, chief economist at the National Association of Manufacturers. “Just a few years ago, no one would have predicted this renaissance.”
In fact, the newfound cost advantage will lead to increased U.S. industrial production, adds a report by the American Chemistry Council, which examined the years between 2012 and 2025. The increase is equivalent to $258 billion in new manufacturing output in 2020 and $328 billion in 2025.
As of June 2014, more than 180 chemical industry projects, including facilities that break down wet natural gas, represent hundreds of billions in U.S. investment over the last couple years, the council says. And it’s expected to keep growing.
The positive outlook for those liquids is driving much of the chemical industry’s investments and plant expansions. Inexpensive natural gas prices, meanwhile, are lowering the cost of overhead for manufacturing and chemical enterprises — a primary expense for those businesses. The one-two punch means that certain manufacturing enterprises that were once considered causalities of globalization are now finding their feet once again. “For the last 20 years, people have been asking about a company’s China strategy,” says Kevin Swift, chief economist with the American Chemistry Council. “And now the questions are about a company’s American strategy.”
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(ACC Mentioned) Judges Appear Skeptical Of Industry Push To Weaken EPA's NHSM Policy
May 11, 2015 | InsideEPA
By Suzanne Yohannan
Appellate judges during May 11 oral arguments appeared skeptical of industry arguments seeking to broaden exemptions under EPA's non-hazardous secondary materials (NHSM) rule to include third-party transfers of such materials, but the judges also pressed environmentalists on whether imposing stricter air emission standards under the rule would affect recycling under the Resource Conservation & Recovery Act (RCRA).
The judges also sought answers on how broad a definition to apply to the term "discard" -- a trigger for deeming materials a solid waste and therefore stricter air emissions requirements -- and whether legitimacy criteria are being met under the rule.
EPA, environmentalists and industry argued their positions in Eco Services Operations LLC v. EPA before a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit.
The lawsuit challenges EPA's NHSM rule under RCRA, issued in 2011. The NHSM rule determines if a combustion unit must meet emissions limits in the Clean Air Act boiler maximum achievable control technology rule or the air law's more stringent commercial/industrial solid waste incinerator rule. NHSM burned in combustion units is a solid waste -- and subject to the incinerator rule -- unless it falls under one of five conditions. For instance, exemptions are given if EPA has determined on a case-specific basis that the material has not been discarded, or if the material has been identified as a categorical non-waste fuel.
The case is complex, with environmental groups and industry groups filing as both petitioners and intervenors. During the first half of oral arguments, Earthjustice, representing a coalition of environmental groups, argued for tighter emissions controls under the rule -- contending that secondary materials such as used oil and tires should be classified as solid waste and trigger the more stringent incinerator requirements when burned as fuel -- while EPA and industry attorneys defended it. During the second half, industry attorneys argued for loosening the rule -- specifically calling for the exemption from solid waste to extend to third-party transfers of secondary materials for fuel burning and for sewage sludge to be exempt from solid waste under the rule.
In the case, the coalition of environmental groups, including Sierra Club and Environmental Integrity Project, argues that EPA has violated RCRA by allowing discarded materials to be considered non-wastes. They argue these materials should meet the air law's more stringent incinerator standards.
Industry parties include the American Chemistry Council, American Petroleum Institute and American Forest & Paper Association, among others, and argue EPA is wrongfully asserting RCRA jurisdiction over secondary materials solely due to the transfer of the materials to third parties for combustion.
During arguments, attorney Christopher Bell representing industry petitioners contended that EPA singles out third-party transfers of secondary material for use as a fuel as a "discard," even if the material meets legitimacy criteria under the rule.
Judges' Skepticism
But the judges appeared skeptical of the argument, and pointed out that industry could request a determination in such cases from EPA for an exclusion from the discard classification. Judge David B. Sentelle asked Bell why it was unreasonable for EPA to require industry to petition the agency to make a determination to exclude the materials from the discard definition.
Bell answered that industry does not believe a transfer by itself equates to a discard, and argues EPA's record does not support that.
Judge David S. Tatel said EPA's distinction on the third-party matter seems like an intuitive position -- to be stricter if the materials are sent to a third-party -- and said he does not see anything in the statute to prohibit the agency's policy on that.
Tatel also voiced skepticism over industry's arguments that the rule should exclude sewage sludge from the definition of solid waste. At one point he asked attorney Jeffrey Knight, representing the National Association of Clean Water Agencies, "Are we looking at the same statute?" Tatel said he read the law as including sewage sludge as a solid waste.
During arguments, Department of Justice attorney Norman Rave Jr., representing EPA, contended that the materials at issue do not undergo a two-step process, but rather are not discarded as they undergo a continuous single process for reuse. He pointed out too that the legitimacy criteria require that these materials be handled as a valuable commodity.
Judge Robert L. Wilkins questioned Rave on whether it is a valuable commodity if one has to pay someone to take it. Rave said EPA would make that determination on a case-by-case basis. He stressed that RCRA's main purpose is to encourage the recovery of materials so they are not part of the solid waste problem. "These programs are part of the solid waste solution," he said.
Industry attorney Douglas Green, representing industry intervenors, echoed that sentiment, expressing concern that the environmentalists' position "will reverse years of successful recycling programs" that have solved the problem.
Defining 'Discard'
The judges went on to ask Earthjustice attorney Seth Johnson to focus on that argument with respect to the purpose of RCRA and "what effect on the recovery aspect of RCRA would occur if you were to prevail?" Johnson argued that EPA is allowing the materials to be burned without subjecting them to protective air emission standards.
Earlier in the arguments, Tatel asked Johnson what he dubbed a "big picture question." He asked, "Are you basically questioning the statute's balancing of discard versus recycling? Is it your position that there shouldn't be any recycling?"
Johnson replied, "Certainly not," explaining that environmentalists' position is that Congress believed there should be energy recovery from solid waste, but that protective air emission standards should apply, referring to the stricter air standards.
Tatel noted that in one of the court's earlier decisions the D.C. Circuit had recognized that the term discard was ambiguous. Johnson responded that in the case API 2, the court reiterated that materials thrown out, disposed of or abandoned equals discard. That has to be treated as a waste, "from soup to nuts," he said.
Sentelle earlier in the arguments questioned Johnson on what is meant by thrown out, asking if anytime one lets go of something, is that considered thrown out? Johnson said it is because the material is not being treated as a valuable commodity, and the party throwing out the item is not getting anything in return.
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Localities Can Block Fracking With Zoning, Virginia Attorney General Says in New Opinion
May 12, 2015 | BNA Daily Environment Report
By Jeff Day
Local governments in Virginia are allowed to use zoning authority to prohibit hydraulic fracturing for extracting natural gas, Virginia's attorney general said in the non-binding opinion letter.
The opinion by Virginia Attorney General Mark Herring (D) differs from one issued in 2013 by his predecessor, Ken Cuccinelli (R).
In his opinion, Cuccinelli said state law bars localities from prohibiting drilling through zoning or other means, and that localities can use zoning authority only to control the location of oil and gas drilling (11 DEN A-14, 1/16/13).
According to Herring's opinion, released May 8, Virginia's zoning statute gives localities broad authority over land use, allowing the jurisdictions to regulate, restrict or prohibit land development, including “excavation or mining of soil or other natural resources.” Hydraulic fracturing, or fracking, is a form of such land development, Herring said.
Virginia's Oil and Gas Act specifically reserves to localities zoning decisions, he said. “All other possible local powers over fracking are totally preempted, but zoning authority is not,” Herring suggested.
State Supreme Court Ruling
Cuccinelli reached a different conclusion in 2013, saying that localities can't ban fracking, even through zoning. The opinion cited a Virginia Supreme Court ruling that found local governments cannot use their zoning authority to ban the land application of biosolids.
Herring said the state Supreme Court ruling was based on a statute specifically dealing with local regulation of the application of biosolids. In contrast, the Virginia Oil and Gas Act specifically recognizes local zoning authority, he said.
State Sen. Richard H. Stuart (R) requested Herring's opinion. Stuart's district includes an area in eastern Virginia known as the Taylorsville Basin. Energy companies own drilling rights in the Taylorsville Basin but have not sought permits, according to the Virginia Petroleum Council.
In a statement, Stuart said, “I appreciate the effort of Attorney General Herring and his team who thoroughly researched this question to provide a clear, well-informed answer. It is important to King George [County] and other jurisdictions in the Commonwealth to know what tools they have to properly manage these activities. The Attorney General's answer gives the clarity we need.”
Courts Have Final Say
Mike Ward, executive director of the Virginia Petroleum Council, said Herring's opinion has no greater standing than Cuccinelli's. Courts of law will have to determine whether and to what extent local governments can restrict fracking through their zoning authority, Ward told Bloomberg BNA May 11.
Greg Buppert, senior attorney with the Southern Environmental Law Center, agreed that court rulings will be determinative. However, Buppert told Bloomberg BNA that Cuccinelli's opinion overlooked important statutory and legal details, while Herring's opinion's is “well-reasoned” and an accurate interpretation of state law.
Herring's opinion “gives local governments reassurance that they have legal authority to enact zoning laws that put limits on drilling operations to protect their communities and natural resources,” Buppert said.
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Shell Gets Conditional Approval for Its Plan To Explore for Oil in Arctic Offshore in 2015
May 12, 2015 | BNA Daily Environment Report
By Alan Kovski
A plan by Royal Dutch Shell Plc to explore for oil this summer in the Chukchi Sea received conditional approval May 11 from the Bureau of Ocean Energy Management.
Shell still must obtain permits from other federal agencies, including a drilling permit from the Bureau of Safety and Environmental Enforcement, as well as state regulatory clearance.
BOEM's approval was conditioned on Shell's receipt of those regulatory steps and a set of other environmental protection and reporting requirements, notably some marine mammal protective measures that the agency described as typical.
Along with the approval, BOEM issued an environmental assessment and a finding of no significant impact, a finding that averts the need for an environmental impact statement, which can take more than a year.
The Shell plan is to drill as many as six exploration wells at the Burger prospect in the Chukchi Sea, where the open-water drilling season runs approximately from July 1 to Oct. 31. In the ice-shortened 2012 drilling season, Shell drilled one well at that site to a depth of 1,505 feet (70 DEN A-11, 4/13/15).
Greenpeace Ordered to Stay Away
The approval of the exploration plan came three days after another minor victory for Shell. A federal judge May 8 issued an injunction requiring the activist group Greenpeace and allies to stay away from Shell's drilling operations (Shell Offshore Inc. v. Greenpeace Inc., D. Alaska, No. 3:15-cv-00054, 5/8/15).
The U.S. District Court for the District of Alaska issued an order establishing safety zones around the drillship and the floating drilling platform that Shell will use and around a small fleet of support vessels. The safety zones will apply in Puget Sound, in transit to the Arctic drill sites and at the sites, as well as at a Barrow, Alaska, airport.
Another environmental advocacy group, the Natural Resources Defense Council, denounced the approval of the exploration plan as a “license to despoil our last pristine ocean and spew massive amounts of carbon pollution into our atmosphere.”
Sen. Lisa Murkowski (R-Alaska) welcomed the approval of the exploration plan but noted the regulatory hurdles still ahead.
“There is a total of seven permits that Shell must receive before it can resume drilling,” Murkowski said. “Continued collaboration by the responsible federal agencies to ensure those outstanding permits are not saddled with unworkable conditions will be critical.”
18 Conditions Listed
Shell Gulf of Mexico Inc., the subsidiary that submitted the exploration plan, received a list of 18 conditions from BOEM, many of them simply requirements for all regulatory procedural steps to be completed before drilling can begin.
One condition was a restriction on drilling into an oil-bearing zone late in the drilling season, presumably to limit the risk of facing encroaching ice while attempting to complete or at least seal off an oil-bearing well.
BOEM said the extra restriction was “in consideration of the distance to limited support infrastructure on the Chukchi Sea coast, worst case discharge estimates, the capacity and location of staged oil spill response equipment, relief drilling rig proximity, the estimated time required to drill a relief well in the unlikely event of a late season well control incident, and other considerations.”
Shell had no well control incidents during its short 2012 drilling season, but it did have problems that year, most notably after the drilling season ended. The company was towing the drillship Kulluk back toward Seattle when a towing line broke and the Kulluk ran aground just off an island on the southern side of Alaska.
The Kulluk is not being used this year. Shell will use the floating drilling platform Polar Pioneer and the drillship Noble Discoverer. Two vessels are required to back each other up in the event of serious problems.
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Obama Advances Shell’s Bid To Drill In Arctic Waters
May 11, 2015 | PoliticoPro
By Elana Schor
The Obama administration placed a politically risky bet on Shell, granting a crucial approval on Monday to allow the oil giant restart its troubled Arctic offshore drilling plan despite fierce resistance from green groups.
The Interior Department’s move sharply escalates a confrontation with environmentalists that began when Shell scrapped its last Arctic drilling bid after a series of public stumbles in 2012.
The company and the regulators say that Shell is at long last ready to operate in the challenging environment of Alaska’s Chukchi Sea — a region that the green activists whom the president has long courted to back his climate change agenda say is far too sensitive to allow oil exploration.
“Giving Shell 'conditional’ permission to drill in the Arctic is like giving a drunk keys to your car and asking them to please drive safe,” 350.org co-founder Jamie Henn tweeted, lamenting the “shameful decision.”
The conditional approval from the Bureau of Ocean Energy Management for Shell’s 139-page exploration plan in the Chukchi requires separate safety permits and endangered species consultations before the company can begin drilling.
But those steps offered scant consolation to climate activists who want to keep the Arctic off-limits to the oil industry, and they have cited the emissions that drilling would generate as well as the potential risks to Alaska’s wildlife and communities from a spill in the remote waters.
Shell spokesman Curtis Smith said that while awaiting its remaining regulatory approvals — its summer drilling season can legally begin on July 15 — the company would “continue to test and prepare our contractors, assets and contingency plans against the high bar stakeholders and regulators expect of an Arctic operator.”
Interior sought to raise that bar when it proposed new Arctic drilling safety rules in February that it said would help make Alaska coastal drilling “an integral part of the nation’s ‘all of the above’ energy strategy.” Those rules, which are not expected to become final for at least a year, incorporate many of the measures that Shell and Interior addressed in the years after the failed 2012 season forced a halt to the company’s Arctic operations.
Those failures included damage to Shell’s oil spill containment system, followed by the grounding of its Kulluk drilling rig in rough weather.
Interior later concluded after a special review of the company’s Arctic program that Shell was “not fully prepared” to begin the challenging task of extracting oil from its leases in the Chukchi and Beaufort Seas.
Other oil companies hold leases in the Arctic region, but Shell’s performance this year will be viewed as a test case for establishing operations in offshore Alaska. Those far-reaching ramifications are part of the reason that greens pushed back so vociferously on Monday, joining a battle that is likely to end up in court.
“Arctic drilling gives us a 75 percent chance of an oil spill and a 100 percent chance of climate catastrophe,” the Center for Biological Diversity’s Alaska director, Rebecca Noblin, said in a statement. “Interior should send Shell packing.”
Interior’s projection of a 75 percent likelihood of a spill of 1,000 barrels or more in the Arctic offshore region, mentioned in its February environmental impact statement on Chukchi development, has become a major element of green groups’ arguments against the Shell plan.
“If three out of four airline flights led to fatalities, travelers would reassess their need to get on an airplane,” Center for American Progress distinguished senior fellow Carol Browner, the former EPA chief, who served as Obama’s top climate adviser, wrote in an op-ed last month opposing Arctic drilling. Browner penned another op-ed against Arctic oil exploration in 2013 alongside John Podesta, chairman of Hillary Clinton’s presidential campaign.
But BOEM has countered environmentalists’ suggestion that Shell’s plan carries a 75 percent spill risk by explaining that its forecast covers more than 500 wells over a 77-year period — not the six wells that the company plans to drill this summer.
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Feds Greenlight Arctic Drilling
May 11, 2015 | The Hill - E2 Wire
By Timothy Cama
The Obama administration gave its stamp of approval Monday to Royal Dutch Shell’s plan to drill for oil and natural gas as soon as this summer in the Arctic Ocean north of Alaska.
The Interior Department’s Bureau of Ocean Energy Management (BOEM) approved the drilling plan, drawing intense criticism from environmental groups that say the risk of a spill or other disaster is too high.The decision is a major win for the oil and natural gas industry, and it comes as the Obama administration works to demonstrate a balanced approach to energy production that takes into account both environmental and economic factors.
The Arctic authorization came with five pages of conditions the company must follow to protect the environment, wildlife and nearby residents. Shell must also obtain other necessary approvals, including the actual permits to drill.
The company’s years-long quest to drill in Alaska’s Chukchi Sea is controversial, especially after a disastrous 2012 drilling attempt led to a rig running aground on a nearby island during a fierce storm.
“We have taken a thoughtful approach to carefully considering potential exploration in the Chukchi Sea, recognizing the significant environmental, social and ecological resources in the region and establishing high standards for the protection of this critical ecosystem, our Arctic communities, and the subsistence needs and cultural traditions of Alaska Natives,” BOEM Director Abigail Ross Hopper said in a statement.
“As we move forward, any offshore exploratory activities will continue to be subject to rigorous safety standards,” she added.
The Chukchi, federal officials estimate, contains 15 billion barrels of recoverable oil and 78 trillion cubic feet of recoverable natural gas.
The conditions attached to the approval largely mirror regulations BOEM proposed earlier this year for Arctic drilling, including mandating a backup rig be kept nearby to drill a relief well in the case of a blowout and being able to contain spills through purely mechanical means.
Those proposed rules, along with the new conditions for Shell’s permit, reflect the lessons regulators learned from Shell’s 2012 attempt. The approval allows Shell to drill up to six exploratory wells in an area about 70 miles off Alaska’s northwest corner.
Shell spokesman Curtis Smith said the approval “is an important milestone and signals the confidence regulators have in our plan.”
He added that “it’s imperative that the remainder of our permits be practical, and delivered in a timely manner,” and said Shell would continue to prepare to drill this summer.
Environmentalists quickly slammed the agency’s approval on Monday.
Green groups have been working on various fronts to block Shell’s drilling plan, saying the unique, treacherous conditions of the Arctic make drilling too risky. They also argue that Shell has a poor track record in the area.
“Once again, our government has rushed to approve risky and ill-conceived exploration in one of the most remote and important places on Earth,” Susan Murray, deputy vice president for the Pacific at the group Oceana, said in a statement.
“Shell has not shown that it is prepared to operate responsibly in the Arctic Ocean, and neither the company nor our government has been willing to fully and fairly evaluate the risks of Shell’s proposal,” she added.
“We can’t trust Shell with America’s Arctic,” added Cindy Shogan, executive director of the Alaska Wilderness League.
“As we all remember, Shell’s mishaps in 2012 culminated with its drilling rig running aground near Sitkalidak Island, Alaska. Events such as these demonstrated to the nation that drilling in the Arctic is reckless and irresponsible and that no oil company should develop there,” she said.
Green groups’ tactics to stop Shell’s drilling plans have included boarding a drilling rig traveling through the Pacific Ocean and using kayaks to block the Port of Seattle, where Shell plans to store its equipment.
Opponents scored a victory this month when Seattle officials ruled the company that plans to host Shell’s operations there would need a new permit for the rigs.
Sen. Lisa Murkowski (R-Alaska), chairwoman of the Senate Energy and Natural Resources Committee, welcomed the permit Monday, but said the administration needs to do more to make sure Shell can drill this year, including seven more minor approvals.
“With this latest milestone, I am cautiously optimistic and stand ready to continue working with the agencies to ensure exploration is conducted safely for the maximum benefit of Alaskans and our nation,” she said.
White House press secretary Josh Earnest, meanwhile, seemed caught off guard when reporters asked him about the Arctic drilling plan during Monday’s daily press briefing.
“I’m not aware of that breaking news,” Earnest told reporters who brought it up.
“You just barked out ‘Arctic drilling,’ so why don’t we ... find out what the announcement is, and we’ll get back to you,” he said.
Other drillers are keeping a close eye on Shell’s lease as they weigh whether they should propose to drill in the United States’ portion of the Arctic, which has not seen drilling in decades.
ConocoPhillips Co., Statoil and Chevron Corp. all have leases in the Arctic that have gone unused.
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Huckabee: Lift Oil Export Ban, Use Renewables
May 11, 2015 | The Hill - E2 Wire
By Devin Henry
Republican presidential candidate Mike Huckabee says the United States needs to lift its ban on crude oil exports, encourage more energy production on federal lands and embrace renewable energy in order to "completely transform the balance of world power."
Huckabee detailed his energy platform on Monday, according to the Texas Tribune, telling a Houston audience that more domestic energy production is needed to reduce America's dependence on foreign sources.The former Arkansas governor said state and local governments should have more control over energy policy and that there should be more energy exploration on federal lands. He said he would lift the crude oil export ban and do more to encourage natural gas exports, arguing that American energy production is more climate-conscious than in other parts of the world.
At the same time, Huckabee said people "shouldn't demonize renewable fuels" such as solar and wind power, which could be used to supplement current energy production.
"We need to be a country that looks at the world and realizes energy is the backbone of making this world function, and we start talking about what we can do rather than what we can't do," he said, according to the Tribune.
Huckabee’s energy platform touches on a handful of local issues, both in Texas, where he was speaking and kicking off a fundraising tour, and Iowa, which hosts the country’s first presidential caucuses in January.
State lawmakers in Texas have recently banned local ordinances against hydraulic fracturing after voters in the town of Denton approved a fracking moratorium last year. Huckabee said he would move "regulations back to the people closest to the industries” to give more local control over energy policy.
In Iowa, Republican presidential candidates have already faced questions over renewable energy sources. The state leads the country in wind energy and, critically, ethanol production. Some candidates have already said they oppose the government’s ethanol blending mandate, though Huckabee told an Iowa audience in March that he supports the standards.
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Window Narrows For FERC To Suggest Reliability Tools
May 11, 2015 | E&E News PM
By Rod Kuckro and Emily Holden
Time is running short for the Federal Energy Regulatory Commission to weigh in on how to address reliability concerns arising from state compliance with U.S. EPA's Clean Power Plan, although the industry seems to be coalescing around tools that might be needed.
One FERC watcher thinks EPA will send the plan to the White House Office of Management and Budget by the end of this month, leaving little time for the agency to develop a consensus. Still, others predict that EPA's expectation of publishing the rule in "midsummer" could mean late July or August.
FERC Commissioner Colette Honorable said last week that the agency will send suggestions to EPA soon.
"I'm certain we will do so promptly because we all want to have the ability to provide this advice and counsel to the EPA in time for them to consider it as they put the final touches on the final Clean Power Plan," Honorable said.
FERC likely will not make recommendations until after Thursday's monthly meeting, which was moved up a week because of safety concerns about planned protests.
Go to E&E's Power Plan Hub to read more and to see news and documents related to the latest Clean Power Plan developments.
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Senators Ask EPA To Delay Biomass Use In ESPS Until GHG Method Adopted
May 11, 2015 | InsideEPA
By Dawn Reeves
As EPA faces continuing criticism over its methods for estimating greenhouse gas (GHG) emissions from biomass, two Democratic senators are asking the agency to delay until 2020 its plan to allow states to use biomass as a renewable energy resource for complying with its GHG rule for existing power plants, saying the delay will give officials time to craft methods for estimating emissions.
Massachusetts' Sens. Edward Markey (D) and Elizabeth Warren (D) say in a May 8 letter to Administrator Gina McCarthy that EPA's plan to treat biomass power plants as carbon neutral -- and exempt them from emissions reduction requirements -- risks undermining the rule's ability to reduce GHG emissions.
Treating “bioenergy as having zero emissions under the [Clean Power] Plan could undermine the Plan's intended purpose of reducing power sector carbon emissions,” the senators write. “Accordingly, we recommend a temporary moratorium on the use of biomass combustion as a method of complying with the requirements of the Plan.”
The moratorium should extend through 2020, the first year of implementation of the existing source performance standards (ESPS), the senators write, because that gives EPA the time to finalize its biomass accounting framework, develop a tool for facility-level assessment and determine how to best count biomass emissions under the ESPS. 2020 is also when states can modify their compliance plans to add bioenergy if they choose, the letter notes.
The senators' call for a moratorium is already winning praise from environmentalists, who noted that Massachusetts state regulators eliminated renewable energy subsidies for biomass power plants after conducting a study finding that wood-burning plants in the state increased GHG emissions relative to fossil-fueled plants.
“Two senators with home grown experience on the perils of biomass have called for a needed national time out,” Bill Snape of the Center for Biological Diversity said in a statement accompanying the letter. Mary Booth of the Partnership for Policy Integrity added, “We can't reduce emissions under the [ESPS] by replacing coal with the only thing that emits more carbon pollution: biomass.”
But the letter prompted swift backlash from industry, with one source calling the letter perplexing because “Sen. Markey has been a champion of the biomass electricity industry for at least a decade” and has voted consistently to extend tax credits and to include biomass in a national renewable energy standard. “So we're trying to figure out what this is all about.”
EPA in a statement indicated that it is planning to stick with its current approach. The agency “addressed this issue” in the November 2014 memo. The memo, by acting air chief Janet McCabe, said that if biomass is sustainably produced and harvested, it can be considered carbon neutral in the ESPS because forest regrowth absorbs the carbon dioxide (CO2) emissions from combustion -- though EPA has yet to define what it means by sustainable practices.
The statement adds that the agency is reviewing all of the comments it received on the ESPS including those on biomass.
The American Forest & Paper Association also pointed to the memo in a statement opposing the moratorium. “EPA has already stated they have more than enough information and data to justify inclusion of energy from biomass as a renewable energy source in the” ESPS.
Scientific Struggle
But EPA is again struggling to craft a framework for estimating whether CO2 emissions from biomass combustion are sequestered by forest regrowth and are carbon neutral when burned, or how much emissions can be attributed to the emitting facility.
The agency has generally backed industry's view that biomass energy is carbon neutral because regrowth sequesters emissions. But environmentalists charge that some materials that are burned for energy -- such as whole trees, which emit CO2 at a rate of about 3,000 pounds of CO2 per megawatt hour -- emit more GHGs than coal because of a dramatic immediate release that takes decades to resequester.
The agency released its latest draft framework last November, its second such effort, along with the McCabe policy memo indicating that it would allow sustainably harvested biomass energy to count for compliance with its ESPS to cut GHG emissions from the existing power fleet, though the agency has yet to define sustainably harvested.
The framework includes a series of formulae to determine whether CO2 emissions from biomass combustion are completely carbon neutral due to forest regrowth, must be fully counted or are somewhere in between.
But the draft framework has drawn strong criticism, including most recently from the agency's own Science Advisory Board (SAB). In recently posted comments, the chair of the panel reviewing the draft framework suggested there is a wide gap between EPA and the panelists. For example, she suggested the framework's goal should be “to reduce CO2 emissions,” while EPA's original intent was to use the framework to determine when to discount biomass CO2 from smokestacks in stationary source permitting.
EPA and the panel are also split over the agency's plan to maintain a policy-neutral approach in the framework.
In the letter, the senators wade into the scientific issues, noting “a growing body of scientific evidence” that finds it takes decades of forest regeneration to offset emissions from wood-burning power plants.
The letter also notes that SAB is only beginning to review the new biomass accounting framework, which will not be completed by the time the ESPS is finalized this summer.
“The EPA should not approve biomass combustion as a compliance method under the Plan until the agency has a method in place to account for facility-level emissions.”
A moratorium also “avoids incentivizing a carbon-intensive energy source that works against the Plan's objectives” and “focuses near-term state efforts on wind, solar and other zero-carbon renewable energy technologies.”
A second industry source downplays SAB's criticisms. “The last I checked, the SAB worked for the EPA, not the other way around. And what EPA has done is send a clear signal to the SAB that they're looking for information to inform policy and reminding SAB they're not policymakers.”
This source also notes that there is “a strong body of science” that supports EPA's plan to consider sustainable biomass carbon neutral in the ESPS, and points to a Nov. 6 letter to EPA from the National Association of University Forest Research Programs that seeks to inform EPA on its biomass policy. “The carbon benefits of sustainable forest biomass are well established,” the letter says.
Senators' Letter
The Markey-Warren letter cites a different scientist letter that says sustainably derived biomass has no relationship to GHGs.
The senators' letter “got our attention,” the second industry source says. “The opportunity in front of EPA is to clarify [biomass carbon] in a way that aligns its policy with the rest of the administration. The rest of the administration clearly recognizes the substantial carbon benefits of biomass. That White House has made that clear under their Climate Action Plan as has the Department of Agriculture.”
The source does not fault Massachusetts for the position it has taken on biomass, noting that states have the “prerogative to determine how they're going to supply energy” while noting, “What works in Massachusetts doesn't necessarily work in the rest of the country.”
The source says the “more important point is that what EPA is going to do in the final [ESPS] is still uncertain. . . . And what we hope to encourage EPA to do is to align with the rest of the administration, and by doing that they'll promote and encourage investment in biomass in a way that will help forests and remove more carbon from the air.”
The source also downplays the impact that the letter will have on EPA as it works to finalize the ESPS and include language on biomass, saying the letter comes from “an outlier delegation that feels that they need to weigh in on something based on policies in their own state.”
But one environmentalist says the letter “stresses a point that probably cannot be stressed enough: EPA should not let regulated companies and states rely on biomass combustion as a compliance strategy . . . until EPA has shown that biomass combustion actually serves the emission reduction goals of the” ESPS. The source notes the letter is an important counter to other members of Congress who have pressed EPA to assume biomass is carbon neutral.
“There may be important nuances when it comes to biomass” but EPA has not yet studied them enough. “The moratorium suggested by Senators Markey and Warren is therefore both reasonable and appropriate.” Another environmentalist says the senators' call for a moratorium until 2020 is “a reasonable approach” because there is “no reason” that biomass electricity plants should “automatically be available for compliance” with the ESPS, which only requires GHG cuts from fossil-fueled plants. Coal plants that co-fire with biomass also need a scientific framework before they should be able to discount their emissions, the source says.
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Judges Appear Wary of Overturning EPA Rules on Nonhazardous Secondary Materials
May 12, 2015 | BNA Daily Environment Report
By Anthony Adragna
Industry and environmental groups urged a federal appeals court May 11 to overturn an Environmental Protection Agency regulation exempting certain nonhazardous secondary materials—including used tires and coal refuse—from stricter air pollution requirements when burned in boilers or solid waste incinerators (Eco Services Operations LLC v. EPA, D.C. Cir. , No. 11-1189, oral arguments heard 5/11/15).
Environmental advocates told a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit the explicit exemptions for certain materials from being classified as “solid wastes” under the Resource Conservation and Recovery Act were a “loophole” that endangered human health and the environment.
Attorneys for industry groups argued the list of excluded materials should be expanded to other items like sewage sludge, and said the EPA should not have classified certain materials transferred to third parties as “discarded,” subjecting them to stricter regulation as solid wastes.
Judges David Tatel, Robert Wilkins and David Sentelle appeared skeptical of overturning the rules altogether. They said much of the RCRA terminology appeared ambiguous and appeared open to EPA's statutory interpretation.
Solid wastes are regulated more strictly under Section 129 of Clean Air Act, while fuels are subject to regulations under Section 112
At issue is a 2013 regulation from the EPA (78 Fed. Reg. 9112) that outlined what materials could be considered “solid wastes” subject to stricter emissions control standards in solid waste incinerators, and what could be considered “fuels” and burned in industrial boilers subject to less strict air control requirements (190 DEN A-3, 10/1/14).
The regulation also outlined specific legitimacy criteria for determining case-by-case whether certain materials could be exempted from the stricter regulatory standards.
Controversy Over ‘Discarded.'
Lawyers for industry, environmental groups and the EPA disagreed over how the agency chose to classify materials as “discarded” under RCRA. Once a material is defined as “discarded,” it must meet stricter solid waste regulatory requirements under the act.
Environmental advocates said granting the broad exemptions to certain materials violated the plain meaning of “discarded” and the congressional intent behind RCRA.
“The overarching problem here is that EPA is taking materials that have been thrown out and calling them not discarded,” Seth Johnson of Earthjustice told the court. “This violates the plain text of RCRA as this court has interpreted it.”
Expressing skepticism that the term “discarded” was as clear as environmental groups argued, judges asked whether the legitimacy criteria outlined in the rules were sufficient to protect human health and the environment.
“Let's just assume that we think there's enough ambiguity in the term to accommodate the agency's view about this,” Judge Tatel said. “Then what would you say? The legitimacy criteria would protect then, wouldn't they?”
Johnson said the legitimacy criteria were insufficient and would endanger human health and the environment in violation of the intent of RCRA.
Justice Department attorney Norman Rave, representing the EPA, said the agency used reasonable discretion in crafting specific exemptions and said the final rule balanced adequate human health and environmental protections with its goal of encouraging recycling.
“These materials are never thrown away, they're never discarded,” Rave said. “They go right from one use to another use. So, they never become a solid waste.”
Third-Party Transfer Questioned
Industry groups later argued the EPA improperly classified nonhazardous secondary materials transferred to third parties for use as fuels as subject to RCRA solid regulations.
Christopher Bell of Greenberg Traurig, arguing for industry groups, said the materials would not be regulated as “discarded” if used by the same company, and the transfer to a third party by itself was not sufficient to trigger additional regulations.
But the judges questioned that argument.
“The distinction the agency is making seems so intuitive,” Judge Tatel said. “Stricter standards if the transfer is to a third party. … I know you don't like it, but to win you have to show us what in the word ‘discard' prohibits the agency from doing it.”
Tatel also cited passages from RCRA that responded to a separate argument that sewage sludge destined for incineration should also receive an exemption from solid waste regulations.
“You think the statute's crystal clear on this point?” Tatel asked. “Really?”
Industry groups argued there is a specific exclusion under RCRA Section 1004(27) that would prohibit the EPA from regulating sewage sludge as a solid waste.
Johnson represented environmental groups; Rave represented EPA; and Bell, Jeffrey Knight of Pillsbury Winthrop Shaw Pittman LLP and Douglas H. Green of Venable LLP represented the industry petitioners.
The court is expected to issue an opinion in the case later this year.
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Industry Appeals NEPA Ruling Over Combustion Impacts From Mined Coal
May 11, 2015 | InsideEPA
By Bridget DiCosmo
An energy company is urging the U.S. Court of Appeals for the 10th Circuit to overturn a district court ruling that said the Obama administration erred by not considering mercury emissions from coal combustion and other adverse impacts in its National Environmental Policy Act (NEPA) review of a proposed coal mine expansion.
The appeal, filed by the Navajo Transitional Energy Company (NTEC), contests environmentalists' lower court victory that said the Office of Surface Mining Reclamation & Enforcement (OSM) failed to fully account for the indirect effects related to the combustion of coal burned to fuel the Four Corners power plant in New Mexico, given that such coal would be extracted at the nearby proposed mine as a result of OSM's approval of the expansion.
The ruling echoes an argument that environmentalists have made with respect to a need to analyze the broader environmental impacts of "connected" projects, such as the impacts of liquified natural gas plants on upstream gas drilling. The district court ruling could be seen as broadening the scope of what must be considered in NEPA decisions involving mineral extraction where that mineral would solely supply a nearby utility.
"The Navajo Mine and the Four Corners Power Plant are unusually interconnected; indeed, as Petitioners argue, they are interdependent," Senior U.S. District Court Judge John Kane for the U.S. District Court for the District of Colorado, wrote in a March 2 memorandum opinion in the coal mine case, Dine Citizens Against Ruining Our Environment, et al. v. United States Office of Surface Mining Reclamation and Enforcement.
Environmental groups argued that the increased combustion of coal at the power plant, as the sole recipient of the coal from the mine on Navajo land, must be considered in any NEPA review of a mine expansion.
However, the ruling did not reach the environmentalists' argument that the NEPA analysis was required to take in the impacts related to combustion at the plant because it was a "connected action" because Kane found that the combustion impacts are "indirect effects" of the OSM proposed action.
NEPA defines indirect effects as those which are caused by the federal action that triggers the NEPA review and are "later in time or farther removed in distance, but [is] still reasonably foreseeable."
Indirect Effects
To demonstrate indirect effects, advocates must demonstrate both that "but for" the proposed expansion of the mine, the coal combustion impacts would not occur, and that those impacts are reasonably foreseeable, the ruling says, citing a 2002 10th Circuit ruling in Utahns for Better Transportation v. U.S. Department of Transportation.
Kane said because the Navajo mine coal is delivered exclusively to the Four Corners Plant and it is not feasible for the utility to secure coal from any other source, "there is no uncertainty as to the location, the method, or the timing of this combustion" and therefore possible to predict with certainty the combustion-related impacts.
"Accordingly, I find that the coal combustion-related impacts of NTEC's proposed expansion are an 'indirect effect' requiring NEPA analysis," Kane wrote. While OSM did conduct some analysis of the emissions from the Four Corners facility in the context of its "cumulative effects" analysis, the judge agreed with the environmentalists that the review was "extremely limited" especially on effects related to combustion.
Environmentalists have welcome the district court ruling, with one advocate arguing that the language on mercury emissions could also apply to greenhouse gases.
"While this case deals with the local environmental impacts of mercury pollution, it bears on federal agencies' obligation to consider the climate impacts of fossil fuel extraction," Jennifer Klein, of the Sabin Center for Climate Change Law, writes in an April 10 blog post about the ruling.
Klein wrote the judge's "logic should apply with equal force to greenhouse emissions from coal combustion" in cases where increased extraction of fossil fuels could lead to more combustion of those fuels.
But she said critics of the theory that such emissions are a reasonably foreseeable indirect impact of the extraction and should be considered in environmental impact review will likely seek to distinguish the Dine Citizens ruling as a one-off case. She said that opponents of the ruling will likely argue that the utility is unique in that all its coal goes to a single power plant, and therefore emissions can more easily be traced.
In the appellate suit, NTEC filed a request for an emergency stay of the district court ruling, but 10th Circuit Judges Gregory Phillips and Nancy Moritz in an April 16 order rejected the company's motion, finding it failed to meet the legal threshold for granting the stay. In considering an emergency stay, the court considers four factors: whether party requesting the stay is likely to succeed on the merits; whether irreparable injury will occur absent a stay; whether the stay could injure other parties in the litigation and public interest.
Industry's opening brief in the appeal is due on June 1.
NEPA Litigation
In a separate NEPA suit, environmentalists are challenging the administration's decision to approve a coal mine lease for federal coal reserves in Colorado, arguing that the NEPA review improperly "segments" air impacts that will occur as a result of expanded mining and operations at a power plant they say rely on the reserves.
WildEarth Guardians in its opening brief in the suit, filed last year in the U.S. District Court for the District of Colorado, argued that the Interior Department improperly segregated consideration of air quality impacts from coal mining and combustion into separate discussions in its NEPA review for a coal lease.
In the suit, WildEarth Guardians v. United States Bureau of Land Management et al, the group argued in its Feb. 27 opening brief that DOI failed entirely to consider a relevant factor and important aspect of the problem -- the combined effects of air pollution from mining and combustion, rendering the agency's action arbitrary and capricious. The suit is currently in abeyance pending the outcome of settlement discussions.
Under NEPA, segmentation rules dictate that a project not be treated alone when it is a part of a larger known project. Once a segmentation review is completed, the agency must examine the cumulative impacts of the project in its environmental assessment that takes into account other separate but connected facilities. But agencies frequently limit their reviews, declining to consider whether a project might have broader impacts. For example, environmentalists and EPA have urged the Federal Energy Regulatory Commission to broaden its assessments of LNG exports to consider lifecycle impacts both from direct effects of the projects under review and indirect effects stemming from increased upstream production.
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Opponents Of NEPA Climate Guidance Hoping For Republican White House
May 12, 2015 | E&E Daily News
By Hannah Northey
Manufacturers and lobbyists yesterday said it may take a Republican in the White House to reverse draft federal climate guidance that they believe will stall new gas pipelines and export terminals.
Republicans are unlikely to muster enough support to block the Obama administration's new plan for how federal agencies should integrate climate change into their National Environmental Policy Act reviews, lobbyist and former GOP aide Mike Catanzaro told attendees at an event on Capitol Hill.
But a Republican administration come 2017 could get the job done, said Catanzaro, a partner with lobbying firm CGCN Group who previously worked for House Speaker John Boehner (R-Ohio) and Senate Environment and Public Works Chairman James Inhofe (R-Okla.).
"I would think the Republicans would come in and one of the first things on their agenda at [the White House Council on Environmental Quality], I would think, would be to toss this out," said Catanzaro, who also held top environmental jobs in the George W. Bush administration.
Catanzaro said a Republican president would need to build the case for why the guidance should be rescinded -- a move he supports.
Catanzaro made the comments ahead of a House Natural Resources Committee hearing tomorrow to examine the revised draft guidance the CEQ issued in December after years of delay. The CEQ guidance seeks to streamline how agencies address the causes and effects of climate change when permitting projects (E&E Daily, May 11).
The draft has drawn the support of environmentalists. They note the purpose of the guidance is to create a uniform policy for how agencies across the government incorporate climate change into NEPA implementation. Currently, some agencies consider its effects fully when permitting projects, and some do not.
But Republicans, natural gas producers and other industry advocates worry that the restrictions would stymie economic development on federal lands and make it impossible to build needed infrastructure, including transmissions and pipelines.
Catanzaro joined Greg Bertelsen, the director of energy and resources policy at the National Association of Manufacturers, in warning that the guidance could open projects to new environmental lawsuits and delays.
Once finalized, agencies like the Federal Energy Regulatory Commission, which coordinates environmental review of gas and electric infrastructure, would be required to quickly implement the guidance, and that will have reverberations for projects under review, Catanzaro said.
Other analysts have raised similar concerns. Christi Tezak, managing director of research at ClearView Energy Partners LLC, said in December that the proposed guidance could encourage FERC, which conducts reviews of gas pipelines, compressor stations and export terminals, to expand its scope of upstream and downstream effects of projects, as was done with the Keystone XL pipeline (Greenwire, Dec. 19, 2014). The commission is currently reviewing the guidance.
Catanzaro and Bertelsen argued that the guidance would inject NEPA reviews with uncertainty, cost and delays. Bertelsen said it already takes years for project developers to complete NEPA reviews, and even then the decisions are open to lawsuits.
"The open-ended directive and draft guidance to consider upstream and downstream greenhouse gas emissions is particularly concerning in its potential to vastly increase litigation challenges to NEPA analysis," Bertelsen said.
But they both acknowledged the answer may not come from Capitol Hill.
When asked about including such language in a bipartisan, comprehensive energy bill that both chambers of Congress are currently crafting, Catanzaro expressed doubt that language to halt the CEQ draft guidance would survive in the new air of bipartisanship.
While Republicans have called the CEQ guidance dangerous for new energy infrastructure, Democrats are pushing the administration to do more.
Last month, dozens of House Democrats told Christy Goldfuss, CEQ's managing director, that they strongly supported the draft guidance and called for the CEQ to direct agencies to account for the social cost of carbon emissions in their decisions (Greenwire, April 28). The draft guidance says the social cost of carbon may be used in NEPA decisions but does not require agencies to do so. The Democrats said it should.
A divisive measure to halt the guidance isn't likely to be taken up as the House and Senate craft energy bills, Catanzaro said.
"Congress is trying to move bills that have bipartisan support and deal with controversial bills outside of that context," he said. "There's no way Democrats would ever allow a provision to move forward that took greenhouse gases out of NEPA in some way."
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Coal Billionaire Running for W.Va. Governor
May 12, 2015 | E&E Daily News
By Manuel Quiñones
Billionaire coal mine owner James Justice yesterday announced he is running for West Virginia governor as a Democrat, promising to help turn the state around from its decades-old troubles.
Justice is the second candidate and second Democrat to formally declare his intention to run in what could be one of the top gubernatorial contests in the country next year.
Being a prominent owner of coal mines and the Greenbrier Resort means Justice is automatically considered a top-tier candidate. He's worth almost $1.7 billion, according to Forbes magazine.
"I can tell you that our state and our people are hurting, and we need somebody to step forward who doesn't have a vested interested in doing something for themselves," Justice said during a formal announcement yesterday at the White Sulphur Springs Civic Center, a short drive from the hotel.
Justice said he would help address the painful coal industry downturn. But the coal mine owner told the crowd, "We've got to do more than just coal."
He said that too often West Virginia is the butt of jokes for being low in development rankings. "Something has got to change because we're a wonderful state," he said.
West Virginia Senate Minority Leader Jeff Kessler, the other Democrat formally in the race, came out swinging against Justice during an interview with West Virginia MetroNews radio yesterday morning.
"The bad news is now I'll be running against a billionaire," Kessler said. As for the good news, he said, "I'm still the only real Democrat in the race."
Democratic politicians in West Virginia have for years worked to differentiate themselves from their national counterparts and have been particularly worried about an unpopular President Obama.
But Kessler said Mountain State Democrats need to go back to their progressive roots. And he said Justice, who has supported candidates on both sides of the aisle, would not cut it as the party's champion.
Kessler highlighted the need to promote economic diversification and raise new money for infrastructure investments.
Last year, Kessler launched the Southern Coalfields Organizing and Revitalizing the Economy initiative (SCORE) in response to the coal industry's woes. The effort takes inspiration from a much larger program in neighboring Kentucky.
"If it's a bean counting contest, he wins," said Kessler about Justice. "I look forward to pointing out the contrasts between the two of us."
Kessler's views aside, Justice has ties to West Virginia Democrats. He has been a donor to Sen. Joe Manchin and former Sen. Jay Rockefeller. Plus, former state Democratic Party Chairman Larry Puccio has lobbied for Justice and is close to Manchin.
Manchin said yesterday evening, "I'm tickled to death that Jim's running. It speaks volumes of our state that someone of his stature is running." 'In for a very long summer'
With Justice's prominence comes significant baggage. Last year, regulators in several states accused him of having dozens of environmental violations and unpaid fines. Vendors have also sued him for nonpayment (Greenwire, July 24, 2014).
Justice sold some of his coal mines in 2009 to Russian firm Mechel OAO and recently announced buying them back for a fraction of the price.
In advance of yesterday's announcement, the West Virginia Republican Party released a website listing Justice's past and potential controversies.
The GOP also pointed to Justice donations to Democratic interests in an effort to tie him to Obama, who arouses deep suspicion in the Appalachian coal fields.
"Jim Justice, sadly, is just another fat checkbook the Democrat Party wants to use to prop up their failing operation and fading legacy in West Virginia," said Conrad Lucas, chairman of the West Virginia GOP.
West Virginia Republicans are still celebrating their takeover of the state Legislature last year. With gains on Capitol Hill, too, their goal now is to win the governor's mansion.
Lucas also accused Justice of taking taxpayer subsidies for his businesses. "This is just the tip-off of our effort to expose Justice's shaky liberal background," Lucas said. "He's in for a very long summer explaining himself."
Still, there is good will in West Virginia toward Justice, who comes off as folksy and gregarious. The Marshall University graduate is credited with saving the Greenbrier from bankruptcy and hosting the Greenbrier Classic, a stop on the PGA Tour.
It's that side of Justice his campaign wanted to push yesterday. A Greenbrier worker at the announcement called it the "greatest hotel on earth" and told Justice, "Thank you, sir." Justice's wife then said, "Jim Justice is a Christian. Jim Justice is a great man."
Justice himself said about the hotel, "We turned it around, and now it's going." And he said West Virginia needs "somebody that's not a politician" and "somebody that knows how to create jobs."
Candidates who could still get into the race include Republican Rep. David McKinley and Republican Attorney General Patrick Morrisey, top opponent of U.S. EPA's actions with respect to coal.
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As Crude-by-Rail 60-Day Challenge Clock Begins, API Sues, Others Consider Options
May 12, 2015 | BNA Daily Environment Report
By Rachel Leven
The clock is ticking for railroads, energy companies, public interest groups and others to sue the Transportation Department over its final rule governing shipment of crude oil by rail, and so far only one group has challenged the rule.
The American Petroleum Institute filed a lawsuit against the rule May 11, and several other industry and public interest groups that have expressed concerns on everything from brake to disclosure requirements said they are considering their legal and legislative options. Transportation Secretary Anthony Foxx said that lawsuits over individual provisions wouldn't necessarily hold up implementation of the entire rule, but an attorney told Bloomberg BNA the lawsuits could cause compliance confusion for industry.
“Our history with rules is that, when challenged, the courts have historically focused on the area of challenge and not necessarily the entire rule. That remains to be seen,” Foxx said May 1, responding to a question regarding the impact of potential legal challenges on brake requirements by railroads. “I'm hopeful that the rail industry will accept this rule, will follow this rule and help America become a safer place as well as Canada, but we believe strongly that our rule will stand up.”
The Transportation Department released the final rule May 1. The rule aims to mitigate damages associated with Class 3 flammable liquid train derailments by issuing requirements for tank cars and operation practices for this type of service. The rule, which the department estimates would cost railroads, energy companies and others $2.5 billion and would beget benefits of up to $2.9 billion, was published in the Federal Register May 8 thereby starting the 60-day period that lasts through July 7 where groups are allowed to sue under the Administrative Procedure Act.
The Pipeline and Hazardous Materials Safety Administration led development of the rule (RIN 2137-AE91) as this type of transportation became more frequent, the number of related derailments increased and environmental, property and public health damages increased public scrutiny on the issue. However, in its final Regulatory Impact Analysis the agency highlighted that the rate of flammable liquid by rail shipment accidents is down nearly 13 percent over the last 10 years (85 DEN A-14, 5/4/15).
First Lawsuit Filed
The petroleum institute petitioned the U.S. Court of Appeals for the D.C. Circuit May 11 to review the rule (American Petroleum Institute v. United States , D.C. Cir., No. 15-01131, petition filed, 5/11/15).
The court should set aside and remand requirements for when tank cars used in flammable liquid transport must be retrofitted, as well as certain brake requirements and the related installation timeline for them, according to the institute.
Operational requirements for tank cars used in flammable liquid service that don't meet retrofitting or brake requirements should also be set aside and remanded, the petition said.
A spokesman for the Association of American Railroads said it is still considering its options regarding the rule, while the Railway Supply Institute told Bloomberg BNA it was still reviewing the rule. Electronic brake requirements likely will be a central issue in industry lawsuits, and they already are a part of API's.
On the May 1 release date of the rule, all three groups sent statements to media identifying the requirement that “high-hazard flammable unit trains” use electronically controlled pneumatic brakes as an area of concern. The brake requirement would force the use of unjustified technology or slow the entire rail network by forcing longer trains to travel at speeds of less than 30 miles per hour, several industry groups said.
Electronic Brakes Concerning
Tom Simpson, president of the supply institute, highlighted the provision in a May 9 statement to Bloomberg BNA as an area of continued concern.
But the united industry front won't necessarily be replicated on other issues within the rule. For example, Simpson's group already said that the phaseout time frame for tank cars was “aggressive” but realistic, while API challenged the timeline in its lawsuit.
Additionally, some public interest groups are consider filing lawsuits over the rule. Earthjustice, for one, is “seriously considering” challenging the rule, Patti Goldman, a managing attorney for Earthjustice, told Bloomberg BNA.
“These tank cars are far too hazardous to leave on the rails shipping this oil,” Goldman said, declining to confirm anything beyond that.
Devorah Ancel, staff attorney for the Sierra Club, said “everything is on the table” at this point, including resolving issues with the rule through actions on Capitol Hill. She reiterated the group's May 1 comments that notification requirements and speed limits listed in the final rule were not stringent or inclusive enough.
There is the potential for several individual or joint lawsuits in different U.S. circuits against the Transportation Department, sources told Bloomberg BNA. For example, Ancel declined to rule out acting separately from Earthjustice in terms of lawsuits, but the environmental groups have joined together in the past to sue the Obama administration over crude-by-rail safety issues.
How Many Lawsuits
Meanwhile, industry groups specifically didn't respond to Bloomberg BNA's question on whether they were considering joint lawsuits challenging the rule. However, Alexander Obrecht, an associate at Baker & Hostetler LLP, told Bloomberg BNA that some industry groups may choose to sue individually or separately, if they choose to challenge the rule.
The petroleum institute challenged the rule by itself.
“I think there has been some fracturing of the interests and they have not been as cohesive as they had been previously,” Obrecht said. “But it could be decided that there is enough overlap of interests that they would file a joint lawsuit.”
Obrecht also highlighted that environmental groups previously have challenged the administration on this issue in the U.S. Court of Appeals for the Ninth Circuit, rather than the U.S. Court of Appeals for the D.C. Circuit. However, the courts could choose to consolidate the cases since they would be over the same rule, which would allow a judge to make a “coherent ruling” and which would be in the agency's favor, he said.
Obrecht also confirmed Foxx's statement that a challenge to one provision of the rule wouldn't necessarily mean delayed implementation of the entire rule. Obrecht emphasized that lawsuits can be difficult for industry trying to comply with the rule since its difficult to predict how the court will rule.
“Generally the best course of action is to prepare as if the rule will go into effect as it was issued,” Obrecht said.
Ongoing Challenges on Phaseout
To a certain extent, one provision of the rule is already being litigated. Earthjustice, the Sierra Club and ForestEthics sued the Transportation Department in December over Foxx's decision not to immediately ban use of older DOT-111 tank cars from Bakken crude oil transportation.
The cars have been called too puncture-prone and not safe enough for this transportation by a federal safety board and by environmental groups. The case is stayed through May 12, at which point the different parties involved or the court could determine appropriate next steps in the case, Earthjustice's Goldman said (Sierra Club v. United States , 9th Cir., No. 14-73682, case stayed, 1/20/15).
Goldman, who is an attorney on the lawsuit, said it is possible this case could move forward and environmental groups could file a separate challenge to the now final rule (232 DEN A-14, 12/3/14).
American Petroleum Institute, Railway Supply Institute and the American Fuel and Petrochemical Manufacturers are intervenors on behalf of the federal government in the case.
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New Rules On Oil Trains Draw Flak From Firefighters, Too
May 11, 2015 | The Sacramento Bee
By Curtis Tate
Lawmakers and environmental and industry groups criticized the federal government’s new safety measures for oil trains when they were announced earlier this month. Now another group has expressed disappointment in the new rules:
Emergency responders. They’re among the first in danger when a fiery derailment happens.
After another oil train derailed and caught fire last week, this time in North Dakota and the fifth in North America this year, firefighters renewed their call for more training and information about hazardous rail shipments.
The International Association of Fire Fighters’ primary objection to the new rules is about their information-sharing requirements. But Elizabeth Harman, an assistant to the general president of the group, also said firefighters needed more training on responding to hazardous materials incidents. The rule didn’t directly address that issue, though some lawmakers have sought additional funding.
“The training that’s needed has been developed,” she said. “This is the first step that needs to be funded and expanded for all first responders.”
Harman said her group had been talking to the Federal Emergency Management Agency about making more competitive grants available for first-responder training. Tank cars still showing accident vulnerability
Tens of thousands of rail tank cars haul flammable liquids, such as crude oil and ethanol, across North America, and most have weak spots that make them vulnerable to puncture and fire in an accident. A new tank car design has been approved, but is not widely available yet. There have five serious oil train derailments so far this year.
Feb. 14, Gogama, Ontario, 29 cars of a Canadian National oil train derail and a fire engulfs seven cars. No injuries are reported.
Feb. 16, Mount Carbon, W.V., 28 cars of a CSX oil train derail along the banks of the Kanawha River. One injury reported.
March 5, Galena, Ill., 21 cars of a BNSF crude oil train derail and a fire erupts.
March 7, Gogama, Ont., 39 cars of a Canadian National oil train derail and a fire engulfs multiple cars. A bridge is destroyed by the heat. No injuries are reported.
May 6, Heimdal, N.D., six cars of a BNSF crude oil train derail and a fire erupts, forcing temporary evacuation of Heimdal.
*In addition to the 2015 accidents, the map locates selected derailments from 1981 through 2014 involving DOT-111A tank cars that polluted waterways and threatened cities with flammable or toxic chemicals.
Sources: McClatchy Washington Bureau, National Transportation Safety Board, Department of Transportation, Surface Transportation Board, Association of American Railroads, Railway Supply Institute
Since 2010, an exponentially larger volume of flammable liquids, especially crude oil and ethanol, has been moving by rail, and with it has come an increase in risk to communities.
“We need to be prepared for it, and we’re willing to be prepared for it,” Harman said.
The rail industry and the government have funded new training for emergency responders as a result of the increased risk. Railroads train 20,000 firefighters a year in communities across the country, according to the Association of American Railroads, an industry group.
Since last summer, the rail industry has paid to send hundreds more to an advanced firefighting academy in Pueblo, Colo., designed for responding to oil train fires.
While firefighter groups have praised the industry’s efforts, 65 percent of fire departments involved in responding to hazardous materials incidents still have no formal training in that area, according to a 2010 survey by the National Fire Protection Association.
While no first responders have been injured in multiple oil train derailments and fires in the past year and a half, they’ve faced numerous challenges:
– When an oil train derailed and caught fire near Casselton, N.D., on Dec. 30, 2013, a BNSF student engineer became an ad-hoc first responder. According to interview transcripts published last month by the National Transportation Safety Board, the student donned firefighting gear and equipment as he uncoupled cars that were still on the track to move them away from the fire.
– When an oil train derailed and caught fire in downtown Lynchburg, Va., on April 30, 2014, first responders didn’t know right away which railroad to call, since two companies operate tracks through the city. According to a presentation at a conference of transportation professionals in Washington in January, it also took 45 minutes for first responders to obtain documents showing them what the train was carrying.
– After an oil train derailed and caught fire near Galena, Ill., on March 5 this year, volunteer firefighters could reach the remote site only via a bike path. Once there, they attempted to extinguish the fire, but had to retreat when they realized they couldn’t, leaving their equipment behind. According to local news reports, their radios didn’t work, either.
Harman said the U.S. Department of Transportation’s new regulations for trains carrying crude oil, ethanol and other flammable liquids didn’t go far enough with respect to information that railroads provided to communities.
Under an emergency order the department issued last May, railroads were required to report large shipments of Bakken crude oil to state emergency-response commissions, which then disseminated that information to local fire departments.
But under the department’s new rules, starting next year, railroads will no longer report the information to the states, and fire departments that want the information will have to go directly to the railroads. It also will be shielded from public disclosure.
“These new rules fall short of requiring rail operators to provide the information fire departments need to respond effectively when the call arrives,” said Harold Schaitberger, general president of the firefighters group.
Susan Lagana, a spokeswoman for the Department of Transportation, said Friday that the department was reviewing feedback from emergency responders and lawmakers to address their concerns.
She said the new rule would expand the amount of information available to first responders and noted that for now, last year’s emergency order remains in place.
Ed Greenberg, a spokesman for the Association of American Railroads, said the industry was reviewing the new regulations. He said it had shared information with first responders for years and would continue to do so.
Greenberg said the industry was developing a mobile application called AskRail that would give emergency responders immediate access to information about a train’s cargo.
“Freight railroads have ongoing dialogue with first responders, residents and local civic officials on rail operations and emergency planning,” he said.
Emergency planners in Washington state sought more information about oil trains from BNSF, including routing information, worst-case derailment scenarios, response planning and insurance coverage. On April 30, the railroad met with state fire chiefs in Olympia.
“I think both sides learned a little bit about the other group’s point of view,” said Wayne Senter, the executive director of the Washington Fire Chiefs. “I was pretty positive by the end of the meeting the information we asked for in our letter was either available or will soon be available either directly or indirectly.”
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