27 September 2012 10:52 [Source: ICB]
Specialty and batch chemical producers are gathering in Cambridge, Maryland, in late September for a leadership conference at a time weighted with risk and potential, not least because US elections in five weeks' time could send major headwinds to challenge even the most tested helmsman.
Mitt Romney on the convention trail - the result of the presidential election In November will impact regulatory initiatives
Among many others, Sloan sees the national elections on 6 November as a pivotal event for US governance, economy, business and regulatory affairs for many years to come. The vote will determine whether President Barack Obama will be rewarded with a second term in the White House, or if former Massachusetts governor Mitt Romney takes the helm.
Also in contention are all 435 seats in the House of Representatives and roughly one-third of the 100 seats in the Senate. Republicans are expected to lose some seats in the House but retain their current majority in that chamber. But the narrow 53-47 majority the Democrats hold in the Senate is very much in play.
With 21 Democratic senators up for re-election along with two Democratic-leaning independents, compared with only 10 Republican senators facing voters, Democratic control in the Senate is seen to be in jeopardy.
"If the Democrats retain the White House and the Senate," says Sloan, "we can reasonably expect additional regulation, especially environmental regulation. If they are comprehensive and over-reaching that would not be good for business because we are already facing a complex web of regulations, so adding still more would not be favourable for our industry."
That, he adds "is our biggest concern going forward. Thousands of new regulations have been finalised just this year alone - and ours is already the most regulated industry in the country."
IMPLICATIONS FOR TSCA REFORM
The November elections, regardless of which party secures the most votes, will have a profound effect on a wide variety of issues critical to chemical producers, he believes, perhaps chief among them the long-overdue modernisation of the Toxic Substances Control Act (TSCA), the principal US statute governing chemicals in commerce.
All sides - industry, environmentalists, state and federal policymakers - agree that the 37-year-old TSCA is past due for a major overhaul, but there is wide disagreement on what form that revision should take.
"Something has to happen with TSCA in the next Congress," Sloan says. "TSCA reform is needed, but it needs to be a tailored reform."
The TSCA reform bill put forward by Democrats in the Senate is widely seen by business and industry as a non-starter, an innovation-killing approach based on the precautionary principle and one that would largely reflect the EU programme for Registration, evaluation, authorisation and restriction of chemicals (Reach).
"We can't have an unreasonable definition of safety and risk and a statute that allows individual state governments to pre-empt federal law," Sloan notes. "That would kill our markets and cause innovation and production to go overseas."
Referring to the precautionary principle that colours Democrats' TSCA reform measures, he says that "we can't have a guilty until proven innocent philosophy driving this." On the other hand, if Republicans should win the White House and Senate while holding on to the House, "then I would have a more upbeat perspective on this particular issue", Sloan adds.
Sloan also commends the Administration and Congress for taking action on two important priority issues - free trade and drug safety. In the last year, Washington ratified trade agreements with Colombia, South Korea and Panama and enacted the Food and Drug Administration's user fee bill, thereby improving the quality and availability of drugs in the US.
As the election looms, Sloan says that "I am really concerned about the overall economy." He notes that many key indicators suggest a continuing decline in US economic growth for the second half of this year, with GDP falling below even the mediocre first quarter expansion of 2% and the still weaker 1.5% second quarter GDP measure.
He also cites increasing pessimism among member companies of the National Federation of Independent Business (NFIB), the recent forecast of worsening conditions by the National Association for Business Economics (NABE), and a three-month run of declining consumer spending.
"Really, across the board, all expectations are for reduced growth for the rest of this year and the real possibility of a new recession next year," Sloan says.
He is not alone in that evaluation. The ISM purchasing managers index in June showed that US manufacturing slipped into contraction for the first time since the June 2009 end of the recession, the IMF warned that the eurozone sovereign debt crisis is at a new and critical stage, and Federal Reserve Board chairman Ben Bernanke rattled Congress and the markets by saying that the US economy is decelerating and a new recession is likely in the new year.
These and other daunting forecasts have in part shaped the SOCMA Leadership Conference agenda for this year. Sloan notes that Jay Timmons, president of the National Association of Manufacturers (NAM) will keynote the three-day conference, focusing on the November elections and what they portend for manufacturers.
Corporate governance authority Jim Harris will outline best practices in empowering leaders at all company levels, and Brian Beaulieu, CEO of the Institute for Trend Research, will update major economic trends facing the specialty chemicals sector.
Established authorities also will address the abundant potential in shale gas and tar sands development for chemical makers, new advances in and the manufacturing impact of biomaterials, and global market implications in aging populations worldwide.
Sloan says that the Leadership Conference will hopefully leave those attending better equipped to cope with issues and challenges in the six to 12 months ahead, and better able to make prudent business decisions in a time of considerable uncertainty.
Those concerns go to what Sloan says is the overall SOCMA goal, to be the advocate in Washington, DC, for small producers. "We've just completed a new internal study to better grasp our value proposal for SOCMA members," Sloan explains, "and we're hearing, among other things, 'advocacy' and a focus on smarter regulations, impact on TSCA reform, a strong effort on the R&D tax credit, arranging on-site visits by members of Congress at their plant sites - and guidance on what to do if the EPA [Environmental Protection Agency] shows up on their doorstep."
Bill Allmond, SOCMA vice president for government and public relations, underscores the important roles that the society can fill for its members. "Some 70% of our members are small businesses, and the reason they belong to SOCMA is that many of them don't have the sort of extensive administrative resources that larger companies can afford, such as legal departments or corporate lobbyists. "They rely on us for those needs."
And those needs are large, growing and costly, he adds. "Our members face a myriad of major regulations which have a much greater financial burden on small producers."
He cites a study by the US Small Business Administration (SBA) showing that the costs of environmental regulations compliance are 364% higher for small producers than for large companies. That is because small firms lack the kind of in-house resources of larger firms and consequently have to outsource a great deal of their compliance work to consultants, engineers, safety inspectors and others to do assessments, draft and file regulatory reports, conduct audits and complete other tasks that cost far more than in-house staff.
For small producers, says Allmond, those challenges and costs are increasing at an alarming rate, and once again the culprit is chiefly the flood of regulations. "We at SOCMA and other associations have been asked by our members to do more to explain to policymakers the impact of regulations, especially those of the EPA the number of regulations finalised this year alone is pretty staggering."
SOCMA has tallied some 1,300 new regulations so far this year, with 15% of those coming from the EPA alone. "On top of the 1,300 new regulations issued just this year, more than 1,000 additional new rules have been proposed," he says, "and we estimate that the total could reach 4,000 by the end of the year."
Allmond also cites a new study by the Manufacturers Alliance for Productivity and Innovation, that found that chemical manufacturing output could fall by 9-10% per year on average over the next decade because of the cost of regulation, mostly imposed by the EPA. "If findings such as this don't give elected officials a reason to pause before issuing a new regulation, what will?" he asks.
As voluminous as the flow of federal regulations has been already, there is wide speculation that the Obama administration is purposely withholding a huge number of proposed rules, regulations and executive orders until after the 6 November elections.
The federal regulatory engine "has definitely picked up steam in the last few years", Allmond says. In particular, he cited the number of economically significant regulations issued by various federal agencies in the last 10 years. By law, federal agencies must identify as "economically significant" any proposed regulation that will impose compliance costs of $100m (€80m) or more.
The SOCMA event takes place at the Hyatt Regency on the shores of Chesapeake Bay
"In 2001 the federal government issued 56 economically significant regulations," Allmond says, "but in 2011 they had expanded to 133 economically significant rules issued - that's a huge, 140% increase over 10 years."
Those are just the regulatory juggernauts that breach the $100m threshold, while there are hundreds, even thousands of rules, executive orders and other policy actions that may impose still considerable compliance costs in the $10m-90m range.
With federal policymakers on pace to generate 4,000 new regulations this year alone, the costs to business and the overall US economy can be staggering while at the same time largely invisible to the general public.
In addition, once free of election-year stalemate, Congress next year could well come to agreement on a range of policy issues that Allmond says could impact specialty chemicals and batch producers. Chief among them, of course, would be modernisation of TSCA, as already highlighted by Sloan. Within the many facets of TSCA, SOCMA is greatly concerned by efforts to further narrow existing protections for confidential business information (CBI).
SOCMA is particularly concerned about plans by the EPA to require greater disclosure of chemicals by producers when they file pre-manufacturing notifications with the EPA before a product can be brought to market. As an example of the broad knock-on effect of chemicals regulation, SOCMA noted that new EPA requirements for pre-manufacturing disclosure of hydraulic fracturing fluids - many of which are produced by SOCMA member companies - could undermine innovations in this area and hinder development of newly abundant US shale gas supplies.
Allmond and others at SOCMA warn that if the US is to continue to develop greener chemicals and products, federal laws such as TSCA and EPA regulation in general must include proper incentives to safeguard innovation.
"The bottom line is, the government needs to spend more time on policies that support manufacturing competitiveness and market expansion and less time finding ways to weaken them," Allmond argues.
Sloan notes that "protection of trade secrets is, in some cases, the only difference between the success and failure of a business in our highly competitive sector".
Companies would not be inclined to make major capital investments in producing new, innovative processes and products if the underlying proprietary information were to be inadvertently handed on by regulators to US competitors worldwide.
Allmond also is concerned about potential changes in 2013 to the Chemical Facility Anti-Terrorism Standards (CFATS), which give federal regulators at the Department of Homeland Security (DHS) authority over security precautions at chemical production, storage and transit facilities that might be targeted by terrorists seeking to cause massive off-site casualties.
That programme has recently come under heavy fire from members of Congress who charge that despite five years of effort and as much as $500m in funding, DHS still does not have the CFATS programme up and running.
"This leads me to believe that we might see legislation in the next Congress to reconsider the extent to which DHS regulates security at chemical facilities," Allmond says. Chemical makers would prefer to see the existing CFATS extended as-is for five or seven years, to give manufacturers a measure of certainty about the requirements and costs of the programme going forward.
But as the problem-riddled CFATS programme continues to flounder at DHS, the odds increase that Congress may want to review the programme from the ground up. That in turn could open the door to renewed risks for producers, including still more challenges to confidential business information, greater involvement by state regulators and environmentalists' demands for federal imposition of inherently safer technology (IST) standards as a security measure.
Allmond also has concerns about congressional renewal of miscellaneous tariffs legislation, which protects specialty producers from fees on imported raw materials that eventually end up in products that are exported.
SOCMA is trying to ring alarm bells among federal legislators, regulators and the defence community about China's almost exclusive control over rare earth elements that are essential to a range of specialty chemical products and a broad array of other critical items, including many in defence and aerospace.
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
Sample issue >>
My Account/Renew >>
Register for online access >>
|ICIS Top 100 Chemical Companies|
|Download the listing here >>|
Asian Chemical Connections