NACD: Election presents opportunity for change

29 November 2012 18:47  [Source: ICB]

PHOTO CAPTION:

Skipp: NACD has been more proactive with regulators over the past year

President Obama won a second term in office

QUOTES:

"Our members want to comply... and we too want a safer environment"

andrew skipp, Chairman, NACD

"What I hope members take away from this annual meeting is how to run their businesses more efficiently"

CHRIS JAHN, NACD president

As chemical distributors digest the outcome of the US presidential election, the NACD hopes to offer even more support to its members

The re-election of President Barack Obama for a second term probably was not the result that most chemical company owners wanted, but NACD president Chris Jahn says the vote outcome also poses new political and advocacy possibilities.

As chemical distributors gather in San Diego, California, for the annual NACD meeting, Jahn notes that the political landscape in Washington has not changed all that much, and the industry is still facing a range of legislative, regulatory and tax challenges.

In addition to the second White House term for Obama, Democrats also gained a few seats in the Senate and the House of Representatives, but Republicans retained their majority control in the House. So the political balance is more or less status quo.

But, says Jahn, there is a key element hidden below the surface of party affiliation and control on The Hill.

"Between the election which just ended and the Tea Party wave in 2010 that swept a lot of new members into the House," he notes, "about one-third of House members were not there three years ago.

"We see that as a tremendous opportunity to educate key members of Congress on the role played in this economy by chemical distributors, and we are going to take advantage of that opportunity," he says.

SITE VISITS

He says that NACD, its staff and member firms are ramping up their grass-roots outreach, having industry executives fly in to Washington to meet with their representatives and senators, but more importantly by getting those political players into distributors' facilities.

"Fly-ins work, but facility visits are the Holy Grail of our outreach," says Jahn.

If a distributor owner or executive visits Washington to meet with his or her representative, often it is an all-too-brief office conference or perhaps just a brisk chat-walk as the member of Congress is headed elsewhere.

But with a visit to a distributor's business, says Jahn, the story is wholly different. The politician is likely to spend the better part of an hour on-site, learning how the business is run, the equipment and technology in play and - perhaps most importantly - meeting and talking with executives on their home turf and with other employees who are constituents and voters.

Jahn says that three years ago NACD and its member firms held few on-site visits for legislators, but that there have been dozens of such sessions in recent years. NACD is also increasing its budget this year to enable still more outreach.

Andrew Skipp, NACD board chairman and CEO of Hubbard-Hall, in Waterbury, Connecticut, also puts great store in on-site visits, but also sees value in extending NACD outreach to regulators.

"Regulators have taken it upon themselves to be more aggressive in interpreting the laws that are already on the books," Skipp says. "And we certainly don't see that changing over the next four years, because the election outcome will be seen as validation for the Obama administration's practices - especially at EPA," he adds, referring to the Environmental Protection Agency.

BEING MORE PROACTIVE

Skipp says that for some years chemical distributors essentially just tried to "stay below the radar" of regulators.

"But in the last year or so, we've been more proactive with regulators, seeking meetings and sitting down with EPA, OSHA [Occupational Safety and Health Administration] and DHS [Department of Homeland Security] to not only understand the regulators' agendas but also explain what we are doing, our Responsible Distribution programme, rather than us just trying to avoid confrontation."

Skipp says he initiated a meeting with EPA Region I top officials and asked regulators to educate distributors on what the agency is trying to accomplish and how industry could help them reach those areas of most critical concern.

"Our members want to comply," Skipp says, "and we too want a safer environment, so the question is: how can we do this together?"

He says that EPA Region I officials provided NACD with a list of the most common environmental rules violations found among distributors, so that member companies could identify potential vulnerabilities and remedy them.

"It was a very positive meeting," Skipp says, noting that officials from EPA headquarters in Washington were teleconference participants.

"As a consequence, EPA thinks that our engagement with Region I might be a model for the other EPA regions," he says.

"I found it to be a very positive development," he adds. "Will this approach work with OSHA, DHS and others? We have to try. Ultimately, they hold all the cards, and we have to find a way to work with them and demonstrate to them that we are trying to be safe and good stewards of the environment."

There is a lot at stake.

Steve Seeler, NACD's incoming chairman of the government advocacy committee and executive vice-president at Seeler Industries, says: "I hope that President Obama doesn't feel that this election is a mandate to push forward on every aspect of his agenda."

The past year was bad enough, he says. "Last year there were about 4,100 new regulations in the federal pipeline - you can't keep track of them all, although our NACD staff do that for us.

He says: "The biggest thing we fear is uncertainty, especially on the regulatory side. It doesn't stop with EPA and OSHA. There's the Food & Drug Administration, Department of Transportation, Federal Railroad Administration, Homeland Security and Federal Aviation Administration - and that's just on the federal side.

"In the multiple state governments, there's health departments, agricultural controls, local OSHA agencies, county governments and fire marshals," he adds.

REGULATORY PRESSURES

"The amount of resources, financial and administrative, a company has to put forth for all of this just eats into the company's ability to create a profit, stay alive.

"We recognise the need for regulation, but we'd like more of a partnership with agencies, not having the government dropping the regulatory hammer on us every time to squeeze out every cent in fines and penalties," Seeler says. "What we have now is regulatory overreach."

Seeler, like other NACD officials and member firms, was especially concerned about the "general duty clause", a provision that gives regulators and government inspectors broad authority to assess penalties for circumstances or conditions that are not explicitly prohibited or covered by specific statutes or regulations.

"It is devastating to have that kind of power in a regulatory agency," Seeler says.

He also is concerned that with the political status quo in Washington now renewed by the 6 November election - with Democrats in the Senate facing off with the Republican majority in the House - that a second-term Obama will expand on unilateral policy moves.

"The fear is that the president will use executive orders to impose regulations and rules that Congress would not approve if they were to vote on it," he says.

There are multiple existing statutes or regulations that could be toughened further still.

Seeler says that concerns are high among distributors about the long-term status of the Chemical Facility Anti-Terrorism Standards (CFATS), the six-year-old federal mandate that gives the Department of Homeland Security authority over security levels at facilities deemed to be at high risk for a terrorist attack.

That programme has come under heavy fire in the last year, with some in Congress charging that the department has wasted hundreds of millions of taxpayer dollars with the system still not fully functioning.

Seeler notes that distributors have put similar multi-million dollar investments into securing their sites to comply with CFATS, but with the programme subject to annual review and renewal by Congress, "we don't know for sure what the programme will look like next year or the year after".

NACD and other chemical industry sectors subject to CFATS controls would like to see the programme extended as-is for five or more years, but that seems unlikely given congressional ire over mismanagement at DHS and the need for continued annual congressional oversight.

Also high on NACD's regulatory sweat list is the now looming reform of the Toxic Substances Control Act (TSCA), the 37-year-old statute that stands as the principal US federal vehicle for control of chemicals in commerce.

The bill put forward by Democrats in the Senate this year and earlier in 2011 was widely condemned by industry as a bald effort to impose an EU-like precautionary principle system on the US chemicals sector, including mandatory use of inherently safer technology (IST), banning the use of some substances.

That bill, the Safe Chemicals Act, was a non-starter for the Republicans in the Senate and House as well as for industry.

"We recognise that TSCA has to be reformed, modernized," Seeler says, "but we want to be involved in the process so that we can come up with something that works for us as well as for government."

GETTING MORE INVOLVED

As TSCA reform is certain to come up in the new 113th Congress that convenes in January next year, Seeler says: "We want to be more included in the development of a replacement for TSCA. We can't make them [legislators] take our information, but we certainly want to be part of the process."

That is where the NACD boost in funding for outreach comes in, with more fly-ins and on-site legislator visits being planned for 2013.

Doug Brown, chief executive of Brown Chemical and incoming NACD board treasurer, is also a major advocate of on-site visits with legislators and regulators.

Having previously served as chairman of NACD's government advocacy committee, Brown sees the plant-site meetings as "a very valid tool for NACD".

"These on-site sessions get the legislator out of the ivory tower a bit," he says. "In an hour or so on site, they get a chance to understand in depth what is going on.

"The other side of this is that the people that work at, and for, these companies get a chance to understand the political process better, so they don't feel alienated from it, so that they'll make the phone calls and write the letters to their representatives, and that's a really good thing," he says.

"NACD has made a huge move forward with this sort of thing, and I hope we can do a lot more," Brown says. "Every time we ramp up on-site visits, we get more effective."

NACD chief Jahn also raises concerns about tax issues and worries that the federal government will seek to impose higher tax rates on small businesses and individuals in order to offset federal budget deficits and the nation's $16.0 trillion (€12.6 trillion) debt load.

"Tax issues are of paramount importance to our members," Jahn says, noting that most NACD companies are "pass-through" entities, meaning that the firm's profits flow through to the owners, who are then taxed at individual rates.

About half of NACD members are pass-through operations, and as Obama has renewed his demand that "the rich pay their fair share", it could mean higher, even punitive taxes on NACD small business operators.

Still, says Jahn, there is an opportunity to work with the administration and Congress.

"I would say that the president and his regulators have a tremendous opportunity now for improvement," he says, citing the Obama administration's continuing hold on power.

"The president's first term was pretty bad in terms of our industry and regulation, so in a manner of speaking there is no way to go but up.

"Regulatory overreach has been a huge issue for our members these last four years," Jahn says. "More broadly, regulations are really choking our entire economy."

He cites a recent study by a major US production trade group and small businesses that found that manufacturing in the US costs 20% more than in any other nation, even after domestic high labour costs are removed from the equation.

"What I hope members take away from this annual meeting is how to run their businesses more efficiently, a better grasp of the economy going forward, and the need for continued engagement of our companies with government," he says.

"We can only be as effective as our members permit us to be," he adds. "And we've seen that the more involved we become, the more effective we are.

"Just because we've just had a status quo election doesn't mean we can sit on the sidelines," Jahn says.


By: Joe Kamalick
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