OUTLOOK ’15: Bright prospects for US legislation key to industry

Joe Kamalick

13-Jan-2015

WASHINGTON (ICIS)–The US chemicals sector secured an important legislative goal as 2014 drew to a close, and there are improving prospects for action by the US Congress on other, even more crucial items on the industry’s legislative wish list.

As the 113th Congress inched toward its closing hours, the House on 11 December gave final congressional approval on legislation extending for four years the federal mandate for chemical facility anti-terrorism precautions. The bill later was signed by President Barack Obama.

In addition to the four-year renewal long sought by the chemicals sector – the legislation, HR-4007, the “Protecting and Securing Chemical Facilities from Terrorist Attacks Act”, also made some minor changes to the Chemical Facility Anti-Terrorism Standards (CFATS), enforced by the Department of Homeland Security (DHS).

First put in place in 2007, the CFATS programme requires some 4,000 US chemical facilities to meet certain DHS security standards to thwart a possible attack by terrorists seeking to cause massive off-site casualties and damage.

However, since 2007 the CFATS programme had been renewed chiefly with annual votes by Congress, a practice that chemical manufacturers said created continuing uncertainty about the rules, making it difficult for plant operators to make long-term investments to meet those federal standards.

The Society of Chemical Manufacturers and Affiliates (SOCMA) welcomed passage of HR-4007, saying that “A multi-year CFATS authorisation will provide much-needed certainty for chemical owners and operators”.

The American Chemistry Council (ACC) also welcomed final congressional approval, saying that HR-4007 is “a long-term solution for regulating security that will help create a stronger foundation for CFATS”.

Among other things, HR-4007 provides for a semi-annual federal audit of how well DHS is implementing the programme. The department has come under frequent criticism in Congress for its management of CFATS.

But with the CFATS extension now secured, the chemicals industry is focused in particular on perhaps the single most important piece of legislation in four decades, modernisation of the Toxic Substances Control Act (TSCA), the principal federal law governing chemicals in commerce.

Prospects for final congressional work on badly-needed reforms for the 39-year-old TSCA are seen as especially improved now that Republicans have won a complete majority in Congress.

In the 4 November nationwide vote, Republicans picked up nine Senate seats to gain a 54-seat majority in that 100-member upper chamber, and they even added 13 more seats to their existing House majority, now holding 247 of the total 435 House seats or 56.8%.

In all, Republicans have secured their largest majorities in Congress since 1928.

ACC president Cal Dooley said that his association’s members now are largely confident that the new political balance in the US Senate will enable completion of a bipartisan TSCA modernisation bill in that chamber perhaps by the end of 2015.

Dooley said that Senate approval of a bipartisan TSCA reform bill is now more likely because Republican Senator James Inhofe of Oklahoma is to assume chairmanship of the Senate Environment and Public Works Committee (EPW) as the former chair, California Democrat Barbara Boxer, steps down.

“We do acknowledge that passage of TSCA reform in the Senate was probably impeded because of specific opposition by Boxer,” Dooley said, “but now as Inhofe is taking over the chairmanship … we are confident of seeing Senate passage of the bill in the next year.”

Dooley said he was equally certain of House passage of a bipartisan TSCA reform bill and that once Congress has sent the measure to the White House, “we are confident the president would sign a balanced measure”.

He also said that he has increased expectations that other legislation will advance to revise the manner in which the Surface Transportation Board (STB) decides freight rail rate disputes between railroad operators and high-volume rail shippers such as chemicals manufacturers.

Dooley said that a measure already pending on Capitol Hill could well be passed that would “address some of the financial and regulatory barriers to shippers being able to secure timely and equitable rate resolution processes” at the STB.

In addition, he said he has hopes the new 114th Congress that convenes in January might move to influence pending plans by the Environmental Protection Agency (EPA) to toughen the federal standards on atmospheric ozone and proposed rules by EPA to sharply restrict carbon dioxide emissions by existing US electric power plants.

On the pending EPA ozone rule, Dooley said he wished that the agency would instead focus on implementing the existing ozone standards “before imposing a reduced level that could create uncertainty for industry”.

Dooley said he did not think that Congress would move to completely reverse EPA plans to sharply reduce CO2 emissions by power plants because such a move would unquestionably draw a presidential veto. 

Despite their gains in the Senate and expanded majority control in the House, he said that congressional Republicans would not have enough votes to override a presidential veto.

Instead, he said he thought there might be efforts to ensure that EPA’s CO2 emissions rules “are implemented in a way to give us the flexibility and time to make a transition” to a lower-carbon electric power industry.

Dooley noted that chemicals manufacturers are concerned about EPA’s move to restrict power plant emissions because his industry is one of the most energy-intense sectors in the country.

He said he also was concerned that EPA’s CO2 power plant restrictions might accelerate fuel-switching – as more and more coal-fired power plants switch to lower-carbon natural gas – that could raise the cost of natural gas and natural gas liquids, the primary feedstocks of US chemicals production.

Bill Allmond, vice president for government and public affairs at the Society of Chemical Manufacturers and Affiliates (SOCMA), also thinks the new Republican Senate could help advance TSCA reform, but it still might not be easy.

“Even under the best circumstances, with a small Republican majority in the Senate,” he said, “you’d still have to work with Democrats to get congressional passage of any significant legislation of interest to the chemicals industry.”

For SOCMA’s specialty and batch chemicals producers, there is a lot that they would like to see happen in the 114th US Congress that will convene in January.

“One issue of importance to us, the trade issue, likely will be seen more favourably in a Republican Congress,” Allmond said.

He would like to see Congress finally renew trade promotion authority (TPA) for the president, also known as fast-track trade authorisation. That once long-standing authority for the White House expired years ago and its lack has hampered trade negotiations.

Under TPA, when the president negotiates a trade deal with one or more other nations, Congress may only approve or reject the trade agreement as-is without amendments.

“I think that because the Obama administration is doing its part to be pro-trade, with a Republican Congress we could see trade promotion authority actually getting passed in the next year or two,” Allmond said.

Prospects for another key trade matter also might improve in a Republican-controlled Congress, renewal of the miscellaneous tariffs bill (MTB).

Under that measure, US tariffs on hundreds, even thousands of imported substances would be eliminated, reducing costs for domestic chemicals manufacturers who require feedstocks or elements of one sort or another that are not produced domestically but used in production of or as end-product components in US manufactured goods and materials.

The MTB expired in 2012, Allmond notes, and restoring it would make US producers more competitive in the global marketplace.

“It’s not that congressional Democrats are against MTB,” Allmond said, “and in fact many of them support it, but with the two chambers split between the two parties, it has been hard to pass this and other trade measures because of uncertainties about what the other chamber will do.”

With both the Senate and House in Republican hands, said Allmond, that reluctance to act may change.

So too with tax reform, he said. “There have been a number of tax reform proposals on both sides, but as with so many other issues they did not advance” because of the party split between the two chambers.

“I think a Republican Congress will try to take this up again, likely in a comprehensive approach,” Allmond said.

US chemicals producers and a legion of other companies have long complained that US corporate income taxes – nearly 40% when most state-level taxes are included – are far higher than all but a couple of other industrialised nations and undermine US companies’ competitive standing abroad.

Allmond said that SOCMA also would like to see renewal for the research and development (R&D) tax credit, which expired two years ago.

“A lot of our members spend a lot of money on R&D before a product goes to market,” Allmond said. “We would like an incentive to do more R&D here in the US.”

More broadly, Allmond said that with both chambers in Republican hands, the chemicals sector might see more progress on such issues as protection of confidential business information (CBI) in any area of legislative action such as trade deals, EPA rules or freight rail regulation.

Ernie Rosenberg, president of the American Cleaning Institute (ACI), also sees more options for issues of interest to the chemicals sector with Republicans in control of the Senate.

On the major topic of TSCA reform, Rosenberg said : “I think if you can get past the obstruction in the Senate, then a lot of people now not engaged on the issue might have to take it more seriously,” meaning that a bipartisan bill “could have significantly more Democrat sponsors” to help get the measure through the Senate.

“This is a bizarre situation,” Rosenberg said, “in which the industry and environmentalists and the agency all agree that this law needs to be strengthened,” but Congress is unable to move forward on it.

“How often does industry go to EPA and say ‘Make this law stronger’?” he said.

He said that a modernised TSCA bill would establish a single, credible and comprehensive programme for chemicals controls that would “take the wind out of the sails of state legislatures that think they need their own laws”.

Rosenberg said that another key issue that might get a better hearing from a Republican Senate is energy.

“I think our members are very much focused on energy,” he said, “expansion of natural gas resources and production.”

US chemicals manufacturers are heavily dependent on natural gas as a feedstock and power fuel, and newly abundant shale gas supplies of the last six years or so have positioned US producers as among the most feedstock-advantaged manufacturers in the world.

“We have huge hydrocarbon reserves,” Rosenberg noted. “Energy is the single biggest thing for our members other than taxes and trade.”

The Society of the Plastics Industry (SPI) also sees improved prospects for industry-friendly legislation in 2015-2016.

In a message to members, SPI president Bill Carteaux urged them to help educate the new Senate and House members that will be sworn in for the 114th US Congress in January.

“That means we’ll have lots of new lawmakers to educate about our industry, its economic importance and the issues that matter to companies throughout the value chain,” he said.

Carteaux reflected general industry optimism about the new 114th Congress.

“Looking ahead, there’s an opportunity not just to head off threats that face us,” he said, “but to advance meaningful, positive, proactive policy initiatives for the benefit of our entire industry.”

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

READ MORE

Global News + ICIS Chemical Business (ICB)

See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.

Contact us

Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.

Want to learn about how we can work together to bring you actionable insight and support your business decisions?

Need Help?

Need Help?