Major new US chemical investments seen at risk under EPA rules

WASHINGTON (ICIS)–Billions of dollars’ worth of new chemical sector and other manufacturing projects may be in jeopardy because of federal pre-construction environmental requirements, industry officials told a US House panel on Wednesday.

In a hearing before the House Subcommittee on Energy and Power, a top chemicals industry official warned that some of the many new US chemicals production facilities now on the drawing board ultimately could be abandoned because of time-consuming, laborious and confusing federal environmental permitting processes on new construction.

In her testimony on a draft bill aimed at accelerating and clarifying permitting processes at the Environmental Protection Agency (EPA), American Chemistry Council (ACC) regulatory and technical affairs director Lorraine Gershman noted that “As of this week, 177 chemical industry projects valued at $112bn in potential new US investment have been announced”, with at least 62% of that from foreign investors.

However, she said, “All of these projects must undergo a lengthy and complex environmental permitting process filled with challenges that could derail the investment”.

“Problems include uncertainty as to the schedule for obtaining a final pre-construction permit, a requirement that companies use emission modelling programmes that cannot adequately accommodate site-specific data, and the need to address public input and legal challenges,” she said.

And, “once a project is significantly delayed, the project is often scrapped, and companies make plans to proceed elsewhere,” Gershman added.

Gershman was joined by Ross Eisenberg, vice president for energy and resources at the National Association of Manufacturers (NAM), who complained to the panel that the EPA often alters pre-construction permit criteria while investors are already in the permit application process, creating “conditions that derail the project”.

He also cited the agency’s practice of issuing a mandatory stay – an order to stop construction work – when third parties initiate a challenge to a project with the EPA.

In his testimony, Eisenberg said that other regulatory impediments to new project construction include modelling issues, barriers to installation of combined heat and power (CHP) units, energy efficiency measures, and threats of litigation.

He said that US manufacturers “continue to be concerned with the NSR process as applied to greenhouse gases (GHG)”.

The EPA’s New Source Review (NSR) process is part of the Clean Air Act (CAA) and requires pre-construction approval by the agency to ensure a given project has adequate pollution emissions controls.

In early 2011, EPA expanded the scope of NSR permitting to include projects’ potential emissions of GHGs, not previously regulated as “pollutants” under the CAA.

Eisenberg said that when the EPA extended the reach of NSR to greenhouse gases, “it forecast that it would need to issue 900 new pre-construction permits per year”.

“However, in the three-plus years since GHGs became covered,” he said, “only 166 permits have been issued in total.”

The subcommittee hearing was to consider the discussion draft of a bill called “The Promoting New Manufacturing Act” (PNMA).

Among other things, that measure would require the EPA to accelerate its permitting processes to ensure that permit applications are approved or rejected within one year as provided by the CAA, ensure that new environmental standards are accompanied by concurrent guidelines and rules, and report annually to Congress on actions taken to speed the agency’s permitting work.

Gershman noted that President Barack Obama in his State of the Union address earlier this year promised to expedite government permitting of new industrial projects.

In that 28 January speech before a joint session of Congress, Obama said: “Businesses plan to invest almost $100bn in new factories that use natural gas.  I’ll cut red tape to help states get those factories built.”

With that presidential promise as background, Gershman said she hoped that Congress would act quickly to pass the PNMA “and expedite the unprecedented chemical industry investment planned for the US”.

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