President’s Message: End of Economic Recession Possibly In Sight

TCC President & CEO Hector Rivero

While the U.S. chemical industry has experienced the worst decline since the 1980s, economic indicators suggest that the end of the recession may be within sight.

According to American Chemistry Council chief economist, T. Kevin Swift, and senior economic consultant, Martha G. Moore, expect the U.S. economy to have hit bottom in the second quarter and then move into positive territory during the second half of the year.

And although a weak first six months still means that U.S. chemical production will fall 8.1% this year compared with 2008, Swift and Moore are predicting a modest 1.6% rise in 2010 and a better 2.2% increase in 2011.

U.S. Consumer Spending Up
On the positive side for 2009, U.S. personal spending, consumer spending, existing home sales, and orders for durable goods are all up compared to this time last year.

But slowing the economic recovery are two key factors: depressed U.S. automobile and new home markets, which are major users of chemicals and plastics.

Car sales in the world’s biggest economy slumped 28% year-over-year in June. And purchases of new homes unexpectedly fell in May as builder discounts failed to keep pace with the slump in prices for existing homes, which was driven by increased foreclosures.

Destocking Dissipates
For U.S. chemical producers, “margins will be challenged for a couple of years mostly because of industry overcapacity,” notes Frederick M. Peterson, president of business consultants, Probe Economics.  However, he sees some strong quarters ahead for chemical makers as their customers restock depleted inventories.

Along the supply chain, inventories-to-sales ratios for chemicals have improved over the past few months, but remain historically high, says Swift.  Still, “it appears that the massive destocking of 2008 and into the first quarter of 2009 is dissipating.”

Swift forecasts basic chemicals and some specialty segments are expected to face the most volatile variation as the inventory cycle plays out.  “Chemicals production will fall in all regions in 2009 with a double-digit decline expected in the Gulf Coast region,” said Swift.

Dennis Cassidy Jr., a principal at management consulting firm, Booz & Co., also sees some rays of hope, but he notes that government stimulus spending still hasn’t had a measurable impact on the industrial economy. “No one is building inventory today in anticipation of stimulus spending. Right now, most are still drawing down inventories to maximize their cash position.”

Job Losses Continue     
June employment data from the Department of Labor show that job losses in the chemical sector have accelerated during 2009.  Preliminary numbers indicate that the industry employs 41,300 fewer workers than at the same time last year, a decrease of 4.8%.

The shrinking chemical workforce is part of a broader contraction in U.S. employment. Total nonfarm jobs slipped by 4.2% for the 12-month period. In June alone, an estimated 467,000 nonfarm workers lost their jobs, and unemployment has stayed at 9.5%. The government figures show that the manufacturing sector—which includes the chemical industry—was hit hardest, with a 12.3% decline in jobs since June 2008.

Employment in the chemical industry has been slipping for years because of a long-running increase in productivity.  More recently, production cutbacks that were instituted in response to the recession are the bigger culprit.

Production-related job losses are slowing now that companies are more comfortable with inventory levels after months of destocking, says Tom Morrison, human capital principal at Deloitte Consulting.  Companies that are hoping to receive government stimulus funds will prize skilled production workers and R&D staff, he says.

To stay competitive, firms are trying to avoid layoffs while controlling labor costs. “Furloughs, flexible workforce arrangements, work-hour cutbacks, shift reconfigurations – we’ve seen every possible iteration of that coming out of the chemical industry,” Morrison observes.

The chemical industry has weathered many economic storms in its long history.  We are optimistic that calmer economic waters lay ahead and our industry can look forward to economic recovery with new scientific innovation, improved efficiency, increased production and job growth.

Industry Honors Dr. Eugene Chiappetta with Excellence in Industry Education Award

The chemical industry recently honored Dr. Eugene L. Chiappetta, of the University of Houston, with the Excellence in Industry Education Award, in recognition of his 19 years of outstanding leadership of, and dedication to, the Science Teachers and Industry (STI) Education Program.

Former Shell Executive Dale Taggart presented the award at the TCC/ACIT Awards Banquet on June 11th at Moody Gardens Hotel and Conference Center in Galveston.

Since 1990, TCC has sponsored the STI program: Learning about Chemicals and the Environment.  Approximately 50 middle and high school science teachers from around the state came to the University of Houston each summer to capitalize on this eleven-day program, which was designed to improve chemical and environmental education in Texas.  

Dr. Eugene Chiappetta, of the University of Houston, and Dale Taggart (formerly of Shell) presenting the Excellence in Industry Education Award

“The program provided teachers with a fair and balanced view of the industry and its relationship to the environment,” said Dr. Chiappetta.  “They asked for a balanced program, and that’s what we gave them.”

Dr. Chiappetta’s goal for presenters was simple: find knowledgeable experts who were also good speakers.  Each year, science teachers heard from toxicologists; professors from Rice, the University of Texas, the University of Houston; the Texas Parks & Wildlife Department; the Texas Commission on Environmental Quality; physicians from UTMB; and representatives of the chemical industry.

A science education professor, Dr. Chiappetta was the designer and implementer of this STI program, which included demonstrations, technical presentations, classroom instruction, facility tours, and a diverse environmental panel discussion.  Teachers created curriculum reflecting a more balanced view of industry for their students while earning continuing education hours, graduate college credit hours, and gifted/talented credits.

“The STI program provided teachers with a close-up view of what happens behind chemical facility fences with tours of various sites,” said Taggart. “Visiting chemical plants and industrial-waste disposal facilities around the Houston Ship Channel offered the participants an insight into the manufacture, use, and disposal of chemicals.”

The field trips allowed students to “analyze data from both sides of the environmental debate to gain an appreciation for the high quality of chemical industry’s environmental stewardship and the depth of industry commitment to safety and health of employees and community,” Taggart said.

TCC President Hector Rivero said, “TCC is honored to have been a part of this Science Teachers and Industry program over the last 19 years.  The TCC Outreach Committee worked closely with Dr. Chiappetta in planning the annual program and organizing tours and presenters.  TCC volunteers have been passionate about this program and recognized the importance of giving science teachers an opportunity to learn about the chemical industry and take what they learned back to their classrooms to share their experiences with their students; our engineers, chemists, and science teachers of tomorrow.”

Dr. Chiappetta said the industry representatives and members of the planning committee “offered as much help as they possibly could – sincerely and always interested.”  Planning for the curriculum would occur year-round and committee members always attended planning meetings, and industry presenters “would come back year after year, for a long time,” said Dr. Chiappetta.

The STI program would not have been possible without Dr. Chiappetta, who led the curriculum since its inception.  He has worked at the University of Houston for 37 years, teaching science methods at all academic levels, from elementary school to college.  Chiappetta’s expertise is in the development of methods and materials for teaching science in middle and secondary schools, in curriculum evaluation, and in science program evaluation.

Originally from upstate New York, Dr. Chiappetta earned a bachelor’s degree from Allegheny College in Pennsylvania, and a master’s and doctorate from Syracuse University in New York.  He and his wife, Barbara, have one grown son, Robert.

In the upcoming 2009-2010 school year, Dr. Chiappetta will go from a full-time, to a part-time professor, while gladly giving up his department’s administrative duties.

Asked about reactions from the STI students about the program, Dr. Chiappetta said: “the teachers were always impressed; they always offered great evaluations (of the program).”  And whether the instruction transformed student attitudes, he offered this: “some (teachers) were hostile, but not by the end of program.”

TCC/ACIT FREEPAC Gears Up for 2010 Election Cycle

Political Action Committees (PACs) help shape public policy by combining the contributions of many like-minded individuals in order to present a stronger voice for a common message. The campaign contributions of a strong chemical industry PAC help facilitate access to decision-makers – regardless of their political party affiliation – as we work to build the relationships necessary to succeed in today’s political environment. Contributing to the FREEPAC will be one of the most effective ways you can show your support for the chemical industry and impact the legislative process.

After a very successful legislative session, it is now imperative to raise money for FREEPAC to participate in the next election cycle in 2010.  We encourage TCC & ACIT members to consider making a contribution to FREEPAC and ensure that the chemical industry continues to have a strong voice in the political and legislative process.

We wish to thank and recognize our 2008 top-level contributors to FREEPAC:

PLATINUM

GOLD

SILVER

TCEQ Tests New Aerial Emissions Detection Technology in June

During the month of June, people near the Houston Ship Channel and in the Tyler, Longview, and Marshall areas may have noticed helicopters traversing the skies over many industrial facilities.  These helicopters were part of a project being conducted by the Texas Commission on Environmental Quality (TCEQ) to field test a new type of remote sensing technology intended to identify sources of emissions.

In Houston, the helicopter was equipped with specialized remote sensing technology known as Differential Absorption Light Detection and Ranging (DIAL).  The TCEQ used another form of DIAL technology in a past study in the Texas City area in an effort to measure emissions from such industrial sources as liquid storage tanks and flares.  The purpose of this project was to field test the capabilities of a smaller, more specialized version of DIAL mounted on a helicopter.

This project is part of an ongoing TCEQ effort to identify sources of volatile organic compound (VOC) emissions in the Houston Ship Channel area.  The DIAL technology used in this project has been adjusted to detect the presence of benzene. While ground based and airborne DIAL systems have been in use for many years, a specialized airborne benzene detection system has never been used in a field setting.

In the Tyler/Longview/Marshall areas, the helicopter was equipped with a specialized infrared camera called the HAWK that can image VOCs and other hydrocarbon emissions invisible to the eye.  VOCs are a class of compounds that include common things like gasoline and other solvents as well as industrial chemicals such as styrene and toluene.  VOCs combine with nitrogen oxides (NOX) in the presence of sunlight and light winds to form ground-level ozone.

This project is a follow up to similar projects conducted in the Texas Gulf Coast and Dallas-Fort Worth areas by the TCEQ to identify VOC sources that may potentially be unreported or under-reported.  The HAWK infrared camera images VOCs such as gasoline vapors, styrene, or propane as a dark cloud. 

Two Pollutants Removed from TCEQ Air Pollutant Watch List

The Texas Commission on Environmental Quality (TCEQ) has removed one air pollutant (1,3-butadiene) from two areas of concern, in Port Neches and in Houston; and another (hydrogen sulfide) from a third area of concern in Beaumont.

“The TCEQ is constantly undertaking a variety of efforts to improve air quality for the people of Texas,” said TCEQ Chairman Buddy Garcia.  “In these watch list areas, we can focus all appropriate resources, and the result is cleaner air.”

“We are proud of these emissions reductions,” said TCEQ Commissioner Bryan Shaw. “TCEQ has many ongoing air quality efforts, and we are always looking at new science and technology to improve our programs.”

TCEQ Chairman Buddy Garcia

Because of the relatively large number of air monitoring sites in the Houston and Beaumont areas, the TCEQ,  has the ability to examine pollution levels of specific compounds at specific locations in order to address potential issues.

The TCEQ maintains an Air Pollutant Watch List (APWL), which is a list of areas in Texas where specific pollutants were measured at levels of concern.  When an area is listed on the APWL, the TCEQ works with the regulated industry in the area to identify and reduce emissions and focuses agency resources such as facility inspections, field investigations, and enforcement activities.  Additionally, permitting of new or modified sources of these emissions undergo a more stringent review, encouraging concurrent reductions with the permitting actions.

Because of the successful reductions in air pollution of these specific compounds (see below), the monitored levels of these compounds have dropped significantly.  The agency has removed pollutants from three APWL areas because monitored levels of these pollutants have decreased below levels of concern.  This action eliminates two areas from the APWL and one pollutant from the third area.

Levels of 1,3-butadiene near Merriman Street in Port Neches and near Milby Park in Houston have been measured at levels of concern in the past, prompting their listing on the APWL.  These levels have fallen 75% in Port Neches since 1996 and in Houston since 2004 and are therefore no longer a concern in these areas.

In Beaumont, hydrogen sulfide was measured prior to 2005 at Carroll Street Park at levels that exceeded the TCEQ state standard. Since 2005, no exceedances were measured therefore the agency has determined that hydrogen sulfide concentrations are no longer a concern in this area.

TCEQ will continue to monitor these compounds to ensure that concentrations remain below the level of concern.  More information can be found about the APWL here. 

TCEQ Commissioners Approve Amendments to Water Fees

In March of this year, TCEQ published for public comment a proposed rule to amend the assessment of three of the agency's water fees: the consolidated water quality (CWQ) fee; the public health service (PHS) fee; and the water use assessment fee (WUF). TCC commented on the rule in April.
 
At the TCEQ Agenda meeting on July 8th, the Commissioners unanimously approved the proposed rule change to increase the assessment of these three fees.
 
The increased revenue to be generated between the three fees is approximately $18.7 million annually.  This amount is expected to be sufficient to fund the appropriations made by the Legislature to support the TCEQ water program activities.  The new fee assessments will be billed this fall.
 
In the past regular session, TCC negotiated legislative language (HB 1433) to limit the maximum fee to $100,000 (rather than $200,000 as originally filed). This legislation passed and the $100,000 cap that is in HB 1433 will be used in the assessment of the CWQ and WUF fees.  The adopted rule mentions the existence of a statutory cap, and assessments for the CWQ and WUF fees will be based on that statutory cap.

Texas Considers Dike in Galveston to Prevent Hurricane Flooding

It has been dubbed the “Ike Dike” – a 55-mile barrier, 17 feet high, that would be built along the Texas Gulf Coast to fend off the sort of devastating flooding inflicted by last year's Hurricane Ike.  The grand idea for what would probably be the biggest seawall in the nation faces some major hurdles itself.  Chief among them: a price tag of up to $4 billion.

But with thousands of people still in temporary housing 10 months after the storm, many say it is time to find a permanent means of protecting Galveston and the rest of the Houston metro area.

Texas A&M engineering professor William Merrell's solution is to extend Galveston's existing 10-mile seawall – first built after the Great Storm of 1900 killed 6,000 people – with a series of walls and retractable floodgates that would extend from one end of Galveston Bay to the other.  The gates could be closed to block the entrance to the bay when a storm approaches.

The project is modeled after the world's largest flood protection system, which is in the Netherlands.  The details are still being worked out, but the idea has already won the support of some members of a state panel studying disaster preparedness.

Project backers, who hope to secure federal funding for the barrier, say it would save homes and lives among the Houston metropolitan area's 5.7 million residents.  They also say it would help protect the nation's biggest, most vital concentration of oil refineries and chemical plants.

But detractors say the dike could inflict environmental damage, obstruct the ocean views of some residents and end up trapping floodwaters in the bay.

Even if the project were to gain approval, construction could take a generation. A proposal of this scale would have to be built by the U.S. Army Corps of Engineers, which could take three or four years just to complete a feasibility study. Congress would then need to approve funding for the project. And it could take 20 years to build it, said Col. David Weston, commanding officer of the corps' Galveston district.

Ike's storm surge of up to 20 feet shattered thousands of homes on Galveston Island and nearby areas. It also fouled farmland and ranches with saltwater.

“In order to justify something like this, it just can't be vacation homes,” Merrell said. “It has to be looking at protecting the entire bay, people's lives and all the infrastructure.”

The barrier would most likely be built of concrete.  Most sections would be on land, running between the beach and the oceanfront homes and businesses.  But the floodgates would be out in the water, across various openings in the coastline.

The dike would be justified simply by the protection it would offer the $15 billion petrochemical complex along the Houston Ship Channel, said Bob Mitchell, president of the Bay Area Houston Economic Partnership.  “If it were to flood there, you would not bring back those facilities for at least six months,” Mitchell said.

Bill King, a member of the state task force looking at disaster recovery, said the dike's scope seemed unrealistic to him until he weighed its cost against the more than $29 billion in damage Ike caused in Texas.  “I've become more convinced it's at least something we need to take a hard look at,” said King, former mayor of the Galveston Bay community of Kemah. But King and others also worry about how the dike might affect fish migration and salinity levels in Galveston Bay.

Mary Kelly, vice president of rivers and deltas at the Environmental Defense Fund in Austin, suggested authorities are going about it the wrong way. She said smaller levees should be constructed to protect critical structures such as petrochemical plants, and the state should rethink where it allows people to build homes on the Texas coast.

“We really need a public debate on what realistically we ought to be doing along the coastline in terms of discouraging people from living in vulnerable areas. We can't keep paying these billions of dollars in damages on these losses,” said Kelly, who is also a member of the state task force looking at disaster recovery.

Phil Bedient, director of the Severe Storm Prediction, Education and Evacuation From Disasters Center at Rice University, said authorities should consider a more natural approach – letting marshes and barrier islands re-establish themselves to help hold back floodwaters.  But Bedient said the dike merits further study.

2009 EHS Seminar Presentations Now Available to Attendees

Presentations from the TCC/ACIT EHS Seminar are now available to attendees at the seminar website:  This year’s EHS Seminar featured 127 presenters and 44 Exhibitors.  In 2010, additional exhibitor booths will be available.  These booths go quickly, so please sign up early if you are interested.  Please mark your calendars for the 2010 EHS Seminar on June 7 – 10, 2010 at Moody Gardens Hotel & Conference Center in Galveston.

ACIT Houston Ship Channel Hosts Successful Dinner Cruise

The ACIT Houston Ship Channel region hosted another successful dinner cruise on July 23rd on the FantaSea Yacht Charter in League City with more than 60 attendees from across industry.

A very special thanks to our sponsor: Commercial Fence Inc.  For all the photos from the event, click here.

Bayer Plans Closure of Several U.S. Chemical Plants

Bayer announced its plan to close down several chemicals plants in the US, where it still sees no sign of sustained improvement in demand, the German chemicals and drug maker said recently.

The company’s Bayer MaterialScience division said permanent shutdowns would include a chlorine electrolysis plant in Baytown, Texas, and a resins plant in New Martinsville, West Virginia.

Bayer’s polycarbonate films production in Berlin, Connecticut, would be consolidated at the company’s Massachusetts site, while a small methyl di-p-phenylene isocyanate (MDI) plant would also be closed.

Bayer said further restructuring measures would take place depending on economic developments, especially in polycarbonates, with more decisions due at the end of 2009.

INEOS Offers $1 Million to LyondellBasell for Texas Resin Plant

INEOS Olefins & Polymers USA has offered $1 million in cash to LyondellBasell Industries to buy a Texas resin plant that is set to close its doors by the end of September.

In recent court filings, officials with Houston-based INEOS said the firm has the option to buy the high-density polyethylene plant in Chocolate Bayou, according to a 1988 agreement between the predecessor companies of both firms.

On top of the $1 million cash offer, INEOS will commit to buy 8 to 10 million pounds of ethylene feedstock from LyondellBasell each month through the end of 2010.  INEOS also will agree to drop a $4.5 million claim for capital recovery costs, officials said in a June 5 filing with U.S. Bankruptcy Court in New York.

INEOS officials, in a July 13 statement, confirmed their attempts to save the plant from closure and demolition. “INEOS has made a firm offer for the facility, which it believes remains viable,” they said.

The potential sale of the plant is one of several topics that will be covered at a bankruptcy court hearing on Aug. 11.  LyondellBasell spokesman David Harpole said the hearing “will give greater clarity to our next step.”

Harpole added that LyondellBasell “continues to explore ways to maximize the value” of the Chocolate Bayou site.  But he also said the firm “hasn't received a viable offer” for the plant.
“At this time, the most cost-effective option is demolition and the scrapping or sale of any equipment,” Harpole said.

LyondellBasell – based in Rotterdam, the Netherlands, with U.S. offices in Houston – announced in May that it would close and demolish the plant, which has annual capacity of almost 500 million pounds of HDPE.  The site employs 50 and is one of the firm's oldest plants, opened by USI Inc. in the 1970s.  At the time the closing announcement was made, LyondellBasell officials said the firm made the move because of low profit margins, excess capacity and declining U.S. PE demand.

SMRP Symposium: August 27 & 28 in Galveston

The Houston Chapter of the Society for Maintenance and Reliability Professionals (SMRP) will present the 3rd Annual Maintenance & Reliability Symposium (MaRS) on August 27 & 28, 2009 at Moody Gardens in Galveston.  TCC and ACIT encourage members to attend the Symposium.

Program highlights include technical presentations dealing with Real Time Issues on topics from the SMRP 5 Pillars of the Body of Knowledge: Business Management; Process Reliability; Equipment Reliability; People Skills; and Work Management.

Six Papers will be presented in each of the Tracks – 30 in all.  Attendees will have a multitude of opportunities for professional development and interact with industry professionals about the latest strategies and techniques for boosting the performance of their facility.  Presentations by representatives from: Bayer; BP; Cargill; Shell; Total; Siemens; Kirby Logistics; etc.

To register click here.

Registration is $250. To exhibit or sponsor the event, please contact Bobby Massengale at (281) 960-7957.  The exhibitor fee is $525; sponsorship levels are platinum $2,000; gold $1,000; and silver $525.