According to Texas Comptroller Susan Combs, the state’s sales tax collections from December 2009 sales were down more than 14 percent over the same month a year ago, the twelfth consecutive month of decline.

Sales tax revenue is an important indicator of Texas’ fiscal health because it comprises more than half of the $80.6 billion annual state budget. For the 2010 fiscal year, sales tax revenue was expected to rise slightly but is still lagging. Current sales tax revenue is almost $1.3 billion less than collections for the same time last year.

Comptroller Combs recently told the TCC Board of Directors that she remains cautiously optimistic, saying her office “will continue to closely monitor sales tax revenue, and although we expect further collection declines in the near term, it is anticipated the rate of decline will moderate and return to revenue growth sometime in the second quarter of 2010.”

Indeed, manufacturing orders have been up for the past six months as the world economy has picked up; the help-wanted index has improved, showing that employers are seeking new workers; and the weekly average of hours worked has also increased.

These factors could bode well for Texas job growth as high as 2 percent in 2010, up from the 3.2 percent decline last year. More jobs and more wealth, measured by stock and real estate values, could drive more consumption by consumers.

But Texas has a lot of catching up to do, even if sales tax revenue meets projections. In the first five months of the 2010 fiscal year, sales tax collections have been down 13 percent on average. To meet this year’s projection of flat revenue, the trend would have to turn sharply and then it would take big sales tax revenue gains in the second half of the fiscal year. At the same time, several other key budget items have come in below projections, including taxes on motor vehicle sales and cigarettes.

In case there is a hole in the current budget, state officials are poised to reduce state spending. In January, Gov. Rick Perry, Lt Gov. David Dewhurst and House Speaker Joe Straus asked all state agencies to offer proposals cutting 5 percent of their budgets.

The objective of the spending cuts, unveiled by agencies in mid-February, was to identify programs that could be trimmed if needed while reducing the impact on direct services.

But more than half of the general operating budget was exempt from the cuts, including money for public schools, Medicaid and the Children's Health Insurance Program. The brunt of any cuts would probably be borne by the corrections system and other health and human services programs.

Any shortfall in the current two-year budget would only exacerbate the budget headache that legislators know is coming when they return to Austin next January to write the 2012-13 budget. But the proposed five percent cuts are probably not enough to close the budget cap that Texas is facing.

Already, the hole in the state’s budget is expected be more than $10 billion, and could be upward of $16 billion. Thankfully, the state has more than $8 billion in its Rainy Day Fund, but it is unlikely that lawmakers will want to deplete this fund during its budget process.So, the Legislature will likely have to consider additional spending cuts or revenue increases when it convenes next year.

The chemical industry already pays more than $1 billion in state and local taxes each year and is responsible for nearly a half-million Texas jobs. And Texas chemical products are the state’s largest export with approximately $35 billion in exports in 2007.Our industry is vital to the Texas economy.

Legislative Committees are conducting interim studies that include looking at state taxes and exemptions that could impact Texas manufacturers. The Texas Chemical Council is actively engaged and is representing our industry’s interest in this process. For chemical manufacturers, industrial contractors, suppliers and vendors, any increased tax burden could be devastating and would threaten the chemical industry’s economic recovery. Our industry must remain vigilant and voice our concerns to legislators about the importance of preserving a competitive business climate for the chemical industry in Texas.

The NAS is encouraging EPA to evaluate all chemicals by assuming that there is no safe level of exposure. Thus, the majority of chemicals would be regulated like carcinogens are currently regulated. Current acceptable levels of exposure for most chemicals would drop by at least a factor of 100.

If implemented, this report will have severe regulatory ramifications. In response to this report, Toxicology Excellence for Risk Assessment (TERA), Texas Commission on Environmental Quality (TCEQ) and the American Chemistry Council (ACC) are working together to organize a coalition of groups interested in improving dose-response assessment techniques through 3 workshops that would have the following goals:

-Dissemination of information on the latest dose-response assessment techniques by invited presentations.

-Brainstorming of appropriate or promising dose-response assessment techniques that either have or can be developed into case studies.

-Selection of dose-response assessment techniques and case studies for further evaluation by an expert peer consultation panel in a second meeting.

TCC has joined this initiative and will work with TERA, TCEQ, ACC and many others developing workshops to support the protection of public health by developing, reviewing and communicating risk assessment values and analyses, improving risk methods through research, and educating risk assessors and managers and the public on risk assessment issues.

The first of these workshops is scheduled for March 16-18, 2010 at TCEQ. You can view the website for more information by clicking on the following link: Alliance for Risk Assessment

TCC has committed to participate in this initiative and will keep its members apprised of any developments.If you are interested in participating or have any questions, please contact Mike McMullen at (512) 646-6404 or via email at mmcmullen@txchemcouncil.org.

Former Houston Mayor Bill White got more than 75% of the vote in the Democratic primary and will challenge Governor Perry in the November general election.

Five incumbents in the Texas House of Representatives were defeated: Reps. Betty Brown (R-Terrell), Tommy Merritt (R-Longview), Tara Rios Ybarra (D-South Padre Island), Dora Olivo (D-Mission City) and Al Edwards (D-Houston). However, a recount is expected in the Edwards race as the vote difference was 11 votes.Another three House members are in a runoff on April 13^th: Reps. Fred Brown (R-Bryan), Delwin Jones (R-Lubbock) and Norma Chavez (D- El Paso.)

For all the official results in the Republican primary, click here for the Secretary of State's vote totals. For Democrat primary races, click here.

The gathering had over 140 attendees and numerous local elected officials.  ACIT thanks our Exhibit and Lunch Sponsors for this event:

·Austin Industrial, Inc.
·CMM Services, LLC
·Ray West Warehouses
·Repcon, Inc.
·The Eads Company
·Turner Industries Group, LLC
·Veolia ES Industrial Services

More photos of the ACIT South Texas Political Forum can be found here: http://www.flickr.com/photos/chemicalcouncil/sets/72157623457585865/

Rivero’s presentation can be found here (presentation). As always, TCC and ACIT are very grateful to our sponsors who support these events, some who support multiple events.The exhibit and food and beverage sponsors were:

·Loss Analysis and Accident Prevention (LAAP)
·Odessa Pumps
·Purgit Tank Degassing
·The Mundy Companies
·Turner Industries Group, LLC

In the absence of legislation, the EPA has begun considering ways to regulate stationary sources of carbon dioxide and other greenhouse gases. Businesses say such rules would add new costs and pinch many industries in Texas.

Texas state officials, including Gov. Rick Perry and TCEQ, have challenged the scientific justification for greenhouse gas controls, arguing that climate change science has been politicized. Under the Clean Air Act, Texas would be required to enforce new rules aimed at lowering greenhouse gases – or risk losing its authority to award all federal pollution permits.

EPA Administrator Lisa Jackson said that the EPA would begin by regulating sources that emit more than 75,000 tons a year of carbon dioxide-equivalent gases in 2011 and 2012. That threshold would cover sources such as coal-fired power plants, as well as refineries, cement kilns and chemical plants.

No permits would be needed in 2010, Jackson said. The EPA wouldn’t require permits for smaller sources until 2016 at the earliest, and the threshold for a permit may be set at 50,000 tons instead of the EPA’s original proposal of 25,000 tons, she said.

“It will probably be at least two years before we would look at something like a 50,000 [ton] threshold,” Jackson told a Senate Appropriations subcommittee.

The details of how the EPA intends to regulate greenhouse gas emitters remains the subject of speculation among lobbyists, environmental groups and industry lawyers.

The EPA’s proposal, announced in September, would use an existing program to require that newly built and modified sources use the best available technology to limit greenhouse gas emissions. Whether the agency can use a separate program to cover all other existing major sources is a more nettlesome question that would probably be litigated.

“The question of whether and how existing, on-the-ground stationary sources will be regulated is open,” Nathan Richardson, a visiting scholar at environmental think tank Resources for the Future, said at a seminar in Washington.

The House passed legislation last year to create a cap-and-trade system, which would allow businesses to buy and sell pollution allowances to meet emission reduction targets. But that concept has stalled in the Senate.

In the meantime, Republican lawmakers including Rep. Joe Barton of Arlington are pushing resolutions that, if approved, would invalidate the EPA’s basis for regulating greenhouse gases.

Jackson told senators that the Obama administration still prefers legislation to limit carbon pollution. But some environmental groups and industry lawyers say the agency could create a limited cap-and-trade system even without congressional approval.

“The question is how aggressively that authority can be used,” Jeff Holmstead, a former EPA official and partner at Bracewell & Giuiliani, said at Wednesday's seminar. “Something like the 5 to 10 percent reductions ... can be accomplished under [the Clean Air Act] as long as there is a showing that existing technology can be used to get those reductions,” Holmstead said.

Since the start of the recession (considered December 2007 by the National Bureau of Economic Research), the U.S. chemical industry has lost 66,000 jobs, or 7.7% of employees.

The U.S. and Western Europe have been the hardest hit, with commodity chemicals having the greatest proportion of job losses, notes U.S.-based Polymer Consulting International (PCI).

The worst may be over: most companies have already cut back significantly because of the economic crisis.

However, warns Robert Bauman, president of PCI, “most of us in the industry are waiting for the other shoe to fall.” That shoe is the impact of the new capacity under construction in the Middle East and China. “While some capacity has started up, the impact has been minor due to stronger-than-expected demand in Asia and the shutdown of capacity, primarily in Europe and the U.S.” he said.

The new capacity is expected to start up in the next 12-18 months. When this happens, Bauman said there could be another price and margin drop as current operating rates decline as well. “If this is severe, then additional layoffs could occur, especially if additional plants are shut down.” With most companies now running lean, the magnitude of any potential layoffs will be much lower than what has already occurred in the industry.

A potential alternative scenario that PCI notes involves start-up delays and operating problems staggering the impact of the new capacity and it is absorbed via improving global economies.

While the North American and European chemical markets are stagnant or contracting, expansions and construction in Asia and the Middle East are driving up employment in those regions. However, cautions PCI's Bauman, petrochemical production is not labor intensive.

“New plants are bigger and are more automated, requiring [fewer] people to run them,” Bauman said. “Moreover, it is not a fluid job market: People working in Europe and North America are not likely to transfer to Asia or the Middle East.”

BASF CEO Jürgen Hambrecht summarizes the overall economic mood of the chemical industry, with his view that “the worst is behind us, even though dark clouds remain.”

He added that “overall, there are no signs of a self-sustaining, long-term recovery. We are still significantly below the capacity utilization rates that were seen ahead of the crisis. (We expect) the majority of growth to come from the emerging economies in Asia, especially China, and from South America.

“The economy is still sputtering in Europe and North America. Growth in Europe would not return to 2008 levels before 2012. Stimulus programs are being wound down, credit is becoming tighter, excessive national debt is leading to austerity measures, the number of jobs is falling and overcapacities still exist. There are further risks associated with geopolitical tensions and a trend towards protectionism.”

Chevron Phillips has three crackers in Sweeny with combined ethylene capacity of around 1.86m tonnes/year, according to the company’s most recent filing with the U.S. Securities and Exchange Commission (SEC).

The company idled one of the three crackers in late 2008, citing weak market conditions. The outage this week was said to have affected a 930,000 tonne/year unit, which leaves a single cracker with around 670,000 tonnes/year of capacity in operation at the site.

Chevron Phillips has two other crackers in Texas, in Port Arthur and Cedar Bayou, but the Cedar Bayou unit was taken off line this week for a turnaround of nearly two months. The Port Arthur cracker has 794,000 tonnes/year of capacity, according to the company filings.

March 18^th – The ACIT Golden Triangle Crawfish Boil will be held at DuPont’s Brad Club in Beaumont from 5:00 – 7:00 p.m. Link to register is here:  http://www.acit.org/articles/343/1/Golden-Triangle-Crawfish-Boil---March-18-2010/Page1.html.

April 7^th – Mid-Coast Economic Outlook Breakfast to be held at the Dow facility in Freeport. Registration and more information will be sent electronically.

April 12^th – ACIT Mid-Coast 11^th Annual Golf Tournament at Wilderness Golf Course in Lake Jackson. Link for more information or to register: http://www.acit.org/articles/417/1/Mid-Coast-Golf-Tournament---April-12-2010/Page1.html

Registration for the EHS Seminar is now open!  To register or for more information on the seminar, go to: www.ehs-seminar.com.

August 19^th & 20^th – Maintenance & Reliability Symposium at Moody