June 2010


President’s Message: EPA Denounces Texas Air Programs

TCC President & CEO
Hector L. Rivero

The U.S. Environmental Protection Agency (EPA) has denounced several aspects of Texas’ air permitting program and ignited a volley of criticisms between state and federal regulators.

EPA announced last month it is taking over the issuance of a Title V operating permit for the Flint Hills refinery in Corpus Christi, and will likely take similar action for permits at another 39 chemical and refining facilities across the state.

EPA regional administrator Al Armendariz threatened to remove Texas’ entire air permitting authority by midsummer if it did not comply with the Clean Air Act, saying his office has already started hiring additional staff, in part to tackle the state’s permitting program. Armendariz said the EPA wants assurances by July 1st that Texas will comply with federal law.

State regulators have consistently said they disagree with the EPA’s conclusions. “It would take years and kill millions of jobs and the economy would suffer eventually, and we’re seeing no environmental benefit,” said TCEQ Chairman Bryan W. Shaw, Ph.D.

"The TCEQ strongly disagrees that Texas air permits violate the Clean Air Act. For the past 16 years the state of Texas has successfully implemented innovative air permitting programs that have resulted in significant air quality improvement throughout the state,” said Shaw. “Our flexible permits, which are similar to the federal government's PAL (Plant-wide Applicability Limits) program in that they allow site-wide caps, are protective because they are based on modeling analysis that reflect worst case scenarios. The EPA cannot deny that Texas programs work. Instead, the federal government is more interested in a blatant power grab."

This is the first time we are aware of EPA demanding a Texas facility apply directly to the federal government for a Title V permit.  The Clean Air Act delegates authority to Texas to implement the state’s Title V program, and the state has successfully administered the program since 1994.  In that time, the state has seen dramatic improvement in air quality. 

When it comes to making actual emission reductions in Texas, TCEQ and Texas employers have made the difference: by investing more than $3 billion since 2001, power plants and industrial manufacturers have achieved an 80% reduction in nitrogen oxide (NOx)in the Houston/Galveston/Brazoria (HGB) nonattainment area.

A critical factor in this accomplishment is TCEQ’s commitment to reduce emissions through its robust air-permitting program. The TCEQ Flexible Permits Program – which enables operators to reduce overall emissions under an emissions cap while safely and efficiently operating their plants – has resulted in more than 260,000 tons of reductions in actual emissions from otherwise unregulated grandfathered facilities through pollution controls or shutdowns.

Similar air quality improvements have been made all over Texas.The decreases in air emissions of this magnitude – especially in the midst of rapid population growth – are amazing achievements in air quality that must not be ignored.Statewide, NOx emissions have decreased significantly from 800,000 tons per year (tpy) in 2000 to approximately 375,000 tpy in 2009.

In the Houston region, the 8-hour ozone design value (the statistic used to measure air quality) for NOx, has dropped from 120 parts per billion (ppb) in 1999 to 84 ppb in 2009, putting Houston in attainment with the current 8-hour ozone standard a full 10 years before the deadline (2019).

EPA is specifically targeting the Flexible Permits Program and others, claiming the permits are not federally enforceable.In fact, EPA is poised to disapprove the program by the end of June, as it did earlier this year with the Qualified Facilities Program.

Throughout the process, EPA has offered little to justify its actions and has yet to provide specific changes that it would like the TCEQ to make in its programs that would satisfy EPA’s concerns. Most of these state air programs have been in operation since 1994.Since its inception, federal law specified that EPA had 18 months to disapprove the state’s program, but has never taken such action before now. That’s more than 15 years of dramatic emissions reductions that the federal government now says is simply “not good enough.”Texas and its regulated industry should not be punished for EPA’s failure to uphold its legal obligation to evaluate and approve the state’s programs within the statutory time period.

Hundreds of Title V permits have been issued, examined and renewed in Texas with no previous objection by EPA since the program’s inception under the Clinton administration.

The EPA takeover could cause regulatory uncertainty at companies across Texas, and employer retraction could stop local job growth and investment, crushing the already fragile economic recovery.

Texas’ air programs are a model of success for reducing emissions and cleaning the air.Texas has the most extensive network or air monitoring in the country and has largely outpaced other states with air attainment programs.

We are incredulous that EPA would encroach on a state regulatory program that has had such a proven track record of success.


Gov. Perry Holds News Conference at ACIT Member Facility


One week after EPA’s announced takeover of Texas’ air permitting program, Governor Rick Perry blasted the federal government at a news conference at the Leader Global Technologies facility in Deer Park, an ACIT member and supplier to the chemical industry. 

“Texas should not be threatened with a takeover of its air quality program but should instead be lauded as the poster child for clean air and pollution regulation,” Gov. Perry said. Perry defended Texas’ efforts to monitor pollution and cut levels of dangerous pollutants, including a 22 percent reduction in ozone levels and a 46 percent reduction of nitrogen oxide levels since 2000.


 Gov. Rick Perry

Mark Vickery, executive director of TCEQ, said he was proud of the state’s “tremendous strides in cleaning up the air in Texas.” He said the commission is working to address the EPA’s concerns.

Many local employers are deeply concerned about EPA’s unprecedented decision to take over a successful Texas environmental permitting program. The move could impose new requirements on manufacturers that will do little to help the environment, but can stifle the state’s economic recovery and result in job losses for locally owned and operated businesses.

“Just as our local businesses were starting to see new capital investment and a semblance of economic expansion and job growth, the federal government is threatening to stop our region’s economic recovery,” said Chad Burke, President and CEO of Economic Alliance, Houston Port Region. 

Also attending the news conference Texas State Representatives Wayne Smith (R-Baytown), Randy Weber (R-Pearland) and Ken Legler (R-Pasadena).

Gov. Perry posted a link to a video of the news conference on Facebook with this entry: “Texas is a national leader in reducing emissions and known pollutants, and advancing renewable energy sources all while remaining a leader in the nation's energy production.”

Leader Global Technologies (formerly JM Clipper) has become one of the premier manufacturers and suppliers of fluid sealing products for global industry (web site: http://www.leadergt.com/). The company’s primary product lines include gasketing, bolting, and mechanical packing for industries including automotive, chemicals, petro-chemical, pulp and paper, refining, mining, minerals and production both on and offshore.

“The recently proposed action by the EPA creates so much confusion that it is difficult to forecast in order to make sound business decisions,” said Leader Global Technologies President/COO Kevin Kolb. “We face significant challenges in expanding our workforce and growing market share when our energy, oil & gas customers are being forced to reconsider capital improvements at their facilities, while they wade through new EPA regulations.  This appears to be a major obstacle standing in the way of economic recovery.” 

Leader Global Technologies provides engineering solutions for bolted joint connections, fugitive emissions packing, and fixed equipment gaskets that exceed EPA requirements.

TCC Responds to TCEQ on Qualified Facilities Proposed Rules

TCC has responded to TCEQ’s proposed rules to address EPA’s specific concerns with the state’s Qualified Facilities Program, which EPA proposed disapproval on September 23, 2009.

Unfortunately, one day after the adoption of the proposed rule package by TCEQ commissioners on March 30, 2010, the EPA announced its disapproval of the program without reviewing the proposed changes from TCEQ.

TCC has always supported the full approval of the Texas Qualified Facilities Program, which does not shield a source from major NSR permitting requirements. The state’s Qualified Facilities Program, as it is currently implemented, promotes flexibility and allows sources to make certain types of changes without triggering federal NSR permitting requirements.

While TCC may not support similar proposed revisions in other programs across the board, these revisions adequately represent a respectable effort to resolve the concerns documented by EPA for this specific program.

TCEQ Adopts Rules on IR Camera, Public Participation, BACT

At its June 2nd meeting, TCEQ Commissioners adopted rules on use of the infrared (IR) camera; public participation in air permitting; and best available control technologies (BAST) in PSD permitting. TCC submitted comments to TCEQ on each rulemaking, and they are effective on June 24th.

HB 1526 (80R): Supplemental Leak Detection – This rulemaking implements HB 1526, 80th Legislature, 2007, Regular Session, by establishing incentives for the voluntary use, as a supplemental detection method, an innovative leak detection technology to detect leaks and emissions of air contaminants.

Chapter 115 VOC Leak Detection and Repair (LDAR) Alternative Work PracticeThe adoption would revise the Chapter 115 leak detection and repair rules to allow an optional alternative work practice to detect fugitive emission leaks using optical gas imaging instruments.

Public Participation in Air PermittingEPA evaluated Texas’ SIP and corresponding rules regarding public participation for New Source Review permits and on Nov. 26, 2008, proposed limited approval and limited disapproval of the submitted rules. This rulemaking is intended to address the concerns to obtain full state implementation plan approval from EPA.

Best Available Control Technologies in PSD PermittingRevisions are being made to the Texas air permitting program rules for prevention of significant deterioration to ensure requirements of the Federal Clean Air Act are included.

EPA Sets New Limits on Sulfur Dioxide Emissions

Federal environmental regulators have set new limits on sulfur dioxide emissions for the first time in 40 years, a move intended to reduce respiratory diseases and early deaths.

The new rules, which take effect under court order, will prohibit short-term spikes of sulfur dioxide, or SO2, which is primarily emitted from coal-fired power plants and some industrial facilities.

The tougher standard will be felt mostly in the East and Midwest where coal plants are most common. Texas has 17 coal plants, with another dozen in the works across the state.

The EPA said the stricter rules could prevent thousands of asthma attacks and premature deaths while reducing health care costs.

The EPA estimates the cost to industry of retrofitting power plants to comply with the new rules at $1.5 billion during the next 10 years and the value of the health benefits at $13 billion to $33billion a year.

The previous standard called for concentrations of no more than 140 parts per billion, averaged over 24 hours. Under the new rules, the allowable level of sulfur dioxide would drop to 75 parts per billion in one hour to guard against short-term spikes.

“We’re taking on an old problem in a new way, one designed to give all American communities the clean air protections they deserve,” EPA Administrator Lisa Jackson said in a statement. “Moving to a one-hour standard and monitoring in the areas with the highest SO2 levels is the most efficient and effective way to protect against sulfur dioxide pollution in the air we breathe.”

Health and environmental groups said the EPA could have imposed a tougher limit, based on the latest science about health risks posed by breathing the widespread pollutant, but they still praised the action.

“Although the final standard is a bit less strict than we and the American Lung Association had urged, it is well within the range recommended by EPA’s independent science advisers,” said Frank O’Donnell of Clean Air Watch, an advocacy group. “We would certainly give it a high passing grade — a B-plus or A-minus.”

Jefferson County is the only area in Texas that would fail the tougher standard.

Deeper Cuts Loom for State Budget; 10% in Additional Cuts Sought

Less than two weeks after imposing a $1.2 billion reduction in current state spending, Gov. Rick Perry and other leaders recently ordered state agencies to submit plans for additional cuts of 10 percent as they prepare their operating budgets for the next two years.

The latest instructions from Perry, Lt. Gov. David Dewhurst and House Speaker Joe Straus continued a course of severe belt-tightening as state leaders and lawmakers confront a budget shortfall of up to $18 billion for the coming 2012-13 fiscal biennium.

Agencies were instructed to submit their base-line budget requests for the next biennium along with a “supplemental schedule” outlining how they would reduce the base-line requests by 5 percent each year.

The plans will be submitted to Perry’s office and the Legislative Budget Board between Aug. 2 and Aug. 30.

The three leaders had earlier ordered agencies, universities and appeals courts to submit plans for cutting 5 percent from current spending -- or $1.7 billion -- in the 2010-11 biennium, which started Sept. 1.

After reviewing the plans and granting full or partial exemptions for about a third of the agencies, they announced reductions totaling $1.2 billion.

“As we move into the upcoming budget cycle, state leadership will continue to identify ways to trim spending, just as families and businesses across the state have done, in order to balance our budget,” Perry said. “This request for 10 percent reduction proposals for the next biennium builds on our ongoing call on state agencies to tighten their belts so Texas can continue our commitment to keep taxes low, attract businesses and create jobs as we continue to lead the way out of the national economic downturn.”

The notification was described as a “starting point” for state agencies as they prepare their budgets for the 82nd Legislature, which convenes in January.

The budget crunch, caused largely by plummeting sales tax revenue during the nation’s economic downturn, is expected to dominate the 140-day session.

Straus has called on lawmakers to look at all available ways to pare spending. He also insisted that lawmakers reject the option of raising taxes, which he said would restrain economic growth and job creation.

Money-saving options suggested by Straus include having unpaid furloughs for state employees, moving to a four-day workweek, freezing top-level state salaries and imposing a moratorium on new programs.

House Appropriations Chairman Jim Pitts (R-Waxahachie) said last month that lawmakers would examine revenue-raising options such as expanding gambling, increasing fees and eliminating some tax exemptions. Another option is tapping the Rainy Day Fund, which is funded primarily by oil and gas revenue and is expected to total $8.2 billion when lawmakers convene.

U.S. Senate to Vote on EPA’s Regulation of Greenhouse Gases

Sen. Lisa Murkowski   

This week, the U.S. Senate will debate whether the EPA should have the authority to regulate greenhouse gases before Congress has an opportunity to debate climate change legislation.

The debate will center on a Thursday vote on a resolution by Sen. Lisa Murkowski (R-Alaska) that would block the EPA from enforcing emissions rules under the Clean Air Act. Murkowski objects to the EPA’s authority and believes that Congress should set such standards instead of the executive branch.

Although the resolution is not expected to pass, Murkowski is bringing the resolution forward under the Congressional Review Act, which prevents any filibusters and only requires 51 votes for passage. Murkowski’s measure has 41 formal co-sponsors, including Democratic Sens. Mary Landrieu of Louisiana, Ben Nelson of Nebraska and Blanche Lincoln of Arkansas.

Senator John Kerry (D-Massachusetts) said that Murkowski's resolution is “a distraction.”

“The Supreme Court has affirmed the EPA’s right to address greenhouse gas emissions. But more importantly, all the science is staring us in the face saying we’ve got to act,” Kerry said. “If you don't want the EPA to do it, then the Senate needs to provide some adult leadership to pass a comprehensive climate and energy bill instead of keeping our heads in the sand and then tying the hands of the EPA.”

Even if the resolution somehow squeezes through the Senate, it is unlikely to pass the House and would face a certain veto by President Barack Obama. Still, the possibility of even a close vote could prove embarrassing to Senate Democrats, just weeks before Majority Leader Harry Reid (D-Nevada) and Kerry plan to bring climate change legislation to the Senate floor.

Specifically, Murkowski’s measure would veto the EPA’s power to regulate greenhouse gases under the “endangerment finding” it issued last December. That finding would lead to regulations that “will ultimately endanger job creation, economic growth and America’s competitiveness,” Murkowski said, and is opposed even some by congressional Democrats who prefer legislative action instead.

“Given the widespread support for legislation, and the likely consequences of regulation, I believe these Clean Air Act regulations should be taken off the table,” Murkowski said. “My decision to introduce this measure is rooted in a desire to see Congress – not unelected bureaucrats – lead the way in addressing climate change.”

Murkowski’s resolution comes just weeks after the EPA issued a rule clarifying how it intends to apply regulations under the Clean Air Act to large-scale emissions factories and refineries — not smaller-scale polluters such as schools or small businesses — starting next year. The action was seen as a signal that the EPA is planning to take an aggressive stance on regulations next year in the absence of any congressional action.

Kerry and Sen. Joe Lieberman (I-Conn.) have already introduced climate-change legislation that Reid plans to bring forward in July, and Kerry last month described the EPA’s action as a “last call” to lawmakers.

House Speaker Nancy Pelosi endorsed that view, saying that climate regulations should be done by Congress, not the Obama administration, to prevent policy fluctuations with administration turnover.

Reid has issued a directive to four key Senate committee chairmen to solicit ideas for the Senate’s climate change bill that would be taken up after the weeklong July 4 recess. Reid wants the Senate bill to restructure civil and criminal penalties for environmental disasters such as the BP oil spill in the Gulf of Mexico, since current law sets caps that were quickly exceeded by the BP spill. A Democratic caucus meeting is scheduled for mid-June to determine how to proceed with the bill in July.

Sen. John Cornyn (R-Texas) said he would work with Democrats on limited energy proposals but warned against a comprehensive energy and climate bill that congressional leaders want to push this summer.“We need to be very careful here,” said Cornyn.

“I think rather than try to hit a grand slam home run, I’d like to work with Sen. Kerry and others to try to hit some singles,” said Cornyn, who heads the National Republican Senatorial Committee. He mentioned nuclear power, improved battery technology and expanded natural gas production as areas that could form the basis of an energy bill.

Deep-Water Drilling Moratorium “Will Kill Economy,” Analyst Says

A University of Houston engineering professor who has authored books and articles on the oil industry and its affect on the economy says the moratorium on deep water drilling announced by President Obama could trigger another deep recession with Texas at ground zero.

Michael Economides, whose 2000 book, The Color of Oil, examined the industry’s role in politics and economics, said that any sizeable cutback on crude production would quickly send the economy into a tailspin.

“History shows, dating back to the oil embargo of 1973 to the Iran-Iraq War, to the first Gulf War, that a disruption of 2 million barrels or more has devastating consequences,” Economides said.

His views are shared in several news releases and op-eds from the energy sector warning that the shutdown of 33 existing deep-water rigs and a moratorium on new drilling for six months in response to the devastating British Petroleum spill off the Louisiana Gulf Coast will extend far beyond just the energy sector.

“This issue is much larger than the oil industry, since access to affordable energy impacts every sector of our economy, every state in our nation and every American family,” wrote Jack Gerard, CEO of the American Petroleum Institute, on the organization’s website last week. “Further, thousands of products – from toothpaste to iPods, cell phones to computers, and vitamins to vegetables – use oil and natural gas as a feedstock in the manufacturing process.”

James LeBas, a former chief revenue estimator for the state comptroller’s office who his now a private consultant with energy clients, says it’s probably way too soon to measure the moratorium’s effect on tax collections and economic activity in Texas. “It seems inevitable that it will affect us, but we just don’t know yet,” LeBas said.

Just two weeks before the April 20 explosion on the Deepwater Horizon rig that killed 11 and triggered the massive uncontrolled gusher a mile below the Gulf, Economides in a blog post for Forbes Magazine praised Obama’s decision to go forward with offshore operations in the Atlantic, said the latest move could to be political suicide for the President.

“I am surprised that he would take such a risk that could have dire consequences for his re-election,” Economides said. “Maybe it’s an honorable move, if he truly believes in what he is doing. But this will kill the economy going into 2012.”

Texas Manufacturing Hits 3-year High, But Could be Slowing

Texas factory activity continued to expand in May, but there were also signs that growth might be cooling off somewhat, according to a monthly manufacturing survey released by the Federal Reserve Bank of Dallas.

The survey’s production index reached its highest level in three years, the Dallas Fed said. The index rose because a smaller percentage of survey respondents reported declines in activity – only 17 percent in May, down from 21 percent in April.

The percentage of manufacturers reporting increased activity also fell – to 38 percent from nearly 40 percent in April. The percentage reporting no change rose to almost 45 percent in May from 39 percent in April.

The Dallas Fed calculates survey indexes by subtracting the percentage of respondents reporting a decrease in activity from the percentage reporting an increase. Most survey indexes remained in positive territory in May, indicating there were more respondents reporting an increase than a decrease.

The business activity index, the survey’s broadest indicator, stayed positive but fell sharply after a strong increase in April. The capacity utilization index edged down, and an index tracking the growth rate of orders fell more significantly, even as it remained positive. The employment index edged up, while an index tracking the average employee workweek went down.

Despite some mixed signals, manufacturers largely grew more optimistic about the six-month outlook, according to the survey. The Dallas Fed said it collected survey responses from 109 Texas manufacturers between May 18 and May 26.

Global Chemical Mergers & Acquisitions Making a Comeback

Global chemical industry mergers and acquisitions (M&A) are on the upswing, with signs of increased activity, according to Peter Young, president of US-based investment bank Young & Partners.

“There are clear signs of a revival in the M&A market, with a thawing of credit, stabilization of economies around the world, increasing buyer confidence, more realistic price expectations by sellers, a higher confidence in earnings and cash flow forecasts, and high cash balances,” said Young.

“We expect the M&A market to improve substantially in 2010 over 2009. Only a drop into another economic recession or a major hit to the financial system will prevent this improvement in M&A,” he added.

Cash-rich buyers are on the prowl, seeking growth through acquisitions. Strategic buyers with strong balance sheets are well positioned to make deals, as financing is widely available for good credit. And private equity firms could become a force once again.

In the first quarter (Q1) of 2010, $4.5bn (€3.5bn) in chemical deals closed, versus just $300m in the same period a year ago period and $25.4bn for all of 2009, according to Young & Partners.

The largest and only deal over $1bn in size in Q1 was Japan-based Mitsubishi Chemical's $2.52bn acquisition of Mitsubishi Rayon, which closed in March.

More significantly, the number of completed deals over $25m in size rose to 15 in Q1 – a major increase over activity in 2009. In 2009, there were four deals completed in Q1, seven in Q2, eight in Q3 and seven in Q4.

And the backlog of announced deals yet to close totaled 12 transactions with a value of $19bn at the end of March, versus five deals with a value of $6.3bn at the end of 2009, according to Young & Partners.

“The M&A market is coming back significantly,” said Chris Cerimele, director and head of chemicals at global investment bank Houlihan Lokey. “The capital markets are also active, with the high-yield financing market open and equity market healthy.”

ACIT Golden Triangle Region Holds Golf Tournament

The ACIT Golden Triangle Golf Tournament was held on May 14th at the Bayou Din Golf Club in Beaumont.Over 60 players participated in the event.  The winners of the golf tournament were: 1st place – DuPont team; 7th place – MMR Constructors team; 14th place – Pala-Interstate team; Longest drive – Mark Netterville with BASF; and Closest to the pin – Steve Breaux with BASF.

We wish to thank our sponsors who provided tents, food & beverages and door prizes:

  • A Box 4 U
  • Aggregate Technologies
  • AmeriTrac Railroad Services
  • BASF
  • BIC Alliance
  • ChemTreat
  • Chevron Phillips
  • DMC - Carter Chambers
  • DuPont
  • Evergreen Industrial Services
  • Fishbone Solutions
  • Houston 2-Way Radio
  • Hunter Buildings
  • Huntsman
  • JDDA Construction/HBS
  • Lofton Staffing & Security Services
  • ODIN Industrial Demolition & Asset Recovery
  • Pala-Interstate, LLC
  • Rain For Rent
  • Remax
  • Sabina Petrochemicals
  • Safway Scaffolding
  • Securitas Security Services
  • Superior Supply
  • The Mundy Companies
  • Triangle Waste
  • Universal Plant Services
  • Veolia ES Industrial Services
  • Zachry

We also wish to thank the Golden Triangle Activities Committee for all their hard work in planning this event.More photos of the ACIT Golden Triangle Region Golf Tournament can be found here: http://www.flickr.com/photos/chemicalcouncil/sets/72157623971813623/

ACIT Houston Ship Channel Region Holds Crawfish Boil

The ACIT Houston Ship Channel Crawfish Boil & Mixer was held on May 20th at the Bridge Water in Baytown.  Over 100 attendees participated.

We wish to thank our exhibitors and food & beverage sponsors:

  • Cherry Demolition
  • N2it Containers
  • The Mundy Companies
  • Trinity Bay Pipe and Supply
  • U.S. HealthWorks Medical Group
  • Waco Filters
  • William Grant Tank & Vessel, Inc.

U.S. HealthWorks Medical Group, a new member of ACIT, donated the door prize which were two fishing rod & reels and a cooler.

More photos of the ACIT Mid-Coast Region Golf Tournament can be found here: http://www.flickr.com/photos/chemicalcouncil/sets/72157624198163778/

Upcoming TCC & ACIT Events

June 10th - TCC/ACIT Awards Banquet at Moody Gardens in Galveston.  For more information, go to the following link: http://www.acit.org/articles/337/1/TCCACIT-Awards-Banquet---June-10-2010/Page1.html

June 24th – ACIT Houston Ship Channel Clay Shoot at the American Shooting Center in Houston. For more information, go to the following link:http://www.acit.org/articles/432/1/ACIT-Houston-Ship-Channel-Clay-Shoot---June-24-2010/Page1.html

June 25thACIT South Texas Golf Tournament at the River Hills Country Club in Corpus Christi. For more information, go to the following link: http://www.acit.org/articles/430/1/South-Texas-Golf-Tournament---June-25-2010---Register-Today/Page1.html

August 19th & 20th – The 4th Annual Maintenance & Reliability Symposium “Improvement in Maintenance & Reliability – Leading the Recovery” to be held at Moody Gardens in Galveston.  For more information, please click here.



Upcoming Member Events

For a listing of TCC & ACIT Member promotions and events, please click http://www.acit.org/categories/Events/Upcoming-Member-Events/.

(These events are not organized or endorsed by TCC or ACIT.)