President’s Message: Texas Budget Woes Could Impact Industry

TCC President & CEO Hector L. Rivero

Budget problems are dominating the current Texas legislative session.

The day before the 82nd Texas Legislature convened, State Comptroller Susan Combs officially presented lawmakers with the magnitude of the problem, by issuing her revenue estimate for the next budget cycle. The Texas Constitution requires that the Legislature pass a balanced budget when it meets every two years. 

In her revenue estimate, Comptroller Combs said that after paying off the current year deficit of $4.3 billion, budget writers would have about $72 billion in general revenue available for financing the 2012-13 biennial budget. When budget experts take into account the current year deficit, the $7.9 billion in federal stimulus money that won’t be available for the next budget, and other factors like falling property values, many believe the budget shortfall is actually nearing $27 billion (if the state were to maintain the same level of service in public education, health and human services, prisons and other major services).

The Comptroller only estimates revenue; she cannot estimate what the Legislature will spend. Combs said the State should have up to $9.4 billion available from the “Rainy Day Fund”, accumulated from oil and gas severance taxes. However, to use money from the Rainy Day Fund in the current biennium would require a super-majority (three-fifths vote) of the Legislature.  It would take a two-thirds vote to use the Rainy Day Fund in the next biennium.

Governor Rick Perry said state leaders “will separate the wants from the needs, and then cut spending” to stay “within this revenue estimate.” And Lt. Governor David Dewhurst said lawmakers will ignore “an infinite wish list of ... automatic spending increases.”

Budget proposals prepared for Texas lawmakers call for eliminating thousands of state jobs. Under the initial House budget proposal, the State would cut support for public schools, state colleges and universities, and would bring down a hatchet on social programs. The last time Texas faced a budget shortfall in 2003, state leaders balanced the budget with reduced spending and no new taxes.

“As we did back in ‘03, we’ll balance the budget this time too, setting priorities, making tough decisions and not raising taxes,” Perry said.

Governor Perry, Lt. Governor Dewhurst and House Speaker Joe Straus are united in their stance not to raise taxes, but acknowledged that the state’s lagging business tax (the franchise tax) might need to be examined. The concern has also been raised by Senate Finance Chairman Steve Ogden (R-Bryan), who is calling for revisions in the state’s business tax.

The franchise tax (also called the margins tax) was modified five years ago to modernize and broaden the tax burden, but has fallen approximately $2 billion a year short of the original projections. Sen. Ogden said the tax has underperformed and, unless fixed, will cause an increase in property taxes and could lead to problems with equitable financing of schools.

The Texas chemical industry supports a broad-based tax system that is equitable for all taxpayers. Our industry opposes any legislation making substantive changes to the new franchise tax that would have a damaging effect on Texas’ business tax competitiveness. Revenues from franchise, sales, and other taxes have fallen with economic performance and not just from structure. Franchise tax collections in the most recently concluded fiscal year were $400 million less than the amount estimated by the Comptroller when she certified the current budget. By comparison, the falloff from sales tax was $1.5 billion.

Changes to the property tax system are another major concern. Our industry opposes any legislation that would treat business property less favorably than residential, such as by splitting the tax rolls in the appraisal system or by applying different tax rates.

While state leaders say they will balance the budget with no new taxes, the chemical industry will be watching closely for proposals that could negatively impact our industry’s investment and the thousands of industry related jobs in our communities. Continuing to keep Texas’ business climate competitive in the global economy must remain a top priority.

Sunset Advisory Commission Holds Decision Hearing on TCEQ Sunset

On January 12th, the Sunset Advisory Commission held the “Decision Hearing” in the TCEQ sunset process, where the Commission considered the sunset commission staff report, the testimony they received in December at the TCEQ sunset hearing (at which TCC offered oral and written testimony), and modifications offered by legislators and the public.

The result of the hearing is a final report that outlines the changes that will be in the TCEQ Sunset Bill.  Please note that this is not the end of the TCEQ sunset process.  After the TCEQ Sunset Bill is introduced, it has to survive the full legislative process (including attempts to amend the bill) before it is final.  TCC will stay actively engaged and will work to ensure that our members’ interests are protected as the bill moves through the legislative process.

There were 290 new issues offered for consideration by the public and legislators. Of the 290 new issues offered, only two passed.  The first directs the TCEQ to provide electronic copies of water rate case materials obtained from the utility available on-line.  The second directs TCEQ to include the phrase “public health” in its mission statement.

The following recommendations were approved by the Commission and will be included in the TCEQ Sunset Bill:

EPA’s Lisa Jackson Includes Texas in “Environmental Justice Tour”

EPA Administrator Lisa Jackson

The head of the U.S. Environmental Protection Agency claimed that the long-running dispute between the agency and Texas is about public health and not politics. EPA administrator Lisa Jackson visited Texas as part of her “environmental justice tour,” seeking to highlight the agency's work regulating air and water.

Jackson claimed her agency isn’t out to cripple Texas businesses with its actions. This month, the EPA took over the issuing of greenhouse gas permits in Texas, the only state that has refused to implement the tighter federal rules.

EPA officials didn’t immediately know whether the agency had any Texas applications on file since the new greenhouse gas rules took effect Jan. 2.

Gov. Rick Perry has said that Texas is making dramatic gains in air quality and that the tougher EPA rules put jobs throughout the state at risk. The Texas Commission on Environmental Quality (TCEQ) argued that it issues permits that are protective of the environment and human health.

“Ms. Jackson cannot ignore the fact that our programs have been extremely successful in reducing air pollution in Texas, and we remain confident that we will ultimately prevail in the court system,” said TCEQ spokeswoman Andrea Morrow.

Carol Browner Announces Departure from White House

Carol Browner

Carol Browner, a key adviser to President Obama on energy and environmental issues, has announced that she plans to leave the White House.

Browner had been an integral part of the team involved in congressional negotiations over climate legislation. The measure passed the House last year but died in the Senate, and given the current makeup of Congress, its prospects of coming up for a vote are widely seen as nil. President Obama is instead expected to seek common ground with Republicans over ways to promote the burning of natural gas, rather than coal, by utilities with aging coal plants.

Browner, the Environmental Protection Agency administrator for eight years under President Bill Clinton, had been suggested as a candidate for another post in the Obama White House – perhaps as deputy chief of staff.

Browner said there was “no back story - it was just time to go.” She said she felt “honored to have a second . . . chance to serve.”

White House advisers described Browner as an integral voice in internal discussions, the rare outsider to join the upper ranks of Obama’s staff. The Florida native’s departure comes at a time when many Republicans – and several Democrats – are vowing to block the EPA from implementing new regulations on large generators of greenhouse gases.

Environmentalists saw her as a key liaison to the West Wing, and her leaving is certain to add to the anxiety of many on the political left already nervous about Obama’s outreach to industry.

Obama recently announced an administration-wide review of regulations that he said could be harming the country’s economic recovery. Some environmentalists are worried he will not stand up to businesses trying to roll back new curbs on greenhouse gas emissions enacted by the EPA.

Her position, assistant to the president for energy and climate change, was created by Obama. Whether the president replaces her, and with whom, will be closely watched by environmentalists and industry advocates alike.

GOP Congressional Leaders working to Block EPA Climate Change Rules

Republican Congressional leaders are actively working to undercut the Environmental Protection Agency’s pending climate change rules this year.

While a bill blocking EPA’s climate authority is likely to pass the House, the legislation faces an uphill battle in the Democrat-controlled Senate, as well as a potential veto from President Obama.

Still, Republicans are planning to push forward with the legislation, hoping to gain support from vulnerable Democrats in states that will be most affected by EPA rules. Even if the bill ultimately fails to become law, Republicans will attempt to force a vote on the issue in order to get Democrats on the record in anticipation of next year’s election.

“This is going to be a year to shape legislation in terms of the presidential race in 2012,” a Senate Republican aide involved with efforts to block EPA climate rules said, arguing that fears of repercussions back home might convince fence-sitting lawmakers to support the bill.

Republican plans to block efforts by the Obama EPA to regulate greenhouse gas emissions are quickly coming into focus. House Republicans, with House Energy and Commerce Committee Chairman Fred Upton (R-MI) at the helm, will outline a plan to permanently block the agency’s upcoming climate rules in the coming weeks, and Sen. John Barrasso (R-WY) will introduce similar legislation soon.

“We’re going to try to pass what we think is right out of the House. We’re going to make every effort that we can do to get it through the Senate,” stated Rep. Ed Whitfield (R-Ky.), who chairs a key House Energy subcommittee and is playing a major role in efforts to block EPA climate rules. “And if the president vetoes it, then one thing that’s going to do is elevate these issues for the 2012 presidential election.”

There is little indication Democrats like Sen. Jay Rockefeller (D-WV), who support a two-year delay in EPA climate rules, would vote in favor of legislation to permanently block the agency’s authority. Rockefeller recently told reporters in the Capitol that he does not support such legislation.  Rockefeller will soon reintroduce his legislation delaying EPA’s authority to regulate greenhouse-gas emissions for two years.

“We will likely move on it shortly,” Rockefeller spokesman Vincent Morris said. But another looming question is whether Republicans will support his bill or Barrasso’s. So far, it’s unclear where Sen. Lisa Murkowski’s (R-AK) support will fall. Murkowski tried and failed to pass similar legislation last year.

Barrasso will introduce his legislation Monday and Sen. James Inhofe (R-OK) will co-sponsor the bill. Emily Lawrimore, a Barrasso spokeswoman, said there will be other co-sponsors, but she declined to name them. Lawrimore said Barrasso hopes to move the legislation through the Senate Environment and Public Works Committee.

“If it doesn’t progress in the committee, there are other legislative options,” she said.
Republicans are also mulling ways to overcome a veto from Obama. Another Republican aide closely involved in efforts to block EPA’s climate authority said attaching such a proposal to must-pass legislation like a spending bill is one way of circumventing a veto threat.

Republicans will also continue to cast bills to block EPA's climate rules as essential for preventing further damage to the economy.

"If the president wants to go against a majority of Congress and veto legislation to protect the economy, that’s his option," the aide said.

EPA Ordered To Issue Boiler Rules

A federal judge in Washington, D.C., has denied a request by the Environmental Protection Agency to extend by more than a year a court-ordered deadline for issuing controversial new emissions standards for industrial boilers and incinerators.

Instead, U.S. District Court Judge Paul L. Friedman ordered EPA to finalize the regulations by Feb. 21, 2011, ruling that the agency has had more than enough time to complete the rule-making under the Clean Air Act. The case dates back to 2001, when the environmental group Sierra Club sued EPA for missing statutory deadlines for developing regulations for a variety of hazardous air pollutants.

After being granted numerous extensions, EPA faced a deadline of Jan. 16, 2011, to finalize a set of standards that would require chemical plants and other large industrial facilities to install new pollution controls to limit emissions of mercury, soot, and other toxic air pollutants from their boilers and incinerators.

In December, EPA asked the court to extend the deadline until April 2012, saying it needed more time to review and consider the more than 4,800 comments and additional data it received during the public comment period for the rules.

Industry groups have charged that it would be so costly to achieve compliance with the proposed standards that many facilities would be forced to shut down and more than 300,000 jobs would be put at risk.

EPA says in a statement that it will issue standards that are “significantly different” than the ones it originally proposed by the February deadline. The rules could also be fine-tuned through an administrative process it plans to initiate, the agency notes.

But Cal Dooley, president and CEO of the American Chemistry Council, which represents more than 100 chemical companies, says he is worried that EPA “will not have adequate opportunity to improve the rules to ensure they are achievable, effective, and will not stifle economic growth or put more Americans out of work.”

Michael Brune, the Sierra Club’s executive director, says toxic air pollution from industrial plants threatens the health of 36 million Americans. “Industry has done everything it can to delay these clean up measures. These polluters must be held accountable,” he said.

The same day the a federal judge rejected EPA’s bid to wait 15 more months, the agency sent the final rules to the White House for review, drawing fire from environmentalists, who say the agency was being disingenuous in requesting an extension.

Review at the White House Office of Management and Budget is usually the last step before an agency issues new regulations, signaling that EPA had already finished a draft of the final rules.

James Pew, a staff attorney at Earthjustice who has worked on the case, said EPA’s actions didn’t line up with the agency’s claims in court. “Both things can't be true. I don't know how to explain it,” Pew said in an interview. “You can’t say this rule can’t possibly be done on time and simultaneously hand it to the OMB, which only happens when it is done.”

In a statement, EPA said its final standards would be “significantly different” from the proposed rule, and that the agency expects to use the reconsideration process to hammer out any remaining problems. Officials would “work diligently to issue these standards by this new deadline,” the agency said, though they were “disappointed that the extension was not longer.”

EPA is stuck between a rock and a hard place, said Michael Livermore, executive director of the Institute for Policy Integrity at New York University School of Law. Even if the agency has qualms about the proposed rules, it can’t make any changes that weren’t subjected to public comment last year.

Whether the agency’s final rule is similar to the proposed rule or makes substantial changes, it’s bound to face lawsuits, Livermore said. “On this rule in particular, they’re damned if they do and damned if they don’t,” he said.

The agency’s plan to refine its eventual rules by reconsidering them later drew objections from critics such as Sen. James Inhofe (R-OK), the ranking member of the Senate Environment and Public Works Committee. “With all due respect, this makes a mockery of the regulatory process,” he said in a statement. “In essence, EPA will finalize a rule that it doesn’t believe in.”

Inhofe said he was confident that Republicans and many Democrats in Congress “will not allow this rule to stand as currently drafted.” During the last session of Congress, about 40 senators -- including more than a dozen Democrats -- and about 115 members of the House, signed letters opposing the proposed rule.

The rules have also gotten an intense backlash from groups like the American Chemistry Council and the American Forest & Paper Association, which say that some of their member companies could be put out of business by the need to install new pollution controls.

U.S. Chemicals Production Up in December

Chemical production rose in all U.S. regions in December driven by gains in the Gulf Coast and Ohio Valley regions and increased output in key end-use markets, according to the American Chemistry Council.

The Chemical Production Regional Index increased 0.5% in December, following a 0.6% gain in November. The industry benefited from increased output in key markets for chemistry products, including computers, electronics, and plastics and rubber products.

Production gains were particularly noticeable in the organic chemicals, plastic resins, synthetic rubber, coatings, adhesives and other specialties sectors. But the gains were partially offset by declines in the production of pharmaceuticals, industrial gases, consumer products, inorganic chemicals, synthetic dyes and pigments, artificial fibers, pesticides and fertilizers.

Compared to December 2009, total chemical production in all regions was up 2% and was up year-over-year in all regions.

Golden Triangle Region Hosts Successful Reverse Trade Show

The Texas Chemical Council (TCC) and the Association of Chemical Industry of Texas (ACIT), joined with several partners to host its first ever Golden Triangle Reverse Trade Show at the Bowers Civic Center in Port Arthur on February 2nd.  The event attracted over 400 attendees from across the Golden Triangle region to network and meet with owner company representatives.

Our event partners included: Industry of Southeast Texas (ISET), Industrial Safety Training Council (ISTC), Golden Triangle Business Roundtable (GTBR), the Southeast Chapter of the Associated Builders and Contractors (ABC), the Beaumont Chamber of Commerce, and the Port Arthur Chamber of Commerce.  “We are grateful to all our partners who helped make this event a huge success,” said Hector Rivero, President of ACIT.  “One attendee told me this was the single best industry networking event he has attended in 22 years of working in and around the petrochemical industry.” 

Owner companies - BASF, Chevron Phillips Chemical, DuPont, ExxonMobil, Motiva, and TOTAL’s Port Arthur Refinery  – staffed exhibit tables and consulted with hundreds of vendors, suppliers and contractors on how to do business with their companies. 

ACIT thanks the following sponsors who helped make this event possible:

Upcoming TCC & ACIT Events

February 16th  - Mid Coast Joint ACIT/ABC Luncheon at River Place in Freeport.  Click here to register, and click here for sponsorship information.

February 24th  – Mid Coast Reverse Trade Show at the Lake Jackson Civic Center. Click here for more details.

March 3rd – Houston Ship Channel Political Breakfast.  Click here for more information.

March 8th  – Chemicals Day Legislative Dinner at Sullivan’s Restaurant in Austin, sponsored by The Mundy Companies. 

March 9th – TCC/ACIT Chemicals Day at the Texas State Capitol. 

March 16th – South Texas Political Forum Luncheon. Details to follow.

April 6th – Mid Coast Economic Outlook Breakfast. Details to follow.

April 21st – Houston Ship Channel Clay Shoot. Details to follow.

June 6 -9, 2011 – TCC/ACIT EHS Seminar at Moody Gardens in Galveston.

All 2010 TCC and ACIT events are now listed on the website; go to: http://www.acit.org/categories/Events/

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.)