Events and News

AFS CEO Writes U.S. Department of Commerce on the Request Information on the Impact of Federal Regulations on Domestic Manufacturing

April 10, 2017

Click here for a PDF of the letter.

Letter text:

March 31, 2017

Mr. Carter Halfman
Special Advisor
The Office of Policy and Strategic Planning
H.C. Hoover Building – Room 5863
U.S. Department of Commerce 1401 Constitution Ave. N.W.
Washington, D.C. 20230

U.S. Department of Commerce - Request for Information on the Impact of Federal Regulations on Domestic Manufacturing - Docket Number: 170302221-7221-01

Dear Secretary Ross:

On behalf of the American Foundry Society (AFS), we appreciate the U.S. Department of Commerce’s and the administration’s strong interest in examining the impact of federal permitting requirements on the construction and expansion of domestic manufacturing facilities, and on federal regulations that adversely impact domestic manufacturers.
Our regulatory system is in need of serious reform. Federal regulation profoundly affects the U.S. metalcasting industry.  American manufacturers face double the regulatory costs of other industries. Lowering that burden will help our industry to better compete, grow and create jobs.  Too often, federal regulations are too costly and too rigid, hurting both our innovation and competitiveness.  A host of regulations developed over the past eight years, if implemented, will harm the international competitiveness of energy-intensive, trade-exposed U.S. industries like the metalcasting industry. The bottom line is the compounding effect of compliance costs diminish the resources available to make meaningful long-term investments into domestic foundries that create jobs, promote innovation, and solidify our competitive position.

INDUSTRY OVERVIEW: U.S. FOUNDRIES ARE CRITICAL TO THE U.S. ECONOMY, INFRASTRUCTURE AND NATIONAL DEFENSE

The U.S. metalcasting industry  is the sixth-largest industry in America and the second largest supplier of castings in the world, after China.  Metal castings are integral to virtually all U.S. manufacturing activities. In the U.S., castings are used to produce 90% of all manufactured durable goods and nearly all manufacturing machinery.  

Our industry is composed of 1,956 facilities  manufacturing castings made from iron, steel and aluminum alloys, which have thousands of applications. In addition to the automotive, construction, and defense industries, other major sectors supplied by the metalcasting industry include agriculture, aerospace, energy exploration and conversion, oil and gas, mining, railroad, municipal/water infrastructure, transportation, and health care.

The American metalcasting industry provides employment for over 200,000 men and women directly and supports thousands of other jobs indirectly.  The industry supports a payroll of more than $9 billion and sales of more than $30.3 billion annually.  Metalcasting plants are found in every state, and the industry is made of predominately small businesses, with 80% of domestic metalcasters having fewer than 100 employees.  AFS is the major trade and technical association for the North American metalcasting industry.  The association has more than 8,000 members representing over 2,000 metalcasting firms, their suppliers and customers.

Imported castings now comprise nearly 25% of the market, with more than 20% of these imports coming from China.  

Please find below critical information responding to the request for information regarding the Impact of Federal Regulations on Domestic Manufacturing facing the U.S. metalcasting industry.

I.  HOW DOMESTIC MANUFACTURING FACILITIES ARE AFFECTED BY THE PROCESS OF ACQUIRING FEDERAL PERMITS REQUIRED FOR THE CONSTRUCTION, EXPANSION, OR OPERATION OF THEIR FACILITIES

Navigating the permitting process has become increasingly cumbersome, unduly lengthy, expensive, time consuming, and oftentimes inconsistent with federal and state agencies working at cross purposes.  The typical U.S. metalcasting operation must obtain a large number of permits, particularly those focused on managing environmental concerns.  

The list of permits includes, but is not limited to, the following:
•    Air permits to control hazardous air pollutants, criteria pollutant and prevent significant deterioration of existing air quality;
•    Water permits, such as federal and state discharge permits and local publicly owned treatment works (POTWs);
•    Stormwater notifications and permits for construction and plant operations;
•    Hazardous waste generation and management permits, including onsite landfills in some cases;
•    Radioactive materials licensing for metal scrap;
•    Highway, road access and commercial drive permits (federal, state, county and city Department of Transportation);
•    US Army Corp of Engineers and EPA 404 permits for wetlands, riparian areas and other waters of the U.S. jurisdiction (which also opens other requirements such as endangered species, historic preservation, cultural resource investigations, mitigation plans, deed restrictions and other land use constraints);
•    High capacity water wells and surface water extraction permits; and,
•    Local construction codes and erosion control plans.

In addition to the large number of permits required for metalcasting operations, several other challenges associated with the permitting process are summarized below.
Time Frame for Permits – Typically facilities are not allowed to begin construction or conduct any operations until the permitting process is complete and the permit is issued.  While the time frame is highly variable, a typical air quality permit takes approximately one year to be issued.  The time period can be closer to six months in extremely efficient permitting processes and over two years in some cases.  Many of these permits also have administrative fees associated with them as part of the regulatory requirements.  In some cases, expedited review of permits is offered with the payment of an additional fee.

Uncertainties Associated with the Permitting – The extended time frame in obtaining permits can often be attributed to the uncertainties about the control technologies that may be needed or the lack of specific requirements that must be met to obtain the permit.  For example, a metalcasting operation may have to conduct a control technology assessment or some air quality modeling to determine what details must be included in a permit application.  Often, facilities must make determine the best available control technology (BACT) by identifying any feasible control technology, ranking them by effectiveness, and then finding the lowest limits that have been issued in a permit.  Similarly, it is often challenging to determine the scope of activities that may be subject to the permit.  The recent Clean Water Act (CWA) jurisdiction rule is a good example of an overly broad scope and the confusion that results from it.  These uncertainties present a significant challenge in planning for the permit process, managing a schedule for assembling what is needed for the permit, and identifying economically feasible options to address the critical issues.  

Federal Oversight – In many permitting programs, states are authorized to issue permits.  The states use the standards set forth in the federal program, but may add more stringent requirements.  After undergoing the state permitting process, facilities are subject to federal oversight authority to review the permitting process.  This federal oversight process typically occurs after the state has completed the process and can, therefore, cause further delays, costs and uncertainties in how requirements and standards may be applied.  Furthermore, the federal oversight does not negate federal enforcement of the permit issued by the state.  The federal agency reserves the right to over file in state enforcement actions or to initiate a federal enforcement action in cases when the state has not initiated an enforcement action.  Some options to minimize the negative impacts of federal oversight would be to provide more clarification on the specific criteria to be used in the oversight process, have the federal agency work concurrently and cooperatively with the state agency issuing the permit, or eliminate federal oversight altogether.

Inconsistent Applications and Interpretations – Another challenge with the permitting process is the variability from state to state in how the same permitting process is implemented.  Individual states often take different approaches on what should be included to support a successful permit application.  This can include the application of a more stringent requirement, fewer exemptions or exceptions, less flexibility, or a different standard altogether (e.g., the use of potential emissions versus actual emissions in determining permit requirements).  Even in instances where the standard is the same, individual permit reviewers and regulators can have different interpretations of the standards (even within the same agency) that can pose significant challenges that can result in further delays and unnecessary costs.

II. BURDENS OF COMPLYING WITH FEDERAL REGULATIONS FOR MANUFACTURING FACILITY CONSTRUCTION, EXPANSION, OR OPERATION

The ability of the U.S. metalcasting industry to compete in a global market and preserve and create well-paying domestic manufacturing jobs is directly related to our ability as a nation to strike the right balance with respect to government regulation.  Burdensome regulations place manufacturers of all sizes at a competitive disadvantage with our global counterparts.   

Our industry recognizes that regulations are critical and necessary to protect the environment, health and safety, but we need a regulatory system that effectively meets its objectives while supporting innovation and economic growth.  Metalcasters work diligently to comply with regulations handed down from Washington. Too often, these rules are too complex and not technologically and/or economically feasible.  The burden of environmental regulation falls disproportionately on manufacturers, and it is heaviest on our small manufacturers because their compliance costs often are not affected by economies of scale.  

AFS is eager to work with the administration and urges an in-depth review and overhaul of the following top burdensome regulations impacting the U.S. metalcasting industry:

Safety

1.    OSHA’s Crystalline Silica Rule – In March 2016, the Occupational Safety and Health Administration (OSHA) issued a final silica rule which will negatively harm the metalcasting industry, as well as the construction, ship building, brick, and hydraulic fracturing industries, and the economy, while doing little to improve the health and safety of industry workers.  The final rule is technologically and economically infeasible.  The rule will cost our industry alone more than $2.2 billion annually—more than $1 million per foundry and more than 50 times OSHA’s inaccurate analysis. It will likely force some foundries to close, shift production offshore, and impact the long-term productivity, profitability and competitive structure of our industry. Although the enforcement deadline of June 2018 is a year away, many foundries have begun the lengthy process of trying to comply while investing millions of dollars, and they still might not be able to meet the requirements of the rulemaking.  At least one foundry has decided to close because of the silica rule and others are considering whether they will be forced to do the same.  OSHA’s feasibility analysis is proving to be highly erroneous, and foundry industry cost data and economic predictions which OSHA completely ignored are being confirmed.  AFS urges the administration, as soon as possible, to re-open the rulemaking record for its recently promulgated respirable crystalline silica rule and administratively stay its implementation and enforcement.

Energy
2.    EPA Greenhouse Gas (GHG) Emissions from Electric Generating Utilities – In 2015, the U.S. Environmental Protection Agency (EPA) finalized new rules designed to limit GHG reductions from both existing and new power plants.  The rule for existing plants mandates a 32% reduction in CO2 emissions from the electric power sector by 2030, compared to 2005 levels.  The final rule for newly constructed power plants will effectively require use of carbon capture and sequestration (CCS) technology to achieve these emissions goals, even though these control technologies have not yet been demonstrated to be commercially viable.  Metalcasting is one of the most energy-intensive industries in the U.S.  As a significant energy consumer, the GHG rules could substantially increase energy costs for metalcasters and potentially disrupt the reliability of the energy grid.  Both rules are under litigation and subject to a stay issued by the U.S. Supreme Court pending judicial review.  EPA should withdraw the rule and develop a more cost effective, reliable and feasible approach to reduce CO2 emissions to an appropriate level.  A number of leading states where metalcasting production is predominant heavily depend on coal for electricity production and, therefore, so does our industry.  EPA regulations that disproportionately impact coal-generated electricity have put the affordability and reliability of electricity for foundries at risk.  
Environment

3.    Residual Risk and Technology Review (RTR) for Iron and Steel Foundry NESHAP for Major Sources – Air emissions from iron and steel foundry major sources are subject to the national emissions standards for hazardous air pollutants (NESHAP).  EPA must conduct a residual risk and technology review (RTR) for all NESHAPs eight years after promulgation.  The iron and steel foundry NESHAP is now due for this review.  Recently, EPA has issued more stringent and revised NESHAPs for several industry source categories, even though the RTR process determined that the risks associated with the controlled emissions from these sources were acceptable and that no new control technologies were identified.  This regulatory overreach is not consistent with the letter and intent of the Clean Air Act (CAA), but nonetheless have been upheld by federal appeals courts applying the Chevron doctrine giving great deference to the actions of federal agencies, including EPA.  AFS urges the EPA to implement the RTR process for iron and steel foundries that is consistent with the letter and intent of the CAA.

4.    Stormwater Management – Metalcasters operate under a multi-sector general permit (MSGP), as is the case for most industrial stormwater dischargers, and must implement best management practices (BMPs) to meet stormwater benchmark concentration levels.  If a benchmark level is exceeded, facilities must review their BMPs and determine if additional BMPs must be implemented of if other corrective measures are needed. Many of the benchmark concentration levels for metals have been set so low that it may not be possible for metalcasting operations to meet the benchmarks.  In fact, many are so low that nearly all residential and commercial stormwater discharges would exceed them.  As a result, many metalcasting operations could face unnecessary enforcement issues, even though their stormwater discharges are effectively controlled with BMPs.  

Cost of Typical BMPs

As discussed above, facilities would need to implement one or more BMPs to control stormwater discharges.  Typical BMPs to reduce suspended solids and metals levels in runoff could include, but not be limited to, the following:
•    Inlet protection such as catch basin inserts or filter socks ($6,000 to $10,000/yr);
•    Vegetated bioswale or buffer strips ($30,0000 to $50,000, plus $1,000/yr);
•    Detention ponds ($150,000 to $200,000, plus $5,000 to $10,000/yr);
•    Filter systems ($100,000 to $750,000, plus $10,000 to $20,000/yr);
•    Hydrodynamic separators ($75,000 to $300,000, plus $5,000 to $10,000/yr);
•    Regular sweeping ($20,000 to $25,000/yr);
•    General housekeeping and weekly inspections (as much as $50,000/yr); and
•    Inside or covered storage (wood frame building, 3,200 SF at $60,000 to 80,000).

The decisions on which BMPs to implement at a foundry will depend on the specific conditions and needs at each individual facility. If additional BMPs are still not achieving benchmarks (and if EPA required strict compliance or identified possible stream impairment), then end-of-pipe, mechanical/chemical stormwater treatment may be required.  While this may appear to be an extreme option, it may be necessary if the facility must meet numeric limits as part of the MSGP or it may be forced to secure an individual facility permit outside the MSGP and thus meet new numeric limits set at or near benchmark values.  EPA needs to provide for flexibility in and for enforcing them as permit levels.  If left unchecked this permit process will be never-ending, extremely burdensome, and very expensive for our industry.

5.    Startup, Shutdown and Malfunction (SSM) Provisions – The CAA provides for some affirmative defenses for facilities that may exceed air emission limits during temporary periods of startup, shutdown and malfunction (SSM).  The U.S. Court of Appeals for the D.C. Circuit vacated the rule that allows facilities to exceed applicable hazardous air pollutant emissions standards during periods of startup, shutdown and equipment malfunctions (SSM).   
 
EPA is also in the process of removing these SSM provisions as part of its residual risk and technology reviews (RTRs) for NESHAPs.  In June 2015, EPA issued a final rule requiring states to revise their state implementation plans (SIPs) to control excess air emissions during periods of SSM and submit revised plans that address new SSM provisions to EPA for approval by November 22, 2016 (SIP Call Rule), and this rule has been challenged in federal court.  States and industry groups claim that: 1) EPA does not have the authority to ban affirmative defense for SSM; 2) it is not practical for facilities to comply with emissions standards during periods of SSM; and 3) it will lead to unnecessary violations for emissions over which facilities have no control.  The problem for metalcasting facilities is that even with the best control technologies, emissions may exceed the regulatory standard temporarily during these periods of startup, shutdown and malfunction, despite the fact that facilities may have a plan in place to address these occurrences.  Without some relief, facilities will be subject to enforcement actions that are beyond their control and state regulatory authorities may be faced with an unnecessary and unwanted administrative burden of enforcing such events.

6.    National Ambient Air Quality Standards (NAAQS) for Particulate Matter (PM2.5) Air Emissions –  In December 2012, EPA finalized its update to the PM2.5 rule.  The recent changes to the PM2.5 standards were set so low that many areas in the country, including some rural areas with no industrial operations, have background PM2.5 levels that are at, or near the NAAQS for PM2.5.  As a result, some foundries are unable to obtain air permits to build new, state-of-the-art metalcasting operations or to expand or update their existing facilities because such activities would have the potential to emit PM2.5 over the NAAQS.  PM2.5 air emissions are managed at metalcasting facilities with the use of baghouses and other pollution control devices.  In most cases, more than 99% of the fine particulates are captured and not emitted into the environment.  Such results are not consistent with needed increased production, sound economic growth, and improved environmental performance in the metalcasting industry.  Major flexibility is needed for metalcasters in implementing the PM2.5 NAAQS.

7.    Ozone NAAQS Revision from October 2015 – This rule set a very stringent emission standard for ozone emissions from all stationary sources in the U.S.  This standard is just now starting to be implemented, and is expected to result in significant costs for communities.  AFS is concerned that metalcasters will not be able to expand without a reduction of emission or shut down of operations from other businesses in the area.  With new restrictions, plans for expansion may be delayed or shelved. EPA should defer implementation of the new Ozone NAAQS standard by at least two years to allow states and impacted sources more time to prepare to meet the new standard and have a smooth transition from efforts associated with meeting the 2008 Ozone standard.

8.    Waters of the United States – This rule redefines the scope of the Clean Water Act (CWA) to state which waters (such as cooling ponds, catch basins) need to meet CWA standards to protect aquatic life.  It is currently stayed while going through litigation, so it is not being implemented.  If implemented, it would force foundries to meet CWA standards at waters on their facilities that are currently unregulated and impact upgrades and plant expansions.

9.    EPA Spill Prevention Control and Countermeasure (SPCC) [40 CFR Part 112] – The EPA SPCC rule established requirements for facilities to prevent a discharge of oil into navigable waters or adjoining shorelines.  It was designed primarily to cover onshore and offshore oil drilling and production facilities, oil refining or storage facilities and other oil-intensive industries with a high probability of significant damage should an oil release occur.

Current SPCC regulations require a comprehensive, detailed plan developed and certified by an engineer, dedication of adequate resources and manpower to react to an unforeseen spill, storage tank testing and evaluation for integrity, and many other elements.  While metalcasters and manufacturers do use oils for machining and lubrication, they do not generate nearly the same amount that are present in the oil production, refining, storage and distribution sectors. While there is a “streamlined” process for smaller facilities with less than 10,000 gallons of onsite oil storage, many small- and medium-sized manufacturers miss that cutoff, and are essentially held to the same standard as large multi-national corporations and other major producers. The agency should offer more flexibility for smaller scale manufacturing facilities, with multiple lubricant-containing machines, that are above the 10,000-gallon threshold.

III. RECOMMENDATIONS FOR IMPROVING THE REGULATORY PROCESS

Cumulative Regulations - The Federal regulatory process and analysis of regulations can be improved significantly. We would like to see the Office of Management and Budget (OMB) and the individual agencies update their respective economic impact analysis guidance to require cumulative impact of multiple regulatory actions, particularly on small business. AFS would like to see agencies identify and catalogue the sectors impacted by a new regulation and even extend that approach into the paperwork burden. If our regulatory agencies are capable of assessing the cumulative benefit of their regulatory programs, surely they are capable of assessing the cumulative burden.  

The federal government should streamline the permitting process for siting and operating a new facility/project – A more certain and speedier permitting process will enhance U.S. competitiveness and create jobs. One component toward achieving this recommendation is to create a federal office responsible for coordinating and expediting permit applications across the federal government.

The government should objectively analyze the costs and benefits of proposed and final major rules from all agencies, including “independent” regulatory commissions – It is imperative that estimates of costs and benefits be done objectively.  One valuable way to ensure objective analysis is to have a credible, independent party perform the analysis rather than the regulatory agency itself.
For example, EPA should be required to consider economic impacts when amending NAAQS requirements, as well as incorporate what is technologically feasible when establishing new NAAQS requirements. In addition, too often, EPA relies on co-benefits, or a description of purported benefits of pollutants will be reduced, as a result of a regulatory measure, but that are not the pollutants the rule seeks to address.

Agencies should publicly disclose the estimated costs of planned regulatory actions early in the regulatory process and with greater specificity.  Agencies should clarify the indirect costs of regulation – The Regulatory Flexibility Act (RFA) only requires agencies to consider those small entities that are directly impacted by a new regulation. Consequently, regulators may ignore foreseeable indirect impacts a new regulation may have on small business manufacturers. Regulatory agencies often proclaim indirect benefits for regulatory proposals, but fail to analyze and make publicly available the indirect costs to consumers, such as higher energy costs, lost jobs and higher prices.  AFS believes agencies should be required to make public and take into account a reasonable estimate of indirect impact.

Restore Voluntary Partnership Programs at the EPA - OSHA does offer a Voluntary Protection Program (VPP) designed to recognize employers in the private sector who have or desire to implement effective safety and health management systems, resulting in injury/illness rates below their respective industry averages. EPA does offer some compliance assistance through education to small businesses, but the bulk of their site visits are geared towards enforcement, not outreach or assistance.  In the past, the EPA has embraced the concept of voluntary programs such as Performance Track and VPP on the part of industrial stakeholders.  These programs were designed to encourage companies to develop EHS management systems that would improve compliance in exchange for various forms of relief from enforcement.  We would like to encourage the new administration to work with industry as opposed to approaching compliance from strictly an enforcement posture and examine the benefits of an OSHA type VPP program for the environmental side of regulations.

Modify the Small Business Regulatory Enforcement Fairness Act (SBREFA) panel process – The Small Business Regulatory Enforcement Fairness Act (SBREFA) SBAR panels are currently only required at the EPA, OSHA, and the Consumer Protection Financial Bureau (CPFB). AFS believes that SBAR should be expanded to cover all agencies issuing rules that affect small businesses, in order to require these agencies to evaluate the burdens their rules place on small employers.  In addition, agencies should not be permitted to utilize SBAR panel reports in rulemakings when they are over a decade old, as was the case in the OSHA silica rulemaking.  The industry data and impact of rulemakings on the small business community is outdated and does not reflect of the true impact of the rulemaking on stakeholders.

AFS appreciates the opportunity to provide these comments on the challenging permit process and the significant impact federal regulations have on the U.S. metalcasting industry.  If you have any questions or would like additional information about our comments, please contact me or Stephanie Salmon with our AFS Washington office at ssalmon@afsinc.org or 202-452-7135. We look forward to working with you to streamline the federal permitting processes for manufacturers and reduce regulatory burdens impacting domestic manufacturers.

Sincerely,
 
Doug Kurkul
CEO
American Foundry Society