Chamber: EPA Ozone Rule Threatens Thousands of Jobs | Eastern North Carolina Now

    Publisher's note: The author of this post is Dan Way, who is an associate editor for the Carolina Journal, John Hood Publisher.

Higher energy costs would pummel manufacturing, other industries

    RALEIGH     North Carolina is on the verge of recapturing pre-recession levels of job creation, but a controversial Obama administration ozone regulation proposal could erase recent gains and launch a new round of job losses, business and manufacturing officials said Monday.

    "At a time when we're beginning to see our economy recover, we're beginning to see some jobs coming back into the state, we're beginning to see some reshoring of jobs that went offshore, it's worrisome that this new ozone standard is going to bring all that to a screeching halt," said Preston Howard Jr., president of the North Carolina Manufacturers Alliance.

    Lew Ebert, CEO of the North Carolina Chamber of Commerce, and Mark Hawes, director of environment and safety for Shurtape, a global company with corporate headquarters in Hickory, joined Howard at the state Chamber office. They highlighted what they view as a grim National Association of Manufacturers report on the ozone regulation's impact.

    The study further shows North Carolina could lose 127,360 jobs by 2040, the economy could lose $150 billion in projected growth over that time, and 24 percent of the state's coal-fired generating capacity could be shut down. Total compliance costs would soar to $98 billion, and North Carolina households' buying power would drop $1,820 annually, the report concluded.

    "The costs are exorbitant. Some manufacturers won't survive it," Howard said. "Those that do will not be nearly as competitive in the world market as they are today."

    "If we're lucky, this year we will get back to the job creation numbers we had back in 2007," Ebert said. "This year we're on track to produce 70,000, maybe 80,000 new jobs a year." The number has been 30,000 to 40,000 new jobs a year in recent years.

    But the state can ill afford to absorb 127,000 regulation-induced job losses per year as it pursues plans to create 1 million new jobs by 2030, by when 3 million more people are expected to have moved into the state, Ebert said.

    "At a time when North Carolina is well positioned to be an economic and job driver engine for the national economy, these new rules just come at the worst possible time," Ebert said.

    The Obama administration seeks to reduce concentration limits of ozone — commonly called smog — from the current 75 parts per billion to 60 parts per billion. A final decision is expected before the end of the year.

    Howard noted the ozone rule is just one of several costly air quality rules being promulgated by the federal Environmental Protection Agency.

    Ebert said the impact of those regulations should be viewed alongside the nonprofit Tax Foundation's just-released 2014 International Tax Competitiveness Index Rankings. The ratings show the United States at No. 32 among the top 34 industrialized countries, ahead of only France and Portugal.

    "So at a time when we're not competing on tax [policy], we're now stacking on top of it our inability to compete on regulations," Ebert said, even though the United States has one of the best records of all nations in cutting pollution, and North Carolina has made "tremendous progress" in meeting the environmental standards.

    "We should probably be more pro-American business" and limit barriers to manufacturers, he said. Unfortunately, Washington doesn't understand the connection between economic prosperity and activity, and the cost of regulations' impact on business, he said.

    Hawes, whose company has facilities in urban and rural areas, said all sections of the state would be affected by lower ozone standards.

    "Some of our traditional industries are beginning to see a resurgence, such as furniture manufacturing, coming back and broadening in the state. These rules will directly affect their ability to produce a product in the state of North Carolina in a cost-efficient manner," Hawes said.

    Lower ozone standards would jeopardize his company's plan to add 50 employees to its facility in Alexander County, Hawes said.

    Shurtape estimates the new ozone rule would add about 12 months to the time it takes to get a permit. It would cost between $1 million and $2 million more in increased capital investment, and $500,000 to $1 million in additional operating costs.

    "It's not a huge number, but when you look at a facility that employs 150, 160 people, and we want to go to 200 people ... it could be a deal-breaker for that expansion," Hawes said.

    "The area around Lake Mattamuskeet [Hyde County] is going to be affected by this. You're talking about a county the size of Mecklenburg, with 5,500 people grasping for jobs," Hawes said. "When you go into a small area and you talk about $2 million to $3 million in additional capital costs for a small facility, and operating costs, that could be a deal breaker."

    The counties most likely to be harmed by the new standards are responsible for 636,307 manufacturing, natural resources and mining, and construction jobs, according to a Chamber handout citing U.S. Bureau of Labor Statistics data.

    Anson, Cabararus, Caswell, Chatham, Cumberland, Currituck, Davie, Durham, Edgecombe, Forsyth, Franklin, Gaston, Graham, Granville, Greene, Guilford, Hoke, Johnston, Lincoln, Mecklenburg, Nash, Orange, Person, Pitt, Randolph, Rockingham, Rowan, Stokes, Union, Wake, Yadkin, and Yancey counties all would be exceed a standard set at 70 ppb.

    Alexander, Buncombe, Burke, Caldwell, Catawba, Haywood, Henderson, Lenoir, Madison, and Martin counties would be impacted if the standard were lowered to 65 ppb.

    Avery, Brunswick, New Hanover, Pender, and Swain counties would be noncompliant if the standard were reduced to 60 ppb.

    The top 10 manufacturing industries at risk in North Carolina and their contribution to the state's GDP cited by the Chamber are: chemicals, $24 billion; food and beverage and tobacco products, $19.9 billion; computer and electronic products, $7.4 billion; machinery makers, $5 billion; plastics and rubber products, $3.7 billion; electrical equipment, appliance, and components, $3.6 billion; fabricated metal, $3 billion; textile mills and textile products, $2.7 billion; motor vehicle, body, trailer, and parts, $2.3 billion; furniture and related products, $1.9 billion.

    Electricity is one of the top three costs for manufacturers, Howard said. If that cost rises by 15 percent, as the NAM study projected, "you can't have anything but a bad impact on your competitiveness," he said. "We have companies who have $1 million a month power bills. They're struggling to stay alive now."

    Lower prices sparked by increased natural gas production have led the nation's manufacturing boom, Howard said. But the new regulation would have "a chilling effect" on that boom, because the states where it's being produced would fall into noncompliance, spiking prices by 32 percent, according to the NAM study.

    Asked about any actions North Carolina's congressional delegation is taking to address the EPA proposal, Howard said, "I don't know the answer to that question. It's the political season and everybody's focused on the next election."

    Ebert said he is confident the state's representatives are aware of the situation.

    "I get that Congress might be dysfunctional, but when Congress is dysfunctional, this is what happens," Ebert said. "So now you have a White House showing up with its EPA saying, 'This is what we're going to do,' because they can."