EDWARDSVILLE — From the phone at your ear to the carpet under your feet, there’s a little petrochemical in much of what you use on a daily basis.
Despite that, there is a general disconnect between the consumers who use the products derived from petroleum and natural gas and the industries that manufacture them.
Representatives of the American Fuel & Petrochemical Manufacturers group came to Illinois recently to open a line of communication on behalf of its membership, which includes four refineries and seven petrochemical facilities in the state, affecting some 3,500 workers.
The group spent two days in the region as part of its push for a fact-based discussion on environmental regulations that affect business.
Representatives met with members of Leadership Council Illinois, toured a local foundry of railcar giant Amsted Rail, which helps move its products, had lunch with representatives of Wood River-based Economy Boat Store (a huge user of diesel fuels) and met with various others before sitting down for an exclusive interview with the Illinois Business Journal at Bella Milano Restaurant in Edwardsville.
It was a long-overdue, catch-up session, representatives said, acknowledging that the association hasn’t done all it should to reach outside the D.C. Beltway in recent years.
“Part of the reason we’re here is that policymakers and the general public don’t understand the importance of the petrochemical industry. Look around this restaurant, just about everything in here has some component derived from petrochemicals,” said Sarah K. Magruder Lyle, vice president of strategic initiatives for the manufacturers’ group.
Indeed, the petrochemicals business produces chemicals and derivatives that are used to make a wide swath of everyday products, from hospital gloves to medications and from paints to adhesives. Much of what is produced becomes a feedstock for use in making other products. Oil-derived benzene, for instance, goes toward making detergents, solvents, nylons and more. The ethylene from natural gas liquids goes even further, contributing the products from hardhats to medicine.
America’s refining and petrochemical companies employ and support more than 2 million people, she said. The industries are expected to support almost 3.9 million jobs by 2025. The average petrochemical salary is around $88,000, while refinery jobs typically pay in excess of $111,000.
The stakes are higher now than ever, especially with the potential for developing industries to take advantage of what she said is abundant natural gas produced from shale.
“We’re looking at an opportunity for a large manufacturing renaissance,” Lyle said. “We’ve gone from a country consuming things, to a country that produces things. We’ve gone from a country that consumes to a country that produces. Many manufacturers left our shores a long time ago and now they’re starting to come back. LyondellBasell (refining and chemical company) just announced they are opening a new petrochemical facility in Texas, which will include 1,200 jobs and a $1 billion investment. That’s what we want to see, bringing jobs and manufacturing back to our country.”
Still, much of the industry’s fate is determined at the national level, through legislation, and a refined lobbying strategy will be determined after the Nov. 4 election.
“We are among the most heavily regulated industries, from upstream to midstream to downstream — all across the board,” Lyle said, referring to the production stages that cover extracting oil out of the ground, refining it and transporting it across the country. “The petrochemical guys are even further downstream. They can actually use natural gas as a feedstock to make ethylene, propylene, butadiene, plastics and polymers.”
Illinois leads the Midwest in refining capacity and ranks fourth in the national in barrel-per-day production. The group’s members represent an annual payroll of more than $100 million.
Nationwide, the association has more than 400 members and represents manufacturers that encompass “virtually all” U.S. refining and petrochemical manufacturing capacity, she said.
During the interview, Lyle and others summarized some of their major concerns:
Fracking is big
The group is now looking over draft regulations issued this past month by the Illinois Department of Natural Resources as part of the state’s passage last year of the Hydraulic Fracturing Regulatory Act. The proposed rules are based on some 31,000 comments rendered during the first round of public comments. The rules are open for further public comment and a final decision will be made by the General Assembly’s Joint Administrative Committee on Rules, which is due by Nov. 15. If JACAR misses that deadline, the public comment portion starts again.
The uncertainty has delayed the companies who want to simply test the ground for its potential before investing enormous sums on actual production. Meanwhile, fracturing is already big business in other states.
“The Illinois basin has not been fully tested, so it’s not clear what we’re going to find,” Lyle said. “You can’t blame companies for wanting to do due diligence. Unless they determine that Illinois is a good business environment they’re not going to test, they’re not going to set up shop and they’ll go elsewhere like Ohio, Pennsylvania and North Dakota where the states’ economies are profiting because of fracking.”
“These are expensive considerations and you need to have a clear and certain regulatory environment before you plunk down your or your shareholders’ money?” added Jonathan Perman, managing director of the Perman Group, a public affairs firm working with the manufacturer’s association.
Perman said there is also a “deployment of resources question” among exploration companies.
“There are a limited number of these (drilling) rigs nationwide, and most of them are sitting in places where there is already a concentrated effort to pull resources out of the ground,” Perman said.
Cyber security and transport
Regarding cyber security and hazards of petroleum product transport, Laura Berkey-Ames, manager of government relations, said Congressman John Shimkus, R-Collinsville, a member of the House Energy and Commerce Committee, has worked closely with the group on a bill dealing with the Chemical Facility Anti-Terrorism Standards Program. That measure has passed the House and a similar bill is pending in the Senate.
He’s also been working very closely with staff on reforms to the Toxic Substances Control Act.
“Rep. Shimkus drafted legislation that started to receive bipartisan interested earlier this year. Hopefully it will pick up again this year or next and deal with the safety of chemicals and commerce,” Berkey-Ames said.
Regarding regulation in general, the group urges legislators to weigh the benefit to the environment vs. the potential negative impact on the economy.
Lyle cited a proposed ozone emissions rule that would place all of Illinois — not just select counties, as is the case now — in a “nonattainment” category. This regulatory action would make it more difficult for businesses to operate and for new businesses to invest in Illinois because getting a permit to operate would become exceedingly difficult. The group also opposes the Renewable Fuel Standard mandate, which in an effort to reduce carbon dioxide, forces increasing volumes of biofuels including ethanol to be blended into transportation fuel.
“Our industry is the largest buyer of ethanol; we will use it whether it’s mandated or not. It’s a good oxygenate. What we don’t support is being forced to use ethanol in quantities that are harmful and that consumers don’t want,” Lyle said. “You can’t put anything beyond E-10 (fuel) in the vast majority of cars because it can cause engine damage.” And most gas stations are owned by local entrepreneurs who operate at low profit, not by oil companies. “You’re not helping these small businesses by forcing them to sell a product that consumers don’t want.”
“The biggest costs for most businesses are energy, raw materials and labor,” Lyle said. “Businesses that can’t afford the investment in these will go elsewhere — out of the state or out of the country. Many community leaders don’t understand what’s at stake. That’s why we’re out talking to thought leaders, stakeholders, communities and elected officials and making that connection for them,” Lyle said.
For more information go to afpm.org.