More testing possible
WEB EXCLUSIVE
Gordon Graff -- Purchasing, 12/8/2005
Recent changes in laws and regulations governing air quality, toxic chemicals and renewable fuels could have far-reaching effects on the demand and pricing for a host of chemical commodities.
A bill recently introduced into the U.S. Senate by Frank R. Lautenberg (D-N.J.), and cosponsored by James Jeffords (I-Vt.), could have profound impact on the sales and marketing of many common chemical products. Known as the Child, Worker and Consumer Safe Chemicals Act, the measure, introduced on July 13, 2005, would overhaul provisions of the 1976 Toxic Substances Control Act. That law required producers of chemicals introduced since 1980 to file a premanufacturing notification (PMN) and allow EPA to review safety data for their products. Under the new bill, manufacturers of all new and existing chemicals would have to prove to EPA that there is a “reasonable certainty” of no harm. Some 300 widely used chemicals would be tested within the next five years, and by 2020 all chemicals distributed commercially would have to be tested. The Lautenberg bill, which is backed by other Senate Democratic heavyweights such as John Kerry of Massachusetts and Hillary Clinton of New York, is given little chance of passage in the current session of the Republican-controlled Senate. But the chemical industry is carefully monitoring its progress because of its similarity to legislation in Europe, which is very close to being implemented. That measure, called Registration, Evaluation, and Authorization of Chemicals (REACH), would require filing of toxicological and environmental data for all commercial chemicals produced above a certain volume threshold, regardless of when the products were introduced. Registration would apply to specific uses of a chemical; new uses would require submission of new data. The REACH provisions would cover not only European chemical producers but foreign producers that sell into the European market. Industry has been staunchly opposed to the REACH legislation, which is expected to take effect in 2006. BASF, for example, says it supports the goals of the REACH program, but Bernhard Thier, who works on environmental affairs for the company, asserts that the legislation in its present form "is not feasible." Costly testing, bearing no relationship to a chemical’s actual risk, would economically handicap chemical companies, he claims, especially small firms lacking the wherewithal to conduct such tests. Instead, BASF and the European chemical industry propose a voluntary system of registration. Despite industry’s dire forecasts, officials at the European Union say the impact of REACH on downstream chemical users will not be crippling. The actual cost of the legislation to purchasers of chemical products over its 11-year phase-in period would be 2.8-4.0 billion Euros ($3.4-4.8 billion), according to the Enterprise Directorate-General office of the EU. That may seem like a lot, but the EU estimates that purchase prices of chemicals would only rise about 0.02%-11% annually as a result of REACH. These higher tags would result from such factors as pass-along costs of extra testing, the need to substitute withdrawn products with more expensive ones, and any needed infrastructure changes in the chemical supply chain. Ethanol could get a lift from a comprehensive energy bill signed into law on August 8, 2005 by President George W. Bush. Among other provisions, the new law aims to reduce U.S. reliance on foreign oil by encouraging greater use of renewable fuels such as ethanol and biodiesel. To do this, the measure mandates a minimum renewable fuels usage of 4 billion gallons in 2006, increasing to 7.5 billion gallons in 2012. According to John Urbanchuk, an analyst with the market research firm LECG, LLC, the renewable fuels provision in the new law will spur some $6 billion in investments to build 4.3 billion gallons of new ethanol capacity.
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