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Economist contrasts concrete pipe profitability with OSHA’s silica rule claims

Sources: American Chemistry Council, Washington, D.C.; CP staff

The American Concrete Pipe Association joined peers in the public comment period for OSHA’s proposed permissible exposure limit of respirable crystalline silica in General Industry and Construction, concluding it “is unnecessary (without sufficient verifiable data to support that an exposure problem exists), cost prohibitive, especially for small businesses (OSHA cost data is understated and outdated), and contrary to the intended purpose of protecting our workers.”

In his comments to the agency, ACPA President Matt Childs concurs with other associations on “the time frame provided to prepare an adequate response to this rule. APCA has labored, as have many other[s], with haste and diligence to educate its industry as to the requirements and impacts of the ruling and to collect information to facilitate a response. However, the timeframe allowed was simply inadequate to review the thousands of pages associated with the ruling … We respectfully request that the rule be withdrawn.”

Reinforcing concrete pipe producers’ position is an analysis Bethesda, Md.-based Environomics, Inc. conducted for the American Chemistry Council Crystalline Silica Panel, with an emphasis on the proposed rule’s economic feasibility and cost-benefit factors. Among industries OSHA profiles in Notice of Proposed Rulemaking for Occupational Exposure to Respirable Crystalline Silica tables, notes Environomics President Stuart Sessions, “Consider concrete pipe manufacturing, [where] estimated (pre-tax) profitability changed from 7.27 percent in 2000 to 4.90 percent in 2001, a decrease of 32.6 percent. From 2004 to 2005, however, this industry’s profitability, as OSHA calculated it, increased from 5.95 to 10.78 percent, a large increase of 81.2 percent.

“Over the seven years from 2000 through 2006 that OSHA shows in the table, the concrete pipe industry’s profit rate increased year-over-year four times and decreased year-over-year three times. What are we to make of this? What does this information suggest, if anything, about whether the concrete pipe industry now, in 2014, is likely to be able to afford whatever compliance costs the Proposed Standard will impose on it?”

“I believe OSHA’s information on historical changes in profitability for an industry suggests absolutely nothing about whether the industry will or will not be significantly adversely affected by potential regulatory compliance costs. OSHA presents no information to indicate whether the concrete products industry was healthy or unhealthy in 2000 or 2006, no analysis to indicate whether [overall] profitability was increasing or decreasing over this period (the Agency presents information only to show that profitability was fluctuating over this period rather than steady), and no information to indicate whether any trend that might have been observed from 2000 through 2006 might or might not have continued between that period and the present,” Sessions argues.

“Year-to-year fluctuations in an industry’s profitability, or the lack of such fluctuations, are not particularly important to the industry’s long-term economic health. What is important is the longer-term trend in profitability, notwithstanding whatever fluctuations occur. Industries can and do survive substantial year-to-year changes in profitability or costs while remaining healthy if the long-term trend is favorable … The analogy OSHA attempts to draw between regulatory costs and these short-term reversals is inappropriate. Because OSHA has annualized the expected compliance costs for the regulation (i.e., it has converted the initial capital and ongoing compliance costs into an equivalent stream of annual costs, continuing each and every year, forever), the regulatory costs that OSHA is imposing result in permanent, not temporary, changes in industry costs, revenues and profits. It is wrong for OSHA to expect that the response of an industry to a permanent and continuing negative economic change such as the annualized compliance costs of the Proposed Rule will be the same as to one that is expected to be only temporary.”

For full text of Comments, click source:

ACC Silica Panel
American Concrete Pipe Association
Environomics