The Hardwood Federation Newsletter

From the Executive Director:  

Federal Agencies Manufacture More Red Tape While Congressional Agenda Stalls

With Congress having been largely hamstrung during most of October to address key priorities such as the farm bill and federal budget, the business community has turned its attention to federal rules that create headwinds for industry, including hardwoods. As usual, EPA is emerging as the most active federal agency when it comes to the manufacture of red tape and is using the Clean Air Act as its primary tool to expand its authority.  To address these challenges, on October 25, the Hardwood Federation joined the U.S. Chamber of Commerce, National Association of Manufacturers (NAM), the American Public Power Association, American Chemistry Council and others in a meeting with the White House Office of Management and Budget (OMB) to advocate against EPA’s proposal to tighten the air quality standard for fine particulate matter (PM 2.5). The standard is currently set at 12 micrograms (ug) per cubic meter and appears to be poised for reduction to an anticipated level of 9 ug. As a point of reference, the European Union standard is 25 ug.  Lowering the standard would place 589 counties in non-attainment and hundreds more on the cusp of non-attainment, exposing industry to new regulations as regulators review additional control measures to achieve the new targets.  To view a map showing potential nonattainment counties in red, and borderline counties in pink, please click here.

While compliance currently falls mainly on the backs of “major sources” of pollution under the Clean Air Act such as power plants and chemical refineries, the Federation is concerned that lowering the standard would capture currently unregulated hardwood mills and manufacturing facilities operating on the cusp of or within newly designated non-attainment areas.  This could trigger costly analysis and monitoring in the event a plant seeks to expand its operations. During the OMB meeting, the Federation cited a study conducted by the American Forest & Paper Association and American Wood Council outlining the economic impacts of a more stringent standard.  According to the study, the wood products sector could take on up to $900 million in compliance costs if the agency imposes a standard of 9 ug. Fortunately for industry, both the Federation and U.S. Chamber of Commerce directed their remarks at OMB toward responsible forest management as the common-sense solution to reducing PM levels, which have increased in many regions because of wildfires. 

Unfortunately, the mounting red tape doesn’t stop with air permits.  According to a new study by NAM, air quality rules are only the tip of the iceberg.  In 2022, according to NAM, the total cost of complying with federal rules and regulations reached over $3 trillion, which equals 12% of U.S. GDP.  As that relates to small manufacturers such as sawmills, the cost translates to $50,100 per employee. 

The Hardwood Federation also joined forces with the U.S. Chamber of Commerce and 24 allied groups in comments submitted September 29 on the Administration’s proposed regulations to implement the National Environmental Policy Act (Act), an umbrella statute that outlines procedures for obtaining environmental permits.  The coalition urges the Administration to revoke the proposal on the grounds that it is designed to lay out a permitting process that drives specific policy outcomes, such as mitigating climate change, rather than agency procedures, thereby exceeding the legal limits of NEPA.  Industry also points out that the proposed changes would only add more delays to issuance of environmental permits, citing large scale bridge and port projects that took more than ten years to process. In Canada and Australia, similar projects typically receive permits within two years.  The volume of comments submitted during the rulemaking could delay issuance of a final outcome into 2024.  Stay tuned for details as the Federation pushes back on growing regulatory initiatives from the Administration as it enters the final stretch of its current term. 

Issues: 

Hardwood Industry Rallies Broader Forestry Sector to Blunt Final EU Import Regs

For the past 18 months, the Hardwood Federation has been working closely with the American Hardwood Export Council (AHEC) to inform our allied forest products and landowners associations about AHEC’s work to address the new anti-deforestation, import regulations finalized this year by the E.U.  Several organizations have mobilized on the issue this year, most notably the American Forest and Paper Association, which is working with their European allies to apply political pressure on E.U. officials to take steps to avoid penalizing U.S. wood products in the European market.  On Monday, October 30, the Federation co-hosted an informational session with AF&PA about the hardwood and the paper sectors’ activities around this issue. The Federation brought in AHEC’s Mike Snow and his team to discuss their experience (and resulting frustrations from) working with the E.U. and their proposed solution for meeting the E.U. regulation, including definitional changes to the new rules and development of technology that could provide an App based solution to onerous geolocation reporting requirements. There was a great deal of interest and support for AHEC’s efforts. Other sectors participating included softwood, hardwood panel & veneer, pallets, pellets, and landowners; there was general agreement that working together on solutions is the most effective approach.  The group will continue to meet on a regular basis with joint leadership from the Federation, AHEC and AF&PA.

Take Four! House Taps New Speaker, Removes Roadblock for Legislative Action

On October 25, the House finally elected a new Speaker by supporting Rep. Mike Johnson (R-LA), by a vote of 220 to 209.  After weeks of infighting, a united GOP caucus passed the 217-vote threshold needed to push a new speakership across the finish line.  This follows a chaotic three-week period in which Speaker Johnson’s nomination emerged in the wake of unsuccessful bids from Reps. Tom Emmer (R-MN), whose candidacy lasted less than 24 hours, Jim Jordan (R-OH), and Steve Scalise (R-LA).  The weeks long suspension of legislative activity has created a logjam, with major consequences for tax policy, possibly removing the item from end-of-year action as issues such as the Fiscal Year (FY) 2024 budget take center stage. 

In early summer, for example, the House Ways and Means Committee passed a tax package and created a generous timeframe on the 2023 calendar for House lawmakers to pass a bill that serves as a vehicle for some of the hardwood industry’s top priorities.  These include full expensing of equipment until 2027 and restoration of business interest deductibility, known in accounting-world as Earnings Before Interest, Depreciation and Amortization (EBITDA) until 2026. The Federation is joining a letter led by the National Association of Manufacturers urging Congress to pass these priorities.  Now that the House is free to roll up its sleeves on specific items, the Federation will keep you posted on the House agenda as it unfolds. 

USDA Unveils $50 Million for Wood Products Grants, Promotes Rural Economy

On October 18, the USDA released almost $50 million in grant funds for proposals that create new markets for wood products as part of the Administration’s latest initiative under its “Investing in America” agenda.  As part of the announcement, USDA Secretary Tom Vilsack stated that “a strong forest products economy contributes to healthier forests, vibrant communities and jobs in rural areas.”  The new grant funding will fall under the umbrella of the U.S. Forest Service’s programs for Wood Innovation Grants, Community Grant Wood and Wood Products Infrastructure Assistance. USDA states that it will focus on proposals that “support innovative uses of wood in the construction of low carbon buildings, as a renewable energy source, and in manufacturing and processing products.”  The announcement is consistent with Federation advocacy in Congress and EPA pointing out that wood products are the quintessential low-embodied carbon construction material.

Bipartisan Lawmakers Adress Forest Management, Industry Workforce Shortage

On September 22, leaders of the Senate Energy & Natural Resources (SENR) Committee, Chairman Joe Manchin (D-WV) and Ranking Member John Barrasso (R-WY), introduced S. 2867, the “Promoting Effective Forest Management Act of 2023.” The bipartisan bill taps existing sources at USDA and the Department of Interior to mitigate wildfire risk and improve forest health. Specifically, the bill directs the National Forest Service (NFS) and Bureau of Land Management (BLM) to establish yearly acreage targets for mechanical thinning and require a scientific basis for changes to definitions of old growth and mature forests. The bill would also establish an apprenticeship program to funnel young people into the logging workforce.  Senate leaders have referred the bill to the SENR where a path forward is not known at this time.   To view a one-page summary of the bill, please click here.

Further demonstrating that lawmakers are receiving the message on worker shortages, Senate and House members have introduced the  “The Jobs in the Woods Act.”  Legislative champions inlcude Reps. Chavez-Deremer (R-OR) and Gluesenkamp-Perez (D-WA) on the House side and Sens. King (I-ME) and Risch (R-ID).  This bill will provide education grants ranging in size from $500,000 to $2 million to promote jobs in the understaffed timber industry and U.S. Forest Service. Although the bill’s champions are working to insert provisions of the bill into upcoming farm legislation, this will remain an uphill battle in 2023 as Congress operates under a stopgap funding measure and hashes out controversial spending legislation for Fiscal Year (FY) 2024, which began on October 1.

Economic Indicators Rise as Pessimism Persists

Federation partners at the National Association of Manufacturers participated in a survey conducted by the Wall Street Journal which shows a shrinking likelihood of recession during the next 12 months, dropping from a 54% likelihood this summer to 48% in September.  Reasons cited for the more optimistic forecast include declining rates of inflation, a robust job market, steady albeit elevated interest rates and unexpectedly strong consumer spending.  In a related development, the Department of Commerce has reported a “spike” in housing starts which rose to 1.358 million in September as compared to 1.269 million in August. 

Unfortunately, sunnier economic indicators haven’t yet broken through to perceptions held in the business community.  Also in September, the National Association of Manufacturers (NAM) released a report showing that federal red tape, among other challenges, prevents expansion of manufacturing businesses in 2023.  According to the survey, reflecting feedback from respondents in August, 69.1% of small manufacturers would hire more employees or give pay raises “if their regulatory burdens decreased.”  Respondents identified workforce shortages (72.1%), expensive healthcare (60.7%) and supply chain disruptions (45.5%) as top challenges facing them at the close third quarter. 

It’s October 31. Have a Happy Halloween!