Bricks on Pennsylvania Avenue
Feb 09, 2016 - 9:00am

Two Rules. Two Brickmakers. Immeasurable Damage.


Executive Director, Communications & Strategy

On their way to work every morning, hundreds of Environmental Protection Agency employees tread the sidewalks of Pennsylvania Avenue outside the agency’s headquarters in Washington. Surely unknown to those commuters, the bricks below their feet trace their roots to a small factory in northeastern Ohio.

It’s likely many of them don’t realize, either, that 35 years after those concrete blocks were laid down, the rulemakers working inside their building are pushing that factory to the brink of closure.

“I try not to think about the irony,” said Janet Kaboth, president of Whitacre Greer, the family-owned brick manufacturer in Alliance, Ohio that in 1980 churned out more than a million candlelight-colored bricks that still stretch from the White House to the Capitol. “It’s frustrating. Very, very frustrating.”

What’s threatening Kaboth’s company, which will celebrate its 100th year in business this year, are onerous new regulations finalized last year by the EPA – regulations that business leaders expect to  wreak havoc on an already troubled American industry. In the works for several years, the new rules will require brick manufacturers to purchase and install expensive new equipment that Washington regulators hope will slightly reduce their plants’ mercury output and emissions of so-called particulate matter – essentially, a mix of dust, dirt, and smoke particles.

At the same time, the Occupational Safety and Health Administration (OSHA) recently finalized more strict silica emissions limits on brickmakers. Combined, this wave of regulations from the two agencies is expected to cost U.S. brick producers more than $100 million every year, despite mounting evidence that the restrictions would do little if anything to protect the environment or protect worker health.

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Whitacre Greer

“Our industry has been hit hard in recent years, and we don’t have the funding for something like this,” said Kaboth, whose company has been in the family since it opened in 1916 and who now runs the business with her brother and sister. “I’m not sure what we’re going to do yet.”

EPA's rules are at the heart of a more stringent set of brick industry regulations known as the Brick Maximum Achievable Control Technology rule, or Brick MACT. A more workable Brick MACT rule was implemented in 2003, at which time brick producers spent millions of dollars on similar equipment to trim their emissions and comply with the new federal restrictions. However, following a lawsuit from environmental activists, the rule was later thrown out and EPA had to start over.

In what has become an alarmingly consistent trend from environmental regulators in the nation’s capital, the cost of this latest stab at brick industry rules vastly outweighs the expected benefits. By the EPA’s own calculations, for instance, these rules will reduce mercury emissions nationwide by around 118 pounds per year. Compare this with the finite traces of mercury in the dental material used to fill cavities, and the brick industry’s mercury reduction under these rules amounts to less than 0.3 percent of the mercury Americans are collectively carrying around in their mouths.

The estimated annual reduction in particulate matter – 170 tons – is larger in number but still miniscule in context. Consider that the new rules are expected in one year to trim from the brick industry’s output less particulate matter than U.S. fast food restaurants churn out in one day.

In other words, these rules’ expected benefits are as tiny as the particles they concern.

On the other hand, the costs are enormous.

EPA's rules alone, which have been finalized and are scheduled to take effect in three years, carry a price tag of more than $100 million for brick producers, according to a new report by the U.S. Chamber of Commerce. Meanwhile, the new silica regulations proposed by OSHA would tack on another $900,000 in upfront costs for every small brick manufacturer, plus another $224,000 on average in additional operational costs ever year, researchers found.

It’s not just that it’s a high cost. It’s that it comes with so little benefit."
Janet Kaboth, President of Whitacre Greer

Interestingly, OSHA’s new rules turn a blind eye to numerous studies (several of which OSHA has acknowledged) that found that silica emissions from brick manufacturing are not a prevailing cause of silicosis (the very illness that the new rules are meant to combat) among factory workers. Consequently, as the U.S. Chamber report noted, under the new regulations, “brick plants are asked to shoulder a heavy burden to solve a problem that they play little or no part in causing.”

Not surprisingly, the rules have caught the attention of lawmakers in Washington. A House Energy and Commerce subcommittee earlier this month held a hearing on the implications of the new brick industry regulations and the process by which EPA and OSHA arrived at them. The House Judiciary Committee will hold a second hearing on the rules later this month, at which Kaboth has been invited to testify.

“I would like to think that after almost 100 years of providing good employment, paying taxes, and being a responsible corporate entity that someone in our government could look at the cumulative effect of regulation compliance and help us,” she will tell Congress, according to a copy of her prepared testimony.

In Kaboth’s case, for EPA's rules alone, her 80-employee company would be required to purchase and install new equipment that would scrub some of the mercury and particulate matter emissions out of Whitacre Greer’s smokestacks. All told, the new systems will amount to a more than $4 million investment (equal to approximately a quarter of the company’s net worth) to scrub out only a few additional pounds of mercury – or for those counting, less than 1 percent of 1 percent of the amount of mercury currently embedded in American mouths.

“It’s not just that it’s a high cost,” she said. “It’s that it comes with so little benefit.”

***

Separated by 800 miles of mostly Appalachian Mountains, Davis Henry and Kaboth share a lot in common. Like Kaboth, Henry grew up watching his father run a small brick plant, this one located in Selma, Alabama. Henry Brick was started by his father’s father in 1945 and has weathered the same economic ups and downs as Kaboth’s firm. Today, Henry runs the company with the help of his brother and two of his cousins’ husbands – every bit as much a family affair as Whitacre Greer.

“In the brickmaking industry, we’re actually one of the new kids on the block,” said Henry, whose 60 employees produce about 120 million bricks every year. “We would like to continue to keep it in the family as long as we can, but that’s proving more and more difficult.”

In large part, that’s because Henry - who testified at last week's hearing in the House - is just as worried about the Brick MACT rules as Kaboth.

“This is going to hit us hard,” he said in an interview.

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Henry Brick

When the previous version of the Brick MACT was implemented in 2005, Henry Brick, then led by Davis’s father Ted Henry, spent $1.5 million on new scrubbers and other equipment to comply with the mandates. Those scrubbers capture about 95 percent of the Hazardous Air Pollutants (known in the industry as HAPs) emitted through the company’s smokestacks.

When the rules were later thrown out at the federal level, Alabama’s environmental department opted to keep them on the books as a statewide mandate - a decision that made little difference to Henry Brick, which had already invested in and started installing the equipment. More importantly, Henry explained, the company’s leadership team believed the technology was a reasonable, albeit expensive, investment meant to limit its emissions and protect the environment.

A decade later, these newly proposed brick emission rules out of Washington would render that equipment insufficient. In fact, brickmakers like Kaboth and Henry who took steps to comply with the old Brick MACT rules before they were discarded are in some sense being penalized for being proactive. That’s because EPA later used the improved emissions performance metrics from upgraded kilns as its baseline for setting these even more strict emission reduction targets.

Consequently, in order to trim its already greatly reduced emissions by a few additional percentage points, Henry explained that his small company “would have to spend in the neighborhood of $8 million on new equipment. That’s an inordinate amount to capture a tiny remaining portion of emissions.”

It wouldn’t merely be the $8 million spent on new equipment, either. Before even purchasing upgraded technology, Henry Brick would have to spend thousands on demolition to strip out and discard the scrubbing equipment it installed in 2005, which is still in perfectly good condition.

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Henry Brick

“So the bottom line is, we would have to tear out the systems we put in, purchase and install new scrubbers, and then possibly add another system to deal with mercury,” Henry concluded.

Echoing Kaboth, Henry has no idea where that money would come from.

“Our regulators are targeting an industry that has been absolutely crippled by the recession,” said Henry, noting that his company has already had to shut down one of its two brick kilns (a reflection of the downward trend across the brick industry, which is currently operating at less than 50 percent capacity). He pointed out that “a bank is not going to invest millions into a business for something that isn’t going to increase sales one bit and will instead drag down its profits."

Once the rules are finalized, Henry and other brickmakers will have three years to come up with a plan to comply. Henry, his brother and the rest of his management team are mulling their options. But as it stands now, the outlook appears bleak.

“The worst case scenario is that we can’t find a way to avoid these new requirements, a bank won’t give us a loan, and in three years’ time, if we haven’t sold the company, we would just have to cease operations,” he said. “I mean, that’s the worst case scenario: We would have to close the business.”

***

John Miller doesn’t have many slow days. In his 13th year as manager of engineering and environmental health and safety at Kaboth’s Ohio company, Miller oversees everything from routine emissions tests and workplace safety programs to technology upgrades and regulatory compliance.

Unfortunately, that last task has been taking up more and more of his time lately.

“It’s been busy on the regulatory front, to the point where that consumes most of my days right now,” said Miller, who has spent his entire life in northeastern Ohio and lives about 10 miles west of Alliance. “We have a lot of work ahead just to figure out what the new MACT will mean for us.”

Miller has a unique perspective on the MACT rulemaking process, as he served as one of the brick industry’s small business representatives on review panels held by the EPA. In the early stages of the process, the agency seemed to focus largely on trimming the industry's emissions of certain non-mercury metals, such as arsenic and beryllium, Miller said. However, the targets later shifted toward the mercury and particulate matter reductions.

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Henry Brick

“The mercury was quite a surprise wrinkle, and that’s where we’re probably going to get hit the hardest,” Miller said, noting that the sudden decision to home in on mercury veered away from the initial conversations EPA officials had with industry representatives. In addition, he added, “it was a surprise because the amount of mercury the brick industry emit is extremely, extremely low.”

Once mercury and particulate matter became the focal points, Miller explained, “EPA took one sample from one test of one controlled kiln and from that they decided what would be reasonable for the entire industry.” While the agency has since tweaked those emission reduction targets in its proposal, attempting to add some degree of flexibility for brick producers, Miller said that the new rules will still slap his company and many others with inordinately high costs for minimal benefit.

“The amount of mercury just isn’t there,” he said of the industry’s emissions.

Disturbingly, what’s happening to brick producers is indicative of a broader trend in Washington.

$8.5 million

Henry Brick's expected investment cost to comply with new Brick MACT rules. Operating the new systems would cost an additional $2.4 million every year.
U.S. Chamber study

As William L. Kovacs, the U.S. Chamber’s senior vice president for Environment, Technology and Regulatory Affairs, noted in the study: “The brick industry experience clearly illustrates the increasingly common situation where regulations… impose heavy burdens on specific businesses and their host communities that far outweigh their assumed local and national benefits. Rules such as these – that do more harm than good to communities – should never be allowed to become legally binding requirements.”

Nevertheless, Whitacre Greer has little choice but to start bracing for the new rules.

Miller’s team is in the midst of conducting expensive smokestack tests to determine exactly how much mercury and particulate matter the company is emitting and what precisely that particulate matter is composed of. Depending on what they find, Miller estimated that the upfront costs of the new rules for his firm could top $5 million, plus another $1.5 million in annual operational costs.

Moreover, he isn’t certain the equipment that regulators would require the company to install would actually reduce their emissions. Due to the relatively low temperatures in his small kilns compared to those used by large brick manufacturers (the latter of which was used by regulators to arrive at their regulatory proposals), Miller believes the scrubbing technology may not strip out nearly as much mercury or particulate matter as the agency has predicted.

“It’s all for something that may or may not work,” Miller said. “But we may not have much choice.”

***

While the industry has taken a hit in recent years, U.S. brickmakers remain an integral part of both their local economies and the national economy. There are approximately 70 American brick plants still operating in 38 states, collectively employing nearly 7,000 workers. More broadly, through raw material sourcing, manufacturing, distribution and transportation, the brick industry supports 200,000 American jobs and adds $8 billion annually to the U.S. economy.

Those jobs and that economic boost are particularly important to towns like Selma, Alabama.

“Selma is a repressed community,” Henry explained. “There’s not a lot of industry moving into town, and there aren’t many businesses starting up, so there aren’t a lot of jobs being created.”

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Henry Brick

Repressed, by most measures, appears to be an understatement. Dallas County, Alabama – of which Selma is the county seat – is the poorest county in one of America’s poorest states. Nearly 50 percent of the children in the county live in poverty (that is, on an annual income of less than $22,000 for a family of four), and the unemployment rate hovers above 13 percent, more than double the national level.

It’s here that Henry is creating and sustaining permanent, nonseasonal, good-paying jobs.

“We hire locally, and we pay a fair wage,” Henry explained. “Just to be clear, we don’t live in Birmingham or Montgomery; I live here in Selma, my workers and their families live here in Selma. We live here, we work here, and we plan to continue being a part of this community.”

Under the new regulations, however, it’s unclear how much his company will be able to help lift Selma out of the economic shadows. One option Henry and his team are contemplating in order to keep their business afloat is to apply for what’s known as a “synthetic minor” designation, which would exempt Henry Brick from some of the new, much more strict emission limits.

To qualify for the exemption, the company would have to limit the number of bricks it produces every year to a maximum of 100 million – about 20 million less than Henry Brick has the capacity to manufacture. From a financial perspective, of course, that would be devastating.

“We would be losing almost 20 percent of our capacity, and as is the case for most industries, that’s where all the profit is,” Henry explained. “It’s that last 20 percent or so that we could make money on, and that’s the 20 percent we wouldn’t be allowed to produce.”

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Henry Brick

It’s that forgone profit, Henry said, that could be used to reinvest into the company. Consequently, while carrying the synthetic minor tag, even if demand for brick bounces back as the national economy and housing markets rebound, Davis wouldn’t be able to expand his operations in Selma, or anywhere else in Alabama. In a sense, by embracing the production limits in order to cope with the new regulations, his company would be abandoning any hope of local expansion.

“If we do start growing again, we wouldn’t be able to create those jobs in Selma,” Henry said. “We wouldn’t be able to do any more to help the local community, and that’s the really sad part.”

***

Janet Kaboth takes similar pride in creating jobs in her community, particularly for workers who would likely have difficulty finding jobs elsewhere. She points out that many of her employees don’t have a high school degree, and several lacked technical training when they started at Whitacre Greer.

Today, every one of them has access to health insurance (of which Whitacre Greer pays 90 percent of the premiums) and a retirement savings account (into which the company contributes 4 percent of every employee’s paycheck, regardless of whether the employee contributes). Whitacre Greer also pays the full cost for any employee seeking additional training, and it runs a profit-sharing plan in which 25 percent of all company earnings are split evenly among every employee.

We wouldn’t be able to do any more to help the local community, and that’s the really sad part.”
Davis Henry, President of Henry Brick

“We value our employees and have spent a great deal of time and effort over the last few years to improve our operations and make our company a good place to work,” Kaboth explained. “We try very hard to be a good employer and a good neighbor in our community.”

To stay afloat, and to prepare for what Kaboth hoped would be another century in business, Whitacre Greer several years ago started implementing a five-phase modernization plan intended to update the company’s two kilns. Currently in the second phase of renovations, the company recently invested in technology, for instance, that will reduce its gas use, which will in turn cut the firm’s energy costs by around $500,000 per year and shrink the size of its carbon footprint.

“It took me two years to find a financial institution willing to lend us the money” for that project, Kaboth will tell lawmakers during the hearings this week – and that was for an expenditure that is expected to pay financial dividends down the road. “It would be impossible for us to obtain a loan of this size that would not provide us with any benefits at all,” she added.

Ultimately, Kaboth explained, should the new federal rules take effect as written, “the cost of compliance with both regulations at the same time would put us out of business.”

If so, 80 American workers would lose their jobs, many of whom would likely struggle to find work elsewhere.  Whitacre Greer’s demise would eliminate more than $800,000 in annual output from the local community, which would have far-reaching ripple effects. Most notably, the company currently pays local coal mining companies – another industry clobbered by overregulation in recent years – about $1 million every year for raw materials; namely, clay and shale. Those companies and the rest of Whitacre Greer’s suppliers would feel the harmful repercussions of these regulations, too.

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Henry Brick

Right now, though, Kaboth isn’t thinking as much about her industry or her suppliers.

She’s worrying about her employees and their families.

“We don’t have a lot of automation. Our guys are picking the bricks off the machines and loading them into the trucks by hand,” Kaboth said. “It’s not easy work, but our guys are great, they work very hard, and that’s what makes the possibility of shutting down that much harder.”

So does the thought of her company’s history.

“It would be a shame, when you think about all the things we have gone through and all our company has survived over the past hundred years – recessions, wars, housing market crashes –  to be brought down by one regulation,” Kaboth said. “It just seems wrong. I don’t make the rules, though, so we’ll just have to do our best to keep surviving.”

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About the Author

About the Author

J.D. Harrison
Executive Director, Communications & Strategy

J.D. Harrison is the Executive Director for Strategic Communications at the U.S. Chamber of Commerce.