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NOTE: This series looks at the agency’s overreach and how it affects the day-to-day operations of American businesses.
Drew Greenblatt’s small manufacturing company, Marlin Steel, has already experienced exponential growth under his watch. Greenblatt, who purchased the company nearly 20 years ago with 18 employees and $800,000 in annual revenue, has nearly doubled the workforce and led the firm to $5.5 million in sales last year. He’s not ready to slow down, either.
Over the past couple years, Greenblatt has been planning to significantly expand his facility in Baltimore, Maryland. The plans, which are nearly finalized, would expand Marlin Steel’s current manufacturing space by 53 percent and allow Greenblatt to hire at least 15 more workers.
“These are middle-class, good-paying jobs,” said Greenblatt, whose firm sells wire containers and other industrial products to automotive, aerospace and pharmaceutical factories. “They’re the type of jobs that pull people out of poverty, that can lift people into the middle class, that can pay for their kids to college. These are the type of jobs that our community needs.”
However, his expansion and hiring plans may soon grind to a halt because of onerous new regulations coming down the pipe from Washington.
Holding Greenblatt back is the Environmental Protection Agency’s proposal to further tighten ozone standards across the country, lowering the acceptable threshold of surface-level ozone in the atmosphere from 75 parts per billion (an already strict limit set in 2008) to between 65 and 70 parts per billion. While that may sound like a minor tweak, it would result in more than 300 U.S. counties falling into the “nonattainment” category, with another 200 counties at risk of not meeting (as in, hovering dangerously close to) the new ozone standard.
In those areas, many of the manufacturing and industrial firms that Marlin Steel counts as customers will see their regulatory compliance costs skyrocket as communities are forced to lower pollution levels even further than they already have (ozone levels have already dropped by a third since 1980). Every dollar spent complying with the new rules is one less dollar those manufacturers have to invest back into their firms and purchase new machinery.
Only when those manufacturers are expanding and investing in new machines do they need more steel containers (like the ones Greenblatt sells) to move goods from machine to machine within their factories. Thus, only when they're expanding does Marlin Steel have customers.
Several longtime clients have already told Greenblatt that the EPA’s new ozone rules will put a freeze on any expansion or investment plans they had in the works.
“My clients are going to clamp down, and my phone is going to stop ringing” Greenblatt said. “When they hit pause, we have to hit pause, too, and as a result, we’re simply not going to be able to expand and hire as much as we had planned.”
That would be hard pill to swallow anywhere, but it’s “an especially devastating blow” for an employer in a city like Baltimore, Greenblatt explained. He noted that the nation watched this summer as riots erupted across the city due in part to a dearth of economic opportunity and a sense that the poor don’t have access to jobs that can lift them into the middle class.
“We’re here trying to create jobs and strengthen our communities, and Washington keeps making it harder and harder,” Greenblatt said. “It’s just another round of smackdown, and it’s a shame, because cities like ours really need these jobs.”
Marlin Steel isn’t alone. In Maryland, which has struggled to rebound from the economic downturn as it is, the new ozone rules are expected to exact a $37 billion toll on the economy and threaten 43,000 jobs, according to a study by the National Association of Manufacturers. Nationwide, the rule is expected to reduce U.S. GDP by an estimated $140 billion per year and could result in more than a million fewer jobs every year through 2040.
Many of those jobs will likely be stripped from small businesses.
“In the end, all sectors of the economy would be negatively affected by the EPA’s new, stringent NAAQS ozone regulations,” Karen Kerrigan, president of the Small Business and Entrepreneurship Council, wrote in an analysis of the proposed ozone rules. “That means, of course, that small businesses will be hit hardest, as is the case with nearly all regulations.”
While no sector will be spared, two industries will be hit particularly hard, she explained.
“It’s worth highlighting that energy, which has been a rare bright spot in an otherwise dismal economy over the past eight years, and manufacturing, which is in the midst of a revitalization, would both suffer significantly under the new EPA regulations,” Kerrigan wrote. She later noted that “those sectors are very much about small business.” In fact, small businesses account for about 75 percent of manufacturers and 90 percent of trucking firms, Kerrigan added, as well as 90 percent of oil and gas extraction firms and 80 percent of oil and gas drilling companies.
SBE Council Center for Regulatory Solutions Senior Fellow Kevin Nyland, the former deputy administrator at the White House’s Office of Information and Regulatory Affairs, has gone on record calling the new ozone rules possibly “the most expensive in U.S. history.”
Of course, EPA officials say the rules are necessary to help clean up our atmosphere. However, experts believe the rule will have minimal – if any – positive impact on air quality or health. In a letter to the agency this summer, nearly two dozen doctors-turned-lawmakers wrote that the department’s analysis of the ozone rule’s potential health benefits was flawed and that they believe “the proposal’s harm outweighs its claimed benefits.”
Back in Maryland, Greenblatt worries the rule may actually cause environmental damage.
“These rules are going to squeeze more American manufacturers out, pushing even more production overseas to places like China and India, where factories are allowed to and do in fact pump much more pollution into the atmosphere,” he said, noting that U.S. factories are already held to incredibly strict environmental standards compared to most nations.
“If we want a clean atmosphere, we should be doing everything we can to force those countries to clean up their act while at the same time tearing down barriers for American manufacturers,” he said. “Instead, all we’re doing is putting up more barriers.”
That’s frustrating from both an economic and environmental perspective, Greenblatt said.
“I breathe the air, I swim in the Chesapeake,” he said. “I want clean water and clear air, too.”
Marlin Steel’s environmental record shows he’s not just blowing smoke. In addition to implementing a myriad of energy-saving technologies at his factory, Greenblatt and his firm use 100 percent recycled steel from a plant in Indiana that churns out its raw materials by melting down, for example, old dishwashers and cars. Marlin Steel also recycles all of its scrap metal.
Most U.S. manufacturers that Greenblatt works with are taking similar steps.
“Our planet faces real environmental challenges, but the problem doesn’t lie with American factories,” Greenblatt said. “We should start focusing on where the problems actually exist, in places like India and China, rather than continuing to hammer American manufacturers who have been doing the right thing, who are already trying to help clean up our environment.”
If we don’t, he said, “rules like these will keep hurting our economy and our environment.”