Infrastructure Plan Could Benefit DowDupont, Other Chemical Firms

By Adam Allington and Tiffany Stecker

DowDupont, Westlake Chemical and RPM International are among the U.S. chemical companies that would be well-positioned to benefit from an infrastructure package that President Donald Trump pitched in his State of the Union address.

“This proposal further demonstrates that this administration fundamentally understands the business of business,” DowDupont said in a statement. “Dow and the chemical industry, as well as countless U.S. workers and citizens, will benefit from the President’s proposal to invest in our infrastructure.”

Higher spending on infrastructure would juice sales for chemical-based products, such as piping, coatings, and concrete additives that are critical to meeting modern performance standards, said a Bloomberg Intelligence report released Jan. 30, the day of Trump’s address.

“Yesterday’s concrete, steel, and glass meet modern expectations with today’s chemicals,” said Jason Miner, senior global chemicals analyst for Bloomberg Intelligence and co-author of the report.

More than 20 percent of Westlake Chemical’s sales are tied to the U.S. construction industry, according to a Miner’s analysis of company filings. About 15 percent of DowDupont’s sales and 10 percent of RPM International’s sales are tied to the sector.

Small Firms, Biggest Boost

Miner also pointed out that small, specialty chemical companies focusing on a small portfolio of products such as gases, solar, and battery materials, could see the biggest boost.

“Assuming transportation moves the fastest, concrete additives, polyvinyl chloride resins (PVC) and adhesives would join coatings to be among the earliest to capture new sales,” according to the Bloomberg Intelligence report.

The current economic momentum—combined with tax reform—is already factoring into spring demand forecasts for concrete additives.

“There is little doubt that the near-term outlook for construction and cement consumption in 2018 and 2019 remain favorable,” said Ed Sullivan, senior vice president and chief economist for the Portland Cement Association, the main trade group representing cement companies.

Permitting Process Needs Fix

In a speech that largely avoided specifics, Trump did call for shrinking the permitting process for federal infrastructure projects.

Trump said any infrastructure plan should include a goal of getting the permitting window down to “no more than two years, and perhaps even one.”

The process currently can take anywhere from five to 10 years—a situation that former President Barack Obama also tried to address through a 2012 executive order instructing agencies to use better technology and work concurrently on their reviews in order to cut down on approval times.

“There are a lot of regulatory hurdles just to do some basic stuff,” said Chris Bryant, a senior regulatory consultant at Bergeson & Campbell , a Washington, D.C., law firm specializing in chemical regulatory issues.

A gauntlet of federal, state, and local regulations includes many costly redundancies, Bryant told Bloomberg Environment.

“Everything from the Clean Air Act, to the Endangered Species Act, New Source Review, to the Clean Water Act—there can be well over 20 different types of permits for just one infrastructure project,” said Bryant.

But others maintain that the infrastructure needs in the U.S. are not because of environmental reviews or permitting.

“Our problem is cash,” said Scott Slesinger, legislative director for the Natural Resources Defense Council. “The solution is the political will to appropriate the needed dollars. Environmental reviews and permitting are scapegoats.”

NEPA Seen As Hurdle

The biggest challenge from a regulatory standpoint, said Bryant, is the National Environmental Policy Act. It essentially requires federal agencies to evaluate the “social and economic effects of their proposed actions” before they start any major development.

“I don’t think anyone is going to argue against laws that are going to safeguard the health and safety of American lives and our environment,” Bryant said. “But this has been an issue among our clients for a really long time, and I’m a pro-regulation guy.”

Some caution that any steps that would speed the permitting process be founded on market-based solutions.

“In particular, these policies should ensure that all federally funded infrastructure projects require an open, competitive bidding process for all materials,” said Scott Openshaw, a senior director with the American Chemistry Council.

Show Me the Money?

Notably, Trump did not ask Congress to allocate $1.5 trillion toward his infrastructure ambitions, but to produce a bill that “generates” that amount.

That turn of phrase could presage an eventual conflict over cost-shifting funding from other social projects to pay for infrastructure and seeking significant money from the states—moves Democrats are likely to oppose. But even getting to that fight may be a long way off, if not unreachable.

“There isn’t enough time for Congress to agree on such a broad package before they turn their attention to the 2018 elections, not to mention coming to a bipartisan agreement over budget concerns,” Bloomberg Intelligence analyst Nathan Dean told Bloomberg Environment. “All of this infrastructure talk in Washington is going to have little impact on total U.S. infrastructure growth in 2018.”