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VOLUME XXI

September 14, 2023

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Industry groups: Statewide ban on ethylene oxide a ‘sledgehammer,’ would hurt IL economy, health care

Hot Topics

By Jonathan Bilyk | Jul 31, 2019

With a DuPage County judge set to weigh in in about a month on the potential fate of Sterigenics’ shuttered Willowbrook medical device sterilization plant, a Republican Illinois state lawmaker is pushing a new proposed law he wants to use to target the plant and keep it closed for good.

However, the measure has already drawn pledges from industry associations to oppose the measure, saying it would take a “sledgehammer” to an issue that requires a scalpel, harming Illinois’ economy and America’s healthcare system in the process.

On July 30, Illinois State Sen. John Curran (R-Downers Grove) filed legislation in Springfield to effectively ban the use of the chemical compound known as ethylene oxide in the state by 2022.


Illinois Gov. JB Pritzker | Youtube screenshot

The chemical is widely used in a variety of industries for a variety of purposes.

Mark Biel, president of the Chemical Industry Council of Illinois, said ethylene oxide is a key industrial building block ingredient for the manufacture of a large number of products used by people and businesses every day. These include antifreeze used in cars and to deice aircraft wings; brake fluid; carpeting; upholstery; recyclable plastic packaging; and products made from fiberglass, including bathtubs and bowling balls, among other uses.

Derivatives of EO also are used to make shampoo, cosmetics, ointments and pharmaceuticals.

Biel said about 1% of EO is used to sterilize most of the medical devices and surgical tools employed in hospitals and health care facilities in the U.S.

But it is that use, particularly by Sterigenics, that has drawn the fire of politicians, including Curran.

Since February, the Sterigenics plant in west suburban Willowbrook has remained closed under a so-called seal order issued by the Illinois Environmental Protection Agency under Gov. JB Pritzker. The order prohibits the company from using any of its stores of EO gas, which the company says are essential to its operations. The company says it uses the EO to sterilize mass quantities of surgical kits and other essential medical devices.

That seal order came shortly after Pritzker took office, but months after former Illinois Attorney General Lisa Madigan filed suit against Sterigenics, along with DuPage County Robert Berlin, seeking a court order closing the plant for allegedly violating Illinois nuisance laws.

The state actions relied heavily on data and reports issued by the U.S. EPA and the federal Agency for Toxic Substances and Disease Registry, which claimed to show a sharply elevated cancer risk for people in and around Willowbook. An ATSDR report linked that elevated risk to EO emissions from the Sterigenics plant.

The report generated a large public outcry, which placed heavy political pressure on Pritzker and others in state government to act. Pritzker had also used the controversy over the Willowbrook plant to attack former Gov. Bruce Rauner during the 2018 gubernatorial campaign.

Sterigenics has contested the findings of the federal reports, and has opposed the state legal and regulatory actions in court. The company sued the IEPA over the seal order, calling it illegal, baseless and unconstitutional.

The company has consistently noted it never violated the terms of the operating permit issued to it by the state.

The state, however, has asserted the company still broke Illinois pollution laws by creating a “public nuisance” by emitting EO at all.

The state actions have drawn concern from industry groups who worry about the effects on the American health care system of state actions to curtail the use of EO, and the precedent set by the state actions targeting this one company.

As the court actions continued, the Illinois General Assembly enacted strict new EO emissions standards, believed to be the most stringent in the country.

After Pritzker signed that measure into law in June, Illinois Attorney General Kwame Raoul and DuPage County State’s Attorney Berlin announced they had reached an agreement with Sterigenics to end the court fights and create a path for Sterigenics to potentially reopen in compliance with the new state emissions rules.

Curran and two other state lawmakers have since filed a brief in court opposing that agreement, which is spelled out in a legal document known as a consent order. The lawmakers assert the new law doesn’t give the attorney general the authority to negotiate such a consent order, because the law was written intentionally to all but prevent any facility from reopening after it had been the subject of an EO-related seal order. In this case, they said, this means Sterigenics should never be allowed to reopen under the law.

The attorney general has disputed that interpretation.

DuPage County Circuit Court Judge Paul Fullerton has given the village of Willowbrook and some of its neighboring communities the chance to weigh in on the consent order. The judge is expected to consider the consent order near the end of August.

After the consent order was announced, Pritzker indicated a willingness to sign further legislation, potentially including an outright ban on the use of EO in Illinois. He further indicated a willingness to call the General Assembly into a special session to debate and vote on legislation banning EO.

In response, Curran filed his bill.

“I am grateful that Gov. Pritzker has offered to call a special session to deal with this issue and that he has clearly stated that he supports a ban on the use of ethylene oxide,” Curran said in a release announcing the legislation. “The governor has proven that he is able to use his position to push through major legislation and I look forward to working with him to advance this bill.”

Curran also reiterated his belief Sterigenics should never be allowed to reopen its Willowbrook facility.

The measure also drew the support of Berlin, who said: “The only way to guarantee the residents of Willowbrook and the surrounding communities clean air that is free of ethylene oxide today, tomorrow and for generations to come, is to completely eliminate the source of the contamination.”

Industry representatives, however, said such a ban would have large unintended consequences.

Biel said an outright ban on EO use represents “an overreach.”

“We’ve already got a law here that sets up the most stringent rules on ethylene oxide anywhere,” said Biel. “This is a sledgehammer approach.”

Biel said there are 1,500 jobs that would be directly eliminated by such a ban, and many others in “downstream industries” that would be affected.

“To ban the use of all ethylene oxide, just to shut down one facility, it flies in the face of common sense,” said Biel.

Greg Crist, a spokesman for AdvaMed, the Advanced Medical Technology Association, said his group would also oppose any bill to ban EO use outright.

“We’re talking about the safety of billions of medical devices at stake here,” Crist said.

Crist said Sterigenics is not a member of AdvaMed.

He said EO is not the “first choice” of sterilizers, and is not “a choice sterilizers have made out of ease or convenience.”

Rather, he said, EO is used to sterilize medical instruments “out of necessity,” as the only sterilizing agent that allow medical device makers to satisfy the infection-control requirements of the U.S. Food and Drug Administration for intricate devices like pacemakers or other medical implants.

He said AdvaMed members and others are working with EPA and other officials on improving emissions controls. He noted the U.S. EPA is also expected to soon roll out a new nationwide rule on EO emissions.

“We don’t want this to be lost in the linear question of ‘Should it stay or should it go?’” Crist said.

https://cookcountyrecord.com/stories/512815758-industry-groups-statewide-ban-on-ethylene-oxide-a-sledgehammer-would-hurt-il-economy-health-care

Industry groups: Statewide ban on ethylene oxide a ‘sledgehammer,’ would hurt IL economy, health care

Hot Topics

By Jonathan Bilyk | Jul 31, 2019

With a DuPage County judge set to weigh in in about a month on the potential fate of Sterigenics’ shuttered Willowbrook medical device sterilization plant, a Republican Illinois state lawmaker is pushing a new proposed law he wants to use to target the plant and keep it closed for good.

However, the measure has already drawn pledges from industry associations to oppose the measure, saying it would take a “sledgehammer” to an issue that requires a scalpel, harming Illinois’ economy and America’s healthcare system in the process.

On July 30, Illinois State Sen. John Curran (R-Downers Grove) filed legislation in Springfield to effectively ban the use of the chemical compound known as ethylene oxide in the state by 2022.


Illinois Gov. JB Pritzker | Youtube screenshot

The chemical is widely used in a variety of industries for a variety of purposes.

Mark Biel, president of the Chemical Industry Council of Illinois, said ethylene oxide is a key industrial building block ingredient for the manufacture of a large number of products used by people and businesses every day. These include antifreeze used in cars and to deice aircraft wings; brake fluid; carpeting; upholstery; recyclable plastic packaging; and products made from fiberglass, including bathtubs and bowling balls, among other uses.

Derivatives of EO also are used to make shampoo, cosmetics, ointments and pharmaceuticals.

Biel said about 1% of EO is used to sterilize most of the medical devices and surgical tools employed in hospitals and health care facilities in the U.S.

But it is that use, particularly by Sterigenics, that has drawn the fire of politicians, including Curran.

Since February, the Sterigenics plant in west suburban Willowbrook has remained closed under a so-called seal order issued by the Illinois Environmental Protection Agency under Gov. JB Pritzker. The order prohibits the company from using any of its stores of EO gas, which the company says are essential to its operations. The company says it uses the EO to sterilize mass quantities of surgical kits and other essential medical devices.

That seal order came shortly after Pritzker took office, but months after former Illinois Attorney General Lisa Madigan filed suit against Sterigenics, along with DuPage County Robert Berlin, seeking a court order closing the plant for allegedly violating Illinois nuisance laws.

The state actions relied heavily on data and reports issued by the U.S. EPA and the federal Agency for Toxic Substances and Disease Registry, which claimed to show a sharply elevated cancer risk for people in and around Willowbook. An ATSDR report linked that elevated risk to EO emissions from the Sterigenics plant.

The report generated a large public outcry, which placed heavy political pressure on Pritzker and others in state government to act. Pritzker had also used the controversy over the Willowbrook plant to attack former Gov. Bruce Rauner during the 2018 gubernatorial campaign.

Sterigenics has contested the findings of the federal reports, and has opposed the state legal and regulatory actions in court. The company sued the IEPA over the seal order, calling it illegal, baseless and unconstitutional.

The company has consistently noted it never violated the terms of the operating permit issued to it by the state.

The state, however, has asserted the company still broke Illinois pollution laws by creating a “public nuisance” by emitting EO at all.

The state actions have drawn concern from industry groups who worry about the effects on the American health care system of state actions to curtail the use of EO, and the precedent set by the state actions targeting this one company.

As the court actions continued, the Illinois General Assembly enacted strict new EO emissions standards, believed to be the most stringent in the country.

After Pritzker signed that measure into law in June, Illinois Attorney General Kwame Raoul and DuPage County State’s Attorney Berlin announced they had reached an agreement with Sterigenics to end the court fights and create a path for Sterigenics to potentially reopen in compliance with the new state emissions rules.

Curran and two other state lawmakers have since filed a brief in court opposing that agreement, which is spelled out in a legal document known as a consent order. The lawmakers assert the new law doesn’t give the attorney general the authority to negotiate such a consent order, because the law was written intentionally to all but prevent any facility from reopening after it had been the subject of an EO-related seal order. In this case, they said, this means Sterigenics should never be allowed to reopen under the law.

The attorney general has disputed that interpretation.

DuPage County Circuit Court Judge Paul Fullerton has given the village of Willowbrook and some of its neighboring communities the chance to weigh in on the consent order. The judge is expected to consider the consent order near the end of August.

After the consent order was announced, Pritzker indicated a willingness to sign further legislation, potentially including an outright ban on the use of EO in Illinois. He further indicated a willingness to call the General Assembly into a special session to debate and vote on legislation banning EO.

In response, Curran filed his bill.

“I am grateful that Gov. Pritzker has offered to call a special session to deal with this issue and that he has clearly stated that he supports a ban on the use of ethylene oxide,” Curran said in a release announcing the legislation. “The governor has proven that he is able to use his position to push through major legislation and I look forward to working with him to advance this bill.”

Curran also reiterated his belief Sterigenics should never be allowed to reopen its Willowbrook facility.

The measure also drew the support of Berlin, who said: “The only way to guarantee the residents of Willowbrook and the surrounding communities clean air that is free of ethylene oxide today, tomorrow and for generations to come, is to completely eliminate the source of the contamination.”

Industry representatives, however, said such a ban would have large unintended consequences.

Biel said an outright ban on EO use represents “an overreach.”

“We’ve already got a law here that sets up the most stringent rules on ethylene oxide anywhere,” said Biel. “This is a sledgehammer approach.”

Biel said there are 1,500 jobs that would be directly eliminated by such a ban, and many others in “downstream industries” that would be affected.

“To ban the use of all ethylene oxide, just to shut down one facility, it flies in the face of common sense,” said Biel.

Greg Crist, a spokesman for AdvaMed, the Advanced Medical Technology Association, said his group would also oppose any bill to ban EO use outright.

“We’re talking about the safety of billions of medical devices at stake here,” Crist said.

Crist said Sterigenics is not a member of AdvaMed.

He said EO is not the “first choice” of sterilizers, and is not “a choice sterilizers have made out of ease or convenience.”

Rather, he said, EO is used to sterilize medical instruments “out of necessity,” as the only sterilizing agent that allow medical device makers to satisfy the infection-control requirements of the U.S. Food and Drug Administration for intricate devices like pacemakers or other medical implants.

He said AdvaMed members and others are working with EPA and other officials on improving emissions controls. He noted the U.S. EPA is also expected to soon roll out a new nationwide rule on EO emissions.

“We don’t want this to be lost in the linear question of ‘Should it stay or should it go?’” Crist said.

https://cookcountyrecord.com/stories/512815758-industry-groups-statewide-ban-on-ethylene-oxide-a-sledgehammer-would-hurt-il-economy-health-care

August 7, 2019

Huntsman Divestiture

Huntsman Agrees to Sell its Chemical Intermediates and Surfactants Businesses to Indorama Ventures for $2.1 Billion

THE WOODLANDS, Texas, Aug. 7, 2019 /PRNewswire/ — Huntsman Corporation (NYSE: HUN) announced today it has entered into a definitive agreement to sell its chemical intermediates businesses, which includes PO/MTBE, and its surfactants businesses to Indorama Ventures in a transaction valued at $2.076 billion, comprising a cash purchase price of $2.0 billion plus the transfer of up to approximately $76 million in net underfunded pension and other post-employment benefit liabilities. The $2.076 billion transaction value represents an LTM adjusted EBITDA multiple of approximately 8.0 times, which includes retained SG&A costs of about $30 million, a portion of which Huntsman expects to eliminate over time.  Under the terms of the agreement, Indorama Ventures would acquire Huntsman’s manufacturing facilities located in Port Neches, Texas; Dayton, Texas; Chocolate Bayou, Texas; Ankleshwar, India; and Botany, Australia. The transaction is subject to regulatory approvals and other customary closing conditions and is expected to close near year-end.

Peter Huntsman, Chairman, President and CEO commented:

“This transaction further transforms Huntsman’s balance sheet and future.  It accelerates our ability to expand more in areas both downstream and complementary to our portfolio.  This is another milestone in our stated strategy to focus more on our downstream and specialty businesses where we will generate more stable margins and consistent, strong free cash flow. We are committed to retaining our strong investment grade balance sheet, repurchasing our shares, investing in organic research and select capacity expansions and acquiring strategic assets that are accretive to our earnings and create shareholder value.

“For Indorama Ventures, they will be acquiring a strong EO/PO derivatives business with a very experienced workforce and management team.  This is also a transformational opportunity for Indorama Ventures that provides them hundreds of product grades and thousands of customers. Huntsman looks forward to continuing to work with Indorama Ventures as a customer and manufacturing partner through long-term commercial arrangements, including propylene oxide supply.

“Huntsman intends to accelerate share repurchases under its existing $1 billion multi-year authorization after the close of this transaction.”

Aloke Lohia, Group CEO of Indorama Ventures, commented:

“This acquisition is a momentous propellant in our journey towards our stated goal of being a global, diversified chemicals company with multiple, and related earnings streams.”

BofA Merrill Lynch served as Huntsman’s financial advisor and Kirkland & Ellis LLP is acting as its legal advisor.

https://ir.huntsman.com/news-releases/detail/415/huntsman-agrees-to-sell-its-chemical-intermediates-and

August 7, 2019

Huntsman Divestiture

Huntsman Agrees to Sell its Chemical Intermediates and Surfactants Businesses to Indorama Ventures for $2.1 Billion

THE WOODLANDS, Texas, Aug. 7, 2019 /PRNewswire/ — Huntsman Corporation (NYSE: HUN) announced today it has entered into a definitive agreement to sell its chemical intermediates businesses, which includes PO/MTBE, and its surfactants businesses to Indorama Ventures in a transaction valued at $2.076 billion, comprising a cash purchase price of $2.0 billion plus the transfer of up to approximately $76 million in net underfunded pension and other post-employment benefit liabilities. The $2.076 billion transaction value represents an LTM adjusted EBITDA multiple of approximately 8.0 times, which includes retained SG&A costs of about $30 million, a portion of which Huntsman expects to eliminate over time.  Under the terms of the agreement, Indorama Ventures would acquire Huntsman’s manufacturing facilities located in Port Neches, Texas; Dayton, Texas; Chocolate Bayou, Texas; Ankleshwar, India; and Botany, Australia. The transaction is subject to regulatory approvals and other customary closing conditions and is expected to close near year-end.

Peter Huntsman, Chairman, President and CEO commented:

“This transaction further transforms Huntsman’s balance sheet and future.  It accelerates our ability to expand more in areas both downstream and complementary to our portfolio.  This is another milestone in our stated strategy to focus more on our downstream and specialty businesses where we will generate more stable margins and consistent, strong free cash flow. We are committed to retaining our strong investment grade balance sheet, repurchasing our shares, investing in organic research and select capacity expansions and acquiring strategic assets that are accretive to our earnings and create shareholder value.

“For Indorama Ventures, they will be acquiring a strong EO/PO derivatives business with a very experienced workforce and management team.  This is also a transformational opportunity for Indorama Ventures that provides them hundreds of product grades and thousands of customers. Huntsman looks forward to continuing to work with Indorama Ventures as a customer and manufacturing partner through long-term commercial arrangements, including propylene oxide supply.

“Huntsman intends to accelerate share repurchases under its existing $1 billion multi-year authorization after the close of this transaction.”

Aloke Lohia, Group CEO of Indorama Ventures, commented:

“This acquisition is a momentous propellant in our journey towards our stated goal of being a global, diversified chemicals company with multiple, and related earnings streams.”

BofA Merrill Lynch served as Huntsman’s financial advisor and Kirkland & Ellis LLP is acting as its legal advisor.

https://ir.huntsman.com/news-releases/detail/415/huntsman-agrees-to-sell-its-chemical-intermediates-and

Young Vs Old, Urban Vs Rural, Home-Buyers Vs Sellers

Authored by Chris Hamilton via Econimica blog,

Summary

  • The Quantity of New Potential Homebuyers is Decelerating to a Trickle.
  • The Quantity of Potential Sellers is Surging.
  • This Mismatch Will Continue to Drive The Federal Reserve to Cut the Federal Funds Rate (& Resultant Mortgage Rates) to Record Lows.
  • The Net Result is a National Oversupply of Housing, Particularly in Rural Areas, While Select Urban Markets Continue to Face Housing Shortages.

Just a few charts today to make a simple point regarding the present and future of the housing market.

1960 through 2019

Potential Home Sellers

1- 65+ year-olds have the highest homeownership rate, presently 78% of these folks own their own home and they are over-represented in rural areas

2- 65+ year-olds now account for over 75% of the net annual population growth in America (red columns below)…with annual 65+ growth rising from +0.3 million in 1960 up to +1.6 million as of 2019

3- 65+ year-olds also account for 75% of annual deaths (grey negative columns below)…with elderly deaths accelerating from -1.1 million annually in 1960 to -2.1 million as of 2019 (to clarify, in 2019 this means +3.7 million enter the 65+ crowd but 2.1 million exit…leaving a net increase of +1.6 million)

4- When elderly die, there are a couple options for their property

-A) will it to their heirs

-B) sell it to settle their affairs (as in the case of reverse mortgages)

Generally their heirs either occupy the home themselves (and sell or rent their existing home) or sell or rent the deceased parties property.  The net result in all these scenarios is a net addition of housing to the market (either as a rental or property for sale).

Potential Home Buyers

5- 20 to 64 year-old annual population growth has decelerated from the 1998 peak of +2.4 million annually to just +0.5 million, as of 2019 (blue columns, below)…but they are over-represented in select urban areas

6- Those under 35 years-old (entering the 20-64 year-old population) have just a 36% homeownership rate, but the lack of 20-64 year-oid population growth coupled with record student loan debt, record rents as a percentage of income, minimal savings, record delayed marriages (average now over 30yrs/old) and record low birth / fertility rates all continues to undermine rising homeownership rate and total growth of potential buyers

Potential New Homes

7- The annual quantity of new homes (represented below by annual housing permits…black line) varied from 1 million to 2.2 million annually from 1960 through 2005…on the whole driven by the annual growth of potential buyers among the 20 to 65 year-old population with significant short term gyrations due to the impact of changes in the Federal Funds rate (yellow line), driving mortgage rates up/down.

Since 2005, new permits (like the 20-65 year-old annual population growth) collapsed but permits have partly recovered (thanks to a decade of ZIRP and the re-employment of the workforce following the GFC) while potential population growth among home buyers has continued to decelerate.

2019 through 2030

These trends only become more acute over the next decade (chart below, same as above but including projections from 2019 through 2030).  The imbalance of miniscule growth among potential buyers (blue columns) versus massive growth among potential sellers (65+ year-olds, red columns) and definite sellers (65+year-old deaths…grey columns).

Below, same chart as above but 1980 through 2030 and flipping the annual elderly deaths (grey columns) to put them into perspective against the potential annual change in potential buyers (blue columns), potential sellers (red columns), 30yr mortgage rate (yellow dashed line), and permits (black line).  These are the changing ingredients that make up the US housing market (and economy).  Just some food for thought.

The 2019 through 2030 chart below highlights the discrepancy of minimal potential buyers (blue columns), surging elderly (red columns), accelerating elderly deaths (grey columns), and likely implementation of NIRP (yellow dashed line) versus best guestimate for new housing creation (permits, black dashed line).

By 2023, the growth of potential home buyers will decline to just 0.2 million annually, deaths among elderly will accelerate to -2.4 million annually (bringing up to 1.9 million properties to the market, either as rentals or “for sale”), and population growth among the elderly will peak at +2.4 million annually.

The net-net of this is an absolute mess.  65+ year-olds (who already own homes) are not likely to buy another and are more likely to downsize &/or enter a nursing/memory care home.  The accelerating deaths among the property owning elderly will bring significantly more properties to market against a fast decelerating quantity of new buyers.  The Federal Reserve is almost sure to push the Federal Funds rate negative (implementing NIRP) to incent the largest segment of the US economy, homebuilding, to continue creating new product. The NIRP is also likely to push mortgage rates to record lows, (perhaps 2% for a 30yr fixed?) continuing to push leverage, speculation, and valuations higher?!?  Of course, the lack of working age population growth and the already existing state of full employment means that potential employment growth over the next decade will likewise be a trickle (at best)…again putting secular downward pressure on the potential for new home buyers.

On a fundamental national basis, this means the imbalance only gets more severe with significantly more potential sellers versus just a trickle of growth among potential buyers…and the Fed will do all it can to kick the can as long as possible.  Of course, the local realities are very unique and quite different.  Simultaneously, urban markets are exhibiting housing shortages (due to relatively positive demographics, population growth, and jobs growth) while rural markets face overwhelming housing surplus’ (due to awful demographics, depopulation, and declining jobs).  I previously detailed the urban / rural discrepancies in demographics, population growth, employment, by region SouthWestMidwestNortheast, and National Overview.

Population data via UN 2019 Population Prospects Report

https://www.zerohedge.com/news/2019-08-07/young-vs-old-urban-vs-rural-home-buyers-vs-sellers