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AGENDA MEETING CF THE CMA ECAED OF DIRECTORS Monday and Tuesday, January 11 and 12, 1962 Grand Ballroom, Arizona Siltmore Phoenix, Arizona Monday, January 11, 19S2 - 8:00 a.m. 8:0G-3;01 1. Call to Order -- Chairman Creffice 8:Gl-10:CO 10:00-10:35 10:35-11:10 11:10-11:45 COMMITTEE CHAIRMEN REPORTS 2. Communications Committee Chairman: M. C. Carpenter, The Dow Chemical Company 3. Chemical Regulations Advisory Committee Chairman: E. Hamilton Hurst, Nalco Chemical Company 4. Patent and Trademark Committee Chairman: Richard G. Waterman, Dow Chemical U.5.A. 5. Occupational Safety and Health Committee Chairman: Thomas F. Evans, Monsanto Company 11:45-11:55 ASSOCIATION ACTIVITIES 6. Member Services Report -- Victor H. Peterson LUNCH (North Patio) TA3 This 3oard meeting will continue Tuesday, January 12, 1982, beginning at 9:00 a.m. in the Grand Ballroom. Next meeting of the Board of Directors: 2:00 p.m., Tuesday, April 6, 1982, CMA Board Conference Room, Washington, D. C. CMA 073515 AGENDA - .Meeting of the CMA Board of Directors (continued) Tuesday, January 12, 1982 -- 9:00 a.m. CONTINUATION C? COMMITTEE CHAIRMEN REPORTS 9:00 a.m. 9:00-9:35 9:35-10:10 Call to Order -- Chairman Oreffice 7. International Trade Committee Chairman: F. Milton Hunt, The Dow Chemical Company 8. Tax Policy Committee Chairman: James L. Eichner, Eastman Kodak Company BUSINESS SESSION 10:10-10:11 9. Approval of Minutes of Meeting, November 3, 1981 -- Chairman Oreffice 10:11-10:15 10. Report of Executive Committee -- Chairman Simeral 10:15-10-17 11. Treasurer's Report -- Gary C. Herrman 10:17-10:27 12. International Trade Policy -- Leo H. Johnstone, Phillips Petroleum Company 13. Association Activities: 10:27-10:45 a. Report of the President -- Robert A. Roland 10:45-11:00 b. Results of R&D Survey of Member Companies -- Myron T. Foveaux 11:00-11:10 c. Report of Technical Director -- G. V. Cox 11:10-11:20 d. Report of General Counsel -- E. B. Frost 11:20-11:30 e. Report of Director of Government Relations -- w. M, Stover 11:30-11:45 14. New Business 11:45 15. Adjournment TAB 2 3 4 5 6 7 CMA 073516 2174 MINUTES of the two-hundred eighty-sixth meeting of the Board of Directors of the Chemical Manufacturers Association, Inc., held at the Arizona Biltmore, Phoenix, Arizona, on Monday at 3:00 a.m. and Tuesday at 9:00 a.m., January 11 and 12, 1982. Directors: Paul F. Oreffice, Chairman Louis Fernandez. Vice Chairman Richard C. Ashley Wilbert J. Magers Dexter F. Baker Dwight C. Minton Charles E. Brookes John Morrisroe Harry W. Buchanan L. John Polite, Jr. Carlyle G. Caldwell Robert A. Roland Robert S. Dudley John P. Sachs Richard E. Engebrecht M. Whitson Sadler Robert W. Gerwig James F. Schorr Arthur L. Goeschel George J. Sella J. B. Henderson William G. Simeral Paul F. Hoffman (2) Orin R. Smith E. C. Holraer Alfred C. Stepan, Jr. Richard J. Hughes Allan J. Tomlinson (I) .Ray R. Irani Hugh B. Vanderbilt William B. Jackson Edward A. Von Doersten Richard H. Leet William G. West John S. Ludington Secretary: General Counsel: Treasurer: By Inviation-. Bruce M. Barackman Edmund B. Frost Gary C. Herrman M. C. Carpenter, The Dow Chemical .Company (1 j Geraldine V. Cox, CMA John E. Dull, E. I. du Pont de Nemours & Company James L. Eichner, Eastman Kodak Company (2) Thomas F. Evans, Monsanto company ,f1J Myron T. Foveaux, CMA (2) Milton Freifeld, CMA (1) Robert B. Hill, CMA F. Milton Hunt, The Dow Chemical Company E. Hamilton Hurst, Nalco Chemical Company Patrick c. Joyce, CMA (1) Victor H. Peterson, CMA (l) Ernest S. Robson, Jr., SOCMA, Monsanto Company William Sharfman, Brouillard Communications Division of J. Walter Thompson (1) Randal P. Schumacher, CMA James N. Sites, CMA William M. Stover, CMA Gordon D. Strickland, CMA Richard G. Waterman, The Dow Chemical Company (1) Richard L. Wilson, CMA (1) (1) first day only (2) second day only Monday, January 11, 1982 2175 1. The meeting was called to order by Chairman Oreffice. COMMITTEE REPORTS Executive summaries are attached in lieu of the complete committee reports which have been previously distributed to the Board. 2. COMMUNICATIONS COMMITTEE The executive summary of the committee report is attached as Exhibit A. Chairman Carpenter reviewed the objectives, audiences, and program elements of ChemCAP, Exhibit B. Mr. Roland described the results of the program, including illuminating statistics relating to the size of audiences reached in each activity of ChemCAP, Exhibit C. Following Mr. Carpenter's presentation of the recommendations of the Communi cations Committee, Exhibit D, Dr. Sharfman, senior vice president and planning director of Brouillard Communications, a division Of J. Walter Thompson, ex plained the specifics of the proposed T.v. test. At the conclusion of a question and answer period during which various con cerns were expressed, the matter of the T.V. ad test was referred to the Executive Committee to prepare a recommendation for consideration by the Board. 3. CHEMICAL REGULATIONS ADVISORY COMMITTEE The committee report, supplemented with chairman Hurst's report, is attached as Exhibit E. 4. PATENT AND TRADEMARK COMMITTEE The committee report, supplemented with chairman waterman's report, is attached as Exhibit F. 5. OCCUPATIONAL SAFETY AND HEALTH COMMITTEE The committee report, supplemented with chairman Evans' report, is attached as Exhibit 0. 6. MEMBER SERVICES REPORT Mr. Peterson's report is attached as Exhibit H. Additionally he described a preliminary analysis conducted of some 114 non-member chemical companies having annual sales ranging from $30 million to over $100 million -- all of which could contribute meaningful financial support if they were members of CMA. After further study it is planned to make a presentation to the Membership Committee for their consideration and recommendation to the Board as appropriate. * *** CMA 073518 The Board adjourned until 9:00 a.m., Tuesday, January 12, 2176 Tuesday, January 12, 1982 7. INTERNATIONAL TRADE COMMITTEE The committee report, supplemented with chairman Hunt's report, is attached as Exhibit I. 8. TAX POLICY COMMITTEE The committee report, supplemented with chairman Eichner's report, is attached as Exhibit J. The committee reports having been concluded the Board then proceeded with its scheduled business session. ~ 9. MINUTES OF THE NOVEMBER 3, 1981 MEETING The minutes of the November 3, 1981 meeting of the Board, as distributed, were approved. 10. REPORT OF EXECUTIVE COMMITTEE Mr. Simeral reported the following actions taken by the Executive Committee the preceding day: Approved a change in the name of the "Pension Committee" to "Employee Benefits Committee". Also approved the committee's recommendations pro viding for: establishment of an educational assistance program which would reimburse CMA full-time employees for 75* of the cost of successfully com pleted, job related, continuing education activities at an estimated annual cost of $8,000; establishment of a thrift savings plan permitting an employee to contribute up to 10* of salary of which CMA will match 50* of the first 6% at an estimated annual cost of $56,000,- and amendment of the CMA Pension Trust to clarify the language of the disability provisions in the current plan. Approved chemical industry participation in U.S. government petrochemical discussions with Japan and Mexico. Approved several recommendations of the Occupational Safety and Health Com mittee which included the establishment of a new Lammot du Pont Safety Award category for intermediate size companies. There will now be three award categories. Category 1 -- less than 1,000 employees; Category 2 -- 1,000 to 10,000 employees,- and Category 3 -- over 10,000 employees. Heard a report that the staff training program is going forward as planned. Heard a suggestion from Mr. Oreffice that the opportunity exists for member companies to work constructively with EPA regional officers on environmental matters. CMA staff will explore what the Association may do by working with state organizations such as the CIC's. CMA 073519 !! iI I r 2177 Discussed in depth CMA's advertising program and unanimously voted to recommend to the Board that consideration of the proposed T.V. ad test program be deferred until the August meeting. During discussion of the foregoing recommendation the Board was advised that in preparing the 1982-83 budget to be submitted for approval of the Board in April, staff has been instructed to be guided by Option #1 in the Treasurer's Analysis of Combined Communications Program Funding and Expenditures -- deleting the T.V* ad test, but preserving the funds for same. ON MOTION, duly made and seconded, it was VOTED: To approve the recommendation of the Executive Committee that consideration of the proposed T.V. ad test program be deferred until the August meeting of the Board. 11. TREASURER'S REPORT Mr. Herrman's report is attached as Exhibit K. Additionally he advised: For the current year CMA should end up with a net contribution to reserves of several hundred thousand dollars. Dues will be lower but this should be offset by interest income and the fact that research and consulting ex penses should be significantly less than budget. Full projections will be available at the March Finance and Executive Committee meetings and will be distributed to the Board in April following preliminary review. The communication assessment was billed in early December, 1981. Through January 6, 1982, a total of $1,556,336 has been paid by 88 members. Pay ments are not due until January 31. At this point the payment rate is running ahead of prior years. The budget process for fiscal 1982-83 is w^ell under way. The requests for 1981 chemical sales have been mailed with a cut-off date of February 1 for returns. Assistance of member companies in expediting the return of reports was requested since they form the basis for revenue projections. 12. REPORT OF MEMBERSHIP COMMITTEE Chairman Caldwell reported that the committee had examined the qualifications of the companies named below and recommended their election. ON MOTION, duly made and seconded, it was VOTED: That Petrosar Limited and Philip A. Hunt Chemical Corporation be elected to membership in the Association. 13. INTERNATIONAL TRADE POLICY Mr. Foveaux, on behalf of Mr. Johnstone, briefly reviewed the Common Market talks concerning petrochemicals in which Mr. Johnstone participated. As a result CMA 073520 .. .f. 2173 of these talks th_ threat to levy protective tariffs against petrochemical exports to Europe from the United States was eliminated* Mr. Foveaux then presented the recommendations, Exhibit L, previously approved by the Executive Committee, relating to chemical industry participation in U.S. government petrochemical discussions with Japan and Mexico. He advised that Canada also is expected to seek similar discussions. He then reported that the House Ways and Means Trade Subcommittee under Chairman Sam Gibbons (D-Fla.) held trade policy overview hearings late in the first session of Congress. He advised that Mr. Johnstone was scheduled to appear on behalf of the chemical industry on December IS, 1981. However, his appearance was postponed because Congress went home that week. The hearings and Mr. Johnstone's appearance will be rescheduled early in the second session, probably in February, perhaps in March. The significant points to be made in his testimony were summarized. 14. ASSOCIATION ACTIVITIES (a) Report of the President ' Mr. Roland described the reports of the committee chairmen as the ~ best ever and truly reflective of the continuing growth and efficacy of the committee structure at CMA. The reports also show that the burden of work is expanding. Accordingly more emphasis will have to be placed, especially in the light of present economic conditions, on prioritization -- a better utilization of resources is the focus of committees and staff in the ongoing planning process to manage the workload. The political bloom is off.the rose and it will become increasingly difficult to resolve the government relations problems that face the industry. Just one significant policy issue is how do we forge an industry position on the new federalism versus-States rights. In addressing this and the many other issues confronting us, we have the machinery in place to do the kind of imaginative thinking that is called for at this stage in our development. (b) Results of R&D Survey of Member Companies Mr. Foveaux's report is attached as Exhibit M. He also referred to the economic press conference held by CMA in New- York City on December 16, 1981, which is further discussed in Mr. Stover's report. (c) Report of Technical Director Dr. Cox's report is attached as Exhibit N. (d) Report of General Counsel Mr. Frost's report is attached as Exhibit 0-. In addition he presented CMA 073521 2179 an update and overview of the Administration's regulatory reform activity. He also commented on CMA's Supplemental Response to the President's Task Force on Regulatory Relief, copies of which were distributed to those present. (e) Report of Director of Government Relations Mr. Stover's report is attached as Exhibit?. He referred in particular to the Clean Air Act amendment process and urged member companies to respond to the action call going out this week from CMA explaining what actions individual companies can take to obtain improvements in the act. 15. NEW BUSINESS Mr. Robson advised that SOCMA considers the New Federalism to be one of the key issues facing the industry this year. A SOCMA study is being conducted which will result in some industry policy guidelines which will be shared with CMA. Certified correct: Bruce M. Barackman Vice President-Secretary PauA/F. Orexffii.ee Chali/rman of the Board CN\A 073522 COMMUNICATIONS COMMITTEE REPORT EXECUTIVE SUMMARY EXHIBIT A The chemical industry's communications action program has hit stride during the 1981-1982 year, fulfilling the promise en visioned by the special Public Relations Task Force appointed by the CMA Board of Directors in early 1979 to come up with a plan of action to meet the industry's worsening public atti tude problems. This multifaceted program, carried out by the CMA Communications staff with the overall guidance of the in dustry's Communications Committee, was marked by these devel opments as 1982 began: "The Chemical Balance: Benefitting People, Minimizing Risks," has been completed as the comprehensive sixth booklet in the CMA's key. issue series documenting the -industry's case. It comes on top of 100,000 copies of the other five booklets already printed. "Pollution Control and Waste Management: Where Do We Stand?" is appearing in the first-of-l982 issue of Time Magazine as a special four-page advertisement documenting the industry's case for Time's 20 million readers. This special report caps off two generations of ads that in 20 months have made over a billion impressions on readers and the public consciousness. Camera crews are shooting industry scenes for a new hazardous waste motion picture and series of television news* clips and public service announcements, with a completion, target date set for March 1982. The new film will sup- -r_ clement "Doing Something," which has-gone through more *' than 8,000 showings before schools, organizations and in dustry groups and been viewed by 8,000,0(Jp on TV. The CMA News Service, after handling a record 4,000 press Inquiries in 1981, produced a special package of new-year story materials, held an economic briefing in New York City and inaugurated "The Report"--a chemical industry radio news service for 625 stations covering the nation. ChemEcologv, reaching 100,000 thought leaders monthly, . sought to extend its reach to millions through a new ChemEcology Science News Service for 1000 science editors. This emphasizes the Cma magazine's special policy issue reports and its new "Chemical Connection" series on indus try contributions and benefits. "Chemical Worker Safety," the fifth in CMA's series of envelope-size key issue leaflets, is being mailed to the industry and thousands of consumer contacts and organiza tion leaders. 2 CMA News has published a year-end Review and Outlook is sue for the press and other thought: leaders, capping off a series of special reports on public policy issues pro viding direct support for governmental action during the year. The CMA communications staff is responding to steadily rising requests for public support aid from the industry's government relations forces and other CMA departments and industrywide committees. The central objective behind this varied, wide-ranging action: Public reassurance. The Communications Committee seeks tc in tegrate CMA programming with that of individual member compan ies in pursuit of these objectives: 1. To increase public recognition of the industry's efforts to meet health, safety and environmental challenges and to manage the risks associated with chemical industry products and operations. 2. To develop public support for the industry's governmental policy positions, 3. To better inform the nation of the industry's positive contributions. Toward this end, CMA's modest information program was supple mented two years ago, through CMA Board action, by the Chemi cal Industry's Communications Action Program--and both are now fully integrated into a consolidated effort. A competent staff has been assembled and, for the first time in its history, the industry has a full package of communications materials avail able to tell the industry's story and build public support for its objectives. The Communications Committee, composed of 13 public relations specialists from CMA membercompanies and another 58 experts on the Committee's six Task Groups, was appointed simultan eously and charged with the specific mission of advising the CMA Board and CMA communications staff on problems and atti tudes involving the industry's relations with the public and providing guidance and assistance on the development and im plementation of remedial programs in this area. In carrying out its mandate, the Committee has developed an intensive program planning process that began last September with an in-depth review by its Long-Range Planning Task Group. The Committee recommendations in summary; The CMA communications program is on course, is achieving results and should be continued as an interlocked, multifaceted package; however, a number of "course corrections'* should be made to shift over all emphasis in present programming somewhat from print adver tising to more news and issue support action. At the same 073524 3 time, the Committee recommends that testing be carried out to determine the feasibility of extending the industry's print advertising campaign into network television. The proposed TV test would be carried out in two stages: 1. Developing the most effective message vehicle for com municating the industry's case on television. 2. Undertaking a pilot field test of television advertis ing in four selected communities at two different ex penditure levels to ascertain whether and at what cost the industry should carry out a national television information effort. The ad test timetable would postpone any actual broadcasting and.its funding until September of 1983, according to present planning, and the Committee would keep the Board fully informed of test progress and results so that the Board would have the fullest possible evidence before it for any discussion of fol low-through action. Cost of the TV ad test is_budgeted at 5455,000. The present backlog of unspent ChemCAP funds would be tapped for this amount, and their expenditure would be spread over the present and next budget years. . The public attitude climate facing the industry seems to be improving, despite polls that show continued heavy public sup port for government regulation in health and safety areas. CMA's third-stage survey of attitudes should provide a better fix on these questions by April. And while some of the improve ment is due to the let-up of the drumbeat of negative publicity originating from EBA and other government sources in 1980, pollsters ascribe a share of it to the industry's communica tions efforts. The television ad test would give the CMA Board additional facts to determine if our overall efforts to build a favorable public attitude climate for the industry need to be expanded into television advertising. Member company communications efforts seem to be lagging, further highlighting this question. The CMA program was intended to serve as an "umbrella" nationwide effort that would provide materials and serve as a catalyst for individual company action, especially at the community level and with company contacts. Toward this end, the Committee and CMA staff, with Board sup port, have devoted the strongest efforts. Unfortunately, and especially as a result of economic recession, many companies seem to be reducing rather than expanding their communications efforts. The Committee believes this underscores even more the need to maintain a strong CMA role in fighting the industry's overall public communications battles. CMA 073525 0 In 4 In summary, the Committee deals che industry can cake c: ns idrabie pride in developing an effective corrir.ur.icat ions ; - ** ram, which is acting results. Quality is present. ; is a continuing problem. The key question dor 3card cci ,5;c5ration involving TV ad testing: Should the industry position itself now so that it. night later be ready, if public opinion and governmental cevalocme.nts demand it, to take another step forward in the in dustry's public supoort efforts? rA' CMA BO-l/11/82 CMA 073526 EXHIBIT COMMUNICATIONS COMMITTEE REPORT TO CMA BOARD OF DIRECTORS January 11, 1982 PROGRAM STATUS Two years ago CMA had a modest public information program that was basically a defensive operation. The Board of Directors then approved a plan to aggressively put our position before a number of audiences -- the Chemical Industry's Communications Action Program, or ChemCAP. Both the ongoing CMA communications activities and ChemCAP are now fully integrated. The central goal of the integrated program is: Public reassurance. The main objectives are: Increased recognition by the public of Industry efforts to: Meet health and safety and environment challenges. Manage risks associated with chemical industry products and operations. c. Build public support: for the industry's governmental policy positions. Our programs to date have been aimed at the following audiences: Political actives Government officials Communicators Company employees Through CMA, member companies, some shareholders, suppliers and customers are reached as well as employees. The program is made up of a number of elements: News Services produces materials for the press, radio and tele vision, concentrating on the news media in New York and Washington. CMA 073527 2- - It also produces materials for member companies and local and regional organizations to help them influence local reporting. The Service handles about 20 press inquired per day. Media Tours, virtually an extension of the News Service, arranges for industry scientists to be interviewed by local television, radio and press across the country. Scientists have high credibility with the public and the media. Print Advertising gets our message to our target audiences in the form, in the place and at the time that we want them to receive it. CMA Direct Issue Support includes counsel and.preparation of brochures, white papers, etc; for the other CMA departments. An example of such support is the Clean' Air packet prepared for the Government Affairs Department. Public, Information activities focus on cooperative communi cations work with other organizations inside and outside the chemical industry such as American Women in Radio and TV, and the National Association of Farm Broadcasters. Included here are efforts to encourage company Involvement in the communications program. Speakers Program seeks to encourage member companies to begin or extend their speaking programs. Education Program carries out the Catalyst Awards program, one of the few effective entries in academia. If* cm BD-l/ll/82 . , iii'j i i mi mm 1 'Jff CMA 073528 EXHIBIT C COMMUNICATIONS PRESENTATION BY ROBERT A. ROLAND TO CMA BOARD OF DIRECTORS JANUARY 11, 1982 There is a growing recognition among our association peers, media, govern ment and industry that CMA's communications program is a first-class opera tion. We have the right mix of industry leadership, talented people, in telligent programming and grade A supporting materials. No question about it. So you say. Right, Bob. You've got really fine people, programs and publications. Good work. But what about the return on our investment? How many people do we reach? Who are they? Is media getting our message? What impact are we having on public opinion? Good questions. So let's go to the bottom line and talk results. Specifically, what have we done for you lately? NEWS SERVICE. Operating in a climate of controversy and hostility, we're developing a network of personal media contacts and servicing that network with no-nonsense news materials. In 1979, the Department received 1,900 phone calls. In 1981, two years later, 4,000 calls were-received, most of them from media. 'Clearly, we've established a presence in the media community as an authori tative source of information. Press releases, 211 of them in the past three years, are part of the package. More than 1,700 press clippings, a fraction of the reality, have been generated. ` And I'll tell you, it's nice to see some favorable headlines for a.change. In 1981, we participated in editorial briefings with the staffs of 30 pub lications with a circulation of 42 million--like U.S. News, Wall Street Journal, Time, and The Washington Post. Fact File is^ a comprehensive ref erence piece on the industry. More than 1,720 copies have been personally placed with newspaper editors and reporters representing a circulation of more than IS million- We just wrapped up our year-end economic briefing for the press--total circulation represented: 5 million. Our participation in the American Women in Radio and Television convention generated 87 broadcast interviews with industry experts. I can tell you that an estimated audience of 15.6 million people received our message. Our participation in the National Association of Farm Broadcasters con- . vention resulted in 296 interviews with industry experts. Potential audi ence: More them 10 million people. The television news feature is an important part of our arsenal. A news feature on CHEMTREC is being distributed to more than 200 stations with a potential audience of more than 10 million viewers. Our Radio-TV Manager runs the chemical industry Radio and Television News Service--reaching more than 10,000 stations. CMA 073529 2 Media tours are the bread and butter of our news operation. CMA members and staff are specially trained to handle broadcast and print interviews. Our media tour program has generated 161 television interviews, 190 radio interviews and 91 print interviews. We've already covered 61 market areas representing a total population of over 33 million people. That's 83 mil lion people. In our current media tour season we are targeting 69 market areas with a total population of more than 85 million. Print advertising provides a synergistic base for everything else we do in communications., The ads give us a national presence that opens windows of opportunity--particularly with media and government. What's the impact, you say? 87.9 million people have seen our ads an average of 12.7 times. That's a bottom line of 1.1 billion advertising "impressions." And the ads have produced nearly 20,000 individual requests for our key issue booklets, an exceptionally high number for this type of ad. CMA Direct Issue Support embraces those communications activities that seek to directly improve the climate of public opinion that influences legisla tive and regulatory decisions. Our News Service and print advertising are certainly a force in the public policy arena. Our monthly ChemEcology news letter reaches 100,000 opinion leaders in academia; government and business. And our frequent ChemEcology Special Reports on key issues give us extended impact through distribution to 1,175 editors and reporters. CMA News reaches 5,500 members--all of them real or potential activists on behalf of the industry.. And CMA News Special Reports expand our reach to 1,175 editors and reporters. More than 2,000 copies of our clean air back grounder, the definitive package on this key issue, were distributed to the U.S. Congress, key legislative contacts in member companies and the press. Our public information efforts employ a comprehensive array of print and audio-visual materials to reach a network of business and special interest groups and the general public. By now you've all seen our "Doing Something" film. But is the film "doing something" for ypu? Try 8,000 showings to civic groups, women's clubs and schools for a"total audience of a quarter of a million people. CMA members multiply this impact by using 250 prints to reach community audiences. Eight million viewers saw our film on cable and public television stations. Six public service announcements were ex tracted from "Doing Something." We've had an estimated 80 million viewers for our PSAs. That's right. 80 million viewers. In fact, WDVM-TV, th Washington, D.C. CBS affiliate, ran one of our PSAs over 40 times in a tough and important market of more than 3 million people. And most of that, incidentally, in prime time. "The Need to Know," our new 27*i-niinute hazardous waste film, is in produc tion for delivery this March. Like "Doing Something," it will get full group and television distribution and will give us more PSAs and news features to put into the media stream. Our "Meeting the Challenge of Change" slide presentation is used extensively by member companies, with more than 400 sets being used to reach employees and the public. CMA 073530 3 Our group liaison efforts give us a multiplier effect through other organi zations that have considerable public credibility--like the American Home Economics Association and the Future Homemakers of America. CMA members and staff host exhibits and distribute materials at the conventions of five major groups representing a constituency of 683,000 influentials. The General Federation of Women's Clubs and the National Grange are but two of ten other organizations that we work with to help tell our story--through film and material distribution and speaker placements. There are some prestigious platforms available and we want to be on them. The bottom line is reaching 6^ million influentials--the constituents of these organizations. And we're doing it. As in a recent issue of the National Businesswoman Magazine, the journal of the National Federation of Business and Professional Women's Clubs, featuring the availability of CMA speakers and printed mater ials. At the core of our print effort are six key issue booklets. The sixth book let in this series, "The Chemical Balance: Benefiting People, Minimizing Risks," a summary of our commitment to environmental health and safety is before you today. More than one million copies of these booklets have been put before the nation's opinion leaders. Our leaflets, presenting shorter statements on the key issues, have reached a distribution figure of more than 275,000. The just-issued "Public Support Programming Action Guidebook" offers speci fic success stories of member company communications programming. 692 copies are in use and spurring industry action. There is clear evidence that our speakers program is coming to life. 3,000 copies of the CMA Speakers Resource Manual are in use by member companies. The result: Thousands of real and potential speaker appearances before em ployees, civic groups, women's clubs, schools and other appropriate forums. 39 member companies currently have or are planning such programs. I'd like to report that 200 companies are involved. We have a. marvelous opportunity for some powerful eyeball-to-eyeball dialogue. Our education programming is modest but productive. The Catalyst Awards Program recognizes teaching excellence in high school and college chemis try. 18 educators are honored annually, generating substantial prestige for our industry in the academic community. Taking it one step further, our 315 winners to date give us a pool of blue-ribbon educators who are generally favorable to the industry--and don't mind talking about it. ChemEcoloqy gives us another entree to the educational community--15,000 readers are teachers and students. So there you have it--hard, bottom line results. A return on your consider able investment in a comprehensive communications effort. But the real payoff comes well down the road, when we begin to see the needle of public opinion move back in our direction. It took us a long time to be consid ered the bad guys. And we won't reverse that overnight. But there are some encouraging signs. A Lou Harris poll asked respondents to rate the chemical industry's air and water pollution control efforts. In 1979, only 33% put us in the "good to excellent" category. In 1980, we hit an abysmal CMA 073531 4 V 4 25% as EPA and activists generated a media blitz on toxic wastes. In 1981, we rebounded remarkably to a 42% "good to excellent" rating. Harris at tributes the major part of this comeback to our advertising and communica tions efforts. So the needle is moving. And we'll continue to take the temperature. Our third-stage Cambridge survey will be completed by April. And the proposed television ad test would give us an immediate fix on the impact of this medium on the public's perception of our industry. CMA BD-1/11/82 CMA 073532 EXHIBIT 0 COMMITTEE RECOMMENDATIONS Each year the Communications Committee and the Long-Range Planning Task: group review the communications program. Both have found the program on course, but needing a few "course corrections". Taking account of today's economic conditions, some of these changes will take some years to accomplish. The major.recommendation is that we should shift the overall emphasis somewhat from print advertising to more news and issue support action. This will include a series of media background briefings involving industry key executives. An expanded effort to produce and place video news clips is also planned. The committee recommends devoting further resources-to dayto-day support of related governmental activities. More media tours by industry scientists are planned. The advertising print campaign should be extended at its current level, with 10 percent of the present ChemCAP advertising budget being devoted to "issue advertising". CMA and member companies should provide for communications programming at the local level, since environmentalist pressure is shifting from the national capital to the state capitals. More resources should therefore be devoted to support of the local Chemical Industry Councils. The Communications Committee feels that adverse public opinion of the chemical industry and its potential for more government regulation makes it necessary to at least develop the information the industry needs to determine whether expansion of its public support program into television might be warranted in the future. The test would produce this evidence. We would place it before you in 1983- Conversely, if the test is not carried out, the industry will never have had a chance to know the facts in this crucial area. The Committee therefore recommends proceeding promptly to carry out the television advertising test. CMA BD-l/ll/82 CMA 073533 1 EXKI3IT E CHEMICAL REGULATIONS ADVISORY COMMITTEE EXECUTIVE SUMMARY OF ACTIVITIES INTRODUCTION The Toxic Substances Control Act ("TSCA" or the "Act") was signed into law on October 11, 1976, and became effective on January 1, 1977. A complex and detailed statute, TSCA empowers the Environmental Protection Agency ("EFA" or the "Agency") to evaluate and, if necessary, regulate the effects of chemical substances and mixtures on human health and the environment. TSCA's coverage is comprehensive. It potentially applies to all chemicals manufactured, processed, distributed or used in the United States except where these chemicals are already regulated under certain other federal laws. TSCA thus affects not only the chemical industry, but the many industries that use its products. TSCA is, therefore, the primary act of con cern to the Chemical Regulations Advisory Committee (CRAC) . Because TSCA has had a direct and substantial impact on the chemical industry, CRAC has made a concerted effort to express its members' views on EPA's actions under the Act, and has used a variety of formal and informal channels to communi cate with the Agency, including the submission of extensive written comments on EPA's proposed regulations. CRAC's efforts have been effective.1 While the Agency has developed and articulated a regulatory approach under each of TSCA's principal provisions, very few EPA proposals have been issued as final rules and no irreversible policies have been adopted.. Additionally, EPA's new leadership is taking a fresh look at the Agency's policies under TSCA and intends to alter the Agency's course wherever a change is warranted. CMA has criticized several EPA proposals published during the last administration and awaiting final action. EPA's new leadership has reviewed CMA's comments and is re-examining those proposed rules. To aid EPA in that review CRAC published a 339-page book, "The First Four Years of TSCA." The book describes major provisions of TSCA, summarizes and references over 3000 pages of formal CMA comments on EPA's proposed rules and highlights the following nine guidelines to better imple mentation of the Act. EPA's regulatory requirements should be well within the limits of its statutory authority and clearly necessary to achieve the purposes of TSCA. -1- CMA 073534  EPA should place less reliance on formal legalistic requirements and instead emphasize voluntary action and informal negotiation to achieve TSCA's objectives. EPA must be more sensitive to the impact of TSCA's requirements on innovation in the chemical industry and must make greater efforts to evaluate the economic impact of its proposals. EPA should seek information only when it is needed to further specific and defined regulatory objectives, and should not demand the collection and submission of large amounts of information for its own sake. EPA must recognize the limited resources that industry is capable of devoting to the goals of TSCA without placing overwhelming burdens on particular products and operations. EPA's proposals should avoid stifling flexibility and inhibiting scientific judgement. EPA must make a greater effort to recognize the legal and commercial necessity of protecting confidential business information. EPA should take regulatory action under TSCA only after adequate data are gathered and only on the basis of scientifically defensible decisions that have been subject to peer review. EPA must recognize that the various provisions of TSCA do not stand alone, but interact with and mutually support each other, necessitating an integrated ap proach to the Act's implementation. in addition to the above guidelines, CMA developed and presented a major regulatory reform package to Vice President Bush and his counsel, the Secretary of Commerce, the Office of Management and Budget, the Reigulatory Relief Task Group, and the regulatory agencies. Together, the publications are a de tailed roadmap to resolving priority concerns of our industry and to.promulgating reasonable, cost-effective regulations that embody the original intent of Congress. During the past year CRAC has continued to expand its influence within the government and the private sector and consequently to require more support from its members and its staff. -2 CMA 073535 MAJOR ACCOMPLISHMENTS CRAC has been able to achieve a high level of performance in regulatory and legislative activities, and has expanded its community, public relations and committee orientation functions by using representatives from member companies, outside legal counsel, outside consulting firms and CMA staff. Under its present task group structure, CRAC was able to address major EPA proposed or final rules under Sections 4, 5, 8 and 12 of TSCA. In addition, CRAC testified before Congress on the implementation of TSCA and was successful in preventing potentially troublesome amendments to TSCA. Communication with CMA members, EPA, Congress and the public remains an essential component on CRAC's program, which it has sought to expand through newsletters and other publications, informa tional meetings and meetings scheduled to discuss a specific topic. CRAC has also sought to define its objectives and to involve each committee member on.specific task group projects. Development of CMA comments on major rule proposals and studying the economic impact of TSCA rules on the chemical industry account for most of the budgeted funds spent during this past year. In order to maintain its high level .of per formance during 1981-1982, CRAC will continue to rely upon outside legal counsel and consulting firms for issues needing special expertise. As many proposed regulations reach final form under the new EPA Administration, environmentalist groups may litigate rules for which they believe EPA has not pro vided adequate support. CRAC will need to document its posi tions on TSCA proposals and to enter the counts where favorable final regulations are challenged or where filial rules are un reasonable and pose substantial burdens. Some major accomplishments made during the past year include: Testified before the House Commerce, Tourism and Transportation Subcommittee on EPA*s-progress toward the implementation of TSCA. Worked with key congressional staff to augment written CMA comments and positions by outlining and advocating CMA positions on EPA initiatives. Commented informally on a congressional subcommittee proposal which would request the Office of Technology Assessment to conduct a study examining the adequacy of test data that the chemical industry has histori cally submitted with PMNs. -3- CMA 073536 1 Briefed key individuals within EPA and. OMB on priority regulatory issues facing the chemical industry under TSCA and through international agreements. Conducted an economic impact analysis of EPA's proposed premanufacture notification (PMN) re quirements under Section S of TSCA,, Petitioned EPA requesting that the Agency commence rulemaking and to exempt certain low-volume chemi cals, site-limited intermediates and polymers from PMN requirements under Section 5(h)(4) of TSCA. Informed the Department of State of the proposed OECD Decision adopting minimum premarket data (MPD) requirements -- i.e., testing -- for all new chemi cals . Submitted a petition to EPA requesting that the Agency modify its final export notification rule promulgated under Section 12(b) of TSCA. Prepared, in coordination with other CMA depart ments, -a detailed regulatory reform package to the President's Task Force on Regulatory Relief, high lighting major regulations under TSCA needing immediate attention. Drafted a policy paper on the Chemical Substances Information System used by'government agencies to store and retrieve information used in regulatory decision-making. Reviewed and commented on test protocols being developed by EPA under Section 4 of TSCA and by OECD. Completed the NERA pilot study examining the methodology used to measure the overall economic impact of TSCA on the chemical industry. Held quarterly, Informational Meetings to keep member company representatives fully apprised of positions developed by CRAC on regulatory pro posals, the origins of those positions, and the anticipated effect they would have on company operations. Published periodic Toxic Substances Newsletters which were sent to the designated TSCA contact of each member company. CMA 073537 a Communicated CMA positions on major regulatory issues to the media. Worked with other trade associations representing the chemical industry to develop a uniform industry position on regulatory proposals having broad impacts. Met or talked with various "public interest groups" having an interest in toxic chemicals in general, or CMA positions on specific TSCA regulations in parti cular, to more fully appreciate their interests and concerns, and in turn, to detail CMA's position to ensure they completely understood it and its support ing rationale. Provided input for CMA's Communications Department through articles related to TSCA that were published in CMA News, ChemEcology, and other CMA promotional material. Distributed to EPA members of the trade press, uni versities, public interest groups, and law schools, copies of CMA's primer. The First Four Years of TSCA. Briefed each new CRAC member on CMA procedures and policies, and on past and current activities of the committee. Prepared a CRAC Procedures Book which contains rules of procedure, charters of CRAC and its task groups, and the objectives and strategies for the committee.. Held a planning meeting for CRAC members and CMA staff to determine what its long-term objectives should be and what strategies should be employed to meet those objectives in a timely manner. MEMBER COMPANY PERSONNEL The level of company participation under CRAC in FY 80-81 was comparable to that measured the year before, with a slight increase in the numberwof companies involved but with a reduction in the total amount of time spent attending CMA meetings. Figures show that 67 CMA member companies participated in various CRAC activities, compiling a total of 3.50 years of direct support through meeting attendance alone . CRAC's activities were sup ported by 214 company representatives who are members on the com mittee and its subordinate task groups and work groups. During the first 6 months of FY 81-82, member companies increased their direct support in CMA meetings, which equates to 2.01 years. CRAC is able to maintain a high level of performance by distributing the CMA 073538 work load among a greater number of companies, and through efforts to make meetings more productive by insisting on an early meeting agenda, asking company representatives to adequately prepare by obtaining company views on draft comments and company support information prior to meetings, and using written and electronic means of communication to enhance operational efficiency. CMA STAFF SUPPORT Currently, two staff executives from the Technical Department are assigned to CRAC full-time while four others provide part-time support. In addition, both the Legal Department and Government Relations Department, have assigned staff to work with CRAC on issues needing their expertise. Administrative and public relations support staff add significantly to the smooth functioning of the committee. For 1981-82, the level of staff support is expected to remain constant. Peak work loads will be distributed among staff executives assigned to CRAC to ensure constant efficient operation. / CMA 073539 -6- Chemical Regulations Advisory Committee Report to CMA Board of Directors January IT, 1982 I interpret my assignment today to be one wherein I should highlight for you the activities of your Chemical Regulations Advisory Committee (CRAC) as they pertain to the implementation of the Toxic Substances Control Act (TSCA) and to indicate our thinking and plans for the coming year. You have in your premeeting papers, a detailed summary prepared by the CMA staff which covers all of the activities that CRAC has carried out this past year. perhaps this summary or my remarks will create some questions from the group to which I can respond at the end of this prepared presentation. Before I can effectively present to you the highlights of our past activities and plans for the future, it is appropri ate that we spend a few minutes summarizing the present status of implementation of the law. I. CURRENT STATUS Just ten days ago, TSCA celebrated its fifth birthday. It hardly seems like it has been five years since the law w nt into effect, but that's the way it is -- "time passes quickly when you are having fun." What has been accomplished in five years with TSCA? The answer to that question depends on the perspective of who is answering. The Regulators (EPA) would poi,.nt with pride to the publication of the TSCA inventory listing some 0,000 chemicals manufactured and/or marketed in the U.S. The Agency would extol their efforts in implementing the premanu facture Notification (pMN) System in which over 1,100 new chemicals have been processed in the 2-1/2 years it has oper ated. The third point of accomplishment would be the Section 8(e) Substantial Risk Report System, wherein 420 reports have been received and reviewed. EPA says they have accomplished a lot in just five y arsl The environmentalists, however, answer the question differently. Prom their point of view the inventory, while published, was months late. The PMN system rules, while pro posed, .have never been finalized. They believe the Agency is accepting pmns from industry with insufficient data and test ing on new chemicals particularly toxicological testing data. For existing chemicals, no test rules have been finalized. The Agency has regulated only a few existing cheiicals -Polychlorinated biphenyls (pCBs), disposal of dioxins and certain uses of chlorof 1 uorocarbons an.d. asbestos. The regulation of pCBs was required in the law itself and even then EPA's regulations were arbitrary resulting in a lawsuit to begin new rulemaking. In short, the environmentalists believe TSCA has not been implemented. The law is five years old and the Agency is still not doing what Congress intended it to do. prom the position of those being regulated (industry), irrespective of the pace of EPA in putting rules into final form, TSCA is working, it is accomplishing the job intended by Congress. The Inventory is published, although not com pletely -- reportedly some 5,000-6,000 chemicals have not been listed publicly. The pMN System has not been finalized, and the system proposed by EPA should not be finalized. The current interim system is operating fairly smoothly and in dustry can best communicate the risks or lack of risk associ ated with a new chemical in the free-style" dialogue ap proach now being Used. The Agency has demonstrated in over I,100 cases now that it can effectively review new chemicals for unreasonable risk using this approach. The development of test protocols has been a slow pro cess and it has delayed EpA's issuance of test rules. In the meantime, numerous industry-initiated test programs have com menced on products needing additional testing, whether brought into the health and safety spotlight by EPA or the companies' own initiative. Cooperative testing programs permitted under TSCA are taking place -- even though the rules are not in place to require such programs. -Pro industry's point of view, TSCA iSiworking -- new chemical are subjected to PMN review and testing of existing chemicals is taking place. : The first five years of TSCA have seen numerous rules proposed by the Agency. CRAC and CMA members have reviewed these and in almost all cases, found the proposals to be either overly burdensome, beyond the intent of Congress, or unworkable or unmanageable for either the Agency or the in dustry. To date, we have seen none of these types of rules finalized. Under the current Administration, many of the proposed rules are being reworked, almost from scratch, we are told. just how the new philosophy of EPA will be trans lated onto paper in the form of rules is difficult to predict", but we are hopeful. II. MAJOR CRAC EFFORTS IN 1980-81 I mentioned earlier that there have been numerous ac tivities wherein CRAC has interacted with the Agency, Cong ress or with the environmentalists. I do not intend to take you through a long list of activities. I will highlight three areas of major strategical importance to us. in April 1981, CRAC testified before the House Subcommittee on Com merce, Transportation and Tourism at a TSCA reauthorization hearing. At that time, we outlined our concern with the EPA CMA 073541 implementation progress to date, continued to support the spirit of TSCA as passed by Congress, and recommended that TSCA not be amended at that time. It was interesting' to note that neither the Agency nor the environmentalists, when specifically asked by Congressman Florio, requested amend ments to TSCA. This seemed to be disappointing to the Committee as they (Hr. Florio) expressed concern over the lack of SPA accomplishments under TSCA. In fact, the House Subcommittee on Commerce, Transportation and Tourism con tinues to express interest in assessing- the quantity of testing being done on new chemicals and the need for addi tional testing and information. This will be a continuing issue that we will face and will need to handle. Secondly, and this ties into the point I just mentioned, the organization for Economic Cooperation and Development (OECD) has developed as a "Decision," ready for signature by the 24 member countries, a program which would call for a "minimum premarket data" package to be developed on all new chemicals. CRAC and the International Affairs Group ( I AG) , through the Department of State (DOS) were successful in convincing DOS that American industry did not support such a policy despite the former EPA Administration's assertion that such a policy was acceptable for the U.S. Our TSCA law does not require the generation of test data for pMNs. Had the DOS signed such a treaty on behalf of the .D.S., it would have started us down the path of amending our laws so that O.S. could live up to its treaty commitment. The "minimum premarketing data package" would cost an estimated $50,000 to $100,000 for each new chemical. This issue is still not settled internationally and final resolution may not take place for several months. However, the call for additional testing on new chemical sub stances on three fronts -- the international^inpetus fostered by OECD, the interest of Congressman Florio's Committee, and the claim by the environmentalists that industry is not doing sufficient.testing on new chemicals warrant our continued attention. CRAC has maintained that testing should be done as appropriate for new chemical substances based on its ex pected properties and use of those chemicals. This testing should not be done on a cookbook or by-the-numbers approach, but should be done on the basis of need, as judged by quali fied personnel. it is the primary responsibility of the company manufacturing the chemical to make this appropriate j udgment. We were successful in changing the D.S. position at the "last hour." We have submitted revised language for considsration by OECD, which raconizes the differences in existing domestic laws and regulations of all member countries. This has not been widely accepted by other OECD members, particu larly European countries pushing for MPD on all new chemi cals. We are holding to our guns here and plan to do so even CMA 073542 if it means no international agreement. Acceptance of the MPD package would represent a drastic change in the thrust of TSCA- Our suggested rewording of the agreement does, in our opinion, protect our interests and enables each country to operate according to its laws. Our third major area of activity has been to petition and pursue with EPA the granting of exemption to pMN process as permitted by Section 5(h)(4) of the Act. Our study of the PMNs submitted to the Agency disclosed that a high percentage of new chemicals were of such a nature that no unreasonable risk would be encountered in manufacturing, processing or use. The pMN system required that these chemicals be sub jected to the PMN process, which delayed manufacturing and market introduction unnecessarily and at a cost which was not j ustified . The available evidence from studies done on the innova tion of new chemicals also indicated there was a significant drop in the number of new chemicals being introduced because of the cost of the PMN system. It is estimated there has been approximately an 80% reduction in new chemical introduc tions since TSCA came into effect. This is in part due to the combination of cost burdens of the PMN system and com panies' reluctance to engage' in new ventures due to regula tory and cost uncertainty. We believe our petition for exemption would significantly ease the adverse impact of TSCA PMN notifications on innovations. Our petition to EPA calls for exemption from all or part of the pMN system site-limited intermediates, small volume chemicals (less than 25,000 Ibs/yr), polymers and those chem icals for which the Agency determines no unreasonable risk exists prior to the 90 days of the pMN review period. The Agency has expressed interest in our concepts and we are currently discussing with the EPA staff the additional de tails they need to develop in a rulemaking for such exemp tions. We are hopeful we can have all of these exemptions available to the industry by the end of the summer of 1982. III. CRAC OBJECTIVES, 1981-1982 I indicated earlier, that I would talk about our plans for 1981-1982. At our two-day CRAC planning meeting, which we he last October, we recognized several items that warrant our attention in CRAC, and for that matter, in CMA as a whole.1 1. Many points within the government and society exist where pressure will develop, and is now developing, which can influence the course of TSCA implementation. While we have spent the great bulk of our time interfac ing with EPA, we see other branches of government, such as. Congress, Office of Management and Budget, Govern ment Accounting Office, and Office of Technology CMA 073543 Assessment and regulatory reform activities as playing a timely role as TSCA moves toward full implementation. We will broaden our approaches to include identification of these pressure points and to take appropriate action. The continuing interest of Congressman Florio's Subcom mittee on the adequacy of PMN data is a good example of how groups other than EPA will need our attention. Where other CMA committees, such as the Government Relations Committee, can help us, we will employ their services or coordinate our activities with them. 2. Since industry supported TSCA, as it was ultimately drafted and passed, we believe that the statement "TSCA is a workable law when implemented in a reasonable and timely fashion" appropriately expresses the industry's and CHA's continued support for the principles and spirit of the law. it is our belief that despite the lack of regulatory action taken by EPA (final rulemaking, etc.) that the law is having its intended effect on the behavior of the industry. We have, in an infor mal way, surveyed part of our membership and developed a long list of actions that have occurred as 'a result of the passage of TSCA and the publ-ic opinion climate, which produced TSCA as a law. We plan to further de velop this type of information, to publicize and use it to help quiet the claim that TSCA is "not working." If Congress perceives that TSCA is not working, it might ultimately begin efforts to amend TSCA adversely. The effectiveness of TSCA may be reviewed and scrutinized during the next congressional year in oversight hear ings. Our approach is to work to assure there is no perceived need on the part of Congress to adversely amend this law. Should amendments be sought by others, we, are prepared to advance those changes which we believe would improve TSCA from industry's viewpoint. 3. We are developing conceptually, a plan for how TSCA can be effectively implemented while complying with the statutory limits of the law. This plan is based on CRAC1s review of EPA proposals and constructive comments we have submitted. These are summarized in the book -"The First Four Years of TSCA" which has been highly effective and well received by the new EPA Administra tion. We plan to work with the Agency to encourage a full implementation of the Act. We believe there exists now with the present Agency management a "window" through which we can get implementation achieved in a "reasonable manner". we want to captalize on this op portunity, since subsequent administration might not be as favorable. Rules that can be finalized now will be more difficult to change later on. CMA 073544 m 4. Finally, we will continue to pursue to a successful completion, our petition for pMN exclusion and resolu tion of the MPD issue. We will continue to respond to all EPA-initiated activities to assure they comply with the thrust of TSCA and represent reasonable implementation. IV. CONCLUSION This has been a very quick summary of where we are -our accomplishments and our plans. TSCA is working and is, as expected, affecting our business, both in dollars and cents, as well as in the way we do our business. To date, TSCA implementation to EPA has been slow. The past EPA Administration was quite aggressive in proposing rules that pushed to the outer limits and beyond, the thrust and intent of TSCA as envisioned by Congress. We in CRAC sense a change in direction, at least at the top positions of EPA under the Reagan Administration. We should see considerable progress in implementing TSCA within the next two years. CRAC will be working to assure that this implementation is in reasonable step with the legislative intent that our industry supported in 1977. I believe CRAC has'been and will continue to be an effective tool for the industry, representing our industry's interest well at EPA and helping to demonstrate industry's commitment to good corporate citizenship. CMA BD-1/11/82 CMA 073545 background SXHI3IT F PATENT AND TRADEMARK COMMITTEE REPORT Executive Summary In April 1981, the Board of Directors elevated CMA's informal patent counsel group to full committee status and charged it with-the responsibility of advising the Board with respect to patent, Trademark and related industrial property rights. PATENT 'PROTECTION IS INCENTIVE FOR INNOVATION The decline in American innovation during the last quarter century has been the subject of frequent commentary. The new Administration has accepted the challenge of regu latory reform so as to promote increased productivity. We are more familiar with the high visibility reform activities underway at EPA and OSHA, but although perhaps less publicized r there are also significant reforms underway in the U.S. Patent System in which our Committee is an active parti cipant. We are optimistic that such reforms will, in the r _> future, offer additional incentives for investment in research and development. To restore sagging confidences in the reliability of a patent to protect research and development investment, legislation to establish a single court of Patent appeals and thereby reduce conflicting decisions in patent laws has passed the House of Representatives and Senate and awaits final resolution in Congressional Conference. (H.R.4482, S.1700) Congress and the Administration now acknowledge the lengthy delays in marketing of new products because of 1 CMA 073546 ft 2 health and environmental impact assessments by regulatory agencies. Legislation is advancing that would extend the normal 17 year patent term for that period, during which commercialization of patented subject matter is delayed due to regulatory review. (H.R.1937, S.255) The Patent and Trademark Office is initiating programs aimed at improving efficiency and timely processing of Patent applications. CMA has strongly urged that the Patent Office be given the necessary resources to acheiye these objectives. A new law allows reexamination of challenged Patents. to be handled within the PTO thereby reducing the number of expensive court challenges. This same law provides for better funding of the Patent Office and charges the costs for administering the Patent Office to the users. It also takes a first step toward establishing a uniform government patent policy. while we are witnessing a new respect for innovation and for a patent system designed to protect that innovation in the U.S., CMA's Patent Committee seeks also to secure such protection abroad through the U.S. state Department and by direct contanct with the Governments of Korea and the U.S.S.R. In addition, the Committee chairman was asked to be a member of the U.S. Delegation at the second conference to amend the international treaty concerning industrial property, CMA 073547 FUTURE 3 CMA's Patent and Trademark Committee and your corporate patent counsel will continue to promote the patent system as one of several measures to encourage increased innovation in our industry. ACTION REQUESTED NONE, FOR INFORMATION ONLY i CMA 073548 m PATENT AND TRADEMARK COMMITTEE REPORT TO CMA BOARD OF DIRECTORS January 11, 1982 In his fascination for Yankee ingenuity, Mark Twain said "A country without a patent, a patent office and good patent laws is just a crab, it can't travel any way but sideways and backways." We couldn't agree more that the patent system is an essential element in the innovation process. And fortunately, in the past couple of years. Congress seems ready to do something to move the process forward by generating a relatively high level of legislation involving industrial property. As a result, the Patent and Trademark Committee has been quite active. I expect you will be happy to know that this activity has been a low cost item. No funds were spent for outside assistance and all commentary and testimony was developed and delivered by the committee members and our staff representative. And, I want to mention and give credit to Patrick Joyce, our Staff Representative. Pat has been most helpful and responsive to the Committee's needs and contributed substantially to its effectiveness. Thanks, Pat! Now I would like to briefly mention what this legislation may mean to the CMA member companies. At the beginning of 1981, we saw the first substantial piece of patent legislation enacted in 25 years. A bill that I believe substantially all of the CMA members supported. There had always been some legislation in the pipe line in previous years but none was delivered. This new bill contains four principal parts, and regulations are still being developed to implement some of |the law. The first provision, which is the one I am sure you have heard the most about, is a procedure for the -re-examination of patents. A recent survey of court cases holding patents invalid showed that most'of the decisions were based . on patents and publications not previously considered by the Patent Office. Re-examination permits anyone to bring to the attention of the Patent Office prior publications relevant to any issued patent. Provided the Patent Office is allowed the manpower and funds to do the job right, this should strengthen the presumption of validity of patents and therefore reduce the number of infringement suits and extremely expensive litigation. The second provision provides for a uniform government patent policy. But, the term "uniform" is misleading because the policy is not uniformly applied. It provides that only small business and non-profit institutions will receive title to inventions made under government funded research. There is currently a bill pending which would expand this to include big business, which, as you might expect, is fairly controversial. Our Patent Committee has not been involved in this legislation because apparently the acquiring of government research contracts has not been a significant factor in the chemical industry, and for those agencies we deal with, we have been able to negotiate acceptable patent clauses. A third provision of the new law provides for funding of the operations of the Patent Office. The schedule provides for a recovery of 50% of the costs of patent prosecution; 25% from filing fees and 25% from maintenance taxes on mmrnm CMA 073549 m 2 patents, which is a first for the United States. Every other country in the world has maintenance taxes on patents except the U.S. and Canada. However, the Patent Office has just proposed to recover from the users 100% of these costs and make the Patent Office self-sufficient, starting in October of this year. This is based on the expectation that the Administration, while supportive of the Patent Office, will not push to increase the level of -funding the office feels it will need to meet its goals. If the present proposal goes through to recover 100% of the costs, most of the CMA companies can expect filing and issue fees to increase about 4*j times what they are now. To give you an idea of what this means in dollars, we looked at our operations at Dow and estimate that if we continue filing patent applications at the same rate we did in 1961, the annual increase will be about a quarter of a .million dollars in out-ofpocket costs to cover the increased fees, going from $71,000 to S315,GOQ. while this sounds like a rather staggering increase, it is less painful with the knowledge that the fees have not been increased since 1965. The fourth provision of this new bill placed an obligation on the Patent Office to undertake a study to introduce computerized searching in order to upgrade its operations. This became part of the bill primarily to offset a substantial thrust by the private sector, including CMA, to take the Patent Office out of the Department of Commerce and make it an independent agency. While that did not fly, the effort was not lost, because we got the attention of the Administration and they agreed the Patent Office was getting less than its fair share when it came to funding. Also, before this, the Commission of Patents answered to the Assistant Secretary of Commerce for Science and Technology, he was not included on the Secretary's staff and he had no dealing with Congress or the 0MB in developing and defending the budget for the Patent ; Office. Now the Commissioner answers directly to and is on the staff of the Secretary of Commerce, and is directly involved in all phases of the budget. On the proposal for. computerization, the biggest problem we see is that the Patent Office is listening; primarily to the vendors of computer hardware.: and software and not to the users of the Patent Office services. -. Now to the pending legislation. A bill called the Federal Courts Improve ment Act has passed both the House and Senate. Among other things, it will create a Court of Appeals havincf exclusive appellate jurisdiction in patent cases. This should establish more uniform interpretation of the patent laws, and with that, perhaps when you ask, you can get your patent counsel to commit to something other than a 50-50 chance of winning. The same bill passed both Houses during the last Congress, but got snarled up because of the addition to the Senate version of the bill, the controversial "Bumpers Amendment". We have a similar situation with the present Senate version. Senator Dole added an amendment dealing with grain elevators that become bankrupt. However, Pat Joyce advised me just last Friday that Senator Dole has agreed to withdraw the amendment. Naturally, we take that as good news, however, I am somewhat personally disappointed in that I thought the title of the bill would have an interesting ring, "The Federal Courts Improvement and Bankrupt Grain Elevator Act of 1982". Sort of reminds me of the "Great Bubble Gum and Storm Door Company of Gopher Hole, N.D." In any event, we do expect the differences between the House and Senate bills to be resolved during conference and that bill will be enacted. CMA 073550 2 patents, which is a first for the United States. Every other country in the world has maintenance taxes on patents except the U.S. and Canada. However, the Patent Office has just proposed to recover from the users 100% of these costs and make the Patent Office self-sufficient, starting in October of this year. This is based on the expectation that the Administration, while supportive of the Patent Office, will not push to increase the level of-funding the Office feels it will need to meet its goals. If the present proposal goes throng!* to recover 100% of the costs, most of the CMA companies can expect filing and. issue fees to increase about 4*i times what they are now. To give you an idea of what this means in dollars, we looked at our operations at Dow and estimate that if we continue filing patent applications at the same rate we did in 1981, the annual increase will be about a quarter of a million dollars in out-ofpocket costs to cover the increased fees, going from $71,000 to $315,000. While this sounds like a rather staggering increase, it is less painful with the knowledge that the fees have not been increased since 1965. The fourth provision of this new bill placed an obligation on the Patent Office to undertake a study to introduce computerized searching in order to upgrade its operations. This became part of the bill primarily to offset a substantial thrust by the private sector, including CMA, to take the Patent Office out of the Department of Commerce and make it an independent agency. : While that did not fly, the effort^ was not lost, because we got the attention of the Administration and they agreed the Patent Office was getting less than its fair share when it came to funding. Also, before this, the Commission of ^ Patents answered to the Assistant Secretary of Commerce for Science and Technology, he was not included on the Secretary's staff and he had no dealing, with Congress or the 0MB in developing and defending the budget for the Patents Office. Now the Commissioner answers directly to and is on the staff of the. .: Secretary of Commerce, and is directly involved in all phases of the budget. On the proposal for computerization/ the biggest problem we see .is that ode the Patent Office is listening primarily to the vendors of computer hardware, ret and software and not to the users of the Patent Office services. Now to the pending legislation. A bill called the Federal Courts Improve ment Act has passed both the House and Senate, Among other things, it will create a Court of Appeals having exclusive appellate jurisdiction in patent cases. This should establish more uniform interpretation of the patent lavs, ... and with that, perhaps when you ask, you can get your patent counsel to commit to something other, than* 50-50 chance of winning. The same bill passed both Houses during the last Congress, but got snarled up because of the addition :. to the Senate version of the bill, the controversial "Bumpers Amendment". : We have a similar situation with the present Senate version. Senator Dole added an amendment dealing with grain elevators that become bankrupt. However, Pat Joyce advised me just last Friday that Senator Dole has agreed to withdraw - the amendment. Naturally,, we take that as good news, however, I am somewhat personally disappointed in that I thought the title of the bill would have an interesting ring, "The Federal Courts Improvement and Bankrupt Grain Elevator Act of 1982". Sort of reminds me of the "Great Bubble Gum and Storm Door Company of Gopher Hole, N.D." In any event, we do expect the differences between the House and Senate bills to be resolved during conference and that bill will be enacted. CMA 7355i 3 3eora it'5 all over, the sending hill shat will probably create the most controversy is the Patent Term Restoration Act, or in simple lane-cage, the bill Shat would extend the tarn of patents that cover products held up from marketing due to regulatory review. This bill has already passed the Senate, and hearings are completed on the house Side. We have special pride in this bill since it originated with an ad hoc group of our Patent Committee. Three of us prepared the first draft which is substantially intact in the present bill. We hoped to provide a law no extend certain patents in a simple, objective way that could be easily admin istered. We did not want to include a lot of procedural and discretionary features that would only lead to legal battles later on. 3ut, as a result of the House Committee hearings we see some of this creeping in, and there have been a number of amendments proposed for retroactivity to catch certain products already commercialized or far along in the approval process, like hanging Christmas tree ornaments on the bill. One such product is G. D. Searle's new synthetic sweetner, Aspertame. If the bill is passed, and considering that extension only comes about at the end of the 17 year patent life, I suspect a lot of us probably won't be in our present roles to realize the benefits of all this. On the International scene, we encourage developing countries to adopt patent laws that are compatible with free trade and technology flow. 3ut the most significant development that, bears watching is the proposed revision of the Paris Convention, which is the International Treaty providing for reciprocaltreatment of industrial property rights. This treaty has been effective for over 1QQ years. Two international conventions have been held to revise the treaty for the sole, purpose of finding ways to-appease the demands of developing nations for special treatment, with no resolution. However, the developing nations, remaining completely inflexible in their demands, are slowly converting most of the other countries to their side. As you might expect, there are the usual three factions -- the developing countries, the Soviet Bloc and the Group B industrialized countries. The problem is there is no unity within the industrialized-country bloc, with several distinct groups pulling in different directions. The U.S., for example, stands alone in resisting a provi sion which would allow for the forfeiture of patents by he governments of developing countries, and the U.S. 3tands alone in resisting a provision that would allow the granting of compulsory exclusive licenses, which could mean that a patent owner could find his own patent used to stop him from importing his product into a country. - One reason why we see the other industrialized countries being so pliable and we think insensitive to the consequences of these proposals, is that their delegations are made up of government bureaucrats, whereas the (J.5. delegation has a large number of representatives from the private bar. As Chairman of the CMA Patent Committee, for example, I was invited to participate as a member of the U.S. State Department Delegation. Overall, I believe our Patent Committee has high visibility and respect. Congressional and agency staff people solicit the Committee's comments and guidance, and it has been requested several times to provide testimony at legislative hearings. We feel the U.S. patent system is designed to encourage l investment in innovation, and we intend to devote our efforts to help make the J system work. We are also proud to report that one of our committee members who retired last year, Don Quigg of Phillips Petroleum, was appointed to the post of Deputy Commissioner of Patents and Trademarks, which, is the second ranking position in the Office, and is a Presidential appointment. bd-i/h/82 CMA 073552 !f!* jj; 4 ll ' ! . H\- is 11 OCCUPATIONAL SAFETY AND HEALTH COMMITTEE EXECUTIVE SUMMARY Major Accomplishments Major accomplishments of the Occupational Safety and Health Committee include: Providing information and technical expertise to regulators and legislators who look to the Committee for industry representation on occupational safety and health issues. Providing a major portion to CMA's contribution to Vice President Bush's Regulatory Reform Task Force. Revising its task group structure in late 1980 to react quickly to new trends. Bolstering the CMA safety awards program to improve the industry's image. Health Revision of OSHA's cancer policy was one of CMA's top ten priorities sent to the Regulatory Reform Task Force. The Agency has not carried out the existing policy but plans to review it soon. Reproductive hazards in the workplace remain a major chemical industry concern. In its comments on the Interagency Regulatory Eiaison Group's ' (IRLG) guidelines for control of reproductive hazards, CMA discussed the complexity and lack of information on this subject. Under the new adminis tration, the successor to IRLG, the Interagency Science/Health Coordina tion Group, is continuing to prepare new guidelines; this time with input from industry, including CMA representatives. CMA reiterated its comments to IRLG in a formal response to the Council on Environmental Quality (CEQ) on their draft document, "Chemical Hazards to Human Reproduction." In addition, CMA filed an amicus brief supporting a member company's embryofetotoxin policy. The key issue is whether the company cam protect the fetus by excluding women of childbearing capacity from workplaces where they may be exposed to fetotoxins. CMA also commented on proposed Equal Employment Opportunity Commission guidelines in this area which were eventually withdrawn. In comments to OSHA, CMA recommended that stays be continued on the amendment to the occupational noise standard. CMA made additional sugges tions on remaining parts of the standard to permit continued use of hearing conservation programs which have been so successful in the chemical industry. OSHA also interpreted parts of the rule on access to employee records to provide increased protection for trade secrets. CMA recommended that negotiations with employee representatives, not regulations, should deter mine the conditions for allowing access to records with trade secrets. Moreover, CMA has intervened in the AFL/CIQ lawsuit to prevent further broadening of access to employee records. k, In response to OSHA, CMA stated that laboratories should be the sub ject of separate rules rather than required to comply with general industry regulations. Such rules would lighten their recordkeeping andmonitoring burden. Moreover, OSHA has proposed a revision to its lead standard in keeping with the CMA suggestion of using qualitative respirator fit testing. CMA cosponsored a pioneering course in cooperation with the American Occupational Medical Association (AOMA), to inform primary care physicians and other health professionals about occupational medicine. In a cooperative venture with NIOSH, CMA cosponsored a two-day sym posium in control technology in the chemical manufacturing industry. The event was well received by the participants. As part of the Hazards Communications Special Committee, the OSH Committee played a key role in formulating CMA policy on labeling. OSHC worked closely with OSHA personnel and participated in the hearings before Congressman Gaydos' Health and Safety Subcommittee of the House Committee on Education and Labor. Safety In written comments and testimony at an OSHA hearing on Hazardous Materials (Subpart H), CMA requested a substantial delay in the rulemaking procedure to allow time for considering major changes in rules. CMA is suggesting that standards be performance goals that address workplace hazards. They should include workpractices plus training and education requirements, thus de-emphasizing equipment rules. * CMA testimony on lockout and tagging of equipment helped deflect a rigid rule. The regulation would have required extensive and costly changes in the practices of many member companies. CMA specifically, argued against a proposed rule on conveyors. While the Agency may yet publish such a rule, it would now probably be a performance goal so that compliance would not be an unreasonable burden for the chem ical industry. CMA endorsed OSHA proposals for targeting safety inspections and made suggestions for improvement. These included the use of OSHA record able injuries and self-reporting of these data to the Agency. We will continue to work with OSHA on this matter. CMA argued that walkaround pay is a collective bargaining issue rather than a safety issue. The final rule has been revoked by the new OSHA administrator. 2 CMA 073554 CMA recommended the exclusion of bulk liquid terminals from a prooosed OSHA regulation on marine terminals. Existing regulations adequately protect workers at such terminals. Finally, the new administration is changing OSHA's attitude toward industry from one of confrontation to one of cooperation. As part of this process they are rewriting the Field Manual. CMA endorsed the Agency's draft of Instructions to compliance personnel on complaint procedures and the General Duty Clause of the OSH Act. We also made some technical comm nts on these drafts. Legislation OSHC worked with Senate staff members to support the Schweiker Bill._ The Bill would have eased the inspection burden on relatively safe companies. Overall OSHC/Staff Activities The program, structure and management of OSHC were strengthened by reexamining task group missions. Consequently a group on Health Standards was established to deal with specific health concerns such as cancer policy, hearing conservation, and reproductive hazards. Further realignment and personnel changes are planned to handle new issues as they arise. The effectiveness of CMA staff was significantly improved through better coordination with the Government Relations and Legal Departments. OSHC's efforts were refined to increase the Committee's impact on legislative and regulatory processes. Refinements were designed to: Identify at an early stage, emerging occupational safety and health issues. Establish timetables for early drafts to allow member companies to use applicable arguments in their own responses to requests for comments from public agencies. Monitor and influence NIOSR and OSHA research programs. Member Company Personnel Ninety-seven people from 38 companies participated in OSHC efforts. In the coming year, participation by member company personnel is expected to increase about 20 percent because of the opportunity to change regulatory policies under the Reagan Administration. CMA Staff Personnel One professional and one supporting staff member are assigned full time to OSHC. However, the Committee is part of the Health, Safety and Chemical Regulations Division and assistance and advice are available from the director and other members of the Division and from senior CMA staff. i ft -37* CMA 073555 Routine professional support from outside the Technical Department includes the equivalent of one attorney from the Legal Department and one-fourth person from the Government Relations Department. Also, the librarian has helped organize and distribute background documents to interested members. Budget The Fiscal Year 1981/1982 Research and Consulting budget for OSHC, 545,000, reflects a planned emphasis on occupational medical training. It also includes starting a project to analyze costs of compliance with OSHA rules. Planned expenditures for health and safety grants during Fiscal Year 1981/1982 are the same as for last year, about $10,000. I 4- m * i i Value to Industry We do not currently have a way to quantify dollar savings attrib utable to Committee activities. Yet we should keep in mind, important employee relations and public image aspects of the Committee's work. Estimates of avoidance of added costs are in the following categories: Redirection in agency programs. There are billions of dollars in potential savings if we succeed in deflecting inappropriate rules, and improving others. - Draft revision of the ANSI Z129.1 labeling standard is serving as a basis for discussions with OSHA in its rulemaking efforts. - Elimination of inappropriate requirements, as in the noise standard, avoids costly conflicts with the Agency. - Revision of the OSHA cancer policy to put it on a firmer scien tific basis will preserve many commercial products. Savings due to timely and sound comments in early stages of agency programs. - Continuing CMA input to the Interagency Science/Health Coordina tion Group on reproductive hazards helps reduce the chance for rigid guidelines based on poorly developed scientific tests. Influencing Legislation - We are working with other industry groups to update our OSHA reform program. - We continue to work with Congressional Committees in their over sight investigations and hearings on such matters as OSHA over sight, occupational disease, hazards communication, reproductive hazards, and the like. In addition, some Committee programs considered necessary cannot be related directly to immediate financial benefits. Examples are: Annual Symposia like the successful one on "Control of Workplace Hazards in the Chemical Manufacturing Industry," in Philadelphia, March, 81. Safety Awards Program - Lammot DuPont Safety Award - Certificates of Achievement and Honor Safety Statistics - Occupational Injury and Illness Reports Legal action on OSHA regulation on Access to Employee Records and the issue of protecting the fetus from fetotoxins in the workplace. 5 CMA 073557 Occupational Safety and Health Committee Report to CMA Board or Directors January 11, 1982 Good morning, welcome to occupational safety and health. X am both pleased and privileged to be back to report to you again -- as my term was extended for another year as Chairman of the Occupational Safety and Health Group. The Committee is alive and well -- and we hope -functioning more energetically and effectively. Last year, I reported to you that we intended to reestablish our Committee to a position of leadership in the occupational safety and health community and become a force to which the agencies and other associations turn for industry representation and cooperative efforts. We are achieving our goal and must continue hard work to sustain our position. We have again revised our task group organization by consolidating several health activities into one major group and have added two, expanded scope of another while sunsetting yet another, leaving 12 in operation. We also still maintain liaison with three other groups in CMA. At the outset, let me confirm an impression or alter a misconception, whichever the case may be, relative to regulatory activity within the occupational safety and health community. If any of us thought that life would be easier and the pace slower under a new and more friendly admin istration in Washington -- be advised it is. not so. As you all know, regulatory reform under Vice President Bush is real, and requires, and is getting, our input and support. Activities have involved, the establishment of priorities within OSHA for review of those regulations that were in various stages of proposal by the previous administration. Shortly after we met in Florida last year, the outgoing Eula Bingham Administration published their now famous series of "midnight regulations" which have provided much of the raw material for this review. The administration of Thorne Auchter, the new Assistant Secretary of Labor for OSHA, has set a timetable of l1} to 3 years to complete this review and final pro mulgation of the rules involved. During this period of time only a few, if any, new regulations will emerge and there should be no real sur prises . The new Agency administration is accessible and is one with which is is easy to communicate and work. After almost a year of operation, the new administration at OSHA summarizes their approach by emphasizing their goals in three areas; attitude, program mix and management. They pride themselves for having greatly minimized^ the adversarial posture with industry. They feel that their program includes a blend of sensible enforcement, effective standards development and consultation for education and training. And finally, Thorne Auchter characterizes his management approach as one of the hands on variety and plans to develop indicators that will 2 measure the performance of the enforcement regions as well as the Agency as a whole. In summary, Auchter is dedicated to and is practicing administrative reform of the Agency to reduce injuries and illnesses through performance standards in rulemaking, cooperation in enforce ment and by giving power back to state programs and responsibility to employers. Many of the accomplishments of the Occupational Safety and Health Committee are recorded in our annual report and need not be repeated in detail here today. Some areas of our activity however, are worthy of summary. OSHA review of proposed, final, stayed or withdrawn published regulations required the preparation of a number of formal comments for submission to represent CMA's position to the Agency. We com mented on the trade secret aspects of the medical records regulation calling for liquidated damages for companies where violations are proven, and we have taken a lead role in presenting suggested revisions for the hearing conservation amendment. We updated the ANSI Z 129 Labeling Standard, for which CMA is the secretariat, and launched it on its journey for panel approval. Two of our members continued in active service on the Hazards Communication Special Committee dealing with labeling while I represented the OSH Committee with the Hazards Communi cation Special Committee for CMA, in testimony before the Gaydos Eouse 'Labor and Education Subcommittee on Health and Safety that was .investi gating the "Labeling - Right-to-Know" issue.. We also sponsored the right-to-know panel presentation at the Semi-Annual Meeting in November. There has been a late breaking development here. As a result of an OMB procedure dealing with the paperwork reduction act and a clever CMA Legal Department, we obtained a copy last Wednesday of the Hazard Communication proposal that is still under review at OMB. The standard proposal applied to SIC Codes 20-39 and covers acute and chronic hazards, and is due to become effective 1 to 3 years after final publication in 19S3. Manufacturers are allowed to make their own hazard evaluation following suggested guidelines and not definitive specifications. Material Safety Data Sheets are required must be delivered to customers on initial shipment, eaqployees and designated representatives on request. Labels are required on all containers in a plant, but not pipes while placards are allowed in some instances. Each workplace must have a training and communication program for the employees and lists of chemicals in the workplace must be available. Provisions are made for protecting trade secrets, but there are concerns. Requirements to list hazardous ingredients in mixtures down to 1% also raises concerns. CMA has filed comments with OMB and will file a more detailed critique with OSHA. Agency personnel claim that OMB is seriously considering not releasing the proposal for publication in order to minimize the output p.lWM 1PW CMA 073559 3 of regulations from the Reagan Administration. If this happens, the states and municipalities will redouble their efforts to proliferate the scene with laws and regulations far more stringent than the Federal proposal. This intent has been forcefully represented to OSHA by labor organizations. CMA has written OMB and restated its support of a federal standard I would personally like to make a plea to each one of you in this room who have contacts in the White House and OMB -- to please urge them to support the issuance of the Federal proposal to blunt the efforts in the states. We feel we can resolve many of the regulation requirements that are unpleasant with Agency personnel during the comment and review period. OSHA personnel have asked for this support: your help will be appreciated. To continue with 1981 -- our cooperative efforts with NIOSH re sulted in what appeared to be a successful and well received symposium on control technology in the chemical manufacturing industry held in Philadelphia last March. Our physician training task group is co-sponsoring a pioneering course in cooperation with the American Occupational Medical Association (AOMAl to inform private physicians and other health professionals about occupational medicine. Several other representatives participated in an IRLG workshop concerning guide lines for reproductive hazards in the workplace. Our Committee repre sentatives also appeared at several OSHA hearings to present comments on issues such as hazardous materials and lockout and tagging. Some of the other responses by the Committee included the following shown here: to appraise all Association members about the status of occupa- ' tional safety and health regulatory issues, the Committee sponsored an informational meeting several months after`the new Administration took office. -' All in all, the number of member company personnel par ticipating in our activities has increased about 50% oyer the past year and is expected to increase further in 1982. Within a week or two of his Senate confirmation as the new OSHA Assistant Secretary, Committee and CMA staff personnel called on Thome Auchter and presented verbally, and in writing, our recommendations for -- OSHA administrative reform -- which we perceived to be the number one priority for the Agency. We stressed the:need to reduce adversarial relationships, expand consultive services, target inspections, encourage voluntary compliance practices, prepare performance oriented standards, combine engineering controls with administrative controls and protective equipment, reduce the oppressive application of General Duty Clause citations and also consider technical feasibility, cost and risk assess ment in standards preparation -- and others. Not that all of these suggestions were terribly new with us, but OSHA has taken action -- favorably, in every one of the areas mentioned. We later followed up with more detailed recommendations to guide the Agency to target their compliance and inspection efforts in high hazard industries based on performance criteria. We recommended that 4 total recordable injury and illness data be used instead of the LWDR (lost workday rate) data since the latter is influenced by judgment calls and workman's compensation awards. The system we proposed would employ industry data by workplace within a given OSHA area permitting individual plant site targeting within either hazardous or non high risk industry. Although the Agency has not initiated targeting action for health inspections, as they have for safety inspections, an idea was presented for health targeting that will be pursued as they develop their plans further. Such a plan would include criteria that a given plant location must meet before OSHA inspectors would leave the site without conducting an inspection. The quality of a location industrial hygiene program, monitoring records and compliance to TLVs etc., are features included in such a plan. For what it is worth, an article dealing with the matter of OSHA reform by me was published in the Journal of Commerce in connection with our Semi-Annual Meeting issue. Our OSHA Reform Committee has now been requested to develop a laundry list of legislative reform issues that should eventually be considered if it appears that changes in the law are possible to engineer. We have communicated our thoughts to OSHA management and have been urged not to push for legislation for ,,at least one more year. The new adminis tration wants one full year to evaluate the successful features of their administrative reform program before selecting areas to be etched in legislative stone. Sam Pickard representing the CMA OSHA Legislative Affairs Group has been so informed of these discussions and plans. Our Safety Standards Committee has.develop?*! an innovative new , approach to the preparation of effective performance standards that also . - has been formally presented to OSHA. The solution.is for.OSHA.to add the dimensions of employee training and safe work.practices.to their ;fc issues and at the same time^ reduce.the dependency on detailed equipment ,r specification. The value of this balanced approach is illustrated in the pyramid - the base of which represents the basic components of any workplace - equipment, materials and worker's, actions. Without adequate safeguards a worker's interaction with these elements takes place at the base of the pyramid and injuries an illnesses can.result- Three mechanisms are needed to raise the worker from the plane of injury: - the first - is safe equipment design and specifications ., - the second - is training ' " - the third - is safe workpractices such as tank entry, lock out, etc. - the result - safe employees This system is employed in most of our member company safety programs. Our industry has today proven to be first in safety performance according to the National Safety Council, and we feel strongly that our work CMA 073561 WORKPLACE RELATIONSHIPS I ) practices favorably affect our position, and would so influence the rest of the manufacturing industry covered by OSHA if they were equally em ployed. OSHA has shown a keen interest in the techniques and will work further with us to understand and apply it to the task of preparing safety and health standards. Although we do find the new OSHA Administration accessible, coopera tive and easy to work with, we have a few concerns: 1) we are concerend over the dedication of the Reagan team to push more and more occupational safety and health program activity to the states. We are concerned over the prolifera tion of regulations in many states covering the same issue, such as the right-to-know one. We are federalists when it comes to regulations and do not become states "rightists" until it comes to compliance. We have communicated our views forcefully to the Administration. 2) We are concerned about OSHA*s STAR program (Share the Accounta bility for Regulation), the Project Build and the CEP (Coopera-tive Experiments Program) - all designed to encourage joint workplace labor and management safety and health committees. Here again, we have communicated our reasons for concern to OSHA management and will continue to offer alternate approaches. 3) We are concerned over the general morale of the Agency at the lower working levels. A new, eager and quite capable management team exists today while rather severe reductions in staffing " have taken place in the main workforce. At these levels, there is frustration over the gigantic task ahead with too few hands to produce. The ideology of this group resembles that of the old Bingham Administration more than that of the new one. So far - they appear to be manageable. 4) Our ultimate concern is for the success of the new OSHA. Con trary to what you read in the Washington Post, the Agency is not inactive or being totally ravaged. Industry cannot afford to let up in their safety and health programs -- we must perform and prove that the new balanced approach at OSHA is effective in reducing occupational injuries and illnesses - or - I am certain, that we will see a return in future administrations to the tough police style that characterized OSHA during the last four years that were dominated by labor influences. So - in 1982, the Occupational Safety and Health Committee will work hard to continue to improve the safety and health performance of our member companies and help to make this OSHA Administration successful. We will promote the programs of the successful companies to make the improvement happen. Each of you gentle men would do your companies and your industry a service by re turning home and urging even greater efforts to improve safety and health performance. 6 We will remain a leader and significant source for the Agency to call upon to develop scientific and regulatory positions on key issues. OSHA has confided that these issues for the next one to three years will include -- lead, cotton dust, noise, labeling, medical records access, cancer, protective equipment vs. engineering controls, qualitative vs. quantitative respiratory fit testing, laboratory safety and some specific substances such as formaldehyde, ethylene oxide, ethylene dibromide, chromium, arsenic, nickel, cadmium and asbestos. ANFRs are expected by the end of January that will further reopen the record and provide an opportunity to recommend additional changes for improvement in noise, medical records, and respirator standards. Here again, there has been a late development. The OSHA Cancer Policy ANPR was published in the Federal Register on January 5. Comments are requested on the current policy for identifying, classifying and regulating occupational carcin ogens and including the staying of the part of the policy that calls for candidate and priority list publication. AIHC has assumed the lead role on this issue in the past. We -- CMA -- will work with them to provide the best technical input here and to be sure that we maximize -- not duplicate our efforts and manpower. I have already discussed this rela tionship with Bill McCarville, who is Chairman of the AIHC Scientific Committee. CMA's participation is necessary to maintain consistency in industry's advocacy at OSHA as well as the other agencies investigating the cancer problem. Participation is essential to preserve our legal standing to challenge the final regulation on behalf of either the OSH Committee or a CMA special program. Safety regulations will include hazardous materials, marine terminals, walking and working surfaces and a few others. Our task groups are active with the Agency to develop reasonable positions on the issues as they address them - one by one. Also in 1982, we will continue to invite Agency management personnel to our Committee meetings to promote cooperative efforts and understanding. We will continue to maintain old and develop new personal contacts within OSHA and NIOSH so that we can avoid major surprises promote our positions effectively. - We will work to develop a health targeting system at OSHA. We will promote our injury/illness data approach to overall safety inspection targeting. We will continue to promote the performance standard concept and will provide examples to the Agency for Health as well as safety. In 1982, we will discourage formal joint/labar management committees in the workplace. We will offer alternatives to the STAR program and others. CMA 073564 i 7 We will discourage preparation of regulations at the state level and encourage adoption of federal requirements while promoting state compliance control. Our long range planning for each of the issues with which we deal, must include a three year thought process as well as a seven more years approach. We must position ourselves with respect to these issues in such a way that a possible change of administration would not totally destroy the effectiveness of the work we will be doing. . And, finally, we will encourage each of our 12 task groups to work hard to accomplish their specific objectives in the short term, and promote the image of CMA and the chemical industry. And on that subject, to promote our industry image and to recognize and advertise our number one safety rating, the Occupational Safety and Health Committee would like to increase the number of annual Lammot du Pont Safety Award cate gories from two to three, so that the intermediate size companies can participate and compete equitably in the program with the large and small ones. We would like you to approve this change in CMA's Awards Program and at the same time, encourage your company to participate, if you are ' not, since only about one-third of our'members submit data for considera tion. Ladies and gentlemen, I have not dwelled upon the specifics of the positions we promote in noise, or medical records, or labeling as much as I have tried to give you a feel for the approach we take in this new atmosphere in Washington. We are promoting education and training -- philosophies and reform procedures and policies as strongly as the technical positions we favor in a specific regulatory proposal. The new Administration is green and inexperienced but dedicated, hard working and eager for help and guidance. They will be short handed as budget cuts are felt throughout government, but we will work with them and try to show them how they can best maximize their resources to achieve our mutual goal of a healthier and safer - injury and illness-free work place . In conclusion, I would like to say that I have met a lot more of your people over the past year and have been much impressed with the quality and pleased to see the increased interest in taking part in our Committee activities. It is most important that we not relax and reduce our advocacy during the next three years of this friendly Administration in Washington. We have a unique opportunity here to revise and put in place some rules and regulations that we can live with rather than coast these three years only to be blitzed vindictively again in the future. Thank you for your help and keep the good ones coming. CMA BD-1/11/82 i!:! s! i IS- member services department STATOS REPORT TO THE BOARD OF DIRECTORS JANUARY 11, 1981 The First Annual Meeting of State Organizations was held on November 4, 1981. The all-day meeting was preceded by a dinner the evening of November 3. William G. Simeral, Chairman of the Executive Committee, spoke to those attending. There were 43 representatives from 19 state organizations. Some of these are Chemical Industry Councils, some are chemical associations and some are committees working under the wing of a manufacturers association or other state organization. Attendance was 100 percent. All of CMA's vice presidents, as well as President Roland and George Ingle of Association Liaison, participated in the November 4 meeting. A number of managers from various departments also were in attendance. Total attendance was 60. The program was equally divided between CMA and state groups. The morning was given over to CMA vice presidents who described their operations and the services they could provide the state groups. The afternoon covered a number of items of specific interest to state groups and were addressed by the participants in formal presentations and open discussion. Included were such matters as surveys they had conducted," legislative/regulatory activities, the building of effective Public Affairs Committees, new organizations and how they get started,' how to tap resources in a crisis and the desirability of joint state meetings. - Participants were asked to fill out a critique form either at the meeting or to be mailed in. All critiques, both verbal and written, have been highly complimentary and show a sincere appreciation of CMA's interest. Looking to the future, the participants definitely desire an annual meeting very likely tied to CMA's Semiannual Meeting. There also is interest in having regional meetings, possibly in three different spots during the year. There is interest in such subjects as membership recruitment and motivation, longrange planning, the development of new groups in additional states and the possibility of workshops and seminars held in their areas pertinent to their members. Planning already is underway for the Second Annual Meeting of State Organizations, which will, be held in conjunction with CMA's Semiannual Meeting at the Palmer House in Chicago, October 4-5. The state meeting will begin at 5:00 p.m. October 5. This opening session of one-and-a-half hours will set the stage for a full-day program October 6. Physical arrangements have been completed in cooperation with Meetings and Conventions. Programming is under study. There will be general subjects for the group along lines previously indicated in this report. Others will be developed during the year. Very likely there will be break-out meetings where topics of interest to specific state groups can be studied. Such discussions will be reported to all attending at a closing session. 4 No regional meetings are planned for 1982. It is our belief that the year should be one of consolidation of efforts to date, and that more attention should be directed to CMA member companies proper and the building of membership. On invitation, I spoke at the Annual Meetings of the Alabama Chemical Council (Montgomery) and the Chemical Industry Council of the Midwest (Chicago) in November. I am scheduled to meet with the Chemical Industry Council of Ohio January 19-20, 1982 in Columbus. At the invitation of the Texas Chemical Council, I will participate in its Annual Meeting in April. TCC has invited the California CIC to attend so that mutual problems can be discussed. This example of cross-fertilization will be encouraged with other state groups. Interest continues to be expressed for some form of state organizations in South Carolina, Iowa and Arkansas. All such efforts are carried out in cooperation with CMA member companies who take the lead. .: There are several states which have enough CMA member companies (16 to 27) represented to form nuclei for state groups, but the need and desire must be there for any group to remain viable. t ... i i We have asked all state organizations to complete a rather detailed survey which provides an over-all, in-depth understanding of purpose, structure, dues, bylaws, programming, membership, meeting dates, paid staff and/or outside counsel and insurance carried. With this information, we hope to serve the groups progressively better from CMA's points of view, while the various organizations can tap this resource to strengthen themselves. Currently, the department is working with Tim Bums, Karen Neale and Bill Buckley of the Government Relations Department; Janet Matey, Technical Department and Jeff Van, Communications Department, on a program related to CMA's position on the Clean Air Act. It was one year ago this month that the Member Services Department formation was announced at the Board and Executive Committee Meetings in Florida. Action Required: None; information only CMA BD ^1/11/82 CMA 073567 EXHIBIT I INTERNATIONAL TRADE COMMITTEE REPORT EXECUTIVE SUMMARY The International Trade Committee and its four single-issue Task Groups have been formally organized for one year. In 1932, an Investment Task Group will be formed to deal with requests from government for industry opinions on U.3. polity and to provide support for Mr. Dexter Baker on the new Investment Policy Advisory Committee. Another task group nay be necessary to work with the International Trade Commission on tariff system harmonization. Primary action by the ITC has been centered on petrochemical discussions with the Common Market and upcoming discussions with the Japanese and Mexicans. Canada is likely to request similar talks. An ad hoc effort is underway with the SCCMA toward a study of the industry and its major international problems. It would be used in promoting positions on issues in the Congress and Adminis tration. CMA members have been informed of events affecting them with frequent communications, an open committee meeting and a seminar. 1982 activities will include legislative efforts on bills affect ing both exports and imports and cooperation with the U.S. Trade Representative in connection with petrochemical talks. CMA 073568 SKC-IARlf CF THE CHAIRMAN'S REPORT TO THE SCARE Organization of the Committee and its four task groups was com pleted during the year with excellent participation by member companies. Each task group has one -issue to deal with and there have been no dif ficulties in maintaining the one-issue objective. Ourir.g 19S2 an In vestment Task Group will likely be formed with a similar possibility for a task group to deal with the harmonization of the U.S. Tariff System with the Brussels Tariff Nomenclature System used in most major countries abroad. This harmonization will change tariff rates for certain imported products. It is the consensus of the International Trade Committee that govern ment owned and controlled chemical production abroad is the single great est competitive problem of the future for the industry. It will effect mostly petrochemicals and intermediates. The United States Government, in cluding both the Congress and the Administration, have been made aware of this. Some legislation has already been introduced to the Congress to deal with this problem and more is to come in the next few years. The ITC can deal effectively with this problem on behalf of the industry. It will do so in concert with the Industry Sector Advisory Committee, a governmentformed industry committee and through the industry's own Office of the Chem ical Industry Trade Advisor. The ITC is working on an ad hoc basis with an effort jointly with the SOCMA to retain a consultant for a study to be used with the Congress and the Administration. A proposal for that study is now being drawn up. Great interest in this effort has been shewn by the staff of Senators Danforth and Roth. They have proffered the opportunity of oversight hearings on the matter. CMA 073569 a A strong effort will be mads by the ITC to gat recognition and support from member companies on international trade issues. The effect of govern mental actions, both U.S. and foreign, on domestic and international sales is not realized by a number of member companies. The evidence is strong that an awareness program by the ITC is working but there is much left to be done. The International Trade Committee will ge to unusual lengths in the future to promote understanding of these issues and how member companies must organize to deal with them. Relationships with key government officials will be a major effort. Mr. Leo Johnstone's relationship with Ambassador Brock and other government officials is firmly established. Contacts with the Departments of Commerce and State will be heightened. Mr. Johnstone's reports to the Board encourgae understanding of international trade events and provide a reflec tion to him of the Boards' interest in international issues. The International Trade Committee budget under the Government Rela tions Department, is sufficient to meet the Committee's needs with one ad dition. A proposal for a chemical industry study by a consultant is now being drawn up in connection with the joint CMA/SOCMA effort referred to above. The proposal and the cost of the study will be available sometime in January. The ITC will meet approximately every six weeks sum more often if necessary. CMA 073570 INTERNATIONAL TRADE COMMITTEE REPORT TO CMA BOARD OF DIRECTORS JANUARY 12, 1982 This, our first full year as a standing committee, has been one of organization but, more important, results. Excellent participation by member companies and the CMA Staff has enabled us to deal effectively with several major issues. FOUR TASK GROUPS ARE CURRENTLY ACTIVE: 1. -EXPORT OF HAZARDOUS SUBSTANCES TASK GROUP. Chairman, Ken Davis, Rohm & Haas. Deals with regulatory developments in the administration on proposals to control exports of "Hazardous Substances." 2. EXPORT POLICY TASK GROUP. Chairman, Robert Lory, Exxon Chemicals. Established to develop chemical industry consensus and position on U.S. legislation and administrative actions that affect chemical exports. 3 NORTH AMERICAN TRADE POLICY TASK GROUP. Chairman, Richard Dodge, Shell Chemical. Established to develop chemical industry consensus on trade and investment policies of North American countries including Canada, Mexico, Caribbean, Central American and.the United States. 4 * MULTINATIONAL CORPORATIONS TASK GROUP. Acting chairman, Ernst Morhenn, Monsanto. New, established to monitor and develop strategy on activities affecting the chemical industry in United Nations organizations such as UNIDO, UNCTAD, CTC, etc. plus organization for economic cooperation and development, the European community, and other regional government bodies. More details on the issues addressed by these task groups are in your books. Plus watching briefs by committee members on (1) government or ganization for trade CCMA has an approved position! and (2) harmoni zation of the U.S. tariff system with the Brussels tariff nomencla ture system used in most major countries--it will affect' certain products. Task groups will be formed when/if these issues become active. Plus - - During 1982 an investment task group will be formed; more about this issue later. CMA 073571 -2- X would like to emphasize some of the committee accomplishments listed in the briefing book under tabs 1) , 2) , 4) , 7) , 12) and 14) Now let me share with you some of the committee's areas of con cern, both present and future, which must be dealt with by the chemical industry. 1. The single greatest competitive problem is that of Growing Government Owned and/or Controlled Chemical Production. The U.S. government, both Congress and the Administration, have been made aware of this, it will be receiving attention by both croups but industry must work closely with government. The ITC, working with our own Office of the Chemical Industry Trade Advisor and in concert with the industry Sector Advisory Committee,will con tinue to deal with this problem on behalf of the chemical in- dustry. The ITC is working, on an ad hoc basis, jointly with the SOCMA to possibly retain a consultant for a study to be used with Congress and the Administration. a proposal for the study is now being drawn up. 2. Investment, when you consider the scale and importance of international investment tlo the American economy, it is surprising how little attention has been paid to developing a coherent U.S. policy toward international investment. It is especially sur prising in view of the time and attention we have devoted to * developing trade and foreign policies. Investment and trade are really :two sides of the same coin:' One of the most effective ways to expand U.S. exports is through U.S." ' direct investment abroad,, and the increasingly restrictive climate "for international investment is certainly every bit as much a threat' to our economy as trade protectionism is. The U.S. chemical industry is increasingly barred or discouraged from investment in certain countries. France and Canada are examples of problems reflecting the difference in treatment of domestic versus foreign ownership. The ITC is establishing a task group to deal with this problem., The U.'S. Trade Representative has established a new high-level post for investment policy and CMA has nominated Mr. Dexter Baker, President of Air Products, to be a member of this In vestment Policy Advisory Committee. The ITC task group will provide support to Mr. Baker's participation. CMA 073572 -3- 3. The United Nations will require increasing ITC attention in the future. Why? A few examples: 1) a recent UNIDO report promotes development of a greater share of world petrochemical production in developing countries; 2) increasing activities to control information and data flow across national borders; 3) a study of the global chemical industry being done by the CTC; 4) CTC has an advisory service available to LDC' s in negotiating with MNC's. If you feel these wouldn't affect you, consider the baby formula (mother's milk resolution) resolution signed by all UN members except the U. S. , and A Look At Baby Formula Global Sales reports vary from 25-40% off . 4. New International Regulation. As the pressure lessens at the U.S. government level, look for increased activity at the state and international levels. Re*. International, look to increasing activities in the areas of 13 natural resource ex traction, 2) transfer of technology, 33 multinational corporate conduct, 4) the liner code, S) exports and imports, 6) new world information order Ca sleeper for all industries). At their boldest, the international regulators seek mandatory redistri bution of wealth from the developed world. Bad as much of this new international regulation might be for the developed world, it would be far more harmful to the developing world. .By ignoring the realities of capital formation and economic incentives, it would greatly impede the accumulation and flow of capital and resources that are the true prerequisites to developing both the technology and the economic growth sought by the less developed nations. My point is, future developments will he influenced by many factors in addition to market forces. Protectionism in all its forms is a major threat especially during a recession, both within our tradingpartnersand within the U.S. hut, now a new form of protectionism is emerging -- Performance Requirements ox local content. The "U.S. is reacting in many areas, but it's not all "them." Considers H.R. 5133 local content bill which reads; ContentRequirement for Autos 3Q% in 1983 Increasing To -9(1% in 1985 Improved relations with key government officials at all levels will receive a major effort from the ITC. Mr. Leo Johnstone's working relations with Ambassador Brock and key Dept, of Commerce officials has been established; these will be heightened especially at DOC and Dept, of State. The chemical industry owes a note of thanks ; \ j 5 ] | I j s t , ; ,) j j | j ; j CMA 073573 to Leo for his interest and time committed to trade-related issues, especially his chairmanship of the industry sector of the US/EEC petrochemical study group. The success of which made a major contribution to the continuing opportunity for exports of petrochemi cals to Europe. Government wants and needs industry's help and inputs to solve trade-related problems. The ITC will keep you informed of needs, timing and opportunities. we need your help for all our sakes. In closing, let's look at the stats: SLIDE 1 ADJUST FOR INFLATION SLIDE 2 ADJUST FOR INFLATION SLIDE 3 U.N. FIGURES - 80/81 NOT AVAILABLE - NOTE DECREASING PERCENT, WITH DOLLAR APPRECIATION IN 80/81. THIS TREND PROBABLY CONTINUES OR DEEPENS. ! {' . I CMA 073574 a8072 7,96 yarnell CHEMICALS AND ALLIED PRODUCTS Billion $ t a80727ta7 SLIDE NO. 2 yarneit CHEMICALS AND ALLIED PRODUCTS Billion $ Exports Imports 1 mn W: JlM rr* A* t(v'''vl V- v Y ;y>'. .v-* -/ ' VV'-OfT 'l ifiVl' W%\ Mif 1977 1978 1979 1980 1981 CMA 073576 L-~ -- ill--i--fax * & *: JWffeiS a80727,98 yarneli CHEMICALS AND ALLIED PRODUCTS Billion $ up. M.S. Exports 125.8 m World Exports i . 78.2 1977 723% 1978 7.09% 1979 6.74% TAX POLICY COMMUTES REPORT EXECUTIVE SUMMARY MAJOR COMMITTEE ACHIEVEMENTS 1980-1981 SXHI3IT J Tax and Budget Legislation CMA provided effective support to enact President Reagan's tax reduction program, the Economic Recovery Tax Act of 1981. The enactment of this legislation contains several provisions which will provide significant tax benefits for the chemical industry. Specifically, these benefits include: o new Accelerated Capital Cost Recovery System for plant and equipment. o liberal tax leasing rules. o 25 percent income tax cre'dit for research and experimentation expenses. o 2-year suspension of IRS regulations which re quire allocation of research and development expenses to foreign source income. Regulations Superfund Title II Excise Tax CMA presented to the Treasury and IRS a series of recommendations on the application of the excise taxes on chemicals and petroleum imposed under Title II of Public Law 96-510, "The Comprehensive, Environmental Response, Compensation, and Liability Act of 1980". The CMA recommendations became the focus and catalyst for allied trade association comments to secure reasonable regulations on the application of the new taxes. Response to the President's Task Force on Regulatory Relief The Tax Policy Committee identified six major regulatory problems in the administration of Federal tax laws that were included in CMA's response to the President's Task Force on Regulatory Relief. The effective dates of two of the cited regulations were subsequently postponed by statute or administrative decision. * CMA 073578 Service to Member Companies The Tax Policy Committee conducted four open meetings in 1981. The September, 1981 meeting was devoted to an all day forum on the Economic Recovery Tax Act of 1981. Cost Savings to CMA Member Companies It is estimated that when fully effective the provisions of the Economic Recovery Tax Act will reduce income tax liabilities in the chemical industry by as much as $2 billion. $ CMA 073579 TAX POLICY COMMITTEE REPORT TO CMA BOARD OF DIRECTORS JANUARY 12, 1982 Ladies and Gentlemen, I am honored this morning to present the report of the Tax Policy Committee for your consideration. The record of CMA's achievements in tax legislation during this past year is most distinguished. As is noted more fully at Tab 3 in the Report, CMA and the Tax Policy Committee gave effective support to President Reagan's tax and budget reduction program. CMA testified in support of the'President's program before the House Committee on Ways and Means, April 2,*1981, and worked actively in the business coalition to secure enactment of the President's program. The business tax reductions included in this legislation contain several provisions previously targeted by the Tax Policy Committee as needed changes. Specifically, this legislation includes provisions for: o new Accelerated Capital Cost Recovery System for plant and equipment to replace old tax depreciation rules. o new 25 percent incremental income tax credit for certain research and experimentation ex- / _ penses. o 2-year suspension of IRS regulations which require allocation of a portion of research and development expenses incurred in the United States to foreign source income. o extension and liberalization of targeted job credits. o liberalization of exclusion for income earned abroad by employees of U.S. firms. o capital gain treatment for certain incentive employee stock options. o new liberal tax leasing rules. We have conservatively estimated that when all the provisions of this new legislation are fully effective in 1985 the annual Federal income tax liabi^tias of all CMA member companies will be reduced by as much as^2 billion. For the interim period, however, it is more difficult to estimate annual tax savings of member companies. This is because the business decision to use many provisions of the legislation - for example, the new leasing CMA 073580 IW IJ" rules - will depend on the facts and circumstances confronting individual companies. Subject to these limitations, it would appear that during this period the chemical industry will receive annual tax savings in excess of $500 million from this legislation During the past year the most important regulatory activity and concern of the Tax Policy Committee has been to secure regu lations from the Treasury Department to apply the excise taxes imposed on chemicals and petroleum under Title II of Public Law 96-510. At an early stage, the Tax Policy Committee, working in conjunction with the Tax Title II Task Group of the CMA Superfund Implementation Steering Group, recognized the need for prompt interpretative regulations that would reasonably apply these taxes to the complex transactions of the chemical industry in a manner consistent with long standing industry practice. "The Tax Title II Task Group and members of the Tax Policy Committee developed a series of CMA recommendations on the application of these taxes in the chemical industry. The CMA recommendations became the focus and catalyst of allied trade association comments to secure reasonable regulations on the application of the new excise taxes. CMA representatives have met with key officials in both the Treasury Department and the IRS to discuss the CMA recommenda tions. CMA is maintaining contact with these officials on th development of the regulations. It is anticipated that the Treasury Department will publish proposed regulations within the next few weeks. During the coming year the Tax Policy Committee anticipates that there may be several major tax policy issues presented. These issues and CMA's program and goals are outlined in detail at Tab, 4. In brief, the principal legislative issues are DISC (Domestic International Sales Corporations) , ACRS (Accelerated Cost Recovery System) and the new leasing rules, and research and experimentation expenses. The principal regulatory activities will center around the anticipated Superfund Title II Excise Tax regulations and whatever regulations may be necessary to implement the Reagan tax reduction legislation. Rather than repeat the material in the Committee's report, I will hold myself open to questions on these issues after the completion of my remarks. One additional matter which is of great concern to the Tax Policy Committee and that is service to member companies. The Committee is^ommitted to the goal of extending its services CMA 073581 to more member companies of CMA. One efficient means to achieve this goal is through forums, seminars and briefing sessions for all CMA members. It is anticipated that the Committee in connection with the Superfund Tax Title II Task Group will conduct a seminar on the CERCLA excise tax regulations in early spring 1982. In addition, a general tax forum on Federal tax problems of interest to mid-level tax officials in the chemical industry is being planned for late September, 1982. Plans are underway to present a program in connection with the Semi-Annual Meeting in October to consider prospects for tax legislation after the November mid-term Congressional elections. In conclusion, let me express appreciation to the Board for permitting the Tax Policy Committee to increase its member ship to 21 members. With these additional members we believe the ability of the Committee to discharge its responsibilities under the CMA charter will be greatly enhanced. CMA BD-l/12/82 CMA 073582 TREASURERS REPORT Seven Months Ending December 31, 1981 This report will be prepared and distributed following the end of the month. For your reference, the following is provided: The approved budget and funding for the fiscal year beginning June 1, 1981 and ending May 31, 1982. The approved budget for the separately funded Biomedical and Environmental Special program area. A summary recap of the approved budget and funding for all Communication and Public Relations expenditures through CMA. Analysis of Combined Communications Program funding and expenditures assuming retention of the 40% special assessment rate for the fiscal year beginning June!,1982 and ending May 31,1983. EC - 01/11/82 BO - 01/12/82 CHEMICAL MANUFACTURERS ASSOCIATION APPROVED BUDGET AND FUNDING FOR THE Fiscal Year Beginning June 1, 1981 and ending May 31, 1982 REVENUE: Membership Dues Investment Revenue Meetings (Net of Expenses) GENERAL OPERATIONS REVENUE ChemCAP Assessment @ 40% of Dues Utilization of ChemCAP Assessment collected during prior year TOTAL REVENUE >981-82 Annual Budget S 9,500,000 800,000 232,000 510,532,000 3,800,000 160,000 $14,492,000 PROGRAM AND MANAGEMENT EXPENSES: General Counsel Government Relations International Trade & Economics State Activities Program Communications and Public Relations Technical Administration Health, Safety & Chemical Regulations Environmental Activities Distribution, Energy, Engineering Chemtrec Outside Legal Fees Outside Technical Consulting Executive Department Accounting, Purchasing & Building Services Printing, Distribution & Computer Services GENERAL OPERATIONS EXPENSES ChemCAP Expenses TOTAL EXPENSES 5 760,600 722,400 222,300 204,400 1,131,400 181,200 734,300 662,500 417,600 621,500 1,600,000 1,166,800 1,222,100 469,200 415,700 $10,532,000 3,960,000 $14,492,000 AUTHORIZED PERSONNEL 147 Note: The above budget and funding does not include the activities and 14 staff of^fthe separately funded Biomedical and Environmental Special Programs' area. 1B1 i<,'#rn.Mk_"i-i |i u ` W IJI r <pmm CMA 073584 CHEMICAL MANUFACTURERS ASSOCIATION APPROVED BUDGET AND FUNDING FOR BIOMEDICAL AND ENVIRONMENTAL SPECIAL PROGRAMS Fiscal Year Beginning June 1, 1981 and ending May 31, 1982 REVENUE: 1981-82 Annual Budget Overhead reimbursement @ S500 per day S 641,300 Investment Revenue 0 9% 324,000 Less: Direct Credit of Investment Revenue to the Fluorocarbon Program e 9% (162,000) Publication Sales 1,000 TOTAL REVENUE S 804,300 Budget Amendment* 1981-82 Annual Budget As Amended S 39,200 $ 680,500 324,000 -- (162,000) 1,000 S 39,200 $ 843,500 EXPENSES: Salaries & Related Expenses $ Employee Benefits Travel & Staff Training 'Dues, Subscriptions & Pubs. Meetings & Workshops Outside Printing, Artwork & Graphics Direct Postage, Freight & Delivery - Direct Supplies & General Office Expense Taxes & Insurance Special Insurance Rent & Occupancy Common Cost Expenses Administrative Support: Technical Administration Office of General Counsel Accounting Printing & Distribution TOTAL EXPENSES $ 349,200 ' 65,600 8,400 1,200 800 500 11,000 25,800 27,300 56,000 44,300 66,700 48,700 74,100 13,700 11,000 804,300 S 29,400 $ 378,600 5,500 71,100 800 9,200 200 1,400 100 900 500 500 11,500 500 2,200 -- ' -- -- 26,300 29,500 56,000 44,300 66,700 ,, 48,700 -- 74,100 -- 13,700 -- 11,000 S 39,200 S 843,500 AUTHORIZED PERSONNEL 12 2 14 * The addition of a prograi^administrator and secretary to the Special Programs staff was approved at the September, 1981 Executive Committee meeting. CMA 073585 1 CHEMICAL MANUFACTURERS ASSOCIATION SUMMARY RECAP OF COMMUNICATIONS AND PUBLIC RELATIONS EXPENDITURES Fiscal Year Beginning June 1, 1981 and ending May 31,1982 The following detail summarizes total funding and expenditures through CMA in the Com munications and Public Relations area as an integrated program. The portions funded by members dues and those funded by the special ChemCAP assessment are presented both separately and as a conbined total. PROGRAM FUNDING: Dues & Other General Revenue Required to support program ChemCAP Assessment @ 40% of Dues Utilization of ChemCAP assessment collected during prior year TOTAL FUNDING 1981-82 Approved Communications & P.R. Budget 1981- 82 Approved ChemCAP Budget 1981-82 Combined Communications Budget S 1,131,400 N/A N/A $. 1,131,400 $ N/A 3,800,000 160,000 $ 3,960,000 S 1,131,400 3,800,000 160,000 $ 5,091,400 i ? 1 * PROGRAM EXPENSES: * Salaries & Related Expense Employee Benefits Travel & Staff Training Dues, Subscriptions & Publications Meetings & Workshops News Materials/Workshops Media & Public Relations Community Committees Public Opinion Poll Outside Printing, Artwork & Graphics (net of sales of $170,000) Audio Visual Material & Distribution (net of sales of $10,000) Outside Publication Distribution Speakers Program Scientific/Academic Programing Direct Postage, Freight, Delivery Direct Supplies & General Office Taxes & Insurance Rent & Occupancy Common cost Expenses Administrative Allocation of Salaries, Benefits and Overhead Charges of Communications Personnel $ 555,800 99,700 70,700 9,200 9,900 -0- 112,000 -0-0- 276,100 -0-0-0-0142,500 11,000 46,000 87,100 123,500 (412,100) $ 1,;131,400 r* Print Advertising-development, space costs, etc. -0- SUB - TOTAL T.V. Ad Test CMA 073586 TOTAL PROGRAM EXPENSES 1,131,400 -0- $ 1,131,400 k * * -0-086,000 180,000 50,000 85,000 160,000 150,000 40,000 20,000 50,000 60,000 -0- k k k $ 555,800 99,700 70,700 9,200 9,900 86,000 292,000 50,000 85,000 436,100 150,000 40,000 20,000 50,000 202,500 11,000 46,000 87,100 123,500 412,100 S 1,293,100 * $ 2,424,500 - 2,631,900 3,925,000 35,000 $ 3,960,000 2,631,900 5,056,400 35,000 $ 5,091,400 [' f ' jl l ,,. S' ", T i 1 1 Mi 1 i in 4 S * |i i| I ; t ` r r \) l.uJ ANALYSIS OF COMBINED COMMUNICATIONS PROGRAM FUNDING AND EXPENDITURES Approved FY 81/82 Budget and Projected Results FY 82/83 Option #1 - Current Program Plus T.V. Ad Test Fy 82/83 Option #2 - Revised Program Without T.V. Ad Test CMA 073587 Comments on Chemical industry'; Conr.uncatlcrs :-tqram General Comments anq Assu.tiocIc.'is: The financial information and crojections contained herein have been preaared aoouc months aefcre the bjdcetary orocsss for CMA as a whole, "he information was assemoled to assist tne Communications Ccssa-tces `a analyzing their .-eccpmendation of undertaking expend:cores of aoproximacsiy 3455,CCO to carry out a t-ilot fie'd test ibegmring January `9321 which would cacemin* the feasibility of axtancmg the advertising tonpaign into network television. Significant financial --r'crracion which pertains to the organ:tation as a wool* ,as not available due to the ear'y preparation of this projection anp these smcuncs were asti.catec as relates to tne Communications Program in .mat we del'eve is a conservative fashion. As directed by the Communications Policy Review Grouo of the 3card of directors, the Conaunieations expenditures which are funded oy memoar dues and those which ere funded by the special assessment have been combined to facil'tata understanding of tne full communications effort. !n essence, the special assessment provides funding 'or the majority at' outside expend cures including the use of Public Relations firms, the production cf nationally oriented issue material, advertising and approximately five Staff positions in support of the effort. funginq Assumptions and aackcround: On January 3, 1930, the 3oard of Directors approved the establishment of a nationally oriented cssnunieations program through C.'IA. The program was funded by assessment on the dues of member companies. Over the three years of the program, the assessment rate nas varied based on approved budget levels from 36a to 435 and down to 403 for the current year. At the beginning of the current fiscal year, CMA held 3764,100 set aside for the exclusive use of tne national communications effort. These unexpended funds were accumulated during the first two years of the program due tP a slower than anticipatac expenditure rate during the first year of programming and an initial decision to defer or eliminate 3400,000 of previously authorized expenditures to conduct a pilot field test on network television advertising. 3udget planning for the current FT 31/32 year assumed use of 3160,OGO of these funds to permit a reduction in the assessment rate frcm 435 and down to 405. Additionally, it is anticipated that S129.500 of these funds will be required curing the current year to fund a projected 35 shortfall in assessment revenue. This would leave a potential reserve balance of aooroximately 3470,300. These funds could be used to finance the proposed pilot field test or they could be directed toward same other cpmmunicatlons program use. Pilot T.y. Test: The current approved budget does not contain authority for the recomcended feasibility testing of e national television information effort. However, 335,000 tn funds were autnorited in the current budget to develop potential commercial message alternatives and this portion of the effort Is underway with a projected cost Of 345,000. If approved, the cost of the feasibility testing is estimated at 3455.COO. The financial Information presanted on the opposite page assumes thet 3200,000 will be spent for the feasibility test during the current fiscal year with the balance of 3255,COO to be expended in FY 82/83. The effort would be funded sy us* of virtually ail the program reserve funds. If the feasibility testing is not approved, expenditures (and use of program reserve funds) would be 3200,000 less than shown under projected actual results for the current FT 31/82 fiscal year. PROGRAM COSTS ANO OPTIONS: As directed by the Comnunlcatlans Policy Review Group, and In order to assist staff and the Communications Ccmnittee in assessing future direction and probable funding limits for Ft 82/83 budget recommendations, e system of full program costing (using extensive allocations Into eight program areas) was attested. Using the system and fallowing guidance from the Executive committee, two different options for FY 82/83 ware analyzed. - Option I Option 2 Special Assessment rate to remain 9 405. Special assessment rate to remain 9 405. National Prcqram emphasis to be advertising oriented which implies continuation of the print advertising campaign at the current level and conducting the feasibility test of national T.V. Advertising. Ultimately, 37.1 to 311.7 million of National T.V. Broadcasting could possibly be conducted. The goal is to directly achieve public oeinion shifts in a relatively short period of time. CMA staffing levels to remain unchanged but mannours to be shifted, where oossible, into highest priority program areas, e National Program emphasis to be shifted toward non-advertising program activities but reduced advertising retained firsajor news weeklies to maintain presence and channel target audience response into the other progrm ectivltles. The goal is to achieve public opinion shifts over e longer period of time. CMA staffing to be shifted, where possible, into highest priority program areas with aifrieua added staff ss necessary to accomplish desired shifts In program empnasis. (based on anelysls, a minimum of 4 staff positions would be required) a Currently unallocated program rServes to be reduced to zero. Unallocatec program reserves to be reduced to 3200,000 contingency. Anticipated total funding 35.434,700. Anticipated total funding 35.464,700. Tne summary results of the analysis are presented on the opposite page. Cetails of the actual analysis are presented on the following pages. chemical manufacturers rsscciaticm summary totals - c;m3ined ccmml'nicatidns program p^'_ ;.MMASY SUGGS? opticns Aoprpved FY 31'MS 3udgst 2.1a Prsjacted Results FY 32/33 Opfian *1 - Current Program :lus id Test fY 32/33 Option *3 - Revised Prcgram Jitnout T.'l. Ad Test ! CHEMICAL INDUSTRY'3 i CCMMUN(CATIONS PROGRAM ESTIMATED REVENUE: Cues 5 Other General Revenue Resulted aa iusuort Program Special Assessment ? iQ.1', of Dues UtilUacien pf Special Assessment Collected but Unspent During Prior Years ESTIMATED FL'NOING Aoproved FY 31/32 3uc;st SI, 111. 400 3.3CC.0C0 160.0CO SS.091.100 Projected FY 31,2 Actual Results With id Test FY 32/83 Option f 1 Current Program With Ad Test j FT 32/83 ] Oetipn f 2 ] Revised Program i Without Ad Test 51,131,400 3,570,500 493.400 55,295,300 51,220,000 3.964.000 270,700 55,454,700 51,220,COO 3,564,000 270.700 ( 6 I S5,;S4.700 J ESTIMATES EXPE.N5ES: Salaries Related Expenses S 555,300 S 532,000 S 379,500 5 =75,700 ! Employee Benefits Travel Staff Training 9S.7CO 70.7C0 99,700 51,400 113,400 63.300 '36,400 ; 77,500 ,' Cues, Suoscriptions Applications 9.2C0 5.400 7,200 7,700 : Meetings i Genera! Worksfeps 9,900 4,900 29,700 29,700 Mews .Materials .1 Workshops 36,000 36,000 145,000 225,000 I Outside Media Public Relations 292,000 302,300 336,600 376.500 j Community Committaes 50,000 -0- -0- -0- i Public Opin4on Poll 35.000 85,000 91,800 91,800 I Outside Printing, Artwork i Graphics 306,100 487,600 534,900 634,700 Sales of Material Audio Visual l PSA's Sales of Material (170,000) . 160,000 no.cooi (30,000) 315,000 (8,000) (30.000) 170,600 (9.000) (10,000) 59S.S00 (10.000) / Outside Material Distribution Speaker Program Material 40,000 20,000 40.000 10,000 43,200 10,800 43.200 18,200 Sclentific/Academtc Program 50,000 -0" -0- -0- . Direct Postage, Freight, Delivery 202,500 169,500 188,900 ' ! 206.600 : Direct Supplies General Office 11,000 3,800 .4,400 5.600 Direct Taxes Insurance 46,'300 40,300 47,600 54,700 Rent Occupancy Common Costs 37,100 123,500 3.200 123.500 93,400 135,900 111,300 149,500 Print Advertising 52,424.500 2.631,900 52,418,400 2,631,900 52,567,300 2,631,900 53,451.600 j 2,303,100 Pilot T-V. Test (if approved) 55,056,400 35,000 S5.C30.300 245.000 55,199.700 255,000 S5,454,700 *0. ESTIMATED EXPENSES 53,091,400 55,295,300 55,454,700 | 55.454,700 JPersonnel CoooleaenT PROGRAM COSTS: Mews Servic* Media Tours Print Advertising Olrect Issue Support Public Information Speakers Program Education Program Pilot T.V, Test (if approved) ESTIMATED COSTS 20 j 486,900 ITS,030 2,710,200 790,900 534,'100 93,300 148,700 77,000 33,091,400 * 20 S 470,700 185,700 2.760,400 773.300 623,900 107.300 101,000 287,500 SS,295,300 20 S 548,100 149,300 2.750,700 874.100 591.100 107,400 108,900 324.600 SS,454.700 Ti i $ 703.600 194.600 2,104,400 1,102,900 1,073,500 155.600 120,100 ____-055,454,700 , ' "wmpi' AJ CMA 073589 CHEMICAL INDUSTRY CCiWUCATlCM PROGRAM PROGRAM C3ST ANALYSIS GENERAL IM TROCUCTI Oft ANO SUMMARY: The Cotanunications Policy R*view Group directed CMA stiff ta anilyzs Me program sagae-ts and resource requirements of tne combined CotKiunicavqns Program as funaeo tnrougrt CMA, "unaing assumptions were to include continuation of the AO.', soecial assessment and emphasis was to be placed on the level of staff require ment in the program areas. An analysis :f total resource utilization requires that the program ee considered in a contained fashion with funding prcvidid by a coraoination of member dues and the soecial assessment. For purposes of presentation, each of the eight program segments were analyzed as to their principal cost elements which included: Use of outside Public Relations and Aovercisirg Firms Amounts paid outside of CMA (other than to Advertising or P.R, fins) ;o print, produce, distribute or otherwise create materiel or conduct workshops in support of the program. The full cost including salaries, benefits, rent, postage, internal reproduction, etc. as directly chargable o* allocated to the Communication's Qeoartment. Each of the 23 authorized positions were analyzed as to man years devoted to the various Pregram Activities. Octal 1 results under comparable funding Out two different programng formats are discussed for FY 32/83. As relates to resource requirements, three of the eight programs are relatively staff intensive (.News Service, Oirect Issue Support, and Public Information). The ot.ier programs rely more on outside effort or memoer company resources. Summary estimated costs by line item unde1* the two options analyzed are as follows: Outside Public Relations S Ad Firms External Costs of Materials Staff and Internal Production, Distribution and Administration TOTAL FY 32/33 Option 1 Current Program With Ad Test S 3,101,900 1,255,900 1,098,900 S 5,454,700 FY 32/83 Option i 2 Current Program Without Ad Test 5 2.253,100 1,940.000 1,261,600* S 5.454,700 *Under Option f 2 a total of a staff positions were added to provide Increased support to the News Service, Direct Issue Support ard Public Information Programs. A eetalled analysis of the resources required by each program fellows: - MEWS SERVICE: Development of contacts and direct olacement or industry information with the news media. Resources utilized - Outside Fublic Relations Firms External Costs of Materials Staff and Internal Production, Distribution and Administration TOTAL S 49,500 172,200 326,400 S 548,100 3 53,000 241,300 409,300 5 703,600 The Mews Service program Is one of the highest priority and the most manhour Intensive of the eight program areas. The orogram rtiies on outside Public Relations firms to help develop and generate contacts and distribute material and on staff and memoer comoany personnel for additional develooaent, follow uo and maintenance of ongoing relations. Availability of staff manhours becomes the principal bottleneck for any significant imorovement In this program. Currently, an estimated a.O man years representing 304 of availaole Conmunications staff time Is devoted to this program arse. Program success is probably best Indicated by press calls rising from 1,900 to *,000 per year as CMA has become a principal source for Industry issue information and by the increasing use of CMA material In print and broadcast media. Principle areas of program adjustment under option * 2 would be represented by the increase of available staff hours uo to 7.8 manyears to permit greater and more responsive follow up sr.d development and placement of T.Y. news features.* * it F f 1 ^3 ) \! -*i ; ;> CMA 073590 At MEDIA TOURS: The dirsc; :jlacsmsnt of qualified industry experts in qjiewsion, radio and press interviews. Resources utiluid - Outside Public Relations Jirras Exterral Costs of Materials Staff and Internal Production, Distribution anc Administration TOTAL RY 32/33 Option a 1 Current Program itn Ad Test S 53,000 33,100 52,700 S 149,300 RY IU 33 Cptr^i * 2 Revised -'cgram * * tnou* ici ts* i 72.000 H. 300 53.300 3 194,500 The Media Tour program represents a mgn priority and low cast activity (as relates ta the use af CMA financial resources!. Currently, an estimated .9 man years of Ccmraunications staff tin* Is devotes toward overall aaministntion of the program as the majority of tne legwdnc is done by outside public relations Pirns. The principal costs are borne by industry spokesmen. Tne primary limitation oh t&e program is the difficulty to connect a member of the relatively smalt pool of industry personnel with broad issue knowledge and media "presence- with those forums which are made available. Program success is indicated by a monthly average Over the past quarter of aporoximately 4C T.V., raaio, and print Interviews placing the industry story oefore a great many individuals. Due to the limitations noted above, it is believed that only a 30' expansion would be possible under Option Y 2. PRINT ADVERTISING: Placement of the industry message in seiectee print media. Resou-ce utilized - Outside Advertising Pirn External Costs Of Material Staff and Internal P'oauction, Distribution and Administration TOTAL S 2.531,900 44,300 74,500 S 2.750,700 5 2.003.1C3 43.100 53.200 S 2,134,430 Print Advertising Is cleerly the most expensive but as reviewed by industry communications experts '* a most essential program of the National Communications effort. Advertising has two significant elements; the ability to directly modify opinion and (most importantly! the ability to attach a name or inforsatim souree. Chemical Manufacturers Association, to the "ChearfcaT Industry*. In designing the original comnunlcations program, it was correctly perceived that the Industry could net create a central entity to come out of the closet end address regulatory and legislative problems in a concensus fashtea unless there was a way, nationwide, to inform key audiences (principally the*media) of the reasonableness of Industry positions. Tltose issues which were won in the Washington arena could quickly be lost by negative political feedback from the National forum. Clearly, the print campaign continues to be successful in giving the national target audiences a focus to obtain, and Incorporate In their communications, accurate Information on "Chemical Industry" Issues. Prior to June 1S7S, the Chemical Manufacturers Association didn't exist (it was MCAI. Subsequent to the eomencament of the print campaign In April 1930. the requests for printed Information have gone from virtually nothing to an annual leva! of 13,000 - 20,000. press calls have more than doubled in the Coraunications Department alone (and probaoly gone up 3 fold or more throughout the entire organisation), and requests for industry spokesmen are reeieved aleast daily. By redirecting the more important requests into member companies and the scientific sM technical expertise of the CMA coraltte* structure for response, the industry has crested a truly national progrm. Direct attitude changes from public reading of d messages Is more difficult to measure. Under option *1. the primary focus (whan combined with the potential of nationwide T.V. advertising) is mar* toward direct attitude change through advertising. Under Option Y 2, the primary focus Is toward maintenance of nationwide presence and advertising of a source where concerned individuals can have their questions answered. If the questions are asked, then the member companies and the commi.tee structure through DMA have a chance to direct the answer. Print advertising requires a relatively low level af staff involve ment. Estimates are 1.2 man years under Option Y 1 and dawn to .7 men years under Option I 2. CMA 073591 t 4 DIRECT ISSUE iUPPCPT: Direct Communications suooort in tne legislative ana regulatory issues of DMA committa-s ana task groups. Resources Utilized - Outside Public delations Fims external Costs of Materials Staff and Internal Production, Cistribution and Administration 70T.1L r< 3Z/S3 Option 1 Current Program Uitn Ad Test S 107,300 477,100 239,300 S 374,100 FT 32/33 Cetion 2 Fevisao Program without Pd Test 5 125,000 04.500 373.100 S 1,102,900 Direct Issue Support is one of tbe highest priority and the second most manhour intensive program of the communications area. Current estimates are that 3.4 man years4ri devoted to the program with internal support rising to 7.3 manyears under option * 2. While the hews Serv'ca program Is often reactive, the Oirect Issue supoort program is most often proactive - determining how do we or can we Barker* a Particular regulatory or legislative position in the public forum. The output of the 220 CKA comnittees and task groups and CHA's internal staff is most often concensus industry positions o.' comments regarding pending or potential regulatory or legislative actions. A main factor in the Industry's successes through C.MA has been the guidance end assistance af the expanded Communications Pregram in pre-planning and developing communications strategy prior to public presentation. Communications planning includes communication to members to Insure e concensus response prior to release along with preparation of press end other supporting material. Under the CIA team concept of operation, the added communications manhours unaer option r 2 ere viewed as required in order to match the eemmunications resource with Technical, Legal ar.d Legislative resources serving the Standing Cammtteas and the Task Grouos. PUBLIC INFORMATION: Developing cooperative relations ana resoonaing to requests of all Inaividuals and grouos ether than working press or educators. Resources Utilized - Outside Public Relations Firms External Costs of Materials Staff and Internal Production, Distribution end Administration -0335,300 195,300 S -0820.300 252.700 TOTAL 591.100 $ 1,073,500 Public Information Is a program that must exist at some level. As a minimum, sufficient manhours end materiel need to be avail tola to provide response to the questions end requests of the general public and non-industry groups end to continue to develop member company involvement tn the national comunlcatlons effort. Under the current program, which requires approximately 3.3 men years of staff effort, the public Information program Is operating only slightly aoove this maintenance level. Approximately 1.3 to l.S man years in this area art devoted to support of the Consumer Information Task Group wnich has actively developed relations with outside consumer oriented organizations. Under option A 2, which assumes nc T.V, Advertising, man years expand to 4.9 (mostly ceveted to the development of audiu-vlsual material such as PSA's, an additional film ana news features) to provide Input Into the critical T.V. market and to assist staff and the standing coomittees and task groups in responding to information requests. Assistance includes review of presentations, speeches and preparation and acquisition of audio-visual material. Fu-ther Internal adjustment of staff resources would require elimination of the Consumer Information Task Group and Its activities, SPEAKERS PROGRAM: Oevelooment, maintenance and placement or materials for Industry speakers at tne local comnunlty level.. Resources Utilized - External Costs of Materials Staff and Internal Production, Distribution and Administration TOTAL 5 4,300 42,900 S 107,400 $ 96.300 53,800 S 155.600 The Speakers Program Is mainly a member company activity with assistance from the Nationally funded program at CMA being provided in the form of material development and placement. It is estimated that _ the program currently requires about .7 man years of staff effort with activity rising to 1.1 man years . under option V 2. Under either ootiojwthe progrim will remain principally a member activity with staff's rqle remaining the development anc Clsplbution of material. Under option A 2, the cost increases are mainly due to an ability of the speaker's program to use material developed for other program areas (especially public Information audio-visual material). f i i } i i !{; i iij :f 1i ;8x 1i r; '! Iu A CMA 073592 <m audi A EDUCATION PROGRAM: Cevelopment a.-.d iHintsnance or 'Ciations wtn the academic ccnsiumcy. Resources Utilized - External Cases of Materials Catalyst Award Grants Staff and Internal Production, Distribution and Administrati on TOTAL FY 32/83 Option = 1 Current Program __With Ad Test S 29,700 24,000 55,200 5 108,900 FY 32/83 Ob*.ion * 2 Revised Prograss without Ad Test S 4C.90C 24,000 55,200 5 120,100 The education Program remains an identifiable separate program primarily as a carry-over from communications efforts prior to the establishment of the National Program funded by special assessment, Resources devotee to the program have been substantially reduced over tne past several vesrs as hither priority programs were developed. Prom a level that included full time support of a Phd in Chemistry and * support staff plus assistance fro.* ocher costnunicacions staff, the resources required have been reduced to an estimated 1.1 man years. Current support is provided by several staff devoting part-time efforts toward maintenance of the Catalyst Award Program and distribution of material requested by Academicians. Expansion of the program jnder option f 2 is mainly the result of an ability to use material developed for other program areas (especially public information audio-visual material anc certain poolicaticns). Further internal adjustment of staff resources would ragui-e elimination of the Catalyst Award Program, Were this to be directed, a gradual phasing out would be recommended. I; is anticipated that the requirement for staff man years would increase above tne current maintenance level during the phasing cut period. PILOT T.7. "ST: Development and testing of the use of national television to directly Impact public opinion. Resources Utilized - Outside Advertising Agency External Costs of Materials Staff and Internal Production, Distribution and Administration TOTAL S 255,000 9,200 60.400 3 324,600 3 -0-0- .. *0' t -0- In order to retain consistency of the analysis, the above resource utilitetion focuses on ft*52/83 requirements. If approved, the test program is anticipated to begin 1 n January >982 (during the current FY 31/32 fiscal year). Expenses to the outside agency would total 3455,000 with an est1*at*d , S200.0QC incurred during the current year and the remaining S255.000 during the FY 82/53 fiscal year as * analyzed above. It is estimated that development and analysis would require about ,9 staff man'years . during FY 82/83. The question to be answered by the research is whether or not it is possible to directly and significantly modify public opinion through television advertising and at what expenditure level this ecu id occur. * CMA 073593 EXHIBIT 1 i U.S. GOVERNMENT/CHEMICAL INDUSTRY PETROCHEMICAL DISCUSSIONS WITH JAPAN AND MEXICO Problem: The U.S. chemical industry must decide whether it should participate in U.S. government petrochemical discussions with Japan and Mexico" in an advisory capacity. Recommendations: 1. That the U.S. chemical industry designate a pool of technically competent individuals to serve as advisors to the USG and to participate as required under the leadership of Mr. Leo Johnstone. 2. That these industry advisors reflect the diverse interests within the U.S.-based petrochemical industry. 3. That the U.S. chemical industry with its designated advisors as sist the USG in developing necessary background data to consider and -an alyze (1) the full range of factors, including structural and cyclical ones, that may relate to the various petrochemical industrys' overall com petitive problems, (2) data on the impact of U.S. natural gas regulations on production costs and trade within the petrochemical sector; and (3) other factors that may contribute to future changes in trade flows and com petitive positions. Action Required; Approval of recommendations. CMA EC - 1/11/82 BD - 1/12/82 i ;j * i`1, i5* Mfimk BACKGROUND PAPER ON PETROCHEMICAL 'DISCUSSIONS WITH JAPAN Past History: In late August 1981, Japanese Minister of Trade and Industry (MITT) Tanaka personally requested USTR Brock to agree to establish a study group on petrochemicals along the lines of the Ad Hoc Group on Petrochemicals which had been set up by the U.S, Government and European Commission in December 1980. At the time, the U.S. Government took the position that, although it was willing to consider the feasibility of establishing a group, it felt that such a step was premature. The USTR reviewed for the Japanese the history and procedures preceeding the establishment of the U.S.-EC Ad Hoc Group and -pointed to the lack of a similar history of need in the case of the Japanese. It then stated that before it could acquiesce to the Japanese request, the OUSTR wanted a paper from the Japanese explain ing their petrochemical problems and the reasons underlying their desire for a meeting. In mid-October, the attached paper was received from MITI. USTR circulated copies of the MITI paper to the Chemical ISAC and to CMA's International Trade Committee at the beginning of November and asked the membership of both bodies whether, on the basis of the paper, parti cipation by the U.S. industry in the proposed group appeared desirable. Both the ISAC and ITC were generally supportive, but expressed some hesita tion to participate until an appropriate terms of reference had been ap proved by both governments. A government-to-government meeting to discuss terms of reference, in industry definitions, and to consider agenda for future meetings has been scheduled for January 6 and 7 in Washington'. In the event this meeting re sults in an agreed upon terms of reference, it is hoped that the Chemical Manufacturers Association Executive Board can provide its formal approval authorizing CMA participation at its January meeting. Japanese Objectives; The Japanese paper provided by MITI explores the deterioration in its petrochemical industry and states that the poor profitability and operations rates are thought to be due to (1) a large increase in the price of naphtha which accounts for 97 percent of petrochemical feedstock in Japan; (2) a decrease in exports and a sharp increase in imports due to the gap in price competitiveness between Japanese and U.S. petrochemicals (and Canadian), and (3) an overall depression in the market. The paper then goes on to state that the Japanese industry is very worried by the growth in imports and is considering filing antidumping and/or countervailing duty complaints against U.S. producers. According to MITI, its purpose in requesting the establishment of an ad hoc group would be: (a) to promote a better understanding between Japan and the United States of the real state of the increase in exports from the United States to Japan and its effects on the Japanese industry; CMA 073595 (b) to study the prospects for decontrol and the feasibility of imposing countervailing duties on U.S. petrochemicals; and (c) to discuss dumping. g.S- Objectives: Obviously, the U.S.'s interests in an Ad Hoc Study Group are somewhat different than the interests of the Japanese; USTR believes that a joint group should explore all the factors responsible for the Japanese producers' competitive pro blems rather than focusing merely on the contribution of U.S. exports to the problem. While it would be willing to consider the issue of natural gas decontrol, it would reject as totally inappropriate any discussions on the feasibility of counter vailing duties or dumping which would include industry parti cipation, nor would U.S. government representatives be willing to participate in discussions of these issues as other than a hypothetical issue. The USG also believes it important to expand discussion beyond basic and petrochemical intermediates and consider processed petrochemical products. It is expected that these issues will be sorted out at the first government-to-government meeting. Antitrust Concerns; The USG appreciates that obtaining a clear and adequate understanding of the objectives of the U.S.-Japan Ad Hoc Study Group by both sides is even more important in the case of the Japanese than it was with the C. For this reason, the USG plans to emphasize to the Japanese that U.S. industry participation depends solely on prior agreement that the focus of the group is on fact finding rather than policy formulation or resolution. Additionally, it will be explained that, although such a limited mandate does narrow po tential antitrust concerns, that antitrust considerations require that disv cussions involving industry deal only with aggregated data and eschew discussion of price or trade data in terms of appropriate or desirable levels. Detailed agenda must be mutually acceptable prior to the commencement of each meeting. As occurred in the past, the Department of Justice representative or other government attorney familiar with antitrust concerns will sit in attendance at all joint government-industry meetings. Need for Industry Participation; Based on its experience with the Europeans, the USG believes that it would be practically impossible to develop adequate information to support the U.S. position or successfully to refute any detailed Japanese analysis concerning the factors responsible for U.S, export growth without the full support and participation of the U.S. chemical industry, without industry cooperation, the USG cannot hope critically to examine any quantitative case made by Japanese chemical industry. Also, a full, balanced and compre hensive look at the apope of the Japanese difficulties and MITI's capability in exacerbating the problems would appear to serve U.S. industry interests from the standpoint of clarifying the record on this issue. CMA 073596 Mode of Industry Participation: Again, it is highly unlikely that the mode of industry participation will be symmetrical on both sides. Like the Europeans, Japanese industry is likely to sit at the table as equal participants with their government, although a government representative will lead the delegation. Regardless of how the European side is structured, however, the USG considers itself bound by the guidelines governing participation of private-sector repre sentatives on U.S. delegations promulgated by the Department of State in the March 23, 1979 Federal Register. As furhther clarified in the guidelines appended to this proposal, these guidelines make the following important points; 1. Delegations should be no larger than absolutely nec essary to provide the most adequate advice and ob tain a balanced representation of interest on the dele gation. 2. Private sector representativs are not required to compro mise among themselves or present united private sector views. 3. Private sector representatives must not use their positions to undercut the U.S. position at a conference or negotiation. 4. Private sector representatives are prohibited from speaking or negotiating for the United States unless asked by the head of delegation to address an issue of a technical or factual nature and unless this will advance U.S. objectives and the private sector representative is best able to speak on the subject under discussion. 5. Private sector representative participation at any meeting is at the discretion of the head of delegation. 6. To the extent feasible, the responsible government officers will consult with and seek recommendations of representative private sector groups and associations but is not bound by such recommendations. 7. Representatives may be invited from labor groups, the aca demic community, trade associations, specific business firms or any other source. 8. Private sector representatives shall be given written letters of invitation which will describe the role of the represen tative and outline the limitations on participation. CMA EC - 1/11/82 BD - 1/12/82 CMA 073597 Results of R S D Survey of Member Companies EXHIBIT M The following information is in response to the September 29, 1981 request of the CMA Board of Directors that CMA staff conduct a survey to determine if the chemical industry was responding favorably to President Reagan's economic recovery program. Page 2 of this tab provides background information as why CMA conducted a survey to determine the effects of the Economic Recovery Tax Act of 1981 on research and development (R & D) activities. Page 3 contains a summary of the analysis of the R & D survey. Page 4 is suggested language to be included in speeches or public statements which may be made by chemical industry officials. ACTION REQUIRED: None - for information only. CMA BD-1/12/82 CMA 073598 CMA Survey on the effects of the Economic Recovery Tax Act of 1981 on Research and Development Activities At the April 7, 1981 meeting of the CMA Executive Committee, a resolution was passed which voiced support for President Reagan's economic program. The resolution further urged that Congress approve legislation which would require both decreases in government spending and provide for increased investment incentives through tax cuts for businesses and private individuals. Even though Congress did pass such legislation in August, the CMA Board of Directors, along with many other segments of the business community, have expressed concern that the President's economic program may yet be sidetracked before it has the opportunity to work. Consequently, the CMA Board of Directors determined at its September 29, 1981 meeting that CMA should attempt to find concrete evidence that the President's program was likely to provide the necessary incentives for economic recovery. The Board directed that a survey be conducted by CMA to determine what effect the Economic Recovery Tax Act of 1981 (ERTA) was likely to have on research and development (R & D) programs in the chemical industry. with the aid of representatives from select CMA member companies, CMA staff developed a questionnaire designed to determine the effect of ERTA on R & D. An analysis of the responses to that questionnaire appears elsewhere in this tab item. CMA 073599 -2- Analysis of CMA Survey on the effects of the Economic Recovery Tax Act of 1981 on Research and Development Activities A survey questionnaire to determine the effect of ERTA on research and development activity was sent to all CMA members in October, 1981. Of the more than seventy-five companies,,responding to the survey, 73 percent felt that ERTA would cause an increase in their R & D budgets. Of those responding affirmatively, three-fourths felt that the increase would be by more than 5 percent and 40 percent stated that increases of greater than 10 percent were anticipated. Of the companies responding, 16 percent had annual sales of less than $100 million, 26 percent had annual sales between $100 million and $500 million, 15 percent had annual sales between $500 million and $1 billion, and 43 percent exceeded the $1 billion mark in sales. In addition to tax credits, the method used to allocate R & D expenditures to domestic income has"also been modified by ERTA. The survey asked the respondents if they felt that ERTA would cause R & D activities to be shifted back to the United States from foreign sub sidiaries or if it would discourage the future shifting of existing R a D facilities from the United States overseas. The majority of respondents answered "no" to both questions. Of the 44 percent who felt that ERTA would cause R a D activity to be shifted to the United States, more than half felt the shift would be slight. Only 34 percent responded affirmatively to the deterrent effect that ERTA would have toward keeping R a D from being moved out of the United States. The majority of the respondents also felt that the deterrent effect would be slight. Because CMA has contended in the past that the Toxic Substances Control Act has the potential to be a disincentive toward increased R a D activity, the respondents to this questionnaire were asked to comment on this belief. When asked whether TSCA compliance was requiring the use of funds which otherwise would have been allocated to R a D, 55 percent of the respondents replied in the affirmative. This effect is slight, however. The majority of those who were able to quantify the degree to which R a D funds had been diverted by TSCA stated that five percent or less of those funds were so affected. ? I1' * -3- m t \ CMA 073600 SUGGESTED SPEECH LANGUAGE on the EFFECTS of the REAGAN ECONOMIC PROGRAM on RESEARCH and DEVELOPMENT ACTIVITY The chemical industry stands firmly behind the Administra tion's economic recovery program. Obviously, as a nation -- and as a single industry -- we still face significant problems- These problems can -- indeed must -- be overcome. We find it encouraging that President Reagan and the Congress have taken the first steps necessary toward addressing these problems. Early results of the Administration's economic program demon strate that it is clearly focused, designed to bring about what is so desperately needed -- immediate and demonstrable improvements in our economy. More than 70 percent of chemical companies responding to a^ re cent CMA survey say that the new Economic Recovery Tax Act will stim ulate increases; in their research and development expenditures in 19S2* Results of the survey show quite clearly that industry -- and especially the chemical industry -- can and will respond quickly to such positive stimulus. The planned increases in R&D spending by the industry -- which are expected to run about 15 percent above that of 1981 -- are signi ficant since historically, such expenditures have translated into in creased product innovation, more efficient utilization of plant and equipment capacity and more jobs. We urge the Administration and Congress to intensify their efforts to bring about this recovery so necessary to our nation and its people. CMA BD-1/12/82 CMA 073601 EXHIBIT N REPORT OF THE TECHNICAL DIRECTOR The cMA Board Review Committee visited the Technical Department on November 10. We were pleased to have their advice. The Technical Director participated in nine tele vision, six radio and seven print media programs during November and December. The Director of CHEMTREC completed two newspaper inter views and eleven radio and television interviews on CHEMTREC while in Augusta and Atlanta, GA. Technical Department personnel made presentations at: Social and Ethical Responsibility in investments Pro gram in National Ministries of American Baptist Churches Board of Directors, Philadelphia, pa. Topic: Hazardous Waste Disposal. By: Dr. G. V. Cox. The American University, Washington, DC. Topic: Case History of The Ravaged River Report in Niagara Falls. By: Dr. G. v. Cox. New york State Assembly, Buffalo, NY. Testimony: Technical Evaluation of The Ravaged River at the request of Joint Senate and Assembly Committees on Environmental and Toxics Control. By: Dr. G. V. Cox. National Association of Manufacturers, Solid Waste Task Force, Washington, DC. Topic: CMA Efforts on Siting. By: Dr. G. V. Cox. Executive Enterprises Symposium on Labeling, Washing ton, DC. Topic: Labeling. By: R. M. Comotto. Louisiana Chemical Association Occupational Health and Safety Seminar. Topic: Chemicals in the Envi ronment (Cancer). -By: Dr. Charles Ryan, Sun Company. Transportation Data Coordinating Committee, Washing ton, DC. Topic: CHEMTREC. By: J. C. Zercher. CMA Emergency Response Team Workshop, Louisville, KY. Topic: CHEMTREC. By: J. C, Zercher. * ! ! i' fi i i CMA 073602 2 Environmental Management Committee Semiannual Envi ronmental Update, Philadelphia, PA. 3y: Environmen tal Division Staff. Lawyers Training Institute on Hazardous Waste Lia bility, Chicago-Kent College of Law, Chicago, IL. Topic: Updating Resource Conservation and Recovery Act implementation. By: D. W. Carroll. International Water Conference, Pittsburgh, PA. Topic : panel- Discussion on Risk Analysis. By: j Mayhew. -- - - Hazardous Materials Control Research Institute, Wash ington, DC. Topic: Chaired Session on Uncontrolled Hazardous Waste. . By: j. J. Mayhew. US-USSR Environmental Exchange program In the spring of 1972, President Nixon and president podgorny of the USSR signed the bilateral agreements which signaled the start of "detente" between the two nations. The US--USSR Environmental Exchange program was one of many of the agreements. The US Department of State designated Russell Train, then chairman of the Council of Environmental Quality, to head the program for the US side. He later carried this title and responsibility to the Administrator of the Environmental protection Agency. His counterpart on the Soviet side was and remains Academecian, Uri_Israel.. Professor S. V. Yakovlev, Director, VNII vodgeo, Gosstroy,. USSR, was appointed head of the working group on the Soviet side, and Mr. Cahill, U.S. EPA, was his counterpart. - From 1973-1977, considerable activity occurred under this program. Delegations from each side visited the other's country to conduct plant tours and information exchanges at factories, technical institutes and ministries. The program encompassed several industrial categories including the chemical industry. CMA and member companies, participated willingly and heavily, and several joint seminars were held under the auspices of EPA and CMA. The exchanges were considered successful and beneficial to both sides. From 1977 to the present, a cooling-off period ensued as a result of world events and the exchange program was dimin ished. Currently, the US State Department wishes to rejuve nate the program and has confirmed the leadership role of EPA t CMA 073603 3 EPA and CMA requested that Dr. Charles p. Priesing of the American Cyanamid Company, represent the US chemical indus try in the initial phases of the renewed program. A working group of the Planning Committee was established and visited the USSR October 26-November S, 1981. Dr. Priesing attended with three EPA representatives. Meetings were held with representatives of the USSR Ministry of the Chemical Indus try, and tentative agreements were reached broadening the scope of the municipal-industrial water and wastewater treatment component of the program. Specifically, exchange agreements were reached in four general areas, namely, pro duction, use and release of chlorofluorocarbons, industrial wastewater treatment and control, hazardous waste management and toxic substances testing. This program is not part of CMA's current budget plans, and if CMA member companies wish to participate, we will be pleased to provide the liaison. CMA has been asked to host a return visit and arrange chemical company contacts. If you are interested, please contact Gerry Cox for additional information. DISTRIBUTION, ENERGY AND ENGINEERING DIVISION Distribution CMA appealed the Interstate Commerce Commission's ,(ICC) decisions.on Market Dominance, Revenue Adequacy, Inflation Index, and Cost of Capital. These proceedings, initiated to implement the Staggers Rail Act, resulted in decisions which would enable railroads to charge "captive" shippers (chemi cal manufacturers) high rates without being subject to chal lenge before the ICC. Related to our concern, Mr. D. G. Griffin, PPG Industries, testified on behalf of CMA at the Staggers Rail Act Oversight hearing, before the Senate Com mittee on Commerce, Science and Transportation. It is CMA's view that the ICC was failing to implement the Act in ac cordance with the stated intent of Congress, thereby permit ting the railroads to increase freight rates unreasonably, particularly for captive shippers. The Distribution Committee presented an outstanding pro gram at the CMA 3lst Semiannual Meeting. Government, car rier and shipper representatives discussed the impact of reduced federal control and subsidies on transportation by rail, highway and inland waterways. t CMA 073604 4 In comments to the House Committee on Merchant Marine and Fisheries, CMA opposed H.R. 4374 (proposed amendments to the Shipping Act of 1916) because it proposed to increase feder al control of ocean shipping and consequently would increase shipping costs unduly. f I *3 >\ CMA supported the upper Mississippi River 3asin sion's recommendation for a second chamber at Lock 26 to facilitate the movement of tows during peak periods and shutdowns for maintenance and repair. Commis and Dam traffic In a statement presented at a Federal Railroad Adminis tration hearing, CMA supported continued safety regulations for short-haul and connecting rail lines. in our view, all railroads should be required to maintain minimum standards as mandated by federal regulations. CMA opposed petitions to the ICC which requested modifi cations of a rule governing the use of private hopper cars in interchange service. CMA supports the unilateral right of private owners to operate their cars for the transporta tion of chemicals. Energy I Mr. James D- Beatty, Procter & Gamble Company, testified on shortcomings of the Natural Gas policy Act (NGPA), Novem ber 6, before the Senate Committee on Energy and Natural Resources. It is CMA's view that the NGPA fails to provide adequate supply incentives, perpetuates disparities- in pricing and supply, impedes efficient use of all national energy sources, and contributes to an imbalance between supply and demand. The NGPA fails to meet important na tional energy objectives because it does not provide: smooth and orderly phase-up, by a date certain, of all natural gas wellhead ceiling prices to market clearing levels; coordinated removal of both supply and demand eons traints, and free-market access for all consumers, pipelines and distributors to all categories of gas. The Committee also prepared additional educational back ground materials including a question and answer listing to -t CMA 073605 A mSI 5 respond to congressional concerns regarding natural gas decon trol. On December 14, CMA held a special briefing for member company Washington Representatives to provide an opportunity for discussions of the natural gas decontrol issues. This was an early planning phase for legislative action on natural gas decontrol. The Administration's legislative proposal is anticipated in January. CMA has initiated outside research for an analysis and critique of ten studies on the economic impact of natural gas decontrol. The objective is to put these studies in proper perspective and provide a better understanding of this complex issue. This study should assist CMA signifi cantly during the coming debate in Congress. Regarding emergency preparedness, CMA submitted recom mendations to the Secretary of Energy on a strategic petro leum reserve {Spr) distribution plan. in our view, the SPR should not be used unless there is a well-established na tional security requirement which includes, defense, public health and safety or severe economic impact. We also advo cate that SPR supplies should be distributed by a marketoriented mechanism, such as an auction. Also, the Adminis tration's policy regarding SPR use should be made public to allow industry to plan accordingly. Final Fuel Use Act rules for new and existing facilities were published in the Federal Register December 7, with proposed rules on sections which had been revised substan tially. CMA is preparing comments on these rules. Also, we recommended that the Department of Energy publish additional rules pertaining to the cogeneration exemption. Engineering* CMA took the following actions upon recommendation of the Engineering Advisory Committee: Submitted 13 proposals for revision of the 1981 Na tional Electrical Code to enhance safety and reduce costs. Submitted ballots for two noncompeting pressure ves sel inspection codes as national standards, provided both codes ar^ approved. The chemical industry is CMA 073606 6 inc1ud ed in the scope of one, and excluded from the other. Long-term goal is a single national s tandard petitioned NFPA to create a group to redetermine cur rent ratings in all sections of the National Electri cal Code. Our concern is with overly-conservitivs ratings. Submitted a statement for the record of a December 17 U.S. Metric Board public hearing on American National Metric Council's Chemical and Allied products Sector Committee Conversion plan. We stated that conversion may or may not coincide with any target date for the industry as a whole, since both timing and extent of conversion are likely to vary widely from company to company. CHEMICAL TRANSPORTATION EMERGENCY CENTER (CHEMTREC) CHEMTREC Advisors initiated a salvage drum progrm and the first stage of planning is complete. The program includes the production of. a data base that identifies the location of drums, the type of drums, and the company official who is authorized to release drums to another company. The program is being prepared for operation at this time. Thirty-five member companies are participating, and that number may be expanded in May to include additional member companies who wish to participate. Robert Mesler of Dow has done an excellent job of coordinating the data for this program. A CMA Emergency Response Team Workshop was held in the Louisville, KY area with a full attendance of 100 people. ENVIRONMENTAL PROGRAMS Hazardous Waste Response Center (HWRC) The HWRC set final plans for its hazardous waste site management plan and protocols on lagoons, groundwater, drum opening and sampling, and drum consolidations. The remain ing protocols should be completed in January 1932. Seminars for CMA member companies on the hazardous waste site manage ment plan and protocols will be held in the spring of 1982 in several locations. * . . ,~r CMA 073607 7 The HWRC approved a report on the development of a re medial action plan for the abandoned Williams' property drum dump site and submitted it to EPA and the State of New jer sey. Discussions are presently underway for the HWRC to assist EPA Region VI and the State of Texas with an abandon ed s i te . Clean Air Act CMA prepared comprehensive written testimony for presen tation to Congressman Waxman's Subcommittee on Health and the Environment concerning amendment of the Clean Air Act. The specific testimony addresses amendment of Section i i 2 concerning regulation of hazardous air pollutants. Dr. William J. McCarville of Monsanto presented the testimony. Clean Air Act mark-up continued in the Senate. To date, positions adopted by the Environmental Management Committee (EMC) and industry in general have essentially been rejected by the Senate Environment and public Works Committee in amendments considered to date. Representatives of CMA met with EPA to discuss potential amendments to Section 112- of the Clean Air Act. The discus sion centered on CMA's "one-step" regulatory.proposals and a revised standard of protecting against an "unreasonable risk." Resource Conservation and Recovery Act (RCRA) CMA representatives met at the office of Management and Budget's (OMB) request to discuss liability insurance re quirements for existing facilities under RCRA. Consistent with EMC guidance, the group took no formal positions but discussed all relevant issues and positions. OMB indicated that no final decision had been made on the Administration's position. Significant progress has been made on at least two issues in the RCRA implementing regulations li tigatio n/s e ttlemen t discussions. In this regard, EPA has revised its definition of when a mixture is subject to the RCRA regulatory system. The chemical industry obtained significant relief since de minimis quantities of a hazardous waste discharged into a wastewater treatment system will not'be subject to the RCRA requirements. In a related matter, a tentative agreement has been reached in redefining what is a solid waste. Le gitimate reuse/rarycling, as defined in the revised regula CMA 073608 8 tion to be proposed early in 1982, will not be defined solid wastes and thereby not subject to the RCRA requirements. A settlement agreement on all aspects of the RCRA consol idated permit issues has been entered finally with the D.C. Circuit Court of Appeals. The resolution of all issues is highly favorable to industrial concerns. Clean Water Act A settlement agreement on the common National pollution Discharge Elimination System (NPDES) consolidated permit issues has been entered with the D.C. Circuit Court of Appeals. As with the RCRA issues, the resolution resolves all issues and is favorable to industrial concerns. Negotiations on possible settlement of the NPDES liti gation on the substantive issues is completed. Of the 54 issues, almost all issues have been resolved satisfactorily, with only a few issues mutually agreed between the parties to be litigated now, and about half a dozen issues to be litigated later if and when they arise in the permitting process. The Clean Water Act position paper developed by EMC has been widely distributed to CMA member companies, Washington trade associations, EPA, and other interested groups. It now looks like the debate to amend portions of the Clean Water Act will commence early in the next session of Congress. Super fund CMA has been advocating actively before EPA the absolute necessity for the National Contingency Plan (NCP) to equally apply to both fund financed expenses and privately funded cleanup. This issue is CMA1s number one priority. Unless such an approach is incorporated into the NCP there will be no incentive for industry cleanup on a voluntary basis as clearly envisioned by the original legislation. CMA representatives met with William Hedeman of EPA to discuss the status of the NCP and bring him up to speed on CMA superfund positions, Mr. Hedeman has replaced Michael Cook as Deputy Assistant Administrator in charge of Superfund programs. * CMA 073609 9 CM A has developed comments for submittal to EPA on various contractor reports concerning a "continuous release" concept under Section 103(f) and Section 102. CMA also met with representatives of the General Account ing Office (GAO) to discuss EpA's implementation of the Superfund legislation and specifically its development of a NCP. GAO is specifically interested in the chemical indus try's views on how Superfund should be implemented. General programs An ad hoc group set final plans for conducting our up coming Environmental Review Information Exchange (i.e., audits) to be held.on January 26, 1982, in Atlanta, Georgia. Eight member company representatives will comprise a panel which will provide a spectrum of information on what types of philosophies are currently being used by member companies t.o conduct environmental reviews. IMCO Draft Hazardous and Noxious Substances Convention D. Carroll and D-. Evans were .industry, advisors to the United States delegation at an informal IMCO working group session to draft revisions to a draft hazardous and noxious substances convention. The draft convention, if ratified, will establish an international compensation mechanism to victims of certain chemical spills from ships. in prepara tion for the full IMCO Legal Committee meeting in February, CMA is drafting alternative proposals that will offer a better balance of shipper and ship owner interests. These will be submitted to the US Coast Guard for consideration in developing the US position. HEALTH, SAFETY AND CHEMICAL REGULATIONS DIVISION Chemical Regulations Advisory Committee As a follow-up to its May 21 petition to EPA, the Chemical Regulations Advisory Committee (CRAC) is refining CMA1s proposal to exempt certain low-risk new chemicals from premanufacture notification (PMN) requirements. CRAC is developing additional technical, toxicological and economic information to support the CMA proposal, which it hopes to complete by year's end. * CMA 073610 10 On November 9, CMA filed comments with EPA on the 'Ov' 1- rgani zation for Economic Cooperation and Development's (OECD) proposed testing guidelines for mutagenicity, neurotoxicity, and reproduction toxicity. in general, CMA supports OECD's effort to develop chemical testing guidelines that are mutually acceptable to all nations. However, the comments stress the following: Development of OECD test guidelines should be limited to areas where conflicting testing requirements be tween countries could constitute an obstacle to trade. Each guideline proposal' should include a statement explaining why the test is needed. when developing test guidelines, OECD should consider the level of understanding and concurrence in the field of research, and the validation of test meth ods. Each guideline proposal should include a state ment indicating the extent to which suggested test methods have been validated internationally. Proposed test guidelines for delayed neurotoxicity are only applicable to a specific class of chemicals (organophosphates) . Such evaluations are not gen erally performed as a part of a routine toxicity testing program, and should be selectively applied. The proposed reproduction toxicity testing guidelines are clearly written for oral routes of exposure and should not be followed if other routes of exposure are used. Test guidelines should not recommend the use of a specific procedure when the state-of-the-art indicates there are several methods, but no general agreement on which one is optimal. By arbitrarily specifying a technique, the superior method may in fact be overlooked. The CMA submission does not include specific comments on the OECD proposed mutagenicity testing guidelines. We fundamentally agree with the mutagenicity comments that will be submitted by the American Industrial Health Council which stress the need for minimal requirements to allow for the use of good scientific' judgment in the performance and selection of test methods. CMA 073611 11 CMA comments were submitted to OMB by latter emphasizing that EPA's compliance cost figures for Section 3(d) and 3(e) reporting grossly underestimate the burden to industry. These rules are currently under OMB review as required by the paperwork Reduction Act and Executive Order 12291- CRAC held an informational meeting on December 2, 1981. centered around the theme, "CRAC's Outlook on Toxic Substances Regulation for 1982". Dr. John A. Todhunter (EPA) spoke on EPA's view of toxics regulation in-1982. - Dr. Todhunter was confirmed by the O.S. Senate on November 4 for the position of EPA Assistant Administrator for pesticides and Toxic Substances. The CRAC Impact Analysis Task Group formed the Data Resources Work Group. The group will examine the data currently available for analysis of TSCA requirements. It has begun to investigate (J.S. Government data on the chemical industry and the survey methods used to gather it. The work group will investigate private data bases later. A Workshop on Data Quality Indicators is planned for February 10-12, 1982- The purpose of the Workshop will be to explore the feasibility of informing on-line data base users about the reliability of the information retrieved. Hazards Communications Special Committee* Activity on the federal hazards communications initia tives has been relatively calm. According to OSHA task force members, the draft labeling rule has been forwarded to OMB. The States Activities Task Group of the Hazards Communi cations Special Committee is developing a State Riqht-toKnow packet. The packet will be distributed to appropriate states and municipalities where right-to-know movements are active. The,packet will contain four parts: The rationale for having no local laws (current and proposed federal standards, rough cost estimates, etc.); CMA's positions on the issues involved; The CMA draft proposal for an effective hazards com munications program; and CMA 073612 12 A mark-up of the proposed legislation, if available. This packet should be completed in a few months. The proposed revision of the ANSI Standard for the pre cautionary Labeling of Hazardous Industrial Chemicals is being sent to approximately 50 organizations for review and approval. The revision updates the 1976 version. There is increased emphasis on chronic hazards. The'canvass process should be completed by June 1982. Occupational Safety and Health Committee performance Standards CMA presented to OSHA a new approach for preparing per formance standards. It balances the Agency's requirements by including work practice and training with equipment pro visions in each case. For example, the regulation on haz ardous materials relies entirely on equipment specifica tions. CMA offered to work with OSHA to draft a better rounded performance .regulation on this subject. The new approach closely resembles actual chemical industry practice, which has been so successful in achieving a very low workplace injury and illness rate. Top OSHA officials were receptive to this approach. We are now developing and publicizing it. New instructions for OSHA Compliance Officers CMA participated in a discussion with OSHA and other in dustry representatives on a draft of new instructions to OSHA inspectors in the field. The follow-up written com ments endorse OSHA's basic concepts which would eliminate earlier abuses of the OSH Act's general duty clause and the employee complaints procedure. Public Right-to-Know Representatives of "CMA member companies at the 31st Semi annual Meeting were urged to support a federal OSHA perfor mance standard on labeling. This would discourage states passing divergent laws on the subject. Control Technology CMA is cooperating with NIOSH and its contractor, EnviroControl, Inc., to-^lan and carry out a study of effective ways to control emissions from sealing devices in plants. CMA 073613 13 Regulatory Impact Special Committee At the 31st Semiannual Meeting in November, the CMA Board of Directors allowed the public Risk Analysis Special Com mittee (PRASC) to sunset because the committee had accomp lished its objectives. The Board established a new commit tee, the Regulatory Impact Special Committee (RISC), to build upon the foundation that PRASC established. The Com mittee's charter and objectives follow the recently adopted CMA policy on regulatory impact analysis for health, safety, and environmental regulations. RISC will develop and apply a set of analytical and data-gathering techniques for use in regulatory impact analysis. Mr. Jackson Browning (Onion Carbide) is chairman, and Mr. D. Christopher Cathcart is the CMA staff executive for this Committee. BIOMEDICAL AND ENVIRONMENTAL SPECIAL PROGRAMS Special programs Advisory Committee (SPAC) On November 2, 1981, the CMA Executive Committee reauthorized SPAC for another year. Arsenic The CMA/National Bureau of S tandard s-sponso red Arsenic Symposium was held November 4-6, 1981, at the National Bureau of standards in Gaithersburg, MD. More than. 160 people attended. The Arsenic panel is exploring the feasi bility of publishing the proceedings of the symposium through a private publisher. The panel is also reviewing a draft of Dr. HardingBarlow's literature review on the carcinogenic effects of arsenic . Benzene The 90-day phase of a jointly sponsored CMA/American Petroleum Institute research program was completed and data analysis is in progress. To date, no early indicators of benzene toxicity have been detected. unless further data analysis reveals otherwise, there will be no need to conduct the proposed two-year study. The Toxicology Research Task Group will be looking to alternative protocols with which to continue the research program. $ CMA 073614 Chlorobenzenes 14 The chlorobenzene producers are awaiting final approval from EPA on a voluntary industry test program. The initial step in the program involves- i_n vitro testing of three compounds in the class. The group also plans to initiate a two-generation reproduction study on monochlorobenzene early in 1982. Epoxy Resins The Epoxy Resin Program Panel is considering expanding its charter to include compounds other than bisphenol-A epichlorohydrin derived epoxy resins. Nominations for new compounds have been received by participating companies and a final selection will be made within the next few weeks. Ethylene Dibromide The CMA Ethylene Dibromide (EDB) panel has conducted research for a number of years on the health and environ mental effects of EDB. Recently, increased attention has been focused on the alleged spermatogenic properties of EDB as a result of its widespread use as a citrus fumigant to control the Mediter ranean fruit fly in California. The State of California has proposed to lower the occupational standard for EDB: exposure from a time-weighted average (TWA) of 20 ppm to ' a 130 ppb with a 130 ppb ceiling. As a result of this drastic action, there has been wide spread alarm among workers and customers alike about the toxic properties of EDB. This alarm has reached interna tional levels. The U.S. Department of Labor's Occupational Safety and Health Administration (OSHA) is now investigating the ljaed for a new nationwide standard for EDB exposure. Some labor organizations have petitioned the federal govern ment for a IS ppb TWA standard. Faced with such dramatic activities in the regulatory arena, CMA's EDB Panel has reorganized itself to present responsible scientific, business and legal arguments to regulatory bodies. An EDB Panel representative testified before the California Standards Board, and written testimony is being prepared to present to OSHA on the federal level. * * v :v i t; CMA 073615 m 15 At present, panel participants include: The Dow Chemical Company, Great Lakes Chemical Company, PPG Industries, E.I. du Pont de Nemours & Co., Inc. and Ethyl Corporation. Ethy1ene Dichloride The Ethylene Dichloride panel is reviewing a response from Montedison concerning several previously unanswered questions regarding the final report by professor Maltoni. Ethylene Oxide (EO) The Ethylene Oxide Industry Council (EOIC) met in early December to review and approve the budget and proposed program for 1982* Activities of the EOIC are expected to include: Response to an anticipated OSHA Advance Notice of Proposed Rulemaking; Interaction with EPA concerning a Toxic Substances Control Act Section 4(a) test rule on EO; A human health risk assessment of exposure to EO; An economic regulatory impact study; Development of an industrial hygiene survey to assess workplace practices; A scientific program that will include a pharmaco kinetic study, reproduction study or epidemiology s tudy; Equivalency testing of monitoring methods and analy sis used for measuring EO in the workplace; Development of a training program for EO workers; and Sponsorship of a cytogenetics workshop. Fluorocarbons Dr. Donald R. Strobach of Du Pont addressed the Technical Breakfast on December 10, 1981. The Fluorocarbon program panel (Fpp) is making rapid progress toward joidgfcly funding approximately $500,000 of ;i CMA 073616 m 16 research with NASA and providing S80,000 to complement the potential EPA funding of $250/000 for another project. The FPP testified on behalf of CM A on November 5, 1931, at hearings before the House Subcommittee on Health and the Environment. The hearings were held to determine whether there should be certain restrictions on EPA's freedom to regulate chlorof1uorocarbons. More specifically, the hear ings reviewed Representative Luken's bill (H.R. 13 5 3 ) to amend the basis for Clean Air Act to require further assessment of the validity of the Ozone Depletion Theory before further regulation. On November 20 , 19 81 , Fpp submitted written rebuttals to some of the testimony given by others. Glycol Ethers The Glycol Ethers panel is actively considering what role, if any, it wishes to play in an advocacy program with EPA and/or OSHA. A preliminary decision has been reached to hire an attorney and-develop an advocacy strategy. Members of the Glycol Ethers panel met with two attorneys and will make a recommendation to the panel to hire one.' Current advisory activities involve interactions with spa and National institute for Occupational Safety and Health (NIOSH). CMA obtained a draft of a Chemical Hazard Identi fication Profile (CHIP) from the EPA, office of Toxic Sub stances (OTS), Chemical Hazard Identification Branch. CMA began a dialogue with NIOSH to determine what help, if any, the Glycol Ethers panel could provide in NIOSH's development of a Current intelligence Bulletin (CIB) on ethylene glycol monomethyl ether (EM) and ethylene glycol monoethyl ether (EE). CMA is collating information on recommended exposure levels and material safety data sheets from member companies for submission to NIOSH. Pour toxicology studies were started in this quarter: A mouse inhalation teratology probe study on EM; A probe dermal teratology study on ethylene glycol monobutyl ether (EB); An inhalation teratology study on EE; and A contract was executed for a 90-day dermal study am CMA 073617 17 The 1982 research program was developed. This program will include inhalation teratology studies on two compounds, propylene glycol monomethyl ether and ethylene glycol monoethyl ether acetate and a 90-day inhalation study on EE. A six-part "comparative assessment" program is still under development and should begin in late 1982* The Glycol Ethers panel is in the process of defining its relationship with users including what role, if any, users will play in the panel's activities. Ketones The Ketones Panel undertook an advocacy program on four ketones on the Inter-agency Testing Committee (ITC) list: Methyl ethyl ketone (MEK); Methyl isobutyl ketone (MIBK); Mesityl oxide (MO); and Isophorone. The program involves developing use and exposure informa tion, as well as a voluntary test program. The Ketones Panel met with EPA twice in this quarter. The first meeting was held to discuss the panel's proposed test program. A document was submitted to EPA at that time describing the Panel's activities, summarizing the toxicity data on the four ketones and presenting use and exposure information. At EPA's request, the Ketones panel met a second time to arrange for Chemical industry Institute of Toxicology (CUT) scientists to meet with the scientists in the Test Rules De velopment Branch of EPA- to discuss the MEK 90-day inhalation study run by CUT. A final report on that study was presen ted to EPA. CUT also discussed pharmacokinetics data on MEK. EPA received the presentation and conclusions well and indicated that with negative results in a battery of genotoxicity tests on MEK, they would have little concern over potential oncogenic effects of the compound. 4F CMA 073618 18 The panel is currently developing a test program which may include mutagenicity and teratology studies as well as the 90-day inhalation study on MIBK which is currently underway. The panel is planning to document their position and submit this position paper to EPA in mid-January. The Panel has recently decided to hire an outside attorney to help in their negotiations with EPA. phthalate Esters The phthalate Esters Program Panel has gained preliminary acceptance of the health and environmental effects voluntary test program from the Test Rules Development Branch of EPA. The final submission of the program was made in September and a Federal Register notice, giving preliminary accept ance, was published October 30, 1981. National Resources Defense Council (NRDC) has submitted comments on the test program and may file a suit. However, the Panel decided to proceed with testing. Environmental testing started at SRC in November and will start at Bionomics in December 1981. Contracts are being written for the Health Effects Testing program which will begin in December. 1981 or January 1982. Following three meetings with Dr. John Hernandez, Deputy Administrator of EPA, on the potential TSCA Section 4(f) finding on di-2-ethylhexyl phthalate (DEHP), the panel submitted a detailed position paper on this issue to Mr. Don Clay, Director of the Office of Toxic substances. NRDC has filed a 60-day notice of intent to sue EPA on this issue and the panel is following the situation closely. The panel decided to recommend that CMA intervene in any suit NRDC might make on either the TSCA Section 4(a) or Section 4(f) issue. This request was made to the Chemical Regu lations Advisory Committee by the Panel chairman and Counsel. The panel has submitted a detailed voluntary test program to PDA on di-2-ethylhexyl adipate (DEHA) and has received unofficial notice of its acceptance. The panel is awaiting formal notification from FDA. Testing for this program is planned to begin in January or February 1982. Polychlorinated Biphenyls The Polychlorinated Biphenyls (PCB) program Panel has submitted two sets of comments and three contract reports to EPA pertaining contested regulations on pCBs. CMA 073619 19 1. Comments in response to two advance notices of pro posed rulemaking (ANPR) relating to the manufacture of pCBs below 50 ppm, published May 20, 1981/ by the Environmental protection Agency [46 Fed. Reg. 27617 and 27619]; 2. Comments in response to an ANPR relating to charac terizing equipment as totally enclosed [46 Fed. Reg. 16096]; 3. A study of enclosed use of pCBs in the chemical industry by the Regulatory Research Service; 4. A report of a survey on the incidental manufacture, processing, distribution, and use of polychlorinated biphenyls at concentrations below so ppmj and 5. A summary of the health effects of PCBs by Ecology and Environment, Inc,, and associated reference material. The comments and reports submitted advocate the following positions: 1. New health effects information does not support EPA's previous conclusion that any exposure to PCBs is significant; 2. There is no basis for concluding that incidentally generated PCBs below so ppm should be regulated. In fact, CM A believes that a substantial amount of factual information may exist to warrant raising the regulatory cut-off level; and 3. PCB-containing electrical equipment in the chemical industry should be classified as a "totally enclosed use" under Section 6(e) of TSCA. Rubber Additives The Rubber Additives panel has accepted the final report by Litton Bionetics which evaluates the genotoxic properties of the rubber accelerator 2-(morpholinothio)benzothiazole sulfenamide. The panel is developing several other testing programs, on rubber additive compounds. $ jj II l CMA 073620 _ a - 20 Styrene The Dow Toxicology Research Laboratory submitted a draft final report on a styrene pharmacokinetic study in mice. The Program Panel has deferred a decision on whether or not to conduct a chronic study in this species until a compari son of styrene pharmacokinetics in mice, rats, and man can be further evaluated. Marked differences were seen between mice and rats with respect to acute toxicity of styrene. Zinc Dialkyldithiophosphates (ZDDP) A draft fin-al report on a dermal toxicity study in rats and rabbits using three members of the class of compounds is under review by the ZDDP panel. phase II of the research program is under development. Present plans call for initi ation of a dermal absorption study in rats and rabbits. A study designed to answer the question of the role stress may be playing in producing the observed testicular effects in rabbits is also under consideration. CMA BD-1/12/82 $ CMA 073621 GENERAL COUNSEL'3 REPORT EXHIBIT 0 1. Ethylene Dibromide Panel (EDB)- CMA's EDB panel has filed comments opposing California's proposed state standard of 130ppb EDB exposure. This state action is clearly a precursor for a new FED/OSHA standard for a product which is employed for considerably more widespread uses than as a "Medfly" fumigant. 2. Access to Exposure and Medical Records. Litigation over this May 23, 1580, regulation has slowed down while parties await the outcome of CSHA's admini strative review. It is possible that the Solicitor of Labor will enter into settlement discussions with the parties in this litigation. 3. Labeling Developments. OSKA's draft notice of proposed rulemaking on hazards identification has been submitted to the Office of Management and Budget for review pursuant to E.O, 12291. Unless 0MB objects, publication is imminent. 4. Patent and Trademark Committee. The legislation (S.1700, H.R.4482) to create a Court of Appeals for the Federal Circuit has now passed the Senate and House and awaits final approval in conference. 5. Revision of ANSI Z129.1-1976. CMA has initiated the ANSI canvass approval procedure for review of the National Standard for the Precautionary Labeling of Hazardous Industrial Chemicals. 6. RCRA Regulations. On October 8, 1981, EPA filed a report to the D-C. District Court in State of Illinois v. EPA which outlines EPA's strategy and timetable for issuing RCRA permitting standards for land disposal facilities. Thus far, EPA has issued no such standards for existing facilities and only temporary standards for new facilities. In EPA's report, EPA projects pro posal of the new standards by late 1982 and final promulgation by fall of 1983. On November 13, 1981, Judge Gesell rejected EPA's proposed schedule. He ordered EPA to issue final permitting standards for existing land disposal facilities no later than February 1, 1982. 7. RCRA Litigation. With respect to the litigation challenging EPA's sub stantive hazardous waste regulations under RCRA (Shell Oil v. EPA), CMA and other parties are actively negotiating settlements on various issues with EPA. Major issues of concern (definition of solid waste, recycle-reuse, "mixture" rule, incinerator standards, etc.) are being negotiated and resolved on different time-tracks, we expect this process to continue for at least the next six months. As an outgrowth of the settlement process, EPA has recently proposed regulatory amendments to the "mixture rule" (November 17, 1981) and will soon issue amendments to its ban on disposal of containerized liquids in landfills. 8* aMA v EPA- (Nonattainment/PSD Case), - This case continues to drag. After a successful second meeting with high level EPA officials in early November at which EPA and industry reached a consensus on virtually every detail of the * CMA 073622 1 substantive issues, EPA has refused to agree no negotiate specific proposed rules changes with industry prior to settlement of the case. Consequently, when EPA moved on December 4th for a further SO-aav extension of briefing, industry responded by saquiescing in the extension but expressing its dis pleasure with EPA's refusal to negotiate the exact language of the settle ment. 9. NRDC v EPA. (Dual Definition Case) (replaces Controlled Treading Policy) In October, EPA issued a final rule changing the definition of "source" in the nonattainment area regulations to make it the same as the definition in the PSD regulations. In November, NRDC, later joined by the Steelworkers, filed suit challenging the new rule. In early December, NRDC followed up by requesting from the court an immediate stay of the new rule. CMA as well as other industry groups have intervened to protect our interests in this litigation. 10. Dusquesne Light v EPA'. (Noncompliance Penalties Case) Having failed to reach settlement in October, industry filed its briefs during November. EPA is now briefing its case, but settlement talks continue. EPA has objected to the latest industry settlement proposal as a mer industry "wish list" not reflecting earlier settlement discussions. Industry faults EPA for refusing to negotiate at all on one of industry's most important issues. i I ) \ 11. Clean Water Act Policy. The EMC's Clean Water Policy Task Group has be gun to draft statutory amendments that would enact its basic legislative objectives. At the same time, the task group continues to explore actively with EPA administrative remedies where those are available. Prospects for close cooperation with EPA on legislative strategy.in 1982 appear much better for the Clean Water Act than for Clean Air. } 12. NPDES Litigation. By the time of the meeting in January, we expect that CMA will have committed in principle to settlement of a large block of the 54 issues in the litigation. A small number of issues will be "litigated now" in the court of appeals due to their general applicability. The other unsettled issues will be reserved for "litigation later" in district court by individual sources or industry groups in the context of individual permit proceedings, a detail summary is available on request. 13. NRDC v EPA. (General Pretreatraent) CMA, as intervenor, has failed a brief in the third circuit defending EPA's decision to suspend the general pretreatment regulation amendments of January 1981. Because the Government may be unwilling to assert that the Administrative Procedure Act allows the type of suspension at issue, CMA may request from the Government some oral argument time to make our case before the court. Litigation on the same issue in the D.C. Circuit, in which CMA is amicus, has so far been incon clusive on the legal issues. 14. Superfund Litigation. On November 10, 1981, the U.S. District Court for the District of Columbia granted the Motion to Dismiss filed by the United states. The Court ruled that there was no case or controversy presented, thereby rendering the case unripe for review. The preemption issue was never * 2- - CMA 073623 j. . v ,, ' m v addressed by the-Court. Neither CMA nor the State of New Jersey plan to appeal this decision. On September 3, 1981, the Environmental Defense Fund (EDF) filed suit against EPA and OMB in D.C- District Court. EDF asks that EFA be ordered no promulgate the final National Contingency Plan (NC?) under CERCLA by February 1, 1982. On September 17, 1981, the State of New Jersey filed a separate suit in the D.C. District Court against EPA and OMB. New Jersey seeks promulgation not only of the NCP, but also the 106(c) "enforcement guidelines" by February 1, 1982. Both the EDF and New Jersey complaints are assigned to Judge Pratt. As of December 15, EPA has filed no substantive pleadings. EDF has filed a motion for summary judgment. 15. Interstate Commerce Commission Litigation. On October 27, 1981, CMA filed in the U.S. Court of Appeals for the Fifth Circuit its brief in the market dominance litigation. On October 30, 1981, CMA in-house counsel filed its Reply Brief in the U.S. Court of Appeals for the D.C. Circuit. CMA rebutted arguments presented by the Interstate Commerce Commission and the Association of American Railroads relating to the impropriety of using the AAR price index as an inflation indicator. 16. Good-Samaritan Legislation. CMA has joined an inter-industry coalition to encourage the states to adopt a model Good Samaritan statute being drafted by the coalition. 17. Natural Gas Policy Act. CMA testified before the Senate Committee on Energy and Natural Resources with respect to shortcomings in the Natural Gas Policy ACT CNGPA) . In addition, CMA submitted a supplementary statement which responds to questions raised during the hearing. CMA stressed that the NGPA does not provide adequate supply incentives and, unless the law is amended, a gas shortage is likely. 18. Product Liability Reform. CMA submitted comments on a Senate staff draft of legislation that would reform state product liability tort law. These comments offer specific suggestions on how to imp rove the language of the staff draft, including a better definition of "product", further clarification that it must be the defendant's product which caused the injury and a limita tion on the open-ended nature of compensation for non-pecuniary damages. 19. CERCLA Implementation, Section 102. CMA reviewed draft documents prepared by Rockwell International and ICF on the implementation of Section 102 of CERCLA. Both reports assume that EPA is obligated to develop a ccurorehensive list of all materials that could pose a hazard when released to the environ ment. CMA's comments on these drafts were submitted to EPA. -3* CMA 073624 20. Toxic Substances Control Act. On December 3, 1981, CMA filed brief comments, in.letter form, on the Agency's proposal (46 Fad. Reg. 54585, (November 3, 1981)) to grant exemptions from the Agency's ?MN requirements to all manufacturers of existant photographic film articles who met a number of criteria. Deferring to members of the instant phonography industry on the merits of the Agency's proposal, CMA nevertheless cautioned that the Agency should not view the detailed conditions of the exemption as a model for future exemptions. Conditions proposed by the Agency included: the creation of separate production areas, reduction of ambient air concentra tions, the use of respirators under certain conditions, evaluations of process wastes in accordance with RCRA requirements, limitations on concentrations discharge to publicly owned treatment works, water and waste stream pretreatment, and the implementation of special monitoring, industrial hygiene and record-keeping procedures. Extensive work continues in developing additional information to support CMA's May 21,'1981 PMN exemption petition. 21. Regulatory Reform. Floor consideration of S.1Q80, (The Regulatory Reform Act), has been postponed until January 28 and 29, 1982. The House Judiciary Committee has reported H.R.746 (The Regulatory Reform Act of 1981). Some time after S.1080 passes the Senate, it is likely that the House will adopt H.R.746 as a substitute for S.1080 and both bills will be referred to conference committee. 22. CMA Special Program on PCB. CMA has submitted two extensive sets of comments and data to EPA in response to both voluntary data collection agreements which the Association made with the Agency and Advanced Notices of Proposed Rulemakings. (Copies of CMA's comments and separate copies of the executive summaries will be available at the General Counsel's Group meeting. Copies of consultant's reports will be made available on request). In general, CMA's submission provided evidence to support the following conclusions: (a) There is no basis for concluding that incidentally generated PCBs below SOppm should be regulated; evidence may exist to warrant a higher concentration as the regulatory cut-off. (b) EPA should exclude -from regulation all processes producing any concentration of PCBs where 1. all PCB wastes or PCB discharges are handled and disposed of in accordance with all applicable EPA and OSHA regulations; and2 2. the PCB concentration in products of such processes do not exceed 50ppm (or such higher level as EPA may establish by rule) . -4- CMA 073625 (c) The nature and amount of PCS leakage from chemical industry equipment do not present significant exposure to humans or the environment. Accordingly, such equipment should be classified as "totally enclosed" and, therefore, exempt from Section 6(e) of TSCA. Remaining to be submitted to the Agency is the result of the joint CMA - EPA analytical round robbin survey,- completion is expected in the immediate future. CMA____ BD-1/12/82 $ -5- CMA 073626 REPORT OF THE DIRECTOR OF GOVERNMENT RELATIONS WILLIAM M. STOVER EXHIBIT ? TAXATION: THE PRESIDENT AND THE FEDERAL BUDGET President Reagan continues to meet uneasiness and resistance in the Congress on his tax and budget program. With the level of the projected deficit for Fiscal 1932 now approaching $109 billion, the President is encountering new opposition from Republican members of the Senate with respect to further reductions in non-defense domestic spending and proposals for increased taxes. Prior to August, the President had demonstrated great success in persuading the Congress to enact his tax and budget program. He effectively marshalled public support as a means of pressing Congress to adopt the Second Congressional Budget Resolution for Fiscal 1982 which provided for reduced government spending of almost $35 billion. In addition, the President was equally effective in achieving enactment of his tax reduction program in the Economic Recovery Tax Act of 1981. This legislation will reduce individual and corporate income taxes by almost $750 billion over a 5-year period and is the largest single tax reduction since the income tax was enacted in 1913. By September it became apparent that the Nation's economy had begun to slow down and that inflationary pressures had eased somewhat. Falling tax receipts attributable to reduced business activity, increased Federal unemployment benefits payments, and continued high interest rates all contributed to a sig nificant increase in the projected Federal deficit for Fiscal'1982 from $37.6 to $42.5 billion. To reduce this projected deficit. President Reagan called for $13 billion in government spending cuts in addition to those which Congress had already enacted for Fiscal 1982, and for $3 billion in new taxes. Since the bulk of the proposals for new spending cuts were directed to non-defense programs, the Congressional response, both Republican and Democrat, was cool. Moreover, the President's new tax proposals were directed at interests with strong political support in the Congress. After vetoing one omnibus spending resolution as too costly, the President accepted a second con^romise resolution which would pro duce some $4 billion in additional spending cuts for Fiscal 1982 and would allow the Eederal Government to continute its operations though March 15, 1982, Congress, however, had refused to enact any of the proposed new taxes. TAXATION: DOMESTIC INTEP'NATIONAL SALES COPORATIONS (DISCS) The question of the conformity of the DISC provisions of the Internal Revenue Code under GATT rules has been pending before the GATT Council since 1976. At the December 8, 1981,^meeting the GATT Council adopted with qualifications a set of four panel reports^dealing with exports. 1 CMA 073627 2 According to David R. MacDonald, Deputy U. S. Trade Representative, the qualification adopted by the GATT Council reflects acceptance of "the principle that an exporting country need nor tax economic activities involving exported goods located outside its territorial boundaries. It is our view that the U. S. global system of taxing export sales, inclusive of the DISC provisions, is consistent with this principle, and hence, is defensible under GATT rules." Other observers have cautioned, however, that the recent events in Geneva might represent a setback for the 0.5. position on DISC. The GATT Council's decisions appear to have upheld the basic conclusions of the panel report that found DISC in violation of GATT. Even these critics concede, however, that the United states can continue for some reasonable period to argue its own interpretation of the GATT criteria and panel report on DISC. Although resolution of this issue may be delayed, they argue that the elements of the ultimate decision now appear to be in place and that DISC must be repealed or substantially modified. Congressional reaction to the GATT Council decision was swift. On December 11, 1981, Congressman Bill Frenzel (R-Minn.) and Congressman Sam M. Gibbons (D-Fla.), ranking Minority Member and Chairman, respectively, of the House Ways and Means Subcommittee on Trade, introduced new legislation which is designed to provide new tax treatment comparable to DISC which would be fully compatible with the GATT Council's decisions. In brief, the. Frenzel - Gibbons bill would allow U.S. corporations or citizens to create an International Sales Corporations (ISCs) in any foreign country which has a corporate income tax. The new entity would, as a foreign corporation, be exempt from U. S. taxes, as long as it continues to qualify as an ISC. To qualify as an ISC, 95 percent of the corporation's income must come from the sale, leasing or rental of goods manufactured or produced within the United States by related parties. Sales msut be of goods whose .final destination is outside of the United States and to an unrelated party. Of the new coporation's assets, 95 percent must be related to export activities. Thus, the ISC would be precluded from manufacturing activities, but would be allowed to provide services related to its export activities. Shareholders of the ISC would receive favorable 0. S. tax treatment when earnings are repatriated. U.S. shareholders would receive a 100 percent dividends-received credit; however, no foreign tax credit would be allowed on dividends received from the TSC. The future of DISC is a matter of great concern for CMA. At its September meeting the Board directed the preparation of a report on DISC. In November,the CMA Tax Policy Committee presented an interim report and outlined plans to continue to defend DISC and to develop a responsible alternative should a decision of an international body, the Congress or the Administration require eventual repeal of these provisions. CMA is working actively with allied trade associations and busings groups and is maintaining contact with key governmental officials and Congressional leaders to support these goals. For the present. CMA 073628 3 developments on this issue will center on response to the Frenzel-Gibbons bill and any Congressional hearings that may be scheduled in the New Year. TRADE: EXPORT OF HAZARDOUS SUBSTANCES The Secretaries of Commerce and state have finally agreed upon a recommended policy for the export of hazardous substances. Subject to re maining clearance procedures, it is expected to go to the President very soon. The provisions recommended, however, will have no force unless President Reagan takes further actions. The expected proposals by the Secretaries include a system of notification but no elements of control over exports. Embassies in the United States would be notified of restrictions placed on U. S. made products. There is no requirement directly related to the export of such products. Additionally, a compendium of such restrictions is to be published annually. The CMA International Trade Committee believes the anticipated proposals wilj. be acceptable to our industry. President Reagan's action on this issue has been one of the most notable of his deregulatory efforts. He rescinded on February 17, 1981, a highly objectionable Executive Order by President Carter which would have been onerous to the chemical industry. If the further actions of the President reflect the recommendations of the Secretaries of Commerce and State, the chemical industry will not find the new policies to be a disincentive to exports. TRADE: PETROCHEMICAL DISCUSSIONS The world's petrochemical industries are in an extreme state of upset. Existing facilities in the traditional petrochemical producing countries are in distress even as large new plants are being built in the OPEC countries, Canada and Mexico. Formal complaints against United States exports of petrochemicals into the Common Market were made by the EEC two-and-one-half years ago. Specifically, it was charged that United States' price controls on-oil and gas were an unnatural advantage that must be eliminated by the United States to avoid retaliatory action against its exports. Three U.s. goverament/EEC con sultations were held on this issue in Washington and Brussels. CMA cooperated with the Trade Representative's Office, forming a technical group which had full advisor status in the talks. The joint efforts were successful in the levying of special duties against U.S. petrochemical exports at the EEC border was avoided. Similar petrochemical discussions have now been, requested by two other governments. Japan has submitted papers to the U.S. government showing dis tress in the Japanese market due to U.S. petrochemical exports* Petrochemical discussions with Mexico are also in preparation due to the Caribbean initiatives by the President, including his intention to open the U.S. petrochemical market to Mexican imports. There are indications that similar petrochemical talks will be requested by Canada. CMA 073629 4 Under the leadership of Mr, Leo Johnstone, trade representative to the CMA Board of Directors, plans are being made to cooperate fully in these dis cussions with the U. S. government, provided that the Board concurs. The terms of reference under which the talks would be conducted are being carefully drawn and will be submitted when the government has completed them. TRADE: SEMINAR FOR MEMBER COMPANIES On December 8 and 9 an International Trade Committee Seminar and an open committee meeting were held in Washington, D. C. Attendance totalled 75, including press and government guests. Attendees heard discussion of important trade policy issues by key government officials, and had opportunities to discuss' details and raise particular questions during portions of-the agenda. TRADE: FOREIGN CORRUPT PRACTICES ACT (FCPA) PASSED BY SENATE By voice vote on November 23, 1981, the Senate passed s. 70S, a bill which clarifies the anti-bribery and accounting provisions of the Foreign Corrupt, Practices Act (FCPA). , In a position paper addressed to each Senator prior to the vote, CMA supported the creation of a materiality standard, the assignment of anti-bribery provision enforement exclusively to the Justice Department and the repeal of criminal penalties associated with the accounting provisions of the FCPA, all of which were subsequently provided for in S. 708. The House of Representatives has not yet scheduled hearings on H.R. 2530, the companion bill for S.708. ECONOMIC PRESS CONFERENCE An economic press conference was held by CMA in New York City on . December 16. Included was a wrap-up of the performance of the U. S. chemical industry in 1981 and the expected results for 1982, as determined by a CMA member company survey. Additionally, the results of a member company research and development survey was detailed, showing the the Economic Recovery Tax Act of 1979 was beneficial, to research and development spending by the industry. Myron T. Foveaux, CMA Legislative Representative for Trade and Economic Policy, made the presentation to these topics. In addition, CMA Vice President and General Counsel reported on regulatory reform efforts. CMA 073630 5 ENERGY: EMERGENCY PREPAREDNESS On October 29, the Standby Petroleum Allocation Act of 1981 (SPAA), S.1503, passed the Senate- The bill provides the President with broad discretionary authority and offers a list of options in the event of a severe petroleum supply shortage. Recognition of a petrochemical priority was included in the final version, as it was in the expired Emergency Petroleum Allocation Act (EPAA) . The House bill, H. R. 4700, similar in many respects to the Senate version, passed by a 244-136 vote on December 14. The bill requires that the President promulgate a standby petroleum preparedness plan to deal with sudden and severe supply disruptions, including a standby program of allocation and price controls on petroleum products and a standby refinery crude sharing plan. An amendment by Congressman Billy Tauzin (D-LA-3), was approved in Committee which in essence protects "consumer petroleum inventories" from being allocated away from the owner in the event that a price and allocation program was instituted. Early drafts of the Committee Report appeared to exclude petro chemical intermediates and feedstocks from the protective definition of the consumer petroleum inventories. Appropriate clarifying language eliminating that concern was included in the final Committee report. Conference activity on the bills must resolve a number of substantive issues including details of standby crude oil sharing and Strategic Petroleum Reserve (SPR) plans, and the areas of the legislation subject to one-House Congressional veto. CMA plans to submit further background materials to conferees. ENERGY: NATURAL GAS Administration officials have indicated that legislation may be submitted to the Congress early in 1982 calling for an accelerated decontrol of all natural gas. The repeal of incremental pricing provisions and the Fuel Use Act are expected to be included, but issues involving existing gas contracts and access to the outercontinental shelf gas would not. DOE Secretary Edwards, speaking before the CMA Semi-annual meeting, and Assistant DOE Secretary for Congressional Affairs, Rob Odle, in continents to the CMA Government Relations Committee, both have indicated that an Administration philosophical commitment remains even though the President has not made detailed decisions as to the timing and content of a natural gas legislative proposal. Clearly, there are some strategy and timing questions raised by gas deregulation. Some officials see a linkage between decontrol of gas and the President's current budget problems, and would tie decontrol to a new tax on gas producers. Others believe that the timing of decontrol is crucial and that action is not politically practical before the Fall elections. Many industri^. users, including CMA, continue efforts to develop broad support for the accelerated phased decontrol of all gas and to encourage CMA 073631 6 Congress to consider legislation promptly. CMA testified before the Senate Energy and Natural Resources Committee on November 6, during oversight hearings on problems involved in implementing the Natural Gas Policy Acz (NGPA). Our witness, James D. Beatty, Manager-Energy, Engineering, and Government Relations, the Procter and Gamble Company and the CMA Energy Committee Chairman, reconaaended faster and broader gas decontrol and identified four concerns regarding the NGPAr it fails to provide adequate supply incentive; it perpetuates disparities in pricing and supply; it does not encourage efficient use of all national energy resources; and it cannot balance supply and demand. The Government Relations Committee Energy Task Group conducted a Natural Gas Issue Briefing for the Washington Representatives of CMA member companies on December 14. The briefing session generated lively discussion and provided specific information to carry to Congressional members. An additional briefing for key Congressional staff members is anticipated. ENVIRONMENT: AMENDING THE CLEAN AIR ACT An up and down hill year of effort to obtain comprehensive amendment of the Clean Air Act has ended with the introduction of a strong, bi-partisan House bill (H.R.5252), which could break legislative logjam. In the House, the subcommittee hearing schedule has been vague and open-ended, while in the Senate, legislative mark up has proceeded slowly and with little positive resuit- H.R. 5252 contains provisions for change of both motor vehicle and plant regulations, and covers industry concerns to a large extent. Congressman Thomas A. Luken (D-OH-2) introduced the bill December the last day Congress , 4 was in session, saying, "It is not in the environmental or economic interest of the nation for Congress to adjourn this year without at least having on the table a legislative proposal . . . This should allow us to act expeditiously when we return to the second session in January." Luken is a member of the Committee on Energy and Commerce, which is responsible for reauthorization and any amendment of the Clean Air Act. But the Committee has waited all year for its Subcommittee on Health and the Environment to dawdle through the review process. It is especially significant that among the initial co-sponsors of H.R.5252 are the chairman of the Commerce Committee, John D. Dingall (R-MI-16) and ranking minority member James T. Broyhill (R-NC-10) Thus, the bill could become the mechanism to propel the amendment to the full Committee level where Congressmen Dingell and Broyhill can expedite House action. CMA testified regarding hazardous air pollutants on December 16 at the last Subcommittee hearing this session. Our witnesses were William McCazville, Director of Environmental Affairs for Monsanto Company, who discussed scientific aspects, and Michael James, Senior Regulatory Attorney for Diamond Shamrock Corporation, who addressed regulation of truly hazardous air pollutants under Section 112. w CMA 073632 7 In che Senate, the Environment and Public Works Committee is scheduled to resume mark-up of the Clean Air Act on January 26, in order to determine what changes a committee bill should contain. Committee voting cn proposals so far could be summarized as reflecting opposition to EPA flexibility and to cost considerations. Environmental group "scare tactics" through the media and an impressive quantity of letters to Congressmen urging no change in the Act have made voting difficult, even for conservative members. The Administration continues to follow an essentially cautious approach in the process. President Reagan, Vice President Bush and ethers have been communicating with the Republican leadership, however. On the other hand, Administration to date has not provided official detail beyond its eleven basic principles announced by EPA Administrator Anne Gorsuch last August. Nor have they been willing to put clear pressure on key Republicans. In explaining why the 'Clean Air Act amendment process is not further along, Ms. Gorsuch recently commented that industry has not been successful in improving editorial and media coverage to the point that members of Congress can more easily and safely vote to amend the Act. CMA and other members of the Clean Air Working Group (a coalition of over 100 representatives of the business and industrial communities in Washington) continue to work closely with the Administration throughout. As a part of the Clean Air Working Group CCAWG) program, several efforts are underway to improve the atmosphere for substantive changes. To more accurately determine what Americans are really thinking, a nationwide poll was generated. According to the results of the poll (conducted by the Opinion Research Corporation of Princeton, New Jersey, and released by the U.S. Chamber of Commerce on December 9) even those calling themselves "environmentalists" accept the need to review the Act periodically as new experience is gained. The survey shows that 81% of the public agrees that air quality can be protected at a lower cost than now. The president of Opinion Research Corporation, Harry W. O'Neill, said "The findings of this poll give new impetus to those -who want to achieve regulatory reform starting with Clean Air." Using the poll results and other communications tools developed through CAWG subcommittee work, more visiting and letter-writing to Congressional members is being generated, with emphasis on support for H.R. 5252 or similar legislation. A network for CAWG communication at the local level around the country is being activated through the U. S. Chamber of Commerce. Major business groups, including CMA, have or will issue new and specific legislative "action calls'*. Aside from substantial CMA participation in the coalition effort, our Clean Air Act Task Group has launched a special project to focus on improved public opinion in target states and Congressional Districts. In conjunction with CMA's Communications Department, our Task Group project will begin with local distribution of an "op-ed" page newspapaer item which refers to the ORC poll results. - CMA 073633 8 We are continuing to meet with Senate Environment and House Commerce Committee members and staff in Washington, aiming at prevention of undesirable hazardous air pollutant amendments and to obtain adequate im provements in the Prevention of Significant Deterioration (PSD) and the NonAttainment (for air quality) programs. In addition, representatives of CMA meet periodically with EPA officials regarding possible regulatory reform, including the hazardous air pollutants program. By late January, when Congress resumes work on the Clean Air Act, we hope our efforts and those of the coalition will have resulted in a better "environment" for voting for change in the Clean Air Act. ENVIRONMENT: CLEAN WATER ACT The House and Senate passed their versions (E.R.4503, S.1274) of the waste water treatment facilities construction grants bills on October 27th. Representative Jim Oberstar (D-MN) refrained from offering his floor amendment to extend the 1984 date for achieving Best Available Technology (BAT). Instead, Mr.. Oberstar said he would push proposal next year during review of the Clean Water Act. 'll On the Senate floor. Senator Robert Stafford (H-VT) quietly slipped in an amendment which would have overturned a recent Supreme Court decision, Milwaukee v. Illinois. The Stafford proposal was not discussed on the floor and' passed by voice vote in a package with other amendments. The amendment would have allowed legal actions for abatement or damages based on Federal "common law" rather than the specific provisions of the Clean Water Act, In effect, the amendment would have unfairly subjected those who are in full compliance with' all Clean Water Act requirements to additional, undefined Federal liabilities. CMA strongly opposed the Stafford amendment because of the unlimited liability exposure. During the House-Senate conference on the bill on Deceri>er Stafford withdrew his amendment but promised the proposal would be part of next year's review of the Act. The House conferees were strongly opposed to Stafford!* amendment, the opposition being led by Representatives Gehe Snyder (R-KY) and Don Clausen (R-CA). The conference also took action that would, in effect, repeal the Industrial Cost Exclusion provision of the Clean Water Act. CMA supported this repeal effort. The conference concluded work on the construction grants bill December 10 and sent it on to the White House for Presidential signature. There* is at least some potential for veto, based on budgetary concerns in out years. ar CMA 073634 9 ENVIRONMENT; GROUNDWATER Representative Toby Moffett (D-CONN] continues to pressure ERA on toe status of the National Groundwater Strategy. In response to Moffett's increasing pressure, EPA Administrator Anne Gorsuch has established an internal group to review how the Safe Drinking Water Act, the Clean Water Act, the Resource Conservation and Recovery Act and s'uperfund cover cleanup and monitoring of groundwater pollution. Gorsuch has continued to state publically that EPA is committed to protecting the Nation's groundwater, Moffett will continue to question the EPA commitment to gorundwacer protection and will continue oversight hearings in 1982, at least partially as a means of furthering his own personal political ambitions. ENVIRONMENT; SUPEREUND OVERSIGHT Congressional committees continue to conduct oversight hearings into the general functioning of EPA under Administrator Anne Gorsuch, and to explore the Agency's ability to carry out the intent of Congress. During these oversight hearings, much attention has been focused on the implementation of the Superftnd program. During one such hearing. Representative Michael Synar (D-OK) expressed concern over Oklahoma's top priority site. Tar Creek, an old abandoned lead mine. EPA has evidently responded to this pressure by granting $450,000 from the Superfund Trust Fund for a preliminary evaluation of the Tar Creek site, a serious policy question is thus developing: i.e., should the Superfund money be used to clean up abandoned mines? CMA is concerned that the use of Superfend money to clean up old mines would quickly exhaust the $1.6 billion trust fund leaving many hazardous waste sites still in need of repair. We believe that developing Superfund policy should not apply Superfund monies toward the cleanup of old mine sites. SAFETY AND HEALTH: TSCA REAUTHORIZATION In September, the House approved its Energy and Commerce Committee bill (H.R.3495) to reauthorize TSCA for two years at $63.5 million. In November, the Senate rejected the House version, and reaffirmed its Environment and Public Works Committee bill (S.1211) to reauthorize TSCA for 1 year at $59.6 million. On December 9 the House and Senate conferees reconciled differences in the two bills and agreed to a two year reauthorization of $60.1 million for FY 1982 and $63.5 million for FY 1983, (including $1.5 million for state programs in each year) . The conference agreement is expected to be approved on the floors of both bodies prior to adjournment for the first session of the 97th Congress. $$ CMA 073635 10 On a related subject. Dr. John Todhunter's nomination as ERA Assistant Administrator for Pesticides and Toxic Substances was confirmed by voice vote of the Senate on November 4, 1981. Dr. Todhunter was officially sworn in November 17, and CMA has already begun to follow up on its pledge to provide complete cooperation and assistance in his office's implementation Of TSCA. SAFETY AND HEALTH: OSHA OVERSIGHT AND LABELING Chairman Gaydos' Health and Safety Subcommittee (House Education and Labor) hearing on OSHA oversight previously scheduled for November 3, was postponed until sometime in 1982. Assistant Secretary of Labor Thome Auchter will testify, with a broad "state of the agency" report and on the hazards communication/labeling rule which is expected to be promulgated by then. In early November, QSHA's new proposed labeling rule was sent over to 0M3 for final approval. It is still under review and analysis at OMB, and its earliest return for publication in the Federal Register is expected to be January, 1582. SAFETY AND HEALTH: JANUARY CHEMICAL FORUM FEATURES AUCHTER 4 The January 7, 1982, edition of the CMA CHEMICAL FORUM luncheon series will be addressed by the Honorable Thome G. Auchter, Assistant Secretary & i of Labor for Health and Safety. Mr. Auchter will likely address a series of workplace-related issues of significance to our industry and comment on his current plans for the Occupational Safety and'Health Administration.- The luncheon is held at the Madison Hotel, Washington, D. C., and regularly attracts a large audience from the business community, government agencies, Capitol Hill and the media. SAFETY AND HEALTH: FOOD SAFETY AMENDMENTS (DELANEY CLAUSE) HEARINGS POSTPONED Senate hearings on S.1442, originally scheduled-for December 1 and 2,' have been postponed until early 1982. Senator Hatch's (R-Jtah) bill, cosponsored,., by Senator Helms (R-NC), would amend the so-called Delaney Clause of the Food Drug and Cosmetic Act to eliminate the zero risk concept after which much of the environmental legislation of the 1970's is patterned. In essence, S.1442 prosid* that food additives would be deemed safe if there is no significant risk to human beings under appropriate conditions of use. The Labor and Human Resources Committee chaired by Senator Hatch, and the Agriculture Committee chaired by Senator Helms, are expected to hold joint hearings on the Food Safety Amendments in late January - early February 1982. 5. ,j CMA 073636 11 The hearings will open debate on whether it is time to amend and improve an the nation's antiquated food safety laws, and the cosponsors consider S.1442 a starting point for discussion and amendment. CMA is in the process of developing a position paper on relevant scientific principles, which deal with the following four issues: zero risk, the Delaney Clause, scientific peer review, and extrapolation of animal data to humans. We will be working with the broad-based industry coalition which is developing testimony and legislative strategy to achieve sound results in this important effort. EPA OVERSIGHT: MOFFETT SUBCOMMITTEE INVESTIGATION OF MCBs/PCBs__________ _______________________ _ Toby Moffett's (D-CONN) Environment, Energy and Natural Resources Subcommittee is inquiring into EPA's recent decision to reopen the issue of whether monochlorinated biphenyls (MCBs) should be treated as polychlorinated biphenyls (PCBs) under TSCA. The EPA/Dow Chemical Company lawsuit has been put on hold pending the outcome of this decision, and the Moffett Subcommittee is looking into the circumstances surrounding the resignation from the case by the four EPA staff attorneys assigned tb it. The Subcommittee staff is hoping to make this another example of what it contends is a pattern of undue influence by industry over EPA through closed door meetings, etc. In this instance, CMA itself was not involved. (Note - CMA did file an amicus brief with the court, in support of the Dow position.) In addition, there were apparently no meetings of any kind, as all contacts were by telephone between Dow attorneys and the EPA General Counsel's office in accordance with appropriate legal ethics applicable to matters under litigation. EPA OVERSIGHT: DINGELL SUBCOMMITTEE HEARING John Dingell's (D-Mich.) Oversight and Investigations Subcommittee hearing November 18 continued the series of EPA oversight hearings by Democratic Chairmen of the House. Joining in the chorus of opposition to Administration actions, Mr. Dingell called this hearing to inquire into reports of large budget and staff cuts at EPA for FY 1982. In addition, he reviewed recent activities and policies of the agency concerning enforcement, personnel changes, and use of outside contractors posing potential conflicts of interest problems. Allegations of "closed door" meetings between EPA and industry were not reiterated at this hearing. Further inquiry into the outside contractor issue, based on previous investigations undertaken by former Chairman Bob Eckhardt, will have to be watched closely in the event of additional hearings. Testifying at the November 18 hearing were Congressman James Florio (D-NJ), Chairman of the Commerce, Transportation and Tourism Subcommittee, and CMA 073637 12 SPA Administrator Anne Gorsuch accompanied by her too assistants. Mr. Flcric strongly criticized Ms. Gorsuch for reported budget cuts, levelled accusations and called for her resignation. Ms. Gorsuch ably defended the Administration against charges that the proposed budget would gut EPA. In fact, she contended, it would force the agency to concentrate on its basic mission and provide an opportunity for wiser use of its resources. FLORIO DEFEATED IN NEW JERSEY GUBERNATORIAL RACE - REMAINS IN CONGRESS James Florio, the ambitious Democratic Congressman from New Jersey, lost his November race for the New Jersey governorship by a narrow margin to Republican Thomas Kean. CMA's interest is due to Mr. Florio's chairmanship of the Subcommittee on Commerce, Transportation and Tourism cf the House Energy and Commerce Committee. The Subcommittee has jurisdiction over TSCA, hazardous and solid waste issues (including Superfund and RCRA implementation, post-closure liability for hazardous waste sites, groundwater contamination, and siting of hazardous waste facilities), the Hazardous Materials Transportation Act and some product laibility matters. Mr. Florio, offering disenchanted blue-collar Democrats a chance to express their doubts about Reaganomics, led in every published opinion poll early in the Fall. However, Mr. Kean, a member of an > old-line New Jersey family with a pro-Reagan economic approach, gained the lead and won by a narrow margin. After a drawn-out statewide-recount, Florio conceded on November 30. One of New Jersey's Senatorial seats is also of interest, since it is held by Democrat "Pete" Williams whose involvement in the ABSCAM scandal has threatened his career in Congress. The full Senate scheduled a day in December to consider his expulsion, but Mr, Williams' request for a postponement was granted. Had the request been denied and the Senate voted to expel Williams, his successor would have been appointed by the outgoing Democratic Governor of New Jersey, Brendan Byrne. A likely candidate to fill the unexpired term might well have been James Florio, a fellow Democrat. However, since the postponement was granted and the Senate is not expected to take up the issue until Congress , . re-convenes in late January, the outcome will be affected by what transpires in j New Jersey between now and then. Outgoing Democrat Byrne will depart/ office cn - January 19, which will leave the possible vacancy to be filled by new Governor . Kean. 1 '-i TRANSPORTATION: HAZARDOUS MATERIALS On October 20, the House passed H.R.3403, legislation that reauthorize* and amends the Hazardoj$p Materials Transportation Act (HMTA) . Basically, Inst year's spending level ih maintained and training programs are provided to instruct CMA 073638 13 local workers who respond to hazardous materials incidents. The Senate version, S.960, remains subject to floor action. Improvement has been achieved in both versions, with original prenotifioation and routing provisions removed or made subject to further study. Of remaining concern to CMA, however, is the problem of preemption, inconsistent state and local statutes and regulations. The House-passed bill recognizes the inconsistency problem, but does not provide for federal preemption. The possibility of a floor amendment to S.960 is being explored. TRANSPORTATION; USER FEES The Senate Environment and Public Works Committee ordered reported a bill, S. 1692, that would allow local authorities to levy user fees on commercial vessels to recover the cost of improvement and maintenance of deep draft channels and harbors. The bill, as amended, is awaiting floor action and, if adopted, would be the first legislative measure regarding user fees. With the user fee concept as a possible source of new revenues to ease some of the Administration's economic and budget problems, several additional legislative proposals are expected to be considered. CMA is monitoring all transportation user fee legislation because of a need to assure that any such fees would be equitable and phased in over a reasonable period of time. TRANSPORTATION: RAILROAD DEREGULATION CMA testified before the Surface Transportation Subcommittee of the Senate Commerce, Science and Transportation Committee on November 10 at oversight hearings regarding implementation of the Staggers Rail Act of 1980. The CMA witness, Donald G. Griffin, Vice President for Distribution and Transportation for PPG Industries, Inc., addressed a number of the problems encountered by chemical shippers in implementation of the act and stressed the continuing need for rate protection for the captive shipper. TRANSPORTA--T I. ON: CA" NA--DIA--N DIVERSION BILL Markup of H.R.3637, the so-called Canadian diversion bill has been cancelled in the House Merchant Marine and Fisheries Committee. While Canada is particularly impacted, the legislation would provide jurisdiction over all common water carriers that are engaged in foreign commerce and use of ports in nations contiguous to the United States. CMA and other shipper organizations, along with the Administration, registered opposition to the bill. No con^arable legislation has surfaced in the Senate. CMA 073639 PATENTS s RESTORATION OF THE PATENT TERM CMA continues to support legislation to restore to the term cf a patent grant the period during which marketing or use or a patented product is delayed because of the need to secure Federal regulatory approval. The key bills are S. 255 (Mathias-R-MD) and H.R. 1937 and they are substantially similar. The Senate bill passed in July. The House Judiciary Subcommittee on Courts, Civil Liberties, and the Administration of Justice is continuing its hearings on this subject. CMA is working in a business coalition under the leadership of the Pharmaceutical Manufacturers' Associaiton to secure passage. PATENTS: UNIFIED COURT OF PATENT APPEALS On November 18, 1981, the House of Representatives passed H.R..4482, a bill to establish a single court of patent appeals. In the Senate, the language of S.1700 (Dole-R-Kansas) was then substituted for the House-passed legislation, and then passed by the Senate. A House-Senate conference committee on this legislation will convene when Congress returns. CMA is working actively in the coalition of allied business interests to secure early passage of this important legislation. REGULATORY REFORM LEGISLATION CMA is supporting omnibus regulatory reform legislation in the 97th Congress. Cooperating with allied business groups, CMA has assisted in the development of S.1080, the Regulatory Reform Act, iritroduced by Senator Paul Laxalt (R-Nev). The focus of CMA's effort has been to secure amendments which would provide that "good science" be considered a principal factor in the regulatory reform decision-making process. S.1080 has been reported with amendments by both the Senate Judiciary and Governmental Affairs Committees. The version of the legislation reported by the Governmental Affairs Committee includes one of CMA's "good science" - amendments. Floor action is now scheduled for January 28. CMA is working to assure that a compromise version will be passed by the Senate promptly. --- In the House, the Judiciary Committee has ordered H.R.746 (DanielsonD.Calif) favorably reported with amendments. It is anticipated that.the Committee report will be filed in January. CMA 073640 15 STATE AFFAIRS STATE AFFAIRS SPECIAL COMMITTEE During their November and December meetings, the State Affairs Special Committee (3ASC) and its Steering Group continued to focus on the operation of the committee's issue task groups, the building of a nationwide state network, and the finalizing of the details of the electronic bill and regulatory tracking service for 1982. Issue Task Groups: The Committee's four issue task groups (Hazardous Waste Disposal, Hazard Communication, Hazardous Materials Transportation, and Environment) met during this period to focus on remaining state activity in 1981, and plans for 1982. Network Task Group: The Network Task Group is developing.a list of state contacts which will form the basis for a nationwide CMA state communications network. It is contemplated that the basic network will be in place by January 15. Electronic Services Task Group: The Electronic Services Task Group finalized the arrangements with the vendor for the bill and regulatory tracking service for 1982, Federal-State Reports. Two training sessions on the new system were held. To date, there are sixteen subscribers to the legislative service and fourteen to the regulatory service. Efforts are continuing to interest other member companies. RELATED DEVELOPMENTS AND ACTIVITIES State Affairs Division Staff and the Network Task Group participated in the November 4 program of State Chemical Industry Councils held at CMA headquarters. State Affairs Division staff continued its visits to the various CIC's to explain and coordinate with them on CMA's state legislative and regulatory program. Planning is in the final stages for a CMA Legislative and Regulatory Newsletter which will monitor and report on priority chemical industry issues in the states. State Affairs Division staff made a presentation to the Council of Chemical Associations describing the CMA state program. The staff also hosted the first of a series of monthly meetings between state government relations professionals of allied trade associations. These meetings will provide an exchange of information and better coordination of activities. CMA 073641 16 1981 LEGISLATIVE ACTIVITY The majority of State Legislatures had adjourned their sessions bv November and December. As of December 1, only Colorado, Massachusetts, Michigan, New Jersey, New York and Pennsylvania remained in regular session. A number of other states had special sessions scheduled in November and December with the focus on reapcortionnent, budget and tax matters. FORECAST FOR 1982 LEGISLATIVE AND REGULATORY ACTIVITY Fiscal matters will continue to be in the spotlight as most states struggle to adjust to increased demands and responsibilities and decreased State revenues and Federal grants. More than twenty states will carry over legislation from 1981 while others such as New Jersey and Virginia begin new sessions. Environmentalists and labor activists will continue to press their efforts at the state and -local levels' following their decreased success at the Federal level. State regulatory agencies will be faced with the same problems of increased responsibilities under -existing Federal and State laws and decreasing funds as a result of Federal cuts and state revenue shortfalls. This may work to decrease the overall amount of regulation, but it is also possible that regualtion which takes place may be based on less research and good science because of limitations in agency personnel and finances. ) Superfund: The only state which could address Superfund before tbs end of 1981 is New Jersey, where negotiations are continuing on amendments to their state Spill Fund. Although New Jersey's suit in the District of Columbia Federal Court concerning the preemption provisions of the Federal Law was dismissed, similar suits brought in both Federal and state courts by Exxon, Tenneco, Monsanto, B.F.Goodrich and Union Carbide continue to raise questions in New Jersey and other states as well. Until the extent of Federal preemption is finally determined, confusion will remain regarding the extent to which state Superfunds may be financed by industry fees. The legislative sessions that begin in January in many states will continue to address Superfund. Many of the bills not completed in 1981 will carry over into 1982. In other states, the finalizing of the Federal priority list of sites and the issuance of the Revised National Contingency plan and other implementing regulations will prompt legislation to raise the required state matching share. Even those states which have acted on this issue prior to 1982, such as New Jersey and California, will be reexamining their statutes as proponents seek to reopen issues such as funding mechanisms, caps on spending* third party compensation and liability provisions. In addition to California and New Jersey, activity is definitely expected in New York, Connecticut, Minnesota* Michigan, Florida and Illinois. tf - 17 The Hazardous waste Disposal Task Group of the CMA State Affairs Special Committee has developed and is updating a complete status report on pending state Superfund legislation. The group is also working closely with tie EMC Superfund Task Group and CMA's legal department on the development of a state Superfund resource manual that will include an overview of the Federal law and its implications at the state level, samples of basic Superfund legislation passed in Texas ar.d Colorado, and an issues paper detailing the elements raised in state legislation and enumerating recommended positions and arguments that can be used in local advocacy efforts. Hazardous Waste Disposal Facility Siting: The siting of hazardous waste disposal facilities is an issue the Federal government has avoided to date, since it involves an area of traditionally local concern -- land use. Despite the recognized need for more disposal sites and facilities, states are having difficulty in devising procedures which provide the necessary local input into the process without granting the locality veto power over sites within their jurisdiction. CMA previously developed a Model Siting Bill that has been widely distributed, and adopted in part in at least one state (Indiana). There are serious deficiencies in hazardous waste disposal capacity in a number of states and regions. The SASC Hazardous Waste Disposal Task!Group will be working jointly with a corresponding EMC task group to identify those states with the most immediate problems so that our efforts can be directed accordingly. Other interested associations and organizations will be contacted to identify common concerns and to foster coalitions to address the siting problem. Hazard Communication: The past year showed a marked increase in state Worker Right-to-Know legislative activity. Factors which contributed to this increase included the withdrawal of the Carter Administration's proposed Federal standard by the Reagan Administration, and the growth and shift of environmental/labor coalitions to the states. Laws were enacted in Connecticut, Maine, West Virginia and Philadelphia. As the year ended, there was on-going legislative activity on right-to-know in Santa Monica (California) Cincinnati (Ohio), Minnesota and Wisconsin. In addition, legislation is expected in California, Illinois, Massachusetts, Ohio and New Jersey. Regulatory activity is continuing in California to implement the bill passed in 1980. New York's 1980 law is being enforced on a "complaint only" basis because of problems inherent in implementing the statute as passed. Philadelphia's ordinance which passed early in 1981 is now fully implemented by regulations and has gone into effect without much evidence of public interest in accessing the information now available. In addition to Worker Right-to-Know bills, we are also seeing Community Right-to-Know proposals. The Philadelphia ordinance incorporated both worker and community informational requirements. The proposed ordinance in Santa Monica (califolifoia) and AB 3310 in New Jersey were specifically directed outside the workplace. In states where worker right-to-know has been adopted, we can expect to see an effort to expand this to the community level. CMA 0736A3 18 CMA is working to put in place the mechanisms and resources necessary to effectively fight these largely ill-advised crccosals. Firso, we are still hoping for a workable Federal standard that will address meaninor-' concerns without imposing burdensome and bureaucratic requirements on incustrv. Second, a task group of the CMA Hazard Communication Special Committee is drafting an analysis of each sub-issue and recommended legislative language. Third, we are also developing a resource manual that will enable industry* advocates to more effectively articulate our position. Finally, we are sponsoring a working meeting of ether interested associations in January to discuss policy positions and to exchange reports on activities in the states. This will be followed by an informational neetinc for all CMA member companies, probably in March. Hazardous Materials Transportation: ' Concerns in this area include burdensome local restrictions and regulations on the movement, routing and storage of hazardous material, (including prenotification of shipments) and the development of duplicative and bureaucratic emergency response plans and requirements. This is another area where we believe that a well-ccr.ceivad Federal program that meets legitimate state and local concerns should preempt a patchwork of state statutes and regulations and municipal ordinances. This preemption does not exist today, nor does it appear likely to be enacted in 1982, given the reagan Administration's commitment to the "New Federalism*. On the positive side, CMA is working with others on drafting -and advocating "Good Samaritan" legislation which would encourage shippers and transporters to cooperate more fully in responding to hazardous materials incidents. If legislation of this type were in place, either Federally or in a large number of states, it could reduce the necessity of creating expensive government programs and their attendant bureaucracies. The State Affairs Special Committee Hazardous Materials Transportation Task Group is identifying and monitoring pending legislative and regulatory proposals in this area, and is working closely with CMA's Distribution CommitteeThe task group is also contacting other associations and groups with mutual interests so that efforts at the state level can be coordinated. Air and Water quality: The most recent CMA activity in this area was December 10 testimony at a joint Assembly/Senate hearing held by the Stew York Legislature in Niagara Falls. The hearing focused on the Niagara River and allegations regarding its water quality raised on the "60 Minutes" television program. Geraldine V. Cox, CMA Vice President and Technical Director, appeared at the joint committee's invitation, and also at the urging of the New York Alliance of Chemical Industries, and the Industrial Liaison Committee of the Niagara Falls Chamber of Commerce. Her testimony was intended to clarify misstatements made concerning the quality of the Niagara River and the compliance by our industry with the applicable Federal and state regulations, and also to refute the scientific basis of a report by an environmentalist group. State Affairs jftj.vision staff coordinated Dr. Cox's appearance with the efforts of the New York chemical Alliance. t CMA 073644 k if ' A* 3-' j _ m 19 National attention continues to focus on Congress ' s .efforts to revise the Clean Arr and the Clean Water Acts during 1982. 'Jltir.ateiy those actions will determine to a large degree what activities we will see at the state level during the 80's. However, state regulatory agencies in 19S2 will continue to be preoccupied with efforts to adopt and revise their State Implementation Plans (SIPs) under the Clean Air Act. Also of interest will be consideration of "bubble" plans under the Clean Air Act similar to those recently adopted in New Jersey and under consideration in California. Another emerging issue involving environmental quality will be groundwater protection. Closely related to Superfund, siting and RCRA, we expect to see expanded efforts by the states to assess their groundwater both quantitatively and qualitatively, and to take steps to protect it. CMA BD-1/12/82 * CMA 073645