A number of issues loom on the state horizon for plastics companies. New taxes as states deal with record budget deficits. Efforts to enact product responsibility laws. The potential regulation of chemicals used to make plastics.
But casting a very large shadow over all those issues is the renewed, and rapidly growing, interest in banning plastic carryout bags and not just in California.
Four communities have already passed plastic bag bans this year, three in California and one in Texas, bringing the number of U.S. bans to 19. The most recent: Calabasas, Calif., on Feb. 1, and Santa Monica and Marin County in California on Jan. 25.
At least 15 cities and counties in California, several towns in Texas, and four states Arkansas, Oregon, Connecticut and Vermont - are mulling bag bans. West Virginia and Connecticut are considering a 5-cent tax on bags; the only plastic-bag tax in the U.S. today is in the District of Columbia.
Bag ban initiatives, after a relatively quiet 2009, have re-emerged this year. They are galvanized at least in California by that Legislature's decision last year to reject a statewide ban or tax, and by Los Angeles County's decision last November to ban plastic carryout bags as well as charge a fee of 10 cents on paper bags.
Two associations representing the interests of plastics firms have somewhat different views of the plastic bag ban initiatives.
The biggest threats at the state level in 2011 are general over-regulation, product deselection and proposals to ban products, said Bill Carteaux, president and CEO of the Society of the Plastics Industry Inc. in Washington.
From bans on products containing certain chemicals to blanket bans on food-service pack- aging and bags, [the] ramifications are many, he said, particularly the continued added costs and unpredictability associated with doing business in the U.S.
While not minimizing the potential impact on the industry from product bans, the plastics division of the American Chemistry Council in Washington does not see the issue as quite so ominous. The bans and taxes on plastic bags are taking place in very small, coastal communities in California where the bag may become the symbol of a larger problem such as marine debris, said ACC's Roger Bernstein.
We have seen more local legislation this year, but there is much less state legislation and it is generally rejected, said Bernstein, ACC's vice president of state affairs and grass-roots efforts. I think proponents of these efforts venue shop for areas where there is less resistance and more emotional support, he said. I don't think these efforts will have as much traction in jurisdictions that look at the issue from a broader standpoint.
You will see it come up as a bill in some states, he said, noting that a ban already has been rejected in Virginia. But at the state level, we will be in a stronger position than in a local community, because it's a more deliberate process and they look at it from a broader view.
However, one legislative advocate whose firm represents California businesses and associations said the industry is mistaken if it thinks the issue will simply disappear. The biggest danger is the industry thinking that the issue will go away. It is not going to go away. If the industry doesn't stop denying it is an issue, plastic bags won't exist in California in 10 years.
Mark Murray, executive director of Californians Against Waste, chastised the industry in a blog item last month for its misleading advertising and desperate tactics.
The plastics industry will do, say, and spend just about anything in a desperate attempt to save their billion-dollar plastic bag industry, Murray wrote. It has spent millions in the last two years in lobbying, campaign contributions and misleading advertising to block legislation to ban plastic bags, and to undermine public confidence in reusable shopping bags, he said.
While product bans have potential to impact select manufacturers and create a mindset that spreads to other jurisdictions and product areas, state budgetary issues represent another trouble spot. States could impose new taxes on businesses and manufacturers to help reduce record budget deficits.
It certainly is a challenging time for states, said Steve Russell, president of ACC's plastics division. The imperative of raising funds without destroying their tax base is a tightrope they all walk, because it can lead to user fees that erode the tax base.
States have to trim budgets. They have to raise revenues. So certainly, there could be new taxes, agreed Bill Allmond, vice president of government relations for the Society of Chemical Manufacturers and Affiliates Inc. in Washington. A number of manufacturing states are already focusing on that, he said. Included in that number are California, Texas, Pennsylvania and Illinois, which recently approved a steep tax hike on both personal and corporate income taxes.
But imposing taxes on business could have a disruptive effect on the economy and tax revenues in those states, Allmond suggested. California is a good test case for what happens when you do that, he said. The state has lost 1.3 million private-sector jobs since 2005, according to a report published last July by the California Employment Development Department.
The majority of states are facing historic fiscal challenges [and] finding stability and new revenue streams is a vital concern, Carteaux agreed. Taxes are one way that some states are seeking relief. New taxes on our member companies are a concern.
On a positive note, state deficits and budgetary issues are likely to lessen the possibility of new far-reaching legislation, such as green chemistry initiatives, Allmond said. There is a continued concern that states will develop new regulations in the absence of federal action, he said. But, even in California, state budgets can't afford those costs, he said. He pointed out that California unexpectedly completely halted its Green Chemistry initiative in late December.
In a letter to the bill's original sponsor, the state said it was stopping the scheduled implementation of regulations governing safer chemical alternatives to discuss programmatic issues that have been brought to our attention and to revisit the proposed regulations.
Allmond said he has slightly more confidence than in the past that state green chemical initiatives won't materialize because state budgets are quite constrained and can't afford these new massive regulations.
Bernstein agreed. It does temper expanded regulatory overreach of industry, Bernstein said. At a time when states are cutting services, bills that have more spending requirements or expanded regulations don't seem to move quickly or at all. If there is any additional cost, it has to go through another committee.
Still, state budget issues won't necessarily stop a growing interest in enacting or expanding bottle bills or extended producer responsibility (EPR) laws. Vermont, Massachusetts and Connecticut are looking at expanding bottle bills; Oklahoma and New Jersey are considering adopting them; and more than a half-dozen states are considering EPR laws.
That is a pressure felt by our downstream customers very directly, Bernstein said. Local governments would like to get out of curbside recycling programs and offload those costs to producers and have industry pay for that.
That concerns SPI.
These bills have been very broad and vague, basically saying, 'You make it, so you take it back,' said Carteaux. So they have the potential, intentionally or unintentionally, to ensnare a huge range of products.
Illinois Tool Works Inc.'s Mike Lynch pointed out: These bills don't just address packaging, but capital equipment. They say, 'When I sell, I'm responsible for it,' which changes your whole cost equation and approach to doing business.
We ought to be in the states and letting legislators know that it's not the right thing to do, said Lynch, who is vice president of government affairs for ITW in Glenview, Ill.. But some of my colleagues [in manufacturing] are ready to wash their hands of this and promote something be done in Washington because they think that would be more manageable.
ACC thinks recycling, not enacting EPR laws, should be the top concern, a point the group also has made in arguments against bag bans.
We think our priority has to be that plastics are recyclable, said Keith Christman, managing director of plastic markets for ACC. With that in mind, ACC will be expanding its plastic bag awareness campaign, called A Bag's Life, currently in use in Florida and Virginia, to two more states by March 1.
The group also will try to persuade states to modify energy codes as North Carolina did in 2010 to signify plastic building materials as energy-efficient products. Working to get states to adopt energy-efficient codes for building construction is where most of our effort and resources will go, said Bernstein.
The industry also has the opportunity right now to help states understand the amount of renewable energy that can come from waste, Russell added. Recycling is our main priority and focus. But we view energy recovery as part of a broader strategy.