Bluegrass Beacon: EPA regulations foil Kentucky aluminum jobs
By JIM WATERS
Bluegrass Institute for Public Policy Solutions
Friday, July 20, 2012 – Kentuckians weren’t surprised to hear recently that Abound Solar, a federally subsidized solar-power manufacturer, declared bankruptcy.
Why should we be? Unintended consequences always accompany each attempt by our Environmental Protection Agency overlords to force yet another pie-in-the-sky scheme on our communities.
Not one day after the U.S. Senate failed to override new regulations that would price coal-powered plants out of the market, Arch Coal Company took the hint and decided to close its facilities in Pike and Knott Counties.
In announcing the layoffs of 750 workers – including 600 Kentuckians– Arch President John W. Eaves blamed “current market pressures and a challenging regulatory environment” for the 20-year low in coal consumption.
If coal companies are forced out of business because they can’t keep up with the competition, they – like automakers and banks – should be allowed to fail. However, no legitimate American business – regardless of how politically incorrect its product may be to an out-of-touch presidential administration – should be destroyed by over-zealous regulators.
EPA administrator Lisa Jackson obsessively refuses to acknowledge the extreme costs of her agency’s unilateral mandates on those scraping by in Appalachian coal country.
In Louisa, Kentucky, for example, the unemployment rate of 12.6 percent – more than 4 percent greater than the national jobless rate – is about to skyrocket due to a decision by coal plant Big Sandy 2 that it cannot afford the $1 billion necessary to comply with the EPA’s delusional fantasies.
But Jackson’s regulatory jolts have shaken the whole commonwealth with industries originally lured to Kentucky by the cheap energy rates that coal has offered for decades now feeling the tremors.
Aluminum manufacturers are uncertain of their ability to survive the inevitable cost increases due to regulation-induced mine closures. Just this month, Century Aluminum announced that it may be forced to close its 700-employee smelter in Hancock County if it can’t get better electric rates.
And that’s just the beginning for the aluminum industry and for Kentucky – where more than 30 percent of the nation’s aluminum manufacturing takes place.
Higher energy prices could force aluminum manufacturers to not only leave Kentucky, but the country altogether.
This is true especially of smelting plants like Century’s, where energy costs consume 40 percent of operating expenses for each ton of aluminum produced, according to Mike Baker, director of economic development for the Hancock County Industrial Foundation.
“There’s no doubt that there’s a global movement of the smelting industry,” Baker said. “I’ve seen numbers that show as much as $11 billion worth of new construction on aluminum facilities in China, and a big part of that is on smelters.”
What’s more alarming is that the aluminum produced in Kentucky’s two smelters (out of the eight in the entire nation) is the high-purity aluminum used by our military.
Ironically, even as the two smelters in Kentucky (out of the eight in the entire nation) face uncertain futures because of over-regulation, the Kingdom of Bahrain is building the world’s two largest smelters.
“Losing all of our domestic capacity to produce our own high-purity aluminum products is not in the best interest of our country,” Baker said. “I don’t think we want to be in a position of being forced to go to a smelter in China or Bahrain to get aluminum to supply our weapons of defense.”
It’s one thing for an American-owned company to rationally respond to market signals by moving operations to Bahrain.
It’s quite another if an entire industry is forced to relocate because of a moronic government that subsidizes solar silliness while turning the lights out on multi-generational firms like Century and the hundreds of Kentuckians they employ.
— Jim Waters is acting president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at jwaters@freedomkentucky.com. Read previously published columns at www.freedomkentucky.org/bluegrassbeacon.
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