By John Stark
At last week’s Gateway Pacific Terminal meeting in Ferndale, nearly all of the support for the Cherry Point coal export facility seemed to be based on its potential to create both jobs and tax revenue.
Supporters tend to portray Gateway Pacific as the only local project now on the table that could provide industrial jobs with decent wages, plus the millions of dollars in new tax revenues that heavy industries provide. More than one speaker mentioned the other G-P: the Georgia-Pacific pulp and paper mill on the Bellingham waterfront that subtracted hundreds of jobs when it closed down in stages during the first decade of this century.
Other pulp mills in the region, such as Kimberly-Clark in Everett, have also closed. (The Everett Herald observed that a town that once proudly called itself “The City of Smokestacks” no longer has any.) Alcoa Intalco Works still makes aluminum at Cherry Point, but similar smelters around the Northwest have been shut down for years.
We have heard so much about the decline of industry in this country that we tend to think of U.S. industrial prowess in the past tense. We all know that U.S. manufacturing simply can’t compete against low-wage workers in China. It’s hopeless.
But what if what we all know is wrong? In the current issue of Atlantic Monthly, Charles Fishman digs up some encouraging news: Major U.S. companies are discovering that in many cases, it is cheaper to manufacture products in the United States, despite the wage differential. Fishman’s example is General Electric, an old-line pillar of U.S. industry that is ramping up appliance production in Louisville, Ky. at a giant manufacturing complex that had become a near-ghost town until recently. Appliances once built in China are now rolling off the line in the Bluegrass State again. And make no mistake: Patriotism has nothing to do with it. Fishman describes in vivid detail how GE is saving money and making its products more price-competitive by bringing jobs home.
In the same issue of The Atlantic, James Fallows describes the same phenomenon from his own vantage point in China. He describes the pitfalls for U.S. firms trying to manufacture in China, and the competitive edge that many smaller firms achieve by keeping designing and manufacturing side by side in this country.
But China does enjoy another competitive advantage: cheap energy. In this country, the cost of environmental controls add to the cost of energy used for manufacturing. China, with fewer environmental constraints, gets an economic edge.
It’s an edge that the U.S. could blunt with one fell swoop, says economist Jeff Rubin. In his book “Why Your World is About to Get a Whole Lot Smaller,” Rubin says the U.S. could impose a countervailing tariff — a carbon tax, if you will — to make Chinese manufacturers pay the true global cost of their carbon emissions. That would shift more jobs back to North America, argues Rubin, a former chief economist at big Canadian bank CIBC. It’s also an idea that appeals to both labor unions and environmental activists.
Larry Horowitz, who alerted me to Rubin’s book, provides a link to this excerpt from the Montreal Gazette.
What does all this have to do with the local debate over Gateway Pacific? Maybe it’s a bit of a reach, but I can’t help but wonder if this project would look different to some people if the overall outlook for industrial jobs did not seem so bleak.
Is Whatcom County well-situated to benefit from the shift of manufacturing back to this country–assuming that this shift lives up to the expectations that Fishman’s article creates? Maybe not. This county’s industries have generally been extractive and resource-based: Coal, lumber, paper pulp, seafood processing, aluminum, petroleum.
GE’s Louisville plant enjoys a strategic, central location for access to retail markets. Whatcom County’s location is the opposite of central. What do you think?
I think GE paid ZERO taxes last year.
As long as the unions are willing to accept more pollution and more global warming so they can have jobs, we will never get anyplace.
The practical side of me says “more growth fights”.
At the end of your long rant about industrial jobs you asked “What do you think”?
I think that you made an attempt to focus attention away from the discussion of the GPT and to manufacture consent that Whatcom County residents want industrial jobs. Perhaps this is your way of putting a spin on your failure to give an unbiased story about the GPT.
In the time that it took you to write this story you could have answered the questions about the actual jobs that the GPT has to offer. Or you could have written about the true reasons, the harm to the environment that the public objects to in the building of the terminal. Any industry that will cause harm to our city, county, state and the world will be met with opposition by the people who are acting to preserve and protect our earth for now and for future generations.
What is keeping you from writing about the environmental crisis and the harm heavy industry and projects like the GPT will cause?
Correct that geographically we fail. That’s why shipping anything is a plus.
Here are a few ideas, though:
Pot. Whatcom should position itself as the pot growing capital of the word. We have a good jump on it now….
Homosexuals. While it’s another service-based industry, the sex trade will boom in Washington very, very soon. Whatcom has a big head start on it now, so we may as well position (tee hee, I said “position”) ourselves as the San Francisco of the PNW. How about renaming it “WhatCum”?
Other than that, maybe Microsoft or one of its feeders would be interested in buying the county cheap cheap?
John, thanks for your blog post. You have asked, “Is Whatcom County well-situated to benefit from the [potential] shift of manufacturing back to this country.”
Jeff Rubin has identified two issues that impact the cost of manufactured goods: internalizing the cost of pollution (i.e., a potential carbon tax) and long-distance transportation (i.e., the rising cost of oil).
According to Rubin, US manufacturers generally pollute less than their Chinese counterparts. If all manufacturers are required to pay a carbon tax, the net effect is to make US manufactured goods less expensive relative to Chinese manufactured goods. Theoretically, that will make it more cost effective to manufacture in the US (though not necessarily in Whatcom County relative to the rest of the US).
As the price of oil rises above $100 per barrel, the cost of transporting goods from China to the US makes it more attractive to manufacture the same goods locally. In fact, Rubin’s book (WHY YOUR WORLD IS ABOUT TO GET A WHOLE LOT SMALLER) is basically a book about re-localization. Even companies that currently manufacture goods in Mexico for their US customers are considering manufacturing those goods closer to those customers to reduce transportation costs. Whatcom County is not centrally located to the rest of the US, but we are closer to many locations in the west than Louisville. We are also closer to the 4.4 million residents of British Columbia.
A carbon tax has the potential to bring manufacturing back to the US, while increasing oil prices have the potential to bring manufacturing to Whatcom County to serve those customers who live nearby.
A better question might be, “How can Whatcom County manufacturers take advantage of these two dynamics (a carbon tax and expensive oil)?”
Can we manufacture goods with minimal pollution to serve residents of the Pacific NW (including BC) in a cost-competitive way? Do local labor unions understand these dynamics? Are they willing to join forces with those concerned about sustainability like the United Steelworkers of America and the Sierra Club have done in their Blue Green Alliance (www dot bluegreenalliance dot org)?
While we may not be centrally located for domestic retail we have a huge edge in location to the global market. It is not a new theory that shipping finished products versus just our natural resources would benefit many more Americans. This has definitely been a long running conversation in the timber industry of the NW.
John,
I’m one of those people that could really use one of those jobs. However, I don’t want an “industrial” job if it means one that could potentially pollute as much as the GPT facility. And not all industrial/manufacturing jobs do. We have a very unique location and environment here in Whatcom County. We need to respect, protect and promote that by trying to find industries that don’t have to be heavy polluters or have to be located in the most environmentally sensitive locations of Whatcom County.
There are many here already, like HeathTechna, Alpha Technologies, TriVan Trucks, just to name a few. They build stuff right here, and hire people from our high school grads to engineers and scientists.
I hope we can find businesses that see our uniqueness as an advantage, whether it be our proximity to the border, close – but far enough away – from Vancouver and Seattle, easy access to shipping (trains, planes, trucks), or our community, which says in a picture “We are greener and healthy”, while offering employers/employees more recreational opportunities than almost anywhere else in the country.
I don’t think it needs to be GPT-type industries or nothing. Some of us are desperate for living wage jobs. I get that loud and clear. But let’s not be short-sighted and ruin opportunities for ourselves and our children’s children in that desperation.
The U.S. manufacturing index was down more this past November than at any time since 2009. Manufacturers are afraid of what the politicians in DC are going to do.
U.S. Manufacturing Index Drops To Three-Year Low In November
ismmanuf-120312.jpg
12/3/2012 10:31 AM ET
Following two months of modest expansion, activity in the U.S. manufacturing sector unexpectedly contracted in the month of November, according to a report released by the Institute for Supply Management on Monday.
The ISM said its purchasing managers index fell to 49.5 in November from 51.7 in October, with a reading below 50 indicating a contraction in manufacturing activity. The drop surprised economists, who had expected the index to come in unchanged compared to the previous month.
With the unexpected decrease, the purchasing managers index fell to its lowest level since coming in at 49.2 in July of 2009.
Bradley Holcomb, chair of the ISM Manufacturing Business Survey Committee, said, “Comments from the panel this month generally indicate that the second half of the year continues to show a slowdown in demand; respondents also express concern over how and when the fiscal cliff issue will be resolved.”
The report showed that the new orders index dropped to 50.3 in November from 54.2 in October, although the reading above 50 indicated continued new orders growth.
The employment index fell to 48.4 in November from 52.1 in October, hitting its lowest level since September of 2009. The reading below 50 points to a drop in employment in the manufacturing sector.
That is really odd that you think that US manufacturing is showing signs of rebounding because I just got an email from the WSJ which says:
The U.S. manufacturing sector fell back into contraction last month and employment weakened sharply, according to data released by the Institute for Supply Management. The ISM’s manufacturing purchasing managers’ index unexpectedly fell to 49.5 in November from 51.7 in October. A reading below 50 indicates shrinking activity. Economists surveyed by Dow Jones Newswires had expected the index to fall but only to 51.
Manufacturing is not rebounding and raising taxes isn’t going to help, with people have less buying power and businesses having less money to reinvest, the outlook doesn’t look good for the country, let alone Whatcom County. The coal terminal will cost Whatcom County more than we get out of it.
US manufacturers are moving production back to the US, but they are not rehiring punch press operators. The production lines are staffed with robots.
China is losing its competitive edge to places like Bangladesh that pay workers less.
The assembly of the iPod in China adds less than 20% to the product, which is assembled from components designed and made elsewhere.
STEM education is key.
Is there anyone out there that knows if there is an on-line feed of the scoping hearings in Spokane? Thanks -John
John,
In noting that supporters for GPT talk as if it’s the only chance to get this type of employment in Whatcom County, you overlook what has already come here in the past few years. The expansion of the BP plant alone provides more permanent jobs, more taxes, and likely more construction jobs than GPT will, even if the terminal ultimately garners approval. This oversight makes the drama over the jobs feel a little forced.
In addition, supporters don’t talk about the real, existing jobs put at risk, at Intalco, at Sierra Pacific, at the Port of Seattle–where Port of Seattle folks issues a cacophony of angst over a basketball/hockey arena that largely uses excess transportation capacity during off-peak hours, while remaining mum on coal export proposals which would block access to Port of Seattle facilities for hours every day–to the detriment of existing and potential jobs. Or the jobs at ports and industrial parks from here to Helena, wherever there are jobs served with rail access.
I’ve had employers tell me that BNSF has informed them if the GPT terminal is approved, BNSF will terminate those companies’ access to their small sidings, because they’ll interfere with the efficient delivery of coal to Ferndale. Other companies business models are put at risk due to the pollution (diesel particulates; the coal dust s not the driver in this) generated by the increased trainsets coming through. Whatcom County already generates over a quarter of the polution, as measured by EPA, of the airshed we share with the lower mainland of BC–despite having only 9% if the airshed’s population. We have been close to noncompliance during several measurements over the past decade; if we cross that line, every company that emits anything, air pollution-wise, will face significantly higher costs of operation if they remain here. Some will choose to go, others may simply close shop and move overseas.
Who’s standing up for those employers, and for their employees? Not the Chamber of Commerce, not the Mayors of Lynden and Ferndale; County and Bellingham officials are also largely silent. Given the absence of in-depth, investigative journalism, apparently those employees and employers cannot count on help from the Herald, either. As I’ve told many, many people, this is much more about the cost of jobs than it is about the environment. The environmental issues are real, but they make a convenient way for those selling the project to divert attention form an even more important truth: this proposal hurts everyone in our community, and none more than those in need of a good job/
Thanks Dan
Dan,
Thanks for all the misinformation. BNSF will be upgrading the existing sidings along the route to ensure that all of their customer’s needs are able to be met. Nice try. Secondly, diesel particulates are another of yours and the rest of the left wingers misinformation. Fuel and engine technology have eliminated over 90% of the particulates that existed in clean diesel just 5 years ago – we now have ultra clean diesel with 15ppm or less of sulfur. The tweaks to the formulas are actually at a point of diminishing returns…kind of like your continued breathing of air that robs a useful creature of the oxygen. The final solution for the diesel engines is in the after treatment of the exhaust. That technology exists and is already coming on line. Try and come up with some new lies next time.
“I’ve had employers tell me that BNSF has informed them if the GPT terminal is approved, BNSF will terminate those companies’ access to their small sidings, because they’ll interfere with the efficient delivery of coal to Ferndale.”
Dan,
If you’re going to make that kind of assertion, I think you should name names.
This is an unsupported slur that must be clarified.
“According to Rubin, US manufacturers generally pollute less than their Chinese counterparts.”
That is obvious.
Rubin and Horowitz would correct this by levying a carbon tax.
I would correct this by shipping cleaner coal to China, who is going to burn coal to produce power in any case. In this way, Gateway Pacific reduces pollution from China and other countries. In this way, nobody pays a tax that distorts resource allocation and reduces economic growth.
Good points from Dan Pike. (See above.)
And if you ever travel around the northwest, you might notice a coal train or two, running over Stevens Pass…
They got a whole lot of new track cars on a siding too, the Seattle Bypass Route, just in case your not from Great Northern Country.
Ever ride thru the Cascade Tunnel, it’s quite a bit brighter than a local tunnel vision master.
Tunnel Vision Dan?
http://en.wikipedia.org/wiki/Cascade_Tunnel
Ain’t it great, those silly Chinese can’t figure out fracking for natural gas. He he, guess they’ll just have to keep buying our coal … ooooops http://www.theworld.org/2012/08/the-next-fracking-frontier-china/
Thank you, Dan. John. I’ve not been able to forget an economist on CNN when gas prices here were exploding in 2008 and the country was in panic. His advice: relax and live with the realities of energy costs because once oil reaches $100/barrel, ALL manufacturing will come back to the U.S. since it will be prohibitively expensive to manufacture Barbies in China and ship them back here. The focus will be on making everything as local as possible. Forgive me if I believe that sounds like heaven.
The more I’ve researched the coal terminal, the more I realize that, ultimately, the boogie man here is globalization. All those ships are just wrecking this planet.
We need to add value to what our industries are allready producing. Manufacturing things out of aluminum. Auto parts to fry pans to supply the west coast. Turn ingots into local manufacturing jobs.
It would mean more if we had a container port.
If part of our competitive disadvantage with China in manufacturing is their use of cheap, dirty energy, then what sense does it make for our government to sell publicly-owned coal from the Powder River Basin to Peabody Coal for $1.11 per ton to ship to China? The Gateway Pacific project might create some jobs here, but at the cost of how many other US jobs as we subsidize Chinese manufacturing with cheap coal power?
Thought I’d take the time to correct some misstatements put out in response top my earlier post:
Dave—it was not a slur, it was a statement of a business decision made by BNSF about how they would prioritize access. From a business perspective, it makes sense to give priority to mainline operations over siding slots that compromise mainline capacity, at a time when demand for that capacity could increase by 20 or more trainsets of 8500 feet or more in length every day. Coal shipping generates about 37% of BNSF’s profits; of course they’ll pay attention to that aspect of their business; their interests are not exactly the same as our community interests. And I won’t name names of those who have spoken to me in confidence.
Regionally, it could reach could be 40 or 50 additional daily trains. Those trains impact access everywhere there is an at-grade crossing between here and the Powder River coal mines. A substantial number of those crossings serve industrial employment areas, including many of Washington’s public ports. In addition, companies like Boeing, who have multiple manufacturing facilities around the Puget Sound, and who use excess rail capacity to ship oversized (read: too large to ship by truck) parts from plant to plant, will see their windows of shipping opportunity shrink or vanish completely, again leading to business questions like, “Can we perform more of our work in South Carolina, where this is not among the challenges we face?”
Ray—you play pretty loose with reality when you accuse me of lies, especially when your facts don’t add up, or you conveniently forget key modifiers. For example, you state:
“…BNSF will be upgrading the existing sidings along the route to ensure that all of their customer’s needs are able to be met…”
In fact, taxpayers have funded nearly EVERY rail improvement in Western Washington over the past three decades. In conversations with BNSF brass, they made it clear they’ll spend what they absolutely must, but they’re looking for the state, the feds, and yes, local dollars to make these improvements.
You also claim, “…Fuel and engine technology have eliminated over 90% of the particulates that existed in clean diesel just 5 years ago – we now have ultra clean diesel with 15ppm or less of sulfur…”
Now it is true that the new tier 4 locomotive engine standards are a major improvement over tier three, which was an even bigger step up from tiers 0, 1 and 2. And it is true that lower sulfur diesel is an improvement. However, sulfur is only one component of the problem—Nox and particulate emissions are major problems. Tier 4 standars reduce these problems, but don’t eliminate them. Here’s a handy chart from the EPA summarizing standards for the different tiers going forward (or in the case of Tier 4, beginning in 2015, the effective date of Tier 4 requirements. Ooops! You forgot to mention that the requirements you tout are not even in effect for over two more years…):
Line-Haul Emission Factors (g/bhp-hr)
– PM10 – HC – NO x – CO -
Uncontrolled – 0.32 – 0.48 – 13.00 – 1.28
tier 0 – 0.32 – 0.48 – 8.60 – 1.28
tier 0+ – 0.20 – 0.30 – 7.20 – 1.28
tier 1 – 0.32 – 0.47 – 6.70 – 1.28
tier 1+ – 0.20 – 0.29 – 6.70 – 1.28
tier2 – 0.18 – 0.26 – 4.95 – 1.28
tier 2+ & tier 3 – 0.08 – 0.13 – 4.95 – 1.28
tier 4 – 0.015 – 0.04 – 1.00 – 1.28
+ indicates that these are the revised standards in 40 CFR Part 1033
The bigger issue is that locomotives are grandfathered in to their existing classifications. While some upgrades are required when the engines are rebuilt, a rebuilt tier 1 engine is allowed to pollute much more that a Tier 4 engine can. BNSF’s fleet is about 15 years old, on average. Given the average life span of their engines is about 35 years, the emissions issues are magically going away anytime soon. Engines working under a heavy load–and coal trains are the heaviest loads railroads haul–produce significantly more pollution than do lighter trains, especially particulates. And particulates are never fully going away, which is where our airshed’s noncompliance issues are most challenging.
Nope, it’s still a bad idea.
That last paragraph should have read, “…the emissions issues are NOT magically going away…” I should also have noted that the chart reflects emissions under current standards for rebuilt engines (eg, cleaner, less polluting) for Tiers 0, 1, 2 and 3. Unrebuilt engines in those classes can pollute up to their original constraints, which were higher. This is a fairly minor issue, though.
One last correction: taxpayers have funded almost all rail CAPACITY EXPANSION improvements in western Washington over the past 3 decades, including new and lengthened sidings. Other improvements, such as strengthening the railbeds to handle heavier loads, or installing seamless rails, have been largely on BNSF’s dime.
What continues to amaze me is how the majority of pro coal terminal comments continue to come from people who do not use their real names. Nobody can verify if they really exist or are just paid employees of SSA Marine/Smith & Stark. More and more I see those opposed to the coal dump using their real names for their real and fact based opinions.
Woo hoo. Thank you Dan!!!! Who, lest anyone forget, is a transportation specialist. I LOVE when the proponents try to throw BS at you, and you shoot it down with the facts. You’ve been quiet for a while, and we were worried we’d lost your voice. So glad you’re here, or back, or whatever.
Because here’s what we’re dealing with. Alliance for NW Jobs and Exports just posted on their FB page the following:
“We share your concerns about coal dust and have solutions in place to avoid this issue—simple solutions include covering the trains or spraying the coal down to ensure dust doesn’t drift. The companies involved in each terminal project want to make sure this won’t be an issue.”
In response, I posted a resopnse to their webpage. They’re trying not to shut down comments, a la Northwest Jobs Alliance (Oplinger and Warren), who battened down that page when we started posting facts. So for the moment, at least, this comment is on ANWJE’s website:
“There are no covered trains. They simply don’t exist. And the mines are currently suing BNSF before the STB for requiring them to use surfactants on coal on rail cars. There are no simple answers. http://westerncoaltrafficleague.com/pdf/Aug%2012,%202011.pdf.”
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