Transportation and Infrastructure

Manufacturers can take specific steps to improve the resilience of the health care supply chain, the NAM’s latest health care study found.

What’s going on: The study—conducted by the Manufacturing Policy Initiative at Indiana University—analyzes data from the COVID-19 pandemic, when manufacturers in the U.S. had to produce large quantities of critical health care equipment under difficult, fast-evolving conditions.

Building resilience: The study found that to prepare the supply chain for a future disruption of similar magnitude, manufacturers should focus on seven areas:

• Speed: Manufacturers must be able to satisfy demand quickly.
• Information: Manufacturers require timely access to accurate information.
• Cost: Firms face the costs of taking action within the supply chain, as well as the costs of managing market unpredictability and policy environment uncertainty.
• Networks: Partnerships can support information sharing and networks to help manufacturers navigate the disruption.
• Size: Supply chain challenges can look different for small, medium-sized and new manufacturers than for larger, established firms.
• Technology: Tech can help manufacturers increase production, improve efficiency and speed up innovation.
• Flexibility: Responses can come from unexpected sources and need a flexible policy environment.

The NAM says: “Policymakers should utilize these lessons to bolster our supply chain for the next disruption,” NAM Chief Economist Chad Moutray said. “This analysis … reveals that there are key policy actions needed to strengthen the manufacturing supply chain. Research shows a more balanced regulatory agenda, with an emphasis on clarity, predictability and coordination, will help mitigate the effects of the next disruption.”
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Chevron Corp. has bought a majority stake in a federal government–supported “green” hydrogen project in Utah that, once completed, will “produce massive volumes” of the renewable energy source, according to E&E News’ ENERGYWIRE (subscription).

What’s going on: Chevron said on Tuesday that it had completed a deal with fuel-storage developer Magnum Development LLC to take over full ownership of the Utah salt caverns where green hydrogen production and storage is set to take place.

• This purchase gives the energy giant “a majority interest in the joint venture that is developing the [Advanced Clean Energy Storage] project.”
• ACES—in which Mitsubishi Power Americas Inc. and private-equity firm Haddington Ventures LLC are also partners—won a $504 million loan guarantee from the Department of Energy in 2022.
• The project is part of a larger effort by Chevron to develop emerging energy technologies through 2028.

Why it’s important: “We seek to leverage the unique strengths of each partner to develop a large-scale, hydrogen platform that provides affordable, reliable, ever-cleaner energy and helps our customers achieve their lower carbon goals,” Chevron New Energies Vice President Austin Knight said in a statement.

• The plan is to make the hydrogen in the salt caverns in Delta, Utah, “for use at a nearby power plant” looking to diversify its energy mix—and aiming to run entirely on hydrogen by 2045.

Another effort: In partnership with ExxonMobil Corp. and Shell PLC, Chevron is also part of a Texas industry group asking for $1.25 billion in 2021 Bipartisan Infrastructure Law funds to construct hydrogen “hubs,” large-scale demonstrations of hydrogen production, transportation, usage and storage.

A model project: “Currently under construction, the ACES project could become one of the western U.S.’s most important demonstrations of what a low-carbon hydrogen industry might look like,” ENERGYWIRE reports.

The NAM’s take: “Manufacturers view clean energy solutions, such as hydrogen, as an important part of our country’s energy present and future—and the industry is used to leading the charge in developing and scaling hydrogen projects for widespread use,” said NAM Vice President of Domestic Economic Policy Brandon Farris.

• “The NAM is committed to ensuring that the hydrogen tax credit and other incentives help build the appropriate market conditions for hydrogen projects to succeed.”

Factory orders for manufactured products declined 2.1% in July, after having risen for four consecutive months, while factory shipments increased 0.5%, according to U.S. Census Bureau data.

Orders: Durable goods orders fell 5.2% in July, mostly due to declines in orders of aircraft and aircraft parts.

• However … excluding transportation equipment, factory orders increased 0.8% in July, with durable goods up 0.5%.
• Nondurable goods orders rose 1.1% in the same period.

A spending proxy rises: New orders for core capital goods—nondefense capital goods excluding aircraft, a proxy for capital spending in the U.S. economy—inched up 0.1% in July to $73.60 billion, just shy of the record high of $73.87 billion in May.

• Year-over-year, core capital goods orders have increased 0.8%.

The long view: Orders for new manufactured goods have decreased 0.7% in the past year, with factory orders excluding transportation declining 2.5% year-over-year. 

Shipments: July marked the third consecutive month of increases for factory shipments.

• But in the past 12 months, total factory shipments have declined 0.6%, or 2.3% year-over-year excluding transportation equipment.
• Core capital goods shipments fell 0.3% in July, pulling back for the second month in a row from May’s record high of $74.05 billion.

In related news: Economic activity in the U.S. services sector continued to grow last month, with the ISM® Services PMI recording its eighth straight month of growth, the strongest pace since February, according to Markets Insider.
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Late last week, West Coast dockworkers voted to ratify a long-term employment contract that was agreed upon earlier this summer, The Wall Street Journal (subscription) reports.

What’s going on: Approximately 75% of International Longshore and Warehouse Union members voted in favor of the six-year labor contract with the Pacific Maritime Association.

• This ratification vote formalizes the tentative agreement reached in June, which was preceded by several brief work stoppages, and is the culmination of negotiations that began in May 2022.
• “The ILWU represents about 22,000 workers at 29 ports from California to Washington state.”

Why it’s important: These negotiations, which ultimately took 14 months to resolve, were at times tumultuous, and the resulting supply chain disruptions led to a significant loss of West Coast cargo business to the East and Gulf coasts.

• Together the ports of Los Angeles and Long Beach constitute the busiest ocean trade gateway in the U.S., handling almost 40% of U.S. imports from Asia, according to the Los Angeles Times.
• The NAM consistently advocated for a resolution to these talks and commissioned an economic impact study in 2022 that found even a 15-day shuttering of these two West Coast ports would cost the U.S. economy nearly half a billion dollars a day and 41,000 jobs.

The NAM says: “Ratification of this six-year contract provides manufacturers with the supply chain reliability they need for operational planning and stability,” said NAM Director of Infrastructure and Labor Policy Ben Siegrist.

• “NAM members have overcome countless shipping challenges over the past few years and were at the forefront of calling for this resolution. We are pleased the contract has been ratified.”

The federal permitting process for major transmission lines should soon get a lot easier to navigate, according to POLITICO’s ENERGYWIRE (subscription).

What’s going on: Last Thursday, the Department of Energy proposed “completing environmental reviews and other federal approvals for electric power lines within two years.”

• In addition, “DOE would be the lead agency conducting environmental impact statements and other federal reviews for transmission projects so that developers wouldn’t need to go through multiple federal agencies.”
• Once finalized, the framework will be called the Coordinated Interagency Transmission Authorization and Permits Program.

Why it’s important: The draft revision—a response to the recent debt-ceiling deal—could slash the time it takes to get long-distance power lines built and operational.

• This “could help integrate more solar and wind into the U.S. energy resource mix,” according to ENERGYWIRE.
• Though Congress authorized the DOE as lead federal agency in reviewing electric power lines, this proposal marks the first time the authority has been “formally proposed,” a source told the news outlet.

Developers’ role: The proposal details what developers would have to do under the new process.

• “For example, DOE would require developers to complete resource reports about potential environmental impacts from construction or operation of their projects. Applicants would also need to submit plans for engaging with communities affected by a new transmission line.”

However … CITAP wouldn’t cancel the need for local and state permits.

• “Rather, the goal is to ensure that developers have a clearer and smoother process for obtaining necessary federal permits.”

The NAM’s take: “This is a step in the right direction,” said NAM Vice President of Domestic Economic Policy Brandon Farris. “As part of our push for permitting reform, the NAM has long advocated for a lead federal agency to run point and streamline the permitting process.”

• “The NAM will continue to work with Congress and the administration to make the permitting process more predictable and consolidate the many complex layers of review so the U.S. can continue to build on our shared goals of boosting domestic manufacturing.”

With one of its key components—printed circuit boards—in short supply, Schweitzer Engineering Laboratories chose the proactive solution: it would begin making them itself. Now that its new factory is up and running, SEL is receiving unexpectedly keen interest from other companies, and considering ramping up production for outside sales.

Fixing a supply chain problem: The Pullman, Washington–based electric power system protection solution manufacturer began manufacturing PCBs at its new $100 million, 162,000-square-foot factory in Moscow, Idaho, back in March.

• “Printed circuit boards take electronic components and interconnect them so they can interact with each other,” SEL CEO David Whitehead said. “Without them, you can forget about AI, forget about your cell phones—they’re in just about any electronic device.”
• The Moscow factory is running at about 25% capacity. When it reaches full production later this year, it will be one of the top PCB manufacturers in the U.S., according to Whitehead.

Domestic and accessible: The PCB “is a critical component that goes into our devices,” Whitehead continued. “Now, instead of sourcing PCBs from around the U.S., we can produce them ourselves.”

• The Moscow facility—which only produces the circuit boards for SEL—has increased the company’s supply chain resiliency and sped up its output, Whitehead told us. “Now, in a handful of days after designing a printed circuit board for a product, our engineers are in their labs testing it. It’s a big win for us.”
• Nearly half of manufacturers in the U.S.—44.9%—cite supply chain hurdles as one of their top business challenges, according to the NAM’s Q2 2023 Manufacturers’ Outlook Survey.

Self-funded and viable: SEL funded 100% of the facility’s construction costs, and it will have paid for itself in two to three years, Whitehead said.

• “I think that’s really a big deal for not only taxpayers but the local community generally,” he said. State and local governments “can take the funds [they didn’t use on us] and invest” elsewhere.

A good neighbor: The Moscow plant—which features a fume scrubber system that exceeds Environmental Protection Agency standards for volatile organic compounds—also uses a “zero-liquid discharge water treatment system that recycles and reuses all the water used to manufacture the printed circuit boards,” Whitehead said.

• A comparable factory would use about 90,000 gallons of water each day of production, while SEL uses about 500 to 600 gallons—the equivalent of only a few households’ daily usage, according to Whitehead. Most of that is for worker needs (drinking water and restrooms).
• The company also reclaims and reuses metals, such as tin, silver and gold, that are used in the production process.
• “We are very environmentally conscious about how we produce these boards,” Whitehead said. 

What’s next? Since the facility began production, SEL has gotten numerous inquiries from other manufacturers interested in buying the PCBs. The company is likely to oblige them soon.

• “This is our next opportunity,” Whitehead said of producing boards for other manufacturers. “We love being vertically integrated, building as much as we can close to where we’re going to use the products. … As we get better at it for our own consumption, I can see us expanding it.”

The Biden administration will soon announce the first grant winners of a multi-billion-dollar competition to speed up development of technology to “remove carbon dioxide from the sky,” according to E&E News’ CLIMATEWIRE (subscription).

What’s going on: The “awards for so-called direct air capture hubs could define the future of the nascent DAC industry in the United States as well as the broader CO2 removal sector, experts say.”

• The Department of Energy received more than a dozen proposals in response to the $3.5 billion DAC hub competition, which was created in 2021 as part of the historic bipartisan infrastructure legislation and seeks to increase the use of DAC technology.
• The projects expected to be announced this month could get “between $3 million and $500 million in matching funds” for efforts such as DAC undertakings capable of capturing and storing one million tons of carbon dioxide every year.

What it is: DAC plants use filters, power, piping and fans to remove carbon dioxide from the air and sequester it underground.

• Just 27 such facilities have been commissioned globally, and the largest of these can remove 4,000 tons of carbon dioxide from the atmosphere annually.

The economic challenge: “At the moment, it costs around $700 per ton for a DAC facility to remove carbon from the air, according to the industry data clearinghouse CDR. The Inflation Reduction Act, meanwhile, increased the tax incentives for DAC operators to $180 per ton for the CO2 they permanently store.”

• To bridge that cost gap, last year Congress ordered the Biden administration to start a pilot program to pay DAC firms and developers of carbon-removal technology to remove emissions from the air.

The final say: “Manufacturers view clean energy solutions—such as carbon capture and sequestration/storage technologies and hydrogen—as important parts of our country’s energy present and future,” said NAM Director of Domestic Economic Policy Brandon Farris.

• “Manufacturers are leading the charge in developing them and scaling them up for widespread use.”

Canadian dockworkers and their employers in British Columbia agreed to a labor contract Sunday, ending the uncertainty that has plagued the North American port system for the past month, according to CNBC. 

What’s going on: The International Longshore and Warehouse Union of Canada voted to ratify a four-year agreement with the British Columbia Maritime Employers Association following a tumultuous few weeks that included two dockworker strikes—one lasting 14 days and the other only a day.

• “The new deal includes increases in wages, benefits, and training,” according to BCMEA, which also said deal ratification would offer “certainty and stability for the future of Canada’s West Coast ports.”

Why it’s important: During the two-week strike, “[s]ome U.S. shippers reconsigned the destination of their containers to the U.S during that time. Other ocean carriers eventually went back to the Canadian ports and waited to unload both Canadian and U.S. freight.”

• Changes to shipping routes affect railroads, since fewer containers traveling by rail can be unloaded at ports during work disruptions.
• It could take the railroads weeks to clear the backlog of containers built up as a result of the work stoppage.
• While train trade from Canada to the U.S. is recovering, it still ended the week of July 29 with a 6.2% decrease, according to CNBC.

The NAM’s take: “Disruptions to the interconnected North American supply chain have been a constant challenge for manufacturers over the past several years,” said NAM Director of Infrastructure and Labor Policy. “We welcome the announcement that this agreement has been ratified and will continue urging swift resolution to labor negotiations that might further impede reliable and efficient freight movement.” 

U.S. power companies are finding it increasingly difficult to get the large transformers they need to move electricity long distances—and the Department of Energy should step up to help them, the Government Accountability Office said this week, according to E&E News’ ENERGYWIRE (subscription).

What’s going on: A “GAO report called on DOE to create a plan, with deadlines, to overcome growing delays and difficulties U.S. utilities are facing in getting new large power transformers that are required to move electricity across more than 160,000 miles of U.S. high-voltage lines.”

• Most of the transformers are imported from overseas, and there is still a shortage due to pandemic-related supply chain disruptions.
• In some cases, delivery times have more than doubled, and the largest of the transformers can cost up to $10 million.

Why it’s important: “Transformers are critical for the future energy mix, as they are needed to create a larger grid for increased wind and solar generation, according to analysts.”

• In 2027 the demand by North American power companies for large transformers will likely be about twice what it was in 2020, according to the DOE.

What can be done: The DOE should create a plan to get more power companies to take part in voluntary programs to loan out spare large transformers during emergencies, the GAO recommends.

• The largest of these sharing agreements, the Edison Electric Institute’s Spare Transformer Equipment Program, had 57 participating utilities as of March.
• Thirty-one utilities in 28 states have signed onto a grid program to furnish spare transformers during cyberattacks or natural disasters.

The challenges: “[S]hortages of skilled manufacturing craftsmen able to build the transformers’ complex windings are a significant challenge … [DOE] said it is working on expanding apprenticeship programs to address the issue.”

Our take: “Transformers and transmission lines are critical to meet our growing energy security needs,” said NAM Director of Domestic Economic Policy Brandon Farris.​​​​​​

• “The NAM will continue working with the DOE and others to ensure that current and future needs are met, including developing the next generation of the manufacturing workforce and breaking down permitting barriers to expedite the buildout of our grid.”

The Biden administration’s new fuel-economy standards are too aggressive and add conflicting mandates to on-the-books regulations, the NAM said Friday.

What’s going on: The Department of Transportation’s National Highway Traffic Safety Administration issued a proposal calling for a revision of current Corporate Average Fuel Economy standards for cars and light-duty trucks—to a fleet average of 58 miles per gallon by 2032.

• The draft rules are a complement to regulations released “in April that are the strictest on record and push automakers to make the majority of their sales electric vehicles,” reports Auto Dealer Today.

Why it’s problematic: “Auto manufacturers have been making historic investments to ensure that electric vehicles will have a growing place on America’s roads,” said NAM President and CEO Jay Timmons. “However, the NAM has concerns over the three different sets of standards governing light- and medium-duty vehicles. For instance, the Environmental Protection Agency’s proposed regulation on light- and medium-duty vehicles would require 67% of new manufactured vehicles to be battery electric by 2032 and is too aggressive.”

• Some of the rules that have been put forth recently by federal and state agencies conflict with one another, and some—particularly those released by the EPA—would increase the cost of both manufacturing and purchasing vehicles.
• “In addition, the federal government should not dictate the vehicle choices offered to consumers,” Timmons pointed out. “The administration should allow the market and consumers to grow the number of electric vehicles, rather than depending on a single technology to meet this goal.”

What can be done: “[T]hese regulations should be harmonized to create a single unified standard for vehicle emissions, so manufacturers do not have to navigate three often-conflicting targets, which raise costs for manufacturers and consumers,” Timmons continued.

What we’re doing: In June, the NAM and members of the NAM’s Council of Manufacturing Associations and Conference of State Manufacturing Associations launched Manufacturers for Sensible Regulations, a coalition aimed at addressing the negative effects of the multiple, often contradictory regulations being handed down by federal agencies.