June 2008

The Road Not Taken

As transportation reauthorization approaches, it’s important to remember that we have a voice in how this legislation is crafted. Too often, the easy road is the one most traveled. It’s much simpler to sit back and rely on others to carry the burden of developing relationships with legislators, gathering facts, and advocating the necessary investments.

Some brave souls, however, choose the more difficult path and invest the time and energy needed to build relationships and influence decision-makers. Such is the case with a dedicated North Carolina group, including the aggregate industry’s own Stephen Zelnak, Jr.

Zelnak, CEO of Martin Marietta, serves on the state’s 21st Century Transportation Committee. Formed last year, the 24-member group was assigned the task of studying the state’s infrastructure needs and developing methods to fund those needs. The News & Observer reported that on May 13, the group recommended that state lawmakers end the annual transfer of $172 million from the state’s Highway Trust Fund (HTF) to the General Fund. It recommended that $75 million be used to help fund the gap between toll collections and the cost of building and operating the Triangle Expressway. Remaining monies could then be tapped to cover debt retirement for $800 million in proposed bonds to fund additional projects. Finally, the group recommended that metropolitan counties ante up a portion of transit projects through a half-penny local sales tax and a slight increase in car registration fees.

Local reaction to the committee’s work has been positive. Newspapers including The News & Observer, The Fayetteville Observer, and The Herald-Sun have all endorsed the group’s advocacy of construction projects. Speaking to The Herald-Sun, Zelnak said, “We used to be known as the good-roads state, and now we have a D-rated system.”

The combination of fact-finding, creative financing, and emotional appeal has generated support among the public. In fact, one recent poll — conducted by Elon University — showed that state residents want the chance to consider raising local taxes and issuing state bonds to pay for better roads and transit service.

Looking at North Carolina as a model, similar strategies can be used with federal funding. There is no shortage of documentation regarding the need for an increased infrastructure investment. Many members of the Transportation Construction Coalition are working hard to help their individual constituencies speak with one voice.

What’s missing? More than likely, you. Take advantage of the opportunity to make your voice heard. Let your legislators know where you stand on infrastructure spending. If you doubt the importance of investing your time and energy, consider the words of Robert Frost:

“I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I –
I took the one less traveled by,
and that has made all the difference.”

May 2008

Conservation Conversations

One recent morning, I had an interesting dialogue with my 8-year-old son before taking him to school. We were completing a homework assignment, which involved reading a story to a parent prior to reading it in class. It was an excerpt from a McGraw-Hill reading textbook that discussed endangered plant species.

Everything went well until we got to the following paragraph: “Plants disappear when humans destroy the places where plants live. This problem can happen when people build new roads, factories, or homes. Plants and trees can also disappear as land is cleared for other uses.” Hmm.

Not one to let that kind of statement pass, I asked him, “Do you think this means that people shouldn’t build new roads, factories, or homes?” He pondered that question for a minute and said, “No, people have to live somewhere don’t they?” Mission accomplished.

What struck me about this dialogue was the fact that at the tender age of 8, my adorable little boy was being programmed to view issues in a certain way. Don’t get me wrong, I believe in keeping the planet intact for future generations. Our family draws posters for the local Earth Day contest. My kids help sort trash into the recycling bins. They know we use strangely shaped light bulbs to be more energy efficient and that Mom and Dad are debating whether the next family car will be a hybrid. I want my children to value the environment and am more than happy to start them on that path. I’m just a fan of telling the whole story — not just a single chapter.

What worked during this simple morning conversation holds true when the roles are reversed. As we engage stakeholders in conversations about the aggregates industry and sustainability, we benefit from hearing dissenting opinions and embedding those concerns into our own views.

While I researched this month’s feature on sustainability, I came across one brave company that invited the very man who successfully battled permitting for one of its sites to sit on its sustainability panel. After discussing the invitation with his NIMBY peers, he took the company up on its offer, attended panel meetings, and even made a presentation to the group.

What was the outcome of this olive branch? On his Web site, the gentleman noted that while he went into the process with a certain degree of skepticism, he was duly impressed with the company’s efforts to reduce its carbon dioxide footprint and admitted during his presentation that a company cannot be blamed for producing materials the public demands. Blogging back to his peers, he reported: “I came away convinced that we need to keep pressure up on such corporations, but that there are many people within them who want us to do this, and who actually rely on us to help hold their ethical polices in place.”

Sounds like the beginnings of a mutually respectful relationship, and that’s a goal for which we all strive.

Now, I can’t wait to hear what my second-grader’s teacher thinks of his classroom discussion.

April 2008

Spanning the Gap between Cost and Capacity

As the reauthorization of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) approaches, members of the aggregates industry, the broader transportation industry, and the general public should look to the past to better prepare for the future. That was a key sentiment shared during a presentation made by Jack L. Schenendorf during the National Stone, Sand & Gravel Association’s annual meeting held March 10-13 in Las Vegas. Schenendorf serves as vice chairman of the National Surface Transportation Policy and Revenue Commission, established by SAFETEA-LU to study the future of surface transportation programs and financing.

“We owe our parents and grandparents a debt of gratitude for building the National Highway System,” he told attendees. “That system is aging. It isn’t up to doing what we need it to do for the next 50 years.” Diametrically opposed are the issues of cost and capacity. For example, Schenendorf noted that when the Woodrow Wilson Bridge was built during the 1960s, it cost $14 million. During its recent replacement, the cost climbed to $2.4 billion.

Rather than talking opening and honestly about the growing problem of the nation’s infrastructure needs, the very magnitude of the cost has key personnel scared to speak up. However, ignoring the problem won’t make it go away. In fact, it’s getting worse. Throughout the next 50 years, the U.S. population will grow by an estimated 150 million people. “Our system can’t meet our needs now,” Schenendorf explained. “How is it going to handle the increase in the number of people traveling on it in 50 years?”

To underscore the point, he discussed the Port of Seattle, which is currently among the largest ports in the United States. To meet forecasted capacity, a similarly sized port would need to be built each and every year for the foreseeable future.

Throughout his presentation, Schenendorf outlined the following four key findings by the National Surface Transportation Policy and Revenue Commission.

• Infrastructure investment must increase dramatically. He predicted that a total of $227 billion — in public and private spending — needs to be spent each year to meet capacity needs. Current spending is approximately $87 billion per year.

• The federal government needs to continue to be a full partner in infrastructure investment and must provide its fair share of resources. It is a national transportation system and should not be delegated solely to state, local, and private leadership.

• The federal program must be transformed. Future efforts should mirror those of the 1950s when transportation funding outlined a mission and created a sense of purpose that the public could rally around.

• The public must be educated about the value of infrastructure investment so it will support it.

Every level of government must step up to this effort, Schenendorf warned. Success will require making infrastructure investment a national priority; a factor already recognized in nations such as India and China.

“We have to have a wake-up call in the United States to create the sense of urgency that other countries already recognize,” he said. “If we’re going to remain the economic force that we are today, we need to have an effort comparable to that of the 1950s.”

March 2008

Limiting Operator Opportunity

It’s no secret that relations with the Mine Safety and Health Administration (MSHA) have changed since a series of coal mining fatalities brought MSHA under the Congressional microscope. And it is not a change for the better.

While personal contacts with regulators may remain intact, the overriding relationship can be described, at best, as strained. Various incidents have impacted this climate shift — the passage of the Mine Improvement and New Emergency Response (MINER) Act, the implementation of flagrant penalties, the focus on establishing a pattern of violations, and the ill-conceived Supplemental Mine Improvement and New Emergency Response (S-MINER) legislation.

The most recent incident comes from a procedural instruction letter dated Feb. 4. In it, Kevin Stricklin and Felix Quintana — the administrators for coal mine safety and health and metal and non-metal safety and health, respectively — address the issue of safety and health conferences. They write, “Until further notice, all safety and health conferences held pursuant to 30 C.F.R. Part 100.6 may be limited to unwarrantable failure and high negligence violations. All other violations may be conferenced at the discretion of the district manager by the conference litigation representative (CLR), or other MSHA personnel assigned to conduct Part 100 safety and health conferences… Conference requests that have already been granted and which do not involve unwarrantable failure and high negligence in the violations should be cancelled. The citations shall be forwarded for assessment of penalty.”

With the sweep of a pen, operators have lost the opportunity — except for the most serious of citations — to offer factual rebuttals to penalties they feel are assessed in error. Many operators currently use these conferences to avoid mounting legal challenges, and the likely result will be more time and money spent in courts. 

While it is understandable that MSHA is striving to meet its statutory obligation to inspect all mines, it is incomprehensible that operators will be denied the opportunity to challenge the findings.

The FY 2009 proposed budget for MSHA is $332 million, a 6-percent increase compared to FY 2008. Richard Stickler, acting assistant secretary of labor for mine safety and health, said that that money would include funding for 55 additional metal and non-metal enforcement personnel. In a press release concerning the proposed budget, Stickler noted that the request affords the agency the necessary resources to continue the aggressive enforcement that led to a doubling of fines from $35 million in 2006 to $75 million in 2007.

The agency should be adequately staffed, and better yet, adequately trained, to fulfill its statutory obligation. At the same time, it should honor its tradition of giving operators a chance to rebut citations. As it touts its ability to increase the value of fines and decides not to provide such an opportunity, MSHA takes another step in the wrong direction.

February 2008

In Critical Condition

Despite attempts by various spin doctors to perform CPR on America’s perception of the current housing market, 2007 demonstrated that an acute and chronic affliction has struck the residential sector.

Because residential construction serves as the end use of about one-third of the aggregates produced during any typical year, a significant downturn in its fortunes reverberates throughout the aggregates industry. When evaluating the implications of the drop in housing starts, consider that each start represents approximately 400 tons of aggregates. It’s no wonder that residential market concerns have been a common ailment reported by numerous publicly held aggregates companies.

The big question is whether the residential market has hit its bottom. The answer depends greatly on who you ask. Although the National Association of Realtors continues to paint a positive picture with regards to pent-up demand, its own data contradicts the happy talk. For example, the group reported last October that the current home inventory of 4.4 million homes would take 10.5 months to sell at the existing sales rate.

The New York Times touts that renting has been a better choice than buying in markets such as Los Angeles, Las Vegas, and Miami during the last two years. In fact, it notes that housing prices in the Los Angeles market would need to increase 5 percent during each of the next five years for a typical buyer to do better than a renter.

As our economics expert, Daryl Delano, points out in this month’s AggMan Outlook (click here), the median price of a new single-family home sold during October 2007 was 13 percent lower than one year earlier. Existing home values didn’t diminish as rapidly, but a 5.1-percent decrease in value — the nationwide average — is something no one should take lightly.

What should aggregates managers do? First, consider the short-term implications for your business. Look at your customer base and, to the extent possible, adjust your processing plant to focus on other opportunities as they exist in your local market. Next, keep in mind that history repeats itself. Remember the dynamics of the boom-bust cycle of the 1980s. The 2000-05 residential boom lasted longer than its predecessor, so prepare for a longer period of recuperation. Finally, determine the right prescription for preventative health. Monitor the vibrancy of the residential, non-residential, and public works sectors on a regular basis. And when you’re lobbying for transportation funding, ask legislators for their support in all three segments. If predatory lending practices had been targeted sooner, the residential market might be in healthier condition.

January 2008

Old Problems, New Solutions

New strategies to the age-old problem of permitting reserves may be helping some producers succeed in this traditionally difficult area. In fact, results from the 2008 Aggregates Manager Forecast Survey show that 6 percent fewer aggregates managers saw permitting as a major challenge during 2007, compared to 2006. (For more industry insights, see Forecast 2008, page 20.)

Twin techniques may be responsible for progress on this front: new ways of explaining the significance of local resources to the local market and driving home the value of aggregates deposits.

In Southern California, Granite Construction Co. is taking a data-driven approach to minimize the emotional reaction to permitting efforts. As it works to permit its Liberty Quarry, a proposed 155-acre site near the Southwest Riverside-San Diego County line, Granite Construction is sharing facts and figures through a multi-media campaign that includes press releases, video clips, and a dedicated Web site. It cites the shortage of construction materials in Southern California and wisely uses not only independent research but also notes statistics developed by the California Department of Conservation and the state department of transportation.

Key points about how the site would reduce truck traffic and emissions, as well as provide taxpayers with a cost-effective transportation investment, make their case well. In contrast, a local opposition group is using propaganda and scare tactics in its attempt to stop the quarry. Local citizens are recognizing the dichotomy between the two positions. Last August, Gene Campbell, a Temecula resident, wrote a letter in support of the Liberty Quarry. Published in The Californian, it was one of numerous such letters. In it, Campbell noted, “Granite Construction has made it easy to get the information you need to get your decision…Propaganda is just that, but fortunately in today’s information-driven world, we can find the truth if we look for it ourselves.”

On the opposite coast, Londonberry, N.H.-based Thibeault Sand & Gravel offered residents a business alternative if they didn’t want an aggregates operation permitted in their neighborhood: the town could purchase the site — at market value.

“It’s really up to the community as a whole if this is something they want to protect,” Vincent Iacozzi, who’s representing Thibeault, told The Union Leader. “We don’t want to be the skunk at the picnic, and if there is a legitimate need to preserve that property…(the town) has the first right of refusal.”

While community residents whose property abuts the site may continue to pursue the purchase, a spokesman for the town told The Union Leader that he wasn’t sure if voters would support a petition being circulated to purchase the site. Apparently, residents are suffering from sticker shock.

Each of these producers took a different approach, but both share a common thread: aggregates operations are a valuable asset. Consider how that message may benefit your business during its next permitting endeavor.

December 2007

Goliath Slays David

Throughout the post-Sago regulatory environment, mine safety has become a political issue that is more about soundbites than safety and the results are devastating.

Gone are discussions about best practices in mine safety and health, the economic rationale behind strong safety programs, and the impact of regulations on safety. Politicians have pre-empted regulators’ ability to work collaboratively to develop effective, appropriate regulations. Miner training — particularly for small mine operators — has been relegated to an afterthought rather than being recognized as one of the three prongs of a meaningful safety culture.

Sadly, these philosophies have been lost as national “leaders” remain more caught up in playing the blame game than in truly protecting workers. In fact, their efforts have gone so far off course that they have actually resulted in what they are purportedly trying to end — loss of life.

On Oct. 15, mine owner and operator David Himmelberger committed suicide, according to reports in The Morning Call.

Earlier this year, Himmelberger’s company, R&D Coal, was the first to be fined under the “flagrant violations” standards developed as part of the Mine Improvement and New Emergency Response (MINER) Act of 2006. Following an Oct. 23, 2006, methane blast that resulted in the death of miner Dale Reightler, the five-man Tremont mine was issued a dozen citations and assessed an $874,500 fine.

Himmelberger was appealing the fine, but faced delays from the Mine Safety and Health Administration (MSHA). On Oct. 5, The Morning Call reports that he attended a meeting of the Independent Miners and Associates of Tremont, an anthracite mine advocacy group whose representatives say they believe MSHA’s District One office is trying to close mines in the region. He did not speak at the meeting, but took his life 10 days later.

His death is not among those reported by the agency’s fatality statistics, so let me offer the following fatality report.

COAL MINE FATALITY  — On Monday, Oct. 15, a mine owner and superintendent was fatally injured by a self-inflicted gunshot wound. Distressed by multiple hearing postponements and facing egregious penalties, the victim was overcome by the regulatory burdens placed upon him.

Throughout the last 14 months, the R&D mine has lost two workers. Dale Reightler’s death resulted from series of mistakes throughout the mining process that could have been avoided. David Himmelberger’s suicide resulted from a combination of an overzealous regulations and punitive penalties that should have been avoided.

Regulators and legislators should follow MSHA’s practice of determining root causes, assigning blame, and penalizing the appropriate parties. It might invoke a hard look in the mirror, but it could prevent future tragedies and that is what a safety culture should be all about.

November 2007

Fostering Productive Environments

As some Aggregates Manager readers know, in my “spare” time, I serve on my local school board. One of my recent board responsibilities was to help develop parameters for the board’s team during contract negotiations with two of our unions. I didn’t participate in the negotiations themselves, but I did enjoy the experience of having hundreds of lime-green clad employees attend the board’s bi-monthly meetings to express their opinions.

Although the salaries and benefits reached through those two negotiations processes were quite comparable, how the various teams got to those results was quite different. One union agreed to interest-based bargaining (IBB). Through that process, each group brought a short list of concerns and agreed to develop mutually agreeable resolutions. The second group (the ones wearing the green T-shirts) opted for traditional bargaining.

As with many businesses, controlling health care costs was a primary issue in both processes. The team using IBB quickly realized that health care costs were, by necessity, going to be shared by both employer and employee. It took several months more — including both public commentary and picketing sessions — for the traditional based negotiating team to come to the same realization.

To say the negotiations process was an eye-opening experience would be a great understatement. However, several vital lessons came out of that process. First, working through collaboration rather than confrontation can produce the same results but much more quickly and with fewer hurt feelings. Second, clear, consistent, honest communications are vital, even when the message is one that some employees may not want to hear. Finally, emotions are always going to play a role in not only contract negotiations, but in ongoing employee satisfaction.

Another lesson that came from this process is that how employees perceive they are being treated is every bit as important as how they actually are being treated. The very human need for acknowledgement and positive feedback is one that applies to all employees regardless of their occupation.

In the aggregates industry, where more than one-half of producers say that finding and retaining workers can be problematic, employee satisfaction is a key component of employee retention programs. Many studies also show that people who enjoy their work, feel important, and valued are more productive than those who don’t enjoy their work and don’t feel appreciated. These concepts apply whether or not your operation is a union environment. They are simply good business.