Rising Regulatory Pressures on U.S. Chemical Manufacturing Sector

Close up of glass bottles with chemicals

by | Apr 2, 2024

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The American Chemistry Council (ACC) has recently disclosed findings from a comprehensive survey illustrating the escalating regulatory challenges faced by chemical manufacturers in the United States. The survey sheds light on the negative repercussions of these challenges, particularly about the Biden Administration’s national priorities.

Impact on National Priorities and Economic Expansion

According to the survey data, a significant majority (86%) of respondents from the chemical manufacturing sector have observed increased regulatory burdens, especially at the federal level. This upsurge in regulations is anticipated to continue, potentially hindering the sector’s ability to contribute effectively to critical national initiatives. These initiatives include the development of computer chips, electric vehicles (EVs), clean energy solutions, infrastructure renewal, healthcare advancements, and biotechnology innovations.

The survey, which garnered insights from 58 chemical producers, of which 38% qualify as small businesses, underlines the critical role of chemical manufacturers in supporting a range of Biden Administration objectives. However, the influx of new regulations and a perceived lack of coordination within the administration pose significant threats to the sector’s capacity to produce essential chemistries. These regulatory challenges are affecting areas crucial for America’s future and its competitiveness on the global stage as detailed below:

Clean Energy Sector Under Pressure

The survey underscores the vital role of specific chemicals, such as ethylene oxide, fluoropolymers, and N-Methylpyrrolidone (NMP), in the clean energy sector, particularly for lithium-ion batteries essential to electric vehicles (EVs). The Biden Administration’s commitment to clean energy through the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) could be undermined by proposed regulations. These regulatory actions threaten the chemical manufacturers’ capacity to produce necessary components, potentially slowing the transition to EVs and the broader adoption of clean energy solutions.

Semiconductors: The Backbone of Technological Innovation at Risk

Chemicals like ethylene oxide and fluoropolymers are indispensable for the semiconductor industry, which is critical for the U.S. to maintain its technological edge. The Administration’s CHIPS Act aims to revitalize domestic semiconductor manufacturing with substantial investment. However, the EPA’s regulations, including the Hazardous Organic National Emission Standards for Hazardous Air Pollutants (HON) for ethylene oxide, could restrict the availability of essential materials, impacting the industry’s ability to innovate and compete globally and jeopardizing America’s technological leadership.

Biotechnology and Biomanufacturing: A Sector in Jeopardy

Cases like formaldehyde and chlorine are essential in biotechnology and biomanufacturing, which supports agriculture, animal health, and aquaculture. The regulatory burdens companies report threaten their ability to manufacture competitive inputs for this sector. Far-reaching implications, from crop production to veterinary medicine, are possible repercussions that could hamper the United States’ agricultural productivity and sustainability.

Healthcare: Vital Chemistries at Stake

The healthcare industry relies on chemistries for sterilizing medical equipment, manufacturing vaccines, and producing medical devices. Regulatory proposals, such as the EPA’s sterilizer rule, pose significant risks to the supply chain of sterilized medical supplies, which could lead to shortages and impact patient care. The ability to respond to health crises and maintain a sterile hospital environment could be compromised, affecting the quality and accessibility of healthcare services.

Infrastructure Development Hindered

Chemicals critical for building resilient and sustainable infrastructure, such as butadiene, formaldehyde, and chlorine, face regulatory challenges that could limit their use. The Administration’s infrastructure goals under the IIJA are threatened by this, potentially delaying or increasing the cost of infrastructure projects to enhance the nation’s competitiveness and sustainability.

Navigating the Regulatory Landscape: Challenges and Solutions

The findings further reveal that 65% of companies experienced negative impacts over the past year due to regulatory delays or inaction on permits, licenses, or product approvals. A notable 12% of companies reported that the current regulatory climate has deterred them from expanding operations within the U.S.

The survey also highlights the stifling effect of the Environmental Protection Agency’s (EPA) New Chemicals Program on innovation, with 70% of companies choosing to introduce new chemicals outside the U.S. due to uncertainties and challenges associated with the program.

Chris Jahn, representing the ACC, pointed out the doubled volume of regulations over the past two decades, emphasizing the necessity for the U.S. to avoid the pitfalls of deindustrialization seen in other regions. A call for more thoughtful regulatory processes was made, suggesting that significant reductions in regulatory compliance costs could lead to increased investments in research and development, new technologies, and products, ultimately supporting U.S. leadership in the global market.

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