P&Q Roundtable & Conference part one: Solution searching

By |  November 10, 2014

Highway funding, safety and MSHA, and employment drove the conversation during one of two sessions at the annual Pit & Quarry Roundtable & Conference in Cleveland.

PQ_Rndtble_logo[1]Session one participants:

Moderator: Kevin Yanik, Pit & Quarry
Jack Ackerman, TCI Manufacturing
Jeff Carlisle, Douglas Manufacturing
Jason Emch, Shelly Co.
Michael Garard, Aggregate Manuf. Intl.
Jeff Gray, Telsmith
Fred Gross, FLSmidth Excel
Jeff Heinemann, Sandvik Construction
Mike Heenan, Ogletree Deakins
Neil Hoobler, H&H Materials
Scott Killough, Command Alkon
Alan Maio, U.S. Silica
Kristen Randall, W.S. Tyler
George Reddin, FMI
Josh Swank, Philippi-Hagenbuch
Keith Whetsel, Essrock Cement
Ron Williams, Baldor Electric Co.

The roundtable event was divided into two sessions, with different participants in each. Following is an abbreviated transcript from one discussion, while the transcript from the other session will run next month, in Pit & Quarry’s December issue.

YANIK: One popular public policy consultant and others suggest the days of massive transportation bills are over because the political environment makes it almost impossible to pass a single legislative package worth hundreds of billions of dollars. Do you believe another large, multi-year highway bill is still a possibility, or are we more likely to see continued short-term extensions? Any impressions on the nature of the political environment and what’s taking place in Washington, D.C.?

ACKERMAN: The political environment right now is extremely disappointing, to say the least. The fact that [the government] can’t come together for the good of the country is very disappointing.

SWANK: I think [a highway bill] is one item in their basket of items that they have to deal with in Washington. I don’t think the November election is going to impact us a whole lot. As for what we got this year: we got a Band-Aid. We needed something. At least we got that, but it’s not a good long-term approach to continue managing our highway restructures. I really don’t understand why [highway funding] is so difficult and why they can’t tie it to either inflation or a percentage based on the cost per gallon of gas so they don’t have to continue revisiting us.
KILLOUGH: We haven’t been getting our money’s worth in our investments – in our ROCKPACs. This might be an opportunity to say, okay, we’ve given you $5,000 or whatever the amount is. We want to see some results. You said you’d do this, and it didn’t get done. We need to start making sure the investments we’re making in this process are getting a return. It seems that we’re not getting a return.

GRAY: We see in Wisconsin that they’ve started using actual commercials on public TV to promote construction, road construction repairs. Everybody you talk to in your community agrees with you. It’s a matter of collecting our voices and taking it to our politicians. There are other important things politicians have to deal with, but road construction doesn’t seem to be a sexy one to chase through.

REDDIN: I think another concern is that at the lobbying effort, our associations have had the same pitch whether it’s good times or bad times. They’re dusting off the notes and talking about the condition of roads and bridges, and I think people are jaded with the arguments because life continues to go on after we’ve been crying wolf for 20 years. I think what’s missing is the re-shift in the paradigm that this is a stimulus bill; that this has a multiplier effect on the economy. A dollar spent in return is more than a dollar. We should be playing on the growth of the economy issue and not just the condition of the roads and bridges.

HOOBLER: I don’t know that this election would change anything, but I think politicians should be more interested in the good of the country rather than just getting re-elected.

HEINEMANN: As a manufacturer, one of the things that we’re seeing with this Band-Aid fix on the highway bill is it totally wipes out any long-term planning on the horizon. It just totally destroys it because most producers are not going to make the investment long-term if they’ve got a year to work with. If you’re a local manufacturer, it makes it very difficult because how do you plan for engineering, design, research, development of the power groups and engines? You have to plan long-term for that.

YANIK: On to safety and MSHA, which proposed a rule this summer that it says will place a greater emphasis on more serious safety and health conditions. In addition, MSHA says its proposed rule will simplify the criteria used to determine civil penalties and increase the weight of violations history, operator negligence and the violation’s gravity. What are your thoughts on MSHA’s proposal? MAIO: I’d say that from my perspective, I’m not surprised. We’ve been seeing an increase over the past couple of years in 104(d) citations and the fines. We do contest our violations, but I’m not surprised to hear this report.

HEINEMANN: Let me tell you something else that they put into these regulations. If you don’t contest, they give you a 20 percent discount. Right now, if you just abate a citation when you’re within the time that you’re supposed to abate it, they give you a 10 percent discount. Now, they’re going to give you a full 30 percent. It’s buying off contests, and I don’t know where that goes. But they’ve got it calculated that, on average, they’re losing that much in the cases so they’re giving away nothing. Where they’re going to get it back is with the new system. Penalties will be higher.

EMCH: As a producer, I’m all for simplifying the process in the interactions with MSHA, but I think what they’re proposing puts the burden on the inspector to classify the inspection or the citation. I think ultimately that’s going to result in frustrations in the operations.

MAIO: My only concern is when you see the [fine] numbers of 2005 ($25 million) compared to 2010 ($200 million). I haven’t seen too many government agencies know how to go back to that $25 million. Once you reach a certain point in revenue, it’s awfully difficult to go backward because you’re hiring people – new judges, all these new inspectors we know that were hired.

HEENAN: Actually, most people think MSHA makes money on their penalties. It’s more symbolic for them because the money actually goes in the general treasury. By law, it can’t go to MSHA but you’re right. 2010 was an anomaly. If you talk about $150 million, it’s not going back to $25 million – ever.

RANDALL: I think the process makes a lot of sense, but I find it disappointing that the focus is on increasing those [fines] and making it difficult for producers as opposed to, let’s say, spending money on education and helping them prevent these things in the future.
HEENAN: MSHA says it’s not our job to help because we’re an enforcement agent.

GRAY: Ten years ago it was commonplace for a new plant installation or an existing plant coming off of winter maintenance to call for a courtesy inspection, and in the last four years it’s almost nonexistent. They won’t respond or will not do it – and they probably have more manpower today than they’ve had.

MAIO: When we’ve called on that, they said, ‘Well, we can do it, but, you know, if we see stuff, we’re going to have to write citations.’

YANIK: What’s the likelihood of these proposals passing and what would you encourage producers to do to mitigate it?

HEENAN: I think MSHA is going to be pretty dug in. This thing’s been at MSHA and OMB (the Office of Management and Budget) for two years, and now it has broken loose. There are some things that they fixed a little bit.  For example, maximum history is one of the things that caused penalties to skyrocket where small operators were getting as much as $200,000 in penalties. I’ve never seen penalties that big, particularly as they were back in 2010. All it takes to get maximum history is 2.1 violations per inspection a day – and that’s why these small operators were getting these huge hits. A lot of points go with that – 25 points under the current system. So what they would do under the regulation here: They would say if you don’t have 10 inspection days a year, you’re not going to get history points. That’s pretty good. It may not be perfect, because what if you had 11 days? So they finally have acknowledged something that’s wrong. The other thing is this: If a small operator has a big accident and gets two distinct violations for that, it’s going to be $140,000 in penalties. If the largest multibillion-dollar gold company had the same violations, they would get $140,000. There’s obviously no consideration of business or effect on the business to continue.

YANIK: From a manufacturer perspective, can you describe the role you play in helping to mitigate MSHA penalties?

GARARD: We do a lot of custom work and we have an MSHA consultant – that’s what we’ll call him. When we get into new territory or something that’s a little different in a project, we’ll contact him and get an opinion. We will always lean toward the subjective analysis of an MSHA inspector as opposed to common sense analysis of the operator.

WILLIAMS: We’ll look at guarding for a while, but I think all MSHA says is you’ve got to guard certain areas. MSHA doesn’t tell you what a good guard is, so it’s pretty subjective.

CARLISLE: We had a return roll guard. I’ll talk to someone in Arizona and they’re like, “That’s great.” I’ll go to Virginia, and they’re like, “That’s not going to work because my [inspector] said it has to be this far out – an arm’s length. The guy in Arizona will say, “Well, it’s got to have this.” So we’ll tweak our design. I’ve got pinning clips, but that guy wants nuts and bolts on everything. So we’ll send the nuts and bolts. But in case you come across the guy who doesn’t like pinning clips, at least you’ve got the bolts on hand. So as a manufacturer, we try to keep a good stock of those. When a customer calls and says, “I just got fined, I need these,” we stop everything to get those out to those people because we know that hurts their bottom line.

WHETSEL: As far as the guarding issues, why do they fall off, why do they get broken off and why don’t they get put back on? Usually, it’s either a design for that particular application that gets torn off, or a maintenance guy has to remove it to do something. Or, it’s a circuit that’s supposed to get back on and its location has to be modified. There are a lot of funds and time going into those types of issues as everyone tries to improve and get in front of some of the inspections.

HEENAN: This conversation is really about safety. Forget about the MSHA stuff. That’s something we live with and we’re always going to have enforcement. But where the accidents are happening these days comes right down to the individual who says, “I can tinker with this for a minute and block out or not block the equipment.” They’ve probably done that 100 times, but then [an accident] will happen. The accidents are happening in that 10 seconds that somebody thinks nothing will happen.

YANIK: Let’s talk about your employees now. Industry employment is down about 5 percent, and it’s been declining for a number of years now. Are you concerned about the future of the industry in terms of who’s going to help run your operations?

MAIO: From a management perspective, as we’ve had a lot of mid-level to senior-level manager jobs open, we do struggle a little bit to fill them. We get a lot of applicants, but not exactly the right applicants. We just don’t do a good job marketing ourselves. It’s not a sexy industry. People want to work in office buildings in cities, but there’s no reason we can’t attract top talent. We just don’t do a good job marketing ourselves.

GROSS: I believe attracting talent in this industry – why it’s become so difficult – goes back to the discussion we had on the highway bill. We, as a country, don’t recognize how bad our bridges, roads and infrastructure is. It’s not a sexy topic people want to talk about. If it was a more popular topic and people were aware of the work we had to do in our country, people would be attracted to the industry and we’d have people who would want to get into this industry.

GERARD: We’re not encouraging young men and women to learn how to make anything anymore. When you need to fix something, nobody knows how to do it. For example, we couldn’t find enough maintenance service techs right now. We want to bring people in, but when they realize they might have to work 60, 70 or more hours, they’re not so attracted to that job anymore.

CARLISLE: I’ve looked at the military. You still have your mechanics, even just a regular Joe who’s not a stranger to doing hard work and stuff.

KILLOUGH: Twenty years ago, you’d hire a farm kid to come in during the summer and work. Well, you don’t do that now. With MSHA, you just can’t bring kids in and train them. Plus, nobody knows how to weld anymore and a mechanic is not just a wrench job anymore.

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