Page 68 - 2019 Annual Report
P. 68
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Management expects future organic profitability growth to result from increased pricing, rationalization of the current
product portfolio and/or further cost reductions.
The Magnesia Specialties business is highly dependent on rail transportation, particularly for movement of dolomitic lime from
Woodville to Manistee and direct customer shipments of dolomitic lime and magnesia chemicals products from both
Woodville and Manistee. The segment can be affected by the risks mentioned in the long-haul distribution discussion in the
Building Materials Business’ Key Considerations section.
Environmental Regulation and Litigation
The expansion and growth of the aggregates industry is subject to increasing challenges from environmental and political
advocates aiming to control the pace and direction of future development. Certain environmental groups have published lists
of targeted municipal areas, including areas within the Company’s marketplace, for environmental and suburban growth
control. The effect of these initiatives on the Company’s growth is typically localized. Further challenges are expected as the
momentum of these initiatives ebb and flow across the United States. Rail and other transportation alternatives are being
heralded by these special-interest groups as solutions to mitigate road traffic congestion and overcrowding.
The Company’s operations are subject to and affected by federal, state and local laws and regulations relating to the
environment, health and safety and other regulatory matters. Certain of the Company’s operations may occasionally use
substances classified as toxic or hazardous. The Company regularly monitors and reviews its operations, procedures and
policies for compliance with these laws and regulations. Despite these compliance efforts, risk of environmental liability is
inherent in the operation of the Company’s businesses, as it is with other companies engaged in similar businesses.
Environmental operating permits are, or may be, required for certain of the Company’s operations; such permits are subject
to modification, renewal and revocation. New permits are generally required for opening new sites or for expansion at
existing operations and can take several years to obtain. In the area of land use, rezoning and special or conditional use
permits are increasingly difficult to obtain. Once a permit is issued, the location is required to generally operate in accordance
with the approved site plan.
As is the case with others in the cement industry, the Company’s two cement operations produce varying quantities of
cement kiln dust (CKD). This by-product consists of fine-grained, solid, highly alkaline material removed from cement kiln
exhaust gas by air pollution control devices. Because much of the CKD is actually unreacted raw materials, it is generally
permissible to recycle the CKD back into the production process, and large amounts are often treated in such manner. CKD
that is not returned to the production process is disposed in landfills. CKD is currently exempted from federal hazardous
waste regulations under Subtitle C of the Resource Conservation and Recovery Act.
The Clean Air Act, originally passed in 1963 and periodically updated by amendments, is the United States’ national air
pollution control program that granted the Environmental Protection Agency (EPA) authority to set limits on the level of
various air pollutants. To be in compliance with National Ambient Air Quality Standards, a defined geographic area must be
below established limits for six pollutants. Environmental groups have been successful in lawsuits against the federal and
certain state departments of transportation, delaying highway construction in municipal areas not in compliance with the
Clean Air Act. The EPA designates geographic areas as nonattainment areas when the level of air pollutants exceeds the
national standard. Nonattainment areas receive deadlines to reduce air pollutants by instituting various control strategies or
otherwise face fines or control by the EPA. Included as nonattainment areas are several major metropolitan areas in the
Company’s markets, such as Houston/Brazoria/Galveston, Texas; Dallas/Fort Worth, Texas; Denver, Colorado; Boulder,
Colorado; Fort Collins/Greeley/Loveland, Colorado; Council Bluffs, Iowa; Atlanta, Georgia; Indianapolis, Indiana; and
Baltimore, Maryland. Federal transportation funding has been directly tied to compliance with the Clean Air Act.
Large emitters (facilities that emit 25,000 metric tons or more per year) of greenhouse gases (GHG) must report GHG
generation to comply with the EPA’s Mandatory Greenhouse Gases Reporting Rule (GHG Rule). The Company files annual
reports in accordance with the GHG Rule relating to operations at its Magnesia Specialties facilities in Woodville, Ohio, and
Manistee, Michigan, as well as the two cement plants in Texas, each of which emit certain GHG, including carbon dioxide,
methane and nitrous oxide. If Congress passes legislation on GHG, these operations will likely be subject to the new program.
Under President Trump’s administration, it is unknown whether the EPA is likely to impose additional regulatory restrictions
on emissions of GHG. However, the Company believes that any increased operating costs or taxes related to GHG emission
limitations at its Woodville or cement operations would be passed on to its customers. The Manistee facility may have to
absorb extra costs due to the regulation of GHG emissions in order to maintain competitive pricing in its markets. The
Company cannot reasonably predict how much those increased costs may be.
Annual Report ♦ Page 66 Celebrating 25 Years as a Public Company