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
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