Manufacturerwww.ima-net.org Fall 2016

THE ILLINOIS

VFDs CAN SIGNIFICANTLY LOWER ENERGY COSTS

Managing your energy strategyall year round

mHUB is Chicago’s first manufacturing innovation center — opening in JanuaryWhat every manufacturer should know about TSCA reform

16Managing your energy strategy all year round

Mission StatementThe object for which the IllinoisManufacturers’ Association wasformed is to strengthen the eco-nomic, social, environmental andgovernmental conditions for manu-facturing and allied enterprises inthe state of Illinois, resulting in an enlarged business base andincreased employment.

ChairmanWilliam M. Hickey, Jr.

PresidentGregory W. Baise

EditorStefany J. Henson

The Illinois Manufacturer is publishedquarterly by the Illinois Manufac -turers’ Association. All rightsreserved. The title, The IllinoisManufacturer, is a trademark of theIllinois Manufacturers’ Association.

Copyright 2016© IllinoisManufacturers’ Association.Reproduction of all or any part isprohibited except by written permis-sion of the publisher. Published arti-cles do not necessarily reflect theviews of the magazine or its pub-lisher. Information in this publica-tion should not be substituted foradvice of competent legal counsel.

For address changes and adjust-ments, write to The IllinoisManufacturer. Presort standardpostage paid at Bloomington, IL.Postmaster: Send address changesto The Illinois Manufacturer, 220East Adams Street, Springfield, IL62701. Telephone: 217-522-1240.

If you have any questions, please contact Stefany Henson,Editor and Director of Publicationsat 217-718-4207, or email shenson@ima-net.org.

Fall 2016

Share your company newswith IMA . . . News information, press re leases and articles may besent to Stefany Henson, Editor and Director ofPublications, Illi nois Manu facturers’ Associa tion(IMA), 220 East Adams Street,Springfield, IL 62701, oremail: shenson@ima-net.org.

ColumnsPresident’s Report: Restructuring and competition have had a suppressing effect on Illinois energy prices, though our robust generation mix has also played a vital role ................................................................................... Page 4

Legislative Report: Why join the IMA? It’s very simple — there is no other association in Illinois fighting for manufacturers’ interests every single day ...................................................................................... Page 6

Management Strategies: Budget for success: With Q4 2016 underway, it’s time to think about 2017 — by Adam Hackman, MIS of Illinois ................ Page 9

Energy & Environment: Four reasons investment and natural gas strategies work the same way — by Constellation ...................................... Page 13

Legal Issues: What every manufacturer should know about TSCA reform — by William J. Walsh, Clark Hill PLC ..................................... Page 15

Government Initiatives: Intersect Illinois seeks to position the state at the forefront of 21st-Century manufacturing — by Jim Schultz, Chairman and CEO of Intersect Illinois ...................................................... Page 19

Tax & Accounting Issues: Five features of tax deductions for energy efficient manufacturing buildings by Daniel Hurtado, RSM ................. Page 21

IMA Member News ................................................................................ Page 28

New IMA Members: Welcome! ................................................................. Page 30

IMA Calendar of Events ......................................................................... Page 30

Water Resource Recovery: The unique partnership of two industry leaders — by Bruce Hauk and Debra Shore, Illinois American Water ......................................................... 7

Variable Frequency Drives can significantly lower energy costs — by Richard Reese, CEM, CEA, Ameren Illinois Energy Efficiency Program .................................... 11

mHUB is Chicago’s first manufacturing innovation center —opening in January — by Dan Naumovich ................................... 22

Understanding the range of factors that influence energy prices can be a time-consuming and confusing process. Constellation, the IMA’s endorsed energyprovider, has various market intelligence publications available to keep you informed.

The Illinois Manufacturer is underwritten by Constellation — an Exelon Company

In total, Illinois may lose a staggering5,780 MW from its generation portfolio . . . Illinoispolicymakers stand at a crossroads.

Navigating the new, uncharted energy terrain

President’s ReportGREGORY W. BAISE

F or decades, our state’s energy landscape has proven to be a key factor in retaining cur-rent manufacturers and attracting new facilities and jobs. “Low” and “stable” have beencommon descriptors of energy prices in Illinois. This has been true in our state since

competition was introduced and the energy market was restructured in 1998. Amid years ofbudgetary struggles, failed pension reform and stalled economic growth, energy prices haveremained a constant positive for our manufacturers. In fact, July 2016 data from the Energy Information Agency (EIA) shows our state enjoys

the lowest commercial and industrial energy rates in the Midwest. This is well below ourneighbors in Indiana, Michigan, Wisconsin and Ohio. Illinois’ edge stretches beyond theMidwest, too. July 2016 rates in our state were far lower than states with a large populousand strong manufacturing presence such as Pennsylvania and California.1

Restructuring and competition have had a suppressing effect on Illinois energy prices,though our robust generation mix has also played a vital role. These factors have helped ourstate and the manufacturing industry greatly. This foundation, though, may weaken in thefuture, absent some proactive, strategic decision-making on the part of our policymakers.This could put Illinois’ energy advantage in jeopardy. We face concern on the federal level aside from the unknowns linked to the presidential

and congressional races. Earlier this year, the U.S. Supreme Court issued a “stay” of theEnvironmental Protection Agency’s (EPA) Clean Power Plan regulations. It remains to be seenwhether these regulations will go into effect at all. They require that states form plans to sat-isfy emission reduction targets as determined by the EPA. A final judgment may not bereached until 2017. Depending on the outcome, our state may need to alter its generationmix in the years to come. As we await a decision on the Clean Power Plan, we have seen a sudden rash of

announced closures of large generation resources in Illinois. Exelon, the owner and operatorof six nuclear facilities in the state, announced it intends to close its Clinton and Quad Citiesfacilities. This hinges on the actions of the legislature and Governor by this December.Dynegy, the owner of 13 power stations in the state, is closing several coal-fueled units aswell. In total, Illinois may lose a staggering 5,780 MW from its generation portfolio. MISO,the Regional Transmission Operator in central and southern Illinois, is thinking aboutchanges to its market structure to address reliability concerns. Environmentalists and renew-able developers have advanced legislation to expand the Renewable Portfolio Standard (RPS)and energy efficiency efforts. Illinois policymakers stand at a crossroads.Like state policymakers, our manufacturing community may face telling decisions in the

near future. Energy policy may have an impact on energy prices within the state and beyond.In turn, this could affect your energy bills. Gain more insight from Constellation’s article onpage 16, as well as other informative articles in this issue of The Illinois Manufacturer.We encourage you to work with our endorsed energy provider, Constellation, to take an

active role in developing a customized energy management strategy. As we face the uncer-tainties of fast-changing state and federal energy policies, Constellation can help you manageyour energy needs and budgets in an unpredictable environment. n

Gregory W. Baise is President and Chief Executive Officer of the Illinois Manufacturers’ Association. He may be reached at 630-368-5300, or viaemail at gbaise@ima-net.org.

4

1. U.S. Energy Information Agency, Electric Power Monthly — July 2016, released Sept. 26, 2016.(https://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_6_a)

We’re up to speed, so you can go full speed.

RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax and consulting firms. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. AP-GL-ALL-IP-0316

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Our manufacturingarmy in Illinois iscomprised of 570,000workers who areengaged in good,high-paying jobs thatare the heart and soulof the middle class.

Legislative Report

MARK DENZLER

6

Constellation — Providing tools to create a customized energy strategy for your company

L et’s face it — selling a membership in a trade organization is getting more difficult every year.Changes in demographics, combined with the Internet and mobile devices, make it easier forthe next generation of leaders to get information at the drop of a hat.

Some individuals find trade associations to be antiquated and increasingly irrelevant in today’smodern world regardless of whether they represent manufacturers, nurses, insurance brokers orrealtors. I’m often asked about the IMA’s value proposition and return on investment.It’s very simple — the IMA is the powerful voice of the Illinois manufacturing community and

the only statewide organization in Illinois dedicated exclusively to advocating for manufacturers inthe policy arena. There is no other association in Illinois fighting for your company every singleday. As Teddy Roosevelt once said, “the credit belongs to the man in the arena, whose face ismarred by dust and sweat and blood . . .”The Illinois Manufacturers’ Association is that “man in the arena” on behalf of the manufactur-

ing sector. Today, manufacturers face unprecedented challenges from federal, state and even localunits of government. We are on the front line of policy battles ranging from labor relations toenergy and the environment, to tax law and workers’ compensation. However, we are only asstrong as our membership.Our direct action and involvement has saved manufacturers millions and even billions of dol-

lars over the past decade in Illinois. Examples are numerous:• The IMA successfully negotiated an Unemployment Insurance Act reform in December of 2015that eliminated a 0.3 percent across the board surcharge on all employers. This is savingemployers nearly $38 per employee annually beginning in 2016.

• The IMA defeated the Tenaska Energy Project which sought to hike electricity prices by $400million per year for the next 30 years. The cost of energy for an average manufacturing facilitywould have jumped from 3.6 cents to 21 cents per kilowatt-hour — a whopping 500 percenthike for Tenaska’s power generation.

• The IMA saved manufacturers millions of dollars by stopping a government-subsidized synthetic natural gas plant that would have sold gas at more than $8 per million BTU com-pared to the market price of less than $3 per hour. Illinois consumers would have missed thebenefits of the energy revolution had the Leucadia plant been built.

• The IMA helped defeat numerous paid leave proposals and minimum wage laws that sought tocreate artificial and costly mandates on employers.

• A broad coalition, including the IMA, defeated a state GMO food labeling law and successfullyenacted a federal law banning a patchwork of state regulations. Food manufacturers will nothave to worry about creating different labels for different states.Every year brings new challenges and battles in the form of nearly 6,000 legislative proposals.

The new General Assembly, to be inaugurated in 2017, will be no different.Our manufacturing army in Illinois is comprised of 570,000 workers who are engaged in good,

high-paying jobs that are the heart and soul of the middle class. But these jobs are under attack,and those involved in the Illinois Manufacturers’ Association are the “boots on the ground” whoare actually doing the work on behalf of manufacturers to help them compete in today’s constant-ly changing global economy. We are more than proud to represent companies that make things in Illinois and we want to

keep it that way! Thank you for your investment in the Illinois Manufacturers’ Association and your commitment

to the economy. If you know of a manufacturing company (customer, supplier, or neighbor) thatis not an IMA member but should be, please let me know (see below). After all, we are stronger together. n

Why the IMA?

Mark Denzler is Vice President and Chief Operating Officer of the Illinois Manufacturers’ Association. Mark can be reached at 217-522-1240, extension 3008, or mdenzler@ima-net.org.

Contact Mark Denzler — email: mdenzler@ima-net.org — telephone: 800-875-4462, Ext. 3726

7

American manufacturing is at acrossroads. Foreign competi-tion, rising operational costs,

and the search for a qualified work-force are enough to keep any manu-facturer awake at night. However,partnerships between private andpublic organizations with visionaryand proactive strategies can offerU.S. manufacturers a competitiveadvantage.Manufacturing is vital to the

country’s economy, but it can leavebehind a big environmental foot-print. The opportunity for compa-nies to save money through environ-mental stewardship has often beenconsidered an elusive, if not entirelyunattainable, “win-win” scenario. But when it comes to water, all

that is changing.Most manufacturers in the United

States are paying full-price to usehigh-quality drinking water forprocesses that do not necessarilyrequire potable water. It’s an expen-sive and ultimately wasteful practice.Fortunately, an affordable, safe, andpractical alternative to potable watercan be found in municipal effluent— that is, treated wastewater fromhomes, businesses, and industries.As leaders in the water industry,

Illinois American Water (IAW) haspartnered with the MetropolitanWater Reclamation District of GreaterChicago (MWRD) on an innovativeeffluent reuse project. This public-private partnership will offset manu-facturers’ operational expenses bysupplying companies with low-costtreated effluent, also known as recy-cled water. Properly recycled watermeets health and safety standardsrequired for the vast majority ofindustrial uses, such as fabricating,processing, washing, diluting, cool-ing, and transporting. This partnership will explore

opportunities for industrial reuse ofeffluent water from MWRD’s CalumetPlant, which treats approximately 237million gallons of wastewater per daywhile eliminating 90 percent of con-taminants. IAW will build and main-tain the necessary infrastructure to

deliver the recycled water to industri-al users while MWRD continues toprocess and treat wastewater. Once-used recycled water will be conveyedback to MWRD for another round oftreatment and subsequent reuse.As both a member of the Illinois

Manufacturers’ Association (IMA) anda steward of our natural environ-ment, IAW shares a common interestin helping preserve, protect andenhance manufacturing operationswhile also advancing sustainablewater solutions throughout theChicago area. A growing percentageof the U.S. population recognizes theimportance of water stewardship andexpects companies to adopt greenerpractices, yet day-to-day industrialoperations are often inherently waterintensive. Recycled water provides anopportunity for manufacturers witheven the largest water footprint tobecome environmental champions. The idea that saving money and

saving water are on opposite ends ofthe spectrum is an outdated way ofthinking, long past its sell-by date.Instead MWRD and IAW are seekingto capture the economic value inwhat was once considered waste.Recycled water is an affordable andrealistic alternative for manufacturers

currently paying full-price for potablewater. It’s good for the planet andgood for the bottom line.

Illinois American WaterIAW serves approximately 1.2

million people in 127 communitiesacross the state of Illinois, providinghigh-quality water and wastewaterservice. IAW is a regulated utilitygoverned by the Illinois CommerceCommission. The company opera-tions follow strict regulations createdby the United States EnvironmentalProtection Agency (USEPA) that helpto provide high quality drinkingwater.IAW’s parent-company, American

Water, was founded in 1886 andtoday is the largest and most geo-graphically diverse publicly tradedU.S. water and wastewater utilitycompany. With headquarters inVoorhees, New Jersey, the companyemploys 6,700 dedicated profession-als who provide regulated and mar-

see WATER page 14

WATER RESOURCE RECOVERYThe unique partnership of two industry leaders

by Bruce Hauk, President, Illinois American Water and Debra Shore, Commissioner, Metropolitan Water Reclamation District of Greater Chicago

Metropolitan Water Reclamation District of Greater Chicago’s Calumet Plant

9

Adam Hackman is Executive Vice President of Property & Casualty for Manufacturers Insurance Services of Illinois (MIS of Illinois), an AcrisureAgency Partner. MIS of Illinois helps members of the IMA manage and reduce their bottom line costs with innovative insurance strategies andvaluable compliance tools. For more information, visit www.mis-360.com or contact us at info@mis-360.com or 855-607-6190.

R unning a manufacturing oper-ation in today’s regulatoryenvironment can be challeng-

ing, to say the least. From OSHAcompliance matters to human capitalmanagement, manufacturers areforced to navigate a myriad ofunique and increasingly complexrisks on a daily basis. Personally, I find the fourth quar-

ter to be particularly fascinatingbecause while manufacturers aremaking their final push to meet year-end sales and production targets,owners and operators must begin theprocess of thoughtfully and strategi-cally developing a budget for theupcoming calendar year. To be clear,not all businesses align their fiscalyear with the calendar year; butwhether your operation’s fiscal yearfalls on January 1st or July 1st, effec-tive budgeting is full of challenges.While financial accounts relate to

the past, budgets are about thefuture. Therefore, all data is plannedrather than actual, probable ratherthan definite. Budgets are based on a number

of assumptions. Some of these areobvious, such as what the cost oflabor and raw materials will be orwhat market research indicatesabout customer demand. Others aremore implicit. A change in yoursales or production staff, a burgeon-ing relationship with a new supplier,or changes within a competitor’sorganization could all affect budgetprojections. So, clearly, developing a respon-

sible budget should be a relativelysimple task. All you need to do islook into your non-existent crystalball, forecast the state of the local,national, and global economy, iden-tify and prepare for changes inindustry regulations, fluctuations infuel costs, insurance, healthcare,and/or the tax code, then determine

the financial impact it will have onyour business model. Oh, and in case you were con-

fused by the recently aired realitytelevision shows that have pinnedtwo [“intriguing”] candidates againstone another in a live, no-holds-barred, name-calling, “I-Know-You-Are-But-What-Am-I” debate forum,it’s also an election year! So plan-ning for your businesses futureshould be fairly easy, right? All kidding aside, effective budg-

eting is a difficult and complicatedtask because there are so manyexternal factors that are out of yourcontrol. I’m not qualified to speakon the impact the current electioncycle will have on your business. Ialso can’t forecast consumer buyinghabits into 2017 and beyond. Soinstead, I’d like to focus my atten-tion on another familiar four letterword: Insurance.Business insurance programs

[Property, Liability, Workers’Compensation, Auto] and Employee

Healthcare [Group Medical,Disability, Dental, Vision] representtwo of the largest annual expensesin a manufacturer’s budget. To thatend, let’s explore trends and fore-casts in the insurance marketplace tohelp you better prepare for the 2017fiscal year.

Property & Casualty InsuranceBoth the property and casualty

industry sectors are experiencingcontinued soft market conditions thatfavor business owners (with theexception of auto insurance). In atraditional “soft market” insurancecompanies are experiencing tremen-dous profitability and, as such, beginunderwriting businesses more aggres-sively in an attempt to gain marketshare. Absent another major cata-strophic loss [this article was pub-lished after Hurricane Matthew struckthe southeastern coast of the UnitedStates], we anticipate that decliningrate positions will continue into 2017.

see INSURANCE page 10

Management Strategies

ADAM HACKMAN

Budget for success: With Q4 2016 underway, it’s time to think about 2017

10

Constellation — 24/7 Access to billing and energy usage data

Most incumbent insurance agentswill advise clients to anticipate flatrenewal pricing; however, if yourbusiness has experienced favorablelosses over the last 3-5 years, apply-ing competitive pressure (eitherthrough agency competition or advis-ing your agent to solicit quotes fromother insurers) can generate rate sav-ings in excess of 15 percent on prop-erty and general liability renewals.

Automobile LiabilityUnlike general liability and prod-

uct liability, the auto liability under-writing process continues to be achallenge for many insurers. Thecommercial auto market reported itsfifth consecutive underwriting lossyear in 2015 and is on track to dothe same in 2016 according to FitchRatings. Reductions in fuel costs andthe subsequent increase in motorvehicle traffic on the roads has beena major contributing factor to theindustry wide underwriting loss. Insharp contrast to the premium reduc-tions being forecast for other liabilitylines of coverage, it is expected thatauto liability premiums will increasein 2017. If auto insurance representsa substantial portion of your businessinsurance expense, work with youragent to explore alternative fundingmethods to control cost.

Workers’ CompensationAlthough 2017 rates have not yet

been released, according to a reportput out by the National Council onCompensation Insurance [NCCI],Illinois employers could see adecrease in their workers’ compen-sation rates of as much as 12.9 per-cent in the upcoming calendar year.It is important to note, however, thata reduction in your respective pay-roll classification rate will not guar-antee a reduction in total premiumas there are a number of additionalunderwriting factors that go intodetermining final pricing (ie. payroll,class of business, individual lossexperience, MOD factor, etc). Thatsaid, the state of Illinois is currentlytrending towards a rate reduction forthe upcoming calendar year.

Cyber LiabilityIf you don’t have it, get it!

Cyber intrusion is becoming an all-too-popular issue in today’s businessenvironment and a comprehensivecyber liability insurance program canmean the difference between a databreach creating a PR headache ver-sus bankrupting your business. TheIMA has resources to assist in quot-ing and placing this important lineof coverage. I strongly recommendthat you contact your IMA represen-tative immediately to learn more.

Health InsuranceHealth insurance premiums con-

tinue to rise across America andwhile the manufacturing sector is cer-tainly not the only industry that willbe impacted, the increased healthcarecosts for workers is putting consider-able pressure on already fragile man-ufacturing cost structures.

U.S. manufacturers face the bur-den of providing healthcare foremployees while their foreign com-petitors are not necessarily requiredto. Therefore, it’s extremely impor-tant that manufacturers partner withan agent who can help identify losstrends in their employee censusand develop a plan design and con-tribution strategy that attracts andretains talent within the confines oftheir budget. According to the National

Business Group on Health, aWashington, D.C.-based organizationthat represents large employers,health insurance premiums willincrease by approximately six percentfor employers and at least 10 percentin the public exchanges (somereports project rate increases inexcess of 25 percent in some states).

Winning StrategiesMuch like manufacturing, the

insurance industry is in a state of

flux: Government imposed mandatesare changing the way that agentsand insurers do business. Pricingmodels are rapidly shifting to betterposition insurance companies tocapture market share. Technologysolutions are rolling out daily tohelp employers navigate regulatoryred-tape and maintain compliance.And insurance agency M&A activityis at an all-time high. So today it ismore important than ever that man-ufacturers partner with agencies whoare equipped to help them stabilizetheir budget and maintain steadygrowth and profitability. Here are afew friendly tips for your nextrenewal cycle:• Identify insurance professionalswho specialize in manufacturing.

• Ask questions about how manydirect carrier contracts they main-tain and what their overall premi-um volume [aka leverage] is withthose carriers.

• Do they have claims advocacy toassist in your cost-containmentstrategies?

• How are benchmarking and ana-lytics used to negotiate pricing?

• What professional resources orexpertise can they provide tohelp you control costs and makebetter business decisions?

• Don’t lose sight of “compliance”in lieu of “cost.”

• Does your benefits provider havetechnology resources to assist inACA reporting?

• What fees exist for use of thattechnology?

• What strategies do they recom-mend to control cost without sacrificing plan design?In the current commercial insur-

ance space, competitive pressurecan be extremely effective in effortsto improve coverage and pricingterms. Pressure does not mean thatyou need to sever ties with yourexisting agent, but make sure thatyour providers are positioning yourbusiness for financial success andproviding you with the resourcesnecessary to maintain compliance intoday’s regulatory environment.The IMA has strategic resources

available to assist you in the insur-ance placement process. ContactMark Frech at the IMA if you’d liketo learn about their resources andcapabilities. n

INSURANCECont. from page 9

Technology solutions are rolling out daily to helpemployers navigate regulatory red-tape and maintain compliance.

M otors are designed to oper-ate at a constant speed.However, the devices they

operate, such as pumps and fans,frequently run at a lower flow rateand are typically controlled with amechanical valve or damper.Allowing the motor to run at a con-stant high rate, under these lowerflow conditions, wastes energy. Avariable frequency drive (VFD) canadjust the shaft speed of the motordrive electronically, allowing forflow or speed fluctuations, increas-ing motor efficiency and reducingenergy costs. In addition to speedcontrol, VFDs provide soft starting,which helps to maximize equipmentlife by reducing mechanical stressand voltage sags.

How VFDs workA variable frequency drive is an

electronic controller that adjusts thespeed of an electric motor by modu-lating the power being delivered. Itdoes this by converting alternatingcurrent (AC) to direct current (DC),and then converting the DC back toAC at a lower frequency and voltagelevel, which reduces the speed ofthe motor to the desired level. VFDsprovide continuous control, matchingmotor speed to the specific demandsof the work being performed.

VFD applications VFDs are ideal for facilities with

long operating hours and frequentlychanging load requirements for keyequipment. Variable torque pumpsand fans are the most commonapplications for VFD installationsacross a variety of industries. VFDsoffer significant energy-savingopportunities for some processingequipment in manufacturing facili-ties, as well as heating, ventilationand air conditioning systems in com-mercial buildings.

Are VFDs a good fit for my application?In general, the longer a motor

operates, the more attractive itbecomes as a VFD retrofit candidate.

A motor/load system operating for6,000 hours per year with throttledoutput will be three times moreattractive for VFD retrofit than thesame motor operating 2,000 hoursper year. The issues of variabletorque with speed and operatinghours per year are much moreimportant than motor size (horse-power) when deciding whether toretrofit with VFDs.

Benefits and limitations of VFDsVFDs offer a number of benefits,

some of which are easy to quantify,while others are less tangible. Theyalso come with some limitations thatshould be considered.

Benefits • Energy savings. By matchingmotor speed to equipment needs,motors run more efficiently anduse less energy. VFDs on pumpsfor example, can reduce energyuse by up to 50 percent.

• Increased equipment life. Singlespeed drives start a motor abrupt-ly, resulting in high torque andcurrent surges. VFDs graduallyramp up motors to operating

speed (soft-start), reducingmechanical stress. This can lowermaintenance and repair costs andextend motor life.

• Improved control. By matchingmotor speed to process or opera-tional requirements, flow orspeed variations can be achievedmore rapidly and more accuratelythan with other control methods,improving overall performance.

• Low maintenance. VFDs are easyto install and have few movingparts, resulting in little wear andtear compared to mechanicaldampening.

Considerations• The initial cost of installing VFDscan be expensive. However,energy savings from thesedevices in many applications canlead to a rapid payback whilelower maintenance and repaircosts provide additional long-term savings. In addition, cashincentives through the AmerenIllinois Energy Efficiency Programcan help offset project costs andreduce the payback period.

see ENERGY COSTS page 12

Variable Frequency Drives can significantly lower energy costs

by Richard Reese, CEM, CEA, Industrial Energy Advisor, Ameren Illinois Energy Efficiency Program

11

12

Installation precautions• VFDs can produce harmonic dis-tortion, which can adversely affectpower quality in some situations.There are a number of solutionsto correct this problem. For exam-ple, installing harmonic filters canhelp to reduce distortion.

• Standard motors with VFDs canexperience increased degradationof winding insulation. Using spe-cial inverter-rated motors withVFDs will eliminate this problem.

• VFDs should not be used withconventional AC motors in appli-cations where the unit mustmaintain high torque as thespeed is reduced (machine tools,for instance).

• VFDs can cause bearing damageon motors with ungroundedshafts. Special grounding bush-ings are available to preventdamage from occurring.

• Long motor lead lengths can cre-ate nuisance tripping and possi-ble damage of the VFD. This canbe prevented with the use ofload-side reactors and some man-ufacturers have precautions builtinto the VFD.

• Following proper installationguidelines as specified by themanufacturer will ensure reliableVFD performance and equipmentlongevity.

Real result: AventineIn a sprawling campus nestled on

the banks of the Illinois River,Aventine Renewable Energy trans-forms corn into clean, renewableenergy. With renewed interest in itsown energy use, the ethanol pro-ducer partnered with Ameren Illinoisto get their motors running at theright speed.Their motivation to take action

took a quantum leap forward aftertaking a closer look at their powerbills. When the company realizedthey were paying into the programevery month but not actively submit-ting projects, they started looking foropportunities.With 2,000 motors running in the

650,000-square-foot facility, they didn’t have to look for long. Motors make an easy target for

efficiency efforts. Designed to han-dle maximum loads, motors typicallyoffer only two speeds — “off” or“full speed.” In contrast, motors equipped

with variable frequency drives(VFDs) don’t work harder than nec-essary which can lead to dramaticreductions in energy use. Scott Schultz, an energy program

engineer for Ameren Illinois, com-pares VFDs to a kind of cruise con-trol that automatically adjusts motorspeed to meet changing demands.“If a motor needs more power,

then the VFD provides it; but ifyou’re going ‘downhill’ and needless power, the VFD reduces thespeed of the motor,” says Schultz.“The motor is not constantly runningat 100 percent and wasting energy.”Aventine partnered with Illinois

Electric Works, a program ally, toidentify fans, motors and pumps thatwould gain the most from variablefrequency drives. That survey identi-fied roughly 100 motors that wouldbenefit from VFDs.To whittle down that list, Aventine

targeted VFD projects with paybackperiods of one year or less. That leftthem with a manageable project:installing VFDs on 12 motors rangingfrom 75 to 400 horsepower.Many of Aventine’s motors run at

full speed, and use a control valve or

ENERGY COSTSCont. from page 11

see ENERGY COSTS page 14

13

Energy & Environment

CONSTELLATION

H ave you ever compared theStandard & Poor’s 500 (“S&P500”) Index and the New

York Mercantile Exchange(“NYMEX”) side-by-side? If you’relike most people, no, why wouldyou? But when you graph the activi-ty of most markets over time, you’llsee a jagged, up-and-down line thatwill most likely look different thenext time you see it. You’ll see that the way we

describe natural gas supply is thesame. We talk about daily volumes,the day’s high and low and historicaltrends. Natural gas and stock marketsare very similar, but for some reasonthey are rarely treated that way. Here we will focus on four rea-

sons you might think about manag-ing your natural gas supply like yourstocks:1. They both accept the fact thatthe markets are always changing.The S&P 500 is an index commonlyused as a benchmark for the U.S.stock market, and it changes by theday. Investment experts monitor andtry to forecast activity, but no onecan predict for sure. In the world ofnatural gas, the NYMEX is the wide-ly accepted natural gas benchmarkprice. It’s determined by the futuresprice at the Henry Hub in Louisiana.Like the stock market, this is some-thing that experts tirelessly monitorand analyze. Many players and external fac-

tors have an impact on volatility.There are variables at each point inthe delivery system of the naturalgas market: production, transporta-tion (interstate), distribution(intrastate) and consumption. Mostof these costs are realized in thebasis component of your energycosts. Basis can be thought of asthe “other” gas costs. It directlyrelates to regional supply anddemand factors that make gaseither more or less expensive than

the gas trading at the Henry Hub.In simplest terms, your basis costsare calculated as the NYMEX pricesubtracted from your specific deliv-ery point price in Illinois. When buying natural gas, you’re

monitoring the fluctuations at HenryHub (NYMEX). You’re also seeingfluxes as gas is delivered to you(storage, local production, etc.).Each of these factors can make itvery hard to decide when and howto buy. Similarly, investment portfo-lio management is impacted by acompany’s stock performance, inter-national economics and more.Again, both graphs are moving allthe time and no one can predictwhere they’re going. 2. They both know not to eat thewhole pie at once. Since we can’tpredict market activity, there areother ways you can gain some sta-

bility. In natural gas and stock mar-kets, buying all on one day is likeputting all of your eggs into onebasket. This is where investmentdiversification strategies, such as a401k or Target Date Fund help. Ona Target Date Fund, you can gainaccess to a number of different assetmanagers and classes without havingto worry about when, and howmuch to buy. When an investment company

develops strategies for people, itoften advocates for the concept ofdollar-cost averaging. This concept isnow quickly being adopted by manybusinesses that purchase natural gas.You can diversify your NYMEX cost,basis or both to achieve the budgetcertainty you’re looking for. Thinkabout it as instead of buying a col-lection of stocks, you’re buying a

Four reasons investment and natural gasstrategies work the same way

see NATURAL GAS page 24

Constellation is the preferred energy provider for IMA members. For more information, visit www.constellation.com/IMA. Or, you may contact Constellation’s Richard Cialabrini at 888-312-1563 or Richard.cialabrini@exeloncorp.com.

14

damper to control the flow of liquidsor gases. The VFD allows the motorto speed up or slow down to providethe necessary pressure — eliminatingthe need for dampers and valves. The sheer size of some of those

motors made the Aventine projectunique. “It’s not common to install VFDs

on 400 horsepower motors,” saysSchultz. “Those are some very, verybig dogs — but the bigger themotor, the bigger the savings.” In fact, by modifying just 12

motors, Aventine has reduced itsannual electrical use by more than 4.2million kilowatt-hours a year. Thoseenergy savings boost the bottom lineby nearly $300,000 every year — andhelp the environment, too.To help fund the improvements,

Ameren Illinois provided more than$170,000. The incentive money cutAventine’s project costs by morethan half. And because Aventine haslimited funds for capital projects,receiving incentives through AmerenIllinois helped push the project tothe forefront. The project proved to be a wake-

up call to the power of energy effi-

ciency. With an eye for energy effi-ciency, the team at Aventine hopes totransform their workplace — original-ly built in 1899 as a sugar processingfacility — one project at a time.

Resources available for VFD projectsThe Ameren Illinois Energy

Efficiency Business Program has anumber of valuable resourcesdesigned to help with your VFDenergy efficiency project. The pro-

gram offers free energy consulta-tions, which can help identify thebest applications for a VFD anddetail how to secure cash incen-tives to offset project costs. For alimited time, Ameren Illinois canprovide businesses with a cashincentive of $115 per horsepowercontrolled for motors of 500 horse-power or less, which could cover

up to 75 percent of the projectcost. The program also offers $0.06per kWh saved for VFD installa-tions on motors larger than 500horsepower. Your facility may alsobe eligible for an additional incen-tive bonus when you completeyour project before March 31, 2017.To schedule an energy consulta-

tion or inquire more about VFDs,please call us at 866-800-0747. Youcan also get more information atActOnEnergy.com/VFD.

About the Ameren Illinois EnergyEfficiency ProgramSince 2008, the award-winning

Ameren Illinois Energy EfficiencyProgram has helped Illinois busi-nesses save over $360 million inenergy costs. Utilizing more than$85 million in cash incentives, busi-ness customers have been able tocut project costs, decrease paybackperiods, and move energy efficiencyprojects forward. n

References1. U.S. Department of Energy (DOE).

Variable Speed Pumping: A Guide toSuccessful Applications. May 2004.

Visit ActOnEnergy.com/VFD or call866-800-0747 for more information.

ENERGY COSTSCont. from page 12

ket-based drinking water, waste-water and other related services toan estimated 15 million people in 47states and Ontario, Canada.

Metropolitan Water ReclamationDistrict of Greater Chicago The MWRD’s mission is to protect

the health and safety of the publicin its service area, protect the qualityof the water supply source (LakeMichigan), improve the quality ofwater in watercourses in its service

area, protect businesses and homesfrom flood damages, and managewater as a vital resource for its serv-ice area. MWRD’s strategic plan

includes a goal to pursue resourcerecovery, including reuse applica-tions for treated wastewater. n

WATERCont. from page 7

For a limited time, AmerenIllinois can provide businesseswith a cash incentive of $115 per horsepower controlled for motors of 500 horsepower or less . . .

Metropolitan Water Reclamation District of Greater Chicago’s Calumet Plant

15

Legal Issues

WILLIAM J. WALSH

R ecent amendments to the fed-eral law governing toxic chem-icals will bring significant

changes that could impact a broadarray of manufacturers. Manufactur -ers need to monitor the implementa-tion of this new law to assess care-fully and, when necessary, attemptto mitigate the chances ofEnvironmental Protection Agency(EPA) prohibitions or restrictions onthe use of chemicals that are neces-sary to make your products. Federal designation and regulation

of “toxic chemicals” have long beenof primary concern to chemical man-ufacturers and importers (while thecompanies that simply use these sub-stances have generally been lessimpacted). That all changed with thepassage of the Frank R. LautenbergChemical Safety for the 21st CenturyAct, which amended the ToxicSubstances Control Act (TSCAAmendments). The new requirementsimpose significant responsibilities onthe myriad of manufacturing compa-nies that use existing “toxic chemi-cals.” As a result, prospects are signif-icantly higher that EPA, on an expe-dited timetable, may find that chemi-cals that are commonly used in man-ufactured products present an “unrea-sonable risk” (as newly redefined inthe Amendments) and impose label-ing requirements, usage restrictions,or even outright bans on their use.1. Existing products may be in perilThe TSCA Amendments have con-

firmed and expanded EPA’s legalauthority to regulate existing “toxic”substances (i.e., chemicals, mineraland manmade fibers, and particles) inproducts. The new provisions requireEPA to designate at least 10 existingchemicals as high-priority substancesby late December 2016, and at least20 more by the end of 2019, with fur-ther designations to follow. EPA must assess the human health

and environmental risks to workers

and consumers from these high-prior-ity substances in manufactured andrecycled products. In terms of timing,EPA generally has just a three and ahalf year post-designation deadline tocomplete each assessment. This isfast forward mode for EPA. The TSCA Amendments instituted

an innovative two stage process. Ifthe human health or environmentalrisk from exposure to the priorityhazardous substance exceeds anEPA-derived unreasonable risk expo-sure level (the so called unreason-able risk level), EPA must issue abinding regulation within two years,selecting one or more of the poten-tial restrictions listed in theAmendments (ranging from bans,warning labels, record keeping, andnotification and/or recalls). Therestriction will be based on consid-eration of human health or environ-mental risk, benefits of the uses, andthe reasonably ascertainable eco-nomic consequences of the rule(including costs and cost effective-ness). However, EPA is no longerrequired to choose the least burden-some restriction, increasing the like-

lihood that more stringent measureswill become the norm. Consideration of risk reduction

options is triggered if the exposurepresents an “unreasonable risk ofinjury to health or the environment,”but unlike the pre-June 2016 TSCAdefinition of “unreasonable risk,” EPAnow explicitly cannot consider costsor other non-risk factors in determin-ing the meaning of the term “unrea-sonable risk” and must protect“potentially exposed or susceptiblesubpopulation[s].” EPA must integrateand analyze available information on,among other things, toxicity, thepotentially exposed or susceptiblesubpopulations, the likely duration,intensity, frequency, and number ofexposures under the conditions ofuse of the chemical substance, thebest available science, the extent ofindependent verification or peerreview of the information or meth-ods, and the weight of the scientificevidence, among other factors. If EPAconsiders “aggregate or sentinelexposures to a chemical substanceunder the conditions of use,” it must

What every manufacturer should know about TSCA reform

see TSCA REFORM page 24

William J. Walsh is Senior Counsel with Clark Hill PLC. He can be reached at 202-772-0924 or WWalsh@ClarkHill.com. Clark Hill PLC is anIMA member law firm with offices in Chicago. This article does not provide legal advice.

F or many, the autumn months meanback-to-school time, football games andthe leaves changing colors. However,as a manufacturer, you’re focused on afew other things. You may be facing

critical business decisions in the fourth quartersuch as achieving year-end targets, budgeting forthe upcoming fiscal year and keeping up withday-to-day operations. Despite these seasonalchallenges, the natural gas and power marketscan provide a great opportunity for you as thecalendar turns to fall and winter. In the “off-peak” period, or shoulder months,

between late-August and October, falling tem-peratures typically result in a seasonal pullbackin natural gas and power prices. From an ener-gy demand standpoint, the peak of summer isover, but the weather is not yet cold enough toyield any significant heating demand. By late summer or early fall, the energy mar-

ket has a firm grasp on how summer funda-mentals have impacted the supply-demand bal-ance. However, there is still uncertainty aboutwhat the weather will be like for the upcomingwinter months. As a result, this window of timebetween the peak summer and winter season isan ideal time for energy buyers to review pro-curement strategies and evaluate current markettrends against budget goals.With this in mind, every energy strategy

should begin with a solid understanding of themarket. This includes knowledge of whereprices stand against historical benchmarks andknowing key fundamental drivers that couldinfluence future price trends. Armed with thisinformation, you can make strategic decisionsthat could impact your bottom line now and inthe years to come.

How the natural gas market can help your facilityWhether your facility is in the market to pro-

cure natural gas, power or both, understandingthe natural gas market can be key to evaluatingwhere energy prices may be headed in comingmonths. This is due to the increasing correlationbetween natural gas and power prices as powergeneration at a national level grows moredependent on natural gas-fired power plants. InIllinois the prices of 24-month forward contractsfor wholesale power and NYMEX natural gashave shown a correlation of 80 percent over thepast three years. The relationship between natu-ral gas and power can be useful for you aspower prices followed natural gas prices tomulti-year lows earlier this year. However, it hasalso resulted in changing risks in the powermarket as any increase or volatility in naturalgas prices can translate into higher power costs.In early March, the NYMEX prompt month

gas declined to a 17-year low of $1.61/MMBtuamid major oversupply in the natural gas market.This was due to a historically mild winter andrecord gas production. However, this summer,which was the hottest on record on a cooling

Managing your

energy strategy all year

round

16

by Constellation

degree day (CDD) basis, led to aquick turnaround in energy prices.On September 21st, the NYMEXprompt month natural gas futuresprice broke through the $3.00/MMBtumark for the first time since May2015 and reached the highest closingprice since early January 2015. There are several vital drivers that

resulted in this rally of short-termenergy prices. First, the hot weatherled to a significant year-over-yearincrease in natural gas demand inthe power sector as air conditioninguse increased this summer. Also, theincrease in natural-gas fired genera-tion on a national level boosted thedemand for natural gas for powergeneration. In fact, according to theEIA, 2016 will be the first year onrecord in which natural gas willaccount for more power generationthan coal. Along with power sectordemand, the U.S. has seen recordgrowth in natural gas exports viapipeline to Mexico this year. Thisadded nearly 1 Bcf/day of incremen-tal demand growth to the marketthis summer. This year, we have alsoseen the first shipments of liquefiednatural gas (LNG) leave the Lower-48 U.S. bound for destinations inSouth America, Europe and Asia.The Sabine Pass LNG export facilityin Louisiana has the capacity toexport 1.2 Bcf/day, representing anoteworthy source of natural gasdemand that did not exist in themarket a year ago.The growth in natural gas

demand that we have seen this sum-mer is projected to be the tip of theiceberg. Through 2020, forecasts pre-dict that the U.S. will see 20 Bcf/dayof incremental demand growth ver-sus 2014 levels. Nearly half of thisnatural gas demand will be in theform of LNG exports (44 percent),with exports to Mexico accountingfor 23 percent of that total.Continued growth in natural gas-fired power generation and industrialgas use are also key drivers ofdemand growth in coming years.For energy buyers, natural gas

demand growth presents a majorupside risk for prices in the future.The key question about prices iswhether the supply side of the mar-ket can keep pace with the growth indemand. Thanks to the “shale revolu-tion” in the U.S. since 2009, dry natu-ral gas production grew sharplythrough February 2016 when outputpeaked at an all-time monthly high

of nearly 74 Bcf/day. Since that time,the decline in oil and natural gasprices to multi-year lows has causedproducers to cut active drilling rigcounts to 30-year lows, according toBaker Hughes. However, with naturalgas and oil prices now rising offyear-to-date lows, cash-strapped pro-ducers have begun to add drillingrigs back into service. This may leadto a rebound in natural gas supply inthe next several months. Accordingto the EIA’s most recent projections,natural gas production in 2017 is pre-dicted to grow by three percent from2016 levels.Based on the trend in longer-

term NYMEX prices this summer,the market seems to be betting thatproduction will be able to keep upwith demand for years to come.While prompt month natural gasprices have moved back above$3/MMBtu recently and prices for2017 delivery have rallied 25 per-cent since the spring, outer yearfutures prices for 2018-2020 aretrading below $3/MMBtu. They havealso declined by three to 10 percentsince the beginning of June. Longer-term natural gas prices have likelydrifted lower on expectations thatprices over $3 next year will incen-tivize producers to increase naturalgas production incoming years. Withnatural gas prices for2018-2020 now tradingat a discount to short-term prices, manyenergy buyers havestarted to procure nat-ural gas and power forextended contractterms to take advan-tage of long-termvalue in the market.

How the power market can help your facilityFor power buyers in Illinois, the

forward market is also providinglong-term opportunities despite anincrease in prices versus the all-timecontract lows achieved earlier thisspring. Forward power prices for2017-2020 at the ComEd zone arenow one to six percent higher thanspring lows. In downstate Illinois,prices at the Ameren zone are with-in eight percent of all-time lows.However, as with the natural gasmarket, power prices are slightlybackwardated with 2018-2019 calen-dar strips now trading below pricesfor 2017. In fact, the current pricespread between 2017 and 2018-2019prices is the largest seen for thesecontract terms. This unique pricetrend could present you with anopportunity to procure power forlonger contract terms at a loweraverage energy cost.Fall is a time of year that you

may be paying close attention toenergy price trends given expecta-tions for a seasonal pullback in themarket. Forward power prices havegenerally trended lower since powerdemand peaked in the second halfof summer. However, this year’s sea-

17

see ENERGY STRATEGY page 18

18

sonal price decline may be less dra-matic than expected due to warmtemperatures that have lasted intoSeptember, along with the rally innear-term natural gas prices. Thus,you may be inclined to wait until thespring shoulder season to make adecision about energy procurement.While the spring also tends to bringa seasonal low in prices, putting offa decision this year in hopes oflower prices next year may amountto a bet on the weather this winter.

What to anticipate in the coming monthsWith winter around the corner,

there are several upside price risksthat you should be aware of. Theweather is one of the largest driversof short-term energy prices, but it isalso the least predictable far inadvance. This year’s initial winterforecasts point to a colder winterthan a year ago and possibly colderthan normal for the northern tier ofthe U.S. Last year’s winter was thewarmest on record on a CDD basis,driven by a very strong El Niño pat-tern. Over the summer, the strong ElNiño gave way to a weak La Niñapattern. That could result in muchstronger heating demand this winter.While there are several other factorsthat can influence winter tempera-tures – ranging from snowpack inSiberia to atmospheric blocking pat-terns – you should be prepared for acolder winter. Expect winter weatherforecasts to gain clarity, and possiblyhave a bigger impact on prices,sometime around the end of October.A year ago, ahead of what was

forecasted to be a mild winter, natu-ral gas storage inventories reached arecord level of 4,009 Bcf. This wasthe first time on record that storageeclipsed 4,000 Bcf. By the end ofwinter, storage inventories totalednearly 2,500 Bcf, more than a 1,000Bcf surplus compared to March 2015.Over the course of this summer,injections of natural gas back intostorage have been nearly 40 percentslower than the average over the pastfive years. This resulted in a year-on-year storage surplus that has beenreduced from over 1,000 Bcf inMarch to only 90 Bcf as of September23rd. In other words, the hot summer

has alleviated oversupply concerns inthe natural gas market and normal-ized inventories prior to what may bea cold winter. While storage invento-ries are likely to be just below 4,000Bcf by the end of October andenough to meet requirements in coldwinter months, a season of strongdemand could leave natural gasstocks in a deficit to the five-yearaverage level by next spring.Last but not least, you should not

forget the lessons learned during thePolar Vortex of 2013-2014. Even intoday’s low energy price environ-ment, sustained periods of coldweather can still lead to major ener-gy price volatility as power genera-tors and heating loads compete fornatural gas supply. Many advanceshave been made in the energy mar-

ket to prevent a repeat of the PolarVortex. These improvements includeincreased pipeline capacity, genera-tor reliability programs, and greatercoordination between pipelines andpower generators. But, the risk ofenergy price volatility during thewinter cannot be ruled out. As aresult, with exposure to the indexgas or power markets, you shouldconsider winter budget protection akey building block of your energyrisk management strategy.In summary, the energy market

has undergone a period of transitionthis summer due to the impact oflow prices and a hot summer. Thishas tightened the supply-demandbalance in the market and workedoff a lingering oversupply. As aresult, natural gas and power priceshave moved off of the multi-yearlows we saw this spring. The poten-tial for a cold winter and natural gas

demand growth represent materialupside price risks in coming monthsthough. On the other hand, thesebullish short-term fundamentals havehad a muted impact on long-termgas and power prices. In somecases, prices in the 2018-2020 time-frame are back within striking dis-tance of their previous lows. Thereis still a lot of value in this energymarket if you have the right energymanagement strategy in place.As this discussion makes appar-

ent, there are many important fac-tors that can drive prices up ordown in the energy market, overboth the short- and long-term hori-zon. How can you use this informa-tion effectively to make a strategicdecision about energy procurement?

Here are five steps you can follow1. Follow market trends to makeproactive, rather than reactiveprocurement decisions.Understanding the range of fac-

tors that influence energy prices canbe a time-consuming and confusingprocess. Constellation, the IMA’sendorsed energy provider, has vari-ous market intelligence publicationsavailable for you including daily,weekly and monthly energy updatenewsletters and bi-monthly energymarket webinars. You can also sub-scribe to regular blog updates thatcover regional information and regu-latory updates.Constellation’s Market Watch tool

enables you to follow price trendsfor specific contract terms throughan email delivered directly to yourinbox at a frequency of your choos-ing. Current forward prices can bemonitored against a desired bench-mark, such as your current contractprice or energy budget goal price.2. Perform a review of your ener-gy budget and procurement goals.The energy market has evolved

immensely since 2009 when theshale revolution began. Has yourview of how you buy energychanged in response? One of thekeys to developing an energy man-agement strategy is defining yourprocurement goals. Identifyingwhere you want to go is the firststep to getting there. Is your budgetattainable given what you knowabout the current fundamentals? Ordo you need to re-evaluate yourgoals and adapt your strategy toachieve your desired outcome?

ENERGY STRATEGYCont. from page 17

see ENERGY STRATEGY page 20

Last but not least, you shouldnot forget the lessons learnedduring the Polar Vortex of2013-2014. Even in today’s low energy price environment,sustained periods of coldweather can still lead to majorenergy price volatility as powergenerators and heating loadscompete for natural gas supply.

Constellation — 24/7 Access to billing and energy usage data

Jim Schultz is the Chairman and CEO of Intersect Illinois. Visit http://intersectillinois.org for more information.

R ecruiting and retaining thenext generation of manufac-turing jobs is a primary objec-

tive for Intersect Illinois, Gov. BruceRauner’s new private business andeconomic development corporation.For years Illinois has lost ground

to neighboring states in manufactur-ing jobs, which are the backbone ofthe middle class. In August, the U.S. Bureau of

Labor Statistics reported a two per-cent year-over-year decrease inIllinois manufacturing jobs, despite a.7 percent overall increase in non-farm job growth. The Illinois manu-facturing sector fared worse thanIndiana, Wisconsin, Michigan andOhio during the same time period.By reimagining the way Illinois

looks at manufacturing, IntersectIllinois seeks to position the state atthe forefront of 21st-Century manu-facturing.We have world-class manufactur-

ing assets — an educated workforce,the finest transportation and logisticsnetwork in the country — just wait-ing to develop and produce theproducts of the future. That’s whywe at Intersect Illinois are targetingmore than just corporate headquar-ters, which yield big headlines butlimited downstream results.Intersect Illinois launched in

February 2016 in an effort to makeIllinois more competitive in theworld of economic development. Originally named the Illinois

Business and Economic Develop -ment Corporation, our teamrebranded the organization “IntersectIllinois” over the summer.The brand captures what’s best

about the state, which is the nation’sfifth largest economy and 19thlargest in the world. The center of the Heartland, this

state is the nation’s largest producerof agricultural products and has oneof the largest interstate networks in

the world, thirty-four Fortune 500companies and a host of buddingentrepreneurs call Illinois home;more of these great facts can befound on our website. “Until recently, few states took

seriously the job of marketing them-selves,” said Kelly Nicholl, whocame to Illinois from a similar rolein Indiana. “But Intersect Illinois iscommitted to selling what’s bestabout the state.”

Despite recent employment loss-es, Illinois manufacturers produced13.4 percent of the state’s outputand employed 9.7 percent of thestate’s workforce in 2015, theNational Association of Manufac -turers (NAM) reported. Manufacturers employed 572,500

Illinois workers in 2015, and with anaverage 2014 compensation of$81,048, according to NAM. In 2014,

wages for employees at the averagenonfarm business were only $54,425.The entire state relies on strong man-ufacturing and Illinois families relyon strong manufacturing.In July, Intersect Illinois along

with the Business Developmentteam at the Department ofCommerce and EconomicOpportunity (DCEO) helped landFCA US’s commitment to producethe new line of Cherokees inBelvidere. The manufacturer choseIllinois over Toledo, Ohio, wherethe vehicles are currently made. The$350 million investment will createabout 300 new jobs.“This investment will strengthen

the FCA US presence in Illinois andcreate good paying manufacturingjobs for Illinois residents,” GovernorBruce Rauner said. “We’re proudFCA US chose Illinois for productionof the Jeep Cherokee. Illinois haslost many of the manufacturing jobsthat made our economy strong. Wehope to continue to build on thissuccess and get Illinois manufactur-ing growing again.”

see INTERSECT IL page 25

Government Initiatives

JIM SCHULTZ

Intersect Illinois

19

3. Contact your BusinessDevelopment Manager to reviewyour goals and product options.A changing fundamental land-

scape may require a different pro-curement strategy to capture valueand account for new risks in theenergy market. A key benefit of thecompetitive energy market in Illinoisis that you have many choices inhow you structure your procure-ment program. Constellation offers avariety of product solutions rangingfrom fixed to variable price, as wellas blended or layered products thatcombine the certainty of fixed pricewith the flexibility of a variableprice product. These products canbe structured over various timehorizons ranging from monthly tomulti-year agreements. A discussionwith a Constellation BusinessDevelopment Manager can help youidentify your optimal strategy inlight of current market trends, risksand your budget goals.

4. Take advantage of value whenthe market presents an opportu-nity (and don’t attempt to timethe bottom).Market fundamentals can change

prices in an instant, and sometimesunpredictably. Evaluate marketprices in light of your goals and takeadvantage of value when the marketpresents an opportunity. A commonmistake among energy buyers isoverreacting when prices increase,and underreacting when pricesdecline. Energy prices are typicallyvolatile and they do not rise and fallconsistently. Attempting to time thebottom of the market is not a stableenergy management strategy.Waiting for an additional 25 centdecline in the market can result inprices that move in the other direc-tion, especially if you are not watch-ing the market closely.

5. Monitor energy cost and strategy performance.Once you have developed an

energy management strategy basedon your needs, the final step is tomonitor its performance against yourgoals. Ongoing assessment of strate-gy performance can make managing

energy costs and risk decisions easi-er. Constellation can help you devel-op monthly budget estimates andtrack performance against yourbudget. Staying informed on the market

fundamentals and managing risk canseem like a daunting task, particular-ly given constraints on time andresources. That’s why working withan experienced energy supplier iscrucial to achieving your budgetgoals and potentially lowering yourtotal energy costs over time. As theIMA’s endorsed energy supplier,Constellation can work with you tonavigate through a changing andvolatile energy market landscapeand help you develop an energymanagement strategy for this falland years to come. n

Constellation has been the IMA’s preferred energy provider and partner since 1998. ContactConstellation’s Richard Cialabrini at 888-312-1563 or Richard.cialabrini@exeloncorp.comto find our how they can help withyour energy needs, or visit www.constellation.com/IMA for more information.

20

ENERGY STRATEGYCont. from page 18

21

Tax & Accounting Issues

DANIEL HURTADO

I f your company owns or leasescommercial buildings used inmanufacturing, and you have

constructed or retrofitted the proper-ty to be more energy efficient, youmay be eligible for an accelerateddeduction for part or all of the costsassociated with the property. In late 2015, Congress and the

President extended a number of taxcredits and deductions through theProtecting Americans from TaxHikes Act of 2015, which includeddeductions (or credits) for energy-efficient commercial building prop-erties through 2016. Here are five features of the

incentive to keep in mind if yourcompany is considering incorporat-ing the credits and deductions avail-able in its strategic tax plans:

1. The amount of the tax deduc-tion depends on the size of thebuilding and the componentsinvolved. The building, which mustbe located in the United States, quali-fies for the deduction when the energyefficiency properties reduce totalannual energy and power costs by 50percent or more. The maximum de -duction is $1.80 per building squarefoot. The tax payer will get the de -duction even if the energy savingsresult from one component. A partialdeduction at 60 cents per square footis available for each of the buildingsystems meeting certain energy costreduction thresholds below 50 percent.

2. Incentives are available forthree types of building systemscomponents: Interior lighting sys-tems; heating, ventilating and airconditioning and hot water systems;and the building envelope (the roof,exterior walls and floor of a struc-ture). Parking garages are also eligi-ble for the deduction (primarilythrough the lighting system). These

incentives allow for the potentialimmediate expensing of costs thatwould otherwise be capitalized anddepreciated over 39 years.

3. An immediate tax deductionmay be available for existing facil-ities and newly constructed build-ings: Section 179D is available forboth newly constructed buildings andrecently remodeled or retrofittedfacilities. Improvements made toexisting facilities to increase energyefficiency may qualify for a partial orfull deduction under section 179D.Projects to replace interior lighting orheating, cooling, ventilation (HVAC)updates with high-efficiency fixturesand replacements are good candi-dates for immediate deductions.

4. Owners can evaluate taxreturns going back 10 years. Inthe search for eligible properties,owners can review tax returns as farback as 2006 and receive deductionsfor qualified properties for the cur-rent year. The best part is an ownerwill not have to amend any prior tax

returns in order to claim missed sec-tion 179D deductions. Instead a tax-payer may simply file a form 3115 tochange their method of accountingand claim any prior year section179D deductions on their next time-ly filed tax return.

5. Software and engineer must beapproved. Companies or their ven-dors must use modeling softwarepre-approved by the Department ofEnergy when determining the ener-gy savings. A certified engineerlicensed to operate in the building’sjurisdiction will also need to reviewthe complete report before thededuction is taken on a tax return.

Given its history of multipleextensions, section 179D is expect-ed to be extended beyond 2016 butthis, of course, remains to be seen.Companies that have manufacturingfacilities eligible for these deduc-tions or credits will want to actnow to take advantage of theopportunity for tax savings andincreased cash flow. n

Five features of tax deductions for energyefficient manufacturing buildings

Daniel Hurtado is a Senior Manager with RSM US LLP. RSM is a leading provider of audit, tax and consulting services focused on the middle market with more than 9,000 people in 86 offices nationwide. For more information, visit www.rsmus.com or, you may contactShane VanVeldhuizen at 217-523-3355 or Shane.VanVeldhuizen@rsmus.com. RSM is an IMA member company.

22

W hile Silicon Valley is the rec-ognized home of innovationand ingenuity in software

and digital technology, when itcomes to manufacturing, the bestand the brightest are producing thefuture right here in Illinois. The lat-est manifestation of this trendtowards cutting edge leadership isthe recent inception of mHUB,billed as “Chicago’s first innovationcenter focused on physical productdevelopment and manufacturing.” Itis slated to open in January of 2017.“We want IMA member compa-

nies to know, especially the small-and medium-sized manufacturers,the great opportunity that mHUB isgoing to offer them. They’ll have aplace they can go to get help indeveloping new products andprocesses. It gives them access toknowledge,” said Jim Nelson, IMAVice President of External Affairsand an mHUB board member.

So what exactly is mHUB? Physically, mHUB is a 60,000

square foot facility with state-of-the-art equipment, labs and work spaces.

Located at 965 West Chicago Avenue,it’s a former prototyping lab forMotorola Mobility. Philosophically,mHUB is the collaborative brainpower of hundreds of engineers,designers, business leaders andentrepreneurs who as a collectiveprovide a formidable and affordableresearch and development resourcefor the manufacturing community.Haven Allen is the Executive

Director of mHUB. Allen has manyyears of experience in economicdevelopment and public policyfocused on the manufacturing sector- including two-and-a-half years as astrategist at World Business Chicago,where mHUB was conceived —along with a background in technol-ogy and entrepreneurship. Indescribing the role that mHUB willplay in the manufacturing communi-ty, he breaks it down into the threePs: people, product and process.“From a people aspect, we see

this as a huge opportunity to attractand cultivate highly-skilled STEM tal-ent in the Chicagoland area,” Allensaid. “Our goal is to give them thetools, resources, mentors and educa-tors they need to thrive, and thenmake them accessible and a valu-

able resource to the manufacturingcommunity.”This talent will come from a vari-

ety of backgrounds. There are engi-neers who crave the challenge ofworking on diverse projects. Thereare designers working at start-upswho will exchange their expertise fora manufacturer’s product develop-ment capabilities. There are evengrad students, eager to put their edu-cation to work on real-world applica-tions while finishing their studies.“One of things that we are con-

stantly hearing is that small-to-medi-um-sized manufacturers are havingdifficulty attracting STEM talent,” Allensaid. “At the same time, some of themdidn’t necessarily need engineers fulltime, they just need them for veryspecific needs. So as this pool of tal-ent is developed, it will become aR&D resource that manufacturers canleverage for design projects or to pro-vide solutions to specific problems.” The second P in the formula is

products. It’s here where the manu-facturers are the resource that will betapped by the mHUB community.“We have some brilliant engi-

neers and entrepreneurs here, butthey’re not manufacturers,” Allensaid. “Some of these people are justhere to innovate new products andthey need assistance from manufac-turers to help them think throughthe manufacturability and how toget their product to market. Theymay need assistance with how theydesign things, and they may alsoneed advice on how to develop andmaintain supply lines.”In such instances, a manufacturer

may offer to produce a prototype ora small-batch run of a designer’sproduct at-cost so the designer canevaluate and fine-tune that productbefore committing to full-scale pro-duction. In exchange for their servic-es, the manufacturer can engage thecommunity to help them developnew products or address inefficien-cies in their operations.Which brings us to process. One

of the biggest challenges facingmanufacturers is the inability to opti-mize operations due to limited, ornon-existent, budgets for research

mHUB is Chicago’s first manufacturinginnovation center — opening in JanuaryShop Technician Henry Africano tweaks a digital designbefore sending it to print on the dual extruder 3D printer,one of many in mHUB's rapid prototyping lab.

by Dan Naumovich

23

and development. This is especiallytrue for smaller manufacturerswhose owners have to focus onoperations, finances and humanresources, with little to no time forinnovation or optimization.In the area of process improve-

ments at mHUB, there will beopportunities for educational ses-sions and mentoring. If a manufac-turer wants to benefit from the fullbrainpower of the innovation com-munity, however, they can initiate a“make-a-thon” with mHUB.Common in app development, thismethod for problem solving andsolution generation is making itsway to the production of physicalproducts.“With the make-a-thons, a manu-

facturer can define a very specificproblem that they have say, withtheir operations or within their prod-uct development. The entire com-munity can then be engaged in atwo- to five-day exercise concentrat-ed exclusively on solving that prob-lem,” Allen said.After the exercise is completed,

the best solution will be selected andthe winner will be awarded a cashprize that is determined by the man-ufacturer who initiated the make-a-thon. The intellectual property willbe transferred to the manufacturer.Allen said that initial expectations

are to do around six-to-eight make-a-thons each year. A company can

engage the entire community intheir effort, or select certain people.Through the mHUB website(www.mhubchicago.com), memberscan search for other members andreview their credentials, work expe-rience, product experience, educa-tional background, certifications andother qualifications.It’s not just the small- and medi-

um-sized manufacturers who standto benefit from mHUB and some ofthe major players in the industry

have already signed up as partners,including GE Ventures, Marmon andUL, to name a few.“These larger organization also

have some challenges in terms ofinnovation and there are things withwhich they could really use helpfrom people outside their organiza-tion,” said Steve Kase. “They’veinvested sponsorship fees to be ableto come onto the campus and inter-

face with the bright young peoplewho are assembled here.”Kase is the founder of ASK

Power, an Aurora-based companythat specializes in the production ofelectrical connectors. ASK is also anmHUB corporate partner.“I’ve been involved in workforce

development activities for aroundseven years,” Kase said. “I workedwith World Business Chicago’s JobsCommittee that was able to help addaround 700 advanced manufacturingjobs. A lot of the same peopleinvolved in that effort are alsoinvolved in mHUB.”Among the organizations that have

already signed on are Argonne Na tion -al Laboratory, Illinois Institute ofTechnology, Northwestern Uni ver sity,GE Ventures and Catalyze Chicago,which will now operate under mHUB. “We have a very robust partnership

program, but we’re always looking formore. What we’re building here is acommunity place where any of thesegroups can operate from and haveaccess to our extensive resources andequipment. They can also do mentor-ing, education and business develop-ment here,” Allen said.mHUB is being self-funded

through various means includingsponsorships and contributions.There are also 15 naming rightsopportunities, four of which havebeen sold and three others with pro-visional agreements. Membershiptypes range from simple shop accessto larger multi-person offices withthe goal of being reasonable toproduct manufacturers, while mak-ing the initiative self-sustaining.“You can basically define your

own involvement here,” Allen said.“This is a resource for the entireindustry. Our mission is to support,strengthen and connect manufacturers.

Ready to get involved?If you would like to start leverag-

ing this valuable resource, go towww.mhubchicago.com and clickon the “Get Involved” button in theupper right corner. Or you can con-tact Haven Allen at emailHaven@mHUBChicago.com, or tele-phone 773-580-1485 for more infor-mation. n

Author Dan Naumovich is a free-lance journalist and business copy-writer. He can be reached atdan@naumo.com or through hiswebsite at www.naumo.com.

One of the biggest challengesfacing manufacturers is theinability to optimize operations due to limited, or non-existent, budgets forresearch and development.

Outernet Founder Syed Karim and Rachel Feinberg,COO, review manufacturing specs for their receivers,

which bring news, information and educational programs to people in developing nations.

collection of dates. Buy once onJanuary 1st, buy once on February1st and so on.3. They both customize plansbased on risk tolerance. When youstarted working, you likely had a401K portfolio with a higher propor-tion of equity than securities or realestate. At the start of your career,you can take higher risks becauseyou have time to build back up fromany potential market dips. As younear retirement, you level out to amore conservative portfolio and takefewer risks. While this formulaic pro-gression over time doesn’t quiteequate to how the natural gas mar-ket works, you do have the flexibili-ty to control the level of marketexposure you wish to assume. Energy decision makers typically

try to get the lowest price possiblefor their energy supply. However,through an investor’s eye, that strate-gy is like buying for all of yourretirement on one day. Stop shop-ping for a low price and, instead,build an investment strategy for yoursupply. You’re not going to get thelowest price — you’re going to getan average, more consistent price. With this strategy, you think

long-term and can gain more value.If you diversify for less than a year,it’s possible you might gain somebenefits of market lows. On the

other end, with a three to five-yearstrategy, you have more time — orthink “stocks” — to dollar-cost aver-age. This can help you betterachieve your desired results ofsteadier, more predictable naturalgas costs as opposed to what youmight be gambling to achieve bypurchasing all on one day.4. They both allow for “I’ll do itmyself” or “you do it for me”options. Most retirement investorsjump for the “you do it for me”strategy. You may work with youremployer or an external investmentagent because you don’t have thetime or expertise to do it whilemaintaining a career, family life andother priorities. When do you havetime to ask whether it’s really theright time to be buying stocks?Instead, a diversified strategy allowsfor a smooth progression to investover time without life’s interruptionsto achieve the retirement goal. For many manufacturers, sourc-

ing or facility managers are jugglingmuch more than just energy supply.By letting your supplier help youmanage your energy strategy, youcan focus on other priorities andsourcing decisions. That being said, in both invest-

ment and natural gas markets, thereare some people that want to man-age their strategy themselves. Forthat, there are tools and intel avail-able to help you make more confi-dent decisions.So what does this mean for your

business? The strategy you use for

investments can also work for yournatural gas supply strategy. As amanufacturer, not only do you relyon natural gas to power your facili-ty, you also use it for mechanicalprocesses and machinery, such asburning, cooling and refining. Thiscan all add up to a large portion ofyour operational budget. What areyou doing to minimize your risks?Do you know what your degree ofrisk tolerance is? Do you have thetime to manage it yourself, or couldyou use the help of some experts? However you might answer these

questions, a strategic diversificationplan can be built to meet theseneeds. To return to our comparison,despite age, career path or financialsituation, thousands of people trustthis same strategy — relying on adiversified retirement investmentplan for the long-term. As an IMAmember, you have access to a trust-ed, IMA-preferred energy supplier,Constellation, to develop this samestrategy for your business. Search for today’s NYMEX and

S&P 500 Index. Put them side-by-side and you’ll see a jagged, unpre-dictable line for both — but if youlook at your latest 401k investmentreport next to your natural gas con-tract, the methods your using tomanage that jaggedness might notbe so similar. Interested in findingout how an investment strategymight work for your natural gas sup-ply? Contact Constellation abouthow we can help you develop anenergy strategy. n

NATURAL GASCont. from page 13

provide an explanation of this deci-sion (see further discussion below).How to apply these new “unrea-

sonable risk” criteria and select a spe-cific risk reduction requirement arenot explicitly defined in the statuteand are different from the approachhistorically taken by EPA. As a result,EPA is likely to have the broaderflexibility to impose more stringentrisk reduction requirements moreexpeditiously. EPA staff have indicat-ed that this new “unreasonable risk”and risk reduction determinationswill be performed on a substance-by-substance and use-by-use basis, andthe relevant analyses will include

exposures throughout the lifecycle ofthe product. The Amendments alsoallow EPA to issue worker protectionrequirements if the OccupationalSafety and Health Administration(OSHA) fails to issue a regulation ororder to reduce the risk after beingnotified by EPA. OSHA already hasinformed EPA that TSCA providesEPA with a “means of eliminating orreducing the risks associated withthese chemical uses in a more coor-dinated fashion across both con-sumer and occupational settings.”With this provision and others thatallow EPA to impose costs of testingpriority chemicals on manufacturers,even if a substance is not subject toan outright ban, companies could beincurring additional costs throughoutthe life of the product.Historically, EPA has been criti-

cized for its slow pace under TSCA.With the new requirements, EPA willnow move full speed ahead to regu-late existing chemicals in products. 2. Substances that may be classified as “high-priority” (asearly as this year)EPA will continue to address iden-

tified risks from trichloroethylene(TCE), methylene chloride (MC) andN-methylpyrrolidone (NMP), chemi-cals for which EPA has already per-formed or begun a risk evaluation,with deadlines ranging from Octoberto December 2017. The other initial“high-priority” substances must beselected before the end of this year.The most likely candidates, in theauthor’s opinion, are:• asbestos and asbestos-like fibers(which may be broadly defined

TSCA REFORMCont. from page 15

see TSCA REFORM page 27

2424

Jeep Cherokee production willbegin in 2017 and will affect othermanufacturers.“This investment will also have a

multiplier effect on the regionaleconomy, growing the manufactur-ing and auto supplier ecosystem inthe Northern Stateline region,”Illinois Department of CommerceActing Director Sean McCarthy said.The state will also be expanding

pharmaceutical production. IntersectIllinois and the Illinois Departmentof Commerce and EconomicOpportunity recently announced thatGerman pharmaceutical serveprovider Vetter will open a new pro-duction and distribution center inDes Plaines.The $320 million facility, the first

of its kind outside of Germany, willcreate at least 300 new jobs. Thefacility will expand the company’sChicagoland presence, where italready operates a U.S. productionfacility and sales office in Skokie. “The collaboration between the

State, the ILBEDC and our local part-ners was instrumental in attractingan investment of this scope andmagnitude, which will reap econom-ic benefits for Illinois for years tocome,” Rauner said.Intersect Illinois President Andria

Winters and I met with Vetter execu-tives in April in Germany while rep-resenting the state at Hanover Messe,the world’s largest industrial fair. Our central location, with unpar-

alleled access to North Americanmarkets, and our skilled workforceare major strengths to companieslike Vetter. By working in partner-ship with the Illinois DCEO andlocal governments and marketingIllinois’ assets in person to Vetterexecutives, we were able to drive adeal that’s good for Illinois andgood for Vetter.McCarthy described the recruiting

process as a “full court press.”“Skokie Mayor George Van Dusenlaid the groundwork through hisrelationship with Vetter, and supportfrom local utilities companies, thecity of Des Plaines and Cook Countycame together to create this successshared by the entire state,” McCarthysaid. “This was a team effort thatepitomizes the model for economic

development and what Illinois canachieve moving forward.”More recently, Intersect Illinois

announced on Sept. 8 that the stateis making a $26 million investmentin a bioprocessing lab at theUniversity of Illinois that could yieldas many as 20,000 new jobs in cen-tral Illinois over the next decade.The Integrated BioprocessingResearch Lab (IBRL) will conductbiochemistry research and eventuallydevelop bioprocessing/bio-greenchemicals using corn and soybeansto convert petroleum chemicals intogreen chemicals.

Additionally, Intersect Illinoisalong with DCEO has also beencommitted to expanding distributioncenters. Amazon made severalrecent announcements about plansto build new fulfillment centers andexpand others. Two new centers will be in

Edwardsville, where Amazon plans

to hire at least 1,000 new workers.“Illinois has been a great place to

do business for Amazon and we lookforward to adding two additional ful-fillment centers and creating another1,000 full-time jobs with benefits onday one in the state,” said AkashChauhan, Amazon’s vice president ofNorth American operations. “Theelected officials throughout the cityand state have been very supportiveof Amazon and we thank them forhelping make this possible. We’reexcited to soon call Edwardsvillehome and become an active memberof this vibrant community.”Amazon will add a second center

in Joliet, expand an existing centerin Romeoville, and add a warehousein Monee. Companies like Amazonneed a strong transportation huband logistics. Illinois provides both.Though we are committed to

growing and recruiting large manu-facturers, we are also aware thatsmall and mid-sized manufacturersare crucial to the state’s continuinginternational export growth. NAM’s most recent statistics show

that small businesses make up 90percent of exporters in the state. In2015, the state exported $58.26 bil-lion in manufactured goods. Thatfigure was a 25.9 percent increasefrom 2010.Illinois is and will continue

to lead the way in international growth. n

2525

INTERSECT ILCont. from page 19

Join fellow manufacturers, business leaders and government officials for the IMA’s

123rd Annual Meeting & Luncheon. Dennis A. Muilenburg, Chairman, President

& Chief Executive Officer of The Boeing Company will present the keynote address.

Illinois Manufacturers’ Association

123rd Annual Meeting & LuncheonFriday • December 2, 2016JW Marriott • Chicago • 9am-2pm

By reimagining the way Illinois looks at manufacturing,Intersect Illinois seeks to position the state at the forefront of 21st-Century manufacturing.

© 2016 Constellation Energy Resources, LLC. The o�erings described herein are those of either Constellation NewEnergy-Gas Division, LLC, Constellation NewEnergy, Inc.,Constellation Energy Services - Natural Gas, LLC, Constellation Energy Services, Inc. or Constellation Energy Services of New York, Inc., a�liates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted. Constellation is the endorsed electricity supplier of Illinois Manufacturers’ Association, which receives compensation for its promotional and marketing e�orts from Constellation.

Let us help you ACTIVELY MANAGE your energy purchasing.

If you want to actively manage your energy purchasing—but struggle to find the resources to do so—use Constellation’s online tools that allow you to set targets based on your individual business needs. You’ll get the latest market information to find a be�er way to power your business.

Interested in finding out how? Contact us by visiting energy.constellation.com/IMA.

YOU DON’T GO ONLINE EVERY DAY TO MANAGE THE STOCKS IN YOUR 401K, SO WHY WOULD YOU WANT TO BUY ENERGY THAT WAY?

to include, talc, other fibers, andeven mineral fragments),

• metals (such as arsenic, lead, hex -a valent chromium, and cadmium),

• phthalates, • bisphenol-A (BPA), • tetrabromobisphenol A, • flame retardants (chlorinated andbrominated),

• 1-bromopropane, • p-dichlorobenzene, • perchloroethylene, • bis(2-ethylhexyl) adipate, • vinyl chloride, • bromoform, • styrene, • ethylbenzene, and • 1,4-dioxane. These chemicals are widely used

in a variety of manufacturing indus-tries. Any company that uses thesesubstances at any point in itsprocess should actively monitorEPA’s forthcoming high-priority sub-stance lists (in December 2016 orsubsequently) and become involvedin EPA’s follow-on actions. 3. Many critical issues remain unansweredA number of critical issues were

not explicitly resolved in the Amend -ments and, therefore, will be decidedin EPA risk evaluation and other reg-ulations or in guidance. While it isdifficult to predict precisely what EPAwill do, EPA is likely to default to itsexisting practices, unless the statutemandates a different course or partiesconvince EPA that another approachis more appropriate. At a minimum,EPA will have to grapple with theissues described below.In the last few years, although

the trend at EPA has been toward amore precautionary approach, EPAhas been criticized for basing its tox-icity determinations on limitedand/or flawed data from worst-casestudies rather than using the weightof the evidence from the best scien-tific studies. In comments to date,industry has advocated use of thebest science, with weight of the evi-dence approaches. Not surprisingly,many in the environmental commu-nity have urged EPA to adopt moreprecautionary assumptions and poli-cies to ease, simplify, and speed upthe risk reduction process. EPA staff has stated that determi-

nations of the exposure levels thattrigger the new “unreasonable risk”determination (i.e., the human healthor environmental risk that is unrea-sonable at a corresponding exposurelevel) may focus the nature of thepopulation subject to the exposure(e.g., perhaps setting “unreasonablerisk” levels lower for susceptible sub-populations or even using risk man-agement goals lower than the one-in-one million risk level). EPA’s widediscretion has prompted concern inthe regulated community about thelack of certainty in this process. Importantly for manufacturers,

EPA acknowledged that it often doesnot have data on uses and resultingexposures and lacks even generallyaccepted methods to measure manyexposures; a clear warning flag forproducts subject to regulation. EPA isexplicitly seeking input on how togather use-specific exposure informa-tion, and how to define and applyconcepts such as “sentinel exposure,”(i.e., when to limit the risk evaluationto a plausible upper-bound expo-sure), “aggregate exposure,” from allsources, and “potential exposure.”Some claim that EPA should obtaindata on exposures, vulnerable popu-lations, and other critical risk evalua-tion information primarily from pub-lic outreach. Industry and environ-mental groups appear to be at log-gerheads over, among other things,when and how to consider aggregateexposure from all uses and pathways,as well as sentinel exposures.Because of the absence of commonmeanings for many of these terms,many public comments are likely andEPA must establish new policies con-sistent with the Amendments. Once EPA determines that an

“unreasonable risk” exists, theAgency has broad discretion to deter-mine the type of risk reduction actionthat should be taken. Recent EPATSCA chemical risk assessments haveproposed risk reduction requirementsmore frequently, and EPA has adopt-ed more stringent requirements. Given the significant business

risks and uncertainties associatedwith these new requirements, earlyengagement is warranted to permitthe development and submission ofactual data for the risk evaluation asa better basis for evaluation than thedefault option of worst-case assump-tions. Such information also must bein the record in case litigationbecomes the only viable option.

4. Action items for manufacturers First, evaluate and monitor your

business risks. Increasingly, environ-mental groups, the media, regula-tors, and the plaintiffs’ bar allegethat the mere presence of substancesin products may cause personalinjury (although most risk evalua-tions are based on exposure of testanimals to high concentrations), and,therefore, should be removed fromproducts. At a minimum, companiesshould confirm the inventory ofchemicals used in their processes,identify the chemicals that EPA (orstates in a few instances) is likely toregulate, and track EPA’s implemen-tation of the TSCA Amendments.Based upon that assessment, a deter-mination can be made on whether,and to what degree, to get involvedin the EPA implementation process.Second, do not assume you can

rely on chemical manufacturers. Theinterests of the chemical manufactur-ers and product manufacturers maybe different. A product manufacturerthat has cost-effective substitutes forhigh-priority substances in its prod-ucts may prefer to avoid the consid-erable transaction costs of trying toconvince EPA not to ban or restrictthe use of a substance. Also, many industry stakeholders

argue correctly that if a risk evalua-tion is performed using hypothetical(i.e., unrealistic) high end exposureand other assumptions, and this socalled screening risk evaluation doesnot find an “unreasonable risk,” thenmore detailed evaluations using lower(albeit more representative exposures)are not necessary. While this kind ofapproach saves cost and shouldaccelerate the risk evaluation process,it may have potential downsides. Forexample, some uses of “high-priority”substances in certain products maypresent a low-priority or de minimisrisk. However, the federal preemptionof duplicative state or local laws inthe TSCA Amend ments apply “onlyto...the hazards, exposures, risks, anduses or conditions of use of suchchemical substances included in thescope of the risk evaluation.” The useof such a screening risk evaluation isunlikely to include the hazards, expo-sures, risks, and uses or conditions ofuse for these low risk uses. As aresult, a product manufacturer maynot be able to avail itself of the pre-emption protection intended by theTSCA Amendments.

TSCA REFORMCont. from page 24

see TSCA REFORM page 29

27

USS Illinois commissioned in New London, Connecticut

IMA Chairman William Hickey, his wifeLeslie Hickey and Jay Tuthill, Chairmanof IMA member company TuthillCorporation, were honored to attend thecommissioning of the USS ILLINOIS(SSN-786) on October 29, 2016.The U.S. Navy with assistance

from the First Lady Michelle Obamacommissioned and brought to life thenewest Virginia class submarine, USSIllinois (SSN 786), during a ceremonyattended by more than 2,500 at NavalSubmarine Base, New London onOctober 29, 2016. Illinois is the 13thVirginia-class, fast-attack submarine tojoin the Navy’s operational fleet.Illinois is the third of eight Block

III Virginia-class submarines to bebuilt. USS Illinois CommandingOfficer, Cmdr. Jessie Porter, highlight-ed the Illinois’ capability to dominatethe undersea domain and enable mil-itary success in any engagement.“The Illinois has joined the fleet,”

said Porter. “The crew of Illinois hasassumed our watch — a watch thatwill continue for the next 30 years— always waiting for the call,always ready.”The submarine is 377 feet long,

has a 34-foot beam, and will be ableto dive to depths greater than 800 feetand operate at speeds in excess of 25knots submerged. It will operate forover 30 years without ever refueling.Construction on Illinois began

March 2011; the submarine’s keelwas authenticated during a ceremo-ny on June 2, 2014; and the subma-rine was christened during a cere-mony October 10, 2015.Source: U.S. Naval Submarine Forces Atlantic.

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FREE quality training offer from the Carroll-Keller Group The Carroll-Keller Group, Ltd., is

committed to helping organizationsnationally and internationally trans-late business strategies into resultsby developing the skills and per-formance of their people. Clientsachieve significant, measurable andsustained improvements by changingstrategies, processes and competen-cies to ensure increased competitive-ness in today’s rapidly changingglobal economy. They are a totaltraining resource for aligningemployee performance with organi-zational strategy in critical areas:• Professional Skill Development,• Safety/Lean/Quality Training,• MS Office/Computer Training, and• Consulting Services.For a limited time, the Carroll-

Keller Group is offering IMA mem-bers TWO FREE SEATS (value:$500-$900) at any PublicWorkshop they offer. (See calendarof events on page 30.) Visit www.c-kg.com/publicworkshops.htmfor more choices. Check back fre-quently as new dates are addedregularly. Sign up today — thisoffer expires December 31, 2017.To register for your compli -

mentary seats, or for more informa-tion, contact Ken Keller, 630-495-0505 or kkeller@c-kg.com.

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ConAgra Foods acquiresFrontera, Red Fork and Salpica BrandsConAgra Foods, Inc., recently

announced that it has acquired thepackaged foods businesses ofFrontera Foods, Inc. and Red ForkLLC, including the Frontera, RedFork and Salpica brands. These busi-nesses make authentic, gourmetMexican food and contemporaryAmerican cooking sauces. “We are excited to add the

Frontera, Red Fork and Salpicabrands to our portfolio. In particular,the Frontera brand is a preeminentgourmet Mexican food brand inNorth America. We believe it pro-vides a tremendous platform offwhich we can build,” said Sean

Connolly, president and chief execu-tive officer of ConAgra Foods.Founding Chef Rick Bayless says,

“In ConAgra, we’ve found peoplewho respect our integrity anduncompromising standards. We willcontinue to make high-quality foodwith the same standards of excel-lence and operate with the samevalues and fresh ingredients thathave helped the business to becomethe premium brands they are today.This is the start of a new era forFrontera, Salpica and Red Fork, andwe are thrilled.”Frontera Foods CEO Manny

Valdes says, “Frontera has grownthrough a passion for innovation andhard work. We have made a differ-ence in the American grocery storeand the American home. We believeConAgra is a fantastic partner to helpus deliver the same level of authen-tic, gourmet food products to evenmore homes across the country.”Chef Rick Bayless, owner of the

highly-acclaimed Frontera Grill,Topolobampo and Xoco restaurantsin Chicago, established FronteraFoods in 1996 with partner andCEO Manny Valdes. Today, thecompany makes more than 50regional Mexican food productsusing premium ingredients andtime-honored cooking methods.IMA member ConAgra Foods,

Inc., is one of North America’s lead-ing packaged food companies withrecognized brands found in grocery,convenience, mass merchandise andclub stores. For more information,visit www.conagrafoods.com.

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Advertiser IndexAmeren .................................12

Bimba Manufacturing .............ifc

Constellation .................26 & bc

Heritage-Crystal

Clean, LLC.........................20

IMA B2b Partner Program.......ibc

MIS-360..................................8

RSM ........................................5

Member News

Constellation — Providing tools to create a customized energy strategy for your company

28

CITGO celebrates 90thAnniversary of Lemont RefineryOn September 1, 2016, CITGO

Petroleum Corporation capped offcelebrations of the CITGO LemontRefinery’s 90th anniversary by wel-coming community leaders, non-profit partners, employees andretirees to the refinery for a com-memorative ceremony. Located 35 miles southwest of

Chicago, the CITGO Lemont Refineryhas grown to be a valuable part of theCITGO network and the Lemont com-munity, contributing more than $300million every year to the area’s econo-my and thousands of volunteer hourssupporting local organizations. “The CITGO Lemont Refinery

employs more than 550 full-timeemployees and 500 additional con-tractors, representing about 85 localcommunities,” said CITGO Presidentand CEO Nelson Martinez. “Our con-nection to the Lemont area is deepand long-lasting, and we will contin-ue to strive to be a good neighborthroughout our next 90 years.”“Through our TeamCITGO volun-

teer program, CITGO Lemontemployees have taken personal timeto give back to their communities onnearly 300 occasions,” said JimCristman, vice president and generalmanager of the CITGO LemontRefinery. “By cleaning up the envi-ronment, making donations to foodand supply drives and participatingin other efforts supporting the com-

munity, we are saying thank you fornine great decades in Lemont.”Operations at the Lemont

Refinery began in 1925 with a majorexpansion, doubling the facility, in1933. Over the years, new unitswere added to meet the demand fora better quality of gas for automo-biles, aviation fuel for WWII, andthe production of asphalt. Petróleosde Venezuela, PDVSA, acquired 100percent ownership of the refinery in1997 and began operations asCITGO Lemont Refinery.

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Linda Boasmond, CedarConcepts, honored as“Hometown Hero” by YWCA Metropolitan ChicagoYWCA Metropolitan Chicago will

host its 44th Annual LeaderLuncheon on November 17 at theHyatt Regency Chicago. This year’sevent will celebrate the organiza-tion’s 140th anniversary as well ashonor the accomplishments of five“Hometown Heroes” who are exam-ples of Chicago-bred leaders whothrough innovation, compassion andcourage have significantly con-tributed to the greater good, particu-larly for women and girls.Honoree Linda Boasmond, Foun -

der and President, Cedar ConceptsCorporation, is the first and onlyAfrican-American woman in the U.S.to own a chemical manufacturingplant. Boasmond serves on multiple

boards including the Illinois Manu -facturers’ Association and is boardchair of Girls 4 Science, Chicago’sonly all-girls science initiative.Other 2016 honorees include

Cynthia Rowley, Fashion Designer &Entrepreneur; Jessica Malkin, CEO,Chicago Ideas & Co-Director,Bluhm/Helfand Social InnovationFellowship; Valerie Jarrett, SeniorAdvisor to President Barack Obama,Office of Public Engagement andIntergovernmental Affairs, Chair ofthe White House Council on Womenand Girls; and COL (IL) Jennifer N.Pritzker, IL ARNG, Retired, President& CEO, TAWANI Enterprises, Inc.

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Member News

29

On the other hand, if a screeningrisk evaluation exceeds the “unrea-sonable risk” exposure level, con-sumers, juries and even judges in liti-gation may misinterpret the meaningof the screening level and assumethat EPA’s regulatory designation as a“high-priority” substance means thatthe substance causes actual harm (inlayman’s terms) in any product.Either of these eventualities mayadversely affect manufacturers thatuse even de minimis levels of thesesubstances in their products. Third, consider providing input

on exposure issues. EPA’s TSCA deci-sions will largely be a function of theworker, consumer, and postcon-sumer exposures related to the sub-stances used in products. Generally,neither EPA, the chemical manufac-turers, nor the public possess thequantum of exposure informationnecessary for a detailed risk evalua-tion of whether an “unreasonablerisk” exists. Measurement protocolsmay not exist or existing methodsmay be inappropriate for the prod-uct-specific risk assessment. It takestime and resources to develop thedata necessary to enable EPA to cal-culate the regulatory risks. Giventhese difficulties, much of the criticalexposure information may be morecost-effectively gathered voluntarily

by manufacturers that use these sub-stances in their products (as opposedto EPA). Similarly, situated manufac-turers also might consider sharingthe costs of information gathering.5. ConclusionThe TSCA Amendments enacted

earlier this year have brought aboutsignificant changes, which may comeas a surprise to manufacturers thatwere not involved in the legislativedebates that took place over thecourse of several years. All manufac-turers should examine the newrequirements closely for businessrisks and prudent manufacturers alsowill seek potential new businessopportunities. n

TSCA REFORMCont. from page 27

Blue Cross Blue Shield of Illinois’Chicago office was illuminated againthis year in honor of Manufacturing Day,October 2, 2016.

ACE SIGN COMPANYSpringfield, IL

ALL-RITE SPRING COMPANYSpring Grove, IL

AMTEC PRECISION PRODUCTS, INC.Elgin, IL

CLARK HILL PLCChicago, IL

DHALIWAL LABORATORIESBedford Park, IL

DIXON AUTOMATIC TOOL, INC.Rockford, IL

GENERAL DYNAMICS/ORDNANCETACTICAL SYSTEMS DIVISION

Marion, IL

GERDAU AMERISTEEL US, INC.Belvidere, IL

M.C. PRODUCTS, INC.Rockford, IL

MATTOON PRECISIONMANUFACTURING COMPANY

Mattoon, IL

MB STEEL COMPANY, INC.Madison, IL

MINUTEMAN INTERNATIONAL, INC.Pingree Grove, IL

PAUTSCH SPOGNARDI & BAIOCCHILEGAL GROUP, LLP

Chicago, IL

RICHARDSON MANUFACTURINGCOMPANY

Springfield, IL

SMITH AND RICHARDSON, INC.Geneva, IL

SONOCOBatavia, IL

SONOCO ALLOYDDekalb, IL

TENNECO AUTOMOTIVELake Forest, IL

WELDING MATERIAL SALES, INC.Geneva, IL

New IMA members

30

November 14-18, 2016Certified Energy Manager Training from Ameren Illinois8:00 am-5:00 pm at OSF Healthcare, 3300 Willow Knolls Drive, Peoria — Cost: $1,900— $1,795 UNTIL SEPTEMBER 14TH. For moreinformation, contact Angela Holloway at 309-677-6116 or aholloway2@ameren.com

November 14-20, 2016National Apprenticeship Week

Friday, December 2, 2016IMA’s Annual LuncheonJW Marriot, Chicago — 9:00 am–2:00 pmKeynote Speaker: Dennis Muilenburg, President & CEO of The Boeing Company

Thursday, January 19, 2017IMA Breakfast Briefing:Conflict Management & MediationDitka’s Restaurant, Oakbook Terrace —8:00-10:30am

Carroll-Keller Group Public Workshops . . .(held at DePaul University, O’Hare Campus,Chicago, from 9:00 am–4:30 pm) Visit www.c-kg.com for more information.

December 8, 2016Effective Business Writing Skills

December 15, 2016MS Excel: Formulas and Functions

January 17, 2017Effective Presentation Skills

Carroll-Keller Group Public Workshops . . .(held at DePaul University, O’Hare Campus,Chicago, from 9:00 am–4:30 pm) Visit www.c-kg.com for more information.

January 24, 2017Project Management Skills for Non-Project Managers

MS Excel: Database Analysis & Pivot Tables Made East

January 30, 2017Essential Leadership Skills for Front Line Managers & Supervisors

February 7, 2017Influencing Without Authority: Achieving Results Regardless of Your Positional Power

2016-2017 Calendar of events

Welcome to the IMA

Visit ima-net.org/calendar for information, pricing, registration, etc., related to all events. For more information on IMA events, contact Kimberly McNamara at kmcnamara@ima-net.org, 800-875-4462, ext. 9371

The Illinois Manufacturer is underwritten by Constellation — An Exelon Company

NOW AVAILABLE . . . ORDER YOUR COPY TODAY

IMA’s 2016-2017 Annual Compensation Survey ReportHow do your compensation plans compare? You need this report to plan for the future. Compiled

by the Illinois Manufacturers’ Association with assistance from the Newport Group, the IMACompensation Survey Report contains valuable data specifically relevant to Illinois manufacturers.

ORDER ONlINE TODAY AT www.ima-net.orgQuestions? Contact Janie Stanley at 800-875-4462, ext. 4214, or email: jstanley@ima-net.org

Illinois Manufacturers’ Association

Do you want to do business with Illinois manufacturers?

ima-net.org

Join the IMA B2B

partner program

and watch your business soar!

Find out how . . . visit the IMA B2B partner program at ima-net.org/b2b or contact

Kimberly McNamara at 800-875-4462, ext. 9371,email: kmcnamara@ima-net.org,

for more information.

© 2016 Constellation Energy Resources, LLC. The o�erings described herein are those of either Constellation NewEnergy-Gas Division, LLC, Constellation NewEnergy, Inc.,Constellation Energy Services - Natural Gas, LLC, Constellation Energy Services, Inc. or Constellation Energy Services of New York, Inc., a�liates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted. Constellation is the endorsed electricity supplier of Illinois Manufacturers’ Association, which receives compensation for its promotional and marketing e�orts from Constellation.

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