Sunday, April 01, 2001

AK Steel at crossroads

Environmental rules, market cause unease

By Randy McNutt and Mike Boyer MIDDLETOWN - The iron core of this Butler County city is still shaking over the suggestion that AK Steel, its largest employer, might someday stop making its own steel here because of rising environmental costs and a slumping steel market.
The Cincinnati Enquirer MIDDLETOWN - The iron core of this Butler County city is still shaking over the suggestion that AK Steel, its largest employer, might someday stop making its own steel here because of rising environmental costs and a slumping steel market.

        The suggestion — company officials emphasize no decision has been made — could eliminate the jobs of about 2,000 of the 3,700 employed at the century-old Middletown Works.

        To many people who grew up in a steel-mill family or knew somebody who did, the idea of AK not making steel here is unthinkable.

        “I thought the company was doing a pretty good job with pollution control,” said Charlie Ervin of Hamilton, who worked at the former Armco Steel (now AK) plant in New Miami for nearly 40 years. “I know it spent a ton of money. Pollution control took out the old New Miami plant.”

        But in private meetings with leaders of the Armco Employees Independent Federation (AEIF), AK officials cautioned that it might some day be forced to do the unthinkable because of a confluence of factors:

        • Eight-month-old pollution lawsuits filed by the federal and Ohio environmental protection agencies seeking millions of dollars in penalties for violations of air, water and solid waste rules at the Middletown Works. Regulators say they're trying to negotiate an end of the lawsuit.

        • An estimated $80 million expenditure that AK Steel faces to bring the Middletown “hot end” operations into compliance with tougher pollution rules in the works.

        • One of the weakest steel markets on record, which makes it cheaper for steel companies to buy semi-finished steel slabs for rolling and coating than to make them.

        AK Steel won't say how much cheaper it is to buy semi-finished slabs from domestic and foreign producers, but some estimates are slabs are selling for as little as $150 a ton.

        The Middletown mill for years has purchased slabs from other producers to supplement its own steel production. The slabs are rolled into thin coils and coated and treated and sold to customers ranging from automobile to appliance makers.

        “At some point down the road, we may be facing tens of millions of dollars in new controls and potential fines and we have to ask ourselves: Does it make sense to continue making slabs in Middletown, or would we be better served to shut down those hot end parts of Middletown Works, buy slabs and finish them in Middletown,” said Alan McCoy, the company's vice president of public affairs.

        The possibility ignited a firestorm of letters and statements of support by local and state officials.

        The Mid-Miami Valley Chamber of Commerce estimated the ripple effect from AK Steel's action could eliminate another 2,000 jobs in the community.

        Middletown's city commission unanimously adopted a resolution supporting AK Steel. The Butler County commissioners called on Gov. Bob Taft to press for a settlement of the EPA lawsuits.

        U.S. Sen. George Voinovich, former governor and now a member of the Senate's Environment and Public Works Committee, said the impact of new environmental rules needs to be weighed against their cost.

        The union expects to send a letter to federal and state officials raising concerns about the potential job losses.

        “We think the environment should be a global issue, not just a U.S. issue,” said Ed Shelley, AEIF president. “We agree we all should be doing something to protect the environment for our children and their children, but that needs to be done globally. We think our federal government should also be working to control (steel) imports.”

        The United Steelworkers of America, which has been locked in an 18-month battle with AK Steel over the company's decision to lock out several hundred striking union members at its Mansfield, Ohio mill, has accused the company of “blackmail” by raising the possibility that jobs could be eliminated.

        “The company is trying to force its workers and Middletown residents to choose between a clean environment and jobs,” said David McCall, Ohio district director for the steelworkers. “AK Steel could easily afford the pollution controls.”

        Mr. McCoy dismisses the Steelworkers' attack as part of its ongoing campaign against the company.

        “The Steelworkers have been visibly involved in communicating against AK Steel on environmental issues in Middletown, Butler (Pa.) and elsewhere where they don't represent employees,” Mr. McCoy said. “They've stated for 18 months that they won't let AK Steel rest. They want to continue their campaign to cajole and presure us to accede to their bargaining demands.”

Courts involved

               The federal and state EPAs and the U.S. Justice Department and Ohio attorney general brought suit last June 29, charging AK with numerous violations of the federal Clean Air and Water acts and seeking civil penalties potentially exceeding $25,000 for each day the violations occurred.

        A request by the Ohio EPA and Ohio Attorney General Betty Montgomery to intervene in the federal lawsuit is still pending before U.S. District Judge Herman Weber in Cincinnati..

        AK Steel says many of the EPA's allegations stem from issues that were resolved years ago.

        The company says the federal and state agencies are literally attempting to burst the pollution control bubble that has served Middletown and southwestern Ohio well for 20 years.

        The “bubble concept” is the name given to the regulatory scheme worked out between Armco Inc., AK Steel's predecessor, and the Ohio EPA to control dust emissions from the Middletown plant in 1981.

        Rather than install pollution controls on specific pieces of equipment with the mill, the company agreed to more stringent controls on dust from within an imaginary “bubble” over the whole facility.

        By doing things like watering down access roads and storage piles within the plant and phasing out older facilities, AK Steel estimates it has reduced dust emissions from the Middletown plant by 5,400 tons annually. That, the company says, is about eight times higher than the estimated 650 tons annually projected if the company and OEPA had opted for equipment specific controls.

        The Ohio EPA, in support of the federal lawsuit, says in court papers filed in Cincinnati it has received at least 131 nuisance complaints about dust emissions around the plant from residents since 1990.

        Mr. McCoy says the lawsuit charges “we burst our own bubble by violating the nuisance law. But how can we be in violation of the nuisance law when we're complying with our bubble?”

        He said the company also questions the accuracy of the OEPA's research, based on two separate surveys of 1,500 residents that generated responses from fewer than 150 residents both times.

        “This survey work is very very questionable science to us,” he said.

        The federal suit also charges AK Steel with repeated violations of its waste water permit for discharges into Dicks Creek and its tributaries.

        But since 1992, Mr. McCoy said the company's compliance rate on its waste water permits has been better than 99.5 percent; yet the government's own standards don't expect compliance better than 95 percent.

Compliance has cost

               Andrew Thompson, spokesman for the Ohio EPA, said his agency has been working with AK Steel for 10 years to resolve the pollution problems at the mill, and those negotiations are continuing.

        As for the potential impact on the plant's jobs, he said, “There is a cost to complying with environmental regulations.”

        Joe Case, a spokesman for the Ohio attorney general, declined to comment on the specifics of its lawsuit, but said the state is continuing to negotiate a settlement.

        “We're interested in working in good faith with the company,” he said. “But we have a responsibility to the state's citizens and taxpayers when the state's environmental laws are violated.”

        Regardless of how the current lawsuits are resolved, AK Steel faces an estimated $80 million cost to bring the mill's “hot end” operations into compliance with pending new federal EPA standards known as MACT, or Maximum Allowable Control Technology, which will tighten emission requirements for AK and other steel makers.

        “We offered a year ago to install MACT controls early as part of settlement (with the EPA). They weren't interested in that.” Mr. McCoy said.

        Union officials and industry analysts say they believe the company when it says it might be forced to silence the blast furnace and related equipment.

        “AK's never been a company to make statements rashly. That's what makes it sound so ominous,” said Charles Bradford, an independent steel analyst in New York.

        “Typically, I don't hear a lot of threats from AK. In many cases they follow through on what they say. In this case, they say they may (close),” said Mr. Shelley.

        Mr. McCoy said AK Steel, which rebounded from near bankruptcy in the early 1990s by drastically trimming operations and jobs and boosting productivity and quality, has never shied from difficult decisions.

        “We've led the steel industry in operating profit per ton for seven years, in part because we make tough decisions,” he said. “Nobody likes to make a decision that affects jobs but our business dictates we have to do that.”

        That fact only heightens concerns running through the brick headquarters of the AEIF, next to the sprawling steel plant on Roosevelt Boulevard.

        “Any news?” a woman worker asked recently as she walked in.

        “Nothing,” a man answered.

        “No news, good news,” she said with a shrug.

        “The majority of them are concerned, but then any threat of job loss raises the eyebrows,” said Mr. Shelley.

        Over at Kelly's Market, 2900 Yankee Road, Kelly Jo Braun is apprehensive. Her husband started at AK Steel last year.

        “It's scary,” she said. “He could be the first to go. People come in the store and say they're concerned. This city would be a ghost town without AK Steel.”

        Her mother, Glenna Clair, has seen good and bad times in the steel business since her husband opened the market near the plant in 1959.

        “That year, Armco laid off a bunch of workers,” she said. “We opened and survived the layoffs. Back then, I think families were bigger and closer. I don't know what would happen to the people and this town if that plant shut down.”


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