www.ima-net.org Summer 2012

NEW: ENERGY PURCHASING POOL FOR IMA MEMBERS

ManufacturerTHE ILLINOIS

New EPA regulations expectedto drive energy costs higher

Exelon-Constellation merger creates nation’s

leading competitive energy company

IMA member profile:Nucor Steel Kankakee

16Strategies for greening your energy use

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 anenlarged business base andincreased employment.

ChairmanMichael Holewinski

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 2012© 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, pleasecontact Stefany Henson, Editor andDirector of Publications at 217-522-1240, Ext. 3017, or email shenson@ima-net.org.

Summer 2012

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.

The Illinois Manufacturer is underwritten by Constellation — an Exelon Company

. . . there is a full scope of options

available today to help companies achieve

their environmental goals and improve the

way they buy, manage and use energy.

ColumnsPresident’s Report: . . . It’s gratifying that Illinois has embraced competition and the benefits of lower energy prices and increased innovation..................... Page 4

Legislative Report: For a manufacturing sector that uses one-third of all energy in the United States, the lack of a comprehensive energy policy in Illinois is creating a stream of ill-conceived proposals ................................ Page 6

Environmental Issues: IMA energy expert David Kolaz discusses new EPA regulations that are expected to drive energy costs higher ........................ Page 7

Tax & Accounting Issues: International sales corporation status can reduce federal tax burden — from CliftonLarsonAllen...................................... Page 9

Legal Issues: Styrene: Regulatory obligations one year after being listed in the NTP’s report on carcinogens — from Edwards Wildman Palmer LLP............. Page 11

Energy Issues: Cheap natural gas fueling an industrial renaissance — from Constellation ............................................................. Page 15

Management Techniques: Advice on what to do if a competitor informs you that they have a patent covering your main product — from Marshall, Gerstein & Borun LLP........................................................... Page 21

Human Resources: It runs in the family: Genetics and Cancer — from HeplerBroom LLC ............................................................................. Page 23

Member News: News for and about IMA members around the state ................ Page 24

Government Initiatives: Manufacturer benefits under the American Job Creation Act of 2004, as amended — from Deutsch, Levy & Engel ................. Page 27

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

IMA & MIT 2012 Calendar of Events ..........................................................Page 30

IMA member profile: Nucor Steel Kankakee ................................. 12Exelon-Constellation merger creates nation’s leading competitive energy company ................................................... 17

Introducing a new energy purchasing pool for IMA members ......... 19

The IMA strongly

advocates for

competitive power

markets because the

ability to comparison

shop for the best

supply program is

one of the strongest

weapons we have

in managing our

energy expenses.

4

Is your energy supply plan ready for the future?

President’s ReportGREGORY W. BAISE

W hen it comes to summertime weather extremes, Illinois manufacturers normally fare much bet-ter than our colleagues in the south and southwest. Consider the record-breaking heat wave inTexas last summer . . . 40 days over 100 degrees! Texas spot market power prices spiked to

nearly $3,000 per mwh during the worst of the scorcher.Summers here are normally cooler and yet it’s worth noting that Illinois and the nation as a whole

is coming off the warmest spring on record. Statewide records go back to 1895 and 2012, with an aver-age spring (March, April, May) temperate of 59.1 degrees, was the hottest ever.Are we having a record-breaking summer? It seems so, but our state has experienced severe heat

waves in the past. Guess wrong and your business can be facing enormous unbudgeted electricity bills. That’s why we urge IMA members to adopt a strategic energy management plan that reduces the risk

of a weather-related budget shock. Illinois’ electricity market is open to competition and that means busi-nesses of all sizes can shop for customized power and gas procurement programs. IMA’s endorsed energypartner, Constellation, has been serving our members for more than a decade. Electricity supply programs come in all shapes and sizes. There’s no single “right” approach or plan.

Customers with the budget flexibility to accept the risk of volatile commodity prices may sign a contractfor half of their power needs and buy the rest on spot market. Others may adopt the opposite approach,securing 80-90 percent of their annual load under a fixed-price agreement and minimizing exposure tospot prices to 10 or 20 percent. Contract terms can range from one year to multi-year. Given today’s lowcommodity costs, many customers are locking in favorable prices for two years or more.Power prices are down sharply the past few years but it wasn’t long ago — in the days before com-

petition — that Illinois electricity charges were among the highest in the nation.A recent report from the COMPETE Coalition (www.competecoalition.com), an organization repre-

senting energy customers and competitive suppliers, includes an interesting chart illustrating prices forall U.S. power consumers over a 21-year period, 1990-2011. Prior to the introduction of retail powercompetition, Illinois power prices were far above the national average. Post-competition, pricesdropped to below the national average. Statistics like that tell the story. Energy customers in Illinois — and competitive markets nationwide

— are shopping for one simple reason: the marketplace is working. It is presenting customers withchoices and, ultimately, a better value.The IMA strongly advocates for competitive power markets because the ability to comparison shop

for the best supply program is one of the strongest weapons we have in managing our energy expens-es. Typically energy is among the biggest expense in the manufacturing sector.Buying power from the competitive market is just one way of getting a better handle on energy

spending. In many commercial operations, lighting can account for up to 20 percent of energy use.Lighting often generates heat, which makes the air conditioning system work even harder when all thelights are on during hot summer days. It pays to look at energy holistically. If your business is design-ing or renovating a facility this year, you’ll obviously want to do so with an eye toward reducing ongo-ing costs for energy, water and maintenance. Modernizing systems on existing buildings can save up to20-30 percent in energy costs.Our mission at IMA is manufacturing, but it’s good to know the benefits of competition are spread-

ing to Illinois households and that’s good news for our employees. Many suppliers, includingConstellation, are actively marketing for residential customers in the ComEd region. Voters are alsoapproving ballot measures that allow local leaders to aggregate residential power load and shop for thebest supply deal. When it comes to energy supply, it’s gratifying that Illinois has embraced competition and the benefits

of lower prices and increased innovation are available to the largest commercial users and now, home-owners. If there’s one silver lining to this prolonged recession it’s that energy costs are down and savingsare available. That’s a much needed dose of good news as we experience the summer of 2012. 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.

When it comes to natural gas, recentgeologic studies ofthe New Albany Shalein the Illinois Basinare providing the bestpotential economicnews and a spark ofhope in nineteen of Illinois’ southern-most counties.

Illinois needs a comprehensive energy policy

Legislative Report

MARK DENZLER

6

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

M ore than a quarter-century ago, Illinois lawmakers created the Energy Policy & PlanningAct (EPPA) as a means of organizing a comprehensive approach for energy that “is ofvital importance to the public welfare and to the continued operation of business and

industry” noting that many of “the problems related to energy are beyond the ability of the nation-al government to solve.” Unfortunately, despite biannual reports required by EPPA and energyproposals from each of Illinois’ last three Governors, the fact remains that Illinois does not have acomprehensive and forward-thinking plan that will help grow our economy and increase energyproduction while protecting the environment.For a manufacturing sector that uses one-third of all energy in the United States, the lack of a

comprehensive energy policy in Illinois is creating a stream of ill-conceived proposals. Over thepast few years, private, out of state companies like Tenaska Energy and Leucadia NationalCorporation have dangled the promise of hundreds of temporary jobs in front of legislators inexchange for sweetheart deals for their companies to sell electricity and natural gas. In each case,the companies sought special legislation locking in guaranteed 30-year contracts regardless of thecost foisted on businesses and consumers. In the absence of an energy policy, the GeneralAssembly will continue to face a piecemeal and detrimental approach to our energy needs.The IMA helped found and lead the STOP Coalition, consisting of three hundred businesses

and trade groups, successfully defeating Tenaska’s expensive carbon sequestration project whichwould have cost nearly $400 million annually in above-market prices to finance a 544 MW “cleancoal” facility in downstate Illinois. After reviewing Tenaska’s own study, the independent IllinoisCommerce Commission found that electricity from the plant would cost as much as 700 percentmore than current market prices. This was the fourth year in a row that Tenaska sought passageof this special sweetheart deal.While Tenaska sought to carve out a special subsidy for electricity, Leucadia tried essentially

the same scheme for synthetic natural gas obtained from coal. Despite record finds of natural gasreserves in shale readily available because of new hydraulic fracturing technologies that havepushed the price of natural gas to near-record low prices, some lawmakers are pushing a newlaw forcing 30-year contracts on gas utilities. In June, Apache announced a massive shale-gas dis-covery with as much as 48 trillion cubic feet of recoverable natural gas, enough to supply U.S.needs for two years. It make no economic sense for Illinois lawmakers to try and force businessesand residential consumers to pay more than $8 per MMBtu for Leucadia’s synthetic natural gaswhen the real resource is available for $2.19 according to the latest Henry Hub price (natural gasspot price). The price is projected to remain low for decades. When it comes to natural gas, recent geologic studies of the New Albany Shale in the Illinois

Basin are providing the best potential economic news and a spark of hope in nineteen of Illinois’southernmost counties. It is estimated that up to 19 trillion cubic feet of recoverable natural gas isavailable through hydraulic fracturing which would be a huge boon for manufacturing, transporta-tion and energy sectors that could see billions of dollars in economic activity.The IMA and other industry groups negotiated a good bill governing wastewater management,

wellhead protection and model chemical disclosure rules that passed the Senate unanimously withsupport from agricultural and environmental advocates. Unfortunately, competing hydraulic frac-turing legislation drafted in the House, with the assistance of Attorney General Lisa Madigan, senta chill over the industry because of excessive set back provisions and a massive 12 percent sever-ance tax. Later, a key Democrat lawmaker proposed a two-year moratorium that would havestopped the burgeoning industry before it takes hold in Illinois. One company tore up $2 millionin mineral rights leases when news of the potential moratorium hit the press. Fortunately, these

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.

(Continued on page 8)

7

Environmental Issues

DAVID KOLAZ

T he U.S Environmental ProtectionAgency has issued several envi-ronmental regulations over the

last two years that impact electricpower producers and industrial boil-ers used in manufacturing, process-ing, mining and refining, as well ascommercial boilers used in malls,laundries, apartments, restaurantsand hotels. These regulations arepredicted to raise energy costs forbusiness and residential consumersalike. Some have expressed concernthat these regulations could eventhreaten the reliability of electricpower in some parts of the countrydue to the retirement certain of coal-fired power plants. In a poll con-ducted recently by Black & Veatchof 500 utility company executives,more than 90 percent believe thatrules instituting stricter limits oncoal-fired power plants and rulesrequiring the use of more renewableenergy will mean consumers will seehigher monthly electric bills. In commenting on the proposed

U.S. EPA rules for industrial, com-mercial and institutional boilers (akaBoiler MACT), the Industrial EnergyConsumers of America (IECA),which represents companies withapproximately 750,000 employees,said that they were concerned thatin this “fragile economic recovery”the high costs of the Boiler MACTrules will leave some companies “norecourse but to shut down the entirefacility, not just the boiler.” This article is not intended to

delve into the intricate details andcomplexities of the rules in questionor to join the ongoing debate aboutthe social and political implicationsof the rules. What is intended hereis to present an overview of the reg-ulations in question and their cur-rent status in order to insure IMAmembers are aware of the potential

for this issue to impact their futurebusiness decisions regarding energycosts. What should become clear isthat the complexity, timing anduncertainty posed by these particularregulations increase the difficulty ofconducting suitable planning.However, failure to adequately planfor and respond to these regulationsin a cost effective and efficient man-ner has the potential to cause seri-ous or even catastrophic conse-quences for affected businesses.Following is a brief overview of therecently proposed or promulgatedregulations affecting businesses thatuse boilers for heat and/or power.

“New” rules affecting electric power generatorsThe electric power industry has

made significant investments inequipment and strategies to reducetheir impact on the environment,especially over the last 20 years.

One indicator of the success of thiseffort comes from air emission datapublished by the Illinois Environ -mental Protection Agency in theirAnnual Air Quality Reports. Theseshow that emissions in 2010 of thethree pollutants emitted by powerplants in the largest quantitiesdecreased to a level of less than 25percent of their 1997 emissions. Newregulations from U.S. EPA seek toreduce these emissions even furtherand address issues such as haz-ardous air pollutants, cooling water,and coal ash disposal.

Clean Air Interstate Rule (CAIR)On March 10, 2005, U.S. EPA

issued the Clean Air Interstate Rule(CAIR) to address the problem ofpower plant pollution that drifts fromone state to another. The U.S. Courtof Appeals for the D.C. Circuit vacat-ed the CAIR rule on July 11, 2008 and

David Kolaz is the IMA environmental issues expert. A former key administrator for the Illinois EPA, David is available to IMA membercompanies for help and advice regarding their environmental concerns. Dave can be reached at 217-971-3357, email dkolaz@ima-net.org.

New EPA regulations expected to drive energy costs higher

see EPA REGULATIONS page 8

then remanded the rule to U.S. EPAto revise the method for addressingthe transport of air pollution acrossstate boundaries while allowing theremainder of the CAIR rule to beimplemented in the interim.

Cross State Air Pollution Rule (CSAPR)This rule was issued in July 2011

in response to the remand of theCAIR rule. It puts in place fourregional trading programs that setemission limits for sulfur dioxide andnitrogen dioxide in 28 states that wasset to begin in 2012 and tighten incertain states in 2014. However, onDecember 30, 2011, the U.S. Court ofAppeals for the D.C. Circuit issued aruling staying the CSAPR rule pend-ing judicial review. The U.S. EPA isnow transitioning back to the CAIRrule while the Court deliberates onthe fate of the CSAPR rule which isexpected to be decided this year,possibly by late summer.

Clean Air Mercury Rule (CAMR)The U.S. EPA issued the CAMR

rule on March 15, 2005 for the pur-pose of reducing mercury emissionsfrom coal-fired power plants. TheU.S. Court of Appeals for the D.C.Circuit vacated the CAMR rule onFebruary 8, 2008 based on “fatalflaws” in the rule.

Mercury and Air Toxics Standards (MATS)On February 16, 2012 the U.S.

EPA’s Mercury and Air ToxicsStandards (MATS) were published.This rule sets limits on emissions ofmercury and acid gases from coaland oil-fired power plants, and itseeks to reduce heavy metals andother toxic chemicals by limitingparticulate matter. The statutorycompliance deadline for MATS is

January 2015 subject to some flexi-bility allowed by the rule.

New Source Performance Standardsfor Greenhouse GassesThe U.S. EPA proposed New

Source Performance Standards forGreenhouse Gasses (GHG) fromElectric Generating Units on March27, 2012 with a comment period thatended on June 25th. The rule requiresnew electric generating units, includ-ing coal-fired boilers, to meet a GHGemission standard equivalent to theperformance of natural gas combinedcycle units, though there are somelimited exceptions.

Coal Combustion Residual Rules (CCR)In June 2010, the U.S. EPA pro-

posed rules that would regulate thehandling of CCRs (often referred toas coal ash) from their generation atpower plants to final disposal. Theproposed rule contains options toclassify CCRs as a non-hazardoussolid waste under the ResourceConservation and Recovery Act(RCRA) (Subtitle D) or as a specialwaste (Subtitle C). Currently, CCRsare used beneficially in productssuch as wallboard, cement, roofingshingles, and abrasives. ClassifyingCCRs as a Subtitle D special wastewould prohibit such beneficialusage. The U.S. EPA does not face alegal requirement to issue a finalrule by a specific deadline but plansto finalize this rule later this year.

Cooling Water Intake Structures 316(b)As proposed by U.S. EPA in March

2011, the Cooling Water IntakeStructures Regulations (under section316(b) of the Clean Water Act) wouldrequire that cooling water intakestructures reflect the best technologyavailable for minimizing adverseenvironmental impact on aquaticorganisms. Affected power plants

would have to demonstrate compli-ance with a national aquatic organ-ism impingement requirement andwork with state and federal permit-ting authorities to address aquaticorganism entrainment on a site-spe-cific basis. The U.S. EPA is under asettlement agreement to issue a finalrule by July 2012.

“New” rules affecting industrial, commercial, and institutional boilersOwners of industrial, commercial,

and institutional boilers have investedin emission reduction projects for anumber of years. The air emissiondata published by the IllinoisEnvironmental Protection Agency(Illinois EPA) in their Annual AirQuality Report provides an indicationof the scope of the substantial invest-ment business has made. The IllinoisEPA data show that emissions of thethree pollutants emitted by theseboilers in 2010 have decreased toabout 33 percent of their 1997 emis-sions. New U.S. EPA regulations forthese boilers are directed at reducingemissions of certain hazardous airpollutants such as mercury, othermetals, dioxin and acid gasses.

Maximum Achievable ControlTechnology (MACT) for IndustrialBoilers and Process Heaters (aka Boiler MACT)This rule has a long history. It was

first promulgated by U.S. EPA inFebruary 2004. Shortly before thecompliance deadline in 2007, the U.S.Court of Appeals for the D.C. Circuitvacated the rule and remanded itback to U.S. EPA. After re-proposingthe rule and receiving extensive com-ments, the U.S. EPA, under Courtorder, promulgated the rule onFebruary 21, 2011. On May 18, 2011,the U.S. EPA stayed the effective dateof the rule in order to reconsider sev-

EPA REGULATIONSCont. from page 7

job killing proposals were defeatedwith the IMA’s help in the last daysof spring legislative session. We can-not afford to let this huge economic

potential slip through our fingers. Illinois has substantial fossil fuels,

huge reserves of coal and naturalgas; and produces ethanol and gen-erates wind and solar power. Welead the Midwest in oil refiningcapacity and are the nation’s topnuclear generator. Our state plays acrucial role as a transportation hub

for natural gas and oil movingacross the nation. We have enor-mous potential to grow our energyand manufacturing sector but weneed a comprehensive policy toreach that goal.

LEGISLATIVE REPORTCont. from page 6

8

Constellation — Innovative products to match your needs

see EPA REGULATIONS page 29

9

Tax & Accounting Issues

LAURY A. CHEZ, CPA

I llinois manufacturers work hard tomake products and services com-petitive in the global economy.

State exporting activity places Illinoisas the enviable top exporter in theMidwest and sixth among U.S. states,according to the International TradeCenter at Southern Illinois University-Edwardsville (SIUE). What’s more,Illinois exports have increased by $24billion, to $64 billion, in the past 10years alone. Clearly, generating for-eign sales is a necessary componentfor growth. And many state exportersare leveraging these internationalsales to reduce their federal tax bur-den through an incorporation toolcalled an IC-DISC.People tend to think that smaller

companies face big obstacles toexporting. Yet, 89 percent of Illinoisexporters are small and medium-sized businesses, according to SIUE.Exporters do face fierce competition— as well as foreign tariffs, fees, andtaxes — on export sales. Fortunately,they have at least one federal tax reg-ulation going for them. By creatingan Interest Charge-DomesticInternational Sales Corporation (IC-DISC), a domestic manufacturer withinternational sales can defer and/orreduce its overall tax burden relatedto the income on these sales. The IC-DISC reduces U.S. taxation

on exports of property manufacturedin the United States for direct useoutside the U.S. Two types of salesqualify: sales from products shippeddirectly outside the U.S. and salesfrom products sold in the U.S. thatultimately are added to a product thatis shipped internationally.Many contract manufacturers are

part of supply chains that serve largeOEMs whose products end up out-side the U.S. Parts shipped domesti-cally to these OEMs may also qualify

for this tax-advantaged status, eventhough on the surface they don’tappear to be foreign sales.An IC-DISC can be used in a

number of ways. Some of theadvantages and benefits provided byan IC-DISC include:• Permanent tax savings on exportsales. Although an IC-DISC is atax-exempt entity, any cash distrib-uted from an IC-DISC is taxed tothe shareholders at the qualifyingdividend rate of 15 percent. Thisresults in a federal tax savings ofup to 20 percent on the incomeassociated with foreign sales.

• Tax deferral on export sales. AnIC-DISC also allows a companyto defer up to $10 million of tax-able income to the future. Thiscan be a significant benefit ifcash flow is tight, or if a business

prefers to defer the payment oftax to Uncle Sam.

• Means to facilitate successionplanning. An IC-DISC offers anumber of capabilities for execut-ing a succession plan.Shareholders can be corporations,retirement accounts, individuals –or a combination thereof. Thiscan result in an effective meansto distribute cash to beneficiariesin a tax-advantaged manner.It doesn’t take much for a com-

pany to benefit from an IC-DISC.Companies with as little as $500,000in export sales have shown savingsfrom establishing IC-DISCs. In addi-tion, the set-up and recurring main-tenance of this strategy is relativelyminimal compared to the savings.IC-DISCs have been around for

Laury A. Chez, CPA, is a partner with CliftonLarsonAllen. He leads CliftonLarsonAllen’s Manufacturing & Distribution practice in the State ofIllinois, spending most of his time working in the manufacturing and distribution sector, including numerous multi-national companies.Laury may be reached at laury.chez@cliftonlarsonallen.com or 847-597-1820. CliftonLarsonAllen is an IMA member.

International sales corporation status can reduce federal tax burden

see TAX BURDEN page 10

10

close to 30 years, yet they are notwidely used in small to midsizedmanufacturing companies. Why not?One reason they are not used stemsfrom a misconception that they aretoo complicated or administrativelyburdensome. However, an IC-DISCstrategy does require a company toestablish a separate entity to reportits international sales. The IC-DISC isa “paper” entity created to make thecompany more competitive. It doesnot require corporate substance orform, office space, employees, ortangible assets. It simply serves as aconduit for export tax savings.Customers do not need to knowabout the IC-DISC, and contractsremain current. In addition, thetransactions required to be reportedfor the IC-DISC can be summarizedand reported once a year.Another reason for a low IC-DISC

adoption rate is that in the past, thisstructure didn’t provide much benefit.There were other provisions in thetax code that provided deductions forinternational sales. These provisions

expired a number of years ago,resulting in the IC-DISC strategy onceagain becoming more advantageous.If you think this strategy may be

an option for your company, it isimportant to act quickly. An IC-DISCis only allowed to provide benefitbeginning on the date it is formed

(benefits are not available retroac-tively). The sooner a taxpayer cre-ates an IC-DISC entity, the greatertheir benefits will be.To maximize savings and ensure

proper IC-DISC formation andadministration, businesses that wishto create an IC-DISC should seek

assistance from a qualified tax advi-sor. While the concept and adminis-tration are relatively simple, it isimportant that the initial set-up isdone properly to maximize and pro-tect this tax advantage. It should be noted that the quali-

fying dividend rate is scheduled toincrease January 1, 2013, whichwould eliminate the federal incometax benefit — if Congress does notact. One proposal would change therate to 25 percent, which would stillprovide a 10 percent benefit.

IMA member CliftonLarsonAllen isone of the nation’s top 10 certifiedpublic accounting and consultingfirms. Structured to provide clientswith highly specialized industryinsight, the firm delivers assurance,tax and advisory capabilities.CliftonLarson Allen offers unprece-dented emphasis on serving private-ly held businesses and their owners,as well as nonprofits and govern-mental entities. The firm has a staffof more than 3,600 professionals,operating from more than 90 officesacross the country. For more infor-mation about CliftonLarsonAllen,visit www.cliftonlarsonallen.com. n

TAX BURDENCont. from page 9

People tend to think that

smaller companies face big

obstacles to exporting. Yet,

89 percent of Illinois exporters

are small and medium-sized

businesses, according to SIUE.

11

Legal Issues

PAUL K. FREEBORN, ESQ. & WILLIAM R. ANDRICHIK, ESQ.

S tyrene is a naturally occurringorganic compound, found in avariety of foods, that has been

synthetically produced and incorpo-rated into thousands of everydayconsumer products for decades,including food containers and pack-aging materials, CD cases, helmets,refrigerators, computers, tires andboats. Domestic styrene productionrepresents a $28 billion industry thatemploys approximately 90,000 work-ers at more than 5,000 plants nation-wide. Illinois is among a handful ofstates that contribute the majority ofthe styrene workforce. Potential health effects associated

with styrene remain a hotly contestedtopic in the scientific community, withnumerous published studies reachingconflicting results as to whetherstyrene may be a human carcinogen.Despite this difference of opinion, onJune 10, 2011, the NationalToxicology Program (“NTP”) listedstyrene in its 12th Annual Report onCarcinogens (“RoC”) as “reasonablyanticipated to cause cancer inhumans.” This listing triggered severalfederal regulations that require certainactions from companies that manufac-turer and distribute styrene andemployers that use styrene in theworkplace. For example, OSHA regu-lates the use of potentially harmfulchemicals through a HazardCommunication Standard (“HCS”).Under the HCS, a chemical is consid-ered to be a carcinogen or potentialcarcinogen if it is listed in the RoC.[See 29 C.F.R. 1910.1200(d)(4).]Accordingly, while the scientificdebate continues regarding styrene’spotential health effects, it is currentlya carcinogen or potential carcinogenfor hazard communication purposesunder OSHA regulations. In light of the listing of styrene

in the most recent RoC, there arethree primary OSHA regulations thathave applied to styrene productssince September 10, 2011. First,styrene manufacturers and distribu-tors must revise their product labelsto reflect the NTP’s classification ofstyrene. [See 29 C.F.R.1910.1200(f)(1),(11).] Second, thosecompanies must update their materi-al safety data sheets to reflect theNTP’s classification. [See 29 C.F.R.1910.1200(g)(5).] Third, companiesthat use styrene in the workplacemust satisfy their ongoing obligationto provide employees with effectiveinformation and training aboutpotential health hazards associatedwith styrene exposure. [See 29C.F.R. 1910.1200(h)(1).] The styrene industry has not

accepted the NTP’s classificationwithout opposition. On June 10,

2011, the same day that the NTPincluded styrene in the RoC, theStyrene Information and ResearchCenter (“SIRC”) and a major manufac-turer of styrene-containing products,Dart Container Corporation (“Dart”),filed a lawsuit in U.S. District Courtfor the District of Columbia (Case No.1:11-cv-01079) to have styreneremoved from the RoC. In the law-suit, SIRC and Dart argue that the list-ing of styrene was arbitrary andcapricious because the Secretary ofHealth and Human Services and theNTP failed to follow proper protocol,mischaracterized various studies toreach a pre-determined conclusionabout the causal link betweenstyrene and human cancer, and failedto consider various scientific studiesthat refuted a finding of carcinogenic-ity. Essentially, the plaintiffs argue

Styrene: Regulatory obligations one year afterbeing listed in the NTP’s report on carcinogens

Paul K. Freeborn, Esq. and William R. Andrichik, Esq. are attorneys with Edwards Wildman Palmer LLP, in Chicago. Paul may be contacted atPFreeborn@edwardswildman.com. William may be contacted at WAndrichik@edwardswildman.com, or 312-201-2000. Edwards WildmanPalmer LLP is an IMA member law firm.

see STYRENE page 20

When Ransom E. Olds firstinvented the Oldsmobile, itwould have been impossible

for anyone to have guessed that hisgasoline-powered “horseless carriage”would also be the genesis of theNucor Corporation, which revolution-ized the steel industry and grew tobecome one of the nation’s largeststeel producers. Through Olds’ inno-vations, the Oldsmobile became oneof the premier businesses in theUnited Sates before he later sold thecompany and started his other auto-mobile business, Reo Motors. Reo procured several defense

contracts during World War II, butafter the war, production of thecompany’s trucks declined, and Reowas forced into a merger withNuclear Consultants, Inc., a St.Louis-based business that offerednuclear consulting to businessessuch as hospitals. Incorporated asNuclear Corporation of America in1955, the business began makingacquisitions and divestitures, and

none would become more valuablethan the acquisition of Vulcraft in1962. Vulcraft was a modest steeljoist manufacturer based in Florence,South Carolina. Under the directionof Nuclear Corporation’s KenIverson, Vulcraft would grow tobecome a symbol of American-madesteel that would eventually beunparalleled.Under the leadership of Chief

Executive Daniel DiMicco, Nucorhas become America’s largest steelproducer. Nucor is also the nation’slargest recycler, keeping more than23 million tons of scrap metal peryear from cars, appliances and otherdiscarded products, out of landfills.The recycled scrap is then melteddown and recovered as useful steel.Nucor’s recycling is so thorough thateven the dust from operations iscaptured so that the metal withincan be recovered and reused.The company is a pioneer of the

mini-mill concept, which uses envi-ronmentally responsible electric arc

furnaces to melt scrap metal intonew steel. The process conserves2,500 pounds of iron ore, 1,400pounds of coal and 120 pounds oflimestone for every ton of steel.Nucor has a strong commitment

to education. Every Nucor teammember and their dependents areeligible to receive a $3,000-per-yearscholarship to college or vocationalschool. To date the scholarship fundhas awarded more than $50 million. And within the Nucor family of

mini-mills, Nucor Steel KankakeeInc. in Bourbonnais has become themost recent to be recognized by thefederal government for its commit-ment to safety.

Nucor Steel KankakeeNucor Steel Kankakee is a

proverbial phoenix arisen from theashes. The mill was once describedby a former CEO as one of “the old-est, meanest, most terrible mills inthe nation.” Now the mill is being recognized

for its safety record, a testament tothe dedication of the more than 300men and women who work in theBourbonnais, Illinois, steel mill. Thefederal Occupational Safety andHealth Administration recentlybestowed upon Nucor SteelKankakee Inc. its coveted StarVoluntary Protection Program (VPP)status — a demonstration of just howfar the mill has come.Before Nucor purchased the

assets of Birmingham Steel Corpor -ation in December 2002, the millswithin the Birmingham fold hadundergone a series of rise-and-fallyears, at times exceeding productivi-ty models, and at others falling woe-fully short. In the waning years ofBirmingham, however, failed merg-ers, stock price decline, and internalmanagement fights had all led to aperiod of prolonged uncertainty.But Nucor’s purchase of the four

mills for approximately $615 million,including mills in Birmingham,Alabama; Seattle, Washington; andJackson, Mississippi — as well asthe Kankakee mill in Bourbonnais,Illinois — has led to a decade ofjoint prosperity, efficiency, safetyand productivity.Even in its best years under

Birmingham, the Illinois mill wasn’table to approach the million tons ofrecycled steel that it regularly pro-duces now. In fact, in the yearbefore Nucor acquired Kankakee,

12

Nucor Steel Kankakee

IMA member profile:

the mill was forced to reduce hoursas demand fell. But 2011 was not 2001. In 2011,

Nucor again assumed the mantle ofAmerica’s largest steel producer,shipping more than 23 million tonsof recycled steel. And the Charlotte,North Carolina-based company didso while running the safest andmost efficient steel recyclingprocess in the world. To be considered for OSHA’s Star

VPP status, Nucor Steel KankakeeInc. first had to have a safety andhealth management system, onemonitored by management and prac-ticed by employees. The facility alsomust maintain an injury/illness ratethat is below the national average ofits industry. Lastly, regular self-evalua-tions must be performed, with partic-ipants striving for improvement.Nucor’s focus on “safety first” is by

design and flows through the entire20,000-person organization.Commitment to the safety of itsemployees in Illinois is how NucorSteel Kankakee recently was wel-comed into the OSHA VPP at the Starlevel. Earning the mill’s VPP statuswas no easy feat, as only about 2,300worksites out of seven million acrossthe United States qualify for member-ship in this elite worksite safety circle.

Kankakee as BirminghamNucor Steel Kankakee began its

life as Birmingham Steel Corpora tion.At the time, the American steel indus-try was suffering from decliningreturns and facing daunting pressurefrom more efficient competition fromrivals in Japan and Europe. Birmingham Steel’s first acquisi-

tion was that of the BirminghamBolt Co., which operated a pair ofrebar and merchant product mini-mills in Birmingham, Alabama andin Kankakee, Illinois.In the two years after it went

public in 1985, Birmingham Steel’ssales increased fivefold, reaching$218 million in 1987. Its annual steeloutput hit 648,000 tons, up 49 per-cent from the previous year.In just over a decade, however,

a dissident shareholder groupencouraged shareholders to initiatea coup, having seen the company’sshare price fall from $17 to $4 inthree years.The move proved to be little more

than a Band Aid, however, as sharevalue increased little, productivity

see NUCOR STEEL page 14

Dedicated to safety first, pictured here (l to r) are Nucor team members David

Zawistowski, Gerry Davis and Andrea Baker.

Bill Ader, Chuck Barwegen and Scott Morse, team members at NucorSteel Kankakee, raise the hard-earned Voluntary Protection Program

(VPP) flag given by the Occupational Safety and Health Administrationof the U.S. Department of Labor to Nucor Steel Kankakee.

13

remained flat, and hours fell at variousmills between 1999 and early 2002. Salvation came at the end of 2002

when Nucor Corp. purchased sub-stantially all remaining assets ofBirmingham Steel Corp. Since the time of the acquisition,

Nucor Steel Kankakee Inc. has seenits productivity increase to morethan 850,000 tons of steel per year,its employment balloon to morethan 310 teammates, and its award-ing of educational scholarships andcontributions in Illinois to about$60,000 per year.

Safety is our mottoTeammates look out for each

other. Teammates protect each other.Teammates help each other achievemore than they could as individuals.And teammates keep each other safe.At Nucor, they proudly declare,

“Safety is our motto.” This is not justlip service. They work in an industrywhere accidents can have seriousconsequences for the men andwomen who drive the company,their families and their communities. While foreign competitors have

little or no worker safety oversight,or ignore those laws that are inplace but are seldom enforced,Nucor says it proudly exceeds thefederal standards for safety to ensureeach one of its teammates goeshome at the end of their shift.OSHA first announced Nucor

would receive this latest VPP desig-nation earlier this year. Kankakee

became the sixth Nucor mill to earnthe coveted VPP Star status, joiningher sister mills in in Norfolk,Nebraska; Seattle, Washington;Marion, Ohio; and Tuscaloosa andDecatur, Alabama.But the company insists that this

is not a goal, but rather a continu-ing, ongoing and evolving process.

Looking forwardNucor is one of many manufactur-

ing businesses caught between theold world and the new — betweenthe age of hard, physical work andsweat and the new digital age. But asChief Executive Daniel DiMiccopoints out, America needs to remain anation that “makes and builds things.” To do this, however, Nucor

asserts that a fundamental shift infocus and policy needs to occur.American companies cannot berewarded for offshoring jobs whilesimultaneously seeking tax sheltersoverseas, and the variousAdministrations that occupy theWhite House can no longer ignorethe fact that American companiesare being forced to compete withgovernment-owned entities abroad. Among a number of our trading

partners, government intervention todevelop and support their steel indus-tries has been frequent and sustained.And this type of intervention contin-ues in Brazil, Japan, Russia, India andespecially, China. Despite depressedglobal economic conditions, thesenations have continued to add newand excessive production capacityand continued to place an emphasison driving exports. While it is never good for an

industry to have to contend withunfairly traded product, now is aparticularly vulnerable time for ourdomestic manufacturers.Nucor insists globalization is a

good thing for American businessesand the American worker, and assertsits confidence that the people andindustry of Illinois and of this greatnation can compete in the global mar-ketplace when given the fair chanceto do so. But it is almost impossiblefor a single company to competeagainst a government anywhere. The steel industry of the United

States is vital to both our economicstability and national security. Whenforeign governments seek to aggres-sively harm that industry, it is theduty of the American government touse the tools available to it to inter-

vene on its behalf. The trade issues are just one

piece of a much bigger pie. The piealso includes the need to create andlegislate a U.S. manufacturing turn-around strategy. Elements of thisstrategy include better trade enforce-ment, infrastructure investment anda comprehensive plan to developdomestic energy resources.Nucor is immensely proud of its

accomplishments to date, both inproductivity and safety. But thecompany has never been one torest on its laurels. Nucor has suc-ceeded through the decadesthrough a series of innovations andacquisitions, strategically placingitself at the forefront of an industrythat is as old as industry itself.And the company whose origins

began with the earliest of automobilesshows no signs of slowing down. Headquartered in Charlotte, North

Carolina, Nucor Corporation and itsaffiliates manufacture carbon andalloy steel — in bars, beams, sheetand plate; steel joists and joist girders;steel deck; fabricated concrete rein-forcing steel; cold finished steel; steelfasteners; metal building systems;steel grating and expanded metal; andwire and wire mesh. Nucor, throughThe David J. Joseph Company, alsobrokers ferrous metals, pig iron andHBI/DRI; supplies ferro-alloys; andprocesses ferrous and nonferrousscrap. For more information, pleasevisit www.nucor.com. n

NUCOR STEELCont. from page 13

14

Nucor installed this monument to honor employeeswho serve or have served in the U.S. armed forces.Each of the five branches: Air Force, Army, Navy,Marines and Coast Guard, are represented.

Jason Nowman, a Nucor Steel Kankakee team member, shares what safety means to him as NucorSteel Kankakee celebrates earning the covetedVoluntary Protection Program (VPP) Star Designationfrom the Occupational Safety and HealthAdministration of the U.S. Department of Labor. Only about 2,300 worksites out of seven millionnationally have qualified for Star VPP designation.

15

Energy Issues

CONSTELLATION

North American energy produc-ers have achieved notable suc-cess by unlocking and devel-

oping the technologies necessary todeliver vast amounts of cheap naturalgas to the market. As a result, theU.S. might be on the verge of anindustrial renaissance that could pro-vide the spark that will help thecountry regain its economic footing,and at the same time significantlyalter the industrial landscape of thecountry for many years to come.A recent surge in domestic natu-

ral gas supplies, due to the processknown as “fracking,” has enabledgas production to reach levels notreached since 1988. The location ofthese hard-to-reach gas depositshave been known for decades, butthe industry has not had the meansto unearth it at costs that were eco-nomically feasible, until recently. It is widely thought that the U.S.

has more than 100 years of recover-able supply at current consumptionlevels. These new sources of naturalgas and natural gas liquids (NGLs)are not only abundant in the tradi-tional areas of the Gulf region ofTexas and Louisiana, but in non-tra-ditional regions such as the EastCoast. Extremely large shale fields inthe Northeast not only providecheap energy to two of the country’smajor consuming regions, but alsoprovide hope of resurgence to onceproud regions that were hit hardestby the economic downturn. The oil and gas boom has not

only injected immediate energy jobsinto the local economies of theseregions, but has also provided theframework for long-term job growthto the industrial production sector aswell. Already, Texas and Louisianatogether share unemployment ratesof seven percent, which is signifi-cantly lower than the national aver-

age (the lowest is three percent inNorth Dakota, where gas producersin the Bakken Shale don’t haveenough workers to fill their shifts).Production companies in theNortheast are estimated to have cre-ated 60,000 jobs in the region withan additional 200,000 likely by 2015. Manufacturing companies, partic-

ularly in the steel industry, willinvest millions in new facilities totake advantage of this low cost inputto their production process. Lowcost energy gives U.S. steel produc-ers a distinct advantage on theworld stage. Energy is a significantpercentage of the overall cost ofthese products. The Department ofEnergy recently reported that theenergy intensity or portion of thecosts of their final product isamongst some of the lowest in theworld. Nucor Steel is expected todevelop a new steel plant in Baton

Rouge, Louisiana, while U.S. steeland other foreign investors are eye-ing Ohio for their new investments.Big steel is not the only industry

that will benefit from this abundanceof cheap energy. Dry natural gas(methane) and feedstock from NGLsare some of the main components ofthe petrochemical industry. “Crackers”are a part of the chain of manufactur-ing that turn natural gas byproductsinto usable components. Ethane is afeedstock for ethylene which is amain component for making plastics.An ethane cracker plant has not beenbuilt in the U.S. since 2001. High natu-ral gas prices, for decades, had madethe U.S. one of the most expensiveplaces to produce ethylene. As a result, many of the plants

along with the jobs were sent over-seas. Today, besides the Middle East,the U.S. is the cheapest place to pro-

see NATURAL GAS page 20

Constellation is the preferred energy provider for IMA members. For more information, visit http://www.constellation.com/partners/associations-chambers/pages/ima.aspx. Article provided by the Constellation Commodities Management Group

Cheap natural gas fueling an industrial renaissance

Businesses that are looking toincorporate robust sustainability

plans into their energy strategies havea lot to consider. Energy costs, currentand future legislation and a growingneed for environmental responsibilityare just a few examples.

Businesses of all sizes can choosewhether to approach developing asustainability plan on their own orby utilizing the various resourcesavailable, including competitiveenergy suppliers and environmental,non-governmental organizations.Companies that choose to work withoutside organizations are executingsustainability plans more quickly,according to a recent study by DavidHyatt of the University of Arkansasfeatured on the DC Velocity website.

“The study points to a shift in theenergy industry we’ve been noticingfor quite some time,” said BruceStewart senior vice president andchief marketing officer forConstellation. “More businesses arelooking to incorporate sustainabilityoptions into their energy strategies.They understand that managing totalenergy cost over time requires astrategy focused on the quantity ofenergy used as well as price.”

According to Stewart, one waythat businesses are achieving this isby bundling electricity purchases withenergy conservation measures.Efficiency Made Easy, Constellation’senergy efficiency solution, factors in

the costs ofenergy efficien-cy upgrades intoa power supplycontract. Thisunique solution

offers customers thechance to manage both

their price for power($/MWh) and the quantity con-

sumed (MWh) over a period of time.Another way that businesses can

cost-effectively incorporate renewablesolutions into their energy strategy —and support the development ofrenewable energy facilities — is by

purchasing renewable energy certifi-cates (RECs) along with their powercontracts. RECs from Con stellationEnergy can be purchased as part of abroader energy supply agreementincluding electricity and gas supply atvery little additional cost.“We also see many commercial

and industrial customers implement-

ing on-site solar installations thatprovide long-term price control andcontribute to sustainability goals,”said Stewart. Through a power pur-chase agreement, businesses mayinstall on-site solar generation withno upfront capital and lock intofixed power costs that are often lessthan projected market rates. Businesses can further maximize

savings by combining on-site solarwith conservation measures. One ofConstellation’s customers,McCormick & Company, has beenoperating its 363,000 square-foot dis-tribution center as a net-zero facilityfor more than a year. As a net-zeroenergy building, it produces asmuch or more electricity than it con-sumes from the grid. This wasachieved through a combination ofenergy conservation measures andthe installation of a 1.8-megawattrooftop solar power system fromConstellation Energy in 2011.Large companies of all types are

pursuing load response or demandresponse programs for various rea-sons. Many customers are able touse the revenue generated from loadresponse programs for efficiencyprojects or to fund other aspects oftheir business. Emerging technologyallows them to better manage elec-tricity use and maximize participa-tion in load response programs. Forexample, Constellation’s VirtuWattTM

application provides commercial andindustrial customers with real-timeelectricity usage and pricing infor-mation from grid operators, as wellas automated electricity curtailmentcapabilities and access to bid intoelectricity markets.As companies and organizations

continue to look ahead to improvetheir sustainability efforts, there is afull scope of options available todayto help achieve their environmentalgoals and improve the way theybuy, manage and use energy. n

16

Strategies for greening your energy use

Submitted by Constellation

Businesses of all sizes

can choose whether to

approach developing a

sustainability plan on their

own or by utilizing the

various resources available,

including competitive energy

suppliers and environmental,

non-governmental

organizations.

E xelon and Constellation recent-ly merged to create thenation’s leading competitive

energy company. It’s a partnershipof industry leaders that promises todrive sustainable energy solutionsand customer-focused product inno-vation in markets coast to coast.The new Exelon has the scale and

scope to compete across the energyvalue chain, from homeowners to thelargest utilities and manufacturers.Exelon’s Generation subsidiary is

the nation’s number one competi-tive power generator, with nearly35,000 megawatts of owned capaci-ty. The portfolio is among thecleanest in the industry: 55 percentnuclear, 28 percent natural gas andnine percent hydro, wind, solar andother clean generation. As Exelon’s retail business unit,

Constellation provides customerswith an array of clean energy solu-tions, including natural gas andrenewable energy supply, loadresponse, real-time energy manage-ment, and solar and energy efficien-cy projects. Constellation servesmore than 100,000 business andpublic sector customers and one mil-lion residential customers. The combined Exelon-

Constellation operates in 47 states,the District of Columbia and Canada. Constellation President Kenneth

W. Cornew said the combination ofExelon’s clean energy fleet andConstellation’s retail, wholesaleand renewable sales expertise is akey advantage in the competitivemarketplace.“Exelon’s competitive platform is

beyond what any competitor canclaim,” said Cornew.As the new president and CEO of

Constellation, Cornew is responsiblefor the marketing of electricity, natu-ral gas and other energy-relatedproducts and services toConstellation customers, as well asensuring the commercial and com-petitive optimization of Exelon’sgeneration portfolio. A 25-year veter-an of the electric industry, Cornew

also serves as Executive VicePresident and Chief CommercialOfficer of Exelon Corporation.In addition to the natural pairing

of a large clean energy fleet withthe industry’s leading energy salesand marketing team, Cornew saidExelon and Constellation also sharea passion for providing customersgreater choice through competitiveenergy markets.

“In a regulated market, customershave few choices,” said Cornew. “Ina competitive market customers dohave choices. If they want to installsolar panels, we’ll help them do that.If they want to become more energyefficient, we’ll help them do that.”Industry research illustrates that

competition is helping business andresidential customers save and man-age energy more efficiently.

The Illinois experience with elec-tric utility restructuring is an interest-ing case study in the ongoing effortto better understand the impact ofrestructuring on prices according to“Retail Electric Choice: Proven,Growing, Sustainable,” a reportissued by the COMPETE Coalition.Prior to the introduction of retailcompetition, average Illinois electricprices had consistently been higherthan the national average. Retailelectric choice was phased-in over aseveral year period starting inOctober 1999 and by 2001, averageIllinois electric prices had fallenbelow and the national average andhave stayed lower every year since.According to COMPETE, competi-

tive electricity markets are active in17 states and the District ofColumbia. By the end of 2011, retailelectric choice accounted for morethan 18 percent of the nation’s totalpower supply.“Customers want more choice in

energy buying and management,” saidCornew. “Whether it’s a product thatsaves money or allows for more cus-tomization or minimizes a customer’scarbon footprint, we’re at work devel-oping and offering products and pro-grams focused on customer need. We firmly believe that competitiondrives innovation and innovation inturn creates customer value.” n

17

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

Exelon-Constellation merger creates nation’sleading competitive energy company

Kenneth W. CornewExecutive Vice President and Chief Commercial Officer,Exelon Corporation — President and CEO, Constellation

A 25-year veteran of the electric utility industry, Cornew leads Constellation, Exelon’s compet-itive retail and commodities businesses. He is responsible for the marketing of electricity,natural gas and other energy-related products and services to Constellation customers in 45

states, the District of Columbia and parts of Canada, as well as ensuring the optimization ofExelon’s generation portfolio by obtaining maximum value for power produced while managing riskfor the Company and its shareholders.

Constellation President KennethW. Cornew said the combinationof Exelon’s clean energy fleetand Constellation’s retail,wholesale and renewable salesexpertise is a key advantage inthe competitive marketplace.

Constellation — Provides products and services to manage energy cost and risk over time

19

O ne of the many benefits ofretail energy deregulation isthe variety of options avail-

able to businesses making purchas-ing decisions. Businesses now havethe flexibility to determine howmuch to buy, when to buy, and forhow long. And with deregulation,businesses can also leverage themarket expertise of an energy servic-es provider, such as Constellation, tomake more informed purchasingdecisions. This allows businesses toproactively develop and maintain anenergy purchasing strategy consis-tent with their risk objectives.Although many businesses like

the idea of having a robust energyprocurement strategy, some don’thave the time or resources (becauseenergy is a relatively low percent ofoperating costs) to regularly reviewand make proactive energy purchas-ing decisions. Additionally, many ofthese same businesses wonderwhether they have sufficient pur-chasing power to get a good deal. Constellation, in collaboration

with the IMA, recently introduced anew energy purchasing program forbusinesses looking to increase theirpurchasing power while limiting theamount of time and resources theyneed to put into following the mar-kets. Constellation’s new IMAEnergy Purchasing Program aggre-gates load from participating mem-bers and creates a structured, sys-tematic, purchasing strategy to man-age energy cost and risk over time.This program, unique to the IMA,allows members to benefit from theincreased purchasing power ofmember aggregation while freeingup time for members to focus ontheir core businesses. The program has been designed

to meet member cost and risk objec-tives. A fixed price will be establishedover a defined period of time for 100percent of IMA members’ anticipated

load. The fixed price will be estab-lished using Constellation’s MinimizeVolatile Pricing (MVP) solution, whichuses a transparent, proprietarymethodology to reduce market timingrisk while locking in fixed prices. Through systematic purchases

over a defined time period, membersmitigate the market-timing risk asso-ciated with a single purchase. Thissystematic strategy also eliminatesthe guesswork and reduces the emo-tional aspect inherent in all purchas-ing decisions, freeing purchasingmanagers from trying to time thehighs and lows of the market. Targetpurchases made on each member’sbehalf are based on sophisticatedmodeling that aims to lock-in higherpercentages of load when prices arelow compared to historical prices, asopposed to basic cost averagingapproaches that lock-in a fixed per-centage at regular intervals regardless

of market conditions. In addition to the purchasing

program, participants will receivecomprehensive monthly reportingon purchases and budget perform-ance. Reports include a forecast ofmember usage and cost, compar-isons of forecast to actual spend,and variance analysis. The objective of the program is to

provide a high degree of budget pre-dictability while using a prudent pur-chasing strategy which benefits fromthe increased purchasing power thatcomes from aggregation. Constella tionwill be providing more details to IMAmembers through direct mail in thenear future. For questions or addition-al information, please contact MarkFrech at the IMA (800-875-4462, ext.4203 — mfrech@ima-net.org) or visitCon stellation at constellation.com/IMAto learn more about this exciting newoffer exclusive to IMA members. n

Introducing a new energy purchasing pool for IMA members Program unique to the IMA provides new approach to managing cost and risk over time

By John Domagalski , Constellation

Constellation and the IMA launched the new IMAEnergy Purchasing Pool at the IMA board meetingheld at the Chicago Bears’ Halas Hall in June. Thisevent was made possible through the relationship

Constellation has with the Chicago Bears. Visit constellation.com/IMA to learn more about thisexciting addition to the IMA Energy Program.

20

duce this product because of thisrecent trend. Ethane production is already up

more than 25 percent as a result ofthe new natural gas drilling. Unlikemethane, that is used to produceheat and electricity, ethane is diffi-cult to transport so it is usually“cracked” close to the source. Dow

chemical is expected to restart anexisting ethylene plant soon andalso build a new one in Louisianaby 2017. Shell has announced thedevelopment of a new petrochemi-cal refinery in Pennsylvania and isalso considering a $10 billion invest-ment in a Louisiana plant that willconvert natural gas to diesel. On topof all this, liquid natural gas or LNGwill soon become a big export itemdue to the profit margin that U.S.gas producers can take advantage ofin the global market.

Many markets in the Far East,such as Japan and China, pay signifi-cantly higher prices to attract car-goes of natural gas to their shores.U.S. LNG terminals need to be retro-fitted with the capacity to liquefy thegas and send it out on a cargo ship.These facilities won’t be ready forthis process until 2015. Once theyare, they promise to be another con-tributing factor to the industrial“renaissance” that is underway as aresult of the surge in production ofthis cheap energy resource. n

NATURAL GASCont. from page 15

that the NTP cannot list styrene inthe RoC if it is a “possible” carcino-gen, and the studies relied upon bythe NTP reflect, at most, a possiblecausal connection. Several third par-ties, including environmental groupsand labor unions, have moved tointervene in the lawsuit to supportthe listing.The lawsuit remains pending

today. SIRC and Dart filed a lengthymotion for summary judgment onMay 18, 2012. The court set a dead-line of June 22, 2012, for the defen-dants to file a response brief and, ifthey desire, their own motion forsummary judgment. If SIRC and Dartprevail in the litigation, styrene willbe removed from the RoC and theaccompanying OSHA regulationswill no longer apply. In addition to contesting the

styrene listing in court, SIRC directlycontacted OSHA and requested astay of enforcement for all regula-tions that would be triggered by thelisting. On November 17, 2011,OSHA publicly responded andaddressed two of the three regula-tions discussed above: labelingrequirements and material safety datasheets. With respect to labelingrequirements, OSHA has maintaineda voluntary stay on its enforcementof 29 C.F.R. 1910.1200(f)(11) sinceMarch 20, 1998. In its November2011 letter, OSHA reaffirmed that thisvoluntary stay will remain in effectand, until further notice, that it willnot issue citations to companies thatfail to update their product labels.Notwithstanding this reaffirmation,OSHA cautioned that the stay onenforcement of the regulation does

not affect the underlying obligationsimposed by the regulation. In fact,OSHA explicitly recommended thatmanufacturers and distributorsupdate their product labels to avoidcitations in the event OSHA ends itsvoluntary stay of enforcement. OSHA also addressed the require-

ment that manufacturers update theirmaterial safety data sheets withinthree months of becoming aware ofnew hazard information for a chemi-cal, such as a new listing by theNTP. According to OSHA, it hasnever stayed its enforcement of thisprovision, and it will continue to

enforce it wherever violations arefound. OSHA did not addressemployee training requirements out-lined in 29 C.F.R. 1910.1200(h)(1).Therefore, as of today, manufac-

turers and distributors of styreneproducts are required to updatetheir labels and material safety datasheets to reflect the NTP’s listing ofstyrene in the RoC, and employersthat use styrene in the workplacemust update their hazard communi-cation programs accordingly. Even ifSIRC and Dart do not prevail in theirpending lawsuit, however, these reg-ulatory obligations may be relaxedin the near future. On October 25,

2011, OSHA submitted to the WhiteHouse Office of Management andBudget a proposed amendment tothe HCS that, if implemented, wouldalign the HCS with the GloballyHarmonized System of Classificationand Labelling of Chemicals (“GHS”)previously adopted by the UnitedNations and European Union. Underthe proposed amendment to theHCS, the listing of a chemical on theRoC will not automatically triggerOSHA’s hazard communication regu-lations. Instead, a “credible weight-of-the-evidence” assessment will beused to determine whether a givenchemical is a carcinogen or potentialcarcinogen. Recently, the EuropeanUnion performed a credible weight-of-the-evidence assessment and con-cluded that styrene is not a carcino-gen. Accordingly, it is possible thatOSHA’s proposed shift to the GHSwill eliminate the labeling, materialsafety data sheet and trainingrequirements for manufacturers, dis-tributors, and employers.But that day has not yet come. In

light of the shifting regulatory schemeand current legal challenges tostyrene’s listing by the NTP, it is cer-tainly possible that the regulatoryobligations currently in effect forstyrene will change in the nearfuture. Even with those potentialchanges on the horizon, however,manufacturers, distributors, andemployers must remember that theyhave current regulatory obligationswith respect to styrene. With a deci-sion in the SIRC lawsuit months oreven years away and with OSHA’sregulatory scheme in flux, companiesthat manufacture, distribute or usestyrene products are best served bycomplying with the current regula-tions to avoid potentially costly cita-tions and minimize their exposure toliability in personal injury litigation. n

STYRENECont. from page 11

In fact, OSHA explicitly recommended that manufacturers and distributorsupdate their product labels toavoid citations in the eventOSHA ends its voluntary stay of enforcement.

21

W hat do you do when a com-petitor informs you that theyhave a patent covering your

main product? Do you pay them afee for a license to avoid a lawsuit?Do you wait for them to sue you?Do you sue them, asking a Federalcourt for a judgment declaring thepatent invalid or not infringed byyour product? How do you decide?A recent court decision (3MCompany v. Avery Dennison Corp.,No. 2011-1339, (Fed. Cir. Mar. 26,2012)), provides you with more cer-tain guidance regarding at least oneresponse to the competitor — suingthe competitor for a court judgmentdeclaring the patent either invalid ornot infringed or both (pursuant tothe Declaratory Judgment Act, 28U.S.C. § 2201 et. seq.).

Under the Declaratory JudgmentAct, when an actual case or contro-versy within its jurisdiction exists, acourt may declare the rights andother legal relations of any interest-ed party seeking such declaration,whether or not further relief is orcould be sought. Put another way,you do not need to wait for yourcompetitor to sue you in order toestablish your freedom to make andsell your product relative to thatcompetitor’s patent.

In 2007, the U.S. Supreme Courtaddressed declaratory judgments inpatent cases, and guided that adeclaratory judgment is proper when“a substantial controversy, betweenparties having adverse legal inter-ests, of sufficient immediacy andreality to warrant the issuance of adeclaratory judgment” exists.MedImmune, Inc. v. Genentech,Inc., 549 U.S. 118 (2007). The Courtstressed that the controversy had tobe “real and substantial” and nothypothetical. Id. Since 2007, howev-

er, companies and lower courtshave struggled to define the practi-cal boundaries of an actual case orcontroversy. The Federal Circuit Court of

Appeals in Washington D.C., whichis responsible for adjudicatingappeals in patent cases, recentlyprovided useful guidance in thecontext of a controversy betweenlongtime competitors, 3M Companyand Avery Dennison (hereinafter,“3M” and “Avery,” respectively). Inearly 2009, counsel for Avery tele-phoned counsel for 3M and statedthat a specific 3M product “mayinfringe” certain Avery patents andthat “licenses are available.” Twodays later, 3M contacted Avery anddeclined Avery’s license offer. Atthat time, Avery stated that they hadanalyzed the 3M product and would

provide 3M with its analysis com-paring the 3M product to thepatents. 3M never received thatanalysis from Avery. More than one year later, in June

2010, 3M sued Avery asking a dis-trict court for a judgment that itsproduct does not infringe the Averypatents and that the patents are notvalid. The district court found that3M did not allege a controversybetween itself and Avery that thecourt could adjudicate and, accord-ingly, the court dismissed the case.On appeal, the Federal Circuitreturned the case to the district courtfor more fact finding on whether ajusticiable controversy exists, anddetermined that if the district courtfinds the facts are indeed as allegedby 3M (and as briefly summarized

see JUDGMENT page 22

Management Techniques

TIFFANY D. GEHRKE

To declare or not to declare (judgment): That is the question

Tiffany D. Gehrke is an attorney with Marshall, Gerstein & Borun LLP in Chicago. Tiffany can be reached at 312-474-6300 or by email attgehrke@marshallip.com Marshall, Gerstein & Borun LLP is an IMA member company.

22

above), then such a controversyexists and the lawsuit may proceed.The court focused on the nature

of the contacts between 3M andAvery regarding these particularpatents and product. Specifically, theFederal Circuit held that to establishan actual case or controversy, “moreis required than a communicationfrom a patent owner to anotherparty, merely identifying its patentand the other party’s product line.”As an example of the elusive “more”description, the court advised thatAvery “initiated the communicationsand, without provocation, assertedAvery’s patent rights and representedthat claim charts were forthcoming.”In addition, the court distinguishedthis case from another prior casewhere no controversy existedbecause in that other case one partyto the communication lacked rele-vant decision making authority andhad not evaluated the potentialinfringement. In contrast, here, thecommunications were between theChief Intellectual Property Counselof each company. Despite Avery’s assertion that its

communications with 3M were “pass-ing remarks made informally over thetelephone,” the court found thatAvery’s “informal” use of the term“may infringe” instead of “doesinfringe” was immaterial in light ofAvery’s offer to license the patentsand its assertion that it would pro-vide analysis in the form of chartsexplaining how the patents coveredthe 3M product. In addition, the his-tory of the litigious conduct betweenthe same parties for different patentsand products was merely “equivocal”in determining whether a case orcontroversy exists. Likewise, the lackof a deadline for 3M to “respond” toAvery — especially in light of the factthat Avery never provided its analysisto 3M — did not weigh against find-ing a case or controversy as well. This case provides more certain

guidance in determining whether youmay be able to maintain a lawsuitwhen your competitor alerts you to itspatent. In addition to analyzing thefacts of your situation to determinewhether a case or controversy exists,you should also consider the benefitsand drawbacks to filing a complaint

pursuant to the Declaratory JudgmentAct. Taking control and filing a com-plaint permits you to choose the tim-ing and court location of the com-plaint rather than being at the whimof your competitor. However, youmay be needlessly increasing yourexpenses through the cost of litigationfor a dispute that may never havematerialized into litigation if yourcompetitor did not file a lawsuitagainst you. Nonetheless, declaratoryjudgment actions are a powerful tool— and because of the FederalCircuit’s recent guidance — compa-nies perhaps will have a bit more pre-dictability whether a controversy existsfor a declaratory judgment action.

Top takeawaysKeep these in mind when your

competitor contacts you regarding itspatent portfolio. Likewise, use thesetakeaways to avoid enabling yourcompetitor to bring a declaratoryjudgment action against you regard-ing your patents.

Don’t jump the gun. You needmore than just a communicationfrom your competitor that merelyidentifies its patent and your productline to have a case or controversy.

The devil is in the details. Ifyour competitor specifically identi-fies its patent(s) in relation to yourspecific product, a case or contro-versy likely exists. A claim chartcomparing the patent to the specificproduct is likely sufficient.

No solicitation. You cannot cre-ate declaratory judgment jurisdictionfor the purposes of asking a court todeclare your competitor’s patenteither invalid or not infringed orboth through mere informal contactswith your competitor where the con-tacts are not with a relevant decisionmaker or are not regarding the spe-cific patent/products at issue.

Don’t rely on Abracadabra!Your competitor need not use themagic word “infringe” for you tohave declaratory judgment standing,rather, the totality of the circum-stances determines whether a suffi-cient case or controversy exists.

Once litigious, always litigious(not necessarily). Prior litigationbetween you and your competitormay be relevant to a current contro-versy; however, if the previous con-flicts related to unrelated patents cov-ering different products, then it willlikely provide little weight to whethera case or controversy exists for thepatents and products at issue.

Tick-Tock, Tick-Tock. If yourcompetitor gives you a deadline torespond to its license offer, thatcould help show a sufficient imme-diacy exists. Conversely, a lack ofdeadline does not negate the exis-tence of a case or controversy.

DISCLAIMER: The views in thisarticle are those of the author, andnot of Marshall, Gerstein & BorunLLP or its clients. The contents of thisarticle are not intended as, andshould not be taken as, legal advice,legal opinion, or any other advice.Please contact an attorney for adviceon specific legal problems.

Marshall, Gerstein & Borun LLP, afull-service intellectual property (IP)law boutique, is exclusively focusedon intellectual property law, and pro-tects, enforces, and transfers theintellectual property of its clients inmore than 100 countries on six con-tinents. The Firm delivers perspectiveand guidance where science, lawand business converge. Nearly half ofthe Firm’s professionals have been in-house as general counsel, patentcounsel, technology transfer man-agers, scientists, engineers, or con-sultants, and offer depth of talentand seasoned experience in devisingand executing intellectual propertystrategy and comprehensive IP solu-tions. The Firm represents Fortune250 corporations, multinationalbusinesses, start-up organizations,and non-profits. Marshall, Gerstein &Borun LLP is ranked as a top intellec-tual property law firm by ChambersUSA, U.S. News & Best Lawyers®,Corporate Counsel, Managing IP,Fortune, Intellectual Property Today,and Intellectual Asset Managementmagazines. Learn more atwww.marshallip.com. n

JUDGMENTCont. from page 21

. . . declaratory judgment actions

are a powerful tool — and because

of the Federal Circuit’s recent

guidance — companies perhaps

will have a bit more predictability

whether a controversy exists for a

declaratory judgment action.

Constellation — Over 10 years as the IMA’s endorsed energy supplier

23

C ancer is possibly the mostmenacing word in the Englishlanguage. No person wants to

be diagnosed with it, no one wantsa loved one to be diagnosed with it,and no company wants its valuedfamily of employees or consumersto be diagnosed with it, regardlessof the cause. In the world of litiga-tion, cancer comes with allegationsof blame. An individual (or her sur-viving heirs) may search for a causefor her cancer and not only beinfluenced but also potentially mis-led by the internet, television, attor-neys, or mere rumor that there isbut one or a short list of causes forthe cancer. Consequently, the indi-vidual or family members conclude,often based on faulty information,that someone is to blame. Often,what follows is a lawsuit allegingthat exposure to a given substancecaused an individual’s cancer viapersonal use of a product; generalpremises based exposure to achemical, fiber, or other agent; orexposure to a product as abystander or second-hand exposurefrom a friend or family member. Inthis world of mass communication,and sometimes mass-misinformation,it is prudent to remember the linewe have all heard “it runs in thefamily.” This is not just an old say-ing that our grandparents and greatgrandparents utilized to explain aunique situation, but as we continueto learn… is often fact.The fact is cancer development is

a complicated process. While expo-sure to certain carcinogens mayincrease an individual’s risk for acertain type of cancer, “the dosemakes the poison.” If faced with alawsuit alleging that low-level expo-sure to a particular carcinogen was

the cause of someone’s cancer,check out the family history. It mayeven be prudent to look into simplegenetic testing of the individual. Theresults may truly reveal just what“runs in the family.”The phrase “it runs in the family”

is a simple way to say that a familyhas a particular predisposition togenetic errors that may lead to a par-ticular cancer. Basically, cancer isuncontrolled cell growth. The geneswe get from our direct blood rela-tives may place us at risk for thedevelopment of cancer. There aretwo main types of genes that relate

to cancer oncogenes and tumor sup-pressor genes. An oncogene can pro-mote out-of-control cell growth andlead to cancer. Tumor suppressorgenes are genes that, if working cor-rectly, slow down cell division,repair DNA errors, or tell a cell whento die in its natural course. When atumor suppressor gene fails to workproperly, cells may grow out of con-trol and lead to cancer. Inheritedgenetic mutations and errors maymake someone more susceptible togenetic errors causing the develop-

Human Resources

ERIC P. HALL

It runs in the family: Genetics and cancer

Eric P. Hall is a member of the law firm HeplerBroom LLC. Eric may be reached at 618-656-0184 or Eric.Hall@heplerbroom.com.HeplerBroom, LLC is an IMA member company.

see GENETICS page 26

24

Constellation — Visit www.newenergy.com/ima

Member News

GE Transportation choosesChicago for global headquartersCentral Location will allow businessto better serve global customers andbring 150 Jobs to Chicago by 2014Chicago Mayor Rahm Emanuel

and GE Transportation President andCEO Lorenzo Simonelli announcedrecently that the company has cho-sen Chicago as its global headquar-ters. The move will be effectiveonce the location for office spacehas been finalized. “This is a banner day for the City

of Chicago, and proof positive thatour central location, business-friendlyclimate, and world-class talent willattract the best companies in theworld,” said Mayor Emanuel. “GETransportation is a top-level, world-wide company that will be using itsChicago headquarters as a centrallocation from which to do businessaround the globe. This is a major winfor the City of Chicago, its businesscommunity, and its residents, and is aharbinger of growth to come.”“We have transformed GE

Transportation from a NorthAmerican rail company to a trulyglobal transportation business,” saidSimonelli. “Chicago allows us tomore efficiently reach and serve cus-tomers around the world in the rail,mining and marine industries.”GE Transportation will relocate

about 50 people from Erie toChicago. These employees are pri-marily associated with the compa-ny’s global support functions and itsservices operations. The companyanticipates having a headquartersstaff of approximately 150 inChicago by 2014 as the businesscontinues to grow. “It is our privilege to welcome GE

Transportation to the great state ofIllinois and the great city of Chicago,”said Governor Pat Quinn. “Chicago isone of the most important rail andtransportation hubs in the nation.Coming to Chicago, GE Transpor -tation will be positioned to competefiercely in the U.S. and all over theworld to grow in the rail, mining andmarine industries. GE Transportationwill build on its century-old locomo-

tive heritage of excellence in Erie,and its more than 5,500 employeeswill continue to manufacture world-class locomotives there.” GE Transportation, a unit of GE,

builds equipment that moves the rail,mining and marine industries. GETranspor tation employs approximately12,000 employees worldwide. Formore information visit the company’sWebsite at www.getransportation.com.GE is an IMA member company.

n n n

Cat lift trucks recognized as a top green provider

Food Logistics, a food and bever-age supply chain publication, namedCat Lift Trucks a 2012 “Top GreenProvider” based on the manufacturer’sindustry-leading lineup of electric lifttrucks that offer zero exhaust emis-sions and low energy consumption.Each year, Food Logistics invites

its readers to nominate a providerthat has developed pioneering, inno-vative and creative products, servic-es and programs to help their cus-tomers in the food service industryachieve sustainable or “green” goals.“We’re honored to have Cat Lift

Trucks recognized by Food Logisticsas a Top Green Provider,” said KentEudy, vice president of sales andmarketing, Cat Lift Trucks. “We arededicated to providing high-quality,energy-efficient products for thefood and beverage industry, whichmakes this recognition an especiallysignificant honor.”Cat Lift Trucks electric battery-

operated lift trucks provide a cleanenvironment for indoor applications,including refrigerators and freezersin grocery and food distribution cen-ters. Equipped with the power to

last up to two shifts on a single bat-tery charge in most applications, theelectric pneumatic tire Cat® lift trucksdo not consume fossil fuels nor emitdangerous greenhouse gases, mak-ing the lift truck series ideal for thefood industry.The publication also recognized

Cat Lift Trucks development of theLift Truck Cost Comparison Tool,which factors in a lift truck’s totalcost of ownership — acquisition,fuel and maintenance — with returnon investment. This tool allows cus-tomers to easily identify the mostefficient lift truck solution for theirmaterial handling application. Withthe Lift Truck Cost Comparison Tool,businesses can evaluate and com-pare operation costs in dollars forfuel or electrical energy. For moreinformation on Cat lift trucks, visitwww.cat-lift.com or call 800-228-5438. Caterpillar has been an IMAmember since 1922.

n n n

Energy Department invests $55 million to spur developmentof transformational manufacturing technologiesAs part of the Obama

Administration’s effort to spark arenaissance in American manufac-turing, the Energy Departmentrecently announced it will investmore than $54 million in 13 projectsto develop innovative technologiesand materials for the industrial sec-tor. This investment will help toprovide American manufacturerswith the cutting-edge tools, tech-niques and processes they need tocompete successfully in the globalmarketplace.According to U.S. Energy Secretary

Steven Chu, the 13 competitivelyselected projects demonstrate theEnergy Department’s commitment toclean energy technology. “When itcomes to clean energy,” he said, “[it]should be invented in America, madein America, and sold around theworld.” By investing in these tech-nologies, the Department is support-ing “an economy built on American

25

manufacturing, American energy, andskills for American workers.”Dr. Leo Christodoulou, Program

Manager for the Energy Depart ment’sAdvanced Manufacturing Office(AMO), noted that “Manufacturingconverts a wide range of raw materi-als, components and parts into fin-ished goods that meet market expec-tations. These projects are an exam-ple of how AMO partners withindustry, small business, universitiesand other stakeholders to pursueemerging technologies that canexpand or create new markets —generating high-quality domesticmanufacturing jobs and enhancingU.S. competitiveness.”The projects selected for award

negotiations represent research anddevelopment ranging from the earlystages of applied research, or proofof concept, up to laboratory testingor prototype verification. All of thetechnologies are at a pre-competitivestage of development, so the techni-cal results will be well positioned toprovide benefits across a broad sec-tion of the U.S. economy. Bystrengthening the competitiveness ofAmerican manufacturing, these proj-ects will help lay a foundation for aneconomy built to last and a Nation incontrol of its energy future.The Energy Department’s Office

of Energy Efficiency and RenewableEnergy accelerates development andfacilitates deployment of energy effi-ciency and renewable energy tech-nologies and market-based solutionsthat strengthen U.S. energy security,environmental quality, and econom-ic vitality. Find out more about theDepartment’s work to partner withindustry, small business, universities,and other stakeholders to identifyand invest in advanced manufactur-ing technologies with the potentialto create high-quality domestic jobsand enhance the global competitive-ness of the United States. And learnmore about the AdvancedManufacturing Partnership, a govern-ment-wide effort to transformadvanced manufacturing in theUnited States. For more information,visit http://www.eere.energy.gov.

n n n

Aviation and clean technologyleaders launch Midwest AviationSustainable Biofuels InitiativeUnited Airlines, Boeing,

Honeywell’s UOP, the ChicagoDepartment of Aviation and theClean Energy Trust recentlyannounced the formation of theMidwest Aviation SustainableBiofuels Initiative (MASBI),designed to advance aviation biofu-el development in a 12-state regionholding significant promise for bio-mass feedstock, technology devel-opment, job creation and sustain-able commercialization. MASBI willdeliver a comprehensive evaluationof the region’s biofuel potential anda plan to support regional andnational needs in a responsiblemanner.“In just a few short years, avia-

tion biofuels have developed from ahopeful vision of the future to anexciting reality of more than 1,500passenger flights flown withadvanced biofuels,” said JimmySamartzis, managing director ofGlobal Environmental Affairs andSustainability for United. “Our indus-try is committed to advancing sus-tainable biofuels, and United isproud to launch MASBI with ourpartners to define appropriate solu-tions to make alternative fuel avail-able at commercial scale, unlock theMidwest’s economic potential foradvanced biofuels and secure a sus-tainable future for aviation.”With the Midwest’s strong agricul-

tural, financial and academic institu-tions, and large aviation industrypresence, MASBI Steering Committeemembers view the region as criticalfor biofuel development. Airlinesoperating in the Midwest transportmore than 234 million passengersand consume nearly three billiongallons of jet fuel annually.“Aviation’s ability to connect theworld to people, goods and servicesthrough the heartland of the countrycontributes significantly to thenation’s economy and job growth,”said Billy Glover, vice president ofEnvironment and Aviation Policy forBoeing. “Biofuels are a critical partof commercial aviation’s long-termfuel-diversification strategy, enablingsustainable growth and improving its

overall environmental performance.”MASBI invites a diverse set of

stakeholders, including airlines, fuelproducers, feedstock growers, logis-tics providers and investors to addtheir knowledge and expertise to theeffort. “The Midwest is ready to leadthe nation in developing and usingadvanced aviation biofuels,” saidRosemarie S. Andolino, commission-er of Chicago Department ofAviation. “Our region has significantfeedstock availability and viability;clean technology leaders; an activefunding community of large banks,venture capital and private equityinvestors; airports that are alreadycommitted to sustainable practicesand support the greater use of bio-fuels in aviation; policymakers whoadvance biofuels as a priority; andend-users committed to action.”“When you consider the U.S. avi-

ation industry uses more than 20 bil-lion gallons of fuel each year, theenvironmental and economic poten-tial of commercializing biofuels tech-nology becomes truly game-chang-ing,” said Amy Francetic, executivedirector of Clean Energy Trust.The Midwest Aviation Sustainable

Biofuels Initiative (MASBI) bringstogether partners from across thevalue chain to promote the develop-ment and use of biofuels. ItsSteering Committee is comprised ofthe following founding members —United Airlines, Boeing, Honeywell’sUOP, the Chicago Department ofAviation and the Clean Energy Trust.To learn more about MASBI, visitwww.masbi.org. United Airlines andBoeing are IMA members.

n n n

Member News

Advertiser IndexCitibank ...........................ibc

Constellation ............18 & bc

Hepler-Broom, LLC.............26

Heritage-Crystal

Clean, LLC ....................ifc

IMTS 2012 ........................10

McGladrey ...........................5

Sikich ...............................28

26

ment of oncogenes and the malfunc-tion of tumor suppressor genes. Medicine may not be curing can-

cer as fast as technology seems tobe changing our phones, but makeno mistake medical professionalsare learning more about cancer, thegenetics of cancer, and how to treatcancer every day. Scientists haverecently discovered, for instance,that mutations of the tumor suppres-sor genes called BRCA1 and BRCA2may have harmful mutations thatcan be inherited, greatly increasingthe risk of developing breast and/orovarian cancer. Similarly, recentstudies have determined that aninherited mutation of the BAP1tumor suppressor gene may predis-pose individuals to uveal melanoma,lung cancer, meningioma, andmalignant mesothelioma. Genetic testing may be of great

use in defending causation claimsby plaintiffs in litigation. Moreimportantly, identifying and under-standing the nature and implicationsof genetic errors associated withoncogenes and tumor suppressorgenes may help scientists not onlyto identify persons at risk for agiven cancer, but also lead to fur-ther advances in the treatment andcure of certain cancers. n

GENETICSCont. from page 23

Member News

Coming Soon . . . MyTax IllinoisThe Illinois Department of

Revenue (IDOR) is currently develop-ing MyTax Illinois, an online accountmanagement program for taxpayers.MyTax Illinois will provide all elec-tronic services in one centralizedlocation on IDOR’s website.Taxpayers will have a single sign-onthat will work for all tax types. MyTax Illinois will be deployed

in phases. Beginning in September2012, IFTA registration, filing, pay-ment, and account management;sales and use tax return filing, pay-ment, and account management;and new business registration for alltax types administered by IDOR willbe available. Some of the features that will be

available in MyTax Illinois includeassigning user access rights to thetax account, viewing registrationinformation, filing most returns andpaying electronically, completingannual IFTA registration, viewing fil-ing and payment frequency sched-ules, viewing and scheduling pay-ments, and viewing correspondenceand return information. For more information, visit

IDOR’s website at tax.illinois.gov.

n n n

Sikich honored as one of the“Best Places to Work” in IllinoisSikich LLP, a leading accounting,

advisory, technology and managedservices firm, was recently named asone of the 2012 Best Places to Work

in Illinois. Recognized at the BestPlaces to Work in Illinois awardsceremony on May 17, Sikich is oneof only 50 companies to receive theaward, which honors achievementsin business process and operationsexcellence, community service,workplace environment and employ-ee engagement practices.“Our dedicated employees con-

tinue to thrive and identify bestpractices not only in their work butalso by continuing to make Sikich agreat place to work and developtheir careers,” said Janel O’Connor,Director of Human Capital. For more information on Sikich,

visit http://www.sikich.com. Sikich isan IMA member company.

n n n

27

The Illinois Manufacturer is underwritten by Constellation — An Exelon Company

On October 22, 2004, PresidentBush signed into law TheAmerican Jobs Creation Act of

2004 (the “Act”) as amended. TheAct contains sweeping changes tothe tax landscape for businesses inthe manufacturing areas. Many peo-ple do not realize that the Act pro-vides significant tax advantages forall factory and manufacturing busi-nesses.The Act is perhaps best known

for changing the playing field in thefilm and television industries by cre-ating tax relief for those taxpayerswho invest in qualifying film andtelevision projects. Less widelyknown is that the Act provides taxincentives and relief, under Section199, for those individuals, compa-nies and small businesses who pro-duce and/or manufacture productsor tangible property. This articlehighlights what production activityfalls under the Act, who qualifiesunder the Act, and the incentivesthat are available.To qualify as Production Activity

and be entitled to tax relief, onemust produce, grow, or extract aneligible item. Section 199 of the Actdoes not apply to sole proprietors,but can be passed through to indi-vidual owners by companies that areSubchapter S corporations, partner-ships, and LLCs not taxed as corpo-rations. The Production Activity mustbe conducted in whole or “signifi-cant part” in the United States and itmust produce tangible property. Thebusinesses that manufacture tangibleProperty are very wide and exten-

sive. The list is too expansive torecite. The end of the spectrum ofqualifying companies might be acompany in the diamond industrythat only provides the polishing ofdiamonds. The polishing itself cre-ates a manufacturing business. The tax benefits for your compa-

ny under the Act for QualifyingProduction Activity are as follows:A business which engages in

Qualifying Production Activity begin-ning 2010, and beyond, is entitled totake a nine percent deduction of thelesser of the following: (a) netincome from the QualifyingProduction Activity, or (b) taxable

income (which is determined with-out regard to the new deduction).However, you must deduct net

operating carry over losses from rev-enue before you can apply the per-centage deductions. There is current-ly no carry forward on any unusedtax relief. As an example of such, ifyou manufacture 100 widgets in theUnited States and sell all 100 widg-ets beginning 2010 and receive$1,000 of net income or taxableincome, you will pay tax based on$910 of taxable income (nine per-cent deduction).

see JOB CREATION ACT page 28

Government Initiatives

HAL “CORKY” KESSLER

Manufacturer benefits under the AmericanJob Creation Act of 2004, as amendedA legal look at the tax changes that resulted from the American Jobs Creation Act and the tax saving benefits available for the manufacturing industry

Hal “Corky” Kessler is an attorney with Chicago-based Deutsch, Levy & Engel, Chartered. The firm offers this article not as a substitute forlegal advice. Kessler can be reached by email at kessler@dlec.com and by phone at 312-346-1460. Deutsch, Levy & Engel, Chartered, isan IMA member company.

28

If a company performs 20 per-cent or more of QualifyingProduction Activity within theUnited States, that company mayinclude all indirect costs and otherindirect expenses related to thatactivity (such as salaries) but maynot include packaging, shipping andfreight in the calculation of revenuequalifying for the deduction.What is probably not well known

is that real estate developers,builders, contractors, and sub-con-tractors engaged in building orimproving real estate may qualifyunder the Act as companies thathave Qualifying Production Activity.The Qualifying Production Activitycan be performed on residential orcommercial real estate. To the sur-prise of many, the benefits underthe Act even cover architects andengineers who provide services toQualifying Production Activity in thebusiness areas of real estate devel-opers, builders, contractors and sub-

contractors engaged in building orimproving real estate. Section 199will apply to net profits or taxableincome from rentals, leases, licensefees and exchange and other dispo-

sition of Qualifying ProductionActivity income in the various areasof the real estate industry asdescribed herein. However, thevalue of any real property (land)

which is part of the sale, dispositionor exchange does not qualify asQualifying Production Activityincome. The recommendation is thatthere should be a separate appraisalto determine the land value andthen deduct that value from theincome received. Only the balanceattributable to improvements madewith Qualifying Production Activitywill be subject to the deductionsunder Section 199.

Only one company can claim theQualifying Production Activity rev-enue under the Act. You can, howev-er, split the benefits. If Company Acontracts with unrelated Company Bto manufacture 100 widgets, only oneof the companies can take advantageunder the Act. The test is who bene-fits and who carries the burdens ofthe property manufactured. Underthis example, Company A, because itpaid for the widgets, can claim thebenefits under the Act. However, thisshould not be left for interpretationor misunderstandings. It would bebetter to have this issue discussedand addressed at the contract stage.

Some other businesses whichmay have Qualifying ProductionActivity include caterers and restau-rants who make or prepare foodproducts and who cater or deliveroff site, music, film, video, naturalgas, water and printing companies,software developers and bakers,baking companies and bakingdepartments in supermarkets, farm-ers and companies that provide stor-age and handling for farm products.It also applies to many other typesof companies and businesses.

One must evaluate their businessand check with their tax advisorsand attorneys as to whether theirbusiness activity qualifies and, if itqualifies, whether it qualifies inwhole or in part as QualifyingProduction Activity. If some, but notall of your business revenue quali-fies, you must be able to identify thequalifying income and separate theQualifying Production ActivityRevenue from non-qualifying rev-enue. This will avoid difficulties sep-arating the revenue at a later date.

The American Job Creation Act of2004, as amended, has providedmany avenues of benefits and areasof tax relief for individuals and com-panies. It is definitely a matter worthtalking about with your attorney andaccountant. n

JOB CREATION ACTCont. from page 27

A business which engages inQualifying Production Activitybeginning 2010, and beyond, isentitled to take a nine percent(9%) deduction of the lesser ofthe following: (a) net incomefrom the Qualifying ProductionActivity, or (b) taxable income(which is determined withoutregard to the new deduction).

29

eral rule provisions. On December23, 2011 the U.S. EPA re-proposedthe rule. However, on January 9,2012, the U.S. Court of Appeals forthe D.C. Circuit vacated the U.S.EPA’s May 18, 2011 notice thatdelayed the effective dates of theBoiler MACT rule. This means thatthe March 21, 2011 rule is in forcethough U.S. EPA is expected to issuethe revised rules that were proposedDecember 23, 2011 this summer. The Boiler MACT rule proposed

in December 2011 will impact morethan 200,000 boilers used in manu-facturing, processing, mining, refiningand other industries, as well as com-mercial boilers used in malls, apart-ments, restaurants and hotels. About14,000 of these boilers are consideredmajor while about 187,000 are locat-ed at smaller facilities such as hotels,hospitals, and commercial buildings.This rule does not apply to majorcommercial electricity generators,which are subject to the rulesdescribed previously in this article.

CommentsIt should be clear from the pre-

ceding summary, that there is sub-stantial uncertainty surroundingefforts to further control powerplants and industrial, commercial,and institutional boilers particularlythose using coal as fuel. The regula-tions themselves are often very com-plex and challenging and the uncer-tainty caused by the legal wranglingand delays simply adds to the confu-sion and difficulty of planning. Thescope and stringency of the regula-tions certainly can lead to the con-clusion that the future of coal-firedboilers will be difficult to predict. This was illustrated to an extent

in the results of the recent (May 18,2012) capacity auction conducted byPJM Interconnection. PJM is aregional transmission organization(RTO) that coordinates the move-ment of wholesale electricity in allor parts of Delaware, Illinois,Indiana, Kentucky, Maryland,Michigan, New Jersey, NorthCarolina, Ohio, Pennsylvania,Tennessee, Virginia, West Virginiaand the District of Columbia. PJM’sauction established contracts withpower producers who committed toprovide electricity between June 1,

2015 and May 31, 2016. This is thetime period when compliance willbe expected for many of the regula-tions we have been considering inthis article. PJM was able to procuresufficient capacity resources to meetprojected need and obtained arecord amount of new generationwith most of it being from naturalgas. The base price was $136 perMW which is only slightly higherthan the $126 per MW price paid forJune 1, 2014 through May 31, 2015.However, this is substantially higherthan the ~$16 per MW paid for June1, 2012 through May 31, 2013 andthe ~$28 per MW for June 1, 2013through May 31, 2014. According to Andy Ott (PJM Senior

Vice-President of Markets), “Capacityprices were higher than last year’sbecause of retirements of existingcoal-fired generation resulting largelyfrom environmental regulations whichgo into effect in 2015.” While thebase price was $136 per MW theprice in much of the mid-Atlantic willbe $167 per MW and in northernOhio it will be $357 per MW. “The retirements (of coal-fired

units) impacted northern Ohio to alarger extent than the rest of PJM forseveral reasons, including inherenttransmission restrictions and the levelof retirements in that area relative tothe rest of PJM,” Ott continued.Capacity prices typically repre-

sent a 10-15 percent portion of theconsumer price of electricity but theprice for 2014-2015 in relation to thepresent time ((2012-2013, 2013-2014)is part of the basis for the increases.The Chicago Tribune reported (Julie

Wernau, May 17, 2012): “Residentialelectricity prices are expected tospike by more than 10 percentbeginning in 2015, with consumerspaying between $150 and $330 ayear more than this year, as coalplants, the least expensive producersof electricity, continue to close.” There are similar operational and

cost pressures and uncertainties fac-ing owners of industrial, commercialand institutional boilers that arepowered by coal.

ConclusionBusinesses with affected boilers

are now faced with difficult deci-sions regarding their choice of com-pliance options. These choices arebeing made more complex by theregulatory uncertainty that nowexists in contemporary decisionmaking. Boiler owners can chooseto comply with these regulationsthrough the use of existing controls,shifts in power dispatch (electricgeneration only), purchase ofallowances (electric generationonly), fuel switching, retrofittingunits with pollution controls, orretiring uneconomic units. It is notunreasonable to expect that a leadtime of four years could be neededfor installing controls not includingregulatory approvals and assumingthat necessary labor and materialsare available.Consumers of electric power

should be prepared to be facedwith rising costs as less coal pow-ered generation is available andrenewable energy and natural gasmakes up a greater part of the elec-tric generation capacity. n

EPA REGULATIONSCont. from page 8

Breakfast Briefings . . .Tuesday, September 18, 2012Where Have All My Workers Gone?Join Ken Mall and Kevin Watson of EDSIConsulting and get the answers — 8:00-11:00 am, Ditka's Restaurant, OakbrookTerrace. For more information or to register:http://events.r20.constantcontact.com/regis-ter/event?oeidk=a07e5ynwa4y8fd53ea9

Tuesday, October 9, 2012What Every Employer Should Know About Wage & Hour ComplianceDiane E. Gianos, partner in the Labor &Employment Law Group of Ice Miller, LLP,will lead this interactive briefing — 8:00-11:00 am, Mon Ami Gabi Restaurant, OakBrook. For more information or to register:http://events.r20.constantcontact.com/regis-ter/event?oeidk=a07e5yo32qp0e4c4d12

IMA Seminars and Events — Fall 2012

WEDNESDAY, NOVEMBER 14, 2012 — IMA'S ANNUAL SALES & USE TAX SEMINARSAVE THE DATE . . . Details to come.

FRIDAY, DECEMBER 7, 2012 — IMA ANNUAL LUNCHEON — SAVE THE DATEFour Seasons Hotel • Chicago

For information on any of the events listed, contact Kimberly McNamara at kmcnamara@ima-net.org, 630-368-5300, ext. 2109.

www.ima-net.org/calendar-of-events

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July 30, 2012IMA-MIT EVENT: Customer ServiceSkills & Excellence

July 31, 2012IMA-MIT EVENT: Excel Formulas &Functions & Excel Pivot Tables MadeEasy

August 7, 2012IMA-MIT EVENT: Effective PresentationSkills

August 8, 2012IMA-MIT EVENT: Excel Formulas &Functions & Excel Pivot Tables MadeEasy

August 13, 2012IMA-MIT EVENT: AssertiveCommunication Skills: Communicatingwith Authority & Impact

August 20, 2012IMA-MIT EVENT: Time Management &Personal Effectiveness Skills

August 27, 2012IMA-MIT EVENT: Effective BusinessWriting Skills

August 29, 2012IMA-MIT EVENT: Excel Formulas &Functions & Excel Pivot Tables Made Easy

September 6, 2012IMA-MIT EVENT: Project ManagementSkills for Non Project Managers

September 10, 2012IMA-MIT EVENT: Essential LeadershipSkills for Front Line Managers &Supervisors

September 18, 2012IMA Breakfast Briefing:Where Have All My Workers Gone?Join Ken Mall and Kevin Watson of EDSIConsulting and get the answers! — 8:00-11:00 am, Ditka's Restaurant, OakbrookTerrace. For more information, or to register:http://events.r20.constantcontact.com/regis-ter/event?oeidk=a07e5ynwa4y8fd53ea9

September 19, 2012IMA-MIT EVENT: Essential InternalTraining Skills & Techniques

September 27, 2012IMA-MIT EVENT: Effective PresentationSkills

October 4, 2012IMA-MIT EVENT: Coaching & CounselingSkills for Improved Performance

October 9, 2012IMA Breakfast Briefing:What Every Employer Should KnowAbout Wage & Hour ComplianceDiane E. Gianos, partner in the Labor &Employment Law Group of Ice Miller, LLP,will lead this interactive briefing — 8:00-11:00 am, Mon Ami Gabi Restaurant, OakBrook. For more information, or to register:http://events.r20.constantcontact.com/regis-ter/event?oeidk=a07e5yo32qp0e4c4d12

November 14, 2012SAVE THE DATE . . .IMA's Annual Sales & Use Tax SeminarDetails to come.

December 7, 2012SAVE THE DATE . . .IMA Annual LuncheonFour Seasons Hotel, Chicago

2012 Calendar of events

ANDERSON BRECONRockford, Illinois

BETTER BUSINESS PLANNING, INC.Itasca, Illinois

THE CARA PROGRAMChicago, Illinois

CGN BLACKWELL GLOBALCONSULTING, LLC

Chicago, Illinois

CLUB COLORS, INC.Schaumburg, Illinois

CMIOak Park, Illinois

EALLIANCE CORPORATIONNaperville, Illinois

EXCEL COLOR CORPORATIONElk Grove Village, Illinois

FREEBORN & PETERSChicago, Illinois

INNOVAXIS MARKETING CONSULTINGChicago, Illinois

JEFFERSON COUNTY DEVELOPMENT COUNCIL

Mt. Vernon, Illinois

KOPPERS, INC.Cicero, Illinois

MULTILINGUAL CONNECTIONSChicago, Illinois

REYES ASSOCIATES, INC.Evanston, Illinois

STRATEGEX INC.Chicago, Illinois

Welcome to the IMA

New IMA members

Visit http://www.ima-net.org/calendar-of-events for information, pricing, registration, etc., related to all IMA special events and IMA-MIT training events

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