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The New Buy Clean California Act – Good Intentions with Unintended Consequences

on September 5, 2018

In the Fall of 2017, the California Legislature passed, and Gov. Brown signed into law, Assembly Bill 262 (AB 262), known as the Buy Clean California Act.  This law has the intentions of bringing climate change and global warming potential into play when choosing and procuring construction materials for large, state-funded infrastructure projects.  Any project in California that receives state funding is affected by this law.  We all know that the manufacture and use of construction materials can have a significant impact on global warming because of the carbon foot print involved.  By requiring this to be considered when selecting and procuring construction materials, California is taking a huge progressive step in this first-of-its-kind law.  Other States are also starting to look at this issue as well.

While the intent of this law is positive, there are some troubling aspects which are coming to light.  First and foremost, the law does not evenly affect all common construction materials.  AB 262 specifically requires a successful bidder on a state funded project to submit an environmental product declaration (EPD) —a product’s climate-change profile—for “eligible materials.”   The “eligible materials” listed in the bill are carbon-steel rebar, flat glass, mineral-wool board insulation and structural steel.  Notice anything missing?  Two of the most prevalent building materials in California and the US, for that matter, are excluded:  concrete (cement) and wood.   While I am not going to enter the ongoing debate about which materials contribute the most global warming potential, I will say that not including ALL construction materials in this bill seems to undermine the very purpose of this bill: put pressure on the manufacturers of construction materials to “green up”.  We all know that “going green” does cost money because of the investments required to produce products in a more environmentally-friendly way, but its more about the greater good of our planet and climate, than costs.

In an article posted in October, 2017 on the website Code Watcher, it was noted by Assembly Member Rob Bonta (D-Alameda), the bill’s lead author, “there was “significant opposition” from the cement and concrete industries, and also from Caltrans, who argued that compliance would significantly increase their concrete costs.”  So, the concrete and cement industries were able to wiggle out of the bill because it would have cost them too much.  What about their steel costs?  Isn’t rebar, which is included in this bill, going to cause a cost impact because of this?

Interestingly, in that same article, Kathryn Phillips, of Sierra Club California, is quoted, “The Department of General Services and the Department of Finance are concerned that it could lead to millions in increased costs.  There’s no reason that the price should have to go up. Unless what they’re admitting [is] that the state has routinely gone out and bought the cheapest and dirtiest products, and I say: shame on them! What hypocrisy!”  The real hypocrisy is not including all construction materials in this law.

Meanwhile, the rest of the construction products manufacturers are left having to make investments in developing facility-specific EPDs to comply with this law, if we want to do business in California.  This is just the beginning of how this law will be deemed anti-competitive.

Next Steps with AB 262

Now that it has fallen to California’s Department of General Services (DGS) to implement and enforce this law, there are many challenges ahead in doing so.  I attended a workshop earlier this summer, hosted by the DGS for stakeholders, so that we could learn more about how DGS intends to implement the requirements of AB 262.  There were representatives from the steel, glass and mineral-wool board insulation industries.  Representing the structural steel industry, was a coalition of the American Institute of Steel Construction (AISC) and the Steel Tube Institute (STI). One of the major issues that needs to be resolved is how to develop the criteria against which we are all judged.    The plan is to use facility-specific EPDs that show the “eligible material” is below the industry average.  This is where it gets tricky.

The first question is what does facility-specific mean?  In the case of structural steel, does this mean the mill where the steel is produced or the fabricator which fabricates and assembles the structure?  John Cross of AISC does a great job of explaining in a June, 2018 Modern Steel Construction article why the facility specific EPD should be taken at the mill.  To further muddy the water, in the HSS industry, while we call ourselves a steel mill, we really don’t make any steel.  We buy hot-rolled coil from flat rolled steel mills and convert it into cold-formed round, square and rectangular Hollow Structural Sections (HSS).  We are a bit of a slave to the practices of the mills from which we purchase our coils.  But we do buy as responsibly as we can while controlling costs, which ultimately are passed on to our customers.  We also take great pride in running as green an operation as possible.  Of course, there is always room for improvement and we are constantly striving to balance cost and “greenness”.

For the record, the HSS industry, as represented by STI, does support having EPDs for the HSS industry.  We have participated in both industry-wide EPDs developed by STI and AISC.  We at Atlas Tube do support the idea of developing facility specific EPDs if that is what becomes necessary.  But what really concerns us, as well as the rest of the structural steel industry, is how those tools get used.

EPDs

AB 262 requires that when the State of California purchases “eligible materials”, the environmental impacts of the selected product must be documented with a facility-specific EPD and that the documented global warming potential (GWP) be less than the weighted industry average value, as determined by DGS.  What happens if there are only two producers with facility-specific EPDs?  By the Law of Averages, one of those two will be below the average and will never be selected.  Even if the guy who is above average invests into his business to become more “green”, he may still be above average if there are only two EPDs used to create the industry average.  Isn’t that somewhat anti-competitive?

Let’s go back a minute.  EPDs are not a new thing.  They have come to the forefront because they have become one of the baselines on which the new LEED V4 (Leadership in Energy and Environmental Design, version 4) is set on.  Many industries, including those listed in AB 262, have developed industry-wide EPDs to be prepared for when LEED V4 begins to be implemented (LEED V4 was introduced in 2013 and effectively wasn’t implemented until 2016 when the previous version of LEED was suspended).

According to the blog on LEEDUser.com,  EPDs are not as prevalent as everyone in the sustainability game may think.  This blog also goes onto say “the actual mechanism adopted into Buy Clean California comes from Option 2 of the EPD credit, an option that hardly anyone has so far been able to achieve.  ……the threshold for that option is so high that it won’t be achievable for most projects until we have lots more EPDs available, and the performance thresholds for industry average values are better established.”  The bottom-line here is that for this really work, we need a lot of participants to have EPDs.

Is getting a facility-specific EPD expensive?   I’ve heard yes, and I’ve heard no, so I guess it’s a matter of perspective.  But it does cost something and for small businesses it might be prohibitive or deemed not worth the effort.  Is it difficult to develop an EPD?  It has its challenges and it requires staff dedicated to collecting data and analyzing that data.  There are organizations out there that you can hire to do this for you (this is where the cost starts to go up) so that does simplify things.

While all of this is ultimately a good thing and AB 262 will put pressure on the construction industry, in the short term, I’ve heard several producers of steel products say that they would likely opt out of the California market rather than go through these hoops (Some of these producers actually are in California).  So, with fewer producers involved, the weighted industry averages that DGS develops will be skewed and it may be difficult for anyone to comply.

If you’re a fabricator, a design engineer or an architect that lives and works in California, you may find that working on a state-funded project has some new challenges in the near future, such as limited choice of materials and higher material costs.  Some of the fabricators in California, a lot of which are small businesses, may find it hard to compete.

What Can You Do?

Where does this leave us?  After the workshop this summer, there was a public comment period where we could comment on the DGS’s planned implementation.  I know the steel industry, through the leadership of AISC, provided a lot of comments.  I know the other material producers and their representatives likely commented as well.  Now we are in a waiting game to see how these comments are addressed and how the implementation gets put into place.

If this is an issue that will affect you and your business, then I encourage you to learn as much as you can about this new law in California.  If you feel it is anti-competitive, then let your assembly member know how you feel.