Highway politics hit aggregate industry hard

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By Christopher Hopkins
Senior Vice President for Aggregates and Mining, The Saint Consulting Group

The U.S. aggregate mining industry is hurting, our highways are crumbling, and Congress is making both problems worse.

The recession certainly has caused great pain within the aggregate industry, due in large part to the crash of both the housing market and commercial construction. In 2008, housing starts fell to the lowest level in 50 years.

These two factors severely diminished demand for aggregate, but they’d be survivable if Congress didn’t create a triple whammy.

In 2005, Congress passed the “Safe, Accountable, Flexible, Efficient Transportation Equity Act,” which called for investment by the federal government in a Highway Safety Improvement Program structured and funded to make significant progress in reducing highway fatalities. The act also sought to relieve congestion through highway construction, highway improvements, bridge improvements and other transportation infrastructure.

Funding for most of the program was earmarked to come from the Highway Trust Fund, established in the 1950s to make sure federal gasoline tax revenue was spent on highway maintenance and improvements.

The problem: The Highway Trust Fund authorization expired in September 2009. Since then, it has been extended on short-term resolutions, as opposed to the original 50-year authorization. Some in Congress favor not renewing the program and simply budgeting highway projects annually through the treasury general fund. The big catch with such an approach is that budgeting for highway improvements would be subject every year to politics surrounding the annual budget process.

Already, the lack of a committed funding source has kept many of the larger aggregate producers and complementary industries from being able to conduct long-term capital planning. Why invest capital resources to increase your reserves or make capital investments for large machinery when you can’t confidently project the demand for your aggregate products in the coming years?

The result has been a stagnation of investment, job creation and tax revenue from companies that mine the rock product that will be needed and from the companies that provide the machinery, trucks and other needed products for the industry.

Insiders on Capitol Hill are stating that the issue will not be addressed until a new Congress is elected in November 2010, and probably not until well into the new session of Congress.

So, the next time you are run across a pot hole-filled roadway, a bridge closed for repair (or not being repaired), or if you are just sitting in traffic, remember that part of the cause is a Congress that will not pass a bill that nearly everyone on both sides of the political aisle says we need.

Christopher Hopkins is senior vice president for aggregates and mining for The Saint Consulting Group, email hopkins@tscg.biz, phone, 615-656-3794

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