- Report Published -
|Report Document No. 41|
PUBLICATION YEAR 2012
|Executive Summary of the 2011 Interim Activity and Work of the Manufacturing Development Commission|
|Manufacturing Development Commission|
|§ 30-276 (8.)|
|Note: This executive summary of the interim activity and work of the Manufacturing Development Commission is prepared pursuant to subdivision 8 of § 30-276, and is submitted in lieu of an annual report. |
In addition to this executive summary, the Manufacturing Development Commission has prepared a separate executive summary regarding the Commission's plan for repatriating manufacturing jobs and evaluating possible tax incentives pursuant to House Joint Resolution 735 of the 2011 Session.
The Manufacturing Development Commission is established by Chapter 41 (§ 30-275 et seq.) of Title 30 of the Code of Virginia. The Commission is charged with assessing manufacturing needs and formulating legislative and regulatory remedies to ensure the future of the manufacturing sector in Virginia.
The Commission's legislative members are Senators Frank W. Wagner, W. Roscoe Reynolds, and Ralph K. Smith and Delegates Harry R. "Bob" Purkey, Watkins M. Abbitt, Jr., Kathy J. Byron, Daniel W. Marshall, III, and Albert C. Pollard, Jr. The citizen members are Brett A. Vassey, David R. Lohr, Jerry Robertson, and Scott Tilley. The terms of Joyce W. Waugh, Robert L. Williams, and Sean D. Kerlee as citizen members ended in November, and the Commission appreciates their dedication and contributions. Secretary of Commerce and Trade James Cheng serves as an ex officio member. Senator Wagner chairs the Commission.
The Manufacturing Development Commission met four times during the 2011-2012 interim: on May 17 at the National Institute of Aerospace in Hampton, on August 4 in Richmond, on December 8 in Charlottesville, and on January 10 in Richmond. The following summarizes the work of the Commission during the 2011-2012 Interim exclusive of its preparation of a plan for repatriating manufacturing jobs and evaluating possible tax incentives pursuant to House Joint Resolution 735 (2011), which is described in a separate summary filed with the Division of Legislative Automated Systems.
2011-2012 INTERIM ACTIVITIES
1. National Institute of Aerospace
The Commission's first meeting of the interim was hosted by the National Institute of Aerospace (NIA) in Hampton. The NIA is a nongovernmental, nonprofit research and graduate education institute conceived to work with the NASA Langley Research Center and others in the aerospace community. With approximately 200 employees, students, and consultants and a $33 million budget, the NIA is primarily engaged in research, graduate education, and public educational and outreach activities. The graduate education program provides graduate students at the nine research universities in the NIA's consortium (Georgia Tech, Hampton University, North Carolina A&T State University, North Carolina State University, the University of Maryland, the University of Virginia, Virginia Tech, Old Dominion University, and the College of William & Mary) the opportunity to earn graduate degrees while participating in leading-edge research programs not available at any single university.
Growth at the NIA has led to the construction of a new 60,000 square foot building with space for laboratories. The new facility, scheduled to open in February 2012, will host the Hampton Technology Incubator, which will provide commercialization abilities and the potential for entrepreneurial ventures.
2. Bayshore Concrete Products Corporation
At its May meeting, the Commission received a report from Bayshore Concrete Products Corporation. The firm, based in Cape Charles on Virginia's Eastern Shore, manufactures and supplies various precast concrete structural materials. John D. Chandler described Bayshore's plans to focus on manufacturing offshore wind gravity foundations and precast tunnel sections. Mr. Chandler noted that the firm's ability to develop some new products depends on increasing the depth of the harbor to 18 feet. While dredging the harbor to this depth is estimated to cost $40 million, the economic impact to Virginia of making the precast tunnel sections at the company's facility has been estimated at $2.5 billion. Mr. Chandler's remarks focused on efforts to obtain federal funding for dredging by the U.S. Army Corps of Engineers.
3. NASA's Technology Initiative
Brett Vassey updated the Commission at its May meeting on the benefits to Virginia's economy provided by the aerospace industry. The sector employs over 9,000 Virginians directly, and when indirect and imputed employment is factored in, the impact tops 28,000 jobs. In addition, spending by the aerospace industry (including direct, indirect, and imputed spending) is nearly $7.6 billion annually. The VMA is collaborating with NASA Langley Research Center and the Virginia Commercial Space Flight Authority to examine how advanced technologies from the aerospace industry can improve the manufacturing sector's productivity and efficiency. Areas that promise benefits include automation technology and robotics, heat exchange technology, and science, technology, engineering, and mathematics (STEM) education. The collaboration reflects NASA's goal to push technology developed for aerospace applications to the private sector.
4. Chesapeake Bay Cleanup Costs
Manufacturers have expressed concerns that new U.S. Environmental Protection Agency (EPA) regulations implemented to reduce nutrient and sediment loads in the Chesapeake Bay will result in higher wastewater treatment costs. At the Commission's August meeting, David Paylor, Director of the Department of Environmental Quality, provided the Commission with an overview of the EPA's Bay Program, which requires states to develop a watershed improvement plan (WIP). In December 2010, the EPA issued a total maximum daily load (TMDL) finding that is intended to cap the amount of nutrients and sediments entering the Bay's watershed. To meet the TMDL requirements, Virginia's WIP includes waste load allocations for wastewater treatment facilities and upgrades to treatment plants in the James River Basin to meet dissolved oxygen and chlorophyll standards. The nutrient caps for this basin are much lower than what Virginia had expected when the EPA approved the chlorophyll standard in 2005. Upgrading wastewater systems in the James River Basin to meet these limits is expected to add between $1 billion and $2 billion to nutrient reduction costs for wastewater treatment.
Mr. Paylor observed that the amount of grant commitments for municipal wastewater facilities under the Water Quality Improvement Fund, based on signed agreements, exceeds the available balance of bonding authority by $103 million. The potential shortfall grows to $304.3 million if projects in the application pipeline are included. The cost of meeting the TMDL in Virginia for all sectors, including agriculture, municipal, stormwater, and industrial, has been estimated at $7 billion. Governors of states in the Bay region have asked the EPA to work with the states in developing watershed-wide cost estimates for the TMDL. Mr. Paylor closed by reporting that the EPA has said that it will conduct a study of the issue.
Christopher Pomeroy, representing the Virginia Association of Municipal Wastewater Authorities (VAMWA), provided members with information on wastewater rate trends and the impact of the TMDL. In Virginia, average monthly residential wastewater rates have increased from $18.63 in 2001 to $31.03 in 2010. Virginia's wastewater utilities have already invested between $1.5 billion and $2 billion in Chesapeake Bay upgrades, and utilities have reported significant rate increases to construct, operate, and maintain these facilities. Mr. Pomeroy noted that the Water Quality Improvement Fund has helped maintain lower, more competitive sewer rates. Shortfalls in the Fund cause wastewater system owners to incur more debt, and the costs of servicing the debt is passed on to users. With regard to the costs of complying with the TMDL, he reported that the EPA unilaterally changed its computer model and reduced the 2005 nutrient limits, which had previously been approved for meeting the 2005 site-specific James River chlorophyll standard. VAMWA has been advised that the public would not get a tangible water quality benefit for the additional expenditures required to meet the new standards, which were cited as an example of the law of diminishing returns.
5. Commonwealth Center for Advanced Manufacturing
At the December meeting at the Boars Head Inn, David Lohr provided the Commission with an overview of the structure and activities of the Commonwealth Center for Advanced Manufacturing (CCAM). CCAM brings together leading institutions of higher education (the University of Virginia, Virginia Tech, and Virginia State University) and leading manufacturers, including Rolls Royce, Siemens, Canon, Sandvik Coromant, Chromalloy, and Huntington Ingalls Industries, in collaborations that help bridge the gap between fundamental research and commercialization. Graduate students at participating universities are provided with internship opportunities at CCAM as well as at research facilities of member companies.
CCAM is one of a network of seven centers, of which five are in the United Kingdom and one is in Singapore, that help industrial partners achieve Best in Class capabilities by linking manufacturers and universities in a new model of collaborative research. The goal of CCAM, which was established in May 2010 as a nonprofit corporation, is to create production-ready solutions that manufacturers need in order to stay competitive in the global marketplace. CCAM seeks to leverage the capabilities of member universities and CCAM's own team, which is expected to grow to 60 employees (49 of whom will be PhD researchers) and 35 graduate research assistants over the next five to 10 years. CCAM will be based at a 50,000-square-foot office and manufacturing space under construction in Prince George County. CCAM intends to increase the number of its corporate members from seven to 30, and its research budget to as much as $20 million. A unique facet of the CCAM model is its two research tracks. Directed research is provided for the exclusive proprietary benefit of a member company, while generic research is conducted for the benefit of all member companies. The intellectual property developed through CCAM research is owned either by individual CCAM members, in the case of directed research, or in common, in the case of generic research, even if the intellectual property is developed at a member university. The results of CCAM's value proposition include collaboration among diverse industry sectors and lower research and development costs for member companies.
6. Old Dominion University's Business Gateway
At the Commission's January meeting, Jerry Robertson provided members with an overview of the Business Gateway program at Old Dominion University. University President John Broderick has fostered the concept of a metropolitan university that serves as a resource to the community. One product of the effort to make the University more business-friendly was the launching 15 months ago of the Gateway, which is a single entry point to engage ODU's assets in solving business problems. One approach of this initiative involves removing imaging barriers in the development of intellectual property in research projects.
Mr. Robertson outlined three programs where ODU is a leader: the Virginia Modeling, Analysis, and Simulation Center, the Frank Reidy Research Center for Bioelectrics, and the National Center for Systems of Systems Engineering. The result is an enhanced role for ODU as a partner with industry in the commercialization of value-driven technology.
7. Expansion of Resources Eligible for Fulfilling Virginia's Renewable Energy Portfolio Standard Program's Goals
At its final meeting on January 10, the Commission received a presentation from Irene Kowalczyk, Director, Energy Policy and Supply, MeadWestvaco Corporation, regarding a proposal to expand the resources eligible for fulfilling Virginia's renewable energy portfolio standard program's goals. The proposal expands the definition of renewable energy to include landfill gas. The measure also provides that the RPS Goals under the renewable energy portfolio standard program may be composed of renewable thermal energy equivalents. A renewable thermal energy equivalent is the thermal energy output from a renewable-fueled combined heat and power generation facility that is (i) constructed, or renovated and improved, after January 1, 2012, (ii) located in the Commonwealth, and (iii) utilized in industrial processes other than the combined heat and power generation facility, where thermal energy is expressed as an equivalent number of megawatt hours.
The Commission appreciates the assistance provided by interested individuals and organizations during its deliberations over the course of the past year. Summaries of the Commission's meetings in the 2011-2012 interim, including materials provided by speakers, may be found on the Commission's website at http://dls.virginia.gov/commissions/mdc.htm?x=mtg.