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You can’t make good decisions without good information
As readers of this publication are no doubt aware, one of CalAPA’s most important goals is to provide timely, valuable and actionable information to help our members and stakeholders plan effectively for success today and in the future. The association expends a considerable amount of time and resources in this regard, developing a deep understanding of our industry, the markets, the regulatory and economic environment, and the myriad of threats and opportunities that they present. The same is true for everything in the technical arena, as the association stays on top of new or contemplated specifications, test methods, products, research and best practices in design, construction and acceptance.
The more we understand what’s coming at us, the better we can prepare for it. Also, being at the forefront of gathering this knowledge, we are often presented with an opportunity to positively influence events before they happen, which is much better than being in reaction mode. There’s an old adage in business, “You can’t make good decisions without good information.” It is CalAPA’s mission to ensure that our members have ready access to high-quality information, much of it available nowhere else. At the same time, we want to avoid “paralysis by analysis.” We do this by distilling vast amounts of information into the most valuable insights, and presenting it in a very accessible, easy-to-digest way.
Last year our Board of Directors revised and updated our three-year Strategic Plan to place even more emphasis in this area. One tangible result has become the single most valuable product our association produces each year: The CalAPA Annual Asphalt Market Forecast for California. Combing through mountains of information, the authors of the CalAPA Asphalt Market Forecast for California zero in on the key elements that bring clarity to all the chaos.
Like any product, there are always opportunities for improvement. In the case of the CalAPA Asphalt Market Forecast for California, we have learned in recent years that an unforeseen event on the other side of the globe can impact us here at home. We need to look no further than the COVID-19 pandemic, and the war in Ukraine, for two prominent examples. For that reason we are adding an important new feature to this year’s Market Forecast: periodic updates. Now our Forecast will be a “living document’ and always current and relevant for C-Suite executives or anyone else who wants to better understand this complex industry and what is ahead.
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Many of these products and services are accessible to our stakeholders, which is another area of emphasis in our Strategic Plan. Our Board of Directors felt strongly that we cannot succeed unless our customers succeed, and in many cases those customers are public agencies. Now that commitment is permanently embedded in our new mission statement: CalAPA serves as the authority for the success of the asphalt pavement industry in California and all stakeholders.“ (emphasis added). Our vision is “All Things Asphalt” and our board will be guided by the following values: Integrity, Transparency, Trust, Expertise and a Commitment to Service.
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Contents
Volume 26, Issue 1
Will the economy be ‘just right,’ or will we have a recession?
The UCLA Anderson Forecast for California
A tale of two scenarios: The California Report
CalAPA's ‘Better-Worse’ survey
Confidence down sharply in our 13th annual 'Better-Worse' survey; economic uncertainty, supply chain and work force issues among top concerns for 2023
Q&A with Peter T. Grass President, Asphalt Institute Association News Leadership in the spotlight at CalAPA's Annual Dinner in Los Angeles
CALIFORNIA ASPHALT PAVEMENT ASSOCIATION
www.calapa.net
HEADQUARTERS: P.O. Box 981300 • West Sacramento • CA 95798 (Mailing Address) 1550 Harbor Blvd., Suite 211 • West Sacramento • CA 95691 • (916) 791-5044
EXECUTIVE DIRECTOR: Russell W. Snyder, CAE, rsnyder@calapa.net
TECHNICAL DIRECTOR: Brandon M. Milar, P.E., bmilar@calapa.net
MEMBER SERVICES MANAGER: Sophie You, syou@calapa.net
MEMBER SERVICE COORDINATOR: Jackie Henry, jhenry@calapa.net
GUEST PUBLISHER: Jeff Benedict, Valero Marketing & Supply, Co.
PUBLISHED BY: Construction Marketing Services, LLC • (909) 772-3121 P.O. Box 892977 • Temecula • CA 92589
GRAPHIC DESIGN: Aldo Myftari
CONTRIBUTING WRITERS: Jerry Nickelsburg, Director, UCLA Anderson Forecast and Russell W. Snyder, CAE, CalAPA
ADVERTISING SALES: Kerry Hoover, CMS, (909) 772-3121
The UCLA Anderson Forecast for the nation
Goldilocks or bust: Will the economy be ‘just right,’ or will we have a recession?
By the UCLA Anderson Forecast Team, December 2022Different from prior forecasts, we are presenting a twoscenario approach for the current economic forecast. One scenario is no recession, where economic growth is “just right,” inflation ebbs, labor market constraints loosen, and the Federal Reserve takes a less aggressive approach to monetary policy tightening. The second scenario is a recession, where inflation would have continued to run hot if not for aggressive Federal Reserve action. In this scenario, the Federal Reserve forces a recession and accepts an economic contraction and higher unemployment to combat inflation. Importantly, the difference in the two scenarios is the exogenous decision of the Federal Reserve in setting monetary policy.
Why are we presenting two scenarios? The trajectory of the economy is sufficiently uncertain that we feel it would be a disservice to present an average of two divergent possibilities. Right now, in 2022 Q4, the economy is still expanding and adding jobs, consumers are still spending, and businesses are still investing. If the Fed eases interest rate increases in the coming months and inflation ebbs mostly on its own, because of easing supply constraints or consumer satiation, then the underlying strength of demand currently in place is forecast to avoid a recession. On the other hand, if the Fed continues aggressive tightening of monetary policy until contemporaneous
inflation rates come in below a year-over-year 3% target rate, then the propagation of contraction in interest sensitive sectors is forecast to generate a 2023 recession. This is a big “if.” The Fed’s Federal Open Market Committee (FOMC) policy board is not bound by policy rules and may make either decision or some hybrid of them. We should know in the next few quarters whether we are in the no-recession or recession scenario, but right now, it is too soon to tell.
The reason why we are uncertain about Federal Reserve policy is that the Federal Reserve itself seems uncertain. During a recent speech, Fed Chair Jay Powell stated:
“Monetary policy affects the economy and inflation with uncertain lags, and the full effects of our rapid tightening so far are yet to be felt. Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down. Given our progress in tightening policy, the timing of that moderation is far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level. It is likely that restoring price stability will require holding policy at a restrictive level for some time. History cautions strongly against prematurely loosening policy. We will stay the course until the job is done.”
While the Fed suggests it will moderate the pace of rate increases, it also reaffirms its stance on restoring price stability and maintaining policy at restrictive levels. However, every time the Fed signals it will moderate the pace of rate increases, as it has again recently, financial conditions loosen. To maintain restrictive monetary policy, the Fed may have no choice but to continue increasing rates in the near-term.
While the economy has so far remained resilient to higher interest rates outside of some moderate softening in construction, that resiliency is what might lead to the recession scenario path. The more consumers continue to spend despite higher prices and higher interest rates, the more gradually demand-induced inflation will come down, and the more the Federal Reserve might be expected to tighten monetary policy to combat inflation. The “might” here could well be mitigated by falling commodity prices and new rental lease contracts.
In what follows, we present the no-recession scenario and the recession scenario together for ease of comparison.
Economic growth
For both scenarios, we expect a strong 2022 Q4 driven by consumption and business investment.
The scenarios then diverge. In the no-recession scenario, economic growth slows in 2023 Q1 and is essentially zero in 2023
FORECAST (NO RECESSION SCENARIO) FORECAST (RECESSION SCENARIO)
Q2. It then picks up in 2023 Q3 and 2023 Q4. In the recession scenario, the economy contracts at a 2-3% annual rate in both 2023 Q2 and 2023 Q3, is flat in 2023 Q4, and then begins to rebound.
These differences in quarterly growth rates imply that in the no-recession scenario, the economy will have grown by 1.2% year-over-year (YOY) by 2023 Q4 versus -1.2% in the recession scenario. In other words, the impact of a recession is to reduce economic output by 2.4% relative to what it would have been in the no-recession case by the end of 2023. By the end of 2023, the real Gross Domestic Product (GDP) gap between the two scenarios will be $490 billion, and by 2024, the gap is $330 billion.
Consumer resilience is a key factor for why the recession scenario features a relatively mild and brief recession. In the recession scenario, consumption is flat in 2023 Q1 and 2023 Q2 and contracts modestly in 2023 Q3 and 2023 Q4. In 2024, both scenarios feature consumption growth.
Fed-driven increases in interest rates typically induce declines in investment, both business and residential (we discuss housing starts in a later section). With higher interest rates and uncertainty about consumption,
businesses cut back on capital investment and inventory replenishment.
Monetary policy reaction and inflation
The key assumptions driving our economic growth projections depend on how aggressively the Federal Reserve tightens monetary conditions. In the no-recession scenario, the Fed stops tightening when the target Federal Funds Rate reaches 4.25-4.5% in the first quarter of 2023. In the recession scenario, the Fed continues to increase its benchmark rate up to 5.5-5.75% in the third quarter or 2023. In both scenarios, the Fed begins to cut rates in 2024 Q1.
In both scenarios, inflation eases at approximately the same rate through mid-2023, but notably, it takes tighter monetary policy in the recession scenario to achieve similar rates of inflation as in the no-recession scenario. The reason is that in the no-recession scenario, we have assumed that supply chain pressures ease more rapidly, and therefore, inflation comes down more quickly on its own creating the rationale for a more moderate monetary policy, whereas in the recession scenario, the assumption is that a greater proportion of the observed inflation is demand-driven, and therefore,
inflation remains sticky for longer. In the no-recession scenario, core Personal Consumption Expenditures (PCE) inflation drops below 2% YOY by early 2024 and in the recession scenario, that occurs two quarters later.
The issue of “stickiness” in the inflation rate is tied to where inflation is most acute. The inflation rate as measured by the Consumer Price Index is illustrative. Exhibit 8 breaks down the 7.8% CPI inflation over the past year by the contribution of various goods and services to illustrate how these factors build up to measured inflation. The major drivers of measured inflation are transportation services, autos, shelter, energy, and food. Of these, autos and food are clearly related to supply constraints. Transportation services reflects robust consumer spending on flights, and shelter and energy are not very responsive to interest rate changes. Thus, the Federal Reserve is using a blunt instrument, and the unknown efficacy of that instrument in this post-Covid expansion puts them in unchartered waters.
Employment
Both scenarios feature a modest increase in the unemployment rate over the current 3.6% rate.
FORECAST (NO RECESSION SCENARIO)
CHARTS – FORECAST (RECESSION SCENARIO)
FORECAST (RECESSION SCENARIO)
In the no-recession scenario, the increase is due to a more rapid secular gain in the labor force than in economic activity coupled with contractions in employment in interest sensitive sectors. For this scenario unemployment peaks at 4.3% in 2023 Q4. In the recession scenario, unemployment is higher due to the aforementioned factors plus the more general contraction in economic activity and it peaks at 5.0% in 2023 Q4. This means that the economy would experience slower hiring and more layoffs throughout 2023 before the labor market begins recovering in 2024.
Housing markets
The scenarios differ sharply in their implications for housing markets. In the no-recession scenario, housing starts remain flat at just below 1.5 million units through 2023 Q2, and thereafter housing construction picks up to 1.6 million units by the end of the forecast horizon. In the recession scenario, housing starts fall, reaching a trough of 1.2 million units annually in 2023 Q3, and then housing construction accelerates sharply to above 1.5 million units as the Fed begins cutting interest rates, having achieved their goal
FORECAST (NO RECESSION SCENARIO)
of price stability and turning their attention to the goal of full employment. Both scenarios feature declining home prices, with slightly larger declines peak-totrough for the recession scenario (6.3%) versus the no-recession scenario (4.6%).
Oil production and prices
Both scenarios feature a rise in domestic oil production and oil prices coming down from their recent highs. Nevertheless, they remain higher than prior to the pandemic, but on an inflation
[ Continued on page 12 ]
FORECAST (RECESSION SCENARIO)
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adjusted basis, at historical averages. This is due to several factors. First, slower growth of the world economy will result in an easing of demand pressures, particularly out of China. Second, investment in oil drilling rigs expands domestic production particularly in the Permian Basin. Third, the easing of labor markets reduces the cost pressure on the production side. And fourth, the high cost of gasoline has induced a more rapid shift toward electric vehicles. Energy then will be less of a factor in measured inflation and will be supportive of more economic growth than would otherwise occur. This is an important component of the mild recession in the no-recession scenario.
Conclusion
Given the uncertain macroenvironment, we have presented two scenarios: one where economic growth slows, but not by enough to create a recession, and one where the economy experiences a comparatively mild and brief recession. The economy has remained resilient in the last two quarters of 2022, consumers have continued to spend, and despite earlier warnings from business leaders about fears of an imminent recession, businesses have continued investing. Whether or not we experience a recession in 2023 depends on inflation stickiness and the reaction of Federal Reserve policy through increases to the benchmark Federal Funds rate. CA
Editor’s Note: This report was edited slightly from the original to conform with this publication’s style and usage guidelines and to accommodate space constraints.
The information provided in this article is only a small excerpt of the UCLA Anderson Forecast for the Nation and California. Visit www.uclaforecast.com to review the UCLA Anderson Forecast in its entirety. For information regarding sponsorship of the UCLA Anderson Forecast, please call (310) 825-1623.
2023 Asphalt Market Forecast for California
The Annual “Asphalt Market Forecast for California” is a separate publication from this magazine and is published once a year as an exclusive free benefit of CalAPA membership. It contains information and insight on the local asphalt market available nowhere else. New this year: two forecast updates. CalAPA members who have not received their copy should contact CalAPA at (916) 791-5044.
A tale of two scenarios: The California Report The UCLA Anderson Forecast for California
By Jerry Nickelsburg, Director, UCLA Anderson Forecast, December 2022Introduction
Uncertainty about California’s 2023 economic outlook abounds. The most important source of this uncertainty is national economic policy. With the Federal Reserve moving from rule-based policy to discretionary policy, forecast for the state, following the U.S. forecast, will consist of two scenarios. It is not quite, choose your own forecast. Rather, it is a guide. In the coming months, the Federal Reserve will reach that fork in the road between continued aggressive tightening and moderation, and it must decide which path to take. The two scenarios will provide the most likely outcome of each, given the data currently available.
The good news is that unlike the past four slowdowns in economic growth we expect a milder impact on California’s economy whichever path the Federal Reserve decides to take. This California report begins with a look at the current employment situation, including a discussion of three key sectors: housing and construction, logistics, and technology. The report concludes with a discussion of the two economic outlook scenarios for 2023 and the implications for 2024.
Employment retrospective
There are normally two measures of employment considered when analyzing labor markets in California: the household survey measure, which counts the number of people employed; and the enterprise survey, which counts the number of payroll jobs. The household survey reports that the number of people employed in October 2022 was just 1.2% below the number in February 2020. The
difference is in large part due to the 1.3% drop in the labor force from retirements, migration out-of-state, and individuals choosing to spend their time in non-market activities such as child raising.
California’s non-farm payroll jobs now exceed the pre-pandemic level of February 2020 by 31,000 jobs. However, many of the new jobs
are in sectors different from those where job loss was the most acute. This disparity is evident in Chart 1. About 170,000 payroll jobs in the leisure and hospitality, and other services sectors, have not returned. In the logistics, technology (professional, technical, and scientific services and information) and health care sectors, rapid job
creation has numerically made up for more than the aforementioned sectoral job loss. This, in part, explains why California’s Gross Domestic Product (GDP) growth has been faster than the U.S. Tech and logistics. More rapidly growing sectors are on average high-income sectors while the slow-growth sectors are on average low-income sectors.
Housing markets and construction
Interest rates are up, and California housing markets are down. The median price of singlefamily homes in the state has declined on a seasonally adjusted basis. As of October, the median price is 8.4% below its previous peak and is now back to early 2021 levels (Chart 5). However, that does not mean all homes have lost 8.4% of their value. The median is the price at which half the homes sold for more, and half for less. If the high end of the market is weaker than the low end, the median falls. Since home sales are down by 36% and the market is in flux, some, but not necessarily all, of the decline is compositional (Chart 6).
Nationwide the higher mortgage interest rates are also taking their toll on new home sales and therefore new home construction. The December (2022) U.S. forecast has national homes starts, an important component of business cycles, as well as associated construction employment, falling. But housing is everywhere local. This is seen graphically in Chart 7. In the first nine months of this year home construction volumes deteriorated. In the last three months the deterioration continued to gain momentum. Only California and Texas defied this trend to fewer homes being built, but even in these two states the rate of increase moved to a crawl. And in California the increase was in part due to the lagged effect of an easier building approval process for duplexes and Accessory Dwelling
Units (ADUs). Our expectation is that these new home products and processes will help ease the national residential building downturn’s impact on the state. This fact, along with the multifamily builder sentiment expressed in the latest Allen Matkins/UCLA Anderson Forecast California
Commercial Real Estate Survey, lead to a forecast of the volume of new building increasing through the forecast horizon of 2024 and into 2025. In the more rapid Fed Funds rate/recession scenario, the expectation is for a milder hit to 2023 residential construction in the state than in the United States.
Though housing markets weakened, overall construction employment in the state remained relatively strong. Average payroll employment for the three months ending October 2022 was 4.6% higher than the same period the previous year and 0.6% higher than the previous three months. The Summer Allen Matkins / UCLA Anderson Forecast Survey results also indicate a strong demand for continued warehouse and other industrial building.
Total construction payroll employment is approximately the same as it was at the peak of the speculative building frenzy in the
2000’s (Chart 8). The bulk of the recent gain has been in nonresidential construction including new infrastructure and industrial building. These two are expected to grow through 2023 and with current work in progress and a smaller impact of interest rates on new housing starts in the state, construction ought not contract in the slower Fed Funds rate/no recession scenario, and by a smaller decrease than in the U.S. in the more rapid Fed Funds rate/ recession scenario.
Logistics
In the last California report we documented the slowdown in goods movements through the seaports and airports of the state. The new data does not change the picture. The growth in goods movement has slowed to a crawl. Some of this is due to trans-Pac shipping diverted to East Coast ports as risk mitigation in the face of a potential labor action at West Coast ports, and some is due to a shift by households from goods purchases back to services consumed. Nevertheless, imports, while down, are still above their pre-pandemic levels. Exports through the seaports continues to decline as the world economy slides towards recession. In addition, the smaller agricultural harvest in the United States has had an impact on exports. As West Coast port and national railroad labor issues are resolved, the volume of imports processed should return to slow growth resulting in an overall increase in goods movement, but the end of the pandemic rush to purchase imported goods will dampen this component of the logistics industry.
California’s airports tell a similar story. International air cargo at Los Angeles International Airport has declined in recent months, but remains above pre-pandemic levels for both imports and exports. A decline in domestic goods movement
by air has resulted in the level of air freight now back to pre-pandemic levels. For both seaports and airports, the soft landing/no-recession scenario has logistics growing in 2023, but at a slow rate. As economic growth picks up with a concomitant growth in imports and online goods purchases an acceleration of logistics demand is expected in 2024. In the recession scenario,
logistics employment experiences a decline in 2023, though it is not expected to be a steep decline. The forecast is for a moderate increase in demand in 2024 as the economy recovers.
The forecast scenarios
In the soft-landing scenario, California grows, and in fact continues to grow faster than the United
States, led by more construction, an ample rainy-day fund for state government, increased demand for defense goods, and increased demand for labor saving equipment and software. In this scenario the unemployment rate for the 4th quarter of this year is expected to be 3.6%, and the averages for 2022, 2023 and 2024 are expected to be 4.3%, 3.9% and 4.0% respectively. Our forecast for 2022, 2023 and 2024 is for total employment growth rates to be 5.1%, 1.1% and 1.2%. Non-farm payroll jobs are expected to grow at 5.1%, 2.4% and 1.3% rates during the same three years. Real personal income is forecast to have grown by -6.3% in 2022 and to grow -0.2% in 2023 as a function of the transfers from the stimulus packages expiring and is expected to grow by 2.2% in 2024. In spite of higher mortgage interest rates, the continued demand for a limited housing stock coupled with
the enactment of laws permitting ADUs to be built in single-family house zoned neighborhoods throughout the state leads to a forecast of increase homebuilding through 2024. Our expectation is for 121,000 net new units to be permitted in 2022 and permits to grow to 142,000 in 2024.
In the recession scenario, the California economy declines, but by less than the United States. In this scenario the unemployment rate for the 4th quarter of this year is expected to be 3.6%, and the averages for 2022, 2023 and 2024 are expected to be 4.3%, 4.4% and 4.5% respectively. Our forecast for 2022, 2023 and 2024 is for total employment growth rates to be 5.1%, 0.5% and 1.3%. Non-farm payroll jobs are expected to grow at 5.2%, 0.5% and 0.5% rates during the same three years. Real personal income is forecast to have grown by -6.3% in 2022 and to grow -1.0% in
2023 as a function of the transfers from the stimulus packages expiring and is expected to grow at 1.9% in 2024. Our housing forecast is for 121,000 net new units to be permitted in 2022 and permits to grow to 135,000 in 2024. CA
Editor’s Note: This report was edited slightly from the original to conform with this publication’s style and usage guidelines and to accommodate space constraints.
Jerry Nickelsburg is the director of the UCLA Anderson Forecast and an adjunct professor of economics. The UCLA Anderson Forecast is published quarterly and is a unit of the UCLA Anderson School of Management.
The information provided in this article is only a small excerpt of the UCLA Anderson Forecast for the Nation and California. Visit www.uclaforecast.com to review the UCLA Anderson Forecast in its entirety. For information regarding sponsorship of the UCLA Anderson Forecast, please call (310) 825-1623.
EXCLUSIVE:
Confidence down sharply in our 13th annual 'Better-Worse' survey; economic uncertainty, supply chain and work force issues among top concerns for 2023
By Russell W. SnyderThe results are in. The 13th annual CalAPA "Better or Worse" survey found respondents more pessimistic about the year ahead than in 2021 when the COVID-19 pandemic cast a pall over work and personal lives. Respondents worried about the economy, inflation, finding enough skilled workers and supply-chain disruptions.
The brief, non-scientific poll of more than 2,600 "Asphalt Insider" newsletter subscribers, conducted at the close of last year, found optimism in short supply and similar to the levels recorded during 2020 when the COVID-19 pandemic was rampaging through the state. The number of respondents who said next year would be better than 2022 stood at 32%, which was down sharply from the 43% recorded in the survey a year ago. Those who said next year would be worse than 2022 came in at 34%, which also represented a steep drop from last year, when the number of respondents who voted for “worse” was at 19%
That is in stark contrast to the heady days in 2017 and 2018, when the passage of SB1 promised to funnel billions of dollars to deferred pavement improvement projects. In 2017 the “Better” figure was 62% and 2018 was at 67%, an all-time high for the survey. The “worse” tally in 2017 was just 5%, the all-time low for the survey, and the 2018 figure was 5%. The levels of pessimism were approaching the gloom reflected in the surveys
taken during the depths of the last major economic downturn in the state. In 2011 the share of survey respondents that said the next year was going to be better was just 20%, the lowest ever recorded in the survey. The same year the number of respondents who said 2012 would be worse stood at 22% -- dramatically better than this year’s 34%.
As for the survey respondents who said 2023 will be “About the Same” as 2022, the figure was 29%, or far below the 36% figure last year and the lowest number ever recorded in the survey.
“Residential development activity significantly reduced; public works increasing but not adequate to offset,” one consultant wrote, predicting next year will be worse. Added a prominent paving contractor, who also voted for Worse: “Not a lot of projects to bid on. When there is a bid, 12-14 bidders. Work is bidding cheap.” A supplier of asphalt commented, “2022 was up and down all year. We are hoping for a more consistent year.” The supplier selected the “About the Same” option on the survey.
Logistical issues and inflation
was on the minds of many who responded to the survey. “Bad economy, oil costs and shortages,” wrote one prominent asphalt producer. Another vertically integrated producer and paving contractor wrote, “It seems like despite SB1 we have seen less jobs bidding.” Another vertically
integrated company representative wrote, “We see the private market slowing even more as we go into 2023 and we haven’t seen the Caltrans work that was expected. The bright side is work being let from local cities and counties. We also believe water could be a big issue in shutting down projects.”
For the first time since 2020, COVID-19-related issues did not dominate the survey responses. Occasionally comments referred to reduced productivity One paving contractor saw it this way: “Too many businesses are still using the COVID crutch?” According to the California Department of Public Health, as of Jan. 19, there have been 10.9 million confirmed cases of COVID-19 in California since the pandemic began spreading widely in 2020, contributing to 98,800 deaths.
As for logistics, disrupted by COVID, high energy costs influenced by the war in Ukraine and other factors, once equipment manufacturer who voted for “Worse” put it this way: “Supply chain issues are not getting better. I anticipate the war will expand and impact more businesses.”
One employee from a prominent vertically integrated company, who also was in the “Worse” camp, viewed the unfolding situation this way: “State, county and city funding is not hitting the street. The agencies don’t have enough people to design the work and deliver it to bid. Then they can’t manage it after bid.”
[ Continued on page 20 ]
AND HERBACK GENERAL ENGINEERING, LLC
Herback General Engineering was founded in 1985. Original owner Greg Herback changed the name and moved the location to Minden, Nevada in 2003. Herback General Engineering (Herback) is a general engineering contractor performing grading and paving operations primarily in Nevada, California and Arizona.
Herback specializes in public works and Federal Highway Administration projects, and they purchased their very first paving machine from Frank Herrmann of Herrmann Equipment 37 years ago in 1986. Greg Herback has been working with Herrmann Equipment ever since that initial purchase and he recently purchased a BOMAG 1030T paver. The BOMAG 1030T was added to assist in their paving efforts in and around challenging terrain and in confined working environments. “One of the projects we have used our new BOMAG 1030T on was the Highway 40 Rehabilitation Project over Donner Pass,” says Herback. “The paver needed to have enough power to make it up steep grades but also have superior maneuverability to pave close to the rock walls and ledges. With all the switch backs and elevated turns, it was necessary to have a track-paver. The operators appreciated the user-friendly electronics on the new BOMAG 1030T paver and the smooth mat it consistently puts down.”
Herback makes it clear as to why he continues to do business with Herrmann Equipment. “I was really impressed with Frank’s son, Matt Herrmann. His attention to detail and customer service is impeccable. He really went above and beyond to suggest upgrades to the machine that would specifically fit our needs and applications. Matt’s knowledge and experience with BOMAG paving machines created an atmosphere of trust and assurance that we were purchasing the best machine for our needs,” continues Herback. “It was great to see the next generation carry-on the Herrmann Equipment tradition of customer service and superior expertise, and I really enjoyed working with Matt Herrmann on this purchase. We will be checking back in with Herrmann Equipment for our future asphalt equipment needs.”
"Better" (by percentage of respondents)
Most comments about transportation funding tended to be dour. SB1, the $50 billion Road Repair & Accountability Act of 2017, has reached Year 5 of its 10-year implementation horizon, and a new $1 trillion federal infrastructure bill passed late last year also promised to infuse more money to pavement repair. Nevertheless, there have been consistent complaints that the funds are not making their way to pavement repairs. A CalAPA analysis of Caltrans data, distributed to members earlier this month, validated those anecdotal reports.
“Things seem pretty static,” one asphalt producer wrote. “Public agencies are really slow in delivering the work, and this will probably continue.”
For the seventh year in a row, the survey added an optional question, “What is the No. 1 challenge where you work?” That question elicited 45 written responses. As it has in recent years, work force issues continued to dominate the comments. Next were supply chain issues, logistics, trucking, the regulatory environment, price inflation and competition.
“We have a little backlog going into next year,” one asphalt producer wrote, “We are assuming we should see a substantial increase in public work bidding next year.”
Nevertheless, he hedged his bets, voting that 2023 would be “About the Same” as 2022. A local public works official, who also voted for “About the Same,” said: “Budget for upcoming projects have been approved for 2023. Most of the projects have been bid towards the new year. It’s just a matter of executing the construction phases when projects proceed as scheduled.”
The number of survey respondents who said 2023 would be "better" than 2022 was 32%. The chart shows all responses to this question since 2010.
"Same" (percentage of respondents)
The number of survey respondents who said 2023 would be "about the same" than 2022 was 29%. The chart shows all responses to this question since 2010.
"Worse" (by percentage of respondents)
The number of survey respondents who said 2023 would be "worse" than 2022 was 34%. The chart shows all responses to this question since 2010.
As the workforce ages and enters retirement or moves to other fields, the survey suggests, the churn in personnel continues to create conflicts between industry and agency personnel. One Caltrans respondent described their biggest challenge this way: “Hiring, training and maintaining staff. The silver tsunami is real!” A paving contractor said the challenge was “finding younger qualified people that want to work.”
Several other respondents, both industry and agency, cited the increasingly complex regulatory environment as a top challenge heading into 2023. “Environmental regulations” were the biggest challenge at work, one county public official stated. A consultant described it similarly as “meeting sustainability goals and requirements.”
The main CalAPA survey question is purposefully vague: "For your
company or organization, how do you think 2023 will compare to 2022?" However, most of the voluntary comments offered up by survey respondents to justify their opinion centered around how much work is expected in the coming year. The answer varied by company, agency and region, reflecting the size and diversity of California's massive economy and the economic micro-climates that are spread across the state.
As in previous surveys, the weather largely depends upon where you are standing. Some respondents commented that work was brisk, while others were disappointed, particularly in rural areas of California. One asphalt producer from a rural part of the state said 2022 was the worst he had experienced in 30 years in the business.
A total of 156 people took part in the voluntary on-line survey, which
was conducted from Oct. 20 to Nov. 8. In December, CalAPA members were sent an exclusive comprehensive analysis, “2023 Asphalt Market Forecast for California” filled with data and insight available nowhere else. Contact CalAPA at (916) 791-5044 if you did not receive your copy. New this year: CalAPA members will be sent two free updates to the Forecast in 2023 to ensure CalAPA members are making important business decisions armed with the most current and relevant information. CA
Russell W. Snyder, CAE, is executive director of the California Asphalt Pavement Association.
REFERENCE:
Snyder, R. (2022) “Results mixed in annual CalAPA ‘Better-Worse’ survey” (2022). California Asphalt, Journal of the California Asphalt Pavement Association, Vol. 25, Issue 1, PP 18-21.
Q&A with Peter T. Grass
President, Asphalt Institute
By Russell W. SnyderEditor’s Note: Peter T. Grass leads the Asphalt Institute as its 11th president, a position he has held since 2001. The Asphalt Institute, based in Lexington, Ky., has more than 125 member companies that include international petroleum asphalt producers, manufacturers, and affiliated businesses. The Institute celebrated its centennial anniversary in 2019 and represents approximately 95% of the annual North American asphalt production and a growing percentage in overseas markets, giving it the majority voice on binder related issues. Peter Grass is a registered professional engineer in the state of Hawaii, and in 2009 achieved the Certified Association Executive designation from the American Society of Association Executives. He formerly worked as the District Engineer for the U.S. Army Corps of Engineers, San Francisco District, among other assignments. He has served on the TRIP board of directors since 2003 and on the board of FP2 Inc. since 2004. He joined the Board of the American Highway Users Alliance in 2010. He and his family reside in Lexington, Ky. The Asphalt Institute is a key strategic partner of the California Asphalt Pavement Association along with the National Asphalt Pavement Association (NAPA) and other state asphalt pavement associations, known collectively as SAPA Inc. The Asphalt Institute has held many of its annual meetings in California, and AI’s Senior Regional Engineer, Bob Humer, is a familiar face at CalAPA conferences and other knowledge-sharing activities
with the asphalt pavement industry, public agencies and private owners. The Asphalt Institute is one of the joint partners of the Asphalt Pavement Alliance, along with NAPA and state asphalt pavement associations, including CalAPA. The APA is the marketing deployment arm of the asphalt industry nationally, and one of its signature initiatives in California has been the promotion of the LongLife (Perpetual) Asphalt Pavement strategy at Caltrans. Peter Grass sat down recently with California Asphalt magazine to give his perspective on the industry, challenges and opportunities ahead, and other issues.
California Asphalt: Thanks for making the time to speak with us. Our magazine has a broad distribution across California, including CalAPA members, non-members, agency personnel, academia, and others that are interested in asphalt pavements. It is also sent to NAPA and all the state asphalt associations around the country. Our organizations intersect in many different ways, so we’re happy to have this opportunity to share your perspective with our readers.
Peter T. Grass: Sounds good.
CAM: For those who may not be that familiar with all that the Asphalt Institute does, perhaps you can let our readers know about the Asphalt Institute’s mission, emphasis areas and the work the Institute does on behalf of our industry.
PTG: Sure. We’re probably the oldest binder-focused organization in the world. We’ve been at this since 1919. Our focus is on petroleum-based binders, and all the ancillary pieces that go together that help successfully make a high-performing asphalt mix. Our focus is on delivering a quality system to the end-user. I say mix, but our focus also includes the 15% of the market that goes to the roofing market in North America. Our principal focus is on asphalt pavements, their performance, and the mix component of that. That’s where we’re really centered.
CAM: Our focus, of course is pavements, but perhaps you can also take a moment to tell us a bit more about the roofing side of your business. We have seen those two worlds intersect in the form of
asphalt pavement mixes that incorporate recycled asphalt shingles in the mix.
PTG: The Asphalt Institute is an international organization. We have members worldwide, although probably the bulk of our membership is in North America because of the scale of this market, so it’s a good place to call home. We represent about 95% of the liquid market in North America, so we have by far the lion’s share of the voice on petroleum binder issues here, and we have a pretty strong voice internationally as well. Our strategic partner, Eurobitume (the European Association of Bitumen Producers), in Europe, focuses on Western Europe mostly, but we work very well with them to advocate for the performancebased use of our members’ products, but also to be advocates for the industry and we keep a close eye on developing specifications and trends in markets. On just the question of where liquid asphalt goes, in the North America markets, which we closely track annually based on reports from our members, typically just north of 85% of the liquid market here goes into paving and paving-related uses, everything from tack coats to the binder that goes into mixes itself. The remainder, just under 15%, goes into roofing products of all types – not only your residential roofing shingles markets, but also commercial roofing products, like waterproofing of roofing systems. There is a small percentage that goes into many other applications, such as; emulsions that are used in vehicle manufacturing, such as in the assembly of major body components of vehicles like trucks and other vehicles. Other examples are of paint used in fencing paint, and pipe coating that’s used in helping prevent corrosion in buried pipe systems. That makes up in a nutshell the principal usage of asphalt.
CAM: Liquid asphalt binder is, of course, an essential ingredient in asphalt pavements, but there is a long chain of events that must be performed properly for the final result that we all want – a durable, economical, sustainable and longlasting pavement project. We have seen the Asphalt Institute play a strong role in being a champion for all links in that chain to be as strong as possible.
PTG: You’re right. Long-lasting, high-quality pavements, constructed in the field, is the ultimate goal for all of us, and I couldn’t underscore that more. Since our inception over 100 years ago, our organization’s members have funded a field force of professional engineers across the country and in Canada who have a mission to promote the quality use of asphalt in pavements and all aspects of its use. A special emphasis, of course, is public agencies. Our members have always felt strongly that a highperforming system is going to have long life and will generate repeat business over a lifetime. That’s the long view they take. Part of our core mission is delivering continuing technical education at all levels, whether it is for the asphalt technician working in the lab doing binder testing or emulsion testing, or it’s an engineer designing pavements, or maybe they are inspectors, engineers or technicians, inspecting work in the field to ensure it meets specifications.
CAM: That’s a diverse audience.
PTG: It sure is. And it also requires what we consider research-grade engineers who are practitioners. They are studying rheology, or they may be into advanced mix designs, such as the use of the Bailey Method, trying to figure out betterperforming mixes in the lab and out in the field. So that’s a broad brush
of how we approach education. In recent years we have emphasized certification for these individuals. Probably our first certification program was the national binder technician certification program, which is not just for technicians but also engineers as we have many engineers certified under this program. Importantly, we developed this national program in concert with the Northeast Transportation Training and Certification Program (NETTCP).
CAM: We’re also promoting that concept in California, with the Joint Training and Certification Program for construction materials technicians, which we championed. The program is run by Caltrans and managed by California State University, Long Beach. CalAPA has also launched a certificate program for asphalt paving companies known as the Quality Paving Certificate, which seeks to establish quality standards for the asphalt paving industry in California.
PTG: In today’s world, labor is expensive, and we’re all competing for limited resources. As that pool shrinks, this certification is a way for individuals to distinguish themselves as value-added to the workforce wherever they choose to go. It’s the same thing in commercial practice – engineering firms, labs, contractors, or agencies. We need to have certified practitioners and may include a specialty area, such as emulsion certification. We also have a pavement inspector certification program (PIC), which is all online now. The modules to successfully complete that course orient that individual to do a very good job as a pavement inspector anywhere. It’s great to read comments of students who have been through that, to see that they have trued up what they know.
CAM: Formal education may offer the basics, but this kind of targeted training really provides the specialized knowledge needed to succeed in our industry.
PTG: If we go back to what we have as an educational system, at least in the United States, realize that if you are pursuing a civil engineering degree, in any of our colleges or universities, the school may not be specifically focused on an asphalt curriculum. If you are going to a university that does not have a focus on asphalt, your exposure to our industry, and specifically, to asphalt pavements, is likely miniscule. We find a lot of engineers who come into our industry have virtually no exposure to asphalt pavements, whether it’s design, pavement type selection, or inspection. It’s a continual effort we all must make, to provide continuing education programs and certification to help all of us really rise to the level of expertise we should have, particularly when it comes to taxpayer trust and the performance of our infrastructure. It’s expensive and we can’t afford to do anything less. So that’s a little bit of what we are doing and how we approach the educational piece.
CAM: One of the common threads embedded in your answer is helping to set the standard for excellence in our industry. Speaking for the California Asphalt Pavement Association, we admire and appreciate the work the Institute has done in this area, and in some cases we have tried to emulate that model in our knowledge-sharing activities to complement and amplify what you have done.
PTG: Thanks.
CAM: Can you talk a bit more about research. You touched on that, and we see that as advancing knowledge, or creating new
knowledge, which ultimately leads to a better product and better outcomes. There seems to be an explosion of new information, new products, new techniques, best practices, that are clamoring for our attention.
PTG: We are certainly not the largest organization out there doing research. We tip our hat to organizations at the academic level, such as TTI (the Texas Transportation Institute), as just one example, and also industry labs like NCAT (the National Center for Asphalt Technology at Auburn University). Those organizations are doing more volume and throughput because of their pure focus on mixes and pavements, but we still do quite a bit, and our lab here in Lexington focuses on funded work. Agencies or other groups often come to us with a research need. We go in with them as a principal investigator, or as a subcontractor, or a collaborator, and we are doing that every day. Some of the contemporary issues include implementing the AASHTO M332 specification (covering asphalt binders graded by performance using the multiple stress creep recovery, or MSCR, test). We’re a promoter of that in a broad sense, but a lot of states want to add something to that specification, whether it’s the Delta Tc requirement (an indicator of the effect of aging and additives on the asphalt rheology), or maybe it might have to do with their binder needs or availability in that state as it relates to M332. We often get involved with helping states, or their consultants, make decisions on their specifications, so those are projects we take on. Quite often a state will come to us with a specific problem that they would like us to take a look at. A lot of our research work is specific to that agency or its needs. Usually, we execute a non-disclosure agreement with regard to that work, and the results
are given to that agency or company. We pride ourselves in providing unbiased, sound scientific information to all parties involved.
CAM: Still, all of these new things require a careful, methodical examination to fully understand what implications they have for the quality and durability of the pavements. It seems like we are being inundated with new products, new technology, new equipment, new techniques, and it is a challenge to stay at the forefront of it all.
PTG: Right. Just one example is the use of recycled plastics in asphalt. It seems to be, certainly over the last two or three years, very popular in the literature. We will read that somebody has taken some form of plastic, introduced it into a recycling process, and then introduced it into mixes, whether it is in the binder itself, called the wet process, or in the dry process, where it is added into the mix. The end result is they do a trial section, and the headline usually reads something along the lines of, “Recycled plastic improves the performance, durability and life of asphalt pavements in this test section.” I cringe when I read that
[ Continued on page 26 ]
Grass during a 2017 panel in Lisbon, Portugal.because it might not really be the case, and the study design might not really reflect that outcome. Our industry, in collaboration with NAPA, has published some important work summarizing the research that’s out there on plastics and asphalt recycling. I recommend those who are interested in the topic read those reports. There’s also an international organization called the Alliance to End Plastic Waste (AEPW), based in Singapore. It’s largely funded by the major oil companies with a goal to reduce the plastic waste problem on a global scale. We are participants in that, as is NAPA, and Eurobitume, as advisers in a forum. They are now in the field phase of their research to see if they can make good use of plastics recycled in a specific way in asphalt pavements. The jury is still out on how all of that will work. That’s not to say that it can’t be done, but there are costs involved, there are quality control issues involved, and in the end, you have to look at what you are trying to achieve with the introduction of another material into our mixes. There are some examples where it has worked well, but there are also some examples where it has not, simply because we don’t have the engineering right, or the quality control isn’t right, or the material is not suitable for incorporation in the asphalt mixes. There’s a need to expand that research, to do more work, so we as engineers, and as an industry, can properly advise policymakers based on sound research. Policymakers are faced with requests from the public to find uses for the plastic waste that we are generating. Plastics give us a nice quality of life but create a large waste stream. As engineers, I think we should do our homework first and look at what else has been done in this area. That’s not to say you can’t do it right with the right structure.
CAM: It seems like our industry is called upon to not only deliver high-quality pavements for our vital transportation infrastructure, but also to solve other problems, like we saw with the utilization of recycled tires in asphalt to keep discarded tires out of landfills. Government was seeking to solve two problems, fixing roads and also addressing a landfill issue.
PTG: Exactly. That happens a lot. We’ve been there with glass. We’ve been there with rubber. There was a mandate to use rubber at the federal level, briefly, but that got removed. The introduction of rubber into the mix, whether it is into the mix itself or into the binder, can have some very beneficial attributes. But I fall back to our role as engineers, to understand what we are trying to achieve, and find the best way to do that, with an eye on the performance long-term, the cost, and the overall impacts. Are we creating a system that is truly re-recyclable, which is the case we have with our pavements today? Or are we creating something that is going to result in only a one-way stream that now creates a landfill problem as an unintended consequence of our decision to forgo the present re-recyclability?
CAM: Please take a moment to speak to the relationship and interaction between the Asphalt Institute and other key partners, such as NAPA and the state asphalt pavement associations. Not to be a shameless name-dropper, but our former asphalt pavement association executive in California, Roger Smith, previously worked for the Asphalt Institute, and our former Technical Director, Dr. Rita Leahy, also has Asphalt Institute on her resume, so there are a lot of connections there. And, of course, your longtime senior regional engineer, Bob Humer, is revered in our state. How do you see these connections from your perspective?
PTG: Yes, there are many connections there. In fact, we just recently recognized Rita Leahy in our Roll of Honor at our meeting last year in San Francisco.
CAM: She has also been recognized nationally as the original “Woman of Asphalt.” She’s a legend, and we’re very proud of her.
PTG: She’s terrific.
CAM: Sorry to get off track, but back to the interaction of those various organizations.
PTG: Those organizations, NAPA, SAPA and the Asphalt Institute, intersect across many areas, whether it is training, education, advocacy, promotion of quality pavements, trying to help our agencies succeed – those are all threads that we are all trying to do, but approaching it from a different perspective perhaps, and I like to say, when done well, really add value to what the agency gets, what the public gets. That’s ultimately our goal. We talk about wanting market share. We talk about
preserving and growing our markets. We talk about various performance problems with our pavements and how we can fix them. We talk about public awareness of the benefits of asphalt pavements, what it does for you. For example, the type of surface that the agency chooses to put on their pavement structure that can reduce splash and spray and still maintain good friction quality for safety. I don’t know how many times I hear a person tell me that the road they have traveled over for decades just got resurfaced with some type of open-graded friction course, and what a game-changer it has been for their ability to see, particularly around large trucks during a commute period in rain. Those are real-world issues the public has that they look at our industry for. All pavements have some choices and tradeoffs and it impacts the public, but these three associations are all involved in that delivery. That’s where I think our strength is, together, to do that. It is not one over the other. I think we each bring a perspective and a set of tools and capabilities to the table that help that agency achieve what they are ultimately trying to do. When we work together to do that end, it really is remarkable to see, and I see that often. Some of the ways that we interface with the state associations, as you well know, is we help the state put on their various paving conferences, particularly the technical program that is part of the content that the conference provides. It might be working to recognize an agency for a particular segment of highway through a perpetual pavement award that they’ve earned because they chose asphalt, and it has performed well for them. To give that back to the agency in terms of recognition, I think, is important, and an honorable thing for our industry to do, and we do that together through the Asphalt Pavement Alliance. I mentioned the
conferences and helping to deliver content. We do that throughout the country, through our network of regional engineers. We do the same in Canada. You mentioned Bob Humer. He is responsible for not only California but the western states in his region. While our engineers are largely responsible for their regions, our director of engineering, Mark Buncher, sets priorities as the workload dictates, or maybe there is specific expertise that is needed. Obviously, the agency is the focal point. We look at the Asphalt Pavement Alliance now in place for about 25 years, and its strong in California and the western states in general. One of the hallmarks of that collaboration is the continuing discussions all three organizations are having about what we’re doing and how we are doing it. The annual meeting of the state asphalt executives is another touch point and I will be there this year with our chair, Jeff Norris of ExxonMobil, and we will help provide a discussion on these and other contemporary topics that are of interest to all three groups. These are just some of the ways that we interface, and I think it works well. Another example: We hired two regional engineers last year, replacing two who retired. We asked them (Grover Allen out
of Florida, and Jason Wielinski out of Indiana) to get on the road early in their tenure and go visit state executives, go visit state DOTs in their regions. As these guys made the rounds it is an example of what is important to us as an organization. They opened channels of communication between these different groups, trying to understand what their challenges are, what problems they are trying to solve, and what frustrates them, and how we can help. We don’t want to be part of the problem. We want to be part of the solution. It’s revealed a whole new openness in terms of the things we can accomplish together. For example, we have had fresh discussions with the DOTs on issues that are challenging to them that they want some help with.
CAM: A lot of the work by CalAPA over the years has been centered around that in an implied way, but in the association’s recently updated strategic plan, the association’s leadership actually put that in writing for the first time as one of our high-level goals. We can’t succeed unless our stakeholders and customers succeed, including public agencies. It was a pretty powerful statement. Another high-level goal
is for the association’s activities to complement and amplify what other stakeholders are doing. The coordination you mentioned is a big part of that.
PTG: Right.
CAM: One thing I think should be mentioned is something the Asphalt Institute doesn’t do, and that is lobbying. NAPA has a federal Political Action Committee (PAC), governmental affairs staff, and employs contract lobbyists. NAPA’s PAC supports the campaigns of various members of Congress who the industry believes are aligned with our priorities, including protecting our pavement infrastructure. CalAPA has a state PAC as well, employs contract lobbyists in Sacramento, and also supports campaigns of state elected officials for similar reasons. Please explain that difference.
PTG: You’re exactly right. AI doesn’t specifically lobby elected representatives at any level. The reason is that our larger members have as part of their focus to ensure their ability to conduct business, and they have internal and external groups to both take that on. But this doesn’t mean we (AI) aren’t advocates for our industry. By being advocates, we can help decision-makers understand how their formulation of policy may affect our industry and our members. Just last year, the federal Buy America Act is one example. It sounds like a great idea on the surface, but the implementation of it, and the details, are very important for lawmakers to understand, especially what the second- and third-order impacts of the provisions might be. We are helping to bring facts to the table on what those impacts are. We worked closely with NAPA to get them facts. Separately, we also work closely with agencies through their technical committees. In some
cases other countries look at our FHWA specifications for potential adoption so this is critical. We work closely with many nationallevel committees, etc. There are a plethora of them that we are involved in as committee members or leaders, so that’s an important way that we are able to participate.
CAM: Being a subject-matter expert, and bringing knowledge to a policy discussion, is very important for our collective credibility. We’ve certainly seen the benefit of that in many different venues, and we appreciate your efforts in that area. To cite just one example in California, NAPA and the Asphalt Institute collaborated with CalAPA to provide research about asphalt to a panel of scientists in California known as the Carcinogen Identification Committee, part of the Office of Environmental Health Hazard Assessment. After reviewing the exhaustive and credible research provided by our industry, the panel determined asphalt was a low priority for further study.
PTG: I remember that. We were pleased to work with your organization on that.
CAM: So, since this is the forecast issue of our association magazine, we would like you to weigh in on the future of the asphalt industry. Certainly, the topic of fossil fuels and their role in our energy future, and many other areas, is ubiquitous in the policy and political arena these days. How do you see things from your perspective?
PTG: There’s no question, when you look at it from a global warming potential, or you look at it from an emerging altruistic view that you want to reduce our dependence on fossil fuels as an energy form, all are great discussions and part of where we’re going to go. It’s going to take time to get there. Anybody who
knows energy production and delivery will tell you it is not a flip of the switch. It’s going to take investment. In some cases, there is technology that needs to be developed, and in some cases, there are resources that are limited that need to be expanded upon to deliver on that promise, whether it is battery material, or even the electric infrastructure to deliver that energy. How many times have electric vehicle owners in your state been told “Don’t charge between this time and that time, because we have limited capacity to deliver what you need?” That’s like going to the 1973 gas lines, if you can remember back that far, during the oil embargo days and waiting in line to buy a limited amount of gas. That is something that is pretty far from our minds, but it is playing out again today. So, it’s going to take time to transition, and we need to make sure that not only what we want to do is there, but also what we can deliver as an energy source is there. That’s just on the energy side. Commensurate to that is our infrastructure. We need to understand that asphalt is perhaps the ideal system to have as infrastructure because it is not a fuel. It’s designed, built and put in place as a construction material, just like that 2-by-4 piece of timber might be in our wood-framed houses. It was never envisioned to be a fuel and burned and increase our carbon footprint. It’s the same with asphalt. It is manufactured on purpose, not as an afterthought, in our refineries, to a specification, put in place, and serves as a great carbon sink. We’re working in our industry to help quantify what that is, and to develop some of those messages. But from everything that I gather, in talking to our oil executives who work in the asphalt arena, they feel that our future is a bright one. Have some smaller refineries been repurposed into alternative fuels? Bio-based diesels
[ Continued on page 30 ]
production facilities and storage facilities? Sure. And that as much as a deference to economics and demand, and that’s the right purpose for that facility at this time, so that happens, and when we in the industry see a refinery change we get a little alarmed because we think capacity is coming off line, but we have not looked at the fact that refining capacity in the United States and globally continues to meet the demand we have out there. So in our foreseeable future we project that asphalt is going to be readily available in the grades and volumes that people need.
CAM: Great! With regard to California, we tend to see most of the debate about the future of fossil fuels, regulation and other issues that impact our industry take root here, and migrate across the country. What is your perspective of the current climate in the Golden State?
PTG: You’re much more of an expert on that than I am. But I would comment on one thing. I’ve lived and worked in California in a prior career. I lived and worked in San Francisco, specifically, and was involved in some of the climate challenges we had back then, that still exist today, and have been acute the last several weeks (with powerful winter storms pummeling California). I can see the devastation of property and infrastructure there. It’s also a challenge due to the regulatory environment you have to work in to get that done. If anything, today, I’m pleased to say that our industry can respond and provide rapid repairs, to restore access to cutoff areas and restore emergency services. Restoring infrastructure quickly provides fundamental life services to those areas affected by landslides, road washouts, etc. The ability to do rapid repairs is not unique to California, it is everywhere,
and I think that we sometimes don’t appreciate what we can deliver in a short amount of time. But we can also build it back in such a way that it is more resilient for the next time. The next time will come. I was part of similar projects in California when I was there and have watched to see how they have held up. With some engineering, some thoughtfulness, some planning, you end up with a more resilient piece of infrastructure. I think that’s a huge advantage we have to deliver a quality of life to the public we all serve.
CAM: We’ve covered a lot of ground in this interview, and you’ve been very generous with your time. Is there anything else you would like our readers to know?
PTG: Just two things. Our chairman this year is Jeff Norus with ExxonMobil. When he came into office, he outlined three things that are important to focus on this year, and I think they are telling. One is collaboration with partners. That is very important to all of us, and we have touched on that in this interview. Another one is supporting diversity and inclusion, both within the Asphalt Institute and our member companies. I remember back when to my first series of interviews with the Institute, and we had maybe 100 members gathered at a meeting in Spring, Texas. I was introduced around by our Chair that year, Tom Bertsch with the Heritage Group. That meeting was all white males, every one of them. There wasn’t a single female in the room. There wasn’t a single person of color in the room. I was a little surprised, coming from government and I thought, we’ve got some work to do. Here we are, in 2022 and the beginning of 2023, and Jeff makes that statement. It struck me as I looked around the room as we’ve made huge gains. I applaud our members and others in our industry who have
helped facilitate this progress. And I look at our own staff and the diversity that we’re helping to bring, talent-based resources, to the table, and I’m very pleased. But we have more work to do. The last thing is our initiatives to provide sustainable solutions for our industry. We’re not only going to identify and figure out how, but we are well on our way to achieve it. Last summer, we put together an Environmental Product Declaration (EPD) task force to build the first EPD for binder. We will look at our Life-Cycle Assessment (LCA) to see what modifications need to be made to it, if any, to help to deliver on the sustainability equation as required by some of our states. California is in that basket, but it's also at the federal level. We have to identify sustainable solutions that work for everybody. There is a big educational component to this too. It’s a whole new language to learn, and we’re on that journey already.
CAM: Congratulations to you and your team and leadership for making real and tangible progress in all of those areas. We look forward to working with you on that journey. CA
Russell W. Snyder, CAE, is executive director of the California Asphalt Pavement Association.
REFERENCES:
Willis, R., Yin, F., Moraes, R. (2022) “Recycled Plastics in Asphalt Part A: State of the Knowledge” – NAPA IS-142.
Yin, F., Moraes, R. (2022) “Recycled Plastics in Asphalt Part B: Literature Review, NAPA IS-142
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ASSOCIATION NEWS
Leadership in the spotlight at CalAPA's Annual Dinner in Los Angeles
Recognizing past accomplishments and new leaders took center stage at the CalAPA Annual Dinner and Membership meeting held Jan 12 at the opulent Hotel InterContinental in downtown Los Angeles.
The annual event featured a tribute to outgoing Chairman Scott Fraser of R.J. Noble Co., who passed the gavel to incoming Chairman Jeff Benedict of Valero. Fraser administered the oath of office to Benedict, who then presented the outgoing chairman with a special award for his service to the association and the industry. Fraser spoke about how his involvement in the association over the years helped him learn and grow into his current leadership position within his company.
"I think we owe it to the next generation," Fraser said. "When you see someone in your organization, send them to the TAC (Technical Advisory Committee), send them to the Environmental Committee. It's going to do nothing but greatly enhance your organization and ours."
More than 100 CalAPA members and family attended the annual event, including association Hall of Fame members and other dignitaries. Former CalAPA Board Member and Officer, Toni Carroll, was presented with a special award for her many years of service to the association in various leadership roles. She also spearheaded the formation of the California Branch of the "Women of Asphalt" organization.
"This association made me who I am," Carroll said in accepting the special award. "There's people in this room who probably don't even realize the impact you have had on me as a professional and as an individual. I can't say enough, from the bottom of my heart, thank you."
The program included an invocation, delivered by Steve Marvin with Labelle-Marvin, and the Pledge of
Allegiance to the U.S. Flag, led by Hall of Fame member Len Nawrocki. A moment of silence was observed by the gathering to remember significant figures from the asphalt industry who have passed away during the past year, including Majid "Mo" Mojibi, Rene Vercruyssen Sr., Norm Aguirre and Mike Hinson.
The keynote speaker of the evening was Assemblyman Vince Fong, R-Bakersfield, who is vice chairman of the Assembly Transportation Committee and Assembly Budget Committee. He
gave his perspective on the current state of the Legislature, as well as his take on the leadership battle in the U.S. House of Representatives. Fong previously worked for U.S. Rep. Kevin McCarthy, who ascended to Speaker of the House earlier this month after a contentious series of votes on the House floor.
"In Sacramento, we are in a very dynamic time," Fong said, noting the surge of retirements and new members of the Legislature. In Sacramento, he said, "structure dictates behavior. We have 24 new
Left: Assemblyman Vince Fong, R-Bakersfield, vice chair of both the Assembly Transportation Committee and Assembly Budget Committee, addresses the attendees at the CalAPA Annual Dinner Jan. 12 in Los Angeles Above: Incoming CalAPA Chairman Jeff Benedict, Valero (left), outgoing Chairman Scott Fraser, RJ Noble Company and Russell Snyder, Executive Director, CalAPA. Above: Russell Snyder presented Toni Carroll with a special leadership award recognizing her years of service to the association and the industry, including as member of the CalAPA Board of Directors and officer.members of the state Assembly, out of 80. So just think, we have 30% of our entire body that is completely brand new."
"They are all coming in from different perspectives," he said. "We're all trying to get to know each other. Just imagine if 30% of your workforce was new, and you're training them up and you're trying to understand how they will get along, and what that chemistry will be. We have that exact same dynamic." He said a similar situation is occurring in the 40-member state Senate, and there is turnover in the governor's office as well.
"My priority as vice chair of the Transportation Committee and Vice Chair of the Budget Committee is pretty simple: I want to build things
in California," Fong said. "And all of you are a critical component of that." Inaction, Fong said, is not an option. "I've never seen the public as anxious and frustrated as they are," he said. "They want things done. We have to deliver tangible results, measurable ones."
The members who were elected to serve on the Board of Directors for 2023 were: Scott Fraser, R.J. Noble; Jeff Benedict, Valero; Scott Metcalf, Ergon Asphalt & Emulsions; Scott Bottomley, Sully Miller; Kevin Jeffers, Albina; Frank Costa, DeSilva Gates Materials; Jordan Reed, George Reed Inc.; Tim Denlay, Knife River; Thomas R. Bess, Thomas R. Bess, Inc.; Chris Handley, Tullis Inc.; Kody King, Mercer-Fraser; Pete Lambert, McGuire & Hester; Mike Murray,
Hardy & Harper; Steve Ward with Pavement Recycling Systems; Chris Gerber with G3 Quality; plus Advisory Board Member Ron Criss with Hat Creek Construction. The 2023 officers are: Chairman Jeff Benedict with Valero, Vice Chair Scott Metcalf with Ergon Asphalt & Emulsions, Treasurer Scott Bottomley with Sully-Miller, and Secretary Chris Gerber with G3 Quality.
The VIP Table Sponsors for the evening were Martin Marietta, R.J. Noble Co., Sully-Miller Contracting Co. and Valero Energy. Event sponsors were Kenco Engineering and Pacific GeoSource. Reception sponsors were Mercer Fraser and Ergon
&
Asphalt Emulsions. The event lanyard sponsor was Pavement Recycling Systems. CA Above: Jim St. Martin, Life Member (left), Ann St. Martin, Juan Forster, Life Member, Steve Marvin, LaBelle Marvin, Mayra Nawrocki, Len Nawrocki, Life Member, Anna Trinidad, Valero and Rueben Trinidad. Above: Cameron Richardson, Ingevity (left) with Martin Marietta team members; Alex Shaw, Albert Garcia, Dave Mundt, Cheyenne Gould, Henry Bejjani and Matt Pound. Above: RJ Noble Company team members; Jason Vera (left), Manny Merida, Brandon Spiers, Rocco Costello, Steve Mendoza, Scott Fraser and Rodrigo Amaya.The Terramac® RT7R features a 360-degree rotating frame that can dump up to 7 tons at any position which improves ef ciencies on the job site while minimizing environmental damage. Ideal for a variety of projects including tight spaces and sensitive areas.
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