State of the Chemical Industry & Legislative Priorities Hector L. Rivero, President & CEO “Clear the Air” Transportation in the Port Region Summit March 2, 2017 11

Texas Chemical Council 70 Member Companies 200 Manufacturing & Research Facilities $100 Billion in Physical Assets in Texas Over 75,000 Employees Over $1.5 Billion in State and Local Taxes #1 State Non-Energy Export ($47 Billion Annually) The Texas Chemical Industry is important to Texas, the region, the U.S. and even the world! This industry is undergoing a renaissance, mostly due to available, accessible and affordable natural gas – a clean fuel and feedstock for the industry.

Association of Chemical Industry of Texas 450 Member Companies Contractors, Suppliers, Service Providers Over 400,000 Texas jobs Beyond the $100 billion in member assets in Texas, the industry has greater reach into our communities with more than 400,000 Texas jobs in associated industry companies. These are chemical industry suppliers, vendors, and those that build and maintain our facilities.

US Chemical Industry Overview $800 Billion Annual US Chemical Output Over 70,000 chemical products 96% of all manufacturing goods are touched by chemistry 804,000 American jobs created by the chemical industry 7x Job Multiplier Avg. Salary - $93,000 $191 Billion in exports 14% of US exports > 850 million tons shipped safely annually Chemical exports have doubled in 10 years Here is a quick national perspective regarding the Chemical Industry. Avg. Salary of $93,000 ($30,000 higher than manufacturing industry average) Despite the slowdown in the broader manufacturing industry, we have seen U.S. chemistry volume gains. Even with the fall in oil prices, the U.S. chemical industry still has a favorable competitive position with regard to feedstock costs as natural gas prices have remained low.

US Chemical Industry Investment Here is a quick look at the national Chemical Industry investment. Source: American Chemistry Council

Texas Chemical Industry Investment $45.8 Billion Announced Investment 84 153,000 Texas Jobs $1.8 Billion State Tax Revenue Here is a focus on new capital investment in the Chemical Industry in Texas. The majority of this capital investment is along the Texas Gulf Coast. Source: American Chemistry Council

Texas Chemical Industry Impact Here is a look at the chemical industry’s economic impact. Largest chemical producing state $165 Billion in revenue $5 Billion annually in capital improvements #1 non-energy State export (over $47 Billion annually) Over 75,000 Texas jobs / over 500,000 indirect jobs $8.1 Billion in payroll Average wage - $104,000 - (46% higher than avg. manufacturing wage & higher than the U.S. Chemical industry average $93K) $2.9 Billion in state & local taxes $5.5 Billion in federal taxes Strategic infrastructure (feedstocks, pipeline, deep water ports, rail, trucking, workforce) Source: American Chemistry Council

Industry State Legislative Priorities State Budget Fair & Balanced Tax Policy Protecting Economic Incentives (Ch. 313) Workforce Development Coastal Spine Initiative Transportation Infrastructure Defending Funding for TERP (Texas Emissions Reduction Plan) I highlighted Transportation Infrastructure and Texas Emissions Reduction Plan because these will help me segue to the next slides about important issues.

Industry Air Quality Improvement TERP: an important element of emissions reduction Technology in new plants reduces emissions Continuing progress to reduce emissions ~50% reduction in ambient NOx concentrations since ’85 ~60% reduction in Highly Reactive VOCs since 2004 Transposed emissions pie chart – mobile source issue Air quality improvement has been achieved while increasing production, creating jobs, growing the region’s population, & adding vehicles to roadways The story of Houston’s air quality is positive: Houston’s Air Quality improvement has been dramatic & continues to improve! Plans are in place to continue Houston’s Air Quality improvement. Air quality has improved while increasing production and building new plants, as well as increasing population and the annual vehicle miles driven in our region. Houston’s Air Quality is comparable to and better than other large U.S. cities 2014 was our cleanest year on record. That year, Houston met EPA standards. In 2015, a hot, dry and wild-fire plagued year, we saw increased ozone in the region.  The levels of ozone were slightly higher, and the number of days we exceeded the standard was higher as well.  We know that weather is a key factor that drives ozone formation.  Some years have more days with hot, dry, stagnant weather that can contribute to more days with high ozone.  Wildfires and agricultural burning, both nearby and far away, can also contribute to high background levels of ozone entering the area.  We know from the National Interagency Fire Center data that 2015 was a particularly bad wildfire season in the U.S. In 2016, we had far fewer days that exceeded the 70ppb standard than in 2015, and overall levels have been lower even on exceedance days. 

Region’s Transportation Needs Greater Houston Partnership: $22.7 billion in new capital projects coming on-line in 2017 Economic Alliance Houston Port Region identified $1.6 billion in priority transportation projects Worker commutes increased Product transportation increased Rail, road & water Primary transportation concerns Safety, health & efficiency Reference to Chad Burke’s earlier comments about 27 priority transportation projects – working with TxDOT, Harris County, local mayors and other partners.

Hector L. Rivero President & CEO www.TexasChemistry.org www.acit.org Chemical Manufacturers and Suppliers working together for the future of Texas! Hector L. Rivero President & CEO