The Energy Question, Episode 50: Kip Eideberg, Senior VP at AEM

 

David Blackmon [00:00:05] Hey, Welcome to The Energy Question with David Blackmon. I am your host, David Blackmon, of course. And my special guest today is Kip Eideberg, who’s the Senior Vice President for government and industry relations at the Association of Equipment Manufacturers, which is a venerable organization representing manufacturers in the country. Based in Milwaukee, Wisconsin but keeps them in the Washington office. Kip, how are you doing today?

Kip Eideberg [00:00:33] David I’m doing great. Thank you so much for having me on the show today. I’m looking forward to the conversation.

David Blackmon [00:00:40] Me too. Me too. This is a really interesting area for me. I you know, so much of what’s happening in I focused mainly on energy and so much of what’s happening in the energy space is based on manufacturing as its base. Of course, the whole energy industry uses tons of all kinds of equipment that your members make.

David Blackmon [00:01:03] And so it’s it’s really the basis of the these of the energy business so I was really glad when I was contacted by one of your representatives recently to see if I’d be interested in having you on and I jumped on the opportunity. I want to start, though, before we get into the Q&A, just give you a few minutes to talk about AEM, you know, and give us some of your background and the background of the association.

Kip Eideberg [00:01:30] That you bet. So as you said, we are the Association of Equipment Manufacturers. We’ve been around for 127 years. So we know just a little bit about what it takes to make things here in America. We’ve got about 1000 member companies, David, and they range from large multinational OEMs down to small family-owned OEMs manufacturers of parts and components as well roughly 2.3 million jobs across the country, 600 sorry, 316 rather billion dollars economic output each year.

Kip Eideberg [00:02:05] We are one in nine or we represent one in nine manufacturing jobs in America that’s 11% total. Yeah, the total U.S. manufacturing workforce. So we are a sizable slice of U.S. manufacturing. We’re spread out across the country, in the Midwest obviously, many people associate manufacturing with the Midwest. But actually our largest footprint in terms of jobs, 350,000 jobs are in Texas.

David Blackmon [00:02:34] How about that? God bless Texas.

Kip Eideberg [00:02:36] Yes, indeed. Yeah. And of course, a lot of that is, as you can imagine, this is driven by the oil and gas industry as well as mining. So a lot of our yeah, a lot of our member companies are in Texas for that reason. Also, it’s a pretty good business climate for manufacturing. So but you’ll find us, as I said, in the Midwest and the Southeast, on the West Coast, up along the Eastern seaboard as well.

Kip Eideberg [00:03:02] One thing I think that is a bit unique about our association is that not only do we represent our member companies and their interests in front of elected officials at the state and federal level trying to advocate for manufacturing policies, we also own and operate trade shows, so we connect our member customer and member companies with their customers. We try to try to really make sure that our members are well positioned to do what they do best, which is to make great equipment here in America and sell it to customers in the U.S. and across the world.

David Blackmon [00:03:34] Well, you talk about the Texas footprint for your member companies and that doesn’t surprise me. You know, Texas, of course, is a huge geographic space, the second most populated in the country. I wonder, first of all, if a lot of the manufacturing installations kind of focused heavily on the Gulf Coast area to facilitate exports. or are you more spread out across the state?

Kip Eideberg [00:04:06] We are. We are more. We are more spread out. Yes. We have concentrations of members in the Dallas area, and the Houston area, there’s a cluster around Waco, but some smaller manufacturers out west, and even Longview has a few members as well there.

Kip Eideberg [00:04:26] So obviously they take advantage of of the great port and ports really that you have in Texas both seaports and land ports for that matter. Multimodal terminals that Texas has built and invested in rights so that we can bring components in from around the country and around the world and then ship world-class equipment out from Texas to customers. So, yeah, our footprint is pretty diverse across the state. David.

David Blackmon [00:04:51] You know, so interesting to me when I look at and I have a list of the five biggest manufacturing states in the country behind Texas, there’s Indiana, Illinois, Wisconsin, Ohio. So all in the Midwest, it’s when you really think about, though, where the population centers are and really the size of the economy in California it’s surprising to me that California is not on that list.

David Blackmon [00:05:19] Would that be mainly a product, would you say, of the difference in policy environments between, say, Texas and California, you know, a more welcoming business climate, or is there something else going on?

Kip Eideberg [00:05:32] That’s an interesting question. I think it goes back originally to just the history of manufacturing in America. A lot of it was established in the Midwest, proximity to steel mills, proximity to the great ports around the Great Lakes. Yeah. So I think that’s really where it started. But then to your point, we have seen in the past 5 to 10 years, we’ve seen equipment manufacturers move to Texas, some from California. To your point about the business climate,.

David Blackmon [00:06:10] Yeah Tesla being one.

Kip Eideberg [00:06:11] Yeah, that’s right and others have relocated to Texas from other parts of the country. Now, Illinois has seen an outflux of equipment manufacturers to either neighboring states like Indiana or Wisconsin, but some to Texas as well.

Kip Eideberg [00:06:27] So I think it’s it’s probably more just the welcoming atmosphere that you have in Texas coupled with some sound public policy and a business environment that really incentivizes manufacturing and other activities there than anything else. So, you know, we’re thrilled, and all our members, too, are thrilled to be in Texas it’s got a lot to offer for our member companies.

David Blackmon [00:06:54] Yeah, we’re and we’re so lucky to have that kind of business here in the state and just from the standpoint of jobs that are so plentiful here in Texas and, you know, I remember during the Great Recession was a great example of how the business environment in Texas kept going and was pretty strong, thanks mainly to oil and gas business, but also the businesses that support oil and gas when the national economy just collapsed, basically. And so it’s just we’ve been very, very lucky to have that welcoming environment here in Texas.

David Blackmon [00:07:31] You guys recently put out an economic impact report I want to give you a chance to talk about because it’s the first one. But like so many other aspects of our society, you didn’t do it during COVID and in the wake of COVID. So this is the first one you released since we came out of the pandemic and I want to give you a chance to talk about some of the findings in that report.

Kip Eideberg [00:07:55] I appreciate that. We are quite proud of the results of this economic impact report. The headline really, David, for our industry is it’s a story of strength and resilience and a return to normal following the COVID-19 pandemic that you mentioned and to be clear, it is a new normal for us that comes with its own set of challenges and we can discuss those.

Kip Eideberg [00:08:23] But I think overall, the headline for us is this is the strengthened resiliency of the industry. We came through it in pretty good shape. We learned to do more with less, whether that was fewer workers available to us, fewer inputs either domestically or internationally, and more challenges in general. Right.

Kip Eideberg [00:08:47] And so that number, 2.3 million jobs across the country, these are family-sustaining jobs. They pay about 35% above the national average or so we learn from this, this latest report. So the good jobs, the jobs that allow people to have careers, raise a family, you know, save for retirement, have a comfortable life.

Kip Eideberg [00:09:08] So another point that we’re proud of I mentioned the one in nine jobs we are an important part of the manufacturing industry. So overall, we are pleased with where we are as an industry now, of course, there are still some challenges, some dark clouds on the horizon.

Kip Eideberg [00:09:28] But we feel like where we were in 2019, late 2019, right before the world, sort of things changed dramatically. And then where we are today in terms of demand, for example, it’s robust and the of our equipment manufacturers are sold out for 2023 and they were sold out for 2023 early this year. And many of them they’re sold out for Q1 and Q2 of 2024. So that’s overall a healthy, robust industry.

David Blackmon [00:10:03] So you talk about the challenges and one that I think everybody’s facing and, you know, I focus a lot on oil and gas. I know the oil and gas industry is really facing the challenge of sourcing qualified workers. Right? I mean, the workforce challenges are really strong right now, even at a time with very low unemployment. And talk about some of the factors that are creating that issue for your members.

Kip Eideberg [00:10:34] So right now we’re looking at roughly 85,000 job openings for our industry across the country. So I’ll say that again, 85,000. A lot of jobs, David.

David Blackmon [00:10:46] That is a lot of jobs.

Kip Eideberg [00:10:48] Lots of jobs and obviously, that’s having a chilling impact on the industry and our ability to take advantage of strong demand. I mentioned that a few seconds ago. Demand is strong it’s been strong since we came out of the pandemic. It remains strong, but many of our member companies simply cannot find enough people to work in their facilities.

Kip Eideberg [00:11:14] I was in Iowa a month ago or so I was meeting with a number of CEOs of our Iowa-based equipment manufacturers, and some of them were telling me that they’ve hired pretty much every person in the county and they don’t know what to do some are having people come in from depending where they’re located but if they’re in northwestern Iowa, there are people coming in from South Dakota, from Minnesota that desperate.

Kip Eideberg [00:11:43] Some counties in Iowa not to pick on Iowa we love Iowa obviously, it’s got a pretty robust footprint to them, equipment manufacturers. But some counties have negative population growth, David and so that’s not a recipe for success for our industry or for any industry. We need more young men and women to explore careers in manufacturing.

David Blackmon [00:12:02] Well, you know, despite that, though, one thing I found on your website you just did, in spite of the workforce challenges and a hard time finding workers, you guys just did it’s called the I Make America Campaign, a letter writing campaign to Congress and it managed to generate 88,000 letters sent to members of Congress. Talk about what that was all about. And I mean, that’s an incredible number.

Kip Eideberg [00:12:34] Yes, it is. And you mentioned the Make America campaign. So let me just give you sort of a quick overview. We launched this actually back in 2011 here in Washington, D.C., with the help of our friend Mike Rowe, we went up to Capitol Hill. Yeah, right. Everyone knows Mike Rowe, right?

David Blackmon [00:12:52] Yeah.

Kip Eideberg [00:12:53] We went up to Capitol Hill and we we we we held a press conference and we made a little noise. And since then, the campaign it’s a national grassroots campaign it’s grown to 40,000 supporters. Many of them work for our member companies but you don’t have to necessarily work you don’t have to at all actually work for our member companies to be part of it.

Kip Eideberg [00:13:13] We have other supporters who either work for suppliers, dealers, or distributors. Some are contractors, others are farmers everyone really just supports American manufacturing that’s the that’s at the center of this campaign.

Kip Eideberg [00:13:26] And yeah, we did mobilize a number of folks, a number of our supporters, and they did generate 88,000 letters to Congress. We know that many member offices got thousands of letters and it was really it was really around three things, David.

Kip Eideberg [00:13:42] Number one is we want Congress to pass a farm bill this year. It expires at the end of September so we need to we need that safety net and certainty for farmers and ranchers. We urge them to move policies that will incentivize domestic energy production. Obviously, it’s hard to run a manufacturing plant if you don’t have access to energy so we need safe, affordable energy and that also has national security implications, as you know better than most people.

David Blackmon [00:14:11] Yes sir.

Kip Eideberg [00:14:12] And then thirdly, permitting reform. Our permitting system is archaic, it is sluggish. It is preventing us from taking advantage of that $1.2 trillion that Congress approved. And really, at the end of the day, David, it’s hurting American families, right? It’s hurting their ability to get to work, to take their kids to soccer practice, to go to that family barbecue. So we certainly hope that those 80,000 letters will generate a little bit of action in Congress. We haven’t seen much on either of those three issues so far.

David Blackmon [00:14:49] No. You know, and you and I were talking before we started recording about it, it almost feels like they’re other than Joe Manchin, of course, who has been all over that issue and remains there. It feels like there’s very little sense of urgency on the permitting issue among the members of Congress. And to me, that means they don’t understand how urgent it really is. The problem really is and I write a lot about it, and I’m afraid we’re going to end up having to have an energy crisis before you get that sense of urgency out of Congress I wonder what your sense of it all is.

Kip Eideberg [00:15:34] Well, I couldn’t agree with you more. Let me ask you a question if you don’t mind and I looked up the answer, so I know this, but your listeners may not. What is the average time it takes to get Infrastructure federally permitted?

David Blackmon [00:15:56] Well, we just had the Trans West transmission system that took 16 years finally get its final approval this year. But I would guess it’s probably somewhere between seven and ten years.

Kip Eideberg [00:16:08] Yeah, you got it. It’s between five and ten, David. That’s that’s right. Now for roads and bridges. It’s seven years. You know, an electrical transmission line is about four. And again, these are averages, right? So we also hear horror stories like the example you just mentioned.

Kip Eideberg [00:16:23] And so now the question that we’re asking lawmakers, state and federal, but federal in particular is why in the 21st century, in the United States of America, should it take 5 to 10 years to get a project not built by you? Right. But permitted. And I think the word is absurd, right, David?

David Blackmon [00:16:45] That’s the word I use a lot.

Kip Eideberg [00:16:46] Yeah, that’s right. It’s absurd and, you know, I mentioned the $1.2 trillion of federal funds now, but half of that, it’s going back into the Highway Trust fund, but even half of that. Right. $600 billion in money for roads and bridges, ports, waterways, locks and dams, and airports. I mean, that’s a lot of money and it’s just sitting there right now in the coffers of the Treasury Department not being put to work.

Kip Eideberg [00:17:17] We have I called it archaic earlier and sluggish and I think that’s right our permitting system has not kept up with the times. And that’s becoming a real problem for us, for our society, and for us as a country and I think you’re right there is not enough urgency on the part of our elected officials where it should be.

Kip Eideberg [00:17:44] And you look at the permitting system as it is. I think it’s a mindset, David. Every president since Richard Nixon has tried permitting reform and everyone has the right. And, you know, our regulatory system is set up. It’s designed to make sure that bad things do not happen. And I think that’s an admirable objective.

Kip Eideberg [00:18:06] But the problem is that when we are trying to make good things happen, it stands in the way. And right now we have a historic, tangible opportunity to put that $1.2 trillion in funds to work. And we are doing absolutely nothing that’s perhaps a little harsh, but, you know.

David Blackmon [00:18:27] It’s not harsh at all. I don’t think that we just saw a great example of this, of the consequences of this impact on the Yellowstone River or what was that, early Saturday or late Friday, we had a bridge, an old rickety old rail bridge that goes over the Yellowstone River collapse with a train on top of it carrying asphalt and molten sulfur that is leaching into the Yellowstone River as we speak, because the bridge collapsed. Right.

David Blackmon [00:18:58] And this is a bridge that is probably needed to be replaced for decades. And you can’t get it done despite this enormous pot of money sitting there and the government just can’t manage to allocate the funds properly to get it done. So I don’t think you’re being absurd at all.

Kip Eideberg [00:19:16] Well, and you know what I worry about, David, and I agree with you, by the way. I worry that it will take a school bus full of children on that bridge before, God forbid, right before something happens or an energy crisis.

Kip Eideberg [00:19:30] And, you know, the other aspect of the permitting reform debate, which is sorely lacking, is, is that it ties in with national security, Are our competitors are not holding back. In fact, they’re moving full speed ahead and we’re getting left behind.

Kip Eideberg [00:19:48] China this year is estimated to be building 1800 miles of new railway, 1800 miles of new railway. Meanwhile, Amtrak just announced that their new high-speed trains that running from Boston to Washington will be delayed yet another year because the tracks are so old and outdated they can’t even put the new trains on the tracks.

Kip Eideberg [00:20:14] And so you’re looking at it from that lens or through that lens and it’s real. It’s really scary. And I’m not suggesting, by the way, that we should not approach any infrastructure project methodically. Obviously, we want to take care. Good. Right. Right. Not cutting corners for safety reasons for environmental reasons, for all good reasons. But I think we can do that in less than 5 to 7 years because other countries can.

David Blackmon [00:20:43] Yeah. You know, in and you talk about that the safety and environmental aspects of this and when you really analyze and you look at the permitting delays, what delays permitting of these big projects and not just of energy, but any big infrastructure project, it virtually all of it has to do with our major environmental protection laws, Clean Air Act, Clean Water Act, Endangered Species Act, and safety.

David Blackmon [00:21:14] And so it’s a real conundrum from a policy standpoint and then the other big piece, of course, is stakeholder rights, who are, you know, stakeholders who don’t want to have their land condemned for a pipeline or a transmission line project, things like that, people protecting their property rights.

David Blackmon [00:21:33] And so these things are very difficult to resolve in our system as it is but when you talk about the point I’d like to make to people when you talk about the DOE is saying we need to build 47,000 miles of new high voltage transmission lines in the next 12 years and it just took us 16 years to permit a single 732-mile transmission line the thought that you’re going to be able to accomplish that in the system as it seems frankly ridiculous to me I just it’s it seems impossible.

David Blackmon [00:22:17] And so I you know, I admire this long way around saying I admire the work you’re doing in this regard. And I hope you have success because it’s a really it really is a tough nut to crack in defense of these policymakers who are struggling as.

Kip Eideberg [00:22:35] They are and I think the answer to your question earlier. Right, that it will not get done, sadly, because they get that many new transmission lines and one took 60 years. It it’s and it’s going to have real-life consequences for all of us. Right? And, you know, you asked me earlier about some of the challenges facing the industry. Obviously, the workforce is one and we talked about that but, you know, the cost of energy is another one.

David Blackmon [00:23:03] Yeah.

Kip Eideberg [00:23:04] And if we want the United States to, I think we all do. Right? Certainly, you and I do want the United States to be the preeminent location for manufacturers, whether they are US-owned or foreign-owned, for that matter. It doesn’t matter. We want people to come to this country to manufacture. The great state of Texas and across the country. We need to have workers, obviously, and we need to have access to affordable, reliable energy. And without those two, it’s game over.

Kip Eideberg [00:23:33] So I think you’re absolutely right to be worried we’re worried we remind lawmakers every chance we get that they got to pay attention to this and that there is a middle way, because if you look at our friends and allies in Europe, for example, the Dutch are a great example of a country that really relies on infrastructure for their survival in terms of making sure that they don’t get swallowed by the Atlantic Ocean. Right.

Kip Eideberg [00:23:59] I mean, and they’ve got an incredibly sophisticated system of levees and locks and dams and roads to navigate around you know, some of the pretty massive challenges that Mother Nature is throwing their way and they’ve been able to do it. I’m not an expert on the Dutch legal system or their regulatory system, but I hazard a guess that their regulatory system probably is no less burdensome than ours.

Kip Eideberg [00:24:25] But I think what they’ve done there is they’ve strong they’ve struck the right balance between having a regulatory system that does what it’s supposed to do, which is to have some safeguards in place, but also to allow to enable businesses to be successful. Whereas our system right now, I feel like, yes, it protects, but it does so in a way that back to your point, right? Six years to get a permit. I mean, what are we doing?

David Blackmon [00:24:50] Yeah, and it’s holding up renewable-related projects, not just fossil fuel kind of stuff. I mean, and electricity, of course, is the enabler, enabler of the expansion of renewable energy in this country so if you can’t build the transmission lines, you know, wind and solar are going to be very limited and so are electricity vehicles and that’s just the way it’s going to be.

David Blackmon [00:25:13] The last thing I want to ask you about is, is a challenge everyone is facing and I’m sure manufacturers are, too, and that is supply chains have you know, we had a big problem at the ports of Los Angeles, Long Beach, in fall of 2021 the summer and fall have we seen have your member companies seen improvements and kind of a detangling of supply chains since then, or is it really still a pretty major problem for them?

Kip Eideberg [00:25:45] I’m glad you asked that question, David, and I wish I had a more optimistic answer to give you the answer is no. Obviously, I think we’ve done ourselves a bit of a disservice as a country through the narrative that has been advanced, and perhaps rightfully so, to a certain degree. Right. That we came out of COVID and things are sort of back to normal. And I think that is true to a large extent, but not when it comes to supply chains. So I’m a little concerned sometimes by that national discourse that seems to ignore the fact that supply chains are still very much an issue for us.

Kip Eideberg [00:26:28] We know from a recent survey that we did of member companies that lead times in 2019 for essential components was about two months, right? So that’s right before the pandemic today or rather late last year. But not much has really changed since then it’s seven months, so it has more than tripled since the outbreak or since right before the outbreak of the pandemic.

Kip Eideberg [00:26:54] So obviously, that’s having a negative cascading impact on manufacturing operations. When you’re waiting up to seven months for essential components. Some are. Peculiarly difficult to source. I think everyone has now learned the word if they didn’t know it before semiconductor or the word chips. Right. And obviously, we recognized or realized as a result of the pandemic that maybe we should be making just a little bit more of these critical components.

David Blackmon [00:27:23] Yeah,.

Kip Eideberg [00:27:24] Right. We all need them. We all rely on them. It’s not unique to our industry but we also know from a recent survey that our member companies on average are only holding 50% of optimal inventory levels when it comes to semiconductors and chips so that’s obviously a problem if you’re down to 50% of what you need to hold just to keep up with demand.

Kip Eideberg [00:27:47] Looking at agriculture, rubber tracks are an important component in the ag space, only 27% of optimal inventory when it comes to rubber tracks, and that’s the components that are used for rubber tracks.

Kip Eideberg [00:28:01] So it’s still very much an issue for us David It’s, it’s gone on notice a bit and so we’re trying to remind everyone, the general public, lawmakers, stakeholders, that we still need to tend to our supply chains, whether they are domestic or whether they are international. But it’s it’s having an impact that is not at all uncommon, unfortunately.

Kip Eideberg [00:28:27] I spent a lot of time visiting our member companies across the country to see, you know, whether they are wheel loaders or tractors or excavators coming off the line and the manufacturers putting old tires on them just so that they can take them off the line and park them somewhere while those new tires do come in.

Kip Eideberg [00:28:47] So, yeah, to your question, it’s still a problem and it’s really preventing us again from taking advantage of the strong demand we’ve talked about that at the beginning of the show. Demand is strong, but when you don’t have enough components, it’s a challenge.

David Blackmon [00:29:04] Well on that note

Kip Eideberg [00:29:07] Go to the.

David Blackmon [00:29:09] Well, you know that as you’ve said throughout this, you know, I mean, we have been really recovering from the pandemic and, you know, the manufacturing business, you know, to the extent it’s able it has the resources to is really pretty strong right now in the United States and especially in the Midwest, in Texas. And so it’s not all bad news and I don’t want to leave viewers with the impression that. Just before we go, tell people where they can find AEM and keep up with what you guys are doing.

Kip Eideberg [00:29:47] Yeah, you can go to AEM.ORG if you want to learn a little bit more about the equipment manufacturing industry, I would urge, and I should say thank you, David, for banging the drum, so to speak, on promoting reform we need more voices such as yours, reminding the American public that this is this may sound and seem like a wonky policy issue that has no impact on their day to day lives, but nothing could be further from the truth.

Kip Eideberg [00:30:15] So thank you for that. And you can go to IMakeAmerica.org I encourage anyone to ever want to sign up, to join the campaign, and Help us advocate for promoting reform for farm bill, for domestic energy production. All the great policy issues that we need movement on desperately to make sure that we can make more things here in America.

David Blackmon [00:30:37] Well, that’s just fantastic, man this has been a great conversation I want to want to invite you back sometime in the future to try to catch up again, and really appreciate your time today.

Kip Eideberg [00:30:49] Yeah, likewise. David, I thank you so much for having me it’s been great.

David Blackmon [00:30:53] And that’s all for today, folks. I’m David Blackmon with The Energy Question, our extraordinary producer, Eric Parel. And thank you to the Sandstone Group for hosting our podcast that’s all for now.

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