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Editor's Note: As 2023 draws to a close, we pause to highlight our choices for the Top 10 stories that impacted the asphalt industry in California over the past year. Click HERE to read last year's roundup. Look for our 2024 predictions in next week's issue of this newsletter.
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1. Transportation funding overall remains robust but trouble looms
The steady and robust flow of tax dollars to pay for critically needed road improvements continued to be the top news story in 2023, but beneath the overall numbers there continued to be a persistent concern that not enough investments were making it to the place motorists notice the most – pavements. This is despite the optimism over the passage in late 2022 of the federal Infrastructure Investment & Jobs Act, a $1.2 trillion investment in a myriad of infrastructure needs, including roads and bridges, resulting in hundreds of millions of dollars flowing to the Golden State. And that was on top of funding from SB1, the Road Repair & Accountability Act of 2017 that raised fuel taxes to pay for projects to stem steady declines in pavement conditions. CalAPA analysis of Caltrans data indicated that HMA-related projects were flat or declining in recent years. This data and other data was folded into a somewhat gloomy Asphalt Market Forecast for 2024 that was published by CalAPA on Dec. 1. With worrisome predictions of the state of the state’s finances, this also cast a pall over the overall assessment of the financial health of the industry in 2023.
2. Assault on petroleum industry falls flat
The petroleum industry, makers of an essential ingredient in asphalt, endured a year of assaults by politicians, environmentalists and others, but largely those efforts fell flat as the year progressed. Pump prices, goosed a year ago by a ground war in Europe, drifted downward, and another war in the Middle East sparked fears of real disruptions to energy markets but those fears never materialized. A special session of the Legislature focused on fuel prices in California, held in the Spring, largely foundered, producing more press releases than insight. In many instances the kerfuffle only served to call additional attention to the cost of regulations to the price of fuel, asphalt and other petroleum products. The Caltrans crude oil price index, used to smooth out swings in asphalt prices, started the year at $437, drifted lower for much of the year before settling in at $446 at year’s end. A newly created Caltrans fuel price index followed a similar trajectory.
3. Climate plans and air-quality regulations proliferate
The steady drumbeat of new air quality regulations continued apace in 2023 as the state continued on a determined path toward eliminating fossil fuels from the state’s energy future in the name of addressing climate change. The California Air Resources Board pushed forward with proposed “zero emission vehicle” (ZEV) mandates, a climate action plan, and other air-quality regulations that impacted vehicles and equipment commonly used by the construction industry. Federal lawsuits challenging CARB’s authority, meanwhile, continued to wind through the court system. CalAPA has joined legal briefs supporting the litigation. Neighborhood activists succeeded in shutting down an asphalt plant in Southern California despite data from regulators proving it posed no health risks, sending shock waves through the industry. There were cracks in the foundation, however, as some of the most aggressive pro-environmental legislation did not make it out of the Legislature, and the Newsom administration and some regulatory agencies were throttling back on some initiatives.
4. CalAPA stands alone in defeating EPD bill
A problematic bill in the legislature to expand the use of Environmental Product Declarations for construction materials, including asphalt, appeared destined to become law in 2023. That is, until CalAPA stepped in to oppose it. It was a lonely task as CalAPA was the only organization to be on the “no” side of the ledger after the environmental group sponsoring the bill rejected several of CalAPA’s proposed amendments. The bill ultimately died in the Legislature as the session came to a close. The association, meanwhile, continued to raise awareness of EPDs via educational forums, articles and other outreach.
5. California’s clout in Washington diminishes
In recent years, California has enjoyed outsized clout in Washington. The state’s Congressional delegation is the nation’s largest at 52, and the speaker’s gavel was held by Democrat Nancy Pelosi from San Francisco for several years. Just prior to the beginning of the year, however, Pelosi stepped back from her leadership position in favor of Rep. Hakeem Jeffries of New York. In January, when House control was taken over by the GOP, Republican Kevin McCarthy of Bakersfield took over the speaker’s gavel, but it would be a short-lived victory. By October, McCarthy had been ousted from the leadership position by restive members of his own party, and announced he would relinquish his seat altogether by year’s end. Vice President Kamala Harris remained the most prominent elected federal official from California, although her influence on matters that impact her home state was rather opaque. Gov. Gavin Newsom’s efforts to raise his national profile with various stunts, such as debating Florida Gov. Ron DeSantis on Fox News, has largely been treated as a sideshow. Demographers, meanwhile, continue to predict California will continue to lose population, and possibly more seats in Congress in the future. Taken together, the developments can only lead to one conclusion: California’s clout is waning on the national stage.
6. Women of Asphalt a bright spot in addressing workforce challenge
The CalAPA annual climate survey found once again that workforce issues are among the top concerns of both public and private employers in 2023, with worries centered on retaining existing workers as well as recruiting new ones. A bright spot in this area was the formal creation in 2022 of a California branch of the national “Women of Asphalt” initiative, which seeks to empower and elevate women in the industry, and also those considering the industry for a career path. The local branch held several events in 2023, supported by CalAPA, including events tied to association events. Additional events are in the planning stages, and a charitable foundation is being formed to support the effort. More information about the California chapter can be found HERE.
7. Long-life asphalt pavement strategy gets national recognition
At a meeting of the California Transportation Commission in January, a prominent long-life asphalt pavement project on Interstate 5 near downtown Sacramento was recognized with a “Perpetual Pavement Award” by a national organization, the Asphalt Pavement Alliance, a CalAPA partner. CalAPA profiled in the project in its magazine HERE. Another I-5 project in the North State was also recognized. Commissioners praised the design strategy that seeks to construct pavements that last more than 40 years or longer with minimal maintenance as good for the environment as well as saving tax dollars and minimizing inconvenience to motorists. As a result of these and other innovations gaining widespread recognition, the sustainable attributes of asphalt, connected in part to its durability, were gaining more champions than ever.
8. Federal “Buy America” guidance released
The federal Office of Management & Budget guidelines for the "Build America, Buy America" (BABA) act related to construction materials. The construction materials industries, including asphalt, praised the new guidance for clarifying important points related to federal procurement of construction materials. Significantly, the guidance included exemptions for critical inputs to asphalt. The sourcing requirements under BABA as part of the $1 trillion Infrastructure Investment & Jobs Act (IIJA) had been a source of controversy, and the asphalt industry had conducted a years-long campaign to educate elected officials and policymakers on the implications of some cumbersome procurement requirements that had been in circulation.
9. State financial difficulties could negatively impact transportation
The state’s non-partisan Legislative Analyst’s Office ended the year on a grinchy note by issuing dire reports predicting that the state was facing a staggering budget deficit, due to less-than-expected tax revenues, and that electric vehicle mandates and other climate-related steps will result in declines in transportation funding by as much as 25% unless immediate action is taken. These two reports set off alarm bells in the halls of the state Capitol as well as among transportation advocates. Much like last year, transportation funding in California continued to be a bit of a mixed bag.
10. Much-feared economic recession never materializes
Despite the unique nature of the state’s finances, which rely heavily on taxes paid by higher-income earners, a much-feared recession never arrived in California in 2023. Interest rates did tick upward due to action by the Federal Reserve responding to inflation worries, generating concerns that it could trigger higher unemployment and a pullback on consumer spending. Neither happened, as job creation remained robust, unemployment relatively low, and the high costs of goods pulled back from the rapid gains seen in the earlier part of the year.
Honorable Mention: The asphalt industry continues to be disrupted by mergers and acquisitions in California, part of a larger trend of family-owned businesses being acquired by multi-state, national or even international companies. Several noted executive managers at Caltrans announced retirements.
Next week: Our predictions for the top stories that will be making headlines in 2024.
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