[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
HELPING SMALL DRY CLEANERS ADOPT SAFER TECHNOLOGIES: WITHOUT LOSING
YOUR SHIRT
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HEARING
BEFORE THE
SUBCOMMITTEE ON TAX, FINANCE, AND EXPORTS
OF THE
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
WASHINGTON, DC, JULY 20, 2000
__________
Serial No. 106-69
__________
Printed for the use of the Committee on Small Business
__________
U.S. GOVERNMENT PRINTING OFFICE
67-353 WASHINGTON : 2000
COMMITTEE ON SMALL BUSINESS
JAMES M. TALENT, Missouri, Chairman NYDIA M. VELAZQUEZ, New York
LARRY COMBEST, Texas JUANITIA MILLENDER-McDONALD,
JOEL HEFLEY, Colorado California
DONALD A. MANZULLO, Illinois DANNY K. DAVIS, Illinois
ROSCOE G. BARTLETT, Maryland CAROLYN McCARTHY, New York
FRANK A. LoBIONDO, New Jersey BILL PASCRELL, New Jersey
SUE W. KELLY, New York RUBEN HINOJOSA, Texas
STEVEN J. CHABOT, Ohio DONNA M. CHRISTIAN-CHRISTENSEN,
PHIL ENGLISH, Pennsylvania Virgin Islands
DAVID M. McINTOSH, Indiana ROBERT A. BRADY, Pennsylvania
RICK HILL, Montana TOM UDALL, New Mexico
JOSEPH R. PITTS, Pennsylvania DENNIS MOORE, Kansas
MICHAEL P. FORBES, New York STEPHANIE TUBBS JONES, Ohio
JOHN E. SWEENEY, New York CHARLES A. GONZALEZ, Texas
PATRICK J. TOOMEY, Pennsylvania DAVID D. PHELPS, Illinois
JIM DeMINT, South Carolina GRACE F. NAPOLITANO, California
EDWARD PEASE, Indiana BRIAN BAIRD, Washington
JOHN THUNE, South Dakota MARK UDALL, Colorado
MARY BONO, California HELLEY BERKLEY, Nevada
Harry Katrichis, Chief Counsel
Michael Day, Minority Staff Director
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Subcommittee on Tax, Finance, and Exports
DONALD A. MANZULLO, Illinois, Chairman
STEVEN J. CHABOT, Ohio CAROLYN McCARTHY, New York
PHIL ENGLISH, Pennsylvania RUBEN HINOJOSA, Texas
PATRICK J. TOOMEY, Pennsylvania CHARLES A. GONZALEZ, Texas
GRACE F. NAPOLITANO, California
Philip Eskeland, Senior Professional Staff Member
C O N T E N T S
Page
Hearing held on July 20, 2000.................................... 1
WITNESSES
Camp, Dave, Member, U.S. House of Representatives................ 2
Price, David, Member, U.S. House of Representatives.............. 3
Ustanik, Tom, Owner, Lansing Cleaners............................ 8
Shaw, Gordon, Former Owner, Fairlane Cleaners.................... 9
Fisher, William, Chief Executive Officer, International Fabricare
Institute...................................................... 10
DeSimone, Joseph, Professor of Chemistry, University of North
Carolina-Chapel Hill........................................... 13
Cole, Henry, President, Henry S. Cole & Associates, Inc.......... 14
APPENDIX
Opening statements:
Manzullo, Hon. Donald A...................................... 30
McCarthy, Hon. Carolyn....................................... 31
Prepared statements:
Camp, Dave................................................... 32
Price, David................................................. 34
Ustanik, Tom................................................. 36
Shaw, Gordon................................................. 41
Fisher, William.............................................. 45
DeSimone, Joseph............................................. 51
Cole, Henry.................................................. 57
Additional Information:
Written testimony of Rep. Carolyn Maloney.................... 71
Written testimony of Ted Williams, Sr........................ 73
Written testimony of Ann Hargrove, President, Ann Hargrove
and Associates............................................. 79
Written testimony of Carl Rohman, Owner, Hangers Cleaners.... 81
Written testimony of Sam Brickle............................. 86
Letter to Chairman Manzullo from Bank of America............. 91
Letter to Chairman Manzullo from Global Technologies......... 93
Letter to Chairman Manzullo from Clean Water Action.......... 96
Letter to Representative Camp from the Joint Committee on
Taxation................................................... 97
Letter to Chairman Manzullo from Three Rivers Constitution... 98
HEARING ON HELPING DRY CLEANERS ADOPT SAFER TECHNOLOGIES: WITHOUT
LOSING YOUR SHIRT!
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THURSDAY, JULY 20, 2000
House of Representatives,
Subcommittee on Tax, Finance and Exports,
Committee on Small Business,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:05 a.m. in
room 2360, Rayburn House Office Building, Hon. Donald A.
Manzullo, (chairman of the Subcommittee) presiding.
Chairman Manzullo. I am pleased to call this hearing to
highlight what we should be doing more of in Congress--adopting
incentive based approaches to resolving complex environmental
problems, as opposed to heavy-handed, one-size-fits all
government imposed regulatory mandates on small businesses.
There are more than 30,000 dry cleaners across the country.
Most employ only a handful of workers. They are truly small
businesses. These small dry cleaners face immense financial
pressures on numerous fronts, including casual work days that
have resulted in less business for dry cleaners, aggressive
price competition and lingering superfund liabilities at the
work site. We should do everything in our power to make sure
that we do not add to their problems.
The Environmental Dry Cleaning Tax Credit Act is a
bipartisan, creative alternative that deserves serious
consideration by every Member of Congress. The benefits
associated with this bill clearly outweigh the long-term
environmental costs of clean up if we do nothing.
Just a few days ago, the North Carolina legislature passed
a similar bill to H.R. 1303. It will be interesting to see the
impact of this initiative on the state level. I look forward to
hearing the testimony of the witnesses and particularly welcome
those who have traveled a great distance to be with us this
morning.
I now yield for an opening statement from my good friend
from New York, the Ranking Minority Member, Mrs. McCarthy.
Mrs. McCarthy. I thank you, Mr. Chairman, and I apologize
for being late. I will actually just enter my opening statement
into the record to save time.
Chairman Manzullo. I appreciate that very much. Without
objection.
Do either of you have a pressing obligation right after
this? Dave, do you have a mark up that you are in the middle
of?
Mr. Price. I do, but it is right across the hall.
Chairman Manzullo. All right. Who wants to go first?
Mr. Camp. You can go ahead. I do not have a mark up.
Mr. Price. Go ahead. I will gladly defer to my colleague.
Chairman Manzullo. Okay.
Mr. Price. There is no rush over here.
Chairman Manzullo. Congressman Camp? We are going to have
the five minute rule that applies to everybody, including those
who wear pins.
STATEMENT OF THE HONORABLE DAVE CAMP, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Camp. Well, thank you very much, Mr. Chairman. I will
try to keep my remarks under five minutes.
Congresswoman McCarthy, thank you very much for allowing me
the chance to testify before this distinguished Subcommittee. I
appreciate the opportunity, and I commend the leadership of
Chairman Manzullo for calling this hearing.
Our local dry cleaner is probably one of the most common
services that we all use, and it is such a part of our lives
that we do not even give a second thought to how our clothes
are cleaned in many cases. For most of us, our clothes are
cleaned right now using a 1960s era technology, specifically by
a chemical known as perc.
Today's perc dry cleaners certainly look a lot different
than they did when the technology was first introduced.
Emissions are less, and the cleaning machinery is considerably
more efficient, as we will hear from other folks today at this
hearing.
I believe we need to take the next step away from
incremental changes in existing technologies to new
technologies and cleaner technologies. Two of these are wet
cleaning and carbon dioxide cleaning, and they are the subject
of today's hearing. I think they hold a potential for enormous
gains in the control of emissions into the environment. That is
why last year I introduced H.R. 1303 with bipartisan support
from my good friend and colleague, David Price. We are original
co-sponsors of the bill.
This legislation provides a tax credit for a portion of the
cost of a new dry cleaning machine using environmentally
friendly technology and cleaning methods. It does not
discriminate in favor of or against any specific technology. It
simply provides a tax credit on an even playing field for any
dry cleaning method that does not use the perc chemical or a
petroleum derived compound.
The wet cleaning technology and the carbon dioxide
technology can clean a person's clothes effectively, but today
these alternatives are still at the stage where they are not
yet economically competitive with traditional dry cleaning
methods.
Existing dry cleaners right now may want to make a shift to
new technology for a variety of reasons. They may be frustrated
with Clean Air Act requirements instead of worrying about
cleaning clothes, and they may be hearing from customers who
are worried about some of the studies that have been pointing
toward risks in the environment or to health, associated with
traditional dry cleaning methods and many cannot afford it.
Right now, because this brand new technology does cost
more--the average carbon dioxide machine may cost as much as
$150,000, more than twice the cost of a traditional machine--
there are only a small number of machines currently operating,
and the big reason for that is the cost of this equipment.
The best way to bring down the cost is to encourage the
purchase and manufacture of more machines. A tax credit to
offset a portion of this cost will make the difference for at
least some dry cleaners who are interested in using a cleaner
and different technology.
The intention of my bill is to allow cleaner dry cleaning
technology to get off the ground and start making an impact.
That is what my bill does. It provides a 20 percent tax credit
to the purchaser of a dry cleaning machine using
environmentally friendly methods. As I mentioned earlier, the
bill does not discriminate for or against any particular
cleaning method.
Mr. Chairman, we all agree that we have a commitment to
ensuring the cleanest possible environment for our families and
our children, and there are two ways that the government can do
that. First, we can impose mandates. Second, the government can
contribute to a cleaner environment by encouraging the
development and use of newer technologies.
We already see that in the Tax Code with tax credits for
the use of electric vehicles, for example, and for wind energy,
just to name a few. H.R. 1303 is designed to be an incentive
for the purchase of better technology that might not otherwise
occur.
In closing, I want to thank again the Chairman and the
Committee for calling this hearing and for calling attention to
this important issue.
Thank you.
[Mr. Camp's statement may be found in appendix]
Chairman Manzullo. I appreciate that.
Congressman Price.
STATEMENT OF THE HONORABLE DAVID E. PRICE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NORTH CAROLINA
Mr. Price. Thank you, Mr. Chairman, Mrs. McCarthy, other
Members of the Subcommittee. I appreciate the invitation to
appear here today to express my support for H.R. 1303, the
Camp-Price Environmental Dry Cleaning Tax Credit Act.
Dave Camp and I have worked closely together in drafting
this legislation. It was introduced on March 25 of last year
and now has 29 bipartisan co-sponsors. This legislation will
provide an incentive for dry cleaners to make the transition to
environmentally friendly dry cleaning technologies by providing
a 20 percent tax credit for the purchase of technologies that
substantially reduce risk to public health and the environment.
Currently these would include liquid carbon dioxide
technologies and wet cleaning technologies, which rely on water
based solvents.
I should mention here that we became aware during the final
stages of drafting the bill that references to ``dry cleaning''
might be interpreted to exclude so-called wet cleaning
technologies, which was not our intent and is not our intent.
We were advised at the time by legislative counsel that a
clarification of this issue would be appropriate in report
language accompanying this bill or any legislative vehicle
containing this bill.
I first became interested in the idea of a tax credit for
dry cleaners after hearing about the work of Joe DeSimone, a
professor of chemistry at UNC-Chapel Hill and a professor of
chemical engineering at North Carolina State University. Joe is
here in the audience today and has worked tirelessly on this
technology. He is also the director of the NSF Science and
Technology Center, and he is co-founder of Micell Technologies
located in Research Triangle Park in North Carolina.
The genius of Research Triangle Park, Mr. Chairman, as you
may know, has been to attract the most dynamic high tech
companies to an area with a high quality of living and in the
midst of three major research universities, North Carolina
State, UNC-Chapel Hill and Duke University. RTP, as we call it,
has been the source of countless innovations over the year, and
the liquid CO2 dry cleaning technology developed by
Dr. DeSimone, who will be testifying later this morning, is a
good example of RTP at its best.
Dr. DeSimone's story also illustrates how the federal
government can play a constructive role in the development of
technologies which benefit society. In 1995, Dr. DeSimone and
fellow scientists Timothy Romack and James McClain invented an
environmentally friendly alternative to traditional dry
cleaning and metal cleaning methods; that is, the use of carbon
dioxide for professional garment care, metal degreasing and
textile processing. This process eliminates the need for
conventional dry cleaning solvents such as perchloroethylene or
perc, and it frees dry cleaners from the regulatory burdens
associated with such solvents.
Funding from both the NSF and EPA's Green Chemistry Program
supported the basic research that led to Dr. DeSimone's
development of cleaning detergents that dissolve in liquid
CO2. This new technology is both environmentally
friendly and safer for consumers and workers in the dry
cleaning industry.
I think there is a role for the federal government in
encouraging the use of technologies like this. I am not talking
about choosing winners and losers. The federal government
should not be in that business. It should not be favoring one
technology over another. But we can play a constructive role in
accelerating the transition to technologies that meet our
criteria for greater energy efficiency or for the greater
protection of public health and the environment.
If we really want the private sector to move towards
greener and healthier technologies and, as Representative Camp
just said, if we do not want simply to rely on new regulation
to do this, the simplest and most effective method is through
targeted tax incentives.
President Clinton and others have proposed this type of
approach for equipment that helps reduce energy consumption,
and I think we need to be looking at it and considering the
same approach in other areas of protecting human health and the
environment.
The North Carolina General Assembly enacted a similar 20
percent tax credit for environmentally friendly dry cleaning
technologies on July 12, just a week ago. I hope this
Subcommittee will agree with North Carolina that investing in
these new dry cleaning technologies through tax credits is
worthwhile.
In our lifetimes, the pace of technological progress and
change has been astounding. From health care, to manufacturing,
to communications, technology has changed in some way almost
everything about the way we live and has vastly improved the
efficiency and the scope of what we as a society can
accomplish.
We are just beginning to see the possibilities of what
technology can accomplish for the environment and for
environmental protection.
Environmental technology promises to mend the rift that has
too often arisen between environmental protection and economic
development. It will make reducing pollution easier and cheaper
and will itself become an engine for growth in our economy.
H.R. 1303 would take a small, but important, step in the
direction of encouraging the use of forward thinking technology
in the dry cleaning industry. I urge you to consider it
favorably, and I thank you for the opportunity to testify this
morning.
[Mr. Price's statement may be found in appendix]
Chairman Manzullo. Thank you, Congressman Price.
We are going to do something a little bit out of order
here. Before we proceed with questions of the two Members,
Congressman Weller has a constituent who will be appearing on
the second panel. He has to run off to a Ways and Means mark
up.
Jerry, if you would like to introduce your constituent,
then we will bring him up here at the appropriate time.
Mr. Weller. Mr. Chairman, Mrs. McCarthy, I thank you for
the courtesy. Today is a great day. We are going to pass
legislation today wiping out the marriage tax penalty for
25,000,000 married working couples, so I know Representative
Camp and I will be on the Floor working on that before the
Committee.
I am sorry. Mrs. McCarthy?
Mrs. McCarthy. Well, I was just wondering. Being that we
are letting you go first, can I get some of my projects
through? [Laughter]
Mr. Weller. Thank you for the courtesy of allowing me to
introduce a constituent of mine who is going to be testifying
before your Subcommittee today and for accommodating me so I
can move and get to the Floor.
Mr. Chairman, Mrs. McCarthy, it is my privilege today to
introduce a constituent who is going to be testifying on the
second panel, Tom Ustanik, of Lansing, Illinois, a south
suburban community just south of Chicago on the state line, who
is going to testify here today on H.R. 1303, the Dry Cleaning
Environmental Tax Credit Act.
Mr. Ustanik and his family have owned and operated Lansing
Cleaners in my district since 1946. They have five locations,
two in Illinois, two in northwest Indiana and a main plant in
Lansing, Illinois, which does both retail cleaning, as well as
fire restoration work.
The Ustaniks have made great efforts to make their
businesses as environmentally friendly as possible. These
efforts include transitioning over to cleaner and safer
cleaning technologies such as wet cleaning and liquid carbon
dioxide machines. As you may imagine, these newer and cleaner
technologies often come at a higher cost, which leaves us as a
society to decide which is more important, a cleaner
environment or lower cost equipment.
We would argue that in the long run everyone benefits by
encouraging business owners such as the Ustaniks to incorporate
cleaner and safer technologies into their businesses. That is
why I support H.R. 1303, which provides a tax credit to
businesses that take advantage of these technologies.
I look forward to hearing about Mr. Ustanik's testimony
before your Subcommittee about these new technologies, as well
as they help our environment and improve his business. Mr.
Chairman and Mrs. McCarthy, thank you for the courtesy of
allowing me to slip in to introduce my constituent and also
voice my support for H.R. 1303. Thank you, Mr. Chairman.
Chairman Manzullo. Thank you, Congressman Weller.
Mrs. McCarthy, do you have a couple of questions you want
to ask?
Mrs. McCarthy. I do, and I thank you.
I think it is important, Congressman Price, that you go
over again, because I think this is where the confusion comes
in. Your position has been that the tax credit does not
discriminate against or does not favor any one dry cleaning
process, and I think it is important that you explain that
again.
The bill specifically states qualified dry cleaning
property means equipment designed primarily to dry clean
clothing and other fabric. It is my understanding that wet
cleaning is not considered dry cleaning. Do you have any plans
to make any changes to the bill by adding language including
the wet cleaning process?
Just on a follow up, the majority of our small businesses
that operate dry cleaners are family owned, and my concern is
even with the 20 percent tax credit would our real small
businesses, you know, the mom and pop, two people running the
business very long hours, would they be able to afford the new
equipment? Is it going to be enough for them?
Mr. Price. That latter question is one that the
Subcommittee may well want to examine. We thought the 20
percent credit was about right. As I said, in the case of North
Carolina, it can be combined with local or state tax credits.
But exactly what kind of tax credit would be appropriate is an
open question.
I think these technologies will increasingly become
commercially viable. That is our hope. I know in the case of
the CO2 technology the costs have already come down
some and have brought this within reach for some
entrepreneurial dry cleaning owners. But we certainly do need a
tax credit now to make this viable for the majority of
operators. I would invite the Committee's attention to whether
the 20 percent level is in fact the optimal level.
Your assumption, Ms. McCarthy, is exactly right about the
so-called wet cleaning technologies. Our intention is that
those wet cleaning technologies which rely on water based
solvents would be included. The point here is not to favor any
one technology, but to favor environmentally friendly
technologies in general.
If it is deemed necessary to add language to the bill or
certainly to add report language accompanying the bill, I think
that would be appropriate, and again that is the Subcommittee's
judgement whether that is necessary to clarify our intent.
Mr. Camp. Could I just comment as well, please? Yes, our
intent is to include the wet dry cleaning technology, and the
language of the bill defines what is a hazardous solvent and
then says all other technologies are in, so if we need further
clarification I would certainly agree with Congressman Price
that we would be willing to do that because our intent was in
drafting the bill to also include that technology.
Also, the machines are not as affordable as we would like
them to be now, and that is why we need the tax credit. We
believe that as this tax credit, first of all, offsets 20
percent of the cost that is a help, but as more machines are
built economies of scale and Economics 101 will kick in, and
hopefully the cost of those machines will come down, but right
now this is new technology, and it is more expensive, but if
the machines were affordable we would not be before you with
this legislation.
Mrs. McCarthy. Well, I applaud your efforts because
certainly even in my own local district when a new dry cleaner
is trying to come into the area we are seeing a lot of
resistance, you know, from the neighborhood mainly because the
reports that have been going out as far as the emissions and
everything else, so I applaud what you are trying to do, and I
think it is a great first step.
Mr. Price. Thank you.
Mr. Camp. Thank you.
Chairman Manzullo. Are both of you gentlemen going to be
able to join us on the panel up here?
Mr. Camp. I will be able to.
Chairman Manzullo. How about you, Congressman Price?
Mr. Price. I have a competing mark up next door, so I will
do the best I can.
Chairman Manzullo. I do not have any questions.
Congressman Camp, you will be able to respond and ask
questions. Any question I would have asked you can be handled
otherwise.
Okay. There being no more questions, you are both excused.
I appreciate your coming.
Mr. Camp. Thank you.
Mr. Price. Thank you, Mr. Chairman.
Chairman Manzullo. Mr. Camp, if you want to have a seat up
here?
Thank you, Congressman Price.
If we could have our second panel come up to the table,
please? Okay. We welcome our second panel. The order of
witnesses will be Tom Ustanik, who is the owner of Lansing
Cleaners in Lansing, Illinois. The next witness will be Gordon
Shaw, a former owner of Fairlane Cleaners in LaJolla,
California; Bill Fisher, who is the CEO of the International
Fabricare Institute out of Silver Spring, Maryland, which is
the industry association.
Joseph DeSimone, Ph.D., professor of chemistry at UNC at
Chapel Hill. Wait a second. It is Simone. That is an Italian
name. You have to pronounce the E at the end. We have
Norwegians trying to tell Italians how to pronounce Italian
names. Can you imagine that? He is the chairman and co-founder
of Micell Technologies out of Raleigh, North Carolina; and
Henry ``Hank'' Cole, president of Henry S. Cole & Associates,
Upper Marlboro, Maryland, former science director of Clean
Water Action.
We are going to hold everybody to the five minute rule.
When you see the yellow light come on on the box that means you
have 30 seconds. When the red light comes on the gavel comes
down.
Our first witness, Mr. Ustanik?
STATEMENT OF TOM USTANIK, LANSING CLEANERS
Mr. Ustanik. Thank you, Mr. Chairman and Members of the
Subcommittee. I appreciate the opportunity to be able to talk
in benefit of this bill that holds the future of our industry.
Chairman Manzullo. Could you bring the mike closer to your
mouth?
Mr. Ustanik. Sure.
Chairman Manzullo. Thank you.
Mr. Ustanik. Do you want me to start over or just go from
here?
Chairman Manzullo. No. Go ahead.
Mr. Ustanik. Okay. This bill will help us facilitate
bringing about dry cleaning technologies that are both safe and
sustainable. Wet cleaning is a water based cleaning system that
uses biodegradable detergents to clean clothing that normally
is not able to be cleaned in water. CO2 is a
cleaning system, no matter whose you use, that uses
CO2, the same that you would drink in your soda pop
or exhale in normal breath.
These are both sustainable technologies. Water is usually
recyclable, and CO2, the kind that we use in our
machinery, is recaptured from other industrial processes. This
eliminate potentials of greenhouse gaseous emissions because we
use them instead of conventional solvents during their
production producing greenhouse gases by using energy in their
production.
This bill will also facilitate getting access to these
processes much sooner through our industry. We were one of the
first to be able to use liquid CO2. We have the
capability of doing that. We still use dry cleaning machines
that use perchloroethylene. They are fourth generation
machines, and eventually they will fail. All machinery does,
but a washer or dry cleaning machine using CO2 will
not have much more of an additional impact into the environment
upon a failure, while my perc machines always can.
This will also help us in moving this along into a more
sustainable, cleaner and safer technology without driving us
into the ground with regulations that we have quite a bit of.
With four machines that use perc, I have a considerable amount
of paperwork in order to justify their operations and a
considerable amount of inspection. These become more ominous to
a smaller company that is only two or three employees.
This bill will help us move forward in that direction. This
will allow us to have machinery that is safe and sustainable.
This bill will also allow us to get there sooner by having
additional machines put out, which will drive down the cost,
just as when the personal computers came out they were quite
expensive. Now you can get one for $99 that is ten times more
powerful.
This will also show the cleaners that government is willing
to work with us to help us go along without driving us into
oblivion. We do not have the capability as a large company like
Dow or General Motors to survive against environmental
onslaught. It is just us.
I appreciate the time that you have given us in
consideration of this bill and hope that you will pass it.
Thank you.
[Mr. Ustanik 's statement may be found in appendix]
Chairman Manzullo. Thank you, Mr. Ustanik.
Mr. Shaw.
STATEMENT OF GORDON SHAW, FAIRLANE CLEANERS
Mr. Shaw. Thank you, Chairman Manzullo and Subcommittee
Members. I really appreciate the opportunity to come here today
and give my testimony in support of H.R. 1303.
The reason I have come from San Diego is mainly there are
three points that I feel are very important. First of all, our
dry cleaning industry provides an essential service to everyone
in the country, while providing paychecks to hundreds of
thousands of Americans.
Secondly, we in the industry want to be the best neighbors
that we can and also to be the best employers that we can. This
bill can help revolutionize the industry in a positive way for
the owners, the employees and for our communities.
I have been in the dry cleaning industry for 22 years in
the San Diego area, and over those 22 years not only have I
paid attention to my business, but I have gotten an acute
understanding of the industry and a great interest in the
industry. Through that interest, I have served as a director
and president of the San Diego Dry Cleaners Association, a
director and vice-president of the California Cleaners
Association. I have also been a member of a compliance
improvement team with the San Diego Air Pollution Control
District.
Although I no longer hold those positions, my interest in
the industry remains just as strong. I have had eight different
locations, five dry cleaning plants, all of them
perchloroethylene plants, and I have always gone to all the
trade shows and stayed up to date with the newest technology,
one of which is the CO2 technology, among other
alternative solvents.
These technologies give me a great deal of interest because
I see that the way that the industry's future is. Living near
the ocean, I have a lot of respect for the environment, the
ocean, and anything I can do in my industry to improve the way
we do things for our environment is of great interest to me.
H.R. 1303 is a great way to start. It offers something that
we in the industry can do positively for the environment, but
it needs to be encouraged, and it needs to be a lot more
affordable.
Right now in California, well over 90 percent of all the
dry cleaning is done in perchloroethylene. EPA has determined
that perc is a hazardous material. Liquid carbon dioxide is a
better solvent. It creates less wear and tear on clothing. It
is safer on many of the delicate garments, but the machines are
very expensive, as we have already heard. They can be two to
three times as expensive to purchase. They cost more to
install. They require more extensive tenant improvements to
install, and they are more expensive to operate.
With the tax credit, this will help to stimulate dry
cleaners like myself to take a chance and do something that is
positive for the industry. States have already come up with an
incentive. North Carolina and Nebraska have incentives to
encourage dry cleaners to shift to a more environmentally
friendly solvent. They are effective, but a national tax credit
would be much more effective.
In summation, dry cleaning is everywhere. It is essential
to everyone. H.R. 1303 protects the environment and all the
proud, hard working people that work in our industry, and I
want to be part of positively revolutionizing our industry. Our
employees and our neighbors deserve the best that we can offer.
Thank you very much, and I really urge your support of H.R.
1303.
[Mr. Shaw's statement may be found in appendix]
Chairman Manzullo. Before we get to our next witness, could
somebody very briefly explain dry cleaning with perc, wet
cleaning without perc and the method we are talking about here?
You have three different methods.
Mr. Ustanik. Right.
Chairman Manzullo. Just very quickly. We need to lay this
predicate before we go on. Go ahead, Tom.
Mr. Ustanik. Wet cleaning is typically a very modified,
high performance washing machine that uses specific detergents
with regular water in order to clean clothes like the garments
you are wearing without causing shrinkage, which is normally
why you would put it in a dry cleaning situation or dye bleed.
Other than that, it would clean effectively.
Perchloroethylene is another dry cleaning solvent. It is
done in enclosed machinery to clean a garment again in this
respect with no water using detergents to lift stains off your
garments.
CO2 would be another ``dry'' solvent--it does
not have water in it--to clean the garments again in a very
specific pressurized vessel in order to have a liquid to clean
your clothing and detergents specific to it.
Petroleum would be similar as being a non-water solvent and
also be silicone based.
Chairman Manzullo. But you cannot clean all clothing in the
wet cleaning? Is that correct?
Mr. Ustanik. I was involved as an evaluator for a project
with design of environment for EPA called the Greener Cleaner,
and there it was tried to determine how much you absolutely,
positively could clean in water based.
Yes, you cannot clean 100 percent, but you also cannot
clean 100 percent in perc. There are items that you cannot do,
you cannot do in CO2 and pretty much in any other
solvent. They do not quite do all of them, but combinations,
this case wet cleaning and CO2, you can do or
combinations of any other others if so chosen.
Chairman Manzullo. Okay. Appreciate that.
Mr. Fisher.
STATEMENT OF BILL FISHER, INTERNATIONAL FABRICARE INSTITUTE
Mr. Fisher. Thank you. To help out on the definition of wet
cleaning and laundering--as we are the association of dry
cleaners, which includes CO2, wet cleaners and
launderers--laundering is what we do to your shirts and
underwear. Wet cleaning is when we take water and put it in a
very specialized machine that can be controlled very, very
closely. Dry cleaning is machine which can be controlled very
closely.
Thank you. I am Bill Fisher, chief executive officer of the
International Fabricare Institute. We are the national and
international trade association of professional neighborhood
dry cleaners, launderers and wet cleaners. My comments today
are on behalf of our members whose stores represent better than
one-half of the nation's 30,000 mom and pop dry cleaners.
Today, many of those dry cleaners are either facing or
going through significant financial hardship. This has been
brought about by fewer clothes being professionally cleaned as
a result of casual dress and by an increasing entrance into the
industry by new investors.
Before I go any further, let me note on the wet cleaning
side that wet cleaning technology in fact typically costs about
$35,000 and that about 40 percent of the existing plants in the
industry today already do some wet cleaning. In fact, with a
good wet cleaning machine and dryer, one can do up to about 45
percent of the garments that would otherwise be professionally
dry cleaned.
With an additional $18,000 to $20,000 investment; in other
words about $50,000 total, one has a complete wet cleaning
system with tensioning finishing equipment. That is what we
call it. It is a press where you can stretch the garments while
you press them, and that is because wet cleaning does shrink
garments a little bit.
Right now, unfortunately, as we read the bill as structured
we felt it was more likely to damage than to help existing
small business dry cleaners and to further exacerbate their
financial problems.
I want to make it clear that we actively support
environmentally responsible operation of existing dry cleaning
systems. We actively promote the development and investigation
of alternative systems. IFI founded the professional wet
cleaning partnership with Greenpeace and several labor unions.
We were specifically and directly responsible for the
introduction of Greenpeace and other environmental groups to
carbon dioxide cleaning.
CO2 dry cleaning, by the way, was invented by
Hughes Aircraft and another company called Global Technology.
Dr. DeSimone is to be credited for being the first person that
was able to commercialize it so that in fact dry cleaners have
been able to begin to use it.
We tested and recommended to the industry the type of dry
cleaning equipment chosen by U.S. EPA as the NESHAP standard
for perc, and we have continually let our members know what
questions need to be asked, and the answers they have to get in
order to consider new technology.
Again, I want to make it clear that we support wet cleaning
and we support carbon dioxide dry cleaning. We are interested
in another possible new technology that may fall under this
bill, dry cleaning in silicone liquid of all things, but in
representing the dry cleaning industry we would like to make
sure that this bill in fact is going to do what we believe you
all intended for it to do.
I am not going to go into detail with my first set of
comments that arguably it does not apply to wet cleaning
technology or the comments that were made about report language
and/or simple language changes within the bill. That will be
taken care of, but arguably the bill did not cover wet
cleaning. We are glad to see that it will because it should.
On the credit for dry cleaning equipment using reduced
amounts of hazardous substances, the dry cleaning industry has,
yes, used a substance that is considered hazardous, perc, for
many years. We have also worked closely with EPA to reduce our
consumption, and in fact the average plant today that has put
in new equipment has a tenfold decrease from that of even ten
years ago.
We do believe that the Committee should look at an
extension of this to dry cleaners who have put in equipment
that meet the requirements of EPA's NESHAP. We were one of the
first National Emission Standard groups under the Clean Air Act
amendments of 1990.
Dry cleaners in the past four or five years have put in
some very high technology equipment, and if the Committee would
like to see them be able to afford to switch to new technology
they have to pay off what they have. They have done the right
thing in meeting EPA's regulations.
The current language states that there is an exception for
any liquid containing ten percent petroleum solvents, and that
surprised us. While we do suggest that a solvent such as
petroleum, if they meet EPA standards, be considered for
inclusion of the tax credit here, we think the Committee needs
to be careful about allowing blends that may escape any
regulations, but again that is something the Committee can look
at in more detail. Additionally, global stratospheric issues
are of a concern to us.
Chairman Manzullo. We are at five minutes. Could you
summarize in 30 seconds?
Mr. Fisher. Yes, sir. I will.
We applaud the Committee for their action. We would like to
see some of our comments certainly looked at so that there
could be expansion of the bill to really afford a credit to
small business dry cleaners, those that we represent.
As of tomorrow, I have been in this industry for 35 years,
and there are a lot of wonderful mom and pop people out there.
I literally talk one on one with thousands of them a year. I
would like to see our industry be given the chance under this
bill to move forward to better technologies.
Thank you.
[Mr. Fisher's statement may be found in appendix]
Chairman Manzullo. Thank you, Mr. Fisher.
Dr. DeSimone.
Dr. DeSimone. Okay.
Chairman Manzullo. How do you like it pronounced?
Dr. DeSimone. My family uses DeSimone, but my cousins use
DeSimone, but others have used DeSimone.
Chairman Manzullo. I guess the Norwegian was right on the
pronunciation.
I look forward to your testimony.
STATEMENT OF JOSEPH DESIMONE, PROFESSOR OF CHEMISTRY, UNC
CHAPEL HILL, CHAIRMAN AND CO-FOUNDER, MICELL TECHNOLOGIES
Dr. DeSimone. Thank you. Mr. Chairman and distinguished
Members of the Subcommittee, thank you for inviting me to
testify.
My name is Joseph DeSimone, and I am an academician who has
dedicated his career to establishing the utility of carbon
dioxide to replace organic solvents in a wide range of
processes. I do this through a joint professorship at the
University of North Carolina at Chapel Hill in chemistry, as
well as the chemical engineering department at NC State.
Recently I was appointed by the National Research Council
onto their Board of Chemical Science and Technology, and my
students and I have received numerous awards, including the
Presidential Faculty Fellowship Award, the National Science
Foundation Young Investigator Award and the Presidential Green
Chemistry Challenge Award. Most relevant to today's issue,
however, is I am director of the National Science Foundation's
Science and Technology Center for Environmentally Responsible
Solvents and Processes.
This NSF funded multi-disciplinary, multi-institutional
center comprised of scientists and engineers from Chapel Hill,
NC State, North Carolina A&T, as well as the University of
Texas at Austin, is focused on the use of CO2 to
replace solvents. We use CO2 research to develop and
share scientific knowledge profitably among students, among
scientists, among industry and society for a cleaner
environment.
The need for our activity is clear. There is some
30,000,000,000 pounds of organic solvents that are manufactured
every year. These solvents get used in everything from cleaning
hard disk drives to painting cars to dry cleaning clothes. Much
of the solvent inevitably ends up in our environment, in our
land, our air and our drinking water.
I would like to share with you today three thoughts. For
the first time in history, there is now an environmentally
responsible alternative available to dry cleaners that
eliminates their dependency on organic solvents, and that
choice is carbon dioxide and water.
Second point. Other industries beyond dry cleaning are
greatly expanding their utility of CO2 to replace
their dependency on organic solvents. Dry cleaners are not
alone.
Third, government needs to treat small businesses
differently than the way it treats large, multi-national
companies in regards to pollution prevention.
Let me elaborate on these points. We developed a process
that uses CO2 to clean clothes in. Our focus was the
development of detergents for CO2. It is the same
CO2 that is used to carbonate soda in gas form at
restaurants all over the country. It is a natural substance,
and it is readily available.
Carbon dioxide is finding promise as a solvent replacement
in lots of industry. Many of you heard about decaffeinated
coffee or naturally decaffeinated coffee. That is a process
that uses carbon dioxide instead of methylene chloride to
decaffeinate 250,000,000 pounds per year of coffee beans.
Dupont has recently announced they are licensing a
technology from our labs to make Teflon in CO2. They
are investing $275,000,000 to build a world scale Teflon plant
that makes Teflon in CO2.
An offshoot of our university research was the development
of these detergents for CO2. We recognize, as Mr.
Fisher mentioned, that other people have invented
CO2 machines and that detergents are going to allow
CO2 to be more useful in cleaning. CO2 by
itself is not effective, just like water by itself is not
effective.
Unlike the plastics or paint industry, when we went to
transfer this technology to the marketplace there are no
Duponts or IBMs of the dry cleaning industry. There is actually
very little R&D that gets done on behalf of small businesses,
and so at this challenge and believing in the impact that we
would have on society, we decided to form our own small company
to bring this technology into the marketplace.
However, it became quite clear to us early on that the
equipment costs were going to be expensive for our technology.
These machines are made out of stainless steel. They are a very
different engineering type of machine than one would use with
traditional solvents.
Despite the fact that there are at least four different
companies now trying to roll out liquid CO2 dry
cleaning machines, we are all faced with the fact that the
equipment is more expensive, so despite all the selling about
the positive attributes of CO2, it being a room
temperature process, no heat setting of stains, less lint
generated, better color fastness on many different fabric types
and no environment contamination issues, small businesses must
focus on what is the cost as opposed to what is the return on
investment. This is a challenge for small businesses.
So we are here today advocating a positive, proactive
approach that allows small businesses to invest in pollution
prevention technologies. What it really boils down to is we
need to treat small businesses different than we do large
companies. It is okay to shake a stick at a large company to
invest in pollution prevention technologies, but if we do that
to small businesses they will inevitably go out of business.
We see it already with the underground storage tanks in gas
filling stations across this country where they were
regulatorily put out of business as opposed to given incentives
to invest in new tank systems. If we do not do something for
dry cleaning, we are going to have on our hands a similar
situation in the dry cleaning industry, and we think that would
be a shame.
Thank you for your support for this incentive, and I would
be happy to answer any questions later on. Thank you.
[Dr. DeSimone's statement may be found in appendix]
Chairman Manzullo. I appreciate your testimony.
Our next witness is Dr. Henry Cole. Dr. Cole.
STATEMENT OF HENRY S. COLE, PRESIDENT, HENRY S. COLE &
ASSOCIATES
Dr. Cole. Thank you, Chairman Manzullo and other
distinguished Members of the Subcommittee, for this excellent
hearing and for the opportunity to testify.
My name is Henry Cole. I am president of Henry Cole &
Associates, a consulting firm that promotes environmentally
safe communities, technologies and businesses. I am the former
science director of Clean Water Action and appear today
representing Clean Water Action and its 700,000 members across
the U.S.
I want to make three main points. First, environmental,
public health and consumer advocates have embraced safe and
sustainable cleaning technologies, and by that we mean wet
cleaning and liquid CO2.
Secondly, these technologies offer safe and healthful
alternatives to toxic chemicals like perchloroethylene
currently in widespread use.
Third, H.R. 1303 is the right approach. It will empower dry
cleaners to speed up the----
Chairman Manzullo. Dr. Cole, excuse me a second.
Dr. Cole. Yes?
Chairman Manzullo. We have a vote coming up now. I am
predisposed at this point to cease your testimony, then when we
come back to start all over with it.
Are you going to come back, Mr. Camp?
Mr. Camp. Yes.
Chairman Manzullo. All right. Why do you not go ahead?
Dr. Cole. Okay.
Chairman Manzullo. We still have about another five
minutes, but if we need time after that I am going to give it
to you.
I have stopped the clock. Go ahead. The clock is not
running, but when the bell goes off the second time please
stop. Go ahead.
Dr. Cole. The third point was that H.R. 1303 will empower
dry cleaners to speed up their transition to safe and healthful
technologies. This is the right approach for this particular
industry.
Let me elaborate. Perchloroethylene is a highly toxic
chemical and one to which hundreds of thousands and dry
cleaning workers and members of the public are routinely
exposed. This chemical poses a range of significant risks and
hazards associated not only with its use, but with its
production, its release and its ultimate disposal.
We acknowledge the progress that dry cleaners have made,
but it does not eliminate the fact that this is a toxic
chemical that should be phased out. It is a highly volatile
liquid that readily evaporates into air and is not only
difficult to contain, but very burdensome to regulate.
We know that it affects the nervous system. High exposures
can cause dizziness, headaches, confusion, nausea, impaired
ability to walk and speak and unconsciousness. Such conditions
can occur with accidental releases or spills from machines or
containers. My written testimony includes an example of a
recent incident in Florida in which the owner of a dry cleaner
was overcome and immobilized by perchloroethylene fumes.
There are also risks associated with long-term exposure to
lower levels of perchloroethylene. The International Agency for
Research on Cancer in 1995 upgraded perchloroethylene from a
possible to a probable human carcinogen. EPA reports that
perchloroethylene may cause dysfunction of liver and kidneys
and also cause birth defects.
A 1998 EPA report presents evidence showing that
significant concentrations of perchloroethylene occur in the
following situations; in dry cleaning establishments, including
some with advanced dry to dry machines, in apartments located
over dry cleaners, in stores next to dry cleaners such as in
strip malls. Levels measured as reported by EPA in those
locations generally exceeded New York state's community health
guideline of .1 milligram per cubic meter. Frequently the
values were higher than the one milligram per cubic meter,
which is New York's recommended corrective action level.
There is another serious problem. Thousands of dry cleaners
have released perchloroethylene to soil and groundwater. Once
in the groundwater, this chemical presents a very nasty clean
up job--one that is very expensive and very difficult to clean
up.
I know about this problem firsthand. One of my clients owns
and operates about a dozen shopping centers in New England, and
at about seven of those shopping centers dry cleaners release a
significant amount of perchloroethylene into the ground. In
each case, that required a response under state law.
Two of those cases were terribly unfortunate because not
only were the releases large, but they occurred in drinking
water aquifers located upgradient of municipal well fields. Let
me tell you that those clean ups will take many years to
complete and will each cost more then $1,000,000.
Now, as a result, this particular company now prohibits the
use of perchloroethylene on its premises. It also, because of
its flammability, prohibits hydrocarbon cleaning as well.
Chairman Manzullo. Dr. Cole, we have to go vote. We will
come back, and I will give you an additional couple minutes
once we get back.
[Recess.]
Chairman Manzullo. Okay. We will reconvene our hearing.
Dr. Cole, had you completed your remarks, or do you want a
couple of extra minutes?
Dr. Cole. One minute should do, Mr. Chairman.
Chairman Manzullo. Sure. Fine. Go right ahead.
Dr. Cole. At the break, I was making the point that these
clean ups, the shopping center clean ups from the
perchloroethylene releases, the two worst ones, each of those,
the total clean up cost will exceed $1,000,000.
The point is that when we talk about the expense of
perchloroethylene we need to fully look at all of the costs,
including these environmental costs and health costs. We find
that the costs of perchloroethylene are not so cheap.
Now, as I said, as a result this particular landlord now
prohibits the use of perchloroethylene on the premise. It will
not allow a switch to flammable hydrocarbons either. Its
preference is that these cleaners go to liquid CO2
and to wet cleaning. Clearly H.R. 1303 would help dry cleaners
in situations like this move to safe, preventive and
sustainable technologies, wet cleaning and CO2.
Let me repeat my three points. Environmentalists and others
concerned about our health embrace safe and sustainable
cleaning technologies, wet cleaning and liquid CO2.
These technologies offer safe and healthful alternatives to
toxic chemicals like perchloroethylene currently being used.
Finally, this bill will empower dry cleaners to make the
transition to these safe and healthful technologies.
In conclusion, on behalf of Clean Water Action and its
700,000 members, we urge Congress to enact this very good piece
of legislation, and thank you for your efforts, Mr. Chairman,
and the other sponsors of the bill.
[Dr. Cole's statement may be found in appendix]
Chairman Manzullo. Thank you for your patience, Dr. Cole.
Mr. Camp, I would like to have you go first and make sure
that I would like to see a dialogue with you and Mr. Fisher
about the drafting of this bill.
Mr. Camp. Yes. Thank you very much, Mr. Chairman.
Before I do that, just one quick question for either Mr.
Ustanik or Mr. Shaw.
What kind of impacts would a tax credit have on your bottom
line like this, and how would it affect your business
decisions, just quickly?
Mr. Ustanik. Do you want to answer first?
Mr. Camp. Mr. Shaw? Go ahead. Either one.
Mr. Shaw. It would encourage me to move forward with
something new. Something new is always more expensive, but it
would be another little vote of confidence. It would not have a
real significant impact on the bottom line, but it would, you
know, encourage people to take that step.
Mr. Ustanik. For us it would mean cutting our time table
from four years to two years before purchase of an additional
machine and then, of course, consequently speed up additional
purchase. For our operation it will take three machines in
order to fully convert to CO2 and liquid wet
cleaning technology.
Mr. Camp. Thank you.
Mr. Fisher, in preparing for this hearing I saw your
written testimony, and in that you mention that there has been
a 70 percent decline in perc use in the last decade.
Mr. Fisher. Yes, sir. That is correct.
Mr. Camp. Is that correct? So clearly dry cleaners are
searching to find a way to minimize their use of perc, and it
is our understanding that the bill applies to all technologies,
given our definition of what hazardous material is.
I would be happy to work with you to try to make sure that
we address that because I think if wet cleaning--if there is
any question, we want to make sure that that is answered. I
know that Congressman Price feels the same way.
There are some other technologies out there, silicone, as
you mentioned in your testimony, and others, at least two other
ones. Is it your understanding that those would be included
under the bill as written?
Mr. Fisher. Yes, sir. The silicone based technology being
commercially sold, just beginning to be sold and placed under
the name of Green Earth. Yes. Our reading is that Green Earth
would probably be covered under this.
I will have to admit that the final language in the bill
where it says if there are any hazards or regulations, that may
be language that you would want to look at so not to exclude
anything that in fact is safe. I am not trying to say make this
overly expansive, but some wordsmithing may be needed at that
point.
Yes, I believe the silicone would be. Water based wet
cleaning would be simply by saying dry cleaning or wet cleaning
equipment, and you have solved the problem.
Mr. Camp. Citrus Max, if there is any other technology out
there, it is my understanding that that would be included as
well.
Mr. Fisher. It may well be. There is another technology
called Rynex. That is a glycol ether. It probably would not be,
but a full evaluation of the toxic properties and safety has
not been made on that either so until those questions are
answered I do not think one would want to leap in that
direction.
Mr. Camp. All right. Thank you.
Dr. DeSimone, again I want to thank you for all of your
work in developing this technology and helping bring it to
market and all of your efforts there. I just wondered if there
were any additional comments you wanted to make after having
heard all the comments this morning?
Dr. DeSimone. Yes. You know, the issue of going forward in
pollution prevention versus what is typically referred to as
command and control and the end of pipe issues is an
interesting one.
Pollution prevention is the highest level of safety for our
citizenry and our environment where you just simply eliminate
the solvents that are used in that particular case. We
certainly applaud the dry cleaning industry and all the
manufacturers of equipment for making the equipment more
effective, less emitting than historically.
But, when one looks at command and control and regulations
related to emissions that continues to encourage continued use
as opposed to preventing its use because there are a lot of
issues related to not only at the dry cleaner level, but
getting the solvents to them.
Many dry cleaners are in fact good stewards of the
environment. They are practicing the issues associated with
proper handling of the solvents, but often the stewardship
recommendations that were given to them early on were not
adequate, and it has been a challenge to achieve really a
significant change, and that is where pollution prevention
really differs from end of pipe controlled regulations.
Mr. Camp. All right. I see the red light is on. Thank you,
Mr. Chairman.
Chairman Manzullo. Well, we probably will have time for
another round if you want to stick around.
Mr. Camp. Okay.
Chairman Manzullo. Mrs. McCarthy.
Mrs. McCarthy. Thank you, Mr. Chairman.
I am going to go back to one of my original questions. When
we say it is $150,000, is that for the machine, or is that for
the whole set up? Is that for everything included, or are we
talking about even more money going into this?
Dr. DeSimone. For the machines sold by Micell Technologies,
that is the cost of the machine. There is typically a chiller,
an auxiliary chiller that is needed for it is just like one
needs to have steam or electricity and those sorts of things,
but the machine sells for $150,000.
I have seen prices from our competitors in the market, and
I have seen numbers that range from $80,000 to $140,000, so
there are different price ranges.
Mrs. McCarthy. Does anybody have an estimate with the cost
of the machine and the set up for what it would actually do for
a small dry cleaner to really change their whole operation?
Mr. Fisher. Yes. Could I offer a comment on that? Yes. One
could put in a basic CO2 machine such as the Micell
and have it up and running with the existing finishing
equipment, the pressing equipment that you have, for probably
in the $150,000 to $170,000 range if you could purchase a
Micell machine. You cannot.
Micell has a franchise. In fact, if the Committee is
interested they have a great 27-page frequently asked question
list on their website as to the requirements of the franchise.
One must purchase a franchise, pay a franchise fee, pay a fee
on gross profits, and one is required to put in a very
substantial, beautiful, and they are beautiful, dry cleaning
plant.
Then the total cost with the equipment is in the $500,000
to possibly $800,000 range, and that is the only commercially
available CO2 right now, and that is one of our
concerns. That is why we want to make sure that this is
available.
Now, there are other CO2 machines out there that
may be commercially available in the future, but for the past
two years only the franchise option is there.
Mrs. McCarthy. So basically are you saying like my little
dry cleaner in Mineola, it is a husband and wife. Even if we
here on the Small Business Committee try to certainly make sure
there were loans through 7(A)s or 504s, 7Ms, it still would be
out of their reach then?
Mr. Fisher. It is unlikely that your small dry cleaner can
afford the $500,000 to $800,000 investment to become a Micell
operator.
Mrs. McCarthy. And I am not saying that we should not go
ahead with this, but obviously I am concerned with, you know,
we here are small business. That is obviously what we are here
for, and we care about them very much.
I think, you know, we are on the right track with this, and
I am not against this, but again what I am saying is it is the
mom and dad and the husband and wife that I am concerned with
because they are not going to have the capital for this, so
somehow we here on the Small Business are going to have to work
with them also.
Dr. DeSimone. Yes. I would just comment that there are
several different manufacturers out there with machines, and
Mr. Fisher is right that we certainly were the first to market.
We have cleaned almost 1,000,000 pounds of clothes now in our
affiliated system, but certainly you can purchase machines from
several different manufacturers.
I know Tom has seen equipment on the floor at different
trade shows. I just read a press release that one of our
competitors just put a machine on a Carnival cruise ship, and
those prices that I have seen advertised were certainly less
than $150,000.
Our particular business strategy was to combine the
technology with a franchise system to allow dry cleaners to
have the marketing materials and related to augment the
technology, but that is just the way our company chose to roll
it out. There are three or four different choices out there.
Mrs. McCarthy. Like I said, I am not against this bill, and
I am not. My concern again is for everybody to be involved in
it. Obviously the more we can do the better off we all are
because of the environmental issues, certainly the clean up
issues.
I had asked off on the side what would this tax credit
cost, and we are talking about $50,000,000.
Chairman Manzullo. $50,000,000.
Mrs. McCarthy. $50,000,000 over ten years, which if you
really add up the clean up costs just in a few areas we could
probably justify it, so hopefully we will work together to
extend this, but again I am concerned with the owners of, you
know, like I said, the husband and wife. I mean, they put in so
many hours. I mean, they are open at 7:00 in the morning. They
close at 7:00 at night, and they are cleaning after hours.
Again, I am not discriminating against the larger
commercial either. You know, we have to start somewhere, but I
think this has to include everybody.
Mr. Camp. Would the gentlelady be kind enough to yield?
Mrs. McCarthy. Absolutely.
Mr. Camp. I did write the Joint Committee on Taxation, and
the five-year number is $146,000,000. The ten year number is
$533,000,000 in terms of cost, so it is a little bit more than
what we had initially heard, but I just wanted to put that in
the record.
Mrs. McCarthy. Everything is in this place.
Mr. Camp. Yes. People are into numbers here.
The other thing, I just wanted to underscore the point that
there is more than one company in this field. This legislation
is written for any technology, any company. Some companies may
choose to franchise. Some may not. I just wanted to make it
clear that there are more. There are competitors in this field,
and I think this would help develop that.
Some have raised the point about the people who have helped
reduce their use of perc are not getting anything out of this.
I worked very hard on the electric vehicle credit in the Ways
and Means Committee, and we did not give credit to the existing
technology, so for more efficient gasoline engines we have not
adopted tax credits, in that way, but for new technology, for
trying to bring new technology to the market, there has been a
precedent for doing that.
That is why Congressman Price and I wrote this bill to
address the new technology issue because the other is ongoing
and is occurring.
Thank you.
Mrs. McCarthy. And I thank you. Again, I am going to
support this and certainly hopefully will continue to work with
all of you.
I think Small Business, certainly this Committee, can again
watch out for those truly small businesses and work with them
through our Committee to make sure that they have the
opportunity to buy the different equipment also to the best--it
is just that, you know, when you start talking about $200,000
even, you know, for redoing the store and everything else like
that, that would be way out of line with almost any of my small
businesses.
Mr. Shaw. Mrs. McCarthy?
Mrs. McCarthy. Thank you, Mr. Chairman.
Mr. Shaw. Right here.
Chairman Manzullo. Go ahead. Sorry.
Mr. Shaw. Am I allowed to respond on that point about small
business and mom and pop because I am a mom and pop without the
mom. I am just me. My daughter has helped me a little bit, and,
you know, I have built my business up over 20 some years.
I can do this, and there is no reason why any other dry
cleaners cannot work their way up and aspire to being the best
they can. Many of the dry cleaners will not be able to do this,
just as they cannot put new tile in their store, just as they
cannot pay good wages, because they are not very good
operators, but this is not--you know, the technology itself is
not off limits to mom and pop or small organizations because I
am going to do it.
Mrs. McCarthy. Well, I think that comes back to our
Committee then to make sure that those small businesses that
are running, that we make them better business people, and that
is part of our job here, too, to give them the information on
how to have a stronger economy in their business and make a
good living.
Thank you.
Chairman Manzullo. I am going to follow up on that. This is
the Small Business Committee, and this is a reference in regard
to the thousands of cleaning establishments throughout the
country.
Mr. Fisher, maybe you can help me with this. The typical
dry cleaning establishment is one facility.
Mr. Fisher. Yes, sir.
Chairman Manzullo. Is that correct?
Mr. Fisher. That is correct.
Chairman Manzullo. What is the average number of employees?
A husband, wife and maybe one or two other employees?
Mr. Fisher. Typically about six, the equivalent of about
six full-time employees, five to six full-time, including
husband and wife.
Chairman Manzullo. One of our concerns, and the reason why
I asked for this hearing, is the fact that we are seeing
communities throughout the nation following the lead of the
owner of that shopping center. They are not allowing dry
cleaning establishments to come in if they use perc period.
I think it is just a matter of time before perc is banned.
If the EPA does not outlaw it either states will outlaw it or
communities will outlaw it or people who build shopping centers
will. The writing is on the wall for the demise of perc, and I
think we have to recognize that.
We are not here to discriminate against the small stores
that can do it, but let me explore something with you. You
probably know personally tons of operators across the country.
What kind of debt are they carrying, those with the perc
machines? Can you give us a scenario?
Mr. Fisher. Yes. If a perc dry cleaning plant has done
anything in the past six to eight years, they have put in the
top-of-the-line equipment, and that would be equipment to meet
the new emission standards from EPA under the Clean Air Act;
very, very tight and very good equipment, but that type of
equipment would typically price out between $50,000 and $80,000
a machine depending on whether you get a Chevy or a Cadillac or
a Mercedes.
Chairman Manzullo. With an anticipated life of?
Mr. Fisher. On that, typically we are going to be looking
at eight to 12 to 14 years.
Chairman Manzullo. Okay.
Mr. Fisher. Usually they will not have paid off the debt on
that before the lifespan is finished.
Chairman Manzullo. Do you have any figures through your
association to indicate the number of stores that are carrying
debt on existing fifth generation perc machines?
Mr. Fisher. We do not, but we are doing some survey work
right now in conjunction with U.S. EPA that would provide those
numbers.
Chairman Manzullo. We are very much interested in that
because you cannot look at new technologies without also taking
into consideration the fact that the fifth generation perc
machine is new technology----
Mr. Fisher. Yes, sir. Could I offer----
Chairman Manzullo [continuing]. That has not been paid off
yet.
Mr. Fisher. I am sorry. Could I offer a comment on what
your bill will do, because we do think it is positive.
For example, Mrs. McCarthy was talking about a very small
dry cleaner. With this type of tax credit, her dry cleaner
could in fact look at a wet cleaning technology. The equipment
dryer there is about $35,000. That will let you do up to about
40 percent of the garments that come in in wet cleaning.
If somebody already has wet cleaning, and wet cleaning
really began its resurgence in our industry about four years
ago. That is one of the reasons we suggest that you look at
1996 instead of 1999. If you have wet cleaning equipment you
put in three years ago, two years ago, you would not get a
credit, but if you did get a credit you could afford the
tensioning finishing equipment which would let you do 80 or 90
percent of the garments that otherwise would be dry cleaned if
you wish.
These people that have put in new perc equipment, the very
best, very tightest that is out there, those people, because of
their debt service, are in a position where they cannot
financially afford to look at new technology such as
CO2, and that is one of the reasons that we
recommended something we would hope you would take a look at,
which would be----
Chairman Manzullo. I think that Mr. Camp----
Mr. Fisher. Yes.
Chairman Manzullo [continuing]. Recognized the fact that
that is an issue, and the purpose of this subcommittee is to
help all small business people.
Mr. Fisher. Precisely. If one did look at that then perc
dry cleaners in fact would have the opportunity to look at
other technologies.
Chairman Manzullo. Now, I have been learning a lot about
dry cleaning lately. I guess you just take dry cleaning for
granted. Somebody mentioned silicone.
Dr. DeSimone. Yes, sir. I did.
Chairman Manzullo. What is that? What kind of technology?
Mr. Fisher. A working partnership between General Electric,
who really are the leader in silicone fluids, and some dry
cleaners from California resulted in the development and now
testing in about 30 or 40 installations in the U.S. of a
silicone based dry cleaning fluid.
It is not as good of a dry cleaning solvent. We recognize
that, but that is a tradeoff against the safety issue. It looks
like toxicologically that there are no problems with that, and
there is some final testing, I understand, that General
Electric is finishing up for U.S. EPA and so forth to make
certain of that.
Chairman Manzullo. Did you want to add to that, Dr.
DeSimone, about the silicone base?
Dr. DeSimone. It is a chemical solvent. Certainly it has
been around for a long time. It is being introduced into the
dry cleaning industry. It certainly is more preferable than
perc.
It is a flammable solvent like petroleum solvents, and it
has to be run in special machines associated with its
flammability, but certainly it is better than perc in the
context of toxicity based on what I have read, but it is still
a chemical solvent, whereas in the context of CO2
and water it is really a pollution prevention.
Chairman Manzullo. That is just gas introduced into water?
Dr. DeSimone. Yes. We are just exhaling it as we sit here.
Yes.
Chairman Manzullo. Okay. Mr. Price.
Mr. Fisher. Could I make a clarification?
Chairman Manzullo. Sure. Go ahead.
Mr. Fisher. You have the words flammable and so forth.
Flammable means something like lighter fluid that has a very
low flash point. Actually, the solvent is combustible, which
means it burns like a cardboard box, so that gives you an idea.
I do not know of any commercial places in the United States
that have prohibited that solvent, so fire codes have not been
an issue for it.
Chairman Manzullo. Thank you.
Mr. Price. Thank you, Mr. Chairman. I am sorry to have to
run back and forth with this mark up across the hall, but I
appreciate the chance to ask a few more questions about cost
and feasibility. I understand this has been explored to some
extent.
Dr. DeSimone, if you could respond to this, and any others
who want to to chime in? When we talk about the up front costs
of these CO2 machines versus conventional machines,
I understand there is a considerable disparity. And, of course,
we hope the tax credit would ease that.
Are there other considerations, though, when a dry cleaning
owner is thinking about this, considering the feasibility of
this? Are there longer term savings that might factor in?
How does the equipment compare in durability, for example,
with conventional equipment?
Are there liability and insurance considerations? Are there
other factors that go in or should go into the calculation of
costs, long-term as well as short-term?
Dr. DeSimone. That is very interesting. When we are out,
when our team is out there marketing and selling our
technology, you know, there is often the very question of what
does it cost? It is hard to sell through something that is two
or three times what they are used to spending.
You have to turn the argument around into what is the
return on investment, as opposed to what is the cost, and
exactly those issues you talk about. I mean, our machines use
beverage grade carbon dioxide. It is the same CO2
that is being delivered to every McDonalds and every Burger
King. One of our dry cleaners goes through about as much
CO2 a year that a Burger King goes through in about
the same order of magnitude.
There is just no contamination issues associated with that
and so, you know, to play that back, to pay back the cost of,
you know, no site contamination, the ability to get into sites
that most dry cleaners would be prohibited to get into because
of chemical solvents, we can get access to them, but it really
gets back into the investment in their employees.
I mean, probably the best part of this job that I have
enjoyed is getting some of the most passionate testimonials
from dry cleaning operators that have been running equipment
for 15, 20 years, and they come up to you, and they talk about
how we have changed their lives, how when they operate the
equipment they are not getting the huff of solvent that they
get in a traditional machine. It is much better operators.
In fact, our cleaner in Wilmington, he bought our first
machine, and his operators--he had two other perc machines or
six other perc machines, put our CO2 machine in
there. His operators would not go back to the other equipment
and so he had sort of an internal turmoil of operators
preferring to work on equipment.
It is much better. I mean, you can just smell the
difference when you go in our facilities. It is really a high
quality work environment for the first time, so if you turn
that into an investment in the employees it is also an
investment in the consumer.
It is hard to calculate all these, you know, returns on
investment associated with these issues, but it makes a
difference in a business that can appreciate in value, as
opposed to being a liability after years, and that is the big
difference that we offer.
Mr. Price. So this tax credit would be available in a
context where there are substantial other incentives and other
payoffs, but hopefully this would clinch the deal so to speak
in terms of operators?
Dr. DeSimone. That is right. This is a cash flow business,
and up front capital costs is challenging.
Mr. Price. Do any of the other witnesses want to chime in
on this issue of cost and feasibility?
Mr. Ustanik. We have been running one of the machines for a
little over a year. I did the installation, and I do all the
service work, so my thing is looking at the equipment.
It is a pressure vessel. Most of the components on it are
listed, which means they are good for 15 years. We are used to
on the dry cleaning machines ten to 12 is probably pushing it,
and even at that point after 12 years it is getting tired.
This machine already has components on it that are rated to
withstand a minimum of 15 years.
It is made out of a high grade stainless steel,
considerably different than our machinery. In fact, I had a
friend of ours who works for Nabisco who is a mechanic came
down. He said for a change you actually got a real toy, not the
stuff that we are used to that is generally sometimes pretty
flimsy.
As for cost of other machinery, the wet cleaning is
available for any operator and is much less expensive. All
these machines have much longer longevity than our perc
machines will ever have, and even for the newer solvents like
DF, which is a Class III-A solvent, those machines have a lot
more maintenance concerns to them because they have a lot more
safety concerns to them. There is a lot more that goes into
them than these machines.
These machines pretty much self-diagnose and control
themselves. If they fail, they take care of it and shut it down
whereas under these others the operator has to do all the work,
so there is a lot more intensive maintenance in those than
these would ever be.
Mr. Price. So the new techniques carry some advantages in
terms of----
Mr. Ustanik. Right.
Mr. Price [continuing]. Maintenance costs and durability of
the equipment?
Mr. Ustanik. And that is part of, you know, long-term
ownership compared to the others.
Mr. Price. All right. Thank you, Mr. Chairman. I appreciate
the chance to sit in.
Chairman Manzullo. Mr. Camp, did you have some more
questions?
Mr. Camp. Not at this time, Mr. Chairman. Thank you.
Chairman Manzullo. I wanted to ask a question about perc
itself. I am also concerned about silicone, which is viewed as
safe now, but that is what people have said about MTBEs several
years ago.
I am not here to wave a red flag, but I can see traps
happening to small businesses where they will comply today with
an EPA environment, and then two years from now the EPA will,
based upon some bona fide research, find out that they made a
horrible mistake two years earlier and catch the small business
in the trap.
Dr. Cole.
Dr. Cole. Mr. Chairman, I have to admit I do not know much
about the new silicone technology, but it is a chemical. It is
flammable. Like you say, we are concerned about the tests which
really need to be done to look at something like that.
But, what we do know is that water and CO2 are
part of our everyday lives. They are essential ingredients to
the ecosystems of this planet and to all of us. Nature, over
the course of 4,000,000,000 years, has done the testing, and we
do not have to worry. The real sustainable and preventive
method is to use these natural substances which we know will
not be hazardous or toxic.
Chairman Manzullo. Mr. Fisher?
Mr. Fisher. Yes. That is something in the association we
are very, very concerned about, and I share exactly your
concerns. In 1977 when we started work with EPA's Air Office on
air regulations, they asked us if we would as an association
move everybody to Freon 113, F-113, because it was not toxic,
and it was good for the environment and so forth.
We said yes, but Rowen and Molena have just come out with
this information. Would you tell us that you are not going to
ban and regulate it? They could not. We said well, until we
know that is true we cannot tell the industry go that
direction. Of course, we know what happened with fluorocarbons
and the Montreal protocol.
I with silicones share the same thing. Until we know and
the companies involved know themselves that there are just as
many assurances as possible, there are no problems, we would
not be going out to the industry and saying great. Hey, switch
to this.
With carbon dioxide, I do not know whether anybody has done
calculations to say if the entire industry went to carbon
dioxide, and Micell's information is about 4,000 pounds of
CO2 released per month from a carbon dioxide
machine. That is from their website. I do not know if 30,000
dry cleaners at 4,000 pounds a month is something that EPA
would be concerned about, but I would like to get an answer
from EPA.
Chairman Manzullo. That sounds like a giant belch.
Dr. DeSimone, do you have an answer to that?
Mr. Fisher. I suspect there is not a problem, but I would
like to know on behalf of our members, and so I think the point
is well taken. We need to know about any of these possible
alternatives before we move in that direction.
Dr. DeSimone. I share Mr. Fisher's concerns for the
industry and sort of the evolution of technologies over the
years and how challenging it has been after being encouraged to
go in one direction and going in the other direction.
CO2 in water sort of eliminates that issue. It
is very interesting that the CO2 that is distributed
all through the country that goes to fast food restaurants, all
that carbon dioxide is generated from other processes. There is
a huge out stream of carbon dioxide from a wide range of
commercial processes. When companies make fertilizer, when they
make ethanol, when they make hydrogen, CO2 is a
byproduct from all those processes.
So when companies sell CO2 to fast food
restaurants they capture a byproduct waste stream and capture
that and then sell it into carbonation of soda or sell it to
dry cleaners. Nobody is out there burning carbon to sell you
carbon dioxide. In fact, it is estimated that far less than one
percent of the CO2 that we generate as a country is
ever captured for reuse.
Every gallon of gas that you burn in your car you generate
20 pounds of carbon dioxide. It is everywhere. That is why it
is so cheap, and that is why it is so easy to tap into, so that
is a pollution prevention issue related to the greenhouse gas
issue.
More importantly, the properties of CO2 allow
one to do distillation and separations with much less energy
required than it does to distill water. If you look at how much
energy is required to distill a gallon of water as opposed to
distilling a gallon of liquid CO2, it takes far more
energy to do that for water than does CO2.
When you talk about energy efficiency, you relate that back
to the burning of fossil fuels, and you actually generate less
new CO2 using CO2 based processes than
you do with conventional solvents or with water, so it is not
only a pollution prevention alternative. It is an energy
efficient approach.
Now, our first generation dry cleaning machines do not
capture all the energy efficiency that we can. We see
technically we should get about a 40 percent more efficient
machine, energy efficient, than a perc machine. Right now we
are running on par because we are running a little
inefficiently, but we think we can capture a machine or
generate and design a new machine that will be able to capture
that energy efficiency as well.
Chairman Manzullo. Mrs. McCarthy.
Mrs. McCarthy. Being that this is a taxation committee,
Congressman Camp, one of the things that I was just talking to
the Congressman, our colleague, is North Carolina apparently is
going to give a 20 percent tax credit, and if we give a 20
percent tax credit that is actually 40 percent.
Mr. Camp. No. That is under the state tax.
Mrs. McCarthy. Under state tax.
Is there any way that we could encourage the states,
because obviously to me it is an environmental issue which most
of our states are concerned about. I know we do not like to put
mandates down on the states. I do not think we should, but is
there any way of working it out that certainly go through with
the federal, but also try to encourage our states to give state
credits also?
This way it would certainly in my opinion bring more people
up faster, even if it was a time cap, five years or so, you
know.
Mr. Camp. I know a couple of states are looking at also
enacting a state tax credit for environmentally friendly dry
cleaning. I do not know offhand what we could do at the federal
level to encourage the state legislatures to act from a tax
standpoint, but it is certainly worth exploring.
I would like to do that because that would then make it
both on state and federal tax returns they would be able to get
a benefit, and I think it would make it more feasible. I have
been in contact with some folks about it, and I think it would
be a very good idea.
Mrs. McCarthy. You know, even if we on the federal level
were able to give monies to the states, and I do not know, but
to me even if it was a time cap of five to ten years or
whatever it would certainly help everybody along the line, you
know, and then you could rescind it because everybody would
have the new equipment, and the regular maintenance would be
there. It always sounds easy until we get involved in it.
Chairman Manzullo. Could you yield?
Mrs. McCarthy. Certainly, Mr. Chairman.
Chairman Manzullo. On that topic, you know, we have these
504 loans. These are long-term loans through the SBA. What is
going on here is a pincer movement because it is a matter of
time before perc is banned. For a lot of dry cleaners, it has
already happened where perc simply cannot be used. One of the
things I would also like to take a look at is using the 504
loan program to help dry cleaners.
Take your choice. Do we subsidize a 504 loan with cheap
interest so a small business can afford to buy this new
machine, or do we use that money to clean up the mess because
perc machines are still out there?
Do you have an opinion on that?
Mr. Fisher. Yes, sir, I do. In fact, we as an association
brought to Congress five years ago a proposal for a bill for
legislation that would have imposed a tax on dry cleaners to
set up a national clean up fund because of the superfund
controversies, and we all know how involved it gets. That was
something that was not feasible.
We have in fact worked with 12 of our state dry cleaning
associations, and in fact there are now 12 state dry cleaning
funds where the legislation was proposed by our industry to
those states where the taxes are solely on our industry. In
fact, generally there is a tax on the perc itself, which leads
to a double incentive to use it. We use those funds to clean
up.
The bottom line with those clean up funds is it removes the
liability from the shopping center owners for the clean up and
says the fund will clean up that, and the state will administer
the fund.
So there is a separate trail going along on that, and
anything that helps dry cleaners will help that side as well.
Mr. Camp. Mr. Chairman?
Would the gentlelady yield?
Mrs. McCarthy. I love these open discussions. No, I do.
Certainly I yield.
Mr. Camp. Well, I think particularly we have had a lot of
discussion about the cost of this new technology, and we really
need to look at the comprehensive costs of comparing existing
technology perc with the new technology.
I believe all of these costs, the costs of additional tax
payments and clean up, ought to be included when you are doing
a comparison because the $150,000 may not look as steep when
you look at the long term, $150,000 per machine and
$533,000,000 over ten years that the tax credit may cost. I
think we need to look at that very carefully and get a
comparison.
I do not believe there has been any in-depth study. Do any
of the panelists know of those cost comparisons, cost benefit
analyses? Has that been done?
Mr. Fisher. Not that I am aware of, but I share your
sentiment, and we certainly realize both in approaching
Congress and at the state level that the dry cleaning clean up
bills would encourage people to look at all technologies, and
that is definitely one of the things we knew would happen.
Chairman Manzullo. Thank you. Thank you very much.
Would you yield?
Mrs. McCarthy. Certainly. Always to the Chairman.
Chairman Manzullo. Well, let me ask a question. The more
machines that are built lowers the cost of production. Can
somebody elaborate on that quantitatively? Can you do that, Dr.
DeSimone?
Dr. DeSimone. When dealing with carbon dioxide, it is very
different than dealing with perc or different than dealing with
petroleum. Certainly, you know, the petroleum machines and
silicone based solvents have, you know, fire suppression issues
and oxygen sensors. They are a different level of machine than
a perc machine.
But a CO2 machine, because of its pressurized
system, is made out of stainless steel, and it is a different
device than a sheet metal based perc machine, for example.
Therefore, you can just weigh it and just weigh the amount of
steel required to do it, compare it and that is your baseline.
No matter how you manufacture it, it is always going to be
more expensive just based on the sheer weight of the equipment.
Certainly economics of scale will be able to drive a lot of
that out, but there is a floor there that is inherently higher
than the floor associated with the perc machine.
Chairman Manzullo. Well, we appreciate you all coming.
Mr. Fisher, I especially appreciate your openness on your
concerns about the bill, I encourage the authors of the bill to
work with you.
There are a lot of things that can be done. Not only is
there the issue of the tax credit. Congress increased expensing
from $19,000 to $30,000 so that you can now use to expense as
opposed to writing off. There may be some other things that can
be done with the 504 loans. There may also be some type of
accelerated depreciation for environmentally friendly machines.
You have all been excellent witnesses adding unique
dimensions to everything we discussed. I think everyone concurs
that we must deal with the environment and we still must clean
our clothes. We have to take a look at all new technologies and
Congress should do whatever by way of the Tax Code to encourage
the affordability of these new technologies. This has been the
purpose of this hearing.
This hearing is adjourned. Thank you.
[Whereupon, at 11:57 a.m. the Subcommittee was adjourned.]
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