The Real Hersch

Jan. 31 was the end of an era for ISRI. That day marked the retirement of Herschel Cutler, ending his 33-year career with the association.
   Cutler began his scrap career in 1967 when he became a transportation consultant to the Institute of Scrap Iron and Steel (ISIS), an ReMA predecessor. He served in that context for five years, never thinking that he’d go beyond his consulting role. But when ISIS began seeking a new executive director in 1971, several members urged Cutler to apply.
To his surprise, he got the job. Thus, Cutler became ISIS’s fifth leader since its founding, and he ended up being its longest-serving, directing ISIS and, later, ReMA for 25 years from January 1972 until June 1997 when he was succeeded by current ReMA President Robin Wiener. He spent his last three and a half years with ISRI—from June 1997 until this Jan. 31—as senior adviser.
  Looking back, Cutler—whom many addressed as Dr. Cutler in deference to his Ph.D. in economics—calls his career “a hell of a run.” During his tenure, he saw the association grow from a staff of eight to as many as 40. He helped transform the group from an internally focused organization to one with a strong external presence. Plus, he guided the association and its members through a gauntlet of challenges, including railroad freight-rate problems, export controls, publicly subsidized recycling programs, and—of course—Superfund reform.
   In every case, Cutler’s modus operandi was this: Break the problem down to its essential components. Find the unique way the problem affects the scrap industry. Explain this unique situation to other stakeholders, using their language to enhance understanding. Then ask for equitable treatment to resolve the unfair 
situation.
   This approach yielded mostly victories for the association. For this work and so much more, Cutler earned the respect of not only the association’s members, but also legislators (see Sen. Blanche Lincoln’s farewell statement on page 142), regulators, the environmental community, other associations, and more. A hell of a run, indeed.
   In this interview, Cutler reflects on his career while offering a glimpse into his not-so-retiring future.

How did you come to work for ISIS as transportation consultant in 1967?
In the fall of 1967, I was teaching at The American University in Washington, D.C. Howard Gould, general counsel of ISIS, called and said he was seeking a professor who knew about logistics and transportation. ISIS needed help with a railroad rate problem. Though I knew nothing about the industry, Howard said, “Why don’t you go down and talk with [ISIS Executive Vice President] Bill Story? If the job interests you, call me back.”
   So I met with Bill, and he explained some of the problems. For years, ISIS had been unable to establish firmly the competitive relationship between iron ore and ferrous scrap from a freight-rate point of view.
   After this meeting, I called Howard and told him I had some ideas but, in order to make sense of everything, I needed to learn about steelmaking. “What do you want to do?” he asked. I said, “Send me to Battelle [Memorial Institute] for a couple of days, let them teach me steelmaking, then maybe I can come up with a theory to help you in this area.”
   It worked out. I put together an economic argument that made sense of the competition between iron ore and scrap and was able to document it both as a metallurgical and economic matter.
   In the end, instead of facing a freight-rate increase—which is what the railroads wanted—the scrap industry got a refund.
   
In 1972, you were hired as executive director of ISIS. Did that surprise you?
   It really did. When Bill Story left in 1971, I had no thought beyond whether I would continue consulting with the association. When ISIS started its executive search, several people suggested that I submit my resume. I was extremely reluctant to do that because my consulting practice was doing very well and I was enjoying teaching. But I said, “Why not?” So I tried, I was interviewed, and I was very surprised to get the offer.

For the next 25 years you served as executive director. Your term spanned most of the 1970s, 1980s, and 1990s. Do you recall the big issues for the scrap industry in those decades?
Export controls were the biggest issue in the 1970s. The steel industry was convinced that, if exports of scrap could be curtailed, the domestic price of scrap would go down. We argued that if you limit the amount of scrap that’s exported, then the material that is exported will escalate in price because the demand stays the same while the supply is curtailed. This would then filter back into the economy and cause domestic steelmakers to pay more for scrap.
   While this was proven by events that followed, export controls on scrap iron were, indeed, imposed for a period of 18 months. Our continuing battle against controls led to a series of legislative and administrative fights in the mid-to-late-1970s. Around 1977, the steel industry decided that it couldn’t rely on the so-called short-supply controls in the law. So the steel leaders decided to obtain new control legislation. They created a series of proposals that would have set the maximum tonnage of scrap that could be exported in a given year. There were also proposals that would trigger controls if exports went up more than a certain percentage from one month to the next. These approaches were originally developed in the 1973-1974 “short supply” controversy.
   We were clearly outgunned at that point. I was the government affairs department. But we retained a law firm in D.C. to help, and we undertook to stop it.
   The bottom line was that we won. Not only did the steel industry not get what it wanted, but we had some language put into the law that set explicit criteria for and a process to determine “short supply.” Congress understood that short supply did not simply mean a change in price, that there had to be some provable facts.
   In 1979, there was another attempt to get export controls. One of the requirements under the new law was that you had to have field hearings, that the Secretary of Commerce couldn’t decide to impose controls based just on what was presented in Washington. After traveling to four or five cities for these field hearings and after reams of testimony, we won absolutely hands down. On the strength of what was passed in 1977 and what was administratively supported in 1979, there has never been another attempt to control scrap iron exports.
   The 1970s also saw the issue of depletion allowances, which gave steelmakers a tax deduction for mining ore that wasn’t available to those who processed or consumed scrap. We testified on the need to bring equity to the marketplace by arguing that the advantage to the iron ore and steel companies, who often owned the ore and took the depletion allowance, created an incentive to maximize the use of ore and minimize the use of scrap. The difficulty was how to determine an equalizing offset.
   The result was the recycling tax credit. Congress allowed firms to deduct from their taxes a percentage of the cost of equipment they bought to increase their ability to recycle. The recycling tax credit was helpful because it enabled members of the industry to modernize. But when it expired, it wasn’t renewed.

Superfund was passed in 1980, but that wasn’t even on your radar screen then, was it?
Not at all. The big issues in the 1980s included resource recovery, subsidized public recycling, and the need to explain the marketplace. In addition, because working capital was drying up at that time, one of ISIS’s big efforts was to show bankers how the scrap system works. When business got bad, bankers had trouble understanding why processors continued to add to their inventory. So ISIS developed a program to explain the “reverse” nature of the industry to bankers.
   The 1980s was also the “gold-in- garbage” decade. Many people thought that all you had to do was put in a recycling plant, separate the good stuff from the garbage, produce energy from the garbage, and then make a fortune selling the metal and paper. ISIS spent the better part of the decade explaining the fallacy in that premise. It was a difficult point to argue because it looked terribly self-serving, and people became suspicious of the economics we presented. In the end, however, we showed that clearly there wasn’t gold in garbage.

When did hazardous waste become a problem for scrap processors?
Under RCRA, companies had to evaluate their waste streams. If you didn’t evaluate your wastes and they were subsequently found to be hazardous, there were some horrendous penalties. So everyone had to do this analysis. The question was how could hundreds of scrap companies evaluate the waste streams from their various processing machines?
   We decided that the way to deal with this would be to create a sampling process for the whole industry. That way, individual scrap businesses wouldn’t have to spend a fortune evaluating each waste stream while a consistent industry picture could be developed. The problem was convincing the regulators that this made sense.
   Working with an outside consulting firm, we developed a sampling protocol. We then went to EPA with our proposal and were pleasantly surprised that the agency was willing to listen. The result was the so-called Clayton study that characterized the industry’s waste flows.
   The sampling process took well over a year. When it was done, the validity of the sample was astounding and was proven repeatedly. We submitted the results to EPA and, based on that submission, the industry had a shield for almost the entire decade until the agency changed the test from EP Tox to the TCLP.

Do you remember when you realized how big a problem Superfund would be for the industry?
I remember exactly. It was a Friday. I got a call from a member who asked, “How do PCBs get into shredder residue?” I told him I didn’t know. Then he said, “They just tested my pile, and they tell me it’s got high PCBs and I’ve got to take it to a PCB landfill.”
   I asked George Smith, ISIS’s safety director, what he knew about PCBs. He recalled that EPA had done a study on the chemical. I found the study and took it home over the weekend. The whole picture was right there. For shredders, the capacitors in appliances were clearly a problem. It quickly became evident that potential PCB contamination was out there.
I   n the beginning, it was only a single state situation. Once the regulatory body there became aware of this, lead and other substances also became issues. ISIS and a number of members in the state worked with the agency to solve the problem. But that then led to the bigger Superfund issue.
   Members started getting letters saying, “You are a potentially responsible party.” In the early 1990s, we convened a group of ReMA leaders to talk about the issue and decide how to commit our resources. The unanimous decision was to focus on the unique problem that affected the scrap industry, which was that our product was considered a waste by law. That’s when the whole “Scrap Is Not Waste” philosophy was perfected.
   A major breakthrough occurred in the mid-1990s when we approached the environmental community. After a lengthy negotiation, a Superfund recycling reform bill was drafted that had the support of the five major environmental organizations. At their request, we then went to EPA and the Justice Department. What started out as a four-page bill became a 13-page bill. In 1999, that bill became law.

Would you say that passage of the Superfund Recycling Equity Act in 1999 was the high point of your career?
It’s always easy to say that the last victory was the best because that’s the one you remember most clearly. But other real exhilarations I remember were getting the law changed on export controls and when, in 1979, the Commerce Department said there was no basis for such controls based on that law. The difference between the Superfund issue and the export issue, though, is that the export issue—while important to all processors—wasn’t an industrywide battle. Nothing could come close to the industrywide high of the Superfund victory because of the industrywide involvement in that issue. We won because everyone fought hard.

Any losses you remember as the most disappointing?
I don’t think anything will ever take the place of the last-minute pulling of the recycling provision in the Superfund legislation in 1998. I’ll never forget sitting in Robin’s office and getting the message that our provision was in the final bill at 11 a.m. but was pulled sometime between 11:15 and noon when the bill was printed. That’s how close it was. That has to be the biggest disappointment, though a year later we won.

Another big event in the 1980s was the merger of ISIS and NARI to form ISRI. Did you see that coming for a long time?
That came about in 1987. ISIS used to have a budget meeting every December, which generally was around the time of NARI’s winter meeting in New York. As I recall, 1986 wasn’t a particularly good year, so the budget committee was being pressed to find a way to balance the budget. During those budget sessions, the possibility of merging came up. [NARI Executive Vice President] Manny Mighdoll had left at that point, so there was a need to replace the leadership at NARI, and both associations were experiencing financial pressures. So merger discussions started and, in that particular atmosphere, the idea took off.

In hindsight, do you think the merger was a smart and necessary move?
Yes. The scrap industry had a growing presence in government circles, but it was not maximizing this situation with two organizations attempting to move forward, each in its own way. Government entities were telling us to come back to them with a single industry story. The merger solved the problem and provided a single—and strong—industry voice.

Looking in-house, what were some of the challenges and rewards of managing an association?
I think the most exciting part was being able to convert the association from an internal-focused organization to embrace a major external focus. That required the association to hire extremely skilled people.
   As the association grew from eight employees to as many as 40, it was intriguing to see its complexion change to the point where virtually every employee was a skilled practitioner. That was the most exciting part of seeing the association grow.
   Then there was the challenge of having that team work together. I believe we demonstrated many times that when you bring talented people together, they can create unbelievable results. It’s apparent that the industry recognizes it has been extremely fortunate in the quality of the people on the ReMA staff.

What about drawbacks of the job?
The worst part of managing people is managing people. When it’s more than yourself, you begin to understand the complexities that can occur. You begin to understand the unbelievable issues that arise because people are human beings with personal problems and concerns.
   If you want to deal with people as human beings, you become humbled very quickly when you realize how difficult that can be.
   Thankfully, the association staff was small enough so that I could be sensitive to the needs of each individual. Trying to do that and trying at the same time to meet goals is the task of any manager.

What will you miss about not working for ReMA and the scrap industry day-to-day?
People are what makes the scrap industry so exciting. The hardest thing is going to be not having 20 or 30 calls a day from people who are like family. I can reproduce the excitement of going to an office, I can reproduce the excitement of travel, but I don’t know how you reproduce the relationships with the people of the industry. So I think I’ll have a big phone bill. I’ve also got most everybody’s e-mail address.

Though you’re retiring from ISRI, it sounds as if you won’t be living a retiring life. What are your plans?
The only thing that’s definite is that I’m back on the faculty at the University of Maryland. I’m teaching two courses in business this semester.
   What happens beyond that, I don’t know. I’ve been approached about doing some consulting work, and a couple of the possibilities are intriguing.

How would you hope the scrap industry remembers you?
I guess it would be that I cared—because I really did and do care about the industry and its people—and that I tried to make it a better place to make a living.

Any parting words of advice or wisdom for scrap recyclers in the new millennium?
The history of this industry is exciting, fascinating, illuminating, and exhilarating when you realize where it came from and how far it has come. The industry should never forget its history. It should enjoy it and pass it on as a great badge of honor because the founders of the industry deserve that, and there’s much to be learned from it.
   On the other hand, the things that worked in the past and that work now need to be evaluated carefully in the future. So many of the problems the industry faced were because it was unknown and many people, in fact, encouraged it to remain unseen and unheard, which was perceived to be a benefit. I think that issues like export controls and Superfund proved that that such a posture wasn’t wise.
   As the role of government continues to increase and the environmental movement continues to grow, the function of the association and the industry’s leaders is to not limit their vision to what works today. Instead, they must try to anticipate what the various stakeholders are going to do and develop a way to deal with those situations before they happen.

A Senatorial Farewell
Mr. President, I rise today to acknowledge the retirement of Dr. Herschel Cutler from the Institute of Scrap Recycling Industries, ISRI. Dr. Cutler, ISRI’s former Executive Director, spent the last 33 years of his life teaching the nation, including the Congress, about the environmental and economic benefits of recycling. In the course of his tenure, ReMA has become a highly respected trade association known for its dedication to both environmental protection and private sector entrepreneurialism. He had a wonderful knack for hiring extraordinary staff. And, by example, Herschel taught them to do their homework, acquire a deep understanding of their issues, keep their standards high, develop reasonable solutions to problems and, with regard to public policy, to never overreach.
   Herschel Cutler is not an Arkansan. But, shortly after my first election to serve as a member of the other body, I met him over dinner through fellow Arkansans whose family recycling business was an ReMA member company. During that dinner Herschel gave me a succinct but thorough description of a serious dilemma facing the scrap recycling industry and its possible resolution. After listening to him discuss the concerns facing the many families in the recycling industry, including many Arkansas families, it was easy for me, a farmer’s daughter, to identify with a key concern facing them. That is, certain government policies were, inadvertently, having the effect of causing many recycling families to wonder whether they should remain with their businesses.
   That dinner was the beginning of a long and fruitful relationship between me, Dr. Cutler, and the entire scrap recycling industry. Herschel Cutler’s earnest integrity convinced me that the recyclers’ cause was worth fighting for. I began that fight in 1993. It ended in 1999, after I teamed up with Senators Daschle and Lott, Baucus, and Chafee to amend the Superfund law to correct a mistake directed at recyclers that nobody had intended.
   Dr. Herschel Cutler and I have been fast friends ever since. As he retires on January 31, 2001, I cannot thank him enough for his guidance and his counsel to me over the years since we first met. He is truly a modest man of great wisdom, integrity and intellect. Upon his retirement the Washington association community is much the poorer. And with his counsel absent from the daily give and take of public policy discussions in the Congress, so are all of his many friends in both houses.
   Herschel, I wish you the best fishing, reading, writing, and teaching in your retirement. I’m sure your legions of friends would agree, your friendship has been a blessing to us all.
   Sen. Blanche Lincoln (D-Ark.), Congressional Record (S1009), Feb. 1, 2001 •