August 2006

ECONOMIC IMPACT STATEMENT

Attachment A

SUPPLEMENTAL

ECONOMIC IMPACT STATEMENT

FOR VERMONT’S PROPOSED RULE

ON OUTDOOR WOOD-FIRED BOILERS

Prepared For:

Vermont Department of Environmental Conservation

Air Pollution Control Division

103 South Main Street Building 3 South Waterbury, Vermont 05671-0402

and

NESCAUM 101 Merrimac St., 10th Floor
Boston, MA 02114

Prepared By:

Robert Black Independent Consultant Brunswick, ME 04011

August 2006August 2006

TABLE OF CONTENTS

INTRODUCTION ...................................................................................................... CHAPTER 1

Background..................................................................................................................... . 1-1 People, Enterprises, and Government Entities Potentially Affected ............................... 1-2

Other Potential Alternatives............................................................................................. 1-3

IMPACTS ON OWB MANUFACTURERS ........................................................... CHAPTER 2

OWB Manufacturers........................................................................................................ 2-1

Review of Emissions Data............................................................................................... 2-1 Compliance with Emissions Limit a nd Ultimate Industry Impacts................................. 2-3

IMPACTS ON PROSPECTIVE OWB OWNERS ................................................. CHAPTER 3

Baseline Cost-Effectiveness of Heating Options............................................................. 3-1 Economic and Adverse Health Impact s on Prospective OWB Users.............................. 3-5

IMPACTS ON OWB RETAILERS AND OTHER VERMONT BUSINESSES . CHAPTER 4

OWB Distribution in Vermont......................................................................................... 4-1 Potential Impacts on OWB Retailers ............................................................................... 4-2 Potential Secondary Impacts on Local Businesses .......................................................... 4-3

IMPACTS ON RESIDENTS NEIGHBORING OWB USERS ............................. CHAPTER 5

Emissions Characteristics and Am bient Monitoring Studies........................................... 5-1 Potential Health Impacts Asso ciated with OWB Smoke................................................. 5-3 Economic Benefits of Reduced PM Exposures ............................................................... 5-5

Nuisance Effects of OWB Smoke.................................................................................... 5-8

IMPACTS ON GOVERNMENT ENTITIES .......................................................... CHAPTER 6

Impacts on Agency of Natural Resources........................................................................ 6-1 Impacts on Health Official s and Municipalities .............................................................. 6-1

INTEGRATION AND SUMMARY ......................................................................... CHAPTER 7

Summary of Findings....................................................................................................... 7-1 Impacts of Other Alternatives.......................................................................................... 7-3 Small Business Impacts ................................................................................................... 7-4

REFERENCESAugust 2006

1-1 INTRODUCTION CHAPTER 1

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The Vermont Agency of Natural Resour ces’ (ANR) Air Pollution Control Division (APCD) is currently revising and expanding re gulations governing the installation of and emissions from outdoor wood-fired boilers (O WBs). First proposed in August 2005, the new regulations would establish a specific emission limit for particulate matter (PM) and would require that a manufacturer demonstrate complianc e before retailers are allowed to sell the manufacturer’s product in Vermont. This ru le is being proposed as § 5-205 (“Control of

Particulate Matter from New Outdoor Wood-Fired Boilers”) of Vermont’s Air Pollution Control Regulations (APCR). The ANR is also propos ing several minor revisions to the current regulation entitled “Siting and Stack Height St andards for Outdoor Wood-Fired Boilers” (§ 5- 204).

BACKGROUND

The APCD began receiving complaints a bout OWB smoke in the late 1980s and early 1990s. In 1997, the state set standards that prohib ited new OWBs from being located closer than 200 feet from a neighboring residence. The rule also required that any OWB located within 500 feet of a neighboring residence be equipped with a stack of a specified minimum height.

Despite the location and stack height sta ndards, the APCD has continued to receive complaints about OWBs. In response to these complaints and to evid ence of potential adverse health effects related to the ope ration of OWBs, the proposed regulations would establish a PM emission standard for OWBs to reduce exposure to particulate matter as well as toxic pollutants produced during wood burning (e.g., carbon monoxide, dioxins, and polycyclic aromatic hydrocarbons). Specifically, the rule would require that OWBs sold for use in Vermont limit PM emissions to 0.20 grains per dry standard cubic foot (gr/dscf) of exha ust gas corrected to 12 percent CO 2 , or an equivalent rate of 0.44 pounds per million BTUs of heat input.

Numerous studies have linked ambient PM exposure to health endpoints, including pulmonary function decrements, respiratory sy mptoms, hospital and emergency department admissions, and mortality. While epidemio logical studies originally focused on PM 10 effects,

more recent studies have examined the im pact of fine-fraction particles (e.g., PM 2.5 ) which have the ability to lodge deep in the lung (EPA , 2004). The proposed emission limitation would

deliver health benefits for residents of hom es neighboring OWBs, pa rticularly sensitiveAugust 2006

1-2 populations such as the elderly, children, and indi viduals with pre-existing heart and respiratory conditions. In addition, the regulations would provi de secondary benefits such as elimination of nuisance conditions and aesthetic disamenities (e.g., visibility).

Concern over OWB emissions has increased as OWB sales have grown. Nationwide, sharp increases in fossil fuel prices have enco uraged homeowners to seek alternative heating options. According to data provided by manufact urers, approximately 156,000 OWBs have been sold in the U.S. since 1990, with sales concentrated in the Northe ast. The rate of sales has increased substantially since 1999; manufacturers e xpected sales increases of 200 to 350 percent

in 2005.

While data are sparse, Vermont appears to reflect these sa me sales patterns. Since 1990, roughly 2,000 OWBs have been sold in Vermon t (NESCAUM, 2006). Sales grew from 64 units in 2000 to 142 units in 2003 (APC D, 2005). The number of units in operation may be greater than indicated by Vermont sales data given that ma ny sales, occurring both inside and outside of the state, have probably not been re ported to the APCD as required.

PEOPLE, ENTERPRISES, AND

GOVERNMENT ENTITIES POTENTIALLY AFFECTED

In accordance with 3 VSA § 838, this Economic Impact Statement (EIS) focuses on the enterprises and entities potentially affected by the proposed OWB rules, characterizing the costs and benefits anticipated for each:

• OWB Manufacturers : Approximately 28 firms manufacture OWBs; one

of these firms is located in Vermont. The proposed rule would require that manufacturers meet the PM emission limit as a precondition of selling their OWBs in Vermont. Therefore, ma nufacturers will incur the costs of modifying OWBs, e.g., through reconfi guration or additio n of emission control devices. Chapter 2 examin es potential economic impacts on

manufacturers.

• Prospective OWB Users : The proposed regulation would require that

future OWB units sold for use in Ve rmont meet the emission standard. Therefore, another pote ntially affected group is prospective OWB buyers (current owners would be unaffected ). Specifically, buyers may face higher prices for OWB units or, if emission controls are prohibitively costly, may need to use alternative heating systems. In addition, OWB users may realize health benefits if they use heating systems with lower emissions. Chapter 3 considers th e range of possible impacts on OWB users and their economic implications.

• OWB Retailers : To the extent that emission controls increase the cost of OWB production, retailers may realize re duced profits or reduced sales.August 2006

1-3 The ultimate effect on retailers (and the regional economy) depends on whether OWBs represent a major or mi nor component of sales and profits. Chapter 4 examines these issues.

• Residents Neighboring OWB Users : The primary benefit of the rule

would be reduced health risks for individuals neighboring prospective OWB users. In addition, some neighbor s would realize benefits associated with reductions in nuisance impacts su ch as odors. Chapter 5 reviews the health impacts associated with PM exposure and the economic benefits of reducing these exposures.

• Government Entities : Chapter 6 briefly considers the resources that the Agency of Natural Resources will devote to enforcement of the OWB emission standard and secondary impli cations for state and local health

officials.

This report concludes with a summary of th e economic impacts on these groups as well as a discussion of potential burdens for small businesses (see Chapter 7).

OTHER POTENTIAL ALTERNATIVES

Provisions in 3 VSA § 838 require that the EIS compare the ec onomic impact of the rule with other regulatory alternatives. While a vari ety of options exist, the Agency of Natural

Resources has focused on three alternatives:

• No Action : One option simply involves maintaining the status quo regulations governing siting and st ack height, introducing no new protective measures.

• Interim OWB Ban : Another alternative involves prohibiting the sale of OWBs in Vermont until the U.S. Environmental Protection Agency has developed nationwide regulat ory standards for OWBs.

• OWB User Compliance : This alternative would limit emissions similar to the proposed regulation; however, it w ould shift the burden of compliance onto purchasers of OWBs, requiring that they demonstrate that their units meet emissions requirements (as opposed to placing this burden on manufacturers).

The summary chapter (Chapter 7) returns to th ese alternatives and compares their economic impacts to the rule under consideration.August 2006

2-1 IMPACTS ON OWB MANUFACTURERS CHAPTER 2

______________________________________________________________________________

The proposed emission limit would apply to th e sale of new OWBs for installation in Vermont. Therefore, to ensure continued sa les in Vermont, OWB ma nufacturers would have primary responsibility for designin g units to meet the emission st andard. This chapter provides an overview of the OWB manufacturing sector, ex amines the potential changes that would be needed to meet the emission limit, and fram es the potential cost of these changes.

OWB MANUFACTURERS

A recent study by the Northeast States for Coordinated Air Use Management (NESCAUM) identified 27 OWB manufacturers in North Am erica (NESCAUM, 2006). The study found that manufacturers are di stributed across 10 states an d Canada: eight in Minnesota; three in Pennsylvania; two in Wisconsin; two in North Carolina; six in Canada; and one each in Missouri, Nebraska, New Hampshire, New Yo rk, Tennessee, and Washington. The companies range widely in size, employing between one and 140 individuals. 1

While none of the manufacturers identified in the NESCAUM report are located in Vermont, APCD staff indicate that one in-state ma nufacturer does exist. The business is a oneto three-person operation located in West Burke in northern Vermont. This firm reported selling

10 OWBs in 2004 and four in 2005.

REVIEW OF EMISSIONS DATA

The cost of meeting the proposed emission st andard is related to the control approach used and the gap between current OWB PM emission rates and the standard. Therefore, this section briefly reviews existing data from OWB emissions testing. Exhibit 2-1 summarizes the studies, noting the characteristics of the OWB tested and the PM emission levels recorded.

1 In at least one case, an American firm serves as a distributor for OWB units manufactured outside the U.S. Specifically, Tarm-USA markets OWB models manufactured in Denmark. It is unclear whether this is true for any of the other manufacturers identified in the NESCAUM study.August 20062-2Exhibit 2-1SUMMARY OF OWB AND INDOOR WOOD FURNACE EMISSION RATE STUDIESStudy Unit and Operation Description Fuel PM Emissions ReportedEmissions in lbs./mmBTUHeat InputSingle pass furnace (A); range of heat removals Oak cordwood 38.5-143.2 g/hr1,048 mg/MJ input2.438 lbs./mmBTUValenti and Clayton,1998Double pass furnace (B); range of heat removals Oak cordwood 14.3-37.6 g/hr681 mg/MJ input1.584 lbs./mmBTUIndoor wood furnace, intermittent firing Cordwood1,862 mg/MJ input 4.331 lbs./mmBTUIndoor woodfurnace, continuous firing Cordwood182 mg/MJ input 0.423 lbs./mmBTUMcCrillis, 1995Indoor woodfurnace Dry woodchips 45.3 mg/MJ input 0.105 lbs./mmBTUCentral Boiler Central Boiler Model CL-7260 Cordwood 93.76 g/hraN.A.cConventional design (water cooled, up-draft combustion) Dry cordwood 87-2,200 mg/MJ 0.202 – 5.117 lbs./mmBTUdModern design (ceramic boiler, flue gas fan, down-draftcombustion, large water tank)Dry cordwood 27-32 mg/MJ 0.063 – 0.074 lbs./mmBTUdJohansson, 2004Modern design (ceramic boiler, flue gas fan, down-draftcombustion, large water tank)Wet cordwood 23-89 mg/MJ 0.053 – 0.207 lbs./mmBTUdN.A. Cordwood 84 g/hr N.A.cN.A. Cordwood 60 g/hr N.A.cN.A. Cordwood 108 g/hr N.A.cN.A. Cordwood 18 g/hr N.A.cN.A. Cordwood 49 g/hr N.A.cN.A. Cordwood 33 g/hr N.A.cN.A. Cordwood 147 g/hr N.A.cManufacturer TestData Reported inSchrieber et al.,2005bN.A. Cordwood 118/g/hr N.A.cIntertek, 2006 DECTRA/Garn 1350 solid fuel boiler; two-stagecombustion with ceramic-lined chamberCordwood(oak)0.17 g/MJ output 0.29 lbs./mmBTUeNotes:a.Central Boiler and VT DEC disagreed over theproper interpretation of the test. The figure reported is that recommended by VTDEC.b.Data provided in this table exclude the Intertek Laboratories study that focused on testing methods using an unidentified woodboiler. Schrieber et al. excluded these data from their calculation of averageemissions.c.Converting these figures to lbs./mmBTU requires information on the output of the OWBunit; this information is not readily available.d.Figures are assumed to be on a heat inputbasis, although Johansson does not explicitlyaddress whether emissions are stated ona heat input or output basis.e.Converted to heat-input basis usingreported efficiency of 75 percent.August 2006

2-3 Emissions are influenced by testing conditions, test methods, OWB design, OWB operating methods, fuel used, and other fact ors, making it difficult to compare results definitively. However, the studies suggest several key conclusions:

• Overall, concentrations of PM in OWB emissions are high. Several studies have placed OWB emissions in context by comparing them with

other heat sources. Most notably, fine PM emi ssion rates from OWBs are

estimated to exceed those of wood stoves by a factor of between four (relative to a conventional woodstove) and 12 (relative to an EPA-certified catalytic woodstove); emission rate s exceed gas and oil furnaces by a much greater degree (S chrieber, et al., 2005).

• While emission test results vary wide ly, OWBs with conventional designs generally would not meet the proposed emission standard.

• Available data suggest that prope rly designed OWBs can meet the proposed emission standard (0.44 lbs. /mmBTU). The modifications and operational changes that appear to reduce emissions include a down-draft combustion design; two-stage combus tion; a ceramic chamber; a large water tank to allow continuous firing; and use of woodchi ps rather than

cordwood. These issues are discussed further below.

COMPLIANCE WITH EMISSION LIMI T AND ULTIMATE INDUSTRY IMPACTS

In analyzing the impact of any regulation, it is essential to anticip ate the ways in which the regulated parties could respond. Availabl e information and conversations with industry experts suggest several possible approaches that OWB manufacturers coul d take in response to the Vermont OWB emission requirements:

• No Change : Some manufacturers may al ready be producing OWB units that comply with the Vermont standard. For example, the Garn unit analyzed in Intertek (2 006) appears to be capable of meeting the 0.44

lb/mmBTU standard. In contacts with APCD, ot her manufacturers have expressed confidence that their units will meet the standard once tested. 2

• Cease Sales in Vermont : Some manufacturers who find compliance with the standard to be cost prohibitiv e may simply discontinue sales in

Vermont and sales of units to be inst alled in Vermont. Sales in Vermont represent a very small portion of nati onal sales (about one percent), so the impact on manufacturers would be minimal.

2 Personal communication with Phillip Etter, APCD, May 26, 2006; and Lloyd Nichols, Tarm-USA, June 7, 2006.August 2006

2-4 • OWB Redesign : Existing manufacturers may redesign their OWBs to reduce emissions. Meeting the standa rd would likely require fundamental re-engineering to introduce featur es such as down-draft combustion design, two-stage combustion and/ or a ceramic chamber. New manufacturers could incorporate such design features into new units brought to the Vermont market.

It is difficult to determine the relative balance of these different options since companies face different baseline circumstances. With resp ect to Option 1, at least one major manufacturer (Garn) appears to have units that will meet the st andards. However, others that make this claim have yet to perform emission testing and in some cases are new entrants to the OWB market.

Option 2 (abandoning the Vermont market) may be an attractive interim measure for manufacturers of non-compliant units. However, Vermont is not the only state enacting or considering OWB emission controls . Washington State already lim its emissions from all solid fuel-burning devices rated lower than one m illion BTUs per hour (NESCAUM, 2006). Indiana is considering regulatory alternatives ranging fr om emission limits to an outright ban on OWBs (Indiana Register, 2006). The Am erican Lung Association of Ma ine is calling for increased OWB emissions controls; in response, the Main e Department of Environmental Protection is developing a regulatory strategy in coordination with relevant legislative committees (MPBN, 2006). Local governments are actively regulating st ack heights and other design parameters, and

in some cases have introduced OWB bans. In New York State alone, 11 municipalities have banned OWBs (Schreiber, 2005). In Vermont, the town of Salisbury is also proposing an OWB ban. Considering these trends, manufacturers may s oon find it difficult to remain competitive in key markets without introducing ne w models with lower emissions.

Manufacturers who choose to redesign non-complia nt units to meet th e emission standard (Option 3) will face significant engineering a nd economic challenges. While a technical discussion of the re-engineering options is beyond the scope of this study, it is unlikely that the standard could be met through simple additi on of conventional emission control devices. Experts suggest that the costs of a catalytic ab ator or other “add-on” emission reduction device are prohibitive and would render the OWB product uncompetitive in the marketplace. 3 Instead, emission tests suggest that fundamental design elements such as two-stage combustion, downdraft combustion, a ceramic chamber, or an en larged water tank offer the greatest emission control benefits. One manufacturer acknowledge d that such elements add to the cost of producing the unit and indicated th at conversion from a conventiona l to a low-emissions design could increase the price of a $7,000 OWB to $10,000, an increase of over 40 percent. This is, however, a very rough estimate and likely represen ts an upper bound; actual results will depend on numerous factors, including the size and starti ng design of the unit; research and development costs; the cost of production inputs (labor, ma terials); and market demand for the redesigned

unit.

3 Personal communication with Martin Lunde of Garn Furn aces, distributed by DECTRA Co rporation, June 1, 2006.August 2006

2-5 Because of the small size of the Vermont OWB market, the proposed emission standard is unlikely to significantly affect the manufacturing sect or. The ultimate effect of the Vermont standard in combination with other state, local, or Federal OWB re gulations could be a

consolidation of the ma nufacturing sector that favors comp anies already producing compliant units as well as larger companies with suffi cient research and development budgets to pursue redesign. Competition and regulatory changes ma y force smaller operations out of business. However, it is essential to consider the full suite of baseline market forces at work in producing this consolidation. One scenario is that, as state and municipal regulations prompt redesign efforts, the price of OWBs will ri se to the point that residential use is no longer cost-effective or feasible. Indeed, analysis pres ented in the following chapter sugge sts that OWBs may already be an economically inferior option for residentia l heating. Manufacturers may focus on larger OWBs for commercial buildings, pr ompting further market consolid ation. Overall, however, the proposed emission standard in Vermont would be a minor contributor to these changes.August 2006

3-1 IMPACTS ON PROSPECTIVE OWB OWNERS CHAPTER 3

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As noted earlier, sales of OWBs in Verm ont have increased in recent years, with approximately 142 units sold in 2003. Manufacturers of OWBs have expressed the concern that the proposed regulations may eliminate a cost-e ffective home heating opti on for potential buyers, forcing them to rely on more expensive heat ing options (Central Boiler, 2005). The relative

cost-effectiveness of different he ating options will in turn influe nce the overall economic impacts of the emission control regulations.

This chapter examines this assertion in gr eater detail, characterizing the baseline costeffectiveness of various home-heating options and discussing whethe r the proposed emission limit would influence the relative desirability of these options.

BASELINE COST-EFFECTIVENESS OF HEATING OPTIONS

Prospective OWB buyers will generally have several options for heating their homes and

domestic water. A valid assessment of heati ng options must standardize the comparison on two important levels:

• First, while some discussions of OWB advantages have focused on the

cost of wood fuel relative to ot her fuels (see DRM, 2005), a valid comparison must consider both operati ng costs (e.g., fuel, maintenance) as well as capital costs (i.e., the co st of the combustion unit and its installation).

• Second, fuel costs must be standardi zed by energy content, expressing the cost per BTU of energy provided.

This section discusses a simple spreadsheet model that yields total annual costs associated with different heating systems, prior to introduction of the proposed OWB regulations. It is important to note that this comparison is very generalized ; the cost-effectiveness of any heating option is house- and location-specific and will depend upon many factors, including the age of the home, how well the home is designed, construction mate rials (e.g., windows), in sulation type, and the availability and price of differe nt fuels in the local market.August 2006

3-2 Operating Costs

Exhibit 3-1 summarizes the inputs and result s of the model, comparing heating option costs for several different systems: (1) a repres entative OWB; (2) indoor wood stoves; (3) natural gas systems using forced air; (4) natural gas systems using hot water; (5) oil systems using forced air; and (6) oil systems using hot water. The first component of the model develops annual fuel cost estimates for these systems. Fu el costs are derived by standardizing the fuel by its BTU value to yield a fuel price per milli on BTUs (MM BTUs). The price per MM BTU is multiplied by 100 (the approximate average MM BTU usage per U.S. hous ehold) and divided by the percentage efficiency of the system, i.e., the heat output of the syst em in comparison to the energy content of the fuel.

The efficiency assumption is an important element in the calculation and should be examined closely. In particular, estimates of OW B efficiency vary widel y. Based on a series of testing studies, Schreiber et al. ( 2005) report an average efficiency of 43 percent. Other sources identify an estimated efficiency of 50 percen t (Valenti and Clayton, 1998; Indiana Register, 2006). However, the efficiency of any give n OWB unit will depend on the unit’s design. OWB manufacturers frequently clai m efficiencies much higher th an 50 percent, although many observers dispute these claims. 4 A recent engineering study estimated an efficiency of 75 percent for a unit with modern design features such as two-stage combustion and a ceramic-lined chamber (Intertek, 2006). The analysis presented here uses an efficiency estimate range of 40 to 50 percent, recognizing that higher efficienci es may be achieved by some cutting-edge OWB

units.

The resulting operating cost estimates hi ghlight the importance of the efficiency assumption. As shown in the exhibit, while wood is relatively inexpensive on a dollars-per-BTU basis, the lower efficiency of OWBs makes th em among the most expensive heating options on an annual fuel cost basis. Only lower-efficien cy oil burning units have annual fuel costs that approach those of OWBs.

Two caveats should be considered when assessing relative fuel costs. First, due to a variety of macroeconomic and political factors, prices for home heating fuels are currently volatile. The analysis presented here attempts to integrate the most recent information on prices. Future changes in fuel prices may influenc e the cost-effectiveness comparison. However, forecasting oil and gas prices is extremely comp lex. Furthermore, forecasts are probably not essential to this comparative an alysis since wood demand and wood prices generally keep pace with fluctuations in the prices of conventional fuels over time.

4 For example, see the arguments made by the Wood Heat Organization, at http://www.woodheat.org/technology/outboiler.htm . One source of disagreement in interpretation of efficiency tests concerns testing methods. Specifically, heating efficiency is measured at th e test unit, which does not account for potential losses in delivering heat through piping betwee n the OWB and the home. As such, laboratory tests may overstate heating efficiency.August 20063-3Exhibit 3-1COST-EFFECTIVENESS COMPARISON FOR OWBs AND CONVENTIONAL HEATING SYSTEMSOperating Costs Capital CostsTotal AnnualCostsSystemFuel UnitPriceper UnitBTUValue perUnitPriceper MMBTUEfficiencyAnnualFuel CostPurchaseandInstallationUsefulLifeAnnualCapitalCostLowerBoundUpperBoundOutdoor Wood Boiler Cord$225.0022,000,000 $ 10.23 40-50%$ 2,045 -$ 2,557$ 5,500 -$ 8,00015 20 $370 $878$2,415$3,435Indoor Wood Stove (non-cat.,68% efficiency)Cord$225.0022,000,000 $ 10.23 68% $ 1,504 $ 2,075 18 22 $130 $206$1,634$1,710Indoor Wood Stove (cat., 72%efficiency)Cord$225.0022,000,000 $ 10.23 72% $ 1,420 $ 2,425 18 22 $152 $241$1,573$1,662Gas Forced Air (80% efficiency) 1,000s cf$ 12.201,000,000 $ 12.20 80% $ 1,525 $ 1,860 17 20 $125 $191$1,650$1,716Gas Forced Air (90% efficiency) 1,000s cf$ 12.201,000,000 $ 12.20 90% $ 1,356 $ 2,690 17 20 $181 $276$1,536$1,631Gas Hot Water (80% efficiency) 1,000s cf$ 12.201,000,000 $ 12.20 80% $ 1,525 $ 3,320 17 20 $223 $340$1,748$1,865Gas Hot Water (90% efficiency) 1,000s cf$ 12.201,000,000 $ 12.20 90% $ 1,356 $ 4,260 17 20 $286 $436$1,642$1,792Oil Forced Air (80% efficiency) Gallons$ 2.42139,000 $ 17.41 80% $ 2,176 $ 1,860 17 20 $125 $191$2,301$2,367Oil Forced Air (90% efficiency) Gallons$ 2.42139,000 $ 17.41 90% $ 1,935 $ 2,690 17 20 $181 $276$2,115$2,210Oil Hot Water (80% efficiency) Gallons$ 2.42139,000 $ 17.41 80% $ 2,176 $ 3,320 17 20 $223 $340$2,400$2,516Oil Hot Water (90% efficiency) Gallons$ 2.42139,000 $ 17.41 90% $ 1,935 $ 4,260 17 20 $286 $436$2,221$2,371Data Sources:Fuel Prices:Wood – Personal communication with Adam Sherman, Biomass Energy Resource Center, June 5, 2006; and ThomMcEvoy, Vermont Extension Service, May 19, 2006.Natural Gas – Vermont price from Energy Information Administration, Natural Gas Monthly, March 2006, Table 21.Oil – New England price from Energy Information Administration, Weekly Petroleum Status Report, 2005-2006 Heating Season, TableC1.Wood BTU Value: Air-dry wood value of 15.36 million BTUs percord (Bioenergy Conversion Factors provided athttp://bioenergy.ornl.gov). Bone-dry value (20 million BTUs per cord(USDA Forest Products Laboratory, Fuel Value Calculator). Commonly burned Vermont hardwoods (e.g., oak and maple) have somewhat higher BTU content, ranging from 20 to 24million BTUs per cord (seeHeat Values of Wood athttp://hearth.com). Average figure of 22 million BTUs assumed.OWB Efficiency: Valenti and Clayton, 1998; Indiana Register,2006; Intertek, 2006; Schreiber et al., 2005.Purchase and Installation Cost:OWB – Schreiber et al., 2005; NESCAUM, 2006; personal communication with Martin Lunde, Garn Furnaces, June 1, 2006.Wood Stove – Houck and Tiegs, 1998; EPA Woodstove Changeout Campaign, athttp://www.epa.gov/woodstoves/changeout.html.Gas Furnace – Consumer Energy Council of America, 2001Oil Furnace – Consumer Energy Council of America, 2001Useful Life:OWB/Wood Stove – Personal communication with Cal Willis, The Wood Heat Organization, Inc., May 20, 2006.Gas/Oil Furnace – Propane Council, athttp://www.propanecouncil.org/trade/residConstruct/heating.htm.August 2006

3-4 Second, some observers point to the availa bility of on-site wood when stressing the advantages of wood as a heating fuel. If a lan downer has a supply of cord wood, it is true that out-of-pocket expenses will be reduced. Such a scen ario is particularly f easible in a rural state such as Vermont. However, wood should not be vi ewed as “free.” The wood is a resource with a well-established market value; hence, there is an opportunity cost to burning the wood rather than selling it. Furthermore, the landowner pays an intrinsic price for the labor devoted to harvesting, cutting, and splitting the wood. Fo r these reasons, the comparative analysis presented here does not include a scenario in which OWB (or wood st ove) fuel costs are zero.

Capital Costs

Capital costs must also be considered in a comparative cost-effectiveness assessment. The purchase and installation costs of different heating systems are listed in the exhibit. The prices for gas and oil systems are from a 2001 report by the Consumer Energy Council of America (CECA, 2001) and were also reported in Schreiber et al., 2005. 5 The prices for wood stoves are taken from a 1998 report (Houck and Ti egs, 1998) and are consistent with more recent information compiled for EPA’s wood stove changeout campaign which estimated a purchase/installation cost for a new wood stove of between $1,000 and $3,000. Finally, the assumed lower-bound OWB unit price is based on a figure reported in Schreiber et al., 2005. The price includes the unit and installation materi als and is based on information provided by the five largest OWB manufacturers. This figure may be low; other s ources suggest a capital cost of $5,000 before installation, with total co sts ranging between $8,000 and $10,000 (NESCAUM, 2006). Therefore, the analysis uses an upper-bound OWB capital cost of $8,000.

To refine the comparison, it is useful to estimate annual capital costs that can be added to fuel costs to yield an overall annual cost fi gure for each heating system. Annualization means that capital costs are not simp ly depreciated but that the fo regone interest on the initial investment is taken into account. Annual cap ital costs are derived by incorporating two parameters: (1) a useful operating life for the unit; and (2) a discount rate that reflects the time value of money. 6 While the discount rate applied is th e same for all systems (thereby rendering it moot in the comparative assessment), systems may vary in terms of their useful life. Available information suggests that the typical life of an oil or gas-fired furnace is about 17 to 20 years (PERC, 2006; EPA Energy Star, 2005). Experts sugge st that 20 years is a reasonable useful life

5 While general price information on furnaces is difficult to locate, the CECA figures are reasonably consistent with price information available at retailer websites and in othe r comparative cost models; see, for example, EPA Energy Star energy savings cal culator available at http://www.energystar.gov/ia/business/bulk_pur chasing/bpsavings_calc/Calc_Furnaces.xls . This model assumes a range of $2,700 to $4,000 for gas fu rnaces with a range of efficiencies.

6 The formula used to annualize capital costs is analogous to an annuity calculation: Annualization Factor = [r(1+r) n ]/[(1+r) n – 1], where r is the assumed discount rate and n is the useful life. Discount rates of 3 and 7 percent are used in the lower and upper bound estimates, respectively.August 2006

3-5 assumption for wood stoves, although results va ry with usage and maintenance patterns; therefore, the analysis app lies a range of 18 to 22 years. 7 Although reliable information is lacking, the analysis assumes an OWB useful life of 15 to 20 year s. The lower bound recognizes that OWBs may not last as long as wood stoves given their exposure to weather. At the same time, some manufacturers offer 20-year warranties on OWBs, suggesting that 20 years may be a reasonable upper bound. 8

As shown, the annualized capital costs of OWBs is greater than all other heating systems

considered.

Overall Baseline Cost-Effectiveness

Considering annual operating costs and annualiz ed capital costs together, OWBs appear

to be the least cost-effective he ating system of those considere d, with total annual costs roughly one to 37 percent greater than the next closes t option (a lower-efficiency oil burning unit).

ECONOMIC AND ADVERSE HEALTH IMP ACTS ON PROSPECTIV E OWB USERS

Direct Economic Impacts on OWB Buyers

To assess the impacts of the proposed emissi on standard on prospective OWB users, a typical economic analysis would examine pot ential OWB price increases resulting from increased manufacturing costs. As noted, estimati on of manufacturing cost increases is complex and will vary by OWB model; however, the cost of manufacturing conventional OWBs could increase by as much as 40 percent give n fundamental redesi gn requirements.

In a traditional supply and demand framework, the OWB price increase would have two effects. First, fewer consumers would purchas e OWBs and would instea d purchase other types of heating systems. These individuals woul d essentially be performing a personal costeffectiveness calculation like th e one presented above, determin ing that substitute heating systems are more attractive now that OWB pri ces have risen. Second, individuals who still choose OWBs would experience consumer surplus losse s. That is, while they are still willing to pay the going price for an OWB unit, the diffe rence between their maximum willingness to pay and the actual price paid has decreased, so they enjoy less “surplus” value from the purchase.

7 Personal communication with Cal Wallis, The Wood Heat Organization, Inc., May 18, 2006.

8 For example, see Alph a American website at http://www.yukon-eagle.com/thankyouletter.htm . OWB lifetimes could be even shorter than the 15-year lower-bound assumption if the unit is operated contrary to manufacturer recommendations, e.g., if the owner burns lumber, garbage, or other non-cordwood materials.August 2006

3-6 A rigorous analysis of consumer surplus loss es associated with an OWB price increase requires data not readily availabl e. Specifically, a demand curve would be constructed from time series data showing OWB price fluctuations in Vermont and th e associated variation in the number of OWBs sold. From these data, a de mand curve could be constructed, showing how the number of OWBs purchased changes in relati on to price. The demand curve would allow estimation of consumer surplus losses resulting from the OWB price increase.

Although the necessary data are not readily available, it is possible to draw basic conclusions about likely consum er impacts by focusing on de mand elasticity. Exhibit 3-2

contrasts two different demand curves, one representing highly inelastic demand and the other representing highly elastic dema nd. Inelastic demand exists wh en a given price increase (from P1 to P2) leads to only a small decrease in the quantity demanded (from Q1 to Q2); i.e., consumers generally continue buying the product de spite the price increase . One key reason for

inelastic demand is a lack of viable substitutes.

The second depiction of demand elasticity is likely to be more representative of OWB consumers. The availability of substitute heating systems will allow prospective OWB owners to seek out other options. Although much of Vermont is rural and lacks re sidential natural gas supplies, oil and propane are viable options, as is use of a wood stove or a pellet stove. The availability of substitutes and th e resulting elasticity of demand suggest that manufacturers will not be able to pass through cost increases associ ated with the emission c ontrol requirements, but

will instead have to absorb cost increases if th ey hope to maintain OWB sales in Vermont. The potential for consumer-level impacts is es pecially unlikely given the baseline costcompetitiveness issues discussed above. To th e extent that OWBs are already a less costeffective heating option, prospective owners should be even mo re sensitive to price increases.

Despite these arguments, some consumers may s till realize losses in economic welfare if OWB prices increase or if manufacturers choose not to sell OWBs in Vermont. Although heating substitutes exist, some individuals may deri ve utility from the self-sufficiency associated with wood heat, especially if they harvest timb er on their own property. If a homeowner wishes

to use wood to heat both his or her home and hot water, OWBs (and some indoor wood boilers) represent the only realis tic option. These individuals may e xperience a loss in consumer surplus when their desire for self-sufficiency is unmet. However, this loss is fundamentally different from the industry claims that the proposed regu lation could deprive consum ers of a cost-effective heating option.August 20063-7Exhibit 3-2ILLUSTRATION OF DEMAND ELASTICITYP1P2P1P2Q1Q2Q1Q2QuantityDemandedQuantityDemandedPricePriceInelasticDemandElasticDemandAugust 2006

3-8 Adverse Health Impacts on OWB Users

Improved OWB emission control may have an indirect economic impact on consumers through subsequent health benefits. Dependi ng on the design of the OWB and its location relative to the owner’s home, reduced emissions may decrease exposure and health risk at the

residence. The nature and magnitude of these h ealth benefits is the subject of Chapter 5, which focuses on health impacts to neighboring resident s. However, these same principles apply to residents of the OWB owner’s home. Key hea lth endpoints include hos pitalization for acute cardiovascular symptoms; respiratory hospital ad missions; premature mortal ity; aggravation of asthma; and miscellaneous respiratory symptoms such as eye irritatio n, cough, and congestion. As discussed later, the economic costs associated with these endpoints can be characterized using cost-of-illness approaches or willingness-to-pay methods.August 2006

4-1 IMPACTS ON OWB RETAILERS

AND OTHER VERMONT BUSINESSES CHAPTER 4

______________________________________________________________________________

Retail distribution represents the link be tween OWB manufacturer s and potential OWB buyers. This chapter examines how OWBs are distributed in Vermont and how the emission standard could potentially aff ect retail establishments.

OWB DISTRIBUTION IN VERMONT

OWBs are marketed and sold throu gh a variety of methods, including:

• Direct Sales : Some manufacturers (e.g., Char master Products of Grand Rapids, Minnesota) encourage buyers to purchase directly, using order

forms at the manufacturers’ websites.

• Trade Fairs : Some manufacturers (e.g., Hardy Manufacturing of Philadelphia, Mississippi) market and sell OWBs at trade fairs, home and garden shows, and other events feat uring innovative heating products and renewable energy products.

• Conventional Retailers : Some OWBs are sold through hardware stores

and other conventional retail estab lishments. In general, indoor

woodstove dealers see OWBs as a co mpeting product and therefore do not carry or promote OWBs (NESCAUM, 2006).

• Sales Representative Network : Some manufacturers build a network of distributors by enlisting customers as sales representatives. These distributors generally have little direct experien ce in the installation or maintenance of OWBs, but participate as a form of supplementary income.

• HVAC Contractors : Some manufacturers market their products through relationships with professional heat ing, ventilation, and air conditioning (HVAC) contractors to ensure prope r design and installation. ThisAugust 2006

4-2 approach is most common in commercial and agricultural markets as opposed to residential heating. 9

The balance of these distribution methods in Verm ont is difficult to discern based on availabledata. Information submitted to the Vermont ANR for the original EIS indicates that 17 “parttime” OWB dealers exist in the st ate (ANR, 2005); these dealers ar e likely to be independent sales representatives. Other OWB dealers likely ex ist in Vermont as part of larger hardware or HVAC operations.

POTENTIAL IMPACTS ON OWB RETAILERS

The nature of OWB distribution has importa nt implications for potential retail-level impacts resulting from the proposed emission standar d. It is useful to c onsider the worst-case scenario first, and then examine factors that mitigate this scenario. In 2003, 142 OWB units

were sold in Vermont or for installation in Vermont. Assuming an av erage unit price of $6,750, retailers in Vermont could potentially lose r oughly $958,000 in sales per y ear. Markup or profit at the retail level is highly uncertain, but a range of 5 to 15 percent is a reasonable estimate; therefore, lost net income to Vermont businesses could be on the order of $48,000 to $144,000 annually. Spread across a significant number of establishments, the impacts are likely to be minor. Therefore, even if the proposed regulations we re to eliminate OWB sales in Vermont, the

worst-case retail losses would be modest.

Several factors further mitigate this wors t-case scenario. First, because many conventional OWB retailers are hardware stores, HVAC contractors or other establishments that do not specialize in OWB sales, the loss of OWB sales is unlikely to affect the viability of their business or cause job losses. Furthermore, the worst-case scenario assumes that all sales are through retailers. In fact, ma ny OWBs are sold directly by manufacturers or through their representatives at fairs and ot her events. Lastly, an unknown por tion of the OWBs purchased for

use in Vermont come from out-of- state retailers, further limiting losses to Vermont businesses. As such, impacts on the Vermont retail s ector could be further minimized.

Nonetheless, some of the small, part-time dealers specializing excl usively in OWB sales may be forced to cease operation. This is especially true for t hose dealing exclusively in OWB models that do not meet the pr oposed emission standard and wh ich cannot be cost-effectively redesigned. As noted, ANR estimates that about 17 small dealers may exist in Vermont; however, it is unclear which OWB models these dealers offer.

9 Personal communication with Martin Lunde of Garn Furn aces, distributed by DECTRA Co rporation, June 1, 2006.August 2006

4-3 POTENTIAL SECONDARY IMP ACTS ON LOCAL BUSINESS

Several findings presented thus far – OWB re design costs, relative cost-effectiveness of OWB heating – suggest the potentia l for a contraction in residen tial OWB sales in Vermont. To the extent that this occurs, minor economic benef its may accrue to other sectors that compete in the home heating market. First, the most direct competitors may be manufacturers and retailers of wood stoves (including pellet stoves) and ind oor wood furnaces. At least three manufacturers of indoor wood heating systems operate in Vermont:

• Vermont Castings is a major manuf acturer of fireplace and wood stove products. While headquartered in Canada, Vermont Castings has production facilities in Randolph, Ve rmont (employing between 250 and 500 individuals) as well as a large network of retailers in Vermont. 10

• Hearthstone wood stoves are manufactur ed in Morrisville, Vermont at a facility employing 75 people. 11

• The Sam Daniels Co. specializes in hand-assembled indoor wood furnaces. Their Montpe lier facility includes a manufacturing plant, offices, and a showroom, and employs six full and part-time individuals. 12

Second, suppliers of conventional heating fu el and equipment (e.g., oil burners, home heating oil dealers) may realize modest sales increases if future OWB usage in Vermont is

reduced.

10 Information obtained online at www.randolphvt.com

.

11 Personal communication with Paul Bartle tt, Hearthstone Q.H.H.P., July 27, 2006.

12 Personal communication with Donna Daniels, Sam Daniels Co., July 27, 2006.August 2006

5-1 IMPACTS ON RESIDENTS NEIGHBOR ING OWB USERS CHAPTER 5

______________________________________________________________________________

The focal concern of the proposed emission st andard is the health and safety of the general public, particularly individuals livin g near OWBs. Health impacts range from exacerbation of respiratory and cardiac illnesses (for PM expos ure) to possible carcinogenic effects (for volatile organic constituents). While the standards would not affect OWBs currently in use, they would offer potenti al health benefits for reside nts neighboring newly installed

OWBs.

The remainder of this chapter is divided into four sections:

• First, the analysis examines the results of ambient monitoring studies

conducted near OWBs and considers the qualities of OWB smoke that

influence health risks and aesthetic concerns;

• Second, the analysis identifies key hea lth effects associated with exposure to elevated particulate matter concen trations as well as other wood smoke pollutants;

• Third, the analysis characterizes th e economic benefits of reduced PM exposures; and

• Finally, the analysis characterizes other potential benefits of reduced

OWB emissions.

EMISSIONS CHARACTERISTICS AND AMBIENT MONITORING STUDIES

Many studies critical of OWBs highlight how OWB de sign and operation influence the

characteristics of OWB emissions and human exposures (NESCAUM, 2006; Wisconsin Division of Public Health, 2005; Connecticut DEP, 2005; Vermont APCD, 2006). In particular, studies highlight how the combustion cycle in a typical OWB contributes to exce ssive emissions. Wood burns completely only at temperatures exceeding 1,000 o F. OWBs are designed to produce a slower, cooler fire to maximize the length of th e burn. The result is le ss efficient combustion, creating more smoke and creosote. The pattern of emissions is exacerbated when the OWB cycles between combustion and “idle” mode. Du ring the periods when no heat is needed, the OWB damper closes and the fire smolders; when heat is again needed, the start-up procedure volatilizes the condensed organics (creosote) and sends smoke out of the unit’s stack.August 2006

5-2 Other factors may aggravate the quality of OWB emissions and raise exposure concerns. Many OWBs are operated with short “stub” smoke stacks that do little to disperse smoke. As noted, 1997 Vermont rules include minimum stack heights for newly installed OWBs. In addition, health officials are c oncerned that OWB owners may bur n materials – such as green wood, brush, lumber, and household refuse – that c ontribute to high PM c oncentrations. Finally, OWBs supply domestic hot water for showeri ng, etc.; therefore, th ey operate year-round, increasing the potential fo r longer-term exposures.

Few ambient air studies have tested pollutant exposure levels in the vicinity of OWBs. The most thorough study to date was conducted la st year by researchers at NESCAUM and is currently in press for publication in the Journal of Human and Ecological Risk Assessment (Johnson, 2006). Exhibit 5-1 summarizes key aspect s of the testing procedure and findings. As shown, the study measured average PM 2.5 concentrations of about 130 ug/m 3 when testing at 150

feet from the OWB. 13 The variation in the concentrations is the result of many factors, most notably the time since the last wood loading and the heat-calling condition s (i.e., damper closed versus damper open).

Exhibit 5-1

JOHNSON (2006) AMBIENT AIR MONITORING PROCEDURES AND RESULTS

OWB Characteristics • Hardy H5-1-07 Economy model

• Capacity = 180,000 BTU/hr

• Stack height = 10 feet Field/Testing

Conditions • Monitoring performed in March on unit located in New York State

• Dry oak and other seasoned hardwood used for fuel

• 50-150 foot distance between OWB and monitoring device

• Calm/variable winds, light snow Sampling Procedure • Thermo Electron DataRAM 4000 (light scattering unit) monitored PM

• 15-second averaging time over 4.3 hours

Results at 150-Foot Monitoring Distance (PM 2.5 in ug/m 3 ) • Minimum: 16-17 ug/m 3

• Maximum: 810-3,328 ug/m 3

• Mean: 130-133 ug/m 3

Source: Johnson (2006) and NESCAUM (2006)

The average recorded PM concentrations significantly exceed existing ambient PM

standards. The current 24-hour Nationa l Ambient Air Quality Standard for PM 2.5 is 65 ug/m 3 ; EPA has proposed a revise d standard of 35 ug/m 3

. 14 While the monitori ng in the Johnson study was performed over a shorter time period (4.3 hours), the concentrati ons recorded strongly suggest the potential for ex ceeding the 24-hour standard.

13 Concentrations measured at 150 feet are the most rele vant to consider since existing Vermont standards require

that OWBs be located a mini mum of 200 feet from the nearest neighboring residence.

14 See http://www.epa.gov/oar/partic lepollution/standards.html

.August 2006

5-3 POTENTIAL HEALTH IMPACTS ASSOCIATED WITH OWB SMOKE

A comprehensive assessment of the health risks associated with OWB smoke is beyond the scope of this economic impact study. However, to properly frame the potential economic benefits of reduced OWB emissions, it is essential to highlight the range of adverse health effects that might be attributable to OWBs. The follo wing discussion examines adverse health effects associated with particulate matter exposure and effects asso ciated with other woodsmoke pollutants.

Adverse Health Effects of PM Exposure

Exhibit 5-2 provides a brief summary of se veral recent studies linking particulate matter exposure to key health outcomes. As show n, major health effects of concern include hospitalization for cardiovascular symptoms; hospitalization for chronic respiratory illness; premature mortality; aggravation of asthmatic conditions (no hospitalization); and miscellaneous respiratory symptoms (e.g., sneezi ng, coughing, runny nose). Studies have focused on effects of

both PM 10 and PM 2.5 . All of the listed studies concentrat e on acute effects fr om short-term PM

exposure.

The modeling in these studies generally yiel ds a statistical association between PM exposure and the likelihood of the given health outcome. For example, a study may find a five percent increase in the risk of hospita lization for heart fa ilure per each 25 ug/m 3 increment of

PM 2.5 . As such, the studies posit linear relationships between am bient PM and health risk without specifying threshold PM concentrations at which effects occur. Nonetheless, the

baseline PM levels in these st udies, when noted, are below the average ambient concentrations found by Johnson (2006). Therefore, the fi ndings strongly suggest that ambient PM

concentrations around OWBs increase the likeli hood of a variety of health conditions.

A much more comprehensive review of the ep idemiological literature associated with PM

can be found in the crit eria document produced by EPA in s upport of the National Ambient Air Quality Standard for PM (EPA, 2004). In th is document, EPA concludes that “there is substantial strength in the epidemiological evidence for association between PM 10 and PM 2.5 and mortality...” Likewise, EPA notes that “all asso ciations with hospitalization for cardiovascular and respiratory diseases are positive and many are statistically significant.”

The potential for adverse health impacts from OWB PM emissions also is supported by enforcement investigations performed by the Ai r Pollution Control Division of Vermont ANR. As described in more detail below, residents neighboring OWBs have fi led numerous complaints about OWB smoke. In one instance, a complainan t was treated in the emergency room for chest pains and difficulty breathing, symptoms consistent with PM exposure. In another instance, a complainant suffering from chronic asthma indicat ed that the smoke from the OWB exacerbates

the condition.August 20065-4Exhibit 5-2RECENT STUDIES OFPARTICULATE MATTERHEALTH EFFECTSHealth Effect Study FindingsPeters et al., 2001 Found moderately elevated PM levels (one-hour average of 12.1 ug/m3) to be associated with anelevated risk of acute MI.Zanobetti and Schwarz, 2005 Founda 0.65% increased risk of hospitalization for MI per 10 ug/m3increase in ambient PM.Lippmann et al., 2000 Estimated a 9.1% increase in the risk of heart failure per 25 ug/m3increment of PM2.5, focusing onindividuals 65+ years of age.Hospitalization forCardiovascularSymptoms (e.g.,congestive heartfailure, myocardialinfarction)Linn et al., 2000 Measured percent increase in hospitalizationfor cardiovascular diseases in individuals over 30 yearsold. Found a 3.04% increase in MI hospitalization and a 2.02% increase in CHF hospitalization foreach 50 ug/m3increment in PM10.Samet et al., 2000 Estimated excess risk of hospital admissions for respiratory conditions in elderly (65+); per 50 ug/m3PM10increment, found 7.4% increasefor chronic obstructive pulmonary disease (COPD) and 8.1%increase for pneumonia (no lag in modeling).Respiratory HospitalAdmissionsMoolgavkar et al., 2000 Estimated excess risk of hospital admissions for COPD; per 25 ug/m3increment of PM2.5, found 6.4 %risk increase.Murakami and Ono, 2006 Found increased incidence of MI-relateddeaths for individuals exposed to one-hour PM levels in therange of 100-149 ug/m3.Samet et al., 2000 Estimated excess death rate per 10 ug/m3of PM10to be about 0.5% in elderly population (>65 years).Excess death rate highest in Northeast U.S., with an increase of 4.6% per 50 ug/m3PM10increment.Dominici et al., 2000 Estimated total percent change in excess deaths due to PM exposure in major U.S. cities; found 1.8%increase per 50 ug/m3PM10increment overall, with results varying by city.Premature MortalityOstro et al., 2003 Found a 10.2% increase in excess cardio deaths per 25 ug/m3increment of PM2.5.Delfino et al., 2002 Reportedsame-day associations between PM10levels and children’s asthma episodes; effects occurredat one-hour maximum concentrations of 38 ug/m3.Mar et al., 2005 Reported association between hourly exposures to PM2.5and exhalation of amarker of airwayinflammation/injury in children with asthma; effects occurred at one-hour averaged concentrations of8.3 ug/m3(at three-hour lag).Asthma (no hospitaladmission)Mortimer et al., 2002 Established association between ambient PM10concentrations and symptoms in asthmatic children inurban areas with average PM concentrations of 53 ug/m3.Schwartz and Neas, 2000 PM2.5found to be significantly correlated with coughing and lower respiratory symptoms in nonasthmatic elementary school children.MiscellaneousSymptomsZhang et al., 2000 Runny nose symptoms in adult women found to be correlated with levels of PM.August 2006

5-5 Adverse Health Effects of Other Wood Smoke Pollutants

Although much of the economic benefits disc ussion in this report focuses on particulate matter, wood smoke contains a vari ety of other pollutants. Sin ce adherence to the proposed PM standard may reduce emissions of these pollutant s, a variety of other health risks may be reduced. The following pollutants are most relevant:

• Carbon Monoxide : Carbon monoxide (CO) is released when any carbonbased fuel is burned. In halation of CO reduces th e ability of the blood to carry oxygen, causing effects ranging from chest pain to death (Schreiber, 2005).

• Polycyclic Aromatic Hydrocarbons : PAHs are formed through the incomplete combustion of coal, gas, wood and other organic fuels and typically adhere to partic ulates in emissions. More than 100 PAHs exist, and generally occur as mixtures rath er than single compounds. Several PAHs emitted from wood burning (e.g., benzo(a)pyrene) are suspected carcinogens and laboratory experiment s have linked some PAHs with reproductive effects and birt h defects (ATSDR, 1995).

• Dioxins : Dioxins are a group of several hundred complex compounds produced during combustion. Workpl ace and laboratory studies provide evidence linking dioxin exposure and cancer . There is also some evidence linking dioxin to reproductive and developmental effects (Dioxin IWG, 2004).

• Irritants : Irritant chemicals in wood sm oke include phenols, aldehydes, quinones, nitrogen oxides, and sulphur oxides. These compounds may exacerbate PM inhalation by interferi ng with the cilia and disrupting mucus flow. Exposure can lead to sw elling of the lung tissue and cause allergic reactions (Washington Stat e Department of Ecology, 2004).

ECONOMIC BENEFITS OF REDUCED PM EXPOSURES

To the extent that the proposed OWB emissi on standard reduces adve rse health outcomes associated with PM exposure, economic benefits will be realized. Economists typically frame these economic benefits in two distinct ways:

• Cost of Illness : The cost-of-illness (COI) approach values health outcomes according to the direct cost of evaluation and treatment, medicine, and extended hospital care. Some studies also include the valueAugust 2006

5-6 of lost wages or productivity that accrue when the individual is incapacitated. The data for such studi es typically come from hospital or

insurance records.

• Willingness to Pay : Willingness to pay (WTP) focuses on the individual’s assessment of what they would pay to av oid the health eff ect in question. Economists typically estimate WTP fi gures through a vari ety of stated preference methods that elicit info rmation through surveys of relevant populations. While costly, economist s generally prefer these methods because they allow measurement of direct costs as well as subjective assessment of discomfort, pain, anxiet y, and other forms of suffering that may accompany illnesses.

Exhibit 5-3 presents fi ndings from studies assessing the economic cost of the PM-related health impacts reviewed above. 15 In many cases, the study cited is itself a survey of existing literature; hence, numerous indivi dual estimates exist beyond those cite d in this table. As shown, the values for each health effect category ra nge widely, depending upon the methods used, the specific health endpoint va lued, and other factors.

The value cited for premature mortality warrants specific discussion. Based on an extensive literature review, the U.S. EPA estimate d an average value of st atistical life (VSL) of $5.5 million with a confidence interval of plus or minus $2.3 million (in 2000 dollars). The source studies derive willingness to pay in two ways. First, some used the contingent valuation method, directly surveying individuals on their WT P for mortality risk re ductions. Other studies

estimated the value of risk reductions based on wo rkers’ willingness to ac cept riskier jobs in return for higher wages. The resulting VSL estimates have been applied in a variety of regulatory contexts (s ee Dockins et al., 2004).

The per-case estimates of the value of h ealth impacts suggest that the OWB emission standard may deliver significant economic benef its. However, development of a statewide benefit estimate is complex. Such an analysis would require estimation of the number of health

incidents avoided as a result of the proposed rule. This populati on risk analysis would in turn require detailed data such as the following:

15 Unless otherwise noted, the analysis uses the Gross Domestic Product Implicit Price Deflator to convert all figures

to 2005 dollars.August 20065-7Exhibit 5-3ECONOMIC VALUE OF PREVENTING PARTICULATE MATTER HEALTH EFFECTSEconomic Value Estimate*Health Effect StudyCost-of-Illness Willingness to PayNotesChestnut et al., 2006 $22,000-$39,000 $2,400 Study examined both respiratory and cardiovascularhospitalizations. WTP to prevent a five-day hospitalization.Russell et al., 1998 $24,662 Direct medical costs over five-yearperiod following non-fatal MI.Hospitalization forCardiovascularSymptoms (e.g.,congestive heartfailure, myocardialinfarction)EPA, 2004a $72,865-$158,000 Average of Russell et al. (1998) and other studies reflects directmedical costs and lost earnings in five-year period following nonfatal MI. Range reflects variation by age group and discount rateapplied.Chestnut et al., 2006 $22,000-$39,000 $2,400 Study examined both respiratory and cardiovascularhospitalizations. WTP to prevent a five-day hospitalization.EPA, 2004a $13,875 Direct medical costs and lost earnings for chronic obstructivepulmonary disease.EPA, 2004a $16,470 Direct medical costs and lost earnings for pneumonia.Respiratory HospitalAdmissionsSaint et al. asreviewed in Halpernet al., 2003$6,623 Hospitalizationcost for acute exacerbation of chronic bronchitis.Premature Mortality EPA, 2004a $5.5 million Average figure with confidence interval of plus or minus $2.3million; based on multiple studies applying survey-based and risktradeoff methodologies.EPA, 2004a $320 $47 COI reflects direct medical cost for emergency room visit. WTPreflects mean estimate of several studies valuing avoidance of a“bad asthma day.”Asthma (no hospitaladmission)EPA Cost of IllnessHandbook$185 Cost of office visit for treatment of acute asthma attack.EPA, 2004a $18-$28 WTP to avoid upper and lower respiratory symptoms.Berger et al., 1987 $7 $145 Average figures across range of symptoms, including cough,congestion, headache, itchyeyes, and drowsiness.MiscellaneousSymptomsEPA Cost of IllnessHandbook$97-294 Direct medical costs for eye irritation (lower bound) and sorethroat (upper bound), assuming office visit and medication.Figures reflect average of multiple sources.* The analysis uses the Gross Domestic Product Implicit Price Deflator (as reported in the 2006Economic Report of the President) to convert all figures to 2005dollars.August 2006

5-8 • the baseline number of OWBs that woul d be installed in Vermont absent the regulation;

• the proximity of receptors around these units; and

• the prevalence of pre-existing hea lth conditions (e.g., asthma) in the receptor population.

The analysis would also require effects threshol ds for the health endpoints; epidemiological evidence is mixed regarding the ex istence of such thresholds (EPA, 2004). For all these reasons, an aggregate benefits estimate is not feas ible within the scope of this EIS.

As a proxy for a population risk/b enefits analysis, it is useful to consider the benefits required to exceed the estimated costs of the proposed emission standard. Manufacturer costs are highly uncertain given the diverse options ava ilable to manufacturers, i.e., some are already producing compliant units, some may abandon th e Vermont market, and some may redesign their units. For the purposes of estimating costs, this illustration assumes that the cost of each unit sold in Vermont is increased by $2,00 0, yielding annual co sts of $284,000 ($2,000 multiplied by 142 units). Adding profit losses fo r retailers ($96,000 assumi ng a 10 percent profit margin) yields total annual costs of $380,000. Th e cost-of-illness figures vary widely, but the following changes in health outcomes would roughly equate to the estimated annual costs expected to be incurred by manufacturers and retailers:

• elimination of three to 15 cardiovascular hospitalizations;

• elimination of 10 to 50 respiratory hospitalizations; or

• a seven percent decrease in the risk of premature mortality for an individual.

The potential for realizing th ese changes would increase ove r time as a larger number of compliant OWBs are put in operation.

NUISANCE EFFECTS OF OWB SMOKE

Staff in the Air Pollution Control Divi sion (APCD) of Verm ont DEC receive and investigate complaints on air pollution sources such as OWBs. APCD provided a listing and description of OWB-related comp laints received since March 2004. As summarized in Exhibit 5-4, 20 complaints have been received in the last two and one-half years. In some instances, multiple neighbors will file complaints about th e same OWB (as shown by the Number of OWBs figure), but most complaints a pply to unique units. The compla ints are distributed throughout the year, consistent with the year-round operation of OWB units.August 2006

5-9 Exhibit 5-4

SUMMARY OF COMPLAINTS RECEIVED ON OWB SMOKE Year Number of Complaints Number of OWBs

2004 7 4

2005 10 10

2006* 3 3

* Partial data through April, 2006. Source: Vermont Agency of Natural Resources, Department of Environmental Conservation, Air Pollution Control Division.

While some of the complainants mentione d specific health effects (e.g., difficulty breathing), most of the complaints focus on the aesthetic impacts or inconveniences of living near the OWB. For instance, several complaints focus on the smell of smoke and concerns that the OWB owner may be burning materials other th an cordwood. Complainants also mention the appearance of the smoke (e .g., color, thickness) and impacts on local viewsheds.

While the economic implications of PM -related nuisance impacts are difficult to characterize, economists have developed methods for certain categories of non-health impacts:

• Soiling and Materials Damage : Particle pollution may contribute to the soiling of painted surfaces and other building exteriors. Such soiling generally requires cleaning, an intrin sic economic cost of the pollution.

• Visibility : Airborne particles can degrad e visibility by scattering and absorbing light. Studies have demonstr ated the public’s willingness to pay for visibility improvement or c onservation (Chestnut and Rowe, 1990).

• Effects on Vegetation : Ecologists believe that PM deposition may indirectly contribute to inputs of compounds associated with negative ecological conditions such as in creased nitrogen deposition and acidification. These changes may have large-scale economic implications for resource-based commercial enterp rises (e.g., agriculture and forestry) as well as non-market, recreational enj oyment of natural resources such as

forests.

These impacts generally are associated with long-term, regional changes in ambient PM concentrations. For example, considered indi vidually, or even collectively, OWBs in Vermont probably will not influence regional PM concen trations at a level that produces vegetation effects. However, it may be possible for OWBs to contribute to local soiling or visibility impacts.August 2006

5-10 A more tangible and location-specific reflection of nuisance impacts may be found in housing markets. Property valua tion studies typically assess how proximity to various amenities (e.g., a bathing beach) or disamenities (e.g., a municipal landfill) influence the amount individuals are willing to pay fo r real property. It is well understood that a house will sell for more or less depending on the attrib utes of the area in which it is located. However, the degree to which amenities and disamenities affect prices is highly variable and is the subject of

extensive research.

Many property value studies have examined the effect of environmental factors such as air quality or water quality on house value. Specifically, severa l studies have examined how particulate matter concentrations can influence home values. The statistical models in these studies have consistently shown a negative rela tionship between particul ate concentrations and house price, relationships that are statistically significan t in most cases (Kiel, 2006). While such studies demonstrate the potential for OWBs to affect the value of neighboring residences, they are regional in nature, i.e., none of the resear ch specifically addresses the impact of small, stationary air pollution s ources such as OWBs on a single residence.

Anecdotal evidence suggests that OWB emis sions may affect the market value of residential properties. In an ongoing APCD inve stigation, a complainant sold their home and moved out at a financial loss, allegedly the result of smoke impacts from an OWB at a neighboring residence. Since it is part of an ongoing enforcement investigation, details of the complaint are confidential.

To the extent that the value of a residen ce was negatively aff ected by OWB emissions, the property value impact would be a market manifestation of the various benefit categories discussed above. That is, the market value of th e residence would be decreased because of the real or perceived health risks associated with the emissions, as well as aesthetic concerns. Consequently, it is redundant to consider the property value impact s in addition to other benefits (e.g., health care costs and willingn ess to pay to avoid health e ffects) when analyzing economic welfare impacts. However, from the standpoint of regional economic implications, property value impacts and associated effects on property tax collections may be legitimate concerns.August 2006

6-1 IMPACTS ON GOVERNMENT ENTITIES CHAPTER 6

______________________________________________________________________________

Vermont’s law regarding the a doption of administrative rule s requires consideration of costs and benefits accruing to “government entit ies” (see 3 V.S.A. § 838(c)(1)). This chapter briefly discusses impacts on the Vermont ANR, as well as on state and local health officials and municipalities. Given the modest commercial economic impacts di scussed in previous chapters, the proposed regulations would have a negligible effect on economic development and social welfare agencies.

IMPACTS ON AGENCY OF NATURAL RESOURCES

The Agency of Natural Resources would likel y realize two offsetting impacts as a result

of the OWB emissions controls. First, APCD staff and the ANR Enforcement Division would be responsible for enforcing the regulations. The proposed rule places th e primary administrative burden on OWB manufacturers; they are expected to test their products and demonstrate compliance as a precondition to selling units in Vermont. As such, the ANR enforcement responsibilities would be limited to ensuring the legitimacy of the emission testing procedures and possibly notifying retailers of changes in th e list of approved OWB manufacturers and units. As noted, the retail system for OWBs is diverse and includes ha rdware stores, HVAC contractors, and individual agents working under ag reement to manufacturers. At the very least,

ANR would need to inform retailers of the rules and advise them to request emissions

certification from manufacturers befo re selling a particular OWB unit.

These enforcement costs would be at least partially offset by reduced investigative burden on APCD staff. Currently, APCD sta ff field complaints from OWB neighbors and concerned citizens, visit OWB locations to verify that installations meet the requirements of existing regulations (at § 5-204) , and mediate disputes between OWB owners and neighbors. The proposed regulations would likely reduce or elim inate the need for thes e activities, a direct

benefit to ANR.

IMPACTS ON HEALTH OFFICI ALS AND MUNICIPALITIES

The proposed regulations would likely bene fit state and local he alth officials and municipalities. Most notably, local health officers and zoning officials sometimes field complaints about OWBs. They and other m unicipal decision makers (e.g., selectboards,August 2006

6-2 planning commissions, etc.) ar e beginning to develop local ordinances governing OWB design/location and possibly OWB bans. As noted, local ordinances are becoming more common nationwide, although in Vermont only one town (Salisbury) is currently developing a local ordinance. The proposed ANR regulations could save significant local resources to the extent that they preclude the need for municipa l ordinances. For example, emissions controls may eliminate the future need to develop re gulatory language, obtain proper legal review, educate selectboards and other decision-makers, debate ordinances at public meetings, and enforce the resulting rules.

Second, the public health benefits of the ru le (see Chapter 5) ma y reduce the burden on programs operated by the Vermont Department of Health (within the Agency of Human Services). For instance, collaboration with and assistance to local health officials on handling of citizen complaints and drafting of ordinances could be reduced.August 2006

7-1 INTEGRATION AND SUMMARY CHAPTER 7

______________________________________________________________________________

This chapter summarizes findings for all of the affected entities to formulate broad

conclusions about the economic im pact of the proposed OWB regula tions. Subsequent sections also consider these impacts relative to those of the other regulatory options introduced in Chapter 1 and characterize potential impacts on small businesses.

SUMMARY OF FINDINGS

Exhibit 7-1 summarizes the key research fi ndings for each of the entities potentially affected by the proposed OWB emi ssion standard. As shown, the st andards are likely to have minor effects on the commercial economy in Vermont . First, only one very small manufacturer

exists in Vermont. While ANR intends to work closely with this business to minimize impacts (e.g., by allowing out-of-state sales), the operati on employs only one to three individuals. Second, the retail network for OWBs includes few businesses whose viability depends on OWB

sales. Current OWB sales are spread across a diverse set of ha rdware stores, HVAC contractors, direct-from-manufacturer operations , and individual sales agents.

The OWB manufacturing sector may under go significant changes in coming years, although the proposed emission standard in Vermont would play only a partial role in producing these changes. As more states and municipa lities introduce regulations , residential OWBs may become more expensive as a result of redesign costs associated with meeting emission standards. This change may limit the market to larger commer cial and agricultural applications, leading to a

contraction in the number of OWB manufacturers.

Potential OWB buyers would rea lize little (if any) loss in economic welf are as a result of the emission standard. Although the standards could necessitate costly redesign of some OWB models, the impact on consumers would be mitiga ted by: (1) the existence of some OWB models that already satisfy the emission limit; and (2) the availability of many other residential heating options. Indeed, comparative analysis suggests that OWBs currently ar e among the more costly residential heating options available to consumer s due to their generally lower efficiencies and higher capital costs.August 2006

7-2 Exhibit 7-1

SUMMARY OF ECONOMIC IMPACTS Affected Entity Impact Description Impact Summary

OWB

Manufacturers • 28 manufacturers; one small operation in Vermont.

• Generally high emissions from OWBs, although units with modern design features capable of meeting proposed standards.

• For manufacturers not meeting sta ndards, options include ceasing sales in VT and redesigning units. Redesign would significantly increase production costs and these cost increases would be difficult

to pass on to consumers.

• Increasing regulation (in VT and elsewhere) may produce market consolidation favoring larger firms and manufacturers of units already meeting standards. Negative impact (minor in Vermont)

Prospective

OWB Owners • Analysis suggests that OWBs are currently among the least costeffective heating options, largely du e to lower efficiencies and high capital costs. Therefor e, potential increased OWB prices associated with emission regulation would not eliminate a cost-effective heating option for the typical residential consumer.

• Demand elasticity for OWBs is high due to diversity of readily available substitutes (oil, gas, wood stove). Hence, increased OWB costs will likely lead consumers to select other heating options, producing limited consumer surplus losses. Minor impact (direction unclear)

OWB Retailers • OWBs sold through diverse distribution network (individual agents, hardware stores, HVAC contractors, direct sales).

• Worst-case sales revenue loss of approximately $958,000. Producer surplus (i.e., profit) losses range from $48,000 to $144,000 annually, based on rough estimates of retailer markup.

• Nature of distribution system implies that impacts would be diffuse and would not eliminate large number of jobs.

• Small dealers specializing in sales of non-compliant units would be

hardest hit. Minor negative impact

Residents Neighboring

OWBs • Ambient monitoring data near OWBs are sparse. Available data suggest average PM 2.5 concentrations of 130-133 ug/m 3 , well above the existing 24-hour ambient NAAQS standard.

• Epidemiological studies clearly establish relationship between PM exposure and several health endpoints, including cardiovascular hospital admissions; respiratory hospital admissions; premature mortality; aggravated asthma; and miscellaneous respiratory

symptoms.

• Economic cost of relevant health endpoints can be based on selfassessment (willingness to pay to avoid health effect) or on direct medical cost of illness. Economic literature offers widely varying

estimates.

• Data do not allow population risk assessment necessary to value aggregate health benef its; however, even limited avoidance of health impacts would likely outweigh regulatory costs. Positive impact

Government

Entities • ANR enforcement costs at least pa rtially offset by reduction in current investigation and mediation costs borne by APCD.

• Avoid future costs of developing and implementing municipal ordinances to regulate OWBs. Neutral impactAugust 2006

7-3 The proposed standard offers potential be nefits to individuals neighboring OWBs. Ambient monitoring data are limite d, but suggest the potential for particulate matter exposures well beyond regulatory levels of concern. While no established threshol d levels exist, an extensive body of epidemiological literature link s the observed ambient PM concentrations with increased risk of respiratory and cardiovascular outcomes, as well as elevated mortality risks. A variety of studies have characte rized the economic cost of these health effects, applying both cost-of-illness as well as willingness-to-pay me thodologies. Development of aggregate health impacts would require data that are not readily availa ble. However, the magnitude of economic costs associated with the key health endpoints implies that only a limited number of avoided cases would be necessary for the health benefits of the rule to exceed the costs to manufacturers

and retailers.

Finally, the proposed standards would like ly have a neutral impact on government agencies. ANR may realize some modest enfo rcement costs for oversight of manufacturer emissions certification. However, these costs would likely be offset by reduced handling of complaints from OWB neighbors as well as redu ced burden on state and municipal health officials who might otherwise formulate local OWB ordinances in the future.

IMPACTS OF OTHER ALTERNATIVES

The other regulatory alternatives intr oduced in Chapter 1 would likely involve unacceptable costs or administrative obstacles:

• No Action : The no-action alternative woul d allow high emissions of PM and other pollutants in future OWB units . The result would likely be more widespread risk of the respirator y and cardiovascular health outcomes identified in Chapter 5 and growth in the accompanying health care costs. Other impacts would include increased exposure to non-PM wood smoke pollutants, increased complaints from OWB neighbors, and continued investigation and mediation responsibilities for APCD.

• Interim OWB Ban : Another alternative involves prohibiting the sale of OWBs in Vermont until the U.S. Environmental Protection Agency has developed nationwide re gulatory standards for OWBs. EPA has no immediate plan to regulate OWBs, so the ban would be open-ended and potentially lengthy. While OWB nei ghbors would realize future health benefits, the ban would unfairly impact manufacturers who have chosen to test emissions and implement low-emission designs, as well as retailers who wish to carry these units.

• OWB User Compliance : This alternative would shift the emissionstesting burden onto OWB purchasers, rather than manufacturers. This approach would theoretically yield the same health benefits as realizedAugust 2006

7-4 under the proposed approach. Howe ver, consumers would pay for a portion of the cost in crease associated with producing low-emission

OWBs and would incur the cost of the em ission testing. This approach would be highly inefficient since it would involve individual testing of

each OWB rather than centralized cer tification of OWB models through manufacturer testing. The approa ch could also produce a significant enforcement burden, with ANR staff reviewing a large number of individual emission tests. Over time, it is likely that the user compliance approach would approximate a ba n on OWBs, as consumers shun the uncertainty of purchasing and testi ng an OWB unit in favor of more established heating options.

SMALL BUSINESS IMPACTS

Impact Description

Many of the commercial economic entities affected by the proposed emission standard

are small businesses under Vermont size standa rds. Vermont has a blanket small business definition of 20 or fewer full-time employees (s ee 3 VSA § 801). By this standard, some OWB

manufacturers are small businesses while others are not. For instance, the single Vermont manufacturer certainly satisfies this definition. However, th e major manufacturers who account for the majority of OWB sales (e.g., Central Boiler) are not small businesses under the Vermont definition. As discussed, the reta il sector comprises a diverse set of entities. In Vermont, most (if not all) of these operations are likely to be small businesses under the 3 VSA § 801 definition. Since the majority, if not all, Vermont businesses impacted by the rule are small businesses, it is not possible to have separate re quirements for small business.

Exhibit 7-2 summarizes the impacts that the proposed alternative and other alternatives would have on small businesses. Focusing on ly on Vermont small businesses, the proposed standards likely pose the least cost. Under th e proposed rule, Vermont retailers would be allowed to continue selling compliant OWB units in the future; in contrast, the ban would

eliminate these sales for an indeterminate tim e and the user-based compliance option could eventually undermine the market for OWBs a nd eliminate all sales. The one Vermont manufacturer typifies the t ype of OWB maker that may fi nd it difficult to compete when

emission controls are introduced. This small operation may not have the capital to pursue redesign of its units and would likel y be forced out of business.

Nationwide, the proposed rule’s small busines ses impacts are difficult to separate from baseline regulatory and market f actors. On one level, the propos ed regulations can be seen as forcing costly redesign, a direct cost to manu facturers with non-compliant units. However, as noted, a growing number of stat es and municipalities are e xploring regulatory options for addressing OWB emissions. Furthermore, as low-emission (and higher priced) OWB models become more attractive, OWBs ma y be eliminated as a cost-eff ective residential heating option,August 2006

7-5 leading to a consolidation in the manufactur ing sector. All of these changes may occur regardless of Vermont’s regulatory actions.

Flexibility Statement

Most, if not all, Vermont OWB retailers and de alers are small businesses, as defined in 3 VSA 801, as is the one Vermont OWB manufactur er. The Agency of Natural Resources has attempted to reduce the dealers' cost of complia nce with this rule by placing the burden of demonstrating compliance on OWB manufacturers, including the costs of reporting and dealer notification. The Agency expect s manufacturers to take the l ead in redesigning (if necessary) and testing their units to demonstrate complian ce. The Agency has attempted to reduce the compliance burden on the one Verm ont manufacturer by allowing it to continue to sell noncompliant units for installation outside Vermont. In 1997, the Agency adopted another rule regulating the siting and stack he ights for new OWBs. That rule had a smaller economic impact on dealers and on the one Vermont manufacturer, who could continue their sales of existing OWBs. However, the 1997 rule was not effectiv e in preventing conti nuing complaints about smoke and odors from OWBs, nor in significantly re ducing the risks to health and welfare caused by such units. Therefore, mainta ining only the 1997 re quirements would be unacceptable, since this would allow continued ri sk to public health and welfare relative to conditions achieved under the proposed rule. Moreover, this approach would significantly reduce the effectiveness of the rule in achieving the purposes of Vermont’s Air Pollution Control

Act.August 20067-6Exhibit 7-2SMALL BUSINESS IMPACTS OFREGULATORY ALTERNATIVESNumber of Small BusinessesImpacts of AlternativesSectorIn Vermont Out-of-State Proposed EmissionLimit Interim OWB Ban OWB User ComplianceOWBManufacturing1•Unknown portion of27 manufacturerswould meet Vermontsmall business sizestandard•Current producers of compliantunits would incur no costs•Producers of non-compliantunits would incur either: (1)costs of redesigning andemissions testing; or (2) loss ofall VT sales•Many of these costs ongoingand independent of proposedrule•All sales in VTeliminated forindeterminate time•No immediateimpact•Likely eventualimpact ofeliminating sales inVTOWB Retail•17 part-timedealers•Unknownnumber ofadditional dealers(e.g., HVACcontractors,hardware stores)Unknown•Some manufacturers mayabandon VT market; retailerprofit losses spread across largenumber of VT establishments•Sales of compliant modelscould continue•Small, part-time OWB dealershardest hit•Eliminate all salesand retailer profits forindeterminate time•Eventually eliminateall sales and retailerprofits as consumersshun cost anduncertainty ofemissions testingAugust 2006

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