EC/R Incorporated Providing Environmental Technical Support Since 1989

MEMORANDUM

TO: Docket EPA-HQ-OAR-2009-0734

FROM: Jill Mozier, EC/R Inc.

DATE: March 31, 2014

SUBJECT: Notes from the Cost, Emissions, and Cost Effectiveness presentation by EPA regarding 

the Proposed Wood Heater NSPS, requested and hosted by the Northeast States for 

Coordinated Air Use Management (NESCAUM) on March 28, 2014, with Gil Wood and 

Larry Sorrels as presenters

The Northeast States for Coordinated Air Use Management (NESCAUM) requested that EPA clarify the 

cost, emission, and cost effectiveness estimates underlying the proposed NSPS (available in the docket). 

The slides presented during this call-in webinar meeting are attachments to this memo. The questions 

and answers discussed during the call are summarized below.

• Question/Comment: Regarding EPA’s emission estimates, Lisa Rector noted that NESCAUM 

noticed the Residential Wood Combustion (RWC) tool uses the same amount of wood in wood 

stoves as in outdoor wood boilers (OWB) for some northern New York counties. This means that 

the tool underestimates the amount of wood burned for at least hydronic heaters in some 

counties. 

Answer: Gil Wood answered that he would look into this concern with Roy Huntley, EPA’s lead 

on the RWC tool.

• Question/Comment: Regarding EPA’s appliance emission estimates, Lisa Rector of NESCAUM 

noted that the current Energy Information Administration (EIA) data for wood usage is almost 

double what the RWC tool estimates. This is therefore another area where EPA may have 

underestimated emissions from residential wood burning.

Answer: Gil Wood noted that this EIA data is more recent than the emission estimates, but that 

EPA is aware of this more recent data. The presentation slides do note that such increases in 

estimated emissions will increase EPA’s emission reduction estimates, decrease the cost of R&D 

per appliance, and also decrease the $/ton (improve the cost effectiveness).

• Question: Rod Tinnemore of Washington State DEC asked if the analysis parsed-out the number 

of models that differ only cosmetically rather than internally/substantively.

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Answer: Gil Wood answered that no, the analysis did not include such parsing. The model numbers are 

based on industry data and discussions and represent the total number of models – so all models are 

included in the tallies, whether they differ merely cosmetically or more substantively. Gil further noted 

that the analysis did not take into account any model consolidation that may occur, and so the number of 

models assumed to undergo R&D costs in the cost effectiveness analysis may be high. Any reduction in 

the number of models will cause the manufacturer cost estimates to be lower than what EPA estimated 

and the cost effectiveness of any emission reductions to thereby improve.

Note: Rod Tinnemore later noted that the Office of Enforcement and Compliance Assurance (OECA) 

should have a list of models that have the same internal working parts with merely external cosmetic 

differences. He estimated that such a list would show that 15% to 20% of models differ only 

cosmetically. This would lower EPA’s estimated R&D costs because fewer models than EPA estimated 

would require R&D.

• Question: Rod Tinnemore asked if EPA took into consideration more recent data from Tom Morrissey 

regarding wood stove R&D costs.

Answer: Gil Wood responded that no, the Morrissey wood stove R&D costs were provided after the cost 

effectiveness analysis was completed.

Note: Morrissey’s R&D costs were considerably less than the cost estimates used by EPA for the cost 

effectiveness analysis (and using such lower costs would decrease the cost per ton of particulate 

reduced, thereby improving the cost effectiveness for wood stoves.)

• Question: Rod Tinnemore noted that the [$80,000] salary figure used by EPA in estimating R&D labor 

costs seemed high.

Answer: Gil Wood noted that this was the estimate provided by industry and also the estimate noted in 

a Hearth & Home article. Lisa Rector added that the salary number probably includes benefits (e.g., 

health insurance), overhead and other costs to the employer.

• Question: Lisa Rector and others asked EPA to clarify regarding the very low $160/ton cumulative cost 

effectiveness bottom line estimate for hydronic heaters.

Answer: Gil Wood explained that this low figure resulted from using a more realistic lifespan for the 

appliances (a 20-year model lifespan plus a 20-year emitting lifespan in consumer homes). Gil explained 

that this was the approach used by the Office of Transportation and Air Quality (OTAQ) when that 

office estimated cost reductions over the life of consumer products such as leaf blowers and lawn 

mowers. Gil further noted that in comparison HPBA’s economic contractor, NERA, did not use the 

appliance lifespan in its cost effectiveness analysis for residential wood heaters.

• Question: NESCAUM asked what the $/ton PM2.5 cost effectiveness numbers are for recent rules – e.g., 

are they higher than the $/ton estimated for residential wood heaters? NESCAUM noted that the bottomline $/ton are very low and that even the annual $/ton “snapshots” are low [for hydronic heaters].

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Answer: Larry Sorrels answered that other rules (principally standards on industrial facilities) tend to 

look at the impacts in the 5th year or similar year, rather than cumulative emission reductions over the 

lifespan of a source. Such analyses therefore tend to have a higher $/ton than estimated for residential 

wood heaters, which used cumulative emission reductions over the lifespan of the source/appliance. Gil 

further commented that while these wood heater NSPS cost effectiveness numbers are relatively low, 

comments-to-date have included other issues such as potential cost increases in appliances and the 

potential impacts to small businesses. Gil also later commented that hydronic heaters have one of the 

lowest $/ton estimates because of the big emission reductions estimated for these appliances. Other 

appliances, such as wood stoves and pellet stoves, have somewhat higher $/ton estimates because lower 

emission reductions are estimated (since these are cleaner burning at baseline, relative to hydronic 

heaters).

• Question: NESCAUM asked Larry Sorrels to clarify what he meant when he said that 90% of 

residential wood heater companies had less than between 500 and 1,000 employees [and would therefore 

be classified as small businesses].

Answer: Larry Sorrels explained that each industry or type of associated business has different small 

business size definitions set by the Small Business Administration (SBA). For some types (e.g., wood 

stove manufacturers) the industry small business definition is that any business with 500 or fewer 

employees is considered a small business, while for other types of wood heater businesses the definition 

is that any business with 1,000 or fewer employees is considered a small business. Using these various 

definitions for all affected industries, 90% of residential wood heater businesses would be classified as 

small businesses across the various appliance types.

• Question: NESCAUM asked if the $115-$270 to $1 benefits to cost ratio [in the RIA] is very high 

relative to other rules.

Answer: Larry Sorrels answered that yes, it is a high benefit per ton estimate, although there are some 

categories [of emission sources] that have even higher benefit estimates.

• Question: Rod Tinnemore asked if there was a way to compare inflation-adjusted costs of the 1988 rule 

with this proposal – i.e., was any historic comparison done?

Answer: Larry Sorrels answered that no such comparison to the 1988 rule was done, that such a 

comparison would require too many extrapolations, due to the many years between the first rule and this 

proposal (i.e., extrapolating from the 1980’s to 2014 would not allow for an accurate or useful 

comparison).

• Question: Rod Tinnemore asked if the RIA also looked at costs and emission reductions over the 20-

year appliance life or if it reported only on the 5 years.

Answer: Larry Sorrels noted that the 20 year lifespan assumptions were also shown in the RIA. Larry 

further noted that Section 6 of the RIA includes a sensitivity analysis regarding changing the number of 

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years in the R&D cycle (e.g., from the 6 years used for the proposed rule calculations to 10 and 20 years, 

and also decreased to 4 years). The results of this sensitivity analysis show close-to-linear results. That 

is, extending the analysis out 20 years shows about 1/3 the impact (in terms of annual cost) compared to

6 years, and vice versa regarding shorter periods.

• Question: NESCAUM noted that an 8 to 10-year R&D cycle seems more typical. Six (6) years [in terms 

of the frequency or interval for beginning new R&D cycles for a new model] seems unrealistic [too 

frequent] and causes EPA’s cost estimates to be too high and represent a worst-case scenario.

Answer: Gil Wood clarified that EPA used a 6-year amortization period for R&D costs, not a 6-year 

model life assumption. Rather a 20-year model life assumption was used after the 6-year R&D 

amortization period.

• Question: NESCAUM noted that, at the public hearing, manufacturers were claiming they would have to 

bear the brunt of any increase in appliance cost, and wondered if the RIA looked at what increasing the 

costs (by for example) $100 would do. 

Answer: Larry Sorrels noted that this type of sensitivity analysis was not done, but it would be possible 

to do so. Larry noted that there is a difference between the cost to manufacture versus the retail price and 

that typically the increased retail price is 160% of the increased costs to the manufacturer. Gil further 

noted that EPA is receiving comments that the price of new hydronic heaters may potentially be more 

like $13,000 rather than $7,000 to $8,000, so EPA will need to look at a cost sensitivity analysis. Gil 

further noted that today’s cleaner models (at least for wood stoves) don’t necessarily cost more than less 

clean/lower efficiency models; the price at retail depends more on how the appliance looks than on its 

emission levels.

• Question: NESCAUM asked if any sensitivity analyses had been done on the cost to re-design [i.e., the 

R&D costs]. 

Answer: Gil Wood responded that while no formal analyses had been done, the results would be linear 

– so a ratio could be applied to the cost effectiveness numbers for such an analysis. A linear relationship 

also exists, essentially, for the benefits.

• No further questions were asked. Gil noted that all slides would be available in the docket for the 

general public and therefore NESCAUM had permission to share the presentation slides as they wished. 

All information presented is public information.

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