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### Page 1 of 6 Initial Regulatory Flexibility Analysis for Le ad; Clearance and Clearance Testing Requirements for the Renovation, Repair, and Painting Program; Proposed Rule

[Docket ID No.: 

### EPA–HQ–OPPT–2005

- 0049]

U.S. Environmental Protection Agency, Office of Pollution Prevention and Toxics January 2010

Pursuant to section 603 of the Regulatory Flexibility Act (RFA) (5 U.S.C. § 601 et seq.), EPA has prepared this initial regulatory flexibility analysis for the “Lead; Clearance and Clearance Testing Requirements for the Renovation, Repair , and Painting Program” proposed rule.

This rule addresses lead -based paint hazards created by renova tion, repair, and painting activities that disturb lead-based paint in target housing and ch ild-occupied facilities. “Target housing” is defined in TSCA § 401 as any housing constructed before 197 8, except housing for the elderly or persons with disabilities (unless any child under age 6 resides or is expected to reside in such housing) or any 0- bedroom dwelling. Under this rule, a child-occupied facility is a building, or a portion of a building, constructed prior to 1978 , visited regularly by the same child, under 6 years of age, on at least two different days within any week (Sunday through Saturd ay period), provided that each day’s visit lasts at least 3 hours and the combined weekly visits last at least 6 hours, and the combined annual visits last at least 60 hours. Child-occupied facilities may be located in public or commercial buildings or in target housing.

1. Need For the Rule

In the Federal Register issue of April 22, 2008, under the authority of sections 402(c)(3), 404, 406, and 407 of the Toxic Substances Control Act (T SCA), EPA issued its fina l renovation, repair, and painting (RRP) program rule. The final RRP rule, codified in 40 CFR part 745, subparts E, L, and Q, addresses lead-based paint hazards created by renova tion, repair, and paintin g activities that disturb painted surfaces in target housing and child-occupi ed facilities. The final RRP rule establishes requirements for training renovators, other renovation workers, and dust sampling technicians; for certifying renovators, dust sampling technicians, and renovation firms; for accrediting providers of renovation and dust sampling technician training; for renovation work practices; and for recordkeeping.

In this rulemaking, EPA is further revising th e TSCA § 402(c)(3) regulatory scheme to require dust wipe testing after many renovations covered by the RRP rule, and for a subset of these jobs to require the renovation firm to demonstrate, through dust wipe testing, that dust-lead levels remaining in the work area are below regulatory levels. The Agency believes it is in the best interest of the public to require dust wipe testing for many types of renovations (and to require renovation firms to achieve clearance for certain types of renovations). EPA expects two kinds of benefits to flow from the proposed dust wipe testing requirements. The first are the direct benefits of the information to the owners and occupants, the pure value of the information on dust lead levels remaining in the renovation work area. For buildingowners and occupants, this information is likely to improve their understanding and awareness of dustlead hazards. It will also greatly improve their ability to make further risk management decisions. This information is particularly critical where dust lead levels approach or exceed the regulatory hazard standards. The second benefit expected to be rea lized from the proposed dust wipe testing requirements stems from changed behavior on the part of renovation fi rms. EPA believes that dust wipe testing results will also provide valuable feedback to renova tion firms on how well they are cleaning up after renovations. It is likely that the specific dust lead levels contained in dust wipe testing results will increase renovation firm cleaning efficiency. Renovation fi rms will be incentivized to lower the dust lead levels remaining after renova tion jobs, even if the levels are at or near the regulatory standards. Because proper cleanup plays such a vital role in the minimi zation of dust lead hazards created by renovations, providing information on dust lead levels remaining after renovations to building owners and occupants*** Deliberative – Do Not Cite, Quote or Release During EO 12866 Review ***



### Page 2 of 6 will serve as an incentive for firms to perform pos t-renovation cleaning efficiently and thoroughly, reducing the amount of dust lead left behind after RRP.

The Agency concludes that the requirements of the proposed rule achieve the goal of minimizing exposure to lead-based paint hazards created during renovation, remodeling and painting activities, taking into account reliability, effectiveness, and safety.

2. Legal basis and objectives for the rule.

TSCA § 402(c)(2) directs EPA to study the extent to which persons engage d in renovation, repair, and painting activities are exposed to lead or create lead-based paint hazards regularly or occasionally. After concluding this study, TSCA § 402(c)(3) further directs EPA to revise its lead-based paint activities regulations under TSCA § 402(a) to apply to renovation or remodeling activities that create lead-based paint hazards. Because EPA’s study found that activities commonly performed during renovation and remodeling create lead-based paint hazards, EPA issued the final RRP rule in 2008. In issuing the final RRP rule, EPA revised the TSCA § 402(a) regulatory sch eme to apply to individuals and firms engaged in renovation, repair, and painting activities. In this proposed rulemaking, EPA is revising the TSCA § 402(c)(3) rule to require dust wipe testing after many renovations covered by the RRP rule, and for a subset of these jobs to require the renovation firm to demonstrate, through dust wipe testing, that dustlead levels remaining in the work area are below regulatory levels.

A central objective of this proposed rule is to provide greater assurance that dust-lead hazards created by renovations are adequately cleaned up, pr imarily by requiring renovation firms to provide building owners and occupants with information on du st lead levels remaining in the work area after many renovation projects, but also by requiring renova tion firms to demonstrate that they have achieved regulatory clearance levels after some of the dustiest renovations.

3. Description and Number of Small Entities to Which the Rule Will Apply

Small entities potentially affected by the rule may include, but are not limited to, entities in the following industries:

• Building construction (NAICS 236), e.g., si ngle family housing construction, multi-family housing construction, residential remodelers.

• Specialty trade contractors (NAICS 238), e.g., plumbing, heating, and air-conditioning contractors, painting and wall covering contractor s, electrical contractors, finish carpentry contractors, drywall and insulation contractors, siding contractors, tile and terrazzo contractors, glass and glazing contractors.

• Real estate (NAICS 531), e.g., lessors of resi dential buildings and dwellings, residential property

managers.

• Child day care services (NAICS 624410).

• Elementary and secondary schools (NAICS 611110) , e.g., elementary schools with kindergarten

classrooms.

This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities could also be affected.

In determining the number of small businesses aff ected by the rule, the Agency applied U.S.*** Deliberative – Do Not Cite, Quote or Release During EO 12866 Review ***



### Page 3 of 6 Economic Census data to the SBA’s definition of sm all business. However, applying the U.S. Economic Census data requires either under or overestimating the number of sma ll businesses affected by the rule. For example, for many construction establishments , the SBA defines small businesses as having revenues of less than $14 million. With respect to those est ablishments, the U.S. Economi c Census data groups all establishments with revenues of $10 million or more into one revenue bracket. On the one hand, using data for the entire industry would overestimate the nu mber of small businesses affected by the rule and would defeat the purpose of estimating impacts on small business. It would also underestimate the rule’s impact on small businesses because the impacts woul d be calculated using the revenues of large

businesses in addition to small businesses. On the othe r hand, applying the closest, albeit lower, revenue

bracket would underestimate the number of small businesse s affected by the rule while at the same time overestimating the impacts. Similar issues arose in estimating the fraction of property owners and managers that are small businesses. EPA has conc luded that a substantial number of small businesses will be affected by the rule. Consequently, EPA has chosen to be more conservative in estimating the cost impacts of the rule by using the closest, albe it lower, revenue bracket fo r which Census data is available. For other sectors (nonprofits operating day care centers or private schools), EPA assumed that all affected firms are small, which may overestimat e the number of small entities affected by the rule.

The vast majority of entities in the industries affected by this rule are small. EPA estimates that the proposed rule will affect an average of over 203,000 small entities per year.

4. Potential economic impacts on small entities.

EPA evaluated two factors in its analysis of the rule’s requirements on small entities, the number of firms that would experience the impact, and the si ze of the impact. Average annual compliance costs as a percentage of average annual revenues were used to assess the potential average impacts of the rule on small businesses and small governments. This ratio is a good measure of entities’ ability to afford the costs attributable to a regulatory requirement, becau se comparing compliance costs to revenues provides a reasonable indication of the magnitude of the regulat ory burden relative to a commonly available measure of economic activity. Where regulatory costs represent a small fraction of a typical entity’s revenues, the financial impacts of the regulation on such entities may be considered as not significant. For non-profit organizations, impacts were measured by comparing rule costs to annual expenditures. When expenditure

data were not available, however, revenue informa tion was used as a proxy for expenditures. It is appropriate to calculate the impact ratios using annualized costs, beca use these costs are more representative of the continuing costs entities face to comply with the rule. Impacts are calculated assuming that all of the costs are absorbed by the firm and none of them are passed on to customers.

The cost of the clearance and clearance testing requirements to a typical small entity could be $500 to $1,900 a year, depending on the industry sector , with an average of $1,200. This represents 0.4 percent to 1.1 percent of revenues depending on th e industry sector. Overall, as many as 203,000 small businesses could be affected by the proposed rule, with average impacts of up to 0.5 percent of revenues. In addition, approximately 100 small governments woul d incur costs of about 0.004 percent of revenues, and about 200 small non-profits are affected a year, with costs of 0.1 percent of revenues. Details of these estimates are provided in the economic analysis for the rulemaking (“Economic Analysis of the Proposed Dust Testing and Clearance Amendments to the TSCA Lead Renovation, Repair, and Painting Program for Target Housing and Child-Occupied Facilities”), wh ich is available in the docket for this rule.

Some of the small entities subject to the rule have employees while others are non-employers. The non-employers typically perform fewer jobs than firms with employees, and thus have lower work practice compliance costs. However, they also have lower average revenues than entities with employees, so their impacts (measured as costs divided by re venues) can be higher. Impact estimates for nonemployers should be interpreted with caution, as some non-employers may have issues related to understatement of income, which would tend to exaggera te the average impact ratio for this class of small*** Deliberative – Do Not Cite, Quote or Release During EO 12866 Review ***



### Page 4 of 6 entities. There are 151,000 non-employer renovation contr actors estimated to be affected by the proposed rule. The average cost to these contractors is estim ated to be about $700 apiece. This represents 0.7 percent to 2.6 percent of reported reve nues, depending on the industry sector.

5. Relevant Federal rules.

The requirements in this rulemaking will fit w ithin an existing framework of other Federal regulations that address lead-based paint. The Lead Disclosure Rule (40 CFR part 745, subpart F), which implements Section 1018 of the Residential Lead-b ased Paint Hazard Reduction Act of 1992, requires the disclosure of known lead-based paint and lead-based pa int hazards as well as general information on the subject to purchasers and tenants of target housing. Similarly, the Pre-Renovation Education Rule (40 CFR 745.85), which implements Section 406 of TSCA, requires renovators to distribute a lead hazard information pamphlet to owners and occupants before conducting a renovati on in target housing and child-occupied facilities. The proposed rule’s requireme nt that renovators provid e owners and occupants with a dust wipe testing report complements th ese existing information transfer and education requirements.

6. Projected Compliance Requirements, Classes of Small Entities Subject to the Compliance Requirements, and Professional Skills Needed to Comply

A. Projected Compliance Requirements

The proposed rule would require dust wipe testi ng after many renovations covered by the RRP rule. For a subset of jobs involving demolition or re moval of plaster through destructive means or the disturbance of paint using machines designed to re move paint through high-speed operation, such as power sanders or abrasive blasters, this proposal wo uld also require the renovation firm to demonstrate, through dust wipe testing, that dust-lead levels re maining in the work area are below regulatory levels.

B. Classes of Small Entities Subject to the Compliance Requirements

Small entities include small businesses, sma ll organizations, and small governmental jurisdictions. The small entities that are potentially directly regulated by this rule include: small businesses (including contractors and property owners and managers); sm all nonprofits (certain daycare centers and private schools); and sma ll governments (school districts).

C. Professional Skills Needed to Comply

Under the lead renovation, repair, and painti ng program requirements, renovators and dust sampling technicians working in target housing and ch ild-occupied facilities have to take courses to learn the proper techniques for accomplishing the tasks (including dust sampling, preparing a report with the results, and performing specialized cleaning) they will perform during renovations. These courses are intended to provide them with the information they would need to comply with the rule based on the skills they already have.*** Deliberative – Do Not Cite, Quote or Release During EO 12866 Review ***



### Page 5 of 6 7. Minimization of Economic Impacts on Small Entities Consistent with Statutory Objectives,

and Consideration of Alternatives

A. Small Business Advocacy Review Panel

EPA has been concerned with potential small entity impacts since the earliest stages of planning for the RRP program under § 402(c)(3) of TSCA. EPA conducted outreach to small entities and, pursuant

to § 609 of the RFA, convened a Small Business A dvocacy Review Panel in 1999 to obtain advice and recommendations of representatives of the regulated sma ll entities. EPA identified eight key elements of a potential renovation and remodeling regulation for the Pa nel’s consideration, including interior clearance, or procedures designed to ensure that work ar eas have been properly cleaned after renovations.

Four options for interior clearance requirement s were presented to the Panel: (1) Clearance through dust wipe testing after all renovations; (2) Clear ance through dust wipe testing after specific jobs involving large-scale surface preparation, demolition, or any work practice prohibited by the abatement rules, with clearance through visual inspection of the work area for all other jobs; (3) Clearance through visual inspection for all jobs; and (4) no clearan ce requirements. After reviewing the available information, including studies, the Panel could not conclude that a thorou gh professional clean-up or a visual inspection would be an adequate substitute fo r dust wipe testing. The Panel recommended that EPA take comment on various options for interior clearance, including the options presented to the Panel.

Of the eight small entity representatives (SERs) on the Panel, three SERs opposed and five SERs supported interior clearance through dust wipe testing. SERs that opposed dust wipe testing mentioned

the cost and time commitments involved, contractor liability, and the potential difficulty in achieving clearance standards. SERs that supported dust wipe testing thought that it was a reasonable regulatory approach and noted that the industry needs an objective way to evaluate whether a specific job is likely to generate a lead-dust hazard and an objective method for qualitatively evaluating dust clean-up techniques.

Throughout the development of the RRP program, EPA has made a concerted effort to keep the associated costs and burdens as low as possible, while still providing adequate protection against leadbased paint hazards created by renovation activities. EPA believes that given the highly-variable nature of the regulated community, the l ead-safe work practices required by this rule should be simple to understand and easy to use. EPA is very aware that this regulation will apply to a whole range of individuals from day laborers to property maintenance staff to master craftsmen performing a whole range of activities from simple drywall repair to window re placement to complete k itchen and bath renovations to building additions and everything in between. Lead -safe work practices that are easy and practical to use are more likely to be followed by all of the pe rsons who perform renovations, and, therefore, more likely to be reliable and effective in minimizi ng exposure to lead-based paint hazards created by renovation activities. In addition to the statutory f actors of reliability, safety, and effectiveness, these considerations included the compliance costs to be im posed by the rule, both in general and particularly

on small entities, and the benefits to be obtained.

With respect to clearance issues in the final RRP rule, EPA gave significant weight to the cost, timing, and liability concerns expressed by commenters. In balancing the various considerations in the proposed rule, EPA has preliminarily concluded that, fo r certain jobs, the additional benefits of dust wipe testing, and in some cases clearance, warrant impos ing these additional requirements. EPA acknowledges that the benefits of dust wipe testing identified in Section 1. above would appl y for most renovation jobs, but EPA is not proposing to require dust wipe testi ng after all renovation jobs covered by the RRP rule. In order to establish a program that is practical fo r all renovation activities and considerate of the burden imposed on small businesses, EPA has tried in the proposed rule to maintain some proportionality between the complexity and cost of the proposed requirements on one hand, and the size and cost of the*** Deliberative – Do Not Cite, Quote or Release During EO 12866 Review ***



### Page 6 of 6 renovation job on the other. Likewise, EPA is only pr oposing to require clearance after jobs that EPA has preliminarily determined to be am ong the dustiest of renovations.

Details on the Panel and its recommendations are prov ided in the Panel Report, which is included in the docket for this rulemaking. Additional information on how EPA implemented the Panel’s recommendations in the development of the RRP program is available in Unit VIII.C. of the preamble to the 2006 Proposal (71 FR 1588, January 10, 2006) and in Unit V.C. of the preamble to the 2008 Final Rule (73 FR 21692, April 22, 2008), which are also included in the docket for the rulemaking.

B. Alternatives considered

EPA considered alternatives to today’s proposed rule that could affect the economic impacts of

the rule on small entities. These alternatives would have applied to both small a nd large entities, but given the number of small entities in the affected industries, these alternatives would primarily affect small entities. Following is a brief description of signi ficant alternatives that would have minimized the impacts of the rule on small entities, incl uding EPA’s reasons for rejecting them.

i. Higher thresholds . EPA considered an option under which the size thresholds for determining whether renovation jobs would need to perform dust wi pe testing or achieve clearance would be higher than those in the proposed rule. By reducing the number of renovations where dust wipe testing or clearance are required, this option would reduce the co sts of the rule and thus the estimated small entity impacts. However, higher thresholds would result in more jobs where occupants do not have information on the dust lead levels they are exposed to, or where they are exposed to dust lead levels above the hazard standard. EPA believes that the proposed rule provides the best balance between the benefits of the rule (the value of information from dust wipe testing a nd the benefits of reduced exposure to lead dust from achieving clearance) compared to the costs (and resulti ng small business impacts) of dust wipe testing, recleaning, and the other requirements of the proposed rule. Therefore, EPA believes that an option with higher thresholds is not consistent with the stated objectives of the proposed rule.

ii. Dust Testing Only . EPA considered an option that would require dust wipe testing but not clearance for any of these renovation events. EPA rema ins concerned that renovations that disturb paint using machines designed to remove lead-based paint through high speed operati on (such as power sanders or abrasive blasting) can create large amounts of diffi cult-to-clean dust, creating the possibility that dust lead levels may substantially exceed the clearance sta ndards even after cleaning verification. The same is true for the demolition or removal through destructive means of plaster and lath walls, ceilings or other building components with lead-based paint. Therefore, EPA believes that this option is not consistent with the stated objectives of the proposed rule.

As required by § 212 of SBREFA, EPA issued a Small Entity Compliance Guide in December 2008 to help small entities comply with the 2008 RRP rule. The Guide is available at: http://www.epa.gov/lead/pubs/sbcomplianceguide.pdf or from the National Lead Information Center by calling 1(800) 424-LEAD [5323]. EPA will revise the Gu ide, as necessary, to reflect this rulemaking activity.