*** EO 12866 Review Draft – Do Not Cite, Quote or Release During the Review ***

1 EO12866_RIN2070-AJ92Formaldehyde-Imp_NPRM_UMRA_2012-02-27.docx 

### 1

Unfunded Mandates Reform Act Statement 

### 2 Formaldehyde Emission Standards for Composite Wood Products; Proposed Rule; RIN 2070-AJ92 

### 3 U.S. Environmental Protection Agency, Office of Pollution Prevention and Toxics 

### 4 January, 2012 

### 5

Pursuant to the Title II of the Unfunded Ma ndates Reform Act (UMRA), 2 U.S.C. 1531-1538, 

### 6 EPA has determined that the rule being proposed, “ Formaldehyde Emission Standards for Composite 

### 7 Wood Products; Proposed Rule ,” contains a Federal mandate that may result in expenditures of $100 

### 8 million or more by the private sector in any one year, but is not expected to result in expenditures of this 

### 9 magnitude by State, local, and Tribal governments in the aggregate. EPA has prepared this statement in 

### 10 accordance with section 202(a) of UMRA. 

### 11 12 (1) Authorizing Legislation. This proposed rule is issued under the authority of Section 601 of 

### 13 TSCA, 15 U.S.C. 2697. 

### 14 15 (2) Benefit-Cost Analysis. EPA has prepared an economic analysis to evaluate, among other 

### 16 things, the benefits and costs of this rule as well as various regulatory options. See “Economic Analysis 

### 17 of the Formaldehyde Emission Standards for Com posite Wood Products Act Implementing Regulations 

### 18 Proposed Rule.” This document is availabl e in the public docket for this rule. 

### 19 20 The proposal is estimated to result in a total cost of $435 million to $447 million in the first year. 

### 21 The cost is estimated to drop to $57 million to $66 million per year in the second year. The total 

### 22 annualized cost of this proposal is $72 million to $8 1 million per year when using a 3 percent discount 

### 23 rate and $81 million to $89 million per year using a 7 pe rcent discount rate. When adjusted for inflation, 

### 24 the $100 million UMRA threshold is equivalent to approximately $143 million in 2010 dollars. Thus, the 

### 25 cost of the rule to the private sector and State, lo cal, and Tribal governments in the aggregate exceeds the 

### 26 inflation-adjusted UMRA threshold in the first year. 

### 27 28 This proposed rule will reduce exposures to formaldehyde, resulting in benefits from avoided 

### 29

adverse health effects. For the subset of health e ffects where the results were quantified, the estimated 

### 30 annualized benefits (due to avoided incidence of asthma, eye irritation, nasopharyngeal cancer, and 

### 31 reduced female fertility) are $184 million to $278 mil lion per year using a 3% discount rate, and $91 

### 32 million to $137 million per year usin g a 7% discount rate. There are additional unquantified benefits due 

### 33*** EO 12866 Review Draft – Do Not Cite, Quote or Release During the Review ***

2 to other avoided health effects (upper respirator y tract pathology, pulmonary function, allergic 

### 34 sensitization, immune function effects, neurological a nd behavioral toxicity, and developmental toxicity). 

### 35 36

Net benefits are the difference between benefits a nd costs. The proposal is estimated to result in 

### 37 net benefits of $103 million to $206 million per year using a 3% di scount rate, and $2 million to $57 

### 38 million per year using a 7% discount rate. 

### 39 40 (A) Federal Financial Assistance. EPA has not identified any sources of federal 

### 41 financial assistance (e.g., grants or loans) that are available from either EPA or other federal 

### 42 agencies to defray State, local, or Tribal expenditures under this rule. 

### 43 44 (B) Federal Resources. EPA has not identified any federal resources available to carry 

### 45 out the private sector mandate contained in this rule. 

### 46 47 (3) Costs and Budgetary Impacts. 

### 48 49 (A) Future Compliance Costs. Total compliance costs for th e proposal are estimated to 

### 50 be $435 million to $447 million in the first year. The cost is estimated to drop to $57 million to 

### 51 $66 million in the second year. The total annualized cost of this proposal is $72 million to $81 

### 52 million per year when using a 3 percent discount rate and $81 million to $89 million per year 

### 53 using a 7 percent discount rate. 

### 54 55 (B) Disproportionate Budgetary Effects. EPA believes that the most relevant measure 

### 56 of the budgetary effect of this rule is the cost of compliance with the rule. Costs can be expected 

### 57 to vary from state to state, region of the country, and industry to industry, depending on the 

### 58 number and type of regulated firms. On an aggregate basis, the retail industry has the highest 

### 59 first year costs ($215 million). The industries w ith the highest aggregat e annualized costs are 

### 60 laminated product producers ($32 million per year us ing a 3 percent discount rate) and fabricators 

### 61 ($21 million per year). None of these industries is likely to incur disproportionate effects. 

### 62 Aggregate first year costs for retailers are high because of the large number of firms (759,000) 

### 63 that are potentially subject to the rule. Retailers s ubject to the rule have an average first year cost 

### 64 of approximately $300, which is not disproportiona te to the costs incurred by other industries. 

### 65 Fabricators subject to the rule have an average annualized cost of $300 to $400 per year. And of 

### 66 the 7,000 to 14,000 laminated product producers, mu ch of the aggregate cost will be incurred by 

### 67*** EO 12866 Review Draft – Do Not Cite, Quote or Release During the Review ***

3 the 150 to 300 firms assumed to continue using formaldehyde-based resins, which will need to 

### 68 certify and test their products. Most laminate d product producers will find it less expensive to 

### 69 use no-added formaldehyde resins rather than engaging in certification and testing. 

### 70 71 Firms located in California are likely to ha ve incurred costs to comply with a similar 

### 72 California regulation on formaldehyde emissi ons from composite wood products, which will 

### 73 lower their incremental costs of complying with th is rule. But many firms outside of California 

### 74 have also incurred these costs because their products are sold in California. EPA has no evidence 

### 75 to suggest that this rule will have disproportiona te budgetary impacts on any particular regions of 

### 76 the country, or particular State, local, or tribal governments or communities, or particular 

### 77 segments of the private sector affected by the rule. 

### 78 79 (4) Effect on National Economy. Guidance issued by the Office of Management and Budget 

### 80 indicates that the economic impact of a regulation on the national economy becomes measurable only if 

### 81 the economic impact of the regulation reaches 0.25 pe rcent to 0.5 percent of Gross Domestic Product 

### 82 (GDP). See Memorandum from Sally Katzen, “Guida nce for Implementing Title II of [UMRA],” March 

### 83 31, 1995. Given the current GDP, this is equivalent to a cost of $37 billion to $75 billion. Therefore, 

### 84 EPA has concluded that this rule is highly unlik ely to have any measurable effect on the national 

### 85

economy. 

### 86 87 (5) Prior consultation with affected State, local, and Tribal governments. Consistent with the 

### 88 intergovernmental consultation provisions of secti on 204 of the UMRA EPA has initiated consultations 

### 89 with governmental entities affected by this rule. EPA has met with officials from the state of California 

### 90 on numerous occasions to discuss aspects of the California Air Resources Board’s (CARB) Airborne 

### 91 Toxic Control Measure (ATCM) for composite wood products and its implementation. With the 

### 92 assistance of the National Conference of State Legisl atures, EPA has also initiated consultations with 

### 93

state environmental health directors. 

### 94 95 (6) Small Government Agency Plan. This rule does not contain a significant Federal 

### 96 intergovernmental mandate as described by § 203 of UMRA, because it neither imposes enforceable 

### 97 duties on State, local, or tribal governments nor reduces an authorized amount of Federal financial 

### 98 assistance provided to State, local, or tribal governments. And this proposed rule contains no regulatory 

### 99 requirements that might significantly or uniquely a ffect small governments. The proposed rule would 

### 100 regulate entities that manufacture (including import), fabricate, distribute, or sell composite wood 

### 101*** EO 12866 Review Draft – Do Not Cite, Quote or Release During the Review ***

4 products. Governments do not typically engage in these activities, so government entities are not 

### 102 expected to be subject to the rule’s requirements. 

### 103 104