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1 EO12866_RIN2070-AJ92_Formaldehyde-Imp_NPRM_UMRA_2013-04-11_MARKUP.docx 

2 Unfunded Mandates Reform Act Statement

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

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

5 January, 2012

6 April 2013

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

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

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

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

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

12 accordance with section 202(a) of UMRA. 

13 

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

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

16 

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

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

19 of the Formaldehyde Emission Standards for Composite Wood Products Act Implementing Regulations 

20 Proposed Rule.” This document is available in the public docket for this rule. 

21 

22 The proposal is estimated to result in a total cost of $435434 million to $447 million in the first 

23 year. The cost is estimated to drop to $5756 million to $6665 million per year in the second year. The 

24 total annualized cost of this proposal is $72 million to $81 million per year when using a 3 percent 

25 discount rate and $8180 million to $89 million per year using a 7 percent discount rate. When adjusted 

26 for inflation, the $100 million UMRA threshold is equivalent to approximately $143 million in 2010 

27 dollars. Thus, the cost of the rule to the private sector and State, local, and Tribal governments in the 

28 aggregate exceeds the inflation-adjusted UMRA threshold in the first year. 

29 

30 This proposed rule will reduce exposures to formaldehyde, resulting in benefits from avoided 

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

32 annualized benefits (due to avoided incidence of asthma, eye irritation, and nasopharyngeal cancer, and 
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33 reduced female fertility) are $18420 million to $27848 million per year using a 3% discount rate, and 

34 $919 million to $13723 million per year using a 7% discount rate. There are additional unquantified 

35 benefits due to other avoided health effects (upper respiratory tract pathology, pulmonary functionrelated 

36 effects, reduced female fertility, allergic sensitization, immune function effects, neurological and 

37 behavioral toxicity, and developmental toxicity). 

38 

39 Net benefits are the difference between benefits and costs. The proposal is estimated to result in 

40 quantified net benefits of $103-$24 million to $206-$60 million per year using a 3% discount rate, and $2

41 million to $-$57 million to -$79 million per year using a 7% discount rate. As stated above, there are 

42 additional unquantified benefits due to other avoided health effects. EPA considers two of these effects, 

43 health benefits from avoided cases of respiratory related effects and reduced fertility, to be potentially 

44 very important non-monetized impacts that contribute to the overall net benefits of this rule.

45 

46 (A) Federal Financial Assistance. EPA has not identified any sources of federal 

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

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

49 

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

51 out the private sector mandate contained in this rule. 

52 

53 (3) Costs and Budgetary Impacts.

54 

55 (A) Future Compliance Costs. Total compliance costs for the proposal are estimated to 

56 be $435434 million to $447 million in the first year. The cost is estimated to drop to $5756

57 million to $6665 million in the second year. The total annualized cost of this proposal is $72 

58 million to $81 million per year when using a 3 percent discount rate and $8180 million to $89 

59 million per year using a 7 percent discount rate. 

60 

61 (B) Disproportionate Budgetary Effects. EPA believes that the most relevant measure 

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

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

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

65 first year costs ($215 million). The industries with the highest aggregate annualized costs are 

66 laminated product producers ($18 million to $32 million per year using a 3 percent discount rate) 
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67 and fabricators ($21 million to $26 million per year). None of these industries is likely to incur 

68 disproportionate effects. Aggregate first year costs for retailers are high because of the large 

69 number of firms (759,000) that are potentially subject to the rule. Retailers subject to the rule 

70 have an average first year cost of approximately $300, which is not disproportionate to the costs 

71 incurred by other industries. Fabricators subject to the rule have an average annualized cost of 

72 $300 to $400 per year. And of the 7,000 to 14,000 laminated product producers, much of the 

73 aggregate cost will be incurred by the 150 to 300 firms assumed to continue using formaldehyde74 based resins, which will need to certify and test their products. Most laminated product producers 

75 will find it less expensive to use no-added formaldehyde resins rather than engaging in 

76 certification and testing. 

77 

78 Firms located in California are likely to have incurred costs to comply with a similar 

79 California regulation on formaldehyde emissions from composite wood products, which will 

80 lower their incremental costs of complying with this rule. But many firms outside of California 

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

82 to suggest that this rule will have disproportionate budgetary impacts on any particular regions of 

83 the country, or particular State, local, or tribal governments or communities, or particular 

84 segments of the private sector affected by the rule. 

85 

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

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

88 the economic impact of the regulation reaches 0.25 percent to 0.5 percent of Gross Domestic Product 

89 (GDP). See Memorandum from Sally Katzen, “Guidance for Implementing Title II of [UMRA],” March 

90 31, 1995. Given the current GDP, this is equivalent to a cost of $37 billion to $75 billion. Therefore, 

91 EPA has concluded that this rule is highly unlikely to have any measurable effect on the national 

92 economy. 

93 

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

95 intergovernmental consultation provisions of section 204 of the UMRA EPA has initiated consultations 

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

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

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

99 assistance of the National Conference of State Legislatures, EPA has also initiated consultations with 

100 state environmental health directors. 
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101 

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

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

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

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

106 requirements that might significantly or uniquely affect small governments. The proposed rule would 

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

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

109 expected to be subject to the rule’s requirements. 

110