*** EO 12866 Review Draft – Do Not Cite, Quote or Release During the Review ***

1 EO12866_RIN2070-AJ92_Formaldehyde-Imp_N PRM_UMRA_2013-04-11_MARKUP.docx 

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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

April 2013 

### 6

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

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

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

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

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

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

### 12 13 (1) Authorizing Legislation. This proposed rule is issued under the authority of Section 601 of 

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

### 15 16 (2) Benefit-Cost Analysis. EPA has prepared an economic analysis to evaluate, among other 

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

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

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

### 20 21 The proposal is estimated to result in a total cost of $ 435 434 million to $447 million in the first 

### 22 year. The cost is estimated to drop to $ 57 56 million to $ 66 65 million per year in the second year. The 

### 23 total annualized cost of this proposal is $72 m illion to $81 million per year when using a 3 percent 

### 24 discount rate and $ 8 1 80 million to $89 million per year using a 7 percent discount rate. When adjusted 

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

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

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

### 28 29 This proposed rule will reduce exposures to formaldehyde, resulting in benefits from avoided 

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

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

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

2 reduced female fertil ity ) are $ 1 8 4 20 million to $ 2 78 48 million per year using a 3% discount rate, and 

### 33 $ 9 1 9 million to $ 1 37 23 million per year using a 7% discount ra te. There are additional unquantified 

### 34 benefits due to other avoided health effects ( upper respiratory tract pathology, pulmonary functio n related 

### 35 effects, reduced female fertility , allergic sensitization, immune function effects, neurological and 

### 36 behavioral toxicity, and developmental toxicity). 

### 37 38

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

### 39 quantified net benefits of $ 10 3 -$24 million to $ 20 6 -$60 million per year using a 3% discount rate, and $ 2 

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

### 41 additional unquantified benef its due to other avoided health effects. EPA considers two of these effects, 

### 42 health benefits from avoided cases of respiratory rela ted effects and reduced fe rtility, to be potentially 

### 43 very important non-monetized impacts that contri bute to the overall net benefits of this rule. 

### 44 45 (A) Federal Financial Assistance. EPA has not identified any sources of federal 

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

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

### 48 49 (B) Federal Resources. EPA has not identified any federal resources available to carry 

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

### 51 52 (3) Costs and Budgetary Impacts. 

### 53 54 (A) Future Compliance Costs. Total compliance costs for th e proposal are estimated to 

### 55 be $ 435 434 million to $447 million in the first year. The cost is estimated to drop to $ 57 56 

### 56 million to $ 66 65 million in the second year. The total annualized cost of this proposal is $72 

### 57 million to $81 million per year when us ing a 3 percent discount rate and $ 8 1 80 million to $89 

### 58 million per year using a 7 percent discount rate. 

### 59 60 (B) Disproportionate Budgetary Effects. EPA believes that the most relevant measure 

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

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

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

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

### 65 laminated product producers ($ 18 million to $ 32 million per year using a 3 percent discount rate) 

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

3 and fabricators ($21 million to $26 million per year). None of these industries is likely to incur 

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

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

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

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

### 71 $300 to $400 per year. And of the 7,000 to 14,000 laminated product producers, much of the 

### 72 aggregate cost will be incurred by the 150 to 300 firms assumed to continue using formaldehyde

### 73 based resins, which will need to certify and test their products. Most laminated product producers 

### 74 will find it less expensive to use no-added form aldehyde resins rather than engaging in 

### 75 certification and testing. 

### 76 77 Firms located in California are likely to ha ve incurred costs to comply with a similar 

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

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

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

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

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

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

### 84 85 (4) Effect on National Economy. Guidance issued by the Office of Management and Budget 

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

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

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

### 89 31, 1995. Given the current GDP, this is equivalent to a cost of $37 billion to $75 billion. Therefore, 

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

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economy. 

### 92 93 (5) Prior consultation with affected State, local, and Tribal governments. Consistent with the 

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

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

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

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

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

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state environmental health directors. 

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

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

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

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

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

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

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

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

### 109 110