Summary	of	Interagency	Working	Comments	on	Draft	Language	under	EO	12866	Interagency	Review. Subject	to	Further	Policy	Review.

Page 1 of 4 **R eg Flex Analysis** 

 EPA should consider additional regulatory alternatives as required in the RFA to minimize the rule’s economic impact on small entities 

### ▪ Based on the anal ys is of the economic impacts of this rule on small entities illustrated in Table 6 - 7 of the RIA, EPA was not able to certify this rule under the RFA. EPA also found that this rule is expected to have some sizeable impacts to very small entities, that individual industries had with compliance costs encompassing over 10% of industry revenues, and, in some cases, compliance costs to be over 100% of entity revenues. Given these substantial impacts, EPA should consider additional reasonable alt ernatives to reduce the economic impact on small entities. While EPA has considered an alternative to the proposed approach to this rule, this alternative as shown in Table 6 - 8 of the RIA is actually expected to increase the already large economic impact o n small entities. Therefore, EPA should consider alternatives such as those suggested in section 603(c) of the RFA namely:  Exemption for certain or all small entities from coverage of the rule in whole, or in part;  Establishment of different compliance or reporting requirements for small entities or timetables that take into account the resources available to small entities; and  Clarification, consolidation, or implication of compliance and reporting requirements for small entities.

 EPA should provide greater detail on wh y it chose to reject the SBAR panel, SBA, and OMB’s recommendation to not move forward on issuing emissions limitations for the mason heater industry 

### ▪ Advocacy

staff interprets the recommendation that EPA focus on the most polluting sources first differentl y than does EPA in its summary and response to the panel recommendation. The EPA proposal includes sources that are already quite clean and provide significantl y fewer emissions benefits than other sources in the proposal. Advocacy staff again encourages EPA to refocus its efforts on only the sources that provided the greatest cost effectiveness of regulation and consider other means of addressing other sources, such as continuing the successful volunteer programs or allowing states to regulate based on local and regional variation and needs. 

### ▪ On page 152 of the preamble EPA explains that it is issuing emissions limitations on masonry

heaters against the recommendations of the SBAR panel, SBA, and OMB because industry

requested a standard. Please identify the individuals representing “industry” in this case, provide as much specifics as possible about the request, and how EPA’s proposed standard responds to this request. Please also explain how the industry request is relevant to the agenc y’ s obligations under section 111 and its decision to regulate. 

### ▪ Why does EPA believe that masonry heaters are a source that causes or significantly contributes to air pollution? SBA and OMB suggested excludingSummary	of	Interagency	Working	Comments	on	Draft	Language	under	EO	12866	Interagency	Review. Subject	to	Further	Policy	Review.

Page 2 of 4 sources that fell below a threshold emission level; why is that not equivalent to saying a source does not significantl y contribute? 

### ▪ EPA further justifies regulating all residential wood heaters as soon as possible based on some State’s desire for another tool to help them with their efforts to reduc e wood smoke emissions. Please explain how the State request creates a need for Federal regulation under sec. 111(b), and how existing state Clean Air Act programs or existing voluntary programs are insufficient for these low volume sources.

 How did EPA address the panel’s recommendation that: 

### ▪ the EPA Administrator should consider, where beneficial, adopting behavioral approaches including but not limited to disclosure and labeling, as well as increasing the public’s awareness of voluntary programs? 

### ▪ the EPA Administrator should consider exempting small production lines where the firm may

be unable to recover the R&D and related expenses in a reasonable amount of time?

 Use of “conservative” estimates: EPA should provide information to help create a best estimate and not most conservative estimate of economic impacts on small entities. EPA should either use their best estimate or present a high and low range and request comment on whether the high and low are reasonable. 

### ▪ EPA uses the term “conservative” in its RIA repeated, presumabl y to deflect criticism that their estimates are not supported b y available information. Labeling these estimates 'conservative' doesn't make the end result the high - end of the cost estimates, particularl y where EPA does not c ontrast their 'conservative' estimate with a 'best' estimate. 

### ▪ Throughout Section 6 of the RIA, EPA explains that the anal ys es of the impacts of this rule on small entities should be put into context of these “conservative” (i.e., intentionally

overstated) estimates. We believe EPA’s presentation is therefore renderi ng some estimates less relevant because they are so large. EPA should be describing its economic anal ys es to help the public get the most accurate estimate of the rule’s impacts as possible.

 EPA needs to reconsider the SBAR panel’s recommendation to coll ect more data on the manufacturing costs associated with this rule to ensure that its cost estimates are comprehensive 

### ▪ While EPA has put effort into gathering more information on the potential costs associated with this rule, the data behind the EPA’s cost estimates as part of the RIA and cost memos may not be comprehensive. These estimates depend on a very small number of data points from only a couple of manufacturers potentially leading to a selection bias in EPA cost estimates. It is possible that the d ata EPA collected may

understate the costs of small manufacturers who may not be able to easily spread out administrative and overhead costs over many units and potential models. Similarly , manufacturers that produce very few units may

face significantl y greater testing costs than estimated since they will not see an ySummary	of	Interagency	Working	Comments	on	Draft	Language	under	EO	12866	Interagency	Review. Subject	to	Further	Policy	Review.

Page 3 of 4 efficiency games from being able to test representative units. As a result, some cost estimates may

be understated for particular groups of manufacturers depending on whether they could utiliz e economies of scale.

 EPA’s time period for evaluating the cost - effectiveness of the proposed standard should be much shorter, particularly given required periodic reviews of the NSPS. 

### ▪ According to Table 11 of the preamble which details the cost effective ness of the proposed standard, EPA is evaluating cost effectiveness for a BSER determination using a period of anal ys is of 44 y ears (i.e., 2013 to 2057). Since EPA is required to review NSPS at least every 8 y ears it is likely

that this 44 y ear period of analy sis will encompass future rulemakings. Given that EPA expects manufacturers to compl y with these rules b y redesigning fireboxes and the need to continuously

update the NSPS, it may not be reasonable to model purchases of 2019 models out an additional 2 0 y ears. As a result, EPA should consider making this period of anal ys is consistent with time periods used in the RIA. EPA could shorten this period to either the life of a wood heater from when the NSPS becomes effective or to the length of this rulemakin g c ycl e.

 Use of industry

standards: Does EPA intend to incorporate b y reference standards not yet finalized? I f so, how will EPA ensure the future availability of a draft standard if/when the standard is finalized? If not, will EPA delay the rulemaking until those standards are finalized?

 Time frame for cost expenditures: The cost expenditures for this rule appear to be almost entirely R&D during the phase - in period. Amortizing costs over a longer period of time serves to reduce the presented annual c osts of the rule in a way that is unreasonable for small businesses that have limited access to capital and must finance their R&D out of current revenues. We strongl y recommend presenting R&D costs annualized only for the phase - in period. 

### ▪ Please confir

m the annualization periods for Tables 6 - 4, 6 - 5.

 R&D cost difference between proposal and alternative: How does EPA characterize the difference between the intensity of R&D necessary

to meet step 2 (proposal) from step 1 vs. the lesser intensity

that woul d be required to meet step 2 (alternative) followed by step 3 (alternative)? Without allowing for some difference in intensity and more time across which to pay

for the R&D, the alternative seems designed to be rejected. **RIA Comments** Analy tic timeline: EPA should clarify that the agency

is assuming that the heaters will be commerciall y available for purchase for 20 ye ars with 20 y ears of useful life. Different languages around the analy tic timelines are confusing. Also, please explain what EPA is onl y presenting results up to 2022?Summary	of	Interagency	Working	Comments	on	Draft	Language	under	EO	12866	Interagency	Review. Subject	to	Further	Policy	Review.

Page 4 of 4 Stranded capital: can the manufacturers sell heaters that were manufactured before the publication date (p. 2 - 16)? If no, what is the magnitude of the potential stranded capital? Are there other areas of potential stran ded capital problem? Shipment information: please include the shipment projection (tables would be great). Benefit estimates between the primary and the alternative: wh y are there such differences between the alternative and the proposed options if the only change is timing of when provisions kick in? Why

are VOC and CO emissions so high for the alternative option? Usage: what are the assumed usage rates for different heaters? Provision by

provision analy sis: it looks like some heater categories deliver the bulk of the benefits. Has EPA conducted a provision - by - provision analy sis? 2 - 4: why require manufacturers to offer unconditional warranties? 2 - 6: why require hang - tags and permanent labels if manufacturers have to meet the emission standards ? 2 - 12: is PFIa virtual monopoly?