Regulatory Impact Analysis for the Plywood

and Composite Wood Products NESHAP

Final Report
 EPA-452/R-04-005

 February 2004

Regulatory Impact Analysis for the Plywood and Composite Wood Products NESHAP

U.S. Environmental Protection Agency

Office of Air Quality Planning and Standards

Air Quality Strategies and Standards Division

Innovative Strategies and Economics Group

Research Triangle Park, NC
TABLE OF CONTENTS
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES-1

1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-1

1.1 Scope and Purpose of the Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-1

1.2 Need for Regulatory Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-1

1.3 Requirements for the Regulatory Impact Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-2

1.4 Other Federal Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-5

1.5 Organization of the Regulatory Impact Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-5

1.6 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-6

 2 Profile of the Plywood and Composite Wood Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-1

2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-1

2.2 The Supply Side . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-3

2.3 The Demand Side . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-20

2.4 Industry Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-29

2.5 Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-42

2.6 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-58

3 Regulatory Alternatives, Emissions, Emission Reductions, and Control and Administrative Costs

3.1 Regulatory Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-1

3.2 Emissions and Emission Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-10

3.3 Control Equipment and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-22

3.4 Testing, Monitoring, Reporting, and Recordkeeping Costs . . . . . . . . . . . . . . . . . . . . . 3-33

3.5 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-36

4 Economic Impact Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-1

4.1 Results in Brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-1

4.2 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-1

4.3 Economic Impact Analysis Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-2

4.4 Economic Impact Analysis Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-4

4.5 Economic Impact Analysis Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-6

4.6 Analysis of Economic Impacts on Engineered Wood Products Sector . . . . . . . . . . . . 4-15

4.7 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-22

5 Small Business Impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-1

5.1 Results in Brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-1

5.2 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-1

5.3 Screening Analysis Data Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-2

5.4 Screening Analysis Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-2

5.5 Screening Analysis Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-3

5.6 Screening Analysis Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-3

5.7 Screening Analysis Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-10

5.8 EIA Results for Small Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-1

5.9 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-12

6 Qualitative Assessment of Benefits of Emission Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-1

6.1 Identification Of Potential Benefit Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-1
6.2 Qualitative Description of Air Related Benefits - HAP and CO . . . . . . . . . . . . . . . . . . 6-1

6.3 Qualitative Description of Effects from Reductions and Increases in Emissions from 

Other Pollutants Due to HAP Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-6

6.4 Lack of Approved Methods to Quantify HAP Benefits . . . . . . . . . . . . . . . . . . . 6-8

6.5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-10

6.6 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-11

Appendix A Summary of Impacts Associated with the Delisted Low-Risk Subcategory . . . . . . . . A-1
LIST OF EXHIBITS

Exhibit 2-1: SIC & NAICS Codes for the Plywood and Composite Wood Industries . . . . . . . . . . . . . . 2-2

Exhibit 2-2: Other Primary SIC Codes for the Plywood and Composite Wood Industries . . . . . . . . . . . 2-3

Exhibit 2-3: SIC and NAICS Codes and Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-12

Exhibit 2-4: Specialization and Coverage Ratios, 1982 - 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-13

Exhibit 2-5: Summary of Annual Costs and Shipments, 1992 -1997 . . . . . . . . . . . . . . . . . . . . . . . . . . 2-14

Exhibit 2-6: Materials Consumed By Kind for Softwood Plywood and Veneer, 1997 . . . . . . . . . . . . 2-17

Exhibit 2-7: Materials Consumed by Kind for Reconstituted Wood Products, 1997 . . . . . . . . . . . . . . 2-18

Exhibit 2-8: Industry Outputs, by SIC Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-21

Exhibit 2-9: MDF Shipments by Downstream Market, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-23

Exhibit 2-10: Particleboard Shipments by Downstream Market, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . 2-24

Exhibit 2-11: Housing Market Indicators, 1988 - 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-25

Exhibit 2-12: Trade for Household Furniture (SIC 251), 1989 - 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 2-25

Exhibit 2-13: Use of Wood and Non-wood Products in Residential Construction

1976 - 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-27

Exhibit 2-14: Demand Elasticities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-29

Exhibit 2-15: Concentration Ratios by SIC Code, 1982-1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-30

Exhibit 2-16: Facilities with Compliance Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-31

Exhibit 2-17: Full Production Capacity Utilization Rates, Fourth Quarters, 1992 - 1997 . . . . . . . . . . . 2-33

Exhibit 2-18a: 1998 Employment at Facilities with Compliance Costs . . . . . . . . . . . . . . . . . . . . . . . . 2-34

Exhibit 2-18b: 1998 Employment at Facilities with Compliance Costs . . . . . . . . . . . . . . . . . . . . . . . . 2-34

Exhibit 2-19: Number of Mills, Average Capacity and Utilization, 1977 - 1997 . . . . . . . . . . . . . . . . . 2-36

Exhibit 2-20: Summary of Capital Expenditures, 1992 - 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-37

Exhibit 2-21: Size Distribution of Firms Owning Affected Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . 2-38

Exhibit 2-22: Types of Firm Ownership for Lumber and Wood Products (SIC 24), 1992 . . . . . . . . . . 2-39

Exhibit 2-23: Indicators of Financial Condition, 1995-1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-41

Exhibit 2-24: Trade Balance and Selected Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-44

Exhibit 2-25: Production, Trade and Consumption Volumes for Selected Products (1988-1997) . . . . 2-45

Exhibit 2-26: 1997 U.S. Wood Products Imports by Region and Major Trading Partner . . . . . . . . . . . 2-48

Exhibit 2-27: 1997 U.S. Wood Product Exports by Region and Major Trading Partner . . . . . . . . . . . 2-50

Exhibit 2-28: Lumber and Wood Products Producer Price Index, 1988-1997 . . . . . . . . . . . . . . . . . . . 2-51

Exhibit 2-29: Producer Price Indices of Plywood and Wood Composite Products . . . . . . . . . . . . . . . . 2-52

Exhibit 2-30: F.O.B. Prices of Southern plywood, OSB, and Particleboard . . . . . . . . . . . . . . . . . . . . . 2-53

Exhibit 2-31: APA Forecasted Structural Panel Production and Demand . . . . . . . . . . . . . . . . . . . . . . . 2-56

Exhibit 2-32: APA Actual and Forecasted Structural Panel Capacity and Production . . . . . . . . . . . . . 2-57

Exhibit 3-1: Illustration of Total HAP Calculation for an Emission Source . . . . . . . . . . . . . . . . . . . . . . 3-5

Exhibit 3-2: Summary of MACT for PCWP Process Units at New and Existing Sources . . . . . . . . . . . 3-6

Exhibit 3-3: Cost-Effectiveness Analysis Of Beyond-The-Floor Control Options . . . . . . . . . . . . . . . . . 3-8

Exhibit 3-4: Illustration Of Total HAP Calculation For An Emission Source . . . . . . . . . . . . . . . . . . . 3-13

Exhibit 3-5: Uncontrolled and Baseline HAP Emissions Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-17

Exhibit 3-6: Speciated Nationwide Uncontrolled HAP Emissions by Product . . . . . . . . . . . . . . . . . . . 3-18

Exhibit 3-7: Speciated Nationwide Baseline HAP Emissions by Product . . . . . . . . . . . . . . . . . . . . . . . 3-19

Exhibit 3-8: Estimated Number of Major Sources By Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-20

Exhibit 3-9: Estimated Nationwide Reduction in Total HAP and THC . . . . . . . . . . . . . . . . . . . . . . . . 3-21

Exhibit 3-10: Press Enclosure Exhaust Flow Rates and Capital Costs . . . . . . . . . . . . . . . . . . . . . . . . . 3-29

Exhibit 3-11: Control Equipment Costed for Process Units with Controlled MACT Floor . . . . . . . . . 3-31

Exhibit 3-12: Default Flow Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-32

Exhibit 3-13: Estimated Nationwide Control Costs for the PCWP Industry . . . . . . . . . . . . . . . . . . . . . 3-34

Exhibit 3-14: Dollars (In Total Annualized Costs) Per Ton Of HAP And THC Reduced . . . . . . . . . . 3-35
Exhibit 4-1: Baseline Characterization of Plywood and Composite Wood Markets: 1997 . . . . . . . . . . 4-3

Exhibit 4-2. Market-Level Impacts of the NESHAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-7

Exhibit 4-3. Industry-Level Impacts of the NESHAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-10

Exhibit 4-4: Distribution of Industry-Level Impacts of NESHAP: 

Affected and Unaffected Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-12

Exhibit 4-5: Distribution of Social Costs Associated with the NESHAP . . . . . . . . . . . . . . . . . . . . . . . 4-13

Exhibit 4-6: Primary Uses and Substitutes for LSL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-16

Exhibit 4-7: Characteristics of LSL Plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-17

Exhibit 4-8: Primary Uses and Substitutes for PSL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-17

Exhibit 4-9: Characteristics of PSL Plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-18

Exhibit 4-10: Retail Prices of GL and PSL Beams Delivered to Los Angeles . . . . . . . . . . . . . . . . . . . 4-18

Exhibit 5-1: Net Profit Margins by Product Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-3

Exhibit 5-2: Affected Firms by Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-4

Exhibit 5-3: Affected Firms by Process Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-5

Exhibit 5-4: Affected Firms with C/S Ratios of 3 Percent or Greater . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-6

Exhibit 5-5: Affected Firms with C/S Ratios of 1 Percent or Greater . . . . . . . . . . . . . . . . . . . . . . . . . . 5-7

Exhibit 5-6: C/S to R/S Comparison for Firms with C/S of One Percent or Greater . . . . . . . . . . . . . . . . 5-8

Exhibit 5-7: Economic Impacts on Small Businesses Associated with 

Projected Market Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-11

Exhibit 6-1: Key Health Effects of Exposure to Ambient Carbon Monoxide . . . . . . . . . . . . . . . . . . . . . 6-5

LIST OF FIGURES

Figure 2-1: Plywood and Veneer Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-6

Figure 2-2: Softwood Plywood and Veneer Value of Shipments and Production Costs, 

1992 - 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-15

Figure 2-3: Reconstituted Wood Products Value of Shipments and Production Costs, 

1992 - 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-16

Figure 2-4: Materials Consumed by Softwood Plywood and Veneer Products, 1997 . . . . . . . . . . . . . . 2-17

Figure 2-5: Materials Consumed by Reconstituted Wood Product Producers, 1997 . . . . . . . . . . . . . . . 2-19

Figure 2-6 Industry Outputs of Softwood Plywood and Veneer Industry . . . . . . . . . . . . . . . . . . . . . . . 2-22

Figure 2-7: Industry Outputs of Reconstituted Wood Products Industry . . . . . . . . . . . . . . . . . . . . . . . 2-23

Figure 2-8: Plywood and Composite Wood Facility Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-32

Figure 2-9: Full Production Capacity Utilization, Fourth Quarters, 1992-1997 . . . . . . . . . . . . . . . . . . 2-33

Figure 2-10: Value of Product Shipments, 1989-1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-46

Figure 2-11: Apparent Consumption, 1989-1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-47

Figure 2-12: APA Projected Housing Starts (000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-55 

Figure 3-1: Variation in RTO Purchased Equipment Cost with Flow Rate . . . . . . . . . . . . . . . . . . . . . . 3-24

Figure 3-2: Relationship between RTO Electricity Consumption and Flow Rate . . . . . . . . . . . . . . . . 3-25

Figure 3-3: Relationship between RTO Natural Gas Consumption and Flow Rate . . . . . . . . . . . . . . . 3-25

Figure 3-4: Variation in RTO Total Capital Investment with Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-27

Figure 3-5: Variation in RTO Total Annualized Cost with Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-27

Figure 4-1: Supply Curves for Affected Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-5

Figure 4-2: Market Equilibrium Without and With Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-6
EXECUTIVE SUMMARY
ES-1

EPA is issuing a rule to reduce hazardous air pollutant (HAPs) emissions from existing and new

plywood and composite wood products facilities that are major sources. This rule, which will be

promulgated in February 2004, is a National Emission Standards for Hazardous Air Pollutants

(NESHAP), and will reduce HAP emissions by requiring affected plywood and composite wood products

facilities to meet a level of emissions reductions needed to meet the Maximum Achievable Control

Technology (MACT) floor for these sources. This MACT floor level of control is the minimum level

these sources must meet to comply with the final rule. The major HAPs whose emissions will be reduced

are formaldehyde, acetaldehyde, acrolein, methanol, phenol, and propionaldehyde. The proposed rule

will also lead to emission reductions of other pollutants such as volatile organic compounds (VOC),

particulate matter (PM10), carbon monoxide (CO), and emission increases in nitrogen oxides (NOx) due to

the application of incineration-based controls. Increased electricity use due to application of controls will

also lead to general increases in the levels of sulfur dioxide (SO2) and NOx emitted from electric utilities.

This rule allows an affected source to use a production-based compliance option, defined in units

of mass of pollutant per unit of production, or any of six control system compliance options if an affected

source is equipped with an add-on control system. As explained in the Federal Register notice, the

options entail HAP reductions of 90 percent or limiting the concentration of HAPs in the exhaust from the

control system. In addition, an affected source may choose to comply with an emissions averaging

option that allows the sources to not control or under-control some process units while controlling other

affected process units. Finally, a source can be eligible to become part of a delisted low-risk subcategory

and thus not be required to control HAP emissions to meet the final rule requirements if the source’s

emissions have a sufficiently low risk level. 

The rule is expected to reduce HAP emissions by 11,000 tons per year in the third year after its

issuance. The rule is also expected to reduce VOC emissions, measured as total hydrocarbon, by 27,000

tons per year, PM10 emissions by 13,000 tons per year, and CO emissions by 11,000 tons per year in the

third year. The increased electricity required to operate the control systems is also expected to increase

NOx and SO2 emissions at electricity generating utilities by 1,200 and 2,000 tons, respectively. It should

be noted that the NOx SIP call and Acid Rain emission trading programs would likely reduce or eliminate

any increases in emissions at utilities. The compliance costs, which include the costs of control and

monitoring, recordkeeping and reporting requirements, are estimated at $143 million (1999 dollars). 

The total social costs, which account for the behavioral response of consumers and producers to higher

pollution control costs, are estimated at $135.1 million (1999 dollars). Economic impacts associated with

these costs include price increases nationally of 0.9 to 2.5 percent for products affected by this rule, and a

reduction in output of only 0.1 to 0.7 percent nationally for the affected industries. An analysis of small

business impacts shows that there are 17 small firms affected, with 10 of them having annual compliance

costs of 1 percent or greater than their sales, and 3 of these having annual compliance costs of 3 percent

or greater than their sales. The Agency has certified that there is no significant impact on a substantial

number of small entities (SISNOSE) associated with this rule. Also, an analysis of the energy impacts

associated with this rule indicates that there is no significant adverse effect on supply, distribution, or use

of energy from implementation of this rule. Impact results considering the effect of a delisted low-risk

subcategory show reductions in all impacts with a particular effect on costs. 

 The Agency is unable to monetize the benefits from the HAP, VOC, and CO emissions

reductions due to lack of credible data for assigning a benefits value to these reductions. While the

Agency has done so in past RIAs and may do so in the future, for this rule, the Agency has not monetized

the benefits and disbenefits associated with the criteria pollutant (PM, NOx, SO2) emission decreases and
ES-2

increases, respectively. This lack of inclusion of a monetized benefits estimate for criteria pollutant

emission changes is not meant to imply that the Agency will choose not to provide such monetized

benefit estimates for other NESHAPs and other standards.

Results associated with a compliance alternative to the final rule, an alternative which is based on

the eligibility of sources to become part of a delisted low-risk subcategory, can be found in Appendix A. 
1-1

1 INTRODUCTION

Under the authority of Section 112(d) of the Clean Air Act as amended in 1990, the U.S.

Environmental Protection Agency (EPA or the Agency) is a regulation requiring facilities that

manufacture plywood and composite wood products to reduce their emissions of hazardous air pollutants

(HAPs). This regulation, a National Emission Standard for Hazardous Air Pollutants (NESHAP), will

apply to major sources of HAPs in this industry. This regulatory impact analysis (RIA) presents the

supporting documentation and analyses developed by the Agency that describe and quantify the expected

impacts of the Plywood and Composite Wood Products NESHAP.

1.1 Scope and Purpose of the Report

The NESHAP will require the manufacturers of plywood and composite wood products to install

additional pollution controls to reduce their emissions of HAPs to the air. The purpose of this EIA is to

present the results of the Agency’s evaluation of the cost, economic impacts, and benefits from

compliance with the requirements of the NESHAP.

The NESHAP will apply to all new and existing major sources of HAPs that manufacture

plywood and composite wood products. These sources emit HAPs associated with heating of wood and

related to their use of resins, adhesives, and additives in the pressing and drying stages of the production

process. The EPA estimates that there are 447 facilities that produce plywood and composite wood

products. Of these, the EPA determined that 223 facilities are major sources of HAPs.

1.2 Need for Regulatory Action

The purpose of this NESHAP is to protect public health by reducing emissions of HAP from

plywood and composite wood products facilities. The authority for doing this lies in Section 112 of the

Clean Air Act (CAA), which requires EPA to list categories and subcategories of major and area sources

of HAP and to establish NESHAP for the listed source categories and subcategories. The plywood and

composite wood products source category was originally listed as the plywood and particleboard source

category on July 16, 1992 (57 FR 31576). The name of the source category was changed to plywood and

composite wood products on November 18, 1999 (64 FR 63025) to more accurately reflect the types of

manufacturing facilities covered by the source category. A major source of HAP is defined as any

stationary source source or group of stationary sources within a continuous area and under common

control that emits or has the potential to emit, considering controls, in the aggregate, 9.1 Megagrams

(Mg)/year (10 tons/yr) or more of any single HAP or 22.7 Mg/year or more (25 tons/yr) of multiple HAP. 

Section 112 of the CAA requires EPA to establish NESHAP for the control of HAP from both

existing and new sources. The CAA requires the NESHAP to reflect the maximum degree of reduction in

emissions of HAP that is achievable. This level of control is commonly referred to as the maximum

achievable control technology (MACT). 

The MACT floor is the minimum level of control allowed for NESHAP and is defined under

section 112 (d) (3) of the CAA. In essence, the MACT floor ensures that the standard is set at a level that

assures all major sources achieve the control level that is at least as stringent as that already achieved by
1-2

the better-controlled and lower-emitting sources in each source category or subcategory. For new

sources, the MACT floor cannot be less stringent than the emission control that is achieved in practice by

the best-controlled similar source. The MACT standards for existing sources can be less stringent than

standards for new sources, but they cannot be less stringent than the average emission limitation achieved

by the best-performing 12 percent of existing sources in the category or subcategory (or, the bestperforming 5 sources for categories or subcategories with fewer than 30 sources.) 

In the course of rule development, we may also consider control options that are more stringent

than the floor. EPA may establish standards more stringent than the floor based on the consideration of

cost of achieving the emissions reductions, any non-air quality health and environmental impacts, and

energy requirements. 

1.3 Requirements for this Regulatory Impact Analysis

This section describes various legislative and executive requirements that govern the analytical

requirements for Federal rulemakings, and describes how each analytical requirement is addressed in this

EIA. 

1.3.1 Executive Order 12866

Under Executive Order 12866 (58 FR 51735, October 4, 1993) as amended by Executive Order

13258 (67 FR 9385, February 28, 2002), the EPA must determine whether the regulatory action is

“significant” and therefore subject to review by the Office of Management and Budget (OMB) and the

requirements of the Executive Order. The Executive Order defines “significant regulatory action” as one

that is likely to result in a rule that may:

1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way

the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or

safety, or state, local, or tribal governments or communities; 

2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another

agency;

3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs, or the rights

and obligation of recipients thereof; 

4) Raise novel legal or policy issues arising out of legal mandates, the President’s priorities, or the

principles set forth in the Executive Order. 

Pursuant to the terms of Executive Order 12866 as amended by Executive Order 13258, it has been

determined that this rule is a “significant regulatory action” because the annual costs of complying with

the rule are expected to exceed $100 million. Consequently, this action was submitted to OMB for

review under Executive Order 12866 as amended by Executive Order 13258. 

1.3.2 Regulatory Flexibility Act and Small Business Regulatory Enforcement Fairness Act of 1996

The Regulatory Flexibility Act (RFA) of 1980 (PL 96-354) generally requires that agencies

conduct a screening analysis to determine whether a regulation adopted through notice-and-comment
1

 Where appropriate, agencies can propose and justify alternative definitions of “small entity.” This RIA

and the screening analysis for small entities rely on the SBA definitions. 

1-3

rulemaking will have a significant impact on a substantial number of small entities (SISNOSE), including

small businesses, governments, and organizations. If a regulation will have such an impact, agencies

must prepare an Initial Regulatory Flexibility Analysis, and comply with a number of procedural

requirements to solicit and consider flexible regulatory options that minimize adverse economic impacts

on small entities. Agencies must then prepare a Final Regulatory Flexibility Analysis that provides an

analysis of the effect on small entities from consideration of flexible regulatory options. The RFA’s

analytical and procedural requirements were strengthened by the Small Business Regulatory Enforcement

Fairness Act (SBREFA) of 1996 to include the formation of a panel if a proposed rule was determined to

have a SISNOSE. This panel would be made up of representatives of the EPA, the Small Business

Administration (SBA), and OMB. 

For reasons explained more fully in Chapter 5 of this economic impact analysis for the rule, EPA

has determined that there is no SISNOSE for this rule. While there are some impacts to some small

firms, these impacts are not sufficient for a SISNOSE. Therefore, the EPA has not prepared a Final

Regulatory Flexibility Analysis for this rule.

The RFA and SBREFA require the use of definitions of “small entities,” including small

businesses, governments, and organizations such as non-profits, published by the SBA.1

 Screening

analyses of economic impacts presented in Chapter 5 of this report examine potential impacts on small

entities.

1.3.3 Unfunded Mandates Reform Act of 1995

The Unfunded Mandates Reform Act (UMRA) of 1995 (PL-4) was enacted to focus attention on

federal mandates that require other governments and private parties to expend resources without federal

funding, to ensure that Congress considers those costs before imposing mandates, and to encourage

federal financial assistance for intergovernmental mandates. The Act establishes a number of procedural

requirements. The Congressional Budget Office is required to inform Congressional committees about

the presence of federal mandates in legislation, and must estimate the total direct costs of mandates in a

bill in any of the first five years of a mandate, if the total exceeds $50 million for intergovernmental

mandates and $100 million for private-sector mandates. 

Section 202 of UMRA directs agencies to provide a qualitative and quantitative assessment (or a

“written statement”) of the anticipated costs and benefits of a Federal mandate that results in annual

expenditures of $100 million or more. The assessment should include costs and benefits to State, local,

and tribal governments and the private sector, and identify any disproportionate budgetary impacts. 

Section 205 of the Act requires agencies to identify and consider alternatives, including the least costly,

most cost-effective, or least burdensome alternative that achieves the objectives of the rule. 

Since this rule may cause a mandate to the private sector of more than $100 million, EPA did

provide an analysis of the impacts of this rule on State and local governments to support compliance with

Section 202 of UMRA. A summary of this analysis is in Chapter 4 of this EIA. In short, no government

entity is affected by this rule - only businesses. 
1-4

1.3.4 Paperwork Reduction Act of 1995

The Paperwork Reduction Act of 1995 (PRA) requires Federal agencies to be responsible and

publicly accountable for reducing the burden of Federal paperwork on the public. EPA has submitted an

OMB-83I form, along with a supporting statement, to the OMB in compliance with the PRA. The OMB83I and the supporting statement explains the need for additional information collection requirements and

provides respondent burden estimates for additional paperwork requirements to State and local

governments associated with this rule.

1.3.5 Executive Order 12898

Executive Order 12898, “Federal Actions to Address Environmental Justice in Minority

Populations and Low-Income Populations,” requires Federal agencies to consider the impact of programs,

policies, and activities on minority populations and low-income populations. Disproportionate adverse

impacts on these populations should be avoided to the extent possible. According to EPA guidance,

agencies are to assess whether minority or low-income populations face risk or exposure to hazards that is

significant (as defined by the National Environmental Policy Act) and that “appreciably exceeds or is

likely to appreciably exceed the risk or rate to the general population or other appropriate comparison

group.” (EPA, 1996). This guidance outlines EPA’s Environmental Justice Strategy and discusses

environmental justice issues, concerns, and goals identified by EPA and environmental justice advocates

in relation to regulatory actions. The plywood and composite wood products rule is expected to provide

health and welfare benefits to populations around the United States, regardless of race or income.

1.3.6 Executive Order 13045

Executive Order 13045, “Protection of Children from Environmental Health Risks and Safety

Risks,” directs Federal agencies developing health and safety standards to include an evaluation of the

health and safety effects of the regulations on children. Regulatory actions covered under the Executive

Order include rulemakings that are economically significant under Executive Order 12866 as amended by

Executive Order 13258, and that concern an environmental health risk or safety risk that the agency has

reason to believe may disproportionately affect children. EPA has developed internal guidelines for

implementing E.O. 13045 (EPA, 1998).

The plywood and composite wood products rule is a “significant economic action,” because the

annual costs are expected to exceed $100 million. Exposure to the HAPs whose emissions will be

reduced by this rule are known to affect the health of children and other sensitive populations. However,

this rule is not expected to have a disproportionate impact on children. 

1.3.7 Executive Order 13211

Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy

Supply, Distribution, or Use,” was published in the Federal Register on May 22, 2001 (66 FR 28355). 

This executive order requires Federal Agencies to weigh and consider the effect of regulations on supply,

distribution, and use of energy. To comply with this executive order, Federal Agencies are to prepare

and submit a “Statement of Energy Effects” for “significant energy actions.” The executive order defines

“significant energy action” as the following: 
1-5

1) an action that is a significant regulatory action under Executive Order 12866 or any successor order,

and 

2) is likely to have a significant adverse effect on the supply, distribution, or use of energy; or

3) that is designated by the Administrator of the Office of Information and Regulatory Affairs as a

significant energy action. 

An analysis of the effects of this rule on supply, distribution, and use of energy is summarized in

Chapter 4. 

1.4 Other Federal Programs

The only other federal program that may have an effect on these sources is the wood building

products surface coating NESHAP, a rulemaking promulagated in February, 2003. However, the overlap

of coverage of these rules will be minimal. The wood furniture manufacturing operations NESHAP, a

rule signed in December 1995, may apply to some facilities that will be affected by the plywood and

composite wood products rule, but there are no overlapping requirements for individual process units. 

1.5 Organization of the Regulatory Impact Analysis 

This report includes six chapters and an appendix that present a description of the industry, the

costs associated with the regulatory control options and compliance alternatives associated with the

NESHAP, results of the economic impact analysis, and a summary of impacts on small businesses. 

• Chapter 2 profiles the plywood and composite wood products industries.

• Chapter 3 summarizes the approach to estimating the costs of the NESHAP, presents the results

of the cost analysis, and provide the emissions reductions for the final rule.

• Chapter 4 summarizes the approach to performing the economic impact analysis of the NESHAP

and presents the results of the analysis. An analysis of impacts on energy distribution, supply, or

use is also in this chapter.

• Chapter 5 includes the results of the analyses of the NESHAP’s impact on small businesses.

• Chapter 6 presents a qualitative assessment of the benefits associated with this final rule. 

• Appendix A presents impacts associated with a delisted low-risk subcategory that could allow

various PCWP sources to not have to put on controls to comply with the final rule.

Throughout this report, a distinction is made between “affected” and “unaffected” facilities and

firms. Affected facilities are those that will incur compliance costs (control and monitoring,

recordkeeping, and reporting ) to comply with the rule. In general, unaffected facilities and firms have no

compliance costs. However, of the group of unaffected facilities, 51 of these will incur costs associated

with monitoring, reporting, and record keeping (MRR). MRR costs are estimated to be $25,194 per year. 

The distinction between affected and unaffected facilities and firms will be noted throughout the

document.
2-6

1.6 References

Federal Register, 1993. Executive Order 12866, Regulatory Planning and Review. Vol. 58, October 4,

1993, pg. 51735.

U.S. Environmental Protection Agency, 1996. Guidance for Providing Environmental Justice Concerns

in EPA’s NEPA Compliance Analyses (Review Draft). Office of Federal Activities, Washington, D.C.,

July 12, 1996.

U.S. Environmental Protection Agency, 1996. Memorandum from Trovato and Kelly to Assistant

Administrators. Subject: “Implementation of Executive Order 13045, Protection of Children from

Environmental Health and Safety Risks.” April 21, 1998. 

Federal Register, 2001. Executive Order 13211, Actions Concerning Regulations That Significantly

Affect Energy Supply, Distribution, or Use. Vol. 66, May 22, 2001, pg. 28355.

Federal Register, 2002. Executive Order 13258, Amending Executive Order 12866 - Regulatory Planning

and Review. Vol.67 , February 28, 2002, pg. 9385. 

2 PROFILE OF THE PLYWOOD AND COMPOSITE WOOD PRODUCTS INDUSTRIES

2.1 Introduction

Through a 1998 information collection request (ICR), the EPA identified plants potentially

impacted by the NESHAP. This profile presents information on several industries that comprise the

plywood and composite wood source category because they will be impacted by the regulation in some

way. These industries fall into three categories based on their Standard Industrial Classification (SIC) or 

North American Industry Classification System (NAICS) classifications. 
2-1

• Softwood plywood and veneer

• Reconstituted wood products

• Structural wood members

The industries are represented by the three SIC codes and four NAICS codes presented in Exhibit

2-1. The NAICS codes replaced SIC codes in federal statistical data beginning in 1997. The SIC code

for Structural Wood Members, Not Elsewhere Classified (n.e.c.) was divided into two NAICS codes for

Engineered Wood Members and Truss Manufacturing. The ICR surveyed 416 potentially impacted

facilities (EPA, 1998) , and an additional 15 facilities were identified that either did not respond to the

survey or have commenced operation since the date of the survey. The Agency determined that of these

431 facilities, 223 were impacted facilities, owned by 52 firms.

EPA expects this rule to primarily impact certain facilities engaged in the manufacturing of

softwood plywood, reconstituted wood products, and structural wood members. Exhibit 2-1 shows, for

each of the three industry categories, the number of facilities EPA expects will experience compliance

costs as a result of this MACT standard and the total number of facilities. The total estimated capital

costs associated with the new MACT standard are $479 million. The annualized costs for affected

facilities are $139 million on an annual basis, including monitoring, reporting, and record keeping costs

(in 1999 dollars). Some unaffected facilities will also have monitoring, reporting, and record keeping

costs of approximately $4 million per year. Therefore, the total annualized compliance costs are $143

million (1999 dollars).

Including costs associated with monitoring, reporting, and record keeping requirements, EPA

expects 88 softwood plywood and veneer facilities to experience approximately 22 percent of the costs,

38 oriented strandboard facilities to experience approximately 18 percent of the costs, 82 other wood

composite (including medium density fiber (MDF), particle board (PB), and hardboard (HB)) to

experience approximately 58 percent of costs, and engineered wood product facilities to bear the

remaining 2 percent. Most of the discussions contained in this profile will emphasize the softwood

plywood and reconstituted wood products industries because facilities in these industries will experience

the greatest impacts associated with the new MACT standard. A discussion of the affected EWP facilities

is presented in Section 4.4 of this chapter.
2

See section 2.4.3.1 for a description of how primary SIC codes were assigned to the surveyed facilities.

2-2

Exhibit 2-1: SIC & NAICS Codes for the Plywood and Composite Wood Industries

SIC Code SIC Description NAICS Code

NAICS

Description

Impacted

Facilities*

Total

Facilities in

Category

2436 Softwood Veneer and

Plywood

321212 Softwood Veneer

and Plywood 

66 155

2493 Reconstituted Wood

Products 

321219 Reconstituted

Wood Products 

Total: 97 317

OSB: 23

PB/MDF: 56

HB: 18

2439 Structural Wood

Members, Not

Elsewhere Classified

321213 Engineered Wood

Members (Except

Truss)

3 53

321214 Truss

Manufacturing

0 992

* Does not include number of facilities with MRR costs only.

Sources: MRI (1999), U.S. Environmental Protection Agency (1998), Dun & Bradstreet (1999a), U.S. Department of

Commerce (1999a). 

Producers of plywood and composite wood products also engage in additional manufacturing

activities including furniture and wholesale timber production. In some cases, their primary SIC code2

may be one other than those listed in Exhibit 2-1. The facilities with a primary SIC codes other than for

plywood and wood composite manufacturers are shown in Exhibit 2-2. The operations related to these

other SIC codes are unlikely to be affected by the MACT standard. In addition, the number of facilities

identified as potentially affected by this rule relative to the total number of establishments in all categories

is extremely small (under one percent for all categories). Therefore, this profile focuses on the SIC and

NAICS listed in Exhibit 2-1. In particular, the profile will focus on the softwood plywood and veneer and

reconstituted wood products industries. All facilities that are impacted by the MACT standard are

included in these analyses, regardless of their primary SIC or NAICS code.
2-3

Exhibit 2-2: Other Primary SIC and NAICS Codes for the Plywood and Composite Wood Industries

SIC Description NAICS NAICS Title

Facilities

in ICR

Impacted

Facilities

Total

Facilities in

Category

2421 Sawmills

and

Planning

Mills,

General

321113

321912

321918

321999

Sawmills

Cut Stock, Resawing Lumber, & Planning

Other Millwork (including Flooring)

All Other Miscellaneous Wood Product

Manufacturing

32 13 5,815

2426 Hardwood

Dimension

and Flooring

Mills

321113

321912

321918

387215

Sawmills

Cut Stock, Resawing Lumber, & Planning

Other Millwork (including Flooring)

Showcase, Partition, Shelving, and Locker

Manufacturing

5 0 833

2448 Wood

Pallets and

Skids

321920 Wood Container and Pallet Manufacturing

1 0 1,929

2499 Wood

Products,

Not

Elsewhere

Classified

321920

333414

339999

321999

Wood Container and Pallet Manufacturing 

Heating Equipment Manufacturing

All Other Miscellaneous Manufacturing

All Other Miscellaneous Wood Product

Manufacturing

4 0 2,760

2511 Wood

Household

Furniture,

Except

Upholstered 

337122

337215

Non-upholstered Wood Household

Furniture Manufacturing

Showcase, Partition, Shelving, and Locker

Manufacturing

13 0 2,785

Sources: MRI (1999), U.S. Environmental Protection Agency (1998), Dun & Bradstreet (1999a), U.S. Department of

Commerce (1999a). 

Section 2.2 of this chapter describes the supply side of the affected industries and characterizes the

production process, the products concerned, and the costs of production. Section 2.3 examines the

demand side of the affected industries, product uses, and consumers. Section 2.4 characterizes the

facilities and firms that comprise the industry, their organization, and their financial conditions. Finally,

Section 2.5 describes the markets and discusses domestic production and consumption, international

trade, and prices.

2.2 The Supply Side

The following section contains information concerning the supply of plywood and composite

wood products. This section describes the production processes of each of the aforementioned industries. 

It then presents the products, by-products, and co-products of each industry. Lastly, the costs of

production for each of the three industries are presented. Factors, such as industry shipments, costs of

materials, fuels and electricity, payroll, capital expenditures, and materials consumed are all examined.
3

The descriptions contained in this section rely primarily on U.S. EPA’s Lumber and Wood Products Sector

Notebook (1995).

2-4

2.2.1 Production Process

This section discusses three categories of plywood and composite wood production: plywood and

veneer; particleboard, strand and fiber composites; and structural wood members. The construction of

plywood, consists basically of combining an odd number of layers of veneer, with each layer having one

or more plies. Hardwood plywood is generally made by applying a hardwood veneer to the face and back

of a softwood plywood, MDF, or particleboard panel. The differences between the hardwood and

softwood processes occur because of different inputs and markets. Particleboard, oriented strandboard,

fiberboard, and hardboard are all processed similarly. These three types of reconstituted wood products

are manufactured by combining fragmented pieces of wood and wood fiber into a cohesive mat of wood

particles, fibers, and strands. Structural wood members are the products of multiple manufacturing

techniques. This section describes the production of glue-laminated timber and the three types of

structural composite lumber: laminated veneer lumber, parallel strand lumber, and laminated strand

lumber.

2.2.1.1 General Considerations for Plywood and Composite Wood Product Manufacturing

Release of hazardous air pollutants (HAPs) is primarily associated with drying and pressing

processes in the manufacturing of plywood and composite wood products. Coating processes are

intrinsically related to the manufacturing process and result in further emissions through drying and

pressing. Conventional composite wood products are generally made with a thermosetting or heat-curing

resin or adhesive that holds wood fiber together. Commonly used resin-binder systems include phenolformaldehyde, urea-formaldehyde, melamine-formaldehyde, and propionaldehyde. A number of

additives are used in the manufacturing of wood composites as well. Most notably, wax is used to

provide finished products with resistance to water penetration. Other additives include preservatives, fire

retardants, and impregnating resins.

While there is a broad range of plywood and composite wood products and many applications for

such products, this section of the profile groups the production processes of these products into three

general categories: plywood and veneer; particle board, strand and fiber composites; and structural wood

members. Further descriptions of the production processes for each of these categories are provided in

this section. 

2.2.1.2 Plywood and Veneer3

Construction of plywood relies on combining an odd number of layers of veneer. Layers consist

of one or more than one ply with the wood grain running in the same direction. Outside plies are called

faces or face and back plies, while the inner plies are called cores or centers. Layers may vary in number,

thickness, species, and grade of wood. To distinguish the number of plies (individual sheets of veneer in

a panel) from the number of layers (number of times the grain orientation changes), panels are sometimes

described as three-ply, three-layer, or four-ply, three-layer. 

As described above, veneer is one of the main components of plywood. Most softwood plants

produce plywood veneer for their own use. Of facilities reporting drying of veneer, 86 percent of the

veneer produced was used for in-facility plywood production. Only approximately 7 percent of the
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facilities in the ICR survey produced veneer solely for outside sales and non-internal plywood use (EPA,

1998). 

The general processes for making softwood includes: log debarking, log steaming and/or soaking,

veneer cutting, veneer drying, veneer preparation, glue application, pressing, panel trimming, and panel

sanding. Softwood plywood is generally made with relatively thick faces (1/10 inch and thicker) and

with exterior or intermediate glue. This glue provides protection in construction and industrial uses

where moderate delays in providing weather protection might be expected or conditions of high humidity

and water leakage may exist. Figure 2-1 below presents a diagram of the plywood production process.

Logs delivered to a plant are sorted, then debarked and cut into peeler blocks. Almost all

hardwood and many softwood blocks are heated prior to peeling the veneer to soften the wood. The

peeler blocks are heated by steaming, soaking in hot water, spraying with hot water, or combinations of

these methods. Heated blocks are then conveyed to a veneer lathe. The block, gripped at either end and

rotated at high speed, is fed against a stationary knife parallel to its length. Veneer is peeled from the

block in continuous, uniform sheets. Depending on its intended use, veneer may range in thickness from

1/16 to 3/16 (1.6mm to 4.8mm) for softwood and much thinner for hardwood and decorative plywood

uses (Youngquist, 1999). Slicing methods are also used to produce hardwood decorative veneers

generally in thicknesses of 1/24 inch and thinner.

After peeling, the continuous sheets of veneer are transported by conveyor to a clipping station

where it is clipped. In softwood mills and some hardwood mills, high-speed clippers automatically chop

the veneer ribbons to usable widths and defects are removed. In many hardwood mills, clipping may be

done manually to obtain the maximum amount of clear material. Wet clipped veneer is then dried. 

Proper drying is necessary to ensure moisture content is low enough for adhesives to be effective.

Dryers

Two types of dryers are used in softwood veneer mills: roller resistant dryers, heated by forced

air; and “platen” dryers, heated by steam. In older roller dryers, also still widely used for hardwood

veneer, air is circulated through a zone parallel to the veneer. Most plants built in recent years use jet

dryers (also called impingement dryers) that direct a current of air, at a velocity of 2,000 to 4,000 feet per

minute, through small tubes on the surface of the veneer. Veneer dryers may be heated indirectly with

steam, generated by a separate boiler, which is circulated through internal coils in contact with dryer air. 

Dryers may also be heated directly by the combustion gases of a gas- or wood-fired burner. The gas-fired

burner is located inside the dryer, whereas combustion gases from a wood-fired burner are mixed with

recirculating dryer air in a blend box outside the dryer and then transported into the dryer. Veneer dryers

tend to release organic aerosols, gaseous organic compounds, and small amounts of wood fiber into the

atmosphere. Once dried, veneer is sorted and graded for particular uses.
2-6

Figure 2-1: Flow Diagram of Veneer and Plywood Production

Figure 2-1:

Source: U.S. EPA (1995).
4

The descriptions in this section rely primarily on Chapter 10 of the USDA’s Forest Products Laboratory

Wood Handbook (Youngquist, 1999).

2-7

Adhesives

Plywood manufacturing begins with the veneer sent to a lay-up area for adhesive application. 

Various adhesive application systems are used including hard rolls, sponge rolls, curtain coaters, sprayers,

and foam extruders. The most common application for softwood plywood is an air or airless spray system,

which generally uses a fixed-head applicator capable of a 10-foot wide spray at a nozzle pressure of 300

pounds per square inch (psi). The phenol-formaldehyde (PF) adhesives typical in softwood plywood

manufacturing is made from resins synthesized in regional plants and shipped to individual plywood

mills. At the mills, the resins are combined with extenders, fillers, catalysts, and caustic to modify the

viscosity of the adhesive. This glue mixing has several additional effects: allowing the adhesive to be

compatible with the glue application method (curtain, roll, spray, foam); allowing for better adhesive

distribution; increasing the cure rate; and lowering cost. 

Presses

Following the application of glue, the panels must be pressed. The purpose of the press is to bring

the veneers into close contact so that the glue layer is very thin. At this point, resin is heated to the

temperature required for the glue to bond. Most plywood plants first use a cold press at lower pressure

prior to final pressing in the hot press. This allows the wet adhesive to "tack" the veneers together,

permits easier loading of the hot-press, and prevents shifting of the veneers during loading. Pressing is

usually performed in multi-opening presses, which can produce 20 to 40 4x8-foot panels in each two- to

seven-minute pressing cycle.

Finishing

After pressing, stationary circular saws trim up to one inch from each side of the pressed plywood

to produce square-edged sheets. Approximately 20 percent of annual softwood plywood production is

then sanded. As sheets move through enclosed automatic sanders, pneumatic collectors above and below

the plywood continuously remove the sander dust. Sawdust in trimming operations is also removed by

pneumatic collectors. The plywood trim and sawdust are burned as fuel or sold to reconstituted panel

plants.

2.2.1.3 Particle, Strand, and Fiber Composites4

This group of products falls into the SIC or NAICS code category of reconstituted wood

products. The impacted facilities in this category manufacture the following products (MRI, 1999).

• Medium density fiberboard

• Oriented stand board

• Particleboard

• Hardboard

All particle, strand and fiber composites are processed in similar ways. Raw material for

particleboard, oriented strandboard (OSB), fiberboard, and hardboard is obtained by flaking or chipping

wood. The general process then includes wood drying, adhesive application, and forming a mat of wood
2-8

particles, fibers, or strands. The mat is then pressed in a platen-type press under heat and pressure until

the adhesive is cured. The bonded panel is finally cooled and further processed into specified width,

length, and surface qualities. Specific details regarding the production processes for different products

are provided below.

Particleboard

Generally, particleboard is produced by mechanically reducing wood materials into small

particles, applying adhesive to the particles, and consolidating a loose mat with heat and pressure into a

panel product. Particleboard is typically made in three layers with the faces consisting of finer material

and the core using coarser material. Particleboard can also be made from a variety of agricultural

residues, including kenaf core, jute stick, cereal straw, and rice husks depending on the region. EPA does

not expect facilities that produce particleboard made from agricultural residues, also called agriboard, to

experience compliance cost impacts associated with the new MACT standard. EPA expects only one

facility that produces molded particleboard to experience compliance cost impacts (MRI, 1999).

The raw materials, or "furnish," that are used to manufacture reconstituted wood products can be

either green or dry wood residues. Green residues include planer shavings from green lumber and green

sawdust. Dry process residues include shavings from planing kiln-dried lumber, sawdust, sander dust,

and plywood trim. The wood residues are ground into particles of varying sizes using flakers, mechanical

refiners, and hammermills, and are then classified according to their physical properties.

After classification, the furnish is dried to a low moisture content (two to seven percent) to allow

for moisture that will be gained by the adding of resins and other additives during blending. Most dryers

currently in operation in particle and fiber composite manufacturing plants use large volumes of air to

convey material of varied size through one or more passes within the dryer. Rotating drum dryers

requiring one to three passes of the furnish are most common. The use of triple-pass dryers predominates

in the United States. Dryer temperatures may be as high as 1,100 - 1,200° F with a wet furnish. 

However, dry planer shavings require that dryer temperatures be no higher than 500° F because the

ignition point of dry wood is 446° F. Many dryers are directly heated by dry fuel suspension burners.

Others are heated by burning oil or natural gas. Direct-fired rotary drum dryers release emissions such as

wood dust, combustion products, fly ash, and organic compounds evaporated from the extractable portion

of the wood. Steam-heated and natural gas-fired dryers will have no fly ash.

The furnish is then blended with synthetic adhesives, wax, and other additives distributed via

spray nozzles, simple tubes, or atomizers. Resin may be added as received (usually as an aqueous

solution), or mixed with water, wax emulsion, catalyst, or other additives. Waxes are added to impart

water repellency and dimensional stability to the boards upon wetting. Particles for particleboard are

mixed with the additive in short retention time blenders, through which the furnish passes in seconds. 

The furnish and resin mixture is then formed into mats using a dry process. This procedure uses air or a

mechanical system to distribute the furnish onto a moving caul (tray), belt, or screen. Particleboard mats

are often formed of layers of different sized particles, with the larger particles in the core, and the finer

particles on the outside of the board. The mats are hot pressed to increase their density and to cure the

resin. Most plants use multi-opening platen presses. Though more popular in Europe, the continuous

press is currently being used in particleboard plants in the United States.

Primary finishing steps for all reconstituted wood panels include cooling or hot stacking, grading,

trimming/cutting, and sanding. Cooling is important for UF-resin-cured boards since the resin degrades at

high temperatures after curing. Boards bonded using PF resins may be hot-stacked to provide additional
2-9

curing time. Secondary finishing steps include filling, painting, laminating, and edge finishing. The vast

majority of manufacturers do not apply secondary finishes to their panels; panels are finished primarily by

end-users such as cabinet and furniture manufacturers. Panels are also finished by laminators who then

sell the finished panels to furniture and cabinet manufacturers.

Oriented Strandboard (OSB)

OSB is an engineered structural-use panel manufactured from thin wood strands bonded together

with waterproof resin under heat and pressure. OSB manufacturing begins with debarked logs usually

heated in soaking ponds sliced into wood strands typically measuring 4.5 to 6 inches long (114 to

152mm). Green strands are stored in wet bins and then dried in a traditional triple-pass dryer, a singlepass dryer, a combination triple–pass/single-pass dryer, or a three-section dryer. A recent advance in

drying technology is a continuous chain dryer, in which strands are laid between two chain mats so the

strands are held in place as they move through the dryer.

After drying, blending and mat formation take place, blending of strands with adhesive and wax

takes place in separate rotating blenders for face and core strands. Different resin formulations are

typically used for face and core layers. Face resins may be liquid or powdered phenolics, while core

resins may be phenolics or isocyantes. Mat formers take on a number of configurations to align strands

along the length and width of the panel. Oriented layers of strands are dropped sequentially (face, core,

face, for example), each by a different forming head. The mat is then transported by conveyer belt to the

press. Hot pressing involves the compression of the loose layered mat of oriented strands under heat and

pressure to cure the resin. Most plants utilize multi-opening presses that can form as many as sixteen 12-

by 24-ft (3.7- by 7.3m) panels simultaneously. Recent development of a continuous press for OSB can

consolidate the oriented and layer mat in 3 to 5 minutes.

Fiber Composites

Fiber composites include hardboard, medium-density fiberboard (MDF), fiberboard, and

insulation board. In order to make fibers for these composites, bonds between the wood fibers must be

broken. This is generally done through refining of the material, which involves grinding or shearing of

the material into wood fibers as it is forced between rotating disks. Refining can be augmented by water

soaking, steam cooking (digesting), or chemical treatments as well.

Fiber composites are classified by density and can involve either a wet process or a dry process. 

High and medium density boards, such as hardboard and MDF, apply a dry process. Wet processes can

be used for high-density hardboard and low-density insulation board (fiberboard). Dry process involves

adhesive-coated fibers that are dried in a tube dryer and air-laid into a mat for pressing.

Wet processes differ from the dry processes. This process involves the utilization of water as a

distributing medium for fibers in a mat. Further differences lie in the lack of additional binding agents in

some wet processes. The technology is very much like paper manufacturing in this pulp-based aspect. 

Natural bonding in the wood fibers occurs in this process. Refining in this process relies on developing

material that can achieve this binding with a degree of “freeness” for removal from mats. The wet

process involves a continuously moving mesh screen, onto which pulp flows. Water is drawn off through

the screen and through a series of press rolls. The wet fiber mats are dried in a conveyor-type dryer as

they move to the press. Wet process hardboard is then pressed in multi-open presses heated by steam. 

Fiberboard is not pressed.
5

The descriptions in this section rely primarily on Chapter 11 of the USDA’s Forest Products Laboratory

Wood Handbook (Moody and Liu, 1999).

2-10

Manufacturers use several treatments alone or together to increase dimensional stability and

mechanical performance of both wet and dry process hardboards. Heat treatment exposes pressed

fiberboard to dry heat, reducing water absorption and improving fiber bonding. Tempering is the heat

treatment of pressed boards preceded by the addition of oil. Humidification is the addition of water to

bring board moisture content into equilibrium with the air. 

2.2.1.4 Structural Wood Members5

Structural wood members, such as glue-laminated timbers and structural composite timber, are

manufactured using a number of methods. Glue-laminated timber, or glulam, is an engineered product

formed with two or more layers of lumber glued together in which the grain of all layers, called

laminations, is oriented parallel to the length of the lumber. Glulam products also include lumber glued

to panel products, such I-joists and box beams. Structural composite lumber consists of small pieces of

wood glued together into sizes common for solid-sawn lumber.

Glue-Laminated Timber (Glulam)

Glulam is a material that is made from suitably selected and prepared pieces of wood, either

straight or curved, with the grain of all pieces essentially parallel to the longitudinal axis of the member. 

The manufacturing process for glulam involves four major steps: (1) drying and grading, (2) end jointing,

(3) face bonding, and (4) finishing and fabricating.

Structural Composite Lumber

The are three major types of structural composite lumber: laminated veneer lumber, parallel

strand lumber, and laminated strand lumber. Each is described in more detail below, however, the general

manufacturing process for these composites is similar.

Laminated veneer lumber (LVL) is manufactured by laminating veneer with all plies parallel to

the length. This process utilizes veneer 1/8 to 1/10 inches. (3.2 to 2.5 mm) thick, which are hot pressed

with phenol-formaldehyde adhesive to form lumber of 8 to 60 feet (2.4 to 18.3 m) in length. The veneer

used for LVL must be carefully selected to achieve the proper design characteristics. Ultrasonic testing is

often used to sort veneer required for LVL. Once the veneer has been selected, end jointing occurs

followed by adhesive application and continuous pressing. 

Parallel strand lumber (PSL) is a composite of wood strand elements with wood fibers primarily

oriented along the length of the member. PSL is manufactured using veneer about 1/8 inch (3 mm) thick,

which is then clipped into 3/4 inch (19 mm) wide strands. The process can utilize waste material from a

plywood or LVL operation. Strands are coated with a waterproof structural adhesive, and oriented using

special equipment to ensure proper placement and distribution. The pressing operation results in

densification of the material. Adhesives are cured using microwave technology. As with LVL, the

continuous pressing method is used. 

Laminated strand lumber (LSL) is produced using an extension of the technology used to produce

oriented strandboard structural panels. LSL uses longer strands than those commonly used in OSB
2-11

manufacturing. LSL is pressed into a billet several inches thick in a steam-injection press, as opposed to

an OSB panel pressed in a multi-opening platen press. The product also requires a greater degree of

alignment of the strands at higher pressures, which result in increased densification.

2.2.2 Products, By-Products, and Co-Products

Exhibit 2-3 presents products, corresponding SIC and NAICS codes, and product examples of the

plywood and composite wood products industry. 

The plywood and composite wood products industries have unique manufacturing processes in

their use of waste wood products as an input for additional products. Planer shavings, sawdust, edgings,

and other wood by-products are inputs to many wood composites. Structural wood members were

developed in response to the increasing demand for high quality lumber when it became difficult to obtain

this type of lumber from forest resources. Therefore, many of the by- and co-products from one process

may be used in another.
2-12

Exhibit 2-3: SIC and NAICS Codes and Products

Product Description SIC NAICS Example Products

Softwood Veneer and

Plywood

2436 321212 Panels, softwood plywood

Plywood, softwood

Softwood plywood composites

Softwood veneer or plywood

Veneer mills, softwood

Reconstituted Wood

Products

2493 321219 Board, bagasse

Flakeboard

Hardboard

Insulating siding, broad-mitse

Insulation board, cellular fiber or hard pressed 

Lath, fiber

Medium density fiberboard (MDF)

Particleboard

Reconstituted wood panels

Strandboard, oriented

Wafer-board

Wall tile, fiberboard

Wallboard, wood fiber

Structural Wood

Members, Not

Elsewhere Classified

2439 321213 Arches, glue-laminated or pre-engineered wood

Fabricated structural wood members

Finger joint lumber manufacturing

I-joists, wood

Laminated structural wood members

Laminated veneer lumber

Parallel strand lumber

Structural wood members (except trusses)

321214 Floor trusses, wood, glue-laminated or pre-engineered

Roof trusses, wood, glue-laminated or pre-engineered

Source: U.S. Department of Labor, OSHA (no date).

Exhibit 2-4 provides ratios of specialization and coverage (product mix) calculated by the U.S.

Census Bureau for the last three Censuses of Manufacturers. The Census assigns a “primary” SIC code to

each establishment which corresponds to the SIC code for the largest (by value) single type of product

shipped by the establishment. The products shipped from that establishment that are classified in the

same industry as the establishment are considered “primary,” and all other products shipped by the

establishment are considered “secondary.” The Census then calculates various measures to illustrate the

product mix between primary and secondary products in each industry. The specialization ratio

represents the ratio of total primary product shipments to total product shipments for all establishments

classified in the industry. The coverage ratio represents the ratio of primary products shipped by the

establishments classified in the industry to the total shipments of these products shipped by all

establishments classified in all industries. 
2-13

As Exhibit 2-4 illustrates, all three industries have specialization ratios well above 80 percent and

coverage ratios above 90 percent. This implies that most establishments with these SIC codes are highly

specialized, and that most product shipments of each type originate in establishments with these SIC

codes. Therefore, the Census data on these SIC and NAICS industries provide information on the

primary production of facilities engaged in plywood and composite wood products manufacturing. These

ratios have been stable over time.

Exhibit 2-4: Specialization and Coverage Ratios, 1982 - 1997

SIC NAICS Description 1982 1987 1992 1997

2436 321212 Softwood Veneer and Plywood

Primary products specialization ratio 87 87 84 88

Coverage ratio 96 95 94 95

2493 321219 Reconstituted Wood Products

Primary products specialization ratio 96 97 96 97

Coverage ratio 97 95 95 97

2439 321213 Structural Wood Members, N.E.C./Engineered Wood Members

Primary products specialization ratio 96 97 96 95

Coverage ratio 95 97 97 96

2439 321214 Structural Wood Members, N.E.C./Truss Manufacturing

Primary products specialization ratio 96 97 96 96

Coverage ratio 95 97 97 94

Source: U.S. Department of Commerce (1999a and 1995b).

2.2.3 Costs of Production

Exhibit 2-5 provides information on the overall value of shipments (VOS) and production costs (a

component of operating expenses) by SIC code as reported by the Bureau of the Census. Typical of many

intermediate goods, the cost of materials is the largest portion of production costs, with payroll

constituting 15-20 percent of VOS. In particular, timber supply plays a large role in industry costs. In

this decade, reductions in public timber supply, especially reductions in National Forest timber harvests,

combined with the economy’s continued demands for wood has led to substantial increases in the cost of

timber (Spelter, 1997).
2-14

Exhibit 2-5: Summary of Annual Costs and Shipments, 1992 -1997

(Thousands of 1997 Dollars)

1992 1993 1994 1995 1996 1997 % Change

Softwood Veneer and Plywood (SIC 2436, NAICS 321212)

Industry Shipments 7,321,641 6,400,683 6,755,571 7,725,037 6,525,702 5,748,047 -21.5%

Cost of Materials 4,169,048 3,671,638 4,097,921 4,736,984 4,330,167 3,795,985 -8.9%

Fuels & Electricity 220,039 178,592 178,601 183,507 176,759 161,239 -26.7%

Payroll 1,112,158 897,839 883,819 1,047,092 1,006,792 912,613 -17.9%

Ratio of Costs to

Shipments 75% 74% 76% 77% 84% 85%

Reconstituted Wood Products (SIC 2493, NAICS 321219)

Industry Shipments 5,350,565 4,951,902 5,517,234 5,827,821 5,561,099 5,278,809 -1.3%

Cost of Materials 2,400,670 2,144,060 2,342,362 2,582,565 2,697,471 2,633,139 9.7%

Fuels & Electricity 327,706 250,814 268,934 316,876 321,390 350,950 7.1%

Payroll 825,718 699,627 707,179 810,753 855,237 798,767 -3.3%

Ratio of Costs to

Shipments 66% 62% 60% 64% 70% 72%

Structural wood members (SIC 2439, NAICS 321213 and 321214)

Industry Shipments 3,367,525 3,281,578 4,295,002 4,739,339 5,096,809 5,112,873 51.8%

Cost of Materials 1,958,576 1,966,635 2,584,765 2,863,098 3,154,297 3,007,103 53.5%

Fuels & Electricity 35,486 33,406 34,585 39,595 42,621 42,090 18.6%

Payroll 692,377 604,180 740,318 867,510 947,403 954,694 37.9%

Ratio of Costs to

Shipments 80% 79% 78% 80% 81% 78%

All dollars adjusted to 1997 using Producer Price Index for Lumber and Wood Products (SIC 24).

Source: U.S. Department of Census (1999a).

From these data, one can estimate the sector-wide ratio of production costs to VOS. The ratio of

costs (materials, fuels and electricity, and payroll) to the VOS has been increasing over the 1992 to 1997

period for softwood plywood and veneer and reconstituted wood products. The data in Exhibit 2-5 show

that 1997 cost to shipment ratios range between 72 percent (reconstituted wood products) and 85 percent

(softwood veneer and plywood). This measure indicates the proportion of the revenues received for the

goods produced that are associated with production expenses (materials, fuel and electricity, and payroll). 

Figures 2-2 and 2-3 present cost and VOS data for the softwood plywood and reconstituted wood

products industries, respectively.
2-15

Figure 2-2: Softwood Plywood and Veneer Value of Shipments and Production Costs, 1992 - 1997

-

2,000,000

4,000,000

6,000,000

8,000,000

Thousands of Dollars (1997)

1992 1993 1994 1995 1996 1997

Year

VOS - Total Costs

Payroll

Fuels & Electricity

Cost of Materials 

Source: U.S. Department of Commerce (1999a).

Note: Total costs in this figure is the sum of payroll, fuels & electricity, and materials costs.
2-16

Figure 2-3: Reconstituted Wood Products Value of Shipments and Production Costs, 1992 - 1997

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

Thousands of Dollars (1997)

1992 1993 1994 1995 1996 1997

Year

VOS - Total Costs

Payroll

Fuels & Electricity

Cost of Materials 

Source: U.S. Department of Commerce (1999a).

Note: Total costs in this figure is the sum of payroll, fuels & electricity, and materials costs.

The cost to shipment ratio does not reflect other operating expenses such as non-payroll

employment expenses, taxes, interest, or depreciation. Nor does it indicate whether the expenses are of a

variable or fixed nature. However, it does provide an approximate measure of how much cash, at a gross

level, the industries are generating to cover all operating expenses, use for capital investment, and provide

a return to owners. While this measure is somewhat crude, it indicates that the impacts of the rule may

potentially be more significant for the softwood plywood and veneer industry than for reconstituted wood

products.

Exhibit 2-6 and Exhibit 2-7 provide information on materials consumed by kind in 1997 for the

three sectors. In softwood plywood and veneer manufacturing, 81.6 percent of material costs result from

timber and veneer purchasing. Glues and adhesives represent 5.7 percent of the material costs in the

softwood plywood and veneer industry.
2-17

Exhibit 2-6: Materials Consumed By Kind for 

Softwood Plywood and Veneer, 1997

Materials Consumed

 Delivered Cost

($1,000)*

% of Total

Materials

Stumpage cost (cost of timber, excluding land,

cut and consumed at same establishment) 346,854 9.4%

Hardwood logs and bolts 64,617 1.7%

Softwood logs and bolts 2,218,800 60.0%

Hardwood veneer 27,355 0.7%

Softwood veneer 363,583 9.8%

Glues and adhesives 210,105 5.7%

All other materials 471,717 12.7%

TOTAL 3,703,031 100%

* Excludes costs of resales and contract work.

Source: U.S. Department of Commerce (1999a).

Figure 2-4 shows the percentage materials consumed by kind by the softwood plywood and veneer

industry in 1997.

Figure 2-4: Materials Consumed by Softwood Plywood and Veneer Products, 1997

Softwood veneer

9.8%

Glues & adhesives

5.7%

All other materials

12.7%

Softwood logs & 

bolts

60.0% Hardwood veneer

0.7%

Hardwood logs & 

bolts

1.7%

Stumpage cost

9.4%

Source: U.S. Department of Commerce (1999a).
2-18

Exhibit 2-7: Materials Consumed by Kind for Reconstituted Wood Products, 1997

Material Consumed Delivered Cost ($1,000)* % of Total Materials

Logs and bolts 80,891 3.2%

Pulpwood 400,579 15.7%

Chips, slabs, edgings, sawdust, and other

wood waste, and planer shavings

399,446 15.7%

Hardboard, MDF, and particleboard 346,052 13.6%

Paints, varnishes, lacquers, stains, shellacs,

enamels, and allied products

69,488 2.7%

Adhesives and resins 548,553 21.5%

Petroleum wax 61,173 2.4%

Vinyl and paper overlays 101,405 4.0%

All other materials, components parts,

containers and supplies

538,183 21.2%

TOTAL 2,545,770 100%

* Excludes costs of resales and contract work.

Source: U.S. Department of Commerce (1999a).

As with the plywood industry, timber products are the largest portion of costs for the

reconstituted wood product industry. Logs, pulpwood, wood materials, and other wood products account

for a combined 48.2 percent of material costs. Unlike plywood and veneer manufacturing, reconstituted

wood products have higher material costs for adhesives and resins, compromising 21.5 percent of costs. 

Figure 2-5 shows the percentage of materials consumed by kind by the reconstituted wood products

industry for 1997.
2-19

Figure 2-5: Materials Consumed by Reconstituted Wood Product Producers, 1997

Hardboard, MDF, & 

particleboard

13.6%

Chips, slabs, edgings, 

sawdust, & other wood 

waste, & planner 

shavings

15.7%

Paints, varnishes, 

lacquers, stains, 

shellacs, enamels, & 

allied products

2.7%

Adhesives & resins

21.5%

All other materials, 

components' parts, 

containers & supplies

21.2%

Pulpwood

15.7%

Logs & bolts

3.2%

Vinyl & paper overlays

4.0%

Petroleum wax

2.4%

Source: U.S. Department of Commerce (1999a).

Wood costs for plywood and composite wood product manufacturing vary according to plant

location, wood species, and facility efficiency. While there may be considerable variability in wood

prices across regions, the last decade has seen substantial increase in wood prices across all regions. 

Wood use efficiency depends on wood species used, log temperature, speed of cutting, board compaction,

and other process variables. Next to wood, adhesives and wax play an important role in industry costs,

especially for the production of reconstituted wood products such as OSB, particleboard, and MDF

(Spelter et al, 1997).

In 1995, sixteen percent of the output from the adhesive and sealant industry, SIC 2891, went to

the wood products market. As such, a MACT standard that greatly reduces the demand for adhesives and

sealants (or coatings) could potentially have a significant impact in the adhesive and sealant industry (Abt

Associates Inc., 1997). The response on the part of the softwood plywood and veneer and reconstituted

wood products industries will depend on the final requirements of the MACT standard and the

attractiveness of comparable resin, adhesive and sealant products that do not contribute to HAP

emissions. There will be many constraints on the ability of the impacted industries to switch away from

current adhesives, as their products generally must meet certain requirements related to building codes. 

These properties are discussed in the next section.
2-20

2.3 The Demand Side

The following section contains information concerning the demand for plywood and veneer,

reconstituted wood products, and structural wood members. The characteristics of plywood and wood

composites are examined first, highlighting the numerous uses of these types of wood products. The

consumers and users of plywood and composite wood products are then examined, specifically analyzing

the distribution of consumption. Substitution possibilities are addressed, looking at both wood and nonwood options. Lastly, the elasticities of demand of the plywood and composite wood products industries

are discussed.

2.3.1 Product Characteristics

Plywood and composite wood products provide a more stable product over solid wood by

reducing the variations between wood species, among trees of the same species, and even between wood

from the same tree. Unlike solid wood which is evaluated at a cellular level, composite wood is evaluated

at fiber, particle, flake, or veneer level. Properties of products can be changed by combining,

reorganizing, or stratifying these different elements. Control of the size of particles used in producing

composite wood products provides the chief means by which materials can be produced with

predetermined properties (Youngquist, 1999).

Strength is a crucial factor in determining the applicability of plywood and composite wood

products to structural and other manufacturing uses. Stiffness and strength properties of a wood product

depend primarily on the constituents from which these products are made. The basic wood elements can

be made in a great variety of sizes and shapes, and may utilize any number of wood species. Plywood

can be manufactured from over 70 species of wood. The choices available for composite wood products

are almost unlimited. Types of adhesives and bonding-agents also play an important role in the strength

of a composite wood product. 

Durability will also determine the market for composite wood products. Panels used for exterior

applications will have a fully waterproof bond and are designed for permanent exposure to weather and

moisture. Interior panels may lack the waterproof bond and be manufactured with glue products designed

for interior use.

Depending on the composite wood product, a range of sizes and thicknesses are available. The

range of structural applications for which these products are used requires production of several

standardized sizes as well as custom-made pieces. Sizes and thicknesses will depend on the type of wood

composite product and the market for which it is primarily produced. 

Wood panels and other composite wood structures are subject to performance-type standards as

outlined by various industry organizations. A number of organizations including American Plywood

Association - The Engineered Wood Association, Composite Panel Association (CPA), American

Hardboard Association, and others monitor products produced by their member firms to assure highquality production and industry conformity with testing and performance standards.

2.3.2 Consumers and Uses

Exhibit 2-8 shows industry output by SIC code. Output of plywood and veneer goes mainly to

the construction sector, primarily to the residential housing and repair industries. Almost one third of

plywood goes to the manufacturing sector, part of which is used as an input for other plywood
2-21

production, and part of which goes for furniture and other durable goods manufacturing. The “Other”

category is made up of foreign trade, inventory change, and wholesale trade. The outputs for

reconstituted wood products, including particleboard, are more evenly split between construction and

manufacturing, The “Other” category for reconstituted wood products is made up of sales to state and

local government, foreign trade, and services (Gale Business Resources, 1999).

Exhibit 2-8: Consumption of Industry Outputs, by SIC Code

SIC SIC Description Construction Manufacturing Other

2436 Softwood veneer and plywood 63.5% 27.9% 8.6%

2493 Reconstituted wood products 45.7% 47.6% 6.7%

2439 Structural wood members 94.8% 0.6% 4.6%

Source: Gale Business Resources (1999).

The major use of structural panel products is for construction activities. Panel products include those

products such as plywood, OSB, particleboard, and others formed as a panel. These products may be

used for floor systems, exterior walls, roofing, and exterior siding. Figure 2-6 shows the industry outputs

by percentage for the softwood plywood and veneer industry.

Figure 2-6 Industry Outputs of Softwood Plywood and Veneer Industry

Manufacturing

27.9%

Other

Construction 8.6%

63.5%

Source: Gale Business Resources (1999).
2-22

Figure 2-7 shows the industry outputs by percentage for the reconstituted wood products industry.

Figure 2-7: Industry Outputs of Reconstituted Wood Products Industry

Manufacturing

47.6%

Other

6.7%

Construction

45.7%

Source: Gale Business Resources (1999).

MDF and particleboard are two products of the reconstituted wood products industry. Exhibits 2-9 and 2-

10 below show the downstream uses of MDF and particleboard in 1997. For each of the products, about

20 percent of the output is used for household furniture, and the remainder is used for construction,

shelving, cabinetry and other customized applications.

Exhibit 2-9: MDF Shipments by Downstream Market, 1997

Downstream Use Million ft2 Percent

Household Furniture 247.8 19%

Custom Laminators 208.6 16%

Stocking Distributors 286.9 22%

Kitchen and Bath 65.2 5%

Molding 130.4 10%

Millwork 65.2 5%

Partitions and fixtures 65.2 5%

All Other 182.6 14%

Other (n.e.c.) 52.2 4%

Total 1,304.0 100%

Source: Composite Panel Association (1998).
2-23

Exhibit 2-10: Particleboard Shipments by Downstream Market, 1997

Downstream Use Million ft2 Percent

Household Furniture 889.0 20%

Custom Laminators 711.2 16%

Stocking Distributors 755.7 17%

Kitchen and Bath 711.2 16%

Flooring Products 400.1 9%

Office Furniture 266.7 6%

Door Core 177.8 4%

All Other 400.1 9%

Other (n.e.c.) 133.4 3%

Total 4,445.2 100%

Source: Composite Panel Association (1998).

Construction Activities

Over sixty percent of the softwood plywood and veneer industry output and approximately 50

percent of the reconstituted wood products industry output goes to the construction sector, primarily to

the construction, remodeling and repair of single and multiple family dwellings. The majority of the

work performed by the construction sector is associated with single family dwellings, and the largest

share of their costs is associated with materials such as wood-based materials. As Exhibit 2-11 shows,

housing starts have been quite strong since 1996 and are expected to continue through at least this year. 

Housing start activity is closely linked to general economic conditions, employment, income, and interest

rates. Renovation and remodeling expenditures have declined in real terms, as would be expected. 

Generally, more renovation and remodeling takes place during periods when fewer new houses are being

constructed (U.S. Department of Commerce, 1995a).

Exhibit 2-11: Housing Market Indicators, 1988 - 1997

Year New Housing Units

(thousand)

Renovation and Remodeling

Expenditures

(million current $)

Renovation and Remodeling

Expenditures 

(million 1992 $)

1988 1,706 101,117 110,874

1989 1,574 100,891 106,425

1990 1,381 106,773 109,175

1991 1,185 97,528 98,813

1992 1,411 103,734 103,734

1993 1,542 108,304 104,339

1994 1,761 115,030 106,411

1995 1,694 111,683 99,362

1996 1,838 114,919 99,756

1997 1,828 118,423 99,431

Source: Howard (1999).
2-24

Because economic conditions can vary between regions in the U.S., the impact of housing starts

on demand for wood-based construction materials can vary. This regional variation is further amplified

by differing local preferences, housing codes, and availability of specific wood-based products.

Wood Furniture Industry

The wood furniture industry produces output for a high value added market. Exhibit 2-12 below

shows the value of shipments from the household furniture sector. Wood household furniture is a portion

of this sector. Domestic shipments and apparent consumption of household wood furniture have

experienced modest growth since 1989, indicating that the shipments from the softwood plywood and

veneer and reconstituted wood products industries to the furniture sector has had limited experience for

growth.

Exhibit 2-12: Trade for Household Furniture (SIC 251), 1989 -1996

(Millions of 1997 Dollars)*

1989 1990 1991 1992 1993 1994 1995 1996

%

Change

Value of product

shipments 23,056 22,477 21,521 21,949 22,823 24,038 24,355 na 6

Value of imports 3,301 3,200 3,117 3,368 3,723 4,201 4,586 5,047 53

Value of exports 565 884 1,091 1,252 1,298 1,385 1,361 1,342 237

Apparent Consumption 25,792 24,793 23,547 24,065 25,248 26,854 27,580 na 7

*Values adjusted to 1997 dollars using PPI for Furniture and Household Durables 

Source: U.S. Department of Commerce (1999a).

Wood furniture manufacturers constitute a large portion of the demand, 20 to 30 percent, of the woodbased products other than structural panels and structural members. Much of the growth in retail demand

is being met by imports. This translates into a large lost opportunity for domestic furniture manufacturers,

as well as for their suppliers, including the industries that are the subject of this profile. The potential

causes for this increase in imports are lower material and labor costs in exporting countries, and declining

availability of timber products to domestic producers (CINTRAFOR, 1999 and Dirks, 1991).

The 1992 Census of Manufacturers showed that 21 percent of the delivered cost of materials in

the manufacture of wood household furniture is associated with plywood and composite wood products. 

As a result, significant price changes in the cost of plywood and composite wood products have the

potential to affect production costs of wood household furniture. As the demand for wood household

furniture is highly elastic with respect to price (see discussion in section 2.3.4), increased input costs

could affect both the demand for wood household furniture and for plywood and composite wood

products supplied to furniture manufacturers.

2.3.3 Substitution Possibilities

The basic substitution in these industries is between different wood products, although non-wood

substitutes exist as well for some applications. Composite wood products were originally manufactured

in response to the growing demand for wood products as the availability of larger sized timber declined. 

As new wood composites products were developed, they further replaced sawn lumber and other types of

wood products. Plywood and veneer production lost market share during the late 1980s and early 1990s
2-25

to new products that are categorized as reconstituted wood products, largely as a result of several

challenges: legislation protecting federal timber lands; recession in the early 1990s; price increases and

instability; and supply shortages. To provide an indication of the structural uses of wood panel products

and substitutes, Exhibit 2-13 outlines the use of various products in new single-family and multi-family

residential construction in the United States. 
2-26

Exhibit 2-13: Use of Wood and Non-wood Products in Residential Construction

1976 - 1995

Application

Incidence of Use (%)

Single-family houses Multi-family houses

1976 1988 1995 1976 1988 1995

Floor Sheathing

Lumber 1 5 - 2 6 -

Structural Panels 51 56 55 51 52 54

 Softwood Plywood 51 48 31 51 46 24

 OSB 0 9 24 0 7 30

Nonstructural Panels 12 9 9 10 9 7

Lightweight Concrete 0 0 0 5 7 3

Concrete Slab 30 30 35 32 26 36

Exterior Wall Sheathing

Lumber - 2 - - - -

Structural Panels 16 33 52 17 40 43

 Softwood Plywood 16 26 19 17 28 10

 OSB 0 7 33 0 12 33

Fiberboard 34 13 6 32 11 5

Foamed Plastic 7 22 29 2 18 34

Foil-faced kraft - 17 3 0 13 1

Gypsum, other 18 8 2 18 15 8

None 25 5 8 31 5 9

Roof Sheathing

Lumber 14 6 1 11 2 1

Structural Panels 85 91 98 87 94 94

 Softwood Plywood 84 70 37 87 78 19

 OSB 1 21 61 1 16 75

Other 1 3 0 2 4 5

Exterior Siding

Lumber 10 12 7 9 16 2

Structural Panels 22 23 9 32 15 4

 Softwood Plywood 22 23 4 32 15 2

 OSB - - 5 0 - 2

Hardboard 16 16 6 7 11 5

Non-wood 52 49 77 49 58 89

 Vinyl 14 15 29 12 14 41

 Masonry, stucco 38 34 48 37 44 48

Other 0 0 1 3 - -

Source: Spelter et al. (1997).

Structural wood panels hold the majority of the market share for floor, exterior wall, and roof sheathing in

single and multi-family housing construction. The major substitution effect in this market has occurred

between OSB and softwood plywood, with OSB capturing much of the market from softwood plywood

by 1995. Much of the trade-off between softwood plywood and OSB is due to lower cost for OSB. 
2-27

However, questions of exterior durability with OSB have led many builders to continue plywood use

despite higher initial costs.

Fiberboard has also seen reduction in market share for exterior wall systems due to increases in

OSB use. Non-wood products, mainly masonry, have captured 77 percent of the market for exterior

siding, greatly reducing the market share of structural panels in this market. Other major substitutes

include concrete slab for floor sheathing and foamed plastic, which gained major shares of the exterior

wall sheathing market from wood-based structural panels.

2.3.4 Demand Elasticities

The price elasticity of demand is the percentage change in the quantity of product demanded by

consumers divided by the percentage change in price. Demand curves slope downward, signifying a

negative response (less demand) to an increase in price. If demand is elastic (an absolute value of greater

than one) a small price increase will lead to a relatively large decrease in demand. Conversely, if demand

is inelastic with respect to price, or an absolute value less than one, the quantity demanded will change

very little relative to a change in price.

For the purposes of performing an economic analysis, short-term price elasticities are relevant as

impacts of the regulation fall directly on the entities owning facilities faced with compliance

responsibilities. In appropriating compliance costs to facilities impacted by this rule, the economic

analysis assumes that these facilities have a fixed capital stock in the short term. This method allows an

evaluation of the severity of impacts using static measures of profit and loss. This short-term analysis

approach, which is described in more detail in Chapter 4, differs from other behavioral approaches that

take into account adjustments made by producers, such as changing input mixes, that can generally affect

the market environment in which they operate over the longer term.

In the case of plywood and reconstituted wood production that is going to the construction

industry, the overall price elasticity of demand for these products is relatively inelastic. This is because

the wood product component of construction is fixed once the decision to construct has been made. The

other factors that contribute to the inelastic nature of demand for structural wood panels include local

building codes, home buyer and home owner preferences, and building industry investment in the training

and infrastructure required to construct with wood panels as opposed to a substitute.

The demand for each individual type of product may differ, depending on several factors,

including the product’s own-price elasticity, the availability and price of other wood based and non-wood

products with comparable characteristics, and the availability and price of imported products. Cross price

elasticities are often difficult to identify or estimate. However, if available, cross price elasticities of

substitutes and imports might be considered when developing an approach to the economic analysis. For

example, analysis of the softwood plywood market may incorporate the cross-price elasticity of OSB, a

major substitute for plywood. When analyzing the OSB market, the converse would also be true. Even if

such cross price elasticities were available, other considerations would also determine whether the

economic analysis incorporates the market substitution dynamic.

We examined several recent and historical studies of price elasticities of demand. Most of these

studies were concerned with the softwood lumber sector, most likely due to the limited availability of

relevant price and consumption information at a disaggregated product level. Our review focused on the

1996 study by Joseph Buongiorno, a forestry economist, who noted that previous econometric studies of

the wood products sector have produced estimates of demand elasticities for softwood lumber, a product
6

The majority of studies reviewed estimated price elasticity of demand as being between -0.15 and -0.4.

2-28

with similar demand drivers, inputs, input costs, and uses, between zero and -0.96. Buongiorno also

reported that other studies have estimated the cross elasticity of lumber with respect to the price of

plywood to be between 0.5 and zero. Buongiorno developed a model using a price-endogenous linear

programming system (PELPS) that endeavored to address the entire wood products market using a system

dynamics approach. The results of this model included short-term price elasticities of demand for woodbased products, as shown in Exhibit 2-14.

Exhibit 2-14: Demand Elasticities

Product Price Elasticity of Demand

Plywood -0.16

Fiberboard -0.10

Particleboard -0.27

Source: Buongiorno (1996).

Buongiorno’s results provide the basis for imputing price elasticities for the other products that

are the subject of this MACT standard. In addition, further review of identified studies may produce

information useful in the final determination of appropriate elasticities for use in the economic analysis of

the impacts of a MACT standard on the softwood plywood and reconstituted wood products industries.

In the case of softwood plywood and reconstituted wood production going to the furniture

industry, the price elasticity of demand is highly elastic. This is because the price elasticity of demand for

wood furniture is highly elastic itself and the softwood plywood and reconstituted wood component of

production costs for wood furniture is also quite high, over twenty percent. The EPA’s study of the

economic impacts of alternative NESHAPS on the wood furniture industry estimated the price elasticity

of demand for wood furniture as -3.477 (U.S. EPA, 1992). This result forms the basis for a derived price

elasticity of demand for use in the economic analysis of the impacts of the MACT standard.

2.4 Industry Organization

The following section contains information pertaining to the organization of the plywood and

veneer, composite wood , and structural wood members industries. This section will provide the basis

for understanding the following.

• The industry structure 

• The characteristics of the manufacturing facilities

• The characteristics of the firms that own the manufacturing facilities

A detailed examination of these three topics is essential, as it provides the basis for much of the

approach to estimating economic impacts of the MACT standard. In addition, this section also provides

detailed information about facilities and firms that are important inputs to the analysis itself as well as to

analysis of how the MACT standard might affect firms of different sizes.
2-29

2.4.1 Industry Structure

Exhibit 2-15 shows concentration ratios by SIC code for the three census years, 1982, 1987, and

1992. The m-firm concentration ratios are equal to the sum of the market shares for the largest m number

of firms in the industry. A market is generally considered highly concentrated if the 4-firm concentration

ratio is greater than 50 percent. Exhibit 2-15 also shows the Herfindahl-Hirschman (HH) index, which is

an alternative measure of concentration equal to the sum of the squares of the market shares for the 50

largest firms in the industry. The higher the index, the more concentrated the industry is at the top. The

U.S. Justice Department uses 1,000 as a benchmark for the presence of market concentration, where any

industry with a Herfindahl-Hirschman index less than 1,000 is considered to be unconcentrated (Arnold,

1989). 

Exhibit 2-15: Concentration Ratios by SIC Code, 1982-1992*

Year

Number of

Companies

in Industry

Percent of value of industry shipments shipped by the

largest (in terms of shipment value) HerfindahlHirschman

Index** 4

Companies

8

Companies

20

Companies

50

Companies

Softwood Veneer and Plywood (SIC 2436)

1982 135 41 56 74 92 619

1987 131 38 56 74 93 571

1992 123 47 66 82 96 797

Reconstituted Wood Products (SIC 2493)

1982 N/A

1987 158 48 65 82 95 743

1992 193 50 66 81 94 765

Structural wood members (SIC 2439)

1982 649 15 22 35 50 104

1987 831 13 18 30 44 92

1992 830 19 25 34 46 166

*The latest year for which data is currently available.

**The index is based on the 50 largest companies in each SIC code. 

Source: U.S. Department of Commerce (1992).

The concentration ratios presented in Exhibit 2-15 show very little evidence of market

concentration in the plywood and composite wood products industries. Four-firm concentration ratios for

the three sectors are below 50 with the exception of reconstituted wood products (classified as “General”

in the ICR survey) which is 50. The HH indices for all SIC codes are well below the benchmark of 1000. 

While concentration appears to have increased in general between 1982 and 1992, there is no clear trend

as all appear to have been less concentrated in 1987.

2.4.2 Manufacturing Plants

Through an ICR, the U.S. Environmental Protection Agency identified plants potentially affected

by this rule. EPA categorized the surveyed facilities according to their production processes and

developed estimates of compliance costs for each facility. Exhibit 2-16 below presents information on the
7

 Map developed based on original survey database dated July 23, 1999.

2-30

number of potentially impacted facilities, and their corresponding primary SIC code. The exhibit also

shows the percent of potentially impacted facilities as a percent of total facilities for each SIC.

Exhibit 2-16: Facilities with Compliance Cost Impacts

Facilities

SIC Code Description Impacted* Total in SIC % of Total

2436 Softwood Veneer and

Plywood

66 155 42.6%

2493

Reconstituted Wood 

Products

Total 97 317 30.6%

OSB 23

PB/MDF 56

HB 18

2439 Structural Wood Members 3 53 5.7%

* Does not include number of facilities with MRR costs only.

Note: Percentages represent survey facilities’ share of total facilities in the category. 

Sources: U.S. Environmental Protection Agency (1998), U.S. Department of Commerce (1999a), MRI

(1999).

2.4.2.1 Location

Nationally, facilities that produce softwood plywood and reconstituted wood products are

clustered in distinct geographic regions of the South, Pacific Northwest, and the upper Mid-West of the

U.S. Based on the 1997 Census of Manufacturers, the softwood plywood and veneer facilities have the

highest employment in Oregon, Washington and Louisiana. The Census showed that reconstituted wood

product facilities had the highest employment in Oregon, California, North Carolina, Texas, and

Michigan (source: U.S. Department of Commerce, 1999a). 

Figure 2-87

 is a map of locations of impacted and total ICR facilities as identified by EPA (MRI,

1999, EPA, 1998). For this figure, all types of facilities are combined. The map shows the state-by-state

distribution of the potentially impacted facilities relative to the total ICR facilities in the state. The states

with the greatest number of potentially impacted facilities are Oregon (36), Louisiana (16), Georgia (8),

Mississippi (7), Virginia (10), Texas (8), and North Carolina (7). Major producing states where impacted

facilities constitute a significant portion of all facilities in the state include Louisiana (66 percent), Oregon

(57 percent), Washington (77 percent), Georgia (38 percent) and Texas (44 percent).
2-31

8 of 18

4 of 5

4 of 12

1 of 1

0 of 1

0 of 1

5 of 7

0 of 1

1 of 1

0 of 1

1 of 1

0 of 1

5 of 12

36 of 63

0 of 1

2 of 5

8 of 21

1 of 1

10 of 13

3 of 25

2 of 12

6 of 20

0 of 6

0 of 3

0 of 5

7 of 41

7 of 

16

3 of 11

4 of 

13

2 of 6

16 of 

24

0 of 

17

10 of 25

6 of 15

0 of 3

0 of 2

Impacted Facilities

01 - 910 - 1819 - 2728 - 36States

Figure 2-8: Plywood and Wood Composite Facility Locations

(Potentially Impacted Facilities and Total ICR Facilities by State)

Sources: U.S. Environmental Protection Agency (1998), MRI (1999) 
2-32

2.4.2.2 Production Capacity and Utilization

Exhibit 2-17 shows the capacity utilization rates by SIC code and for all manufacturing industries

for 1992 through 1997. The rates for softwood plywood and veneer, and reconstituted wood products are

significantly higher than the average for all lumber and wood products and for all industries. Capacity

utilization for structural wood members is below industry averages but has increased over the 1992 - 1997

period.

Exhibit 2-17: Full Production Capacity Utilization Rates, Fourth Quarters, 1992 - 1997

SIC SIC Description 1992 1993 1994 1995 1996 1997 Change

2436 Softwood Veneer and Plywood 87 92 95 95 86 84 -3.4%

2493 Reconstituted Wood Products 87 92 92 88 86 82 -5.7%

2439 Structural Wood Members 65 66 66 74 77 72 10.8%

24 All Lumber and Wood Products 80 81 80 77 78 75 -6.3%

2000-3999 All Manufacturing Industries 77 78 80 76 76 75 -2.3%

Source: U.S. Department of Commerce (1997).

Figure 2-9 presents the capacity utilization rates of softwood plywood and veneer and reconstituted wood

products from 1992-1997.

Figure 2-9: Full Production Capacity Utilization, Fourth Quarters, 1992-1997

1992 1994 1996

74

76

78

80

82

84

86

88

90

92

94

96

Utilization Rate

(percent)

Year

Softwood, plywood &

veneer

Reconstituted wood

products

Source: U.S. Department of Commerce (1997).

The capacity utilization for softwood plywood and veneer, and reconstituted wood peaked in 1994,

consistent with utilization peaks for all manufacturing industries. Interestingly, utilization rates for

reconstituted wood product facilities declined, while softwood plywood and veneer was unchanged in
2-33

1995, the year that shows the highest value of shipments for all (see Exhibit 2-17). This may be

explained, in part, by capacity expansions driven by the increased capital expenditures by softwood

plywood and veneer producers in 1994 and subsequent years. 

The ICR provided further information on capacity utilization. A sample of general facilities

responding to questions regarding their production processes reported production and capacity. From this

data, capacity utilization for general facilities was 78 percent, slightly below the figures in Exhibit 2-17

2.4.2.3 Employment

Exhibit 2-18 provides information on employment at the softwood plywood veneer and

reconstituted wood products facilities responding to the ICR in 1998.

Exhibit 2-18a: 1998 Employment at Facilities with Expected Compliance Cost Impacts

Softwood Plywood and

Veneer Oriented Strandboard

Medium Density

Fiberboard/

Particleboard

Number of

Employees

Facilities

in Size

Category

% of All

Impacted

Facilities

Facilities 

in Size

Category

% of All

Impacted

Facilities

Facilities in

Size

Category

% of All

Impacted

Facilities

Not reporting 2 3.0% 0 0.0% 0 0.0%

<50 0 0.0% 0 0.0% 1 1.8%

50 to 99 0 0.0% 0 0.0% 12 21.4%

100 to 249 18 27.3% 21 91.3% 30 53.6%

250 to 499 34 51.5% 1 4.3% 2 3.6%

500 to 999 11 16.7% 1 4.3% 8 14.3%

1,000 to 1,499 1 1.5% 0 0.0% 2 3.6%

>1,500 0 0.0% 0 0.0% 1 1.8%

TOTAL 66 100% 23 100% 56 100%

Sources: U.S. Environmental Protection Agency (1998), MRI (1999).

Exhibit 2-18b: 1998 Employment at Facilities with Expected Compliance Cost Impacts

Hardboard

Engineered Wood

Products Total Facilities

Number of

Employees

Facilities

in Size

Category

% of All

Impacted

Facilities

Facilities 

in Size

Category

% of All

Impacted

Facilities

Facilities in

Size

Category

% of All

Impacted

Facilities

Not reporting 0 0.0% 0 0.0% 2 1.2%

<50 0 0.0% 0 0.0% 1 0.6%

50 to 99 1 5.6% 0 0.0% 13 8.0%

100 to 249 8 44.4% 1 33.3% 77 47.2%

250 to 499 4 22.2% 2 66.7% 41 25.1%

500 to 999 5 27.8% 0 0.0% 25 15.3%

1,000 to 1,499 0 0.0% 0 0.0% 3 1.8%

>1,500 0 0.0% 0 0.0% 1 0.6%

TOTAL 18 100% 3 100% 166 100%

Sources: U.S. Environmental Protection Agency (1998), MRI (1999).
2-34

Potentially impacted facilities engaged in the production of plywood and composite wood

products tend to be small- to medium-sized. Just over half of the facilities reported having less than 250

employees. Softwood plywood producers tend to have larger facilities, while facilities producing

reconstituted wood products tend to be smaller. 

2.4.2.4 Facility Population Trends 

Plant age may be of particular significance to potential regulatory impacts. Older plants may be

less efficient as compared with newer plants utilizing technological improvements in production

efficiency. One example mentioned earlier is the development of the continuous press, enabling recently

constructed plants to produce more panel products in less time than older manufacturers. Newer plants

may utilize better volatile organic compound emission control technologies and have adapted their

processes to meet indoor air quality requirements.

While specific age information for all facilities is not available, an analysis performed by Spelter

et al. (Spelter, 1997) provides insights into the changing nature of plywood and composite wood facilities

over time. In their analysis, they traced the number of mills, average mill capacity, and capacity

utilization over the course of 20 or more years. The analysis does not present information on specific

plant closures and openings over time, but presents the total number of operating mills, which reflects the

net change resulting from both closures and openings. Exhibit 2-19 provides information on the results of

the analysis for selected years from 1977 to 1997, using census years to provide some comparison to

overall industry figures presented elsewhere in this chapter.
2-35

Exhibit 2-19: Number of Mills, Average Capacity and Utilization, 1977 - 1997

1977 1982 1987 1992 1997 % Change

Softwood Plywood

Number of Mills 62 69 58 56 57 -8%

Average Mill Capacity (1000 m3

) 110 138 180 201 215 95%

Capacity Utilization 97 79 99 95 97 0%

Oriented Strandboard

Number of Mills 8 21 39 44 66 725%

Average Mill Capacity (1000 m3

) 88 115 148 187 259 194%

Capacity Utilization 44 90 99 84 91%

Particleboard

Number of Mills 54 43 44 45 45 -17%

Average Mill Capacity (1000 m3

) 137 151 168 181 196 43%

Capacity Utilization 86 87 89 89 97 13%

Medium-density Fiberboard

Number of Mills 12 13 17 17 26 117%

Average Mill Capacity (1000 m3

) 95 105 122 141 151 59%

Capacity Utilization 69 66 87 91 86 25%

Laminated Veneer Lumber

Number of Mills 2 6 12 17 750%

Average Mill Capacity (million m3

) 0.078 0.075 0.063 0.085 9%

Capacity Utilization 73 60 75 93 27%

Engineered Joists

Number of Mills 12 12 18 35 192%

Average Mill Capacity (million meters) 3459 200%

Capacity Utilization 69 73 90 58 -16%

*Information not available for some years. For softwood plywood, particleboard, and MDF, 1997

figures are from 1996. For particleboard, 1984 figures are used for 1982. 

Source: Spelter et al. (1997).

Average facility capacity has shown substantial increases over the last twenty years for all

product groups. While the number of softwood plywood facilities declined by 8 percent between 1977

and 1997, the average mill capacity increased substantially, nearly 100 percent. Particleboard has

experienced some capacity growth while the number of plants has declined. 

The OSB industry has shown the largest increase in per facility capacity, 194 percent, along with

large net additions of facilities. Most notably, there were nine more OSB plants than softwood plywood

plants in 1997, whereas in 1977 plywood plants outnumbered OSB plants nearly 8 to one. Recent facility

additions for OSB and MDF show these sectors have newer facilities, while the softwood plywood and

particleboard industries are generally composed of older facilities.
2-36

A review of recent capital investment trends provides some insights into the facility population

trends of the softwood plywood and reconstituted wood products industries. Exhibit 2-20 shows capital

expenditures by industry sector. Capital expenditures have seen substantial overall increases in the last

five years for all three sectors, indicating increasing investment, particularly in the reconstituted wood

product and structural wood members sectors. However, investment by the softwood plywood and

veneer and reconstituted wood products sectors declined sharply from 1996 to 1997. This trend indicates

the connection between declining capital expenditures and the sharp increase in products costs’ share of

the value of shipments (as shown in Exhibit 2-5) that began after 1995. If such conditions in the baseline

continue into the future, it is possible that certain firms may experience difficulty accessing capital to

cover these costs in addition to compliance costs associated with the MACT standard.

Exhibit 2-20: Summary of Capital Expenditures, 1992 - 1997

(Thousands of 1997 Dollars)

1992 1993 1994 1995 1996 1997 % Change

Softwood Plywood & Veneer 110,125 128,490 159,685 192,090 212,277 168,142 52.7%

Reconstituted Wood Products 159,330 185,452 353,665 367,057 583,659 329,744 107.0%

Structural Wood Members* 47,420 70,659 220,523 143,523 108,889 138,880 192.9%

All dollars adjusted to 1997 using GDP Deflator.

* 1997 figure is sum of capital expenditures for NAICS 321213 and 321214.

Source: U.S. Department of Commerce (1999a).

For softwood plywood, the level of capital investment constitutes only 3 percent of the industry’s

total value of shipments. With the number of mills in decline and average mill capacity growing, it

appears that the majority of capital expenditures made by the softwood plywood industry occur at

existing plants. This conclusion is supported by U.S. Industry & Trade Outlook ‘99, which reported that

only one new softwood plywood facility has opened in the last 10 years (U.S. Department of Commerce,

International Trade Administration, 1999).

Conversely, results of the growing capital investments made by the reconstituted wood products

industry can be observed in the large increases in the number of OSB and MDF plants, and the rising

average plant capacities of reconstituted wood products producers. As a group, these producers invested

6 percent of the value of shipments in 1997, twice the investment rate of the softwood plywood

producers. For example, in September of 1999, Willamette Industries announced that it will build an $85

million particleboard plant in South Carolina. The plant will have a capacity of 210 million square feet

per year and will be in operation in late 2001.

2.4.3 Firm Characteristics

Several factors will likely be of importance in determining the distribution of impacts generated

by the proposed MACT standard on companies. Size may play a role in a company’s ability to absorb an

increase in compliance costs. Ownership is a second factor that may play a role. Because firms have

different legal and financial guidelines based on ownership, their approaches to complying with the

MACT standard may vary. Vertical and horizontal integration, or lack there of, in plywood and

composite wood product firms may affect the manner in which they absorb the potential costs of the

MACT standard. Lastly, the overall financial condition of the plywood and composite wood industries is

assessed, attempting to determine the industry’s ability to withstand adverse conditions.
2-37

2.4.3.1 Size Distribution

Firm size is likely to be a factor in the distribution of the impacts of the proposed MACT on

companies. Under the Regulatory Flexibility Act (RFA) and its 1996 amendment, SBREFA, SBA

definitions are used to designate which businesses are considered to be small. The SBA has set size

standards under the NAICS system, using various thresholds for the number of employees or revenues. 

In determining the size of a company, the SBA treats a facility that has a substantial portion of its assets

and/or liabilities shared with a parent company as part of that company. In this analysis, the company’s

primary NAICS code is used to determine the appropriate SBA threshold. 

Exhibit 2-21 provides information on firm size for plywood and wood composite firms owning

facilities with expected compliance cost impacts. In the ICR, facilities were asked to provide information

on employment size for domestic parent firms. Many facilities did not report information on the ultimate

domestic parent. For this reason, information on ultimate domestic parent primary SIC and NAICS code

and employment size were obtained from Dun and Bradstreet’s DUNS Database. Exhibit 2-21 shows the

number of firms and the facilities owned by the firms in the first two data columns. In the absence of Dun

& Bradstreet information on the owner, the facility’s primary SIC and NAICS code from Dun &

Bradstreet was used to determine the appropriate SBA threshold. Based on this SIC code, facility

employment information from the ICR was used to make a size determination. Exhibit 2-21 shows the

number of firms and the facilities owned by the firms in the third and fourth data columns. In the absence

of facility primary SIC code from DUNS, the standard for lumber and wood products (all SIC 24 codes)

of 500 employees was used as the threshold. A full list of the facilities and their size determination is

provided in the economic impact analysis for this proposed rule.

Exhibit 2-21: Size Distribution of Firms Owning Facilities with Expected Compliance Cost Impacts

Size

SIC Based on

DUNS

SIC Based on ICR Other Sources Total

Firms Facilities

Owned by

Firms*

Firms Facilities

Owned by

Firms*

Firms Facilities

Owned by

Firms*

Firms % Facilities

Owned by

Firms*

%

Small 8 10 5 5 6 7 19 35.2% 22 8.4%

Large 29 231 4 8 2 2 35 64.8% 241 91.6%

Total 37 241 9 13 8 9 54 100% 263 100%

* Includes all facilities reported, impacted and non-impacted.

Sources: U.S. Environmental Protection Agency (1998), MRI (1999). SBA Size Standards from SBA website:

http://www.sba.gov/regulations/siccodes/.

While over 35 percent of firms in the industry are considered small, 91 percent of facilities are

owned by large firms. Given the concentration ratios presented in Exhibit 2-15, there does not appear to

be any significant market power to these larger firms. However, the ability of larger firms to deal with

compliance costs, as compared to smaller firms, may have impacts on the industry organization. 

The larger parent firms have both impacted and non-impacted facilities. Firms such as GeorgiaPacific (43 ICR facilities), Louisiana-Pacific (32 ICR facilities), Willamette Industries (23 ICR facilities),

Columbia Forest Products (13 ICR facilities), Weyerhaeuser (19 ICR facilities), and Boise-Cascade (12

ICR facilities) may be able to make trade-offs between facilities and shift production to more efficient

facilities in response to compliance costs associated with the MACT standard.
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2.4.3.2 Ownership

The form of firm ownership has a set of legal and financial characteristics that may influence a

firm’s regulatory compliance alternatives. The legal form of ownership impacts the cost of capital,

availability of capital, and effective tax rate faced by the firm. Debt-equity issues for these firm types will

play a role in financing capital-intensive controls. Firm ownership may generally be one of three types.

• Sole proprietorships (companies with a private single-owner)

• Partnerships (non-corporate firms with more than one owner)

• Corporations (publically or privately owned companies formed through incorporation)

Exhibit 2-22 provides information on ownership type for the lumber and wood products industry. 

While specific information by 4-digit SIC or 5-digit NAICS is not available, the table provides a general

sense of ownership types in the industry, assuming that ownership structure for the three industries

profiled is similar to that of the overall lumber and wood products industry. 

Exhibit 2-22: Types of Firm Ownership for Lumber and Wood Products (SIC 24/NAICS 321), 1992

Corporation

Sole

Proprietorship Partnerships

Other/

Unknown

Single-Facility Firms 1,291 14,909

Multi-Facility Firms 17,617 61

All Firms 18,908 10,447 2,336 2,187

Source: U.S. Dept. of Commerce (1992).

Over ninety percent of single facility wood and lumber products firms are owned by sole

proprietorships, partnerships, or some other/unknown entity. Nearly all multi-facility firms are owned by

corporations. Just over half of all lumber and wood products firms are a corporation, while the remainder

are sole proprietorships (30 percent), partnerships (7 percent), or other (6 percent). These data support the

conclusion that single-facility firms owned by sole proprietors are more likely to be classified as small

businesses, while multi-facility firms owned by corporations are more likely to be classified as large

businesses.

2.4.3.3 Vertical and Horizontal Integration

The data presented in Section 2.2 on concentration and specialization ratios for the plywood and 

composite wood industries, combined with the information on establishment size and ownership type

demonstrate that the majority of firms in the three industries examined in this profile are predominantly

not, or minimally, vertically or horizontally integrated. However, there are several exceptions to this

conclusion. The six largest firms that own multiple facilities are for the most part both vertically and

horizontally integrated. These firms, described in more detail below, are large multi-billion dollar

concerns that are vertically integrated through their ownership of timberland, their production facilities,

and their involvement in product distribution. Their horizontal integration is attributed to their other

product lines, generally pulp and paper. 

Georgia-Pacific, a large, horizontally and vertically integrated firm, manufactures and distributes

building products, pulp and paper, and resins. The company’s wood product line includes wood panels,

plywood, and hardboard. It also produces lumber, gypsum products, chemicals, and packaging. GeorgiaPacific grows and sells timber, and participates in several other activities related to forestry management.

Its 1998 net sales revenues exceeded $13 billion, and it has 45,000 employees at 400 locations. Its

building products division reported record profits during the second quarter of 1999. It currently has
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plans to build an OSB plant in Arkansas and recently merged with Unisource, a major distributor of

imaging paper and supply systems (Financial Times, 1999b; PR NewsWire, 1999b).

Louisiana-Pacific is principally a manufacturer of building products, but also produces pulp and

building insulation, and owns almost one million acres of timberland. Its sales of structural lumber,

industrial panels, and exterior building products made up nearly 75 percent of the company’s revenues,

which reached $2.3 billion in 1998. The company manufactures OSB, I-joists, LVL, MDF, fiberboard,

particleboard, hardboard, softwood plywood and hardwood veneer. Louisiana-Pacific has been involved

in a series of mergers and acquisitions that include Le Goupe Forex of Canada, Evans Forest Products,

and ABT Building Products (Louisiana-Pacific, 1999; Financial Times, 1999c).

Willamette Industries, a forest products manufacturing company, has three main lines of business:

brown paper, white paper, and building products. The building products division manufactures plywood,

lumber, particleboard, MDF, OSB, LVL and I-joists, among others. Approximately one third of the

company’s $3.7 billion in total revenue is from its building materials segment. Most of Willamette’s

recent merger and acquisition activity has been with firms in France and Mexico. It also owns plants in

Ireland and 1.8 million acres of timberland in the U.S. (Financial Times, 1999d; PR NewsWire, 1999c,

1998, 1997).

Columbia Forest Products describes itself as North America’s largest manufacturer of hardwood

veneer, and laminated products. They sell their products through a network of wholesale distributors,

mass merchandisers and major original equipment manufacturers (OEMs). Their products include

decorative, interior veneers and panels used in high-end cabinetry, fine furniture, architectural millwork

and commercial fixtures. Columbia Forest Products is an employee-owned company with 13 plants in the

U.S. and four in Canada (Columbia Forest Products, 1999).

Weyerhaeuser is an integrated international forest products company. It is involved in growing

and harvesting timber, and the manufacturing and distributing of several categories of forest products. 

Among its wood products are plywood, OSB, and wood composites. The company bills itself as the

world’s largest private owner of saleable softwood timber and the country’s largest producer of softwood

lumber and pulp. In addition, it is the top U.S. exporter of forest products. The company has

approximately 36,000 U.S. and Canadian employees and sales of $11 billion, ten percent of which comes

from exports (Weyerhaeuser, 1999).

Boise Cascade, an integrated international paper and forest products company, manufactures and

distributes paper and wood products, distributes office products and building materials, and owns and

manages over 2 million acres of timberland. Its building products include lumber, plywood,

particleboard, veneer, and engineered wood products. Sales of these products constitute 27 percent of the

company’s $6.2 billion annual revenue (Financial Times, 1999a; PR NewsWire, 1999a).

2.4.3.4 Financial Condition

The financial condition of an industry’s firms will affect the incidence of impacts of the costs

associated with complying with a new MACT standard. While information necessary to determine which

specific firms might experience adverse impacts is not available, one can examine industry-wide

indicators of financial condition. Each year, Dun & Bradstreet (D&B) publishes Industry Norms & Key

Business Ratios, which reports certain financial ratios for a sample of firms in the industry. This section

focuses on measures of profitability and solvency.
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Profitability Ratios

The return on sales ratio, also known as the net profit margin, is an indicator of a firm’s ability to

withstand adverse conditions such as falling prices, rising costs, and declining sales, and is calculated by

dividing net profit after taxes by annual net sales. 

Return on assets is calculated by dividing a firm’s net profit after taxes by its total assets. This

ratio is a key indicator of both profitability and operating efficiency by comparing operating profits to the

assets available to earn a return. According to Dun & Bradstreet, companies that use their assets

efficiently will have a relatively higher return on assets than those firms that do not use their assets

efficiently.

The return on equity shows the profitability of the company’s operations to owners, after income

taxes, and is calculated by dividing net profit after taxes by net worth. According to Dun & Bradstreet,

this ratio is looked to as a ‘final criterion’ of profitability, and a ratio of at least 10 is regarded as desirable

for providing dividends plus funds for future growth.

Solvency Ratios

The current ratio is calculated by dividing a firm’s current assets by its current liabilities. This is

a measure of liquidity that gauges the ability of a company to cover its short-term liabilities. The standard

guideline for financial health is 2. The quick ratio is slightly different than the current ratio, because it

does not include inventories, advances on inventories, marketable securities, or notes receivables. The

quick ratio measures the protection afforded creditors in cash or near-cash assets. Any time this ratio is 1

or greater, the firm is said to be in a liquid condition. 

Exhibit 2-23 shows various measures of the financial condition of the plywood and composite

wood industry over the period 1995 to 1997. The trends shown in Exhibit 2-23 confirm that the softwood

plywood and reconstituted wood products industries have experienced a profit squeeze due to increasing

costs and falling prices in recent years. 

Exhibit 2-23: Indicators of Financial Condition, 1995-1997*

Indicator 

Softwood Plywood

and Veneer

Reconstituted Wood

Products

Structural

Wood Members

1995 1996 1997 1995 1996 1997 1998

Return on Sales 5.8 3.6 1.7 3.8 3.1 3.5 5.0

Return on Assets 15.7 13.5 6.0 7.8 5.9 3.5 13.0

Return on Equity 28.7 22.9 8.7 15.2 10.0 5.7 NA

Current Ratio 3.2 2.6 2.7 2.8 2.7 1.7 2.3

Quick Ratio 1.1 1.3 1.2 1.8 1.2 1.1 1.3

*Includes 1998 data for Structural Wood Members, the only data reported for this sector.

Source: Dun & Bradstreet (1999). Indicator values are based on median values of the industrial sample.

For SIC 2436, there were 14 establishments in the sample in 1995, 15 in 1996, and 11 in 1997. For SIC 2493,

there were 28 establishments in the sample in 1995, 30 in 1996, and 31 in 1997. For SIC 2439, there were 135

establishments in 1998.

The softwood plywood and veneer industry has not maintained its relatively strong degree of

financial health, with many of its profitability indicators significantly lower in 1997 than in 1995. In

particular, the softwood plywood and veneer industry experienced 60 to 70 percent declines in all three

profitability ratios. The falling profitability of this industry is now at a level that indicates the presence of

firms that are not using their assets efficiently, are not providing the cash needed for future growth, and
2-41

may more acutely experience adverse conditions associated with MACT standard compliance costs. The

currently low net profit margin is indicative of an industry that is experiencing increasing production

costs as a percentage of its value of shipments and falling capacity utilization (Exhibits 2-5 and 2-18).

The reconstituted wood products industry also saw fairly dramatic decreases in its financial

indicators over the time period shown, resulting in a relatively low return on assets and return on equity,

as well as a current ratio lower than generally considered healthy. These indicators are consistent with

recent trends in the industry associated with increases in production costs relative to the value of

shipments (Exhibit 2-5), rapid expansion of production capacity (Exhibit 2-20) and competitive pressures

on prices from overseas producers. This industry also includes firms that are not using their assets

efficiently or providing the cash needed for future growth. The reconstituted wood products industry’s

profit margin is also somewhat low, but typical of all firms in the lumber and wood products sector (Dun

and Bradstreet, 1999b).

In the fall 1999 issue of Engineered Wood Products Journal, industry analyst Evadna Lynn

discussed investor response to the industry’s current financial performance (APA, 1999c). Lynn

attributes several recent trends to stockholder pressure for improved financial performance.

• Separating timber assets

• Corporate restructuring

• Cost control through consolidation

These trends have contributed to a dynamic market structure in recent years. By selling or otherwise

spinning off timber assets, forest products companies are converting them to cash and improving financial

performance. Restructuring activities have focused on gaining higher returns from core business

activities through the closure or divestiture of less profitable facilities or products. Some of the divested

facilities, particularly plywood mills, have been reopened by new owners as sawmills. The industry has

seen several major corporate mergers and acquisitions in the late 1990s, including: Weyerhaeuser and

MacMillan Bloedel, International Paper and Union Camp, and Louisiana Pacific and Le Groupe Forex (of

Canada). Most post-merger cost reductions are gained from streamlining operations, including closure of

production facilities (APA, 1999c; International Paper, 1998).

2.5 Markets

This chapter discusses general market conditions for the plywood and composite wood products

industries. In particular, this chapter discusses market structure, provide background on current market

volumes, prices, and international trade. It also presents information on future market volumes, prices

and international trade. The purpose of this chapter is to describe the current status of the industry and to

support the development and implementation of the economic impact analysis that is summarized in this

RIA.

2.5.1 Market Structure

Based on the data, background and analyses reviewed while preparing this industry profile, it is

reasonable to conclude that these industries exhibit clear signs of a competitive market for the products

that are the subject of this MACT standard. There are several reasons for this conclusion. First, as

discussed in section 2.4.2, the plywood and composite wood products industries are unconcentrated. 

There is little concentration of market power evidenced by each separate industrial category having a 4-

firm concentration ratio of 50 or below (often well below) and HH indices below the 1000 benchmark. 

Next, the output of several of the production sectors are substitutes for each other, putting competitive

pressures on suppliers. There are also competitive pressures from alternative products, either traditional

sawn lumber or non-wood materials. This chapter will focus on other factors of the competitive nature of
8

1995 is the latest year for which data is available.

2-42

these industries. For the most part, the markets for these goods also experience competitive pressures by

the presence of imported products. Finally, several industry experts have observed trends where prices of

the products respond negatively to the presence of excess capacity. The remainder of this chapter will

provide additional details related to these observations on industry competitiveness.

2.5.2 Market Volumes

This section will present a discussion of market consumption and production volumes for the three

industrial sectors examined in this study. For the most part, this discussion will rely on the data contained

in Exhibit 2-24 and Exhibit 2-25. Exhibit 2-24 shows the value of product shipments by product class for

the period 1989 to 19958

 as reported by the International Trade Administration of the U.S. Department of

Commerce. Note that value of shipments data for Structural Wood Members is not available for inclusion

in this table. Exhibit 2-25 shows the physical volume of output produced, traded and consumed between

1988 and 1997 for selected products as reported by Spelter et al. in their 1997 statistical report. 

International trade is discussed later in the section.

Exhibit 2-24: Trade Balance and Selected Statistics, Thousands of 1997 Dollars

1989 1990 1991 1992 1993 1994 1995

%

Change

Softwood Veneer and Plywood (SIC 2436, NAICS 321212)

Value of product shipments 7,125 6,887 6,185 6,422 5,643 5,885 6,671 -6%

Value of imports 81 69 55 79 82 100 111 37%

Value of exports 452 509 428 452 391 333 375 -17%

Trade Surplus (Deficit) 371 440 373 372 310 234 263 -29%

Apparent Consumption 6,755 6,447 5,812 6,050 5,333 5,651 6,407 -5%

Ratio of Imports to Consumption 0.01 0.01 0.01 0.01 0.02 0.02 0.02 45%

Ratio of Export to Product Shipments 0.06 0.07 0.07 0.07 0.07 0.06 0.06 -11%

Ratio of Imports to Exports 0.18 0.14 0.13 0.18 0.21 0.30 0.30 65%

Reconstituted Wood Products (SIC 2493, NAICS 321219)

Value of product shipments 5,013 4,761 4,743 5,359 4,940 5,511 5,772 15%

Value of imports 461 409 364 540 616 861 1,080 134%

Value of exports 261 334 350 328 271 301 345 32%

Trade Surplus (Deficit) (200) (75) (14) (212) (345) (560) (735) 268%

Apparent Consumption 5,213 4,836 4,757 5,572 5,285 6,070 6,507 25%

Ratio of Imports to Consumption 0.09 0.08 0.08 0.10 0.12 0.14 0.17 88%

Ratio of Export to Product Shipments 0.05 0.07 0.07 0.06 0.05 0.05 0.06 15%

Ratio of Imports to Exports 1.76 1.22 1.04 1.65 2.27 2.86 3.13 77%

Source: U.S. Department of Commerce, International Trade Administration (1998).
2-43

Exhibit 2-25: Production, Trade and Consumption Volumes for Selected Products (1988-1997)

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

Softwood Plywood (M ft3, 3/8 in basis)

Product shipments 22,089 21,385 20,919 18,652 19,332 19,315 19,368 19,367 19,181 17,963 Imports 96 49 38 28 47 41 47 60 85 104 Exports 1,004 1,442 1,613 1,322 1,442 1,409 1,211 1,267 1,248 1,548 Apparent Consumption 21,181 19,991 19,344 17,358 17,937 17,946 18,474 18,160 18,018 16,519 Other Structural Panels (M ft3, 3/8 in basis)

Product shipments 4,604 5,105 5,418 5,613 6,653 7,002 7,486 7,903 9,314 10,534 

Imports 815 1,111 1,313 988 1,572 2,163 2,588 3,214 4,414 5,272 Exports 57 49 60 78 82 157 167 Apparent Consumption 5,416 6,213 6,728 6,544 8,176 9,105 9,995 11,036 13,572 15,639 Particleboard/Medium Density Fiberboard (M ft3, 3/4 in basis)

Product shipments 4,768 4,828 4,856 4,730 5,046 5,402 5,793 5,307 5,705 5,916 Imports 1,634 425 363 293 405 572 775 840 814 963 Exports 163 333 373 369 394 318 297 319 154 188 Apparent Consumption 6,239 4,920 4,746 4,654 5,057 5,656 6,271 5,828 6,365 6,691 Hardboard (M ft3, 1/8 in basis)

Product shipments 5,118 5,196 5,025 4,895 5,273 5,248 5,206 4,930 5,280 4,501 

Imports 633 718 689 571 571 639 1,119 1,152 1,183 1,306 Exports 322 427 552 606 836 917 1,190 1,377 1,426 1,259 Apparent Consumption 5,429 5,487 5,162 4,860 5,008 4,970 5,135 4,705 5,037 4,548 Source: Spelter et al. (1997).* since 1991
2-44

2.5.2.1 Domestic Production

As Exhibit 2-24 shows, the value of shipments (representing production) of softwood plywood and

veneer was slightly lower in 1995 than it was in 1989. During the period, production reached its lowest

level in 1993 and then began to climb, in response to meeting demand from rising expenditures for

renovation and remodeling and new housing starts. The value of shipments of reconstituted wood

products rose 15 percent between 1989 and 1995, linked to the underlying growth in the construction

sector and the growth in market share of structural panel products over softwood plywood.

Figure 2-10 compares the value of product shipments of softwood plywood and veneer to

reconstituted wood products from 1989-1995.

Figure 2-10: Value of Product Shipments, 1989-1995

1989 1990 1991 1992 1993 1994 1995

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

 1997 Dollars ($1,000,000)

Year

Softwood plywood &

veneer

Reconstituted wood

products

Source: U.S. Department of Commerce, International Trade Administration (1998).

Trends in product shipments by volume (Exhibit 2-25) have been mixed for this group of industries. 

A statistical report produced by the U.S. Forest Service’s Forest Products Laboratory (Spelter et al., 1997)

focused on production of softwood plywood, Other Structural Panels (OSB and waferboard),

particleboard and MDF as a group, and hardboard. Production by the Other Structural Panels category

experienced high growth during the period, with 1997 production almost 130 percent greater than it was

in 1988. Most of this increase can be attributed to the rapid increase in OSB’s share of the structural

panel market in recent years. Particleboard and MDF production grew a moderate 24 percent, while

production of softwood plywood and hardboard declined by 19 percent and 12 percent respectively. 

Historically, softwood plywood production made a continuous steady climb through the late 1980's. At

that point, the product began losing market share to OSB and production leveled off. This trend was

accompanied by a certain amount of mill attrition (Spelter et al., 1997).

2.5.2.2 Domestic Consumption
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Domestic, or apparent, consumption is the sum of domestic production and imports, less exports. The

dollar value of apparent consumption (Exhibit 2-25) for softwood plywood and veneer was slightly lower

in 1995 than it was in 1989. During the period, demand for softwood plywood and veneer dropped

slightly in the early 1990s and reached its lowest level in 1993 and then began to climb. The value of

domestic consumption of reconstituted wood products followed a similar pattern, increasing by 25

percent overall between 1989 and 1995. Drivers of consumption trends described here are the same as

those presented in the previous section on production (increased demand for renovation, remodeling and

new housing starts).

Figure 2-11 compares the apparent consumption of softwood plywood and veneer to reconstituted

wood products from 1989-1995.

Figure 2-11: Apparent Consumption, 1989-1995

1989 1990 1991 1992 1993 1994 1995

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1997 Dollars ($1,000,000)

Year

Softwood plywood &

veneer

Reconstituted wood

products

Source: U.S. Department of Commerce, International Trade Administration (1998)

Further examination of consumption volumes (Exhibit 2-25) shows the following trends for softwood

plywood, other structural panels, particleboard and MDF as a group, and hardboard.

• By volume, apparent consumption of softwood plywood fell by over 20 percent in the last 10

years.

• At the same time, consumption of other structural panels increased by almost 200 percent.

• Particleboard and MDF were consumed at a slightly higher level in 1997 than they were in 1988,

following a decline that ended in 1992.

• Hardboard consumption has fluctuated during the same 10 years, with a 16 percent decline from

1988.
2-46

Demand for softwood plywood and OSB combined experienced an annual average growth rate of 2-3

percent from 1970 to 1996 (Spelter et al., 1997). Most of this demand was met by increased production

of OSB by both domestic and imported producers.

2.5.2.3 International Trade

Imports

Import value trends during the 1989-1995 period (Exhibit 2-24) show the constant dollar value of

softwood plywood and veneer imports grew by 37 percent, particularly during the later years when the

price for the commodity was rising rapidly and supplies of timber were declining. The ratio of imports to

consumption of softwood plywood and veneer, while only 0.02, grew by 45 percent. The trade surplus

for softwood plywood and veneer fell by 37 percent. Imports of reconstituted wood products more than

doubled from 1989 to 1995 and the value of imports’ share of consumption grew by almost 90 percent

and the trade deficit nearly quadrupled.

Looking at import volumes (Exhibit 2-25) for softwood plywood, other structural panels,

particleboard and MDF as a group, and hardboard, imports have made the biggest gains in the other

structural panel category, taking advantage of the overall growth in demand for those products. Imports

now supply over a third of the other structural panel market. Imports of hardboard have also grown, more

than doubling in volume since 1988. There was a slight increase in imports of softwood plywood over

the 10 years, and a decline of 40 percent in imports of particleboard and MDF. Exhibit 2-26 shows U.S.

imports of by major region and trading partner.

Exhibit 2-26: 1997 U.S. Wood Products Imports by Region and Major Trading Partner

Trade Areas

Value*

($millions) Share

NAFTA 8,128 85.1

Latin America 541 5.7

Western Europe 234 2.5

Japan/Chinese Economic Areas 35 0.4

Other Asia 458 4.8

Rest of World 150 1.6

World Total 9,554 100.0

Top 5 Countries

Canada 7,991 83.6

Indonesia 340 3.6

Brazil 303 3.2

Mexico 137 1.4

Chile 108 1.1

*Includes Sawmills (SIC 2421), Softwood Plywood and Veneer (SIC 2436), Reconstituted

Wood Products (2435), and Hardwood Plywood and Veneer (SIC 2435).

Source: U.S. Department of Commerce, International Trade Administration (1999).
2-47

Exhibit 2-26 shows that a vast majority, 85.1 percent, of U.S. imported wood products originated in

the North American Free Trade Agreement (NAFTA) trade zone, of which only 1.5 percent originates in

Mexico. The U.S. is also importing a significantly greater value of wood products than it is exporting. 

In 1997 the U.S. exported about $3,683 million of wood products while it imported $9,554 million. 

Imports of softwood plywood and veneer grew by 24 percent from 1996 to 1997. Seventy-seven

percent of U.S. softwood plywood and veneer imports are from Canada. This growth is consistent with

the strong demand for softwood plywood and veneer during this period. The overall penetration of

imports into the U.S. market is quite small (2 percent), which is attributed to the efficiency and low costs

of U.S. softwood plywood and veneer producers (U.S. Department of Commerce, International Trade

Administration, 1999).

Imports of reconstituted wood products grew by seven percent from 1996 to 1997. Seventy-eight

percent of U.S. reconstituted wood products imports are from Canada. The overall penetration of imports

into the U.S. market is significant (18 percent), which is attributed to recent capacity additions by

Canadian reconstituted wood products producers (U.S. Department of Commerce, International Trade

Administration, 1999).

Exports

Export trends during the 1989-1995 period (Exhibit 2-24) show the value of softwood plywood and

veneer exports fell by 17 percent, particularly during the later years when the price for the commodity

was rising rapidly and supplies of timber were declining. Economic crises in several Asian economies

and the falling value of the Canadian dollar relative to the U.S. dollar played a role in this trend. The

ratio of exports to value of shipments of softwood plywood and veneer fell by 11 percent. Exports of

reconstituted wood products grew by 32 percent from 1989 to 1995 and the proportion of exports to

shipments grew by almost 15 percent. 

Export volumes (Exhibit 2-25) of hardboard quadrupled between 1988 to 1997, and constitute a

significant portion of the total shipments from this industry. Exports of softwood plywood grew by 50

percent, and have become an increasingly important part of the sector’s overall production. While total

exports of other structural panels grew significantly, this market still remains a small portion of

production. Exports of particleboard and MDF grew significantly through 1992 but have dropped

steadily in recent years and are now just 15 percent higher than they were seven years ago. Exhibit 2-27

shows U.S. exports by major region and trading partner.
2-48

Exhibit 2-27: 1997 U.S. Wood Product Exports by Region and Major Trading Partner

Trade Areas

Value*

($millions) Share

NAFTA 1,001 27.5

Latin America 203 5.6

Western Europe 1,230 33.8

Japan/Chinese Economic Areas 837 23.0

Other Asia 205 5.6

Rest of World 161 4.4

World Total 3,638 100.0

Top 5 Countries

Canada 800 22.0

Japan 636 17.5

Germany 292 8.0

United Kingdom 244 6.7

Mexico 202 5.5

*Includes Sawmills (SIC 2421), Softwood Plywood and Veneer (SIC 2436), Reconstituted

Wood Products (SIC 2493), and Hardwood Plywood and Veneer (SIC 2435).

 Source: U.S. Department of Commerce, International Trade Administration (1999).

By region, the U.S. exports its largest share (33.8 percent) of wood products to Western Europe. 

However, no single country in Europe imports the most significant share of U.S. wood products. Canada

imports the largest share, 22 percent, due to two reasons. First, Canada’s economy has strengthened. 

Second, on January 1, 1998 Canada completed its final stage of tariff removal as directed under the U.S.-

Canada Free Trade Agreement. For the two aforementioned reasons, U.S. wood product exports to

Canada increased 21 percent to $800 million in 1997 (U.S. Department of Commerce, International

Trade Administration, 1999).

Continued growth in U.S. exports of wood products is dependent on an Asian economic revival,

particularly in Japan’s economy. In 1996, prior to the economic crisis, Japan was the largest importer of

U.S. wood products. By 1997, Japan’s share of U.S. wood product exports fell to 17 percent, a 24

percent decrease from the previous year. To further exacerbate the problem, U.S. exports to Japan are

expected to decline an additional 30 percent in 1998 and 1999. Japan has undertaken several steps to

revitalize its economy, such as the implementation of the Enhanced Initiative on Deregulation and

Competition Policy. However, an increase in the Japanese consumption tax from 3 percent to 5 percent

in 1996 is believed to have canceled out the potential gains of the Policy, resulting in the expected

continuing decline in Japanese demand for U.S. plywood and wood products (U.S. Department of

Commerce, International Trade Administration, 1999).

In 1997, exports of softwood plywood and veneer accounted for about 10.6 percent of wood product

exports from the U.S. This was a 24 percent increase from the previous year, raising the total value of

softwood plywood and veneer exports to $392 million, the highest level in eight years. Exports to the

United Kingdom, Canada, and Germany, the top three importers of U.S. softwood plywood and veneer,

experienced strong gains in 1997. A healthy European market has increased the demand for softwood

plywood and veneer. In particular, the construction sector throughout Europe has seen an increase in
2-49

activity. However, the recent strong performance of softwood plywood and veneer is not expected to

continue due to an increasing international acceptance of OSB, and increasing competition from Canada,

Brazil, and Indonesia (U.S. Department of Commerce, International Trade Administration, 1999).

Reconstituted wood products accounted for about 9.75 percent of U.S. wood product exports in

1997. Both the value and volume of reconstituted wood product exports increased by 15 percent from

the previous year. Canada, the United Kingdom, Mexico, and Japan are the largest export markets for

U.S. reconstituted wood. The continuing increase in exports is mainly attributable to a growing

international acceptance of OSB. Exports are expected to continue to grow in the upcoming years, but at

a slower rate than they did in 1997 (U.S. Department of Commerce, International Trade Administration,

1999).

2.5.3 Prices

An index of the change in producer prices for lumber and wood products is shown below in Exhibit

2-28 This index was compiled by the Bureau of Labor Statistics. 

Exhibit 2-28: Lumber and Wood Products Producer Price Index, 1988-1997

(1982 = 100)

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 88-97

Lumber

and wood

products

(SIC 24) 

122.1 125.7 124.6 124.9 144.7 183.4 188.4 173.4 179.8 194.5

Change

from

Previous

year

2.9% -0.9% 0.2% 15.9% 26.7% 2.7% -8.0% 3.7% 8.2% 59.3%

Source: U.S. Bureau of Labor Statistics (1999).

The biggest annual price increases for lumber and wood products occurred in 1992 and 1993 and the

overall price increase between 1988 and 1997 was nearly 60 percent. Another source, the Forest

Products Laboratory (FPL), that is part of the U.S. Department of Agriculture, provides a statistical

report with disaggregated price indices presented in Exhibit 2-29. Note that the base year of the BLS

index is 1982 while the base year for the FPL data is 1992.

Exhibit 2-29: Producer Price Indices of Plywood and Composite Wood Products

(1992 =100)

Year 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 88-97

Softwood

Plywood

74.2 84.5 81.4 82.2 100.0 115.4 120.3 128.0 118.3 119.3

Change from

Previous year 0000000001

Particleboard 103.4 106.0 96.7 96.5 100.0 114.8 128.5 128.4 123.3 117.6

Change from

Previous year 0000000000

Hardboard 100.8 100.9 98.6 96.7 100.0 106.5 109.1 113.2 115.8 119.0

Change from

Previous year 0000000000

Source: Howard (1999).
2-50

Softwood plywood experienced the biggest price increase, 61 percent over the 1988 to 1997 period,

with volatile price changes within the period with the biggest annual increases came in 1992 and 1993. 

Overall prices for particleboard rose 14 percent, but the large price increases in 1993 and 1994 have been

offset by price declines in the last three years presented. Hardboard prices grew by 18 percent, with

mostly steady annual price increases from 1994 on.

The market conditions and the factors that affect softwood plywood prices, supply and demand are

somewhat analogous to those that affect prices for softwood lumber. For example, the cost of timber and

transportation, foreign supply and demand, inventory levels as well as construction-driven demand are

factors that affect market prices for softwood lumber, as well as softwood plywood and other structural

panels. 

A recent study produced by WEFA (Wharton Economic Forecast Associates) on trends in the

softwood lumber market provides some clues about the future of the three industries examined here. 

Softwood lumber prices have climbed steadily since November of 1998. This climb included some

higher than expected price increases in the early summer of this year. The WEFA report cites strong

domestic demand related to housing construction as one underlying cause of the price increases in

softwood lumber. Current price conditions are partially explained by the expectation that housing

demand has peaked while remaining strong, exports to Asia will increase as those economies recover,

and imports from Canada will decrease.

For the most part, the WEFA report indicates that the construction industry has responded to

climbing prices by switching to “just-in-time” buying of products. Buyers are hoping that prices will

begin falling and are postponing inventory build-up during this period of climbing prices. Another

short-run factor affecting prices during the second quarter of this year was a constraint on truck and rail

transportation availability. WEFA concludes that the market has reached equilibrium for the moment,

although this could change if inventories increase at the same time that construction-driven demand

levels off or falls (WEFA, 1999).

Exhibit 2-30 presents the industry-reported free on board (f.o.b.) prices of southern plywood, OSB

and particleboard from 1989 to 1996. These are the product prices prior to shipping costs and distributor

mark-ups. On an adjusted basis, these prices reflect the trends demonstrated in the previous exhibit, with

large price increases during early 1992, falling back to or below 1989 levels by 1996.
2-51

Exhibit 2-30:

F.O.B. Prices of Southern plywood, OSB, and Particleboard

($ per cubic meter)

Year Southern plywood OSB Particleboard

As

Reported

Adjusted

$1997

As

Reported

Adjusted

$1997

As

Reported

Adjusted

$1997

1989 184 229 166 206 129 160

1990 168 200 124 148 122 145

1991 175 201 144 165 120 138

1992 226 252 208 232 129 144

1993 257 279 227 247 152 165

1994 274 291 252 268 171 182

1995 267 277 242 251 173 180

1996 231 235 184 187 165 168

89-96 2.8% -10.1% 4.5%

Prices adjusted by the GDP deflator.

Source: Spelter, et al. (1997).

Softwood Plywood

Long-term price trend data presented in the report “Review of the Wood Panel Sector in the U.S.”

showed a fairly stable price pattern for softwood plywood between 1977 and 1991. At that point, prices

increased steadily from 1992 to their peak in 1994. Prices declined over 15 percent from 1994 to 1996. 

The report authors observe that with softwood plywood prices at their current high levels, producers will

have a difficult time competing against the newer, more cost effective OSB producers. However, the

authors note that softwood plywood producers may be able to hang on to market share and justify the

higher prices by differentiating their product as a premium construction material (Spelter et al., 1997).

Oriented Strand Board

The “Review of the Wood Panel Sector in the U.S.” report presents OSB price data over time that

shows a 27 percent decline in price during 1995 and 1996, after a continuous trend of price increases

since 1977. The report’s authors attribute this weakening to a rapid increase in capacity that contributed

to an increase in production, putting downward pressure on prices. Due to the ability of users to

substitute plywood for OSB, these low OSB prices have only added to the growing market share enjoyed

by OSB. Falling prices have cut into the net revenues of OSB producers, after a period from 1992 to

1995 where the industry enjoyed excellent cost/price margins, drawing more investment to OSB

production capacity (Spelter et al., 1997).

Particleboard

Particleboard price data from 1984 to 1992 presented in the report, “Review of the Wood Panel

Sector in the U.S.” show some variation within a relatively small range, with a substantial price increase

in the years 1993 to 1995, declining slightly in 1996. The price trend for particleboard from 1977 to

1996 is very similar to that of plywood. One reason for this similarity is the close relationship of

particleboard input costs to the plywood manufacturing industry. About 25 percent of industry

production cost is for wood inputs, which are primarily made up of wastes from lumber and plywood

production (Spelter et al., 1997). 
2-52

Medium Density Fiberboard (MDF)

Producer-reported MDF prices were $235 per ton in September of 1996 and declined by 15 percent

to $205 per ton as of April, 1997. Despite this drop, there continues to be a price gap between MDF and

less costly particleboard, although increasingly narrow. The price drop was attributed to MDF

production capacity expansions that resulted in an increase in supply, putting pressure on the profits of

MDF producers (Spelter et al., 1997).

Structural Wood Members

Producer-reported prices for I-joists reach a high in 1994 and have been declining since that time. 

Recent price conditions have made I-joists more competitive with traditional 2" by 10" lumber on an

installed cost basis, typically for floor framing applications. In particular, I-joists are price competitive

with lumber when lumber prices are high. However, precise estimates of market prices are difficult to

obtain. The authors found that prices varied depending on whether the product was being sold under a

brand name, on sale, or under a volume discount. Laminated veneer lumber, presented in the Review at

$550/m3

 f.o.b., is generally more expensive than 2" by 10" lumber, and is used mostly for structural

applications or as an input to I-joists (Spelter et al., 1997).

2.5.4 Market Forecasts

Production and Consumption

A study published by WEFA in the summer of 1999 examined housing starts and concluded that

housing starts will decline throughout 1999, resulting in a decline in lumber demand (WEFA, 1999). 

However, housing starts continue to remain strong well into 1999, keeping demand for lumber and other

wood products for construction strong as well. The WEFA study also noted that another factor affecting

demand for softwood lumber is interest rates and concluded that rising interest rates could have a

dampening effect on demand. Higher interest rates will not only affect the affordability of new homes,

but also will curtail purchases of existing homes and mortgage refinancing activity, both major sources

of demand for materials used in home remodeling. Based on the relationship between housing starts,

purchases of existing homes, and remodeling and renovation (the construction-based demand for

plywood and other products examined in this profile), this decline in demand can be expected to affect

the plywood and composite wood industries, as 60 to 70 percent of their output goes to the construction

sector. WEFA expects the industry to experience most of this decline in 2000 (WEFA, 1999).

The most recent wood products market outlook published by APA - The Engineered Wood

Association (APA) shows U.S. housing starts exceeding expectations in 1999 (APA, 1999d). Similar to

the WEFA study, the forecast expects higher interest rates in the future to play a role in reducing future

housing demand in the period from 2000 to 2002. The report also forecasts the same trends for

residential improvements and repairs, but notes the long-term outlook for remodeling to be good as

home ownership increases. Figure 2-12 below provides information from the APA on U.S. housing

starts. The APA forecast also reports the industrial outlook is good for other wood-consuming sectors. 

The APA expects demand for furniture and fixtures to remain healthy, but not at peak levels as existing

home sales will be declining from the current peak rates. Nonresidential construction is forecasted to

peak in 1999 and 2000 with declines in 2001 and 2002. Increased school construction will be a driving

factor in the upward trend for nonresidential construction (APA, 1999d).
9

While the report does not specify whether the forecast is exclusively for softwood plywood or includes

hardwood plywood, it is assumed to cover softwood plywood only, as hardwood plywood is typically not used for

structural panels.

2-53

0

500

1000

1500

2000

1997 1998 1999 2000 2001 2002

US Single Family US Multi-Family

Figure 2-12: APA Projected Housing Starts (000s)

Source: APA (1999d).

In addition to providing overall forecasts for the market demand, the APA outlook includes detailed

forecasts of the demand for and production of structural panels, specifically softwood plywood and

OSB.9

 These forecasts, summarized in Exhibit 2-31, show the demand from each of the major markets

for structural panels, in order of their share of market demand: new residential construction, remodeling,

industrial uses including furniture and materials, nonresidential construction, and foreign demand. The

industrial use category will have the largest domestic demand increase over the forecast period, 8

percent. Foreign demand shows significant increase of 78 percent. However, reductions in U.S.

production as imports gain a large market share point to increased pressure from imports.

Exhibit 2-31: APA Forecasted Structural Panel Production and Demand 

(million sq. ft. 3/8" basis)

1999 2000 2001 2002 % Change

New Residential 18,415 17,715 17,585 18,435 0.00

Remodeling 7,440 7,440 7,475 7,550 1%

Industrial/Other 6,575 6,720 6,875 7,085 8%

Nonresidential 3,800 3,800 3,735 3,670 -3%

Domestic Demand 36,230 35,675 35,670 36,740 1%

Foreign Demand 990 1,275 1,705 1,760 78%

Total Demand 37,220.00 36,950.00 37,375.00 38,500.00 3%

Imports (Canada only) (7,345) (7,400) (8,300) (9,330) 27%

Total Domestic Production 29,875.00 29,550.00 29,075.00 29,170.00 -2%

Plywood 18,135 17,450 16,575 16,295 -10%

OSB 11,740 12,100 12,500 12,875 10%

Source: APA (1999d).
2-54

The APA forecasts for panel capacity and production provide additional insight into substitution

between softwood plywood and OSB. Exhibit 2-32 below shows these projected trends. Softwood

plywood shows significant decreases in capacity (down 24 percent) and production (down 16 percent)

from 1992 to 2002. Meanwhile, OSB has shown significant increases in capacity and production and is

projected to continue to capture the market for structural panels. The relatively constant capacity

utilization in the plywood sector with significant decreases in production supports the forecast of

expected plant closures in the future, while the opposite is true for OSB with expected increases in the

number of facilities.

Exhibit 2-32: APA Actual and Forecasted Structural Panel Capacity and Production 

(million Sq Ft, 3/8" Basis)

Plywood OSB

Capacity Production Utilization Capacity Production Utilization

1992 23,700 19,332 82% 7,040 6,653 95%

1993 23,300 19,315 83% 7,560 7,002 93%

1994 21,875 19,638 90% 7,920 7,486 95%

1995 22,070 19,367 88% 8,830 7,903 90%

1996 21,150 19,181 91% 11,285 9,314 83%

1997 19,275 17,965 93% 11,575 10,534 91%

1998 19,075 17,776 93% 12,050 11,227 93%

1999 19,275 18,135 94% 12,250 11,740 96%

2000 18,835 17,450 93% 13,120 12,100 92%

2001 18,260 16,575 91% 13,725 12,500 91%

2002 18,010 16,295 90% 14,380 12,875 90%

% Change -0.24 -0.16 1.04 0.94

Shaded areas represent estimated values.

Source: APA (1999d). 

The spring edition of the APA’s on-line Engineered Wood Journal reports that the expectation of

overall production of structural panels in 1999 would be roughly the same as it was in 1998 (APA,

1999b). However, the long term prospects for the softwood plywood and veneer sector indicates that the

industry is in for a difficult time. APA members are bracing for a battle to preserve market share, a

particularly challenging goal in the face of expected declines in housing starts. Further, the APA’s

spring journal focuses on the multiple pressures on its market share. A primary source of pressure is

from the expanding sentiment that wood products are not environmentally sensitive. They are concerned

that environmental advocacy groups are becoming increasingly successful at convincing major

corporations that the use of wood products should be curtailed in order to preserve trees and forested

land (APA, 1999b).

Shipments of reconstituted wood products are expected to increase 4 percent in 1998 and 1999

according to the U.S. Industry and Trade Outlook 1999. Strong demand in the furniture market has

proved beneficial to particleboard, MDF, and hardboard producers. For reconstituted wood products, the

forecast predicts an increase in growth of 3.3 percent per year from 1998 to 2003 as furniture markets
2-55

and residential construction remain healthy (U.S. Department of Commerce, International Trade

Administration, 1999). 

In their article, “A Look at the Road Ahead for Structural Panels, ” authors Spelter and McKeever

compare the situation of the OSB industry in 1996 to that of the MDF industry in the 1970's. The MDF

industry experienced a major upheaval in the 1970's when an economic slump hit the U.S. right when the

industry had added a significant amount of capacity. In this article, Spelter looks at whether the OSB

industry is in danger of experiencing the same process. While the OSB industry’s capacity additions

reflect those of the MDF industry, the economic conditions in the late 1990's lead the author to conclude

that the OSB industry conditions probably will not lead to closures like those experienced by the MDF

sector in the seventies. However, Spelter does not expect that the OSB producers will continue to enjoy

the gains in market share they have experienced over the last 10 to 15 years. He cites the near 100

percent market share held by OSB in the northeast and the Midwest as the peak of growth opportunity in

those markets. Further, the market share split in the south and west may have stabilized due to the

entrenchment of softwood plywood in those areas (Spelter and McKeever, 1996).

At the same time, manufacturers of substitutes for wood-based construction such as steel, cement

and plastic, are aggressively pushing their products hard on the construction industry using the argument

that their products are environmentally friendly, and have advantages in the areas of price stability,

quality, and performance. In-roads by these competing non-wood substitutes are expected to continue as

overall costs for wood-based products continue to climb and the underlying price advantage that woodproducts have traditionally held is undermined. Other concerns expressed the Engineered Wood Journal

include having adequate supply of timber in the long run to meet producers’ needs (APA, 1999b).

International Trade

The hope for the plywood and composite wood products export markets is that declining domestic

prices and economic recovery, particularly of the Asian economies, will boost the demand for U.S.

produced wood-based products. This is of particular importance to the softwood plywood industry, as

they are currently exporting approximately 10 percent of their production. Another international driver

of demand for domestically produced wood-based building products is the effect of regulatory changes

in countries such as Japan and Korea to promote wood-based housing construction. WEFA attributes

most of the increases in exports from North America during 1999 to the U.S. rather than Canada. 

Continued growth in this market is limited by expected falling housing starts in Japan (WEFA, 1999). 

Any future changes in the U.S.-Canadian exchange rate will likely have a positive effect on exports in

the short-term (in the next 2-3 years), as will any modifications to tariff structures in place for U.S.

exports.

The APA outlook includes an international forecast that projects a positive outlook for wood product

exports from 2000 to 2002. This projection is based on expectation that the markets in Europe, Mexico,

South America, and Japan will pick up in 2000, causing a weaker dollar and better overall climate for

exports as (APA, 1999d). The strength of the dollar in 1999 placed U.S. wood products at a

disadvantage in world markets, but APA projects significant increases in exports from 2000 to 2002 (see

Exhibit 2-31 for structural panel export forecast). The 1999 fall edition of the APA’s Engineered Wood

Journal pointed to continuing pressures on U.S. exports coming from recent increases in European

production capacity as posing a sizeable challenge to structural wood panel products in the U.S. (APA,

1999c).

The U.S. Industry & Trade Outlook notes growth in European markets and removal of tariff barriers

throughout the world as contributing to modest growth in the wood products industry. At the same time,

the report cautions that economic conditions in Asia, especially Japan, may be of some concern. While

OSB is making significant strides in residential construction in Japan and elsewhere, an Asian recession
2-56

could threaten this progress. Softwood plywood is still considered the material of choice in many

markets unfamiliar with OSB. Nontraditional markets such as South America, eastern Europe, and

China could provide significant opportunity for growth in the wood products industry, especially

softwood plywood (U.S. Department of Commerce, International Trade Administration, 1999).

Prices

The recently published WEFA report on softwood lumber forecasts a 5 percent increase in the price

index for those products during the third quarter of 1999 from the previous quarter. Because of the

expected leveling off or decline in construction, prices are expected to decline during the year’s fourth

quarter. Based on WEFA’s forecast, overall annual prices in 1999 are expected to be about 8 percent

higher than they were in 1998. Year 2000 prices are forecast to rise only marginally over 1999. 

The “Review of the Wood Panel Sector in the U.S. and Canada” presents a forecast for structural

wood panels (softwood plywood and OSB combined). In the 1997 report, Spelter and his co-authors

assume that the long run average annual growth in demand for softwood plywood and OSB combined

will continue at the historical 3 percent rate. Using that assumption, these industries will have excess

capacity until 2001, when capacity utilization reaches 95 percent (Spelter et al., 1997).

This forecast concluded that current and planned production capacity will exceed demand until

2001. This excess capacity will continue to put downward pressure on prices, a trend that began in

1996. The report authors expect that this price pressure will result in a market correction, requiring both

the plywood and the OSB sectors to adjust capacity through the closure of some high cost, low

productivity plants.
2-57

2.6 References

Abt Associates Inc. 1997. Market Profile of the Adhesive Industry. Prepared for Wendy Hoffman,

Regulatory Impacts Branch, Office of Pollution Prevention and Toxics, U.S. Environmental

Protection Agency, 401 M Street, SW, Washington, DC 20460.

American Plywood Association - The Engineered Wood Association. 1999a. Web page information on

product characteristics and manufacturing. Tacoma, WA: APA - The Engineered Wood

Association. http://www.apawood.org/ 

American Plywood Association - The Engineered Wood Association. 1999b. Engineered Wood

Journal Online. Tacoma, WA: APA - The Engineered Wood Association. Spring. 

http://www.apawood.org/news/journal/spring99.html

American Plywood Association - The Engineered Wood Association. 1999c. Engineered Wood Journal

Online. Tacoma, WA: APA - The Engineered Wood Association. Fall. 

http://www.apawood.org/news/journal/fall99.html

American Plywood Association - The Engineered Wood Association. 1999d. Market Outlook. Lumber,

Structural Panels, and Engineered Wood Products: 2000 - 2002. Tacoma, WA: APA - The

Engineered Wood Association.

American Plywood Association - The Engineered Wood Association. 1998. Engineered Wood Journal

Online. Tacoma, WA: APA - The Engineered Wood Association. Fall. 

http://www.apawood.org/news/journal/fall98.html

American Plywood Association - The Engineered Wood Association. 1997. Design/Construction

Guide: Residential & Commercial. Tacoma, WA: APA — The Engineered Wood Association. 

Bentley, Jerome T., C. C. Lawson, and D. Crocker (Mathtech, Inc.) 1992. Economic Impacts of

Alternative NESHAPS on the Wood Furniture Industry. Prepared for U.S. Environmental Protection

Agency, Cost and Economic Impact Section, Emissions Standards Division, office of Air Quality

Planning and Standards. September.

Buongiorno, Joseph. 1996. “Forest sector modeling: a synthesis of econometrics, mathematical

programming, and system dynamics methods. International Journal of Foresting, 12, pp. 329-343.

CINTRAFOR. 1999. “Asian Crisis Hits PNW: Export Revenues Down 27% Between 1998-1998.” 

Fact Sheet #29. January. http://www.cintrafor.org/FS29.htm

Columbia Forest Products. 1999. “About our Company.” Portland, OR.

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Composite Panel Association. 1998. 1997 Annual Shipments Report & Downstream Market Survey:

U.S./Canada Particleboard & Medium Density Fiberboard Industry. Gaithersburg, MD: Composite

Panel Association. http://www.pbmdf.com/pubs/shipments97.html

Dirks, John. 1991. Perspectives on Wood Furniture Production, Marketing and Trade: A Survey of

Research Results. CINTRAFOR Special Paper #1. http://www.cintrafor.org/SP01.htm

Dun & Bradstreet. 1999a. D-U-N-S Number Database. Murray Hill, NJ: Dun & Bradstreet. May 24. 

http://www.dnb.com/dunsno/dunsno.htm
2-58

Dun & Bradstreet. 1999b. Industry Norms & Key Business Ratios 1998-1999, Information for SIC

Codes 2435, 2436, 2439, and 2493.

Eastin, Ivan, C. Lane, T. Waggener, R. Fight, J Barbour. 1996. An Assessment of the Market for

Softwood Clearwood Lumber Products. CINTRAFOR Working Paper No. 59. 

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Financial Times Limited. 1999a. “Boise Cascade Corporation.” Company Briefs/Company Financials. 

http://www.ft.com

Financial Times Limited. 1999b. “Georgia-Pacific Corporation.” Company Briefs/Company

Financials. http://www.ft.com

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Financials. http://www.ft.com

Financial Times Limited. 1999d. “Willamette Industries, Inc.” Company Briefs/Company Financials. 

http://www.ft.com

Gale Business Resources. 1999. Online business database. Essays by industry SIC code downloaded

from http://www.gale.com.

Howard, James L. 1999. U.S. Timber Production, Trade Consumption, and Price Statistics 1965-1997.

General Technical Report FPL-GTR-116. Madison, WI: U.S. Department of Agriculture, Forest

Service, Forest Products Laboratory, 76p. July.

International Paper. 1998. “International Paper, Union Camp Corporation Announce Merger.” Release,

November 24. 

http://www.internationalpaper.com/ca/page/press_releases.cgi?funcs=links&ID=493957&back=arch

ive

Louisiana-Pacific Corporation. 1999. 

“Headquarters: Product Lines Overview” http://www.lpcorp.com/hq/products.html

“Louisiana-Pacific Corp. Successfully Completes Tender Offer for ABT Building Products Corp.” 

Release No.: 112-2-9. February 24. http://www.lpcorp.com/pressrel/19990224_gen_pr.html

“Louisiana-Pacific to Acquire Evans Forest Products, Ltd.” Release No.: 138-8-9. August 24. 

http://www.lpcorp.com/pressrel/19990824_gen_pr.html

“Louisiana-Pacific Corp. Successfully Completes Tender Offer for Le Groupe Forex.” Release No.:

140-9-9. September 10. http://www.lpcorp.com/pressrel/19990910_gen_pr.html

McKeever, Davis B. 1997. Engineered Wood Products: A Response to the Changing Timber Resource. 

Pacific Rim Wood Market Report, November.

Midwest Research Institute. 1999. Memorandum from Becky Nicholson and Melissa Icenhour to Mary

Tom Kissell and Larry Sorrels, U.S. EPA: “Preliminary facility-specific cost estimates for

implementation of the plywood and composite wood products NESHAP.” October 20.

Moody, Russell C. and J. Y. Liu. 1999. “Chapter 11: Glue Structural Members,” Wood

handbook--Wood as an engineering material. Gen. Tech. Rep. FPL-GTR-113. Madison, WI: U.S.

Department of Agriculture, Forest Service, Forest Products Laboratory.

PR NewsWire. 1999a. 
2-59

“Boise Cascade to Acquire Furman.” June 15. 

“Boise Cascade Reports Sharply Increased Second-Quarter Earnings.” July 15. 

http://www.prnewswire.com/gh/cnoc/comp/109525.html

PR NewsWire. 1999b.

“Georgia-Pacific Group Reports Fourth Quarter and 1998 Results.” January 26.

“Georgia-Pacific to Construct Oriented Strand Board Plant in Arkansas.” February 23.

“Georgia-Pacific Group Reports Improved First Quarter Earnings and All-Time Quarterly Record

for Building Products.” April 22.

“Georgia-Pacific Completes Merger with Unisource Worldwide, Appoints Key Leadership; Sets

Target for Resumption of Share Repurchases.” July 6.

http://www.prnewswire.com

PR NewsWire. 1999c. 

“Willamette Industries Reports Fourth Quarter Earnings.” January 20.

“Willamette Industries Completes Darbo Acquisition.” June 22.

“Willamette Industries to Build Particleboard Plant; Name New CFO.” August 5

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PR NewsWire. 1998. “Willamette Industries Finalizes Purchase of French Plant.” March 4.

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PR NewsWire. 1997. “Willamette Industries to Acquire Mexico City Box Plant.” December 15.

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Spelter, Henry. 1998. Substitution, Timber Processing, March.

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States and Canada, General Technical Report FPL-GTR-99. Madison, WI: U.S. Department of

Agriculture, Forest Service, Forest Products Laboratory. 45p.

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Products Journal, 46(7/8).

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Publications, Inc., 11(5). October.

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Reconstituted Wood Products Manufacturing, EC97M-3212E

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2-60

Wood Office Furniture Manufacturing, EC97M-3372A

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Furniture, Industries 2511, 2512, 2514, 2515, 2517, and 2519. MC92-I-25A. Washington, D.C.:

U.S. Government Printing Office.

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U.S. Department of Commerce. No date. Census of Manufactures:

Industry 2435, Hardwood Veneer and Plywood

Industry 2436, Softwood Veneer and Plywood

Industry 2439, Structural Wood Members, N.E.C.

Industry 2493, Reconstituted Wood Products

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Outlook.

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for the Development of Plywood and Particleboard Maximum Achievable Control Technology

(MACT) Standards.

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Sector Notebook Project.

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Wood Furniture Industry.”

U.S. Small Business Administration. 1999. Small Business Size Standards Matched to SIC Codes,

http://www.sba.gov/regulations/siccodes/siccodes.html.

WEFA. 1999. Informational Web site on softwood lumber. 

http://www.wefa.com/news/stories/99/lumber.cfm
3-61

Weyerhaeuser. 1999a. “Weyerhaeuser Completes Acquisition of MacMillan Bloedel; Haskayne to Join

Weyerhaeuser Board of Directors. Release. November 1. 

http://www.weyerhaeuser.com/news/mb/default.asp

Weyerhaeuser. 1999b. “Facts About Weyerhaeuser.” Tacoma, WA: Weyerhaeuser Company. 

http://www.weyerhaeuser.com/facts/weyer.htm

Willamette Industries, Inc. 1999. “Willamette Industries to Build $85 Million Facility in South

Carolina.” Release. http://www.wii.com/newsexp.htm

Youngquist, John A. 1999. “Chapter 10: Wood-Based Composite and Panel Products.” Wood

handbook--Wood as an engineering material. Gen. Tech. Rep. FPL-GTR-113. Madison, WI:

U.S. Department of Agriculture, Forest Service, Forest Products Laboratory.

3 REGULATORY ALTERNATIVES, EMISSIONS, EMISSION REDUCTIONS, AND

CONTROL AND ADMINISTRATIVE COSTS
3-1

3.1 Regulatory Alternatives

3.1.1 Background

Section 112 of the Clean Air Act (CAA) requires that EPA establish NESHAP for the control of

hazardous air pollutants (HAP) from both new and existing major sources. A major source of HAP is

defined as any stationary source or group of stationary sources within a contiguous area and under

common control that emits or has the potential to emit, considering controls, in the aggregate, 10 tons

per year or more of any single HAP or 25 tons per year of combined HAP. The CAA requires the

NESHAP to reflect the maximum degree of reduction in emissions of HAP that is achievable. This level

of control is commonly referred to as the maximum achievable control technology, or MACT. The

MACT floor is the minimum control level allowed for NESHAP and is defined in Section 112 (d) (3) of

the CAA. 

The requirements for new sources are potentially more stringent than those for existing sources. 

For new sources, Section 112(d)(3) of the CAA requires EPA to set standards for each category or

subcategory that are at least as stringent as “the emission control that is achieved in practice by the best

controlled similar source.” For existing sources, Section 112(d)(3) requires the HAP standards to be no

less stringent than “the average emission limitation achieved by the best-performing 12 percent of the

existing sources” for source categories or subcategories with at least 30 sources and “the average

emission limitation achieved by the best-performing five sources” for source categories or subcategories

with fewer than 30 sources.1

 

In a previous rulemaking, the EPA promulgated a final rule (59 FR 29196) that presented the

Agency’s interpretation of the statutory language regarding the basis of the MACT floor.2

 The EPA’s

interpretation of the “average emission limitation” is that it means a measure of central tendency, such as

the median. If the median is used when there are at least 30 sources, then the emission level achievable

by the source and its control system that is at the bottom of the top 6 percent of the best-performing

sources (i.e., the 94th percentile) then becomes the MACT floor. For example, assume that there are 100

sources, and HAP emissions from approximately 15 of these sources (15 percent nationwide) are

controlled using thermal oxidizers and the HAP emissions from the remainder of the sources are

uncontrolled. In this example, the 94th percentile is represented by the control system applied to the

source ranked at number 6 (6/100 = 6 percent). However, in this example, the same type of add-on

control technology used by the source at the 94th percentile (thermal oxidizer) is used by sources ranked

below the 94th percentile. Assuming that there are no significant design or operational differences

between the different thermal oxidizers that would affect their performance, all 15 sources equipped with

thermal oxidizers would be considered representative of the MACT floor. Thus, when determining the

performance level of the MACT floor technology, EPA would evaluate the available data for any and all

of the sources equipped with thermal oxidizers.

When there are less than 30 sources, the emission level achievable by the source and its control

system that is the median of the 5 sources represents the MACT floor. For example, if there are 10

sources nationwide and the emissions from 2 of these sources are controlled with thermal oxidizers and

the emissions from the remaining 8 are uncontrolled, then the MACT floor is “no emission reduction”

because the top 5 sources include the 2 that are controlled, plus 3 that are uncontrolled. In this example,

the median source (the source ranked “number 3”) is uncontrolled.
3-2

3.1.2 Control Technologies and Practices in MACT Floor Determination 

Control systems in use in the plywood and composite wood products (PCWP) industry include

add-on control systems and incineration of process exhaust in an onsite combustion unit. The potential

for pollution prevention also exists in the PCWP industry; however, there are no known and

demonstrated pollution prevention techniques that can be universally applied across the industry. The

emissions from PCWP process units are associated with the wood and/or resin processed. Thus,

switching to alternative fuels (e.g., switching from wood fuel to natural gas) would not significantly

reduce emissions and would not be economical for many facilities that use their wood waste as fuel. 

Facilities cannot readily switch wood types (e.g., from softwoods to hardwoods) for several reasons: (1)

equipment at each facility is often designed for a particular wood type; (2) product characteristics would

change; and (3) PCWP facilities are located near their wood source. Over the past decades, the PCWP

industry and its resin suppliers have responded to pressure to reduce the HAP content of resins. It is

expected that this trend will continue into the future (e.g., resins with lower HAP content are likely to be

developed). Resin reformulation is a slow, trial-and-error process that must be completed by individual

facilities and their resin suppliers so that product quality is maintained. At this time, no information is

available to determine the degree of emission reduction that can be achieved through resin reformulation. 

The achievable emission reduction would be very facility-specific, and may not be comparable to the

emission reduction achievable with add-on control systems because emissions from the wood would

remain. At the present time, few (if any) facilities use pollution prevention measures to achieve an

emission reduction comparable to that of add-on incineration-based control systems. Therefore, this

analysis focuses on add-on control devices. 

Available data on control device performance were reviewed to determine which add-on control

systems are best at reducing HAP emissions. Because total hydrocarbons (THC), formaldehyde, and

methanol are the most prevalent pollutants emitted from the PCWP industry and represent the majority

of the available data on control device performance, the control systems were analyzed based on their

ability to reduce emissions of these three pollutants. Although THC is not a HAP, control systems that

are effective in reducing THC emissions are generally effective in reducing HAP emissions. 

The available control device performance data for the PCWP industry shows that only two types

of add-on air pollution control devices consistently and continuously reduce HAP emissions:

incineration-based controls (including regenerative thermal oxidizers [RTOs], regenerative catalytic

oxidizers [RCOs], and incineration of pollutants in onsite process combustion equipment [process

incineration]) and biofilters. For control systems that use onsite process combustion equipment (e.g.,

power boilers or fuel cells) to reduce emissions, only those systems that route 100 percent of the process

unit’s exhaust to the combustion equipment are included in the “incineration-based controls” category. 

Several of the process incineration systems are fully integrated systems that combine heat/energy

recovery with pollution control. Systems that only incinerate a portion of the process unit exhaust

stream (e.g., less than 75 percent) are referred to as “semi-incineration” and are not included in the

incineration-based controls category.

Those PCWP facilities that practice semi-incineration take a portion of the exhaust stream and

then route these emissions to a burner for use as combustion air. In those situations, the HAP emissions

in the slip stream are actually combusted. However, some facilities with direct-fired dryers (i.e., dryers

that receive hot exhaust air directly from combustion source) that practice semi-incineration may also

use the dryer exhaust gas slip stream (or fresh air) to cool the exhaust gas from the burners in “blend

chambers.” 3

 When the exhaust gas is routed to the blend chamber, the HAP in the exhaust gas are not

combusted in the dryer, and if the dryer emissions are uncontrolled, these HAP are ultimately emitted to

the atmosphere. The amount of exhaust gas recycled either to the burner or to the blend chamber can
3-3

vary over time. Decisions about how much of the recycled exhaust stream are used as combustion air

and when and how much exhaust air is used in a blend chamber generally are made by the equipment

operators and are affected by process conditions such as the moisture content of the incoming wood

furnish (which affects the target dryer operating temperature) and the desired amount of water removal.4

Thus, semi-incineration is used to maintain the heat balance in the drying system (e.g., combustion unit

and dryer). There is a lack of detailed information on how the semi-incineration process works at each

facility, and thus, the actual HAP emission reductions that are achieved at PCWP facilities that practice

semi-incineration cannot be determined/verified. In addition, it may not be possible to retrofit semiincineration onto existing process units, and therefore, semi-incineration may not be an option for

process units that were not originally designed to incorporate semi-incineration. For the reasons stated

above and for the purpose of establishing MACT floors for the PCWP source category, semiincineration is not considered a verified control technique for reducing HAP emissions. However, as

explained later in the technical support document for the cost analysis, there are only two process unit

groups (bagasse fiberboard mat dryers and hardwood veneer dryers) where semi-incineration is the only

available candidate for the MACT floor technology.

The available control device efficiency data show that control devices installed for particulate

matter (PM) abatement had no effect on gaseous HAP or THC emissions.5

 These control devices include

cyclones, multiclones (or multicyclones), baghouses (or fabric filters), and electrified filter beds (EFBs). 

The performance data for wet electrostatic precipitators (WESPs) and wet scrubbers installed for PM

control also showed no effect on HAP and THC emissions. These wet systems may achieve short-term

reductions in THC or gaseous HAP emissions, however, the HAP and THC control efficiency data,

which range from slightly positive to negative values, indicate that the ability of these wet systems to

absorb water-soluble compounds (such as formaldehyde) diminishes as the recirculating scrubbing liquid

becomes saturated with these compounds.5

 One wet scrubbing system, a combination water tray

tower/high energy venturi scrubber that uses treated water and is designed to minimize emissions of both

PM and odorous compounds from a hardboard press, did achieve notable HAP and THC emissions

reductions. This system reduces formaldehyde and methanol emissions by 65 percent and 50 percent,

respectively, and reduces THC emissions by 86 percent.5

 

The THC, methanol, and formaldehyde control device performance data for incineration-based

control and biofilters are presented in the MACT floor memo included in the public docket.6

 The

information in this memo was extracted from a separate memorandum which provides information on

the available control device performance data for the various types of control devices applied to PCWP

process units. The performance data for the incineration-based controls and biofilters showed methanol

and formaldehyde emission reductions equal to or greater than 90 percent, except in some cases where

the pollutant loadings of the emission stream entering the control systems were very low. The

performance data for THC showed that incineration-based control systems could achieve THC emission

reductions equal to or greater than 90 percent. The THC emission reductions achieved with biofilters

varied somewhat, with THC reductions ranging from 73 percent to 90 percent. Although biofilters are

effective in reducing the HAP compounds emitted from process units in the PCWP industry, they can be

less effective in reducing some of the less water-soluble non-HAP compounds, such as pinenes, that can

make up a portion of the THC measurements.

The MACT floor technology for the process units was either determined to be no emission

reduction or equivalent to the emission reduction achievable with incineration-based control systems or

biofilters. Although some process units are equipped with add-on controls that perform at a level

somewhere between zero (no control) and the performance level achievable with incineration-based

controls and biofilters, none of these control systems were identified as MACT floor control

technologies because they (1) do not reduce HAP emissions (e.g., bag houses) or (2) do not reduce HAP
3-4

emissions on a consistent basis (e.g., wet electrostatic precipitators), or (3) achieve lower HAP emission

reductions than biofilters and incineration-based controls (e.g., semi-incineration). Therefore, the

MACT floor analysis focused on incineration-based controls and biofilters.

For the purpose of establishing the performance level of the MACT floor control systems, all

available data on incineration-based controls and biofilters were grouped together. This “group

approach” was used because some of the control systems treat HAP emissions from multiple types of

process units, such as primary tube dryers, reconstituted panel presses, and board coolers. 

Determinations of the performance of the control system on emissions from each type of process

unit were not possible. Also, for some process unit groups, limited data were available for the control

systems applied to the process units in that group. By considering all of the performance data for

incineration-based controls and biofilters together, the amount of available data upon which the MACT

floor level of performance was based was maximized. 

The available data for incineration-based controls and biofilters (provided in the MACT floor

memo)6

 shows variability in performance from process unit to process unit and over time. In some

cases, it was not possible to directly compare the performance of different control systems because data

were not available for the same pollutant (i.e., not all test reports included data for THC, methanol, and

formaldehyde). Comparison of the performance of the different types of incineration-based control

systems with other incineration-based controls and with biofilters was also hampered by the fact that the

uncontrolled emissions being treated by the different control systems varied with respect to pollutant

loading (inlet concentration) and pollutant type. Because the control device efficiency is somewhat

dependent on the amount of HAP entering the device, the variability in the uncontrolled emissions from

process units both within and among the different process groups meant that the control device

efficiencies also varied. With a few exceptions, when the concentration of methanol, formaldehyde, or

THC in the uncontrolled emission stream was greater than 10 parts per million dry volume (ppmvd), the

associated HAP emission reductions ranged from 90 to 99 percent. In general, lower control efficiencies

were achieved when the inlet pollutant concentrations were below 10 ppmvd; however, in some cases,

the control efficiency exceeded 90 percent even at the lower inlet concentrations. 

To account for the variability in the type and amount of HAP in the uncontrolled emissions from

the various process units and the effect of this variability on control system performance, it is

recommended that the MACT floor performance level be based on all three of the pollutants analyzed

and include maximum concentration levels in the outlet of the control systems as an alternative to

emission reductions. The MACT floor performance level is a 90 percent reduction in THC or methanol

or formaldehyde emissions. The maximum concentration level in the outlet of the MACT floor control

system is 20 ppmvd for THC, or 1 ppmvd for methanol, or 1 ppmvd for formaldehyde. The 20 ppmvd is

recommended as the alternative maximum concentration for THC because 20 ppmvd represents the

practical limit of control for THC. The 1 ppmvd is recommended as the maximum outlet concentration

for both methanol and formaldehyde because this concentration is achievable by the MACT floor control

systems and the method detection limits for these compounds using the National Council of the Paper

Industry for Air and Stream Improvement (NCASI) impinger/canister emission test method (NCASI

Method IM/CAN/WP-99.01) are less than 1 ppmvd.7

 

3.1.3 MACT Floor Options

The six recommended options for representing the MACT floor are shown in Exhibit 3-1. These

six options reflect the emission reductions and maximum outlet pollutant concentrations achievable at

the MACT floor for all process units with a MACT floor technology represented by incineration-based
3-5

controls or biofilters. As shown in Exhibit 3-1, it is recommended that a restriction be placed on the use

of the outlet concentration options for methanol and formaldehyde. The restriction would be that the

concentration of the pollutant (methanol or formaldehyde) entering the MACT control system must be at

least 10 ppmvd for the facility to use the outlet concentration option. The purpose for this restriction is

that some process units may have very low uncontrolled methanol or formaldehyde emissions, while still

emitting significant quantities of HAP, and facilities with these process units could claim that they are

achieving MACT floor levels of control without doing anything to reduce HAP emissions. All of the

MACT floor control systems evaluated can meet at least one of the six control options for add-on control

devices, based on the available data. Only a few of the MACT floor control systems evaluated can meet

all six options; in those cases, the control systems tend to be applied to process units with both

moderately high HAP emissions and moderately high THC emissions, which would allow them to meet

the outlet concentration-based options for methanol and formaldehyde as well as the percent reduction

options. Therefore, it is recommended that facilities be required to meet only one of the six emission

options in Exhibit 3-1.

Exhibit 3-1. MACT FLOOR CONTROL OPTIONS 

Pollutant Reduce by OR achieve emissions #

methanol 90 percent 1 ppma

...OR...

formaldehyde 90 percent 1 ppma

...OR...

THCb 90 percent 20 ppm a This option would only be applicable to units with uncontrolled emissions of that HAP that are $10 ppm. b Mills will be allowed to adjust THC measurements to subtract methane.

3.1.4 Summary of MACT for Existing and New Process Units

Exhibit 3-2 summarizes MACT for each type of process unit at new and existing PCWP

facilities. The MACT represents the level of control that would be required by the PCWP NESHAP. 

The technologies listed below achieve that control level. 
3-6

Exhibit 3-2. SUMMARY OF MACT FOR PCWP PROCESS UNITS

AT NEW AND EXISTING SOURCES

Process unit

MACT for process units at existing

sources

MACT for process units at new

sources

Tube dryers; Rotary strand

dryers; Conveyor strand dryers;

Green particle rotary dryers;

Hardboard ovens; Softwood

veneer dryers; Pressurized

refiners

emission reduction achievable with

incineration-based controla

emission reduction achievable with

incineration-based controla 

Reconstituted wood product

presses

emission reduction achievable with

incineration-based controla

 or

biofilter

emission reduction achievable with

incineration-based controla or

biofilter

Fiberboard mat dryers (wood);

Hardboard press preheat ovens

No emission reduction emission reduction achievable with

incineration-based controla

Reconstituted wood product

board coolers

No emission reduction emission reduction achievable with

incineration-based controla

 or

biofilter

Rotary agricultural fiber dryers;

Dry particle rotary dryers;

Paddle-type particle dryers;

Hardboard humidifiers

Fiberboard mat dryers (bagasse);

Veneer kilns; Radio-frequency

veneer redryers; Hardwood

veneer dryers; Particleboard

press molds; Particleboard

extruders; Engineered wood

products presses; Agriboard

presses; Plywood presses; Standalone digesters; Atmospheric

refiners; Blenders; Formers;

Sanders

Saws; Fiber washers; Chippers;

Log vats; Lumber kilns

No emission reduction No emission reduction

a Incineration-based control includes RTOs, RCOs, TCOs, TOs, and incineration of process exhaust in combustion

unit.

3.1.5 Beyond the MACT Floor Options and Related Technologies

Because the control devices that represent MACT levels of control are the same for all process

units that have a controlled MACT floor for both new and existing units, the only beyond the floor

options considered were for existing process unit groups that had MACT floors equal to “no emission

reduction.” The annual total HAP emissions from the following equipment are very low compared to the

emissions from other process units used in the PCWP industry: 

C agriboard dryers C particleboard press molds
3-7

C dry particle rotary dryers C particleboard extruders

C paddle-type particle dryers C engineered wood products presses

C hardboard humidifiers C agriboard presses

C bagasse fiber mat dryer C atmospheric refiners

C veneer kilns C lumber kilns

C RF veneer redryers C resin storage tanks

C hardwood veneer dryers C other miscellaneous equipment (formers,

sanders, saws, fiber washers, chippers, and log

vats)

No beyond-the-floor control options were considered for these equipment because emissions

from these process units would not be cost-effective to control. In addition, no beyond-the-floor

analyses of wastewater operations, wastewater tanks, and miscellaneous coating operations were

conducted because sufficient information is not available to make beyond-the-floor determinations and it

is not known (or expected) that emissions from these operations would justify control.

Based on a review of the HAP emissions data for process units with MACT floors of no

emission reduction, blenders and stand-alone digesters were selected for a beyond-the-MACT-floor

analysis because these equipment emit higher levels of HAP emissions relative to other process units. 

Beyond-the-floor analyses were also conducted for process units with a MACT floor of no emission

reduction for existing units and a MACT floor represented by the emission reduction achievable with

incineration-based controls for new units. These process units include fiberboard mat dryers, press

preheat ovens, and reconstituted wood products board coolers. 

This analysis of beyond-the-floor options was based on the industry average exhaust flow for

each process unit, the typical number of each process unit per plant, the industry average amount of HAP

emitted from the process units, and assuming that an RTO would be used to control emissions from each

process unit. The average exhaust flow rates and typical number of process units per plant were

determined using the results from EPA’s MACT survey. The average HAP emissions and emission

reductions were determined using the methodology described in the baseline emissions memo.9

 The

annualized RTO cost was calculated based on flow rate using the methodology described later in this

chapter. The cost per ton values were calculated by dividing the total annualized cost (TAC) for the

RTO by the HAP reduction. This analysis assumes that facilities will not be able to route the emissions

from process units to an existing control device or to a new control device installed to meet the PCWP

standards (i.e., that a separate RTO must be purchased to handle the additional flow from the process

units). Exhibit 3-3 below presents the results of this analysis.

Exhibit 3-3. Cost-Effectiveness Analysis Of Beyond-The-Floor Control Options
3-8

Process Unit

Average

flow, dscfm

Typical

no.

per plant

RTO

TAC

Average

HAP

emitted, tpy

Tons HAP

reduced, tpy

Cost

effectiveness

$/ton (1998

dollars)

Fiberboard mat dryer at FB

plant

49,389 1 $471,187 8 7.6

Fiberboard mat dryer at w/d

HB plant

19,491 1 $370,952 12 11

Fiberboard mat dryers

(average)

34,440 1 $421,070 10 9.3 $30,076

Press preheat oven - w/d HB

plant

21,812 1 $377,904 15 14 $26,520 

Board cooler - PB 41,423 1 $442,096 5 4.8

Board cooler - MDF 79,483 1 $599,447 3 2.9

Board cooler (average) 60,453 1 $520,772 4 3.9 $133,531

Stand-alone digester - FB 7,587 2 $358,359 14 13

Stand-alone digester - HB 7,587 2 $358,359 14 13

Stand-alone digester (average) 7,587 2 $358,359 14 13 $26,944 

Blender - PB 13,590 2 $394,486 45 43

Blender - OSB 13,590 2 $394,486 11 10

Blender (average) 13,590 2 $394,486 28 27 $14,610

In all cases, the emission reductions that could be achieved from requiring controls for these

existing units did not appear to be justified by the cost. Many of the existing control devices at wellcontrolled facilities would not have the additional capacity to treat the emissions from these process

units, and thus, these facilities would have to install new controls.

 For more information, refer to the MACT memo for this rule and the BID.8

 

3.1.6 Considerations of Possible Risk-Based Alternatives to Reduce Impacts to Sources
3-9

The Agency has made every effort in developing this rule to minimize the cost to the regulated

community and allow maximum flexibility in compliance options consistent with our statutory obligations. 

However, we recognize that the rule may still require some facilities to take costly steps to further control

emissions even though their emissions may not result in exposures which could pose an excess individual

lifetime cancer risk greater than one in one million or which exceed thresholds determined to provide an

ample margin of safety for protecting public health and the environment from the effects of hazardous air

pollutants. We are, therefore, on whether there are further ways to structure the rule to focus on the

facilities which pose significant risks and avoid the imposition of high costs on facilities that pose little

risk to public health and the environment.

Industry representatives provided EPA with descriptions of three mechanisms that they believed

could be used to implement more cost-effective reductions in risk. The docket for today’s rule contains

“white papers” prepared by industry that outline their proposed approaches (see docket number A-98-44,

Item # II-D-525). The Agency has taken comment on these approaches. We believe that one of the three

suggested approaches warrant consideration. We believe it could be used to focus regulatory controls on

facilities with significant risks and avoid the imposition of high costs on facilities that pose little risk to

public health or the environment. This approach, subcategorization and delisting, would be implemented

under the authority of CAA sections 112(c)(1) and 112(c)(9). The maximum achievable control

technology, or MACT, program outlined in CAA section 112(d) is intended to reduce emissions of HAP

through the application of MACT to major sources of toxic air pollutants. Section 112(c)(9) is intended to

allow EPA to avoid setting MACT standards for categories or subcategories of sources that pose little risk

to public health and the environment. 

3.1.6.1 Subcategory Delisting Under Section 112(c)(9)(B) of the CAA

EPA is authorized to establish categories and subcategories of sources, as appropriate, pursuant to

CAA section 112(c)(1), in order to facilitate the development of MACT standards consistent with section

112 of the CAA. Further, section 112(c)(9)(B) allows EPA to delete a category (or subcategory) from the

list of major sources for which MACT standards are to be developed when the following can be

demonstrated: 1) in the case of carcinogenic pollutants, that "no source in the category . . . emits

[carcinogenic] air pollutants in quantities which may cause a lifetime risk of cancer greater than one in one

million to the individual in the population who is most exposed to emissions of such pollutants from the

source”; 2) in the case of pollutants that cause adverse noncancer health effects, that "emissions from no

source in the category or subcategory . . . exceed a level which is adequate to protect public health with an

ample margin of safety"; and 3) in the case of pollutants that cause adverse environmental effects, that “no

adverse environmental effect will result from emissions from any source.” 

Given these authorities and the suggestions from the white paper prepared by industry

representatives (see docket number A-98-44, Item # II-D-525), EPA has considered whether it would be

possible to establish a subcategory of facilities within the larger PCWP category that would meet the riskbased criteria for delisting. Since each facility in such a subcategory would be a low-risk facility (i.e., if

each met these criteria), the subcategory could be delisted in accordance with section 112(c)(9), thereby

limiting the costs and impacts of the MACT rule to only those facilities that do not qualify for

subcategorization and delisting. Facilities seeking to be included in the delisted subcategory would be

responsible for providing all data required to determine whether they are eligible for inclusion. Facilities

that could not demonstrate that they are eligible to be included in the low-risk subcategory would be

subject to MACT and possible future residual risk standards. 

Establishing that a facility qualifies for the low-risk subcategory under section 112(c)(9) will

necessarily involve combining estimates of pollutant emissions with air dispersion modeling to predict
10“A Tiered Modeling Approach for Assessing the Risks due to Sources of Hazardous Air

Pollutants.” EPA-450/4-92-001. David E. Guinnup, Office of Air Quality Planning and Standards,

USEPA, March 1992.

3-10

exposures. The EPA will promote a tiered analytical approach for these determinations. A tiered analysis

involves making successive refinements in modeling methodologies and input data to derive successively

less conservative, more realistic estimates of pollutant concentrations in air and estimates of risk. 

As a first tier of analysis, EPA developed a series of simple look-up tables based on the results of

air dispersion modeling conducted using conservative input assumptions. By specifying a limited number

of input parameters, such as stack height, distance to property line, and emission rate, a facility could use

these look-up tables to determine easily whether the emissions from their sources might cause a hazard

index limit to be exceeded. 

A facility that does not pass this initial conservative screening analysis could implement

increasingly more site-specific but more resource-intensive tiers of analysis using EPA-approved modeling

procedures, in an attempt to demonstrate that their facility does not exceed the hazard index limit. The

EPA’s guidance could provide the basis for conducting such a tiered analysis.10 

Another approach would be to define a subcategory of facilities within the PCWP source category

based upon technological differences, such as differences in production rate, emission vent flow rates,

overall facility size, emissions characteristics, processes, or air pollution control device viability. If it

could then be determined that each source in this technologically-defined subcategory presents a low risk

to the surrounding community, the subcategory could then be delisted in accordance with 112(c)(9).

With the adoption of this his section 112(c)(9) approach, EPA indicates that the rule does not

apply to any source that demonstrates, based on a tiered approach that includes EPA-approved modeling of

the affected source’s emissions, that it belongs in a subcategory which has been delisted under section

112(c)(9).

3.2 Emissions and Emission Reductions

As mentioned in Chapter 1, the U.S. Environmental Protection Agency (EPA) is developing

national emission standards for hazardous air pollutants (NESHAP) for the plywood and composite

wood products source category. This part of the RIA presents emission reductions expected to occur

from compliance with the final (MACT floor) alternative. 

3.2.1 Some Results in Brief

The plywood and composite wood products NESHAP will reduce HAP emissions by about

11,000 tons in the third year after its issuance.9

 The major HAP reduced, as mentioned in the rule

preamble, are acrolein, acetaldehyde, formaldehyde, phenol, propionaldehyde, and methanol. In

addition, nearly 27,000 tons of VOC (reported as total hydrocarbon) emissions will be reduced. Nearly

11,000 tons of CO emission reductions will occur, along with 13,000 tons of PM (coarse) emission

reductions. There will also be 2,400 tons of additional NOx emissions and 4,000 tons of SO2 emissions

added to the atmosphere due to the additional incineration-based controls that may be necessary for

affected facilities to meet the MACT floor alternative. 
3-11

3.2.2 General Approach 

The methodology used to estimate the HAP emission reductions associated with this rule is

summarized in this section. Before the emissions reductions could be estimated, the baseline emissions

level for each pollutant had to be determined. This was conducted by first estimating emissions without

considering current air pollution controls, and then calculating the emissions levels with current controls

applied. The first, uncontrolled emission estimates, are developed without consideration of air

pollution controls currently in use at wood products plants. Baseline estimates reflect the level of

pollution control that is presently used. The remainder of this section discusses the general methodology

used to estimate uncontrolled and baseline emissions. 

Estimating uncontrolled and baseline emissions involves the following four steps:

(1) Identification of hazardous air pollutant (HAP) emission sources,

(2) Characterization of emission sources (e.g., assignment of throughput and other

characteristics),

(3) Application of emission factors, and

(4) Calculation of emissions.

3.2.2.1 Identifying Emission Sources

Emission sources were identified based on responses to the EPA’s maximum achievable control

technology (MACT) surveys and available emissions test data. The EPA gathered plant-specific

information with three MACT surveys. The results of the three surveys are documented in separate

memoranda.10,11,12 Available emissions test data include data from nearly 100 test reports collected

through EPA’s MACT survey, data from EPA’s Compilation of Air Pollutant Emission Factors, Volume

I: Stationary Point and Area Sources (commonly referred to as AP-42), and extensive data from the

industry-sponsored test program performed by the National Council of the Paper Industry for Air and

Stream Improvement (NCASI). Emissions were estimated for sources that were identified in the EPA’s

MACT survey (e.g., dryers, presses, board coolers) and for additional miscellaneous sources (e.g.,

digesters, refiners, fiber washers) for which applicable emission test data were available. Process flow

diagrams submitted with the MACT surveys provided information about the presence (or absence) of

miscellaneous sources at plants. The EPA’s MACT survey also provided information on the control

devices used for most unit operations.

Some plants have begun operation and other plants have added equipment and controls since

EPA conducted the MACT survey. Such changes have been accounted for in the nationwide emission

estimates. A separate memorandum summarizes the changes to plants that have occurred following the

EPA’s MACT survey.13

3.2.2.2 Characterizing Emission Sources

After the emission sources were identified, each source was assigned a throughput and further

characterized. In most cases, plant-specific dryer and press throughput was provided in EPA’s MACT

survey. If the dryer or press throughput was claimed confidential or was not provided, then a default

throughput was assigned. For dryers, the default throughput was the average throughput for the same

type dryers for the product manufactured. 10,11,12 If available, plant production (or capacity if production
3-12

was unavailable) was used as the default throughput for presses; otherwise, presses were assigned the

average press throughput for the product manufactured. 

Throughput for miscellaneous equipment was based on either dryer or press throughput,

depending on the units of measure for the applicable emission factor (e.g., pounds per oven dry ton

[lb/ODT] or pounds per thousand square feet [lb/MSF]). Collective throughputs for digesters, refiners,

fiber washers, blenders, and formers were generally approximated as the total dryer throughput (ODT/yr)

for the plant. Board cooler, sander, and saw throughput was generally approximated as the total press

throughput (MSF/yr) for the plant. By assigning either the total dryer or press throughput to

miscellaneous processes, no assumption about the number of miscellaneous operations (e.g., number of

refiners) at each plant was necessary.

Following assignment of throughput for each emission source, sources were further

characterized (as necessary for application of emission factors) based on wood species, resin type, or

other characteristics. Further characterization of emission sources is discussed in the baseline emissions

memo for this rule. If characterization of an emission source was not possible due to claims of

confidentiality or missing information in the survey response, then default characterizations were applied

based on practices most commonly observed at other plants. 

3.2.2.3 Applying Emission Factors

As emission sources were characterized, the available emission factors were reviewed for

applicability to each emission source. The emission factors used in developing the nationwide estimates

are documented in a separate memorandum.14 Emissions were generally estimated for total hydrocarbon

as carbon (THC as C , referred to as “THC” in this RIA) and the following HAP’s as shown in the

following table: 

acetaldehyde methyl isobutyl ketone (MIBK) 

acrolein phenol 

benzene propionaldehyde 

cumene styrene 

formaldehyde toluene 

methanol m,p-xylene

methylene chloride o-xylene 

methyl ethyl ketone (MEK) 

When used in this document, the terminology “complete set” refers to the set of emission factors

for the above list of HAP’s, THC, and any other additional HAP’s that may have been measured at levels

above a test method detection limit.

Total HAP was taken to be the sum of the individual HAP’s. If all test data for a pollutant at a

source were below the test method detection limit (denoted as “BDL” in reference 5), then the emission

factor was treated as zero. For a few specific sources, HAP’s other than the ones listed above were

tested for and detected. These HAP were included in the total HAP estimate for that source. Exhibit 3-4

illustrates how the total HAP emission factors were developed.
3-13

Exhibit 3-4. ILLUSTRATION OF TOTAL HAP CALCULATION

FOR AN EMISSION SOURCE

HAP Emission Factor (from reference 5)

acetaldehyde 0.0012

acrolein BDLa

benzene BDL

cumene BDL

formaldehyde 0.015

methanol 0.076

methylene chloride BDL

MEK BDL

MIBK BDL

phenol 0.0047

propionaldehyde BDL

styrene BDL

toluene BDL

m,p-xylene BDL

o-xylene BDL

Total HAP 0.0012 + 0.015 +0.076 + 0.0047 = 0.097

a BDL (below detection limit); all test runs for this pollutant and this source were below the test method detection

limit.

Test data were not available for all of the HAP’s considered for some sources (i.e., a complete

set of emission factors was not available). In some cases, it was necessary to apply emission factors for

one source to a similar source for which factors were not available. In other situations, it was necessary

to group emission factors so that emissions of all the likely pollutants could be estimated for a particular

emission source. Grouped emission factors were calculated from emission test averages using the

methodology described in the emission factor memo that is in the public docket for this rule14. Specific

application of the emission factors for each unit operation is discussed in the baseline emissions memo

for this rule.

 3.2.2.4 Calculating Emissions

Applicable emission factors were used to estimate uncontrolled emissions from each unit

operation as follows:

E = EF x T / 2000

where:

E = annual emissions (ton/yr)

EF = emission factor (lb/ODT or lb/MSF-specified basis)

T = process throughput (ODT/yr or MSF/yr-specified basis)
3-14

To estimate baseline emissions, the emission reduction achieved by air pollution control devices

(APCD’s) in place on unit operations was taken into account. Control devices that achieve significant

reduction of HAP and THC include biofilters and incineration-based controls (e.g., regenerative thermal

oxidizers [RTO’s], regenerative catalytic oxidizers [RCO’s], thermal oxidizers [TO’s], and thermal

catalytic oxidizers [TCO’s]). Emission factors were available for several, but not all, of the unit

operations that are presently controlled with biofilters and incineration-based controls. If a complete set

of emission factors based on inlet and outlet test data for a single control device was available, the set of

emission factors was used to estimate baseline emissions. Otherwise, the achievable percent reduction in

emissions for the control device was used as follows:

E = EF x T / 2000 x (1-R)

where:

R = percent reduction achievable with the control device (see table below)

Control device HAP reduction THC reduction

Biofilter 95% 80%

RTO, RCO, TO, & TCO 95% 95%

If only a portion of an exhaust stream was controlled (e.g., as with semi-incineration where only

a portion of the exhaust is routed to a combustion unit), then controlled emissions were estimated for the

controlled portion of the exhaust and uncontrolled emissions were estimated for the remaining exhaust. 

Because plant-specific capture efficiency information is not readily available, presses and board coolers

without a permanent total enclosure that are routed to an APCD were assumed to operate with 50 percent

capture efficiency.

Following estimation of uncontrolled and baseline emissions for each unit operation, annual

emissions for each facility were totaled. If there were facilities with no available information was

available (e.g., plants that claimed their entire MACT survey confidential or plants that never responded

to the survey), then the average facility-specific emissions for plants making the same product was used

to approximate the emissions from plants with no available information. The emissions from all

facilities were summed to obtain nationwide emission estimates.

3.2.3 Nationwide HAP Emission Estimates

Exhibit 3-5 presents the total nationwide uncontrolled and baseline emission estimates for each

product type. Uncontrolled emissions are the emissions that occur before the application of a HAP

emission control device. Baseline emission estimates take into account the HAP emission controls

currently in place on HAP sources in the industry. Exhibits 3-6 and 3-7 present the nationwide

uncontrolled and baseline speciated HAP emission estimates for each product type.
3-15

To estimate the emissions and emission reductions associated with compliance with this

proposed rule, it is necessary to determine the number of major sources that may be subject to the rule. 

Major sources are facilities with the potential to emit 10 or more tpy of any single HAP or 25 or more

tpy of any combination of HAP. The number of major sources was approximated using the uncontrolled

emission estimates (scaled up to reflect potential to emit) for each facility. 

The emission estimates presented in this chapter are based on equipment throughput at plant

production levels. Plant capacity typically exceeds plant production. Thus, a facility’s potential to emit

may be greater than the emissions estimated for each facility at plant production levels. To account for

this, an average ratio of plant production to plant capacity was determined based on the non-CBI

responses to EPA’s MACT survey. On average, plywood (hardwood and softwood) and reconstituted

wood products plants were found to operate at around 75 percent of their plant capacity. Engineered

wood products plants were found, on average, to operate at 60 percent of their capacity. For purposes of

determining which facilities may be major sources based on potential to emit, the uncontrolled emission

estimates for each facility were scaled up by 25 or 40 percent before comparison to the 10- or 25-tpy

major source thresholds. Exhibit 3-8 presents the estimated number of major sources by product type.

Because of the uncertainty in the emission estimates and lack of knowledge about the specific

operations at facilities the numbers of major sources presented in Exhibit 3-8 are merely estimates. 

Major source determinations depend on the types of operations at a facility and facility-specific factors. 

There may be operations and HAP emission sources at wood products facilities that have not been

accounted for in the emission estimates (e.g., plants that manufacture furniture in addition to

particleboard). Plants with additional onsite operations may be major sources regardless of their

plywood and composite wood products operations. Then again, there may be plants that were

determined to be major sources in this analysis that are not major sources due to uncertainty in the

emission estimates or potential to emit. The purpose of the analyses discussed in this document is to

estimate – on a nationwide scale – emissions from plywood and composite wood products plants and the

number of major sources. On a nationwide scale, it is unlikely that the uncertainties in the emission

estimates or number of major sources will have a significant impact on the direction of the plywood and

composite wood products rulemaking.

The reduction in emissions of total HAP and THC is the difference between baseline emissions

and the emissions expected to remain following implementation of the MACT floor level of control

identified for the PCWP standards. Baseline emissions reflect the level of air pollution control that is

currently used at PCWP plants. The MACT floor control level reflects the level of control that will be

used following implementation of the PCWP standards. The following assumptions were used when

estimating emissions at the MACT floor control level: (1) plants will install RTO on all process units

that require controls to meet the MACT floor; (2) presses at conventional particleboard, MDF, OSB, and

hardboard plants will be fully enclosed by a PTE that captures and routes 100 percent of the emissions

from the press area to an RTO; and (3) WESP will be installed upstream of RTO for new RTO

installations on rotary strand dryers. The nationwide HAP and THC emission reduction was calculated

by subtracting the emissions remaining at the MACT floor control level from the baseline emissions. 

Exhibit 3-9 presents the nationwide HAP and THC emissions reduction.14

3.2.4 Nationwide Emission Estimates - Non-HAP Species

As mentioned earlier in this chapter, there are reductions in pollutants other than HAPs as a

result of compliance with this rule. There are reductions of coarse particulate matter (PM10), volatile

organic compounds (VOC), and carbon monoxide (CO), and increases in nitrogen oxides (NOx), and
3-16

sulfur dioxide (SO2). The reductions of PM10 are estimated at 13,000 tons, the reductions of VOC

(reported as total hydrocarbon) are estimated at 27,000 tons (see Exhibit 3-9), and the reductions of CO

are estimated at 11,000 tons. The increase of NOx emissions is estimated at 2,400 tons, and there are

potentially as many as 4,000 tons of additional SO2 emissions. All emission estimates are estimated for

the fifth year after the issuance of the rule. The methodology used to prepare these estimates is

contained in the BID for this rule.15
3-17

Exhibit 3-5. UNCONTROLLED AND BASELINE HAP EMISSIONS ESTIMATES

No. of

plantsa

Uncontrolled emissions, ton/yrb Baseline emissio

Product Total HAP THC as C Total HAP MDF 24 4,000 8,200 2,400 Particleboardd 51 5,700 13,000 5,400 

Hardboard 18 3,500 5,800 3,300 Fiberboard 7 78 400 78 OSB 37 7,100 19,000 3,500 Softwood plywood 105 4,000 24,000 3,700 Hardwood plywood 166 150 640 150 EWP 39 310 990 290 Nationwide totale 447 25,000 73,000 19,000 

a Some plants make multiple products and are counted once for each product they make (e.g., a particleboard and softwood plywood plb Uncontrolled emissions represent the emissions that occur before the application of HAP emission control devices.c Baseline emissions reflect the application of HAP emission controls in the industry as of April 2000.d Includes conventional and molded particleboard.e Nationwide emission totals may not exactly match sum due to rounding.
3-18

Exhibit 3-6. SPECIATED NATIONWIDE UNCONTROLLED HAP EMISSIONS BY PRODUCT T

Product

Estimated HAP’s emitted, ton/yr

Acetaldehyde Acrolein Formaldehyde Methanol Phenol Propionaldehyde Other 

MDF 48 1 1,700 2,200 93 1 Particleboardb 230 56 1,300 3,800 150 20 16

Hardboard 320 76 580 2,100 99 250 5Fiberboard 9 1 17 45 1 0 OSB 1,500 540 890 3,500 340 88 28Softwoodplywood

450 26 280 2,900 150 24 1

Hardwoodplywood 

20 0 11 81 15 0 

EWP 53 4 36 140 46 8 1

Totalf 2,600 700 4,800 15,000 890 390 7

a Other HAP’s include benzene, cumene, methylene chloride, MEK, MIBK, styrene, toluene, m,p-xylene, and o-xylene.b Includes conventional and molded particleboard.c Includes HAPs listed in footnote “a” plus acetophenone, biphenyl, bis-(2-ethylhexyl phthalate), bromomethane, carbon disulfide, carb

chloroform, chloromethane, di-n-butyl phthalate, ethyl benzene, hydroquinone, n-Hexane, 1,1,1-trichloroethane, and 4-methyl-2-pent

d Includes HAPs listed in footnote “a” plus chloroethane, chloromethane, ethyl benzene, m.p-cresol, and o-cresol. e Includes HAPs listed in footnote “a” plus MDI.f Totals may not exactly match sum due to rounding.
3-19

Exhibit 3-7. SPECIATED NATIONWIDE BASELINE HAP EMISSIONS BY PRODUCT

Product

Estimated HAP’s emitted, ton/yr

Acetaldehyde Acrolein Formaldehyde Methanol Phenol Propionaldehyde Other 

MDF 29 1 1,000 1,300 51 0 Particleboardb 200 50 1,200 3,700 140 18 15

Hardboard 270 61 570 2,100 96 200 4Fiberboard 9 1 17 45 1 0 OSB 570 200 370 2,000 210 32 6Softwoodplywood

390 20 230 2,700 130 17 1

Hardwoodplywood 

20 0 11 81 15 0 

EWP 47 4 30 140 46 7 1

Totalf 1,500 330 3,400 12,000 690 270 4

a Other HAP’s include benzene, cumene, methylene chloride, MEK, MIBK, styrene, toluene, m,p-xylene, and o-xylene.b Includes conventional and molded particleboard.c Includes HAPs listed in footnote “a” plus acetophenone, biphenyl, bis-(2-ethylhexyl phthalate), bromomethane, carbon disulfide, carb

chloroform, chloromethane, di-n-butyl phthalate, ethyl benzene, hydroquinone, n-Hexane, 1,1,1-trichloroethane, and 4-methyl-2-pent

d Includes HAPs listed in footnote “a” plus chloroethane, chloromethane, ethyl benzene, m.p-cresol, and o-cresol. e Includes HAPs listed in footnote “a” plus MDI.f Totals may not exactly match sum due to rounding.
3-20

Exhibit 3-8. ESTIMATED NUMBER OF MAJOR SOURCES BY PRODUCT

Product No. of plantsa No. of major sourcesb

No

non

MDF 24 24 Particleboardc 51 42 

Hardboard 18 18 Fiberboard 7 3 OSB 37 37 Softwood plywood 105 87 Hardwood plywood 166 0 EWP 39 12 Total 447 223 

a Some plants make multiple products and are counted once for each product they make (e.g., a particleboard and softwood plywood plb Major sources are defined as facilities with the potential to emit 10 or more tons per year (tpy) of any single HAP or 25 or more tpy o

HAP. Sources with HAP emissions estimated to be below the 10/25 thresholds in this analysis are labeled as potentially non-major s

estimation methodology described in this document does not account for onsite operations (e.g., furniture manufacture) not included icomposite wood products source category.

c Includes conventional and molded particleboard. Five of the potentially non-major particleboard sources manufacture molded particl
3-21

Exhibit 3-9. ESTIMATED NATIONWIDE REDUCTION IN TOTAL HAP AND THC

Product type

Total HAP (ton/yr) THC (ton/yr)

Baselinea MACT floor Reduction Baselinea MACT floor 

Softwood plywood/veneer 3,700 3,043 657 19,631 9,709 Hardwood plywood/veneer 161 161 0b 640 640 

Medium density fiberboard 2,469 345 2,124 4,763 572 Oriented strandboard 3,513 753 2,760 5,362 1,755 Particleboardc 5,377 2,787 2,590 12,632 6,724 

Hardboard 3,291 752 2,539 5,478 2,103 Fiberboard 78 78 0b 398 398 

Engineered wood products 298 230 68 793 617 TOTAL 18,933 8,196 10,737 49,706 22,529 

a The baseline emissions presented in this table may differ slightly from the values presented in Exhibits 3-4 through 3-6 because of sli

calculation procedures (i.e., use of a total HAP emission factor instead of summing speciated HAP emissions) and rounding. 

b There is no impact because no plants are impacted by the PCWP standards at the MACT floor control level.c Includes conventional and molded particleboard.
3-22

3.3 Control Equipment and Costs

Traditional add-on pollution control devices are expected to be the types of control measures

that firms will choose in order to comply with the rule. Add-on air pollution control devices that are

most likely to be used to comply with the plywood and composite wood products rule include

incineration-based controls. Among these types of controls are regenerative thermal oxidizers (RTO),

regenerative catalytic oxidizers (RCO), and process incineration. Biofilters is another add-on control

that may be applied. The control device most commonly used to control emissions from plywood and

composite wood products plants is the RTO. Therefore, it was assumed that most plants would install

RTO’s to comply with the rule. A number of RCO’s and biofilters are also presently used by plywood

and composite wood products plants, and plants may choose to install these technologies to comply with

the plywood and composite wood products rule. There may be cost advantages to using RCO’s or

biofilters instead of RTO’s for some plants. However, the cost analyses focus on use of RTO’s for

simplicity (e.g., to minimize the number of cost algorithms developed and to avoid judgements regarding

which plants may choose a particular technology).

Several facilities with large capacity heat energy systems currently use process incineration as a

method of emissions control. Facilities may elect to use process incineration to comply with the rule. 

However, the applicability of process incineration is limited to those plants that have or may later install

large onsite heat energy systems. The capital and operating costs of process incineration are expected to

be significantly lower than the costs of add-on controls.

The plywood and composite wood products rule contains emissions averaging provisions and

production-based emission limits. It may be possible for some plants to reduce their control costs by

complying with either the emissions averaging provisions or production-based emission limits. 

However, because there is no way to predict which plants might use the emissions averaging provisions

or production-based emission limits, the cost estimates did not account for these options. Instead, the

control cost estimates were developed assuming that all facilities would install RTO(s) to meet the 90

percent HAP reduction emission limit in the plywood and composite wood products rule.

Oriented strandboard plants typically install wet electrostatic precipitators (WESP’s) upstream

of rotary dryer RTO’s to protect the RTO media from plugging. Thus, the capital and annual costs

associated with WESP’s were modeled for rotary strand dryers.

Enclosures must be installed around presses in order to ensure capture of the press emissions that

are routed to a control device. Thus, the capital costs of permanent total enclosures (PTE’s) were

included in the costing analyses. Annual costs associated with PTE’s (if any) were assumed to be

minimal and were not included in the cost analyses.

This chapter presents the estimated nationwide capital and annualized costs for compliance with

the PCWP rule. Compliance costs include the costs of installing and operating air pollution control

equipment and the costs associated with demonstrating ongoing compliance (i.e., emissions testing,

monitoring, reporting, and recordkeeping costs). Section 3.3.1 discusses the estimated air pollution

control costs. Cost estimates associated with testing, monitoring, reporting, and recordkeeping are

discussed in the Paperwork Reduction Act submission for the PCWP standards and are summarized in

Section 3.4. 

3.3.1 Basis For Control Costs
3-23

As discussed above, add-on air pollution control devices most likely to be used to comply with

the PCWP rule include incineration-based controls (e.g., RTO, RCO, and process incineration) or

biofilters. The control device most commonly used to control emissions from PCWP plants is the RTO. 

Therefore, for costing purposes, it was assumed that most plants would install RTO’s to comply with the

rule. A number of RCO’s and biofilters are also presently used by PCWP plants. In addition, several

plants with large capacity heat energy systems currently use process incineration. However, the

applicability of process incineration is limited to those plants that have, or may later install, large onsite

heat energy systems. There may be cost advantages to using RCO’s, biofilters, process incineration,

other add-on control devices, or pollution prevention measures instead of RTO’s for some plants. Plants

may elect to use any of these technologies to comply with the rule, provided the technology limits HAP

emissions to the levels specified in the rule. However, the cost analyses described in this chapter focus

on use of RTO’s due to their prevalence in the industry and to minimize the number of cost algorithms

developed and to avoid judgements regarding which plants may choose a particular technology.

Oriented strandboard plants typically install WESP’s upstream of rotary dryer RTO’s to protect

the RTO media from plugging. Thus, the capital and annualized costs associated with WESP’s were

modeled for rotary strand dryers. Available information indicates that WESP’s are not necessary for

protecting RTO’s installed of other types of dryers (e.g., tube dryers) or on presses.16 Therefore, with the

noted exception of OSB dryers without WESP’s, the existing particulate abatement equipment on

process units was assumed to be sufficient for protecting the RTO media.17

Enclosures must be installed around presses to ensure complete capture of the press emissions

before routing these emissions to a control device. Thus, the capital costs of permanent total enclosures

(PTE’s) were included in the costing analyses. Annualized costs associated with PTE’s were assumed to

be minimal and were not included in the cost analyses.

The following sections discuss the RTO, WESP, and PTE costs. Section 3.3.1.4 describes how

plant-by-plant control costs were estimated, and Section 3.3.1.5 summarizes the nationwide control

costs.

3.3.1.1 RTO Costs

An RTO cost algorithm was developed based on: (1) information from an RTO vendor with

numerous RTO installations at PCWP plants, and (2) the costing methodology described in the EPA Air

Pollution Control Cost Manual.18,19 The RTO cost algorithm was used to determine RTO total capital

investment (TCI) and total annualized cost (TAC) based on the exhaust flow to be controlled and annual

operating hours. Development of the algorithm is discussed in Sections 3.4.1.1.1 and 3.4.1.1.2.

 RTO Total Capital Investment.

18,19

Equipment costs (including equipment, installation, and freight) were provided by the RTO

vendor for four sizes of RTO’s. The 1997 equipment costs were not escalated because the Vatavuk Air

Pollution Control Cost Index (VAPCCI) for 1997 (107.9) was slightly greater than the preliminary

VAPCCI for RTO’s in fourth quarter 1999 (107.8). 20 According to the EPA Air Pollution Control Cost

Manual, instrumentation is typically 10 percent of equipment cost (RTO and auxillary equipment); sales

tax is typically 3 percent of the equipment cost; and freight is typically 5 percent of the equipment cost. 

Figure 3-1 presents the purchased equipment costs (PEC) supplied by the RTO vendor (minus freight),

and shows that the equipment costs vary linearly with gas flow rate. The regression equation presented

in Figure 3-1 was included in the RTO cost algorithm to calculate the equipment cost for the oxidizer
3-24

y = 8.5101x + 499194

R2 = 0.991

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

0 50,000 100,000 150,000 200,000 250,000

Flow rate , ds cfm

Purchased Equipment Cost, $

Figure 3-1. Variation in RTO purchased equipment cost with flow rate.

and auxillary equipment for various gas flow rates. Instrumentation, sales tax, and freight were added to

the calculated equipment costs to obtain the total PEC.

 Direct installation costs for handling and erection, electrical, and piping were included in the

equipment cost provided by the RTO vendor. Start-up costs were also included in the equipment cost

provided by the RTO vendor. These costs are typically 22 percent of the PEC. Thus, these costs were

subtracted from the PEC before further calculations based on the PEC were performed. Direct

installation costs including foundation and support, insulation for ductwork, and painting were estimated

according to the procedures in the EPA Air Pollution Control Cost Manual. Because PTE’s were costed

separately, no enclosure building was costed in the RTO algorithm. Site preparation costs and indirect

installation costs (e.g., engineering, field expense, contractor fees, performance tests, and contengencies)

were estimated according to the procedures in the EPA Air Pollution Control Cost Manual. The TCI

was calculated by summing the PEC, direct and indirect installation costs, and site preparation cost.

RTO Total Annualized Cost 

Total annualized costs consist of operating and maintenance labor and material costs, utility

costs, and indirect operating costs (including capital recovery). Operating and maintenance labor and

material costs were estimated based on the RTO vendor information because the RTO vendor

assumptions led to higher costs than the EPA Air Pollution Control Cost Manual and were assumed to be

more representative of the PCWP industry. The operator labor rate supplied by the RTO vendor was

$19.50 per hour.
3-25

y = 0.1479e2E-05x

R2 = 0.9981

0

2

4

6

8

0 50000 100000 150000 200000 250000

Flow rate, dscfm

MMBTU/HR

Figure 3-3. Relationship between RTO natural gas consumption and flow rate.

y = 0.0052x + 3.283

R2

 = 1

0

500

1000

1500

0 50000 100000 150000 200000 250000

Flow rate, dscfm

kW

Figure 3-2. Relationship between RTO electricity consumption and flow rate.

The RTO electricity use and natural gas use was provided by the RTO vendor for the four RTO

sizes. Figures 3-2 and 3-3 present the relationships between flow rate and electricity and flow rate and

natural gas use, respectively. As shown in the figures, there is a linear relationship between RTO

electricity consumption and flow rate, and an exponential relationship between RTO fuel consumption

and flow rate.
3-26

Electricity costs were estimated by the RTO vendor at $0.045 per kilowatt-hour (kWh). The

RTO vendor estimated natural gas costs at $3 per million British thermal units (MMBtu). Both of these

energy prices match closely with currently published nationwide average prices. 21,22 Thus, the electricity

and natural gas prices supplied by the RTO vendor were used in the cost algorithm.

Indirect operating costs were estimated using the methodology described in the EPA Air

Pollution Control Cost Manual. The capital recovery cost was estimating assuming an RTO equipment

life of 15 years (based on the RTO vendor information) and a 7-percent interest rate. The TAC was

calculated by summing the direct and indirect annual operating costs. 

Application of the RTO Cost Algorithm to Estimate Capital and Annualized Costs. 

The complete RTO cost algorithm, which predicts RTO capital and annualized costs as a

function of operating hours and flow rate, was run several times assuming 8,000 operating hours per year

and various flow rates. The 8,000-hr operating time was selected based on the results of the EPA’s

MACT survey, which show industry average operating hours of slightly less than 8,000 hr/yr.10

Although several plants operate process lines more than 8,000 hr/yr, their equipment and control devices

may or may not be operated for more than 8,000 hr/yr. Thus, 8,000 hr/yr was selected as the control

device operating time for purposes of costing. 

The TCI and TAC values generated for each flow rate using the RTO cost algorithm are

presented in the BID for this rule. A regression equation was developed based on the calculated TCI and

TAC for each flow rate. Figures 3-4 and 3-5 present the relationships between flow rate and RTO

capital costs and flow rate and annualized costs, respectively, and the associated regression equations. 

3.3.1.2 WESP Costs

A WESP cost model was developed based on: (1) information from a WESP vendor with many

WESP installations at wood products plants, and (2) the costing methodology described in the EPA Air

Pollution Control Cost Manual for electrostatic precipitators (ESP’s).19,23 The cost model was used to

determine TCI and TAC for WESP’s used to control particulate emissions from OSB rotary dryers. The

WESP vendor provided cost information for a WESP sized to treat 27,650 dry standard cubic feet per

minute (dscfm) of OSB rotary dryer exhaust. This flow rate matches closely with the flow rates for
3-27

y = 317394e8E-06x

R2 = 0.9887

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

- 50,000 100,000 150,000 200,000 250,000 300,000 350,000

Flow rate, dscfm

TAC ($)

Figure 3-5. Variation in RTO total annualized cost with flow.

y = 13.797x + 809310

R2

 = 1

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

- 50,000 100,000 150,000 200,000 250,000 300,000 350,000

Flow rate, dscfm

TCI ($)

Figure 3-4. Variation in RTO total capital investment with flow.

uncontrolled OSB. Thus, the model TCI and TAC could be applied for each dryer to be controlled (i.e.,

the model need not calculate different costs for varying flow rates). The WESP cost model is presented

in the BID for the rule. Development of the model is discussed below.

WESP Total Capital Investment. 

The WESP and auxiliary equipment costs (which makeup the PEC) were provided by the WESP

vendor. These PEC include the cost of the WESP; pumps, piping, and tanks; ducting (including the

quench); fans; and a 1-gallon per minute (gpm) blowdown solids removal system. Instrumentation costs

were also provided by the WESP vendor. Sales tax and freight were added into the total PEC based on

the methodology described in the EPA Air Pollution Control Cost Manual.
3-28

The direct installation costs such as foundation and support, handling and erection, electrical,

piping, insulation for ductwork, and painting were included in the PEC provided by the WESP vendor. 

It was assumed that no building would be necessary for the WESP and that there would be no additional

site preparation costs. Several indirect costs were also included in the equipment cost supplied by the

WESP vendor, including engineering, construction and field expense, start-up, and contingencies. 

Because WESP’s are already widely used at OSB plants, it was assumed that no model study would be

necessary for the WESP although the EPA Air Pollution Control Cost Manual mentions model-study

costs for ESP’s. 

The cost of a performance test was included in the WESP cost model. According to the EPA Air

Pollution Control Cost Manual, the performance test is typically 1 percent of the PEC. Thus, 1 percent

of the model PEC (minus the direct and indirect installation costs included in the PEC) was used as the

cost of the performance test. The direct and indirect costs were summed to arrive at the WESP TCI. 

WESP Total Annualized Cost

The direct annualized costs include operating and maintenance labor and materials, utilities, and

waste disposal. The operating labor cost was based on 1,146 hr/yr (provided by the WESP vendor) at

$19.50/hr (the labor rate used in the RTO cost algorithm). The annual cost of operating materials,

including caustic and defoamer, was provided by the WESP vendor. The maintenance labor rate was

estimated as 110 percent of the operating labor rate. The maintenance hours per year were estimated

based on information supplied WESP vendor. The cost of maintenance materials (including replacement

of one pump seal per year, and one voltage controller every 4 years, and miscellaneous materials) was

supplied by the WESP vendor.

The electricity necessary to power the WESP components (approximately 2,076,000 kWh/yr for

all WESP components) was based on information provided by the WESP vendor. An electricity cost of

$0.045/kWh was used (the same as used in the RTO cost algorithm). A $0.20/gal cost for makeup water

was used based on the EPA Air Pollution Control Cost Manual. The WESP water recirculation rate,

makeup water addition rate, and blowdown generation rates were provided by the WESP vendor. The

EPA Air Pollution Control Cost Manual indicated that wastewater treatment costs may range from $1.30

to $2.15 /1,000 gallons. Methods of WESP wastewater treatment and disposal could include evaporation

from settling ponds, discharge to a municipal water treatment facility, or spray irrigation. The

wastewater treatment and disposal cost for the blowdown was assumed to be $2.15 per gallon. The

wastewater percent solids of 7.6 percent was based on the average from the MACT survey responses.11 It

was assumed that the solids would ultimately be disposed in a landfill (although they could be burned

onsite or used for soil amendment). The trucking cost for hauling sludge to landfill was estimated to be 

$0.20 yd3-mi.22 The landfill was assumed to be 20 miles away, and a $20/ton landfill tipping fee was

used.22 The density of the solids was assumed to be 0.5 ton/yd3 for wet wood particulate (given that the

density of water is 0.84 ton/yd3 and the density of wood is from 30 to 50 percent of the density of

water).

The indirect operating costs were estimated based on the methodology described in the EPA Air

Pollution Control Cost Manual. The capital recovery cost was estimated assuming a WESP equipment

life of 20 years (based on the EPA Air Pollution Control Cost Manual and WESP vendor information)

and a 7-percent interest rate. The TAC was calculated by summing the direct and indirect annual

operating costs. 
3-29

3.3.1.3 Permanent Total Enclosure (PTE) Costs

The capital costs associated with installation of a PTE were based on available information in

the project files on the capital cost of PTE’s for particleboard, MDF, and OSB presses.24 These costs

included the following elements:

• installed cost of the PTE (including fan system)

• ductwork

• instrumentation and wiring

• fire suppression (in some cases)

• site supervision

• start-up and testing

Based on the available cost information, the following algorithm was developed to estimate the PTE

costs for various exhaust flowrates:

TCIPTE = 1.2031 x Qdscfm + 425,760

where:

TCIPTE = the total capital cost of the permanent total enclosure, $

Qdscfm = design exhaust flow rate from PTE, dry standard cubic feet per minute

Available information on actual exhaust flow rates from PTE’s installed around reconstituted wood

product presses was used to develop model flow rates for the various press applications.25 Information

on press vent flow rates from unenclosed presses was available, but not used, because unenclosed press

flow rates are altered when a PTE is installed around a press.26 The cost algorithm was then applied to

the model flow rates to estimate the capital costs of the model PTE’s as shown in Exhibit 3-10. The

costs were rounded to the nearest $1,000. In the case of the particleboard press PTE, the cost was set at

$485,000 (instead of $481,000, which is the value derived from the cost algorithm) because the PTE

model flow rate was similar to those for the MDF and hardboard presses, and applying the same cost to

all three types of press PTE’s simplified the costing analyses. Annualized costs were not developed for

PTE’s because the annualized cost of the fans is already accounted for in the estimated costs of the

RTO’s.

Exhibit 3-10. PRESS ENCLOSURE EXHAUST FLOW RATES AND CAPITAL COSTS

Equipment type Flow rate, dscfm PTE capital cost

Particleboard press 45,524 $485,000

OSB press 97,509 $543,000

MDF or dry/dry hardboard press 49,413 $485,000

Wet/dry or wet/wet hardboard press 49,209 $485,000

3.3.2 Plant-by-Plant Costing Approach

The control costs associated with the PCWP standards were estimated for each plant and were

summed to arrive at a nationwide estimate of control costs. The PCWP standards apply only to major

sources of HAP emissions. Therefore, cost estimates were developed for only those plants that were

assumed to be major sources.15 The information used to estimate the plant-by-plant control costs is

described below.
3-30

3.3.2.1 Application of Control Costs to Process Units

 The cost models discussed in Section 3.3.1 were applied to each plant that would likely need to

install air pollution controls in order to meet the PCWP standards. Plant-specific information on process

units (e.g., dryers, presses) and controls was taken from the MACT survey responses.10,11,12 In addition,

information about the presence of PTE’s on presses was taken from the MACT survey responses.10 If

information about press enclosures was not provided in the MACT survey responses, or was claimed

confidential, the press was assumed to be unenclosed if it was uncontrolled or enclosed if it was

controlled for purposes of costing.

Some plants have begun operation and other plants have added equipment or controls since EPA

conducted the MACT survey. Such changes were accounted for in the nationwide cost estimates. A

separate memorandum summarizes the changes to plants that have occurred following the EPA’s MACT

survey.13

The process units and controls present at each plant were reviewed to determine which of the

assumed what control equipment (i.e., RTO, WESP, or PTE) the plant would need to install to meet the

PCWP standards based on the MACT floor control levels. The MACT floor control levels are based on

the information presented in the BID for this rule.6

 Exhibit 3-2 summarizes the process units for which

control equipment would be required to meet the MACT floor and the control equipment costed for these

process units. At each plant, the exhaust gas flow rates from the applicable uncontrolled process units

listed in Exhibit 3-11 were summed to yield a plant-wide uncontrolled exhaust gas flow rate. Process

units already equipped with controls to meet the MACT floor were not included in the plant-wide

uncontrolled gas flow rate estimates. The procedures for estimating the uncontrolled gas flow rates from

process units and the application of the cost algorithms is discussed in the following section.
3-31

Exhibit 3-11. CONTROL EQUIPMENT COSTED FOR PROCESS UNITS WITH

CONTROLLED MACT FLOOR

Existing process units with

control requirements

Control

equipment costed Notes

Tube dryers (primary and

secondary)

RTO Tube dryers are located at particleboard, MDF, and

hardboard plants

Rotary strand dryers WESP and RTO Rotary strand dryers are located at OSB and LSL plants. 

Assumed that the WESP is not needed for plants that

already have an RTO without a WESP. Assumed that

plants that currently operate an EFB or multiclone alone

(i.e., with no RTO) would install a WESP with the RTO.

Conveyor-type strand

dryers

RTO Conveyor strand dryers are located at OSB and LSL plants.

Rotary green particle dryers RTO Rotary green particle dryers are located at particleboard,

MDF, or hardboard plants and process furnish with >30%

(dry basis) inlet moisture content at dryer inlet temperature

of >600°F

Hardboard ovens RTO Includes bake and tempering ovens

Softwood veneer dryers RTO Softwood veneer dryers are located at softwood plywood,

hardwood plywood, LVL, and PSL plants and dry $50% (by

volume, annually) softwood veneer

Pressurized refiners None The exhaust from pressurized refiners typically passes

through a tube dryer and exits through the tube dryer control

device. Therefore, it was not necessary to cost separate

control equipment for pressurized refiners. Pressurized

refiners are located at MDF and hardboard plants.

Reconstituted wood

products presses

PTE and RTO Reconstituted wood products presses are located at

hardboard, MDF, OSB, and particleboard plants

Exhaust Flow Rate to Be Controlled

 If provided in the non-confidential MACT survey responses, process-unit specific exhaust flow

rate, temperature, and percent moisture were used to determine the dry standard flow rate for each

process unit. If sufficient information was not provided in the MACT survey response to determine dry

standard flow rates (or the information was claimed confidential), then default values were used for the

flow rate. The default values were based on the average value for other similar process units at plants

that provided enough non-confidential information to calculate the dry standard flow rate. Exhibit 3-12

summarizes the default flow rates used in the costing analyses. The average flow rates from press

enclosures are described in Section 3.3.1 and were used for all presses.
3-32

Exhibit 3-12. DEFAULT FLOW RATES

Process line Equipment type Flow rate (dscfm)

Particleboard Rotary green particle dryer 35,731

Tube dryer 14,955

OSB Rotary strand dryer 32,478

Conveyor-type strand dryer 37,810

MDF Primary tube dryer (single-stage or first

stage of staged dryer)

79,173

Secondary tube dryer (second stage of

staged dryer)

18,195

Plywood Softwood veneer dryer 12,062

Hardboard Bake oven 4,742

Tempering oven 4,055

Primary tube dryer (single-stage or first

stage of staged dryer)

37,436

Secondary tube dryer (second stage of

staged dryer)

31,728

Several plants have multiple process units requiring controls. The flow rates for these process

units were summed and divided across control equipment as necessary. In most cases, the total dryer

flow was assumed to be routed to one or more RTO’s dedicated to controlling dryer exhaust and the total

press flow was assumed to be routed to one or more RTO’s dedicated to controlling press exhaust. 

Because RTO fuel costs increase exponentially with gas flow rate, RTO sizes were assumed to remain

less than about 150,000 dscfm. (The largest RTO in mentioned in the MACT survey responses was

around 150,000 dscfm.)

In some cases, dryers and presses were assumed to be routed to the same RTO, provided that the

total dryer and press flow remained under 150,000 dscfm. For example, two RTO’s (103,500 dscfm

each) would be costed for a MDF plant with 2 dryers (79,000 each) and 1 press (49,000) assuming that

the flow for both dryers and the press could be combined and split equally across the two RTO’s. This

approach seems reasonable given that several MDF plants currently route dryer and press exhaust to the

same RTO. 
3-33

Calculation of Nationwide Control Costs

 The total plant-by-plant control cost was calculated by summing the control cost associated with

each RTO, WESP, and PTE costed for each plant. The number of control devices at each plant

depended on the number of process units and the exhaust flow to be controlled at the plant. In some

cases, only one control device was costed, while in other cases, multiple control devices were costed for

a plant. 

Some plants claimed all relevant portions of their MACT survey responses confidential. In

addition, a MACT survey response was not available for a few plants likely to be impacted by the PCWP

standards. Without a non-confidential MACT survey response, information was not available to develop

plant-specific cost estimates. Therefore, the average cost for all other plants manufacturing the same

product was used to approximate the costs for plants for which there was no non-confidential plantspecific information.

The nationwide capital and annualized control costs were determined by summing the total

plant-specific costs. 

3.3.3 Summary of Nationwide Control Costs

Exhibit 3-13 summarizes the nationwide control costs for different product types. The

nationwide total capital cost for control equipment is estimated to be $473 million and the nationwide

total annual cost for control equipment is estimated as $139 million (1999 dollars). Exhibit 3-14

presents the dollars of total annualized costs per ton of HAP and THC reduced.

3.4 Testing, Monitoring, Reporting, And Recordkeeping Costs

Compliance with the PCWP standards must be demonstrated through performance testing,

ongoing monitoring of process or control device operating parameters or emissions, periodic reporting to

the government agency that implements the PCWP rule, and recordkeeping. There are capital and

annualized costs associated with these testing, monitoring, reporting, and recordkeeping activities. 

These costs, which are estimated and documented in the supporting statement for the Paperwork

Reduction Act submission, and are summarized in this section.27
3-34

Exhibit 3-13. ESTIMATED NATIONWIDE CONTROL COSTS FOR THE PCWP INDUSTR

Product type No. of plantsa

No. of plants

impacteda,b Process units impacted Control equipment

Total ca

costs, $

Softwood plywood/veneer 105 66 softwood veneer dryers RTO $8Hardwood plywood/veneer 166 0 N/A no control $Medium density fiberboard 24 18 dryers, presses RTO for dryers and 

PTE/RTO for presses

$7

Oriented Strandboard 37 23 dryers, presses WESP/RTO for dryers and

PTE/RTO for presses

$9

Particleboard (conventional and molded)

51 38 green rotary particle

dryers, presses

RTO for dryers and 

PTE/RTO for presses

$12

Particleboard (agriboard) 5 0 N/A no control $Hardboard 18 18 tube dryers, presses,

ovens

RTO for dryers and 

PTE/RTO for presses

$8

Fiberboard 7 0 N/A no control $Engineered wood products 41 3 softwood veneer dryers,

strand dryers

RTO for veneer dryers and 

WESP/RTO for strand dryers

$1

TOTAL: 454 166 $47

a Some plants manufacture more than one product type. These plants are listed once for each product type manufactured.b The number of plants impacted may be different from the number of plants nationwide for one of the following reasons: (1) some pla

(2) some plants already have all of the necessary control equipment; or (3) a few plants are major sources but do not operate any procare control requirements (e.g., glu-lam plants). 
3-35

Exhibit 3-14. DOLLARS (IN TOTAL ANNUALIZED COSTS) PER TON OF 

HAP AND THC REDUCED

Product type HAP, $/ton THC, $/ton

Softwood plywood/veneer $43,000 $2,900

Hardwood plywood/veneer NA NA

Medium density fiberboard $10,000 $5,100

Oriented Strandboard $9,200 $7,100

Particleboard (all types) $13,000 $5,800

Hardboard $9,300 $7,000

Fiberboard NA NA

Engineered wood products $47,000 $18,000

Overall industry $13,000 $5,000

The annual costs associated with testing, monitoring, reporting, and recordkeeping activities

include reporting and recordkeeping labor; annualized capital for monitoring equipment, file cabinets,

and performance tests; and the operation and maintenance costs associated with monitoring equipment. 

The capital costs include capital for monitoring equipment, file cabinets and performance tests. 

Performance tests are considered to be capital costs because plants will typically hire a testing contractor

to conduct the performance tests.

The total nationwide capital cost associated with testing, monitoring, reporting, and

recordkeeping is estimated to be $5.8 million and the total nationwide annualized cost is estimated to be

$5.6 million (1999 dollars). These costs were developed based on the information presented in the

Paperwork Reduction Act submission for the first 3 years following the effective date of the PCWP rule. 

The costs apply for the 223 PCWP plants that are expected to be major sources. There are 57 facilities

that incur monitoring, recordkeeping, and reporting costs but do not incur control costs from compliance

with this rule.

3.5 REFERENCES
3-36

1. United States Congress. Clean Air Act, as amended October 1990. 42 U.S.C. 7401 et seq. 

Washington, DC. U.S. Government Printing Office.

2. U. S. Environmental Protection Agency. National Emission Standards for Hazardous Air

Pollutants for Source Category: Organic Hazardous Air Pollutants from the Synthetic Organic

Chemical Manufacturing Industry and Other Processes Subject to the Negotiated Regulation for

Equipment Leaks; Determination of MACT “Floor.” 59 FR 29196. Washington, DC. U.S.

Government Printing Office. June 6, 1994.

3. Memorandum from K. Hanks and B. Nicholson, MRI, to P. Lassiter, EPA/ESD. April 16, 1998

(Finalized 5/28/98). Trip report for February 12, 1998 site visit to Timber Products Company

particleboard and hardwood plywood plant in Medford, Oregon.

4. R. Nicholson, MRI, to D. Word, NCASI. February 17, 2000 (Confirmed via Email on 9/7/00). 

Contact report to (1) find out if oxygen measurement data were available from the NCASI

MACT emissions test program, and (2) to get some information on typical oxygen

concentrations in dryer and press exhaust at plywood and composite wood products plants.

5. Memorandum from R. Nicholson, MRI, to M. Kissell, EPA/ESD. May 26, 2000. Control

Device Efficiency Data for Add-on Control Devices at PCWP Plants.

6. Memorandum from K. Hanks and B. Nicholson, MRI, to M. Kissell, EPA/ESD. July 13, 2000. 

Determination of MACT floors and MACT for the Plywood and Composite Wood Products

Industry.

7. National Council of the Paper Industry for Air and Stream Improvement (NCASI) Method

IM/CAN/WP-99.01, Impinger/Canister Source Sampling Method for Speciated HAPs at Wood 

Products Facilities. 1999.

8. Reference 6.

9. Memorandum from K. Hanks and D. Bullock, MRI, to M. Kissell, EPA/ESD. June 9, 2000. 

Baseline Emission Estimates for the Plywood and Composite Wood Products Industry. 

10. Memorandum from D. Bullock, K. Hanks, and B. Nicholson, MRI to M. Kissell, EPA/ESD. 

April 28, 2000. Summary of Responses to the 1998 EPA Information Collection Request

(MACT Survey) -- General Survey.

11. K. Hanks, B. Threatt, and B. Nicholson, MRI to M. Kissell, EPA/ESD. May 19, 1999. 

Summary of Responses to the 1998 EPA Information Collection Request (MACT Survey) --

Hardwood Plywood and Veneer.
3-37

12. K. Hanks, B. Threatt, and B. Nicholson, MRI to M. Kissell, EPA/ESD. January 20, 2000.

Summary of Responses to the 1998 EPA Information Collection Request (MACT Survey) --

Engineered Wood Products.

13. Memorandum from K. Hanks, MRI, to Project Files. April 18, 2000. Changes in the population

of existing plywood and composite wood products plants and equipment following the

information collection request.

14. Memorandum from D. Bullock and K. Hanks, MRI, to M. Kissell, EPA/ESD. April 27, 2000. 

Documentation of Emission Factor Development for the Plywood and Composite Wood

Products Manufacturing NESHAP.

 

15. Background Infomation Document for the Proposed Plywood and Composite Wood Products

NESHAP. U.S. EPA/OAQPS, September 2000. 

16. Suchsland, O., and G. Woodson, Fiberboard Manufacturing Practices in the United States, John

Wiley & Sons, New York, 1991, pp. 151-153.

17. K. Corrigan, North Dakota Department of Health, Division of Environmental Engineering. 

February 11, 1997. Performance Test Report Review: Primeboard, Inc.

18. Facsimile from J. Seiwert, Smith Environmental Corporation, to L. Kesari, EPA/OECA. 

October 31, 1997. Revised emissions abatement systems RTO pricing (Smith Proposal BO7-95-

156-1, Trinity Consultants)

19. EPA Air Pollution Control Cost Manual (Sixth Edition), U.S. Environmental Protection Agency,

April 26, 2002. EPA -452/B-02-001. Found on the Internet at

www.epa.gov/ttn/catc/products.html#cccinfo. 

20. Vatavuk Air Pollution Control Cost Indexes (VAPCCI), Chemical Engineering, March 2000,

p. 150.

21. Energy Information Administration, Form EIA-826, “Monthly Electric Utility Sales and

Revenue Report with State Distributions.”

22. Energy Information Administration, Natural Gas Monthly, February 2000, p. 60.

23. Letter and attachments from S. Jaasund, Geoenergy International Corporation, to B. Nicholson,

MRI. March 28, 2000. Geoenergy WESP Capital and Operating Costs.
3-38

24. Memorandum from B. Nicholson, MRI, to Plywood and Composite Wood Products Project File. 

July 31, 2000. Cost of Permanent Total Enclosures. (Confidential Business Information)

25. Memorandum from B. Nicholson, MRI, to Plywood and Composite Wood Products Project File. 

July 31, 2000. Exhaust Gas Flowrate Information for Enclosed Presses. (Confidential Business

Information)

26. Memorandum from D. Bullock and K. Hanks, MRI, to P. Lassiter, EPA/ESD. October 27,

1998. Trip report for visit to Temple-Inland Forest Products plant in Diboll, Texas.

27. Paperwork Reduction Act Submission, Supporting Statement, Plywood and Composite Wood

Products, 2000.
4-1

4 ECONOMIC IMPACT ANALYSIS

4.1 Results in Brief

This economic impact analysis presents the results of modeling the effects of the plywood and

composite wood products NESHAP upon affected facilities, firms, markets, and industries. The

analysis shows that product prices increase for each of the four industry sectors included in the economic

model, from 0.9 percent for the softwood plywood industry to 2.5 percent for the particleboard and

medium density fiberboard industry. Output is expected to decrease from 0.1 percent for the softwood

plywood industry to 0.7 percent for the particleboard and medium density fiberboard industry. Exports

of these products are expected to decline by no more than 0.7 percent for these four industries, while

imports are expected to rise. Only one product line closure at an affected facility is expected, and

employment at affected firms is expected to decline by only 0.3 percent. In addition, an analysis of

effects of this rule on the supply, distribution, or use of energy finds that these effects are not significant. 

The economic and energy impacts depending on eligibility of sources to become part of a

delisted low-risk subcategory can be found in Appendix A of this RIA.

4.2 Introduction

This NESHAP addresses the emissions of hazardous air pollutants (HAPs) from facilities that

produce plywood and composite wood products. As described in Chapter 3, the rule will result in some

facilities in this industry incurring costs associated with controlling HAP emissions. The addition of

these control costs will directly affect the individual facilities because their costs of production will

increase. In addition, the addition of compliance costs may also have an effect on the overall markets for

plywood and composite wood products through market price changes. Depending on market conditions,

these changes could occur if facilities with compliance costs increase their prices, reduce their output, or

cease operations altogether.

This chapter presents the result of the Economic Impact Analysis (EIA) performed to estimate

the economic changes that are expected to occur as a result of the NESHAP for the plywood and

composite wood products industry U.S. EPA, 1999a). The goal of the assessment is to develop estimates

of the following impact measures.

• Market price changes

• Market quantity changes

• International trade effects

• Size and distribution of social costs
4-2

Chapter 2 presented a profile of the different sectors within the plywood and composite wood

industry, which provides market information necessary to design and implement the EIA for this

industry. The plywood and composite wood products manufacturing industry affected by the proposed

NESHAP rule includes five distinct market sectors.

• Softwood Plywood and Veneer (SWPW)

• Oriented Strandboard (OSB)

• Other Wood Composites (OWC), including

• Particleboard and Medium Density Fiberboard (PB/MDF)

• Hardboard (HB)

• Engineered Wood Products (EWP)

For all but the EWP market sector, the Agency applied partial equilibrium (P/E) modeling

techniques to estimate the economic impacts of the NESHAP rule for plywood and composite wood

products. For reasons presented in Section 4.4 below, developing an estimate of the economic impacts

of the rule on the EWP sector required a qualitative approach.

Section 4.3 presents the inputs for the P/E economic analysis, including producer

characterization, market characterization, and compliance costs of the regulation. Section 4.4 describes

the approach to estimating the economic impacts on the SWPW, OSB, PB/MDF, and HB industry

sectors, and Section 4.5 presents the results of the economic impact analysis. Section 4.6 presents the

qualitative analysis of the EWP market sector. The economic analysis methodology and inputs are

described more fully in the EIA.

4.3 Economic Impact Analysis Inputs

The first step of an impact assessment is developing information used to characterize the

baseline conditions of the industry. Key information needed for EIA inputs is used to characterize the

following.

• Individual producers

• Product markets

• Compliance costs

4.3.1 Producer Characterization

The primary source of baseline data on individual producers used in the EIA is a database

developed using the data collected by 1998 ICR described in Chapter 2 (U.S. EPA, 1998). The

information in the facility database allowed the characterization of facilities according to several features

needed for the analysis, including major products (SWPW, OSB, etc), baseline production volumes, and

facility capacity. The baseline year for the analysis is 1997 as it corresponds to the year for which

plywood and composite wood producers provided this information for the ICR.
11As mentioned in Chapter 1, some facilities in the “unaffected” category have monitoring, reporting, and

record keeping costs of $25,194 per year.

4-3

For certain facilities, production and capacity information was not available, and was

supplemented by additional research. Those facilities without specific production and capacity data

were assigned an estimate based on the average production and capacity data for facilities within the

same market sector and size category (as determined by employment).

4.3.2 Plywood and Composite Wood Markets

The Plywood and Composite Wood Products industry is a broad category encompassing the four

distinct markets listed above: (1) SWPW, (2) OSB, (3) OWC, and (4) EWP. For reasons discussed in

the EIA, the OWC sector is decomposed into two markets: PB/MDF and HB. The Agency developed

P/E models representing each of these four markets.

Market level data used in this EIA are presented in Exhibit 4-1. The market prices and

elasticities for each of the four markets were obtained from various industry market reports and

economic literature as described in Chapter 2. Total market volumes used in the models for each product

are the sum of the production of all identified U.S. facilities (from the facility database) and imports

from foreign producers. Total U.S. production for each market is the total production of all facilities

identified in the EPA’s facility database. The production was also separated in to two subsets - the total

production of affected facilities and the total production of unaffected facilities.11 The source of foreign

trade data on exports and imports of these products was presented in Chapter 2.
4-4

Exhibit 4-1: Baseline Characterization of Plywood and Composite Wood Markets: 1997

Softwood

Plywood

Oriented

Strandboard

“Other Composites”

PB/MDF HB

Market price (1997$/cubic meter) $235 $185 $169 $1,322

Price Elasticity of Demand

Construction -0.1034 -0.1034 -0.1149 -0.1149

Manufacturing/Other -0.2585 n/a -0.2872 -0.2872

Price Elasticity of Supply 0.42 0.42 0.42 0.42

Market quantity 

(thousand cubic meters) 17,568,254 9,595,121 11,646,227 1,768,930

Domestic production 17,568,162 9,590,456 11,644,523 1,768,545

Affected 11,680,778 4,691,645 9,670,639 1,768,545

Unaffected 5,887,384 4,898,811 1,973,884 n/a

Exports 1370 148 333 371

Imports 92 4,666 1,705 385

Sources: U.S. EPA facility database; Section 2; and Appendix B of the Economic Impact Analysis.

4.3.3 Facility Compliance Costs

As described in Chapter 3, the Agency developed compliance costs estimates for those facilities

that must control HAP emissions in accordance with the regulatory requirements of the NESHAP rule. 

The EIA uses these costs to develop a “with regulation” market equilibrium scenario used to estimate

changes in individual facility production, total market volumes, market price, and social costs. 

Typically, the Agency adjusts the compliance cost estimates from nominal dollars to baseline dollars

using the plant cost indices to be consistent with the baseline industry characterization of the economic

model (U.S. EPA, 1999b). In this case, there was virtually no change in the plant cost indices between

the baseline year of 1997 and current period, so no adjustment was made to the costs used in this

analysis.

4.4 Economic Impact Analysis Methodology

The following section presents a summary of the approach used to assess the economic impacts

of the NESHAP . The EIA contains a more detailed description of the methodology used to analyze the

economic impact of this regulation on each of the markets analyzed. The purpose of the EIA is to model

the responses of individual producers and the overall market to the imposition of compliance costs. For

this EIA, the agency used a market-based economic model that reflects the production choices producers

make in the face of changes in their individual production costs and changes in overall market prices.
4-5

The economic model used in this analysis simulates the short run decisions of the producers in

response to operating cost and price changes within a given market. For each of the four markets, the

model used in this analysis assumes that the market is perfectly competitive, based on the conclusions

drawn from the information in the industry profile. In a competitive market, each individual facility

takes the price as determined by the market because they do not have the power to set the market price of

the product. The approach used for this EIA assumes that the competitive market for each of the four

products determines both prices and quantities (U.S. EPA, 1999b). 

In the short run, a firm with an existing plant will decide, based on the market price, how much

output to produce with its capital stock (e.g., fixed investment in the plant and equipment) considered as

constant. In this decision, the firm considers the costs of inputs that vary with output levels, such as

materials and labor (U.S. EPA, 1999b). When the market price is equal to the average variable

(operating) costs, the firm is only recouping the cost of its variable inputs. When the price is less than

the firm’s variable costs, it will no longer produce output because it cannot recover all of its variable

costs in the short run. When the market price exceeds variable costs, the firm can also recover a part of

its fixed investment in the plant and equipment. In the long run, the firm must cover all of its fixed

investment in the plant and equipment. Under this more stringent condition, the market price must

exceed its average total costs, which include capital and variable input costs. In this analysis, which is

short-run in timeframe, the model assumes that all firms wish to maximize its profits and will produce

output using their existing plants as long as the market price even marginally exceeds their variable costs

of producing output. The short-run focus for this analysis is appropriate since full implementation with

this rule is required by 3 years from promulgation. Thus, implementation by affected firms must occur

by 2007. Most of the economic impacts associated with this rule are therefore likely to occur between

promulgation and 2007. In addition, the statutes and Executive Orders that call for economic impact

analyses for regulations implicitly call for an assessement of impacts on current producers and

consumers. Therefore, a long-run approach has some weaknesses in addressing the requirements that an

analysis like this one must adhere to. Thus, short-run modeling of the economic impacts of this rule,

which means presuming the capital stock as a constant, is a reasonable approach. 

The market model developed by the Agency for this EIA is based on a series of equations that

represent the market supply and demand functions for a given product. The demand functions use

baseline price, total domestic production, import, and export data, as well as estimates of the price

elasticity of demand for a given product as inputs. The market supply function is based on an estimated

supply function for each plywood or composite wood product at all production facilities. The Agency

developed a spreadsheet model for each of the four markets to represent the conceptual model described

below. The EIA provides a description of this process. 

Figure 4-1 shows a generalized upward-sloping supply function that characterizes the production

function of each facility included in the analysis (affected and unaffected). In the EIA model, this

function represents the marginal cost curve for each supplier of the product within the market. The

minimum constraint on this function is zero, and the maximum constraint is each facility’s capacity. If

the market price is above a given facility’s average variable cost, the facility will produce output up to

the point where production equals the facility’s production capacity. If a given facility’s marginal

production cost is above the market price, it will produce zero output (EPA, 1999b).
4-6

$/lb S

lbs/year

Figure 4-1. Supply Curves for Affected Facilities

Source: U.S. EPA, 1999b.

The model then aggregates the supply functions of the individual facilities within a market to

represent the market level supply curve. Next, the model equilibrates the market demand curve and the

market supply curve according to the baseline market price and quantity values. Figure 4-2 shows that

market prices and quantities are set in the baseline according to the intersection of the supply and

demand curves in the baseline (the period prior to the imposition of compliance costs on affected

facilities). The baseline scenario equilibrium market price and quantity (P, Q) are the points on the

graph’s axes points where the downward-sloping market demand curve (DM) intersects with the upwardsloping market supply curve (SM). In the baseline, at price P, the industry produces total output, Q, with

affected facilities producing the amount qa and unaffected facilities producing qu (EPA, 1999b). 

Next the same facility-specific supply functions in the model are recalculated after taking into

account the increase in production costs associated with the imposition of annual compliance costs on

some producers. The costs are expresses in terms of dollars per unit of output in the baseline (in this

case per thousand cubic meter of product). Figure 4-1(b) show the effect of the compliance costs: the

supply curve for the affected producers shift upward Sa to Sa' . This raises the point at which market

price must cover variable production costs from pa to pa'. The supply curve Su for the unaffected

facilities remain the same. When the supply curves for the affected and unaffected facilities are

aggregated to represent the market level supply curve, the market supply curve also shifts upward from 

SM to SM'. Using the original market demand curve, DM, the new equilibrium price increases from P to P'

and market output declines from Q to Q'. This reduction in market output is the net result from

reductions at affected facilities and increases at unaffected facilities (EPA, 1999b).
4-7
4-8

p

Sa

qa qu Q

Affected Facilities

Su SM

DM

+ = p p

Unaffected Facilities

Market

a) Baseline Equilibrium

p

q′

a qu Q′

Affected Facilities

Su SM′

DM

+ = p p

Unaffected Facilities

Market

b) With Regulation Equilibrium

p′

Sa

qa q′

u Q

SM

p′ p′

S′

a

Figure 4-2. Market Equilibrium Without and With

Regulation

Source: U.S. EPA, 1999b.

4.5 Economic Impact Analysis Results

The following section presents the results of the Agency’s implementation of the EIA models

described in the previous section. The results are presented at three levels: market, industry, and

societal. The market level results present the impacts in terms of changes in price and quantity for each

of the four markets. The industry level impacts include changes in revenues, production, employment,

and number of operating production lines.

4.5.1 Market-Level Results

Exhibit 4-2 presents the expected impacts of the regulation at the market-level. These changes

include the new price and quantity for each product and changes in foreign trade. In each market, prices
4-9

increase and production quantities decrease due to the imposition of compliance costs on the affected

producers. The reduction in market quantities of each product reflect reductions in domestic production

(including production for exports) and increases in foreign imports. The reduction in domestic

production reflects production decreases by affected producers and increases by unaffected producers

(EPA, 1999b).

For softwood plywood, the market price is expected to increase by 0.9 percent, while market

quantity declines by 0.1 percent, or 26,207 thousand cubic meters (or M cubic meters) per year. For

oriented strandboard, the market price is expected to increase by 1.3 percent, while market quantity

declines by 0.1 percent, or 12,945 M cubic meters per year. For particleboard and medium density

fiberboard, the market price is expected to increase by 2.5 percent, while market quantity declines by 0.7

percent, or 78,595 M cubic meters per year. Finally, for hardboard, the market price is expected to

increase by 1.0 percent, while market quantity will decline by 0.3 percent, or 4,727 M cubic meters per

year. 

Generally, increases in market price result in changes in foreign trade of these products: exports

decrease and imports increase. Exhibit 4-2 shows that exports of softwood plywood from the United

States are expected to decline by 0.2 percent (or 2 M cubic meters per year); exports of oriented

strandboard are expected to decline by 0.1 percent (or 0.2 M cubic meters per year); exports of

particleboard and medium density fiberboard are expected to decline by 0.7 percent (or 2 M cubic meters

per year); and exports of hardboard are expected to decline by 0.2 percent (or 1 M cubic meter per year). 

Imports of each of these products to the United States are expected to increase as follows: SWPW by

685 percent (or 630 M cubic meters per year), OSB by 28.82 percent (or 1,345 M cubic meters per

year), PB/MDF by 85 percent (or 1,451 M cubic meters per year), and HB by 100 percent (or 387 M

cubic meters per year).

Exhibit 4-2. Market-Level Impacts of the NESHAP 

Industry Sector Baseline

With

Regulation

Changes from Baseline

Absolute Percent

Softwood Plywood

Market price (1997$/cubic meter) $235 $237.20 $2.20 0.9%

Market output (M cubic meters/yr) 17,568,254 17,542,048 -26,206 -0.1%

Domestic production 17,568,162 17,541,326 -26,837 -0.2%

Affected Facilities 11,680,778 11,629,258 -51,520 -0.4%

Unaffected Facilities 5,887,384 5,912,067 24,683 0.4%

Exports 1,370 1,368 -2 -0.2%

Imports 92 722 630 685.1%

Oriented Strandboard

Market price (1997$/cubic meter) $185 $187.43 $2.43 1.3%

Market output (M cubic meters/yr) 9,595,121 9,582,176 -12,945 -0.1%

Domestic production 9,590,456 9,576,165 -14,291 -0.1%
Exhibit 4-2. Market-Level Impacts of the NESHAP 

Industry Sector Baseline

With

Regulation

Changes from Baseline

Absolute Percent

4-10

Affected Facilities 4,691,645 4,654,117 -37,528 -0.8%

Unaffected Facilities 4,898,811 4,922,048 23,237 0.5%

Exports 147.8 147.6 -0.2 -0.1%

Imports 4,666 6,011 1,345 28.8%
Exhibit 4-2. Market-Level Impacts of the NESHAP 

Industry Sector Baseline

With

Regulation

Changes from Baseline

Absolute Percent

4-11

Particleboard and Medium Density Fiberboard

Market price (1997$/cubic meter) $169 $173.29 $4.29 2.5%

Market output (M cubic meters/yr) 11,646,228 11,567,633 -78,595 -0.7%

Domestic production 11,644,523 11,564,477 -80,046 -0.7%

Affected Facilities 9,670,639 9,553,510 -117,129 -1.2%

Unaffected Facilities 1,973,884 2,010,967 37,083 1.9%

Exports 333 331 -2 -0.7%

Imports 1,705 3,156 1,451 85.1%

Hardboard

Market price (1997$/cubic meter) $1,322 $1,335.17 $13.17 1.0%

Market output (M cubic meters/yr) 1,768,930 1,764,203 -4,727 -0.3%

Domestic production 1,768,545 1,763,431 -5,114 -0.3%

Affected Facilities 1,768,545 1,763,431 -5,114 -0.3%

Unaffected Facilities n/a n/a 0 n/a

Exports 371 370 -1 -0.2%

Imports 385 772 387 100.5%

4.5.2 Industry-Level Results

Industry impacts associated with the NESHAP for the plywood and composite wood industry

are presented in Exhibit 4-3. Industry-level impacts include changes in revenue, production, numbers of

operating product-lines, and changes in employment. The estimates for changes in production lines and

employment are described in Section 4.5.3 below.

The EIA model estimates the change in prices and production levels after the imposition of the

compliance costs on the affected facilities. Exhibit 4-3 shows that overall revenues for each industry

increase slightly. Industry revenues increase because demand elasticities for these four markets mean

that the change in price (in percentage terms) is greater than the percentage reduction in output. 

Affected facilities will experience an increase in revenues due to the increase in the market price, but this

effect is likely to be offset by the increase in production costs. Changes in profits, however, could not be

estimated due to lack of information on production costs at the facility level.
4-12

Exhibit 4-3. Industry-Level Impacts of the NESHAP

Baseline With Regulation

Changes from Baseline

Absolute Percent

Softwood Plywood

Revenues ($ million/yr) $4,128.5 $4,161 $32.4 0.78%

Production (M cubic meters/yr) 17,568162 17,541,326 -26,836 -0.15%

Operating product lines (#) 108 107 -1 -0.93%

Employment* 36,877 36,821 -56 -0.15%

Oriented Strandboard

Revenues ($ million/yr) $1,774.2 $1,794.9 $20.7 1.17%

Production (M cubic meters/yr) 9,590,456 9,576,164 -14,292 -0.15%

Operating product lines (#) 38 38 0 0.00%

Employment* 6,681 6,671 -10 -0.15%

Particleboard & Medium Density Fiberboard

Revenues ($ million/yr) $1,967.9 $2,004.0 $36.1 1.83%

Production (M cubic meters/yr) 11,644,523 11,564,477 -80,046 -0.69%

Operating product lines (#) 83 83 0 0.00%

Employment* 20,424 20,284 -140 -0.69%

Hardboard

Revenues ($ million/yr) $2,338.0 $2,354.5 $16.5 0.71%

Production (M cubic meters/yr) 1,768,545 1,763,431 -5,114 -0.29%

Operating product lines (#) 18 18 0 0.00%

Employment* 6,271 6,252 -18 -0.29%

*Baseline employment estimates are based total production and employment of all facilities in each market as

reported in the EPA facility database. Average production per employee was calculated using the sum of

facility-specific production and employment. Because facilities reported employment as a range, they are

assigned an employment estimate using the mid-point of the reported range. Post-regulation employment was

then estimated by dividing post-regulation production by the baseline production per employee.

4.5.3 Distribution of Impacts

The distribution of regulatory impacts is presented in Exhibit 4-4. This table presents the same

information as in Exhibit 4-3, but provides details on how the rule impacts affected and unaffected

facilities differently.

One important result from the EIA model is the projection of process line closures that could

occur following promulgation of the NESHAP. The model’s estimate of process line closures may be

sensitive to the accuracy of the baseline characterization of the facilities. Characteristics such as baseline

production levels, revenues (as a function of production and price), the underlying supply function that
4-13

represents production costs, and the compliance cost estimates are all factors that affect the distribution

of the rule’s impacts.

 

Exhibit 4-4: Distribution of Industry-Level Impacts of the NESHAP: 

Affected and Unaffected Producers

Baseline

With

Regulation

Changes From Baseline

Absolute Percent

Softwood Plywood

Affected Process Lines

Revenues ($ million/yr) $2,745.0 $2,758.5 $13.5 0.49%

Production (M cubic meters/yr) 11,680,778 11,629,258 -51,520 -0.44%

Operating process lines (#) 66 65 -1 -1.52%

Employment* 24,519 24,411 -108 -0.44%

Unaffected Process Lines

Revenues ($ million/yr) $1,383.5 $1,402.4 $18.9 1.37%

Production 5,887,384 5,912,067 24,683 0.42%

Operating process lines (#) 42 42 0 0.00%

Employment* 12,358 12,410 52 0.42%

Oriented Strandboard

Affected Process Lines

Revenues ($ million/yr) $868.0 $872.3 $4.4 0.50%

Production (M cubic meters/yr) 4,691,645 4,654,117 -37,528 -0.80%

Operating process lines (#) 20 20 0 0.00%

Employment* 3,268 3,242 -26 -0.80%

Unaffected Process Lines

Revenues ($ million/yr) $906.3 $922.6 $16.3 1.80%

Production 4,898,811 4,922,048 23,237 0.47%

Operating process lines (#) 18 18 0 0.00%

Employment* 3,413 3,429 16 0.47%

Particleboard & Medium Density Fiberboard

Affected Process Lines

Revenues ($ million/yr) $1,634.3 $1,655.6 $21.2 1.30%

Production (M cubic meters/yr) 9,670,639 9,553,510 -117,129 -1.21%

Operating process lines (#) 53 53 0 0.00%

Employment* 16,962 16,756 -205 -1.21%

Unaffected Process Lines
Exhibit 4-4: Distribution of Industry-Level Impacts of the NESHAP: 

Affected and Unaffected Producers

Baseline

With

Regulation

Changes From Baseline

Absolute Percent

4-14

Revenues ($ million/yr) $333.6 $348.5 $14.9 4.47%

Production 1,973,884 2,010,967 37,083 1.88%

Operating process lines (#) 30 30 0 0.00%

Employment* 3,462 3,527 65 1.88%
Exhibit 4-4: Distribution of Industry-Level Impacts of the NESHAP: 

Affected and Unaffected Producers

Baseline

With

Regulation

Changes From Baseline

Absolute Percent

4-15

Hardboard

Affected Process Lines

Revenues ($ million/yr) $2,338.0 $2,354.5 $16.5 0.70%

Production (M cubic meters/yr) 1,768,545 1,763,431 -5,114 -0.29%

Operating process lines (#) 18 18 0 0.00%

Employment* 6,271 6,252 -18 -0.29%

Unaffected Process Lines

Revenues ($ million/yr) n/a n/a n/a n/a

Production n/a n/a n/a n/a

Operating process lines (#) n/a n/a n/a n/a

Employment* n/a n/a n/a n/a

Total

Affected Process Lines

Revenues ($ million/yr) $7,585.3 $7,640.9 $55.6 0.73%

Production (M cubic meters/yr) 27,811,607 27,600,316 -211,291 -0.76%

Operating process lines (#) 157 156 -1 -0.64%

Employment* 51,020 50,662 -358 -0.70%

Unaffected Process Lines

Revenues ($ million/yr) $2,623.4 $2,673.4 $50.1 1.91%

Production 12,760,079 12,845,082 85,003 0.67%

Operating process lines (#) 90 90 0 0.00%

Employment* 19,233 19,366 133 0.69%

All Process Lines (net)

Revenues ($ million/yr) 10,209 10,314 $105.6 1.03%

Production 40,571,686 40,445,398 -126,288 -0.31%

Operating process lines (#) 247 246 -1 -0.40%

Employment* 70,252 70,028 -225 -0.32%

n/a = not applicable

*Baseline employment estimates are based total production and employment of all facilities in each market as

reported in the EPA facility database. Average production per employee was calculated using the sum of

facility-specific production and employment. Because facilities reported employment as a range, they are

assigned an employment estimate using the mid-point of the reported range. Post-regulation employment was

then estimated by dividing post-regulation production by the baseline production per employee.
4-16

Exhibit 4-4 shows that one softwood plywood production line is expected to prematurely cease

operations. The model does not predict any closures in all of the other product markets. The affected

entity that closes following adoption of the regulation is a small SWPW producer that incurs higher

control costs per unit of production than other SWPW production lines. This facility, with one process

line, did not respond to the EPA’s ICR survey. Therefore, it was necessary to estimate baseline

production and compliance costs based on very little facility-specific information. Total baseline

production of SWPW by the facility that closes was roughly 9,500 M cubic meters per year, or less than

0.05 percent of the 17,568,162 M cubic meters of SWPW produced by all SWPW facilities during 1997.

As a result of the closure and reductions in production at other affected facilities, the EIA model

estimates a total net loss in employment of 225 employees (0.3 percent) attributable to the NESHAP

across all four market sectors. Affected facilities experience employment loss of 358, which is offset by

employment gains at unaffected facilities of 133. Overall the four sectors together experience a 1

percent increase in revenues, and a 0.3 percent decrease in production.

4.5.4 Social Costs of the NESHAP

The social costs of a regulation are measured according to the impacts that it has on both

consumers and producers. The NESHAP, because it is expected to result in changes in both market price

and market quantity, will impact the consumers and producers of softwood plywood and composite

wood products. Social costs, also called welfare impacts, are the measure of overall gains and losses

experienced by the two groups that may result from the imposition of costs associated with the

regulatory requirements. 

The economic benefits producers experience when participating in a market is called producer

surplus. Producers experience impacts when their revenues change either because of a new market price,

increased production costs, or both. These impacts change the amount of producer surplus relative to the

baseline. Likewise, the economic benefits consumers experience is called consumer surplus. Consumer

surplus changes when consumers experience impacts when the amount of product they consume or the

product price changes. The economic principles behind the measurement of social costs are presented in

detail in the EIA.

The estimate of the social cost of the NESHAP, presented in Exhibit 4-5, is the sum of the

change in producer and consumer surplus. The EIA model estimates the social cost of the proposed

NESHAP as $135.1 million annually (1999 dollars). These costs are distributed across both consumers

and producers of plywood and composite wood products according to projected changes in market price

and quantity associated with the NESHAP. 

Consumer surplus is reduced by $136.1 million annually due to the increase in prices and

reductions in consumption. Consumers of softwood plywood are worse off by $38.7 million annually;

consumers of oriented strandboard are worse off by $23.3 million annually; consumers of particleboard

and medium density fiberboard and of hardboard are worse off annually by $49.8 million and $23.3

million, respectively. 
4-17

Producers (in aggregate) are slightly better off because of the imposition of the NESHAP, with

an increase in producer surplus of just under $1 million annually. Essentially all of this is change

associated with domestic producers. Because the market prices for these products increase, certain

individual domestic producers gain at the expense of their competitors. The size of this gain at any

given facility depends on how much their production costs change (as a result of new compliance costs)

relative to the change in market price and quantity that increases revenues. The benefit to foreign

producers associated with higher market prices is quite small, under $100,000.

Exhibit 4-5: Distribution of Social Costs Associated with the NESHAP

Stakeholder

Change in Value ($ million -1999

dollars)

Social Costs of Regulation 

(Change in consumer surplus + Change in producer surplus) $-135.1

Total Change in Consumer Surplus $-136.1

SWPW Consumers $-38.7

OSB Consumers $-23.3

PB/MDF Consumers $-49.8

HB Consumers $-23.3

Total Change in Producer Surplus $0.9

Softwood Plywood

Producer Surplus, total $8.3

Domestic producers $8.3

Affected Facilities $-4.1

Unaffected Facilities $12.4

Foreign producers $0.0

Oriented Strandboard

Producer surplus, total $-1.4

Domestic producers $-1.4

Affected Facilities $-12.9

Unaffected Facilities $11.5

Foreign producers $0.0

Particleboard & Medium Density Fiberboard

Producer surplus, total $-5.2

Domestic producers $-5.2

Affected Facilities $-13.5

Unaffected Facilities $8.3

Foreign producers $0.0
Exhibit 4-5: Distribution of Social Costs Associated with the NESHAP

Stakeholder

Change in Value ($ million -1999

dollars)

4-18

Hardboard

Producer surplus, total $-0.8

Domestic producers $-0.8

Affected Facilities $-0.8

Unaffected Facilities n/a

Foreign producers $0.0

4.5.5 Energy Impact Analysis

Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy

Supply, Distribution, or Use” (66 FR 28355, May 22, 2001), provides that agencies shall prepare and

submit to the Administrator of the Office of Information and Regulatory Affairs, Office of Management

and Budget, a Statement of Energy Effects for certain actions identified as “significant energy actions.” 

Section 4(b) of Executive Order 13211 defines “significant energy actions” as “any action by an agency

(normally published in the Federal Register) that promulgates or is expected to lead to the promulgation

of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and

notices of proposed rulemaking: (1) (i) that is a significant regulatory action under Executive Order

12866 or any successor order, and (ii) is likely to have a significant adverse effect on the supply,

distribution, or use of energy; or (2) that is designated by the Administrator of the Office of Information

and Regulatory Affairs as a significant energy action.” The rule is not a “significant energy action”

because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. 

The basis for the determination is as follows.

As stated in Chapter 2, this rule affects manufacturers in the softwood veneer and plywood

(NAICS 321212), reconstituted wood products (NAICS 321219), and engineered wood products

(NAICS 321213) industries. There is no crude oil, fuel, or coal production from these industries. 

Hence, there is no direct effect on such energy production related to implementation of this rule. In fact,

as mentioned in section IV.D. of this preamble, there will be an increase in energy consumption, and

hence an increase in energy production, resulting from installation of regenerative thermal oxidizers

(RTOs) and wet electrostatic precipitators (WESPs) likely needed for sources to meet the requirements

of the rule. This increase in energy consumption is equal to 718 million killowatt-hours/year (kWh/yr)

for electricity and 45 million cubic meters/year (m3

/yr) for natural gas. These increases are equivalent

to 0.012 percent of 1998 U.S electricity production and 0.000001 percent of 1998 U.S. natural gas
12U.S. Department of Energy, Energy Information Administration. Annual Energy Review, End-Use

Energy Consumption for 1998. Located on the Internet at http://www.eia.doe.gov/emeu/aer/enduse.html. 

13 Ibid. 

14 U.S. Department of Energy, Energy Information Administration. 1998 Manufacturing Energy

Consumption Survey. Located on the Internet at 

http://www.eia.doe.gov/emeu/mecs/mecs98/datatables/contents.html. 

15 U.S. Environmental Protection Agency. “Energy Impact Analysis of the Proposed Plywood and

Composite Wood Products NESHAP.” July 30, 2001. 

4-19

production.12 It should be noted, however, that the reduction in demand for product output from these

industries may lead to a negative indirect effect on such energy production, for the output reduction will

lead to less energy use by these industries and thus some reduction in overall energy production. 

For fuel production, the result of this indirect effect from reduced product output is a reduction

of only about 1 barrel per day nationwide, or a 0.00001 percent reduction nationwide based on 1998 U.S.

fuel production data13. For coal production, the resulting indirect effect from reduced product output is a

reduction of only 2,000 tons per year nationwide, or only a 0.00001 percent reduction nationwide based

on 1998 U.S. coal production data. For electricity production, the resulting indirect effect from reduced

product output is a reduction of 42.8 million Kilowatt-hours per year (kWh-yr), or only a 0.00013

percent reduction nationwide based on 1998 U.S. electricity production data. Given that the estimated

price increase for product output from any of the affected industries is no more than 2.5 percent, there

should be no price increase for any energy type by more than this amount. The cost of energy

distribution should not be affected by this proposal at all since the rule does not affect energy

distribution facilities. Finally, with changes in net exports being a minimal percentage of domestic

output (0.01 percent) from the affected industries, there will be only a negligible change in international

trade, and hence in dependence on foreign energy supplies. No other adverse outcomes are expected to

occur with regards to energy supplies. Thus, the net effect of this rule on energy production is an

increase in electricity output of 0.012 percent compared to 1998 output data, and a negligible change in

output of other energy types. All of the results presented above account for the passthrough of costs to

consumers, as well as the cost impact to producers. These results also account for how energy use is

related to product output for the affected industries.14 More detailed information on the estimated energy

effects and the methodology employed to estimated them are in the background memo15 that provides

such details for the proposed rule. 

Therefore, we conclude that the rule when implemented is not likely to have a significant

adverse effect on the supply, distribution, or use of energy. 

4.6 Analysis of Economic Impacts on Engineered Wood Products Sector

4.6.1 Overview
4-20

The engineered wood products (EWP) sector is much different than the other four sectors

examined in this analysis. Due to both the nature of the products and their markets as mentioned in

Section 4.6.4 below, and the limited availability of data, a quantitative analysis was not performed. 

EWP products are characterized by differentiated structural beam products, although some can

also be used as columns. EWPs are produced by firms using differentiated production systems. There

are a number of large firms with market power, allowing them to set prices. Although many of the

products in this market sector can be substituted for one another to an extent, each product’s design

usually provides it with an advantage over others in the design of final structures. Product

differentiation allows each product to dominate particular market niches, but also makes many of the

products complements as well as substitutes. Even when substitution is possible, some large firms use

their market power to influence purchase decisions and persuade consumers to purchase their products. 

Consequently, these products are not standard commodities as are products in the other plywood and

composite wood sectors. Therefore, commodity prices and other standard information that is

characteristic of competitive markets are not available. These factors limit the ability of EPA to quantify

the impact of the NESHAP on this sector using the same quantitative method applied to the other

sectors.

Three of the fifty-three EWP facilities in the U.S. will have compliance costs are a result of the

NESHAP. This includes the country’s two LSL plants, and one of the country’s two PSL plants. 

Weyerhaeuser, Inc. purchased these four plants when they acquired Trus Joist MacMillan.

(Weyerhaeuser-Trus Joist MacMillan will be referred to as W/TJM for the remainder of this report.) 

W/TJM is currently the only manufacturer of LSL and PSL in the world.

4.6.2 Characteristics of EWP Products

EWPs include laminated veneer lumber (LVL), laminated strand lumber (LSL), parallel strand

lumber (PSL), wood I-joists (I-J), and glue laminated timber (GL). These are value added lumber

products designed to be used in applications that are not suitable for ordinary framing lumber. The

design and composition of each of these products differ, providing them with different strength,

stiffness, cost, and dimensional properties. Strength properties allow products to carry heavier loads

without breaking. Strength is particularly important for uses such as carrying beams in floors or bridge

girders, which are used to support structures. Stiffness prevents materials from shaking as objects are

moved over them. This is particularly important in floors and bridge decks where structure shakes or

squeaks are uncomfortable or dangerous. Each product’s strength and stiffness is partially a function of

its dimensional characteristics. For example, I-J are strong, stiff and typically less expensive than the

other products. However, their structural integrity does not hold beyond certain lengths.

Laminated-Strand Lumber
16 LSL bending strength = 1700psi; stiffness (modulus of elasticity or MOE) = 1.3-1.5E.

4-21

W/TJM introduced LSL in 1992. Its dimensional characteristics match nominal 2x4 and 4x4

framing lumber, but it provides greater and more uniform strength and stiffness properties.16 Unlike

many of the other EWPs, one of the primary uses of LSL is in vertical applications, as a stud or column. 

PSL is also used in vertical applications, but its primary uses are in horizontal applications, as a beam. 

The uses of LSL are summarized in Exhibit 4-6.

Exhibit 4-6: Primary Uses and Substitutes for LSL

Application Uses Substitutes

Columns or studs Wall, window, and door framing Framing lumber, PSL, solid sawn

lumber, steel

Headers Garage door, other wide span doors and

windows

Framing lumber, GL, LVL, PSL, steel

Beams Light applications, low load bearing Solid sawn lumber, GL, LVL, PSL, I-J 

Rim Board Floor systems, nailing surface for

sheathing, decks and siding 

Plywood

Source: http://www.trusjoist.com

Because W/TJM is the sole producer of LSL, very little information is available about their costs

or profits. Exhibit 4-7 below identifies the production information that is known. Note that neither plant

operates near full capacity. The two plants combined operate at less than 50 percent of their combined

capacity (EWP survey). This may be due to a decline in demand or an immature market. 

Exhibit 4-7: Characteristics of LSL Plants

Location Item

Deerwood, MN Capacity

Production

Capacity 

Employees

Plant Age

7,900,000 ft3

/yr 

4,900,000 ft3

/yr

62%

100-249

1992 (estimate)

Chavies, KY Capacity

Production

Capacity

Employees

Plant Age

14,900,000 ft3

/yr

5,400,000 ft3

/yr

36%

250-499

1992 (estimate)

Source: EPA facility survey, 1998.

Parallel-Strand Lumber 
17 PSL bending strength = 2900psi; stiffness = 2.0E.

18 GL bending strength = 2400-3000psi; stiffness = 1.8 - 2.1E

4-22

PSL is a slightly older technology than LSL. It was introduced to the market in the mid-1980’s

by W/TJM. PSL is a high performance beam and header product that can also be used as a column. It is

designed with exceptional strength, stiffness characteristics that is capable of spanning much longer

distances than most other EWPs.17 Only GL can match or beat PSL’s ability to carry heavy loads over

long spans.18 Furthermore, PSL is a balanced beam, which means it has no top or bottom. This

property is particularly desirable to the residential framing industry. Balanced beams save on labor costs

due to lower skill required to install the product, providing PSL with an edge over GL for a number of

years. However, Anthony Forest Products recently developed a line of balanced GL beams with

comparable strength and stiffness properties to PSL, and a number of other GL manufacturers have since

done the same. This has lead to a competitive more environment. However, PSL still maintains a share

of the residential market. Exhibit 4-8 summarizes the uses of PSL.

Exhibit 4-8: Primary Uses and Substitutes for PSL

Application Uses Substitutes

Columns or studs Wall framing, street lights Steel, solid sawn lumber, steel 

Headers Garage door, other wide span doors and

windows

GL,LVL, steel

Beams Heavy applications, high load bearing GL, steel, solid sawn lumber, LVL 

Because W/TJM has been the only producer of this product, very little is known about their

production costs and profits. Exhibit 4-9 below identifies the production information that is known

about the two U.S. PSL production facilities.

Exhibit 4-9: Characteristics of PSL Plants 

Location Item

Colbert, GA

(affected by rule)

Capacity

Production

Capacity Factor

Employees

Plant Age

3,000,000ft3

/yr

2,770,000ft3

/yr

92%

250-499

mid-1980s (estimate)

Buckhannon, WV

(not affected by rule)

Capacity

Production

Capacity Factor

Employees

Plant Age

2,500,000ft3

/yr

1,929,000ft3

/yr

77%

250-499

mid-1980s (estimate)

source: EPA facility survey, 1998.
4-23

Since PSL does compete directly with GL in some applications, there is slightly more information

available on it than on LSL. There is one published source of EWP prices that includes some retail PSL

delivered prices: Engineered Lumber Trends produced by The Irland Group in Winsor, ME. Exhibit 4-

10 presents a comparison of retail prices for PSL and GL. However, it is not possible to estimate firm

revenue using these prices because they are retail prices and there is considerable markup from the

producer to retail level. The prices listed in the table below show that PSL is more expensive than GL. 

Exhibit 4-10: Retail Prices of GL and PSL Beams 

Delivered to Los Angeles 

Beam* Width 

(inches)

Depth 

(inches)

Price

per linear foot

PSL

(strength = 2900psi 

 stiffness = 2.0E)

3-1/2 11-7/8 $8.16

GL

(strength = 2400psi

stiffness = 1.8E)

3-1/8 12 $5.90

GL **

(strength = 3000psi

stiffness = 2.1E)

3-1/8 12 $7.08

Source: Engineered Lumber Trends (December 1999) 

*Beam bending strength measured in pounds per square inch and 

 stiffness the beams modulus of elasticity or E

**Price of the 3000-psi GL is estimated by marking up the 2400psi 

 GL by 20% based on conversations with GL manufacturers

 W/TJM has stated that PSL could be manufactured using waste material from plywood and

LVL. Other industry members dispute this due to the high quality material required for the product. 

They feel that there is actually considerable wasted material in the production process in order to acquire

the high-quality wood fiber. Consequently, there are two conflicting arguments why PSL is able to sell

their product at the higher price. 

• Consumers view it as a superior product despite the availability of substitutes, providing it with

a higher profit margin. 

• W/TJM has used strategic behavior to maintain the price it requires to provide its product on the

market. 

4.6.3 Comparison to Other EWP Products

Substitution among EWPs is a complicated dynamic. While the products can be viewed as

distinct commodities, they are integral components in the engineering design of a structure. Therefore, it

is possible for two EWP products to be both substitutes and complements. This is particularly true for
4-24

W/TJM’s products because they sell both the individual products and entire framing systems that include

either LSL or PSL, or both. 

LSL is more comparable to framing lumber and solid sawn lumber than most other engineered

wood products. As a header it competes with LVL, GL, and PSL. However, as a column or stud, it is

fairly unique. It is also a very new technology, which may partially explain why competing firms have

not developed comparable products to date. Furthermore, LSL is marketed as a complementary product

to W/TJM’s other engineered wood products (I-J, LVL, PSL) in various structures they design. 

As an individual product, PSL has more direct substitutes than LSL. In shorter spanning

applications (such as headers or floor joists) LVL, I-J, GL, or LSL can be substituted for each other

depending on the application. In longer spanning applications, PSL competes with GL and steel.

W/TJM also designed PSL to complement their other products in pre-designed framing systems. If an

architect or engineer purchases the pre-designed framing system, PSL will be specified in the system. 

This eliminates the possibility of substitutes in these applications. These characteristics are discussed in

greater detail below.

4.6.4 Market Characterization

The EWP sector is characterized by imperfect competition among firms, particularly. In the case

of LSL and PSL, W/TJM is a monopoly producer because it operates all four facilities that produce

products affected by the rule. Although a number of other products can be substituted for both LSL and

PSL at the commodity level, W/TJM has a monopoly on these two products. In addition, they have

some ability to control material choice within the residential framing market because they produce

Computer Automated Design (CAD) programs used by architects, engineers, and lumber product

distribution companies to design structures. The individual using the program is actually purchasing a

complete architectural design, which competes with other architectural designs on the basis of total

design cost. Other EWP companies have not developed such programs to the same extent that W/TJM

has.

By pre-specifying its products as material inputs in these design packages, W/TJM assures that

they are used in the structure. Moreover, the individual product prices are less important to W/TJM

because the price the buyer using the program is concerned with is the price of the whole structure. 

Further, because W/TJM makes all the products used in the design, they can sell any one of the

components at a loss provided the loss is made up by profits on the whole structure. In addition, W/TJM

also sells pre-designed floor, roof, and wall systems that incorporate its EWP products.

Therefore, W/TJM is a price setter in both these markets. The high price of PSL allows

producers of comparable GL a substantial markup over its costs. However, GL manufacturers offered

the opinion that PSL could not raise its price without suffering a loss in demand . Those same producers

believe that PSL is already selling at a loss to promote the sale of its other products, although this

information cannot be confirmed. Another complicating factor is the purchase of TJM by

Weyerhaeuser, Inc. Even if TJM had been selling PSL at a loss, Weyerhaeuser may not be willing to do

this, particularly if costs increase due to the NESHAP.
4-25

4.6.5 Appropriateness of Partial Equilibrium Economic Analysis for the EWP Market

It is not appropriate to use a partial equilibrium analysis to quantify the impact of the rule on the

EWP sector. The EWP facilities that will have compliance costs due to the rule are not part of a

competitive market. W/TJM has a monopoly on both PSL and LSL because they are the only company

in the world producing both these products. Although the products compete to an extent with other

EWPs, W/TJM is able to use its market power to influence consumer purchasing decisions and prices. 

Also, W/TJM may be able to absorb cost increases on one product with profits from another.

4.6.6 Analysis

The estimated total annual compliance costs for the three impacted EWP facilities are $3.2

million, which is only 2.4 percent of the overall compliance cost of the rule of $142 million per year. 

Moreover, the costs are incurred by one of the largest wood products companies in the world. The costs

incurred by W/TJM are less than 1 percent the corporation’s total annual revenues, which now include

revenues from the facilities purchased from TJM. Although the specific impact on W/TJM’s

profitability cannot be determined, it is likely that W/TJM can afford the costs at the corporate level.

The Agency cannot be certain of the impact that these cost increases will have on the markets for

LSL and PSL. W/TJM could decide use their price setting power to increase the price of PSL and/or

LSL. This could lead to a decrease in consumer surplus. However, it is important to note the

distributional impact of this potential price increase. EWPs are often used in high end residential and

commercial construction. They typically provide luxury features, such as squeak proof floors, large

open rooms with high ceilings and no support columns.

Alternatively, W/TJM may choose not to raise the prices of PSL and LSL. For example, PSL is

already more expensive than GL, a substitute product. A rise in PSL prices could lead to a loss in

market share. Furthermore, production data showed that the PSL market is functioning at about 50

percent of its full capacity. These factors indicate that a PSL price increase may not be favorable to

W/TJM. W/TJM could choose to absorb the cost increase with profits from its other products in the

short run. In the long run they could abandon production of these products. In order to meet the demand

for their pre-designed structural systems, they could either produce or buy a substitute product to use in

the structural systems.

If W/TJM chooses to shut down these plants, there may be a number of unfavorable short run

impacts. First, the closures could mean the loss of 600-1250 jobs, spread over three communities. EPA

expects that the reduction in employment at these facilities would be offset by an increase in

employment at a competing firm, but the community impacts may remain. 

The impact of the NESHAP on both consumers and the individual facilities and firms will

depend upon corporate strategy. Given the acquisition of Trus Joist MacMillan by Weyerhaeuser,
4-26

corporate decisions and long term strategy are more influential than what could be represented in a

model.

4.6.7 Conclusions

Although the specific impacts to the EWPs sector cannot be determined, it is unlikely that

substantial economic losses will result. The cost burden of this sector is minimal in comparison to the

other sectors. Furthermore, the affected facilities are all owned by W/TJM, which has sufficient

resources to handle the compliance costs. Even if W/TJM passes this cost on to consumers, the price

increase is likely to be minimal as substitute products are available.
4-27

4.7 References

Abt Associates Inc. 1999. Profile of the Plywood and Wood Composite Industries. Prepared for Larry

Sorrels, Innovative Strategies and Economic Group, Air Quality Strategies and Standards

Division, Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency,

Research Triangle Park, NC. December

Abt Associates Inc. 2000. Economic Analysis Methodology for the Plywood and Wood Composite

Industries. Prepared for Larry Sorrels, Innovative Strategies and Economic Group, Air Quality

Strategies and Standards Division, Office of Air Quality Planning and Standards, U.S.

Environmental Protection Agency, Research Triangle Park, NC. March.

U.S. Environmental Protection Agency. 1998. Industry Specific Information Collection Request (ICR)

for the Development of Plywood and Particleboard Maximum Achievable Control Technology

(MACT) Standards. Air Quality Strategies and Standards Division, Office of Air Quality

Planning and Standards, U.S. Environmental Protection Agency, Research Triangle Park, NC.

U.S. Environmental Protection Agency. 1999a. OAQPS Economic Analysis Resource Document. Air

Quality Strategies and Standards Division, Office of Air Quality Planning and Standards, U.S.

Environmental Protection Agency, Research Triangle Park, NC.

U.S. Environmental Protection Agency. 1999b. Economic Impact Analysis for the Polymers & Resins

III NESHAP. Air Quality Strategies and Standards Division, Office of Air Quality Planning and

Standards, U.S. Environmental Protection Agency, Research Triangle Park, NC.
5-1

5 SMALL BUSINESS IMPACTS

Under the requirements of the Regulatory Flexibility Act (RFA) of 1980, Federal regulatory

agencies must give special consideration to small entities that are affected by regulatory actions. In

1996, amendments to the RFA under the Small Business Regulatory Enforcement Fairness Act

(SBREFA) added certain requirements associated with analyses and procedures associated with

determining whether a regulatory action will have a significant impact on a substantial number of small

entities (U.S. EPA, 1999a, 1999b).

5.1 Results in Brief

The screening analysis of small business impacts presented in this EIA chapter indicates that 17

of the 83 businesses affected by this rule are small. Of these 17 small firms, ten have annual compliance

costs of 1 percent or greater of their sales. Of these 10 firms, three have annual compliance costs of 3

percent or greater of their sales. Of the 32 facilities owned by these 17 small firms, only one facility is

predicted to close in order to avoid incurring costs associated with compliance with the rule. This

analysis supports a certification of no significant impact on a substantial number of small entities

(SISNOSE) for this rule because, while a few small firms may experience significant impacts, there will

not be a substantial number incurring such a burden. 

The small business impacts depending on the eligibility of sources to become part of a delisted

low-risk subcategory can be found in Appendix A of this RIA. 

5.2 Introduction

The NESHAP for the plywood and composite wood industries will affect the owners of the

facilities that will incur compliance costs to control their HAP emissions. The owners, either firms or

individuals, are the entities that will bear the financial impacts associated with these additional operating

costs. The rule has the potential to impact all firms owning affected facilities, both large and small. This

section presents the results of EPA’s small business impact analysis of the impact the NESHAP for the

Plywood and Composite Wood Industries on small businesses. The analysis was performed in two

stages: a screening-level analysis, and an examination of impacts on small businesses developed using

the models described in Chapter 4. 
5-2

The screening analysis provides EPA with a preliminary estimate of the magnitude of impacts

the NESHAP may have on the ultimate domestic parent companies that own facilities EPA expects to be

impacted by the standard. The analysis focused on small firms because they may have more difficulty

complying with a new regulation or affording the costs associated with meeting the new standard. This

section first describes the data sources used in the screening analysis, the methodology we applied to

develop estimates of impacts, the results of the analysis, and conclusions about the results. The results

of the impact assessment specific to small businesses that own affected facilities follows. Detailed

documentation of the screening analysis presented in this section is contained in the economic impact

analysis (EIA). 

5.3 Screening Analysis Data Sources

The screening analysis was based on the following information:

• Industry Specific Information Request (ICR) for the Development of Plywood and Particleboard

MACT Standards (U.S. EPA, 1998).

• Profile of the Plywood and Composite Wood Products Industries (Abt Associates, January

2000).

• Estimated Nationwide Costs of Control: Plywood and Composite Wood Products (MRI, April

14, 2000).

• Dun & Bradstreet, Ward’s Business Directory, and Internet research on facility and firm

employment and sales.

5.4 Screening Analysis Methodology

Cost Analysis

After summing annual compliance costs for each affected facility associated with a given parent

firm, EPA developed ratios of firm-level compliance costs to firm-level sales. The preparation of cost to

sales ratios is a typical part of screening analyses such as this one. The analysis incorporated firm level

compliance costs from the most recent facility compliance cost estimates for all affected facilities. The

firm sales data for the majority of the firms with affected facilities was obtained through a search of the

Dun & Bradstreet (D&B) company database. The information obtained from D&B was supplemented

with data from firm web sites and several other business databases available through the Internet (e.g.,

Zapdata, Hoover’s Online, Thomas’ Register, and Lycos Companies Online).

Profitability Analysis
5-3

For the second step in the screening analysis, EPA reviewed the profitability of only those firms

with affected facilities with a cost to sales ratio (C/S) greater than 1 percent. Specifically, EPA

examined a measure of profitability called the net profit margin, also known as the return on sales ratio

(R/S), calculated by dividing net profit after taxes by annual net sales. Profitability data is not publicly

available for those affected firms with cost /sales ratios greater than 1 percent because they are all

privately held firms. EPA estimated profitability according to industry-wide average profitability

measures available from public sources. Exhibit 5-1 presents the profitability measure of R/S by product

category.

Exhibit 5-1: Net Profit Margins by Product Type

Product Category 1997 Return on Sales Ratio

Softwood, Plywood, and Veneer 1.7

Oriental Strandboard 3.5

Other Wood Composites 3.5

Engineered Wood Products* 5.0

Multiple Processes** 2.6

Notes:

Source: Dun & Bradstreet (1999). Indicator values are based on median

values of the industrial sample.

*Includes 1998 data for Structural Wood Members, the only data

reported for this sector.

**Firms with multiple product lines were assigned an R/S ratio based on

the average of the R/S ratios for firms with Softwood Plywood and

Other Wood Composite product lines. 

5.5 Screening Analysis Assumptions

Because there were certain gaps in the data, EPA had to make assumptions regarding some

affected firms’ employment and sales data as follows.

 

• For those affected facilities for which no parent company data were available, EPA assumed that

the facility represents the ultimate parent. EPA then assumed that the employees or the sales

associated with the facility were the same for the parent firm.

• For 8 affected firms for which Dun & Bradstreet, Ward’s, or Internet sales data was not available

at the firm or facility level, EPA applied a sales estimate based on the average sales for firms in

the same product and employee size category.

• For one affected firm, EPA obtained employment information for all three of its identified

facilities and sales information for two of the three. EPA extrapolated the sales data on a dollar
19Medium density fiberboard, hardboard, conventional particle board and molded particleboard.

5-4

per employee basis from the two facilities with complete data to the facility with only

employment data and added those sales to estimate the firm’s total sales.

5.6 Screening Analysis Results

Cost Analysis

Based on the results of the C/S ratio test, EPA developed the following summary information.

• The total number and percent of affected firms with C/S ratios greater than 3 percent.

• The total number and percent of affected small firms with C/S ratios greater than 3 percent.

• The total number and percent of affected firms with C/S ratios greater than 1 percent.

• The total number and percent of affected small firms with C/S ratios greater than 1 percent.

• The median and mean C/S ratios for the following groups of firms:

• All firms.

• Small firms.

• Firms owning affected softwood plywood and veneer facilities.

• Firms owning affected oriented strand board facilities.

• Firms owning affected other wood composite products facilities.19

• Firms owning affected engineered wood product facilities.

• Firms owning affected facilities that make multiple products.

The screening analysis showed that of the 52 firms that own facilities incurring both capital and

monitoring, recordkeeping , and reporting (MRR costs), 17 of them (33 percent) are small firms

according to the U.S. Small Business Administration’s “Small Business Size Standards Matched to

NAICS Codes” (U.S. SBA, 2000). Small firms with affected facilities had a median C/S of 1.22 percent. 

The remaining 35 firms (67 percent) are large, with a median C/S ratio of 0.33 percent. Overall, the

weighted median C/S ratio for all firms is 0.62 percent. Exhibit 5-2 summarizes this information, along

with the mean, maximum and minimum C/S by firm size category.
20Firms categorized according to the process types associated with the affected facilities. Firms owing

facilities with more than one process type were assigned to the “Multiple Processes” category.

5-5

Exhibit 5-2: Affected Firms by Size

Firm

Size1

Number of

Affected

Firms2

Percent of

Total Affected

Firms

Median C/S

Ratio

Mean

C/S Ratio

Maximum

C/S Ratio

Minimum

C/S Ratio

Small 17 33.0% 1.2% 2.3% 8.3% 0.53%

Large 35 67.0% 0.3% 0.6% 5.1% 0.01%

Total/

Weighted

Average

52 100.0% 0.6% 1.2% 8.3% 0.01%

Notes:

1

For those firms for which firm size information was not available, EPA assumed a typical firm size

within the product type category.

2

Based on affected facilities only. Includes the firm that has capital costs but no annual costs.

When screened by process type,20 EPA found that the affected softwood plywood and veneer

firms (40 percent of all firms), other composite wood firms (25 percent of all firms) and firms with

multiple processes (29 percent of all firms) make up the majority of affected firms. The firms owning

facilities that produce softwood plywood have the highest median C/S ratio, 0.82 percent, followed by

the owners of other composite wood facilities, with a mean C/S ratio of 0.41 percent. See Exhibit 5-3

for a summary of the data by process type, including mean, maximum and minimum C/S ratios.
5-6

Exhibit 5-3: Affected Firms by Process Type

Process Type1

Number of

Affected

Firms3

Percent of Total

Affected Firms

Median

C/S Ratio

Mean

C/S

Ratio

Maximum

C/S Ratio

Minimum

C/S Ratio

Softwood Plywood/Veneer 21 40.4% 0.8% 1.1% 8.3% 0.01%

Oriented Strand Board 3 5.8% 0.2% 0.7% 1.9% 0.01%

Other Wood Composites2 13 25.0% 0.4% 2.1% 8.2% 0.03%

Engineered Wood Products 0 0.0% n/a n/a n/a n/a

Multiple Processes 15 28.8% 0.4% 0.6% 2.0% 0.01%

Total/Weighted Average3 52 100.0% 0.6% 1.2% 8.3% 0.01%

Notes:

1

Firms categorized according to the process types associated with the affected facilities. Firms owing facilities

with more than one process type were assigned to the “Multiple Processes” category.

2

Includes Medium Density Fiberboard, Hardboard, and Particleboard (conventional and molded). 3

Based on affected facilities only (facilities incurring capital and MRR costs). Includes one firm that has

capital costs but no annual costs.

Of the four firms with C/S ratios of 3 percent or greater, three are small. Ten small firms have

C/S ratios of one percent or greater out of 16 in this category. One large firm has a C/S ratio of 3 percent

or greater and six of them have C/S ratios of one percent or greater. The other wood composite category

has the most firms with C/S ratios of 3 percent or greater (three out of the four). The softwood plywood

has seven firms followed by other wood composites with five firms with C/S ratios of one percent or

greater (out of 16). The C/S screening results are presented in Exhibits 4 and 5, below. These tables

also compare the number of affected firms (i.e., firms with facilities incurring only MRR costs as well as

those incurring capital and MRR costs) to the estimated total number of firms nationally.
5-7

Exhibit 5-4: Affected Firms with C/S Ratios of 3 Percent or Greater

Category

Number of Firms

Nationwide*

Number of

Affected Firms

Firms as a Percent

of National Firms

Firms as a Percent

of Affected Firms

Firm Size

Small 38 3 7.9% 17.6%

Large 42 1 2.4% 2.9%

Undetermined 3 n/a n/a n/a

Total/Weighted Average 83 4 4.8% 7.7%

Process Type

Softwood Plywood/Veneer 30 1 3.3% ??

Oriented Strand Board 2 0 0.0% ??

Other Wood Composites 19 3 15.8% ??

Engineered Wood Products 11 n/a n/a n/a

Multiple Processes 21 0 0.0% ??

Total/Weighted Average 83 4 4.8% 7.7%

Notes:

See notes to Exhibits 5-2 and 5-3 above.

* Estimate.
21 That is, firms with C/S ratios greater than one percent.

5-8

Exhibit 5-5: Affected Firms with C/S Ratios of 1 Percent or Greater

Category

Number of Firms

Nationwide*

Number of

Firms

Firms as a

Percent of

National Firms

Firms as a Percent of

Affected Firms by

Category

Firm Size

Small 38 10 26.3% 58.8%

Large 42 6 14.3% 17.1%

Undetermined 3 n/a n/a n/a

Total/Weighted Average 83 16 19.3% 30.8%

Process Type

Softwood Plywood/Veneer 30 7 23.3% ??

Oriented Strand Board 2 1 50.0% ??

Other Wood Composites 19 5 26.3% ??

Engineered Wood Products 11 0 0.0% n/a

Multiple Processes 21 3 14.3% ??

Total/Weighted Average 83 16 19.3% ??

Notes:

See notes to Exhibits 5-2 and 5-3 above.

* Estimate. In a few cases, a firm’s process type changed when all facilities were taken into account. 

Profitability Analysis

Based on the results of the profitability analysis performed as described above, EPA developed

the following information.

• The total number and percent of affected firms21 whose C/S ratio: 1) exceeds their profitability

ratio by 50 percent or more; 2) is between zero and 50 percent; or 3) is less than or equal to their

profitability ratio.

• The total number and percent of affected small firms whose C/S ratio: 1) exceeds their

profitability ratio by 50 percent or more; 2) is between zero and 50 percent; or 3) is less than or

equal to their profitability ratio.
22Research indicates that one of the small firms with particularly high impacts, Dominance Industries (d.b.a.

Pan Pacific Products) is a single location private corporation owned Philip Ling. However, Dr. Ling is also the

owner of a group of companies around the world and is the chairman of Malaysian-based Pan Pacific Asia Berhad,

an investment holding company that also provides management services. Pan Pacific Asia’s 1998 sales were $88

million (U.S.). The group manufactures and distributes timber logs and timber moldings. Other activities of the

company are stockbroking and investment holding. While this information is not necessarily applicable to the

ultimate domestic parent of Dominance Industries’ affected facility, is indicates that the facility’s owner has access

to financial capital beyond what the sales from the facility generate.

5-9

When EPA compared the C/S ratio to the R/S ratio for those firms with C/S ratios greater than one

percent, EPA found that in 14 of the 16 cases, the C/S ratio exceeded the R/S by over 50 percent. Two

firms’ C/S ratio exceeded their R/S ratio by between zero and 50 percent. Exhibit 5-6 presents these

results in tabular form.

Exhibit 5-6: C/S to R/S comparison for firms with C/S of one percent or greater

C/S exceeds R/S by over 50

percent 

C/S exceeds R/S by between 0

and 50 percent

 C/S is less than or equal to R/S

Firm Size Number

of Firms

Percent of Total

Firms with Costs

Number

of Firms

Percent of Total

Firms with Costs

Number

of Firms

Percent of Total

Firms with Costs

Small 10 ?? 1 ?? 0 n/a

Large 4 ?? 1 ?? 0 n/a

Total/

Weighted

Average

14 ?? 2 ?? 0 n/a

Notes:

See notes to Exhibits 5-2 and 5-3 above.

EPA focused its review of the results for the 16 firms with C/S ratios greater than one percent. 

For 4 of the 10 small firms in this category, no sales data were available. EPA developed sales estimates

for these firms according to the average sales for firms with the same number of employees in the same

product category. It is possible that in reality, these firms have parent-level sales that differ from those

assumed in the current analysis. However, based on extensive research into domestic parent-level

employment and sales data, EPA expects that this information is not publicly available for these firms.22

For the remaining 6 small firms with C/S ratios greater than one percent, EPA assumed that the domestic

parent firm sales information obtained from D&B, Wards, or the other Internet sources are reliable for

the purpose of this analysis.

EPA assumed that the firm size and sales data are reliable for 5 of the 6 large firms with C/S

ratios greater than 1 percent. One firm, Sierra Pine (a California Limited Partnership), should be
5-10

regarded as a special case. Sierra Pine recently purchased three affected facilities from Weyerhaeuser,

greatly increasing the total costs associated with Sierra Pine. However, Sierra Pine’s sales data is from a

query of D&B data performed in late 1999. As a result, the sales associated with recent acquisition of

the three plants are not reflected in Sierra Pine’s sales data. If, for instance, Sierra Pine’s total

compliance costs were prorated to exclude the costs attributed to the plants previously owned by

Weyerhaeuser, Sierra Pine’s C/S would change from 4.9 percent to 1.7 percent.

EPA also tested the sales estimates applied to large firms. The one large firm for which EPA

assumed sales had a C/S ratio well below one percent. In this case, the firm’s actual sales would have to

be approximately half of the assumed sales in order for the firm’s C/S ratio to exceed one percent. EPA

believes that while the assumed sales are potentially higher than the actual sales of this firm, it is less

likely that the firm has actual sales that would result in a C/S ratio over one percent.

EPA used industry-wide measures of profitability because such information is not available for

privately held firms. Because all the affected firms with C/S ratios above one percent are privately held,

firm-specific information regarding R/S is not publicly available. If firm specific profitability measures

were available, it is likely that a comparison of firms’ C/S ratio to their R/S ratio would produce

significantly different results. It should be noted that while overall industry return on sales may be low,

it is not necessarily the case for any given firm.

All ten small firms with C/S ratios of one percent or greater had a C/S ratio that exceeded the

industry profitability measure of return on sales. For the three small firms whose C/S ratios were three

percent or greater, the comparison of compliance costs and profitability measures showed that their C/S

ratios exceeded the industry R/S by over 100 percent. This divergence between the C/S ratios for these

firms and the industry R/S is an indicator that these three firms may experience high impacts as a result

of incurring the costs of compliance associated with the rule. However, the results of the economic

impact analysis show that the affected facilities owned by these firms will continue to operate after

controls have been applied to comply with the rule. Therefore, the impact on these firms, while

relatively high, are not enough to lead them to cease operations at these facilities. 

5.7 Screening Analysis Conclusions

The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory

flexibility analysis of any rule subject to notice and comment rulemaking requirements under the

Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a

significant economic impact on a substantial number of small entities. Small entities include small

businesses, small organizations, and small governmental jurisdictions. 
5-11

For purposes of assessing the impacts of today’s rule on small entities, small entity is defined as:

(1) a small business according to Small Business Administration size standards by 5-digit NAICS code

of the domestic parent owning entity (in this case, 500 employees); (2) a small governmental jurisdiction

that is a government of a city, county, town, school district or special district with a population of less

than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently

owned and operated and is not dominant in its field. 

After considering the economic impact of today’s rule on small entities, we certify that this

action will not have a significant impact on a substantial number of small entities. In accordance with

the RFA, we conducted an assessment of the standard on small businesses in the industries affected by

the rule. Based on SBA size definitions for the affected industries and reported sales and employment

data, the Agency identified 17 of the 52 companies, or 32 percent, owning affected facilities as small

businesses. These facilities incur capital and MRR costs associated with the rule. There 31 other firms

that only incur MRR costs; and all of these firms are small. Although small businesses represent 32

percent of the affected companies within the source category, they are expected to incur only 6 percent

of the total industry compliance costs of $143 million. There are only three small firms with compliance

costs equal to or greater than 3 percent of their sales. In addition, there are seven small firms with costto-sales ratios between 1 and 3 percent. 

We performed an economic impact analysis to estimate the changes in product price and

production quantities for the firms affected by this rule. The analysis shows that of the 32 facilities

owned by affected small firms, only one would be expected to shut down rather than incur the cost of

compliance with the rule. Although any facility closure is cause for concern, it should be noted that the

baseline economic condition of the facilities predicted to close affects the closure estimate provided by

the economic model. Facilities which are already experiencing adverse economic conditions for reasons

unconnected to this rule are more vulnerable to the impact of any new costs than those that are not.

This analysis indicates that therule should not generate a significant impact on a substantial

number of small entities for the coatings manufacturing source category for the following reasons. First,

of the 10 small firms that have compliance costs greater than 1 percent of sales, only 3 have compliance

costs of greater than 3 percent of sales. Second, the results of the economic impact analysis show that

only 1 facility owned by a small firm out of the 32 facilities owned by affected small firms may close

due to the implementation of this rule. The facility that may close rather than incur the cost of

compliance appear to have low profitability levels currently. It also should be noted that the estimate of

compliance costs for this facility is likely to be an overestimate due to the lack of facility-specific data

available to assign a precise control cost in this case. In sum, this analysis supports today’s certification

under the RFA because, while a few small firms may experience significant impacts, there will not be a

substantial number incurring such a burden. 

Although this rule will not have a significant economic impact on a substantial number of small

entities, we minimized the impact of this rule on small entities in several ways. First, we considered
5-12

subcategorization based on production and throughput level to determine whether smaller process units

would have a different MACT floor than larger process units. Our data show that subcategorization

based on size would not result in a less stringent level of control for the smaller process units. Second,

in light of cost considerations, we chose to set the emission limitation at the MACT floor control level

and not at a control level more stringent than the MACT floor control level. Thus, the control level

specified in the PCWP rule is the least stringent allowed by the CAA. Third, the rule contains multiple

compliance options to provide facilities with the flexibility to comply in the least costly manner while

maintaining a workable and enforceable rule. The compliance options include emissions averaging and

production-based emission limits which allow inherently low-emitting process units to comply without

installing add-on control devices and facilities to use innovative technology and pollution prevention

methods. Fourth, the rule includes multiple test method options for measuring methanol, formaldehyde,

and total HAP. 

5.8 Economic Impact Analysis Results for Small Businesses

Exhibit 5-7 provides a summary of the economic impact on small businesses associated with the

estimated market adjustments due to compliance with the NESHAP. As shown, the Agency’s economic

analysis indicates that the 17 small businesses that own 18 affected process lines will be affected as

follows: 

Exhibit 5-7: Economic Impacts on Small Businesses Associated with 

Projected Market Adjustments*

Changes from Baseline

Baseline With Regulation Absolute Percent

Revenues ($

thousands/yr)**

394,393 387,229 7,164 -1.82

Production (million

m3

/yr)

1,791,408 1,737,969 53,439 -2.98

Compliance Costs ($

thousands/yr)

0 9,194 9,194 n/a

Operating Process

Lines

18 17 1 -5.56

 Employment loss

(FTEs)

3,621 3,513 108 -2.98
5-13

Notes:

* Does not include small businesses that own facilities with

MRR costs only. 

** Estimated using production and price data in economic

impact model

FTEs = full-time equivalents

The one process line closure predicted by the economic impact model is owned by a small

business. This results in a 5.6 percent decrease in the number of process lines owned by small business. 

Overall, the small businesses’ revenues decrease by just under 2 percent, their production decreases by

just under 3 percent, and their total employment decreases by just under 3 percent, or 108 FTEs. The

estimate of employment loss assumes that the production per employee at the affected facilities owned

by small firms is the same as the industry average. 

5.9 References

Abt Associates Inc. 2000a. Small Business Screening Analysis for the Plywood and Wood Composite

Industries: Revised Draft. Prepared for Larry Sorrels, Innovative Strategies and Economic

Group, Air Quality Strategies and Standards Division, Office of Air Quality Planning and

Standards, U.S. Environmental Protection Agency, Research Triangle Park, NC. June.

Abt Associates Inc. 2000b. Corporate employment and sales data collected through Internet business

information resources, including Dun & Bradstreet, Hoover’s On-line, Lycos Companies Online, Thomas’ Register, Ward’s Business Directory, and Zapdata.com.

Abt Associates Inc. 1999. Profile of the Plywood and Wood Composite Industries. Prepared for Larry

Sorrels, Innovative Strategies and Economic Group, Air Quality Strategies and Standards

Division, Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency,

Research Triangle Park, NC. December.

Midwest Research Institute. 1999. Memorandum from Becky Nicholson and Melissa Icenhour to Mary

Tom Kissell and Larry Sorrels, U.S. EPA: “Preliminary facility-specific cost estimates for

implementation of the plywood and composite wood products NESHAP.” October 20.

Midwest Research Institute. 2000. “Estimated Nationwide Costs of Control: Plywood and Wood

Composite Products.” April 14.

U.S. Environmental Protection Agency. 1998. Industry Specific Information Collection Request (ICR)

for the Development of Plywood and Particleboard Maximum Achievable Control Technology
5-14

(MACT) Standards. Air Quality Strategies and Standards Division, Office of Air Quality

Planning and Standards, U.S. Environmental Protection Agency, Research Triangle Park, NC.

U.S. Environmental Protection Agency. 1999a. OAQPS Economic Analysis Resource Document. Air

Quality Strategies and Standards Division, Office of Air Quality Planning and Standards, U.S.

Environmental Protection Agency, Research Triangle Park, NC.

U.S. Small Business Administration. 2000. “Small Business Size Standards Matched to NAICS

Codes.” 
6-15

6 QUALITATIVE ASSESSMENT OF BENEFITS OF EMISSION REDUCTIONS
6-1

The emission reductions achieved by this environmental regulation will provide benefits to

society by improving environmental quality. This chapter provides information on the types and levels

of social benefits anticipated from the plywood and composite wood products (PCWP) NESHAP,

including the health and welfare effects associated with the HAPs and other pollutants emitted by

affected sources. 

In general, the reduction of HAP emissions resulting from the regulation will reduce human and

environmental exposure to these pollutants and thus, reduce potential adverse health and welfare effects. 

This chapter provides a general discussion of the various components of total benefits that may be

gained from a reduction in HAPs through this NESHAP. The rule will also achieve reductions of coarse

particulate matter (PM10), volatile organic compounds (VOC), and carbon monoxide (CO). There will

also be emissions increases in nitrogen oxides (NOx) and sulfur dioxide (SO2) associated with the use of

incineration-based controls. The benefits and disbenefits of the PM, NOx, and SO2 emissions

reductions and increases are presented separately from the benefits associated with HAPs and CO. The

benefits and disbenefits associated with PM, NOx, and SO2, along with the benefits associated with

HAPs and CO are presented in this chapter. 

6.1 Identification Of Potential Benefit Categories

The benefit categories associated with the emission reductions predicted for this regulation can

be broadly categorized as those benefits which are attributable to reduced exposure to HAPs, which are

also VOCs, and those attributable to reduced exposure to other pollutants. Some of the HAPs associated

with this regulation have been classified as probable or possible human carcinogens. As a result, one of

the benefits of the regulation is a reduction in the risk of cancer. Other benefit categories include: 

reduced incidence of neurological effects and irritants associated with exposure to noncarcinogenic

HAPs, reduced incidence of cardiovascular and central nervous system problems associated with CO. 

In addition to health impacts occurring as a result of reductions in HAP and CO emissions, there are

welfare impacts which can also be identified. In general, welfare impacts include effects on crops and

other plant life, materials damage, soiling, and acidification of estuaries. Each category is discussed

separately in the following section.

6.2 Qualitative Description Of Air Related Benefits - HAPs and CO

The operation of plywood and composite wood product sources produces emissions of

acetaldehyde, acrolein, benzene, formaldehyde, manganese, methanol, methylene chloride, and phenol. 

The qualitative health and welfare benefits of these HAPs, and CO reductions are summarized separately

in the discussions below. 

6.2.1 Benefits of Reducing HAP Emissions
6-2

According to emission estimates, the regulation will reduce approximately 11,000 tons of 

emissions of HAPs such as acetaldehyde, acrolein, benzene, formaldehyde, manganese, methanol,

methylene chloride, and phenol at all affected plywood and composite wood products sources.

Human exposure to these HAPs may occur directly through inhalation or indirectly through

ingestion of food or water contaminated by HAPs or through dermal exposure. HAPs may also enter

terrestrial and aquatic ecosystems through atmospheric deposition. HAPs can be deposited on vegetation

and soil through wet or dry deposition. HAPs may also enter the aquatic environment from the

atmosphere via gas exchange between surface water and the ambient air, wet or dry deposition of

particulate HAPs and particles to which HAPs adsorb, and wet or dry deposition to watersheds with

subsequent leaching or runoff to bodies of water.1

 This analysis is focused only on the air quality

benefits of HAP reduction. 

6.2.1.1 Health Benefits of Reduction in HAP Emissions. 

The HAP emission reductions achieved by this rule are expected to reduce exposure to ambient

concentrations of acetaldehyde, acrolein, benzene, formaldehyde, manganese, methanol, methylene

chloride, and phenol, which will reduce a variety of adverse health effects considering both cancer and

noncancer endpoints. Acrolein is classified as a possible human carcinogen, according to the Integrated

Risk Information System (IRIS) 2

, an EPA system for classifying chemicals by cancer risk. This means

that there is some evidence to indicate that exposure to this chemical could cause an increased risk of

cancer in humans. Acrolein may also cause general respiratory congestion and upper respiratory tract

irritation. Formaldehyde and acetaldehyde are classified as probable human carcinogens, according to

IRIS. Therefore, a reduction in human exposure to acrolein, formaldehyde, and acetaldehyde could lead

to a decrease in cancer risk and ultimately to a decrease in cancer mortality.

The remaining HAP emitted by plywood and composite wood products sources, phenol and

methanol, have not been shown to cause cancer. However, exposure to these pollutants may still result

in adverse health impacts to human and non-human populations. In particular, methanol has been shown

to be an irritant causing dizziness, headaches, and slight visual impairment. 

For the HAPs covered by the NESHAP, evidence on the potential toxicity of the pollutants

varies. However, given sufficient exposure conditions, each of these HAPs has the potential to elicit

adverse health or environmental effects in the exposed populations. It can be expected that emission

reductions achieved through the NESHAP will decrease the incidence of these adverse health effects.

6.2.1.2 Welfare Benefits of Reduction in HAP Emissions. 

The welfare effects of exposure to HAPs have received less attention from analysts than the

health effects. However, this situation is changing, especially with respect to the effects of toxic

substances on ecosystems. Over the past ten years, ecotoxicologists have started to build models of

ecological systems which focus on interrelationships in function, the dynamics of stress, and the adaptive

potential for recovery. This is consistent with the observation that chronic sub-lethal exposures may

affect the normal functioning of individual species in ways that make it less than competitive and

therefore more susceptible to a variety of factors including disease, insect attack, and decreases in habitat

quality. 3

 All of these factors may contribute to an overall change in the structure (i.e., composition) and

function of the ecosystem.
6-3

The adverse, non-human biological effects of HAP emissions include ecosystem and recreational

and commercial fishery impacts. Atmospheric deposition of HAPs directly to land may affect terrestrial

ecosystems. Atmospheric deposition of HAPs also contributes to adverse aquatic ecosystem effects. 

This not only has adverse implications for individual wildlife species and ecosystems as a whole, but

also the humans who may ingest contaminated fish and waterfowl. In general, HAP emission reductions

achieved through the NESHAP should reduce the associated adverse environmental impacts. 

6.2.2 Benefits of Reduced CO Emissions Due to HAP Controls

As is mentioned above, controls that will be required on plywood and composite wood products

sources to reduce HAPs will also reduce emissions of CO. The EPA Staff Paper for CO provides a

summary of the health effects information pertinent to the NAAQS for CO4

. This information is a

summary of information from the CO Criteria Document (CD)5

, which provides a critical review of a

wide variety of health effects studies, including a limited number of newer health effects studies, as well

as older studies. Some were conducted at extremely high levels of CO (i.e. much higher than typically

found in ambient air); however, the focus of this Staff Paper is on those key controlled-exposure

laboratory studies and newer epidemiology studies, which were conducted with human subjects at COHb

levels that are most relevant to regulatory decision making. 

Based on the CD, staff concludes that human health effects associated with exposure to CO

include cardiovascular system and central nervous system (CNS) effects. In addition, consideration is

given in the CD to combined exposure to CO, other pollutants, drugs, and the influence of environmental

factors. Cardiovascular effects of CO are directly related to reduced oxygen content of blood caused by

combination of CO with Hb to form COHb, resulting in tissue hypoxia. Most healthy individuals have

mechanisms (e.g. increased blood flow, blood vessel dilation) which compensate for this reduction in

tissue O2, although the effect of reduced maximal exercise capacity has been reported in healthy persons

at low COHb levels. Several other medical conditions such as occlusive vascular disease, chronic

obstructive lung disease, and anemia can increase susceptibility to potential adverse effects of CO during

exercise.

Effects of CO on the CNS involve both behavioral and physiological changes. These include

modification of visual perception, hearing, motor and sensorimotor performance, vigilance, and

cognitive ability. Developmental toxicity effects of low-level ambient CO exposures, though not well

studied in humans, may pose a threat to the fetus. Finally, environmental factors (e.g. altitude,

temperature), drug interaction, and pollutant interaction also can play a role in the public health impact

of ambient CO exposure. There is little new information on these effects.

Exhibit 6-1 is a summary of key health effects and studies which have been identified as being

most pertinent to a regulatory decision on the NAAQS for CO6

. Each of the key studies is considered in

light of limitations discussed in the CD and the Staff Paper. For example, epidemiological studies are

limited by factors such as exposure uncertainties and confounding variables, and many of the controlled

exposure studies of CO health effects have been hampered by uncertainties regarding COHb

measurements, relatively small sample sizes, and lack of “real world” exposure conditions. 
6-4

Exhibit 6-1. Key Health Effects Of Exposure To Ambient

Carbon Monoxide

Target

Organ Health Effectsa,b Tested Populationc References

Lungs Reduced maximal exercise duration with 1-h

peak CO exposures resulting in $2.3% COHb

(GC)

Healthy individuals Drinkwater et al. (1974)

Raven et al. (1974b)

Horvath et al. (1975)

Heart Reduced time to ST segment change of the

ECG (earlier onset of myocardial ischemia)

with peak CO exposures resulting in $2.4%

COHb (GC)

Individuals with

coronary artery

disease

Allred et al. (1989a,b;

 1991)

Heart Reduced exercise duration because of increased

chest pain (angina) with peak CO exposures

resulting in $3% COHb (CO-Ox)

Individuals with

coronary artery

disease

Anderson et al. (1973)

Sheps et al. (1987)

Adams et al. (1988)

Kleinman et al. (1989,

 1998*)

Allred et al. (1989a,b;

 1991)

Heart Increased number and complexity of arrhythmia

(abnormal heart rhythm) with peak CO

exposures resulting in $6% COHb (CO-Ox)

Individuals with

coronary artery

disease and high

baseline ectopy

(chronic arrhythmia)

Sheps et al. (1990)

Heart Increased hospital admissions associated

with ambient pollutant exposures

Individuals >65 years

old with

cardiovascular

disease

Schwartz and Morris

 (1995*)

Morris et al. (1995*)

Schwartz (1997*)

Burnett et al. (1997*)

Brain Central nervous system effects, such as

decrements in hand-eye coordination (driving or

tracking) and in attention or vigilance (detection

of infrequent events), with 1-h peak CO

exposures (.5 to 20% COHb)

Healthy individuals Horvath et al. (1971)

Fodor and Winneke (1972)

Putz et al. (1976, 1979)

Benignus et al. (1987)

a

The EPA has set significant harm levels of 50 ppm (8-h average), 75 ppm (4-h average), and 125 ppm (1-h

 average). Exposure under these conditions could result in COHb levels of 5 to 10% and cause significant health

 effects in sensitive individuals.

b

Measured blood COHb level after CO exposure. 

c

Fetuses, infants, pregnant women, elderly people, and people with anemia or with a history of cardiac or

respiratory disease may be particularly sensitive to CO.

d

This table is a reproduction of Table 6-7 of the CD (p. 6-36, U.S. EPA, 1999a).

*Newer studies, published since completion of the last CO NAAQS review. 
6-5

Although acute poisoning induced by CO can be lethal and is probably the best known health

endpoint of CO, this only occurs at very high concentrations of CO (greater than 100 ppm, hourly

average), which are not pertinent to the setting of the NAAQS. In the ambient air, exposures to lowerlevels of CO predominate. Very little data are available demonstrating human health effects in healthy

individuals caused by or associated with exposures to low CO concentrations. Decrements in maximal

exercise duration and performance in healthy individuals have been reported at COHb levels of > 2.3%

an d > 4.3% (GC), respectively; however, these decrements are small and likely to affect only athletes in

competition. No effects were seen in healthy individuals during submaximal exercise, representing more

typical daily activities, at levels as high as 15 to 20 % COHb7

. Most recent evidence of CNS effects

induced by exposure to CO indicates that behavioral impairments in healthy individuals should not be

expected until COHb levels exceed 20% (CO-Ox), well above what would be caused by typical ambient

air levels of CO8

. Evidence of CO-induced fetal toxicity or of interactions with high altitudes, drugs,

other pollutants, or other environmental stresses remains uncertain or suggests that effects of concern

will occur in healthy individuals only with exposure to much higher levels of CO than are likely for

offsite receptors for these facilities 9

. 

6.3 Qualitative Description of Effects from Reductions and Increases in Emissions from Other

Pollutants Due to HAP Controls

As is mentioned above, controls that will be required on PCWP sources to reduce HAPs will

also reduce emissions of other pollutants, namely: PM10, PM2.5, and increase NOx and SO2 emissions. 

For more information on these non-HAP emissions and emission reductions, please refer to Chapter 3 of

this RIA, the preamble for this rule, and the docket. The effects associated with exposure to PM (both

coarse and fine), NOx, and SO2 emissions are presented below. 

6.3.1 Effects of NOx and Ozone Emissions. 

Emissions of NOx produce a wide variety of health and welfare effects. Nitrogen dioxide can

irritate the lungs at high occupational levels and may lower resistance to respiratory infection, although

the research has been equivocal. NOx emissions are an important precursor to acid rain and may affect

both terrestrial and aquatic ecosystems. Atmospheric deposition of nitrogen leads to excess nutrient

enrichment problems (“eutrophication”) in the Chesapeake Bay and several nationally important

estuaries along the East and Gulf Coasts. Eutrophication can produce multiple adverse effects on water

quality and the aquatic environment, including increased algal blooms, excessive phytoplankton growth,

and low or no dissolved oxygen in bottom waters. Eutrophication also reduces sunlight, causing losses

in submerged aquatic vegetation critical for healthy estuarine ecosystems. Deposition of nitrogencontaining compounds also affects terrestrial ecosystems. Nitrogen fertilization can alter growth patterns

and change the balance of species in an ecosystem.

Nitrogen dioxide and airborne nitrate also contribute to pollutant haze (often brown in color),

which impairs visibility and can reduce residential property values and the value placed on scenic views.

NOx in combination with volatile organic compounds (VOC) also serves as a precursor to ozone. 

Based on a large number of recent studies, EPA has identified several key health effects that may be
6-6

associated with exposure to elevated levels of ozone. Exposures to ambient ozone concentrations have

been linked to increased hospital admissions and emergency room visits for respiratory problems. 

Repeated exposure to ozone may increase susceptibility to respiratory infection and lung inflammation

and can aggravate preexisting respiratory disease, such as asthma. Repeated prolonged exposures (i.e., 6

to 8 hours) to ozone at levels between 0.08 and 0.12 ppb, over months to years may lead to repeated

inflammation of the lung, impairment of lung defense mechanisms, and irreversible changes in lung

structure, which could in turn lead to premature aging of the lungs and/or chronic respiratory illnesses

such as emphysema, chronic bronchitis, and asthma.

Those who work , play, or otherwise are active outdoors have the highest ozone exposures. 

Children who are active playing outdoors during the summer have particularly high exposures. Further,

children are more at risk than adults from the effects of ozone exposure because their respiratory systems

are still developing. Adults who are outdoors and moderately active during the summer months, such as

construction workers and other outdoor workers, also are among those with the highest exposures. 

These individuals, as well as people with respiratory illnesses such as asthma, especially children with

asthma, may experience reduced lung function and increased respiratory symptoms, such as chest pain

and cough, when exposed to relatively low ozone levels during periods of moderate exertion. In addition

to human health effects, ozone adversely affects crop yield, vegetation and forest growth, and the

durability of materials. Ozone causes noticeable foliar damage in many crops, trees, and ornamental

plants (i.e., grass, flowers, shrubs, and trees) and causes reduced growth in plants. 

Particulate matter (PM) can also be formed from NOx emissions. Secondary PM is formed in the

atmosphere through a number of physical and chemical processes that transform gases such as NOx, SO2,

and VOC into particles. A discussion of the effects of PM on human health and the environment are

discussed further below. Overall, emissions of NOx from PCWP sources can lead to some of the effects

discussed in this section - either those directly related to NOx emissions, or the effects of ozone and PM

resulting from the combination of NOx with other pollutants. 

6.3.2 Benefits of PM Reductions.

Scientific studies have linked PM (alone or in combination with other air pollutants) with a

series of health effects 10. Fine particles (PM2.5) can penetrate deep into the lungs to contribute to a

number of the health effects. These health effects include decreased lung function and alterations in lung

tissue and structure and in respiratory tract defense mechanisms which may be manifest in increased

respiratory symptoms and disease or in more severe cases, increased hospital admissions and emergency

room visits or premature death. Children, the elderly, and people with cardiopulmonary disease, such as

asthma, are most at risk from these health effects. 

PM also causes a number of adverse effects on the environment. Fine PM is the major cause of

reduced visibility in parts of the U.S., including many of our national parks and wilderness areas. Other

environmental impacts occur when particles deposit onto soil, plants, water, or materials. For example,

particles containing nitrogen and sulfur that deposit onto land or water bodies may change the nutrient

balance and acidity of those environments, leading to changes in species composition and buffering

capacity. Particles that are deposited directly onto leaves of plants can, depending on their chemical

composition, corrode leaf surfaces or interfere with plant metabolism. Finally, PM causes soiling and

erosion damage to materials.
6-7

Thus, reducing the emissions of PM and PM precursors from PCWP sources can help to

improve some of the effects mentioned above - either those related to primary PM emissions, or the

effects of secondary PM generated by the combination of NOx or SO2 with other pollutants in the

atmosphere. 

6.3.3 Effects of SO2 Emissions. 

Very high concentrations of sulfur dioxide (SO2) affect breathing and ambient levels have been

hypothesized to aggravate existing respiratory and cardiovascular disease. Potentially sensitive

populations include asthmatics, individuals with bronchitis or emphysema, children and the elderly. SO2

is also a primary contributor to acid deposition, or acid rain, which causes acidification of lakes and

streams and can damage trees, crops, historic buildings and statues. In addition, sulfur compounds in the

air contribute to visibility impairment in large parts of the country. This is especially noticeable in

national parks.

PM can also be formed from SO2 emissions. Secondary PM is formed in the atmosphere

through a number of physical and chemical processes that transform gases, such as SO2, into particles. 

Overall, emissions of SO2 can lead to some of the effects discussed in this section - either those directly

related to SO2 emissions, or the effects of ozone and PM resulting from the combination of SO2 with

other pollutants. 

6.4 Lack Of Approved Methods To Quantify HAP Benefits

The most significant effect associated with the HAPs that are controlled with the rule is the

potential incidence of cancer. In previous analyses of the benefits of reductions in HAPs, EPA has

quantified and monetized the benefits of potential reductions in the incidences of cancer 11,12. In some

cases, EPA has also quantified (but not monetized) reductions in the number of people exposed to noncancer HAP risks above no-effect levels13 .

 

Monetization of the benefits of reductions in cancer incidences requires several important inputs,

including central estimates of cancer risks, estimates of exposure to carcinogenic HAPs, and estimates of

the value of an avoided case of cancer (fatal and non-fatal). In the above referenced analyses, EPA

relied on unit risk factors (URF) developed through risk assessment procedures. The unit risk factor is a

quantitative estimate of the carcinogenic potency of a pollutant, often expressed as the probability of

contracting cancer from a 70 year lifetime continuous exposure to a concentration of one :g/m3

 of a

pollutant. These URFs are designed to be conservative, and as such, are more likely to represent the

high end of the distribution of risk rather than a best or most likely estimate of risk. 

In a typical analysis of the expected health benefits of a regulation (e.g., the Interstate Air

Quality Rule benefit analysis), health effects are estimated by applying changes in pollutant

concentrations to best estimates of risk obtained from epidemiological studies. As the purpose of a

benefit analysis is to describe the benefits most likely to occur from a reduction in pollution, use of highend, conservative risk estimates will over-estimate of the expected benefits of the regulation. For this

reason, we will not attempt to quantify the health benefits of reductions in HAPs unless best estimates of

risks are available. While we used high-end risk estimates in past analyses, recent advice from the EPA

Science Advisory Board (SAB) and internal methods reviews have suggested that we avoid using high-
6-8

end estimates in current analyses. EPA is working with the SAB to develop better methods for

analyzing the benefits of reductions in HAPs.

While not appropriate for inclusion in our primary quantified benefits analysis, to estimate the

potential baseline risks posed by the PCWP source category and the potential impact of applicability

cutoffs, EPA performed for the proposal a “rough” risk assessment for 185 of the 223 facilities in the

PCWP source category. There are large uncertainties regarding all components of the risk quantification

step, including location of emission reductions, emission estimates, air concentrations, exposure levels

and dose-response relationships. However, if these uncertainties are properly identified and

characterized, it is possible to provide upper bound estimates of the potential reduction in inhalation

cancer incidence associated with this rule. It is important to keep in mind that these estimates will not

cover non-inhalation based cancer risks and non-cancer health effects.

The HAP included in this “rough” risk assessment at the proposal were acetaldehyde, acrolein,

benzene, formaldehyde, manganese, methanol, methylene chloride, and phenol. Of these HAP, four are

presently not considered to have thresholds: acetaldehyde, benzene, formaldehyde, and methylene

chloride. 

Of the 185 facilities assessed, 148 facilities were found to pose cancer risks equal to or greater

than 1 in 1,000,000 to their surrounding population. Forty-six facilities were predicted to pose cancer

risks of 1 in 100,000 or greater, and two PCWP facilities were found to pose cancer risks equal to or

greater than 1 in 10,000. 

If this rule is implemented at all PCWP facilities, annual cancer incidence would be reduced

from about 0.09 cases/year to about 0.02 cases/year, while the number of people at or above a cancer risk

level of 1 in a million would be reduced from about 900,000 to 150,000. In addition, the number of

people exposed to hazard index (HI) values equal to or greater than 1 was estimated to be reduced from

about 270,000 to about 30,000, and the number of people exposed to HI values of 0.2 or greater was

predicted to decrease from about 1,500,000 to about 250,000. (Details of these analyses are available in

the docket). 

EPA has prepared a more refined risk assessment for the final rule as part of evaluating the

development of a low-risk subcategory of sources which could be delisted and thus not have to put on

controls associated with the rule 14. This more refined assessment included 26 HAPs, and these HAPs

include those that were in the “rough” risk assessment plus: antimony, arsenic, beryllium, cadmium,

chromium, cobalt, cumene, ethylbenzene, lead, mercury, methyl ethyl ketone (MEK), methyl isobutyl

ketone (MIBK), methylene diphenyl diisocyanate, nickel, selenium, styrene, toluene, and xylene. 

There were 181 facilities included in this more refined risk assessment. Twenty-four facilities

were found to pose cancer risks equal to or greater than 1 in 1,000,000 to their surrounding population. 

No facilities were predicted to pose cancer risks of 1 in 100,000 or greater. The reduction in annual

cancer incidence and the number of people to particular HI levels were not estimated in among affected

populations, and these reductions were not estimated since the focus of the more refined assessment was

on affected PCWP sources.

EPA has not tried to monetize this reduced incidence of inhalation cancer for several important

technical reasons. The primary reasons include the lack of information on the latency period for the
6-9

onset of the disease and the fact that we have no information on the proportion of fatal versus nonfatal

cancers which may occur. These factors prevent us from providing monetized estimates.

For non-cancer health effects, previous analyses have estimated changes in populations exposed

above the reference concentration level (RfC). However, this requires estimates of populations exposed

to HAPs from controlled sources. Due to data limitations, we do not have sufficient information on

emissions from specific sources and thus are unable to model changes in population exposures to

ambient concentrations of HAPs above the RfC. As a result, we are unable to place a monetary value of

the HAP related benefits associated with this rule.

6.5 Summary

The HAPs that are reduced as a result of implementing the plywood and composite wood

products NESHAP will produce a variety of benefits, some of which include: a possible reduction in the

incidence of cancer to exposed populations, neurotoxicity, irritation, and crop or plant damage. The rule

will also produce benefits associated with reductions in CO. Human health effects associated with

exposure to CO include cardiovascular system and central nervous system (CNS) effects. Although we

are unable to place a monetary value on these benefits, the information on the variety of effects

associated with these pollutants and the level of reductions anticipated from the NESHAP indicate that

the benefits of the rule will be substantial. 
6-10

6.6 REFERENCES

1. U.S. Environmental Protection Agency. Regulatory Impact Analysis for the National Emissions

Standards for Hazardous Air Pollutants for Source Categories: Organic Hazardous Air

Pollutants from the Synthetic Organic Chemical Manufacturing Industry and Seven Other

Processes. Draft Report. Office of Air Quality Planning and Standards. Research Triangle

Park, NC. EPA-450/3-92-009. December 1992.

2. U.S. Environmental Protection Agency. Integrated Risk Information System; website access

available at www.epa.gov/ngispgm3/iris.

3. Reference 1. p. 3-5.

4. U.S. Environmental Protection Agency. Ecological Exposure and Effects of Airborne Toxic

Chemicals: An Overview. EPA/6003-91/001. Environmental Research Laboratory. Corvallis,

OR. 1991.

5. U.S. Environmental Protection Agency; Staff Paper for the Carbon Monoxide NAAQS; Office

of Air Quality Planning and Standards, Research Triangle Park, N.C.; 2000.

6. U.S. Environmental Protection Agency; Criteria Document for Carbon Monoxide; Office of Air

Quality Planning and Standards, Research Triangle Park, N.C.; 1999.

7. Reference 6..

8. Reference 6.

9. Reference 6.

10. US Environmental Protection Agency, 1996. Review of the National Ambient Air Quality

Standards for Particulate Matter: Assessment of Scientific and Technical Information. Office of

Air Quality Planning and Standards, Research Triangle Park, NC EPA report no. EPA/4521R96-013.

11. Reference 10.

12. U.S. Environmental Protection Agency. 1992. Draft Regulatory Impact Analysis of National

Emissions Standards for Hazardous Air Pollutants for By Product Coke Oven Charging, Door

Leaks, and Topside Leaks. Office of Air Quality Planning and Standards, Research Triangle

Park, NC.

13. U.S. Environmental Protection Agency. 1995. Regulatory Impact Analysis for the Petroleum

Refinery NESHAP. Revised Draft for Promulgation. Office of Air Quality Planning and

Standards, Research Triangle Park, NC.
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14. U.S. Environmental Protection Agency. 2004. Risk Assessment for the Final Maximum

Achievable Control Technology (MACT) Rule for the Plywood and Composite Wood Products

(PCWP) Source Category. Office of Air Quality Planning and Standards, Research Triangle

Park, NC.
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 Appendix A: Summary of Impacts Associated with the Delisted Low-Risk Subcategory

Background

One of the compliance alternatives to the final rule is allowing PCWP sources to demonstrate

that their HAP emissions are sufficiently low-risk to avoid being subject to the MACT compliance

requirements. Such sources would then be part of a low-risk subcategory and can be delisted.

For your affected source to be part of the delisted low-risk subcategory, you must have a lowrisk demonstration approved by EPA, and you must then have federally-enforceable conditions

reflecting the parameters used in your EPA-approved demonstration incorporated into your title V permit

to ensure that your affected source remains low-risk. Low-risk demonstrations for eight facilities were

conducted by EPA and no further demonstration is required for them, and they will now need to obtain

title V permit terms reflecting their status. (We will provide these sources and their title V permitting

authorities with the necessary parameters for establishing corresponding permit terms and conditions.) 

These facilities are listed in the preamble. Other facilities may demonstrate they are low risk to EPA by

using the look-up tables in appendix B to subpart DDDD or conducting a site-specific risk assessment as

specified in appendix B to subpart DDDD. Appendix B to subpart DDDD also specifies which process

units and pollutants must be included in your low-risk demonstration, emissions testing methods, the

criteria for determining if a affected source is low risk, risk assessment methodology (look-up table

analysis or site-specific risk analysis), contents of the low-risk demonstration, schedule for submitting

and obtaining approval of your low-risk demonstration, and methods for ensuring that your affected

source remains in the low-risk subcategory. If you demonstrate that your affected source is part of the

delisted low-risk subcategory of PCWP manufacturing facilities, then your affected source is not subject

to the MACT compliance options, operating requirements, and work practice requirements in the final

PCWP rule (subpart DDDD). 

Low-risk Criteria

We may approve your affected source as eligible for membership in the delisted low-risk

subcategory of PCWP sources if we determine that it is low risk for both carcinogenic and

noncarcinogenic effects. To be considered low risk, the PCWP affected source must meet the following

criteria: (1) the maximum off-site individual lifetime cancer risk at a location where people live is less

than one in one million for carcinogenic chronic inhalation effects; (2) every maximum off-site targetorgan specific hazard index (TOSHI) at a location where people live is less than or equal to 1.0 for

non-carcinogenic chronic inhalation effects; and (3) the maximum off-site acute hazard quotients for

acrolein and formaldehyde are less than or equal to 1.0 for noncarcinogenic acute inhalation effects. 

These criteria are built into the look-up tables included in appendix B to subpart DDDD. Facilities

conducting site-specific risk assessments must explicitly demonstrate that they meet these criteria. 

Facilities need not perform site-specific multipathway human health risk assessments or ecological risk

assessments since EPA performed a source category-wide screening assessment which demonstrates that

these risks are insignificant for all sources.

More details on the delisted low-risk subcategory can be found in the preamble.
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Number of Affected Facilities

Facilities with estimated potential to emit 25 tons or more of total HAP or 10 or more tons of an

individual HAP are major sources of HAP and are subject to the final rule. Approximately 223 PCWP

major source facilities nationwide are expected to meet the applicability criteria defined in today’s final

rule. These major source facilities generally manufacture one or more of the following products: 

softwood plywood, softwood veneer, medium density fiberboard (MDF), oriented strandboard (OSB),

particleboard, hardboard, laminated strand lumber, and laminated veneer lumber. However, only 212 of

these facilities have equipment that is subject to the control requirements of the final rule. In addition,

there are approximately 34 major source sawmill facilities that produce kiln-dried lumber; although these

major source sawmill facilities meet the applicability criteria in the final rule, there are no control

requirements for any of the equipment located at the sawmills.

The number of impacted facilities was determined based on the estimated potential to emit (i.e.,

uncontrolled HAP emissions) from each facility, whether each facility has any process units subject to

the compliance options, whether or not the facility already operates control systems necessary to meet

the final rule, and whether or not the facility is currently eligible (or may later demonstrate eligibility)

for inclusion in the delisted low risk subcategory. Of the 223 major source facilities, an estimated 162

are expected to install add-on control systems to reduce emissions. The remaining facilities already have

installed add-on controls, do not have any process units subject to the compliance options, are expected

to comply with work practice requirements only, or are one of the eight facilities currently eligible for

inclusion in the delisted low-risk subcategory. We estimate that eventually as many as 147 of the 223

major source PCWP facilities may demonstrate eligibility for the low-risk subcategory, leaving 58

facilities expected to install add-on control systems to reduce emissions. Some of the 147 facilities

expected to eventually be included the low-risk subcategory were not expected to install controls to meet

MACT because they either already have the necessary controls or do not have process units subject to

the compliance options in today’s final rule.

The impacts presented in this appendix to the RIA represent the estimated impacts for the range

of facilities, from 58 facilities estimated to be impacted following completion of eligibility

demonstrations for the low-risk subcategory, to 162 facilities estimated to be impacted today. The

impact estimates were based on the use of RTO (or in some cases a combination WESP and RTO)

because RTO are the most prevalent HAP emissions control technology used in the PCWP industry. 

However, technologies other than RTO could be used to comply with today’s final rule. For a facility

that we feel already achieves the emissions reductions required by today’s final rule, only testing,

monitoring, reporting and recordkeeping cost impacts were estimated.

Emission Reductions

We estimate nationwide baseline HAP emissions from the PCWP source category to be

17,000 Mg/yr (19,000 tons/yr) at the current level of control. We estimate that today’s final rule will

reduce total HAP emissions from the PCWP source category by about 9,900 Mg/yr (11,000 tons/yr). In

addition, we estimate that today’s final rule will reduce VOC emissions (approximated as THC) by about

25,000 Mg/yr (27,000 tons/yr) from a baseline level of 45,000 Mg/yr (50,000 tons/yr). Depending on

the number of facilities eventually demonstrating eligibility for the low-risk subcategory, these emission
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reductions could change to 5,900 Mg/yr (6,600 tons/yr) for HAP or 13,000 Mg/yr (14,000 tons/yr) for

VOC.

In addition to reducing emissions of HAP and VOC, today’s final rule will also reduce emissions

of criteria pollutants, such as carbon monoxide (CO) from direct-fired emission sources and particulate

matter less than 10 microns in diameter (PM10). We estimate that today’s final rule will reduce CO

emissions by about 9,500 Mg/yr (10,000 tons/yr). We also estimate that the final rule will reduce PM10

emissions by about 11,000 Mg/yr (12,000 tons/yr). Depending on the number of facilities eventually

demonstrating eligibility for the low-risk subcategory, these emission reductions could change to 7,600

Mg/yr (8,400 tons/yr) for CO and 5,300 Mg/yr (5,900 tons/yr) for PM10.

Combustion of exhaust gases in an RTO generates some emissions of nitrogen oxides (NOX). 

We estimate that the nationwide increase in NOX emissions due to the use of RTO will be about 2,100

Mg/yr (2,400 tons/yr). This estimated increase in NOX emissions may be an overestimate because some

plants may select control technologies other than RTO to comply with today’s final rule. Depending on

the number of facilities eventually demonstrating eligibility for the low-risk subcategory, the estimated

NOX emission increase could fall to 1,100 Mg/yr (1,200 tons/yr).

Secondary air impacts of today’s final rule would result from increased electricity usage

associated with operation of control devices. The secondary air emissions of NOX, CO, PM10, sulfur

dioxide (SO2) depend on the fuel used to generate electricity. Assuming as a worst-case that PCWP

plants will purchase electricity from a coal-fired utility plant, we estimate that the final rule may increase

secondary emissions of PM10 by 99 Mg/yr (110 tons/yr), SO2 by 4,000 Mg/yr (4,500 tons/yr), NOX by

2,000 Mg/yr (2,200 tons/yr), and CO by 66 Mg/yr (72 tons/yr). Depending on the number of facilities

eventually demonstrating eligibility for the low-risk subcategory, these emission increases could fall to

52 Mg/yr (57 tons/yr) for PM10, 2,200 Mg/yr (2,400 tons/yr) for SO2, 1,000 Mg/yr (1,100 tons/yr) for

NOX, and 35 Mg/yr (39 tons/yr) for CO. However, The EPA believes SO2 emissions may not increase

from electric generation since that the requirements of the Acid Rain trading program will keep power

plants from increasing their SO2 emissions. Furthermore, we believe that NOx emissions increases from

power plants may be limited. The EPA expects the emissions trading program that is part of the NOx

SIP call will likely keep NOx emissions in the eastern United States from increasing as result of

additional power generation to operate RTOs.

 Wastewater impacts

Wastewater is produced from WESP blowdown, washing out of RTO, and biofilters. We based

all of our impact estimates on the use of RTO (with or without a WESP upstream depending on the

process unit). We estimate that the wastewater generated from WESP blowdown and RTO washouts

will increase by about 100,000 cubic meters per year (m3

/yr) (27 million gallons per year (gal/yr)) as a

result of today’s final rule. Depending on the number of facilities eventually demonstrating eligibility

for the low-risk subcategory, the wastewater impacts could fall to 89,000 cubic meters per year (m3

/yr)

(24 million gallons per year (gal/yr)). According to the data in our MACT survey, this nationwide

increase in wastewater flow is within the range of water flow rates handled by individual facilities. 

Facilities would likely dispose of this wastewater by sending it to a municipal treatment facility, reusing

it onsite (e.g., in log vats or resin mix), or hauling it offsite for spray irrigation. In addition, we are

amending the effluent limitations, guidelines for the timber products processing point source category to
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allow facilities (on a case-by-case basis) to obtain a permit to discharge wastewaters from APCD

installed to comply with today’s final rule.

Impacts on Solid Waste

Solid waste is produced in the form of solids from WESP and by RTO or RCO media

replacement. We estimate that 4,500 Mg/yr (5,000 tons/yr) of solid waste will be generated as a result of

today’s final rule. Depending on the number of facilities eventually demonstrating eligibility for the

low-risk subcategory, the solid waste increase could change to 2,800 Mg/yr (3,000 tons/yr). Some

PCWP facilities have been able to use RTO or RCO media as aggregate in onsite roadbeds. Some

facilities have also been able to identify a beneficial reuse for wet control device solids (such as giving

them away to local farmers for soil amendment). 

Additional Energy Use from Control Equipment Applications

The overall energy demand (i.e., electricity and natural gas) is expected to increase by about 4.3

million gigajoules per year (GJ/yr) (4.1 trillion British thermal units per year (Btu/yr)) nationwide under

today’s final rule. The estimated increase in the energy demand is based on the electricity requirements

associated with RTO and WESP and the fuel requirements associated with RTO. Electricity

requirements are expected to increase by about 711 gigawatt hours per year (GWh/yr) under today’s

final rule. Natural gas requirements are expected to increase by about of 44 million m3

/yr (1.5 billion

cubic feet per year (ft3

/yr)) under the final rule. Depending on the number of facilities eventually

demonstrating eligibility for the low-risk subcategory, these energy estimates could fall to 2.3 million

GJ/yr (2.2 trillion Btu/yr) for overall energy demand, 378 GWh/yr for the increase in electricity

requirements, and 23 million m3

/yr (0.8 billion ft3/yr) for the increase in natural gas requirements.

Compliance Cost Estimates

The cost impacts estimated for today’s final rule represent a high-end estimate of costs. 

Although the use of RTO technology to reduce HAP emissions represents the most expensive

compliance option, we based our nationwide cost estimates on the use of RTO technology at all of the

impacted facilities because: (1) RTO technology can be used to reduce emissions from all types of

PCWP process units; and (2) we could not accurately predict which facilities would use emissions

averaging or PBCO or install add-on control devices that are less costly to operate, such as RCO and

biofilters. Therefore, our cost estimates are likely to be overstated as we anticipate that owners and

operators of impacted sources will take advantage of available cost saving opportunities. 

The high-end estimated total capital costs of today’s final rule are $471 million. Depending on

the number of facilities eventually demonstrating eligibility for the low-risk subcategory, the capital

costs could fall to $240 million. These capital costs apply to existing sources and include the costs to

purchase and install both the RTO equipment (and in some cases, a WESP upstream of the RTO) and the

monitoring equipment, and the costs of performance tests. Wood products enclosure costs are also

included for reconstituted wood products presses. 
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The high-end estimated annualized costs of the final standards are $140 million. Depending on

the number of facilities eventually demonstrating eligibility for the low-risk subcategory, the annualized

costs could fall to $74 million. The annualized costs account for the annualized capital costs of the

control and monitoring equipment, operation and maintenance expenses, and recordkeeping and

reporting costs. Potential control device cost savings and increased recordkeeping and reporting costs

associated with the emissions averaging provisions in today’s final rule are not accounted for in either

the capital or annualized cost estimates.

 Economic Impacts

The economic impact analysis shows that the expected price increases for affected output would

range from only 0.4 to 1.3 percent as a result of the NESHAP for PCWP manufacturers. The expected

change in production of affected output is a reduction of 0.06 to 0.4 percent for PCWP manufacturers as

a result of today’s final rule. No plant closures are expected out of the 223 facilities affected by the final

rule. Therefore, it is likely that there is no adverse impact expected to occur for those industries that

produce output affected by the final rule, such as hardboard, softwood plywood and veneer, engineered

wood products, and other composite wood products. 

The economic impact analysis for the final rule estimates effects upon employment and foreign

trade for the industries affected by the rule. The total reduction in employment for the affected

industries is 0.3 percent of the current employment level (or 225 employees). This estimate includes the

increase in employment among firms in these industries that do not incur any cost associated with the

final rule. There is also minimal change in the foreign trade behavior for the firms in these industries

since the level of imports of affected composite wood products only increases by less than 0.1 percent. 

There will be reductions in effects on the national economy associated with eligibility of sources for the

delisted low-risk subcategory. The employment level will now be reduced by 126 employees, which is

99 fewer than the reduction estimated for the final rule. The increase in the level of imports is half as

large as that for the final rule.

Social Costs and Benefits

Our assessment of costs and benefits of today’s final rule is detailed in the “Regulatory Impact

Analysis for the Plywood and Composite Wood Products MACT.” The Regulatory Impact Analysis

(RIA) is located in Docket number A-98-44 and Docket number OAR-2003-0048.

It is estimated that 3 years after implementation of the final rule requirements, reductions of

formaldehyde, acetaldehyde, acrolein, methanol, phenol and several other HAP from existing PCWP

emission sources would be 5,900 Mg/yr (6,600 tons/yr) to 9,900 Mg/yr (11,000 tons/yr), depending on

how many affected sources are in the low-risk subcategory. The health effects associated with these HAP

are discussed earlier in this preamble.

As for social costs, the high-end estimated annualized social costs of the final standards are

$135.1 million. Depending on the number of facilities eventually demonstrating eligibility for the lowrisk subcategory, the annualized social costs could fall to $75 million. 
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At this time, we are unable to provide a comprehensive quantification and monetization of the

HAP-related benefits of the final rule. Nevertheless, it is possible to derive rough estimates for one of

the more important benefit categories, i.e., the potential number of cancer cases avoided and cancer risk

reduced as a result of the imposition of the MACT level of control on this source category. Our analysis

suggests that imposition of the MACT level of control would reduce cancer cases by less than one case

per year, on average, starting some years after implementation of the standards. We present these results

in the RIA. This risk reduction estimate is uncertain and should be regarded as an extremely rough

estimate and should be viewed in the context of the full spectrum of unquantified noncancer effects

associated with the HAP reductions. The risk reduction estimate will be somewhat less depending on the

number of facilities eventually demonstrating eligibility for the low-risk subcategory. 

The control technologies used to reduce the level of HAP emitted from PCWP sources are also

expected to reduce emissions of CO, PM10, and VOC. Human health effects associated with exposure to

CO include cardiovascular system and CNS effects, which are directly related to reduced oxygen content

of blood and which can result in modification of visual perception, hearing, motor and sensorimotor

performance, vigilance, and cognitive ability. The VOC emissions reductions may lead to some

reduction in ozone concentrations in areas in which the affected sources are located. There are both

human health and welfare effects that result from exposure to ozone, and these effects are listed earlier in

the RIA and in the preamble.. 

At the present time, we cannot provide a monetary estimate for the benefits associated with the

reductions in CO. We also did not provide a monetary estimate for the benefits associated with the

changes in ozone concentrations that result from the VOC emissions reductions since we are unable to

do the necessary air quality modeling to estimate the ozone concentration changes. For PM10, we did not

provide a monetary estimate for the benefits associated with the reduction of the emissions, although

these reductions are likely to have significant health benefits to populations living in the vicinity of

affected sources.

There may be increases in NOX emissions associated with today’s final rule as a result of

increased use of incineration-based controls. These NOX emission increases by themselves could cause

some increase in ozone and particulate matter (PM) concentrations, which could lead to impacts on

human health and welfare as listed in Table 3 of this preamble. The potential impacts associated with

increases in ambient PM and ozone due to these emission increases are discussed in the RIA. In addition

to potential NOX increases at affected sources, today’s final rule may also result in additional electricity

use at affected sources due to application of controls. These potential increases in electricity use may

increase emissions of SO2 and NOX from electricity generating utilities. As such, the final rule may

result in additional health impacts from increased ambient PM and ozone from these increased utility

emissions. However, it is possible that the Acid Rain trading program will serve to keep SO 2 emissions

from increasing, and the NOx SIP call may serve to mitigate increases of NOX. We did not quantify or

monetize these health impacts. All of these impacts will be reduced 

In determining the overall economic consequences of the final rule, it is essential to consider not

only the costs and benefits expressed in dollar terms but also those benefits and costs that we could not

quantify. A full listing of the benefit categories that could not be quantified or monetized in our analysis

is provided in Chapter 6 of the RIA. All of these benefits and effects will be mitigated depending on the

number of facilities eventually demonstrating eligibility for the low-risk subcategory.
5 Ibid. 

6

U.S. Department of Energy, Energy Information Administration. 1998 Manufacturing Energy

Consumption Survey. Located on the Internet at http://www.eia.doe.gov/

emeu/mecs/mecs98/datatables/contents.html. 

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Small Business Analysis

As discussed in earlier sections of this preamble, we present the impacts of the rule associated

with allowing PCWP facilities to demonstrate eligibility for the delisted low-risk subcategory and

thereby avoid MACT altogether. The number of small businesses impacted is reduced to seven from the

original 17, and the total number of businesses impacted is reduced to 42, down from the original 52. 

Small businesses represent 17 percent of the companies within the source category, which is down from

the 32 percent estimate for the final rule. These small businesses are expected to incur 4 percent of the

total industry compliance costs of $75 million (the costs considering inclusion of the delisted low-risk

subcategory). There are no small firms with compliance costs equal to or greater than 3 percent of their

sales as compared to three for the final rule. In addition, there are four small firms with cost-to-sales

ratios between 1 and 3 percent, which is down from seven for the final rule.

Energy Impact Analysis

The impacts from consideration of a low-risk subcategory are a reduction in all of the energy

impacts listed above. For fuel production, the result of this indirect effect from reduced product output

is a reduction of only about 0.6 barrel per day nationwide, or a 0.000007 percent reduction nationwide

based on 1998 U.S. fuel production data.5

 This is a 0.4 barrel smaller reduction than that estimated for

the final rule. For coal production, the resulting indirect effect from reduced product output is a

reduction of only 950 tons per year nationwide, or only a 0.0000044 percent reduction nationwide

based on 1998 U.S. coal production data. This is a smaller reduction than that estimated for the final

rule by 1,050 tons per year. For electricity production, the resulting indirect effect from reduced

product output is a reduction of 20.7 million kWh/yr, or only a 0.00006 percent reduction nationwide

based on 1998 U.S. electricity production data. This is a smaller output reduction than that estimated

for the final rule by 22.1 million kWh/yr. Given that the estimated price increase for product output

from any of the affected industries is no more than 2.5 percent, there should be no price increase for any

energy type by more than this amount. The cost of energy distribution should not be affected by the

final rule at all since the rule does not affect energy distribution facilities. Finally, with changes in net

exports being a minimal percentage of domestic output (0.006 percent, or practically the same as that

for the final rule) from the affected industries, there will be only a negligible change in international

trade, and hence in dependence on foreign energy supplies. No other adverse outcomes are expected to

occur with regards to energy supplies. Thus, the net effect on energy production if facilities are eligible

for the low-risk source category is an increase in electricity output of 0.008 percent compared to 1998

output data, and a negligible change in output of other energy types. This is a 0.004 percent smaller

increase in electricity output compared to the impact of the final rule. All of the results presented above

account for the passthrough of costs to consumers, as well as the cost impact to producers. These

results also account for how energy use is related to product output for the affected industries.6
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TECHNICAL REPORT DATA

(Please read Instructions on reverse before completing)

1. REPORT NO.

 EPA-452/R-04-005

2. 3. RECIPIENT'S ACCESSION NO.

4. TITLE AND SUBTITLE

Regulatory Impact Analysis for the Plywood and Composite Wood

Products NESHAP

5. REPORT DATE

 February 2004

6. PERFORMING ORGANIZATION CODE

7. AUTHOR(S)

 8. PERFORMING ORGANIZATION REPORT NO.

9. PERFORMING ORGANIZATION NAME AND ADDRESS

Air Quality Strategies and Standards Division

Innovative Strategies and Economics Group

10. PROGRAM ELEMENT NO.

11. CONTRACT/GRANT NO.

 

12. SPONSORING AGENCY NAME AND ADDRESS

 Office of Air Quality Planning and Standards

 U.S. Environmental Protection Agency

 Research Triangle Park, NC 27711

13. TYPE OF REPORT AND PERIOD COVERED

14. SPONSORING AGENCY CODE

EPA/200/04

15. SUPPLEMENTARY NOTES

16. ABSTRACT

This report contains costs, economic impacts, and benefits information for the final Plywood and

Composite Wood Products NESHAP. This MACT standard has annualized social costs of $135

million. No significant small business impacts are expected. 

17. KEY WORDS AND DOCUMENT ANALYSIS

a. DESCRIPTORS b. IDENTIFIERS/OPEN ENDED TERMS c. COSATI Field/Group

Air Pollution control, Economic

Impacts, Small Business Impacts,

Benefits

18. DISTRIBUTION STATEMENT

 Release Unlimited

19. SECURITY CLASS (Report)

 Unclassified

21. NO. OF PAGES

180

20. SECURITY CLASS (Page)

 Unclassified

22. PRICE

EPA Form 2220-1 (Rev. 4-77) PREVIOUS EDITION IS OBSOLETE