*** EO 12866 Review Draft – Deliberative – Do Not Cite, Quote or Release During the Review ***



### Page 1 of 7 Final Regulatory Flexibility Analysis for Lead; Amendment to the Opt-out and Recordkeeping Provisions in the Renovation, Repair, and Painting Program; Final Rule

[Docket Id No.: 

### EPA–HQ–OPPT–2005

- 0049]

U.S. Environmental Protection Agency, Office of Pollution Prevention and Toxics February 2010

Pursuant to section 604 of the Regulatory Flexibility Act (RFA) (5 U.S.C. § 601 et seq.), EPA has prepared this final regulatory flexibility analysis fo r the “Amendment to the Opt-out and Recordkeeping Provisions in the Renovation, Repair, and Painting Program” final rule.

This rule addresses lead -based paint hazards created by renova tion, repair, and painting activities that disturb lead-based paint in target housing and ch ild-occupied facilities. “Target housing” is defined in TSCA § 401 as any housing constructed before 197 8, except housing for the elderly or persons with disabilities (unless any child under age 6 resides or is expected to reside in such housing) or any 0- bedroom dwelling. Under this rule, a child-occupied facility is a building, or a portion of a building, constructed prior to 1978 , visited regularly by the same child, under 6 years of age, on at least two different days within any week (Sunday through Saturd ay period), provided that each day’s visit lasts at least 3 hours and the combined weekly visits last at least 6 hours, and the combined annual visits last at least 60 hours. Child-occupied facilities may be located in public or commercial buildings or in target housing.

1. Need For the Rule

In the Federal Register issue of April 22, 2008, under the authority of sections 402(c)(3), 404, 406, and 407 of the Toxic Substances Control Act (T SCA), EPA issued its fina l renovation, repair, and painting (RRP) program rule. The final RRP rule, codified in 40 CFR part 745, subparts E, L, and Q, addresses lead-based paint hazards created by renova tion, repair, and paintin g activities that disturb painted surfaces in target housing and child-occupi ed facilities. The final RRP rule establishes requirements for training renovators, other renovation workers, and dust sampling technicians; for certifying renovators, dust sampling technicians, and renovation firms; for accrediting providers of renovation and dust sampling technician training; for renovation work practices; and for recordkeeping.

In this rulemaking, EPA is further revising th e TSCA § 402(c)(3) regulatory scheme to cover renovations in all target housing and child-occupied facilities. After further consideration of the opt-out provision, EPA believes it is in the best interest of the public to remove the provision. The Agency believes that the opt-out provision is not sufficiently protective for children under age 6 and pregnant women, because it does not provide protection fro m improperly-performed renovations for visiting children and pregnant women; for children and pregnant women who move into a newly-purchased house that was recently renovated under the opt-out provision; and for children and pregnant women who live adjacent to a home where the exterior is being renovate d under the opt-out provision. In addition, while the RRP rule focused mainly on protecting young chil dren and pregnant women from lead hazards, exposure can result in adverse health effects for olde r children and adults as well. Removing the opt-out provision will protect older children and adult occupa nts of target housing where no child under 6 or pregnant woman resides, as well as residents of adjacent properties. Finally, EPA believes that implementing the regulations without the opt-out prov ision promotes, to a greater extent, the statutory directive to promulgate regulations cove ring renovation activities in target housing.

EPA has determined that providing owners and o ccupants of renovated buildings with copies of the records documenting the renovation firm’s compli ance with the rule’s training and work practice requirements will serve to reinforce information on bo th the potential hazards of renovations and on the RRP rule’s requirements. It will also enable buildi ng owners and occupants to better understand what the renovation firm did to comply with the rule and how the rule’s provisions affected their specific*** EO 12866 Review Draft – Deliberative – Do Not Cite, Quote or Release During the Review ***



### Page 2 of 7 renovation. Educating the owners and occupants in this way is likely to improve their ability to assist the EPA in monitoring compliance with the RRP rule. These improvements in education and monitoring will improve compliance with the rule, which will ultimately protect children and adults from exposure to lead

hazards due to renovation activities.

The Agency concludes that the requirements of the rule achieve the goal of minimizing exposure to lead-based paint hazards created during renovatio n, remodeling and painting activities, taking into account reliability, effectiveness, and safety.

2. Legal basis and objectives for the rule.

TSCA § 402(c)(2) directs EPA to study the extent to which persons engage d in renovation, repair, and painting activities are exposed to lead or create lead-based paint hazards regularly or occasionally. After concluding this study, TSCA § 402(c)(3) further directs EPA to revise its lead-based paint activities regulations under TSCA § 402(a) to apply to renovation or remodeling activities that create lead-based paint hazards. Because EPA’s study found that activities commonly performed during renovation and remodeling create lead-based paint hazards, EPA issued the final RRP rule in 2008. In issuing the final RRP rule, EPA revised the TSCA § 402(a) regulatory sch eme to apply to individuals and firms engaged in renovation, repair, and painting activities. In this rulemaking, EPA is revising the TSCA § 402(c)(3) rule to cover renovations in all targ et housing and child-occupied facilities. In so doing, EPA has also taken into consideration the environmental, economic, and social impact of the rule as provided in TSCA § 2(c). A central objective of the rule is to mini mize exposure to lead-based paint hazards created during renovation, repair, and painting activities in all target housing and other buildi ngs frequented by children under age 6.

3. Description and Number of Small Entities to Which the Rule Will Apply

Small entities potentially affected by the rule may include, but are not limited to, entities in the following industries:

• Building construction (NAICS 236), e.g., si ngle family housing construction, multi-family housing construction, residential remodelers.

• Specialty trade contractors (NAICS 238), e.g., plumbing, heating, and air-conditioning contractors, painting and wall covering contractor s, electrical contractors, finish carpentry contractors, drywall and insulation contractors, siding contractors, tile and terrazzo contractors, glass and glazing contractors.

• Real estate (NAICS 531), e.g., lessors of resi dential buildings and dwellings, residential property

managers.

• Child day care services (NAICS 624410).

• Elementary and secondary schools (NAICS 611110) , e.g., elementary schools with kindergarten

classrooms.

This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities could also be affected.

In determining the number of small businesses aff ected by the rule, the Agency applied U.S.

Economic Census data to the SBA’s definition of sm all business. However, applying the U.S. Economic Census data requires either under or overestimating the number of sma ll businesses affected by the rule. For example, for many construction establishments , the SBA defines small businesses as having revenues*** EO 12866 Review Draft – Deliberative – Do Not Cite, Quote or Release During the Review ***



### Page 3 of 7 of less than $14 million. With respect to those est ablishments, the U.S. Economi c Census data groups all establishments with revenues of $10 million or more into one revenue bracket. On the one hand, using data for the entire industry would overestimate the nu mber of small businesses affected by the rule and would defeat the purpose of estimating impacts on small business. It would also underestimate the rule’s impact on small businesses because the impacts woul d be calculated using the revenues of large

businesses in addition to small businesses. On the othe r hand, applying the closest, albeit lower, revenue

bracket would underestimate the number of small businesse s affected by the rule while at the same time overestimating the impacts. Similar issues arose in estimating the fraction of property owners and managers that are small businesses. EPA has conc luded that a substantial number of small businesses will be affected by the rule. Consequently, EPA has chosen to be more conservative in estimating the cost impacts of the rule by using the closest, albe it lower, revenue bracket fo r which Census data is available. For other sectors (nonprofits operating day care centers or private schools), EPA assumed that all affected firms are small, which may overestimat e the number of small entities affected by the rule.

The vast majority of entities in the industries affected by this rule are small. EPA estimates that the renovation, repair, and painting pr ogram will affect an average of over 289,000 small entities per year. Of the 289,000 small entities estimated to incur cost s due to the rule, almost 101,000 small residential contractors are assumed to seek certification as a result of the removal of the opt-out provision; therefore, they would incur training, certification, work prac tice, and recordkeeping costs. The remaining nearly 189,000 small entities (working in buildings that were not eligible for the opt-out) are only expected to

incur costs due to the additional r ecordkeeping provisions in the rule.

4. Potential economic impacts on small entities.

EPA evaluated two factors in its analysis of the rule’s requirements on small entities, the number of firms that would experience the impact, and the si ze of the impact. Average annual compliance costs as a percentage of average annual revenues were used to assess the potential average impacts of the rule on small businesses and small governments. This ratio is a good measure of entities’ ability to afford the costs attributable to a regulatory requirement, becau se comparing compliance costs to revenues provides a reasonable indication of the magnitude of the regulat ory burden relative to a commonly available measure of economic activity. Where regulatory costs represent a small fraction of a typical entity’s revenues, the financial impacts of the regulation on such entities may be considered as not significant. For non-profit organizations, impacts were measured by comparing rule costs to annual expenditures. When expenditure data were not available, however, revenue informa tion was used as a proxy for expenditures. It is appropriate to calculate the impact ratios using annualized costs, beca use these costs are more representative of the continuing costs entities face to comply with the rule.

The average cost to a typical small renovation contractor of removing the opt-out provision and adding the new recordkeeping requirements could be as much as $1,100 to $6,400, depending on the industry sector. This represents 0.8 percent to 1.7 percent of revenues depe nding on the industry sector. Overall, as many as 101,000 small businesses could be affected by the removal of the opt-out provision, with average impacts of up to 1.10 percent of revenues.

The rule’s new recordkeeping requirement has an average cost of $1 to $280 for entities not affected by removal of the opt-out provision. Th is results in incremental cost impacts ranging from 0.0001 percent to 0.08 percent of revenues. An estim ated 189,000 small entities could be affected solely by the additional recordkeeping re quirement, including 165,000 small businesses with average impacts of 0.03 percent of revenues, 17,000 small non-profits w ith average impacts of 0.0005 percent, and 6,000 small governments with average impacts of 0.0001 percent.

Combining the firms affected by the removal of th e opt-out provision with those only affected by the new recordkeeping requirement, a total of 289 ,000 small entities could be affected by the rule,*** EO 12866 Review Draft – Deliberative – Do Not Cite, Quote or Release During the Review ***



### Page 4 of 7 including 266,000 small businesses with average impacts of 0.4 percent, 17,000 small non-profits with average impacts of 0.0005 percent, and 6,000 small governments with average impacts of 0.0001 percent.

Some of the small entities subject to the rule have employees while others are non-employers. The non-employers typically perform fewer jobs than firms with employees, and thus have lower work practice compliance costs. However, they also have lower average revenues than entities with employees, so their impacts (measured as costs divided by re venues) can be higher. Impact estimates for nonemployers should be interpreted with caution, as some non-employers may have issues related to understatement of income, which would tend to exaggera te the average impact ratio for this class of small

entities.

There are an estimated 75,000 non-employer renovation contractors that could be affected by the removal of the opt-out provision. The average cost to such contractors is estimated to be $1,193 apiece. This represents 1.3% to 4.7% of reported revenues, depending on the industry sector. This rule’s new recordkeeping requirement is estimated to aff ect approximately 96,000 additional non-employer renovation contractors not affected by removal of the opt -out provision. The costs to such contractors are estimated to be $42 apiece. This represents 0.05% to 0.17% of revenues, depending on the industry

sector.

To the extent that renovators and firms working in housing eligible for the opt-out provision will already have become trained and certified because they also work in regulated f acilities ineligible for the opt-out provision, or to the extent that eligible homeowners would decline to opt out, the average impacts

of this action will be lower than estimated.

5. Relevant Federal rules.

The requirements in this rulemaking will fit w ithin an existing framework of other Federal regulations that address lead-based paint. Notabl y, the Pre-Renovation Edu cation Rule, 40 CFR 745.85, requires renovators to distribute a lead hazard inform ation pamphlet to owners and occupants before conducting a renovation in target housing and child-occupied facilities. The rule’s requirement that renovators provide owners and o ccupants with records documenting compliance with the program’s training and work practice requirements complements the existing pre-renovation education requirements.

6. Projected Compliance Requirements, Classes of Small Entities Subject to the Compliance Requirements, and Professional Skills Needed to Comply

A. Projected Compliance Requirements

The rule would eliminate the opt-out provision that currently allows the owner of a residence he or she occupies to opt-out of the requirements of the RRP rule as long as no child under age 6 or pregnant

women resides in the home and the home is not a ch ild-occupied facility. The rule would also require renovation firms to provide a copy of the records demonstrating compliance with the training and work practice requirements of the RRP rule to the owner a nd, if different, the occupant of the building being renovated or the operator of the child-occupied facility.

B. Classes of Small Entities Subject to the Compliance Requirements

Small entities include small businesses, sma ll organizations, and small governmental jurisdictions. The small entities that are potentially directly regulated by this rule include: small businesses (including contractors and property owners and managers); sm all nonprofits (certain daycare centers and private schools); and sma ll governments (school districts).*** EO 12866 Review Draft – Deliberative – Do Not Cite, Quote or Release During the Review ***



### Page 5 of 7 C. Professional Skills Needed to Comply

Under the lead renovation, repair, and painti ng program requirements, renovators and dust sampling technicians working in target housing and ch ild-occupied facilities have to take a course to learn the proper techniques for accomplishing the containm ent, cleaning, cleaning verification, and dust sampling tasks they will perform during renovations. These courses are intended to provide them with the information they would need to comply with the rule based on the skills they already have. Renovators then provide on-the-job training in work practices to any other renovation workers used on a particular renovation. Entities are required to apply for certification to perform renovations; this process does not require any special skills other than the ability to complete the application. They also need to document their training and the work practices u sed during renovations, which does not require any special skills.

7. Minimization of Economic Impacts on Small Entities Consistent with Statutory Objectives,

and Consideration of Alternatives

A. Small Business Advocacy Review Panel

EPA has been concerned with potential small entity impacts since the earliest stages of planning for the RRP program under § 402(c)(3) of TSCA. EPA conducted outreach to small entities and, pursuant to § 609 of the RFA, convened a Small Business A dvocacy Review Panel in 1999 to obtain advice and recommendations of representatives of the regulated sma ll entities. Pursuant to the RFA, EPA used the report of the Panel that was convened for the closely related RRP rule promulgated in April 2008. EPA identified eight key elements of a potential re novation and remodeling regulation for the Panel’s consideration. These elements were: applicability and scope; firm certification; individual training and certification; accreditation of training courses; work practice standards; prohibited practices; exterior clearance; and interior clearance.

Details on the Panel and its recommendations are prov ided in the Panel Report, which is included in the docket for this rulemaking. Information on how EPA implemented the Panel’s recommendations in the development of the RRP program is available in Unit VIII.C. of the preamble to the 2006 Proposal (71 FR 1588, January 10, 2006) and in Unit V.C. of the preamble to the 2008 Final Rule (73 FR 21692, April 22, 2008), which are also included in the docket fo r the rulemaking. This rule is closely related to the RRP rule and the conclusions made in 2008 regard ing the Panel’s recommendations are applicable to this final rule. Although this fina l rule expands the number of renovation firms that must comply with the RRP requirements, it does not change the elements iden tified by the Panel. For example, this rule does not change the work practice or certification requirements of the RRP rule. EPA believes that reconvening the Panel would be procedurally duplicat ive and is unnecessary given that the issues here were within the scope of those considered by the Panel.

EPA has made a concerted effort to keep the costs and burdens associated with the RRP program as low as possible, while still providing adequate prot ection against lead-based paint hazards created by renovation activities. EPA believes that given the high ly-variable nature of the regulated community, the lead-safe work practices required by this rule should be simple to understand and easy to use. EPA is very aware that this regulation will apply to a whol e range of individuals from day laborers to property maintenance staff to master craftsmen performing a whole range of activities from simple drywall repair to window replacement to complete kitchen and bath renovations to building additions and everything in between. Lead-safe work practices that are easy and practical to use are more likely to be followed by all of the persons who perform renovations, and, therefor e, more likely to be reliable and effective in minimizing exposure to lead-based paint hazards creat ed by renovation activities. In addition to the statutory factors of reliability, safety, and effectiv eness, these considerations included the compliance costs to be imposed by the rule, both in general and particularly on small entities, and the benefits to be

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



### Page 6 of 7 B. Alternatives considered

EPA considered several significant alternatives to the rule that could affect the economic impacts

of the rule on small entities. These alternatives woul d have applied to both sm all and large entities, but given the number of small entities in the affected in dustries, these alternatives would primarily affect small entities. Following is a brief description of si gnificant alternatives that would have minimized the impacts of the rule on small entities, incl uding EPA’s reasons for rejecting them.

i. Delayed effective date . EPA considered an option that would delay the removal of the opt-out provision by 6 months, and another option that w ould delay the date by 12 m onths. These options would make the RRP program more complex to implement and might lead to confus ion by renovators and homeowners. These options would also lead to incr eased exposures during the delay period, including exposures to children under the age of 6 and pregnant women. Therefore, EPA believes that these options are not consistent with the stated objectives of the rule.

ii. Staged approach. EPA considered a staged approach that would initially remove the opt-out provision in pre-1960 housing, and then remove it in housing built between 1960 and 1978 a year later. This would make the RRP program more complex to implement and might lead to confusion by renovators and homeowners. It would also increase exposures during the first year of the rule from

renovations in houses built between 1960 and 1978, including exposur es to children under the age of 6 and pregnant women. EPA does not believe that the reduced burden of a staged approach outweighs the implementation complexity and additional exposures th at it would create. Therefore, EPA believes that this option is not consistent with the stated objectives of the rule.

iii. Alternate work practices. EPA also considered different options for the work practice requirements in housing that was previously eligible for the opt-out provision. Specifically, EPA considered options: with the containment requireme nts specified in 40 CFR 745.85, but without any cleaning or cleaning verification work practices; with the cleaning and cleaning verification requirements specified in 40 CFR 745.85, but without any containment work practices; with the cleaning requirements specified in 40 CFR 745.85, but without any containment or cleaning verification work practices; and with the containment, cleaning, and cleaning verification requirements specified in 40 CFR 745.85, but without the prohibitions or restrictions on paint removal practices specified in 40 CFR 745.85(a)(3) (i.e., open-flame burning or torching, the use of machin es that remove paint through high-speed operation without HEPA exhaust control, and heat guns op erating in excess of 1100 degrees Fahrenheit).

EPA’s study on the Characterization of Dust Lead Levels after Renovation, Repair, and Painting

Activities (the “Dust Study”), indicated that renovation, repair, and paint preparation activities produce large quantities of lead dust that create dust-lead hazards. The Dust Study showed that the largest decreases in dust levels were observed in the experi ments where the rule’s practices of containment, specialized cleaning, and cleaning verification were al l used. And the Dust Study indicated that if the prohibited and restricted practices are avoided, the suite of work practices as a whole are effective at addressing the lead-paint dust that is generated during renovation activities. However, excluding any single component of the suite of work practices or allowing the prohibited practices to be used led to instances where dust-lead hazards remained. Thus, EPA has concluded that the alternative work practice options are not effective at minimizing exposure to lead-based paint hazards created during renovation activities. Therefore, EPA believes that these options ar e not consistent with the stated objectives of the

rule.

As required by § 212 of SBREFA, EPA issued a Small Entity Compliance Guide in December 2008 to help small entities comply with the 2008 RRP rule. The Guide is available at: http://www.epa.gov/lead/pubs/sbcomplianceguide.pdf or from the National Lead Information Center by*** EO 12866 Review Draft – Deliberative – Do Not Cite, Quote or Release During the Review ***



### Page 7 of 7 calling 1(800) 424-LEAD [5323]. EPA will revise the Gu ide, as necessary, to reflect this rulemaking activity.