Larry
Sorrels
To:
Arthur_
G._
Fraas@
omb.
eop.
gov,
02/
20/
2004
06:
15
PM
Edmond_
Toy@
omb.
eop.
gov
cc:
Ron
Evans/
RTP/
USEPA/
US@
EPA,
Lisa
Conner/
RTP/
USEPA/
US@
EPA,
Mary
Kissell/
RTP/
USEPA/
US@
EPA,
Ken
Hustvedt/
RTP/
USEPA/
US@
EPA
Subject:
Current
RIA
version
­
plywood
NESHAP
Attached
are
the
individual
chapters
for
the
plywood
NESHAP
RIA
as
they
stand
now.
Note:
the
qualitative
benefits
chapter
is
consistent
with
the
language
in
the
utility
MACT
and
IAQR
benefits
reports.
Thanks.

(
See
attached
file:
Covlogo­
pcwpRIAfinalomb204.
wpd)
(
See
attached
file:
pcwcria­
tocfinalomb204.
wpd)(
See
attached
file:
acropcwcria.
wpd)
(
See
attached
file:
exsumpcwpriafinalomb204.
wpd)(
See
attached
file:
pcwcria­
ch1finalomb204.
wpd)(
See
attached
file:
pcwcria­
ch2finalomb204.
wpd)(
See
attached
file:
pcwcria­
ch3finalomb204.
wpd)(
See
attached
file:
pcwcria­
ch4finalomb204.
wpd)(
See
attached
file:
pcwcria­
ch5finalomb204.
wpd)(
See
attached
file:
pcwcria­
ch6finalomb204.
wpd)

Larry
Sorrels
Economist
US
EPA/
OAQPS
C339­
01
RTP,
NC
27711
(
919)
541­
5041
fax:
(
919)
541­
0839
United
States
Office
Of
Air
Quality
Environmental
Protection
Planning
And
Standards
February
2004
Agency
Research
Triangle
Park,
NC
27711
FINAL
REPORT
Air
Regulatory
Impact
Analysis
of
the
Plywood
and
Composite
Wood
Products
NESHAP
Final
Report
TABLE
OF
CONTENTS
Executive
Summary
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1
1
Introduction
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1­
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1.1
Scope
and
Purpose
of
the
Report
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1.2
Need
for
Regulatory
Action
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1­
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1.3
Requirements
for
the
Regulatory
Impact
Analysis
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1.4
Other
Federal
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1­
5
1.5
Organization
of
the
Regulatory
Impact
Analysis
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1­
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1.6
References
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1­
6
2
Profile
of
the
Plywood
and
Composite
Wood
Industries
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2­
1
2.1
Introduction
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2­
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2.2
The
Supply
Side
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2­
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2.3
The
Demand
Side
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2­
20
2.4
Industry
Organization
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2­
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2.5
Markets
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2­
42
2.6
References
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2­
60
3
Regulatory
Alternatives,
Emissions,
Emission
Reductions,
and
Control
and
Administrative
Costs
3.1
Regulatory
Alternatives
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3­
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3.2
Emissions
and
Emission
Reductions
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3­
15
3.3
Control
Equipment
and
Costs
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3­
26
3.4
Testing,
Monitoring,
Reporting,
and
Recordkeeping
Costs
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3­
37
3.5
References
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3­
40
4
Economic
Impact
Analysis
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4­
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4.1
Results
in
Brief
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4­
1
4.2
Introduction
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4­
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4.3
Economic
Impact
Analysis
Inputs
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4­
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4.4
Economic
Impact
Analysis
Methodology
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4­
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4.5
Economic
Impact
Analysis
Results
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4­
6
4.6
Analysis
of
Economic
Impacts
on
Engineered
Wood
Products
Sector
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4­
15
4.7
References
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4­
22
5
Small
Business
Impacts
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5­
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5.1
Results
in
Brief
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5­
1
5.2
Introduction
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5­
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5.3
Screening
Analysis
Data
Sources
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5­
2
5.4
Screening
Analysis
Methodology
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5­
2
5.5
Screening
Analysis
Assumptions
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5.6
Screening
Analysis
Results
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5­
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5.7
Screening
Analysis
Conclusions
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5­
10
5.8
EIA
Results
for
Small
Businesses
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5­
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5.9
References
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5­
12
6
Qualitative
Assessment
of
Benefits
of
Emission
Reductions
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6­
1
6.1
Identification
Of
Potential
Benefit
Categories
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6­
1
6.2
Qualitative
Description
of
Air
Related
Benefits
­
HAP
and
CO
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6­
1
6.3
Qualitative
Description
of
Effects
from
Reductions
and
Increases
in
Emissions
from
Other
Pollutants
Due
to
HAP
Controls
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6­
9
6.4
Lack
of
Approved
Methods
to
Quantify
HAP
Benefits
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6­
12
6.5
Summary
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6­
13
6.6
References
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6­
14
LIST
OF
EXHIBITS
Exhibit
2­
1:
SIC
&
NAICS
Codes
for
the
Plywood
and
Composite
Wood
Industries
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2­
2
Exhibit
2­
2:
Other
Primary
SIC
Codes
for
the
Plywood
and
Composite
Wood
Industries
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2­
3
Exhibit
2­
3:
SIC
and
NAICS
Codes
and
Products
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.
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
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
.
.
.
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.
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.
.
.
.
.
.
.
.
.
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.
.
.
.
.
.
.
.
.
.
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
7
Exhibit
3­
3:
Cost­
Effectiveness
Analysis
Of
Beyond­
The­
Floor
Control
Options
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3­
9
Exhibit
3­
4:
Illustration
Of
Total
HAP
Calculation
For
An
Emission
Source
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3­
17
Exhibit
3­
5:
Uncontrolled
and
Baseline
HAP
Emissions
Estimates
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3­
21
Exhibit
3­
6:
Speciated
Nationwide
Uncontrolled
HAP
Emissions
by
Product
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3­
22
Exhibit
3­
7:
Speciated
Nationwide
Baseline
HAP
Emissions
by
Product
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3­
23
Exhibit
3­
8:
Estimated
Number
of
Major
Sources
By
Product
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3­
24
Exhibit
3­
9:
Estimated
Nationwide
Reduction
in
Total
HAP
and
THC
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3­
25
Exhibit
3­
10:
Press
Enclosure
Exhaust
Flow
Rates
and
Capital
Costs
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3­
33
Exhibit
3­
11:
Control
Equipment
Costed
for
Process
Units
with
Controlled
MACT
Floor
.
.
.
.
.
.
.
.
3­
34
Exhibit
3­
12:
Default
Flow
Rates
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3­
36
Exhibit
3­
13:
Estimated
Nationwide
Control
Costs
for
the
PCWP
Industry
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3­
38
Exhibit
3­
14:
Dollars
(
In
Total
Annualized
Costs)
Per
Ton
Of
HAP
And
THC
Reduced
.
.
.
.
.
.
.
.
.
.
3­
39
Exhibit
4­
1:
Baseline
Characterization
of
Plywood
and
Composite
Wood
Markets:
1997
.
.
.
.
.
.
.
.
.
4­
3
Exhibit
4­
2.
Market­
Level
Impacts
of
the
Proposed
NESHAP
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
4­
7
Exhibit
4­
3.
Industry­
Level
Impacts
of
the
Proposed
NESHAP
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
4­
10
Exhibit
4­
4:
Distribution
of
Industry­
Level
Impacts
of
Proposed
NESHAP:
Affected
and
Unaffected
Producers
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
4­
12
Exhibit
4­
5:
Distribution
of
Social
Costs
Associated
with
the
Proposed
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:
Potential
Health
and
Welfare
Effects
Associated
with
Exposure
to
Hazardous
Air
Pollutants..
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
6­
3
Exhibit
6­
2:
Key
Health
Effects
of
Exposure
to
Ambient
Carbon
Monoxide
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
6­
6
Exhibit
6­
3:
Summary
of
Subpopulations
Potentially
at
Risk
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
6­
9
LIST
OF
FIGURES
Figure
2­
1:
Plywood
and
Veneer
Production
.
.
.
.
.
.
.
.
.
.
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.
2­
6
Figure
2­
2:
Softwood
Plywood
and
Veneer
Value
of
Shipments
and
Production
Costs,
1992
­
1997
.
.
.
.
.
.
.
.
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.
2­
15
Figure
2­
3:
Reconstituted
Wood
Products
Value
of
Shipments
and
Production
Costs,
1992
­
1997
.
.
.
.
.
.
.
.
.
.
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.
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
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
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.
.
.
.
.
2­
22
Figure
2­
7:
Industry
Outputs
of
Reconstituted
Wood
Products
Industry
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
.
.
.
2­
23
Figure
2­
8:
Plywood
and
Composite
Wood
Facility
Locations
.
.
.
.
.
.
.
.
.
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.
.
.
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.
2­
32
Figure
2­
9:
Full
Production
Capacity
Utilization,
Fourth
Quarters,
1992­
1997
.
.
.
.
.
.
.
.
.
.
.
.
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.
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.
.
2­
33
Figure
2­
10:
Value
of
Product
Shipments,
1989­
1995
.
.
.
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.
.
.
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.
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.
2­
46
Figure
2­
11:
Apparent
Consumption,
1989­
1995
.
.
.
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.
2­
47
Figure
2­
12:
APA
Projected
Housing
Starts
(
000)
.
.
.
.
.
.
.
.
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.
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.
.
2­
55
Figure
3­
1:
Variation
in
RTO
Purchased
Equipment
Cost
with
Flow
Rate
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3­
27
Figure
3­
2:
Relationship
between
RTO
Electricity
Consumption
and
Flow
Rate
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3­
28
Figure
3­
3:
Relationship
between
RTO
Natural
Gas
Consumption
and
Flow
Rate
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3­
28
Figure
3­
4:
Variation
in
RTO
Total
Capital
Investment
with
Flow
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
.
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.
.
3­
30
Figure
3­
5:
Variation
in
RTO
Total
Annualized
Cost
with
Flow
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
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.
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.
3­
30
Figure
4­
1:
Supply
Curves
for
Affected
Facilities
.
.
.
.
.
.
.
.
.
.
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.
4­
5
Figure
4­
2:
Market
Equilibrium
Without
and
With
Regulation
.
.
.
.
.
.
.
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.
4­
6
Select
List
of
Acronyms
and
Abbreviations
BID
­
Background
Information
Document
CAA
­
Clean
Air
Act
CAPMS
­
Criteria
Air
Pollution
Modeling
System
CO
­
Carbon
Monoxide
COPD
­
Chronic
Obstructive
Pulmonary
Disease
C/
S­
Cost
to
Sales
Ratio
EFB
­
Electrified
Filter
Beds
EO
­
Executive
Order
EPA
­
Environmental
Protection
Agency
EWP
­
Engineered
Wood
Products
HAP
­
Hazardous
Air
Pollutant
HB
­
Hardboard
ICR
­
Information
Collection
Request
lb
­
Pound
LDs
­
Loss
Days
LRS
­
Lower
Respiratory
Symptoms
LSL
­
Laminated
Strand
Lumber
LVL
­
Laminated
Veneer
Lumber
MACT
­
Maximum
Achievable
Control
Technology
MDF
­
Medium
Density
Fiber
NAAQS
­
National
Ambient
Air
Quality
Standards
NAICS
­
North
American
Industrial
Classification
System
NESHAP
­
National
Emission
Standards
for
Hazardous
Air
Pollutants
NOx­
Nitrogen
Oxides
NPR
­
Notice
of
Proposed
Rulemaking
NSPS
­
New
Source
Performance
Standards
NSR
­
New
Source
Review
OEM­
Original
Equipment
Manufacturers
OMB
­
Office
of
Management
and
Budget
O&
M
­
Operation
and
Maintenance
OSB­
Oriented
Strandboard
ODT
­
Oven
Dry
Tons
PB
­
Particleboard
P/
E
­
Partial
Equilibrium
PM
­
Particulate
Matter
PSL
­
Parallel
Strand
Lumber
ppbdv
­
Parts
Per
Billion,
dry
volume
ppm
­
Parts
Per
Million
PRA
­
Paperwork
Reduction
Act
of
1995
PTE
­
Permanent
Total
Enclosure
RCO­
Regenerative
Catalytic
Oxidizer
viii
RTO
­
Regenerative
Thermal
Oxidizer
RIA
­
Regulatory
Impact
Analysis
RFA
­
Regulatory
Flexibility
Act
R/
S
­
Return
to
Sales
Ratio
SAB
­
Science
Advisory
Board
SBA
­
Small
Business
Administration
SBREFA
­
Small
Business
Regulatory
Enforcement
Fairness
Act
of
1996
SIC
­
Standard
Industrial
Classification
SOA
­
Secondary
Organic
Aerosols
SO2
­
Sulfur
Dioxide
SPV
­
Softwood
Plywood
Veneer
TAC
­
Total
Annualized
Cost
THC
­
Total
Hydrocarbon
tpd
­
Tons
Per
Day
tpy
­
Tons
Per
Year
UMRA
­
Unfunded
Mandates
Reform
Act
URS
­
Upper
Respiratory
Symptoms
VOS
­
Value
of
Shipments
VOCs
­
Volatile
Organic
Compounds
WESP
­
Wet
Electrostatic
Precipitator
WLDs
­
Work
Loss
Days
ix
This
page
intentionally
left
blank.
DRAFT
ES­
1
EXECUTIVE
SUMMARY
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
proposed
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.
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
DRAFT
ES­
2
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
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.
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
economic
impact
analysis
(
EIA)
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
bestcontrolled
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
bestperforming
12
percent
of
existing
sources
in
the
category
or
subcategory
(
or,
the
best­
performing
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
Economic
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
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
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
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.
1­
4
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.

1.3.4
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
OMB­
83I
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
5
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)
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
Economic
Impact
Analysis
This
report
includes
six
chapters
that
present
a
description
of
the
industry,
the
costs
associated
with
the
regulatory
control
options
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
proposed
alternative.

$
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.
1­
6
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.

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
1
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.

°
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
$
138
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
$
142
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.
1See
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
code1
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.
2The
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
Veneer2
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
2­
5
veneer
produced
was
used
for
in­
facility
plywood
production.
Only
approximately
7
percent
of
the
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).
3The
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
sevenminute
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
Composites3
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
2­
8
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
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
2­
9
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
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
single­
pass
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
4The
descriptions
in
this
section
rely
primarily
on
Chapter
11
of
the
USDA's
Forest
Products
Laboratory
Wood
Handbook
(
Moody
and
Liu,
1999).

2­
10
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.

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
Members4
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.
2­
11
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
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
21
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
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.
2­
22
Figure
2­
6
Industry
Outputs
of
Softwood
Plywood
and
Veneer
Industry
Manufacturing
27.9%

Other
8.6%
Construction
63.5%

Source:
Gale
Business
Resources
(
1999).
2­
23
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
24
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).
2­
25
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).

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,
2­
26
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
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
27
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
2­
28
1995.
Much
of
the
trade­
off
between
softwood
plywood
and
OSB
is
due
to
lower
cost
for
OSB.
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
5The
majority
of
studies
reviewed
estimated
price
elasticity
of
demand
as
being
between
­
0.15
and
­
0.4.

2­
29
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
with
similar
demand
drivers,
inputs,
input
costs,
and
uses,
between
zero
and
­
0.95.
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
wood­
based
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
2­
30
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.

2.4.1
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)
Herfindahl­
Hirschman
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.
6
Map
developed
based
on
original
survey
database
dated
July
23,
1999.

2­
31
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
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
86
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
32
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
0
1
­
9
10
­
18
19
­
27
28
­
36
States
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
33
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
2­
34
reconstituted
wood
product
facilities
declined,
while
softwood
plywood
and
veneer
was
unchanged
in
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%
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
2­
35
Sources:
U.
S.
Environmental
Protection
Agency
(
1998),
MRI
(
1999).

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
36
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)
3
4
5
9
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
37
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
38
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
Georgia­
Pacific
(
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.
2­
39
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.
Georgia­
Pacific
grows
and
sells
timber,
and
participates
in
several
other
activities
related
to
forestry
management.
2­
40
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
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.
2­
41
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
2­
42
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
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
71995
is
the
latest
year
for
which
data
is
available.

2­
43
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
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
19957
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.
2­
44
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
45
Exhibit
2­
25:
Production,
Trade
and
Consumption
Volumes
for
Selected
Products
(
1988­
1997)

1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
%
Change
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
­
19%

Imports
96
49
38
28
47
41
47
60
85
104
8%

Exports
1,004
1,442
1,613
1,322
1,442
1,409
1,211
1,267
1,248
1,548
54%

Apparent
Consumption
21,181
19,991
19,344
17,358
17,937
17,946
18,474
18,160
18,018
16,519
­
22%

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
129%

Imports
815
1,111
1,313
988
1,572
2,163
2,588
3,214
4,414
5,272
547%

Exports
57
49
60
78
82
157
167
193%*

Apparent
Consumption
5,416
6,213
6,728
6,544
8,176
9,105
9,995
11,036
13,572
15,639
189%

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
24%

Imports
1,634
425
363
293
405
572
775
840
814
963
­
41%

Exports
163
333
373
369
394
318
297
319
154
188
15%

Apparent
Consumption
6,239
4,920
4,746
4,654
5,057
5,656
6,271
5,828
6,365
6,691
7%

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
­
12%

Imports
633
718
689
571
571
639
1,119
1,152
1,183
1,306
106%

Exports
322
427
552
606
836
917
1,190
1,377
1,426
1,259
291%

Apparent
Consumption
5,429
5,487
5,162
4,860
5,008
4,970
5,135
4,705
5,037
4,548
­
16%

Source:
Spelter
et
al.
(
1997).

*
since
1991
2­
46
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
47
2.5.2.2
Domestic
Consumption
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
48
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
49
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
50
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
2­
51
plywood
and
veneer.
In
particular,
the
construction
sector
throughout
Europe
has
seen
an
increase
in
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.
2­
52
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
0
0
0
0
0
0
0
0
0
1
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
0
0
0
0
0
0
0
0
0
0
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
0
0
0
0
0
0
0
0
0
0
Source:
Howard
(
1999).

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
53
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
54
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).
8While
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
55
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.
8
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
56
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
2­
57
forecast
predicts
an
increase
in
growth
of
3.3
percent
per
year
from
1998
to
2003
as
furniture
markets
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
wood­
products
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
2­
58
OSB
is
making
significant
strides
in
residential
construction
in
Japan
and
elsewhere,
an
Asian
recession
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
59
2.6
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Prepared
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Wendy
Hoffman,
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Prevention
and
Toxics,
U.
S.
Environmental
Protection
Agency,
401
M
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SW,
Washington,
DC
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­
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Tacoma,
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APA
­
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html
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­
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1999c.
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­
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1997.
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back=
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gen_
pr.
html
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Pacific
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8­
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24.
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lpcorp.
com/
pressrel/
19990824_
gen_
pr.
html
"
Louisiana­
Pacific
Corp.
Successfully
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Offer
for
Le
Groupe
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140­
9­
9.
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10.
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B.
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Mary
Tom
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Larry
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U.
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EPA:
"
Preliminary
facility­
specific
cost
estimates
for
implementation
of
the
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an
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PR
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1998
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January
26.
"
Georgia­
Pacific
to
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Strand
Board
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Arkansas."
February
23.
"
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Pacific
Group
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First
Quarter
Earnings
and
All­
Time
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Record
for
Building
Products."
April
22.
"
Georgia­
Pacific
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Appoints
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Sets
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June
22.
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1
3
REGULATORY
ALTERNATIVES,
EMISSIONS,
EMISSION
REDUCTIONS,
AND
CONTROL
AND
ADMINISTRATIVE
COSTS
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.
3­
2
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.

3.1.2
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
incinerationbased
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:
incinerationbased
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.
3­
3
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
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
semi­
incineration
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,
semi­
incineration
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
3­
4
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
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
3­
5
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
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:
3­
7

agriboard
dryers

particleboard
press
molds

dry
particle
rotary
dryers

particleboard
extruders

paddle­
type
particle
dryers

engineered
wood
products
presses

hardboard
humidifiers

agriboard
presses

bagasse
fiber
mat
dryer

atmospheric
refiners

veneer
kilns

lumber
kilns

RF
veneer
redryers

resin
storage
tanks

hardwood
veneer
dryers

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.
3­
8
Exhibit
3­
3.
Cost­
Effectiveness
Analysis
Of
Beyond­
The­
Floor
Control
Options
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
dryer
s
(
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
9
3.1.6
Considerations
of
Possible
Risk­
Based
Alternatives
to
Reduce
Impacts
to
Sources
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
1"
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
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
exposures.
The
EPA
envisions
that
we
would
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
could
develop
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.
1
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).

One
concern
that
EPA
has
with
respect
to
the
section
112(
c)(
9)
approach
is
the
affect
that
it
could
have
on
the
MACT
floors.
If
all
of
the
well­
controlled,
low­
risk
facilities
are
subcategorized,
that
could
make
the
MACT
floor
less
stringent
for
the
remaining
facilities.
One
approach
that
has
been
suggested
to
mitigate
this
effect
would
be
to
establish
the
MACT
floor
now
based
on
controls
in
place
for
the
category
and
to
allow
facilities
to
become
part
of
the
low­
risk
category
in
the
future,
after
the
MACT
standard
is
established.
This
would
allow
low
risk
facilities
to
use
the
112(
c)(
9)
exemption
without
affecting
the
MACT
floor
calculation.
EPA
requests
comment
on
this
suggested
approach.

If
this
section
112(
c)(
9)
approach
were
adopted,
the
rulemaking
would
likely
indicate
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
11
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.

3.2.2
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:
3­
12
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
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:
3­
13
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.

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
3­
14
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)

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%
3­
15
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.

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
3­
16
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
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
emissions,
ton/
yrc
Product
Total
HAP
THC
as
C
Total
HAP
THC
as
C
MDF
24
4,000
8,200
2,400
4,800
Particleboardd
51
5,700
13,000
5,400
13,000
Hardboard
18
3,500
5,800
3,300
5,500
Fiberboard
7
78
400
78
400
OSB
37
7,100
19,000
3,500
5,400
Softwood
plywood
105
4,000
24,000
3,700
20,000
Hardwood
plywood
166
150
640
150
640
EWP
39
310
990
290
790
Nationwide
totale
447
25,000
73,000
19,000
50,000
a
Some
plants
make
multiple
products
and
are
counted
once
for
each
product
they
make
(
e.
g.,
a
particleboard
and
softwood
plywood
plant).

b
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
TYPE
Product
Estimated
HAP's
emitted,
ton/
yr
Acetaldehyde
Acrolein
Formaldehyde
Methanol
Phenol
Propionaldehyde
Other
HAPa
Totalf
MDF
48
1
1,700
2,200
93
1
27
4,000
Particleboardb
230
56
1,300
3,800
150
20
160c
5,700
Hardboard
320
76
580
2,100
99
250
52d
3,500
Fiberboard
9
1
17
45
1
0
6
78
OSB
1,500
540
890
3,500
340
88
280e
7,100
Softwood
plywood
450
26
280
2,900
150
24
170
4,000
Hardwood
plywood
20
0
11
81
15
0
22
150
EWP
53
4
36
140
46
8
19e
310
Totalf
2,600
700
4,800
15,000
890
390
730
25,000
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,
carbon
tetrachloride,

chloroform,
chloromethane,
di­
n­
butyl
phthalate,
ethyl
benzene,
hydroquinone,
n­
Hexane,
1,1,1­
trichloroethane,
and
4­
methyl­
2­
pentanone.

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
HAPa
Totalf
MDF
29
1
1,000
1,300
51
0
17
2,500
Particleboardb
200
50
1,200
3,700
140
18
150c
5,400
Hardboard
270
61
570
2,100
96
200
48d
3,300
Fiberboard
9
1
17
45
1
0
6
78
OSB
570
200
370
2,000
210
32
69e
3,500
Softwood
plywood
390
20
230
2,700
130
17
150
3,700
Hardwood
plywood
20
0
11
81
15
0
22
150
EWP
47
4
30
140
46
7
16e
290
Totalf
1,500
330
3,400
12,000
690
270
480
19,000
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,
carbon
tetrachloride,

chloroform,
chloromethane,
di­
n­
butyl
phthalate,
ethyl
benzene,
hydroquinone,
n­
Hexane,
1,1,1­
trichloroethane,
and
4­
methyl­
2­
pentanone.

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.
of
potentially
non­
major
sourcesb
MDF
24
24
0
Particleboardc
51
42
9
Hardboard
18
18
0
Fiberboard
7
3
4
OSB
37
37
0
Softwood
plywood
105
87
18
Hardwood
plywood
166
0
166
EWP
39
12
27
Total
447
223
224
a
Some
plants
make
multiple
products
and
are
counted
once
for
each
product
they
make
(
e.
g.,
a
particleboard
and
softwood
plywood
plant).

b
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
of
any
combination
of
HAP.
Sources
with
HAP
emissions
estimated
to
be
below
the
10/
25
thresholds
in
this
analysis
are
labeled
as
potentially
non­
major
sources.
The
emission
estimation
methodology
described
in
this
document
does
not
account
for
onsite
operations
(
e.
g.,
furniture
manufacture)
not
included
in
the
plywood
and
composite
wood
products
source
category.

c
Includes
conventional
and
molded
particleboard.
Five
of
the
potentially
non­
major
particleboard
sources
manufacture
molded
particleboard.
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
Reduction
Softwood
plywood/
veneer
3,700
3,043
657
19,631
9,709
9,922
Hardwood
plywood/
veneer
161
161
0b
640
640
0b
Medium
density
fiberboard
2,469
345
2,124
4,763
572
4,191
Oriented
strandboard
3,513
753
2,760
5,362
1,755
3,607
Particleboardc
5,377
2,787
2,590
12,632
6,724
5,908
Hardboard
3,291
752
2,539
5,478
2,103
3,374
Fiberboard
78
78
0b
398
398
0b
Engineered
wood
products
298
230
68
793
617
176
TOTAL
18,933
8,196
10,737
49,706
22,529
27,178
a
The
baseline
emissions
presented
in
this
table
may
differ
slightly
from
the
values
presented
in
Exhibits
3­
4
through
3­
6
because
of
slight
differences
in
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
proposed
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
incinerationbased
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
and
auxillary
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,
dscfm
Purchased
Equipment
Cost,
$

Figure
3­
1.
Variation
in
RTO
purchased
equipment
cost
with
flow
rate.
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
R
2
=
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
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
y
=
317394e
8E­
06x
R
2
=
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.

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.
3­
29
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.

3.3.1.3
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
3­
30
$
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
31
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
32
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
3­
33
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.

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
3­
34
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.

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
plant­
specific
information.

The
nationwide
capital
and
annualized
control
costs
were
determined
by
summing
the
total
plantspecific
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
$
136
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
35
Exhibit
3­
13.
ESTIMATED
NATIONWIDE
CONTROL
COSTS
FOR
THE
PCWP
INDUSTRY
Product
type
No.
of
plantsa
No.
of
plants
impacteda,
b
Process
units
impacted
Control
equipment
Total
capital
costs,
$
MM
Total
annual
costs,
$
MM
Softwood
plywood/
veneer
105
66
softwood
veneer
dryers
RTO
$
87.1
$
28.4
Hardwood
plywood/
veneer
166
0
N/
A
no
control
$
0.0
$
0.0
Medium
density
fiberboard
24
18
dryers,
presses
RTO
for
dryers
and
PTE/
RTO
for
presses
$
71.3
$
21.5
Oriented
Strandboard
37
23
dryers,
presses
WESP/
RTO
for
dryers
and
PTE/
RTO
for
presses
$
94.6
$
25.5
Particleboard
(
conventional
and
molded)
51
38
green
rotary
particle
dryers,
presses
RTO
for
dryers
and
PTE/
RTO
for
presses
$
125.2
$
34.2
Particleboard
(
agriboard)
5
0
N/
A
no
control
$
0.0
$
0.0
Hardboard
18
18
tube
dryers,
presses,

ovens
RTO
for
dryers
and
PTE/
RTO
for
presses
$
84.4
$
23.5
Fiberboard
7
0
N/
A
no
control
$
0.0
$
0.0
Engineered
wood
products
41
3
softwood
veneer
dryers,

strand
dryers
RTO
for
veneer
dryers
and
WESP/
RTO
for
strand
dryers
$
10.3
$
3.2
TOTAL:
454
166
$
473
$
136
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
plants
are
not
major
sources;
(
2)
some
plants
already
have
all
of
the
necessary
control
equipment;
or
(
3)
a
few
plants
are
major
sources
but
do
not
operate
any
process
units
for
which
there
are
control
requirements
(
e.
g.,
glu­
lam
plants).
3­
36
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
proposed
rule.
3­
37
3.5
REFERENCES
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.
3­
38
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.

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.
3­
39
23.
Letter
and
attachments
from
S.
Jaasund,
Geoenergy
International
Corporation,
to
B.
Nicholson,
MRI.
March
28,
2000.
Geoenergy
WESP
Capital
and
Operating
Costs.

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.
