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Economic Impact Analysis for the National
Emission Standards for Hazardous Air
Pollutants: Plywood and Composite Wood
Products Amendments
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EPA-452/R-23-008
April 2023
Economic Impact Analysis for the National Emission Standards for Hazardous Air Pollutants:
Plywood and Composite Wood Products Amendments
U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards
Health and Environmental Impacts Division
Research Triangle Park, NC
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TABLE OF CONTENTS
Table of Contents i
List of Tables hi
List of Figures v
1 Executive Summary 1-1
1.1 Background 1-1
1.2 Description of the Source Category and Affected Industries 1-2
1.3 Market Failure 1-4
1.4 Compliance Cost and Emissions Impact Estimates of Proposed Action 1-4
1.5 Organization of the Report 1-5
2 Industry Profile 2-6
2.1 Plywood and Composite Wood Products Industry Profile 2-7
2.2 The Supply Side 2-9
2.2.1 Production Process 2-9
2.2.2 Products, By-Products and Co-Products 2-16
2.2.3 Costs of Production 2-19
2.3 The Demand Side 2-24
2.3.1 Product Characteristics 2-24
2.3.2 Consumers and Uses 2-25
2.3.3 Substitution Possibilities 2-29
2.3.4 Demand Elasticities 2-32
2.4 Industry Organization 2-33
2.4.1 Industry Structure 2-33
2.4.2 Manufacturing Plants 2-35
2.4.3 Firm Characteristics 2-39
2.5 Markets 2-42
2.5.1 Market Structure 2-43
2.5.2 Market Volumes 2-43
2.5.3 Prices 2-52
2.5.4 Market Forecasts 2-54
3 Emissions and Engineering Cost Analysis 3-56
3.1 Introduction 3-56
3.2 Cost Impacts 3-57
3.2.1 Lumber Kiln Costs 3-57
3.2.2 Resinated Material Handling (RMH) Process Unit Costs 3-57
3.2.3 Hardboard Process Unit Costs 3-59
3.2.4 Atmospheric Refiner Costs 3-60
3.2.5 Log Vat Costs 3-60
3.2.6 Costs for Processes with MDI Emissions 3-61
3.2.7 PCWP Wood-fired Dryer Non-Mercury HAP Metal and PM 3-63
3.2.8 PCWP Wood-fired Dryer Mercury (Hg) 3-66
3.2.9 PCWP Wood-fired Dryer Acid Gases 3-66
3.2.10 PCWP Wood-fired Dryer Dioxin/Furan and PAH 3-68
3.2.11 Direct-fired Dryer Burner Tune-Up and Bypass Stack Monitoring Costs 3-71
3.2.12 Testing, Monitoring, Reporting and Recordkeeping Costs 3-72
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3.3 Engineering Cost Analysis Summary Results 3-74
3.4 Compliance Costs of the Proposal 3-77
3.5 Effects of Emis sions Reductions 3-78
3.6 Uncertainties and Limitations 3-79
4 Economic Impact Analysis 4-81
4.1 Small Business Impacts Analysis 4-82
4.2 Employment Impact Analysis 4-85
5 References 5-86
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LIST OF TABLES
Table 1-1 Compliance Costs for Proposed Amendments to the PCWP NESHAP for 2027-2046 (dollars in
million 2021$, discounted to 2023) 1-5
Table 2-1 Plywood and Composite Wood Product Industries Potentially Impacted by the Proposed
Regulation 2-8
Table 2-2 NAICS Codes and Products 2-16
Table 2-3 Specialization and Coverage Ratios (%), 1997 - 2012 2-18
Table 2-4 Summary of Annual Costs and Shipments, 2012-2016 (Thousands 2016 Dollars3) 2-20
Table 2-5 Materials Consumed by Kind for Softwood Plywood and Veneer, 2012 (Nominal Dollars) 2-22
Table 2-6 Materials Consumed by Kind for Reconstituted Wood Products, 2012 (Nominal Dollars) 2-23
Table 2-7 Consumption of Industry Outputs, 2017 2-25
Table 2-8 MDF Shipments by Downstream Market, 2012 2-27
Table 2-9 Particleboard Shipments by Downstream Market, 2012 2-28
Table 2-10 Housing Market Indicators 2-28
Table 2-11 Trade for Household and Institutional Furniture and Kitchen Cabinet Manufacturing (NAICS
3371), 2010 - 2017 (millions of 2017 Dollars3) 2-29
Table 2-12a Use of Wood and Non-wood Products in Residential Construction, 1995-2003 2-30
Table 2-12b Percentage Use of Wood and Non-wood Products in Residential Construction, 1995-2012 2-31
Table 2-13 Demand Elasticities 2-33
Table 2-14 Concentration Ratios by NAICS Code, 2002 - 2012 2-34
Table 2-15 Plywood and Wood Composite Facility Locations (Potentially Impacted Facilities Subject to the
PCWP R I R) 2-35
Table 2-16 Full Production Capacity Utilization Rates, Fourth Quarters, 2012-2017 2-36
Table 2-17a Employment at Facilities with Expected Compliance Cost Impacts 2-38
Table 2-17b Employment at Facilities with Expected Compliance Cost Impacts 2-38
Table 2-18 Summary of Capital Expenditures, 2012-2016 (Thousands of 2016 Dollars) 2-39
Table 2-19 Size Distribution of Parent Firms Owning Facilities with Expected Compliance Cost Impacts. 2-40
Table 2-20 Types of Firm Ownership for Wood Product Manufacturing (NAICS 321), 2012 2-41
Table 2-22 Balance and Selected Statistics (Millions of 2017 Dollars3), 2012-2017 2-44
Table 2-22 Balance and Selected Statistics (Millions of 2017 Dollars3), 2012-2017 (continued) 2-45
Table 2-23 Production, Trade and Consumption Volumes for Selected Products, 2004 - 2013 2-46
Table 2-24a 2017 US Wood Products Imports by Region and Major Trading Partner for NAICS 321212,
NAICS 321215, and NAICS 321219 (Million Dollars) 2-49
Table 2-24b 2017 US Wood Products Imports by Region and Major Trading Partner for NAICS 321113,
NAICS 321211, NAICS 321999, and NAICS 337122 (Million Dollars) 2-50
Table 2-25a 2017 US Wood Products Exports by Region and Major Trading Partner for NAICS 321212,
NAICS 321215, and NAICS 321219 (Million Dollars) 2-51
Table 2-25b 2017 US Wood Products Exports by Region and Major Trading Partner for NAICS 321113,
NAICS 321211, and NAICS 321999 (Million Dollars) 2-51
Table 2-26 Wood Product Manufacturing (NAICS 321) Product Price Index, 2009-2018 (December 2003 =
100) 2-52
Table 2-27 Producer Price Indices of Plywood and Composite Wood Products (2009 = 100) 2-53
Table 2-28 Producer Price Index (PPI) by Commodity for Pulp, Paper, and Allied Products: Waferboard and
Oriented Strandboard, 2013-2018 (Index Dec 1982=100, Annual, Not Seasonally Adjusted)... 2-54
Table 2-29 APA Actual and Forecasted Structural Panel Production (Million Square Feet) 2-55
Table 3-1 Emission Testing Costs for Process Units 3-72
Table 3-2 CPMS Costs 3-73
Table 3-3 Reporting and Recordkeeping of Information Not Involving CPMS 3-74
Table 3-4 Detailed Nationwide Costs for the PCWP Source Category by Emission Point for the Proposed
Rule (2021$) 3-75
Table 3-5 Summary of the Total Costs ($2021) 3-76
Table 3-6 Discounted Costs from 2027-2046, for the Proposed Amendments to the PCWP (million 2021$,
discounted to 2023) 3-76
Table 3-7 Summary of the HAP and VOC Emission Reductions per Year 3-77
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Table 3-8 Summary of Emission Reductions (Increases) Other Than HAP and VOC in Tons per Year3... 3-77
Table 3-9 Summary of Compliance Costs for PCWP, 2027-2046 (million 2021$, discounted to 2023).... 3-78
Table 4-1 SBA Size Standards by NAICS Code3 4-83
Table 4-2 Summary Statistics of Potentially Affected Entities 4-83
Table 4-3 Distribution of Estimated Compliance Costs by Rule and Size for Proposed Options ($2021).. 4-84
Table 4-4 Compliance Cost-to-Sales Ratio Distributions for Small Entities, Proposed Options 4-84
Table 4-5 Compliance Cost-to-Sales Ratio Thresholds for Small Entities - Proposed Options 4-84
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LIST OF FIGURES
Figure 2-1 Softwood Plywood and Veneer Value of Shipments and Production Costs, 2012 - 2016 2-21
Figure 2-2 Reconstituted Wood Products Value of Shipments and Production Costs, 2012-2016 2-22
Figure 2-3 Materials Consumed by Softwood Plywood and Veneer Products, 2012 2-23
Figure 2-4 Materials Consumed by Reconstituted Wood Product Producers, 2012 2-24
Figure 2-5 Industry Outputs for Structural Panels, 2017 2-26
Figure 2-6 Industry Outputs for Nonstructural Panels, 2017 2-27
Figure 2-7 Full Production Capacity Utilization, Fourth Quarters, 2012-2017 2-37
Figure 2-8 Value of Product Shipments, 2012-2016 2-47
Figure 2-9 Apparent Consumption, 2012-2016 2-48
Figure 2-10 PPI by Commodity for Pulp, Paper, and Allied Products: Waferboard and Oriented Strandboard
(OSB), 2013-2018, Index Dec 1982=100, Annual, Not Seasonally Adjusted 2-54
Figure 2-11 APA Actual and Forecasted Housing Starts (000s) 2-55
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1 EXECUTIVE SUMMARY
1.1 Background
The EPA originally promulgated the plywood and composite wood products (PCWP)
NESHAP (40 CFR part 63, subpart DDDD) on July 30, 2004. On August 13, 2020, the EPA
took final action on the risk and technology review (RTR) required by Clean Air Act (CAA)
sections 112(d)(6) and (f)(2) for the PCWP residual risk and technology review (2020 RTR). The
EPA is proposing in this action to amend the NESHAP to ensure that all emissions of HAP from
sources in the source category are regulated.
In setting standards for major source categories under CAA section 112(d), the EPA has
the obligation to address all HAP listed under CAA section 112(b) emitted by the source
category. In the Louisiana Environmental Action Network v. EPA (LEAN) decision issued on
April 21, 2020, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) held
that the EPA has an obligation to address unregulated emissions from a major source category
when the Agency conducts the 8-year technology review of a maximum achievable control
technology (MACT) standard that previously left such HAP emissions unregulated.
In 2007, the D.C. Circuit remanded and vacated portions of the 2004 NESHAP
promulgated by the EPA to establish MACT standards for the PCWP source category. NRDC v.
EPA, 489 F.3d 1364 (D.C. Cir. 2007). In the 2004 NESHAP, the EPA had concluded that the
MACT standards for several process units were represented by no emission reduction (or "no
control" emission floors). The "no control" MACT conclusions were rejected because, as the
court clarified in a related decision, the EPA must establish emission standards for listed HAP.
489 F.3d 1364, 1371, citing Sierra Club v. EPA, 479 F.3d 875 (D.C. Cir. 2007). The EPA
acknowledged in the preamble to the proposed RTR (at 84 FR 47077-47078, September 6, 2019)
that there are unregulated sources with "no control" MACT determinations in the PCWP source
category, and the EPA stated plans to address those units in a separate action subsequent to the
RTR.
This proposed rule responds to the partial remand and vacatur of the 2004 NESHAP, and
to the petition for reconsideration of the 2020 technology review and addresses currently
unregulated emissions of HAP from process units in the PCWP source category, including
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lumber kilns. Six HAP compounds (acetaldehyde, acrolein, formaldehyde, methanol, phenol,
propionaldehyde), defined as "total HAP" in the PCWP NESHAP, represent over 96 percent of
the HAP emitted from the PCWP source category. In addition to total HAP, emissions estimates
collected for the 2020 RTR indicated that unregulated HAP are present in the PCWP source
category as a result of combustion in direct-fired dryers, including: non-mercury (non-Hg) HAP
metals, mercury (Hg), hydrogen chloride (HC1), polycyclic aromatic hydrocarbons (PAH),
dioxin/furan (D/F). There are also emissions of methylene diphenyl diisocyanate (MDI) from
processes that use MDI resins and coatings. The EPA is proposing amendments establishing
standards that reflect MACT for these pollutants emitted by process units that are part of the
PCWP source category, pursuant to CAA sections 112(d)(2) and (3) and, where appropriate,
CAA section 112(h).
1.2 Description of the Source Category and Affected Industries
The PCWP industry consists of facilities engaged in the production of PCWP or kiln-
dried lumber. Plywood and composite wood products are manufactured by bonding wood
material (fibers, particles, strands, etc.) or agricultural fiber, generally with resin under heat and
pressure, to form a structural panel or engineered wood product. Plywood and composite wood
products manufacturing facilities also include facilities that manufacture dry veneer and lumber
kilns located at any facility. Plywood and composite wood products include (but are not limited
to) plywood, veneer, particleboard, oriented Strandboard (OSB), hardboard, fiberboard, MDF,
laminated strand lumber, laminated veneer lumber (LVL), wood I-joists, kiln-dried lumber, and
glue-laminated beams. There are currently 223 major source facilities that are subject to the
PCWP NESHAP, including 99 facilities manufacturing PCWP and 124 facilities producing kiln-
dried lumber. A major source of HAP is a plant site that emits or has the potential to emit any
single HAP at a rate of 9.07 megagrams (10 tons) or more, or any combination of HAP at a rate
of 22.68 megagrams (25 tons) or more per year from all emission sources at the plant site.
The affected source under the PCWP NESHAP is the collection of dryers, refiners,
blenders, formers, presses, board coolers, and other process units associated with the
manufacturing of PCWP. The affected source includes, but is not limited to, green end
operations, refining, drying operations (including any combustion unit exhaust stream routinely
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used to direct fire process unit(s)), resin preparation, blending and forming operations, pressing
and board cooling operations, and miscellaneous finishing operations (such as sanding, sawing,
patching, edge sealing, and other finishing operations not subject to other NESHAP). The
affected source also includes onsite storage and preparation of raw materials used in the
manufacture of PCWP, such as resins; onsite wastewater treatment operations specifically
associated with PCWP manufacturing; and miscellaneous coating operations. The affected
source includes lumber kilns at PCWP manufacturing facilities and at any other kind of facility.
The NESHAP contains several compliance options for process units subject to the
standards: (1) installation and use of emissions control systems with an efficiency of at least 90
percent; (2) production-based limits that restrict HAP emissions per unit of product produced;
and (3) emissions averaging that allows control of emissions from a group of sources collectively
(at existing affected sources). These compliance options apply for the following process units:
fiberboard mat dryer heated zones (at new affected sources); green rotary dryers; hardboard
ovens; press predryers (at new affected sources); pressurized refiners; primary tube dryers;
secondary tube dryers; reconstituted wood product board coolers (at new affected sources);
reconstituted wood product presses; softwood veneer dryer heated zones; rotary strand dryers;
and conveyor strand dryers (zone one at existing affected sources, and zones one and two at new
affected sources). In addition, the PCWP NESHAP includes work practice standards for dry
rotary dryers, hardwood veneer dryers, softwood veneer dryers, veneer redryers, and group 1
miscellaneous coating operations (defined in 40 CFR 63.2292).
The 2020 residual risk review found that the risk associated with air emissions from the
PCWP manufacturing industry (including lumber kilns) are acceptable and that the current
PCWP NESHAP provides an ample margin of safety to protect public health. In the 2020
technology review, the EPA concluded that there were no developments in practices, processes,
or control technologies that would warrant revisions to the standards promulgated in 2004. In
addition to conclusions with respect to the RTR, the 2020 action contained amendments to
remove exemptions from the standards during periods of startup, shutdown, and malfunction
(SSM). The 2020 amendments added work practices so there would be standards in place of the
former startup and shutdown exemptions for three specific events that occur during PCWP
production: safety-related shutdowns, pressurized refiner startup/shutdown, and softwood veneer
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dryer gas-burner relights. Lastly, the 2020 amendments included provisions requiring electronic
reporting and repeat emissions testing. However, the 2020 technology review did not address the
unregulated HAP emissions from PCWP facilities that the EPA is now addressing in response to
the 2007 remand of the 2004 NESHAP.
1.3 Market Failure
Many regulations are promulgated to correct market failures, which otherwise lead to a
suboptimal allocation of resources within a market. Air quality and pollution control regulations
address "negative externalities" whereby the market does not internalize the full opportunity cost
of production borne by society as public goods such as air quality are unpriced.
While recognizing that the optimal social level of pollution may not be zero, HAP, VOC,
and other pollutant emissions impose costs on society, such as negative health and welfare
impacts, that are not reflected in the market price of the goods produced through the polluting
process. For this regulatory action the goods produced are products from PCWP manufacturing
(e.g., oriented strandboard). If processes of production yield pollution that is emitted into the
atmosphere, the social costs imposed by the pollution will not be borne by the polluting firms but
rather by society as a whole. Thus, as developed from economic theory regarding the
environment, the producers are imposing a negative externality, or a social cost from these
emissions, on society. The equilibrium market price of products from plywood manufacturing
may fail to incorporate the full opportunity cost to society of consuming these products.
Consequently, absent a regulation or some other action to limit such emissions, producers will
not internalize the negative externality of pollution due to emissions and social costs will be
higher as a result. This proposed regulation will serve to address this market failure by causing
affected producers to begin internalizing the negative externality associated with HAP and other
emissions also affected by this proposal such as VOC.
1.4 Compliance Cost and Emissions Impact Estimates of Proposed Action
Table 1-1 presents the compliance costs, from the proposed amendments to the PCWP.
The compliance costs are shown as a present value (PV) and as equivalent annualized values
(EAV). More information on how PV and EAV are defined can be found in Chapter 3.
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We estimate the sum of primary and secondary impacts on emissions under the proposal
to be about 591 tons per year of HAP emission reductions and 8,051 tons per year of VOC
emission reductions. Table 3-7 contains those reductions in more detail. There are also emission
reductions (per year) in criteria pollutants of 162 tons of fine particulate matter (PM2.5), 118 tons
of nitrogen oxides (NOx). There is an emission increase of 2 tons of sulfur dioxide (SO2) due to
additional energy usage from the controls applied in the proposal cost analysis. Finally, there are
climate emission decreases per year of about 106,000 tons of carbon dioxide (CO2), 4 tons of
nitrous oxide (N2O), and 9 tons of methane (CH4). Table 3-8 contains the primary and secondary
sources changes in emissions other than for HAP and VOC.
Table 1-1 Compliance Costs for Proposed Amendments to the PCWP NESHAP for
2027-2046 (dollars in million 2021$, discounted to 2023)
3 Percent Discount Rate
7 Percent Discount Rate
PV
EAV
PV
EAV
Compliance Costs
$693
$47
$435
$41
1.5 Organization of the Report
The remainder of this report details the methodology and the results of the EIA. Chapter
2 presents a profile of the Plywood and Composite Wood Products industry. Chapter 3 describes
emissions, emissions control options, engineering costs, compliance costs of the proposal, and a
brief qualitative discussion of the benefits associated with HAP and VOC emissions reductions.
Chapter 4 presents analyses of economic impacts, impacts on small businesses, and a narrow
qualitative analysis of employment impacts. The economic impacts include estimates of annual
cost to sales calculations for all affected parent businesses and a qualitative discussion of the
potential price and output changes in response to the costs of the proposed rule. The small
business impact analysis includes estimates of annual cost to sales calculations for affected
parent small businesses and concludes that this proposal will not have a significant impact on a
substantial number of small entities (or SISNOSE). Chapter 5 contains the references for this
EIA.
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2 INDUSTRY PROFILE
The U.S. Environmental Protection Agency (EPA) is proposing amendments to the
National Emission Standards for Hazardous Air Pollutants (NESHAP) for Plywood and
Composite Wood Products (PCWP), as required by the Clean Air Act (CAA). To ensure that all
HAP emissions from sources in the source category are regulated, the EPA is proposing HAP
standards for processes currently unregulated for total HAP (including acetaldehyde, acrolein,
formaldehyde, methanol, phenol, propionaldehyde), non-mercury HAP metals, mercury (Hg),
hydrogen chloride (HC1), polycyclic aromatic hydrocarbons (PAH), dioxin/furan (D/F), and
methylene diphenyl diisocyanate (MDI). The standards the EPA is proposing include emission
limitations and work practices applicable for PCWP process units and lumber kilns located at
facilities that are major sources of HAP emissions. The PCWP NESHAP regulates hazardous air
pollutant (HAPs) from existing and new PCWP facilities that are major sources (i.e., emit 10 or
more tons per year of a single HAP or 25 or more tons per year of a combination of HAPs).
We use the profile of the PCWP industry prepared for the 2020 final PCWP risk and
technology review (RTR) to assist with the economic impact and small business analyses of this
proposed PCWP rule (U.S. EPA, 2019a). The profile provides an overview of industry
conditions, examines industry organization, and analyzes market data and trends.
We look at both supply and demand side issues in our examination of current industry
conditions. On the supply side, we describe production processes and pollution control
technologies in the industry, the types of products the industry produces, inputs and production
costs, and specialization ratios. Information on product types is helpful in understanding the
products that would be impacted by the regulation and whether these are end-use products or
intermediate products.
Description of the production processes, pollution control technologies, and costs of
production are useful for the presentation of costs in the economic impact analysis and for
determining if additional controls are justified. On the demand side, we provide an overview of
product uses, substitution possibilities, and demand elasticities. This helps in comprehending
how product demand is impacted by changes in costs and prices due to the proposed regulation.
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The supply and demand side information we present supports the economic analysis by
identifying the factors that influence and lead to shifts in market supply and demand.
As part of our examination of industry organization we often look at industry structure as
measured by market concentration; impacted PCWP facilities and their location, employment
and other characteristics; and firm characteristics such as size, ownership, vertical/horizontal
integration and financial condition. Industry organization and structure information is of vital
importance for the economic impact and small business analyses. Information on impacted
facilities helps in determining whether the impact on entities is focused on a few or spread out on
many. Firm characteristics such as the size of the parent firm that owns a facility determine how
the firm will deal with the costs of the regulation and whether the firm's market price and sales
quantities will be impacted. The classification of firms into small versus large is important for
determining the portion of firms for which the rule burden could be high and for which small
business impact analysis needs to be performed using metrics such as cost to sales ratios. Firm
ownership, integration and financial condition are other characteristics that determine the impact
of the rule on individual firms. Of course, the availability of the data on industry organization
and structure and firms is pertinent to the extent of the economic impact analysis that can be
conducted.
For our analysis of market conditions, depending on available data, we can look at the
production, consumption, prices, imports, and exports of industry products. We also analyze
available market forecasts of production and consumption of products. This is key to
understanding baseline market conditions in the industry, how consumers and firms might
respond to additional regulatory program costs, and how market level conditions could change as
a result.
For this proposal, we conducted a limited economic impact analysis that does not include
the information mentioned in this section. See Chapter 5 for more information on the economic
impact analysis.
2.1 Plywood and Composite Wood Products Industry Profile
The EPA identified facilities potentially impacted by the proposed regulation through a
2017 information collection request (ICR) (U.S. EPA, 2017c) and additional information
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regarding facility changes since 2017. This industry profile is developed for industries that will
be impacted by the regulation and comprises industries in the plywood and composite wood
source category. These industries fall under the following seven six-digit North American
Industry Classification System (NAICS) codes:
321113 Sawmills
321211 Hardwood Veneer and Plywood Manufacturing
321212 Softwood Veneer and Plywood Manufacturing
321215 Engineered Wood Member (except Truss) Manufacturing
321219 Reconstituted Wood Product Manufacturing
321999 All Other Miscellaneous Wood Product Manufacturing
The EPA surveyed potentially impacted facilities through the ICR and determined that
223 existing facilities may be impacted. Table 2-1 shows the number of existing facilities the
EPA expects to be potentially impacted by this rule by NAICS code (for 2022).
Table 2-1 Plywood and Composite Wood Product Industries Potentially Impacted by
the Proposed Regulation
NAICS Code NAICS Description Impacted Facilities
321113
Sawmills
139
321211
Hardwood Veneer and Plywood Manufacturing
2
321212
Softwood Veneer and Plywood Manufacturing
33
321215
Engineered Wood Member (except Truss) Manufacturing
11
321219
Reconstituted Wood Product Manufacturing
Total
58
FB
0
HB
4
OSB
24
PB/MDF
30
321999
All Other Miscellaneous Wood Product Manufacturing
0
Notes: Categorization into NAICS based on ICR responses. Numbers do not sum to 223 because some facilities produce products
under multiple NAICS categories. While NAICS 321999 is in the PCWP source category, we did not identify any facility
located in this source category based on the ICR responses. Use of these NAICS codes reflects the 2022 NAICS version.
Here, FB is fiberboard, HB is hardboard, OSB is oriented strandboard, PB is paperboard, and MDF is medium density fiberboard.
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Sources: U.S. EPA, PCWP ICR Data (U.S. EPA, 2017c). US Census. County Business Patterns (2016).
https://www.census.gov/programs-survevs/cbp.html.
The number of impacted facilities is high for NAICS 321113 (Sawmills), NAICS 321212
(Softwood Veneer and Plywood Manufacturing), NAICS 321219 (Reconstituted Wood Product
Manufacturing) and NAICS 321215 (Engineered Wood Member (except Truss) Manufacturing.
All product categories that are impacted by the regulation are included in the profile subject to
availability of data. However, in some sections the discussion focuses on sawmills, softwood
veneer and plywood and reconstituted wood product categories since the number of impacted
facilities in these categories is high, and to a lesser extent engineered wood member products.
While there are 223 existing facilities expected to be subject to this proposal, there are
six projected new facilities that are expected to be subject to the proposal (that is, expected to be
subject to the proposal within 5 years of promulgation). These facilities and their ultimate parent
companies are listed in the economic and small business spreadsheet for this proposal.1
2.2 The Supply Side
This section describes the supply of products covered by the PCWP proposal. The
production processes for the four NAICS codes (321113, 321212, 321219 and 321215) with
relatively high number of facilities impacted by the rule are outlined. The products, by-products,
and co-products of softwood veneer and plywood, reconstituted wood product and engineered
wood member product categories are presented. This section also includes the costs of
production for all impacted industries. In addition, industry shipments and inputs such as
materials and fuels and electricity are examined. Costs of these and other inputs such as payroll
are presented.
2.2.1 Production Process
This subsection describes the production processes of three plywood and composite wood
industries that have a high number of facilities impacted by regulation: plywood and veneer;
reconstituted wood products such as medium density fiberboard (MDF), hardboard (HB),
1 This spreadsheet PCWP_Small_Business_Worksheet.xlsx can be found in the docket for the proposal. Docket ID
No. EPA-HQ-OAR-2016-0243.
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oriented strandboard (OSB), particleboard (PB); and structural wood members. It also includes a
description of the production process of sawmills, an industry that has the highest number of
facilities subject to the PCWP NESHAP.
2.2.1.1 General Considerations for Plywood and Composite Wood Product Manufacturing
The PCWP NESHAP covers HAP emissions from process units used to manufacture
PCWP such as dryers, presses, board coolers and other process units. Boilers for onsite steam
production and coating processes lead to further emissions in the manufacturing of PCWP, but
these processes are outside of the PCWP source category (i.e., are subject to separate NESHAP).
Air pollution controls used to reduce HAP emissions from PCWP processes include
regenerative thermal oxidizers (RTOs), regenerative catalytic oxidizers (RCOs), incineration of
exhaust in an onsite combustion unit such as a boiler (referred to as "process incineration"), and
biofilters. Wet electrostatic precipitators (wet ESPs) or other particulate matter (PM) controls
may be used upstream of HAP control devices to prevent plugging of the HAP control with
sticky particulates.
2.2.1.2 Plywood and Veneer
According to the Engineered Wood Association (formerly the American Plywood
Association, hereafter referred to by the acronym APA), "plywood is manufactured from sheets
of cross-laminated veneer and bonded under heat and pressure with durable, moisture-resistant
adhesives" (APA, 2010). Because the production process has not changed significantly since
2004, we relied on the EPA's 2004 report for the details of the production process, with updated
assessments of the American plywood industry where appropriate.
The production process starts with logs being delivered to a facility, where they are
sorted, debarked, and cut into peeler blocks. These blocks are heated by steaming or soaking in
hot water, or spraying with hot water, or through a combination of these methods. Once the
blocks are heated, they are sent to a veneer lathe that peels the veneer from the block. For
softwood uses, the peeled veneer is thicker than that for hardwood and decorative plywood uses.
The peeled veneer is transported to a clipping station to be clipped. The next step is the drying of
the wet clipped veneer before adhesives are applied and the panels are pressed and finished.
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Dryers. There are two types of dryers used in softwood plywood mills. The first type is
roller resistant dryers that are heated by forced air. In the older roller dryers, air was circulated
through a zone that ran parallel to the veneer. Newer plants use jet dryers in which a current of
air is directed through small tubes on the surface of the veneer. Second, there are "platen" dryers,
heated by steam. Steam could be generated by a separate boiler and circulated through internal
coils that are in contact with the air of veneer dryers. Veneer dryers can also be heated directly
by combustion gases from a gas-fired burner located inside the dryer or combustion gases from a
gas-fired burner located outside the dryer. After veneer is dried, it is sorted and graded for
different uses.
Adhesives, Adhesive Applications, and Layup. The next step in plywood
manufacturing is the application of adhesives to the veneer followed by layup, where the veneer
sheets are placed together to form the plywood panel before pressing. There are a number of
adhesive application systems, including hard rolls, sponge rolls, curtain coaters, sprayers, and
foam extruders. The most widely used system is an air or airless spray system. The primary
adhesive used in softwood plywood manufacturing is phenol-formaldehyde (PF). Soy and other
non-formaldehyde adhesives have found limited application in plywood manufacturing. The
viscosity of the adhesive is modified at plywood mills by mixing extenders, fillers, catalysts, and
caustic substances with the resins, making the adhesive easier to apply at the mill and lowering
costs. The price of PF adhesives is connected to petroleum prices (Consulting, 2012). Typical
layups orient alternating veneer sheets at 90-degree angles, relative to the sheet's grain direction.
The opposing orientation of the veneer sheets balances the panel's strength properties and
stabilizes the panel by reducing shrinking and swelling in response to humidity changes.
Presses. Once the adhesives have been applied, the panels are pressed to cure the glue
layer. First, a cold press at low pressure helps the wet adhesive "tack" the veneers together and
prevents the veneers from shifting during the process of loading them into a hot press. The final
pressing of the panels happens in a hot press, where the adhesive is cured.
Finishing. The pressed plywood panels are finished using stationary circular saws that
trim the plywood to produce square sheets and cut the panel to commercial dimensions,
commonly 4 feet by 8 feet. Pneumatic collectors remove the sawdust from trimming operations.
Some of the trimmed sheets are sanded through enclosed automatic sanders. The sawdust from
2-11
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trimming and sanding operations is burned as fuel or sold to reconstituted panel plants for use as
a raw material.
2.2.1.3 Particle, Strand, and Fiber Composites
The products under this title fall under NAICS code 321219 Reconstituted Wood Product
Manufacturing. For the descriptions of the production processes under this section, we have
relied on EPA's 2004 report. The description of the production process has been updated where
appropriate using more updated references. The impacted facilities in this NAICS code
manufacture the following products:
Particleboard (PB) Medium Density Fiberboard (MDF)
Oriented Strandboard (OSB) Hardboard (HB)
The raw material for the above products is obtained by flaking or chipping logs or by
purchasing trim products from other wood processors (e.g., softwood plywood or lumber mills).
The flaked or chipped wood is dried and an adhesive is applied. The wood is then formed into a
mat of wood particles, fibers, or strands. A press is used to press the mat under heat and pressure
to cure the adhesive and bond the panel. The bonded panel is cooled and processed into specific
width, length, and surface for different products. Following are descriptions of production
processes for specific products.
Particleboard (PB). Manufacturers produce PB by reducing wood materials into small
particles. Then, they apply adhesive to the particles and form a mat which is loaded into a hot
press. Heat and pressure are then applied to cure the adhesive and create a panel product.
Facilities can produce PB using agricultural residues such as wheat straw, but there is only a
limited quantity of this agricultural board produced in the U.S.
Green or dry wood residues are the raw materials or "furnish" used to manufacture PB.
Green residues are planer shavings from green lumber and green sawdust. Dry process residues
are planer shavings from kiln-dried lumber or shavings from sawdust, sander dust, and plywood
trim. The first step is to refine the wood residues into particles using atmospheric refiners and
classify them according to their size.
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The next step is to dry the furnish to a low moisture content. This is done to account for
the moisture gained when the furnish is blended with resins and additives. In the United States,
the most common dryers are rotating drum dryers that require one to three passes to dry the
furnish. Some dryers are directly heated natural gas or by dry wood fuel suspension burners
while others are steam-heated indirectly by boilers using wood fuel, natural gas or oil.
Once the furnish is dried, it is blended with adhesives, wax, and other additives. These
adhesives and additives are applied in a blender. Next, the blended mixture is formed into mats
using an air or mechanical system to distribute the furnish onto a moving tray, belt, or screen.
The formed mats are hot pressed to cure the resin and densify the mat. After the hot press, the
panels are placed in a board cooler until they are cool enough for finishing.
The primary steps in particleboard finishing involves stacking, grading, trimming, and
sanding. The secondary steps in finishing include filling, painting, laminating, and edge finishing
and are done in the particleboard plant directly or downstream by cabinet and furniture
manufacturers or laminators.
Oriented Strandboard (OSB). According to the APA's December 2010 guide, OSB is a
structural engineered wood panel with performance characteristics similar to plywood. It is
manufactured from rectangular wood strands that are made from debarked logs heated in soaking
ponds and sliced into strands. The green strands are stored in wet bins and dried using a triple-
pass dryer, a single-pass dryer, or a conveyor strand dryer. Once the strands are dried, they are
blended with adhesives. Separate rotating blenders and different resin formulations are used for
the face and core strands. Typically, PF adhesives are used in the face and methylene diphenyl
diisocyanate (MDI) adhesives are used in the core, but either adhesive may be used throughout
the panel. Next, the strands are formed into mats, arranged in face and core layers that are
oriented lengthwise at right angles to one another, mimicking the orientation used in plywood.
Next, the mats are transported by conveyor belt to a hot press. The mats are then compressed
under heat and pressure to cure the resin and bond the strands together to form structural-use
OSB panels.
Fiber Composites. Fiber Composites include the following products:
Medium Density Fiberboard (MDF)
Hardboard (HB)
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The first step in the manufacturing of fiber composites is the refining of wood chips or
other raw material in a pressurized refiner, which shears the chips between rotating disks into
wood fibers. This process is typically enhanced with water soaking and steam. Once the raw
material is refined, the next steps depend on whether it is a wet or dry process. The dry process is
used for some hardboards and MDF. For the dry process, the adhesive is applied to the wood
fibers in a blowline while they are dried in a tube dryer. After drying the fibers are formed into a
mat for pressing.
The wet process is used for high-density hardboard. Wet processes sometimes lack
additional binding agents and water is used to distribute fibers in a mat, leading to a natural
bonding of the wood fibers. The wet fiber mats may be dried in a conveyor-type dryer prior to
pressing. Hardboard is pressed in multi-open presses heated by steam.
The mechanical performance of both wet and dry process hardboards is sometimes
increased through heat treatments involving dry heat, tempering by the addition of oil or
humidification via the addition of water.
2.2.1.4 Engineered Wood Products
Engineered wood products include the following products:
Glue laminated timber (Glulam)
Structural Composite Lumber
I-Joists
Each product is produced to meet a specific structural requirement for wood-based
construction. The following are descriptions of production processes for these products.
Glue-Laminated Timber (Glulam). Glulam is a stress-rated engineered wood beam composed
of wood laminations, or "lams", that are bonded together with durable, moisture-resistant
adhesives. The grain of the laminations runs parallel with the length of the member. Glulam is
used in exposed applications such as vaulted ceilings and other designs requiring large open
spaces. In homes, it is used in ridge beams, garage door headers, floor beams, and large
cantilevered beams. In commercial construction, glulam is used in large, flat roof systems and
complex arches. Glulam also can be used in demanding environments like bridges.
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I-Joists. Wood I-joists are a family of engineered wood products consisting of a web made from
a structural panel such as plywood or OSB which is glued between two flanges made from sawn
lumber or LVL. They are used in residential and commercial buildings as floor joists, roof joists,
headers, and for other structural applications.
Structural Composite Lumber. According to the APA's December 2010 guide, structural
composite lumber includes a family of engineered wood products. These products are
manufactured by gluing dried and graded wood veneers or strands with moisture-resistant
adhesives. The gluing creates blocks of material (billets) that are cured in a heated press.
Examples of structural composite lumber include the following products:
Laminated Veneer Lumber (LVL). LVL is produced by bonding thin wood veneers
together in a large billet so that the grain of all veneers is parallel to the long
direction. The LVL billet is then sawn to desired dimensions depending on the end-
use application. Because LVL is made with scarfed or lapped jointed veneers, LVL is
available in lengths longer than conventional lumber.
Parallel Strand Lumber (PSL). PSL is manufactured from veneers clipped into long
strands laid in parallel formation and bonded together with an adhesive to form a
finished structural section. The length-to-thickness ratio of the strands in PSL is
around 300. Like LVL and glulam, this product is used for beam and header
applications where high bending strength is needed. PSL is also frequently used as
load-bearing columns.
2.2.1.5 Sawmills
Sawmills process logs by sorting and debarking, sawing, sorting and grading, drying, and
regrading, then surfacing. The processes of sawing can include edging, trimming and planning
(Gopalakrishnan, Mardikar, Gupta, Jalali, & Chaudhari, 2012). The processing does not always
involve a uniform sequence and various components of the processing may be done at different
times.
There have been a number of innovations in the log-sawing process to reduce waste and
to improve efficiency. Many of these innovations are connected with technologies that can be
automatically controlled by computer. These technologies include lasers, scanners, cameras to
track individual logs, computer three-dimensional processing to analyze the camera pictures,
sensors, and metal detectors (Hoard, 2017). Various technologies can also be combined to
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analyze logs for best use as finished products in different market segments, via "merchandizer"
machines (OFIC, 2016). An example of the analysis is automatic grading, which is now
common. Other changes include the use of ultrasound and taking advantage of leftover particles
as fuel (Woodlands, 2014).
Freshly sawn lumber has a high moisture content that must be reduced for many lumber
end uses. Lumber kilns are used to dry wood to reduce mildew and mold growth. Most lumber
kilns are batch units, however continuous dry kilns are also used in the Southeast.
2.2.2 Products, By-Products and Co-Products
The wood products industry produces a large variety of products. These products include
items used for residential and nonresidential construction, both indoors and outdoors. Their uses
include stairs, underlayment for floors, roofing, siding, shelving, and decking. The products are
also used for furniture (Carli, 1986). Table 2-2 shows three 6-digit NAICS codes with high
numbers of impacted facilities and the specific industry products they pertain to.
Table 2-2 NAICS Codes and Products
NAICS NAICS Description Example Products
321212 Softwood Veneer and
Panels, softwood plywood
Prefinished
Plywood
Plywood, faced with non-wood
softwood
materials, softwood
plywood
Plywood, softwood faced
Softwood
plywood
composites
Softwood veneer
or plywood
Veneer mills,
softwood
321215 Engineered Wood Member
Arches, glue laminated or pre-
Laminated
(except Truss)
engineered wood
veneer lumber
Fabricated structural wood
(LVL)
members (except trusses)
Lumber, parallel
Finger joint lumber
strand
I-joists, wood, fabricating
Structural
Laminated structural wood
members, glue
members (except trusses)
laminated or pre-
engineered wood
Timbers,
structural, glue
laminated or pre-
engineered wood
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321219 Reconstituted Wood Product
Board, bagasse
Compression modified wood
Densified wood
Medium density
fiberboard
(MDF)
Fiberboard
Flakeboard
Hardboard
Lath, fiber
Oriented
strandboard
(OSB)
Particleboard
Reconstituted
wood panels
Reconstituted
wood sheets and
boards
Waferboard
Source: US Census. 2012 NAICS. https://www.census.gov/eos/www/naics/
In addition to wall siding, sheathing, and roof decking, products in the softwood veneer
and plywood category (321212) are also used for concrete formboards (which ensure that poured
concrete takes the shape desired, such as straight planes for a driveway), floors, and containers
(such as boxes). Products in the engineered wood members category (321215) are used for
roofing, walls, interior parts of construction, and window frames. The products in the
reconstituted wood product manufacturing category (321219) compete with those in the
softwood veneer and plywood category to some extent, particularly in the case of oriented
strandboard (OSB). But the products in this category, such as low density fiberboard (also known
as insulation board) have other uses, such as ceiling tiles and sound absorption boards (Berglund
& Rowell, 2005).
Firms in specific industry categories do primarily specialize in that industry category's
products. For example, if a firm in the softwood veneer and plywood category mostly produces
softwood plywood and veneer, it can be considered to be the primary product for the firm. But
that firm may also produce other products, such as particleboard, to a lesser degree. These
products would be considered "secondary." The primary products specialization ratio displayed
below is the ratio of total primary product shipments to total product shipments for all firms in
the product category. The coverage ratio is the ratio of primary products shipped by firms in a
particular industry category to the total shipments of all products of that type shipped by all
establishments in all industries, wherever classified. So, if a furniture manufacturer, whose
primary product was wood furniture, made a small amount of softwood veneer and plywood, as a
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secondary product, the coverage ratio for softwood plywood and veneer would include its
shipments in the denominator.
Table 2-3 shows the specialization and coverage ratios for all NAICS codes covered in
our analysis, through 2012. It is relevant to note that these figures are ratios of current dollar
values of products shipped, and not ratios of physical quantities. Since the products should be
uniform, this makes little difference. However, there may be a small discrepancy because of the
exclusion of miscellaneous receipts (U.S. Census Bureau, 2019). As Table 2-3 illustrates, except
for engineered wood member manufacturing in 2012, all industries considered in our analysis
have specialization ratios and coverage ratios above 85 percent. This implies that most firms in
the wood products industry are highly specialized and account for most of the manufacturing of
their primary products. The high specialization ratio and lower coverage ratio for the engineered
wood member product category in 2012 implies that firms in this industry remain specialized in
the production of these products but the manufacturing of these products is also being spread out
to other industries.
Table 2-3 Specialization and Coverage Ratios (%), 1997 - 2012
NAICS
Description
1997
2002
2007
2012
321113
Sawmills
Primary Products Specialization Ratio
96%
96%
96%
95%
Coverage Ratio
95
96
97
96
321211
Hardwood Veneer and Plywood Manufacturing
Primary Products Specialization Ratio
95
95
96
92
Coverage Ratio
94
93
99
94
321212
Softwood Veneer and Plywood Manufacturing
Primary Products Specialization Ratio
88
91
97
90
Coverage Ratio
95
93
96
94
321215
Engineered Wood Member (except Truss) Manufacturing
Primary Products Specialization Ratio
95
97
98
98
Coverage Ratio
96
92
95
77
321219
Reconstituted Wood Product Manufacturing
Primary Products Specialization Ratio
97
97
99
D
Coverage Ratio
97
98
99
99
321999
All Other Miscellaneous Wood Product Manufacturing
Primary Products Specialization Ratio
94
92
99
97
Coverage Ratio
88
92
95
93
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Notes: D = Withheld to avoid disclosing data for individual companies. Sources: US Census. Economic Census (1997, 2002,
2007, and 2012). https://www.census.gov/programs-survevs/economic-census.html
In general, the specialization ratios have been relatively stable. Exceptions are softwood
veneer and plywood manufacturing, for which specialization has fallen in recent years, and non-
upholstered wood household furniture manufacturing, which has recently moved into other
products besides furniture. Even more dramatic is the coverage ratio for engineered wood
member manufacturing. Other primary producers besides those in that primary product category
have begun to produce engineered wood member products.
2.2.3 Costs of Production
Table 2-4 provides information on the overall value of shipments (VOS), costs, and their
components, by NAICS codes, for the years 2012 to 2016 (the last year for which complete and
usable data are available). These figures have been converted into 2016 dollars, to provide a
more complete basis for comparison. As would be expected, the cost of materials is the dominant
cost for each industry category. But the share of materials cost varies considerably from one
industry category to another. For hardwood veneer and plywood manufacturing, materials cost is
over 61 percent of industry shipments and this percentage is relatively consistent. This is also the
approximate percentage for softwood veneer and plywood and engineered wood members. For
sawmills, the percentage varies but is about 54 percent, and the percentage for non-upholstered
furniture manufacturing is considerably less.
Industry shipments have risen for most categories except softwood veneer and plywood
manufacturing and non-upholstered furniture manufacturing. These are among the industry
categories that have been affected by competition. OSB production has been displacing softwood
plywood production for several decades and imports have affected the non-upholstered furniture
segment. Canadian-produced lumber, engineered wood products, plywood and composite panels
constitute large imports into the U.S. market.
Certain features are noticeable across all industry categories. In each case except
engineered wood member manufacturing and miscellaneous wood product manufacturing, real
fuels and electricity cost has declined over time. Even for engineered wood member
manufacturing, this cost has declined in real terms since 2014, and it has declined as a percentage
2-19
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of industry shipments in miscellaneous wood product manufacturing (from about 2.7 percent to
2.5 percent). The ratio of costs to shipments for each industry category has been relatively stable
or has fallen in these years, as the industry has become more efficient. The one partial exception
to this statement is softwood veneer and plywood manufacturing, where sales have fallen (while
reconstituted wood product manufacturing sales have risen, showing the shift in product
demand). But even for this category, the rise is limited, from 75 percent to 79 percent.
Table 2-4 Summary of Annual Costs and Shipments, 2012-2016 (Thousands 2016
Dollars3)
2012
2013
2014
2015
2016
Sawmills (NAICS 321113)
Industry Shipments
$20,882,096
$22,493,398
$22,610,518
$21,936,618
$22,792,206
Cost of Materials
12,448,565
12,691,259
12,150,281
12,316,079
12,301,952
Fuels & Electricity
647,315
646,644
660,515
693,346
674,583
Payroll
2,923,200
2,949,321
2,922,733
3,107,863
3,206,996
Ratio of Costs to Shipments
77%
72%
70%
73%
71%
Hardwood Veneer and Plywood Manufacturing (NAICS 321211)
Industry Shipments
2,815,464
2,983,879
3,187,468
3,272,149
3,139,303
Cost of Materials
1,646,512
1,731,587
1,954,186
2,018,238
1,919,834
Fuels & Electricity
61,638
66,239
63,326
60,481
55,439
Payroll
488,713
486,091
489,066
511,441
507,081
Ratio of Costs to Shipments
78%
77%
79%
79%
79%
Softwood Veneer and Plywood Manufacturing (NAICS 321212)
Industry Shipments
4,692,129
4,957,280
4,586,389
4,354,354
3,880,878
Cost of Materials
2,681,231
2,754,416
2,528,342
2,439,332
2,265,611
Fuels & Electricity
150,088
151,537
148,074
138,448
132,887
Payroll
693,508
692,466
668,859
680,015
649,504
Ratio of Costs to Shipments
75%
73%
73%
75%
79%
Engineered Wood Member (except Truss) Manufacturing (NAICS 321215)
Industry Shipments
1,002,442
1,457,609
1,823,908
2,009,350
1,752,719
Cost of Materials
683,746
1,020,686
1,226,930
1,240,382
1,065,027
Fuels & Electricity
18,586
22,905
30,042
28,191
22,897
Payroll
134,139
157,908
172,385
195,757
173,744
Ratio of Costs to Shipments
83%
82%
78%
73%
72%
Reconstituted Wood Product Manufacturing (NAICS 321219)
Industry Shipments
7,076,298
7,838,259
6,721,748
6,780,320
7,545,293
Cost of Materials
3,629,412
3,753,577
3,655,678
3,614,046
3,501,845
Fuels & Electricity
434,288
442,872
438,934
406,118
389,269
Payroll
735,715
748,348
726,801
750,864
776,782
Ratio of Costs to Shipments
68%
63%
72%
70%
62%
All Other Miscellaneous Wood Product Manufacturing (NAICS 321999)
Industry Shipments 5,636,492 5,655,235 5,820,377 6,198,479 6,614,778
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2012
2013
2014
2015
2016
Cost of Materials
Fuels & Electricity
Payroll
Ratio of Costs to Shipments
2,901,274
150,990
934,149
71%
2,894,690
160,487
919,005
70%
2,887,348
158,504
922,981
68%
3,125,685
175,814
1,032,715
70%
3,299,042
164,463
1,153,540
70%
Note: aNAICS 321 Codes converted to 2016 dollars withNAICS 321 PPI converted to 2016 dollars withNAICS 3371 PPI.
Source: US Census. Annual Survey of Manufactures (2014, 2015, and 2016). https://www.census.gov/programs-
sur ve v s/a sm. html
Figure 2-1 and Figure 2-2 show how shipments have changed year by year for the softwood
plywood and veneer and reconstituted wood products categories. These figures do show the shift
in demand, but they also show the relative stability of the cost components.
Figure 2-1 Softwood Plywood and Veneer Value of Shipments and Production Costs,
2012-2016
~ 5,000,000
iH
O
4,000,000
O 3,000,000
O
2,000,000
T3
C
« 1,000,000
3
o
2012
¦ VOS-Total Costs
X Payroll
¦ Fuels & Electricity
Cost of Materials
Note: Total costs in this figure is the sum of payroll, fuels & electricity, and material costs.
The blue region in the figure represents value of shipments minus total costs.
Source: Annual Survey of Manufactures. 2014, 2015, and 2016. https://www. census, gov/programs-
survevs/asm.html
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Figure 2-2 Reconstituted Wood Products Value of Shipments and Production Costs,
2012-2016
¦ VOS - Total Costs
K Payroll
¦ Fuels & Electricity
¦ Cost of Materials
o
(N
T3
C
OJ
crt
3
O
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
2012
2013
2014
Year
2015
2016
Note: Total costs in this figure is the sum of payroll, fuels & electricity, and material costs.
The blue region in the figure represents value of shipments minus total costs.
Source: Annual Survey of Manufactures. 2014, 2015, and 2016. httDs://www.census.gov/Drograms-survevs/asm.html
The figures above do not reflect any taxes, interest, or depreciation, and are not
equivalent to Earnings Before Interest, Taxes, and Depreciation and Amortization (EBITDA)
statements. But they are a rough guide to the profitability of the various industry categories and
suggest that the softwood plywood and veneer firms are operating on slimmer margins than are
the firms in the reconstituted wood products category. Table 2-5 and Table 2-6, and Figure 2-3
and Figure 2-4 go into more detail about the exact nature of the materials consumed for softwood
plywood and veneer and reconstituted wood products industries. In each of the Tables and
Figures, the dollar values are nominal (2012) figures.
Table 2-5 Materials Consumed by Kind for Softwood Plywood and Veneer, 2012
(Nominal Dollars)
Materials Consumed
Delivered Cost ($1000)
% of Total Materials
Stumpage cost (cost of timber, excluding land, cut and
consumed at same establishment)
$180,280
7.5%
Hardwood logs and bolts
D
D
Softwood logs and bolts
765,445
31.9
Hardwood veneer
10,677
0.4
Softwood veneer
558,801
23.3
Glues and adhesives
175,121
7.3
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All other materials
D
D
TOTAL
2,396,879
100
Note: D = Withheld to avoid disclosing data for individual companies.
Source: US Census. Economic Census (2012). https://www.census.gov/programs-survevs/economic-census.html
Figure 2-3 Materials Consumed by Softwood Plywood and Veneer Products, 2012
Softwood logs
and bolts
31.9%
Stumpage cost
(cost of timber,
excluding land,
cut and
consumed at
same
establishment)
7.5%
All Other
Materials
29.5%
Glues and
adhesives
7.3%
Note: All other materials include hardwood logs and bolts.
Source: US Census. Economic Census (2012). https://www.census.gov/programs-surveYs/economic-census.html
Timber and veneer make up over 63 percent of the material costs for this category. Glue and
adhesive costs are 7.3 percent.
Table 2-6 Materials Consumed by Kind for Reconstituted Wood Products, 2012
(Nominal Dollars)
Materials Consumed
Delivered Cost ($1000)
% of Total Materials
Logs and bolts
$179,307
5.6%
Pulpwood
364,968
11.4
Chips, slabs, edgings, sawdust, and other wood waste, and
307,126
9.6
planer shavings
Hardwood, MDF, and particleboard
397,879
12.4
Paints, varnishes, stains, lacquers, shellacs, japans, enamels.
41,641
1.3
and allied products
Adhesives and resins
805,276
25.1
Petroleum wax
121,049
3.8
Overlays, vinyl and paper
180,738
5.6
Materials, ingredients, containers, and supplies, nsk
363,759
11.3
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Materials Consumed
Delivered Cost ($1000)
% of Total Materials
Cost of all other materials and components, parts, containers.
444,402
13.9
and supplies consumed
TOTAL
3,206,145
100
Note: nsk = Not specified by kind.
Source: US Census. Economic Census (2012). https://www.census.gov/programs-survevs/economic-census.html
For the reconstituted wood products category, timber costs are much less important, and
processed wood costssuch as pulpwood, particleboard, and wood wasteare much more
important. Figure 2-4 gives a visual sense of how these components affect cost.
Figure 2-4 Materials Consumed by Reconstituted Wood Product Producers, 2012
Chips, slabs,
edgings, sawdust,
and other wood
waste, and planer
shavings
9.6%
Hardwood, MDF,
and Particleboard
12.4%
Pulpwood
11.4%
Logs and bolts _
5.6%
Cost of all other-'
materials and
components,
parts, containers,
and supplies
consumed
13.9%
Paints, varnishes,
stains, lacquers,
shellacs, japans,
enamels, and
allied products
30/
0/0 _ Adhesives and
Resins
25.1%
Petroleum wax
3.8%
Materials,
ingredients,
containers, and
supplies, nsk
11.3%
Overlays, vinyl and
paper
5.6%
Source: US Census. Economic Census (2012). https://www.census.gov/programs-survevs/economic-census.html
The cost for adhesives and resins, as well as paints and other allied products and petroleum wax,
are a major part of product costs for this category at 30.2 percent.
2.3 The Demand Side
2.3.1 Product Characteristics
The key characteristics that are relevant to wood product consumption include strength,
durability, the particular size and thickness desired, and quality of the product. Plywood and
OSB have similar strength and durability under normal conditions, but have different pros and
2-24
-------
cons in other ways. OSB is generally less expensive than plywood and can be made from smaller
diameter trees. OSB is more popular than plywood in the U.S., but less popular elsewhere.
The adhesives and bonding agents also remain important in wood durability and strength.
These have been described in detail by (Frihart & Hunt, 2010). The major change in recent years
has been concern about the carcinogenic effects of the agents in question. In particular, in 2019,
a more stringent rule prepared under the Toxic Substances Control Act (TSCA) for
formaldehyde use in manufactured wood products is scheduled to come into effect (EPA, 2019).
The rule specifically exempts structurally engineered wood products, such as prefabricated wood
I-joists, wood structural panels, and other structural engineered wood products, such as
laminated veneer lumber (APA, 2017).
Standards for performance of wood products continue to be provided by a number of
organizations, including APA, the Composite Panel Association (CPA), American Hardboard
Association, and others. ASTM International (previously the American Society for Testing and
Materials) is also involved in setting standards (ASTM, 2019).
2.3.2 Consumers and Uses
Howard and Liang in their 2017 review of U.S. forest products (James L Howard,
McKeever, & Liang, 2017) offer some information on industry output for PCWP. These data are
reported in Table 2-7, Figure 2-5, and Figure 2-6. Output of structural panels that includes
softwood plywood and OSB panels goes mainly to the construction sector and particularly to
new residential construction and repair and remodeling. Only 7 percent of structural panels are
used in the manufacturing sector part of which goes to furniture and part goes to other
manufacturing. The other category is made up primarily of packaging and shipping and some
other uses. The output for nonstructural panels that includes particleboard, MDF, insulation
board, hardboard, and non-coniferous plywood is more evenly split between construction and
manufacturing. The other category for nonstructural panels is made up of limited packaging and
shipping and more of other uses.
Table 2-7 Consumption of Industry Outputs, 2017
Description
Construction
Manufacturing
Other
Structural Panels
86%
7%
7%
2-25
-------
Nonstructural Panels
45%
44%
11%
Notes: Structural Panels include Softwood Plywood and OSB.
Nonstructural Panels include MDF> particleboard, insulation board, hardboard and non-coniferous plywood.
The 2017 numbers are forecasts which are quite similar to the actual 2015 data presented by Howard and Liang (James L Howard
& Liang, 2019).
Source: (James L Howard & Liang, 2019).
The major use of structural panel products is for construction activities. Panel products
such as plywood and OSB may be used for floor systems, exterior walls, roofing, and exterior
siding. Figure 2-5 shows the industry outputs by percentage for structural panels.
Figure 2-5 Industry Outputs for Structural Panels, 2017
Structural Panels
Construction
86%
Manufacturing
7%
Source: (James L Howard & Liang, 2019).
2-26
-------
rigure 2-6 Industry Outputs for Nonstructural Panels, 2017
/Manufacturing
44%
45% 11%
Source: James L Howard and Liang (2019).
Figure 2-6 shows the industry outputs by percentage for nonstructural panels. The
downstream uses of two products of the reconstituted wood products industry are shown in Table
2-8 and Table 2-9 below. For each of the products, 36 percent of the output is used for furniture
manufacture and the rest is used for construction, other manufacturing and other uses.
Table 2-8 MDF Shipments by Downstream Market, 2012
Downstream Use %
Furniture Manufacture 36%
Residential Construction and Upkeep 30
Other Manufacturing 9
Nonresidential Construction 5
Other Uses 20
Note: Estimated based on classification for "nonstructural panels".
Source: American Wood Council & Canadian Wood Council, Environmental Product Declaration - Medium Density Eiberboard,
2013.
Underlying Data Source: ''Nonstructural panels" from APA - Engineered Wood Association (2012) Structural Panel and
Engineered Wood Yearbook, APA Economics Report E178.
Source Note: Various end uses for MDF were estimated based on the classification for "nonstructural panels" as provided in the
FPInnovations B2B carbon sequestration tools.
2-27
-------
Table 2-9
Particleboard Shipments by Downstream Market, 2012
Downstream Use %
Furniture Manufacture 36%
Residential Construction and Upkeep 30
Other Manufacturing 9
Nonresidential Construction 5
Other Uses 20
Note: Estimated based on classification for "nonstructural panels".
Source: American Wood Council & Canadian Wood Council, Environmental Product Declaration - Particleboard, 2013.
Underlying Data Source: "Nonstructural panels" from APA - Engineered Wood Association (2012) Structural Panel and
Engineered Wood
Yearbook, APA Economics Report E178
Source Note: Various end uses for particleboard were estimated based on the classification for "nonstructural panels" as provided
in the FPInnovations B2B carbon sequestration tools.
Table 2-10 Housing Market Indicators
Year
New Housing Units (1000s)
2004
2,087
2005
2,215
2006
1,918
2007
1,451
2008
988
2009
604
2010
637
2011
660
2012
836
2013
985
Source: (James L. Howard & Jones, 2016).
Construction Activities. Construction activities are an important indicator of the demand for
manufactured wood products. Eighty-six percent of structural panel output and 45 percent of
nonstructural panel output goes to the construction sector, primarily for new residential
construction, repair and remodeling. As Table 2-10 shows, housing starts were low in the years
2-28
-------
following the 2008 recession, but picked up in 2012 and 2013. Housing start activity depends on
general conditions in the economy including employment and interest rates.
Wood Furniture Industry. Wood household furniture is a portion of the household
furniture sector. The value of shipments from the household and institutional furniture sector are
shown in Table 2-11 below. There has been a 10 percent growth in domestic shipments of
household and institutional wood furniture from 2010 to 2016, but there are significant variations
by year.
Table 2-11 Trade for Household and Institutional Furniture and Kitchen Cabinet
Manufacturing (NAICS 3371), 2010 - 2017 (millions of 2017 Dollars3)
2010 2011 2012 2013 2014 2015 2016 2017 °/o
Change
$36,424 $35,800 $35,924 $37,102 $37,038 $39,370 $39,945 N/A 10%
21,488 21,131 22,493 23,815 25,233 27,671 28,539 31,066 45
3,379 3,852 3,808 3,942 4,070 3,921 3,663 3,645 8
54,532 53,079 54,609 56,975 58,201 63,120 64,821 N/A 19
Notes: ^Prices converted using Bureau of Labor Statistics NAICS 3371 Household and Institutional Furniture and Kitchen
Cabinets Manufacturing Producer Price Index.
Sources: US Census. USA Trade Online Data, https://usatrade.census.gov/
US Census. Annual Survey of Manufactures (2014, 2015, and 2016). https://www.census.gov/programs-surveys/asm.html
A large part of the demand for wood-based products comes from wood furniture
manufacturing. Import growth in the household and institutional furniture sector has been
dramatic between 2010 and 2017, whereas export growth has not been as significant. In fact,
export sales have declined since 2014. This implies that domestic furniture manufacturers have
lost business to foreign manufacturers. This also impacts the domestic vendors and suppliers to
the domestic furniture manufacturers including the domestic manufacturers of wood-based
products.
2.3.3 Substitution Possibilities
The substitution in PCWP industries happens mostly between different wood products,
though there is some substitution between wood and non-wood products. Table 2-12 below
illustrates these substitution effects even though it does not provide recent substitution patterns
between these products. For example, a major substitution pattern for wood products is
2-29
Value of Product
Shipments
Value of Imports
Value of Exports
Apparent
Consumption
-------
substitution of OSB for plywood. This pattern is evident in both single- and multi-family
residential construction, as is shown in Table 2-12a. Structural panels held the majority of the
market share for floors, walls and roofs in single and multi-family housing construction, though
their market share in floors declined in 2003. OSB was substituted for softwood plywood in this
market, with OSB capturing a greater share of this market by 2003. The market share for
fiberboard in single-family wall construction also decreased over time due to increased OSB use.
In terms of non-wood products, masonry captured a large share of the siding market, replacing
the use of structural panels in single-family construction. Concrete replaced structural panels in
the floors market. The data in Table 2-12a ends in 2003 because the most recent article we
found, by (Spelter, McKeever, & Alderman, 2006), does not supply data beyond 2003.
Table 2-12a Use of Wood and Non-wood Products in Residential Construction, 1995-2003
Incidence of Use (%)
Single-Family
Multi-Family
Application
1995
1998
2003
1995
1998
2003
Floors
Structural Panels
55%
59%
49%
54%
55%
41%
Softwood Plywood
31
28
19
24
26
19
OSB
24
31
30
30
29
22
Lumber
<0.5
2
<0.5
<0.5
<0.5
<0.5
Nonstructured Panels3
9
11
13
7
10
16
Concrete Slabb
35
28
37
39
35
43
Walls
Structural Panels
52
60
67
43
61
60
Softwood Plywood
19
12
10
10
17
18
OSB
33
47
57
33
44
42
Foamed Plastic
29
21
12
34
15
6
Lumber
<0.5
2
1
<0.5
3
6
Fiberboard
6
8
4
5
5
10
Foil-faced Kraft
3
4
5
1
4
3
Cement, Gypsum Board
2
1
2
8
6
6
None0
8
4
10
9
5
9
Roofs
Structural Panels
98
99
98
94
98
99
Softwood Plywood
37
26
24
19
28
30
OSB
61
72
74
75
70
69
Lumber
1
1
1
1
<0.5
1
Other
<0.5
<0.5
1
5
2
<0.5
None
<0.5
<0.5
<0.5
<0.5
<0.5
<0.5
Siding
Structural Panels
9
3
3
4
5
1
Softwood Plywood
4
1
2-30
1
2
2
<0.5
-------
OSB
5
2
3
2
3
<0.5
Lumber
7
6
5
2
7
2
Hardwood
6
8
3
5
8
6
Vinyl, Metal
29
32
27
41
35
43
Masonry, Stucco, Wood fiber cement
48
47
61
48
43
43
Other
1
4
1
<0.5
4
6
Notes: aParticleboard and MDF; includes lightweight concrete; Includes structural insulated panels (SIPs)
Source: (Spelter et al., 2006) page 16, Table 15.
Table 2-12b depicts more recent substitution between wood and non-wood products in
residential construction. As is evident from the table, wood products have increased their share
of the residential market over time for floors, exterior, and interior walls. Most of the time they
have replaced concrete, for which the market share has declined in floors and walls built for
residential construction. Wood and steel can be substituted in residential construction, and steel
has seen its share decline in floors and walls in some years. Wood has maintained 100 percent of
the share of the market in roofs over the years.
Table 2-12b Percentage Use of Wood and Non-wood Products in Residential
Construction, 1995-2012
Application
1995
1998
2003
2006
2012
Floors
Wood
Concrete
Steel
Exterior Walls
Wood
Concrete
Steel
Interior Walls
Wood
Concrete
Steel
Roofs
Wood
Concrete
Steel
62%
37
1
86
13
0
98
0
2
100
0
0
69%
30
0
12
1
95
1
5
100
0
0
64%
36
0
86
13
0
95
0
5
100
0
0
60%
39
I
89
II
0
95
0
5
100
0
0
64%
35
0
94
5
1
97
0
3
100
0
0
Source: (McKeever & Elling, 2015).
2-31
-------
2.3.4 Demand Elasticities
The price elasticity of demand can be defined as the percentage change in quantity of a
product purchased divided by the percentage change in the product's price. All price elasticities
of demand for goods that are affected by this proposal (e.g., OSB) are non-positive (for they are
normal goods), so that quantity purchased decreases or stays the same, all else equal, as price
increases. It is independent of specific units (dollars, thousands of dollars) used, and describes
the "intensity" with which a change in product price affects demand. For low-cost products, all
else equal, the expectation would be that demand would be relatively inelastica small
percentage change in price would not be expected to make a large difference in quantities
purchased. For higher-cost products, especially those for which substitute products are available
and for which the product is not an absolute necessity (such as a luxury item, e.g., yachts), the
price elasticity of demand might be very high. The longer consumers can delay purchasing a
good or service, and the fewer the number of uses to which a purchased item can be put also tend
to increase the price elasticity of demand.
A relatively recent study for the wood products industry of price elasticity of demand was
conducted by (Buongiorno, 2015). Buongiorno's study considered the U.S. and a number of
other countries, both high- and low-income. He found that for commodity groups such as veneer
and plywood, there were statistically significant differences in price elasticity between high- and
low-income countries. The U.S. results can be considered to be an example of the high-income
country results for the study.
Table 2-13 reports the results of this study. As is evident from this table, the price
elasticity of demand for plywood and reconstituted wood products is inelastic (between zero and
-1). The demand for each individual type of product is differentveneer and plywood have a
higher price elasticity of demand than reconstituted wood products like particleboard and
fiberboard. The availability and price of other products, both wood and non-wood, and the
availability and price of imported products, can influence the demand elasticity of individual
products. Hence, if available, cross-price elasticities of substitutes and imports should be
considered in the economic analysis. The Buongiorno study (2015) investigated only the price
and income elasticity of demand for forest products.
2-32
-------
Table 2-13 Demand Elasticities
Name of Product
Year
Country - Income
Estimation Years
Price Elasticity
Standard Error
Veneer & Plywood
2015
High
2004-2013
-0.61
0.12**
Particleboard
2015
Low or High
1992-2013
-0.51
0.05**
MDF
2015
Low or High
2004-2013
-0.54
0.06**
Note: ** = significant at 1 percent.
Source: Buongiorno, J. (2015). Income and time dependence of forest product demand elasticities and implications
for forecasting. Silva Fennica, vol. 49 no. 5 article id 1395. https://doi.org/10.14214/sf. 1395
https://www.silvafennica.fi/article/1395/ref/4.
2.4 Industry Organization
This section provides information on the structure of the wood products industry, the
characteristics of its manufacturing facilities, and financial and other selected information on the
parent owners of the facilities. This is an attempt to provide a characterization of the impacts the
proposed regulation can have in more detailed terms.
2.4.1 Industry Structure
Table 2-14 discusses how the firms in each product category can be characterized by
market concentration: the market share percentage for the four largest firms, the eight largest
firms, etc. The standard view is that the higher the market concentration, the more changes in
input price brought about by regulation will lead to output price rises. An example of this view
presented in Abdela and Steinbaum (2018), which concludes there is a market concentration
problem in U.S. production, generally. This assumption has been criticized by Newmark (2004),
who argues that "[P]rice-concentration studies are severely flawed. In industries in which sellers
compete on quality and amenities, a positive price-concentration relation could result, not from
coordinated effects, but from competitive superiority."
The table provides additional evidence to examine these issues. In addition to the percent
values claimed by the largest companies in the product categories, it includes Herfindahl-
2-33
-------
Hirschman Index (HHI) numbers by category. The U.S. Department of Justice (2019)
characterizes markets in terms of their HHI statistics as follows:
"The agencies [DOJ and FTC] generally consider markets in which the HHI is between
1,500 and 2,500 points to be moderately concentrated, and consider markets in which the HHI is
in excess of 2,500 points to be highly concentrated."
Table 2-14 Concentration Ratios by NAICS Code, 2002 - 2012
Companies
Year Number of Companies in Industry 4 8 20 50 Herfindahl-Hirschman Index (HHI)a
Sawmills (321113)
2002 3,462 18 24 34 45 117
2007 3,275 15 21 30 43 98
2012 2,640 14 22 35 49 93
Hardwood Veneer and Plywood Manufacturing (321211)
2002 304 33 45 62 77 468
2007 276 30 40 58 78 415
2012 216 36 49 68 86 543
Softwood Veneer and Plywood Manufacturing (321212)
2002 85 57 72 89 99 1,198
2007 76 56 68 91 100 1,233
2012 69 50 65 90 100 906
Engineered Wood Member (except Truss) Manufacturing (321215)
2002 90 67 80 90 98 1,978
2007 132 64 74 86 96 1,353
2012 92 51 66 82 97 1,198
Reconstituted Wood Product Manufacturing (321219)
2002 180 35 51 73 91 498
2007 174 28 44 69 91 345
2012 149 37 56 79 94 535
All Other Miscellaneous Wood Product Manufacturing (321999)
2002
2,031
18
22
31
45
139
2007
1,857
11
17
29
44
65
2012
1,660
11
18
32
48
70
Notes: aHHI is based on the 50 largest companies for each NAICS code. Source: US Census. Economic Census (2002, 2007, and
2012). https://www.census.gov/programs-survevs/economic-census.html
By the U.S. Department of Justice definitions above, the only product category for which
markets could be considered moderately concentrated by the HHI was engineered wood member
manufacturing in 2002, and this characterization no longer holds. There are relatively few
barriers to entry into any of the product categories, and few barriers exist for exit as well.
2-34
-------
Pindyck (2015) discusses difficulty of cross-elasticity of substitution in both demand and supply
as factors which can augment market power and the HHI estimate. But the example of the shift
from softwood plywood and veneer to OSB, and the ability of firms in any category to open
secondary production in other lines (discussed below), suggest these are not relevant for the
wood products industry as a whole. It is, however, conceivable that market concentration will
eventually emerge in hardwood veneer and plywood manufacturing and reconstituted wood
product manufacturing if present trends continue. It is also possible that softwood veneer and
plywood manufacturing has become more concentrated as the number of facilities has fallen.
The number of companies has declined for every product category. But, presently, there
are still enough companies in each category to suggest highly competitive conditions. Note also
that these product categories are sufficiently fine-grained so that the product differentiation and
quality characteristics that Newmark (2004) discusses may not be relevant. Given the declining
(or relatively stable) 4-Company market shares, the superiority of one company versus another in
any product category may not be sufficient to invalidate this conclusion. These shares are
increasing for hardwood veneer and plywood manufacturing and reconstituted wood product
manufacturing. But the rate of increase appears relatively slow.
2.4.2 Manufacturing Plants
2.4.2.1 Location
Facilities that manufacture wood products are generally in the more rural parts of the U.S.
such as in the South, the Pacific Northwest, and the Midwest. Maine, Pennsylvania, and
California are also potentially affected by the regulation. Table 2-15 below shows the potentially
impacted existing sites that were identified based on the EPA's 2017 ICR.
Table 2-15 Plywood and Wood Composite Facility Locations (Potentially Impacted
Facilities Subject to the PCWP RTR)
State Number of State Number of State Number of
Impacted
Facilities
Impacted
Facilities
Impacted
Facilities
South
Alabama 24
Minnesota 1
1
Dakota
2-35
-------
Arkansas
16
Missouri
1
Tennessee
1
California
9
Mississippi
19
Texas
10
Florida
11
Montana
3
Virginia
4
Georgia
24
North
Carolina
15
Washington
11
Idaho
4
Oklahoma
4
Wisconsin
1
Louisiana
16
Oregon
20
West
Virginia
3
Maine
2
Pennsylvania
3
Total
223
Michigan
4
South
Carolina
16
Sources: U.S. EPA, PCWP ICR Data (U.S. EPA, 2017c).
Georgia has the greatest number of potentially impacted facilities. Other states with high
numbers of affected facilities include Alabama, Oregon, and Mississippi. We don't yet have
detailed information to calculate the percentages of facilities by state that will be affected by the
regulation and will add that information at a later date.
Table 2-16 shows the capacity utilization rates by NAICS code and for all manufacturing
industries from 2012 through 2017. The rates for sawmills (NAICS 3211) and veneer, plywood
and engineered wood products (NAICS 3212) saw the biggest rates of increase during these
years. The capacity utilization rates for these NAICS codes were below industry averages in
previous years but have increased over this time period.
Table 2-16 Full Production Capacity Utilization Rates, Fourth Quarters, 2012-2017
NAICS
NAICS Description
2012
2013
2014
2015
2016
2017
Change
31-333
All Manufacturing
70
71
71
70
72
72
2.9%
3211
Sawmills and Wood
Preservation
Veneer, Plywood, and
57
60
61
63
79
78
36.5
3212b
Engineered Wood
Product Manufacturing
59
64
67
65
75
83
40.4
3219
Other Wood Product
Manufacturing
Household and
60
66
65
63
72
74
24.5
3371b,c
Institutional Furniture
and Kitchen Cabinet
Manufacturing
60
64
66
68
74
71
18.2
2-36
-------
Notes: includes manufacturing plants without specific NAICS industry codes as specified within the table and excludes
publishers (NAICS 51111-51119)
bNAICS industries 31521, 31524, 31528 and 3371 now include additional plants that were previously included in the sample as
undistributed cases without specific NAICS industry codes, and therefore, not included in any specific industry. Upon further
research, these cases were placed in one of the above-mentioned industries, effective lst-quarter 2016. All changes apply going
forward.
cThe full utilization rate is based on responses with industry coverage of less than 50%. Coverage is calculated by industry group
as the ratio of the weighted measure of size for respondents to the weighted measure of size for the entire sample.
Source: US Census. Quarterly Survey of Plant Capacity Utilization, https://www.census.gov/programs-survevs/qpc.html
Figure 2-7 below presents the capacity utilization rates of veneer, plywood and
engineered wood product, and all manufacturing. It shows the gradual increase in rates for
veneer, plywood, and engineered wood products as compared to all manufacturing over time.
Figure 2-7 Full Production Capacity Utilization, Fourth Quarters, 2012-2017
¦
2012 2013 2014 2Qi5 ^
2016 2017
Year
31-33* Ail
Manufacturing
3212" Veneer, Plywood,
and Engineered Wood
Product Manufacturing
Notes: *Includes manufacturing plants without specific NAICS industry codes as specified within the table and
excludes publishers (NAICS 51111-51119)
AThe full utilization rate is based on responses with industry coverage of less than 50 percent. Coverage is calculated
by industry group as the ratio of the weighted measure of size for respondents to the weighted measure of
size for the entire sample.
Source: US Census. Quarterly Survey of Plant Capacity Utilization, https://www.census.gov/programs-
survevs/qpc.html
2.4.2.2 Employment
Table 2-17a and Table 2-17b show the employment at the facilities, by product category,
for facilities potentially facing compliance costs due to the regulation. Overall, the major impact
appears to be on small-sized facilities, with those in sawmills and reconstituted wood products
facilities with 101 to 250 employees per facility experiencing the most effect. Larger softwood
2-37
-------
veneer and plywood facilities (those with 251 to 500 employees per facility) and smaller
sawmills (those with fewer than 100 employees per facility) may also experience some effect.
Relatively few very large facilities or very small facilities would be impacted.
Table 2-17a Employment at Facilities with Expected Compliance Cost Impacts
Softwood Veneer Engineered Wood Reconstituted
& Plywood Member (NAICS Wood Product
Total3 (NAICS 321212) 321215) (NAICS 321219)
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
Facilities
in Size
Category
% of All
Impacted
Facilities
Not Reporting/Not
Found
4
2%
2
6%
i
10%
i
2%
<100
21
9
1
3
i
10
6
10
101 to 250
158
69
5
15
6
60
45
74
251 to 500
41
18
21
64
2
20
8
13
501 to 750
3
1
3
9
0
0
0
0
751 to 1000
2
1
1
3
0
0
0
0
1001 to 1250
1
0
0
0
0
0
1
2
TOTAL
230
100
33
100
10
100
61
100
Notes: Categorization into NAICS based on ICR responses (U.S. EPA, 2017c).
aTotal includes NAICS 321113, 321211, 321212, 321215, 321219, 321999.
Source: PCWP Mill List for AEG 3-5-19 RTI EPAnotes 7-19-19 -
Table 2-17b Employment at Facilities with Expected Compliance Cost Impacts
Hardwood Veneer & All Other Wood
Sawmills (NAICS Plywood (NAICS Products (NAICS
321113) 321211) 321999)
Facilities
% of All
Facilities
% of All
Facilities
% of All
Number of Employees
in Size
Impacted
in Size
Impacted
in Size
Impacted
Category
Facilities
Category
Facilities
Category
Facilities
Not Reporting/Not Found
0
0%
0
0%
0
0%
<100
9
8
1
50
3
60
101 to 250
101
86
0
0
1
20
251 to 500
8
7
1
50
0
0
501 to 750
0
0
0
0
0
0
751 to 1000
0
0
0
0
1
20
1001 to 1250
0
0
0
0
0
0
TOTAL
118
100
2
100
5
100
Note: Categorization into NAICS based on U.S. EPA, PCWP ICR responses (U.S. EPA, 2017c).
2.4.2.3 Facility Population Trends
There is little information on facility age by product category. Older mills might have
lower efficiency than newer mills, and so might be more liable to increased expenditures to cope
2-38
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with any regulation. But the downsizing of the industry during the 2000s is likely to have
shuttered or eliminated a number of such older mills. If the number of mills had stayed the same,
capital expenditures would have had to increase just to cope with the aging of the mills. It would
seem that the rate of capital expenditure increase might thus fall, as the mills have retired. But in
fact, for all product categories, capital expenditures have substantially increased, as shown by
Table 2-18, which shows the expenditures by product category in real (2016) dollars.
For softwood veneer and plywood, capital expenditures have more than doubled since
2012. Capital expenditures have increased more than five times in the engineered wood products
manufacturing category over the time period 2012 to 2016. Only in non-upholstered wood
furniture manufacturing have expenditures fallen since 2012, with the closing of old mills
outweighing the capital expenditures for the remaining mills to keep up with the market, and
even in this case, the fall is modest, a little over 4 percent.
Table 2-18 Summary of Capital Expenditures, 2012-2016 (Thousands of 2016 Dollars)
NAICS
Description
2012
2013
2014
2015
2016
321113
Sawmills
$631,219
$894,641
$1,074,063
1$,275,752
$1,251,352
321211
Hardwood Veneer and Plywood
Manufacturing
38,923
61,196
65,547
69,169
74,526
321212
Softwood Veneer and Plywood
Manufacturing
101,391
222,206
177,581
257,773
213,169
321215
Engineered Wood Member (except Truss)
Manufacturing
8,406
28,235
124,807A
49,859
43,807
321219
Reconstituted Wood Product
Manufacturing
149,568
227,795
325,993
265,051
308,350
321999
All Other Miscellaneous Wood Product
185,320
357,413
458,718
195,354
348,308
Manufacturing
Source: US Census. Annual Survey of Manufactures (2014, 2015, and 2016). https://www.census.gov/programs-
survevs/asm.html
2.4.3 Firm Characteristics
An additional feature of the industry that may play a role on the impact of any regulation
is the size of the parent firm that owns any particular facility. Effects of environmental regulation
on the wood products industry itself have not been widely studied, but there have been studies of
other industries regarding the differing effects of such regulation on integrated versus stand-
alone firms. Two effects can be distinguished. First, because integrated firms tend to be larger
2-39
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than firms which are not integrated, any specific environmental regulation on a specific facility
can have its costs spread out over all the firm segments. For a given amount of risk for each
segment, the net effect of the regulation, all else equal, would thus be less for the large integrated
firm as a whole than for the smaller competitive firm. Other segments of the integrated firm
could bear some of the costs. The smaller, competitive firm that would have to install new capital
or acquire new labor or materials by itself to cope with the regulation, would not be able to
spread these costs out, and would have to rely on market price and sales quantities to cope with
the burden (U.S. EPA, 2017a). Second, as the regulation may increase the demand for input
flexibility on the part of the affected firm, the value of long-term contracts may decrease
(Joskow, 2010).
2.4.3.1 Size Distribution
Table 2-19 Size Distribution of Parent Firms Owning Facilities with Expected
Compliance Cost Impacts
Size
Impacted Firms
Small
21
Large
44
Total
65
Notes: There are two companies for which employee size data is CBI.
Categorization of parent company into small versus large based on SBA small business size definitions, except in cases where the
EPA provided reason to do otherwise. These size definitions are updated as of December 19, 2022 and are available
https://www.sba.gov/sites/default/files/2022-
12/Table%20of%20Size%20Standards_Effective%20December%2019%2C%202022_508%20%281%29_0.pdf.
Source: U.S. EPA, PCWP ICR Data (U.S. EPA, 2017c).
Table 2-19 shows the size of the 65 parent firms that own existing or new facilities that
are expected to be impacted by this proposed regulation. The majority of the parent firms are
large (44, or 68 percent) but there are 21 small parent firms (as defined by Small Business
Administration (SBA) small business size definitions) that will be affected as well.
2.4.3.2 Ownership
Firm ownership type affects the cost of capital, the relevant tax law, and other legal and
financial characteristics that may come into play for the impacted firms with regulation.
Accounting for interest expense and depreciation may also be relevant as a result of recent tax
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law changes (Bekaert, 2019). Table 2-20 shows available data on ownership type for firms in the
wood products industry in 2012.
The vast majority of the firms in the industry are corporate entities. However, of these
firms, a substantial minority of them are individual proprietorships and partnershipsabout 26
percent of the relevant companies. We note that only a subset of these companies will be subject
to this proposed RTR.
Table 2-20 Types of Firm Ownership for Wood Product Manufacturing (NAICS 321),
2012
Corporations
Individual Proprietorships
Partnerships
Other
Number of Companies
8,892
1,588
1,576
5
Number of Establishments
10,425
1,593
1,718
5
Source: US Census. Economic Census (2012). https://www.census.gov/programs-survevs/economic-census.html
2.4.3.3 Vertical and Horizontal Integration
In addition to small- and medium-sized firms, horizontally and vertically integrated firms
exist in the wood products industry, and they are of large size. Some of the largest of these
companies are discussed below. Forisk (2018) discusses market concentration among the
structural panel producers, and this discussion is drawn from there.
Georgia-Pacific is one of the largest firms in this category and is a major manufacturer of
both plywood and OSB. It also produces a large variety of paper products, packaging, and
chemicals (including adhesives and sealants). It is a large vertically and horizontally integrated
company. Georgia-Pacific was purchased by Koch Industries in 2005 , and it has over 35,000
employees, with locations in most Southern, Western and Midwestern U.S. states (Georgia-
Pacific, 2019).
Louisiana-Pacific is also a major producer of OSB. In addition to a significant U.S.
presence, it also has locations in Canada and South America. The company also produces siding,
engineered wood products (EWP), and other minor products, and has timber and timberlands.
Revenue for 2018 was over $2.8 billion (MarketWatch, 2019). Louisiana-Pacific is an American
2-41
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company, with about 4,900 employees worldwide (SEC, 2019a). The company also suffered
from falling OSB prices, but is expected to recover (Research, 2018).
Weyerhaeuser is a major producer of both plywood and OSB. The company also has
major timber holdings, is a major lumber producer, produces energy and natural resources, and
has large American real estate holdings, as well as large real estate holdings in Canada. The
American timber holdings are roughly in the Southern U.S. states, the Pacific Northwest, along
the Canadian border in several states, and in West Virginia. The company is a real estate
investment trust (REIT), with about 9,300 employees, 3,035 of whom are employed in OSB
production and 630 in Plywood production. Net sales for wood products were $5.3 billion in
2018 and $5.0 billion in 2017 (SEC, 2019b).
Huber Engineered Woods is also a major producer of OSB. Huber has about 4,000
employees in 20 countries. Based in North Carolina, Huber is among the oldest of the major
companies in the field still in operation, being founded in 1883. Its businesses include three
sectors: engineered materials, natural resources, and technology-based service. It is a private
company and is a subsidiary of the J.M. Huber Corporation. Annual revenues were reported to be
about $2.3 billion (Huber, 2019).
Tolko manufactures plywood and veneer but has much more of a presence in the OSB
market than in the plywood market. Tolko is a private Canadian company with locations in
Western Canada, primarily British Columbia (Tolko, 2019). It just acquired its first U.S.
manufacturing site, in Louisiana, in 2018 (CFJC, 2018) and is also entering a joint venture in
Mississippi (Tolko, 2018). Tolko revenues in 2017 were $850 million (BCBusiness, 2018), and it
employs about 3,000 employees (Thegreenestworkforce.ca, 2019).
2.5 Markets
The general market conditions of the wood products industry can be understood by an
analysis of market structure, (in particular, how concentrated the industry is), the quantities of
products sold and the prices they receive, and exports and imports of the products. There is some
discussion below of future prospects for all these aspects. This discussion relies on available
data, which are incomplete, and while indicative, cannot be considered a full-fledged statistical
analysis and an econometric forecast.
2-42
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2.5.1 Market Structure
As was discussed in Section 2.4.1, the engineered wood member industry is the only
wood products industry that was moderately concentrated in 2002, with an HHI above 1,500,
although this number has declined over time. Both the softwood veneer and plywood industry
and the engineered wood member industries have four-firm concentration ratios above 50 in all
years studied. However, these ratios have declined over time implying that these industries have
become less concentrated recently. For the reconstituted wood product industry, the four-firm
concentration ratio has remained below 50, and the HHI has stayed below 1,000 over the years.
This is also true for the other industries such as sawmills, hardwood veneer and plywood, all
other wood products, and non-upholstered wood furniture which are not concentrated. Therefore,
for these industries, there is a competitive market for the products impacted by this regulation.
Competition for the plywood and composite wood industries can happen due to a number
of factors. The products of these industries can in some cases be substituted for one another.
Other non-wood and imported products can also act as substitutes for these products. Excess
capacity can lead to falling prices for these industries.
2.5.2 Market Volumes
In this section, we present market consumption and production volumes for the industries
examined in this profile. Table 2-22 and Table 2-23 below describe these data. Table 2-22
depicts the value of product shipments by NAICS code from 2012 through 2016 and value of
imports and exports from 2012 through 2017 because 2017 trade data is available from USA
Trade Online. Table 2-23 illustrates the physical volume of output produced, traded, and
consumed from 2004 through 2013.
2.5.2.1 Domestic Production
For most product categories, the period 2012 through 2016 was one of somewhat erratic
increases in product revenue, with the major exceptions being softwood veneer and plywood and
non-upholstered wood furniture. But in all the cases for which there are volume data available,
the quantities produced fell between 2004 and 2013. The increases in price probably sustained
some of the revenue increases. Imports increased in value for all product categories from 2012
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through 2017. The quantities of imports fell between 2004 and 2013, while there were actually
increases in quantity of exports for all the selected product categories except hardboard. Only
sawmills and all other miscellaneous saw an increase in value of exports, while all other product
categories saw a fall, so it can be concluded that processed product prices abroad for American
wood product exports probably fell.
Both Table 2-22 and Table 2-23 show the considerable loss in domestic softwood veneer
and plywood production. This is somewhat disguised by the rise in prices, which has reduced the
loss in sales revenue in 2017 dollars to only 17 percent. The number of million square feet
produced domestically between 2004 and 2013 has dropped over 36 percent. The value of
imported softwood veneer and plywood has risen considerably while the value of exports has
gone down. Engineered Wood Member products show an increase in value of shipments by 75
percent. Shipment values for reconstituted wood products also rose.
Figure 2-8 shows the changes in value of product shipments in more recent years (2012-
2016) for the softwood veneer and plywood and reconstituted product categories. It depicts the
volatility of the reconstituted wood product shipment values by year.
2.5.2.2 Domestic Consumption
Consumption values rose or were stable for every product category between 2012 and
2016, except for softwood veneer and plywood. There were double-digit increases in
consumption values for most product categories, especially engineered wood member products,
which rose 79 percent. The value for non-upholstered wood furniture manufacturing was
essentially static. The ratio of import value to consumption value was relatively stable or
declined or rose to some extent for most product categories. For softwood plywood and veneer,
this value rose by 103 percent. Figure 2-9 shows the behavior of consumption values for
softwood veneer and plywood and reconstituted wood products by year. From the 2016 numbers,
there seems to be an inverse relationship between the consumption of the two product categories
in real terms.
Table 2-21 Balance and Selected Statistics (Millions of 2017 Dollars3), 2012-2017
2012 2013 2014 2015 2016 2017 Change"
Sawmills (NAICS 321113)
2-44
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Value of Product Shipments
Value of Imports
Value of Exports
Trade Surplus (Deficit)
Apparent Consumption
Ratio of Imports to Consumption
Ratio of Exports to Product
Shipments 0.15 0.15 0.17 0.16 0.16 N/A 3%
Ratio of Imports to Exports 1.45 1.58 1.58 1.67 1.90 1.81 25%
$21,781
$23,461
$23,583
$22,881
$23,773
N/A
9%
4,833
5,671
6,179
5,948
7,115
7,292
51%
3,343
3,594
3,922
3,572
3,749
4,027
20%
(1,490)
(2,077)
(2,257)
(2,376)
(3,365)
(3,265)
119%
23,271
25,539
25,841
25,257
27,138
N/A
17%
0.21
0.22
0.24
0.24
0.26
N/A
26%
Hardwood Veneer and Plywood Manufacturing (NAICS 321211)
Value of Product Shipments
2,937
3,112
3,325
3,413
3,274
N/A
12%
Value of Imports
1,969
1,916
2,073
2,326
2,298
2,158
10%
Value of Exports
500
444
441
428
421
391
-22%
Trade Surplus (Deficit)
(1,469)
(1,472)
(1,632)
(1,898)
(1,877)
(1,768)
20%
Apparent Consumption
4,406
4,584
4,957
5,311
5,151
N/A
17%
Ratio of Imports to Consumption
0.45
0.42
0.42
0.44
0.45
N/A
0%
Ratio of Exports to Product
Shipments
0.17
0.14
0.13
0.13
0.13
N/A
-25%
Ratio of Imports to Exports
3.94
4.32
4.70
5.44
5.46
5.52
40%
Softwood Veneer and Plywood Manufacturing (NAICS 321212)
Value of Product Shipments
Value of Imports
Value of Exports
Trade Surplus (Deficit)
Apparent Consumption
Ratio of Imports to Consumption
Ratio of Exports to Product
Shipments 0.08 0.07 0.07 0.06 0.07 N/A -11%
Ratio of Imports to Exports 1.12 1.27 1.53 2.37 2.85 2.72 143%
4,894
5,171
4,784
4,542
4,048
N/A
-17%
418
490
526
664
782
905
116%
373
387
343
280
275
333
-11%
(45)
(103)
(183)
(384)
(508)
(572)
1177%
4,939
5,273
4,966
4,925
4,555
N/A
-8%
0.08
0.09
0.11
0.13
0.17
N/A
103%
Table 2-22 Balance and Selected Statistics (Millions of 2017 Dollars3), 2012-2017
(continued)
2012 2013 2014 2015 2016 2017 Changeb
Engineered Wood Member (except Truss) Manufacturing (NAICS 321215)
Value of Product Shipments 1,046 1,520 1,902 2,096 1,828 N/A 75%
Value of Imports 544 629 660 718 733 784 44%
Value of Exports 261 250 251 226 187 203 -22%
2-45
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Trade Surplus (Deficit)
(284)
(380)
(409)
(491)
(546)
(581)
105%
Apparent Consumption
1,329
1,900
2,311
2,587
2,374
N/A
79%
Ratio of Imports to Consumption
041
0.33
0.29
0.28
0.31
N/A
-25%
Ratio of Exports to Product Shipments
0.25
0.16
0.13
0.11
0.10
N/A
-59%
Ratio of Imports to Exports
2.09
2.52
2.63
3.17
3.92
3.86
85%
Reconstituted Wood Product Manufacturing (NAICS 321219)
Value of Product Shipments
7,381
8,176
7,011
7,072
7,870
N/A
7%
Value of Imports
2,033
2,432
2,272
2,359
2,716
2,913
43%
Value of Exports
529
497
463
419
401
371
-30%
Trade Surplus (Deficit)
(1,504)
(1,935)
(1,809)
(1,940)
(2,315)
(2,542)
69%
Apparent Consumption
8,885
10,111
8,820
9,012
10,185
N/A
15%
Ratio of Imports to Consumption
0.23
0.24
0.26
0.26
0.27
N/A
17%
Ratio of Exports to Product Shipments
0.07
0.06
0.07
0.06
0.05
N/A
-29%
Ratio of Imports to Exports
3.84
4.89
4.91
5.63
6.77
7.85
104%
All Other Miscellaneous Wood Product Manufacturing (NAICS 321999)
Value of Product Shipments
5,879
5,899
6,071
6,465
6,899
N/A
17%
Value of Imports
2,658
2,642
2,751
2,999
2,944
3,074
16%
Value of Exports
824
898
1,035
1,195
1,120
1,101
34%
Trade Surplus (Deficit)
(1,834)
(1,744)
(1,716)
(1,804)
(1,824)
(1,974)
8%
Apparent Consumption
7,713
7,643
7,787
8,270
8,723
N/A
13%
Ratio of Imports to Consumption
0.34
0.35
0.35
0.36
0.34
N/A
-2%
Ratio of Exports to Product Shipments
0.14
0.15
0.17
0.18
0.16
N/A
16%
Ratio of Imports to Exports
3.23
2.94
2.66
2.51
2.63
2.79
-13%
Notes: aNAICS 321 Codes converted to 2017 dollars with NAICS 321 PPI converted to 2017 dollars with NAICS 3371 PPI.
bPercent change is calculated from 2012 to 2016 for the values for which data is available. It is calculated from 2012 through
2017 for the values for which data is available for 2017.
Source: US Census. USA Trade Online Data, https://usatrade.census.gov/; US Census. Annual Survey of Manufactures (2014,
2015, and 2016). https://www.census.gov/programs-survevs/asm.html
Table 2-23 Production, Trade and Consumption Volumes for Selected Products, 2004 -
2013
Product
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Softwood Plywood (Million
Square Feet, 3/8
' in. basis)
Product Shipments
14,665
14,330
13,428
12,243
10,237
8,608
9,131
8,980
9,181
9,346
Imports
2,023
2,421
1,848
1,087
759
616
439
478
426
567a
Exports
492
411
424
553
621
473
795
740
840
784a
Apparent Consumption
16,196
16,340
14,852
12,777
10,375
8,751
8,775
8,718
8,767
9,129a
OSB (Million Square Feet,
3/8 in.
basis)
Product Shipments
14,271
14,985
14,960
14,763
13,003
9,598
10,299
10,039
11,038
12,492
Imports
9,847
10,544
10,138
6,829
3,666
2,756
2,827
2,928
3,378
3,934
Exports
193
169
179
264
450
180
279
339
370
318
Apparent Consumption
23,924
25,360
24,919
21,328
16,219
12,174
12,847
12,628
14,109
16,108
Particleboard/MDF (Million Square Feet, 3/4 in. basis)
2-46
-------
Product Shipments 6,052 5,951 5,911 5,432 4,623 3,865 3,709 3,750 3,757 4,048
Imports 1,751 1,571 1,283 1,241 1,180 1,144 1,326 1,333 557 630
Exports 195 199 205 328 398 338 400 407 310 338
Apparent Consumption 7,608 7,322 6,989 6,345 5,404 4,671 4,634 4,676 4,004 4,340
Hardboard (Million Square Feet, 1/8 in. basis)
Product Shipments
3,880
4,347
3,870
3,312
2,916
2,226
2,718
2,466
1,800
2,100
Imports
4,188
4,786
4,899
4,010
2,407
1,538
1,118
697
647
712
Exports
1,005
1,076
1,321
1,215
1,138
994
920
798
820
739
Apparent Consumption
7,063
8,056
7,448
6,107
4,185
2,770
2,916
2,366
1,627
2,073
Note: aAs reported in Table 38 of source. Table 37 reports the same data but is inconsistent for these values: Imports - 616,
Exports - 836, and Consumption - 9,126
Source: (James L. Howard and Jones 2016)
Figure 2-8 Value of Product Shipments, 2012-2016
9,000
8,000
1" 7,000
= 6,ooo ¦ Softwood Veneer and
~ 5,ooo M Plywood Manufacturing
| 4^000 | (NAICS 321212)
S 2,000
1,000
0
H H H H H ¦ Reconstituted Wood
Product Manufacturing
(NAICS 321219}
2012 2013 2014 2015 2016
Year
Note: NAICS 321 Codes converted to 2017 dollars with NAICS 321 PPI.
Source: US Census. USA Trade Online Data, https://usatrade.census.gov/; US Census. Annual Survey of Manufactures (2014,
2015, and 2016). https://www.census.gov/programs-survevs/asm.html
2-47
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Figure 2-9 Apparent Consumption, 2012-2016
12,000
I10'000 . I . ¦ I
= 8,ooo ¦ ¦ ¦ ¦ ¦ ¦ Softwood Veneer and
I I I I I Plywood Manufacturii
6,ooo ^B ^B ^B ^B (NAICS 321212}
4,000 ¦ ¦ ¦ ¦ ¦ Reconstituted Wood
2,000 I I I I I Product Manufacturin
(NAICS 321219}
2012 2013 2014 2015 2016
Year
Note:NAICS 321 Codes converted to 2017 dollars with NAICS 321 PPI.
Source: US Census. USA Trade Online Data, https://usatrade.census.gov/; US Census. Annual Survey of Manufactures (2014,
2015, and 2016). https://www.census.gov/programs-survevs/asm.html
As is evident from Table 2-23, quantities consumed dropped dramatically for softwood
plywood and reconstituted wood products such as OSB, particleboard, and hardboard between
2004 and 2013. The relative stability of consumption values for reconstituted wood products is
probably explained by prices for OSB. Prices are discussed below more generally in relation to
Table 2-26, Table 2-27, and Table 2-28.
2.5.2.3 International Trade
Imports. Import values depended on the specific product for the years from 2012 through 2017.
As Table 2-22 shows, in all cases, the value of imports rose. For softwood veneer and plywood,
this was dramatic: a 116 percent increase, leading to a massive increase in the trade deficit for
this category. Aside from this category, however, the story is much more elusive. Trade deficits
increased for most product categories, with sawmill production showing an increase in the value
of imports of 51 percent, and an increase in the trade deficit of 119 percent. For hardwood veneer
and plywood, the value of imports increased by 10 percent whereas the trade deficit increased by
20 percent. For reconstituted wood products, the value of imports increased by 43 percent and
the trade deficit increased by 69 percent.
2-48
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However, the ratio of imports to consumption for all categories except softwood plywood
and veneer shows a much more mixed story. The ratio of imports to consumption rose for
sawmills by 26 percent, increased by 17 percent for reconstituted wood products and increased
by 6 percent in the non-upholstered wood furniture manufacturing category. But for the other
product categories, this ratio was basically unchanged or fell.
Table 2-24a and Table 2-24b show the producers of imports. It is evident that many
imports came from Canada and China, which were the subject of anti-dumping and tariffs
recently. But a surprising amount of imports also came from Brazil and Chile, which has not
been directly affected by these actions, and may have benefitted by the appreciation of the dollar.
Russian imports were only among the top five countries for hardwood veneer and plywood. This
may change because of these interventions, while imports from Malaysia, Indonesia, and India
may also rise as the dollar appreciates.
Table 2-24a 2017 US Wood Products Imports by Region and Major Trading Partner for
NAICS 321212, NAICS 321215, and NAICS 321219 (Million Dollars)
Softwood Veneer & Plywood Engineered Wood Member Reconstituted Wood Product
(NAICS 321212)
(NAICS 321215)
(NAICS 321219)
Region
Value
Share
Region
Value
Share
Region
Value
Share
Africa
$0
0.0%
Africa
$0
0.0%
Africa
$0
0.0%
Asia
179
19.8
Asia
175
22.3
Asia
303
10.4
Australia and
C
0.5
Australia and
1
0.1
Australia and
21
0.7
Oceania
3
Oceania
Oceania
Europe
32
3.5
Europe
37
4.8
Europe
320
11.0
North America
347
38.4
North America
474
60.5
North America
1,971
67.7
South/Central
342
37.8
South/Central
96
12.3
South/Central
299
10.2
America
America
America
World Total
905
100.0
World Total
784
100.0
World Total
2,913
100.0
Top five Countries
Country
Value
Share
Country
Value
Share
Country
Value
Share
Canada
345
38.2
Canada
472
60.2
Canada
1,959
67.3
Brazil
189
20.9
China
160
20.4
China
270
9.3
China
177
19.5
Chile
48
6.2
Chile
215
7.4
Chile
139
15.4
Brazil
46
5.9
Germany
161
5.5
Finland
17
1.9
Vietnam
8
1.0
Brazil
69
2.4
Source: US Census. USA Trade Online Data, https://usatrade.census.gov/
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Table 2-24b 2017 US Wood Products Imports by Region and Major Trading Partner for
NAICS 321113, NAICS 321211, NAICS 321999, and NAICS 337122 (Million Dollars)
Sawmills
(NAICS 321113)
Hardwood Veneer &
Plywood (NAICS
321211)
All Other Wood
Products (NAICS
321999)
Non-upholstered Wood
Furniture (NAICS 337122)
Region
Value
Share
Region
Value
Share
Region
Value
Share
Region
Value
Share
Africa
$55
0.8%
Africa
$14
0.6%
Africa
$11
0.4%
Africa
$2
0.0%
Asia
103
1.4
Asia
1,445
66.9
Asia
2,024
65.8
Asia
4,043
80.4
Australia
Australia
Australia
Australia
and
149
2.0
and
1
0.0
and
4
0.1
and
0
0.0
Oceania
Oceania
Oceania
Oceania
Europe
448
6.1
Europe
340
15.7
Europe
323
10.5
Europe
508
10.1
North
America
6,125
84.0
North
America
249
11.5
North
America
487
15.8
North
America
356
7.1
South/
South/
South/
South/
Central
412
5.6
Central
111
5.2
Central
225
7.3
Central
122
2.4
America
America
America
America
World
Total
7,292
100.0
World
Total
2,158
100.0
World
Total
3,074
100.0
World
Total
5,030
100.0
Top five Countries
Country Value
Share Country Value Share Country Value Share Country Value Share
Canada
6,118
83.9
China
959
44.4
China
1,576
51.3
Vietnam
2,196
43.7
Germany
212
2.9
Canada
243
11.3
Canada
438
14.2
China
829
16.5
Brazil
189
2.6
Indonesia
218
10.1
Portugal
198
6.4
Malaysia
519
10.3
New
Zealand
145
2.0
Russia
172
8.0
Brazil
195
6.3
Indonesi
a
308
6.1
Chile
139
1.9
Cambodia
92
4.2
India
124
4.0
Canada
230
4.6
Source: US Census. USA Trade Online Data, https://usatrade.census.gov/
Exports. U.S. exports for these products have traditionally been to North American
trading partners, with Canada being the most important trading partner (Taylor, 2014). China had
generally been the second most important export target in the earlier part of the decade (Taylor,
2014). But the export destinations of U.S. products in these categories have lately changed, as
Table 2-25Table 2-25a and Table 2-25b show.
Table 2-25b show. Canada (and Mexico, to a lesser extent) remain important. But
Australia has become a much more important export destination for some products. Japan is also
an important export destination, as are some countries in Europe. American exports to Vietnam
for sawmill products have also begun to gain importance, as the wealth of the Vietnamese
increases. In 2017, the United Kingdom was not an important destination for exports of most of
these products, which was not true earlier (Taylor, 2014).
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Table 2-25a 2017 US Wood Products Exports by Region and Major Trading Partner for
NAICS 321212, NAICS 321215, and NAICS 321219 (Million Dollars)
Softwood Veneer & Plywood Engineered Wood Member Reconstituted Wood Product
(NAICS 321212) (NAICS 321215) (NAICS 321219)
Region
Value
Share
Region
Value
Share
Region
Value
Share
Africa
$1
0.3%
Africa
$0
0.2%
Africa
$0
0.0%
Asia
54
16.3
Asia
12
6.1
Asia
13
3.5
Australia and
Oceania
Australia
Australia
57
17.3
and
23
11.2
and
5
1.4
Oceania
Oceania
Europe
14
4.3
Europe
8
3.9
Europe
14
3.7
North America
161
48.3
North
America
150
73.8
North
America
334
90.1
South/Central
America
45
13.6
South/
Central
10
4.8
South/
Central
5
1.3
America
America
World Total
333
100.0
World
Total
203
100.0
World
Total
371
100.0
Top five Countries
Country
Value
Share
Country
Value
Share
Country
Value
Share
Canada
123
36.9
Canada
147
72.7
Canada
244
65.9
Australia
56
17.0
Australia
22
10.6
Mexico
90
24.3
China
43
13.0
Japan
7
3.4
Japan
4
1.1
Mexico
38
11.3
Bahamas
5
2.6
Australia
4
1.0
Bahamas
9
2.7
Mexico
2
1.1
Korea,
South
4
1.0
Source: US Census. USA Trade Online Data, https://usatrade.census.gov/
Table 2-25b 2017 US Wood Products Exports by Region and Major Trading Partner for
NAICS 321113, NAICS 321211, and NAICS 321999 (Million Dollars)
Sawmills
(NAICS 321113)
Hardwood Veneer &
Plywood (NAICS
321211)
All Other Wood
Products (NAICS
321999)
Non-upholstered Wood
Furniture (NAICS
337122)
Region Value
Share
Region Value
Share
Region
Value Share
Region
Value Share
Africa $26
0.6%
Africa $10
2.5%
Africa
$1 0.1%
Africa
$1 0.4%
Asia 2,395
59.5
Asia 58
14.7
Asia
51 4.6
Asia
26 11.4
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Australia
Australia
Australia
Australia
and
24
0.6
and
2
0.4
and
9
0.8
and
1
0.6
Oceania
Oceania
Oceania
Oceania
Europe
372
9.2
Europe
79
20.3
Europe
687
62.4
Europe
9
4.0
North
America
1,030
25.6
North
America
220
56.3
North
America
305
27.7
North
America
164
72.8
South/
South/
South/
South/
Central
180
4.5
Central
23
5.8
Central
47
4.3
Central
24
10.8
America
America
America
America
World
Total
4,027
100.0
World
Total
391
100.0
World
Total
1,101
100.0
World
Total
225
100.0
Top Five Countries
Country
Value
Share
Country
Value
Share
Country
Value
Share
Country
Value
Share
China
1,669
41.5
Canada
174
44.5
United
Kingdom
550
49.9
Canada
157
69.7
Canada
602
14.9
Mexico
46
11.8
Canada
215
19.6
Mexico
7
3.2
Mexico
428
10.6
Spain
19
4.8
Mexico
90
8.2
Bahamas
5
2.3
Japan
248
6.2
Germany
14
3.7
Denmark
58
5.2
Japan
5
2.1
Vietnam
196
4.9
China
13
3.2
Belgium
53
4.8
China
4
1.7
Source: US Census. USA Trade Online Data, https://usatrade.census.gov/
2.5.3 Prices
Wood product prices overall have increased in recent years, but the process has been
marked by high volatility, with prices falling in 2015 and essentially unchanged in 2016 while
increasing considerably in 2017 and 2018. Table 2-26Table 2-26 shows this erratic pattern in
detail.
Table 2-26 Wood Product Manufacturing (NAICS 321) Product Price Index, 2009-2018
(December 2003 = 100)
2009
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018
Wood Product
Manufacturing (NAICS 103.2 107.7 108.3 112.9 120.8 125.5 124.5 125.5 130.9 139.8
321)
Change from Previous
Year 4.5 0.6 4.6 7.9 4.7 -1.0 1.0 5.4 8.9 36.6
% Change from Previous
Year 4.4 0.6 4.2 7.0 3.9 -0.8 0.8 4.3 6.8 35.5
Note: 2018 values are preliminary values.
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Source: US Department of Labor, Bureau of Labor Statistics. Industries at a Glance: Wood Product Manufacturing - NAICS 321.
https ://www.bls. gov/iag/tgs/iag321 .htm
Table 2-27 shows the rise in softwood plywood prices since the 2008-2009 recession.
Note that these prices were not exclusively related to GDP behavior in these years. Particleboard
and hardboard prices more closely tracked GDP behavior. Particleboard and hardboard price
rises were only loosely connected, with particleboard prices rising more than hardboard prices in
2013 and 2014 and less than hardboard prices in 2015 and 2016.
Table 2-27 Producer Price Indices of Plywood and Composite Wood Products (2009 =
100)
Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009
2018
Softwood Plywood 100.0 114.7 108.1 127.2 137.7 142.7 136.4 124.8 136.6 160.3
Change from Previous 14.7 -6.6 19.1 10.6 5.0 -6.3 -11.7 11.8 23.7 60.3
Year
% Change from 14.7 -5.7 17.6 8.3 3.6 -4.4 -8.5 9.5 17.3 60.3
Previous Year
Particleboard
Change from Previous
Year
% Change from
Previous Year
Hardboard 100.0 104.2 107.2 107.7 111.9 116.0 125.8 126.7 127.4
Change from Previous 4.2 3.0 0.5 4.2 4.1 9.8 0.9 0.7
Year
% Change from 4.2 2.9 0.5 3.9 3.7 8.4 0.7 0.6
Previous Year
Source: Federal Reserve Economic Data, Economic Research Division, Federal Reserve Bank of St. Louis,
https://fred.stlouisfed.Org/seriesAVPU0831#0. https://fred.stlouisfed.org/series/WPU09220123.
https://fred.stlouisfed.Org/series/WPU092202#0
Detailed price data for structural panel products such as OSB and waferboard by year are
shown in Table 2-28. This table and Figure 2-11 below show the extreme volatility of these
prices.
100.0 98.4 101.5 108.5 114.9
-1.6 3.1 7.0 6.4
-1.6 3.2 6.9 5.9
121.4 121.4 121.5 123.2 124.8
6.5 0.0 0.2 1.6 1.7 24.8
5.6 0.0 0.1 1.3 1.4 24.8
128.4
1.0 28.4
0.8 28.4
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Table 2-28 Producer Price Index (PPI) by Commodity for Pulp, Paper, and Allied
Products: Waferboard and Oriented Strandboard, 2013-2018 (Index Dec 1982=100,
Annual, Not Seasonally Adjusted)
Year PPI
2013 211.2
2014 159.3
2015 149.5
2016 181.0
2017 221.7
2018 230.0
Source: Federal Reserve Economic Data, Economic Research Division, Federal Reserve Bank of St. Louis,
https://fred.stlouisfed.Org/seriesAVPU09220124#0
Figure 2-10 PPI by Commodity for Pulp, Paper, and Allied Products: Waferboard and
Oriented Strandboard (OSB), 2013-2018, Index Dec 1982=100, Annual, Not Seasonally
Adjusted
Source: Federal Reserve Economic Data, Economic Research Division, Federal Reserve Bank of St. Louis,
https://fred.stlouisfed.Org/series/WPU09220124#0
2.5.4 Market Forecasts
2.5.4.1 Production and Consumption
APA - The Engineered Wood Association has made recent forecasts pertaining to
residential housing starts and structural panel production. APA has also made specific product
forecasts for recent years for some of these products.
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Figure 2-11 provides information on U.S. housing starts. It shows a steady rise in housing
starts from 2016 through 2018 which is probably reflective of overall good economic conditions.
Figure 2-11 APA Actual and Forecasted Housing Starts (000s)
1,400
1,200
i.ooo
800
¦ Multi-Family Housing
Starts
600
5 -ig e-Fa-n* y Housing
SLris
400
200
0
2016
2017 20 is
Note: 2017 and 2018 are forecasts. Source: (APA, 2016)
Table 2-29 APA Actual and Forecasted Structural Panel Production (Million Square
Feet)
2016
2017
2018
Total Production
32,600
33,900
35,000
Softwood Plywood
10,800
11,100
11,300
OSB
21,800
22,800
23,700
Note: North American production presented including U.S. and Canada. Source: (APA, 2016)
Table 2-29 depicts APA actual and forecasted values for structural panel production. The
forecasts show a steady rise in production. Note the low rate in production forecasted for each of
softwood plywood and OSB. Production for domestic consumption may increase because of the
recently adopted anti-dumping duties and tariffs, but these and the concomitant appreciation of
the dollar that is included in the forecast may have an effect to decrease exports leading to total
domestic production not showing much of an increase over the years.
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3 EMISSIONS AND ENGINEERING COST ANALYSIS
3.1 Introduction
The Plywood and Composite Wood Products (PCWP) National Emissions Standards for
Hazardous Air Pollutants (NESHAP) (40 CFR part 63, subpart DDDD) was originally
promulgated on January 30, 2004. However, hazardous air pollutants (HAP) that are not subject
to NESHAP remain in the PCWP source category. The EPA develops maximum achievable
control technology (MACT) standards for HAP according to Section 112(d)(2)-(3) of the Clean
Air Act (CAA), or in some cases CAA section 112(h). Regulatory options for PCWP process
units with 2004 no-control MACT determinations for organic HAP that were vacated and
remanded to EPA for further consideration are under review. In addition, the EPA is analyzing
regulatory options for other unregulated HAP including 4,4-diphenylmethane diisocyanate
(MDI) and combustion-related HAP from direct-fired dryers. The purpose of this section is to
present the cost, environmental, and energy impact estimates for the regulatory options
considered for new and existing sources subject to subpart DDDD.
The EPA anticipates proposing MACT standards under subpart DDDD for unregulated
HAP in early 2023. The date of proposal will be the date that distinguishes between new (or
reconstructed) and existing sources for purposes of applying the MACT standards added to the
PCWP NESHAP. The impacts analysis for existing sources is based on sources currently subject
to the NESHAP. The EPA's inventory of 223 facilities and process units at each facility was
used to analyze impacts of the regulatory options considered for existing sources.
Sources that commence construction or reconstruction after the early-2023 proposal date
would be subject to the 2023 MACT standards (once finalized) for new or reconstructed sources,
which may be more stringent that the MACT standards for existing sources. The EPA completed
a detailed analysis to develop new source projections over a period of 5 years when conducting
the residual risk and technology review (RTR) for the PCWP NESHAP (85 FR 49434, August
13, 2020). The new source projections developed for the RTR (U.S. EPA, 2019b) remain
representative of the number of new and reconstructed affected sources expected to come online
in the 5-year period following the proposed rulemaking applicability date (i.e., from 2023 to
2027).
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3.2 Cost Impacts
Regulatory options for PCWP processes were identified based on review of emissions
data and other information as discussed in separate memoranda (U.S. EPA, 2022a, 2022b, 2022c,
2022d). This section discusses inputs into the cost analysis for the regulatory options identified.
3.2.1 Lumber Kiln Costs
An inventory of lumber kilns subject to subpart DDDD was developed based on
responses to the 2017 PCWP ICR and additional updated information on kilns installed or
removed since the 2017 ICR (RTI, 2021; U.S. EPA, 2017c, 2020, 2022b).
The regulatory option under consideration for lumber kilns is an operational or work
practice standard to limit the potential for over-drying of lumber. The standard would include (1)
developing and implementing operation and maintenance procedures to maintain kiln integrity
and optimize lumber charging, (2) annual burner tune-up for direct-fired kilns, and (3) a choice
of work practice (temperature set point, in-kiln lumber moisture monitoring, or site-specific plan
including a site-specific temperature limit and lumber moisture monitoring downstream from the
kiln). A one-time cost of $24,605 was estimated for each kiln to comply with the work practice.
The one-time cost includes labor to develop the lumber kiln operation and maintenance (O&M)
plan and conduct training, as well as some non-labor contingency for initial kiln maintenance,
data acquisition system improvements, and developing the record system. Additional costs were
estimated for other work practice elements.
3.2.2 Resinated Material Handling (RMH) Process Unit Costs
Resinated material handling (RMH) process units within the PCWP affected source
include resin tanks, softwood and hardwood plywood presses, engineered wood products presses
and curing chambers, blenders, formers, finishing saws, finishing sanders, panel trim chippers,
reconstituted wood products board coolers (at existing affected sources), hardboard humidifiers,
and wastewater operations. Standards for RMH units pertaining to wood and resin-related
emissions are under consideration for new and existing sources. These standards include (1)
processing of dried wood, and (2) limits on resin system HAP content.
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The cost associated with the standard for processing dried wood include a one-time,
initial cost to review operations and include the RMH process units in the notification of
compliance status (NOCS). The cost of reviewing operations to address processing of dried
wood in the NOCS is estimated to be $5,600 per facility assuming 40 hours labor at the
composite labor rate of $139.83. The annual cost for semi-annual reporting of ongoing
compliance with the standard is estimated to be $560/year assuming 2 hours labor per semi-
annual report per PCWP facility at the composite labor rate.
The cost associated with the resin-related standards for RMH units include costs for
reviewing operations and the HAP content of resins used, the costs of preparing the initial NOCS
documentation, and costs of resin changes needed to comply with the standards. The one-time,
initial costs for reviewing the HAP content of resins used and preparing the NOCS are estimated
to be $11,200 assuming 80 hours labor per facility at the composite labor rate of $139.83. The
annual cost for semi-annual reporting of ongoing compliance with the standard is estimated to be
$560/year assuming 2 hours labor per semi-annual report per PCWP facility at the composite
labor rate. The annual cost of resin changes needed to meet the standards was estimated to be
$0.20 per pound of resin used per year to adjust the resin HAP content, and $10 per thousand
square feet (MSF) produced on a 3/8" basis for adjustments to production processes (e.g.,
changes in press temperature or time). These estimates are based loosely on the magnitude of
estimates for resin changes to meet CARB and TSCA rules. If additional, more-specific cost
information becomes available following proposal of the RMH standards, that information can
be incorporated into the cost analysis (Board, 2007; U.S. EPA, 2016)
A work practice option in addition to the RMH standards was identified for PCWP
wastewater operations to further limit the potential for HAP emissions. Facilities would be
required to meet one of multiple work practice options, depending on their process. The
incremental costs associated with the work practice requirement are for reviewing operations
documenting the work practice used in the NOCS. The cost of reviewing operations to address
wastewater in the NOCS is estimated to be $5,600 per facility assuming 40 hours labor at the
composite labor rate of $139.83 per hour. The annual cost for semi-annual reporting of ongoing
compliance with the standard is estimated to be $560/year assuming 2 hours labor per semi-
annual report per PCWP facility with wastewater operations at the composite labor rate.
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3.2.3 Hardboard Process Unit Costs
The cost impacts of regulatory options for a batch stand-alone digester, fiber washer,
hardboard press predryer, and fiberboard mat dryer that are not currently subject to the PCWP
NESHAP are discussed in this section. These process units are part of the wet/dry hardboard
production process.
One wet/dry process hardboard facility operates a batch stand-alone digester to produce
wood fiber from chips and a fiber washer. The standards under consideration for these units
include work practices to use clean steam and no HAP-containing or wood pulping chemicals in
the digester system, and work practices to use fresh water for washing and to process wood
without addition of HAP-containing chemicals. The cost for documenting use of clean steam and
no addition of HAP-containing or wood pulping chemicals in the digester system, and use of
fresh water and no HAP-containing chemicals in the fiber washer are primarily reporting and
recordkeeping costs for the wet/dry hardboard process. The one-time, initial cost to review
operations and include the digester and fiber washer in the notification of compliance status
(NOCS) is estimated to be $5,600 assuming 40 hours labor at the composite labor rate. The
annual cost for semi-annual reporting of ongoing compliance with the work practice standards is
estimated to be $560/year assuming 2 hours labor per semi-annual report.
The 2004 PCWP NESHAP contains HAP emission limits for fiberboard mat dryer heated
zones and hardboard press predryers at new sources. However, these types of dryers at existing
sources are unregulated. Regulatory options for total HAP emissions from existing source
fiberboard mat dryers and hardboard press predryers are currently under evaluation.
One existing wet/dry process hardboard facility operates a fiberboard mat dryer and press
predryer that are uncontrolled for HAP. The total HAP MACT floor for these dryers is based on
their current performance level without use of any HAP controls. The costs associated with
complying with the uncontrolled emission limits are emissions testing, monitoring, reporting,
and recordkeeping costs. Dryer temperature monitoring would be used to ensure ongoing
compliance with the numeric limits.
A regulatory option more stringent than the MACT floor in which an RTO would be used
to reduce HAP emissions from both dryers was also analyzed. To estimate the RTO costs, inlet
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gas parameters were based on the emission test results for each dryer (e.g., sum of airflows for
multiple stacks on each dryer). Both dryers were considered together because using one RTO to
treat emission streams from both dryers would be more cost-effective than two separate HAP
control devices.
3.2.4 Atmospheric Refiner Costs
Atmospheric refiners operate under atmospheric pressure for refining wood material into
fibers or particles for the production of dry process hardboard or particleboard. Atmospheric
refiners are further characterized with respect to location in the process relative to dryers. "Dried
wood atmospheric refiners" process wood that has been dried onsite in a dryer while "green
wood atmospheric refiners" process wood before it has been dried onsite in a dryer at the PCWP
facility.
Based on the average performance level for dried wood atmospheric refiners, it is
anticipated that existing and new dried wood atmospheric refiner systems will meet the existing
and new source total HAP MACT floors, respectively. The cost associated with meeting the total
HAP MACT floor are emissions testing and reporting/recordkeeping costs.
Based on the average uncontrolled performance level for green wood atmospheric
refiners, it is estimated that existing sources will meet the total HAP MACT floor. Costs for
emissions testing and reporting/recordkeeping were estimated for existing sources. It is
anticipated that new green wood atmospheric refiner systems will require a HAP control device
to reduce emissions to meet the new source MACT floor. The costs of oxidizer control and
monitoring were estimated for projected new source green wood refiners.
An option more stringent than the MACT floor for both dried and green wood
atmospheric refiners is to route emissions to a HAP control device that meets the limits in Table
IB of subpart DDDD.
3.2.5 Log Vat Costs
A work practice standard for logs vats is proposed. Initial and continuous compliance
with the log vat work practice would be demonstrated through monitoring, recordkeeping, and
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reporting that reflects adherence to the work practice conditions. The estimated initial cost of the
log vat work practice is inclusion of a description of how each log vats meets the work practice
standards in the NOCS. The cost of reviewing operations to address the work practice in the
NOCS is estimated to be $5,600 per facility assuming 40 hours labor at the composite labor rate
of $139.83. The annual cost for semi-annual reporting of ongoing compliance with the standard
is estimated to be $560/year assuming 2 hours labor per semi-annual report per PCWP facility at
the composite labor rate.
For hot water vats, the annual cost for covering with timbers was estimated based on a
50-foot long hot water vat. The annual cost of covering 80 percent of the vat area with 8"x8"xl6'
pressure treated timbers (60 at a cost of $215 each) was estimated to be $12,900/year. The
timbers were assumed to require replacement each year for structural integrity.
3.2.6 Costs for Processes with MDI Emissions
The EPA identified three types of process units that are currently subject to HAP
standards in the PCWP NESHAP but were evaluated further for MDI emissions. These include
miscellaneous coating operations; reconstituted wood products presses; and blow-line blend tube
dryers used to process material containing MDI resin. The costs associated with regulatory
options for MDI from these processes are discussed in this section.
Emission limits for MDI emissions from reconstituted wood products presses are under
consideration. Separate MDI MACT floors apply for OSB and particleboard/MDF presses that
are not co-controlled with tube dryers. No feasible options more stringent than the MDI MACT
floor were identified for reconstituted wood products presses.
All of the OSB presses have HAP controls and are expected to meet the MACT floor for
OSB presses based on the average MDI emissions from comparable process units tested.
The MACT floor for particleboard and MDF reconstituted wood products presses (that
are not co-controlled with a tube dryer) is expected to be met by the particleboard/MDF presses
with HAP controls in place based on the average MDI emissions from similarly controlled units.
However, it is currently unknown whether particleboard presses at two facilities that meet the
PCWP production-based compliance option (PBCO) using pollution prevention measures will be
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impacted by the MDIMACT floor. In the absence of MDI emissions data for these presses, it
was assumed that a HAP control device may be needed to meet the MDI MACT floor. The
capital cost (and annualized capital) of a permanent total enclosure (PTE) were added if full
enclosure was not already present. The enclosure costs were taken from U.S. EPA (2000) and
escalated to 2021 dollars. One facility already has a press biofilter installed, but the biofilter was
not in use at the time of the 2017 ICR. For this facility, it was estimated that operation of the
biofilter could be resumed to reduce HAP emissions including MDI. The incremental costs for
resuming operation of the biofilter were estimated to be $335,833/yr based on biofilter O&M
costs from the 2017 ICR (which were scaled to 2021) and $10,314 in monitoring O&M costs.
Five tube dryer systems use a blow-line to apply MDI resin that mixes with wood fiber
during drying. The tube dryer systems are comprised of primary tube dryers and in some cases,
secondary tube dryers that are co-controlled with the primary tube dryer. Three of the tube dryer
systems blow-line bending MDI are co-controlled with an MDF press. Because all of the tube
dryer systems operate HAP emissions controls, it is expected they will all meet the MDI MACT
floor based on the average MDI emissions from the comparable unit tested. No feasible options
more stringent than the MDI MACT floor were identified.
The EPA is proposing an emission limit for MDI emissions from spray booths in which
MDI moisture sealant is applied. An MDI moisture sealant spray booth was identified at an
engineered wood products facility. The MDI emission limit is based on stack emissions test data
from this facility. No options more stringent than the MACT floor emission level were identified
for further analysis.
The cost impact associated with the miscellaneous coating MDI emission limit is the cost
of initial and 5-year repeat air emissions testing using EPA Method 326. Between tests, ongoing
compliance costs include annual spray booth filter replacement costs of $5,600/year (based on
$5,000/year in 2016 escalated to 2021 dollars using the 2021/2016 GDP ratio 118.37/105.74) and
the costs of reporting and recordkeeping (e.g., amount of sealant applied and wood product
throughput). The annual reporting and recordkeeping cost was estimated the be $l,120/year
based on 8 hr/yr at the composite labor rate.
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3.2.7 PCWP Wood-fired Dryer Non-Mercury HAP Metal and PM
Cost impacts of the non-mercury metal MACT options for existing and new sources were
estimated for direct wood-fired rotary strand dryers, green rotary dryers, tube dryers, and
softwood veneer dryers.
The non-Hg metals options under review are in terms of lb/ODT or gr/dscf of filterable
PM. The baseline PM performance level for each PCWP dryer was determined using the PM
emission test data (documented in U.S. EPA (2022c)) or estimated using other information as
described in Section IV.G of the cost memorandum2. The baseline performance level for each
dryer system was compared to the PM MACT floor emission level (or more stringent option, if
applicable) in terms of lb/ODT. In cases where the PM lb/ODT MACT floor (or options) were
not expected to be met based on the actual or estimated performance level, the actual or
estimated performance of dryers in terms of gr/dscf was considered to estimate whether the dryer
system would require an upgrade to meet the MACT option. Cost estimates were developed if a
control technology upgrade was estimated to be needed.
3.2.7.1 Rotary Strand Dryers
Most of the 26 direct wood-fired rotary strand dryer systems at major sources in the U.S.
already operate with PM and HAP control technology (e.g., WESP/RTO). The use of WESPs for
PM control upstream of HAP controls on PCWP rotary strand dryers is prevalent because the
high moisture exhaust stream and nature of the particulate originating from dryers (e.g., sticky,
flammable) is not well-suited for other methods of PM control (e.g., baghouses). To estimate
cost impacts for existing direct wood-fired rotary strand dryers, where a PM control upgrade was
estimated to be needed to meet the PM MACT floor, the costs of a new WESP system were
assigned where no WESP is in place (e.g., for dryers with an electrified filter bed or multiclone
preceding an RTO). If an upgrade to an existing WESP was estimated to be needed, the
incremental capital cost, annualized capital, and operating costs and operating factors (e.g.,
increased electric or water use) were estimated to be one-third that of a comparable new WESP.
2 See PCWP_Impacts_Memo_Revl2-22-22_rev.docx in the docket. Docket ID No. EPA-HQ-OAR-2016-0243.
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One rotary strand dryer system with an ESP but no HAP control device was estimated to install a
WESP control to meet the PM MACT floor and an RTO to achieve the PAH MACT floor.
Two new OSB facilities with rotary stand dryer systems are projected to be constructed
within 5 years following proposal of the additional standards for the PCWP NESHAP. The PM
MACT floor for new rotary strand dryer systems is achievable with a very well-performing
WESP/RTO system. Because a WESP/RTO system is the most likely control system to be
installed in the absence of the standards being proposed, the incremental control technology cost
estimated to be associated with the PM MACT floor are for an upgraded WESP. As noted above,
for an upgraded WESP, the added incremental capital cost, annualized capital, and operating
costs and operating factors (e.g., increased electric or water use) were estimated to be one-third
that of a comparable new WESP that would likely have been installed in the absence of the PM
MACT floor.
3.2.7.2 Green Rotary Dryers
The seven direct wood-fired green rotary dryer systems in the U.S. already operate with
PM and HAP control technology (e.g., WESP/RTO or equivalent). All of the existing direct
wood-fired green rotary were estimated to meet the PM MACT floor level based on either the
lb/ODT or gr/dscf standard using the control technology already installed. No options more
stringent than the MACT floor for existing sources were identified.
One new green rotary dryer with a WESP/RTO is projected to be constructed within 5
years after proposal. The new dryer is expected to meet the PM MACT floor using the same
control technology that would have been installed in the absence of the PM standard. Thus, no
incremental control costs are estimated for the new green rotary dryer. No options more stringent
than the MACT floor for new sources were identified.
3.2.7.3 Dry Rotary Dryers
The MACT floor for existing wood-fired dry rotary dryers is based on the current level of
control which is a mechanical collection (e.g., multiclone). All nine of the existing dry rotary
dryer systems in the U.S. are expected to meet the PM MACT floor without incremental control
technology costs. No new dry rotary dryers are projected to be constructed in the next 5 years.
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A beyond the floor option to achieve further PM reduction from existing or new dry
rotary dryers is use of a WESP/RTO control system. The beyond-the-floor WESP/RTO
technology could enable the dry rotary dryers to meet the same PM limits as required for green
rotary dryers.
Costs of the WESP were estimated assuming one WESP would be installed per dry rotary
dryer. Costs of the RTO were estimated assuming all dry rotary dryers at the facility would vent
through the same RTO.
3.2.7.4 Primary and Secondary Tube Dryers
The wood-fired secondary tube dryers vent into the primary tube dryers that precede
them. Thus, the primary tube dryer MACT floor also applies for secondary tube dryers because
these dryers share the same emission point(s) to the atmosphere. All 11 of the existing direct
wood-fired primary tube dryer systems in the U.S. were estimated to meet the PM MACT floor
level based on either lb/ODT or gr/dscf using the control technology already installed. Because
the MACT floor for primary tube dryers is based on the PM and HAP control devices that are
already present on these dryers, no options more stringent than the MACT floor were identified
(U.S. EPA, 2022c).
One new wood-fired primary tube dryer with a scrubber or WESP and RTO is projected
to be constructed withing 5 years after proposal. No new secondary tube dryers are projected.
The projected primary tube dryer is expected to meet the PM MACT floor using the same control
technology that would have been installed in the absence of the PM standard. Thus, no
incremental control costs are estimated for the new primary tube dryer. No options more
stringent than the MACT floor for new sources were identified.
3.2.7.5 Softwood Veneer Dryer Heated Zones
There are three direct wood-fired softwood veneer dryer systems in the U.S. The PM
emissions data available for one softwood veneer dryer system were used to establish the MACT
floor, which is the same for existing and new sources. Because PM and HAP control
technologies are already in use, no beyond the floor options were identified for existing or new
softwood veneer dryer systems. The existing direct wood-fired softwood dryers are expected to
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meet the PM MACT floor using the control technology already installed. No new wood-fired
softwood veneer dryers are projected to be constructed in the next 5 years.
3.2.8 PCWP Wood-fired Dryer Mercury (Hg)
The baseline Hg performance level for each direct wood-fired PCWP dryer were
estimated using the Hg emissions data (performance levels) from the 2022 section 114 survey.
The average lb/ODT (or lb/MSF 3/8" for veneer dryers) from the dryers tested was used to
backfill for dryers without Hg emissions data. As noted previously, the baseline level of control
for PCWP rotary strand, green rotary, tube and softwood veneer dryers is typically a PM and
HAP control device in series (e.g., WESP/RTO or similar). For dry rotary dryers the baseline
level of control is a mechanical collector (e.g., multiclone). Due to the low levels of Hg
emissions from PCWP dryers, which were usually below three times the representative detection
level (RDL) of the measurement method (i.e., 3xRDL, the minimum level at which emissions
can reliably be measured for comparison to the MACT floor), all PCWP dryers are expected to
meet the Hg MACT floors for existing and new sources with the baseline level of control. No
feasible regulatory options more stringent than the MACT floors for existing or new PCWP
dryers were identified (U.S. EPA, 2022c).
3.2.9 PCWP Wood-fired Dryer Acid Gases
Cost impacts of the acid gas MACT options for existing and new sources were estimated
for direct wood-fired rotary strand dryers, green rotary dryers, tube dryers.3 The baseline acid gas
performance level for each direct wood-fired PCWP dryer was estimated using the emissions
data (performance levels) from the 2022 section 114 survey (U.S. EPA, 2022c). The average
lb/ODT performance level from the dryers tested was used to backfill for dryers without acid gas
emissions data. In cases where the HC1 lb/ODT emission level options were not expected to be
met based on the actual or estimated performance level, the actual or estimated performance of
dryers in terms of mg/dscm was considered to estimate whether the dryer system would require
3 No acid gas standards are under consideration for softwood veneer dryers because acid gas emissions were not
detected in emissions measurements.
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an upgrade to meet the MACT option. Cost estimates were developed if a control technology
upgrade was estimated to be needed.
3.2.9.1 Rotary Strand Dryers
All existing wood-fired rotary strand dryer systems are expected to meet the HC1 MACT
floor with the baseline controls in place. No feasible options more stringent than the MACT floor
were identified for existing or new rotary strand dryers.
The HC1 MACT floor for new wood-fired rotary strand dryers is about 10 percent lower
than the average HC1 emissions from rotary strand dryer systems included in the section 114
tests. Although below the average performance level of dryers tested, the HC1 MACT floor
emission level (based on the upper prediction limit [UPL]) has been achieved by 3 rotary strand
dryers with WESP control and a rotary strand dryer with a multiclone. Thus, the new source
MACT floor for rotary strand dryers is expected to be met with a well-performing WESP system.
An example of a well-performing WESP is one that incorporates caustic addition (e.g., 1
percent) into the WESP recirculation water and has increased blowdown. These upgrades were
included in the incremental cost for an upgraded WESP estimated to be associated with the PM
MACT floor for new sources. A WESP/RTO system is the most likely control system to be
installed in the absence of the standards being proposed. Therefore, the incremental costs for an
upgraded WESP were estimated to be associated with the HC1 MACT floor for new sources.
3.2.9.2 Green Rotary Dryers
Existing and new wood-fired green rotary dryer systems are expected to meet the HC1
MACT floor with the baseline controls. No feasible options more stringent than the MACT floor
were identified for existing or new green rotary dryers.
3.2.9.3 Dry Rotary Dryers
Existing and new wood-fired dry rotary dryer systems are expected to meet the HC1
MACT floor with the baseline controls. No feasible options more stringent than the MACT floor
were identified for existing or new dry rotary dryers because the MACT floor for existing and
new systems is based on 3xRDL (i.e., the minimum level at which emissions can reliably be
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measured for comparison to the MACT floor). No new dry rotary dryers are projected to be
constructed in the next 5 years.
3.2.9.4 Primary and Secondary Tube Dryers
Existing and new wood-fired primary tube dryer systems are expected to meet the HC1
MACT floors with the baseline controls which typically incorporate a WESP or scrubber. No
feasible options more stringent than the existing and new source MACT floors were identified
for primary tube dryers. The one new wood-fired primary tube dryer projected is expected to
come online with the WESP or scrubber technology needed to meet the HC1 MACT floor for
new sources so no incremental cost impacts were estimated.
Wood-fired secondary tube dryers vent into the primary tube dryers and out the same
emission point. Thus, the primary tube dryer MACT options also apply for secondary tube
dryers. No new secondary tube dryers are projected to be constructed in the next 5 years.
3.2.10 PCWP Wood-fired Dryer Dioxin/Furan and PAH
Burner tune-up standards are under consideration for PCWP direct wood-fired dryer
dioxin emissions because the majority of dioxin/furan test data were below detection limit (U.S.
EPA, 2022c). For PAHs, numeric standards are under consideration for wood-fired rotary strand
dryers, green rotary dryers, dry rotary dryers, and tube dryers. Control technology costs for the
PAH MACT options for existing and new sources were estimated as described in this section.
The baseline PAH performance level for each wood-fired PCWP dryer was estimated
based on the emissions data (performance levels) from the 2022 section 114 survey (U.S. EPA,
2022c). The average lb/ODT performance levels from the dryers tested was used to backfill for
dryers without emissions data. In cases where the PAH lb/ODT emission level options were not
expected to be met based on the actual or estimated performance level, the actual or estimated
performance of dryers in terms of mg/dscm was considered to estimate whether the dryer system
would require an upgrade to meet the MACT option. Cost estimates were developed if a control
technology upgrade was estimated to be needed.
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3.2.10.1 Rotary Strand Dryers
Most existing wood-fired rotary strand dryer systems are expected to meet the PAH
MACT floor in terms of lb/ODT and/or mg/dscm with the baseline PM and HAP controls in
series. One rotary strand dryer system with an ESP but no HAP control device was estimated to
add a WESP to meet the PM MACT floor (discussed previously) and an RTO to achieve the
PAH MACT floor. No feasible options more stringent than the MACT floor were identified for
existing sources.
New wood-fired rotary strand dryer systems are expected to be challenged to meet the
stringent new-source PAH MACT floor in spite of coming online with a WESP/RTO control
system. While the new source MACT floor emission level based on the UPL is achievable (and
was achieved by the best-performing rotary strand dryer with a MC/RTO control system and one
other rotary strand dryer with a WESP/RTO), the new source PAH MACT floor is 90 percent
lower than the average PAH performance level achieved by the well-controlled rotary strand
dryers in the Section 114 emission tests. The burner tune-up requirements required for all direct-
fired PCWP dryers are expected to help with meeting the PAH MACT floor. In addition, costs
for an upgraded WESP system over the baseline were included with the PM MACT floor
estimates. No other incremental control equipment costs were estimated in association with the
PAH MACT floor given that the baseline emissions control system is expected to remain the
same. No feasible options more stringent than the MACT floor were identified for new sources.
Additional incremental emissions testing costs were estimated in association with the new-source
PAH limit, assuming two stack tests for engineering purposes in addition to the compliance test
(i.e., a total of 3 tests) may be needed to fine-tune dryer and control system operation to adhere
to the new-source PAH limit.
3.2.10.2 Green Rotary Dryers
Existing wood-fired green rotary dryer systems are expected to meet the PAH MACT
floor with the baseline HAP controls. No feasible options more stringent than the MACT floor
were identified for existing sources.
New wood-fired green rotary dryer systems are expected to be challenged to meet the
stringent new-source PAH MACT floor in spite of coming online with a WESP/RTO control
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system. While the new source MACT floor is achievable (and was achieved by the best-
performing green rotary dryer with a WESP/RTO control system), the new source PAH MACT
is at least 80 percent lower than the average PAH performance achieved by the well-controlled
green rotary dryers in the Section 114 emission tests. The burner tune-up requirements required
for all direct-fired PCWP dryers are expected to help with meeting the PAH MACT floor. No
incremental control costs were estimated in association with the PAH MACT floor given that the
baseline emissions control system is expected to remain the same. No feasible options more
stringent than the MACT floor were identified for new sources. Additional incremental
emissions testing costs were estimated in association with the new-source PAH limit, assuming
two stack tests for engineering purposes in addition to the compliance test (i.e., a total of 3 tests)
may be needed to fine-tune dryer and control system operation to adhere to the new-source PAH
limit.
3.2.10.3 Dry Rotary Dryers
Existing wood-fired dry rotary dryer systems are expected to meet the PAH MACT floor
with the baseline controls. An option more stringent that the PAH MACT floor for existing
sources would be based on use of a WESP/RTO system. The WESP would protect the RTO from
particulate build up. The RTO is expected to achieve the reduction in PAH emissions as would
be needed to meet the dry rotary dryer new source MACT floor.4
Although no new source dry rotary dryers are projected over the next 5 years, if a dry
rotary dryer were to be installed, it is estimated to require an RTO to meet the new source PAH
MACT floor for dry rotary dryers.
3.2.10.4 Primary and Secondary Tube Dryers
MACT floors with the baseline controls which typically incorporate a HAP control
device. No feasible options more stringent than the MACT floors were identified for existing or
new primary tube dryers. The one new wood-fired primary tube dryer projected is expected to
come online with the control technology (e.g., WESP or scrubber and RTO) needed to meet the
4 Approximately 70 percent reduction in PAH emissions was achieved by a rotary strand dryer RTO system in the
section 114 survey.
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PAH MACT floor for new sources. Therefore, no incremental impacts were estimated for new
sources.
Wood-fired secondary tube dryers vent into the primary tube dryers and out the same
emission point. Thus, the primary tube dryer MACT options also apply for secondary tube
dryers. No new secondary tube dryers are projected.
3.2.11 Direct-fired Dryer Burner Tune- Up and Bypass Stack Monitoring Costs
Combustion unit burner tune ups are under consideration for direct-fired PCWP dryers
and lumber kilns. The costs of tune ups were estimated based on estimates developed for the
Boiler MACT. The Boiler MACT requires annual tune ups new or existing boilers or process
heaters without a continuous oxygen trim system and with heat input capacity of 10 MMBtu/hr
or greater as a work practice for dioxins/furans. Biennial tune ups are required for new or
existing boilers or process heaters without a continuous oxygen trim system and with heat input
capacity of less than 10 MMBtu/hr. The frequency of tune ups is every 5 years for gas-fired
boilers or process heaters with heat input capacity of less than 5 MMBtu/hr. (40 CFR 63.7540)
Based on information available to EPA from the PCWP ICR, the smallest direct-fired
dryer burner is 4.5 MMBtu/hr. Very few burners are between 5 and 10 MMBtu/hr heat input
capacity. Most burners have 10 MMBtu/hr or greater heat input capacity. Thus, for the PCWP
cost analysis, no distinction in burner size was made. The Boiler MACT cost analysis was based
on the estimated cost to conduct an annual tune-up on an industrial, commercial, or institutional
boiler is based on the cost estimate provided by Dr. H.M. Eckerlin and E.W. Soderberg of the
Industrial Extension Service USI Boiler Efficiency Program (Eckerlin, 2004; ERG, 2011). Their
report summarizes the findings and recommendations of an evaluation of boilers in state-owned
facilities. Their report indicates (in 2004 dollars) that the initial set-up for a boiler tune-up ranges
from $3,000 to $7,000 per boiler, and thereafter, an annual tune-up costs $1,000 per boiler per
year. Using this information, as in Boiler MACT cost analysis, an average of $5,000 per boiler in
initial set-up costs was escalated to 2021 dollars and annualized over five years and added to the
subsequent year costs for an annual tune-up.
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The tune-up costs were applied for all direct-fired dryers and lumber kilns in the PCWP
industry. Specifically, an initial tune up cost of $6,975, annualized capital of $1,701, and annual
O&M of $1,395 were included in the PCWP cost analysis for annual burner tune-ups.
Emissions from combustion unit bypass stacks associated with direct-fired PCWP dryers
would be limited by the burner tune-up work practice requirements required for PCWP dryers
which apply regardless of fuel type. Likewise, emissions from combustion unit bypass stacks
associated with direct-fired lumber kilns would be limited by the lumber kiln burner tune-up
work practice requirements.
3.2.12 Testing, Monitoring, Reporting and Recordkeeping Costs
Table 3-1 presents estimated emissions testing costs for different test methods. Emissions
testing costs were treated as capital costs because mills will contract with a testing company to
perform the testing for initial and 5-year repeat tests. The capital costs were annualized over a 5-
year testing interval. The testing costs in Table 3-1 include costs associated with mobilization for
3 test runs, test report preparation, and entering information into the EPA's Electronic Reporting
Tool (ERT) for the test methods currently supported in the ERT (e.g., all methods listed except
EPA Methods 18 and 204 andNCASI A105.1).
Table 3-1 Emission Testing Costs for Process Units
Test Method3
Capital cost per test every 5
years
Annualized capital cost per test,
S/vr^
EPA Method 5 (PM as surrogate for non-
Hg metal HAP)
EPA Method 29 (speciated metals
including Hg)
EPA Method 25A with EPA Method 18
(NMHC)
EPA Method 320 orNCASI A105.1
(HAP)
EPA Method 326 (MDI)
EPA Method 26A (acid gases)
EPA OTM-46 (DF, PAH)
EPA Method 10 (CO)
EPA Method 204 (enclosure capture
efficiency)
$10,000
18,000
14,000 (outlet)
28,000 (inlet/outlet)
15,000 (inlet)
30,000 (inlet/outlet)
14,000
12,000
20,000
5,000
12,000
$2,349
4,390
3,414 (outlet)
6,829 (inlet/outlet)
3,658
7,317
3,414
2,927
4,878
1,219
2,927
a. Test method costs include mobilization and EPA Methods 2-4 for measurement of gas flow, diluents (O2, CO2),
and moisture. Testing costs are for 3 runs. Test report and data entry into the ERT are included.
b. Annualized over the 5-year testing period at a 7 percent interest rate (CRF = 0.244)
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Continuous parameter monitoring costs for control devices were estimated considering
the costs of monitoring systems are driven by the costs of planning, installing, operating, and
maintaining the data acquisition system (DAS). The DAS and associated software may be
connected to sensors and logic controllers that track multiple parameters. Generic costs for a
continuous parameter monitoring system (CPMS) for monitoring and recording up to two
process or control device parameters for each APCD projected to be needed to comply with the
rule, the parameter monitoring, reporting, and recordkeeping costs (in 2021 dollars) were
estimated as shown in Table 3-2.
Table 3-2 CPMS Costs
Cost Factor
Two Parameters
One Parameter
Total Capital Investment, $
$42,986
$19,786
Annualized capital, $/yr'
4,058/yr
1,868
O&M, $/yrb
10,314/yr
7,066
Total Annual Cost, $/yr
14,372/yr
8,934
a. Based on a 7 percent interest rate and 20-year equipment life. Costs are in 2021 dollars.
b. Includes operation and maintenance (O&M), reporting and recordkeeping of CPMS data, and property taxes,
insurance, and administrative costs for CPMS.
The one-parameter costs were assigned for temperature monitoring only, bypass stack
monitoring (e.g., for one indicator of bypass stack use such as temperature or damper position
monitoring), and dry ESPs which would be required to monitor total secondary power output.
The two-parameter CPMS costs were assigned for WESPs (liquid flow and total secondary
power), scrubbers (liquid flow and pressure-drop or pH), and electrified filter beds (EFBs)
(pressure drop and voltage).
For dry control devices other than the controls noted above, opacity monitoring costs
were estimated. Continuous opacity monitoring system (COMS) costs were estimated based on
the EPA Air Pollution Control Cost Manual Section 2, Chapter 4. The COMS costs of $153,246
(TCI), $21,819/year (capital recovery based on a 7 percent interest rate and 10-year equipment
life), and $27,385/year (O&M) were assigned for each PCWP dryer with a mechanical collector,
baghouse, or other dry PM control device.
Reporting and recordkeeping costs not associated with CPMS were estimated based on
the number of hours per year for reporting and recordkeeping to demonstrate continuous
compliance with the standards. The estimated labor hours were multiplied by the reporting and
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recordkeeping composite labor rate. The reporting and recordkeeping costs in Table 3-3 were
assigned for each process requiring a COMS or other method of demonstrating ongoing
compliance that does not involve use of a CPMS. The costs of recordkeeping and reporting were
included with the CPMS costs above.
Table 3-3 Reporting and Recordkeeping of Information Not Involving CPMS
Activity
hr/yr
Annual cost, $/yra
Compile data
48
$6,712
Enter/verify information for semiannual reports
32
4,475
Total
80
11,187
a. Based on composite reporting and recordkeeping labor rate. Costs are in 2021 dollars.
3.3 Engineering Cost Analysis Summary Results
Table 3-4 below presents a summary of the compliance costs for the proposed PCWP
amendments by emission point and in total. Table 3-5 presents the rounded capital and annual
costs for the proposed amendments. The total capital cost of the proposed PCWP amendments is
about $126 million, and the total annual cost is about $51 million in 2021 dollars. The estimation
of total capital cost (synonymous with total capital investment) and total annual cost follows the
methodology in the EPA Air Pollution Control Cost Manual (U.S. EPA, 2017b). Estimates of
total annual cost includes both operating and maintenance and annualized capital costs.
We also show the costs the PV of the costs of these rules over an analysis time period and
an EAV of those costs over the same analysis time period. The presentation of impacts in this
section also includes those for more stringent options. The more stringent option is the same as
the proposal except that tighter controls are considered for some processes described in Section
3.2 of this EIA. Less stringent options were not considered because the proposal is setting
MACT floors and less stringent options are not permitted. Thus, the differences in stringency for
analyses in the EIA reflect different stringencies primarily in the proposed options.
To facilitate the presentation of these costs, Table 3-6 presents the PV and EAV of costs
(in 2021 dollars) over the analysis time period of 2027-2046 for the impacts in this rulemaking,
discounted to 2023. The PV is a current day estimate of the costs over the analysis time period
for this proposed rulemaking, and the EAV is the average annual value of these costs over this
20-year time period whose sum is the PV. The PV of the compliance costs over this 20-year time
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period is $435 million at a 7 percent discount rate and $693 million at a 3 percent discount rate.
The EAV of the compliance costs is $41 million at a 7 percent discount rate and $47 million at a
3 percent discount rate. We present these costs starting in the year in which the proposed rule if
finalized will be fully implemented, and then presenting costs of the rule out to 2046, which
reflects the life of control equipment that may be installed in response to the rule.
Table 3-4 Detailed Nationwide Costs for the PCWP Source Category by Emission Point
for the Proposed Rule (2021$)
Emission Point
Total Capital Cost ($)
Total Annual Cost ($/yr)
Lumber Kiln WP (with burner tune up)
$20,004,725
$19,019,560
RMH Process Units (All) MACT floor
1,780,800
1,980,568
RMH: Wastewater WP Option
184,800
18,480
HB Digester/ Washer WP
5,600
560
HB Mat Dryer and Predryer MACT floor
69,573
25,184
Atmospheric Refiner MACT floor
4,926,553
2,344,488
Log Vat WP
1,250,279
854,867
Reconstituted Wood Products Press MDI
2,613,358
1,326,482
Tube Dryer MDI
84,000
20,484
Misc. Coating MDI
14,000
10,134
Direct-fired Dryer Burner Tune-Up
969,525
430,140
Bypass Stacks
7,973,919
3,600,440
RSD PM/metal MACT floor
77,237,635
18,786,369
GRD PM/metal MACT floor
400,691
129,050
DRD PM/metal MACT floor
1,142,722
439,808
PTD PM/metal MACT floor
833,156
288,332
SVD PM/metal MACT floor
356,278
137,033
PCWP Dryer Hg MACT floor
1,044,000
254,620
RSD HC1 MACT floor
336,000
81,956
GRD HC1 MACT floor
96,000
23,416
DRD HC1 MACT floor
84,000
20,489
PTD HC1 MACT floor
144,000
35,124
RSD PAH MACT floor
3,522,463
1,415,869
GRD PAH MACT floor
200,000
48,780
DRD PAH MACT floor
140,000
34,146
PTD PAH MACT floor
240,000
58,536
Total
125,654,079
51,384,916
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Table 3-5 Summary of the Total Costs ($2021)
Rule
Total Capital Cost ($)
Total Annual Cost ($)
PCWP
$126,000,000
$51,000,000
Table 3-6 Discounted Costs from 2027-2046, for the Proposed Amendments to the
PCWP (million 2021$, discounted to 2023)
Year
3 percent
7 percent
Total Annual Cost
Total Annual Cost
2027
$13.98
$12.00
2028
50.67
41.88
2029
49.20
39.14
2030
45.24
34.65
2031
40.56
29.91
2032
39.71
28.18
2033
38.24
26.12
2034
37.12
24.41
2035
39.02
24.70
2036
34.99
21.32
2037
34.26
20.10
2038
32.98
18.62
2039
32.02
17.41
2040
33.66
17.61
2041
30.18
15.20
2042
29.55
14.33
2043
28.45
13.28
2044
27.62
12.41
2045
29.04
12.56
2046
26.04
10.84
PV
693
435
EAV
47
41
Note: Discounted to 2023. Undiscounted costs available in PCWP_2022_Proposal_Impacts_04_12_23 .xlsx.
Table 3-7 contains a summary of the HAP and VOC emission reductions per year for this
proposed regulatory action. Table 3-8 contains a summary of other pollutant emissions changes
(increases and decreases), both for criteria other than VOC and climate pollutants, for this
proposed action.
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Table 3-7 Summary of the HAP and VOC Emission Reductions per Year
Rule HAP Emission Reductions (tons VOC Emission Reductions (tons
per year) per year)
PCWP 591 8,051
Table 3-8 Summary of Emission Reductions (Increases) Other Than HAP and VOC in
Tons per Year3
Pollutant
Primary
Secondary
Total
CO
718
(22)
696
co2
129,700
(23,200)
106,000
ch4
11
(1.8)
10
n2o
4.7
(0.3)
4
NOx
132
(14)
118
pm25
164
(2)
162
so2
12
(14)
(2)
aValues in parentheses denote emission increases.
3.4 Compliance Costs of the Proposal
EPA presents estimates of the PV of the costs over the period 2027 to 2046. To calculate
the PV of the costs of the proposed action, annual costs are in 2021 dollars and are discounted to
2023 at 3 percent and 7 percent discount rates. The EPA also presents the EAV, which represents
a flow of constant annual values that would yield a sum equivalent to the PV. The EAV
represents the value of a typical cost for each year of the analysis, consistent with the estimate of
the PV, in contrast to year-specific estimates.
Table 3-9 presents a summary of the compliance costs of the proposed rule, and the more
stringent alternative in terms of the PV and EAV. Given these results, the EPA expects that
implementation of the proposed PCWP rule, based solely on an economic efficiency criterion,
could provide society with a relatively potential net gain in social welfare, especially if
considering the expansive set of health and environmental benefits and other impacts we did not
quantify such as monetization of benefits from VOC emission reductions occurring outside of
the ozone season (the months of October-April).
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Table 3-9 Summary of Compliance Costs for PCWP, 2027-2046 (million 2021$,
discounted to 2023)
Proposal
More Stringent Alternative
3%
Compliance Costs
PV
$693
EAV
$47
PV
$1,330
EAV
$89
3.5 Effects of Emissions Reductions
Implementing the proposed amendments is expected to reduce emissions of HAP and
non-HAP pollutants, such as VOC. In this section, we provide a qualitative discussion of the
benefits of this proposed rule and HAP health effects.
We estimate that the proposed amendments would reduce HAP emissions from the
source category by approximately 591 tpy. The amendments would regulate emissions of
acetaldehyde, acrolein, formaldehyde, methanol, phenol, propionaldehyde, non-Hg HAP metals,
Hg, HC1, PAH, D/F and MDI. Information regarding the health effects of these compounds can
be found in Health Effects Notebook for Hazardous Air Pollutants (at
https://www.epa.gov/haps/health-effects-notebook-hazardous-air-pollutants) and in the EPA
Integrated Risk Information System (IRIS) database (at
https://iris.epa.gov/AtoZ/71ist type=alpha).
The proposed amendments would reduce emissions of VOC which, in conjunction with
NOx and in the presence of sunlight, form ground-level ozone (O3). There are health benefits of
reducing VOC emissions in terms of the number and value of avoided ozone-attributable deaths
and illnesses. The Integrated Science Assessment for Ozone (Ozone ISA)5 as summarized in the
TSD for the Final Revised Cross State Air Pollution Rule Update6 synthesizes the toxicological,
clinical, and epidemiological evidence to determine whether each pollutant is causally related to
5 U.S. EPA. 2020. Integrated Science Assessment for Ozone and Related Photochemical Oxidants. U.S.
Environmental Protection Agency. Washington, DC. Office of Research and Development. EPA/600/R-20/012.
Available at: https://www.epa.gov/isa/integrated-science-assessment-isa-ozone-and-related-photochemical-
oxidants.
6 U.S. EPA. 2021. Regulatory Impact Analysis Final Revised Cross-State Air Pollution Rule Update for the 2008
Ozone NAAQS. Available at https://www.epa.gov/sites/default/files/2021-
03/documents/revised_csapr_update_ria_final.pdf
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an array of adverse human health outcomes associated with either acute (i.e., hours or days-long)
or chronic (i.e., years-long) exposure. For each outcome, the ISA reports this relationship to be
causal, likely to be causal, suggestive of a causal relationship, inadequate to infer a causal
relationship, or not likely to be a causal relationship.
In brief, the Ozone ISA found short-term (less than one month) exposures to ozone to be
causally related to respiratory effects, a "likely to be causal" relationship with metabolic effects
and a "suggestive of, but not sufficient to infer, a causal relationship" for central nervous system
effects, cardiovascular effects, and total mortality. The ISA reported that long-term exposures
(one month or longer) to ozone are "likely to be causal" for respiratory effects including
respiratory mortality, and a "suggestive of, but not sufficient to infer, a causal relationship" for
cardiovascular effects, reproductive effects, central nervous system effects, metabolic effects,
and total mortality.
3.6 Uncertainties and Limitations
Throughout the EIA, we considered a number of sources of uncertainty regarding the costs
of the proposed amendments. We summarize the key elements of our discussions of uncertainty
here:
Projection methods and assumptions: Over time, more facilities are newly established
or modified in each year, and to the extent the facilities remain in operation in future years, the
total number of facilities subject to the action could change. We assume 100 percent compliance
as this proposed rule and existing rules are implemented, starting from when the source becomes
affected. If sources do not comply with these rules, at all or as written, the cost impacts and
emission reductions may be overestimated. Additionally, new control technology and approaches
may become available in the future at lower cost, and we are unable to predict exactly how the
affected industry will comply with the proposed rule in the future.
Years of analysis: In addition, the counts of units projected to be affected by this
proposed action are held constant. Given our analytical timeframe of 2027-2046, it is possible
that the affected unit counts may change. The years of the cost and other analyses are 2027, to
represent the first-year facilities when this rulemaking will be effective, through 2046, to
represent impacts of the action over the life of installed capital equipment, as discussed in this
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chapter. Extending the analysis beyond 2046 would introduce substantially more uncertainty in
projected impacts of the proposed regulation.
Compliance Costs: There may be an opportunity cost associated with the installation of
environmental controls or implementation of compliance activities (for purposes of mitigating
the emission of pollutants) that is not reflected in the compliance costs. If environmental
investment displaces investment in productive capital, the difference between the rate of return
on the marginal investment displaced by the mandatory environmental investment is a measure
of the opportunity cost of the environmental requirement to the regulated entity. To the extent
that any opportunity costs are not added to the control costs, the compliance costs presented
above may be underestimated.
In addition, the hurdle rate is defined as the minimum rate of return on an investment that
a firm would deem acceptable under typical business practices. Thus, if the hurdle rate is higher
on average for firms in this industry than the interest rate used in estimating the compliance costs
(in this proposed action, 7 percent at the time of this analysis, which is the bank prime rate in the
U.S. set the Federal Reserve Board as of December 2022), then there is the potential that these
investments in environmental controls may not necessarily be undertaken on average.
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4 ECONOMIC IMPACT ANALYSIS
For economic impact analysis of rules that have a few directly affected industries, the
EPA often prepares a partial equilibrium analysis. In this type of economic analysis, the focus of
the effort is on estimating impacts to the single affected industry or several affected industries,
and all impacts of this rule to industries outside of those affected are assumed to be zero or so
inconsequential to not be considered in the analysis.7 If the compliance costs, which are key
inputs to an economic impact analysis, are relatively small, then the impact analysis could
consist of a calculation of annual (or annualized) costs as a percent of sales for affected parent
companies. This latter type of analysis is called a screening analysis and is applied when a partial
equilibrium or more complex economic impact analysis approach is deemed unnecessary given
the expected size of the impacts. We applied a screening analysis to estimate the economic
impacts for this proposal on small businesses, given that the annual total compliance costs are
about $51 million in 2021 dollars, a very small amount relative to the size of the affected
industries. The value of product shipments as a measure of industry size is presented in Figure
2-8. The analysis employed here is a "sales test" that computes the annualized compliance costs
as a share of sales for each company. The annualized cost per sales for a company represents the
maximum price increase in affected product needed for the company to completely recover the
annualized costs imposed by the regulation.
It should be noted that available estimates of long-run responsiveness of price changes
show that the price elasticity of demand for three different plywood products, is -0.51 and -0.61
as shown in Chapter 2, and the price elasticity of supply for wood products output is 3.0 to 5.0.8
Assuming the affected industries are not perfectly competitive, based on this information, one
can conclude that demand will respond inelastically (that is, between zero and -1) with a change
in output price, and that supply is fairly elastic (i.e., will respond more than 1:1) with a change in
output price. Thus, the direct economic impact of this proposed rule from the standpoint of
7 U.S. EPA. Guidelines for Preparing Economic Analyses. May 2016. p. 9-17. Available at
https://www.epa.gov/sites/production/files/2017-09/documents/ee-0568-Q9.pdf.
8 U.S. International Trade Commission. Hardwood Plywood from China. Investigation Nos. 701-TA-565 and 731-
TA-1341 (Final). Publication 4747. December 2017. Available on the Internet at
https://www.usitc. gov/publications/701 73 lZpub4747.pdf.
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changes in price and output appears relatively low based on the low annualized cost to sales
estimates and these price elasticities, and thus it is reasonable to infer that the impact on
consumers from this proposed rule should also be relatively low. In addition, any other economic
impacts, such as changes in firm concentration within the affected industries, or changes in
employment, should also be relatively minor.
4.1 Small Business Impacts Analysis
For the proposed rule, the EPA performed a small entity screening analysis for impacts
on all affected facilities by comparing compliance costs to historic revenues at the ultimate
parent company level. This is known as the cost-to-revenue or cost-to-sales test, or the "sales
test." The sales test is an impact methodology the EPA employs in analyzing entity impacts as
opposed to a "profits test," in which annualized compliance costs are calculated as a share of
profits. The sales test is frequently used because revenues or sales data are commonly available
for entities impacted by the EPA regulations, and profits data normally made available are often
not the true profit earned by firms because of accounting and tax considerations. Also, the use of
a sales test for estimating small business impacts for a rulemaking is consistent with guidance
offered by the EPA on compliance with the Regulatory Flexibility Act (RFA)9 and is consistent
with guidance published by the U.S. Small Business Administration's (SBA) Office of Advocacy
that suggests that cost as a percentage of total revenues is a metric for evaluating cost increases
on small entities in relation to increases on large entities (SBA, 2017).
For purposes of assessing the impacts of this action on small entities, a small entity is
defined as: (1) a small business as defined by the Small Business Administration's (SBA)
regulations at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a
city, county, town, school district or special district with a population of less than 50,000; and (3)
a small organization that is any not-for-profit enterprise that is independently owned and
operated and is not dominant in its field. Businesses in the Plywood and Composite Wood
Products source category predominately are classified under NAICS codes 321113,321211,
9 The RFA compliance guidance to the EPA rule writers can be found at
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321212, 321215, 321219, and 321999. For the SBA small business size standard definition for
each NAICS classification, see below in Table 4-1.
Table 4-1 SBA Size Standards by NAICS Code3
NAICS Codes
NAICS U.S. Industry Title
Size
Standards (Number
of employees)
321113
Sawmills
500
321211
Hardwood Veneer and Plywood Manufacturing
500
321212
Softwood Veneer and Plywood Manufacturing
500
321215
Engineered Wood Member Manufacturing
500
321219
Reconstituted Wood Product Manufacturing
750
321999
All Other Miscellaneous Wood Product Manufacturing
500
aThe SBA small business size standards are current as of Dec. 19, 2022, and the Ml table of small business size
standards can be found at https://www.sba.gov/sites/default/files/2022-
12/Table%20of%20Size%20Standards Effective%20December%2019%2C%202022 508%20%281%29 O.pdf.
EPA constructed a facility list for the Plywood and Composite Wood Product (PCWP)
source categories. For information on how this list was constructed, see Chapter 2. The initial
facility lists consisted of 223 PCWP facilities. EPA identified the ultimate parent company along
with revenue and employment information for facilities using D&B Hoover's database. In total,
EPA identified 65 ultimate parent companies as owners of the 223 facilities, of which 21 of these
ultimate parent companies were identified as small entities. (Counts of parent companies do not
sum over rules due to some companies owning facilities subject to multiple rules.) Summary
statistics for these ultimate parent companies are in Table 4-2 below.
Table 4-2 Summary Statistics of Potentially Affected Entities
Rule
Size
No. of Ultimate Parent
Companies
Number of
Facilities
Mean Revenue
(million 2021$)
Median
Revenue
(million
2021$)
Small
21
27
$54
$35
PCWP
Not Small
44
196
5,946
1,408
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Screening Analysis Results
Using the facility list discussed in the above section, EPA conducted cost-to-sales
analysis for the proposed action to screen small entities for potentially significant impacts. We
present results specifically for the PCWP proposal, and a total estimate for this rule. While a
sales test can provide some insight as to the economic impact of an action such as this one, it
assumes that the impacts of a rule are solely incident on a directly affected firm (therefore, no
impact to consumers of the affected product), or solely incident on consumers of output directly
affected by this action (therefore, no impact to companies that are producers of the affected
product). Thus, an analysis such as this one is best viewed as providing insight on the polar
opposites of economic impacts: maximum impact to either directly affected companies with no
impact on their consumers, or vice versa. A sales test analysis does not consider shifts in supply
and demand curves to reflect intermediate economic outcomes.
The results of this analysis for the proposed options are presented below. Table 4-3
shows the distribution of average costs for ultimate parent companies by proposed rule. Table
4-4 and Table 4-5 below show the distribution of cost-to-sale ratios (CSRs) by rule and the
percentage of CSRs clearing 1 percent and 3 percent for each rule.
Table 4-3 Distribution of Estimated Compliance Costs by Rule and Size for Proposed
Options ($2021)
Rule
. Average Annualized Cost per
Size No. of Firms ...^
Facility
PCWP
Small 21 $117,054
Not Small 44 204,912
Table 4-4
Compliance Cost-to-Sales Ratio Distributions for Small Entities, Proposed
Options
Mean CSR Maximum CSR
PCWP
No. of Small Entities 21 0.438% 1.94%
Table 4-5
Compliance Cost-to-Sales Ratio Thresholds for Small Entities - Proposed
Options
PCWP
No. of Small Entities % of Small Entities
No. of Small Entities 21 100
Greater than 1% 2 9%
Greater than 3% 0 0.0
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Table 4-4 shows the mean and average compliance CSR for the 21 affected small firms.
The average CSR for the affected firms is 0.44 percent and the maximum CSR for any of the
affected firms is 1.94 percent. Given the relatively low average CSR for small entities, as well as
there being only two small entities out of the 21 affected (about 10 percent) with a CSR of
greater than 1 percent and no small entities with a CSR of greater than 3 percent for the proposed
PCWP amendments, we conclude that it is unlikely that the proposed changes to the PCWP
would have a significant impact on a substantial number of small entities (SISNOSE), and
therefore we certify that there is no SISNOSE for this proposal.
4.2 Employment Impact Analysis
This section presents a qualitative overview of the various ways that environmental
regulation can affect employment. Employment impacts of environmental regulations are
generally composed of a mix of potential declines and gains in different areas of the economy
over time. Regulatory employment impacts can vary across occupations, regions, and industries;
by labor and product demand and supply elasticities; and in response to other labor market
conditions. Isolating such impacts is a challenge, as they are difficult to disentangle from
employment impacts caused by a wide variety of ongoing, concurrent economic changes. The
EPA continues to explore the relevant theoretical and empirical literature and to seek public
comments in order to ensure that the way the EPA characterizes the employment effects of its
regulations is reasonable and informative.
Environmental regulation "typically affects the distribution of employment among
industries rather than the general employment level" (Arrow et al., 1996). Even if impacts are
small after long-run market adjustments to full employment, many regulatory actions have
transitional effects in the short run (OMB, 2015). These movements of workers in and out of jobs
in response to environmental regulation are potentially important and of interest to policymakers.
Transitional job losses have consequences for workers that operate in declining industries or
occupations, have limited capacity to migrate, or reside in communities or regions with high
unemployment rates.
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