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- 1. The Forest Products Industry and the Clean Air Regulatory Challenge Paul R. Noe Vice President for Public Policy American Forest & Paper Association Arkansas Forestry Association Annual Meeting Little Rock, Arkansas September 26, 2012
- 2. Overview Cumulative Burden of Air Regulations Highlights of Key Air rules – Boiler MACT, etc Carbon Neutrality Need for Sustainable Regulations 2
- 3. Forest Products Industry Employment* 000 workers 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 900 800 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 * Includes paper and allied products, wood products, and logging. Source: Bureau of Labor Statistics
- 5. Rules, Costs and Timing Issued Final Rule Potential Cost 2010 NOx NAAQS $0.6 B 2010 SO2 NAAQS $0.2 B 2011 GHG BACT ?? 2012 Boiler MACT rules ~$3 B ?? 2012 Paper Risk and Technology I $5M 2012 PM NAAQS $ 0.1 to >$1 B 2013 Paper Off-gas Venting Elimination $1.6 + 2014 Pulp Risk and Technology II $3.3 B 2014 Pulp and Paper GHG Rule ?? 2014 Ozone NAAQS $0.3 to 3 B 2015 Wood MACT $0.8 B 2016 Cross-state air pollution rule II $0.5 B 2016 Hydrogen sulfide MACT $2.7 B
- 6. Boiler MACT – Starting Point in 2010 Broadest MACT standards ever under the Clean Air Act Industrial, commercial and institutional boilers and process heaters at major sources of hazardous air pollutants. 1,600 facilities and 13,555 boilers (about 11,000 gas boilers) Emission standards for PM, HCl, Hg, CO, and dioxin Multiple controls and complex monitoring to meet limits
- 7. Initial Boiler MACT Rules June 2010: Responding to court decision, EPA proposed changes to the Boiler MACT rules. Original rule would have cost the FP industry $7- $9 billion in capital costs ($21 billion for all manufacturing). March 2011: EPA issued original final Boiler MACT -- $7 billion capital cost for FP industry. Jobs Study by Fisher International: over 20,000 jobs (36 mills) in jeopardy in P&P sector alone. 7
- 8. Fisher International Study of March 2011 Rules Pulp & Paper Mill Jobs Mills At Risk 36 20,541 Total 349 113,858 % At Risk 10% 18% 8
- 9. Re-Proposed Boiler MACT Rules December 2011: The EPA issued re-proposed Boiler MACT rules. The re-proposed rules would cost the forest products industry an estimated $4.3 billion. 9
- 10. Concerted Outreach Effort Allied Industries, Small Business, Agriculture Labor Congress – Bill passed House and almost in Senate Governors, other state/local officials Administration – EPA, USDA, DOC, SBA/OA, OMB, White House Arguments: economic/employment, engineering, science, legal, a nd political 10
- 11. Concerned Trade Groups American Forest & Paper Association Hardwood Federation American Chemistry Council Hardwood Plywood & Veneer Association American Coke & Coal Chemicals Institute Industrial Energy Consumers of America American Foundry Institute of Shortening and Edible Oils American Home Furnishings Alliance National Association of Manufacturers American Iron and Steel Institute National Cotton Ginners Association American Municipal Power, Inc. National Lime Association American Petroleum Institute National Mining Association American Public Power Association National Oil Recyclers Association American Sugar Alliance National Oilseed Processors Association American Wood Council National Petrochemical & Refiners Association Alliance of Automobile Manufacturers National Rural Electric Cooperatives Association Bioenergy Deployment Consortium Ohio Municipal Electric Association Biomass Power Association PA Anthracite Council Biomass Thermal Energy Council Pellet Fuels Association Brick Industries Association Rubber Manufacturers Association Composite Panel Association Society of Chemical Manufacturers and Affiliates Corn Refiners Association Southern Lumber Manufacturing Association Council of Industrial Boiler Owners The Aluminum Association Edison Electric Institute Treated Wood Council Fertilizer Institute U.S. Chamber of Commerce
- 13. HCl Emissions 2005 US Emissions of HCl by Boiler Type Utility Boilers: Coal ICI Boilers & Process Heaters - coal ICI Boilers & Process Heaters ICI Boilers & Process Heaters - wood or waste Utility Boilers: Oil ICI Boilers & Process Heaters - natural gas ICI Boilers & Process Heaters - oil Utility Boilers: Natural Gas Utility Boilers: Wood or Waste
- 14. Hg Emissions – Small Contributors 2005 US Mercury Emissions By Boiler Type Utility Boilers: Coal ICI Boilers & Process Heaters - oil ICI Boilers & Process Heaters - coal ICI Boilers & Process Heaters ICI Boilers & Process Heaters - wood or waste Utility Boilers: Oil Utility Boilers: Wood or Waste ICI Boilers & Process Heaters - natural gas
- 15. SO2 Emissions from Pulp and Paper Mills in PM 2.5 Non-Attainment Areas (15/35, 2010) 4% SO2 Emissions within PM Non- Attainment Areas SO2 Emissions Outside of PM Non-Attainment Areas 96%
- 16. Boiler MACT – Further Improvements Needed Key Improvements from 2010 through Dec. 2011 Reproposal: Cost-effective work practices rather than arbitrary and unachievable limits Emission limits accounting for variability in performance of top boilers Adjusted some limits to account for fuel variability Defined more biomass residuals as fuels Grouping like boilers together – separate biomass from coal Further Improvements Sought: More compliance time -- one or two years Achievable standards -- esp. carbon monoxide Classify more biomass residuals as fuels -- encourage renewable, carbon- neutral alternatives to fossil fuels 16
- 17. Boiler MACT Estimated Costs EPA Action Cost to Forest Cost to All EPA Cost Products Sector Manufacturers Estimates Original Proposal ~$9 B $21 B $11.1 B (June 2010) Original Final $7 B $14.3 B $6.3 B (March 2011) Reproposal $4.3 B $14.2 B $5.8 B (December 2011) Final ?? ?? ?? (2012??) Cost Reductions > $4.7 B >$6.8 B >$ 5.3 17
- 18. Paper Risk and Technology Rules Final Clean Air rule (9/11/12) covers pulping and papermaking operations EPA found health risks acceptable EPA determined no control technology upgrades cost effective Costs reduced from $700-900M in proposal to only $5 M Next Step: litigation by stakeholders More EPA rules under Paper Sector program Risk & Technology rule Phase II – furnaces and kilns, late 2013 Reevaluate existing venting allowances – summer 2013 Determine if changes to Kraft Pulp New Source Performance Std – court ordered deadline of May 2013 18
- 19. NAAQS Permitting Gridlock 2010 NOx and SO2 NAAQS plus 2006 particulate matter Modeled emissions exceeding standards – stops projects PM NAAQS – June proposal Tighter limits could impose more than $1 billion in added costs depending on how implemented Scientific uncertainty questions need for lower limits Ozone NAAQS – proposal in late 2013 Big costs and scientific uncertainty 19
- 20. Carbon Neutrality Fossil Fuel Releases Biomass Carbon Cycle 20
- 21. Timberland Growth/Removal Ratio By Region 5.00 4.50 Rocky Mtn 4.00 3.50 3.00 2.50 North 2.00 Pacific Coast 1.50 1.70 1.37 South 1.00 1.22 1.05 0.50 - 1976 1986 1996 2006 North South Rocky Mtn Pacific Coast 21
- 22. Biogenic Carbon Emissions Oct. 2009: “Fixing A Critical Accounting Error,” Science magazine Dec. 2009: EPA Endangerment Finding on GHG emissions May 2010: EPA Tailoring Rule to direct regulations at large emitters July 2011: EPA imposed 3-year deferral for regulation of biogenic emissions from stationary sources Sept. 2011: EPA proposed Accounting Framework for Biogenic CO2 Emissions from Stationary Sources July 2012: EPA’s Scientific Advisory Board (SAB) issued draft report critical of the Agency’s proposed accounting framework; supports anticipated future baseline 22
- 23. Regulations Can Undermine Competitiveness NERA/MAPI study: costs of major regulations increased at average rate of 7.6% a year since 1998. EPA imposes the largest regulatory cost burden on manufacturing sector ($117 billion in constant 2010 $). Cumulative impact of major regulations between 1993 and 2011 will lower manufacturing output by up to 6% over the next decade. Will reduce paper and wood products output by 6% and 3%, respectively. 23
- 24. Sustainable Regulations • Need for sustainable regulation (meet economic needs, environmental concerns, and social expectations) • Rigorous application of efficiency criteria and sound science. • Consider employment impacts and need for compliance time; allow for economic recovery. • The incorporation of job losses into regulatory cost-benefit analyses could alter the calculus for some propose regulations. 24
- 25. Wrap-up Uniquely challenging time. Worst economy since the creation of the modern administrative state. Stubbornly high unemployment. Aggressive foreign competition. Pressing need for smarter, more cost-effective regulatory approaches. 25
- 26. Questions ??? Paul Noe Vice President for Public Policy American Forest & Paper Association Paul_Noe@afandpa.org 26
Notas do Editor
- We keep updating this ‘train wreck” slide every year with all the air rules, and it remains very crowded. One reason is that many rules get delayed as EPA fails to meet its own ambitious deadlines.Others are deferred but come back around again a few years later , such as the Ozone NAAQS.Finally, the Clean Air Act has periodic reviews of rules (sometimes every five years in the case of NAAQS, or 8 years for MACT), which keeps the regulators (and us) very busy.The bottom line is that when we sum the cost of them all up, the potential capital costs is still on the order of $17 billion.
- Updated for September 2012Non-Hazardous Secondary Materials and Incinerator MACTCompanion rules to the Boiler MACT set HAP controls on incinerators that burn solid wastes. The definition of solid waste determines whether a combustor is regulated under the very stringent Incinerator MACT requirements or the more reasonable Boiler MACT program.We hope EPA adopts definitions that encourage the continued use of a wide variety of biomass residuals as fuels. Otherwise, these materials may be placed in landfills and replaced with other fuels.PM NAAQSThe courts have put EPA on an accelerated schedule to finalize changes to the current particulate matter (PM) National Ambient Air Quality Standards by December. The sources of PM include nitrogen oxides and sulfur dioxides which paper mills emit but have reduce significantly over the last several decades.The tougher limits proposed in July will put more mills in non-attainment areas but more importantly could trigger further control obligations in many other mills depending on how the changes are implemented by EPA and the states.Costs could approach a billion in new capital if there is little flexibility in their implementation or tightened below the levels proposed.And there are other NAAQS standards being implemented (NOx and SO2) and changes to the Ozone NAAQS will be proposed next year which impacts our mills as well.Air Rules targeted at Pulp and Paper millsEPA just completed its health risk and control technology assessment for major portions of pulp and paper mills and concluded no further controls are needed. This shows that the billions in investments on the Cluster MACT worked so EPA could back away from an onerous proposed rule.Now EPA is looking at the rest of the paper mill (like recovery furnaces) to see if any changes are needed. Given the types of sources and pollutants, changes could be very expensive.It appears likely that EPA will change the standards for our venting procedures for process gases. We vent to protect the safety of our workers and equipment so we hope that any new approach by EPA takes that into account.Finally, EPA is considering listing Hydrogen Sulfide as a Hazardous Air Pollutant which could lead to more expensive MACTs.
- Boiler MACT (Maximum Achievable Control Technology) rules for major sources of hazardous air pollutants (HAPs) fall under the Clean Air Act . Due to a court decision, EPA proposed changes to the Boiler MACT rules in 2010. The proposed changes would have cost the forest products industry between $7 and 9 billion in capital costs . In March 2011, EPA issued final Boiler MACT rules. If implemented, the rules would have cost the forest products industry about $7 billion in new capital expenditures. (Although the Agency almost immediately stayed the final rules, a court nullified the stay earlier this year.)A study by Fisher International showed that the March 2011 rules would have caused 36 mills, employing some 20,500 people, to be at risk of closing given the suite of other expected air rules.
- Fisher International analysis showed that the original final Boiler MACT rules would have placed 10% of pulp and paper mills and 18% of the pulp and paper mill workforce in jeopardy.
- The EPA subsequently issued re-proposed Boiler MACT rules in December 2011. Changes included generally less stringent emissions limits, work practices standards in place of unachievable emission limits for some HAPs, and new groupings to put like boilers together
- AF&PA and the FP industry mounted a comprehensive outreach effort.
- Half of the trade groups are affected by the stringency of the biomass limits
- Paper industry made dramatic progress in reducing emissions before Boiler MACT.
- These biomass, gas and oil boilers (or even coal) are not significant contributors to national HCl loadings. HCl not a national health issue,Same is true for mercury especially oil and biomass that represent just 5% of the emission from the category
- Biomass and gas boilers are insignificant contributors to mercury loadings; even oil and coal industrial boilers are fairly small; won’t make a difference with fish advisories or water quality loadings given national and international transport.
- PM 2.5 non-attainment areas account for only 4% of SO2 emissions from pulp and paper mills. SO2 is a PM precursor.
- Background: EPA adopted work practices for most boilers at small mills and gas fired units and proposed them for dioxin which previously were unachievableBackground: AF&PA provided additional test data showing emission differences even for the best performing boilers that EPA must use to set the MACT limits. Also persuaded EPA to acknowledge that levels of contaminants in coal such as mercury and chlorides vary and need to be factored into limits.Background: In the related Non-Hazardous Secondary Materials rule EPA has identified resinated wood and tire derived fuel as boiler fuels and seriously considering listing others like pulping sludges and recycling residuals. If a combustion unit burns a waste, it get regulated as an incinerator which has even more stringent limits and a bad stigma.Background: By creating more subcategories of boilers then limits are less stringent because they are not driven downward by unrelated boilers that use fuels that are cleaner for certain pollutants (like lack of mercury in biomass makes it very hard for coal boilers to meet)The EPA subsequently issued re-proposed Boiler MACT rules in December 2011. Changes included generally less stringent emissions limits, work practices standards in place of unachievable emission limits for some HAPs, and new groupings to put like boilers together
- EPA’s June 2010 $9.5 B is Boiler MACT capital plus $1.0 B for GACT annualized and $574 B in capital for CISWI.EPA’s March 2011 is $6.3 B is $535 in annualized cost from GACT (couldn’t find capital costs), $5.1 B in capital from Boiler MACT (both new and existing sources) and $652 M in capital from CISWI.EPA December 2011 is for Boiler MACT only since EPA did not estimate costs for GACT or CISWI changes
- Background: environmental groups may challenge the Paper RTR because it is not stringent enough or fails to set limits for more pollutants from more pieces of equipment. However, AF&PA also will challenge since rule eliminates separate start-up, shutdown and malfunction (SSM) provisions which we can live with but sets a bad legal precedent for future rulemakings.Background: venting allowances exist so equipment doesn’t blow-up and hurt people or protect the investments.
- [Hunt]EPA set new NOx and SO2 limits in 2010, and they are starting to negatively influence projects at mills because they can’t model compliance. If the assumptions aren’t dramatically changed, permitting gridlock will occur.Under pressure from environmental groups, EPA has committed to decide by June whether it will propose to tighten the 2006 particulate matter (PM) NAAQS. Indications are a significant tightening that could cost several billion dollars for our industry alone.Given scientific uncertainties and ongoing research on which part of the PM emitted is harmful, AF&PA will advocate with its coalition partners for retention of the current limits.
- The principle of “carbon neutrality” differentiates between biomass-derived carbon from fossil-fuel carbon – highlights role in the global carbon cycle.Biogenic carbon is part of a relatively rapid natural cycle that neither adds nor subtracts carbon to/from the atmosphere when in balance. In contrast, fossil fuel combustion transfer geologic carbon into the atmosphere. It is a one-way process. The carbon dioxide (CO2) removed from the atmosphere during photosynthesis is converted into organic carbon and stored in biomass, such as trees and crops. When harvested and combusted, or during decay, the carbon in the biomass is released as CO2, thus completing the carbon cycle.This longstanding principle has been challenged.
- Forest stocks in all regions of the US are in balanceGrowth/drain ratios >1
- Greenhouse gas (GHG) emissions from the largest stationary sources have, been covered by the Prevention of Significant Deterioration (PSD) and title V Operating Permit Programs since January 2, 2011. These permitting programs fall under the Clean Air Act. EPA’s GHG Tailoring Rule, issued in May 2010, established thresholds for the permitting of GHG emissions under PSD and Title V. The EPA issued a three year deferral for biogenic GHGs in January 2011 to give the Agency time to study the matter.
- Existing regulations are hurting the economic competitiveness of the U.S. manufacturing sector.
- Cumulative Air Regulatory Burden- As things now stand, the cumulative air regulatory burden could well be unsustainable for many manufacturing facilities. Boiler MACT- Tens of $ billions will translate into tens and probably hundreds of thousands of jobs – directly and indirectly, facility closures, family impacts- Unachievable controls on wide swath of industries – harm competitiveness and ability to export products- Harm new enterprises that make traditional boilers even with good or best controls or biofuels- Pushes energy policy towards natural gas, which will drive up prices for everyoneAlternative rule could reduce costs by more than half Now more than ever, we need the best thinking brought to bear to develop smarter, more cost-effective regulatory approaches.