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The Forest Products Industry andThe Forest Products Industry and the Clean Air Regulatory Challenge
Paul R. Noe Vice President for Public Policy
American Forest & Paper AssociationA k F t A i ti A l M tiArkansas Forestry Association Annual Meeting
Little Rock, ArkansasSeptember 26, 2012
Overview
Cumulative Burden of Air RegulationsCumulative Burden of Air Regulations
Highlights of Key Air rules – Boiler MACT, etc
Carbon Neutrality
Need for Sustainable Regulations g
2
Forest Products Industry Employment*
1,700
000 workers
1 400
1,500
1,600
1,200
1,300
1,400
900
1,000
1,100
800
900
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
* I l d d lli d d t d d t d l i
Source: Bureau of Labor Statistics
* Includes paper and allied products, wood products, and logging.
Rules, Costs and TimingIssued Final Rule Potential Cost
2010 NOx NAAQS $0.6 B2010 SO2 NAAQS $0.2 B2011 GHG BACT ??2012 Boiler MACT rules ~$3 B ??2012 Boiler MACT rules $3 B ??2012 Paper Risk and Technology I $ 5 M2012 PM NAAQS $ 0.1 to >$1 B2013 Paper Off gas Venting Elimination $1 6 +2013 Paper Off-gas Venting Elimination $1.6 +
2014 Pulp Risk and Technology II $3.3 B2014 Pulp and Paper GHG Rule ??2014 Ozone NAAQS $0.3 to 3 B
2015 Wood MACT $0.8 B2016 Cross-state air pollution rule II $0 5 B2016 Cross-state air pollution rule II $0.5 B
2016 Hydrogen sulfide MACT $2.7 B
Boiler MACT – Starting Point in 2010Broadest MACT standards ever under the Clean Air Act
Industrial, commercial and institutional boilers and process heaters at major sources of ha ardo s air poll tantshazardous air pollutants.
1,600 facilities and 13,555 boilers (about 11,000 gas boilers)gas boilers)
Emission standards for PM, HCl, Hg, CO, and dioxindioxin
Multiple controls and complex monitoring to meet limits
Initial Boiler MACT RulesJune 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
f t i )manufacturing).
March 2011: EPA issued original final Boiler MACT $7 billi it l t f FP i d tMACT -- $7 billion capital cost for FP industry.
Jobs Study by Fisher International: over 20,000 j b (36 ill ) i j d i P&P t ljobs (36 mills) in jeopardy in P&P sector alone.
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Fisher International Study of March 2011 Rules
Pulp & Paper Mills
Mill Jobs
At Risk 36 20,541,
Total 349 113,858,
% At Risk 10% 18%
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Re-Proposed Boiler MACT Rules
December 2011: The EPA issued re-proposed Boiler MACT p prules.
The re-proposed rules would cost the forest products i d t ti t d $4 3 billiindustry an estimated $4.3 billion.
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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 OMBAdministration – EPA, USDA, DOC, SBA/OA, OMB, White House
Arguments: economic/employment engineeringArguments: economic/employment, engineering, science, legal, and political
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Concerned Trade GroupsAmerican Forest & Paper Association
American Chemistry Council
American Coke & Coal Chemicals Institute
American Foundry
Hardwood Federation
Hardwood Plywood & Veneer Association
Industrial Energy Consumers of AmericaAmerican Foundry
American Home Furnishings Alliance
American Iron and Steel Institute
American Municipal Power, Inc.
American Petroleum Institute
Institute of Shortening and Edible Oils
National Association of Manufacturers
National Cotton Ginners Association
National Lime Association
National Mining AssociationAmerican Public Power Association
American Sugar Alliance
American Wood Council
Alliance of Automobile Manufacturers
Bioenergy Deployment Consortium
National Mining Association
National Oil Recyclers Association
National Oilseed Processors Association
National Petrochemical & Refiners Association
National Rural Electric Cooperatives AssociationBioenergy Deployment Consortium
Biomass Power Association
Biomass Thermal Energy Council
Brick Industries Association
Composite Panel Association
Ohio Municipal Electric Association
PA Anthracite Council
Pellet Fuels Association
Rubber Manufacturers Association
Society of Chemical Manufacturers and AffiliatesCorn Refiners Association
Council of Industrial Boiler Owners
Edison Electric Institute
Fertilizer Institute
Society of Chemical Manufacturers and Affiliates
Southern Lumber Manufacturing Association
The Aluminum Association
Treated Wood Council
U.S. Chamber of Commerce
HCl Emissions
2005 US Emissions of HCl by Boiler Type
Utility Boilers: Coal
ICI Boilers & Process Heaters -coalICI Boilers & Process Heaters
ICI Boilers & Process Heaters -wood or wasteUtility Boilers: Oil
ICI Boilers & Process Heaters -natural gasICI Boilers & Process Heaters -oilUtility Boilers: Natural GasUtility Boilers: Natural Gas
Utility Boilers: Wood or Waste
Hg Emissions – Small Contributors
2005 US Mercury Emissions By Boiler TypeUtilit B il C lUtility Boilers: Coal
ICI Boilers & Process Heaters- oil oilICI Boilers & Process Heaters- coalICI Boilers & Process HeatersC o e s & ocess eate s
ICI Boilers & Process Heaters- wood or wasteUtility Boilers: Oil
Utility Boilers: Wood or Waste
ICI Boilers & Process Heaters- natural gas
SO2 Emissions from Pulp and Paper Mills in PM 2.5 Non-Attainment Areas (15/35, 2010)
4%
SO2 Emissions within PM Non-Att i t AAttainment Areas
SO2 E i i O id f PMSO2 Emissions Outside of PM Non-Attainment Areas
96%
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: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 fuelsneutral alternatives to fossil fuels
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Boiler MACT Estimated Costs
EPA Action Cost to Forest Cost to All EPA Cost Products Sector Manufacturers Estimates
Original Proposal (June 2010)
~$9 B $21 B $11.1 B( )
Original Final(March 2011)
$7 B $14.3 B $6.3 B
Rep opo l $4 3 B $14 2 B $5 8 BReproposal(December 2011)
$4.3 B $14.2 B $5.8 B
Final(2012??)
?? ?? ??(2012??)
Cost Reductions > $4.7 B >$6.8 B >$ 5.3
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Paper Risk and Technology RulesFinal 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 2013gy ,
Reevaluate existing venting allowances – summer 2013
Determine if changes to Kraft Pulp New Source Performance StdDetermine if changes to Kraft Pulp New Source Performance Std – court ordered deadline of May 2013
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NAAQS
Permitting Gridlock
2010 NO d SO NAAQS l 2006 ti l t tt2010 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 d di h i l t ddepending on how implemented
Scientific uncertainty questions need for lower limits
Ozone NAAQS – proposal in late 2013
Big costs and scientific uncertainty
19
Biomass Carbon CycleFossil Fuel ReleasesCarbon Neutrality
20
Timberland Growth/Removal Ratio By Region
4.50
5.00
Rocky Mtn
3.00
3.50
4.00
1.701.50
2.00
2.50 North
PacificCoast
1.70
1.22 1.05
1.37
‐
0.50
1.00 South
1976 1986 1996 2006
North South Rocky Mtn Pacific Coasty
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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 emittersemitters
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
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Regulations Can Undermine CompetitivenessNERA/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 $).
C l ti i t f j l ti b t 1993 dCumulative 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
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• 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
Wrap-up
Uniquely challenging time.
Worst economy since the creation of the modern administrative state.
Stubbornly high unemployment.
Aggressive foreign competition.Aggressive foreign competition.
Pressing need for smarter, more cost-effective regulatory approaches.regulatory approaches.
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Questions
??????Paul Noe
Vice President for Public PolicyVice President for Public Policy
American Forest & Paper Association
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