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

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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

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Biomass Carbon CycleFossil Fuel ReleasesCarbon Neutrality

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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.

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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.

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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

Paul_Noe@afandpa.org

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