Flurry of Lobbying on Furnaces and Test Methods on Eve of New Stove Rules

The Office of Management and Budget
is in the Old Executive Office Building
next the White House.

Sources confirmed that the EPA is set to announce the new wood heater rules on Tuesday, February 3rd, the court ordered date.  After years of debate and anticipation about cost impacts and emission standards for stoves and outdoor boilers, the issue that has become the most contested on the eve of the announcement is warm air furnaces.

The Office of Management & Budget (OMB) cleared the rule on Feb. 1 "with changes" setting the stage for it to be signed by Administrator McCarthy and publicly released.  (Rules often take 2 - 4 weeks to appear in the Federal Register after they are publicly released by an agency.)

Even though the big decisions were all supposed to be made last fall, there has been intensive lobbying by stakeholders right up until Friday afternoon, January 30th - one business day ahead of the expected announcement. At least 2 groups met with the Obama Administration through the Office of Management & Budget on Friday, January 30th. During January, interest groups had at least six other meetings with OMB, lobbying for last minute changes to the proposed rule.

The patterns, attendees and paperwork left behind at OMB meetings this month offer a unique glimpse into some of the most contested areas of the rule. Thanks to sunshine laws that make records of meetings with government agencies public, the public can see a list of who met with the OMB in the weeks leading up to the announcement of the rule.

The short term fate of warm air furnaces (WAF) appears to be the top priority of the hearth industry because they represent the only product category where most existing models cannot be made or sold for a period of time after the rule becomes law and before they become certified. HPBA participated in two meetings in January along with their legal counsel and consultant, Jack Ferguson, and various of their member companies, including US Stove, Central Boiler, Hardy, Heatmor and Hawken Energy.

Jack Goldman, CEO of the Hearth Patio & Barbecue Association, said in a letter to EPA that this is "clearly a death sentence" to most of the companies making warm air furnaces. The EPA says that they do not have the legal authority under the Clean Air Act to delay implementation of emissions standards. Warm air furnaces are the only class of wood heaters that will be required to meet emission standards, but are still unregulated and have little ability to be tested and certified until the rule is announced.  US Stove Co may be the leading manufacturer of warm air furnaces in the U.S. and they often sell for less than $2,000 - less than most wood stoves.

Another hot topic that emerged in recent months is a dispute over the opposite end of the spectrum from unregulated hot air furnaces - high performance indoor boilers, often made in Europe, but now being made in the US. The EPA certified test labs refuse to use a test method for these appliances developed by DOE's Brookhaven National Lab and funded by NYSERDA, which captures some start-up emissions and uses cord wood instead of cribs. This is emblematic of a long simmering rift between test methods for outdoor wood boilers and European style indoor boilers with thermal storage, which offer the potential for cleaner combustion. NYSERDA and Econoburn, a NY manufacturer who makes these furnaces ask, "Who should really benefit? Those who innovate or those who refuse to?"

Other meetings in January with OMB and key stakeholders include one with about a dozen air quality agencies and states; with representatives of the Pellet Fuels Institute and a pellet testing facility; and with Intertek Test labs. Attendees in meeting between OMB and indoor and outdoor boilers and furnace manufacturers, and with NYSERDA and New York manufacturers are also in the public record.

If participants of the meetings provided OMB with documents, those documents are also public. Three key documents were provided this month, two from HPBA on a their legal argument (PDF) to delay compliance for hot air furnaces and a survey (PDF) commissioned by HPBA of HPBA member retailers on sell through trends. Four of the groups that met with OMB did not leave materials and there is as of now no record of the topics raised at those meeting. The only other document from the final month of intensive lobbying was from NYSERDA, NESCAUM and New York based companies (powerpoint).

Pro-wood heating group says EPA regulations reasonable and will help industry grow

The Alliance for Green Heat welcomed the release of proposed EPA regulations on residential wood and pellet heating equipment, saying that new, stricter emission standards “will help America embrace wood and pellet heating as a vital renewable energy that can help drastically reduce fossil fuel consumption.”

More than 10 million American homes heat with wood and pellets, ten times more than solar and geothermal combined, according to data from EIA and the US census. “We can harness the huge demand for this type of renewable energy if the stoves and boilers are clean enough,” said John Ackerly, President of the Alliance for Green Heat. “We believe the emissions numbers released by the EPA today are reasonable and achievable and will help the wood stove industry grow and thrive in coming decades,” Ackerly continued.

The proposed rule has few surprises in terms of emission numbers. Virtually all the key numbers were included in draft proposed rules shared with industry, states and non-profits during 2013. But the proposed rule does reflect the much stricter numbers the EPA developed after states and air quality agencies intervened in 2012. Previously, the EPA was considering 2.5 grams per hour to be the strictest level for wood and pellet stoves. But last year, the EPA floated a 1.3 grams per hour for all pellet and wood stoves and that is the number that was released today.

The EPA is proposing that wood and pellet stoves initially meet a 4.5 grams per hour standard, and then meet a much stricter standard of 1.3 grams per hour 5 years after promulgation. Alternatively, the EPA proposes a 3-step process of going to 2.5 grams per hour after 3 years and then 1.3 grams an hour after 8 years.

Similarly, the EPA is proposing two options for furnaces and boilers. The first would establish strict emission limits after 5 years, and the second would have an intermediate step after 3 years, and then the stricter standard after 8 years. Initially, warm air furnaces would only be held to 0.93 lb/MMBTU, whereas hydronic heaters would be held to 0.32. Ultimately, both would need to reach 0.06 lb/MMBTU either 5 or 8 years after promulgation. It is widely anticipated that industry will advocate for the 3-step process and that EPA would be open to this as well.

The EPA’s press release said that “when these standards are fully implemented ... [c]onsumers will also see a monetary benefit from efficiency improvements in the new woodstoves, which use less wood to heat homes.” However, the EPA decided not to include any efficiency standard, leaving open the possibility that some very inefficient units may remain on the market. Wood and pellet heating appliances are the only HVAC equipment without minimum efficiency standards.

Both efficiency and CO would have to be recorded and reported under the new proposed rules. To avoid logjams in testing to the new standards, the EPA is proposing “to allow ISO-accredited laboratories and ISO-accredited certifying bodies to increase the availability of laboratories and certifiers.” 

The EPA is scheduling a public hearing on these regulations in Boston on February 26. Interested parties should register by February 19 at http://www2.epa.gov/residential-wood-heaters if they want to make public comments. Each person will be limited to 5 minutes. The public has 90 days to comment on the regulations after they are posted in the Federal Register, which is expected to happen in the next week or two. 

The proposed rule does offer an unusual glimpse into disagreements between the EPA, the Small Business Agency (SBA) and the Office of Budget and Management (OMB).  In the Panel Report, the “SBA and OMB recommended that the EPA not move forward with proposed emission limits for pellet stoves, indoor hydronic heaters, biomass pellet stoves, masonry heaters.” The EPA however rejected this recommendation and provided a sound basis for their proposal to include pellet stoves, all hydronic heaters and masonry heaters.

The SBA and OMB also recommended that the NSPS only cover parts of the country where wood smoke pollution was high. They suggested that states and regions where wood smoke is not high be allowed to issue their own regulations and consider voluntary standards. The EPA chose to highlight and counter these recommendations in its proposed rule, showing that they have considered these options but found they were not justified.

The Alliance for Green Heat is a non-profit consumer advocacy organization that fights for cleaner and more efficient wood and pellet heating to help households affordably switch to a renewable heating fuel.

For the full regulations see: http://www2.epa.gov/residential-wood-heaters

A summary of the regulations prepared by EPA, without emission numbers, can be found here:
www2.epa.gov/sites/production/files/2013-12/documents/proposed_wood_heater_nsps_overview_fact_sheet_1.pdf

The Significance of “Notices of Intent to Sue” the EPA over the Wood Heater NSPS

Prepared for the Alliance for Green Heat by the law firm Van Ness Feldman, LLP

            On August 1st, a coalition of states and a group of several environmental organizations sent separate notices to EPA notifying of their intent to file a lawsuit over the delay in issuing revised New Source Performance Standards (NSPS) for residential wood heaters.  Under the Clean Air Act, a “notice of intent” is required 60 days before an individual or group sues EPA.  This notice is required in order to give the agency time to respond to the issues raised in the notice, potentially avoiding litigation.  Parties that file intent to sue notices are not required to file suit and may decide that it is ultimately not in their best interest to do so.

            Often, intent to sue notices are used by groups and individuals to prod the EPA to move more quickly in rulemaking and to remind the agency that there are stakeholders concerned about the outcome as well as the timing of a regulation.  In the case of the wood heater NSPS, EPA is already well underway to issuing a proposed rule.  The current draft of the rule has been under review at the Office of Management and Budget (OMB) since July 26th.  However, that said, EPA is 17 years late in revising the rule. States and environmental groups concerned about ongoing particulate matter (PM) pollution and high pollution levels from unregulated boilers are concerned that EPA will let the timeline for the proposed rule slip further.  The intent to sue notices also highlights the fact that there have been a number of improvements to the technology for controlling emissions that are not captured in the current regulations.

            It is unclear whether the intent to sue notices will actually lead to litigation.  The environmental groups’ petitions were more definitive in stating that they would sue after the 60-day time frame elapses, or on October 1st.  Technically, OMB should be finished reviewing the rule by October 26th.  However, it is difficult to predict with any certainty how quickly OMB’s review will proceed, and it could be finished prior to October 1st. A lawsuit likely would not be filed once the rule is released unless the state and environmental groups want to get a firm deadline for when the final wood heater NSPS will be issued.  If this is the case, lawsuits may still be filed despite a proposal coming out of OMB prior to October 1st.

Explanation of the OMB Review of the NSPS

Explanation of the Office of Management and Budget Process for the Wood Heater New Source Performance Standard

Prepared for the Alliance for Green Heat by the law firm Van Ness Feldman, LLP

Introduction

            On July 26, 2013 the U.S. Office of Management and Budget (OMB) received for review the Standards of Performance for New Residential Wood Heaters, New Residential Hydronic Heaters and Forced-Air Furnaces, and New Residential Masonry Heaters (hereinafter referred to as the “Wood Heater NSPS”).  The following discussion explains the role of OMB in the rulemaking process and notes some specific information about the Wood Heater NSPS page on OMB’s website, which can be found here: http://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201304&RIN=2060-AP93.

Background on the OMB Process

            The particular section of OMB that reviews significant draft regulations is called the Office of Information and Regulatory Affairs (OIRA).  OIRA reviews rulemakings to determine whether EPA has considered various alternatives as well as to ensure coordination between federal agencies to avoid inconsistent, incompatible, or duplicative policies.  OIRA reviews approximately 500-700 rules a year.  OIRA can “return” a rule to the drafting agency for further review if it finds that the proposal is deficient.  Often such a process occurs when an agency has not sufficiently examined alternatives in the proposed rule.  OIRA also can suggest that changes be made to a rule before it is released in final form.

            The process of regulatory review is designed to help improve the rulemaking process and create coherent policies across all the agencies of government.  The OMB website notes, “Regulatory analysis is a tool regulatory agencies use to anticipate and evaluate the likely consequences of rules.  It provides a formal way of organizing the evidence on the key effects – good and bad – of the various alternatives that should be considered in developing regulations.  The motivation is to:  (1) learn if the benefits of an action are likely to justify the costs, or (2) discover which of various possible alternatives would be the most cost-effective.”  http://www.whitehouse.gov/omb/OIRA_QsandAs/.

            OMB is required to review a rule within 90 days, but there is no minimum period for review.  The head of the rulemaking agency may extend the review period.  In addition, the Director of OMB also has the ability to extend the review, but not by more than 30 days.  http://www.whitehouse.gov/omb/OIRA_QsandAs/.  In practice, however, OMB sometimes takes far longer than 90 days to review a rule, and in rare cases rules can stay at OMB for years.  If the Executive Branch does not want to finalize a rule, it can instead leave it marooned at OMB.  Thus, it is best to think of 90 days as a general rule of thumb from which OMB sometimes deviates, although legally they are required to act within the 90 day review period unless an extension is received.

Information on Wood Heater NSPS Process

            As noted earlier, the Wood Heater NSPS was received by OMB for review on July 26th.  In addition to the general process explained above, there is some specific information about the Wood Heater NSPS that is helpful to understand when consulting the page on the OMB website which tracks rules. 

            First, note that “NPRM” stands for “Notice of Proposed Rulemaking.”  The date for the NPRM listed on the OMB page is September 2013.  This is the aspirational date for EPA to release the proposed rule after OMB review.  There is no settlement agreement pursuant to which EPA is required to release the Wood Heater NSPS by a particular date.  Given that the rule went to OMB in late July, it is possible that the deadline will slip and the rule will not be released until late October or November if OMB takes the whole 90 day period to review the rule.  

            EPA’s website lists the publication date for the Notice of Proposed Rulemaking in November, not September.  http://yosemite.epa.gov/opei/rulegate.nsf/byRIN/2060-AP93.  It is likely that it will take several weeks after the release of the pre-publication version of the rule before it can be published in the Federal Register.  Therefore, if the pre-publication version is released in late September, in may not be published in the Federal Register until November 2013.  Publication will set the time frame for public comment.

            The date listed for the final rule, November 2014, is similarly a statement of when EPA would like to release the final rule, which includes time for responding to comments received on the proposed rule.  Again, because there is no litigation over EPA’s delayed timing for this rulemaking, this date also is aspirational.  While EPA’s listed date means that the Agency has every intention of hitting this marker, it does not always happen.  It is not possible to say precisely how easy it is to push back the date, other than to note that there are no litigants or a presiding court with which to negotiate, and thus there is much about the timing that is within the Agency’s discretion.  It is important to point out that the Agency could always be sued for delay in issuing its revised NSPS, and if the litigants prevail, a more truncated schedule for the rulemaking may be set by a settlement agreement.

            In addition to the dates for the proposed and final rules, some of the terms listed on the OMB page are helpful to understand.  First, it states that “the statutory final rule deadline is not driving the schedule for this action” and lists “2/26/1996” as the date for the statutory deadline.  This is because under the Clean Air Act, EPA is required to update the NSPS every eight years.  The last time the Wood Heater NSPS was amended was 1988.  Thus, technically, the standards were required to be reviewed in 1996, which means the Agency has fallen woefully behind its schedule for updating the rule.  Consequently, the page correctly notes that the statutory deadline is not “driving the schedule” for this action.

            The page also has a notation that states “small entities affected: businesses.”  The listing in this document is not a conclusion, but just a required statement.  As the EPA’s website explains, “EPA notifies the public when a rulemaking is likely to 1) have any adverse economic impact on small entities even though a Regulatory Flexibility Analysis may not be required and/or 2) have significant adverse economic impacts on a substantial number of small entities.  http://yosemite.epa.gov/opei/rulegate.nsf/byRIN/2060-AP93#2.  Thus, this listing puts the pubic on notice that small businesses may be impacted by this rulemaking proceeding and that the appropriate small business analyses will be conducted.

            Further, the page includes the notations “priority: economically significant” and “unfunded mandates: no.”  Like the small entities notation, these are both required to be disclosed to the public. A rule is economically significant if it has potential economic impact of $100 million or more per year, or could “adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities.” http://www.reginfo.gov/public/jsp/Utilities/faq.jsp.  Economically significant rules require a more extensive review of the costs and benefits.  The notation that there are no unfunded mandates denotes that the rule does not impose large burdens on state, local, or tribal entities without providing the resources to carry out those responsibilities.

Substantive Description of the Wood Heater NSPS

            In addition to the items above, the OMB page includes a description of what is to be included in the rulemaking.  First, it should be noted that this description holds no legal weight and is just an attempt to summarize what will be in the rule.  Specific terms include:

·      That the rule will “reflect significant advancements in wood heater technologies and design;”

·      “This rule is expected to require manufacturers to redesign wood heaters to be cleaner and lower emitting;” and

·      “[S]treamline the process for testing new model lines by allowing the use of International Standards Organization (ISO)-accredited laboratories and certifying bodies, which will expand the number of facilities that can be used for testing and certification of new model lines.”

            Each of these terms explains what is expected to be in the rule; however, this summary is purely descriptive and is not binding on the Agency.  The description simply represents what EPA was willing to put forth as a summary of the rule’s contents.  The text listed on the OMB site is the same as the abstract found on EPA’s website regarding the proposed rulemaking.   http://yosemite.epa.gov/opei/rulegate.nsf/byRIN/2060-AP93#2.  The description is meant to inform the public about the possible changes in the current NSPS, but EPA’s website includes a disclaimer which notes, “The information on this site is not intended to and does not commit EPA to specific conclusions or actions.  For example, after further analysis, EPA may decide the effects of a rule would be different or it may decide to terminate a rulemaking.” http://yosemite.epa.gov/opei/rulegate.nsf/byRIN/2060-AP93#2.

                                   

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Prepared for the Alliance for Green Heat by Van Ness Feldman, LLP