EPA watchdog issues second stinging report on the EPA’s wood heater program

The EPA’s Office of Inspector General found continued lack of enforcement of the EPA wood heater regulations, more than a year after its first major investigative report found similar issues. Unlike that in-depth report, this new report cites very specific details of instances where manufacturers and labs have violated EPA regulations.  It found that even when the EPA knew of significant violations, it did not take action to correct the problem.  

The wood heater manufacturing and test lab industry is a collegial community where members rarely publicly criticize other members, even when major violations of the EPA regulations are widely known. However, manufacturers often relay private complaints about their competitors to the EPA, putting the EPA on notice of a wealth of compliance issues.

“We call on EPA leadership to provide more resources toward the wood stove program and address systemic enforcement issues,” said John Ackerly, President of the Alliance for Green Heat. “Its also vital for the public to know that pellet stoves are not involved in much of this controversy and that many wood stove manufacturers make good products, follow the law and are being undercut by those who knowingly skirt regulations,” Mr. Ackerly said.

Over the last 15 years, the only entity that has consistently published specific instances of non-compliance is the Alliance for Green Heat (AGH) in its monthly newsletter, and on its website.  Like the EPA, AGH is often contacted by industry members who are troubled by the conduct of other members.  The OIG listed five instances of abuse that the EPA overlooked and failed to take sufficient action, but there are scores more.  For instance, the internet continues to be rife with the sale of uncertified wood heaters, including outdoor wood boilers, which the EPA has known about for years, and appears not to have done anything.

  

US Stove sold 4,321 stoves before they were certified

This week’s report from the OIG follows up on several high-profile cases that AGH has pressed the EPA to address, including widespread fraud at US Stove Company which the EPA has been silent on for 5 years. In that case, an employee of US Stove was outraged and blew the whistle on his company.  US Stove then sued the whistleblower, getting a Temporary Restraining Order (TRO) against him to shut him up, which the local Tennessee court said was “in the public interest.” 

 This week’s OIG report described how US Stove manufactured and sold 4,321 stoves before they were certified, and d859 of them were sold even before the test lab started testing the unit. Though the EPA had all of these details, it did lead to further action.

The stove in question was never officially recalled by the Consumer Product Safety Commission.  A list of wood and pellet stove recalls can be found here.

A second whistleblower came forward, providing extensive details of fraud to the EPA, imploring them to take action.  That person wrote: “To those of us who refused to cooperate with this fraud [at the US Stove Company], we had hoped that the EPA would step in, enforce its regulations, and thus provide some level of protection and dignity to whistleblowers. I expect US Stove may come after me, and possibly file a lawsuit against me, as they did with the first whistleblower. The company has dragged that man through the mud, and forced him to hire expensive lawyers, just because he was willing to stand up for EPA regulations.”

False advertising of efficiency

Another major issue that AGH has pursued over the years is false or misleading advertising of efficiency levels, often telling consumers that the unit is eligible for the IRS tax credit, which requires stoves to be 75% efficient, using the higher heating value (HHV). In one case, a test lab listed the stove at 70% efficient, but the manufacturer told consumers it was 75% efficient and eligible for the tax credit. The EPA sent the manufacturer a cease-and-desist request via email, which the manufacturer did not act upon.  The OIG report said the EPA could have revoked the certification of the stove but has not taken further action.  

 

False and misleading efficiency advertising was widespread up until 2021, when most manufacturers began to advertise the efficiency as reported by test lab, and listed in the EPA database of certified stoves. US Stove continued to falsely represent some of its units and declined to comment on the record. Stove Builder International, a large Canadian manufacturer insists that various interpretations of efficiency were acceptable until and unless the IRS defined “efficiency” more clearly. For example, some experts argue that if a stove reaches 75% efficiency on any official test burn, it can qualify even if the average efficiency of all four burns is less than 75%.

 

While the OIG vigorously raises the issue of false advertising of stove efficiencies, it is far from clear whether OECA even believes it has the authority to address efficiency.  Efficiency testing became mandatory in 2020 but the EPA began listing efficiencies in 2012. The EPA does not regulate efficiency, as most European countries do, allowing stoves as low as 51% efficient to be certified.

 

EPA lab served as own third-party certifier

One of the 5 incidents of concern in the OIG report included an EPA approved lab serving as its own third-party certifier of a test report it has produced.  Again, the EPA knew about this but did not revoke the certification and “the lab remained approved by the EPA.”  

 

Test labs are allowed to be third party certifiers and most of them are.  However, they cannot certify the results of stoves tested in their own lab.  PFS-TECO, Intertek, OMNI, RISE (Sweden) and SZU (Czech Republic) are both test labs and third-party certifiers.  PolyTest (Canada), ClearStak and the Danish Technological Institute are approved test labs but are not third-party certifiers. 

 

Deviation from test methods

A fourth concern raised by the OIG, which has already been resolved, involved Lamppa manufacturing who makes Kuuma wood furnaces.  Lamppa had obtained an alternative test method, but the test lab deviated from that method, due to complications.  The manufactured disclosed the deviation and explained why, and the EPA certified it anyway.  After 5 years, the EPA informed Lamp it would not recertify the unit, and Lamppa had to retest and recertify the unit.  

 

Recommendation to the EPA

 

The OIG listed several significant recommendations, some of which could be incorporated into the next set of wood stove regulations, known as New Source Performance Standards (NSPS), which the EPA is currently working on.

 

·      Including a federal criminal false statement clause into the wood heater certification application process, which would require manufacturers, but not necessarily retailers, to not make false statements in their advertising.

·      Develop procedures to revoke the approval of test labs that do not follow NSPS requirements.

·      Develop procedures to revoke the certification of wood heaters that do not coply with NSPS requirements.

·      Inform the OIG of investigations into fraud or abuse of the wood heater NSPS.

 The  OIG report can be found here. 

Consumers can now rely on almost all stove tax credit certificates issued by manufacturers

A sampling of tax credit certificates
issued by various manufacturers 

After ten years, almost all stove and boiler manufacturers appear to be accurately informing their consumers about which models are eligible for the tax credit for wood heaters that are at least 75% efficient.  Some outlets, such as We Love Fire, a network of 280 hearth retailers, go out of their way to educate customers on how to ensure the stove they are buying qualifies for the credit and urges them to check the EPA’s database.

There was widespread exaggeration and misleading advertising about stove efficiencies in the preceding decade, and the EPA did not require wood and pellet stove manufacturers to disclose the efficiency of their models, or even to test for it until 2015.

Consumers are often advised to download the manufacturer certificate and keep it in their files, along with the receipt for the stove, as proof that they properly took the credit.  However, the IRS does not require manufacturer certificates, and a screenshot of the EPA database, showing an efficiency of at least 75% for your model is even better documentation.

 

When Congress passed the new, higher tax credit legislation in 2020, they specified that the minimum 75% efficiency level must be measured using the higher heating value (HHV), eliminating previous ambiguity. However, Congress did not specifically refer to the EPA’s database, which lists the HHV efficiency of all stoves, boilers and furnaces.  Almost all of industry accepts the EPA database should be used to confirm efficiencies and encourages consumers to check it.  The Hearth, Patio & Barbecue Association (HPBA), the industry’s largest association, broke from its past practice and took a strong position that consumers should rely on the EPA database to determine efficiency.

 

The Ashley line of stoves is owned 
by US Stove, which issued this
current certificate.

AGH reviewed scores of certificates issued by stove and boiler manufacturers by brands such as Hearthstone, Jotul, Lopi, Quadrafire and many others and found for the first time that they all were providing their consumers accurate information.  We found only one stove manufacturer, US Stove Company, still willing to list stoves as qualifying for the tax credit that are under 75% efficient.  US Stove issued a certificate saying that four of its pellet stove models qualified for the credit despite test reports from third party EPA-approved labs showing the models have efficiencies of 64%, 66% and 69% (which is also how they are listed on the EPA database).  (As of Sept. 2022, US Stove still claims these units qualify for the tax credit.) The average pellet stove is about 73% efficient. Their test reports are provided on the US Stove website.  

John Voorhees, Vice President for Compliance at US Stove, signed the tax credit certificate that states

The Ashley certificate juxtaposed with
the EPA database 

“Under penalties of perjury, I declare that I have examined this certification statement, and to the best of my knowledge and belief, the facts are true, correct, and complete.”  AGH reached out to Mr. Voorhees for clarification and to ensure the US Stove position was included in this blog, and though we exchanged many emails and US Stove provided relevant information, the company declined to permit AGH to quote from that exchange.  AGH will update this blog if US Stove chooses to provide any information that we can make public.

 

It is unclear why US Stove singled out the four models on this certificate when other models are listed with higher efficiencies, though none are above 75% except for one pellet stove made by their Breckwell brand.  When the tax credit was first passed by Congress in 2009, most companies declared that all of their models qualified.  That year, US Stove issued a certificate saying that 24 models were eligible for the credit requiring a minimum of 75% efficiency.  

In 2009, like many manufacturers, US
Stove listed all or almost all of of their
 models as meeting the requirements of
the 75% minimum efficiency tax credit.

Today, most boiler and furnace companies also seem to be following Congress’s plain language and only certifying units at 75% or more.  Boiler efficiencies are more complex because there are several test methods and the resulting efficiencies aren’t as comparable as they are with wood and pellet stoves. AGH found one indoor wood furnace manufacturer, Hy-C who makes the Shelter furnace, tested at 70% efficiency by the lab but the company issues a Certificate of Qualification that it meets the 75% HHV threshold. 

 

Tax credits for consumer appliances have a variety of purposes, in addition to incentivizing consumers to buy higher efficiency appliances.  They are designed to influence manufacturers to improve product efficiency, accelerate market penetration of more efficient products and potentially prepare the market for future mandatory requirements.  Currently, there is no required minimum efficiency for wood and pellet heaters.  For pellet stoves like the ones in question, they range from 58% efficient for a model produced by US Stove, to an 87% efficiency unit from Cleveland Iron works.

 

Wood and pellet stoves and boilers are an excellent way to reduce fossil fuels and affordably heat your home, especially in seasons like this one when fossil fuel prices are high.  Federal tax credits are an efficient way to help households reduce fossil fuel use with a renewable, low carbon fuel.  However, unless consumers use seasoned wood of under 20% moisture content, wood stoves can produce excessive smoke and will not reflect the efficiency achieved in the test lab.  AGH considers pellet stoves to be the optimum choice, as their combination of high efficiencies and very low particulate matter make them suitable for both rural and more densely inhabited towns and suburban areas.  Unlike wood stoves, the efficiency numbers achieved in the lab can generally be achieved by consumers if the unit is maintained properly. 

 

Even though most manufacturers are now issuing tax credit certificates for stoves that are at least 75% efficient, AGH urges consumers to also check the EPA’s database of wood heaters to be sure.  AGH has been in touch with IRS officials, urging them to issue guidance that wood heaters must be listed at 75% efficient or higher on the EPA database to close any remaining loopholes that a few manufacturers still try to use.  

Further reading

AGH urges the IRS to recognize efficiencies in the EPA database, Feb. 2021

Guidance on the 26% tax credit for wood heaters, Jan. 2021

A review of wood and pellet stove efficiency ratings, Jan. 2014, updated May 2020

How to claim the tax credit, Feb. 2018, updated Jan. 2021

Napoleon's "EPA certified - exempt" fireplace?

Napoleon has labeled one of its fireplaces “EPA certified – exempt.” According to the EPA, this wording is not allowed. For consumers it is confusing at best, but can also be misleading or false advertising. The fireplace is the NZ6000 High Country and it’s an exempt unit, meaning it does not conform to EPA emissions standards.

IRS withdraws right of Shaver Furnaces to claim tax credit

In May 2010 the Alliance for Green Heat wrote to the IRS, urging them to look into the matter of unqualified outdoor wood boilers claiming to be 75% efficient. The Alliance had found one manufacturer, Shaver Furnaces, who had certified their unqualified boilers as 75% efficient lower heating value (LHV) allowing customers to claim what was then a $1,500 tax credit.

The inside of a Shaver
boiler.  For more.

Over a year later, the IRS issued a ruling, finding that Shaver Furnace “failed to meet the efficiencyrating of at least 75% as measured using a lower heating value.”  The IRS revoked the companies right to provide a certification on which future purchasers of the furnace can rely. The ruling did not impact the ability of Shaver consumers to take the tax credit prior to the date of the ruling, Nov. 28, 2011. It does not appear that the IRS imposed any fine on Shaver.

The Alliance for Green Heat is not aware of any other manufacturer who has been denied the right to claim 75% efficiency, but has been very critical of the industry practice that allows virtually every wood and pellet stove to claim 75% efficiency. In reality, wood stoves that claim 75% efficiency may be below 65% efficient LHV and some pellet stoves are under 60% LHV, with some even under 50%.

In February 2011, 8 months before the IRS ruling, Barrett Enterprises urged consumers to buy the clean burning traditional Shaver Furnace “before prices increase.”

Four days before the IRS ruling, Shaver Furnace put out a notice on its Facebook page saying “Shaver Furnace is proud to announce that the Shaver Pro Series 165, 250, 290 and 340 models have all been tested and certified to be 75% efficient or better and this allowed us to offer you a certificate to get the $300 Federal Tax Credit for 2011. Being eligible for the tax rebate means that your Shaver Furnace will burn less wood than with other manufacturers who don't qualify for the rebate and therefore you will use more wood with the other - being less than 75% efficient. That's proof, not just rhetoric.”

A chart of outdoor wood boilers, presumably made by Shaver Furnaces, listing which companies qualify for the IRS tax credit gave a green “yes” only to Shaver Furnaces. Other manufacturers, including Central Boiler, Heatmor and many others were all listed with a red “no.” The site said a red “no” designates “WORST or undesirable.”

Shaver Outdoor Furnace still claim to use “up to 25 to 50% less wood compared to other heating methods.” Their website says:

"Since the Shaver can burn larger pieces of wood it will dramatically reduce the time loading the furnace and the time spent cutting the wood - and there is no splitting. Plus the wood burns better and more completely. Costs for large round pieces are also significantly less than for shorter pieces of split wood..... Once the water heats up to the temperature you set it at, the fan goes off, allowing the fire to just smolder."