The forest products industry faces cumulative burdens from new air regulations that will cost billions. Key rules like Boiler MACT imposed high costs, though revisions have helped. Upcoming rules on pulp and paper operations, particulate matter standards, and greenhouse gas regulation could mean further high costs. Biomass emissions from forest growth offset fossil fuel releases, but accounting is still uncertain. Sustainable regulations are needed that consider costs, science, and economic impacts.

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 A
Ak F t Association Annual Meeting
i ti A l M ti
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
g
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3. Forest Products Industry Employment*
000 workers
1,700
1,600
1,500
1,400
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.
I l d d lli d d t d d t dl i
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 ??
$3
2012 Paper Risk and Technology I $5M
2012 PM NAAQS $ 0.1 to >$1 B
2013 Paper Off-gas Venting Elimination
Off gas $1.6
$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
$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
ha ardo s air poll tants
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).
f t i )
March 2011: EPA issued original final Boiler
MACT -- $7 billion capital cost for FP industry.
billi it l tf i d t
Jobs Study by Fisher International: over 20,000
jobs
j b (36 mills) in jeopardy in P&P sector alone.
ill ) i j d i t l
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
p p
rules.
The re-proposed rules would cost the forest products
industry
i d t an estimated $4.3 billion.
ti t d $4 3 billi
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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,
EPA, USDA DOC SBA/OA OMB
White House
Arguments: economic/employment engineering
economic/employment, engineering,
science, legal, and political
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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 B il
Utilit Boilers: Coal
C l
ICI Boilers & Process Heaters
- oil
ICI Boilers & Process Heaters
- coal
ICI Boilers & Process Heaters
C o es ocess eate s
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 A
Att i t Areas
SO2 E i i
Emissions Outside of PM
O id f
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
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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
Rep opo l $4.3
$4 3 B $14.2
$14 2 B $5.8
$5 8 B
(December 2011)
Final ?? ?? ??
(2012??)
Cost Reductions > $4.7 B >$6.8 B >$ 5.3
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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
gy ,
Reevaluate existing venting allowances – summer 2013
Determine if changes to Kraft Pulp New Source Performance Std
– court ordered deadline of May 2013
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19. NAAQS
Permitting Gridlock
2010 NO and SO2 NAAQS plus 2006 particulate matter
NOx d l ti l t tt
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
d di h i l t d
Scientific uncertainty questions need for lower limits
Ozone NAAQS – proposal in late 2013
Big costs and scientific uncertainty
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20. Carbon Neutrality
Fossil Fuel Releases Biomass Carbon Cycle
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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
1.70
1.37 South
1.00
1.22 1.05
0.50
‐
1976 1986 1996 2006
North South Rocky Mtn
y Pacific Coast
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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
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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 i
C l ti impact of major regulations between 1993 and
t f j l ti b t d
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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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.
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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.
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26. Questions
???
Paul Noe
Vice President for Public Policy
American Forest & Paper Association
Paul_Noe@afandpa.org
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