United States 			Office of Chemical
Environmental Protection	                Safety and Pollution
Agency				Prevention			            August 2011

HUMAN HEALTH HAZARDS OF ALTERNATIVE RESIN TECHNOLOGIES REPLACING UREA-FORMALDEHYDE RESIN

Table of Contents
List of Tables	3
Contributors	4
Glossary of Terms and Abbreviations	5
Executive Summary	6
Legislative Mandate and Objectives	8
Urea-Formaldehyde (UF) Resins	8
Identification of Alternative Resins	11
Phenol-Formaldehyde (PF) Resins	12
Methylene diphenyl diisocyanate (MDI) resins	14
Polyvinyl alcohol/polyvinyl acetate (PVA) resins	15
Bio-Based Adhesives	16
 -- Tannin-containing resins	17
 -- Polyamide epichlorohydrin (PAE)/soy resins	18
 -- Cashew nut shell liquid (CNSL)-based resins	19
Melamine-based resins	19
Scavengers and additives	20
Conclusions	22
References	23

List of Tables
Table 1.  Formaldehyde Exposure in the Life Cycle of UF- Bonded CWPs	9
Table 2.  Alternative Resin Technologies and Selected Chemical Substances Used in Resin and Composite Wood Product Manufacturing	12
Table 3.  Formaldehyde and Phenol Exposures in the Life Cycle of PF-Bonded CWPs	13
Table 4.  MDI /pMDI Exposure in the Life Cycle of MDI/pMDI-Bonded CWPs	15
Table 5.  Vinyl acetate monomer exposure in the life cycle of PVA-bonded CWPs	16
Table 6.  Methanol exposure in the life cycle of tannin-bonded CWPs	17
Table 7.  Epichlorohydrin exposure in the life cycle of PAE/soy-bonded CWPs	19

Contributors
Author:
  Iris A. Camacho-Ramos
  Office of Pollution Prevention and Toxics
  Office of Chemical Safety and Pollution Prevention

Portions of this document were developed under contract with Syracuse Research Corporation (SRC), Inc.  The following SRC staff developed the hazard information used in this report:  Ashlee Aldridge, Christopher Janson, Justine Von Runnen, Teresa Manyin, William L. Richards and Joan D. Garey.

Glossary of Terms and Abbreviations
ATCM		Airborne toxic control measure
CARB		California Air Resources Board
CAS RN		Chemistry Abstracts Service Registry Number
CNSL		Cashew nut shell liquid
CWP		Composite wood products
EPA		Environmental Protection Agency
GI		Gastrointestinal
HWPW		Hardwood plywood
IRIS		Integrated Risk Information System
MDA		4,4'-methylenedianiline
MDI		Methylene diphenyl diisocyanate
MF		Melamine formaldehyde
MUF		Melamine urea formaldehyde
NAF		No-added formaldehyde
NAS		National Academy of Sciences
PAE		Polyamide epichlorohydrin
PF		Phenol formaldehyde
pMDI		Polymeric methylene diphenyl diisocyanate
PPE		Personal protective equipment
PVA		Polyvinyl acetate
RfC		Reference concentration
TSCA		Toxic Substances Control Act
UF		Urea formaldehyde
ULEF 		Ultra low-emitting formaldehyde
μg/m[3]		Micrograms per cubic meter
VAM		Vinyl acetate monomer

Executive Summary
This review of the human health hazards of alternative resin technologies replacing urea-formaldehyde (UF) resin was developed in support of implementing regulations by the United States Environmental Protection Agency (EPA) under the Toxic Substances Control Act (TSCA).  Under the recently established Formaldehyde Standards for Composite Wood Products Act ("Formaldehyde Standards Act"), EPA must establish national limits for formaldehyde emissions from hardwood plywood, particleboard and medium-density fiberboard.

Formaldehyde is capable of producing serious adverse effects in humans by inhalation and dermal exposure, especially over prolonged periods of time.  Sensory irritation is the most frequently reported health symptom by workers manufacturing UF resins and/or composite wood products (CWPs), as well as by the general population that spend most of their time in office buildings or residential units containing UF-bonded CWPs.  Formaldehyde is a human carcinogen, may also cause neurological effects via the inhalation route and dermatological effects (e.g., allergic contact dermatitis) after dermal exposure. Individuals with asthma or other respiratory problems may be especially sensitive to formaldehyde's toxicity.

UF resins are the standard adhesives used in many CWPs.  Formaldehyde released from UF resins may present a health hazard to those who have UF-bonded wood panels in their homes or office workplace.  Levels of exposure to formaldehyde are even greater among those who manufacture the UF resin or who are exposed to it during the manufacture of UF-bonded CWPs; thus workers are more vulnerable to formaldehyde's toxic effects.

In this report, seven alternative resins were assessed and then compared and contrasted to urea-formaldehyde to determine the potential for reducing formaldehyde exposure and its adverse health effects.  Some of the alternative resins have no added formaldehyde; others contain formaldehyde, but emissions of formaldehyde are reduced compared to UF in at least some stages of the product life cycle.   In addition, scavengers and additives used to minimize formaldehyde releases from formaldehyde-based resins were evaluated.

A summary of the key observations is presented below.

Residential and office environment

Methylene diphenyl diisocyanate  (MDI)/polymeric MDI, polyvinyl alcohol/polyvinyl acetate (PVA) and polyamide epichlorohydrin/soy resins are considered no-added formaldehyde resins; thus, these resins do not release any formaldehyde in the bonded wood products.  On the other hand, alternative resins based on phenol-formaldehyde (PF), tannin (e.g., tannin-formaldehyde, tannin-PF, or tannin-UF), cashew nut shell liquid (CNSL)(e.g., CNSL-formaldehyde, CNSL-PF, or CNSL-UF), and melamine (e.g., melamine-formaldehyde, melamine-UF) contain formaldehyde, but CWPs containing them are expected to have much lower formaldehyde emissions than UF-bonded CWPs resulting in a reduction of the exposures to formaldehyde.
Furthermore, among the seven alternative resins and scavengers/additives, many chemicals of concern to human health were identified besides formaldehyde; among the most toxic ones are phenol, MDI, vinyl acetate monomer (VAM), methanol, epichlorohydrin, ammonia, and chromium compounds.  These chemicals, when contained in the final CWP, are expected to constitute a negligible health hazard because emissions are not expected to occupants of office and residential buildings.

Workplace environment

Chemical production of UF resins and alternative resins involve the use of raw materials such as formaldehyde, phenol, MDI, VAM, methanol, epichlorohydrin, ammonia, and chromium compounds.  Hot-pressing operations during CWP manufacturing increase the potential for worker exposures to these chemicals due to increased volatility.  Workers at these life cycle stages are the most exposed population to these chemicals and their degree of exposure depends on many factors, including the availability and effective use of personal protective equipment (PPE) and air emission control technologies (e.g., scrubbing systems) at the workplace.  Regarding workers involved in downstream CWP manufacturing, exposures to formaldehyde and other chemicals of concern would be similar to those described above for the residential and work environment.

The toxicity profiles of formaldehyde, phenol, MDI, VAM, methanol, epichlorohydrin, ammonia, and chromium compounds are well characterized in the scientific literature.  Human epidemiological data and laboratory studies in animals have reported serious adverse effects (e.g., respiratory, neurological, reproductive, and/or carcinogenic effects) for these chemical substances.  Thus, EPA assessed inhalation and dermal exposures in workers involved in the initial stages of the life cycle where the production of polymers (resin) and the manufacturing of the bonded panels take place.  Occupational health impacts from these chemical substances are reduced when feasible engineering and work practice controls (e.g., PPE) are available at the workplace.

Legislative Mandate and Objectives
The United States Environmental Protection Agency (EPA) is implementing regulations under the Toxic Substances Control Act (TSCA) to reduce exposures to formaldehyde from composite wood products (CWPs).  On July 7, 2010, the Formaldehyde Standards for Composite Wood Products Act ("Formaldehyde Standards Act") was signed into law.  Under the Formaldehyde Standards Act, EPA must promulgate implementing regulations by January 1, 2013, that establish national limits for formaldehyde emissions from hardwood plywood (HWPW), particleboard, and medium-density fiberboard.  This legislation, which adds a Title VI to TSCA, mirrors regulations previously established by the California Air Resources Board (CARB) for CWPs sold, offered for sale, supplied, used or manufactured for sale in California.  The standards apply to CWPs in both unfinished panels and finished products that contain urea-formaldehyde (UF) resins (i.e., high-emitting formaldehyde resin).  The Act also promulgates emission standards for CWPs made out of alternative resin technologies such as low-emitting formaldehyde and no-added formaldehyde (NAF) resins; these are the resins that are evaluated in this report.

In support of the implementing regulations, this assessment discusses the potential human health hazards and exposure potential of UF resins and available alternative resins across different stages of the life cycle process for CWPs.  This analysis does not consider emissions from other volatile compounds inherently present in the wood (Salthammer et al., 2010).

A cost-benefit analysis will be developed for the implementing regulations as required by Executive Order 12866 ("Regulatory Planning and Review").  This hazard assessment will provide support for the economic analysis of costs and benefits.

Urea-Formaldehyde (UF) Resins
UF resins are the standard adhesives used in the manufacture of many CWPs, such as HWPW, medium-density fiberboard and particleboard.  UF resins are cross-linked with the wood and usually cured under high temperature/pressure conditions to form an adhesive which binds the different wood feedstocks together to form the CWPs (EPA, 2011b). Formaldehyde is released from UF bonded products.

UF resins are significant sources of formaldehyde emissions.  There are three possible sources of formaldehyde emissions from CWPs containing UF resins.  Free, unreacted formaldehyde can off-gas from the UF resin; the amount of free formaldehyde depends on the ratio of urea and formaldehyde added to the resin and the reaction conditions (pH, temperature, time) during resin formation.  Formaldehyde emissions also occur while the resin is curing during the manufacturing process of CWPs.  Lastly, exposure of CWPs to heat and humidity can contribute to formaldehyde releases (EPA, 2011).

Because CWPs made with UF resins release formaldehyde, EPA is concerned about potential exposures to those living in houses containing UF-resin building materials and those working in the CWP industry.  Breathing of low levels of formaldehyde (<100 ppb) is also expected in office and residential buildings (e.g., commercial/consumer use) containing CWPs; therefore, the general population (e.g., children, adults, elderly) and office workers are also expected to be exposed to formaldehyde (Table 1; EPA, 2011c; EPA, 2011d).  The rate of formaldehyde release is highest right after CWPs are manufactured and decreases rapidly after the first few months, reaching background levels in a few years; thus, the greatest exposure level for the consumer is when CWPs are relatively new.  Dermal exposure is not expected to be a significant exposure route after UF resin and CWP manufacturing.  Dermal and inhalation exposures to formaldehyde are expected for workers involved in the manufacture of UF resins and CWPs, especially in the absence of personal protective equipment (PPE) (EPA, 2011c; EPA, 2011d).

Table 1.  Formaldehyde Exposure in the Life Cycle of UF- Bonded CWPs

                         Chemical Substance of Concern
                               Life Cycle Stage

                            UF resin manufacturing
                               CWP manufacturing
                       Downstream product manufacturing
                          Commercial and Consumer Use
                                 Formaldehyde
                 Inhalation and dermal exposures are expected.
                 Inhalation and dermal exposures are expected.
                       Inhalation exposure is expected.
                       Inhalation exposure is expected.
Note:  The use of CWPs in office and residential building is an example of commercial/consumer use.

Based on its toxicity profile, EPA decided to focus on formaldehyde as the chemical of concern for UF resins.  Formaldehyde (CAS RN: 50-00-0) is a flammable, colorless gas at room temperature with a pungent, suffocating odor.  It is a highly reactive, water soluble chemical that is rapidly absorbed by the respiratory tract.  More than 90% of inhaled formaldehyde is absorbed in the upper respiratory tract.  Although all tissues are capable of metabolizing formaldehyde, the tissues of the respiratory tract are expected to rapidly metabolize formaldehyde with little or no formaldehyde reaching the blood.  Oral absorption is expected to be high, but dermal absorption is quite low.  Once absorbed, formaldehyde is primarily metabolized by glutathione-dependent formaldehyde dehydrogenase and aldehyde dehydrogenases.  Formaldehyde is oxidized to formate which enters various reactions resulting in the production of metabolic by-products such as carbon dioxide (ATSDR, 1999; IARC, 2006; NAC, 2008).

Sensory irritation is the effect most frequently reported in humans after inhalation exposure to formaldehyde.  Individuals may exhibit signs of eye, nose and throat irritation after inhaling formaldehyde for a short time or on a continuous basis.  Pulmonary function may be affected by repeated exposure to formaldehyde and there is evidence of increased asthma incidence associated with formaldehyde exposure.  It is also likely that individuals with respiratory illnesses (e.g., asthma, respiratory allergy) will be more sensitive to the effects of inhaled formaldehyde (ATSDR, 1999; ATSDR, 2010; IARC, 2006).

Moreover, limited human studies suggest that chronic occupational exposure to formaldehyde vapors may be associated with reproductive effects in women; however, other studies have not reported such association (ATSDR, 2010; NRC, 2008a).  Neurological impairment has also been reported in people repeatedly exposed to formaldehyde vapors (ATSDR, 1999; ATSDR, 2010; NRC, 2008a).

Formaldehyde has been classified as a known human carcinogen by the International Agency for Research on Cancer and the National Toxicology Program (IARC, 2006; NTP, 2011).  In 1991, EPA classified formaldehyde as a probable human carcinogen and issued a quantitative estimate of carcinogenic risk in humans for inhalation exposures (i.e., inhalation unit risk= 1.3 x 10[-5] per ug/m[3]).  The inhalation unit risk was based on nasal squamous cell carcinomas observed in male rats chronically exposed to formaldehyde (EPA, 1991).

EPA's Integrated Risk Information System (IRIS) program is currently re-evaluating the cancer risks of formaldehyde as well as developing a reference concentration (RfC) for non-cancer effects.  The latest draft IRIS assessment classified formaldehyde as carcinogenic to humans by the inhalation route of exposure and derived an inhalation unit risk considering human epidemiological evidence for several types of nasal cancer and leukemias (EPA, 2010).  The National Research Council (NRC) of the National Academy of Sciences recently issued its review of the IRIS document on formaldehyde (NRC, 2011) and EPA is working on a revised assessment.

Health effects have been reported for individuals dermally or orally exposed to formaldehyde.  Repeated contact with liquid solutions of formaldehyde has resulted in skin irritation and allergic contact dermatitis in humans.  When ingested, formaldehyde solutions can cause severe injury to the gastrointestinal (GI) tract with signs of inflammation and ulceration of the mouth, esophagus and stomach (NAC, 2008).

Urea (CAS RN: 57-13-6) is another chemical substance used in the production of UF resins.
Urea occurs naturally in mammals as an end-product of amino acid metabolism, which is excreted (IPCS, 2009).  It can be expected that the human organism is well-adapted to urea within the normal physiological range of concentrations, as well as higher concentrations (OECD, 2002a).  This is supported by clinical evidence from high-dose oral administration for therapeutic purposes (OECD, 2002a).  The substance can be absorbed into the body by inhalation of its aerosol or by ingestion (ICSC, 1997); the rate of absorption via the dermal route is lower than that for inhalation or ingestion (OECD, 2002a).  Urea is irritating to the skin, eyes and respiratory tract (ICSC, 1997).  The acute oral toxicity is low (OECD, 2002a).  Similarly, repeated-dose toxicity by oral and dermal routes is low (OECD, 2002a).  The concern for reproductive and developmental toxicity is uncertain because appropriate studies are not available (OECD, 2002a).  Urea has caused DNA single strand breaks in mammalian cells in vitro and has been shown to be clastogenic in mammalian cells in vitro and in vivo, but only at concentrations well beyond the normal physiological range (about 50-100 higher than concentrations found in human blood); therefore, there is little concern for genetic toxicity (OECD, 2002a).  There is no concern for carcinogenicity (OECD, 2002a).  Some exposure to urea may occur during the life cycle stage of UF resin manufacturing (EPA, 2011b) and significant human health effects are not expected due to its low hazard concern.

Methanol (CAS RN:  67-56-1) is used in the synthesis of formaldehyde, which is then used in the manufacture of UF resins.  Occupational exposures to methanol may produce eye, skin and nasal irritation (CalEPA, 2000; OECD, 2004a; HSDB, 2011).  Methanol exposure has been associated with neurotoxicity (e.g., headache, dizziness, nausea and blurred vision) (CalEPA, 2000; OECD, 2004a; NAC, 2005), metabolic acidosis (OECD, 2004a; NAC, 2005), liver and kidney effects (OECD, 2004a), immunotoxicity (OECD, 2004b), ocular toxicity (e.g., severe vision impairment and permanent blindness) (OECD, 2004a; HSDB, 2011), developmental toxicity (e.g., malformations, anomalies and neurodevelopmental effects) (CalEPA, 2000; OECD, 2004a; NAC, 2005; HSDB, 2011), as well as carcinogenicity (likely human carcinogen based on animal data) (OECD, 2004a).

Methanol emissions are not expected after the curing process of CWPs; therefore, the human health impact during commercial/consumer use and downstream product manufacturing processes is likely to be minimal because inhalation exposure is not expected at those times.
Workers continuously exposed to methanol are more vulnerable to methanol-related effects in the absence of PPE during the manufacturing of UF resins and CWPs.  Methanol is a volatile chemical; therefore, inhalation exposure is the most likely route, although dermal exposures to methanol solutions cannot be completely ruled out at the workplace.  During CWP manufacturing, boards are generally subject to high temperatures during the curing process.  Because methanol's volatility will be enhanced at high temperatures, methanol exposure is likely to be higher during CWP manufacturing rather than during the UF resin production (EPA, 2011b; EPA, 2011c).

Identification of Alternative Resins
EPA identified various alternative resin technologies that are being used to replace UF resins in CWPs and achieve lower formaldehyde emissions (Table 2) (EPA, 2011a; EPA, 2011b).  As part of the development of the list of alternative resins, chemistry information was evaluated to understand potential exposures to certain chemical substances involved in resin manufacturing as well as downstream processes ranging from CWP manufacturing to commercial and consumer use (EPA, 2011b).  The alternative resins and scavengers are consistent with what industry is currently using in certain CWPs to meet the CARB airborne toxic control measure (ATCM) limits. Moreover, this analysis considers the resin technologies subject to regulatory emission standards by the Formaldehyde Standards Act.  For instance, the Act sets emission standards for CWPs containing NAF-based resins and may include resins using soy, polyvinyl acetate, and methylene diphenyl diisocyanate (MDI) in their composition.   Similarly, the Act covers CWPs made out of ultra low-emitting formaldehyde (ULEF) resins and may include resins containing melamine-urea-formaldehyde (MUF), phenol formaldehyde (PF) and resorcinol formaldehyde.

Table 2 also lists chemical substances that are important for resin and/or CWP functionality and that could present a relevant source of exposure at certain stages of the product's life cycle, including additives and scavengers that are added to the resin matrix to reduce formaldehyde emissions and/or enhance wood bonding.

Table 2.  Alternative Resin Technologies and Selected Chemical Substances Used in Resin and Composite Wood Product Manufacturing
                                 Type of Resin
                             Name(s) of chemicals
                       Phenol-Formaldehyde (PF) resins
                             Phenol, formaldehyde
                 Methylene diphenyl diisocyanate (MDI) resins
                               MDI, formaldehyde
               Polyvinyl alcohol/polyvinyl acetate (PVA) resins
                             Vinyl acetate monomer
                  Bio-based resin:  Tannin-containing resins
                        Tannins, methanol, formaldehyde
         Bio-based resin:  Polyamide epichlorohydrin (PAE)-soy resins
                         Epichlorohydrin, soy protein
      Bio-based resin:  Cashew nut shell liquid (CNSL)- containing resins
                     Cashew nut shell liquid, formaldehyde
                            Melamine-based resins
         (melamine-formaldehyde or melamine-urea-formaldehyde resins)

                         Urea, formaldehyde, melamine

                           Scavengers and additives
                          used in alternative resins
Urea, ammonia, phenol, tannins, soy protein, melamine, hexamine, sodium sulfate, sodium chloride, triacetin, tris(hydroxymethyl) nitromethane and chromium compounds.
Note:  Additives and scavengers may be used in combination with resin components to reduce formaldehyde emissions and enhance wood bonding.
Phenol-Formaldehyde (PF) Resins
PF resins are another major adhesive used in the CWP industry for products such as plywood, particle board, waferboard and fiberboard (CalEPA, 2007; EPA, 2011c).  Phenol and formaldehyde are reactants in the synthesis of PF resins.   The initial reaction of formaldehyde and phenol occurs with excess formaldehyde; therefore, phenol is the limiting reagent and is expected to be consumed in the reaction (EPA, 2011b).

While most studies indicate that PF resins have low formaldehyde emissions, this is generally achieved at the latter stage of curing and adhesive formation (i.e., commercial/consumer use; downstream CWP manufacturing). Because the initial reaction occurs using an excess of formaldehyde, it is assumed that phenol exposure is negligible during downstream CWP commercial/consumer use and manufacturing (EPA, 2011b; EPA, 2011c).  Inhalation and dermal exposure to phenol and formaldehyde may occur during the synthetic process of the resin and CWP manufacturing.  For instance, workers are expected to breathe phenol during various activities performed during PF resin manufacturing (e.g., filling, transfer, sampling, drumming, cleaning, maintenance and repair work).  Dermal exposures are also possible, but workers usually wear PPE due to phenol's corrosive properties (EPA, 2011b; EPA, 2011c; EPA, 2011d).

Table 3 summarizes the potential exposures to formaldehyde and phenol during the life cycle process of PF-bonded CWPs.

Table 3.  Formaldehyde and Phenol Exposures in the Life Cycle of PF-Bonded CWPs

                         Chemical substance of Concern
                               Life Cycle Stage

                            PF resin manufacturing
                               CWP manufacturing
                       Downstream product manufacturing
                          Commercial and Consumer Use
                                 Formaldehyde
                 Inhalation and dermal exposures are expected.
                 Inhalation and dermal exposures are expected.
Inhalation exposure is expected, but lower emissions are also expected relative to UF.
Inhalation exposure is expected, but lower emissions are also expected relative to UF.
                                    Phenol
        Inhalation exposure is expected.  Dermal exposure is possible.
        Inhalation exposure is expected.  Dermal exposure is possible.
           Negligible inhalation and dermal exposures are expected.
           Negligible inhalation and dermal exposures are expected.
             Note:  The use of CWPs in office and residential building is an example of commercial/consumer use.

Phenol (CAS RN: 108-95-2) is corrosive to the eyes, skin and respiratory tract (IPCS, 2001; OECD, 2004b).  Absorption is high through the lung, skin and GI tract (IPCS, 2001; OECD, 2004b; IARC, 1989).  Phenol is not expected to be a dermal sensitizer (OECD, 2004).  Acute dermal toxicity is moderate, and acute inhalation toxicity is uncertain due to a lack of studies (OECD, 2004b; EPA, 2002).  The systemic effects of dermal and inhalation exposures may be widespread and include liver and kidney toxicity, as well as cardiovascular effects and neurotoxicity (EPA, 2002; ATSDR, 2008).  Inhalation exposure is expected to adversely affect the respiratory system (ATSDR, 2008).  There is uncertain concern for developmental and reproductive toxicity via the dermal and inhalation routes, although reproductive and developmental effects have been observed at high concentrations in oral exposures (ATSDR, 2008).  There is concern for genotoxicity.  Although phenol has shown little evidence of mutagenic properties in bacterial tests, it has demonstrated mutagenicity and clastogenicity in testing with mammalian cells in vitro (OECD, 2004b; IARC, 1989; ATSDR, 2008).  There are mixed results for testing in vivo, including some positive results for the induction of chromosomal aberrations and micronuclei in mice (ATSDR, 2008).  The carcinogenicity of phenol is uncertain (i.e., phenol is considered non-classifiable as to its carcinogenicity in humans) (IARC, 1989); however, dermally-applied phenol is a cancer promoter (OECD, 2004b).  There is concern for neurotoxicity, with effects including convulsions, loss of coordination, reduced motor activity and paralysis (OECD, 2004b).

Health concerns for phenol-related adverse effects are expected to be minimal during the late stages of the life cycle (e.g., commercial/consumer use; downstream product manufacturing) because individuals are not likely to come in contact with phenol (EPA, 2011c).  CWPs made with PF resins usually have 90% less formaldehyde emissions than CWPs made with UF resins (HBN, 2008).  A 90% reduction in formaldehyde emissions means that the likelihood of adverse health effects is dramatically reduced for the later stages of the CWP's life cycle (i.e., commercial/consumer use; downstream manufacturing).

As in the case of formaldehyde, the range of toxic effects for phenol makes it a chemical of concern in the occupational setting.  Workers repeatedly exposed to both phenol and formaldehyde may be more vulnerable to adverse effects when working in the manufacturing process of PF resins and CWPs especially if exposures occur in the absence of PPE.
Methylene diphenyl diisocyanate (MDI) resins
Isocyanate-based resins have a rapid polymerization and, because isocyanates have high reactivity and efficiency in bonding, they can react with many other monomers, allowing a great flexibility in the production of various types of isocyanate-based resins.  For example, a mixture of aromatic monomer MDI and the associated methylene- bridged polymeric MDI (pMDI) is used as an adhesive for CWPs such as oriented strand board, particle board and medium-density fiberboard (Frihart, 2005; EPA, 2011b; EPA, 2011c).

MDI and pMDI are produced from raw materials such as formaldehyde (HBN, 2008).  The synthesis of MDI/pMDI resins requires MDI and water to start the polymerization process.  The isocyanate group reacts with water to form an unstable carbamic acid which is subsequently converted to an amine.  Subsequently, self-polymerization rapidly occurs resulting in an oligomeric homopolymer.  The polarity, viscocity and molecular weight of MDI/pMDI resins are low when compared to other wood adhesives and these properties cause them to rapidly penetrate the wood surface (Frihart, 2005; EPA, 2011b).

Inhalation and dermal exposures to MDI/pMDI are not expected during the use of MDI/pMDI-bonded CWPs (i.e., commercial/consumer use; downstream product manufacturing) due to the rapid reactivity of the isocyanate groups (Frihart, 2005; EPA, 2011c) (Table 4).  In the occupational setting, the synthesis of the resin is typically done in a closed system to avoid unnecessary exposures to workers.  Volatility of the MDI/pMDI resins is low and, although the resin is produced in a closed system, occupational exposures (inhalation and dermal) may occur during worker activities at the manufacturing stage of the MDI/pMDI resins (e.g., sampling; equipment cleaning; accidental spill cleanup) or during the primary manufacturing of CWPs (e.g., spraying; volatilization in hot pressing operations) (Table 4) (EPA, 2011b; EPA, 2011c; Pizzi and Mittal, 2003).  In addition, exposures are mitigated if PPE is regularly used in the workplace (EPA, 2011c; Frihart, 2005).

Table 4.  MDI /pMDI Exposure in the Life Cycle of MDI/pMDI-Bonded CWPs

                         Chemical substance of Concern
                               Life Cycle Stage

                         MDI/pMDI resin manufacturing
                               CWP manufacturing
                       Downstream product manufacturing
                          Commercial and Consumer Use
                                   MDI/pDMI
                 Inhalation and dermal exposures are expected.
                 Inhalation and dermal exposures are expected.
        Inhalation and dermal exposures are expected to be negligible.
       Inhalation and dermal exposures are expected to be negligible.
          Note:  The use of CWPs in office and residential building is an example of commercial/consumer use.

Unlike UF resins, MDI/pMDI resins are formaldehyde-free adhesives, meaning that MDI/pMDI-bonded CWPs do not release formaldehyde at any stage of the life cycle.  However, isocyanate compounds are potentially toxic, especially in the absence of adequate industrial hygiene practices (e.g., emission control technology such as closed systems and PPE).  MDI (CAS RN:  101-68-8) exposure is a leading cause of occupational asthma and can result in irritation to the skin, eyes and respiratory tract (EPA, 1998a; IARC, 1999a; HSDB, 2010a; OECD, 2003).  Lung absorption is expected to be good, but absorption is poor via the dermal route (EPA, 1998a).  MDI is acutely toxic when inhaled, but acute dermal toxicity is low; MDI has dermal sensitizing potential and is a known respiratory sensitizer in humans (EPA, 1998a; HSDB, 2010a; OECD, 2003).  Repeated inhalation exposure to MDI aerosols may result in adverse effects in the respiratory tract (EPA, 1998a; HSDB, 2010a; OECD, 2003).  Moreover, there is evidence for genotoxicity based on observations of DNA damage, formation of DNA adducts, mixed results in bacterial reverse mutation assays, and induction of chromosomal aberrations in vitro (EPA, 1998a).  There is no conclusive evidence for carcinogenicity, although chronic inhalation exposure in animals has been shown to increase the incidence of benign tumors (OECD, 2003; EPA, 1998a; IARC, 1999a).  However, 4,4'-methylenedianiline (MDA), which is a metabolite/reaction product of MDI and formed during the first steps of the synthesis of MDI/pMDI resins, is classified as a known carcinogen (EPA, 1998a).
Polyvinyl alcohol/polyvinyl acetate (PVA) resins
Polyvinyl alcohol/polyvinyl acetate (PVA) resins are thermoplastic adhesives used in the assembly of CWPs such as HWPW.  The bonding process of PVA resins basically involves softening or melting the polymer while in contact with the panels and allowing the joined structure to cool.  PVA resins are generally synthesized through polymerization of vinyl acetate monomer (VAM).  Small amounts of residual VAM (< 1%) are generally present in the PVA resins.  The majority of PVA resins use polyvinyl alcohol as the main protective colloid and thickener (EPA, 2011b; EPA, 2011c; Pizzi and Mittal, 2003).

As with MDI resins, PVA resins are formaldehyde-free adhesives and, therefore, the resins do not release formaldehyde in the bonded products.  The moisture content of the wood, alcohol groups in the wood and the adhesive formulation components should provide sufficient reactants to consume any unreacted VAM, making it unlikely that the CWPs would contain the unreacted monomer.  Therefore, negligible inhalation exposure is expected during commercial/consumer use, downstream product manufacturing and CWP manufacturing (Table 5; EPA, 2011c).

However, VAM (CAS RN: 108-05-4) is an occupational hazard for those involved in the manufacture of PVA resin. Because of VAM's volatility, workers may breathe VAM during the synthesis of the PVA resins (EPA, 2011c; Table 5).  Dermal exposures may also occur in the workplace during PVA resin manufacturing (EPA, 2011c).  Repeated inhalation exposure may result in absorption of harmful amounts of VAM through the lungs.  Workers may complain of eye and upper respiratory tract irritation (ATSDR, 1992; ECB, 2000b; IARC, 1995; HSDB, 2009).  Nasal irritation, labored breathing, lung damage and convulsions have been observed in rodents acutely exposed to high levels of VAM by inhalation (ATSDR, 1992; HSDB, 2009).  Furthermore, rodents repeatedly exposed to VAM via inhalation have developed lung congestion and respiratory tract irritation, including respiratory distress, nasal mucosal metaplasia, tracheal metaplasia, bronchitis or bronchiolitis (ECB, 2000b; IARC, 1995).  Carcinogenic effects have been observed in rats via the inhalation route (nasal carcinomas), but there is inadequate evidence of carcinogenicity in humans (ATSDR, 1992; HSDB, 2009).  However, VAM is rapidly metabolized in human blood and animal tissues to acetaldehyde, which is both genotoxic and carcinogenic (IARC, 1995).  Hazards can be mitigated by conforming to good industrial hygiene practices (e.g., PPE).

Table 5.  Vinyl acetate monomer exposure in the life cycle of PVA-bonded CWPs

                         Chemical substance of Concern
                               Life Cycle Stage

                            PVA resin manufacturing
                               CWP manufacturing
                       Downstream product manufacturing
                          Commercial and Consumer Use
                             Vinyl acetate monomer
                 Inhalation and dermal exposures are expected.
        Inhalation and dermal exposures are expected to be negligible.
        Inhalation and dermal exposures are expected to be negligible.
       Inhalation and dermal exposures are expected to be negligible.
       Note:  The use of CWPs in office and residential building is an example of commercial/consumer use.
Bio-Based Adhesives
Jones (2007) defines bio-derived resins as "materials of natural, non-mineral or non-petroleum based origin that can be used either in their natural state or after small modification, capable of reproducing the behavior and performance of synthetic resins".  The application of natural products as binding agents dates back to before the beginning of human civilization.  Archaeological evidence of the earliest known use suggests that Neanderthals were creating adhesives from birch bark more than 200,000 years ago (Roebroeks and Villa, 2011).  Starch, blood and collagen extracts from animal sources (Lambuth, 2003), as well as natural gums and plant resins, are among the identified sources of binding agents used by early civilizations.  More recently, isolated vegetable proteins have been used in certain adhesives.  Resin durability has been a problem for bio-based adhesives, especially under wet conditions, but some resins have been recently designed to have a longer adhesive working life and better performance under high moisture conditions (Pizzi and Mittal, 2003).  There has been an increased interest in these "green" adhesives because their production is based on renewable plant materials.  However, resins produced with bio-based adhesives for use in CWPs are generally combined with formaldehyde-based resins and therefore still release some formaldehyde.

This report discusses resins derived from tannins, soy protein and CNSL, as they have been identified as alternatives to UF resins in the manufacture of CWPs.
 -- Tannin-containing resins
Tannin adhesives are natural resins that are mainly phenolic in nature and can be used in the production of CWPs (CalEPA, 2007; EPA, 2011b).  Tannins can also be used as wood additives (EPA, 2011b).  Tannin-containing resins are similar to PF resins, with tannins substituting for phenol.  These resins have lower formaldehyde emissions than UF resins since less formaldehyde is used in the initial tannin-formaldehyde reaction (Pizzi and Mittal, 2003).   However, tannin-containing resins are more expensive to produce.  In general, tannins have low toxicity (ECB, 2000a); therefore, there is a low concern for health effects in workers handling tannin extracts during the manufacture of tannin-bonded CWPs.

Methanol can be used in the production of CWPs containing tannin-based adhesives.  Methanol is added to tannin formulations to achieve a slower curing process and lengthen a product's shelf life.  Residual methanol is expected to be consumed during wood processing due to its high volatility (EPA, 2011b).  Although methanol is volatile, exposure will be negligible for commercial/consumer use and downstream product manufacturing processes.  Dermal exposure is also expected to be negligible during commercial/consumer use and product manufacturing, although it is possible during CWP and resin manufacturing (EPA, 2011c; Table 6).

Table 6.  Methanol exposure in the life cycle of tannin-bonded CWPs

                         Chemical substance of Concern
                               Life Cycle Stage

                     Tannin-containing resin manufacturing
                               CWP manufacturing
                       Downstream product manufacturing
                          Commercial and Consumer Use

                                   Methanol
                 Inhalation and dermal exposures are expected.
                 Inhalation and dermal exposures are expected.
        Inhalation and dermal exposures are expected to be negligible.
       Inhalation and dermal exposures are expected to be negligible.
            Note:  The use of CWPs in office and residential building is an example of commercial/consumer use.

As in UF resins that use methanol in UF manufacturing, the application of methanol in the manufacturing of tannin adhesives and tannin-bonded CWPs is not expected to produce adverse health effects in individuals coming into contact with tannin-bonded CWPs during downstream stages of the life cycle.  However, methanol used in the manufacturing of tannin adhesives and tannin-bonded CWPs does constitute an occupational hazard concern.   Occupational exposures to methanol may produce eye, skin and nasal irritation (OECD, 2004a; CalEPA, 2000; HSDB, 2011).  Similarly, there is evidence for numerous toxic effects including neurotoxicity, hepatic and renal effects, immunotoxicity, ocular toxicity, developmental toxicity and carcinogenicity (NAC, 2005; CalEPA, 2000; OECD, 2004a; HSDB, 2011).  As with UF resins, health effects may occur in workers repeatedly exposed to methanol during the manufacturing of tannin adhesives and tannin-bonded CWPs, especially in the absence of PPE.
 -- Polyamide epichlorohydrin (PAE)/soy resins
PureBond is a formaldehyde-free, soy-based adhesive sold by Columbia Forest Products used in the manufacture of HWPW.  The adhesive is produced by coupling polyamide-epichlorohydrin (PAE) pre-polymer with soy protein obtained from soy flour (EPA, 2011b).

Compared to the hazards of formaldehyde, soy protein has low toxicity properties.
However, humans may exhibit allergic reactions, including asthma, when breathing soy flour or soybean dust.  Similarly, skin exposure to soy flour or dust may result in dermal allergies (Gomez-Olles et al., 2007).

Epichlorohydrin is an intermediate chemical used in the manufacture of PAE (EPA, 2011b).   Epichlorohydrin is expected to be fully consumed in the chemical reaction making PAE; therefore, it is assumed that occupational exposures to epichlorohydrin will be negligible during all downstream processes after PAE resin production including the formulation of PureBond, the use of PureBond in HWPW manufacturing, and the subsequent downstream and commercial use of the products (EPA, 2011c) (Table 7).  Consequently, these downstream stages of the life cycle do not constitute a hazard concern for humans.

However, epichlorohydrin could be a serious inhalation and dermal health hazard to individuals working in the manufacture of PAE (e.g., unloading of the epichlorohydrin into the reactor; reaction sampling) in the absence of good industrial hygiene practices (e.g., PPE) (EPA, 2011c) (Table 7).  Epichlorohydrin (CAS RN:  106-89-8) is highly toxic to humans by inhalation and skin absorption (Vincoli, 1997).  Inhalation exposure results in moderate to severe irritation to the eyes (burns can lead to permanent damage to vision), nose, throat and respiratory tract (EPA, 2009a; OECD, 2006).  This chemical is a known sensitizer via inhalation and dermal absorption (may produce eczema or dermatitis) (OECD, 2006; Vincoli, 1997).  Repeated-dose inhalation may result in kidney effects and changes in nasal turbinates and a range of other symptoms, including headache, nausea, vomiting, abdominal discomfort and pain in the liver region, breathing difficulties, cyanosis, coughing, and chemical pneuomonitis or pulmonary edema (IARC, 1999b; EPA, 2009a; OECD, 2006; Vincoli, 1997).  High concentrations may cause depression and injury to the central nervous system (i.e., tremors; somnolence; ataxia), potentially leading to death (Vincoli, 1997).  There is high concern for reproductive toxicity and the chemical is also a suspected teratogen (Vincoli, 1997).  Epichlorohydrin is mutagenic and is carcinogenic in test animals via the inhalation route.  EPA has classified epichlorohydrin as a probable human carcinogen (EPA, 2009a).

Table 7. Epichlorohydrin exposure in the life cycle of PAE/soy-bonded CWPs

                         Chemical substance of Concern
                               Life Cycle Stage

                          PAE/soy resin manufacturing
                               CWP manufacturing
                       Downstream product manufacturing
                          Commercial and Consumer Use

                                Epichlorohydrin
                 Inhalation and dermal exposures are expected.
        Inhalation and dermal exposures are expected to be negligible.
        Inhalation and dermal exposures are expected to be negligible.
       Inhalation and dermal exposures are expected to be negligible.
         Note:  The use of CWPs in office and residential building is an example of commercial/consumer use.
 -- Cashew nut shell liquid (CNSL)-based resins
Cashew nut shell liquid (CNSL) is a mixture of phenolic-based compounds derived from the cashew nut.  It contains approximately 70% anacardic acid, 18% cardol, 5% cardanol and 7% other phenols and less polar substances (HPV, 2006a; HPV, 2006b).  CNSL is used in the manufacture of natural, sustainable adhesives.  However, as with tannin-containing resins,
CNSL resins are often combined with formaldehyde-based resins for use in CWPs.  Nonetheless, they are considered to be better alternatives to UF resins due to lower formaldehyde emissions (Kim, 2010).

CNSL is less likely than UF to present a health hazard to the general population during commercial/consumer use due to negligible exposure to CNSL and formaldehyde at this life cycle stage. CNSL resin is also less likely than UF resin to present a health hazard to workers during downstream CWP manufacturing processes.

Dermal exposure to CNSL is expected to be low during resin and CWP manufacturing and diminishes with the use of appropriate PPE.  Inhalation exposures are not expected due to its low vapor pressure.  CNSL is a strong skin sensitizer in animals and humans, as well as a severe eye and skin irritant (NICNAS, 1996; HPV, 2006a; HPV, 2006b; ECB, 2000c; EPA, 2009b).  CNSL is not associated with the vast array of serious adverse effects that have been reported for formaldehyde (i.e., lung irritation; neurotoxicity; possible reproductive effects; cancer); therefore the hazard concern level for CNSL is low.
Melamine-based resins
Melamine formaldehyde (MF) resins are thermosetting adhesives made from melamine and formaldehyde by polymerization.  These resins have a much higher resistance to water attack when compared to UF resins, but they are more expensive to make because of the high cost of the melamine.  Because MF resins are expensive, urea is generally added to create melamine-urea-formaldehyde (MUF) resins, which are less expensive than MF resins but still retain acceptable water resistance (Pizzi and Mittal, 2003; Frihart, 2005).

Melamine (CAS RN:  108-78-1) has low inhalation and dermal toxicity (IARC, 1999c; OECD, 2002b).  One advantage of CWPs made out of melamine-based resins (e.g., MF, MUF) is the reduced amount of formaldehyde that is emitted from the product when compared to UF-bonded CWPs; therefore, low exposure to formaldehyde is expected during downstream life cycle stages (i.e., commercial/consumer use and during product manufacturing).  Exposures to melamine and urea are also minimal during the production of CWPs and subsequent life cycle stages.

Workers making MF and MUF resins are potentially exposed to melamine, urea and formaldehyde (e.g., while mixing the chemicals) (EPA, 2011c) especially in the absence of good industrial hygiene practices (e.g., PPE).  Melamine is not expected to be an occupational irritant and dermal sensitizer and urea has low toxicity.  However, hazard concerns for formaldehyde are present during the manufacture of MF and MUF resins as well as MF- and MUF-bonded CWPs (e.g., application of the resin; press operations) where exposures to formaldehyde vapors are possible.  Exposure to formaldehyde vapors is associated with various adverse health effects, including cancer, in workers.
Scavengers and additives
Various chemicals are used to minimize formaldehyde release from formaldehyde-based resins.
Formaldehyde scavengers can be added to resins or directly to wood panels.  It is important to note that the action of scavengers may be reduced in the finished CWPs over time such that formaldehyde exposures may increase if the product is subjected to heat and humidity (Frihart et al., 2010).  Additives are sometimes added to resins or panels to enhance desirable properties (e.g., panel strength; water and mold protection) (Frihart, 2005).  Scavengers and additives that may be added to the resin technologies discussed in this report are urea, ammonia, phenol, tannins, soy protein, melamine, hexamine, sodium sulfate, sodium chloride, triacetin, tris(hydroxymethyl) nitromethane and chromium compounds (EPA, 2011a).  It is expected that these scavengers and additives react with components of the resin and/or wood panel such that chemical releases are likely to be minimal after production of the bonded panels. Therefore, exposure to these chemicals is not expected during commercial/consumer use and downstream product manufacturing.

Dermal and inhalation exposures in the workplace are likely during resin manufacturing and production of CWPs.  While most of these scavengers and additives have low toxicity (e.g., urea, melamine, hexamine, sodium chloride, sodium sulfate, soy protein, tannins, triacetin [glycerol triacetate] and tris [hydroxymethyl] nitromethane), there is a concern for occupational hazards to ammonia, phenol and chromium (III) salts.

Wood-based panels can be treated in special chambers with a nitrogen-containing formaldehyde scavenger, such as ammonia (CAS RN:  7664-41-7).  Ammonia can cause severe irritation and burning to the skin, eyes, oral cavity and respiratory tract (particularly mucous surfaces) immediately upon contact due to the rapid conversion of ammonia to ammonium hydroxide, which is very caustic.  Inhalation at high concentrations can cause pulmonary edema and reduced pulmonary function (ATSDR, 2004; NRC, 2008b; OECD, 2007; ECB, 2000d).

However, ammonia exposures are not expected to be significant during commercial/consumer use and downstream product manufacture.  Although nitrogen-based scavenger additives (e.g., ammonia) with low molecular weight have high volatility in their neat form and may have the potential to diffuse from the wood matrix in the final product, once the additives react with formaldehyde, as intended, the corresponding adducts are likely to bind irreversibly to the wood chemical moieties. Therefore, exposures of residual ammonia are expected to be negligible for these life cycle stages (EPA, 2010b; EPA, 2011c).

Ammonia does constitute an occupational hazard due to its corrosivity and irritant properties.  Because the CWPs are usually sprayed with ammonia in a closed system, workers are unlikely to be exposed to high concentrations of ammonia gas via inhalation.  However, some ammonia may remain in the treated panels and, due to its high volatility, workers may be exposed by inhalation.  Dermal exposure is unlikely to be a significant exposure route.  In the absence of a closed system and PPE, inhalation exposure to ammonia is expected in the workplace.

Chromium (III) salts (e.g., chromium nitrate) are used as additives in PVA resins to improve water resistance.  Exposures are not expected during commercial/consumer use and downstream manufacturing.  However, Cr (III) ions are present in treated panels and have the theoretical ability to leach out.  While there is no evidence that such leaching or migration occurs,  if the Cr (III) salt were to leach out, it could potentially convert to the Cr (VI) oxidation state (hexavalent chromium) (EPA, 2011b; EPA, 2011c).  Under this unlikely scenario, hexavalent chromium salts would constitute a prime health hazard.  EPA has classified chromium (VI) as a known human carcinogen by the inhalation route (EPA, 1998b).

Chromium (III) nitrate solution is not expected to be volatile.  Therefore, only dermal exposures are likely during resin and CWP manufacturing.  Chromium allergic dermatitis is the major immunological effect of chromium (III) and is typically elicited by dermal contact in sensitized individuals; however, initial sensitization may result from inhalation, oral or dermal exposure or from a combination of these exposure routes (Langård, 2001).

Phenol can also be included in the category of scavengers and additives.  Once reacted, phenol is not expected to be released during commercial/consumer use and downstream product manufacturing.  However, phenol constitutes an occupational hazard due to its corrosive properties as well as its adverse effects in the respiratory tract (IPCS, 2001; OECD, 2004b).  GI effects and liver toxicity have also been reported in chronically exposed humans (ATSDR, 2008).   There is a concern for worker inhalation and dermal exposures to phenol when used as an additive to CWPs at the upstream stages of the life cycle (i.e., resin and CWP manufacturing).

Conclusions
UF resins are one of the most common adhesives used in the CWP industry.  These adhesives have good bonding properties and are inexpensive to manufacture, but they are a source of formaldehyde emissions.  CWPs made with UF resins typically release formaldehyde during the life of the product, but the rate of release is highest right after CWPs are manufactured and decreases rapidly after the first few months, reaching background levels in a few years.

Formaldehyde constitutes a human health hazard for workers manufacturing UF resins and CWPs, as well as for office workers and general population that spend most of their time in office buildings or residential units containing UF-bonded CWPs.  Sensory irritation is the most frequently reported health symptom and it usually disappears once the person is removed from the source of exposure.  Individuals with respiratory problems (e.g., asthma, respiratory allergies) are likely to be more sensitive to formaldehyde and their symptoms may worsen during exposure.  Formaldehyde is a respiratory carcinogen and may also cause neurological and reproductive effects.

Formaldehyde's serious adverse effects in humans have contributed to the existing efforts to reduce or eliminate formaldehyde emissions from CWPs, including the development of new alternative resin technologies, which were discussed in this report.  The alternative resins evaluated in this report release either no formaldehyde or lower levels of formaldehyde than UF resins as a result of reformulating the resin polymer, scavenging excess formaldehyde during polymer production with various chemicals or a combination of both.

Reductions in formaldehyde emissions translate into reduced hazards for workers and the general population using CWPs that have been bonded with alternative resins, especially during the late stages of the product life cycle (e.g., downstream product manufacturing and commercial/consumer use).

Health concerns exist for workers involved in the initial stages of the life cycle where the production of polymers (resin) and the manufacturing of the bonded panels take place.  Formaldehyde, phenol, MDI, VAM, methanol, epichlorohydrin and ammonia are all resin components of concern.  Heating of products containing resins increases the potential for worker exposures because it raises the vapor pressure of chemicals during hot pressing operations. In addition, many hot pressing methods cause other chemicals to be entrained in the steam from the presses.  Health impacts from these chemical substances are reduced when feasible engineering and work practice controls (e.g., PPE) are available at the workplace.

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[Federal Register: November 22, 2005 (Volume 70, Number 224)]
[Notices]
[Page 70604-70605]
[DOCID:fr22no05-60]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. RP06-88-000]

Southern Natural Gas Company; Notice of Request for Waiver

November 15, 2005.
    Take notice that on November 10, 2005, Southern Natural Gas Company
(Southern) tendered for filing request for waiver with the Commission
for authorization to waive the requirements of section 6.3 of the
general terms and conditions of its tariff to allow shippers with firm
rights at receipt points that are out of service as a result of the
damage caused by Hurricanes Rita and Katrina to request a temporary
shift to a receipt point on a firm basis where capacity is available up
to their maximum daily receipt quantity. Southern states that such
receipt point shifts will be for a temporary period of the earlier of:
(i) The first of the month after the date the existing firm receipt
point is operational and Southern is able to gas accept nominations; or
(ii) through June 30, 2006. Southern further states that the rights to
the existing firm receipt points will automatically revert back at the
end of the temporary period.
    Southern states that it will hold an open season specifically for
such temporary receipt point shifts and will award the receipt point
shifts according to section 2.1(b) of the general terms and conditions
of its tariff.
    Any person desiring to intervene or to protest this filing must
file in accordance with Rules 211 and 214 of the Commission's Rules of
Practice and Procedure (18 CFR 385.211 and 385.214). Protests will be
considered by the Commission in determining the appropriate action to
be taken, but will

not serve to make protestants parties to the proceeding. Any person
wishing to become a party must file a notice of intervention or motion
to intervene, as appropriate. Such notices, motions, or protests must
be filed on or before the date as indicated below. Anyone filing an
intervention or protest must serve a copy of that document on the
Applicant. Anyone filing an intervention or protest on or before the
intervention or protest date need not serve motions to intervene or
protests on persons other than the Applicant.
    The Commission encourages electronic submission of protests and
interventions in lieu of paper using the ``eFiling'' link at http://www.ferc.gov.
 Persons unable to file electronically should submit an

original and 14 copies of the protest or intervention to the Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426.
    This filing is accessible on-line at http://www.ferc.gov, using the

``eLibrary'' link and is available for review in the Commission's
Public Reference Room in Washington, DC. There is an ``eSubscription''
link on the Web site that enables subscribers to receive email
notification when a document is added to a subscribed docket(s). For
assistance with any FERC Online service, please e-mail
<EMAIL_ADDRESS>or call<PHONE_NUMBER> (toll free). For

TTY, call<PHONE_NUMBER>.
    Comment Date: 5 p.m. eastern time November 22, 2005.

Magalie R. Salas,
Secretary.
 [FR Doc. E5-6436 Filed 11-21-05; 8:45 am]

BILLING CODE 6717-01-P


[Federal Register Volume 76, Number 44 (Monday, March 7, 2011)]
[Notices]
[Pages 12386-12388]
[FR Doc No: 2011-5060]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63996; File No. SR-C2-2011-007]

Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to
Codify a Fee Schedule for the Sale by Market Data Express, LLC, of a
BBO Data Feed for C2 Listed Options

March 1, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on February 17, 2011, C2 Options Exchange, Incorporated (``C2'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

    This proposal submitted by C2 Options Exchange, Incorporated
(``C2'' or ``Exchange'') is to codify a fee schedule for the sale by
Market Data Express, LLC (``MDX''), an affiliate of C2, of a data
product that includes C2 best bid and offer and trade data and certain
related market data. The text of the proposed rule change is available
on the Exchange's website. (http://www.cboe.org/legal), at the
Exchange's Office of the Secretary and at the Commission.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, C2 included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. C2 has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to establish fees that
MDX will charge for the sale of certain market data with respect to the
trading of options on C2's market.
    C2 currently collects and processes market data with respect to
options quotes and orders and the prices of trades that are executed on
the Exchange. This market data includes the ``best bid and offer,'' or
``BBO'', consisting of all outstanding quotes and standing orders at
the best available price level on each side of the market, with
aggregate size (``BBO data,'' sometimes referred to as ``top of book
data''). Data with respect to executed trades is referred to as ``last
sale'' data. C2 formats its BBO data and last sale data according to
Options Price Reporting Authority (``OPRA'') specifications and sends
the data to OPRA for redistribution to the public.
    MDX provides to ``Customers'' \3\ a real-time, low latency data
feed that includes the C2 BBO data and last sale data. (This data feed
is sometimes referred to in this filing as the ``BBO Data Feed''). The
BBO and last sale data contained in the BBO Data Feed is identical to
the data that C2 sends to OPRA.\4\ In addition, the BBO Data Feed
includes certain data that is not included in the data sent to OPRA,
namely, totals of customer versus non-customer contracts at the BBO,
All-or-None contingency orders priced better than or equal to the BBO,
and BBO data and last sale data for complex strategies (e.g., spreads,
straddles, buy-writes, etc.). The purpose of this proposed rule change
is to establish the fees MDX will charge for the sale of the BBO Data
Feed.
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    \3\ A ``Customer'' is any entity that receives the BBO Data Feed
directly from MDX's system and then distributes it either internally
or externally to Subscribers. A ``Subscriber'' is a person (other
than an employee of a Customer) that receives the BBO Data Feed from
a Customer for its own internal use.
    \4\ The Exchange notes that MDX makes available to Customers the
BBO data and last sale data that is included in the BBO Data Feed no
earlier than the time at which the Exchange sends that data to OPRA.
The Exchange also notes that it also makes the BBO data and last
sale data that is included in the BBO Data Feed available directly
to its Trading Permit Holders, and permits them to redistribute the
data to their customers.
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    MDX would charge Customers a ``direct connect fee'' of $1,000 per
connection per month. MDX would also charge Customers a ``per user
fee'' of $25 per month per ``Authorized User'' or ``Device'' for
receipt of the BBO Data Feed by Subscribers. An ``Authorized User'' is
defined as an individual user (an individual human being) who is
uniquely identified (by user ID and confidential password or other
unambiguous method reasonably acceptable to MDX) and authorized by a
Customer to access the BBO Data Feed supplied by the Customer. A
``Device'' is defined as any computer, workstation or other item of
equipment, fixed or portable, that receives, accesses and/or displays
data in visual, audible or other form. Either a C2 Trading Permit
Holder or a non-C2 Trading Permit Holder may be a Customer. All
Customers would be assessed the same fees.
    The proposed fees would be implemented on March 1, 2011.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with the requirements of Section 6(b) of the Securities Exchange Act of
1934 (``Act'') \5\ in general, and, in particular, with Section 6(b)(4)
of the Act \6\ in that it provides for the equitable allocation of
reasonable dues, fees and other charges among C2 Trading Permit Holders
and other persons using its facilities, and with Section 6(b)(5) \7\ of

the Act in that there will be no unfair discrimination between
customers, issuers, brokers, or dealers in the distribution of the
data. In addition, the Exchange believes that the proposed rule change
is consistent with the requirements of Section 6(b)(8) \8\ of the Act
in that it does not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act. The fees charged
would be the same for all market participants, and therefore do not
unreasonably discriminate among market participants.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78f(b)(8).
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    The Exchange believes that the proposed market data fees are
consistent with the requirements of the Act for several reasons. First,
they compare favorably to fees that other markets charge for similar
products. The proposed direct connect fee of $1,000 per connection per
month and per user fee of $25 per month compares favorably to the fees
NASDAQ OMX PHLX and ISE charge for similar market data products. NASDAQ
OMX PHLX charges Internal Distributors a monthly fee of $4,000 per
organization, External Distributors a monthly fee of $5,000 per
organization and monthly subscriber fees of $20 per Professional
Subscriber and $1 per Non-Professional Subscriber for its ``TOPO Plus
Orders'' data feed, which like the BBO Data Feed includes top-of-book
data (including orders, quotes and trades) and other market data.\9\
ISE charges distributors of its ISE Depth of Market Feed a monthly fee
of $5,000 plus $50 per month per controlled device for Professionals
and $5 per month per controlled device for Non-Professionals.\10\
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    \9\ See, NASDAQ OMX PHLX LLC Fee Schedule, Section X,
Proprietary Data Feed Fees.
    \10\ See, ISE Schedule of Fees, Market Data Fees. The Exchange
believes that ISE does not market a separate data product that
includes only its top of book prices, but top of book prices are an
important element of the ISE Depth of Market Feed.
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    The Exchange also believes that the proposed fees for the BBO Data
Feed are consistent with the requirements of the Act because
competition provides an effective constraint on the market data fees
that the Exchange, through MDX, has the ability and the incentive to
charge. C2 has a compelling need to attract order flow from market
participants in order to maintain its share of trading volume. This
compelling need to attract order flow imposes significant pressure on
C2 to act reasonably in setting its fees for market data, particularly
given that the market participants that will pay such fees often will
be the same market participants from whom C2 must attract order flow.
These market participants include broker-dealers that control the
handling of a large volume of customer and proprietary order flow.
Given the portability of order flow from one exchange to another, any
exchange that sought to charge unreasonably high data fees would risk
alienating many of the same customers on whose orders it depends for
competitive survival. C2 currently competes with eight options
exchanges (including C2's affiliate, Chicago Board Options Exchange)
for order flow.\11\
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    \11\ The Commission has previously made a finding that the
options industry is subject to significant competitive forces. See
e.g., Securities Exchange Act Release No. 59949 (May 20, 2009), 74
FR 25593 (May 28, 2009) (SR-ISE-2009-97) [sic] (order approving
ISE's proposal to establish fees for a real-time depth of market
data offering).
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    C2 is constrained in pricing the BBO Data Feed by the availability
to market participants of alternatives to purchasing the BBO Data Feed.
C2 must consider the extent to which market participants would choose
one or more alternatives instead of purchasing the exchange's data. For
example, the BBO data and last sale data available in the BBO Data Feed
is included in the OPRA data feed. The OPRA data is widely distributed
and relatively inexpensive, thus constraining C2's ability to price the
BBO Data Feed. In this respect, the OPRA data feed, which includes the
exchange's transaction information, is a significant alternative to the
BBO Data Feed product.
    Further, other options exchanges can and have produced their own
top-of-book products, and thus are sources of potential competition for
MDX. As noted above, NASDAQ OMX PHLX and ISE offer market data products
that compete with the BBO Data Feed. In addition, the Exchange believes
other options exchanges may currently offer top-of-book market data
products for a fee or for free.
    For the reasons cited above, the Exchange believes that the BBO
Data Feed offering, including the proposed fees, is equitable, fair,
reasonable and not unreasonably discriminatory. In addition, the
Exchange believes that no substantial countervailing basis exists to
support a finding that the proposed terms and fees for the BBO Data
Feed fails to meet the requirements of the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    C2 does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of purposes of the Act. The Exchange believes that the BBO
Data Feed offered by MDX will help attract new users and new order flow
to the Exchange, thereby improving the Exchange's ability to compete in
the market for options order flow and executions.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \12\ and subparagraph (f)(2) of Rule 19b-4 \13\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-C2-2011-007 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-C2-2011-007. This file
number should be included on the subject line if e-mail is used.
    To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml).

Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room on official business days
between the hours of 10 a.m. and 3 p.m. Copies of such filing also will
be available for inspection and copying at the principal offices of the
Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-C2-
2011-007, and should be submitted on or before March 28, 2011.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-5060 Filed 3-4-11; 8:45 am]
BILLING CODE 8011-01-P