The EPA had neglected its responsibility to update the standards for new devices for nearly three decades when it finally adopted the current standards in 2015. That long delay increased the need to provide the best systems of emission reduction as soon as possible, not five or seven years down the road. Other industries that market to consumers manage with much shorter time to compliance. For example, EPA adopted the Tier 3 standards for the motor vehicle industry on March 3, 2014 and directed the industry to comply by model year 2017. That meant that the vehicles for sale in the fall of 2016 had to meet the standards just over two years after EPA adopted the regulation, a timetable the motor vehicle industry could meet. The motor vehicle industry is every bit as complex with as many models as the residential wood-burning device market, each requiring certification and approval. Yet the EPA proposal would provide the wood device industry with two additional years on top of the five it already had to continue to manufacture and sell higher-polluting devices.
      Adding two more years for compliance with an already-in-place rule is unjustifiable. Building in a two-year delay that allows continued failure to comply and increases emissions undermines EPA's argument that this does not require a new BSER review.

An alliance of state air agencies (0045 pp.1-4) concluded that a sell-through would not meet the BSER and therefore the anticipated public health benefits of applying BSER, which is the basis for the current NSPS, would not occur as intended. The foregone public health benefits from increased adverse health effects of PM2.5 are estimated in the range of $94 to $210 million, whereas the benefits of this proposal which total $8.3 million accrue only to the manufacturers and retailers. Additionally, these foregone health benefits are only calculated for 2019 through 2022, but appliances may be in use for 20 to 30 years, indicating much greater foregone public health benefits in reality.

A commenter (0056, p.2) more generally contended that "The Step 1 emissions standards in the 2015 rulemaking represented the status quo, and only with the Step 2 emissions standards scheduled to take effect in May 2020 do we see what represents the "best system of emission reduction" required by the CAA. The 2020 standards are long overdue and no further delay in fully implementing these standards should be granted."

Response:
The EPA has considered these comments in opposition to the proposed sell-through periods following the May 2020 Step 2 deadline. For the reasons explained in the final rule preamble and in this response to comment document, the EPA has decided not to promulgate any sell-through periods for the Step 2 standards and therefore is not providing detailed written responses to these specific comments here.

2.3.2 Comment: The sell-through is part of the already established five-year lead time of BSER
Contrary to assertions in Section 2.3.1, several commenters (0045, 0050, 0134, 0063) contended that the two-year sell-through has already been established as BSER because it allows manufacturers the full five-year research and development phase.

For example, the industry trade group (0063 pp.3-4, 8-11, 16, along with public hearing testimony, 0142 p.45) asserted that the two-year sell-through period is required in order to provide manufacturers the full five-year lead time, that was already determined by EPA in the 2015 NSPS to be an integral component of BSER  -
      In the 2015 Rule, EPA's best system of emission reduction ("BSER") determinations for the Step 2 standards -- for both room heaters and central heaters -- were based on the conclusion that five years was an appropriate amount of lead time for manufacturers of all types of covered appliances to develop a full range of Step 2-compliant models, access the capital needed to develop those models, and complete the certification process. EPA further found that, given the nature of this industry, manufacturers simply could not afford to suspend production and sales of Step 1 products during the time they were trying to design, test, evaluate, and certify Step 2 models, which is a concern that was also relevant back in 1988. Thus, EPA concluded that manufacturers needed a full five years to bring product lines into compliance with the Step 2 standards.
      EPA, however, has recently come to realize that manufacturers of both central and room heaters are now having difficulty accessing the necessary capital during the final two years of the five-year lead time period because many retailers have either scaled back on or eliminated orders of Step 1 products. This has effectively reduced or cut off revenue that manufacturers need to develop, test, and certify Step 2-compliant products. A two-year sell-through period would send a signal to retailers that they can continue purchasing Step 1 products for the entirety of the five-year compliance lead time (i.e., until May 2020) without having to fear that they will be stranded with unsellable Step 1 inventory on May 15, 2020. Rather, they would be able to continue selling previously manufactured Step 1 appliances for another two years. ...

      EPA should revise Subpart QQQQ to provide for a two-year sell-through period (until
May 15, 2022) as it has proposed to do. First, without sell-through, most manufacturers will not have the benefit of the five-year lead time to develop multiple lines of Step 2-compliant products. That five-year period was an integral component of EPA's BSER determinations in the 2015 Rule. Thus, EPA has rightly proposed to revise that Rule to add a two-year sell-through period, which in effect, would help ensure that manufacturers will indeed have the full five years. ...[This] justification [] for including sell-through provisions in the Step 2 standards appl[ies] to Subpart AAA as well.
      Full Five-Year Compliance Lead Times are Critical Components of the BSER
Determinations Underlying the Step 2 Standards in the 2015 Rule.
      EPA has long recognized that the determination of what constitutes BSER under CAA
Section 111 requires the Agency to balance a number of factors, including environmental impacts, costs, and the required lead time for the regulated industry to come into compliance with new emission limits. When EPA originally proposed to promulgate Subpart AAA in 1987, EPA emphasized that BSER only applies to new sources that can meet the standards with a reasonable lead time:
            To be [BSER], a technology must be available at a reasonable cost. For
wood heaters, an important element of the cost of a technology is the
cost of delaying production while models with that technology are
designed and certified. Thus, [BSER] applies, and the standards apply,
only to those classes of new sources that can meet the standards with a
reasonable lead time[.]
      When EPA proposed the current standards for residential wood heaters in 2014, it echoed these statements by reiterating that "an element of the BSER determination includes reasonable lead time for R&D to develop and certify cleaner units." The 2014 proposal went on to state that "important elements in determining [] BSER include the significant costs and environmental impacts of delaying production while models with those systems are being designed, field evaluated, and certified." Taking the relevant factors into consideration, EPA determined that it had to provide a full five years between the Step 1 and Step 2 compliance deadlines to "allow manufacturers a reasonable time to develop complying models, access the necessary capital to develop them, and complete the certification process."
      In responding to comments on the 2014 proposal, EPA again emphasized the need for sufficient amounts of lead time for manufacturers of all residential wood heating appliances, whether they are subject to regulation under Subpart AAA or Subpart QQQQ. Because Subparts AAA and QQQQ regulate consumer products made for residential sales, as compared to large industrial process source categories, EPA explained that "if production and sales were to be suspended while designing, testing, field evaluating and certifying cleaner models, the cost of potential lost revenues could be significant, which necessitates reasonable lead times for compliance with emission limitations. This was a concern in 1988 and is still true today." Among other things, EPA highlighted the need "to avoid unreasonable economic impacts on those manufacturers (mostly small businesses) who need additional time to develop a full range of cleaner models." It is not enough to give just enough lead time for companies to certify a single product to more stringent standards. In this industry, few companies (if any) can survive with just a single product. Rather, they must give consumers several options to choose from that
span the range of heating capacities, appearances, and prices, and that use different technologies (catalytic versus non-catalytic) and fuel types (stick wood versus pellet).
      Elsewhere, in the Response to Comments document that accompanied the 2015 Rule, EPA again stressed that it determined in the final rule that the 2020 standards, "although achievable, are technology-forcing for much of the industry" and that they "represent[] stronger emission levels achievable for all appliance types at reasonable cost, allowing appropriate lead times for manufacturers to redesign their model lines to accommodate the improved technology across multiple model lines and test, field evaluate, and certify new model lines."
      These and other statements, which EPA has reinforced in the current sell-through
proposal (at 61,578), reflect the Agency's appreciation of the uniqueness of this industry and the standards codified at Subparts AAA and QQQQ, as well as the importance of lead time. To summarize:
       Virtually all of the manufacturers subject to these regulations are small businesses
that simply cannot afford to put production and sales of older models on hold while
they strive to develop new products that must comply with a future, more stringent
standard. A steady stream of revenue from sales of Step 1 products is necessary for
most manufacturers to have the necessary capital to design, test, field evaluate, and
certify Step 2 products.
       Most manufacturers cannot operate in this industry by offering just one compliant
model for sale. Instead, they offer a range of products to try to address varying
consumer demands and price points, e.g., appearance and material, heat output,
overall dimensions, fuel type, etc. The five-year lead times in the 2015 Rule are
important to give manufacturers enough time to certify a full range of Step 2-
compliant products, not simply to get a single product across the finish line that they
may not have had any time to field evaluate.
       That some manufacturers back in 2015 appeared to have products capable of meeting the Step 2 emission limits did not give EPA a sufficient basis to conclude that the Step 2 limits were BSER back in 2015. EPA recognized that a significant percentage of woodstove and hydronic heater manufacturers still lacked products capable of meeting Step 2 and that no forced-air furnace manufacturers had any products that could meet Step 2. For most manufacturers, Step 2 limits were (and continue to be) technology-forcing, and it will take at least a full five years for them to achieve compliance with those limits across multiple model lines.
      In short, the five-year lead times between the Step 1 and Step 2 compliance deadlines in both Subparts AAA and QQQQ are integral components of EPA's BSER determinations in the 2015 rule. ...
      One final aspect of the 2015 Rule is worth mentioning: nothing in that rule or the supporting record suggested that the need to allow for sell-through would be any less important in 2020 than it was in 1988 and 2015. Again, EPA provided sell-through on two different occasions -- in 1988 and in 2015 -- because it plainly recognized that it needed to give retailers additional time to clear out non-compliant inventory after a new emission limit applies. 2020 is no different: retailers will still need some time to sell Step 1 products after the Step 2 deadline becomes applicable. At the time EPA finalized the 2015 Rule, it gave no indication that it expected that retailers would plan ahead to protect themselves against stranded inventory in 2020 by, for instance, reducing or eliminating Step 1 purchases in 2018 or 2019, well in advance of the Step 2 deadline. Had it done so, that would have called into question EPA's Step 2 BSER determinations, because an important component of those determinations was the assumption that manufacturers would have five years to bring a full range of Step 2-compliant products (or multiple model lines) to the market. Simply put, EPA assumed that five years of lead time actually meant five years of lead time. Now that EPA has evidence to the contrary, EPA must revise Subparts AAA and QQQQ to ensure that manufacturers actually have the benefit of a full five-year lead time to comply with Step 2. Providing two-year sell-through periods for all covered appliances would help to ensure that manufacturers have the amount of lead time that EPA assumed they would when it made its Step 2 BSER determinations.
Likewise, a manufacturer (0050 p.2) asserted that  -
      In the 2015 NSPS comments, the EPA stated that the 5 years between the effective date of the final rule and the Step 2 emission limits matches the window of time many manufacturers noted they would require to conduct R&D and testing to bring a new model to market (development time, testing, EPA certification and begin production). This was based on manufacturers reviewing the number of models and resources (people, time, cost), however, the EPA didn't consider a sell-through for when Step 2 goes into effect. Without a sell-through we would have needed all our products to be 2020 compliant prior to the 2018 burn season (which has come and gone). Therefore, the 2015 NSPS did not provide a 5-year R&D transition to Step 2, in reality it provided a 3-year R&D transition because the Rule did not consider the inventory levels (supply chain) and sell-through needed by manufacturers and dealers in such a seasonal dependent business model.
In a related comment, the U.S. Small Business Administration's Office of Advocacy (0134 pp.3-4) argued that the sell-through will better allow the goals of the 2015 NSPS to be realized, by providing the lead time necessary to bring compliant products to market  -

      The U.S. Small Business Administration's Office of Advocacy (Advocacy) ... supports the amendment to add a sell-through provision for new hydronic heaters and forced-air furnaces, but strongly encourages EPA to include new residential wood heaters as well. Further, Advocacy encourages EPA take additional measures to reduce the burden of the NSPS on small businesses in order to encourage a vibrant market in these products and encourage customers to replace their older dirtier heaters.... Small businesses represent most of the manufacturers of residential wood heaters, hydronic heaters and forced-air furnaces. These businesses have expressed concern about the economic impacts of the NSPS since before their promulgation, extending back to the SBREFA panel concluded in 2011. Small businesses and their representatives were highly critical of the 2014 proposed rule and have raised concerns to Advocacy in its Regional Regulatory Reform Roundtables.
      The primary goal of the NSPS is to reduce emissions from residential wood-burning appliances. Although these appliances have gotten cleaner through the years, most of the appliances in homes remain high emission and uncertified. Most of the emission benefits from the NSPS come from the change out of these older stoves for future cleaner-burning but more expensive options. However, "most of the households that use residential wood heat are lower income or lower middle-income households. Affordability and ease of operation are critical to these households before they change out to a cleaner burning  -  lower-emission - residential wood heater from the current, high emission, uncertified residential wood heaters that nearly 75% of them now use." Industry experience indicates that change-out subsidies can have a very large impact; the corollary is that increases in the price of replacement appliances significantly reduce sales. If the full effect of the NSPS is to reduce both the availability and affordability of wood-burning appliances, then the benefits of the NSPS will be stymied.
      A varied and competitive marketplace in certified appliances is necessary for the NSPS to be successful. But small businesses believe that the NSPS does not provide the time necessary to bring compliant products to market, let alone a full range of offering that consumers desire. In the 2015 Regulatory Impact Analysis, EPA projected a six-year research and development cycle to bring their products from Step 1 compliance to Step 2 compliance but provided only five years before only Step 2-certified products could be sold. And, because of reported delays in the EPA certification process, small businesses have had less than those five years to bring Step 2-certified products to market before their sales of Step 1-compliant products has been cut off.
      Small businesses have even less time because of the market structure. The market for residential wood-burning appliances is unpredictable, and the NSPS is serving to make it even more inhospitable for small businesses. As the Hearth, Patio and Barbecue Association (HPBA) wrote in their public comments on the 2014 proposed rule, the market has been extremely volatile, with no clear pattern of sales trends or customer preferences. Manufacturers and retailers have great difficulty predicting how many of what models to manufacture or purchase for sale each year. "For retailers this is a particularly vexing problem because they have not only to guess how many stoves to buy, but how many sales people, installers and services techs they will need to support their sales. Their profitability depends on keeping careful watch over inventory and overhead."
      This is playing out today, with retailers no longer purchasing Step 1-compliant stoves and purchasing only Step 2-certified stoves, over a year before the compliance date. Combined with delays in obtaining the necessary testing and in the EPA-mandated certification review, small manufacturers needed to have products ready almost two years before the 2020 compliance date. This has caused major hardship in all product categories. HPBA reports that its membership has fallen due to economic hardship in the industry.
      Hardship for small businesses will have negative consequences for the NSPS. Small businesses generally finance R&D with existing sales, so future offerings for Step 2-certified stoves, hydronic heaters and forced-air furnaces may be much more limited than the range of products offered in the past. Competition and innovation may be similarly limited. HBPA, which operates the largest trade show in this industry, reports that the market is significantly narrower this year than last and that prices are significantly higher in some segments of the market. Without a varied and competitive market in wood-burning appliances, the environmental benefits of the NSPS, gained through the change-out of older, dirtier and uncertified wood stoves, will be significantly lower than expected.
      Recommendations: Advocacy recommends that EPA take all reasonable steps to reduce the burden on small businesses that manufacture (or used to manufacture) appliances subject to the NSPS. EPA should consider whether it adequately accounted for the market characteristics when it established the compliance timetable for the NSPS, allowing small businesses enough time to develop robust lines of Step 2-certified stoves. For this reason, Advocacy strongly supports the proposal to provide a "sell-through" for hydronic heaters and forced-air furnaces and strongly supports extending a similar provision to wood heaters.
      Response:
The Agency has considered these comments in support of the proposed sell-through periods following the May 2020 Step 2 deadline. However, for the reasons explained in the final rule preamble and in this response to comment document, the EPA has decided not to promulgate any sell-through periods for the Step 2 standards.

In promulgating the 2015 NSPS, the EPA took a stepped compliance approach to implementing the emission limits for the rule. The Step 1 standard was intended to codify emission limits that were already being met or could be immediately achieved. For wood heaters, (40 CFR part 60, subpart AAA), the Step 1 limit was based on the Washington State standard that had been in effect since 1995, and had been met by most wood heater manufacturers. For hydronic heaters, the Step 1 emission limit was based on the 2010 Phase 2 Voluntary Hydronic Heater Program. Step 1 for forced-air furnaces was what the EPA concluded would be immediately achievable. The Step 1 standard went into effect in May 2015, and Step 2 becomes effective in May 2020 (see discussion at 80 FR 13676-13677). For the Step 1 standards, the EPA provided a "sell-through" period of seven and a half months, until December 2015, to allow retailers additional time after the effective date of the rule to sell the non-compliant wood heaters and hydronic heaters remaining in inventory (see 80 FR 13685). Specifically, the 2015 NSPS allowed non-compliant wood heaters and hydronic heaters manufactured before May 15, 2015, to be imported and/or sold at retail through December 31, 2015 (see 40 CFR 60.532(a) and 60.5474(a)(1)). The 2015 sell-through period was reasonable because retailers had only 60 days from the time that the 2015 final rule was published in March 2015 until the requirements that went into effect in May 2015.

For the Step 2 standards, the EPA did not provide a sell-through period following the May 2020 compliance date. The EPA concluded at the time that the five-year period leading up to the May 2020 Step 2 compliance date would provide manufacturers with sufficient lead time to develop, test, and certify Step 2-compliant wood heating devices. The EPA noted on page 99 of the 2015 RTC document that the five-year period from 2015 to 2020 "matches the window of time many manufacturers noted they would need to conduct research and development (R&D) and bring a new model to market." Likewise, on page 231 of the 2015 RTC, the EPA concluded that the Step 2 compliance date provides "appropriate lead times for manufacturers to redesign their model lines to accommodate the improved technology across multiple model lines and test, field evaluate, and certify new model lines." The EPA based this conclusion on information provided to the Agency by wood heating device manufacturers. Prior to the 2014 NSPS proposal, manufacturers indicated to the EPA that it can take anywhere from 8 to 18 months to develop a new wood heating device. Commenters (manufacturers) indicated similar timeframes in response to the 2018 NPRM, as provided in Sections 5.1.4, 5.2.4 and 5.3.6 of this RTC document, and also noted that it can take 9 to 12 months to obtain EPA certification. Thus, manufacturers have consistently indicated to the Agency that it can take anywhere from 1(1/2) to 2(1/2) years to bring a certified wood heating device to market.

Meanwhile, in the time before the Step 2-certified models are available for sale, the five-year period provided by the NSPS between the stepped standards allows manufacturers and retailers to continue making and selling Step 1-certified wood heating devices (see 80 FR 13676). The five-year period from 2015 to 2020 also provides retailers with sufficient time to manage their inventories of 2015-compliant units that cannot be sold after May 2020. As indicated in a report submitted by HPBA to the 2015 NSPS docket and re-submitted to the 2018 NPRM docket, "[t]he majority of retailers felt that they needed 12 to 24 months to sell moderate and slow selling inventory." Given that the majority of retailers have indicated that they can sell even slow selling inventory within 2 years, the 2(1/2) to 3(1/2) years remaining (after the 1(1/2) to 2(1/2) years manufacturers indicated they require to bring a certified device to market) in the five-year period between stepped standards provides sufficient time for retailers to manage their inventory and avoid stranded inventory. Also, we agree with the commenter above that we "did not explain how exactly these entities would plan ahead," because the Agency expects that the regulated entities are best equipped to make such business decisions for themselves.

Finally, as we noted in the Preamble, the record shows that some manufacturers have succeeded in developing Step 2 model lines but the record contains no examples supported by adequate evidence of manufacturers that have tried and failed to develop Step 2 model lines (e.g., notification from testing laboratories indicating suspended tests and the reason(s) why as required by the RWH NSPS in Sections 60.535(a)(2)(viii) and 60.5477(a)(2)(viii)). Thus, there is no support in the record showing that manufacturers could not develop Step 2 models in time to (1) have Step 2 models for sale as retailers reduced or discontinued their purchase of Step 1 models, and (2) allow for manufacturers and retailers to replace their inventories of Step 1 models with Step 2 models in advance of the May 2020 deadline. Moreover, the record shows that Step 2-compliant model lines have been available to retailers for a considerable amount of time. For example, there were wood heater, hydronic heater and forced-air furnace models that were Step 2-certified starting in 2017 and, as of March 20, 2018 (more than 2 years before the May 2020 compliance deadline), there were 78 wood heater model lines (44 pellet stoves and 34 wood stoves), nine hydronic heater model lines and one forced-air furnace model line certified to Step 2 (83 FR 61578). Further, some model lines have emissions significantly below the Step 2 standard, showing that it is possible not only to achieve the Step 2 standard but also that manufacturers can develop models that emit well below the Step 2 standard. Based on this record, the Agency has insufficient grounds to conclude that a sell-through period is needed and to change the established NSPS and allow a sell-through.

2.4	Supplemental Regulatory Impact Analysis (RIA) Comments
Section 2.4 includes comment excerpts and summaries that critique the Agency's supplemental RIA for multiple reasons, as presented in the following subsections. Most comments included herein are from state and local regulatory agencies, multi-jurisdictional organizations, state attorneys general, academia, and environmental, health and citizen organizations.

2.4.1 Comment: The truncated RIA cost-benefit analysis fails to evaluate all pollutant emissions and underestimates environmental and societal costs
Numerous commenters (0052, 0053, 0054/0200, 0056, 0057, 0065, 0066, 0068, 0071, 0075, 0137) asserted that, by EPA's own estimates in the supplemental RIA, the value of the foregone air quality benefits far exceeds the costs to industry of complying with the existing 2015 NSPS, and some furthermore argued that EPA grossly underestimated this exceedance.

For example, one commenter (0054/0200 pp.6-8) contended that -
      The RIA for the 2015 NSPS demonstrated that the public health benefits of this rule outweigh the costs to industry by more than 100 to 1. At an estimated cost of $281 for room heaters and $74 for central heating units per ton of PM reduced, this NSPS is among the most cost-effective control strategies promulgated for this pollutant.
      Similarly, by EPA's own estimates in the Supplemental RIA for this proposal, the value of foregone air quality benefits that would occur with EPA's proposed sell-through period far exceed the projected cost to industry for complying with the existing rule. According to EPA, the cost to industry over the period of 2020 to 2022 if the proposed amendments are not enacted would be $33.3 million (Scenario 2). Under its approach, EPA estimates cumulative foregone air pollution benefits of $350 to $780 million over the sell-through period under the primary modeling scenario (Scenario 2). The health benefits outweigh the compliance costs by about 11 to 23 times.
      Even EPA's latest estimates, however, grossly underestimate the foregone benefits to public health of the proposed sell-through. As EPA notes in the Supplemental RIA, the analytical approach it used omitted consideration of excess pollution beyond 2022 released by the non-Step 2 units sold during the sell-through period. As these higher polluting units can remain in service for 20 years or longer, this is a major omission.
      We request that the Agency explain why it elected to calculate the loss in emission benefits associated with the proposed amendments using a "truncated" sell-through period instead of evaluating excess emissions over the expected lifetime of the non-Step 2 compliant units sold under the proposed amendments. As noted above, even using its flawed methodology, EPA concludes the foregone environmental benefits greatly outweigh the cost to industry.
      A fuller accounting beyond the truncated period used by EPA would increase the already large benefits relative to compliance costs significantly. To properly account for the lost public health benefits of the proposed amendments to the rule, EPA must include consideration of emissions that will occur for the full lifetime of the non-Step 2 compliant units. Using the accepted practice of considering the full emission impacts over the useful lifetime of the source provides a more transparent and realistic accounting of the foregone health benefits (i.e., increased health costs) attributable to the proposed amendments.
      Table 1 shows the comparative cumulative industry costs and foregone public health benefits as calculated using EPA's analytical method under Scenarios 2 and 3 during the sell-through period (present value discounted to 2016, 3% discount rate) where we have extended the time period for the cumulative foregone public health benefits over an assumed 20-year wood heater useful life (2020-2039). We hold constant the foregone health benefits EPA estimated for the year 2022 across all remaining years of the 20-year device useful life. For the extended years, we apply a 3 percent discount rate in the same manner as EPA did to estimate cumulative benefits occurring only during the truncated sell-through period. By more appropriately accounting for excess PM2.5 emissions resulting from heaters sold during the sell-through period throughout their useful lives, we estimate foregone PM2.5 benefits of $1.9 billion to $4.4 billion under Scenario 2 (3% discount rate). Comparing these projected lifetime foregone benefits to the additional compliance costs EPA calculates that industry would face without the relief proposed in the NPRM ($33.3 million over 3 years) results in a foregone public health benefit to industry cost ratio from 57:1 to 132:1. Under the perhaps more likely Scenario 3, we project that foregone health benefits will outweigh industry costs by 52:1 under the low scenario and 118:1 under the high scenario.
      In Table 1, we also estimate the cumulative foregone public health benefits under Scenario 2 assuming EPA also includes wood stoves in addition to central heaters during the sell-through period. We use the same methodology in estimating the present value discounted to 2016 with a 3 percent discount rate over an assumed 20-year stove useful life. Annual PM2.5 excess emissions during 2020-2022 are taken from Table A-6, Scenario 2, in the EPA Supplemental RIA, and we use the same benefit per ton values of Table A-8 for the low (Krewski, 3%) and high (LePeule, 3%) end points. Foregone benefits increase when wood stoves are included under the Scenario 2 sell-through period, ranging from $2.6 billion to $6.1 billion. While not presented here, we would estimate even higher foregone benefits if wood stoves are included in Scenario 3.
      All results in Table 1 use EPA's basic underlying assumptions on both costs and benefits, other than EPA's truncated approach in calculating cumulative foregone benefits over a wood burning device's useful life. ... [In comment letter page 8, see Table 1. Comparative Cumulative Costs and Foregone Benefits of Proposed Sell-Through Provisions (3% Discount Rate / 2016$ in millions)*. In this table NESCAUM estimates the cumulative present value of the Industry Costs, Foregone Benefits (low and high estimates) and Ratio of Foregone Benefits:Cost (low and high ratios), using data provided in EPA's Supplemental RIA, but assuming a 20-year useful life. These are compared to EPA's Scenario 2 and 3 from the Supplemental RIA, which uses the sell-through period of 2020 to 2022] ...

      There are several associated environmental and economic benefits that are expected to accrue but are not monetized in the Supplemental RIA. Step 2 compliant devices will emit lower levels of volatile organic compounds, air toxics and carbon monoxide than the Step 1 units they replace. Further, the Step 2 units burn more efficiently, which will provide consumers with significant savings in fuel costs over the lifetime of the unit. Allowing the sale of non-Step 2 compliant units during the sell-through period as EPA proposes would result in a loss of these benefits over an assumed 20-year lifetime of these units. ...

Furthermore, regarding wood heaters regulated under Subpart AAA, this same commenter (0054/0200 pp.8-9) asserted that  -

      EPA's analysis of wood stoves only assessed the impact on the estimated 200,000 variable burn rate stoves sold during the two-year sell-through period. EPA failed to analyze or incorporate the emissions impact from 60,0000 single burn rate stoves and 200,000 pellet stoves. Consequently, EPA's analysis of subpart AAA only accounts for 45 percent of the market for these appliances. A full analysis of subpart AAA impacts must be completed with notice and comment to states before rule changes can be implemented.

Another commenter (0071 pp.4-5) referenced an analysis done by the above commenter (0054/0200) and stated that  -
      EPA has underestimated the cost to human health. ... Allowing the continued sale of non-compliant devices is unacceptable. Due to the long lives of these devices, they would continue to spew toxic pollution for decades. The result would be years of harm to human health from wood smoke pollution that could have been prevented. ...EPA begins to look at the impact of those in the Regulatory Impact Assessment (RIA) included with this proposal. In this RIA, EPA only examines the impact of the period from 2020 to 2022, offering to provide a complete assessment in the final rule. ... Looking beyond the 3 years in their assessment, NESCAUM also calculated the impacts across the estimated 20-year lifespan of these devices. Their findings estimated that the devices sold during these 3 years would add, over the next 20 years, the equivalent of the "total 2014 annual residential wood combustion emissions occurring collectively in the states of California, Colorado, Idaho, New York, Utah, West Virginia, and Wisconsin." As they note, "While the timescales differ, the comparison does provide a comparative sense of the magnitude of the excess emissions."
Likewise, another commenter (0057 pp.17-19) argued that  -
      U.S. EPA manipulates the timeframe of its analysis.
      The timeframe of the analysis, from 2019 through 2022, is transparently outcome-seeking. All cost savings from this proposal will occur during the 2019 through 2022 timeframe, while increased emissions will occur for many years beyond this timeframe. The Supplemental RIA acknowledges this: "Retailers will receive additional revenues from the sale of non-Step 2-compliant units, and foregone emissions reductions will occur not only during the sell through period, but over the life of the non-Step 2-compliant units." However, the estimated particulate emissions increases and associated monetized health impacts from these emissions increases are "truncated at the close of the sell through period," or 2022. The Supplemental RIA states, "We are presenting information on truncated emission reduction[s], instead of more typical annualized emission reduction estimates. For the final rule, the agency will provide annualized emission reductions estimates." (This statement regarding "emission reduction estimates" is, at best, misleading, as the proposal would result in increased emissions.)
      U.S. EPA currently admits that the lifespan of these heaters is approximately 20 years; in the 2015 rulemaking, the agency noted that "wood heaters in consumer homes emit for at least 20 years and often much longer." U.S. EPA acknowledges that emissions increases resulting from a sell-through would be sustained for many years beyond the heater's year of manufacture/purchase, but has chosen not to quantify these emissions. The costs associated with the health impacts of the proposal over the lifetime of the equipment could easily be calculated from the data presented in the Supplemental RIA. For example, the annual average monetized particulate-related health impacts are estimated to range from $94 million to $350 million per year in Scenario 2 and Scenario 3. These estimates could easily be carried out another 18 to 20 years to fully (and conservatively) represent the costs of this proposal to public health and welfare, but U.S. EPA has instead chosen to manipulate its data presentation to obscure the proposal's true costs. ...
      U.S. EPA fails to evaluate or monetize .. Emissions impacts
      The Supplemental RIA fails to provide any consideration, quantitative or qualitative, of the increased emissions of black carbon and hazardous air pollutants like formaldehyde, benzene, and dioxin resulting from the proposal. U.S. EPA also fails to monetize the impacts of increased volatile organic compound emissions, increased carbon monoxide emissions, increased nitrogen dioxide exposure, increased ozone exposure, impaired visibility, or impacts on ecosystems.
      U.S. EPA claims, "We are unable to estimate the percentage of premature mortality associated with this specific action's forgone emission reductions at each PM2.5 level." This assertion is belied by U.S. EPA's documented communications with OMB, in which the agency acknowledges having developed a quantified estimate of premature mortality from PM and including it in an earlier draft, but deleting it "in the interest of simplifying the presentation of results."
      Exclusion of all of these costs results in an inaccurate and biased result, which does not fully weigh the impact of the proposed amendments to human health and the environment.
One commenter (0065 p.3) similarly argued that  -

      EPA's proposal to provide a sell-through period is evidently driven by manufacturers' claims (with examples included in the NPRM) that they will not be able to sell off their Step 1 devices without a sell-through beginning in May 2020. ... As substantial as the foregone health benefits reported by EPA appear, the agency's methodology for estimating them underrepresents the true level of the adverse impacts on public health that would result from a sell-through. EPA only calculates the foregone health benefits associated with a sell-through for a "truncated" period of time  -  2019 through 2022  -  that does not include the excess emissions that Step 1 devices sold during the sell-through period will continue to emit every year throughout the full lives of these devices, typically 20 years or more. This omission of the foregone health benefits to accrue during those additional 16+ years is a serious flaw of the SRIA [Supplemental RIA]. Another flaw of the SRIA is the further underestimation of monetized foregone health benefits due to the fact that EPA monetizes only the impact of lost PM2.5 emission reductions and not lost reductions in other emissions  -  such as volatile organic compounds, carbon monoxide, hazardous air pollutants and black carbon  -  or lost reductions in ecosystem and visibility impairment and climate effects.

Another commenter (0056 p.2) also asserted that  -

      In the Supplemental Regulatory Impact Analysis (RIA) that accompanied the proposal, EPA significantly underestimates the adverse environmental impacts associated with the proposed sell-through. EPA evaluated excess emissions for only a "truncated" four-year period (2019-2022) instead of for the 20-year useful life of the non-Step 2 compliant units that would be sold beyond 2020. Further, EPA was able to monetize lost health benefits only for particulate matter even though there also would be excess emissions of carbon monoxide, volatile organic compounds, and air toxics. Even using this methodology, EPA concludes that the lost environmental benefits outweigh the cost to industry by 10 to 20 times.

Another commenter (0052 p.3) questioned the reasonableness of the proposal given the cost-benefit analysis in the RIA and in particular its failure to extend its analysis beyond 2022  -
      The economic analysis of the extended sell-through date indicates that the benefits of this proposal are less than the costs. The net benefit is estimated to be negative $0.06 billion to $0.20 billion. These benefit calculations from both Scenario 2 and Scenario 3 assume that extending the two-year sell-through of Step 1-compliant wood heaters, HHs, and FAFs will result in foregone health benefits from 2020 through 2022. The benefits are not calculated beyond 2022. This does not account for the benefits that would accrue from the foregone reduction in morbidity and premature deaths that would be produced through emission reductions during the entire life span of devices, which is typically substantially longer than three years and may be as long as 30 years. The cost-benefit analysis and long-term ramifications to public health from the on-going emissions from the sell-through heating devices raises concerns for ADEC and causes us to question the reasonableness of this proposal.
Likewise, another commenter (0075 pp.5-6) noted that  -

      EPA's analysis arbitrarily ignores the long useful lifetimes of wood burning devices. EPA acknowledges both that the average lifespan of covered devices is approximately 20 years, Supplemental Regulatory Impact Analysis ("Supp. RIA") at 9 n.7 (Nov. 20, 2018) (EPA-HQ-OAR2018-0195-0008), and that "foregone emission reductions will occur not only during the sell through period, but over the life of the non-Step 2-compliant units." Id. at 3. Yet EPA's analysis of the proposed rule presents only particulate matter emissions increases and associated monetized health impacts from these emissions that are "truncated at the close of the sell through period," or in 2022. Id. at 4. EPA offers no rationale for ignoring the decades of higher emissions that will follow, stating only that "the agency will provide annualized emission reduction estimates" in a final rule. Id. at 2.

Other commenters (0066 pp.11-12, 0137) similarly concluded that  -

      Moreover, EPA's quantification of the foregone public health benefits is likely underestimated ... EPA only estimated the health impacts for four years, but it admits that wood burning devices have life expectancies of twenty years. See 80 Fed. Reg. at 13,693. Step one devices sold in 2021 would emit PM2.5 for decades. Thus, the negative health impacts of allowing a two-year sell-through period are likely far greater than EPA suggests in the proposed rule.

Another commenter (0053 pp.9-10) noted the RIA's truncated analysis and also claims that the year 2019 should not have been included in the estimate of forgone emissions reductions (benefits)  -
      EPA Irrationally Ignores the Lifetime Emissions of Step 1 Heaters and Presents Instead a Flawed Analysis of "Truncated" Forgone Emissions Over Only Three Years
      EPA has calculated the forgone emissions reductions that will result from additional sales of Step 2 non-compliant wood heating devices over a truncated three-year period rather than over the lifetime use of these devices. But each Step 1 heater that is sold in the place of a Step 2 heater emits higher levels of PM2.5 over the lifetime of the product than the Step 2 heater would. In conducting the RIA for the 2015 NSPS, EPA assumed that wood heating devices typically have a 20 year use lifespan. In the original rule, benefits from emissions reductions were therefore calculated over this period: "our analysis assumes that a stove shipped in 2015 will emit in homes for 20 years  -  or until 2034." EPA now only provides three years' worth of those emissions reductions when calculating the forgone emissions. But by ignoring the later years, EPA has ignored a significant category of forgone benefits, rendering this proposed rule misleading and arbitrary and capricious. EPA notes this departure from "typical" lifetime emissions analysis in the Supplemental RIA, but a similar acknowledgement that lifetime emissions have been ignored does not appear in the Proposed Rule's preamble.
      It is no solution for the agency to provide these estimates in a finalized rule delaying Step 2 compliance. To comply with the APA [Administrative Procedure Act], EPA is required to provide the public with "general notice of proposed rulemaking" in enough detail to afford the public with a meaningful opportunity to comment on the proposed rule. In complying with this requirement, the agency must "make its views known . . . in a concrete and focused form so as to make criticism or formulation of alternatives possible." Failing to provide analysis disclosing the majority of the Proposed Rule's forgone benefits does not satisfy this standard. If the agency intends to move forward, the agency should re-propose the rule with the adequate calculations.
      EPA Deceptively Calculates Forgone Emissions Benefits Based on a Four-Year Average that Includes a Year Prior to the Proposed Rule Taking Effect
      EPA presents its calculation of "monetized net forgone benefits" in Table 3 of the Proposed Rule. The agency reports that the costs of the Proposed Rule, in the form of forgone benefits, range between $0.1 and $0.23 billion at a 3% discount rate and between $0.09 billion and $0.21 billion at a 7% discount rate. The agency generated these values by first calculating the value of forgone emissions in each year between 2019 and 2022, and then averaging these values over all four years. However, the agency's inclusion of 2019 in their annual average of emissions reductions is misleading. Under the agency's own analysis, the Proposed Rule's sole impact is to delay the 2020 compliance date, and so generates no forgone emissions until 2020. The year 2019 has no forgone benefits and should not be included in the average. By including 2019 in its calculation of average impacts, EPA significantly dilutes its estimates of annual forgone emissions, essentially dividing by four instead of by three. Had the agency properly omitted 2019, the average annual forgone emissions benefits would have been approximately $30 to $80 million higher, ranging between $0.14 billion and $0.31 billion at a 3% discount rate and $0.12 billion and $0.28 billion for a 7% discount rate.
      The agency's calculations of estimated present values and equivalent annualized values (presented in Table 4 of the Proposed Rule) suffer from this same flaw. In each case, the values are calculated over the four-year time span 2019 to 2022, where 2019 has no forgone emissions benefits because the Proposed Rule has not yet had an effect on emissions. Compliance with the APA requires that "[n]ot only must an agency's decreed result be within the scope of its lawful authority, but the process by which it reaches that result must be logical and rational." The illogical dilution of average annual forgone emissions reductions fails to meet this standard.

This sentiment is echoed by another commenter (0068 p.4) who claimed that "EPA's estimates of the costs and benefits are flawed", explaining the following  -

       The sell-through provision would not take effect until May 15, 2020. In
estimating the foregone PM2.5 emission reductions that would result if the
sell-through is adopted, the period evaluated was 2019 through 2022.
Factoring 2019 into the average annual lost emission reductions (and
corresponding forgone health benefits) artificially dilutes the environmental
and health impacts of the proposed sell-through provision.
       In estimating the environmental and health impacts of the proposed sell through
provision, EPA failed to consider impacts beyond the sell-through
period. Hydronic heaters can last 20 years or more - and the adverse
environmental and health impacts from the operation of Step 1 units sold after
May 20, 2020 could last until the early-2040's
       The costs of this proposal outweigh the benefits by a range of 10:1 to 20:1
(using EPA's own flawed analysis). These ratios increase significantly if the
full life of the Step 1 units sold after May 15, 2020 are considered (NESCAUM
estimated these ratios to be as high as 158:1)

Response:
The Agency acknowledged in the November 2018 supplemental RIA that we used a different method to calculate the estimates of forgone emission reduction for this analysis. As described by commenters, we presented information on truncated emission reduction, instead of more typical annualized emission reduction estimates. While this may appear to be unusual for such information to be presented in this fashion, we note that the benefits and costs for the 2015 RWH NSPS RIA were presented for the years 2015 to 2020 to reflect the years of implementation for the different phases of the NSPS (Step 1- 2015, Step 2- 2020). The benefit estimates for those years reflect the emission reductions estimated by the Agency. We presented truncated forgone emission reductions from 2019 to 2022 in order to be consistent with the presentation of results in the final 2015 NSPS RIA, as we stated in the supplemental RIA. We recognize, however, that the 2015 RIA did provide annualized emission reductions, though not a benefits analysis, over the model life of the affected wood heating devices. For the final rule, we said that we would provide annualized emission reduction estimates. However, we have decided not to promulgate changes associated with a sell-through period for any wood heating device category and such analysis is not needed at this time.

Regarding comments that our methodology underestimated emissions and foregone benefits, we note that even the truncated analysis showed that forgone benefits substantially outweigh cost savings to industry. This is true even though the Agency was unable to monetize the forgone benefits of reductions of CO, VOC, black carbon, and HAPs for the reasons mentioned in the supplemental RIA. In addition, including foregone emission reductions from 2019 in the proposal analyses was necessary to have a consistent timeframe for the scenarios analyzed in the supplemental RIA. Under scenario 3 in the supplemental RIA, an alternate scenario to the primary (Scenario 2), manufacturers were expected to increase production in anticipation of adoption of the sell-through beginning in 2019.

2.4.2 Comment: The RIA scenario assumptions are not supported and underestimate environmental and societal costs
Multiple commentators (0053, 0054/0200, 0057, 0066, 0068, 0071, 0075, 0137, 0142) contended that EPA's assumed scenario in the supplemental RIA is unfounded and not supported by the available information, resulting in a significant underestimation of environmental and societal costs. For example, one commenter (0053 pp.7-8) asserted that "EPA underestimates the societal health costs of the forgone emissions reductions resulting from the proposed rule" partly because of incorrect assumptions evident in the supplemental RIA  -
      Executive Order 12,866 instructs that the assessment of a regulation's costs and benefits should be made "on the best reasonably obtainable scientific, technical, economic, and other information," and effects should be quantified "to the extent feasible." Courts have held that "when an agency decides to rely on a cost-benefit analysis as part of its rulemaking, a serious flaw undermining that analysis can render the rule unreasonable."
      EPA Underestimates the Forgone Benefits by Assuming, Without Support, that Manufacturers Will Not Increase Production of Step 1 Heaters in Response to the Proposed Rule
      EPA underestimates the number of Step 2 non-compliant wood heating devices that will be brought to market as a result of the Proposed Rule. In order to calculate the increase in emissions that would result from the implementation of the two-year sell through period, EPA analyzed the effects of the Proposed Rule in the Supplemental RIA under three different scenarios. The agency designates Scenario 2 as the "primary" scenario that is "most representative of the impacts of the sell-through extension." Only this scenario is presented in the Proposed Rule itself.
      In Scenario 2, manufacturers produce the same number of wood heaters as assumed under the 2015 RIA, but they are allowed to sell inventory "that would otherwise have been stranded" until 2022. In this scenario, emissions are expected to increase as a result of sales of Step 2 non-compliant models in 2020-2022.
      But the agency provides no explanation for why it chooses to ignore a separate scenario, labeled Scenario 3, in which manufacturers are assumed to respond to the extension of the Step 2 compliance date by increasing their production of Step 1 compliant heaters beginning in 2019. In this scenario, emissions increase as a result of increased sales of Step 1 compliant heaters in 2020-2022 and forgone benefits would even higher than under Scenario 2. No mention of this manufacturer response, or the societal harms generated, are made in the preamble of the Proposed Rule published in the Federal Register. This is in spite of the fact that it is a very predictable outcome that manufacturers would ramp up production of Step 1 compliant devices in response to the two-year extension of the compliance date. Nevertheless, EPA fails to mention the possibility of this increase in production and lists only "Scenario 2" projected forgone benefits. By ignoring this relevant factor, EPA has "inconsistently and opportunistically framed" the economic impacts of the Proposed Rule in a way that renders the proposal arbitrary and capricious.
One commenter (0075 pp.5-6) similarly contended that  -
      EPA also presents a dubious analysis of the impact of the sell-through period on the wood burning device market. The agency presents three possible scenarios, only one of which assumes manufacturers will produce any additional Step 1 compliant units in response to EPA's adopting the proposed sell-through period. Supp. RIA at 3. However, as manufacturers of other space conditioning products have repeatedly demonstrated, the rational response when a regulatory compliance date allows the sell-through of non-compliant products is to manufacture as many non-compliant products as possible in the time remaining. See U.S. Department of Energy, Technical Support Document: Energy Efficiency Program for Consumer Products: Residential Central Air Conditioners and Heat Pumps at 3-25 (Dec. 2016) (EERE-2014-BT-STD-0048-0098) (showing an 18% increase in shipments of central air conditioners and heat pumps in 2005, the year before federal efficiency standards took effect for units manufactured beginning in January 2006, followed by a decline in shipments in 2006); U.S. Department of Energy, Technical Support Document: Energy Efficiency Program for Consumer Products and Commercial and Industrial Equipment: Residential Clothes Dryers and Room Air Conditioners at 3-35 (Apr. 2011) (EERE-2007-BT-STD0010-0053) (showing a 39% increase in shipments of room air conditioners in 1999, the year before federal efficiency standards took effect for units manufactured beginning in October 2000, followed by a decline in shipments in 2001). Moreover, EPA's analysis of the benefits of the proposal arbitrarily ignores the ability of manufacturers to produce Step 1 compliant models in 2020. The agency assumes in all three scenarios that no Step 1 compliant models will be produced after 2019. Supp. RIA at 5. However, manufacturers have until May 15, 2020 to discontinue the production of these models, and the proposed sell-through period encourages that production. It is arbitrary for EPA to assume manufacturers will not make the most of the opportunity EPA is proposing to provide.
Another commenter (0057 pp.16-17) asserted that the "U.S. EPA cannot say whether the proposed sell-through would increase production and use of non-compliant heaters."  -
      The primary driver of the Supplemental RIA's estimates of cost savings and emissions increases is the assumed populations of Step 1 and Step 2 devices sold each year in the future, which U.S. EPA presents as three possible scenarios. The assumptions made to forecast these inventories are not based on data or fact, and render the cost-benefit analysis arbitrary.
      All three scenarios incorporate an assumption that "no Step 1-compliant wood heaters will be produced after 2019," with or without the proposed sell-through. This assumption is made even though the Step 2 compliance date is not until May 15, 2020, and even though the purpose of U.S. EPA's proposal is to allow manufacturers to continue to produce non-Step 2-compliant heaters until that date.
      Scenario 2 uses the assumption that 20 percent of Step 1-compliant units would not be sold until the sell-through period; U.S. EPA describes this as the most likely scenario but does not provide any evidence to support either this assessment or the 20 percent value. (This statement indicates U.S. EPA's belief that 20 percent of Step 1 heaters would be stranded without a sell-through  -  which U.S. EPA does not suggest in the NPRM.) Scenario 3 assumes manufacturers increase production of Step 1-compliant devices by 10 percent above projections in the 2015 RIA for the NSPS, but does not provide any data supporting this assumption. Given the industry requests for the proposed sell-through, evidence to support these assumptions should be readily available. If uncertainty exists, U.S. EPA should perform sensitivity analyses to demonstrate the potential costs, health impacts and benefits of the proposal under various assumptions.
      Regardless of the specific assumptions used for these projections, the health costs to individuals across the United States vastly outweigh the cost savings to industry. However, accurate assumptions about future behavior are critical to understanding the potential adverse health impacts that result from the proposed amendments. If industry were to flood the market with a large number of low-cost Step 1 devices above the population estimated in Scenario 3 of the Supplemental RIA, then the adverse health impacts could be much larger than estimated. It is necessary to provide evidence to demonstrate likely adverse health impacts of the proposed amendments to the public.
Other commenters (0066 p.7,11, 0137) similarly stated that  -

      In [the RIA's] scenario 2, EPA assumed manufacturers would produce the same number of units anticipated in the 2015 rule, but an additional two years would be needed to sell existing inventory. Under this second scenario, consumers would purchase wood boilers and forced air furnaces that did not comply with the step two emission standards during the May 2020-22 period instead of purchasing those that did comply. In scenario 3, EPA assumed that manufacturers would increase production of step one-compliant devices before the May 2020 deadline, knowing that retailers could sell those devices until May 2022. EPA stated that it believed that scenario 2 was the primary, and most likely scenario, without explaining the basis for that reasoning. See Supplemental Regulatory Impact Analysis at 13. ...
      Moreover, EPA's quantification of the foregone public health benefits is likely underestimated, for two reasons. First, EPA avoided selecting the most likely scenario (scenario 3) that would result in even more foregone public health benefits. EPA selected scenario 2, where manufacturers would sell no more step one-compliant devices than anticipated in the 2015 performance standards, as the primary scenario. EPA provided no justification, however, for its assumption that scenario 2 was more likely than scenario 3, in which manufacturers would increase production of step one devices because retailers would have additional time to sell them. Given the evidence in the record that step two-compliant devices are more expensive to manufacture -- and therefore result in relatively less profit for manufacturers compared to step one-compliant devices -- EPA's assumption that manufacturers that support a sell-through will not ramp up production of step one-compliant devices runs counter to common sense. If EPA had selected scenario 3 as the primary scenario, the estimated health impacts would be even greater. See Supplemental Regulatory Impact Analysis at 9, 17 (showing that foregone emissions reductions under scenario 3 are greater than under scenario 2).
Contrary to the RIA's scenario assumption, at the public hearing, a commenter (0142 p.32) testified that "the sell-through provision would encourage manufacturers to ramp up production of Step 1 devices before the May 2020 deadline because they would have a longer period of time to sell Step 1 devices through their distribution chains."

Another commenter (0054/0200 p.8) stated that  -

      NESCAUM, however, is concerned that EPA has seriously understated the number of Step 1 units that could be sold during the proposed two-year sell-through period. In the Supplemental RIA, the Scenario 2 analysis assumes that sales in 2019 will decrease by 17 percent for all appliances. Those sales represent the stranded inventory, which translates into roughly 12,000 non-Step 2 stoves and 5,000 central heaters being sold during the 2020-2022 period. In its RIA, EPA provides no basis for the 17 percent figure. EPA's Scenario 3 analysis, which assumes an increase in production rates for Step 1 appliances, only anticipates 24 percent of a single year's inventory will be available for sale during the two-year sell-through period. Manufacturers, however, have indicated that they have at least one year of inventory in the pipeline and there are 17 more months before the production deadline. EPA's assessment of the number of Step 1 units is inconsistent with prior manufacturers' comments, which indicate that at least 200,000 Step 1 wood stoves and 46,000 Step 1 central heaters could be sold during the sell-through. If EPA were to adopt the industry numbers, the foregone emission benefits will be at least an order of magnitude greater than assumed in the RIA.

Another commenter (0071 pp.4-5) referenced an analysis by the above commenter (0054/0200) and asserted that  -
      EPA has underestimated the cost to human health
      Allowing the continued sale of non-compliant devices is unacceptable. Due to the long lives of these devices, they would continue to spew toxic pollution for decades. The result would be years of harm to human health from wood smoke pollution that could have been prevented.
      EPA begins to look at the impact of those in the Regulatory Impact Assessment (RIA) included with this proposal. In this RIA, EPA only examines the impact of the period from 2020 to 2022, offering to provide a complete assessment in the final rule. Even with this short look at the exposure, EPA underestimates the impacts that this rule with have on health across the nation.
      To demonstrate the underestimation, consider the findings of similar analysis by the Northeast States for Coordinated Air Use Management, using the same detailed estimate of emissions prepared for EPA in 2015. NESCAUM used that data to estimate the annual excess PM2.5 emissions and the related health costs that would occur if the deadline for implementing the Step 2 standards was shifted again to 2022. Their analysis examines the annual impact of these emissions from just the 3-year delay, which NESCAUM estimated to be 2,536 tons per year. Their findings were significant:
            "(W)e estimate 110 to 360 additional deaths per year from the excess PM2.5 emissions during 2020-2022. Similarly, we estimate the additional health costs from delaying the NSPS by 3 years to be in the range of $1.0 billion to $2.3 billion annually (2013$, 3% discount rate) during the 2020-2022 timeframe."
      Their study also estimated 25,000 childhood asthma attacks, and 48,000 missed work days, among the other health impacts for each year of these additional emissions.
      By contrast, EPA's estimates in the Regulatory Impact Analysis paint a far rosier picture. Looking at EPA's worst case (Scenario 3, where manufacturers "take advantage of the additional 2 years" to produce and sell more Step 1 devices), EPA's estimate of the reductions in PM2.5 emissions ranges each year are significantly lower, with the highest in 2022 of 790 tons (EPA, RIA 2018).
      Evidence from other similar cases shows that EPA has likely underestimated the impact on sales, and therefore, emissions in the RIA. EPA predictions in the RIA have the manufacturers maintaining about the same sales of these Step 1 devices each year until 2022 (EPA RIA, 2018). However, in other cases, manufacturers increased the production and distribution of the older and less efficient models before the date when the requirements for new and more efficient models would begin. Studies that the U.S. Department of Energy did examining the transition to more efficient clothes dryers, central and room air conditioners and heat pumps found that manufacturers spiked their distribution of the older models by as much as 39 percent before the new models went on sale.,

Furthermore, another commenter (0068 p.4) asserted that  -

      EPA assumed that manufacturers would not produce new Step 1 units during
the period of January 1, 2020 through May 14, 2020. This assumption is
only valid if an additional provision is added to the rules prohibiting the
production of Step 1 units for sale in the United States after December 31,
2019.

Response:
We appreciate these comments and information on the likelihood that increased sales of Step 1 wood heating devices would occur during a sell-through period and the timeframe of these sales. We would have taken this information into account, along with other information were we to revise the supplemental RIA.

2.4.3 Comment: The RIA fails to evaluate how Step 1 devices will compete with Step 2 devices, to the potential detriment of those manufacturers who have invested in Step 2 technology
Several commenters (0054/0200, 0057, 0059, 0066, 0137) noted that EPA failed to evaluate the proposal's impact on the competitiveness of Step 2 devices if lower cost Step 1 devices are still on the market. For example, one commenter (0057 pp.20-21) argued that  -
      EPA acknowledges that some manufacturers will have Step 2 devices available for sale in 2020, and that these Step 2 devices would be more costly than non-compliant devices: "EPA is aware that there are a small number of Step 2 certified models currently available to purchase. However, the price difference between the Step 2 models and Step 1 models may dampen demand for these heaters." Manufacturers who have Step 2 devices available for sale, as required by the NSPS, have invested time, effort, and capital to meet the requirements. These investments result in a costlier product, which manufacturers understood would be the only product allowed for sale beginning in May 2020. Adding a sell-through provision now would open the market to competition from less costly Step 1 devices, which could undercut sales of Step 2 devices and preclude these businesses from recouping upfront costs in the timeframe expected.
      Executive Order (E.O.) 12866 requires an analysis of the costs that may impact "efficient functioning of the economy, private markets (including productivity, employment, and competitiveness), health, safety, and the natural environment)." In 2015, the NSPS set clear expectations for the market, resulting in certainty for manufacturers. Retroactively changing the requirements would result in a competitive disadvantage for manufacturers who made the investment in developing Step 2 devices on time, effectively penalizing these manufacturers for their compliance. This competitive disadvantage was not analyzed as required. The Supplemental RIA justifies the sell-through given that "retailers are concerned they will not be able to sell [Step 1] devices before the May 2020 Step 2 compliance date and will be left with unsalable inventory." However, there is no attempt to quantify the potential impact of retailers that will have unsalable, more expensive Step 2 devices under the proposed amendments.
      Costs to manufacturers who will no longer be able to sell their Step 2 devices also were not quantified. The NSPS assumed that all devices sold beginning in May 2020 will be Step 2 devices. The Supplemental RIA for the proposed amendments assumes that the same total number of devices are sold, but that a mixture of Step 2 and Step 1 devices are sold rather than only Step 2. The Supplemental RIA states, "The other costs of [manufacturing] such as research and development (R&D) are sunk and still required by the NSPS, and thus are not included in the cost savings estimate." However, manufactures that produce Step 2 devices anticipated the ability to recoup increased manufacturing costs by passing these costs on to the consumer. If the proposed amendments open the market to less costly Step 1 devices, manufacturers may have to reduce the price of Step 2 devices to compete, thus resulting in a loss of revenue to those businesses. EPA did not quantify any potential changes to wood heater prices or output changes from the proposed amendments. The NSPS RIA states "While we are unable to estimate price and output changes, we note that the high increase in unit costs for some affected appliances could lead to potential nontrivial increases in market price to wood-burning appliance consumers."
      In addition, the sales of Step 2 devices will be lower than the baseline, resulting in potential losses to some businesses. These losses could damage the very businesses who put forth the effort to comply, resulting in job loss and potentially bankruptcy for small businesses. This could further disrupt the market and sales of Step 2 devices, causing further emissions increases. The magnitude of this effect and impact on potential emissions increases must be estimated to accurately assess the need for these proposed amendments.

Likewise, another commenter (0059 p.2) noted that "Extending deadlines at this point rewards manufacturers of equipment that did not plan in advance and punishes manufacturers that did plan and can meet retailers' demands and the 2020 standard."

A commenter (0054/0200 pp.8) similarly stated that "EPA analysis of industry impacts is incomplete because it fails to account for the negative economic consequences for companies that have invested in Step 2 appliances.",

Other commenters (0066 p.12, 0137) made similar claims and also suggested that manufacturers not only had time to comply with the Step 2 standard, but also that the choice to delay litigation was strategic on their part  -

      Furthermore, EPA's proposed sell-through would reward manufacturers that did not diligently comply with an already generous five-year phase in period. For example, at the EPA public hearing for the proposed rule on December 17, 2018, a representative for Hearth and Home Technologies stated that her company had engaged in research and development for the past twenty-four months. However, the industry was put on formal notice by the proposed NSPS issued in February 2014 (five years ago) that particulate matter standards would be strengthened. The companies that have developed step two compliant devices would suffer business losses if EPA gives an advantage to dilatory companies. Moreover, manufacturers had the opportunity to promptly litigate the legality of the 2015 NSPS, but chose instead to delay that litigation for more than three years (presumably to try and convince EPA to weaken the standards). To the extent these companies delayed in moving ahead to develop compliant wood boilers and furnaces, that was a conscious choice that should not be rewarded with an additional two years to sell noncompliant devices.

Response:
We appreciate these comments and information on the potential impacts of higher costs of Step 2 devices compared to Step 1 devices. We note that a review of current costs, including information from other comments on the proposal, does not uniformly support this assertion, but this overall issue would have been taken into account were we to revise the supplemental RIA.

2.4.4 Comment: The RIA overstates the cost savings to manufacturers
One commenter (0054/0200 p.9) asserted that  -

      The EPA also overstates the cost savings manufacturers would realize by minimizing "stranded inventory." The Agency fails to acknowledge that manufacturers have multiple avenues to continue sales of these appliances beyond allowing a sell-through period. As witnessed during the transition to Step 1 requirements for subpart QQQQ appliances, some manufacturers revised the advertised use of these appliances to light commercial, which are not covered by the NSPS. While NESCAUM does not endorse such strategies, we note that Central Boiler and Hardy Heaters continue to sell uncertified units for light commercial use that they previously sold for residential applications. A YouTube video from installers highlights the industry perspective on the units after rule promulgation - https://www.youtube.com/watch?v=H4s5uiXrWik. Additionally, sales of Step 1 units will still be legal outside the U.S., where many manufacturers have distribution networks. Manufacturers can offer to take back unsold inventory from retailers and use their international distribution chains to minimize issues presented by implementation of Step 2 in the U.S.

      Response:

We appreciate that the commenter offers additional information for consideration on the fate of "stranded" Step 1 devices that would have been taken into account were we to revise the supplemental RIA.

2.4.5 Comment: The RIA fails to analyze impacts on sub-populations of concern
Several commenters (0057, 0065, 0074) argued that the EPA failed to analyze impacts of increased emissions from the sell-through on sub-populations of concern such as children, the elderly, those with pre-existing medical conditions, and those who are socioeconomically disadvantaged.

One commenter (0057 pp.21-25) asserted that EPA failed to analyze impacts on "sub-populations of particular concern"  -
      Per Presidential E.O.s and OMB Circular A-4, agencies must describe how "both benefits and costs are distributed among sub-populations of particular concern." Without quantifying the adverse health and environmental impacts likely to result from the proposed NSPS amendments, it is not possible to describe their distributional impacts. A number of sub-populations of particular concern are likely to be impacted by the proposed NSPS amendment. Air pollution is known to disproportionally impact multiple groups including children, elderly, those with pre-existing cardiopulmonary diseases and those with low socioeconomic standing. As such, emissions increases may disproportionally harm these groups, and these impacts were not analyzed.
      Impacts on Children
      E.O. 13045 and OMB Circular A-4 require additional analyses in the case that a regulation could produce environmental health risks that disproportionately impact children. E.O. 13045 requires Federal agencies to "make it a high priority to identify and assess environmental health risks and safety risks that may disproportionately affect children." In addition, E.O. 13045 requires each significant regulatory action to evaluate the environmental health or safety effects on children, and explain why the proposal is preferable to other potentially effective and reasonably feasible alternatives.
      U.S. EPA acknowledges that the proposed action is subject to E.O. 13045 and states that the proposed amendments would not impose disproportionate risk, but fails to provide any analysis or evidence to support this assertion. Instead, U.S. EPA attempts to apply its 2015 finding that the NSPS would not disproportionately impact children, ignoring the agency's disparate obligations for analysis of the NSPS as a health-protective action and the proposed deregulatory amendments, which do have the potential to disproportionately harm children. U.S. EPA's attempt to simply apply the 2015 finding under E.O. 13045 also disregards its earlier determinations of the specific benefits that the NSPS provides to children. The RIA for the NSPS both quantified and monetized the reduced incidence of infant mortality from exposure to PM2.5 and reduced incidence of morbidity from exposure to PM2.5 on acute bronchitis in children ages 8 to 12, lower respiratory symptoms in children ages 7 to 14, upper respiratory symptoms in asthmatic children ages 9 to 11, and asthma exacerbation in asthmatic children ages 6 to 18. The NSPS RIA also noted multiple studies suggesting that formaldehyde, which the proposed amendments would increase, may disproportionately increase the risk of asthma in youth.
      U.S. EPA's acknowledgment of the potential disproportionate impacts on children is limited to "the delay of the emission reductions of some hydronic heater and forced air furnace appliances in the 2015 NSPS by up to two years," which it says "will not alter the EPA's prior findings that on a nationwide basis, cancer risks due to residential wood smoke emissions among [children] generally are lower than the risks for the general population due to residential wood smoke emissions." These statements ignore both the 20-year lifespan of the additional noncompliant heaters that U.S. EPA proposes to allow to be sold during the proposed sell-through period, and the many health and welfare impacts of woodsmoke on children besides increased cancer risk.
      Additionally, U.S. EPA claims that children will continue to be adequately protected by "existing NAAQS and other mechanisms in the CAA." ignoring both the impact of increased emissions on areas in non-attainment with NAAQS and U.S. EPA's many concurrent efforts to undermine and avoid its other regulatory obligations. The proposed NSPS amendments have the potential to cause environmental harm that disproportionately impacts children, and U.S. EPA has not met its obligation to analyze these impacts.
      Environmental Justice Impacts
      E.O. 12898, Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations, requires additional analyses of regulations that could produce environmental health risks with environmental justice impacts. E.O. 12898 requires agencies to evaluate proposed actions for "disproportionately high and adverse human health or environmental effects on minority populations, low-income populations and/or indigenous peoples." Additionally, § 601 of Title VI of the Civil Rights Act of 1964 prohibits discrimination under covered programs and activities.
      U.S. EPA claims that the proposed action is not subject to E.O. 12898 because the proposed amendments would not impose disproportionate impacts, but it provides no evidence for this position. As with its non-analysis of disproportionate impacts to children, U.S. EPA inappropriately attempts to apply its 2015 findings regarding a health-protective action to its current deregulatory proposal. However, in the NSPS RIA, U.S. EPA wrote:
            This rule establishes national standards that will reduce primarily PM emissions from new residential wood heaters and is expected to decrease the amount of these emissions to which all affected populations are exposed. These emissions happen in minority and low-income neighborhoods and affect people in their homes. To the extent that minority populations and low-income populations are more vulnerable, this rule will help.
      U.S. EPA's NSPS could not generate disproportionately high and adverse human health or environmental effects on any population because it was a health- and environmentally-protective action. U.S. EPA may not apply this conclusion to its current deregulatory proposal.
      U.S. EPA's acknowledgment of the potential disproportionate impacts on the populations covered by E.O. 12898 is limited to "the delay of the emission reductions of some hydronic heater and forced air furnace appliances in the 2015 NSPS by up to two years," which it says "will not alter the EPA's prior findings that on a nationwide basis, cancer risks due to residential wood smoke emissions among disadvantaged population groups generally are lower than the risks for the general population due to residential wood smoke emissions." These statements ignore both the 20-year lifespan of the additional noncompliant heaters that U.S. EPA proposes to allow to be sold during the proposed sell-through period, and the many health and welfare impacts of woodsmoke on these populations besides increased cancer risk.
      U.S. EPA also attempts to avoid its responsibilities under E.O. 12898 by asserting that "the overall distribution of the avoided compliance costs as well as the distribution of forgone benefits is uncertain." This is similarly disingenuous: U.S. EPA knows "the overall distribution of the avoided compliance costs"  -  which would benefit a subset of the industry  -  and cannot skirt an analytical requirement by referencing uncertainty, as the purpose of the analysis is to reduce that very uncertainty.
      The proposed NSPS amendments have the potential to cause environmental harm that disproportionately impacts environmental justice communities, and U.S. EPA is obligated to perform an analysis of these impacts.

Likewise, another commenter (0065 p.4) stated that  -
      Also of concern are EPA's statements in the NPRM that "EPA does not believe that the
environmental health risks or safety risks addressed by the NSPS present a disproportionate risk to children" and that "EPA believes that this proposed action will not have disproportionately high and adverse human health or environmental effects on minority populations, low-income populations or indigenous peoples." These statements are at odds with what EPA reported in its March 2013 publication, Strategies for Reducing Residential Wood Smoke: "People with diseases that affect the heart or lung (including asthma), older adults, children, and people living in lower socioeconomic conditions are at greatest risk from PM2.5 exposure." Further, a comparison of median household income in communities across the country with elevated levels of PM2.5 to corresponding state median household income reveals that median household income in at least half of those communities is below the median state household income.
Another commenter (0074 pp.7-12) discussed the impacts the sell-through might have on sub-populations of concern in their state  -
      Weakening the standards will have disproportionate effects on low-income communities, children's health, minority communities, and communities already experiencing high public health burdens from residential wood combustion.
      DEQ currently estimates there are about 591,000 homes in Oregon with a wood burning device. Approximately 150,000 homes have an uncertified woodstove and 212,000 homes have a fireplace, two of the most polluting devices. In general fireplaces are typically utilized for ambiance heating, (e.g., used only 2-3 times a year), whereas woodstoves are typically used on a daily basis throughout the winter months. DEQ estimates there are about 214,000 homes with certified woodstoves and pellet stoves. DEQ woodstove surveys have indicated usage of all wood burning devices at around 17% as a main source of heat and 37% as a secondary source of heat. Nationally, there are approximately 195,000 certified woodstoves, woodstove inserts, and pellet stoves that are shipped from manufacturers to retailers and stores each year. ...
      PM impacted communities are overwhelmingly low-income communities.
      Oregon DEQ takes issue with EPA's assertion that "this proposed action will not have disproportionately high and adverse human health or environmental impacts on minority populations, [or] low-income populations." Nationally, many low-income households burn wood and are affected by wood smoke pollution. According to EPA's own publications, people living in lower socioeconomic conditions are at greatest risk from PM2.5 exposure.
      In Oregon, the communities most impacted by PM2.5 from residential wood combustion are disproportionately and significantly lower-income than communities not impacted by woodsmoke.
      Four communities in Oregon are currently under PM2.5 maintenance plans or PM advance plans, and all four of those areas have median incomes significantly lower than the statewide median income (See Table 3, entitled Median incomes of communities under PM2.5 maintenance plans or PM Advance plans compared to Oregon state median income [2016]). This pattern holds for the 11 communities in Oregon working to reduce wood smoke and/or PM emissions: all except one have median household incomes that are significantly lower than the statewide median income. There is a clear and obvious pattern of higher impact of wood smoke pollution and health impacts on lower income communities in our state. [emphasis original]
      Modeling of air toxics in the Portland Metro area shows vulnerable groups at higher risk of health impacts attributable to residential wood combustion.
      Oregon DEQ created the Portland Air Toxics Solutions project  to work with the local community to develop air toxics reduction strategies for the Portland region, including portions of Multnomah, Washington and Clackamas Counties. Many of the same sources produce air toxics, particulates, greenhouse gases and ozone, and Portland Air Toxics Solutions was created to support ongoing and future regional air pollution reduction efforts.
      The Portland Air Toxics Solutions modeling study assessed 19 pollutants and identified 14 of them that are above clean air health goals, or benchmarks. Eight of the 14 pollutants cause the most risk. These pollutants are: 1, 3 butadiene, benzene, diesel particulate, 15 PAH, naphthalene, cadmium, acrolein, and formaldehyde. Residential wood burning was estimated to be the second largest source of air toxics, after gasoline and diesel engines, producing 15 PAH (polycyclic aromatic hydrocarbons) and naphthalene (see Table 4, "Portland Air Toxics Solutions estimates of air toxics in 2017" captioned The Portland Air Toxics Solutions modeling study found that residential wood combustion to be the major source of 2 major air toxics present at 10 times over the benchmark for that air toxin.).
      Smoke from residential wood combustion impacts children's health.
      Children's risk of cancer is associated with cumulative exposure to environmental carcinogens and gene-environment interactions during their growth and development. Many of the air toxics have carcinogenic properties and some are established human carcinogens.
      Asthma is one of the most common chronic conditions affecting children. Many of the air toxics have irritant properties that may worsen asthma status for children already diagnosed with asthma, and some of the air toxics are associated with the development of asthma.
      Fetal growth and development may be particularly vulnerable to air toxicant effects, which manifest as adverse birth outcome such as spontaneous abortion, low birthweight, or congenital anomalies.
      Based on prevalence of exposure concentrations above health benchmarks, the four air toxics causing significant children's health risks across Portland are benzene, diesel particulate matter, polycyclic aromatic hydrocarbons (PAH, tar-like byproducts from incomplete burning of carbon-containing substances), and acrolein. Three out of four major pollutants associated with impacts on children's health in the study have residential wood combustion as a major source. ODEQ is concerned about these issues statewide. [Table 5, entitled Wood burning is a major source of children's health concerns., shows that all but diesel particulate emanates from wood burning]
      E. Minority communities experience disproportionate pollutant burdens from residential wood combustion in the Portland area.
      The PATS [Portland Air Toxics Solutions] model found that Hispanics/Latinos were highly likely to be disproportionately impacted by residential wood combustion in the Portland Metro area (p<0.05). As such, any delay in realizing air quality benefits is likely to disproportionately impact Latino/a and Asian communities in the Portland Metro area. Oregon DEQ finds EPA's assertion of little to no disproportionate impacts on minority communities  to be incorrect. [emphasis original] See Figure 3 [entitled, Maps from Portland Air Toxics Solutions showing percent population Hispanic/Latino and Concentrations of air toxics above benchmarks in the study area].
Response:
We appreciate these comments and information on the impacts of the proposed sell-through provisions on sensitive populations. We have decided to not promulgate the proposed sell-through provisions, which should address these concerns.

2.4.6 Comment: The RIA fails to evaluate consumer behavior
One Commenter (0057 p.19) noted that EPA does not take into account consumer fuel switching in the RIA  -
      U.S. EPA does not "contemplate in this analysis consumers switching to heaters that use other fuel types such as natural gas," which does not allow a full understanding of the potential impacts of either the 2015 NSPS or the proposed amendments. Fuel switching in response to price impacts has important economic and emissions consequences. This would increase revenue to manufacturers of other heating devices, decrease revenue to manufacturers of wood and pellet heating devices, and change ongoing energy costs for consumers. In addition, the conversion from even the cleanest wood or pellet heater to natural gas or electricity comes with significant emissions benefits. Consumer fuel switching is a potential response that must be analyzed to understand the impacts of the proposed amendments.
Response:
We appreciate the comment that fuel switching is a possible consumer response to changes in the regulation We recognized the potential for fuel switching by current wood heater users in the supplemental RIA, but explained that we were unable to prepare an analysis of this effect for the proposal. We mention in the 2015 NSPS RIA that an increase of 1% in non-wood (i.e., natural gas, oil) would lead to an increase of 1.82% in residential wood energy consumption, and vice versa. The potential for fuel switching would be considered were we to revise the supplemental RIA.

2.4.7 Comment: The RIA fails to evaluate the costs to state and local governments
Several commenters (0057, 0074) argued that EPA has not evaluated or acknowledged, even qualitatively, the increased costs to state and local governments, which could result from the sell-through proposal. For example, one commenter (0057 p.18) asserted  -
      California Senate Bill No. 1383, signed into law in 2016, requires California to reduce anthropogenic black carbon emissions by 50 percent below 2013 levels by 2030. In 2030, residential wood combustion is projected to be one of the largest individual sources of black carbon in California, responsible for 24 percent of all anthropogenic emissions. In developing these targets and implementation strategy, California policymakers assumed that woodstove emissions reductions from the NSPS would be in place. Any increased black carbon emissions that would result from the proposed amendments must be mitigated in California to meet the SB 1383 2030 targets. California would be required to implement additional programs, regulations, or incentives to make up for the increased emissions that result from these proposed amendments, resulting in increased costs.
      In addition, as noted above, areas within California are in non-attainment for the PM2.5 NAAQS. As U.S. EPA acknowledges, even if the proposed sell-through is finalized, "Areas that need to reduce criteria air pollution to meet the NAAQS will still need to rely on control strategies to reduce emissions." This may result in the need to develop new programs to address these emissions impacts, creating new fiscal costs to plan, promulgate, implement, and enforce additional regulations, programs or incentives. U.S. EPA has not acknowledged or incorporated these costs, even qualitatively, in its analysis.

Another commenter (0074 pp.7-8) discussed the impacts on their state similarly  -
      Weakening the standards will have disproportionate effects on low-income communities, children's health, minority communities, and communities already experiencing high public health burdens from residential wood combustion. ...
      PM impacted communities already bear a higher health burden from conditions associated with residential wood burning and poor air quality.
      The counties and communities affected by high levels of PM2.5 also already experience levels of health impacts higher than the state average for chronic and environmental health conditions associated with residential wood combustion, such as asthma (Table 1, entitled Chronic Diseases among Oregon adults  -  Asthma (2012-2015)), and chronic respiratory diseases (Table 2, entitled Oregon State Populations Health Indicators  -  Chronic Lower Respiratory Disease (2012-2016)).
      Plans for improving air quality and public health in these communities were based on the use of cleaner-burning devices as legislated by the 2015 NSPS. Delays will mean a greater burden on public agencies including health agencies, hospitals, schools, and employers.
Response:
We appreciate these comments on State programs and their efforts to reduce air pollution impacts. We have decided not to promulgate the proposed sell-through provisions, which should address these concerns. We would consider this information on State programs were we to revise the supplemental RIA.

2.4.8 Comment: The RIA fails to account for incentive programs
An association of state regulatory agencies in the Northeast (0133 pp. 4-5) argued that EPA's cost analysis should take into account generous incentive programs that some states offer for switching from Step 1- to Step 2-compliant devices, which make Step 2-compliant devices more affordable  -

      Incentive programs for central heating appliances in the Northeast provide purchase rebates for units with performance levels typically below 0.10 lb/MMBtu heat output. In the Vermont program, prices for residential-sized central heating appliances varied widely (138 units <200,000 Btu/hr), ranging from $4,221 to $24,412 with an average of $12,184. Costs from the New York program are similar with average pellet boiler costs of $11,700. ...In assessing the economic impact of transitioning from Step 1 to Step 2 standards, EPA should take into account the generous incentives states are providing to cleaner appliances. As shown in Table 3 [of comment 0133] incentives for central heating appliances can reach as high as $21,000, while the stove incentives range from $500 to $1,500, further reducing the cost to purchase and install high efficiency, low emissions wood heating appliances. Details on these programs can be found in Attachment 4 [of comment 0133].

Response:
We appreciate the information on the potential impacts of State incentive programs. We recognize the potential impacts of State wood heating device incentive programs in the baseline for the regulatory actions affecting this industry. We would consider this information were we to revise the supplemental RIA.

3.0	Support for Sell-Through
Section 3 presents comment excerpts and summaries regarding support for the sell-through for all wood heating devices and for each category of devices specifically (hydronic heaters, forced-air furnaces, and wood heaters regulated under subpart AAA). While the basis of the support presented in Section 2 is legal in nature, the basis of the support in this section is primarily economic and practical in nature and most comments included herein are from retailers, manufacturers and industry trade groups.

3.1	Support for Sell-Through for All Wood Heating Devices
Section 3.1 includes comments of support for the sell-through that were not indicated by the commenter as being specific to one type of wood heating device, but rather applied to all types. Additional appliance-specific comments are provided in Sections 3.2, 3.3 and 3.4 for hydronic heaters, forced-air furnaces, and wood heaters regulated under subpart AAA.

3.1.1 Comment: EPA's rationale for proposed sell-through applies to all regulated wood heating devices, under both QQQQ and AAA
Multiple commenters (0051, 0063, 0067, 0070, 0123, 0142) asserted that the same sell-through EPA proposes for hydronic heaters and forced-air furnaces under subpart QQQQ should also apply to all wood heaters regulated under subpart AAA.

The industry trade group testified at the public hearing (0142 pp.44-45) that  -
      HPBA emphatically supports the granting of additional sell - -through for QQQQ appliances. However, it is every bit as important that the same provisions be granted to AAA products.
Likewise, in a submitted comment (0063 p.8) the industry trade group contended that  -

      The ability to continue selling Step 1 products until May 15, 2022 is a reasonable and necessary means of avoiding the significant economic harm that regulated entities stand to suffer if Step 1 products are stranded in commerce after May 2020. ...EPA should also revise Subpart AAA to allow Step 1 woodstoves and pellet stoves to be sold until May 15, 2022. Sell-through is every bit as important to ensuring that wood and pellet stove manufacturers have the benefit of the five-year lead time to develop full lines of Step 2-compliant products.

A manufacturer (0070 p.1) similarly supported EPA's proposed sell-through and furthermore asserted that the sell-through should apply to all wood heating devices  -

      USSC [United States Stove Company] fully supports the EPA's proposal for a two-year sell-through period of Step 1 products (compliant to May 15, 2015 PM emissions limits) at retail for 40 C.F.R. Part 60 Subpart QQQQ products, so long as they are manufactured before May 15, 2020. We also feel that it is paramount to provide the same sell-through at retail for all 40 C.F.R. Part 60 Subpart AAA products.

Another commenter (0051 p.2) asserted that "the obstacles EPA has identified as applicable to hydronic heaters and forced-air furnaces may also apply to residential wood stoves and pellet stoves. If retailers have inventory they cannot sell, and manufacture is interrupted because of Step 2 as currently implemented, NAHB [National Association of Home Builders] members will be unable to supply their customers with these heaters at a reasonable cost or in a timely manner."

Response:
We appreciate the commenter's assertion that regulated entities stand to suffer "significant economic harm ... if Step 1 products are stranded in commerce after May 2020" and that this may apply to AAA devices as well as QQQQ devices. However, data was not provided to the Agency showing that Step 1 devices would indeed be stranded in commerce and the cause of the claimed stranding. Manufacturers and retailers failed to show how much of an increase in stranded inventory has taken place as a result of the NSPS, an important consideration given that stranded inventory, sometimes for more than one year, is not uncommon in the residential wood heating device industry. While manufacturers and retailers made qualitative statements asserting economic harm from stranded inventory if a retail sell-through was not allowed, these statements were not supported by contextual data. In fact, very little data were submitted to the Agency in response to the NPRM's solicitations showing, for example, a percentage decrease in sales approaching 2020 relative to previous years and/or the percentage of Step 1 inventory that would be stranded without a sell-through since the promulgation of the NSPS in 2015. Insufficient data was provided by manufacturers and retailers to justify a sell-through, especially in light of the fact that in every wood heating device category, models certified to meet the Step 2 standards are available. Finally, commenters did not provide sufficient data or discussion to explain why the five-year period from 2015 to 2020 was not adequate time for manufacturers and retailers to manage their inventories of Step 1 units to avoid stranded inventory. See also our response in 2.3.2.

3.1.2 Comment: Sell-through necessary to allow retailers to continue to purchase and sell Step 1 heaters, so manufacturers can fund Step 2 model development and certification
Some commenters, in submitted comments and in testimony at the public hearing (0063, 0142), asserted that the sell-through is necessary to allow retailers to continue to purchase and sell Step 1-compliant heaters (i.e., heaters that are not Step 2-compliant), so that manufacturers have the funds to complete Step 2 model development and certification.

For example, a representative from the industry trade organization testified at the public hearing (0142 pp.18-20) that manufacturers and retailers need the extra time provided by the sell-through to fund the final development of Step 2 models  -
      I understand that the emission limits for wood stoves are not in question here. This is true. But surely it is our goal to deliver demonstrated real-world reductions with products that truly reduce wood smoke in a cost-effective manner. The manufacturers need the final year and a half of this Step 1 period to finish developing these stoves, to finish finding ways to make them less expensive and, most important of all, to be certain that the new models really work, that they can be successfully operated by consumers, and that they hold up for the 20-plus years they'll last.
      Currently, the retail stove dealers are terrified of the rigid May 15, 2020 cutoff in the original rule. Our business is very dependent on the weather, and we may or may not have enough cold weather everywhere in the country for all dealers to move their remaining Step 1 stoves by that deadline. The net effect of that is that the system has seized up. Dealers are frantically clearing out every Step 1 stove they can and trying to move to stocking only Step 2 models, which are either mostly pellet units or, in many cases, new units which may be certified but not yet even in production as manufacturers must first move all their old Step 1 units. Either way, dealers are not ordering many Step 1 stoves, and the manufacturers are being starved for resources at a time when they need to "turn on the gas" on testing.
      When the 2015 rule was promulgated, manufacturers knew it would be a tough deadline to meet and suspected that the lack of a Step 1 sell-through provision would be problematic. Now we know it is. There is also no in-situ evidence that a two-year extension will actually cost our airsheds anything. This NSPS may last for many years, and a two-year sell-through now will enable us to generate better performing units that tend to cost less and be better for the environment for a long time.
Likewise, another commenter testified at the public hearing (0142 pp.45-46) that "Importantly, it is through the revenue from sales of Step 1 appliances that manufacturers have the resources to develop, test, and certify products to the Step 2 standards taking effect on May 15, 2020." In submitted written comments, this same commenter (0063 pp.3, 11-12) explained that  -

      In addition to avoiding the economic harm to small businesses from stranding unsellable appliances in commerce, a two-year sell-through period is necessary for a different reason. As recognized in the preamble to EPA's current proposal, the lack of a sell-through provision in the 2020 standards is currently impacting manufacturers' ability to develop, test, and certify Step 2-compliant products because (i) a substantial number of retailers in the hearth appliance industry are reducing or even eliminating orders of Step 1 appliances, even though the Step 2 compliance deadline is still well over a year away; and (ii) the downturn in Step 1 sales revenues jeopardizes many manufacturers' efforts to bring Step 2-compliant products to market. ...
      EPA's current proposal details how "a substantial number of retailers are already
reducing or even ending their purchases of Step 1-certified wood heating devices from the manufacturers because they are concerned that they will not be able to sell these devices before the May 2020 Step 2 compliance date and will be left with unsaleable inventory." The fact that this is already happening so far before May 2020 should not have come as a surprise. When HPBA commented on EPA's 2014 proposal, one of HPBA's consultants with decades of experience in product development, sales, and marketing for many hearth industry manufacturers (Charlie Page) warned that the fear of being stuck with unsellable inventory could have profound implications throughout the supply chain:
            Many retailers will stop buying appliances they are not absolutely
sure that they can sell, and the manufacturers will lose the revenue
from the sales of these stoves; revenue that is needed to fund the
design, testing and the launch costs for new NSPS compliant
models. It has been reported that this is already happening in the
warm air furnace market and will be exacerbated unless EPA
grants adequate sell-through relief.
      It is well known in this industry that "many retailers have unsold inventory at the end of the season" even though there is variation among how retailers do business, e.g., some keep substantial inventories at any given time while others only buy product when they need it. As noted in EPA's current proposal, many retailers have begun to take measures to try to ensure that they will have little or no Step 1 inventory stranded after May 2020 so that they can minimize or eliminate their financial losses. Consequently, manufacturers are already losing out on much needed revenue in the final two years of the Step 1 compliance period -- revenue that they must have to fund the development, testing, and certification of new model lines. Most manufacturers in the hearth appliance industry are small businesses. The capital to develop Step 2-compliance appliances typically comes from sales of Step 1-compliant products, and most manufacturers do not have access to, for instance, revolving lines of credit to fund R&D, testing, and other costs related to developing Step 2-compliant products. For these companies, the downturn in Step 1 sales can be crippling.
      EPA's proposal rightly recognizes that the decrease in revenue from Step 1 sales
threatens to deprive manufacturers of the full five-year lead time that underpins EPA's BSER determinations for the Step 2 standards. This is because manufacturers are experiencing reductions in revenue in the final two years that they have to try to comply with the Step 2 standards. To further complicate matters, EPA notes that "the price differential between the Step 2 models and Step 1 models may dampen demand for these heaters and could result in consumers declining to purchase new heaters altogether[.]"
      Under these circumstances, a two-year sell-through period is essential to ensuring that manufacturers, who are still in the process of trying to bring their model lines into compliance with the Step 2 standards and field evaluating such models rather than rushing to bring them to market, have the entirety of the five-year lead time to do so. EPA's proposed sell-through provision and the supporting rationale account for the realities of the hearth appliance industry -- namely, that manufacturers depend on sales revenue in any given year to fund the development, testing, field evaluation, and certification of new model lines. And for manufacturers to make meaningful use of the five-year compliance lead time for the Step 2 standards, they need a dependable stream of revenue from sales of Step 1-compliant products in the months and years leading up to the May 2020 deadline.

A manufacturer testified at the public hearing (0142 p.82) that  -
      We need sell-through for both QQQQ and AAA appliances as our customers buy these products one and the same. They are all wood heaters in their eyes. Having to buy back inventory means we are robbing the working capital that we need to invest into R&D to make products comply with 2020 emission standards. Financially, this burden could be unsustainable. Without granting sell-through for all Step 1 appliances, manufacturers like us will simply not be able to develop the amount of clean burning Step 2 appliances that this competitive marketplace needs.
Another manufacturer also testified at the public hearing (0142 pp.10-12, 14) that the 2-year sell-through is necessary to allow cleaner models to be field-evaluated by manufacturers  -
      I'm here today as a manufacturer, one that has spent more than a half a million dollars on 2020 compliant models, to argue as clearly as possible the compelling reason why a two-year sell-through is needed. Within the industry, as we look at the proposed rule we are discussing here today, EPA needs to clearly understand the need we have as manufacturers to improve our products for the performance intended. On page 13 of the proposed rule, it states, in quotes: "Thus, important elements in determining BSER include the costs and environmental impacts on consumers of delaying production while wood heating devices with those systems are designed, tested, field evaluated and certified." I wish to make the point and stress "field evaluated." In 1984, when the State of Oregon permitted the first national requirements of self-certified wood heaters, 91 manufacturers shoved heating elements into existing devices of their current products. Unfortunately... with insufficient time to fully field evaluate these modified heaters, the majority of the under-evaluated heaters are still being used, and I doubt they are burning clean heat. ... An additional two-year sell-through will provide the needed time for retailers to clear their inventories, as needed, of Step 1 heaters. Retailers continuing to support manufacturers of Step 1 products will provide the revenues that will be needed by these manufacturers for their 2020 compliant product development. It will also provide an additional two years for field evaluation of Step 2 heaters at any...company. ... What we are asking for and what we need is the necessary time to continue revenue streams to develop Step 2 compliant heaters that are field evaluated so they perform long-term as intended.
Another commenter testified at the public hearing (0142 p.46) that "If, as we are seeing across the industry, retailers are slowing or ceasing purchases of Step 1 products due to the looming retail prohibition on May 15, 2020, manufacturers' ability to bring new, cleaner products to market -- or even to remain in business at all -- suffers dramatically."

Response:
We appreciate manufacturers' assertions that they need more time and revenue from the sale of Step 1-compliant units in order to fund Step 2 model development and certification. However, the Agency did not receive sufficient data from manufacturers showing that revenue has decreased appreciably approaching the 2020 Step 2 compliance date, because retailers have stopped purchasing Step 1 devices. In fact, very little data were submitted to the Agency in response to the NPRM's solicitations showing, for example, a percentage decrease in sales approaching 2020 relative to previous years and/or the percentage of Step 1 inventory that would be stranded without a sell-through since the promulgation of the NSPS in 2015. Manufacturers and retailers failed to show how much of an increase in stranded inventory has taken place as a result of the NSPS, an important consideration given that stranded inventory, sometimes for more than one year, is not uncommon in the residential wood heating device industry. Insufficient data was provided by manufacturers and retailers to justify a sell-through, especially in light of the fact that in every wood heating device category, models certified to meet the Step 2 standards are available. Finally, commenters did not provide sufficient data or discussion to explain why the five-year period from 2015 to 2020 was not adequate time for manufacturers and retailers to manage their inventories of Step 1 units to avoid stranded inventory

In addition, manufacturers have known about the Step 2 compliance date since 2015. Further, they were alerted to the possibility of more stringent standards in 2014 when the NSPS was proposed (and with more stringent Step 2 limits than were ultimately promulgated in 2015). Indeed, formal discussions with stakeholders about more stringent limits have been ongoing since at least 2010. The EPA set the Step 1 standard as achievable in the short term so that manufacturers could focus on Step 2 model development. For these reasons, EPA has concluded that manufacturers and retailers have had adequate time to develop Step 2 models and to manage their inventory of Step 1 units. See also our response in 2.3.2.

In addition, at the same time that EPA published the NPRM, the Agency published the ANPR (83 FR 61585), which solicited comment regarding, among other issues, whether it is feasible/ practicable for manufacturers to meet the Step 2 emission limits by May 15, 2020, and if not, why not. For example, in the ANPR the EPA asked "For manufacturers that do not expect to achieve the Step 2 emission limits by May 2020, what factors are preventing your model(s) from meeting the emission limits?" No data on such factors were submitted. Rather, it was made clear to the Agency, based on comments submitted by manufacturers as well as other stakeholders for both the NPRM and the ANPR, that Step 2-certified models exist in every wood heating device category.

Finally, as a matter of equity, EPA notes that there are some manufacturers that have directed efforts and invested money in order to develop Step 2 models with sufficient time before the May 2020 deadline to ensure that Step 2 models were in the marketplace for retailers (so that they could shift their inventory to Step 2 models and avoid stranded Step 1 inventory in May 2020) and consumers (so that they would have Step 2 models to purchase when the Step 1 models could no longer be sold). For example, in a letter submitted in response to the ANPR, Lamppa Manufacturing, Inc. asserted that they made significant investments in R&D time and money to meet the 2020 Step 2 standard and consequently have a forced-air furnace model line certified and in production. This manufacturer stated that they would not have undertaken this investment if they knew that EPA was going to change the standard, asserting that "It's not fair to move the goalposts halfway through the game!" EPA has considered the equities related to the efforts and investments made by these manufacturers as one factor in its decision not to provide a sell-through period.

Therefore, after reviewing all comments and data submitted, we have determined that there is not an adequate rationale for a sell-through after the Step 2 compliance date.

3.1.3 Comment: Sell-through necessary to allow retailers and manufacturers to continue generating revenue and avoid economic harm from stranded inventory
The assertion that a sell-through is necessary to avoid economic harm from stranded inventory was shared by many retailers and manufacturers across all appliance categories (0028, 0044, 0051, 0063, 0070, 0110, 0127, 0142). For example, one manufacturer of wood heaters and forced-air furnaces (0070 pp.7-8) asserted that "Retailers can't afford to be left with unsellable products, and manufacturers can't afford to buy back these products, or the loss in sales in such a critical time of introducing new products to the marketplace."

At the public hearing, one commenter testified (0142 pp.45-46) that "a two-year sell-through period helps ensure that manufacturers and retailers can recoup their investments in their Step 1 inventory on hand. The ability to continue selling Step 1 products until May 15, 2022 is a reasonable and necessary means of avoiding the significant economic harm that regulated entities stand to suffer if Step 1 products are stranded in commerce after May 2020." In submitted written comments, this same commenter (0063 p.16-17, 18-19) further contended that  -
      Apart from the need to ensure that all manufacturers subject to Subparts AAA and
QQQQ actually have the full amount of lead time that EPA assumed they would have when it finalized the Step 2 standards, there is another reason for revising the 2015 Rule to include a sell-through period starting in May 2020: to avoid the substantial economic harm that results from stranding inventory in commerce. Allowing sell-through for this reason would be consistent with what EPA did in the 2006 CI ICE NSPS, when it provided for a two-year installation period for engines of a previous, less stringent emission tier to, among other things, avoid "prevent[ing] engine manufacturers from using up existing inventories of engines."
      EPA has long recognized the importance of allowing manufacturers, retailers, and
distributors to sell previously manufactured products for a limited amount of time after a new standard takes effect -- even though those products do not meet the new standard -- because it allows "manufacturers to recoup their investment in their stock on hand." The need to avoid stranding inventory in commerce is especially important in an industry like this one that is composed almost entirely of small businesses (manufacturers, retailers, and distributors). In promulgating both the original Subpart AAA and the 2015 Rule's Step 1 standards, EPA acknowledged the importance of allowing the sell-through of inventory. The 1988 rule required units manufactured on or after July 1, 1990 to comply with new emissions standards, but EPA permitted units that did not meet the new standards to be "sold at retail" until on or after July 1, 1992. Similarly, under the Rule's 2015 standards, units manufactured on or after May 15, 2015 must comply with the 2015 emission limits, but units that did not meet those limits could continue to be "sold at retail on or before December 31, 2015." These regulatory provisions reflect EPA's recognition that the ability to "sell-through" inventory was needed to avoid undue harm to the many small business manufacturers and small business retailers subject to the
standards....
      [T]here are still some retailers that cannot afford to stop ordering Step 1 appliances altogether. This could be due to a number of reasons:
      First, to the extent Step 1 models are popular and in high demand by consumers between now and May 2020, many retailers will not want to miss out on such sales. Indeed, several retailers surveyed in the Page Report indicated they would still be willing to buy appliances even if those appliances could no longer be manufactured by a date certain.
      Second, there simply are not enough Step 2 products available for sale at this time.
Retailers want to show a variety of appliances in their stores in hopes of having at least one product to cover every segment of the market. This means they will want to carry a variety of models (both pellet and stick wood models) across a range of prices and offer both catalytic and non-catalytic models. As noted above, there are few or no Step 2 models available for certain segments of the market. To further complicate matters, retailers typically have relationships with only a limited number of manufacturers. This means that some retailers may not be able to order exclusively Step 2 appliances even if they wanted to, because some manufacturers do not have any Step 2-compliant products at this time.
      Third, most consumers of residential wood burning appliances are price sensitive and
may not be willing to pay for Step 2 appliances. As discussed above, Step 2 appliances tend to cost significantly more than Step 1 appliances. Price sensitive customers might look for another retailer that has Step 1 products available for sale; switch to alternative sources of heat (e.g., gas); or forego changing out their older wood-burning appliance and instead continue to use their existing, higher emitting stoves, boilers, or furnaces. These are just a few of the reasons why some retailers nationwide may not be able to reduce or eliminate their purchases of Step 1 appliances and thus, they are at risk of having a lot of unsellable Step 1 appliances come May 2020 unless EPA revises the rule to add sell-through provisions.

A manufacturer similarly testified at the public hearing (0142 pp.71-72) that -
      Obviously, in a perfect world, all retailers would want to sell 100 percent sell-through at the end of the season, but this is not reality. Regardless of how strong the selling season is or how deep their end-of-season clearance sales are, there is always carryover. When I say carryover, I'm talking about the products for that season. Mass merchant retailers tend to carry over somewhere between 25 percent to 30 percent of their purchases for the season. This percentage is split up between QQQQ and AAA, as stated previously. Retailers look at these as the same products, just wood-burning appliances. It is hard to put an exact dollar value because it all depends on the company and their volume. But I would estimate easily among some of our top key customers, the carryover dollars we are talking about are in excess of $14 million. This inventory is what they typically use to start the seasonal setups going into the next season. If the retailers do not get an opportunity to sell through on these appliances, they become unsalable and ties up inventory dollars they are unable to spend on new product. We have had some retailers say if they cannot get sell-through relief, they would spend their dollars in other categories; in other words, potentially exit this category.
A manufacturer of forced-air furnaces and wood heaters (0070 pp.7-8) concluded that  -
      Because these products are seasonal, we strongly support a 2-year sell-through period. Our retailers need the confidence to know they won't be burdened with unsellable Step 1 products in both Subpart QQQQ and Subpart AAA categories. Yes, there are Step 2 compliant products available in today's marketplace, but that number is relatively small for market diversity across all price ranges especially with woodstoves and forced air-furnaces. This limits consumer choice and market variety of proven appliances. The number of these products is totally independent of the need for sell-through for all residential wood heaters. Retailers can't afford to be left with unsellable products, and manufacturers can't afford to buy back these products, or the loss in sales in such a critical time of introducing new products to the marketplace. ...
      We strongly support the 2-year sell-through provision being proposed for both Subpart QQQQ and Subpart AAA. We also ask you to do this as expeditiously as possible, because our retailers are making their final decisions for what they will buy for the 2019-2020 heating season now. We know that this is a win-win for all businesses involved in this industry, and it ultimately has a minimal impact on the environment as the products in this sell-through provision are already clean burning.

This same manufacturer asserted in public hearing testimony (0142 pp.77-78) that  -

      You will hear from others, either in written or public statement, that this is simply a stall tactic, and our intentions are other than attempts to remain compliant to the rule. I can assure you that we, in the engineering department of US Stove, have worked nonstop since the issuance of the current NSPS to produce compliant products and to remain competitive in this market. This has been an expensive and time-consuming challenge for us and the industry. We can't afford to take back and refund our retailers any inventory they have stranded due to the 2020 deadline. I, therefore, request that you move forward with your consideration of a sell-through for two years of not only QQQQ products but also of AAA Step 1 products.

Likewise, another commenter (0051 p.2) asserted that  -

      In general, NAHB [National Association of Home Builders] members are neither manufacturers nor retailers of the categories of heaters covered by the NSPS regulations. However, the implications for the larger supply chain for these regulated heaters will have industry-wide ramifications. The deficiencies in the 2015 NSPS related to the absence of a Step 2 sell through time frame under the rule has the potential to impact the cost and availability of inventory compliant heaters home builders and remodelers are able to provide consumers. When the 2015 Rule was adopted without any sell-through period EPA inadvertently shortened what was intended to be a five-year window for manufacturers to develop Step 2 compliant products. Absent the transition window provided by a sell-through time frame, retailers have already begun to pull back on orders for Step 1 products out of concern they will end up with stranded inventory that they can neither sell nor give away after the May 2020 effective day for Step 2.

Response: