National Volatile Organic Compounds Emission Standards for Architectural Coatings

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 59

[AD-FRL-5526-3]

National Volatile Organic Compounds Emission Standards for

Architectural Coatings

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule and notice of public hearing.

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SUMMARY: The proposed standards would reduce emissions of volatile

organic compounds (VOC) from architectural coatings. The proposed

standards implement Section 183(e) of the Clean Air Act (CAA), as

amended in 1990, which requires the Administrator to control VOC

emissions from certain categories of consumer and commercial products.

Exposure to ozone is associated with a wide variety of human health

effects, agricultural crop loss, and damage to forests and ecosystems.

As required by Section 183(e), the Administrator conducted a study to

determine the potential of VOC emissions from consumer and commercial

products to contribute to ozone levels that violate the National

Ambient Air Quality Standards (NAAQS) for ozone and established a list

of product categories to be regulated. Based on the criteria described

in the study and accompanying report, the EPA determined that VOC

emissions from architectural coatings should be reduced. Therefore, the

EPA is proposing standards to reduce ozone-causing VOC emissions from

these coatings. The proposed standards would reduce annual emissions of

VOC by 106,000 tons representing a 20 percent reduction from 1990

levels.

The proposed rule is centered around requiring VOC content levels

for 55 individual architectural coating categories. When promulgated

these requirements on manufacturers and importers of architectural

coatings are anticipated to take effect on April 1, 1997. This

rulemaking is on an expedited schedule, with a relatively short public

comment period.

Following proposal of this rule, the EPA plans to participate in a

joint study with the architectural coatings industry. This study will

focus on the feasibility of adopting more stringent VOC requirements in

the future.

DATES: Comments. Comments pertaining to the proposed rule must be

received on or before August 30, 1996.

Public Hearing. A public hearing will be held, if requested, to

provide interested persons an opportunity for oral presentation of

data, views, or arguments concerning the proposed standards for

architectural coatings. If anyone contacts the EPA requesting to speak

at a public hearing concerning this proposed rule by July 18, 1996, a

public hearing will be held on July 30, 1996, beginning at 10:00 a.m.

Persons interested in attending the hearing should notify Ms. Kim Teal,

(919) 541-5580 by July 18, 1996, to verify that a hearing will occur

and for notification of the location of the hearing. The record for the

public hearing will remain open for 30 days after completion of the

hearing to provide an opportunity for the submission of rebuttal and

supplementary information.

Persons wishing to present oral testimony concerning this proposed

rule must contact Ms. Kim Teal at the EPA by July 18, 1996. Ms. Teal

may be contacted at the following address: Coatings and Consumer

Products Group (MD-13), U.S. Environmental Protection Agency, Research

Triangle Park, North Carolina 27711, telephone number (919) 541-5580,

FAX number (919) 541-5689.

ADDRESSES: Comments. Comments should be submitted (in duplicate) to:

Air and Radiation Docket and Information Center (6102), Attention:

Docket No. A-92-18, U.S. Environmental Protection Agency, 401 M Street

SW, Washington, DC 20460. Comments and data may also be submitted

electronically by sending electronic mail (e-mail) to: a-and-r-

[email protected]. Electronic comments must be submitted as an

ASCII file avoiding the use of special characters and any form of

encryption. Comments and data will also be accepted on disks in

WordPerfect in 5.1 file format or ASCII file format. All comments and

data in electronic form must be identified by the docket number A-92-

18. No Confidential Business

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Information (CBI) should be submitted through e-mail. Electronic

comments on this proposed rule may be filed online at many Federal

Depository Libraries.

Docket. The proposed regulatory text and other materials related to

this rulemaking, excepting any information claimed as CBI, are

available for review in a public record. This record has been

established for this rulemaking under docket number A-92-18. The

docket, including paper versions of electronic comments, is available

for inspection from 8:00a.m. to 5:30p.m. Monday-Friday, excluding legal

holidays. The docket is located at the EPA's Air and Radiation Docket

and Information Center, Room M1500, 1st Floor, 401 M St. S.W.,

Washington, D.C. 20460, telephone (202) 260-7548, FAX (202) 260-4400. A

reasonable fee may be charged for copying.

Background Information Document. The background information

document (BID) and other documents supporting the proposed standards

may be obtained from the docket or from the U.S. EPA Library (MD-35),

Research Triangle Park, North Carolina 27711, telephone number (919)

541-2777. Please refer to ``Architectural Coatings--Background for

Proposed Standards,'' EPA-453/R-95-009a.

FOR FURTHER INFORMATION CONTACT: For information concerning the

proposed standards, contact Ms. Ellen Ducey at (919) 541-5408, Coatings

and Consumer Products Group, Emission Standards Division (MD-13), U.S.

Environmental Protection Agency, Research Triangle Park, North Carolina

27711.

SUPPLEMENTARY INFORMATION:

Regulated entities

Entities potentially regulated by this action are those who have

the potential to supply products which emit VOC and are listed in

Sec. 183(e) of the CAA in the following regulated categories and

entities:

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Category Examples of regulated entities

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Manufacturer........................ Source that produces, packages, or

repackages architectural coatings

for sale or distribution in the

U.S.

Importers........................... Source that brings architectural

coatings from a location outside

the U.S. into the U.S. for sale

or distribution within the U.S.

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This table is not intended to be exhaustive, but rather provides a

guide for readers regarding entities likely to be regulated by this

action. This table lists the types of entities that the EPA is now

aware could potentially be regulated by this action. Other types of

entities not listed in the table could also be regulated. To determine

whether your facility is regulated by this action, you should carefully

examine the applicability criteria in Sec. 59.400 of the rule. If you

have questions regarding the applicability of this action to a

particular entity, consult the person listed in the preceding

FOR FURTHER INFORMATION CONTACT section of this preamble.

The regulatory text of the proposed rule is not included in this

Federal Register notice, but is available in Docket No. A-92-18 (see

ADDRESSES for information about the docket). The proposed regulatory

language is also available on one of the EPA's Technology Transfer

Network (TTN) electronic bulletin boards.

The TTN provides information and technology exchange in various

areas of air pollution control. The TTN contains 18 electronic bulletin

boards, and the following five items can be obtained through the Clean

Air Act Amendments bulletin board in the section called Recently Signed

Rules:

(1) ``FACT SHEET: Proposed Air Regulations for Architectural

Coatings (1995).''

(2) Federal Register notice for this preamble: ``National Volatile

Organic Compound Emission Standards for Architectural Coatings'' (this

document).

(3) Regulatory text for the proposed rule.

(4) ``Architectural Coatings--Background for Proposed Standards,''

(EPA-453/R-95-009a).

(5) Information Collection Request document for the proposed

standards: ``Reporting and Recordkeeping Requirements for National VOC

Emission Standards for Architectural Coatings,'' November 29, 1995.

The TTN is accessible 24 hours per day, 7 days per week except

Monday morning from 8:00 a.m. to 12:00 p.m. when the system is down for

maintenance and back up. The service is free, except for the cost of a

phone call. Dial (919) 541-5742 for up to a 14,400 bits per second

(bps) modem. If more information on the TTN is needed, call the help

desk at (919) 541-5384.

The information presented in this preamble is organized as follows:

I. Background

A. Clean Air Act Requirements

B. Regulatory Background

C. Supporting Documentation for the Proposed Standards

II. Summary of Proposed Standards

A. Applicability of the Standards

B. Regulated Entities

C. VOC Levels

D. Compliance Requirements

E. Labeling Requirements

F. Recordkeeping

G. Reporting

H. Test Methods

I. Variance

III. Summary of Impacts

A. Environmental Impacts

B. Energy Impacts

C. Cost and Economic Impacts

D. Cost-Effectiveness

IV. Rulemaking Decision Process

A. Legislative Authority

B. Regulatory Negotiation Procedure

V. Rationale

A. Applicability

B. Regulated Entities

C. Selection of Best Available Controls (BAC)

D. Exceedance Fee Approach

E. Low Volume Categories/Exemption

F. Special Provisions

G. Labeling and Public Information Requirements

H. Selection of the Recordkeeping and Reporting Requirements

I. Test Methods

J. Alternative Regulatory Approaches

K. Solicitation of Comments

VI. Future Phase Under Consideration

VII. Administrative Requirements

A. Public Hearing

B. Executive Order 12866

C. Paperwork Reduction Act

D. Regulatory Flexibility Act

E. Unfunded Mandates

F. Enhancing the Intergovernmental Partnership under Executive

Order 12875.

I. Background

A. Clean Air Act Requirements

Exposure to ground-level ozone is associated with a wide variety of

human health effects, agricultural crop loss, and damage to forests and

ecosystems. The most thoroughly studied health effects of exposure to

ozone at elevated levels during periods of moderate to strenuous

exercise are the impairment of normal functioning of the lungs,

symptomatic effects, and reduction in the ability to engage in

activities that require various levels of physical exertion. Typical

symptoms associated with acute (one to three hour) exposure to ozone at

levels of 0.12 parts per million (ppm) or higher under heavy exercise

or 0.16 ppm or higher under moderate exercise include cough, chest

pain, nausea, shortness of breath, and throat irritation.

Ground-level ozone, which is a major component of ``smog,'' is

formed in the atmosphere by reactions of VOC and oxides of nitrogen

(NOX) in the presence of sunlight. In order to reduce ground-level

ozone concentrations, emissions of VOC and NOX must be reduced.

Section 183(e) of the CAA addresses VOC emissions from the use of

consumer and commercial products. It requires the EPA to study VOC

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emissions from the use of consumer and commercial products, to report

to Congress the results of the study, and to list for regulation

products accounting for at least 80 percent of VOC emissions resulting

from the use of such products in ozone nonattainment areas.

Accordingly, in the March 23, 1995 Federal Register (60 FR 15264), the

EPA announced the availability of the ``Consumer and Commercial

Products Report to Congress'' (EPA-453/R-94-066-A), and published the

consumer and commercial products list and schedule for regulation.

Architectural coatings are in the first group of products to be

regulated by March 1997. This listing and prioritization are not final

Agency actions, and the EPA requests comment on the placement of

architectural coatings on the list and the priority assigned to these

coatings.

B. Regulatory Background

Architectural coatings are included under the definition of

consumer and commercial products because the definition under Section

183(e) of the CAA specifically includes paints, coatings, and solvents.

Section 183(e) of the CAA requires that the first group of consumer and

commercial products (i.e., those with highest priority for regulation)

be regulated within two years after publication of the regulatory

schedule. As mentioned previously, architectural coatings are in the

first group of consumer and commercial products to be regulated and,

therefore, must be regulated by March 1997.

Because preliminary information indicated that the architectural

coatings category is a sizable contributor to ozone levels in

nonattainment areas, it seemed probable that this category would be a

high priority for regulation. In 1992, the EPA initiated a regulatory

negotiation to address architectural coatings (see section IV.B for a

discussion of the negotiation). Throughout this process, the EPA

maintained that if the final results of the study of consumer and

commercial products varied from preliminary estimates, the EPA's

decision to include architectural coatings in the first group of

categories to be regulated could change. The study indicated that the

VOC emissions from consumer and commercial products represent

approximately 28 percent of all manmade VOC emissions. The

architectural coatings category is one of the largest consumer and

commercial product categories, accounting for about nine percent of the

emissions of VOC from all consumer and commercial products. Based on

evaluation of criteria developed under Section 183(e) of the CAA,

architectural coatings were placed in the first group of products to be

regulated. The criteria that contribute to the prioritization of

architectural coatings in the first group of consumer and commercial

products to be regulated include the availability of alternatives, the

cost-effectiveness of controls, and the quantity of VOC emissions in

ozone nonattainment areas. Further details about the criteria used to

prioritize consumer and commercial product categories for regulation

are available in the report to Congress.

Architectural coating regulations are already in place in a number

of States, and many other States are in the process of developing

regulations. For the companies that market architectural coatings in

different States, trying to fulfill the differing requirements of State

rules has created administrative, technical, and marketing problems. A

Federal rule is expected to provide some degree of consistency,

predictability, and administrative ease for the industry. In addition,

State representatives have recommended that the EPA develop and

implement Federal control measures. This is because a national rule

helps reduce compliance problems associated with noncompliant coatings

being transported into nonattainment areas from neighboring areas and

neighboring States. Also, a national rule will enable States to obtain

needed emission reductions from this sector in the near term, without

having to expend their limited resources to develop similar rules in

each State.

C. Supporting Documentation for the Proposed Standards

The architectural coating BID (EPA 453/R-95-009a) contains some

supporting documentation for this proposal. It contains a product

category description, an industry profile, a discussion of control

measures, and a description of the expected emission reductions. Other

supporting information for this proposed regulation includes existing

State regulations, regulatory negotiation presentation material,

meeting summaries, survey data, technical memoranda including the

economic impact analysis, and the report to Congress on consumer and

commercial products. This information is contained in the docket and is

available to the public as described above.

II. Summary of Proposed Standards

The proposed standards are summarized below. The rationale for the

regulatory decisions made in developing these standards is provided in

section V.

A. Applicability of the Standards

The provisions of the proposed rule apply to all architectural

coatings that are manufactured or imported for sale or distribution in

the United States on or after April 1, 1997. An architectural coating

is defined in the proposed rule as ``a coating recommended for field

application to stationary structures and their appurtenances, to

portable buildings, to pavements, or to curbs.''

Category definitions in the proposed rule, such as ``exterior

flats'' or ``industrial maintenance coatings,'' are a subset of

architectural coatings. A coating must first meet the general

definition of an architectural coating to be subject to the provisions

of the proposed rule.

The proposed standards do not apply to the following architectural

coatings:

(1) Coatings manufactured exclusively for sale outside the United

States;

(2) Coatings manufactured or imported prior to April 1, 1997;

(3) Coatings supplied in nonrefillable aerosol containers;

(4) Coatings that are collected and redistributed at community-

based paint exchanges; and

(5) Coatings sold in containers with capacities of 1 liter or less.

B. Regulated Entities

Regulated entities in this proposal are limited to architectural

coating manufacturers and importers as defined below.

Architectural coating importer (or importer) means a company,

group, or individual that brings architectural coatings from a location

outside the United States into the United States for sale or

distribution within the United States.

Architectural coating manufacturer (or manufacturer) means a

company, group, or individual that produces, packages, or repackages

architectural coatings for sale or distribution in the United States. A

company, group, or individual that repackages architectural coatings as

part of a community-based paint exchange and does not produce, package,

or repackage any other architectural coatings for sale or distribution

in the United States is excluded from this definition.

C. VOC Levels

The proposed rule is centered around VOC content levels for 55

individual architectural coating categories. Manufacturers and

importers must limit the VOC content of subject coatings to the VOC

levels in Table 1, which are effective April 1, 1997 and thereafter.

As shown in Table 1, the categories of low solids stains and low

solids wood

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preservatives have different units for the VOC content level. The VOC

content for these categories is expressed in grams of VOC per liter of

coating thinned to the manufacturer's maximum recommendation, including

water and exempt compounds. This is because, unlike conventional

coatings, which achieve a film-build, these stains and wood

preservatives are not applied to achieve a certain thickness of solid

film, but rather to affect penetration of the stain or wood

preservative. For these low solids coatings, the assumption that

coverage of the coating is dependent on the volume of solids in the

coating is not valid. The volume of the coating (which must include at

least 50 percent water in the volatile fraction) determines coverage.

For this reason, the VOC content level is determined ``including water

and exempt compounds.''

A coating is subject to the VOC content level for the category in

Table 1 that describes the coating's recommended use, appearance

characteristics, and/or resin type. If a coating meets the definition

of an architectural coating and is subject to the proposed rule, it

must be identified by the manufacturer or importer to be defined under

at least one of the categories listed in Table 1. If a coating does not

meet any of the other category definitions besides ``flat'' or

``nonflat,'' it would be categorized in either the flat or nonflat

category depending on its gloss level. These default categories

generally require lower VOC content levels than other categories in

Table 1. If a coating is marketed in more than one of the listed

coating categories, compliance is required with the lowest applicable

VOC content level except for the following:

(1) High temperature coatings that may also be suitable for use as

metallic pigmented coatings are subject only to the VOC level for high

temperature coatings;

(2) Lacquer sanding sealers that may also be suitable for use as

sanding sealers in conjunction with clear lacquer topcoats are subject

only to the VOC level for lacquer sanding sealers;

(3) Metallic pigmented coatings that may also be suitable for use

as roof coatings, industrial maintenance coatings, or primers are

subject only to the VOC level for metallic pigmented coatings;

(4) Shellacs that may be marketed as primers, sealers, or

undercoaters are subject only to the VOC level for shellacs;

(5) Fire-retardant/resistive coatings that may be suitable for use

as any other architectural coatings are subject only to the VOC level

for fire-retardant/resistive coatings;

(6) Pretreatment wash primers that may be suitable for use as

primers are subject only to the VOC level for pretreatment wash

primers; and

(7) Industrial maintenance coatings that may also be primers are

subject only to the VOC level for industrial maintenance coatings.

These exceptions were developed to clarify the applicable VOC level

in situations where inherent overlap exists between category

definitions, and the least stringent VOC level is meant to apply.

Manufacturers or importers of ``recycled'' architectural coatings

collect, reprocess, and market coatings that contain a percentage of

post-consumer coating product. Such use is environmentally beneficial

because it reduces the magnitude of waste from architectural coatings.

Manufacturers and importers of recycled coatings are given the option

of calculating an ``adjusted VOC content.'' The ``adjusted VOC

content'' provides some credit for the amount of post-consumer material

contained in the coating. The EPA is providing this credit to encourage

recycling of unused paint. The ``adjusted VOC content'' is determined

by multiplying the percentage of post-consumer content of the coating

by the VOC content of the recycled coating, which can then be

subtracted from the VOC content of the recycled coating. An explicit

equation for the calculation is in the proposed rule.

D. Compliance Requirements

1. Compliance Dates

The compliance date for all manufacturers and importers is April 1,

1997. In draft versions of the proposed rule, the compliance date for

small manufacturers and small importers was January 1, 1998. Small

manufacturers and small importers were defined as manufacturers and

importers with annual gross revenues in 1995 of less than $10 million,

and total gross revenues in 1995 from sales of all products of less

than $50 million. This extra compliance time has been eliminated from

the proposed rule due to the inclusion of less stringent VOC levels for

some of the largest categories of architectural coatings, and the

inclusion of a variance provision described in sections II.I and V.F.

These provisions are expected to provide sufficient compliance

flexibility needed by small manufacturers. However, the EPA requests

comment on whether the final rule should include the small manufacturer

compliance extension. If such a provision were included, the VOC

reduction achieved by the proposed rule in 1997 would be reduced from

20 percent to approximately 15 percent. The EPA also requests comment

on the adequacy of the compliance lead time for all affected sources.

Comments supporting extra compliance time for all manufacturers and

other affected sources should include supporting data providing

economic and/or technological justification.

2. Compliance Methods

Compliance with the VOC content levels in the proposed rule is to

be determined on a coating-by-coating basis. To determine compliance

with the VOC levels in Table 1, manufacturers or importers would first

be required to determine the coating category, the applicable VOC

level, and the VOC content for each coating product manufactured or

imported. An initial report is required for all manufacturers and

importers subject to the rule. Other labeling, recordkeeping, and

reporting requirements are summarized in sections II.E, II.F, and II.G,

respectively. Test methods to be used to determine VOC content of the

coatings are described in section II.H.

E. Labeling Requirements

With the exception of low solids stains and low solids wood

preservatives, containers of all subject coatings must bear labels or

lids that include the following information:

(1) The date of manufacture or a code indicating the date of

manufacture;

(2) The maximum VOC content of the coating in the container,

displayed in units of grams of VOC per liter of coating thinned to the

manufacturer's maximum recommendation, excluding the volume of any

water, exempt compounds, or colorant added to tint bases; and

(3) A statement of the manufacturer's recommendation regarding

thinning with organic solvents. Containers of low solids stains and low

solids wood preservatives must bear labels or lids that include the

following information:

(1) The date of manufacture or a code indicating the date of

manufacture;

(2) The maximum VOC content of the coating in the container,

displayed in units of grams of VOC per liter of coating thinned to the

manufacturer's maximum recommendation, including the volume of any

water and exempt compounds; and

(3) A statement of the manufacturer's recommendation regarding

thinning with organic solvents.

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Containers of industrial maintenance coatings, in addition to the

labeling requirements for all subject coatings, must include on the

container label or lid the phrase ``NOT INTENDED FOR RESIDENTIAL USE.''

Containers of recycled architectural coatings, in addition to the

labeling requirements for all subject coatings, must include on the

label or lid a statement of the percentage, by volume, of post-consumer

coating content. This prerequisite must be met to be able to determine

compliance using an ``adjusted VOC content.''

The EPA considered requiring the following statement on every label

or lid of architectural coatings: ``This architectural coating contains

volatile organic compounds that will be emitted to the ambient air

during use and, under certain environmental conditions, these compounds

may contribute to the formation of ground-level ozone, an air pollutant

and major component of urban smog.'' As an alternative to this

requirement, the EPA is considering undertaking an educational effort

directed at informing the public about the role of VOC emissions from

architectural coatings in the formation of ground-level ozone. The EPA

requests comment on whether an outreach effort would be as effective an

approach as an educational statement on each container of architectural

coating.

The EPA is aware that many architectural coating labels currently

display information on the amount of coverage that the coating is

expected to provide. The EPA is considering requiring this information

to be displayed on the labels or lids of all architectural coating

containers. Both coating coverage and VOC content information are

necessary to allow a consumer to estimate and compare the expected

resulting VOC emissions from application of different coatings to

complete a particular job. This information on coating coverage would

allow consumers to make an informed choice between coatings. The EPA

requests comment on the feasibility of requiring coverage information

to be displayed on the label or lid of all architectural coating

containers subject to this rule.

F. Recordkeeping

Except for recycled coatings, there are no proposed recordkeeping

requirements. For recycled coatings, manufacturers and importers must

keep the following records for three years:

(1) The minimum percentage of post-consumer coating content for

each recycled coating product;

(2) Calculation of an adjusted VOC content that accounts for the

post-consumer coating content credit;

(3) The volume of coating received for recycling;

(4) The volume of coating received that was unusable;

(5) The volume of virgin materials; and

(6) The volume of the final recycled coating manufactured.

G. Reporting

Manufacturers and importers of coatings subject to the proposed

standard must file an initial report. The initial report must be

submitted by April 1, 1997 or within 180 days after becoming subject to

the requirements of the proposed standard, whichever is later. The

initial report must include the following information:

(1) Name and mailing address of the manufacturer or importer; and

(2) A list of categories from Table 1 in which coatings are

manufactured or imported.

For recycled coatings, manufacturers and importers must submit an

annual report by February 1 of the calendar year following the year in

which the coatings are introduced into commerce that includes the

following:

(1) The volume of coating received for recycling;

(2) The volume received that was unusable;

(3) The volume of virgin material used;

(4) The volume of the final recycled product; and

(5) The minimum post-consumer content of the coating.

Reporting requirements for the variance application are discussed

in II.I.

In cases where a code is used to indicate the date of manufacture,

all manufacturers and importers of architectural coatings must file an

explanation of each date code displayed on coating containers by April

1, 1997. Explanations of new codes must be filed within 30 days after

their first use.

H. Test Methods

For purposes of determining compliance with this rule, the VOC

content of each coating product manufactured or imported must be

determined using the EPA's Reference Method 24, ``Determination of

Volatile Matter Content, Water Content, Density, Volume Solids, and

Weight Solids of Surface Coatings,'' found in 40 CFR part 60, appendix

A. Analysis of waterborne coating VOC content determined by Reference

Method 24 must be adjusted as described in section 4.4 of Method 24.

Manufacturers and importers may use alternate methods for

determining coating VOC content if it can be demonstrated to the

Administrator's satisfaction that the method provides results

equivalent to or more accurate than those obtained using Reference

Method 24.

I. Variance

The proposed rule also allows manufacturers and importers of

architectural coatings to submit a written application to the

Administrator requesting a variance if, for reasons beyond their

reasonable control, they cannot comply with the requirements of the

proposed rule. The application must include the following information:

(1) The specific grounds for which the variance is sought;

(2) The proposed date(s) by which compliance with the provisions of

the rule will be achieved; and

(3) A compliance report reasonably detailing the method(s) by which

compliance will be achieved.

Upon receipt of the variance application, the Administrator will

hold a public hearing to determine whether, under what conditions, and

to what extent, a variance from the requirements of the proposed rule

is necessary and will be permitted.

The Administrator may grant a variance if the following criteria

are met:

(1) By complying with the proposed rule, the applicant would bear

unreasonable economic hardship;

(2) The public benefit of avoiding hardship to the applicant

outweighs the public interest in any increased emissions or air

contaminants that would result from issuing the variance; and

(3) The proposed compliance schedule can be reasonably implemented,

and compliance will be achieved as expeditiously as possible.

The approved variance order will designate a final compliance date

and a condition that specifies increments of progress necessary to

assure timely compliance. A variance shall end immediately upon the

failure (of the party to whom the variance was granted) to comply with

any term or condition of the variance.

III. Summary of Impacts

A. Environmental Impacts

This section contains a discussion of the incremental increase or

decrease in air pollution, water pollution, and solid waste generation

that would result from implementing the proposed standards.

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1. Air Pollution Impacts

The proposed standards would reduce annual nationwide emissions of

VOC from the use of architectural coatings by an estimated 96,000

megagrams (Mg) (106,000 tons) beginning in 1997. These reductions are

compared to the 1990 baseline emission estimate of 480,000 Mg (530,000

tons) and represent emissions that would occur in the absence of the

proposed standards.

Because the VOC emissions from architectural coatings include a

large class of compounds that are expected to be associated with a wide

spectrum of health effects, reductions in VOC from architectural

coatings would result in a decrease in the associated health effects.

Because many regulated VOC species are also hazardous air

pollutants (HAP), the proposed standards are expected to reduce some

HAP emissions from the use of architectural coatings. An increase in

the use of HAP in product formulation is not expected to occur as a

result of the proposed standards. Data on speciated VOC content from

the VOC Emissions Inventory Survey show no pattern of higher HAP

concentrations in lower VOC formulations.

2. Water and Solid Waste

The major compliance method for this rule will be the use of

compliant coatings. No adverse solid waste impacts are anticipated from

compliance with this rule. It is not expected that the disposal of

coatings as solid waste will increase as a result of this rule. In

fact, because the compliant (higher solids) coatings are more

concentrated, fewer containers will require disposal when the same

volume of solids is applied.

Some provisions in this proposed rule have the potential to reduce

the amount of coating discarded as solid waste. Recycling of coatings

may be encouraged through two provisions. The rule includes a provision

that allows an ``adjusted VOC content'' to be calculated for recycled

coatings for compliance purposes. This adjustment essentially allows a

higher VOC content standard for coatings that contain post-consumer

coating. The rule also exempts any coatings distributed through

community-based paint exchanges.

In cases where conversion from solventborne to waterborne coatings

is the method used to achieve compliance, an increase in wastewater

discharge may occur if waste waterborne coatings are discharged to

publicly owned treatment works.

B. Energy Impacts

No adverse energy impacts are anticipated from compliance with this

rule. No add-on controls are required.

C. Cost and Economic Impacts

By establishing a set of product-specific levels for VOC content,

the proposed regulations have cost implications for manufacturers and

consumers of the affected products. In 1997, manufacturers of

architectural coatings that do not meet the VOC levels in Table 1 will

be required to reformulate products or remove products from the market

(or participate in an alternative compliance mechanism such as an

exceedance fee). It is presumed that manufacturers will choose the

option that is most advantageous to them, but each option imposes

costs, some of which will be passed on to other members of society

(consumers) in the form of higher prices and some of which will be

borne directly by the manufacturers.

The cost for reformulating noncompliant products depends on the

level of effort required to develop a new product (e.g., research and

development and market testing expenditures) and how these expenditures

are incurred over time. Data on level of effort were provided to the

regulatory negotiation committee (see section IV.B for discussion of

the negotiation) for prototype reformulations, from which an annualized

cost estimate of approximately $17,772 (in 1991 dollars) per

reformulation was computed. This cost is assumed to be independent of

the annual sales volume of the product. Other costs and cost savings

associated with reformulation are likely, but could not be quantified.

Unquantified costs include material cost changes and changes in

disposal costs.

An economic impact analysis of the proposed regulatory requirements

was performed. Potential cost, price, and output effects for the

architectural coatings industry were examined for the proposed table of

VOC levels. The economic analysis also evaluated the option of

utilizing an exceedance fee, which is an alternative compliance

mechanism that is discussed in detail in section V.D. However, the

analysis did not consider the impact of any variances or low volume

exemptions that may be granted to reduce impacts.

The cost analyses performed were based on data from the 1990 VOC

Emissions Inventory Survey. These survey data represented approximately

75 percent of the total volume of architectural coating products

produced in 1990. For the products in the survey population, the

estimated average annualized cost, if all products exceeding the VOC

levels were reformulated to meet the standard, is $260 per ton of VOC

emissions reduction (in 1991 dollars). This value is extrapolated to

the national population for the cost and economic analysis.

With exceedance fees as an option, it was estimated that

manufacturers would choose to pay fees for approximately 12 percent of

products instead of incurring reformulating costs or exiting the market

in 1997. These products only account for about 2 percent of industry

output, so the foregone emissions reduction by allowing the fee is less

than 0.8 percent (2,308 tons) of estimated baseline emissions. However,

the fee reduces national reformulation costs by roughly 50 percent.

Thus, it is anticipated that the exceedance fee provision could allow

significant cost savings while sacrificing little in the way of

emissions reduction.

The estimated market effects from the proposed standards are

relatively slight. In 1997, approximately one million liters of

architectural coating products, accounting for less than one-tenth of

one percent of industry product volume, are projected to withdraw from

the market. Price effects in each market ranged from no effect to an

increase of less than two cents per liter, which is still less than a

one percent increase of the baseline price. Average price and quantity

effects across all market segments were each less than one-tenth of one

percent of baseline values.

Although relatively little product volume is projected to be

withdrawn or subject to an exceedance fee, the remaining volume is

subject to reformulation and bears the associated cost. The estimated

cost to society of the regulation is approximately $25.0 million per

year (evaluated in 1991 dollars, excluding reporting and recordkeeping

costs, and costs to the EPA). These cost estimates amount to roughly

0.4 percent of baseline revenues for the industry. With the exceedance

fee alternative compliance mechanism, the estimated annual cost

decreases to $13 million, which equates to a savings of $12 million.

Resource constraints preclude an evaluation of foreign trade

impacts. However, according to a 1992 study by SRI International,

importers accounted for less than one percent of total coating sales

volume in 1990. Due to importers' small market presence and the lack of

detailed product data on imported coatings, importers have not been

included in the cost and economic impacts analysis. However, all of the

[[Page 32735]]

flexible compliance options that are available for manufacturers are

also available for importers. The EPA solicits comment on the potential

cost and economic impacts of this rule on importers.

As discussed earlier in this section, the estimated national cost

for the regulation is based on information developed by industry

representatives during the regulatory negotiation. The assumption in

estimating these costs was that coating technologies would need to be

researched and developed in the laboratories of resin manufacturers/

suppliers and paint manufacturers in order to meet VOC requirements.

Although the proposal is significantly less stringent than the

potential requirements discussed during negotiations (which would have

been implemented in three phases), the EPA has relied on these same

reformulation cost estimates for calculating the national cost of the

proposed rule. Given that the rule has similar VOC content requirements

to State rules which have been enforced since 1990, the EPA believes

the reformulation estimates used may be overstated. Since the proposed

rule is implementing available resin technologies, the cost to comply

for those manufacturers needing to reformulate their higher VOC

coatings is expected to be partially reduced through the assistance of

resin manufacturers/suppliers. Upon request, most resin suppliers are

willing to share information and sample low VOC coating formulations

with interested paint manufacturers, both large and small. In addition,

another limitation in the cost data is that no distinction for

reformulation cost is made between categories (i.e., the reformulation

cost in one category is the same as the reformulation cost in any other

category), or in relation to the required VOC content reduction (i.e.,

it does not distinguish between coatings at different VOC levels above

the limit). The EPA requests comment and technical information on

previous (since 1990) or potential reformulation costs. Commenters on

this topic should provide detailed information specific to a given

category and VOC content level change (e.g., total number of

noncompliant products within each category, VOC content and sales

information for each noncompliant product, the applicable category, and

the estimated cost of reformulation). The EPA also requests historic

information about product reformulations and reformulation costs in

response to State and local architectural coating regulation. In

addition, information is requested on any changes in variable (e.g.,

raw material) costs or disposal costs associated with manufacturing

coatings to meet the proposed VOC levels.

D. Cost-Effectiveness

The EPA often compares the relative cost of different measures for

controlling a pollutant by calculating the ``cost-effectiveness'' of

the measures. Using the EPA's traditional calculation methodology, the

cost-effectiveness of a regulation that applies nationwide is based on

a comparison of national costs and nationwide emission reductions. This

comparison is expressed as the cost per Mg (or ton) of emissions

reduced. Using social cost and emission reduction figures presented

earlier in this section of the preamble, the nationwide cost-

effectiveness of the proposed regulation is $260 per Mg ($237 per ton).

Alternative ways to calculate a measure of the ``cost-

effectiveness'' of the regulation have been suggested by others. One

alternative would be to calculate cost-effectiveness on the basis of

the nationwide cost of the regulation ($25 million for the proposed

regulation) and the VOC reduction achieved in ozone nonattainment

areas. The stated rationale for this approach is that cost-

effectiveness measures should be designed in a way that best represents

the objective of the regulatory action. In this case, for example, a

major objective, though not the only objective, of these regulations is

the control of ozone formation in nonattainment areas. By establishing

nationwide standards, the cost of achieving emission reductions in

ozone nonattainment areas during the ozone seasons requires nationwide

expenditures during all seasons of the year, including expenditures

year-round in areas currently in attainment with the current standard.

These nationwide emission reductions--including emission reductions

outside of nonattainment areas and out of the ozone season--may or may

not contribute to efforts to limit ozone in nonattainment areas,

depending on whether they participate in ozone transport from one area

to another.

The proposed standard will achieve 42,341 Mg of VOC emission

reductions in ozone nonattainment areas. Thus, the cost-effectiveness

of the rule in limiting VOC emissions in nonattainment areas would be

$590/Mg ($538/ton). It has been suggested that cost-effectiveness could

also be calculated considering the seasonality of ozone formation, and

the EPA requests comment on this approach.

While such an approach offers a measure of the cost of emission

reductions in nonattainment areas, the EPA sees significant drawbacks

to this approach. First, cost-effectiveness figures would no longer

provide a consistent basis for comparison of the relative cost of

different control measures or regulations considered at different

points in time. Because the number and location of nonattainment areas

changes frequently, the initial calculation of the cost-effectiveness

of a rule would depend upon when it was issued. The EPA believes it is

important that cost-effectiveness be calculated in a consistent manner

that allows for valid comparisons. Also, introducing new methodology

would tend to make new control measures appear superficially to be less

cost-effective than measures utilized in the past, simply because of a

change in well-established terminology.

Second, this alternative approach attributes all costs of the rule

to emission reductions achieved in nonattainment areas and no cost to

emission reductions achieved in attainment areas. By not including

emission reductions in attainment areas, the methodology assumes that

emission reductions in areas which attain the NAAQS for ozone have no

value. In fact, attainment areas often contribute to pollution problems

in nonattainment areas through the transport of emissions downwind.

Also, emission reductions in attainment areas help to maintain clean

air as the economy grows and new pollution sources come into existence.

Furthermore, measures to reduce emissions of VOC often reduce emissions

of toxic air pollutants.

Another alternative that has been suggested would be to calculate

not only the emission reductions but also the cost if the requirements

applied only in ozone nonattainment areas, perhaps through issuance of

control techniques guidelines (CTG). A request for comment and further

information on the use of a CTG is discussed in section V(J)(2) of this

notice.

The EPA requests comments on the traditional and alternative

methods discussed above to characterize the cost-effectiveness of this

regulation.

IV. Rulemaking Decision Process

A. Legislative Authority

Section 183(e) of the CAA gives the EPA the authority to establish

national standards to reduce VOC emissions from architectural coatings.

According to the CAA, regulations developed under this section shall

require best available controls (BAC). Best available

[[Page 32736]]

controls are defined in Section 183(e)(1)(A) as follows:

The term ``best available controls'' means the degree of

emissions reduction that the Administrator determines, on the basis

of technological and economic feasibility, health, environmental,

and energy impacts, is achievable through the application of the

most effective equipment, measures, processes, methods, systems, or

techniques, including chemical reformulation, product or feedstock

substitution, repackaging, and directions for use, consumption,

storage, or disposal.

Section V.C describes the EPA's determination of BAC for the proposed

regulation.

B. Regulatory Negotiation Procedure

1. Overview of the Regulatory Negotiation Process

The regulatory negotiation process is an alternative to the

traditional approach to rulemaking. Negotiations are conducted through

an advisory committee (hereafter ``the committee'') that consists of

representatives of the interests significantly affected by the outcome

of the regulation (e.g., industry, States, environmental groups, and

consumers). In this process, the EPA works closely with the members of

the committee to develop the regulation.

The goal of the committee is to attempt to reach consensus on

language or issues that can be used as the basis of a proposed rule. If

the committee fails to reach consensus, the EPA proceeds with its own

regulatory development approach.

2. History of the Architectural Coatings Regulatory Negotiations

The EPA recognizes that there are many issues and challenges in

developing, proposing, and promulgating a rule for this source

category. In early 1992, the EPA held three meetings with

representatives of the industry (including small and large

manufacturers), trade associations, resin suppliers, States, and

environmental groups to discuss the potential scope of the regulation

and issues, share information, determine data collection needs, and

assess whether a regulatory negotiation would be appropriate for this

industry.

On July 16, 1992, the EPA solicited comments on its intent to form

an advisory committee under the authority of provisions of the Federal

Advisory Committee Act (FACA), 5 U.S.C. app. II 9(c), and the

Negotiated Rulemaking Act (NRA), 5 U.S.C. Sections 581-590, to

negotiate a proposed regulation for architectural coatings, referred to

in the notice as AIM (architectural and industrial maintenance)

coatings. The EPA held a meeting in July 1992 to discuss the

feasibility of conducting regulatory negotiations to develop a

regulation for architectural coatings. Based on the interest of the

potentially affected parties and the EPA, the EPA decided to proceed

with the regulatory negotiation process. After publishing a notice of

establishment of the regulatory negotiation committee in the Federal

Register on October 2, 1992 (57 FR 45597), the first official

regulatory negotiation meeting was held in October 1992 (57 FR 45597).

The members of the regulatory negotiation committee represented the

affected industries, consumers, Federal agencies, State and local air

pollution control agencies, environmental groups, and labor

organizations. Regulatory negotiation meetings were held from October

1992 to February 1994. During the negotiation process, it became

evident that certain groups of committee members shared similar views

and interests. These groups were called ``caucuses.''

During the negotiations, most of the caucuses submitted proposed

regulations for review by the rest of the committee. Based on elements

from the caucus proposals and discussions, a number of ``frameworks''

for a potential regulation were prepared by the EPA and the facilitator

during the more than two years of negotiation. Despite these efforts,

the committee could not reach consensus on a regulatory framework.

Therefore, on September 23, 1994, the negotiations facilitator notified

each of the committee members that the regulatory negotiations were

concluded without consensus. Following this decision, the EPA continued

development of the rule. The EPA used the information obtained in the

negotiations to develop the proposed rule. The proposed rule

development was, therefore, assisted in part through the regulatory

negotiation. Specifically, information on the volume, VOC content, and

HAP content of coatings produced in 1990 was collected in the VOC

Emissions Inventory Survey conducted by industry. Categories and

definitions for architectural coatings were presented and discussed

both in caucus meetings and meetings of the entire committee.

V. Rationale

The following sections explain the rationale for selecting the

proposed standards.

A. Applicability

These proposed standards apply to all architectural coatings that

are manufactured or imported for sale or distribution in the United

States on or after April 1, 1997. Architectural coatings were

determined to be a significant source of VOC emissions in nonattainment

areas and were designated for regulation under the authority of Section

183(e) of the CAA.

In general, architectural coatings protect the substrates to which

they are applied from corrosion, abrasion, decay, ultraviolet light

damage, or the penetration of water. These coatings are recommended for

field application to stationary structures and their interior or

exterior appurtenances, portable buildings, pavement, and curbs. The

definition in the proposed regulation includes the term ``field

application'' and specifies ``stationary structures'' in order to

distinguish architectural coatings from those coatings applied at a

coating or recoating facility or other shop or maintenance facility.

Some architectural coatings have specialized functions. Concrete

form release compounds and concrete curing compounds are examples of

architectural coatings that are used during construction, rather than

being used for protecting or enhancing the finished structure. Fire-

retardant/resistive coatings and traffic marking coatings have

important public safety functions. Coatings may also increase the

aesthetic value of a structure by changing the color or texture of its

surface. Application of architectural coatings also decreases

maintenance costs associated with stationary structure replacement or

repair. Input received during negotiations from committee members was

used to take these economic, protective, safety, and aesthetic benefits

of architectural coatings into consideration in the development of

these proposed standards.

The proposed standards do not apply to some types of coatings.

There are exemptions for exported coatings, coatings manufactured or

imported prior to April 1, 1997, coatings that are sold in

nonrefillable aerosol containers, coatings that are collected and

redistributed at community-based paint exchanges, and coatings that are

sold in containers with a volume of one liter or less.

The purpose of Section 183(e) of the CAA is to control VOC

emissions that contribute to ozone nonattainment in the United States.

Because exported coatings do not contribute to VOC emissions in the

United States, and because the EPA has no legal or factual basis to

impose VOC control measures outside the United States, coatings

manufactured for the explicit purpose of export and which are in fact

exported

[[Page 32737]]

are exempt from the requirements of the proposed rule. Coatings

manufactured and imported prior to April 1, 1997 are exempted because

the compliance date for the proposed rule is April 1, 1997. An

exemption for coatings sold in nonrefillable aerosol containers is

included in the proposed rule because the EPA is addressing these

coatings separately under Section 183(e) authority. The reason is

because aerosol paint is considered a specialty paint product and

typically involves a specialized division within a paint company. In

addition, it is a complex category due to the many subcategories of

aerosol paint, and the range of options to reformulate include the

potential to change propellant formulations.

Community-based paint exchanges are programs in which the general

public may drop off and pick up post-consumer architectural coatings

(leftover paint), typically free of charge, and thereby reduce

household hazardous waste. The exchanges occur between users and not

manufacturers. Even though these coatings may be repackaged and the

proposed regulatory definition of ``manufacturer'' includes

repackagers, repackaging that occurs at community-based paint exchanges

is specifically excluded from the definition. These programs are

consistent with the EPA's pollution prevention policies and are

generally considered effective in minimizing waste. Because the EPA

wants to encourage this form of recycling, the EPA has excluded paints

exchanged in these programs from the proposed rule.

An exemption for products sold in containers with capacities of one

liter or less is included in the proposed rule as means for

manufacturers and importers to keep selected products on the market.

Similar exemptions are included in State regulations. Due to the

increased cost of packaging products in smaller size containers, and

the increased bulk of multiple containers, the EPA would not expect a

marked increase in the number of products sold in small volume

containers as a result of the exemption. No reporting or recordkeeping

would be required for this provision.

B. Regulated Entities

In contrast to traditionally regulated stationary sources that emit

VOC at a specific fixed location (e.g., a manufacturing plant), VOC

from architectural coatings are emitted wherever the products are used.

For this reason, regulating at the manufacturer and importer level is

the most efficient and least burdensome method of regulating the VOC

content of coatings, and would ultimately impact the VOC content of

architectural coatings at the distributor and end user level.

Regulated entities are defined under Section 183(e) to include

processors, wholesale distributors, and those entities that supply

manufacturers, processors, wholesale distributors, and importers.

However, regulated entities in this proposal are limited to

architectural coating manufacturers and importers.

The EPA is also considering including ``processors'' as a regulated

entity. Processors would be defined to include individuals who add

organic thinner to the coating in a commercial setting at the point of

application. Commercial settings would include industrial applications

of architectural coatings. This would allow the regulation to prohibit

an applicator from using organic solvents to thin a coating beyond the

manufacturer's recommendation. This is a concern because if an

applicator exceeds the maximum recommended thinning, expected VOC

reductions may not be achieved. The EPA requests comments on this

approach.

C. Selection of Best Available Controls (BAC)

The primary factors considered in determining BAC were

technological and economic feasibility, and environmental impacts.

Other factors, such as non-air-environmental impacts (solid waste and

water) and energy impacts, are expected to be minimal and therefore do

not vary significantly among various VOC control levels. Health impacts

are expected to parallel environmental impacts in terms of directional

benefit (i.e., as the environment improves, health improves).

The process of determining BAC for architectural coatings presented

a new challenge for the EPA. In the past, control levels for VOC

emissions from coatings were often established based on the ability to

use add-on controls. For architectural coatings, the method for

achieving VOC reduction is through reformulation, which is a pollution

prevention technique. Reformulation could involve minor adjustments in

coating formulation or larger adjustments involving a change in resin

technology.

The EPA considered many factors in evaluating economic and

technological feasibility of VOC levels (i.e., degree of

reformulation). These include State and local VOC requirements, VOC

content and sales information, technical information, performance

considerations, cost considerations, market impacts, and stakeholder

positions.

The discussion in section V.C.1 focuses on the general process used

to determine categories and VOC levels that constitute BAC. The

discussion in V.C.2 describes the selection of BAC. The determination

of what constitutes BAC by April 1, 1997 involved consideration of what

is economically and technologically feasible in light of the lead time

available for compliance.

1. Process for Selection of BAC

The process of determining BAC began with the collection of

information from existing State and local architectural coating

requirements. The EPA focused generally on existing categories and

associated VOC limits in State architectural coating rules to determine

what categories and VOC levels might constitute the degree of emissions

reduction that represents BAC. Since California has been regulating

architectural coatings for almost two decades and generally has the

most stringent VOC limits in the country, some California air quality

management district regulations were gathered and the record underlying

these regulations was analyzed. The EPA recognizes that what is

achievable now in California cannot necessarily be used to extrapolate

what is achievable nationwide in 1997. Adequate consideration must be

given to lead time, and any other factors that may influence the

ability to apply requirements nationwide (e.g., climate

considerations).

After analyzing existing standards, the EPA reviewed the data from

the Emissions Inventory Survey that was developed during the regulatory

negotiation process. The regulatory negotiation committee developed the

survey that was administered through an industry trade association.

This survey accounted for roughly 75 percent of the volume of

architectural coatings sold in 1990. The survey data included

information on the volume and VOC content of coatings. Manufacturers

were surveyed primarily using a system of coating categories that form

the basis for existing rules in several California districts. The

survey data were used to identify the minimum VOC contents needed for

certain applications and/or resin types as well as to determine the

feasibility of establishing lower VOC levels for various categories

based on the distribution of coating sales with respect to different

VOC content levels.

The EPA also relied on technical input and information received

during the regulatory negotiation process to

[[Page 32738]]

determine BAC. The EPA considered information that was submitted to the

docket by coating manufacturers and other members of the general public

during the course of the regulatory negotiations, and definitions for

categories found in other EPA regulations. The expertise of the EPA's

engineering staff also was used to develop the appropriate definitions

that would minimize overlap and specify characteristics so that

manufacturers and enforcement personnel can identify the applicable

category for each coating on the market.

The Emissions Inventory Survey did not provide data to answer the

question as to whether coatings at a given VOC level can meet all the

performance needs within a particular category. Ideally, coating

performance data in addition to VOC content and sales data would have

been gathered to better aid this type of determination. Collection of

performance data, however, is complicated due to the subjective nature

of performance requirements. ``Acceptable'' performance is difficult to

evaluate. In evaluating potential emissions of VOC into the

environment, acceptable performance means durable coatings with

qualities acceptable to the consumer that would maximize the interval

between required repaintings. These acceptable qualities can vary

significantly depending on the consumer and the coating category. For

example, durability might be of limited value in evaluating house paint

since a house paint may be painted over due to extraneous factors such

as resale of the house or redecorating long before the coating begins

to fail. For coatings used in an industrial setting, such as high

temperature and industrial maintenance coatings, repainting is more

dependent on durability considerations. A variety of performance levels

within most coating categories presently exist in the marketplace and

will continue to exist after regulation.

Because there is no consensus within the architectural coating

industry on standards by which to evaluate acceptable coating

performance, it was not obvious what performance data could be gathered

to permit comparison. The EPA relied to some extent on input from the

negotiation committee to determine the BAC VOC level within each

coating category that would allow customer performance needs to be met.

Beyond that, the EPA also relied on the survey results as support for

its conclusions about the achievability of various VOC levels in light

of performance needs. Although the EPA recognizes that the authority

under Section 183(e) does not limit BAC determination to coatings

available in the marketplace today, availability and the fact that

customers are purchasing coatings at a particular VOC content level to

meet their performance needs were significant factors in the EPA's BAC

determination process.

While low VOC coatings are available today which meet the proposed

coating VOC limits, there continues to be debate over the performance

characteristics and perceived limitations of low VOC architectural

coatings. This issue was raised by some industry representatives during

development of the proposed rule. Specifically, it has been argued that

low VOC content levels may be counterproductive if the use of coatings

with reduced VOC results in more coating applied, more thinners needed,

and more frequent recoating, and consequently, more emissions. This

argument has been made broadly, without detail as to the VOC content

levels to which it pertains or the categories involved. The EPA is

aware of numerous examples of low VOC systems which perform better than

the traditional higher VOC systems and which result in less emissions.

The EPA requests documentation, test results, or factual evidence which

either supports or refutes claims about performance changes in coatings

with VOC contents that comply with the proposed standards.

In addition, the EPA relied on the background and expertise present

within the Agency to make decisions regarding category selection and

corresponding VOC content levels. The EPA has developed VOC standards

and guidance documents for different sectors of the paint industry

since 1977. The EPA has expertise in analysis of control techniques for

coatings and in developing test methods for coatings, including the

test method used to determine the VOC content of coatings (Method 24).

The BAC selection process involved both selection of categories and

determination of VOC content levels. These components are linked in a

determination of what degree of emissions reduction represents BAC.

Decisions to subdivide a given category into more specific

subcategories can be a direct consequence of the VOC content levels

under consideration. For example, the industrial maintenance coating

category is fairly broad and encompasses many industrial coating

applications. As the technological and economic feasibility of lower

VOC content levels are considered for the industrial maintenance

category, coatings within a particular application may not be able to

meet the VOC level under consideration. Rather than establish the VOC

level high enough to allow this particular application, the category

can be subdivided to create another category that would then allow the

achievable VOC content for industrial maintenance to be lower. For

example, the ``high temperature coating'' category was created to allow

a more stringent VOC level for the broader category of ``industrial

maintenance coatings,'' which otherwise would have included high

temperature coatings. Rather than raise the VOC content level for all

the industrial maintenance coatings to ensure that high temperature

coatings could achieve this level, the EPA created a separate, less

stringent VOC level for high temperature coatings while maintaining the

more stringent level achievable for other types of industrial

maintenance coatings. Thus, it is possible to achieve lower VOC levels

and greater emission reductions while still meeting the performance

needs of some coating categories by further subdividing particular

categories. Stains and wood preservatives have both been subdivided

into clear and semitransparent, and opaque coatings. This subdivision

of categories helps preserve markets while still achieving emission

reductions.

During development of the proposed rule, some industry

representatives provided requests for particular categories to be

created and given a higher VOC level than the VOC level for the more

general category in which it would otherwise be grouped. Categories for

which adequate justification was presented appear in the proposed rule.

However, in cases where significant overlap between the requested

category and other existing categories was apparent and the overlap

could be expected to undermine the degree of emission reductions

achieved, the category was not included in the proposal. The categories

and definitions in the proposed rule are roughly consistent with the

categories and definitions presented during negotiations.

For the BAC determination, the EPA generally focused on the coating

categories that contribute the largest amount of VOC to the

environment.

2. Determination of BAC

A primary consideration affecting the selection of VOC content

levels that EPA believes represent BAC was the need expressed by many

industry and regulatory stakeholder representatives to proceed with

development of these standards as quickly and expeditiously

[[Page 32739]]

as possible. State and local agencies and representatives of industry

who market products in different States have expressed concern about

the lack of Federal VOC standards for architectural coatings. For this

reason, the EPA has focused on establishing VOC levels that would take

effect in 1997. An expedited rulemaking process for this proposed rule

is necessary to fulfill the expectations and reliance of the States and

to give coating manufacturers timely notice of requirements. Therefore,

EPA based the BAC determination on VOC content levels that could be

achieved in a short time frame (by April 1, 1997). As discussed in

section II.D.1 of this preamble, EPA requests comment on the adequacy

of this compliance lead time.

The EPA attempted to gather specific information with which to

determine the technological and economic feasibility of different VOC

limits that would take effect in 1997. The following paragraphs discuss

this information and how EPA used it to determine BAC.

Fourteen categories which appear in the proposed rule and which are

found in existing State standards were included in a list of categories

developed during the regulatory negotiation referred to as ``low

volume.'' These are anti-graffiti coatings, bituminous coatings and

mastics, bond breakers, concrete curing compounds, fire-retardant/

resistive coatings (clear/pigmented), form release compounds, graphic

arts coatings (sign paints), high temperature coatings, magnesite

cement coatings, mastic texture coatings, multi-color coatings, pre-

treatment wash primers, sanding sealers, and swimming pool coatings.

The VOC content levels in Table 1 for these categories are in the upper

range of the VOC content limits found in existing State rules. The

industry argued that these coatings represent unique compositions and

specialized uses, and the imposition of lower VOC levels on these

categories would probably result in an adverse economic impact on the

manufacturers and may even have a disproportionate effect on small

manufacturers. Because these coatings are used in relatively low

volumes and in a limited range of circumstances, the EPA has determined

that it should set VOC levels for these coatings based on the

justification presented by the industry and that additional effort to

collect more data is not warranted in the development of this proposal.

After proposal, the EPA plans to reevaluate the feasibility of more

stringent VOC levels for these categories as part of the joint study

with industry that is described in section VI.

In addition to the 14 ``low volume'' categories discussed, the VOC

Emissions Inventory Survey contains 12 categories that represent about

75 percent of the VOC emissions (industrial maintenance, interior

nonflat, exterior nonflat, clear and semitransparent stains, clear

waterproofing sealers and treatments, interior flat, roof coatings,

primers and undercoaters, traffic markings, exterior flat, varnishes,

and lacquers). For these 26 categories and an additional 15 categories

contained in the survey, sales and VOC content data indicate that

coatings are available that can achieve the VOC content levels listed

in Table 1. The fact that the survey reveals that coatings are

available that meet today's proposed standard is one factor that

supports the conclusion that these coatings are economically and

technologically feasible.

During regulatory negotiation discussions of potential VOC content

limits, 17 additional specialty coating categories were added to the

list of categories under consideration. These categories were generally

offered as a result of discussion of specific VOC content levels for

more general and broad categories such as industrial maintenance

coatings. These specialty coating categories did not appear in any

existing State architectural coating regulation and, excepting high

performance architectural coatings, were not categories for which data

were collected in the VOC Emissions Inventory Survey. These 17

categories include alkali-resistant primers, antenna coatings,

antifouling coatings, chalkboard resurfacers, concrete protective

coatings, extreme high durability coatings, floor coatings, flow

coatings, heat reactive coatings, high performance architectural

coatings, impacted immersion coatings, lacquer stains, nonferrous

ornamental metal lacquers and surface protectants, nuclear coatings,

repair and maintenance thermoplastic coatings, rust preventative

coatings, and thermoplastic rubber coatings and mastics.

Fourteen of these 17 additional specialty coating categories appear

in today's proposal because discussion during negotiations and/or

petitions from individual companies provided support for inclusion of

these categories and an associated VOC content level separate from the

broader category and level to which they otherwise would have been

assigned. No data were available to the EPA to conclude that lower VOC

content levels for these categories would represent BAC.

Three of these 14 categories which appear in the rule, antenna

coatings, antifouling coatings, and nuclear coatings, were assigned VOC

content levels consistent with those found in the EPA's National

Emission Standards for Hazardous Air Pollutants for Shipbuilding and

Ship Repair (59 FR 62681). These VOC levels were based primarily on

information contained in the EPA's Alternative Control Techniques (ACT)

Document: ``Surface Coating Operations at Shipbuilding and Ship Repair

Facilities,'' EPA-453/R-94-032.

Two of the three specialty categories that do not appear in the

proposed rule are alkali-resistant primers and lacquer stains. Although

the EPA considered inclusion of alkali-resistant primers based on

requests from some manufacturers, it was excluded for two reasons.

Significant overlap between alkali-resistant primers and the more

general primer category is apparent, and comments were received about

the ability of latex coatings (lower VOC coatings) to perform the

function of alkali-resistant primers. For lacquer stains, although

arguments were presented about the need for the category, the overlap

between lacquer stains and the more general stain categories would

allow the higher VOC lacquer stain for uses in which lower VOC stains

would be acceptable substitutes. In order to attain the degree of

emission reductions achievable, these categories are excluded in the

proposed rule. The coatings that would have been classified into these

categories would be subject to the VOC level of the more general

category of either primers or stains, as applicable.

The third coating category that was surveyed in the VOC Emissions

Inventory Survey, but does not appear in the proposed rule, is ``high

performance architectural (HPA) coatings.'' Several industry proposals

presented to the regulatory negotiation committee contained a

definition and VOC standard for HPA coatings with subcategories for

concrete protective coatings, floor coatings, and rust preventative

coatings. However, the information available to the EPA does not

support a need for a broad HPA category. Rather than including a

separate, broad category of HPA coatings, the proposal contains

separate definitions and VOC levels for concrete protective, floor, and

rust preventative coatings. These subcategories were specifically

identified during negotiations, and arguments were presented for VOC

levels and definitions. These categories have specific performance

requirements such

[[Page 32740]]

as prevention of water and chloride ion intrusion (concrete protective

coatings), abrasion resistance (floor coatings), and prevention of the

corrosion of metals (rust preventative coatings).

In April 1995, architectural coating industry representatives

submitted recommended VOC content limits for BAC to the EPA. These

industry representatives reported that these limits were developed

based on extensive negotiations within the industry to determine what

is economically and technologically feasible. Today's proposed VOC

requirements are consistent with those in the proposal submitted by

these industry representatives.

The EPA requests comment and any supporting data on the

appropriateness of inclusion or exclusion of the 17 additional

specialty categories and the VOC content levels assigned to all of the

categories included in the proposed rule. For comments supporting

exclusion of a category, the supporting argument should include data to

show why the category under consideration could be expected to meet

(consistent with performance needs) the VOC levels applicable to the

more general category to which it would revert back in the absence of

the specific category. For comments supporting inclusion of a category,

the request should be accompanied by a detailed explanation of the need

for the category, and data on why lower VOC coatings would not be

acceptable substitutes.

In addition, the EPA requests information on any coating category

where recent progress in low VOC resin systems has resulted in new low

VOC coatings being introduced into the market since 1990. The EPA

requests comments on the ability of coatings with VOC content levels

lower than those in Table 1 to meet the performance needs within the

category.

D. Exceedance Fee Approach

An exceedance fee economic incentive approach is being considered

for inclusion in the architectural coating rule. Under this approach,

manufacturers and importers would have the option of paying a fee,

based on the amount that VOC content levels are exceeded, instead of

achieving the VOC content levels listed in Table 1.

The fee would be calculated at an initial rate of $0.0028 per gram

($2,500 per ton) of VOC in excess of the applicable VOC level,

multiplied by the volume of coating produced. For example, if a coating

is 50 grams of VOC per liter over the applicable VOC standard, the fee

rate would be approximately 14 cents per liter ($.0028 per gram

multiplied by 50 grams per liter). The fee rate is in the upper end of

the range of the incremental VOC reduction cost imposed by VOC

regulations for other source categories. The EPA believes this rate is

appropriate because the exceedance fee rate is intended to provide

compliance flexibility, but also be high enough to encourage

reformulation to meet the applicable VOC level. This rate would be

adjusted for inflation periodically.

For all but two categories, the volume of coating produced is

determined excluding the volume of any water, exempt compounds, or

colorant added to tint bases to be consistent with the units of the VOC

content level. For the two ``low solids'' categories (low solids stains

and low solids wood preservatives), the volume is determined

``including water and exempt compounds'' to be consistent with the

units of the VOC content level for these coatings. The exceedance fee

would be paid quarterly to the Administrator and would be due no later

than two months after the end of the quarter in which the coating is

manufactured or imported.

The fee option could be expected to provide transition time for

those manufacturers that desire additional time to obtain lower VOC

technologies. It could also provide a less costly compliance approach

for manufacturers selling very low volume products.

Under the exceedance fee approach, manufacturers and importers

would be required to keep records and submit reports detailing the

following information for all coatings for which fees are paid: VOC

content, excess VOC content above the standard, volume of product

manufactured or imported, product quarterly fee, and the total

quarterly fee for all products.

Section 183(e) specifies that fees collected must be deposited in a

special fund. Specifically, under Section 183(e)(5) of the CAA, funds

collected pursuant to the regulation of consumer and commercial

products:

* * * shall be deposited in a special fund in the United States

Treasury for licensing and other services, which thereafter shall be

available until expended, subject to annual appropriation Acts,

solely to carry out the activities of the Administrator for which

such fees, charges or collections are established and made.

The Congress, through the annual appropriations process, will

determine whether and how to spend any fee revenues collected. The

Administrator, however, may make recommendations to Congress concerning

use of any funds collected. Therefore, the EPA today seeks comment on

how the revenues should be spent should the proposed exceedance fee

option be promulgated as part of the final rule. The EPA believes that

it may be possible to construe the statutory language on potential uses

of the money either broadly, to authorize spending for a wide variety

of activities related to reducing ozone, or more narrowly. In

particular, the EPA requests comment on whether these revenues should

be used for:

(1) Grants or awards to promote the development of lower VOC

architectural coating technologies by private firms, or by other

governmental or nongovernmental entities;

(2) Purchase by the government of VOC emission reduction credits

from private firms or emission credit brokers;

(3) State and EPA administrative and enforcement costs in carrying

out architectural coating rules, or other rules to reduce VOC emissions

from consumer and commercial products; or

(4) Other possible uses.

In addition to comments on the use of exceedance fees, the EPA

seeks comment on the exceedance fee rate, and recordkeeping and

reporting associated with this option.

E. Low Volume Categories/Exemption

The EPA recognizes that there may be some low volume, specialty

niche products for which it may not be cost effective for either the

manufacturer or resin supplier to develop a lower VOC formulation. The

Agency addressed this concern during the regulatory negotiation by

developing many new specialty categories and definitions which have

been subsequently included in the proposed rule. To evaluate what

further steps may still be needed to accommodate niche coatings within

the proposed rule, the EPA requests detailed information on the

following: (1) Identification of any specialty coatings which do not

comply with Table 1. (specify coating category from Table 1 in which

the product would be classified) and that cannot be cost-effectively

reformulated, (2) the sales volume and VOC content of each identified

product, (3) detailed cost estimate for reformulation (e.g., man-years,

and product testing expected to be involved) and (4) whether a lower

VOC alternative product currently exists in the market which can

adequately substitute for the identified specialty product.

EPA will consider developing additional categories for newly

identified niche markets in the final rule. In addition, based on

reformulation cost, sales volume, and VOC emissions information

gathered in

[[Page 32741]]

response to the above request on low volume products, the EPA will

evaluate the option of a categorical exemption for any new or existing

low volume specialty categories. Alternatively, although no coating

manufacturers have requested that EPA consider a low volume exemption,

the EPA will consider establishing a low volume cut-off, under which a

coating may be exempt from regulation. These approaches would allow

these low volume, specialized products to remain on the market. Under

the low volume exemption concept, any manufacturer or importer may

request an exemption from the VOC levels in Table 1 for specialized

coating products that are manufactured or imported in quantities less

than a specified number of gallons per year. This exemption would

require an annual report, recordkeeping, and labeling.

A major issue with this type of an exemption is where to set the

cut-off. The EPA would design any low volume exemption to avoid

significant loss in emission reductions. The EPA has limited data with

which to evaluate an appropriate cut-off level. The EPA requests

comment on a cut-off in the range between 1,000 and 5,000 gallons per

year.

A manufacturer or importer applying for this type of exemption

would need to submit an annual report. This report would contain a

written request for the exemption, a list of the coating products for

which the exemption is being requested, a statement signed by a

responsible official that the sales of each product for which the

exemption is being requested will not exceed the cut-off established,

and documentation and a statement signed by a responsible official that

each product serves a specialized use which cannot be cost-effectively

replaced with another, lower VOC product. In addition, the report would

contain the following information for each product for which the

exemption is being requested: the name of the product, the specialized

use, the sales of the product in the previous year, and the VOC content

of the product. The EPA can waive this reporting requirement on a case-

by-case basis if the information from each year is essentially the

same. Whether or not reporting is waived, the company would be required

to keep records for a three year period sufficient to demonstrate upon

request that the product qualified for the exemption. A company that

sold more than the cut-off amount of a product for which the exemption

was claimed would be in violation of the rule and subject to the same

penalties as any company producing coatings in violation of the VOC

content limits.

In addition, the following statement would need to be placed on the

label or lid of each container of coating for which the exemption is

being applied: ``This is a specialized architectural coating produced

in volumes less than X gallons per year.'' The labeling requirement

would serve to identify these coatings to enforcement personnel.

The EPA's goal would be to set the volume cut-off for this

exemption low enough such that it would not significantly impact the

VOC emission reductions achieved by the rule, yet high enough such

that, if needed, it could be expected to be used by a number of smaller

manufacturers and importers for their low volume products.

The EPA requests comment on whether a low volume exemption would

have any disadvantages. Such an exemption might create an incentive for

some companies to circumvent the rule by taking a higher volume product

and marketing (with or without any variations in formulation) as

several separate products, each meeting the sales volume cut-off. Also,

some may perceive that a low volume exemption would give competitive

advantage to higher polluting, low volume products.

The EPA requests comments on whether this exemption should be

included in the final rule and on the following specific aspects of

this exemption: (1) What would be an appropriate cut-off level? (2) To

what degree would a low volume exemption aid small manufacturers and

importers in complying with the rule? (3) To what extent would the

exemption be used if included in the regulation? (4) Would such an

exemption be equitable? (5) Would such an exemption create incentives

for circumvention of the rule?

F. Special Provisions

This section contains a description of the rationale for the

recycled coating and variance provisions that are included in the

proposed standard.

1. Recycled Coatings

The proposed regulation allows manufacturers and importers VOC

credit for recycling post-consumer coatings. Post-consumer coating is

unused coating that has been previously purchased by a consumer, and is

subsequently combined with virgin materials and offered for sale as a

recycled coating. The proposed credit for recycled coating content is

demonstrated in the following example: If a coating has a VOC content

(calculated as prescribed in Sec. 59.404 of the regulation) of 400

grams per liter of coating and contains 10 percent recycled coating,

then 10 percent of the calculated VOC content (40 grams per liter) is

subtracted or credited to give an adjusted VOC content of 360 grams per

liter. Compliance is determined based on the adjusted VOC content.

The calculation of an adjusted VOC content is included in the

proposed regulation to encourage recycling by providing flexibility to

manufacturers of recycled coatings. Recycling these coatings eliminates

the need for their disposal (some unused coatings may be considered

hazardous waste) and reduces the amount of new coating that must be

manufactured.

The EPA recognizes the inherent difficulties associated with

enforcing the credit associated with the recycled coating provision. It

is not normally possible to determine the fraction of post-consumer

content by analytical means. Therefore, enforcement would be through an

evaluation of reports submitted by manufacturers or importers of

recycled coatings (see section II.G) and a comparison of these reports

to claims of recycled content on the labels of coatings. The EPA

requests comment on this VOC credit for recycled coatings and the

enforcement of such a provision.

2. Compliance Variance.

The proposed rule includes a variance provision whereby

manufacturers and importers of subject architectural coatings may apply

to the Administrator for a temporary variance from compliance with the

standards. A variance will be granted if the applicant demonstrates

that compliance would result in economic hardship, and that granting

the variance would better serve the public interest than would

requiring continuous compliance under the conditions of economic

hardship. The EPA intends for this provision to allow manufacturers and

importers some flexibility in responding to unforeseen circumstances

that may cause additional, unanticipated compliance burden. The EPA

recognizes that certain interruptions in the availability of raw

materials and or manufacturing processes may affect the manufacturer's

or importer's ability to continuously comply with the standards. In

particular, the EPA anticipates that this variance provision will help

to mitigate impacts to small manufacturers. Within the architectural

coatings industry, small manufacturers are likely to have fewer

research and development

[[Page 32742]]

resources, and therefore, will benefit from the allowed variance.

G. Labeling and Public Information Requirements

1. Containers of All Subject Coatings

The proposed regulation requires that containers for all subject

coatings display on the label or lid the date of manufacture (or a code

indicating the date) and the maximum VOC content in the coating. The

date of manufacture on the label or lid allows enforcement personnel to

determine whether the coating was manufactured prior to April 1, 1997.

Section 183(e) of the CAA specifically authorizes the EPA to

require certain labeling and informing of the public as mechanisms for

control of VOC emissions from consumer and commercial products. The

proposed standards include labeling requirements that not only allow

the EPA to verify compliance with the VOC content levels but also to

inform consumers about VOC content. Such labeling, with appropriate

consumer education, might provide an incentive to consumers to purchase

coatings that will emit less VOC, and to manufacturers and importers to

manufacture or import lower VOC content coatings.

As described in section II.E, the EPA is considering two other

labeling requirements. The EPA is considering a requirement to include

on the label of each coating an educational statement about VOC

emissions, and their potential contribution to ground-level ozone. The

EPA requests comment on whether an outreach effort would be as

effective an approach as an educational statement. Also, the EPA is

considering a requirement to include coating coverage information on

all architectural coating labels. Comment is requested on the

feasibility of this requirement.

2. Containers of Industrial Maintenance Coatings

In addition to the general labeling requirements for all

architectural coatings, containers of industrial maintenance coatings

(as defined in Sec. 59.401 of the proposed regulation) must also

include on the label or lid the phrase ``NOT INTENDED FOR RESIDENTIAL

USE.'' Section 183(e) of the CAA provides authority to include in the

regulation directions for use of the product. The proposed VOC levels

for industrial maintenance coatings were set based on more rigorous

performance specifications than those needed for residential

applications. While this labeling requirement is intended to discourage

consumers from applying industrial maintenance coatings in a

residential setting where a lower VOC coating with less rigorous

performance specifications may be adequate, it does not prohibit the

use of industrial maintenance coatings in a residential setting where

extreme environmental conditions are present and for which an

industrial maintenance coating would provide the most viable protection

from these conditions.

3. Containers of Recycled Architectural Coatings

Containers of recycled architectural coatings, in addition to the

requirements listed previously for all subject coatings, must also

display a label that includes the statement ``CONTAINS NOT LESS THAN X

PERCENT, BY VOLUME, POST-CONSUMER COATING,'' where X is replaced by the

percentage, by volume, of post-consumer coating. Inclusion of the

recycled coating content is necessary for compliance purposes to

identify coatings for which an adjusted VOC content has been

calculated.

H. Selection of Recordkeeping and Reporting Requirements

The EPA evaluated what recorded and reported information would be

sufficient to ensure compliance with the VOC levels. The recordkeeping

and reporting requirements proposed are necessary to allow

determination of compliance, and the EPA believes they do not represent

an undue burden on manufacturers or importers of architectural

coatings. For all but the initial report, recordkeeping and reporting

are only required for manufacturers and importers who choose to take

advantage of optional provisions, including the calculation of an

adjusted VOC content (based on post-consumer coating content), the

variance provision, or the exceedance fee approach that is under

consideration.

For coatings for which the manufacturer or importer chooses to

demonstrate compliance by meeting the VOC content levels in the

proposed table (Table 1), enforcement personnel can compare the VOC

content of the product to the VOC content statement on the label to

establish compliance or noncompliance. Therefore, there are no

reporting or recordkeeping provisions for the manufacturers and

importers of these coatings beyond initial notification. The initial

report serves to notify the EPA of the identity of the universe of all

manufacturers and importers subject to the standards.

The proposed rule includes reporting and recordkeeping requirements

for coatings that contain post-consumer coating and for which an

adjusted VOC content is reported for compliance purposes. Manufacturers

and importers must maintain the required records for these coatings for

a period of three years. The required recordkeeping and initial reports

are essential for the EPA to determine whether coatings are in

compliance.

Manufacturers or importers that choose to apply for a variance are

required to submit a variance application to the Administrator. The

purpose of this application is for the applicant to provide the

Administrator with sufficient information on which the decision to

grant, or not to grant, the variance can be made.

The reporting and recordkeeping requirements for the exceedance fee

approach and low volume exemption that is under consideration for

inclusion in the final rule is discussed in section V.D., and V.E.

respectively

I. Test Methods

Under the proposed provisions, compliance with the VOC content

levels is based on the EPA's Reference Method 24. This is the EPA's

standard test method for determining the VOC content of coatings.

A provision allowing use of alternative methods of determining VOC

content subject to the Administrator's approval is also included in the

proposed rule.

J. Alternative Regulatory Approaches

1. Other Systems of Regulation.

Section 183(e)(4) allows the EPA to consider ``any system or

systems of regulation as the Administrator may deem appropriate,

including requirements for registration and labeling, self-monitoring

and reporting, prohibitions, limitations, or economic incentives

(including marketable permits and auctions of emission rights)

concerning the manufacture, processing, distribution, use, consumption,

or disposal of the product.'' Accordingly, the EPA requests comment on

any alternative to the proposed system of regulation.

2. Regulation with the Use of CTG

Section 183(e)(3)(C) gives the EPA the flexibility to ``issue

control techniques guidelines under this Act in lieu of regulations

required under subparagraph (A) if the Administrator determines that

such guidance will be substantially as effective as regulations in

reducing emissions of volatile organic

[[Page 32743]]

compounds which contribute to ozone levels in areas which violate the

national ambient air quality standard for ozone.''

In many cases, a CTG can be an effective approach to reduce

emissions of VOC in nonattainment areas without imposing control costs

on attainment areas. For example, a CTG may effectively reduce VOC

emissions from commercial products used in industrial settings where

the targeted emissions occur at a point of end use which is readily

identifiable, and at a fixed location. However, a CTG may not be as

effective as a regulation to reduce emissions in nonattainment areas

for architectural products because these products are easily

transportable and widely distributed. This is because an architectural

coating CTG would prohibit the sale of noncompliant architectural

coatings in nonattainment areas. A CTG would have the potential

compliance problems associated with noncompliant products being

transported into nonattainment areas from neighboring areas and

neighboring states. In contrast, a regulation could require

modification of the product itself. Since all products would be subject

to the same requirements, this would help ensure effective enforcement

and implementation in all areas.

It is expected that an architectural coating national rule would

reduce costs of compliance for companies serving national or large

regional markets by promoting consistency in VOC requirements across

the country. In addition, a national rule would help reduce

recordkeeping and reporting for those manufacturers who sell products

in both attainment and nonattainment areas. To evaluate the benefits

(i.e., reduction in cost) to manufacturers from the consistency aspect

of a national rule, the EPA requests detailed information from

manufacturers on the cost to comply with a variety of State standards.

In particular, the EPA requests comment on the administrative cost

burden (inventory tracking, distribution, labeling, and tracking of

State architectural coating regulation development) expected to result

from use of a CTG. In addition, to evaluate the population and product

mix of manufacturers who may be excluded from regulation under a CTG

approach, the EPA requests comment on the number and identity of

manufacturers who sell products solely in attainment areas. To evaluate

differences in the reformulation cost associated with a CTG versus a

national rule, the EPA requests comment on the proportion of products

which would be reformulated if, in general, only nonattainment areas

were regulated. For example, EPA requests information on whether

manufacturers would tend to produce one product for attainment areas

and one for nonattainment areas, only sell products in attainment

areas, or reformulate all products to be compliant with applicable

nonattainment area requirements.

The EPA requests comment on whether and how a CTG approach (by

itself, or in combination with any other regulatory alternatives) would

be as effective as a national rule in reducing VOC emissions in ozone

nonattainment areas. If warranted by comments, a quantitative analysis

of costs and emission reductions expected from a CTG will be completed.

K. Solicitation of Comments

The EPA invites comments concerning the proposed standards,

particularly as noted in the preceding sections concerning: the

inclusion of specialty product categories; the technological and

economic feasibility of VOC levels listed in Table 1; the ability of

coatings with VOC content levels lower than the proposed levels to meet

performance needs; the inclusion of processors in the applicability of

the rule; economic and other impacts on importers; the feasibility of

requiring coverage information to be displayed on coating labels or

lids; the effectiveness of a public outreach program versus statements

on the container label to educate users about the environmental impacts

of VOC in coatings; and the placement of architectural coatings on the

consumer products priority list. The EPA also requests information on

coating categories where recent progress in low VOC resin systems has

resulted in new low VOC coatings that have been introduced since 1990.

The EPA requests comment on the inclusion of an exceedance fee

option for use as a compliance alternative to meeting the VOC levels in

Table 1. Specifically, the EPA requests comments on the following: the

appropriate use for revenues generated from the fee; the

appropriateness of the exceedance fee rate; and the appropriateness of

the recordkeeping and reporting requirements associated with the fee.

The EPA requests detailed information on any specialty coatings

which do not comply with proposed standards, and cannot be cost-

effectively reformulated. The EPA also requests comment on the

inclusion of a low volume exemption for specialty, niche products.

Specifically, the EPA requests comment on the following: (1) What would

be an appropriate cut-off level? (2) To what degree would a low volume

exemption aid small manufacturers and importers in complying with the

rule? (3) To what extent would the exemption be used if included in the

regulation? (4) Would such an exemption be equitable? (5) Would such an

exemption create incentives for circumvention of the rule?

In addition, the EPA requests comment on the inclusion of the

special provision for VOC credit for recycled coatings, the variance

provision, and the small container exemption. For all of these

provisions, the EPA requests comment on the expected extent of their

use by small manufacturers and small importers.

Comments submitted to the Administrator should contain specific

proposals and supporting data to allow the EPA to fully evaluate the

comments. Recommended changes to any of the VOC content levels

presented in this proposal should include sufficient information for

the EPA to evaluate the technological and economic feasibility

associated with such changes. Applicable dates and addresses for the

submission of comments are included at the beginning of this preamble.

VI. Future Phase Under Consideration

The EPA believes further VOC reductions beyond those in Table 1 may

be technologically and economically feasible. A great deal of

controversy surrounds the proposal of more stringent VOC levels in a

future phase of regulation. To address the controversy, the EPA will

participate in a joint study with industry representatives to

investigate the cost and performance characteristics of coatings with

VOC contents lower than the proposed levels in Table 1. The

environmental and economic impacts of requiring lower VOC contents will

also be assessed. In addition, the EPA will continue to meet with other

stakeholders regarding the potential for a future phase for the

architectural coatings rule. After analyzing comments received

regarding this proposal and following completion of the joint EPA/

industry study, the EPA will evaluate whether further reductions beyond

the 1997 requirements are technologically and economically feasible.

The result of this evaluation could be proposal of more stringent VOC

levels, the proposal of economic incentive approaches, some combination

of VOC levels and economic incentive approaches, or no further action

beyond the 1997 requirements.

The EPA is using this proposal as an opportunity to solicit input

for use in

[[Page 32744]]

the joint EPA/industry study. The EPA expects to focus effort in the

study on evaluation of issues which will include the following: the

cost and economic impact of requiring lower VOC contents than those in

Table 1, identification of any performance issues associated with lower

VOC content coatings, and investigation of reactivity considerations

involved in reformulating architectural coatings. The EPA invites

comments concerning the planned EPA/industry study, and any input on

performance, cost or reactivity considerations which should be included

in the study.

Because the EPA's data consists of the Emissions Inventory Survey

of coatings sold in 1990 and on limits in California coatings

regulations that have been in effect since the late 1980's, the EPA is

requesting information on coating categories where recent progress in

low VOC resin systems has resulted in new low VOC coatings being

introduced into the market since 1990. The EPA requests comments on the

ability of coatings with VOC content levels lower than those in Table 1

to meet the performance needs within the category. Cost information on

these coatings is also requested.

VII. Administrative Requirements

A. Public Hearing

A public hearing will be held, if requested, to provide opportunity

for interested persons to make oral presentations regarding the

requirements in the proposed regulation in accordance with Section

307(d)(5) of the CAA. Persons wishing to make oral presentation on the

proposed regulation for architectural coatings should contact the EPA

at the address given in the ADDRESSES section of this preamble. Oral

presentations will be limited to 15 minutes each. Any member of the

public may file a written statement before, during, or within 30 days

after the hearing. Written statements should be addressed to the Air

and Radiation Docket and Information Center at the address given in the

ADDRESSES section of this preamble and should refer to Docket No. A-92-

18.

A verbatim transcript of the hearing and written statements will be

available for inspection and copying during normal business hours at

the EPA's Air and Radiation Docket and Information Center in

Washington, DC (see ADDRESSES section of the preamble).

B. Executive Order 12866

Under Executive Order 12866, the Agency must determine whether the

regulatory action is ``significant'' and therefore subject to Office of

Management Budget (OMB) review and the requirements of the Executive

Order. The Order defines ``significant regulatory action'' as one that

is likely to result in a rule that may:

(1) Have an annual effect on the economy of $100 million or more,

or adversely affect in a material way the economy, a sector of the

economy, productivity, competition, jobs, the environment, public

health or safety, or State, local, or tribal governments or

communities;

(2) Create a serious inconsistency or otherwise interfere with an

action taken or planned by another agency;

(3) Materially alter the budgetary impact of entitlements, grants,

user fees, or loan programs or the rights and obligations of recipients

thereof; or

(4) Raise novel legal or policy issues arising out of legal

mandates, the President's priorities, or the principles set forth in

the Executive Order.

Pursuant to the terms of the Executive Order, the EPA has

determined that this rule is a ``significant regulatory action'' under

criterion (4) above, based on both the long regulatory negotiation

process that preceded this proposal and the novel use of economic

incentives (potential exceedance fees) for this industry. Therefore,

the proposed regulation presented in this notice was submitted to the

OMB for review as required. Any written comments from the OMB to the

EPA and any written EPA response to those comments will be included in

Docket No. A-92-18, listed at the beginning of this notice under the

ADDRESSES section of this preamble.

C. Paperwork Reduction Act

The information collection requirements in this proposed rule have

been submitted for approval to the OMB under the Paperwork Reduction

Act, 44 U.S.C. 3501 et seq. An Information Collection Request (ICR)

document has been prepared by the EPA (ICR No. 1750.01) and a copy may

be obtained from Sandy Farmer, Office of Policy Planning and Evaluation

(OPPE) Regulatory Information Division; U.S. Environmental Protection

Agency (2136); 401 M Street., SW, Washington, DC 20460 or by calling

(202) 260-2740. This ICR document is also available on the EPA's OAQPS

TTN bulletin board under the Clean Air Act Amendments menu. See the

SUPPLEMENTARY INFORMATION section of this preamble for information on

accessing the EPA's TTN electronic bulletin board.

The information required to be collected by this proposed rule is

necessary to identify the regulated entities who are subject to the

rule and to ensure their compliance with the rule. The recordkeeping

and reporting requirements are mandatory and are being established

under authority of Section 114 of the CAA. All information submitted as

part of a report to the Agency for which a claim of confidentiality is

made will be safeguarded according to the Agency policies set forth in

title 40, Chapter 1, part 2, subpart B, ``Confidentiality of Business

Information'' (see 40 CFR 2; 41 FR 36902, September 1, 1976, amended by

43 FR 39999, September 28, 1978; 43 FR 42251, September 28, 1978; 44 FR

17674, March 23, 1979).

The total annual reporting and recordkeeping burden for this

information collection averaged over the first three years is estimated

to be 37,447 hours and $1,279,469. This is the estimated burden for 500

respondents (i.e., architectural coating manufacturers).

The average burden, per respondent, is 75 hours per year. The total

reporting, recordkeeping, and labeling burden for an individual

respondent will vary depending on the compliance option chosen.

Respondents choosing to meet the VOC levels will have the lowest

reporting, recordkeeping, and labeling burden, whereas, manufacturers

and importers that use the option of calculating an ``adjusted VOC

content'' (for recycled coatings) will have the highest reporting,

recordkeeping, and labeling burden. The proposed rule requires an

initial one-time notification from each respondent. Respondents whose

coatings products have a VOC content that is less than or equal to the

VOC content levels have no periodic reporting requirements. Respondents

choosing the recycled coatings provision must submit annual reports.

Respondents choosing the variance provision must submit a one-time

report requesting the variance.

Burden means the total time, effort, or financial resources

expended by persons to generate, maintain, retain, or disclose or

provide information to or for a Federal agency. This estimate includes

the time needed to: (1) Review instructions; (2) develop, acquire,

install, and utilize technology and systems for the purposes of

collecting, validating, and verifying information; processing and

maintaining information; and disclosing and providing information; (3)

adjust the existing ways to comply with any previously applicable

instructions and requirements; (4) train personnel to be able to

respond to a collection of information; (5) search data sources; (6)

complete and review the collection of

[[Page 32745]]

information; and (7) transmit or otherwise disclose the information.

The exceedance fee alternative compliance mechanism being

considered for inclusion in the final rule would require quarterly

reports of fees by the manufacturers choosing this option. In addition,

these manufacturers would keep records for each coating product on

which fees are paid. The average annual burden increase for each

manufacturer choosing this option is 194 hours.

Comments are requested on the Agency's need for this information,

the accuracy of the provided burden estimates, and any suggested

methods for minimizing respondent burden, including through the use of

automated collection techniques. Send comments on the ICR to the

Director, OPPE Regulatory Information Division; U.S. Environmental

Protection Agency (2136); 401 M Street SW; Washington, DC 20460; and to

the Office of Information and Regulatory Affairs, Office of Management

and Budget, 725 17th Street NW; Washington, DC 20503; marked

``Attention: Desk Officer for the EPA.'' Include the ICR number in any

correspondence. Since OMB is required to make a decision concerning the

ICR between 30 and 60 days after June 25, 1996, a comment to OMB is

best assured of having its full effect if OMB receives it by July 25,

1996. The final rule will respond to any OMB or public comments on the

information collection requirements contained in this proposal.

D. Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires the

EPA to consider potential adverse impacts of proposed regulations on

small entities and to consider regulatory options that might mitigate

any such impacts. It is currently the EPA's policy to perform a

regulatory flexibility analysis of the potential impacts of proposed

regulations on small entities whenever it is anticipated that any small

entities may be adversely impacted. Because it is anticipated that some

small architectural coating manufacturers could be adversely impacted

from implementation of the proposed standards, a regulatory flexibility

analysis was performed.

The analysis of small entity impacts focused on the potential

impacts on small manufacturers producing architectural coatings. For

the purpose of this analysis, small manufacturers were considered to be

firms with less than $10 million of total gross annual revenues from

the sale of architectural coatings and less than $50 million in total

gross annual revenues from all products. Using this definition,

potentially 85 percent of architectural coating manufacturers are

considered small manufacturers. A copy of the technical memorandum

titled ``Economic Impact and Regulatory Flexibility Analysis of the

Proposed Architectural Coatings Rule'' is included in the public

docket.

Reducing VOC content generally requires a fixed investment for

reformulation of each product to its respective regulatory level.

Because, on average, coatings sold by small manufacturers are sold in

smaller quantities than the industry average (an estimated 67,000

liters per product versus 377,000 liters per product), the cost of

reformulation per unit sold may in some cases be significantly higher

for small manufacturers. To meet the limitations in Table 1, the

estimated ratio of annualized reformulation cost to revenues for small

manufacturers equals approximately 3.5 percent as opposed to a ratio of

only about 0.4 percent for the entire industry. Thus, it may be

difficult for small coating manufacturers to pass control costs to

consumers in product markets where competition with larger

manufacturers is significant. This impact will be reduced to the extent

that small manufacturers are provided reformulation technologies from

larger resin suppliers. Still, the EPA has recognized a need to include

special compliance provisions in the rule to avoid adverse economic

impacts upon small manufacturers.

The economic impacts on small manufacturers were taken into

consideration in establishing both the categories and VOC levels.

Special effort was made to consider the economic feasibility of VOC

levels for product categories in which small manufacturers have a

disproportionate presence. The small container exemption, compliance

variance, and consideration of an exceedance fee option and low volume

exemption are also included in the proposed rule primarily to reduce

small business impacts.

Because the per-unit costs of the economic incentive options are

constant with respect to volume sold, and because the per-unit

reformulation cost is higher for small-volume products than large-

volume products, an economic incentive option, such as a fee, if

included, is more likely to be beneficial to and adopted by small

manufacturers than by large manufacturers. The results of the economic

analysis suggests that the fee option is likely to provide a cost-

saving alternative to reformulation for relatively low-volume products

with VOC content fairly close to the regulatory VOC levels. Estimated

annual reformulation cost savings minus fee payments associated with

the fee option equals approximately $5.0 million. In addition, the fee

option reduces foregone profits by roughly 0.3 million for products

which otherwise would have been removed from the market. It is

anticipated that most of these savings would accrue to small

manufacturers.

E. Unfunded Mandates

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public

Law 104-4, establishes requirements for Federal agencies to assess the

effects of their regulatory actions on State, local, and tribal

governments and the private sector. Under Section 202 of the UMRA, EPA

generally must prepare a written statement, including a cost-benefit

analysis, for proposed and final rules with ``Federal mandates'' that

may result in expenditures to State, local, and tribal governments, in

the aggregate, or to the private sector, of $100 million or more in any

one year. Before promulgating an EPA rule for which a written statement

is needed, Section 205 of the UMRA generally requires EPA to identify

and consider a reasonable number of regulatory alternatives and adopt

the least costly, most cost-effective or least burdensome alternative

that achieves the objectives of the rule. The provisions of Section 205

do not apply when they are inconsistent with applicable law. Moreover,

Section 205 allows EPA to adopt an alternative other than the least

costly, most cost-effective or least burdensome alternative if the

Administrator publishes with the final rule an explanation why that

alternative was not adopted. Before EPA establishes any regulatory

requirements that may significantly or uniquely affect small

governments, including tribal governments, it must have developed under

Section 203 of the UMRA a small government agency plan. The plan must

provide for notifying potentially affected small governments, enabling

officials of affected small governments to have meaningful and timely

input in the development of EPA regulatory proposals with significant

Federal intergovernmental mandates, and informing, educating, and

advising small governments on compliance with the regulatory

requirements.

Today's rule contains no Federal mandates (under the regulatory

provisions of Title II of the UMRA) for State, local, or tribal

governments or the private sector. The rule imposes no enforceable

duties on any of these governmental entities. In any event, EPA has

determined that this rule does not contain a Federal mandate that may

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result in expenditures of $100 million or more for State, local, and

tribal governments, in the aggregate, or the private sector in any one

year. Thus, today's rule is not subject to the requirements of Sections

202 and 205 of the UMRA.

F. Enhancing the Intergovernmental Partnership under Executive Order

12875

In compliance with Executive Order 12875, the EPA has involved

State and local governments in the development of this rule. State and

local air pollution control associations participated in the regulatory

negotiation and have also provided regulatory review. State and local

air pollution control representatives participated in the regulatory

negotiation and have also provided input into subsequent regulatory

development.

List of Subjects in 40 CFR Part 59

Environmental protection, Air pollution control, Architectural

coatings, Consumer and commercial products, Incorporation by Reference,

Ozone, Regulatory negotiation, Volatile organic compound.

Table 1.--Architectural Coating Volatile Organic Compound Content Levels

[Unless otherwise specified, units are in grams of VOC per liter of

coating thinned to the manufacturer's maximum recommendation excluding

the volume of any water, exempt compounds, or colorant added to tint

bases.]

------------------------------------------------------------------------

Effective

Coating category Apr. 1,

1997

------------------------------------------------------------------------

Antenna coatings............................................. 530

Antifouling coatings......................................... 400

Anti-graffiti coatings....................................... 600

Bituminous coatings and mastics.............................. 500

Bond breakers................................................ 600

Chalkboard resurfacers....................................... 450

Concrete curing compounds.................................... 350

Concrete protective coatings................................. 400

Dry fog coatings............................................. 400

Extreme high durability coatings............................. 800

Fire-retardant/resistive coatings:

Clear.................................................... 850

Opaque................................................... 450

Flat coatings:

Exterior................................................. 250

Interior................................................. 250

Floor coatings............................................... 400

Flow coatings................................................ 650

Form release compounds....................................... 450

Graphic arts coatings (sign paints).......................... 500

Heat reactive coatings....................................... 420

High temperature coatings.................................... 650

Impacted immersion coatings.................................. 780

Industrial maintenance coatings.............................. 450

Lacquers (including lacquer sanding sealers)................. 680

Magnesite cement coatings.................................... 600

Mastic texture coatings...................................... 300

Metallic pigmented coatings.................................. 500

Multi-colored coatings....................................... 580

Nonferrous ornamental metal lacquers and surface protectants. 870

Nonflat coatings:

Exterior................................................. 380

Interior................................................. 380

Nuclear coatings............................................. 420

Pretreatment wash primers.................................... 780

Primers and undercoaters..................................... 350

Quick-dry coatings:

Enamels.................................................. 450

Primers, sealers, and undercoaters....................... 450

Repair and maintenance thermoplastic coatings................ 650

Roof coatings................................................ 250

Rust preventative coatings................................... 400

Sanding sealers (other than lacquer sanding sealers)......... 550

Sealers (including interior clear wood sealers).............. 400

Shellacs:

Clear.................................................... 650

Opaque................................................... 550

Stains:

Clear and semitransparent................................ 550

Opaque................................................... 350

Low solids............................................... \1\ 120

Swimming pool coatings....................................... 600

Thermoplastic rubber coatings and mastics.................... 550

Traffic marking coatings..................................... 150

Varnishes.................................................... 450

Waterproofing sealers and treatments:

Clear.................................................... 600

Opaque................................................... 400

Wood preservatives:

Below ground wood preservatives.......................... 550

Clear and semitransparent................................ 550

Opaque................................................... 350

Low solids............................................... \1\ 120

------------------------------------------------------------------------

\1\ Units are grams of VOC per liter of coating, including water and

exempt compounds, thinned to the maximum thinning recommended by the

manufacturer.

Dated: June 18, 1996.

Carol M. Browner,

Administrator.

[FR Doc. 96-16009 Filed 6-24-96; 8:45am]

BILLING CODE 6560-50-P