Regulations (Preambles to Final Rules) - Table of Contents Regulations (Preambles to Final Rules) - Table of Contents
• Record Type: Occupational Exposure to Formaldehyde
• Section: 10
• Title: Section 10 - X. Costs of Compliance

X. Costs of Compliance

Engineering Controls

Sources available in the record for analyzing the incremental cost of moving from the current 1.0 ppm PEL to a PEL of 0.75 ppm are limited. While a shift to a new technology would be the only means of achieving compliance with a 0.5 ppm PEL in some industries, this is not necessarily the case with respect to a 0.75 ppm PEL. For the purposes of this analysis, OSHA concludes that the technology necessary to comply with a 0.75 ppm PEL would be generally the same as that used to bring those plants with exposures above 1.0 ppm prior to 1987 into compliance with a 1.0 ppm PEL.

Unit price assumptions and revenue data within this analysis are based upon the 1987 Producer Price index, as they were for the 1987 Regulatory Impact Analysis.

Foundries

In the 1987 RIA [Ex. 206, p. IV-54], it was estimated that 1,047 foundries had exposures above 1.0 ppm and an additional 1,435 had exposures between 0.5 ppm and 1.0 ppm. It was projected that as a result of the 1.0 ppm PEL, average exposures in the first group would be lowered to 0.75 ppm, and that the second group would remain unchanged. OSHA estimates that half of the second group, or 718 foundries, would need to respond to the new PEL of 0.75 ppm.

As discussed in the 1987 RIA [Ex. 206, p. IV-53], OSHA found that this group is comprised largely of foundries using the shell core process. To comply with the standard, firms would incur capital costs for local exhaust ventilation of $10,000, with an annual operating cost of $900 per machine, and would have an average of 3 affected machines per plant [Ex. 206, p. IV-52], for a total capital cost of $21,540,000 (718 X 3 X $10,000) and annual operating costs of $1,938,600 (718 X 3 X $900). Annualizing the capital cost at 10 percent over a 10 year expected equipment lifetime results in an annualized cost of $3,505,536. Total annual costs therefore, are projected to be $5,444,136 (annualized costs plus annual recurring operating costs). It is possible that providing controls for only a portion of the machines would reduce exposures sufficiently to achieve compliance with the proposed PEL, but OSHA conservatively assumes that controls on all three would be necessary.


__________
  Footnote(3) The annualized cost is derived by applying a cost recovery
factor (of 0.163 based on an equipment life expectancy of 10 years and a
10 percent cost of capital] to total capital costs.


Hardwood Plywood

In the 1987 RIA [Ex. 206, p. IV-36] it was estimated that forty hardwood plywood establishments had exposures above 1.0 ppm and would lower exposures to 0.75 ppm as a result of the 1.0 ppm PEL. Sixty-six establishments unaffected by the 1.0 ppm PEL were estimated to have exposures between 0.5 ppm and 1.0 ppm. OSHA estimates that half of these establishments, or 33, would be affected by a 0.75 ppm PEL.

OSHA assumes that plants with exposures between 0.75 ppm and 1.0 ppm have exposure problems similar to those plants which were out of compliance with the 1.0 ppm PEL. These plants were estimated to require fan replacement at an incremental capital cost of $2,000 and an incremental annual operating cost of $100 per plant [Ex. 206, p. IV-34]. The costs to come into compliance with a 0.75 ppm PEL in this industry are therefore estimated to be $66,000 in capital costs and $3,300 in annual operating costs.

In the 1987 RIA, OSHA stated that some plants could comply with a 1.0 ppm PEL with ventilation alone, others would also need to convert to low-emitting ureaformaldehyde (LEUF) resins [Ex. 206, p. IV-30-35]. While it is possible that some or all of the plants discussed in the previous paragraph could achieve compliance with a 0.75 ppm PEL through increased ventilation alone, OSHA conservatively assumes that these plants would also need to convert to LEUF resins to assure compliance. The 1987 RIA noted a gradual shift to LEUF resins in the hardwood plywood industry [Ex. 206, p. IV-32,35]. However, establishments with the highest formaldehyde exposures currently are also the least likely to have converted. Due to uncertainty regarding these plants, OSHA is employing the conservative assumption that LEUF resins would be introduced directly as a result of this rule. Using the same method of estimating cost as was used in the 1987 RIA [Ex. 206, p. IV-35], it is estimated that an additional 235 million square feet (MMSF) of board production would need to be converted to LEUF at a cost of $2,750 per MMSF, or an annual operating cost of $646,250 ($2,750 X 235). The total costs associated with complying with a 0.75 ppm in the hardwood plywood industry are therefore estimated to be $66,000 in capital costs and $649,550 in annual operating costs for the 33 plants affected within this industry. Annualizing the capital cost at 10 percent over a 10 year expected equipment lifetime results in an annualized cost of $10,741. The total annual costs, therefore, are projected to be $660,291.

Particleboard

In the 1987 RIA [Ex. 206, p. IV-24,26] it was estimated that 14 out of 46 plants had exposures above 1.0 ppm, and would lower exposures to 0.75 ppm as a result of the standard. An additional 16 plants were estimated to have exposures between 0.5 and 1.0 ppm, 8 of which are estimated to have exposures between 0.75 and 1.0 ppm. Assuming these plants would need to employ ventilation similar to those with exposures previously above 1.0 ppm, these plants would need additional ventilation at a capital cost of $215,320 per plant and annual operating costs of $53,830 per plant [Ex. 206, p. IV-21], or a total capital cost of $1,722,560 and a total annual operating cost of $430,640. Based upon the annualized capital cost of $280,339 and the recurring annual operating cost, total annual costs are $710,979.

Medium Density Fiberboard (MDF)

The 1987 RIA [Ex. 206, p. IV-27,29,31] projected that 9 MDF establishments would lower exposures to 0.75 ppm as a result of the 1.0 ppm PEL. It is estimated that 5 additional establishments have exposures between 0.5 and 1.0 ppm. It is estimated that approximately half, or 3 of these establishments would be affected by a 0.75 ppm PEL.

In the 1987 RIA it was estimated that the capital costs of lowering exposures to 0.75 ppm through additional ventilation would be $105,534 per plant, with annual operating costs of $63,486. Applying these costs to the 3 affected plants, OSHA estimates the cost of additional ventilation in this industry would be $316,602 in capital costs, and $190,458 in annual operating costs. The annualized cost of capital is equal to $51,526 using the 10 percent, 10 year expected equipment lifetime cost recovery value. Thus, the total annualized costs for this industry is projected to be $241,984.

Furniture

In the 1987 RIA, it was estimated that 184 plants had exposures above 1.0 ppm and would lower exposures to 0.75 ppm in response to the 1.0 ppm PEL. These were all facilities producing both furniture and board ("integrated" plants), with hazardous exposures in board production operations rather than furniture operations. There were an additional 2,646 establishments that had exposures estimated between 0.5 and 1.0 ppm, mostly furniture assembly plants with relatively isolated exposures above 0.5 ppm [Ex. 206, p. IV-43-44].

It was assumed that one-half of these, or 1,323 plants, have exposures between 0.75 ppm and 1.0 ppm. However, as noted in the 1987 RIA [Ex. 206, p. IV-44], in many of these plants, the exposure problems were due to improper use or non-use of existing ventilation systems. Poor work practices may also be responsible. In this regard, more training, not additional engineering controls, would remedy the exposure problems.

To the extent that available ventilation is utilized, there would be an increase in operating costs for these furniture plants. One basis for estimating these costs is the cost of annual exhaust ventilation employed by Ashford [Ex. 70-1]. The annual operating cost related to increased usage was estimated to be approximately $864 per establishment. However, OSHA assumes that this additional per plant cost would apply to only half of annual work days, or $432 annually. This cost would be incurred at 1,323 plants and the estimated cost of compliance at these plants would be $571,536 annually.

In approximately 214 plants (one half the integrated plants unaffected by the 1.0 ppm PEL) additional ventilation would likely be necessary to comply with a 0.75 ppm PEL. Based upon the analysis in the 1987 RIA [Ex. 206, p. IV-42], OSHA estimates that capital costs would be $52,000 per plant, or $11,128,000 for all furniture plants. The annual operating costs would be $13,000 per plant, or $2,782,000 for all "integrated" plants, or a total for the industry of $3,353,536. Annualizing the capital cost at 10 percent over a 10 year expected equipment lifetime results in an annualized cost of $1,811,031; total annual costs, therefore, are projected to be $5,164,567.

Laboratories

In the 1987 RIA analysis of formaldehyde exposures in laboratories [Ex. 206, p. IV-58-59,61], a clear dichotomy was found between laboratories with functioning fume hoods and good work practices and those without them. High exposure levels were believed to exist in "problem" histology and pathology labs as a result of malfunctioning or misused fume hoods or poor work practices. Engineering controls and good work practices implemented in response to the existing standard, should have largely eliminated exposures above 0.5 ppm [Ex. 128, p. 4,6,9]. Exposures in some laboratories also show significant peak periods or episodes [Ex. 128, p.5]. To the extent that laboratories are in compliance with the existing 2.0 ppm STEL, they should also be in compliance with a 0.75 ppm PEL [Ex. 128, p. 9]. Therefore, no engineering controls are thought to be necessary.

Funeral Services

The 1987 RIA indicated, based upon a study of 44 Iowa funeral homes, that TWA exposures were less of a problem than short-term exposures in this industry sector. TWA exposures were estimated to be below 0.5 ppm for all establishments in compliance with the present standard [Ex. 206, p. IV-66]. Annual training for employees exposed between 0.1 and 0.5 ppm should improve work practices and help reduce short term exposures. No engineering controls are thought to be necessary for this.

Resins

OSHA's 1987 RIA indicated that 35 of 97 plants had partially open production processes and would need to install engineering controls, lowering exposures to 0.75 ppm. The other 62 plants had a closed production process and were not believed to have exposures above 0.5 ppm [Ex. 206, p. IV-70]. No additional engineering control costs are estimated for this industry.

Textile Finishing

At the time of the 1987 rulemaking, OSHA estimated that there were 685 textile finishing plants with formaldehyde exposures between 0.5 and 1.0 ppm [Ex. 206, p. 78, 80]. Approximately half, or 343, were estimated to have exposures between 0.75 and 1.0 ppm.

The Ashford report examined methods [Ex. 70-1] which would be expected to lower exposures in many areas of textile plants. However, the textile industry indicated that as of 1986, they were using the most chemically advanced resins available, and a further reduction of formaldehyde content in cloth would come only at the expense of a significant decrease in fabric quality [Ex. 159].

However, in 1989 OSHA lowered permissible exposure limits (PELs) on about 200 chemicals and instituted first time PELs for about 160 others. Since the textile finishing industry uses a large of number of regulated chemicals, OSHA believes that improved ventilation is being introduced in order to limit chemical exposure generally [54 FR 2816, 1/19/89]. Recent OSHA inspection data have indicated no personal exposures to formaldehyde above 0.5 ppm in this industry [Ex. 301-1]. OSHA therefore believes that all textile finishing plants are currently in compliance with a 0.75 ppm PEL.

Apparel

In the 1987 RIA, OSHA estimated that 5,737 establishments had exposures between 0.5 and 1.0 ppm. OSHA estimates that approximately half of these, or 2,869 establishments, may have exposures between 0.75 and 1.0 ppm.

The record indicates that exposure problems in the apparel industry are due to the lack of appropriate exhaust ventilation. That is, the workplace is treated like an office or store and air is recirculated rather than exhausted and replaced, allowing formaldehyde concentrations to build [Ex. 78-24, 78-48]. A relatively simple solution to this problem of air stagnation is to install roof exhaust fans. These fans will also provide the additional benefit of exhausting the excess heat and formaldehyde present within the air. Ashford cited the cost of installing a 2,000 cubic feet per minute (cfm) roof exhaust fan at $1,000, with an annual operating cost of $720 [Ex. 70-1, p. 4-19]. Factoring in inflation, the capital cost is now estimated to be approximately $1,200, and the incremental annual operating cost $864. OSHA, therefore, estimates the cost of compliance with the lower PEL in the apparel industry to be $3,442,800 for capital and $2,478,816 for annual operating costs. Annualizing the capital cost at 10 percent over a 10 year expected equipment lifetime results in an annualized cost of $560,300; total annual costs, therefore, are projected to be $3,039,116.

Formaldehyde Production

The 1987 RIA estimated that approximately 16 out of 49 establishments would have exposures above 0.5 ppm after promulgation of the standard; the 1987 RIA indicated no exposures above 0.7 ppm [Ex. 206, p. IV-78].

Ashford [Ex. 70-1] developed formaldehyde production engineering control cost estimates in 1981 and indicated costs of compliance to meet all potential exposure limits. (However, Ashford actually had very little information on formaldehyde production operations and based his cost estimates on vinyl chloride monomer production operations.) In 1985 Heiden indicated that such plants were already in compliance with a 1.0 ppm PEL [Ex. 77-19]. Consistent with the above analysis and data, OSHA believes no additional controls would be necessary to achieve compliance with a 0.75 ppm PEL.

Plastic Molding Laminates

In its 1987 RIA, OSHA estimated that approximately 1,000 plants have exposures between 0.5 and 1.0 ppm [Ex. 206, p. IV-75,76]. OSHA estimates that approximately half, or 500 plants, have exposures between 0.75 and 1.0 ppm. Ashford [Ex. 70-1] estimated that there was one molding machine for every four workers, the capital cost for local ventilation was $425 per machine and the annual operating cost was approximately $133 per machine. Given the estimated 5,000 workers exposed between 0.75 and 1.0 ppm, ventilation would be required for 1,250 machines. OSHA estimates the capital cost would be $510 per machine and the annual operating cost $160. Based upon these unit costs, OSHA estimates $637,500 in capital costs and $200,000 in annual operating costs. The annualized capital cost amounts to $103,750. Therefore, total annual cost of compliance for this industry is expected to be $303,750.

Summary of Engineering Control Costs

OSHA estimates the total capital costs of instituting engineering controls which would be sufficient to comply with a 0.75 ppm PEL to be $38.9 million, with annual operating costs of $9.2 million. The annualized cost of the engineering control capital costs is estimated to be $6.4 million, for a total annual cost of $15.6 million. An annual cost summary for each industry is provided in Table II.


     Table II - Annual Costs of Engineering Controls in Compliance with
                      the Revisied Formaldehyde Standard

(For Table II, Click Here)

Medical Removal Protection

The medical removal process begins when an employee reports signs and symptoms of possible overexposure to formaldehyde. OSHA previously estimated that 10 percent of workers exposed between 0.1 and 0.5 ppm would report signs and symptoms [Ex. 206, p. IV-11]. These workers would fill out a medical questionnaire, after which a two week evaluation and remediation period would begin. If the symptoms have not subsided after two weeks, the employee would be immediately referred to a physician. The physician might, in turn recommend transferring the employee to a job with significantly less formaldehyde exposure.

OSHA's medical removal provision is a codified version of plans that already exist in a number of companies [Ex. 159]. Companies with current removal programs have noted that placement in another job because of formaldehyde exposure, is rare. The former medical director of Burlington Industries reported that "clearly less than ten percent" of employees completing medical questionnaires required further medical evaluation. He added that among all exposed employees, only about one percent had symptoms that were clearly "chemically related" [Tr. 160, May 12, 1986]. The American Textile Manufacturers Institute stated that "...most companies have a complaint mechanism in place to discover individuals with problems....Corporate medical surveillance programs show absolutely no evidence that contact dermatitis or allergic reaction from formaldehyde is a frequent problem [Ex. 159]." The medical director for the Dan River Clinic, indicated that over a 10 year period he received "no complaints about formaldehyde irritation or formaldehyde induced dermatological problems" [Ex. 159]. This clinic provides medical examinations for 6,000-12,000 company employees, 25 percent of whom are exposed to formaldehyde at levels between 0.15 and 1.0 ppm in textile operations.

There are, however, additional safeguards in the final provision that may increase the frequency of medical removal. The amended standard provides for additional training, which should increase employee awareness of the signs and symptoms of formaldehyde exposure, as well as an understanding of their rights under medical removal protection (MRP) and the proper channels to follow in using it. Additionally, under the final rule, an employee is allowed to appeal the company doctor's decision. Therefore, it is reasonable to expect some increase in the amount of transfer and removal over what is currently reported.

Based upon the discussion above, OSHA estimates that one percent, or 22,000 of all employees exposed to formaldehyde may require medical removal protection as provided for in the final rule. These employees are already provided medical surveillance under the present standard and a large number of employers presently provide for medical removal in one form or another. Thus, the additional burden imposed by this amendment is expected to be small. It is estimated that most sensitized employees will be transferred out of higher exposure areas into other jobs.

However, a potentially significant cost of this provision would be the requirement to provide 6 months compensation to employees for whom alternate jobs would not be available. Although the record on medical removal programs in larger companies suggests that alternate jobs are usually available [Ex. 159], the effect of universal medical removal protection on small firms is uncertain. For the purposes of estimating the impact of this provision, OSHA assumes that 30 percent of 2,200 sensitized employees in smaller establishments, or 660 employees will not be provided alternate positions by their employer and therefore must be provided six months compensation. By this assumption, the cost would be $6.0 million annually.

The existence of current medical removal plans in industry points to the fact that it makes economic sense to have a medical removal program. Workers who suffer adverse health effects from formaldehyde exposure can be moved to positions where they can contribute productively to a firm's operation. OSHA anticipates offsetting cost savings from this provision in the form of reduced absenteeism and reduced medical care costs.

Hazard Communication

In an expansion of the existing standard, workers exposed between 0.1 and 0.5 ppm are now required to receive annual training on the hazards of formaldehyde and ways to avoid them. OSHA estimates the cost of this to be $13.5 million per year.

Based upon the 1987 RIA [Ex. 206, p. I-3], OSHA estimates that there are currently approximately 2 million employees exposed to formaldehyde between 0.1 and 0.5 ppm. OSHA estimates that when current compliance is accounted for, it would take an additional half an hour annually, on average, to provide training specific to formaldehyde for these employees(4). Employing the data and methodology used in the RIA [Ex. 206, p. 15], OSHA estimates the cost of training as follows:

Employee Training Cost:

    # of employees between 0.1 and 0.5 ppm x (1 + 1/2 turnover rate(5))
            x (wage x 1.3 fringe rate) x 1/2 hour
  Trainer cost in establishments with 20 employees or more:
    # of employees exposed between 0.1 and 0.5 ppm x (1 + 1/2
            turnover rate)/20 x $26(6) x 1/2 hour
  Trainer cost in establishments with 20 or fewer employees:
    # of affected establishments x $26 x 1/2 hour


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  Footnote(4) In the 1987 RIA, OSHA estimated that one hour training would
be a reasonable estimate of the amount of time required for the annual
training in the average establishment [Ex. 206, p. IV-15]. However, the
original RIA training costs did not factor in current compliance. In the
apparel industry, with almost half of the affected employees, little time
would be needed to train employees on these provisions. Moreover, in
addition to whatever baseline existed before, the current standard has
likely spurred additional training for employees with exposure below 0.5
ppm, in part because some establishments may have chosen to establish
training programs for all employees, not just new employees or those
exposed above 0.5 ppm.
  Footnote(5) While the exact turnover rate varies by industry, OSHA has
assumed that 1/2 each industry's turnover rate reflects the percent of
employees leaving a job who were already trained in that year. [Ex. 206,
p. IV-4]
  Footnote(6) Trainer hourly compensation [Ex. 206. p. IV-15].

A summary of the compliance costs of these revisions to the standard for each industry are provided in Table III.


     Table III - Annual Costs of Complying with the Reivsed
                      Formaldehyde Standard

(For Table III, Click Here)

[57 FR 22290, May 27, 1992]

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