OSHA: Proposed Standard For Indoor Air Quality: ETS Hearings, January 13, 1995

OSHA: Proposed Standard For Indoor Air Quality: ETS Hearings, January 13, 1995


UNITED STATES DEPARTMENT OF LABOR

OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION

PUBLIC HEARING
PROPOSED STANDARD FOR INDOOR AIR QUALITY

Friday, January 13, 1995

Department of Labor

Washington, D.C.

The above-entitled matter came on for hearing, pursuant to notice, at 9:30 a.m.

BEFORE: HONORABLE JOHN VITTONE

Administrative Law Judge

AGENDA

PAGE

American Federation of Government Employees
Howard Egerman 11083

Questions:

Ms. Kaplan 11090
Ms. Janes 11096
Mr. Rupp 11099
Judge Vittone 11107

Microeconomic Applications
Henry B. R. Beale 11112

Questions:

Mr. Gross 11155
Mr. Rupp 11164
Dr. Nichols 11262
Ms. Sherman 11270

American Federation of Government Employees
David J. Schlein 11272
Kirby Biggs 11280

Questions:

Ms. Kaplan 11288
Judge Vittone 11306


Powell Manufacturing Company
Tom Pharr 11310

Questions:

Ms. Kaplan 11319
Ms. Janes 11326

American Sightseeing International
Joe King 11331

Questions:

Ms. Kaplan 11337

Technacool, Inc.

Robert Edgar 11342

Questions:

Ms. Sherman 11355

EXHIBITS

EXHIBIT NO. IDENTIFIED RECEIVED

222 11308 11308

223 11309 11309

224 11309 11309

225 11310 11310

226 11310 11310

227 11361 11361

P R O C E E D I N G S
9:50 a.m.

JUDGE VITTONE: Good morning. We resume our hearings into the proposed rule on indoor air quality by the Occupational Safety and Health Administration.

We are going to do a little reshuffling today with respect to the order of witnesses. The first witness will be Mr. Howard Egerman.

Mr. Egerman, is that the correct pronunciation of your name?

MR. EGERMAN: Yes, it is, sir.

JUDGE VITTONE: Okay. And you are affiliated with which organization?

MR. EGERMAN: The American Federation of Government Employees, sir.

JUDGE VITTONE: Okay. Mr. Egerman will give his presentation and then be opened up for examination by any of the interested parties.

After that is completed, he will step aside and the other two representatives of the American Federation of Government Employees will wait to present their testimony later in the day.

After Mr. Egerman, we will then go to Dr. Beale, who will be our witness, and go through his direct presentation and examination by the parties and then go back to the American Federation of Government Employees.

Okay. If you are ready to proceed, Mr. Egerman, you can go ahead and make your presentation.

MR. EGERMAN: Thank you, sir.

My name is Howard Egerman and I am a health and safety representative for Social Security field offices. Today, I would like to briefly discuss with you why an indoor air quality standard is needed and why it's needed today, if not yesterday.

Before I begin, I want to show you what I wore for roughly two months in the fall of 1991 when I visited one of our federal buildings, the Western Program Service Center, which is at 1220 Nevin Avenue in Richmond, California.

JUDGE VITTONE: Excuse me a second.

For the record, this is what kind of device?

MR. EGERMAN: This is a respirator with HEPA filters. These whatever they are blue or purple or whatever it is, I'm partially colorblind so I don't know what this is. But this is a HEPA filter respirator and I had to wear this whenever I entered the building at 1221 Nevin Avenue in Richmond, California, our Social Security Administration.

I wore it with my hat for AFGE, my union, and my button. The reason why I wore this was the absence of an indoor air quality standard which resulted in an outbreak of Legionnaires disease which resulted in the death of two private sector workers and 13 individuals who came down with Legionnaires disease. And because of this outbreak, I got firsthand experience at seeing what a sick building was like and I will remember what I saw for the rest of my life.

It's hard to imagine when you think of a six-story brick building with a basement almost totally devoid of people, the only people you would see in this building were people who would wear this. All of us looked like we were Darth Vader's cousins. And the temperature in this building was about a hundred degrees. They had to have chicken wire so no pigeons would go into the building. No ventilation. No electricity. This was a sick building if there ever was one. And it seemed like time totally stood still. It was like a neutron bomb had gone off.

I went into that building first to retrieve material. We got the building closed. People in their haste, they left their glasses there, they left their job applications which is really important if you're a federal worker. They left their jobs, their keys, all kinds of things. Where there was a security guard, there was nobody. You had yellow newspaper stands. Time just stood still.

As strange as it may seem, the date this building was closed was September 13th, Friday the 13th, just like today. It was truly a sick building.

To give you some background, how it began, people started smelling a strange odor in the basement. My colleagues complained to management. A lot of people were getting sick, having the flu. Nothing would happen until September 11th we found out somebody died.

This was a building that Social Security had control over. A lot of people had respiratory problems. As soon as we became aware of it, the medical doctor in the building called the Contracosta Health Department. The woman had an autopsy. She tested positive for Legionnaires disease. The health department took blood tests of everybody who had been sick for more than three days and we closed the building for what we thought would be a weekend.

When it turned out she had Legionnaires disease, the building ended up being closed for two months. What happened was we had a trailer city take place in the parking lot. One trailer was for OSHA, one was for NIOSH, one was for Social Security.

People like myself who could go in the building to see what happened, we had to wear a respirator. What I basically did was observe what was going on, take pictures, because what the government had to do, and it cost them roughly $4 million, was set up a temporary payment center for roughly 1100 employees while this was taking place. Just an incredible situation. And they had news conferences every day.

So what had happened basically, we discovered, was there were all kinds of changes in the building. The building was built in 1975, which is the same year that the Legionnaires outbreak took place in Philadelphia at the Bedford Stratford Hotel. And there were protocols, the Wisconsin protocol, for cleaning up cooling towers.

Nobody knew anything about this because it didn't apply to the government, they didn't know anything about Legionnaires disease. And what also occurred was they wanted us as federal workers to get the work out. They deferred maintenance. In other words, if they wanted to clean the cooling towers, they had to shut down the building the entire weekend. They wanted us to clear claims. They wanted employees to clear claims.

In addition, they had new construction. What we found was ground zero where the two janitors died was the basement. They built training rooms, they put new walls there. They didn't change the ventilation system, they didn't change the ventilation system. The personal computers increased the heat load. They didn't change the ventilation system. We had all kinds of situations occurring. The ventilation system was not updated. It was a mess.

All the time, the bacteria were thriving, nobody could see what was going on. People complained. The people who were the healthiest in terms of breathing in that building were our smokers. At least they could go outside and get some fresh air.

It ended up the agency spent several million dollars cleaning the cooling towers, remodeling the building, replacing the carpet. The building was a mess. We had standing water all over the place. It was just unbelievable.

Mid December 1991, the building was reopened. While this was occurring, we checked out for Legionnella, the bacteria that caused it, in all our payment centers. The one unique thing about our building was they built three buildings at the same time, one in Philadelphia, one in Chicago. And the strange thing about our building is here we are in California, we have snow melting equipment on the roof of our building. We never get snow in California. At least whenever we do we go outside and look at it and it melts when it hits the ground. That was affecting our heat load.

Well, what they did was they started taking care of preventative maintenance situations. But I've encountered a lot of similar situations in the other 1300 buildings and what I mentioned in my statement, I'll just briefly summarize a few of them. I've got additional material on them.

We had the Alan Bible Building, which was in Las Vegas and in Las Vegas, a lot of hot temperatures. This building was designed for doctors and lawyers. The government takes it over. It can't deal with the heat load. In fact, we have hot and cold spots in that building. It could be 115 degrees outside and we have people wearing sweaters inside. I got a NIOSH report on that.

Hugo, Oklahoma. In the Hugo, Oklahoma building we have pigeons which are basically living in the ventilation system. For seven years. A lot of our federal employees are very, very dedicated people. Seven years. And when they cleaned up the building, we have seven years of dead pigeons and pigeon waste being recycled in Hugo, Oklahoma.

Placerville, California, we've got another building closed there. It was over a gold mine. Roughly 30 percent of the employees in that office had elevated levels of C02. That's Placerville, California. We got that building closed in May of '94.

Beaverton, Oregon, they had a nearby beauty salon, nail polish remover. And the ventilation system would suck in the smell of the nail polish remover. People were getting sick. A member of management passed out, they closed the office.

We can go on and on and on. Basically, as I said in my statement, we need written operation plans, the issue of seasonal shutdown, renovations, building owners must be aware of changes. It's really important to have visual checklists and maintenance plans. In other words, as a result of Richmond, situations like this have taken place. Having designated people for IAQ compliance is also important, as well as written records of complaints.

I can go on and on and on about what happened and Richmond and why it's important but the importance of what happened in Richmond is we cannot see, we do not know, what's happening in buildings we visit. We do not have any idea. Our commissioner for Social Security, Shirley Chader, has come down with this little customer service pledge for our customers. She says I'll give you a safe and healthy place to visit. And the same thing could be said of any building we go to, whether it's a department store or it's the Department of Labor here, whether it's National Airport where I have to go to take off to go back to beautiful Oakland, California. We don't know.

It's really important that we have an indoor air quality standard so people will not have to wear respirators like I did in order to go into a building.

And one thing that all of us do, whether we're union, whether we're management, whoever we are, whether we work for the government, the private sector, is every single day we inhale and exhale. Every day we inhale and exhale. Having a standard, having an OSHA indoor air quality standard, will enable us to get through every single day so that we can live as long as possible and make as much contribution as possible.

I still remember what our commissioner said about the two women who died who were not federal workers but still people remembered at workers memorial day, basically she said it was really a tragedy that their lives were cut short and it really was, that had to breathe this bacteria in the aerosol form and that they're no longer alive.

And I think it's really significant, if you look at what happened, when you see what a building like the Richmond building looks like when it's devoid of people, and you see that the one thing that really is important for all of us is the human quality and that's what OSHA should be about. That's what indoor air quality standards should be about, that's why we need one, so that now when I go to work in Richmond, I wear my badge, I don't have to go like this.

Thank you, sir.

JUDGE VITTONE: Thank you, Mr. Egerman.

Ms. Kaplan?

MS. KAPLAN: Was there an investigation undertaken of the Richmond building?

MR. EGERMAN: Yes, there was. All kinds of investigations by just about everybody you can think of.

MS. KAPLAN: This was after the Legionnella outbreak?

MR. EGERMAN: Yes, indeed.

MS. KAPLAN: And what did they find?

MR. EGERMAN: There was literally no smoking gun. In other words, the government spent a lot of money. Their first assumption was that it was the cooling towers and there's about 30 different strains of the bacteria. I think they were trying to match the types of cultures, what the call Knoxwell and Bellingham were two of them. They didn't find a definitive cause of it but it's believe that it was in the tepid water system of the building.

We did have a re-entry protocol which was adopted by OSHA for the last year and we continue to do that, whenever anybody is absent from work more than three days, their blood is tested for the presence of the bacteria. We did, have by the way, all the employees who wished to be tested, tested for that.

MS. KAPLAN: And were there recommendations made for improving the building?

MR. EGERMAN: There were a lot of recommendations made for improving the building. The cooling towers used to be dirty. Now, it is so beautiful you won't believe it. Every time I inspect that building, I just love going in the cooling towers. It's cement -- the building is extremely clean.

What we do when we inspect the building is we ensure that we have everything at least five feet away from all the air handling units. When we inspect that building, we do something which we try to do for every single building and that is look for standing water. In other words, I look for things like flower pots. We found things, that building was so dirty, half-empty Coke cans, standing water all over the place, all kinds of places.

So there was an entire plan and we in terms of our committee, and it's a joint committee and I'm really pleased that management works with us strongly. Nobody wants to see anybody sick. I mean, that's our first situation. So we have definitely followed the re-entry protocol and if we do anything, we bend over backwards.

But the unfortunate thing is a lot of times, I call this management by death. In other words, you're doing the right thing because somebody dies. This should not happen and that's the reason why a standard is needed.

MS. KAPLAN: Had you complained to management prior to the outbreak of Legionnella?

MR. EGERMAN: We complained and we complained and we complained and we complained. We said this really smells weird. We took the deputy commissioner down there and he said it's no problem. I mean, we complained and complained and complained and we went through all of these meetings. And one of the real problems that can happen a lot of times with Legionnaires disease and sick building syndrome, unless it's Legionnaires, something you can find, so many things are unknown.

I was there at the meeting and I never saw so many people wearing suits in my life. It was amazing. We had these people from the state health department and everybody in the world. One guy from the state health department said just dump 40,000 gallons of Chlorox down the system, we don't know what it is, maybe that will make people happy. In other words, they thought some of the employees were just imagining it, in all honesty. That's what management sometimes will do.

MS. KAPLAN: So what steps were taken to improve the building? It sounds like there is now regular inspections?

MR. EGERMAN: Right. Okay. What steps, there was a protocol. The government spent $4 million basically, $3 million to $4 million, in terms of cleaning up the building. And we did the entire cooling tower situation. I have some material here which I will leave. At one point, we thought part of the problem was we had the earthquake and some of the tiles had fallen into the cooling tower. We thought that had occurred. The rebuilt basically everything. Everything was cleaned up. The building was dirty. We have new drapes, we have new carpet, we have new everything. We went through every single faucet in that building, every single sink. That's why I wore my respirator. I mean, we tagged every single urinal. Everything. Everything. We looked at everything for the source of Legionnaires. Everything was cleaned up. And when we inspect, for instance, I saw the showers in the shop area, there was standing water and we got rid of that right away. In other words, they are extremely careful and our agency has attempted to follow the Richmond example because they found presence of the bacteria. Legionnella is basically ubiquitous. It exists everywhere. They found it in Philadelphia. They found it in Chicago. They found it in Albuquerque. They found it in Wilkes-Barre. They found it all over the place. It just was the fact that there was some circumstance that people got it. And none of the 13 people, they didn't know they had it because two things happen if you have Legionnaires disease, either you get better or you die. The 13 people didn't know. They thought they had the flu. They did not know that they had Legionnaires disease.

MS. KAPLAN: And you feel the OSHA standard might have prevented --

MR. EGERMAN: I think the OSHA standard and a greater knowledge of what the requirements are. In other words, one of the real problems we had is management was totally ignorant of the Wisconsin protocol. They didn't know about Legionnaires disease. They didn't know. Because it happened after the building was really constructed. I think having something will make building owners -- I'm not just concerned about federal buildings, I'm concerned about all buildings. You know, whether it's the hotel I'm staying in.

In other words, that's what happened to the Legionnaires and now I've joined the American Legion so I'm a Legionnaire, too, but any building, any building you're staying in. I stayed at the Quality Hotel to come over here. I don't know what the ventilation system is there. It's really important any place because we can get it anywhere. We can get it anywhere if we are just unfortunate enough to be breathing it in an aerosol manner, if we meet the risk factors. And that's what I'm concerned about, not just for myself but just for anybody. Just for anybody.

MS. KAPLAN: What's the Wisconsin protocol?

MR. EGERMAN: The Wisconsin protocol is a series of steps that people are supposed to be following in terms of cleaning cooling towers. That's what is the Wisconsin -- because it happened some place in Wisconsin. We learned a lot because we hung around the trailers, I met all the top people at OSHA and NIOSH and everybody else. To me, it was one of the greatest learning experiences I ever had but it was a real tragedy.

Every time I think of it, you know, I have some additional pictures and stuff I could submit of that sink where these poor women, I mean it really affects me every time I walk in the basement. You know, we learned a lot. I think it was a teaching tool. The tragedy is and what alarms me is a lot of times it will take something like a death to really get people organized or thinking about safety issues and that's what I'm concerned about, it should not take that. It should not take that at all.

MS. JANES: Hello. I'm Deborah Janes.

With the outbreak in Richmond, you're going to submit to the record the reports from that building?

MR. EGERMAN: The only thing I will submit, I have some additional information, I got a couple of Xeroxes of pictures that I have showing certain things in the building like the sink. I have also to submit something about the Las Vegas building, the Placerville building, and I have a few pictures, let me find them, of my national president wearing his respirator when he inspected the building.

MS. JANES: Okay. So there were 15 people who were diagnosed as having Legionnaires disease?

MR. EGERMAN: Thirteen. Thirteen.

MS. JANES: Okay. So two of the 13 died.

MR. EGERMAN: When you count the two who died, it's 15.

MS. JANES: It's 15?

MR. EGERMAN: Yes.

MS. JANES: Okay. And you said that a certain number of individuals were tested?

MR. EGERMAN: Roughly over 500 people were tested, including myself. Because that's one of the situations that our union dealt with and we were able to work with one of our HMOs, Kaiser. In other words, I have a picture, I have a couple of things from the Oakland Tribune, a picture of a lady here who is getting a blood test. This is the front page of the Oakland Tribune, our newspaper. And I got a blood test, too. In other words, you're tested for antibodies.

MS. JANES: Right. What were the results of that testing?

MR. EGERMAN: The results of my test?

MS. JANES: Of the testing of the 500.

MR. EGERMAN: The results of the testing were roughly about 33 people tested positive and the 13 other people were the ones who basically were the ones who had it. In other words, you have elevated levels. And there were a number of different people who had relatively high levels. One of them was the floor person or the floor man, Orville. He had real high levels of the antibody.

MS. JANES: Were any investigations conducted of this building prior to the deaths?

MR. EGERMAN: Not really. I mean, there were other types of inspections but nobody had really done anything in terms of the air quality. One thing that had happened is that our union had submitted to the commissioner requests to have the HVAC system upgraded because we said all along that it could not deal with the increased heat load because one of the situations that occurred is even though we had fewer employees we had personal computers on everybody's desk and printers and everything else that was increasing the heat load for the building and people were just plain uncomfortable.

MS. JANES: Do you know if the GSA is following the Wisconsin procedure currently?

MR. EGERMAN: Well, Social Security, GSA gave the building to Social Security, Social Security has it. We are definitely doing it. In other words, I can assure you they're doing the Wisconsin protocol.

We just did a follow-up inspection, I guess it was six or eight weeks ago. As I said, I will not turn down any opportunity to go out to the cooling towers and the basement or anything else because I really like to check the building out. You know, I spent so much time in the building, I had dreams of the building, just thinking of the building. The building really fascinates me. They definitely are. They definitely are.

MS. JANES: Okay. Thank you.

JUDGE VITTONE: Does anybody else have any questions for this gentleman?

Mr. Rupp.

MR. RUPP: Mr. Egerman, my name is John Rupp and I represent a number of independent scientists in this proceeding who have filed notices of intent to appear on behalf of the Tobacco Institute.

I am wondering whether you have access to or know where OSHA might obtain copies of the test reports on the building.

MR. EGERMAN: I believe what you can do, sir, is you can check with the Region 9 OSHA people. And it was also my understanding that they were rewriting the OSHA manual as a result of what happened in Richmond. Frank Straushein is the regional administrator and the OSHA office is at 71 Stevenson Street.

MR. RUPP: I appreciate that suggestion. If there is an outbreak of Legionnella or a suspected outbreak of Legionnella or Legionnella problem in a building, is it your experience as an AFGE member that NIOSH or the local OSHA office rather frequently would be called in or become the repository of records concerning the incident?

MR. EGERMAN: My understanding is and my belief is we were really fortunate because for one thing we have a real good union with AFGE and when we negotiated our contract we have the right for OSHA and NIOSH to come in and so we are probably a lot more lucky than a lot of people who may not be lucky enough to be a part of an organization that is affiliated with the AFL-CIO.

MR. RUPP: So whatever the Washington OSHA staff may find in Region 9 or at other OSHA offices around the country may not give them a complete picture --

MR. EGERMAN: My understanding is that they did rewrite the manual and that's one of the things that we have talked about, is basically a lot of the things that happened in Richmond have had a major impact.

MR. RUPP: All right. But it's your understanding that actual test reports would be found at the OSHA regional office.

MR. EGERMAN: Yes, sir. Yes, sir. And they're really a good group of people.

MR. RUPP: Okay. Have you had an opportunity to read the portions of the Notice of Proposed Rulemaking in this proceeding dealing with microbial contamination?

MR. EGERMAN: It's been a while because I've been scheduled and rescheduled so many times to come over here.

MR. RUPP: Well, I reviewed it again this morning and let me give you a copy, which I happen to have, and I've marked this section.

(Pause)

MR. EGERMAN: Yes, sir.

MR. RUPP: What I've shown Mr. Egerman is the material that appears on page 16,037 of the Federal Register notice.

And if I could direct your attention, Mr. Egerman, to the bottom of the left-hand column and the top of the middle column. Obviously the provision here dealing with microbial contamination is rather brief.

Now, maybe you could help me to understand this provision and, as I ask you these questions, what I particularly appreciate is any suggestions you might be able to offer to the OSHA staff concerning improvements or refinements in this provision.

The provision dealing with microbial contamination requires routine inspection for and promptly repairing water leaks that can promote growth of biologic agents.

There is no definition of routine. Now, if I were an employer and I were to say, well, I routinely inspect my buildings every two years, that's routine for me. If you as an AFGE member with responsibility in this are, what would you turn to in this provision that says that two years does not qualify as routine, two years qualifies as negligent?

MR. EGERMAN: What I would turn to basically is our requirements in both the executive order and my contract. In other words, the executive order requires inspection at least once a year. My contract is twice a year and what I would do, sir, is I would really spell it out.

MR. RUPP: That's in your contract.

MR. EGERMAN: That is in our contract. It's also in the executive order which is signed by President Carter.

MR. RUPP: All right. And that requires inspections twice a year --

MR. EGERMAN: At least --

MR. RUPP: Let me finish my question, otherwise, the record is going to be a jumble here.

MR. EGERMAN: All right.

MR. RUPP: That requires inspection for microbial contamination in AFGE facilities twice per year?

MR. EGERMAN: Okay. What the contract does is it requires an inspection twice a year. And what I would say as a proactive person is I would try to ensure that it happens twice a year. A real problem that we have in the building is we have these real strange landlords. I mean, that was part of the problem we had, for instance, with Hugo, Oklahoma where we had the pigeons in there for seven years, is they never did it.

MR. RUPP: Right. So the first suggestion you would make in helping to ensure that this provision is successful is defining the word routine.

MR. EGERMAN: Yes, sir. Yes, sir.

MR. RUPP: All right. And I take it that's a particular problem because we're not only talking about AFGE members in buildings owned by the Federal Government but we're talking about AFGE members in buildings that are owned by others.

MR. EGERMAN: Leased buildings, sir. Yes.

MR. RUPP: And AFGE members in multi-tenant structures as well.

MR. EGERMAN: Yes, sir. Yes, sir. In other words, sir, I deal with like roughly 1300 to 1500 different types of buildings. That really concerns me because I think about any office building I may go into for any purpose.

MR. RUPP: Look at this provision again, if you would. I don't see any inspection protocol here. That is, it doesn't really tell me what is to be inspected, how the inspection is to be done, whether any tests are to be conducted, what tests are to be conducted, whether any certification of the laboratory's qualifications are required, any notification to potentially affected employees of the results of the tests and on and on. Do we also not need some sort of protocol here, at least of a minimal sort, to tell people what they're required to do and to inform employees of the kinds of protections so far as microbial contamination is concerned, the kind of protections to which they're entitled?

MR. EGERMAN: I definitely agree, sir, and I think that's one of the real functions that we also have for having union representatives that people belonging to unions such as AFGE and other AFL affiliates is that one of our major functions that we perform is to inform people about what is happening in their building and I think the more people, any person knows, about what's happening, because the real problem, I left the book at my chair over there but I read this book called Anatomy of an Epidemic about what happened at the hotel in Philadelphia when Legionnaires first broke out, nobody knew and that's basically what was happening in terms of Richmond, this bacteria was just growing and multiplying. Nobody knew.

MR. RUPP: You'll also note here that the provisions on microbial contaminations are triggered by the notion of inspection whenever it occurs, if you look at small paragraph (i) at the bottom of the left-hand column. The obligation to cure or repair, take remedial steps, occurs when microbial contamination is found, either as a part of regular or emergency maintenance. There is no provision here for an employee or a union representative to cause an inspection to be made because they have spotted something that is clearly out of the ordinary. Do you believe that this provision ought to be tightened to give employees some role in this process?

MR. EGERMAN: I see no reason why it should not. The fortunate thing, again, is we have that protection in our contract. We also have that right as well in the executive order. In other words, again, we are real fortunate and I feel myself every day how fortunate I am to be a member of my union for that reason because we already have that right. I feel really sorry for people who are not in offices which are represented by unions.

MR. RUPP: One last question. I take it you would not want a lawyer going in and doing these routine inspections because I probably couldn't tell chocolate pudding from Legionnella.

MR. EGERMAN: Sir, I think if you have a lawyer, a union rep and everybody else going in with trained professionals, I don't see why a lawyer cannot be educated as well.

(Laughter)

MR. RUPP: We're resistent to most forms of education.

I stated the question a little facetiously but it's a serious question and that is I see no provision or no passage in the material here that requires that the people doing the inspection be trained or educated so that they know what they're looking for.

MR. EGERMAN: Right.

MR. RUPP: That is, not everybody is going to be able to spot microbial contamination, to distinguish it from dust, inert, innocuous material. And so that an inspection could well be a rather futile exercise if the people undertaking it are not qualified to do so. And I wonder if that is another refinement that the OSHA staff should not be considering here.

MR. EGERMAN: To me, it definitely sounds like one that wouldn't hurt but my major concern is getting something started in terms of having a standard you can at least begin with and then things can be refined. I know we have the same type of situation that I'm dealing with right now in terms of the rain in California and buildings affected by asbestos problems and we're ensuring that we have certified individuals who are doing the cleanup, for instance, in my office in Fresno, which has spray-on ceiling insulation that's been affected by the rain we had this last week.

MR. RUPP: But you'd want provisions of this sort if OSHA is going to spend the effort to make some improvements in this area, you would want them to do it right, would you not, because they're not going to revisit this issue in the next three weeks after the regulations are issued.

MR. EGERMAN: I don't see any problem in it.

MR. RUPP: In doing it correctly for the first time?

MR. EGERMAN: Well, in improving it. I'm not saying it's not -- to me, the only incorrect thing is not having a standard. Having a standard, having this proposal is a real major improvement and it's something that there's no reason why we would have to have people like these two wonderful women die in Richmond to have this accomplished.

MR. RUPP: Thank you very much, Mr. Egerman.

Thank you, Your Honor.

JUDGE VITTONE: You're welcome, Mr. Rupp.

Is there anyone else?

(No audible response)

JUDGE VITTONE: Mr. Egerman, let me ask a quick question here. What's your job with Social Security?

MR. EGERMAN: I am a claims representative in the East Oakland office as my regular job and I have a number of different titles in terms of AFGE. I am the Council 220, which is the field office, health and safety representative, so I am the health and safety representative for all Social Security offices. I'm what's called the general committee health and safety representative which is I am the health and safety representative for all parts of Social Security. I'm the regional health and safety representative for California, Nevada, Arizona and Hawaii. And I'm also the health and safety representative for my local and I'm the health and safety representative for my office in East Oakland California.

JUDGE VITTONE: You go to a lot of meetings.

MR. EGERMAN: Yes, but if it's health and safety, it's really enjoyable.

JUDGE VITTONE: I'm a little confused. You said two women died and you talked about two janitors.

MR. EGERMAN: Those were the women, sir. What happened is we have contracted out janitorial service which means we have private sector workers in Richmond, California. The two women who died were private sector janitors. And in other words, as a result of that, when we had all these different people in suits coming in, some of the suits were CAL OSHA because they were private sector workers. So we had everybody, we had the public sector, we had the State of California Health Department, we had -- God, we had so many people, it was just incredible. It was just amazing.

JUDGE VITTONE: Now, you said the deputy commissioner came and looked at the building.

MR. EGERMAN: The regional commissioner. Yes.

JUDGE VITTONE: Regional commissioner.

MR. EGERMAN: Deputy regional commissioner.

JUDGE VITTONE: Deputy regional commissioner.

MR. EGERMAN: Yes. The commissioner --

JUDGE VITTONE: Okay. Now, wait a minute. He said no problem. I didn't understand what you meant.

MR. EGERMAN: Well, basically, all we said was let's close this building or at least let's get the heck out of the basement. And he said no, that's no problem. The basement smells, we don't like it. And what I tried to do, coincidentally, one of my units was moving in that exact same day. I said don't move my people in. They said, yes, we will.

JUDGE VITTONE: Where was his office?

MR. EGERMAN: His office was San Francisco.

JUDGE VITTONE: And just one little thing on the numbers. You said 33 people tested positive for Legionnella. You said 13 had elevated --

MR. EGERMAN: Thirteen had the disease.

JUDGE VITTONE: Thirteen had the disease.

MR. EGERMAN: Thirteen were really positive. Yes.

JUDGE VITTONE: But they survived?

MR. EGERMAN: They survived. I've talked to a number of them, sir.

JUDGE VITTONE: Okay. It was 13 of the 33 or 13 in addition to the 33?

MR. EGERMAN: My understanding is 13 in addition to the 33. In other words, these people had what was called real high levels of the antibodies in their blood and among them was Orville who was the floor man. He never as far as I know ever came down with any respiratory disease but he just had a lot of antibodies. We had a few problems. We had one thing that was kind of strange. Kaiser did the blood test and they really messed it up, they had to send the blood through all over again. You know, we had all kinds of situations like that but we were able to get it done for free, at least to us. I don't know who paid for it, probably the government.

But the real tragedy, too, sir, is this cost $4 million plus the death of two people. And as far as I know the lawsuits really haven't been settled yet but since the people who died were private sector workers, they had a lot more rights, their survivors did, than we do as federal employees and, as a result, we had heard at one time, I think Melvin Beli was going to be involved who is one of our major lawyers in the San Francisco area.

JUDGE VITTONE: We've all heard of him.

Thank you very much.

MR. EGERMAN: In terms of this additional material, I have three copies of this. And my pictures and my card.

I appreciate this because my goal was getting here and my second goal was getting back.

JUDGE VITTONE: Well, you've accomplished 50 percent of your goal.

MR. EGERMAN: Thank you, sir.

JUDGE VITTONE: I'm going to identify these later for the record when we bring up the other representatives.

JUDGE VITTONE: Dr. Beale?

(Pause)

JUDGE VITTONE: Dr. Beale, I understand you do have some slides but you're not going to use them until you're about midway in your presentation.

DR. BEALE: Yes. I think in the interests of time he can set up the equipment while I start.

JUDGE VITTONE: Are you using that machine or this one?

DR. BEALE: This one.

JUDGE VITTONE: Okay. Let's wait though because I'm going to sit here until you --

DR. BEALE: I'll sort of clue you in as to when I get there.

JUDGE VITTONE: All right. Identify yourself, please, sir, and the name of the organization that you're affiliated with.

DR. BEALE: My name is Henry Beale. I am Principal Economist and President of Microeconomic Applications.

I have a Bachelor's of Arts in economics from Oberlin College and a Master of Arts and Ph.D. in economics from the University of Chicago, where my concentrations included development economics and cost benefit analysis.

I moved to Washington and taught for six years at Georgetown University, where my course offerings included industrial organization and graduate cost benefit analysis.

I was then senior economist with Chase Econometric Associates in the public policy consulting group for five years and when that group was disbanded, I formed my own firm.

I have been working in regulatory analysis for about the last 17 years. I have done RIAs for a number of OSHA regs including acrylonitrile and a number of the industries affected by the lead standard after the second court remand.

I have also done work for other agencies. I was involved in the underground storage tank regulations for EPA. While I was with Chase, I headed up a large team working on appliance efficiency standards that were proposed but not really fully promulgated for the Department of Energy and I have done other work on FAA and National Marine Fishery Service regulations.

I also recently did a study for the Small Business Administration critiquing a number of EPA regulations from the point of view of cost effectiveness and regulatory flexibility.

I was asked by OSHA to review the preliminary RIA for this rule, proposed rule, and to comment and provide an independent perspective on it. I did not work on the rule itself either for IAQ or ETS and my views are not necessarily those of the agency.

What I am going to try to do today is to summarize the written testimony. The organization of my comments may be a little bit different. And I would also, since I got pushed back this late in the hearings, like to comment on some of the other issues and testimony that have been made by some of the other economists.

Let me start out by just trying to take a perspective overview of the rule from a cost effectiveness viewpoint.

The rule is a simple one, essentially. The requirements for the most part are quite general and they are fairly flexible. Quite a number of specific contaminants are covered through ventilation rather than addressing them one by one and this I think is a very cost effective way in general to go about it.

Many of the requirements are really quite minimal. We are looking at things -- we start out with local source capture exhaust ventilation or substitution for point sources. That is in there. It's not the major part of the verbiage but it's there.

And then there are requirements for the operation of the HVAC system. Operating at up to original design specifications and providing ventilation rates required by code are not inherently onerous provisions. Neither is a maintenance program that reflects the equipment manufacturer recommendations or industry good practice.

There is a person that must be designated to be responsible. It is hard to imagine the implications of the converse being a responsible rule.

The system must be documented, maintenance workers must be trained to do their job. These are very, very basic things. They are the type of thing that you would expect to be absolute minimal.

Most of the extra requirements above this basic level kick in as needed. They're not blanket requirements.

Records of employee complaints are caused by employee complaints.

Evaluating the need to alter the building systems to meet code comes from complaints and other issues.

Taking necessary remedial measures, well, if you find something needs to be done, do it. That is both flexible and fairly minimal.

Relocation of air intakes to restrict entry of outdoor air contaminants, that seems pretty obvious but we've had testimony that engineers don't always design buildings that way. And, if it's a problem, it's a problem.

The regulation is very flexible. It does not dictate specific engineering controls. It does not set particular PELs and this tends to make it cost effective, it tends to allow engineers and other people to design systems and people to change and maintain systems in ways that are appropriate to specific circumstances.

And this flexibility is part of the reason why there are not a lot of explicit alternatives, I think, covered by the rule because it gets a little bit difficult to think what kind of an alternative you would analyze that is not less flexible and potentially more burdensome.

Now, ETS is a rather distinctive element of the rule and it's a rather unique situation. Tobacco smoke is not part of the production process in any industry, I think probably even including tobacco because you might get dust but not necessarily smoke. And that's important to remember. There are a couple of major implications. Both of these points were made by the OSHA panel in their original testimony.

The proposed rule is consistent with stated IAQ principals, that is, you ventilate a point source. The point is, however, that this is a mobile point source and so the idea of a smoking lounge that is ventilated would move the point source to the ventilation rather than try to put a hood over every workstation.

ETS is also, in my experience with regulations, unique in the sense that because tobacco smoke is not an inherent part of a production process, you can get approximately to zero without driving the costs up exponentially and most substances that OSHA regulates that are part of the production process the costs just skyrocket as you drop the PEL down towards zero.

This is very different and, as the OSHA panel noted, this means that you can get to a safe level by means of going smokeless. You get there indirectly. And that is in fact a great simplification because it's not necessary to define exactly what a safe exposure level is.

Now, I'd like to turn to some of the issues that arise for cost effective or preliminary analysis.

OSHA has gone with the best available information and this, indeed, is one of the principles. It doesn't pay to be a perfectionist in analysis. It's not cost effective. You get all kinds of precise information that you don't necessarily need. The real issue is what difference does it make to the final outcome to make approximations.

Now, OSHA has made a lot of simplifying assumptions. I would like to point out that everybody makes assumptions all the time. You cannot do analysis without making simplifying assumptions, so that that in itself is not really a shortcoming.

Furthermore, when data are sparse, assumptions have to be used to replace detail in the data. The issue that arises is what problems do the assumptions create? Do they lead to bias? Do you in effect assume your answer? Or do you get an answer that when you sit down and look at it you figure, well, if we varied these assumptions a lot it really wouldn't make a lot of difference?

That's really the issue to look at. And generally speaking, my point is that OSHA's simplifying assumptions do not create problems. Many, many of the assumptions which I've outlined in my testimony essentially have the effect of estimating the mean impact. Proportionality is assumed and means result.

This is not particularly a problem unless there is reason to believe that there are systematic interindustry differences and there really isn't any evidence available that there are systematic interindustry differences of the sort that are going to make a difference.

The potential for missing significant impacts is fairly minimal in this case because, in the first place, the mean industry impacts are extremely small. In the second place, there is reason to believe that the problems are fairly evenly distributed over industries. All industries have buildings.

Now, if you're regulating a chemical, you'd better make sure that you've got only the industries that involve that chemical in their production process in taking a much more aggregated industry classification that where you've got a lot of your industries that don't have that chemical can lead to problems. But in this case, all industries pretty much have buildings.

And, finally, firms enjoy productivity increases and the firms that bear the largest costs because they have problems will also get the largest productivity increases and we've just had a pretty good example of that.

There is a technique that is used which I was taught in graduate school that relies -- actually in a sense relies on biases rather than accuracy per se. It's sort of a conservative estimation technique, kind of building sensitivity analysis into your analysis and it works like this.

When you're looking at the cost effectiveness of a regulation, bias the benefits down and the costs up wherever you're uncertain and you will get a more robust answer if the result shows that the regulation is indeed cost effective.

Now, for the most part in IAQ, this has been done in the analysis. An example of that is OSHA's handling of the productivity studies that it used, some of the cost assumptions that go into small business and the bounding assumptions used for profit and price impacts, all of which I'll say a little bit more about later.

Another technique is to hold elements in reserve. Good analysis does not require quantifying or even including everything.

Sometimes quantification is not possible. OSHA has a strong reluctance to put a dollar value on a life or even anywhere near it and I think that one can respect because it's a very controversial area.

Sometimes quantification is not necessary. For example, although it's rather anomalous when looking at economic feasibility, OSHA has found that the IAQ provisions on average will pay for themselves through productivity gains. Although the whole point of the regulation is health, with that result, you don't necessarily even need to weigh the health benefits into the balance.

Now, OSHA has laid out health benefits but OSHA has not tried to monetize them because the monetary balance is already in favor of the regulation.

For ETS, OSHA has identified cancer and heart disease numbers that are large enough that if you really went on and looked at the effects of irritation and productivity impacts on non-smokers of people near them who smoke, that would simply throw more into the balance.

Now, for a complete analysis, quote-unquote, OSHA probably should try to monetize those things but to get a result it really isn't necessary.

And when you have elements held in reserve like that, the effect is to make the results more robust, the results that you actually have calculated.

Another example is the screening analysis that OSHA does on regulatory impacts. You do a screening analysis, colloquially you might call this a rough and dirty analysis although OSHA personnel tend to cringe when I use that term, but you use a screening analysis to identify where potential problems are and the way this analysis works is that you say let's make one set of assumptions that assumes that everything has to come out of profits, what is the biggest possible impact on profits that this regulation might have. And then you turn around make the opposite assumption, that everything is going to be passed through to the consumer and result in a price increase.

Now, both of those can't happen, one or the other or some lesser combination of the two of them but not both extremes. And when you find that the resulting impact either way is small, that's not realistic. You haven't figured out what the exact impact is but you don't need to because you've already got your answer, it's economically feasible. And so you stop. You don't engage in further analysis that would not add useful information to the decision.

Now, in fact the whole rulemaking process and this hearing is part of this analytical procedure and this is particularly important for a regulation that affects the entire economy.

It is possible, feasible, reasonably inexpensive to go out and do a very detailed analysis of a few industries that might be impacted by a regulation and OSHA has generally done this where that was the case. But where you have a regulation that has small effects on the whole economy, it is much more efficient and cost effective to lay out the averages, say, hmm, they're pretty small, there are a few of them that look bigger, let's hold hearings and find out what information we get that guides as to where to look further.

And that, I think, is essentially what OSHA has done in this case and that's entirely appropriate because it's cost effective rulemaking.

Now I'm getting to the point where I'm going to need the overheads.

Let me just make a few comments about the OSHA costs. I have taken advantage of a little bit of the other information submitted to try to get some comparisons. We have OSHA's average annual cost per square foot and Dr. Levin's costs, NEMI costs and some costs derived from RJR's comments.

These costs differ in a couple of ways. The Levin costs are on net space so if you want to make them comparable, you've got to cut them roughly in half because OSHA and the NEMI costs are gross space and I'm not really quite sure about the RJR.

What we see, though -- and also the Levin costs and I think the NEMI costs include some things that aren't in the OSHA standard explicitly like some thermal issues that are much more detailed.

But what we see is that OSHA's costs are well above the low Levin costs and a little bit below 20 cents or 23 cents, they're in the same ballpark but a little lower than the Levin typical and the NEMI costs and a lot below the high cost but that's not surprising because the high costs are for pretty sick buildings. And they are substantially above the RJR costs. It would not surprise me to learn that RJR buildings are in fairly decent shape to begin with.

Next projection, please?

Now, there's another point which I have also taken from Dr. Levin. In fact, this is really one of his slides. That the level of ventilation implicit in the standards is in fact at a fairly reasonable level. It's about one air exchange per hour depending on a lot of things having to do with how many employees or how many square feet per employee particularly.

MS. SHERMAN: This is slide two?

DR. BEALE: This is slide two. And what slide two shows on the horizontal axis is rates of ventilation, air rate exchange, and what it shows on the vertical axis is concentration levels of contaminants. And Dr. Levin started out with several levels and said let's see what happens when you get more and more ventilation. And the regulation is right in the vicinity of one. And what you see happening in all of these curves, economists love this, is diminishing marginal returns to ventilation. That is, if you double the ventilation from half an air exchange to one, you get fairly substantial reductions. If you double it again, you get much smaller reductions. And the more and more you ventilate, the less and less reduction in contaminant level you get per increase in ventilation.

And what this graph shows is that the standard is really in the area where the diminishing marginal returns begin to set in.

Now, to an economist, just looking at the general cost effectiveness, plausibility issue without even worrying about what this nasty stuff in here is, that's a good place to put it. Obviously for certain serious contaminants, you would want more ventilation and for very high concentrations you would probably want more ventilation but for a general, overall rule, that seems sensible.

And, indeed, that's not very surprising because this level is an industry standard, a good practice type standard.

Anyway, I'm done with that for now. You can turn it off.

Now, the analysis starts off with cost estimates and it traces the costs through. Costs are linked to numbers of buildings with problems, the higher costs in particular, allocation is by averaging. This gets back to the assumptions that I was talking about, the simplifying assumption.

This may understate the impacts in some sectors but it's not clear which.

Just shut the whole machine off, please. I won't need that for quite a while. Okay.

Averaging may understate impacts in some sectors but it's not clear which and you also have to remember that if averaging understates the impacts in some sectors, it's going to overstate them in others. So you can't say, oh, no, no, no, just because they averaged they understated impacts generally.

There are data on numbers of workers, there are data on types of buildings. There aren't particularly good data on how costs would vary with the type of building and to get to a lot more detail, you need to know the combination of those three and that really isn't available, that sort of information.

Now, the approach ignores the fact, averaging, that is, ignores the fact that the costs vary with the severity of the problem. But, again, the benefits also vary with the severity of the problem so this tends to wash out also when you look at the net impacts.

So as long as you are staying at the overall impacts level, these assumptions don't seem to get you into a great deal of trouble.

Then you look at the size of the impacts. And, again, at the industry level, these are small. They average less than 1 percent and, my apologies, but Dr. Viscuzi who suggests that this is not a trivial impact is wrong.

At rates of return under 5 percent and at conventional reporting levels of rates of return, which is two significant figures, any impact under 1 percent of profits rounds to zero. Now, if that isn't a fairly good working definition of trivial, I don't know what one is.

One should, of course, check out the worst industries. This is part of the process of holding hearings. And, in fact, OSHA noted the restaurant industry and the hotel industry and explicitly sought further information, which is entirely consistent with a good approach.

Now, some of that information has come forward and of the information that I have seen I think Dr. Glantz's study, his full study, is by far the most solid.

OSHA is also seeking more information on generally other industries where there may be some problems and that's the major purpose of the hearing and part of cost effective rulemaking.

You will probably have a situation where some economically weak firms are likely to defer maintenance to conserve cash flow and this raises an issue of tradeoff: worker health versus the cash flow or the health of some firms. That's really a policy call to make and the testimony we had just before suggests that there can be serious problems by deferring maintenance too long.

Now, the final point to make about the economic impacts is these are the costs we've been talking about. For IAQ, there are offsetting effects. There are productivity cost savings which OSHA has concluded result in no net impacts. There may also be other payoffs. For example, we had some testimony earlier on that in Florida the utilities, the electric utilities, are running around paying people to balance and improve the quality of their air conditioning systems because it saves so much energy that the utility doesn't have to build new plants.

Now, one of the things you have to pursue is the small entities in regulatory flexibility analysis and this is, too, an area where OSHA used mean impacts on small entities and that is not really that appropriate.

The analysis looked at small entities. So far so good. But the analysis did not identify disproportional impacts related to scale, the low end of the profit spectrum, industry detail beyond two digit SICs and OSHA did not do further analysis of industries with the highest impacts.

It's the disproportional impacts that regulatory flexibility analysis is particularly concerned with and OSHA did not explicitly consider regulatory flexibility alternatives which is also part of a reg flex.

Well, now, let's make some comments about what OSHA did do and see where we come out.

OSHA's analysis again biased costs and impact strongly upward. OSHA looked at establishments under 20 employees as a group. SBA testimony pointed out that the median size is less than five employees, therefore, the costs are probably going to be significantly overstated for the smallest of the firms, for most of the firms that are small.

OSHA also looked at 10,000 square foot buildings. Depending on your assumptions of square footage, this is five to 10 small establishments. Very substantial overstatement of the costs.

OSHA also looked at smoking lounges that are designed for 10 smokers and although there weren't enough smoking lounges, still a 10-smoker smoking lounge would satisfy seven median firms.

OSHA also used profit data from the depths of a recession so that there is an overstatement of the impacts that affected their mean impacts.

So there were quite a number of things about the analysis that very substantially overstated the costs to the small entities. Now, that makes one a little bit more comfortable.

There is also the fact that small entities have options to limit costs. HVAC maintenance can be contracted out. Now, this is particularly important because a lot of the requirements that have real potential for economies of scale are the paperwork and the sort of figure out the system and simply the issue of can a very small firm, you know, somebody has to go to the trouble to learn all this stuff. Well, if you contract -- and that's a cost that's subject to great economies of scale. If you contract it out, you avoid that problem.

You can rent in larger buildings which does the same thing for the economies of scale issue and also splits a number of the costs among small firms.

And for smoking, I submit that a small firm in a small building has a much easier time imposing a smoking ban because you can get outside in very few steps than a larger firm in a large building. So there are options.

Again, you've got to remember two things when you look at the tables. The profit and the price impacts are both upper bounds. They're not both going to happen, so use care in interpreting them. And there are productivity increases which will tend to offset the costs that are found in the tables.

Now, all of these make me a good deal more comfortable about where the reg flex analysis in fact came out. The mean small businesses, small business impacts are still fairly small although not uniformly so across all industries. And, indeed, further analysis is appropriate where testimony or concerns that are recognized suggest problems and/or the hearings yield new data in specific industries. It would be highly appropriate to look at individual industries in more detail for the impact on small entities.

But generally the regulation appears to be economically feasible even for the small entities and the regulations themselves are flexible enough and cost effective enough that, again, doing the regulatory alternatives analysis, devising them and looking at them, would seem a little bit beside the point because it's hard to come up with too many regulatory alternatives that would probably be cheaper and less burdensome.

Now, there are some specific circumstances that can be addressed within the existing proposal and there are some techniques exempting certain peculiar situations that I think OSHA probably will consider and should consider. But for the most part, while there is clearly some fine tuning left to be done, I think they got the basic answer of feasibility all right.

The subject of productivity cost savings has raised a certain amount of controversy. Here, the data sources were fairly thin in terms of numbers of sources and OSHA, it's interesting to note, made a major application of the conservative sort of built-in sensitivity analysis that I described earlier.

OSHA used slightly different assumptions with respect to each source but the bottom line was that OSHA came out with productivity cost savings estimated to be 15 billion whereas the sources, if you follow them through, came out with productivity costs of savings in the vicinity of 50 to 55 billion. And this understatement of what the sources come up with by more than a factor of three adds a substantial level of credibility to the analysis.

Now, this particular finding has been questioned a number of ways by a number of economists in this hearing, so let me sort of run through a kind of a plausibility test because this is essentially where the discussion has been.

At the macroeconomic level, the assertion has been made, well, this is just impossible because three percent increase in productivity, surely we would have seen it, surely people who study productivity would have recognized this because that's a lot for the economy.

Well, there are two things to be noted about this, one of which is that this is a one-time gain in productivity. It's not an ongoing phenomenon. You can get three percent if you fix your building, you can't do it again next year. And people who study productivity gains who are interested in this area are not interested in one-shot productivity gains, they are interested in things that will be replicated and will turn into a growth rate for the economy and even as big a one-time increase as three percent is likely to be regarded as an anomaly and not analyzed much further for plausibility or not by people who look at growth.

The other thing to point out is that talking about three percent and talking about national productivity rates is a little bit apples and oranges, more than a little bit, because in fact the three percent estimate that OSHA uses applies only in OSHA regulated indoor workers, which I think is about 70 percent of the workforce, and only to an estimated 30 percent of those. So that's only about one-fifth of workers. And so the national figure would be about .6 percent labor productivity, not three percent labor productivity, if you average that out over all workers. And that is not particularly unremarkable. A productivity increase of about half a percent is well within the range of the little things that happen here and there in the economy without really being at all implausible.

At more the micro level, you say, okay, you've got a seriously sick building, for 15 minutes a day, does that make sense to you that you're going to come a little bit late, leave a little early, step outside now and again. On the couple of occasions when I've encountered foul air, yes, that seems very plausible to me. I'd go out for a breath of fresh air. And as we've seen in the previous testimony, in fact it can be a lot worse than that.

Another approach is to reverse the question. How much productivity is needed to recoup the costs? And I used Dr. Levin's numbers and he had an interesting approach where he looked at combinations of salary and square feet. And so I sort of did that exercise and for the normal costs in just about all the plausible square footage and salary of the employee combinations, it would require well under half a percent. And even for Dr. Levin's high costs, which were much higher than OSHA's costs, it would require well under two percent in most area and salary combinations to recoup Dr. Levin's IAQ costs and Dr. Levin's costs, as you recall, were a little bit higher than OSHA's costs.

Now, there's also the criticism that Dr. Viscuzi and others have made that, well, this just can't be because if you've got a two-for-one payoff, no self-respecting building manager isn't going to jump at this opportunity so therefore the payoff must be wrong. That's basically the argument.

This ignores several factors on which testimony has been presented. There may be information failure. Management may not recognize that a problem exists. Management may not know what the problem is. Management may not know how to diagnose and fix it and we have just had a very dramatic example of that in the testimony immediately preceding me.

There may be incentive failures. Key managers may report to different profit centers. Building management may exacerbate the problems by deferring maintenance and cutting down the ventilation to save money in their profit center and staff management which would benefit has no way of affecting this decision and unless top management comes in and is perceptive enough to recognize what's going on, they're not going to get it fixed.

Finally, there is an issue of a lagged response. To say that, a profit maximizing theory does not predict that the market will adjust immediately. It may take a while and the long run may run into decades. Personal computers are spreading rapidly now. They've been around for at least 15 years and they still haven't penetrated all sectors of the economy very thoroughly. Innovations take decades to adopt. Why would one expect this sort of building improvement to take less?

The point is this criticism lacks any empirical basis. It's essentially an assumption.

There's another point, too, and that is that a regulation that says you've got to meet these minimal ventilation standards and when you find a problem you've got to fix it would cut through these management failures. It would actually improve the profit maximizing function of management. And if this isn't a case for regulation, a basis for regulation, then I don't know what it is.

But anyway, the implications of productivity on economic feasibility are twofold. In the first place, just the proximate result is that on average the IAQ regulation is self-liquidating. It will pay for itself. The conclusion from the point of view of OSHA's interest in economic feasibility is that there is no significant impact, if indeed there is any impact, by the regulation in most places so it is economically feasible.

Now, a couple of issues which got brought up and I'd like to address them even though they weren't in my original testimony. The first of these has to do with market failure. The preamble discussion of market failure was general and over simplified and perhaps not particularly satisfactory but it did deal with the right issues although I think the real issues are different in particulars. But those issues are information and mobility.

Now, one of the points at issue is the understanding of the risks of smoking. And Dr. Viscuzi has done research on that, quite a lot of research. Enough that he is quite possibly miffed at being overlooked in OSHA's findings. And it's innovative academic work which I think is very commendable and it made very interesting reading. But Dr. Viscuzi makes a lot of critical assumptions and he raises key questions that are left unanswered.

Now, that itself isn't a criticism of Dr. Viscuzi because indeed that's how intellectual knowledge progresses. You do a breakthrough study and then people come up and address the questions you've left unanswered.

But there are a lot of issues that come up in the rulemaking and they come under the two headings of methodology and assumptions.

Methodologically, there is something that bothers me a great deal in the survey methodology and that is that the surveyors are prompted when people are faced with a question how many people out of 100 smokers would die of lung cancer and they say I haven't any idea. The surveyor prompts and says, well, go on, make an estimate. And this, I think, very clearly leads to a serious bias upwards but I have no idea how big it is because the number of people who dug in their heels and said, no, I really don't know is documented but the number of people who estimated in response to that prompt is not documented.

The second problem is that the wording may be critical. Now, Dr. Viscuzi has gone to a great deal of effort to try to come up with a very neutral -- or whoever did the study, I don't know if it was Dr. Viscuzi, the original study, to try to come up with a neutral sounding wording. But Dr. Viscuzi cites other studies as having quite a variance of response depending on how it's worded and one is a little uncomfortable.

I think the real problem with the methodology is that the study analyzes being a smoker, quote-unquote, this is the dependent variable. It's not the decision of starting to smoke and I think that this approach creates some serious problems with interpreting the data, particularly with respect to teenagers.

There are also some assumption issues. Dr. Viscuzi sets up hypotheses that include some specific personality types, one of which is the stylized smoker which is the person who neither knows nor pays attention to when he does learn information about the risks of smoking.

Now, that's a little bit of a straw man although in defense of Dr. Viscuzi it does sometimes seem that a lot of anti-smokers do argue that that is exactly the way that people behave and that Dr. Viscuzi may be doing no more than characterizing what he sees as a very common view. But the other two personality types involve a linkage of perfect or imperfect but basically of reacting to the information that you do have.

Now, that troubles me because he has assumed that people -- he has assumed away a personality type that I think is fairly important and, again, particularly for teenagers, of somebody who has information that is either accurate or overstates the risks and then goes ahead and ignores it anyway. This is commonly known as denial in a different discipline. My wife is a social worker, so I get a little into that sort of language, too, in discussions. And I think that's a very important personality type that wasn't really explored very well.

Another one of my problems is that Dr. Viscuzi does not really address the issue of addiction and he's talking about choice and addiction can severely constrain choice. And what is really striking is that his own data suggests that there is a large involuntary element in smoking and he pretty much passes over that every time it comes up.

Finally, and for purposes of this hearing, most importantly, Dr. Viscuzi simply abstracts from externalities. He is focusing on the individual smoker. He is not focusing on environmental tobacco smoke. And he is rather explicit about that. What that means is that the findings in this book are fundamentally and essentially irrelevant to this regulation.

Now, the issue of market failure raises the question of what is the market mechanism. If the market is going to work, there has got to be a mechanism that makes people react to environmental tobacco smoke. And the other economists that have testified on the subject of market failure have been fairly unanimous in their choice of market mechanism. It's the compensating wage differential.

Now, let me point out, for a compensating wage differential to work, you need pretty good information, you need at least moderately well defined legal and property rights, and you need relatively low transactions costs.

Let me look at those but first let me point out that the empirical findings on compensating wage differential are done on situations that are different from ETS. Dr. Tollison is most copious in his citations and you look at his lists and you find that there are studies of different job related risks, different industry specific risks. Shift work as opposed to non-shift work. Regional differences. All kinds of things that may be related to and may result in wage differentials that compensate the workers for these differences that inherent in the job.

Dr. Viscuzi's original work on this subject was done on two and three-digit SIC industries. None of these explains how a compensating wage differential is going to work within the same sort of job, within the same sort of industry and even within the same sort of office.

Again, smoking is not an inherent risk of the job, the way falling is a risk of high steel or -- you know, pick it. And so it's not really clear how to apply all of these studies that say, oh, yes, this works. This market mechanism works for ETS or to IAQ.

When you look at the situation, we see that the information is often poor. It's not very easy for somebody taking a job to anticipate the indoor air quality in the place he is about to work and it's not all that easy to anticipate what environmental tobacco smoke is going to be like.

For indoor air quality, specific sources may be unknown or there may be multiple sources. There's been testimony to that. Public knowledge may happen only when things get really bad. Neither managers nor building owners like this sort of information to get out. And employees may not know about specific buildings at all.

For ETS, without a smoking policy, people just don't know what to expect. Are people going to be polite and not smoke in your face or aren't they? Even with a smoking policy, the prospective employee may not really know how to interpret its implications.

Now, ironically, if you have a smoking ban or in other words if you have what the OSHA regulation is proposing, then you have good information.

And there are a few specific cases, I have been informed, for example, since VA hospitals do not allow smoking other than in ventilated smoking lounges, it is necessary for nurses to go in and provide treatment within a smoking lounge and they get hazardous duty pay.

So there are some situations where this sort of thing can work but I think that example illustrates how particular such circumstances are really likely to be and how ungeneralizable they are.

Even if you know what the conditions are when you take the job, conditions can change. Your firm can move to a new building. You can have what happened to me. Less than six months after I took the job with Chase Econometrics, the office hired somebody who smoked like a furnace and I always had meetings with her in her office so she wouldn't contaminate mine. There can be policy changes. You don't know what's going to happen down the road.

On the responsibility issue, there may be definitional problems. For indoor air quality, there are the problems that I noted earlier, management fragmentation and poor understanding. The relative responsibility of the owner or tenant may not be clear so the problem just may not get dealt with. Even organized labor, as we have just heard, may not be able to get a response until something fairly severe happens.

For ETS, there is the question of who owns the air and I will treat that at this point as an open question. But that means that needs to be resolved.

The issue is further complicated by the roles of the employer and the owner. It's not just a matter of employees with a homogeneous interest dealing with managers, management or building owners with a homogeneous interest. We have smoking employees and non-smoking employees. For that matter, you have smoking managers and non-smoking managers and that may really complicate matters a great deal.

Mobility, the third element, is limited. Transaction costs are high and it's all well and good to talk about, oh, Dr. Viscuzi cites a very high proportion of quit rates in high risk industries as resulting from learning more about the risks. But quitting your job and moving to another job is not a trivial matter. The costs are very substantial.

A firm can move buildings if there's IAQ but any of you who have been involved in a move, as I have, recognize that isn't trivial either.

Mobility is also limited by information. That is, you've got to know what the next building is going to be like before it does you any good. And transactions costs of negotiation are there. Negotiation isn't simple. There are lots of people involved. Grievance procedures aren't costless, either.

So the problem is that the basic underpinnings for the compensating wage different to work, for the market to work, aren't there.

Now, this regulation can improve the workings of the market. It can do so by providing information, it can set responsibility, it reduces the need for transactions costs, mobility and negotiation. OSHA is the big brother that everybody loves to hate because they can point to OSHA and say they made me do it. That represents savings of a lot of transactions costs. So that's important to remember.

Now, finally, there's the issue of environmental tobacco smoke. Let me look at OSHA's costs. OSHA's estimate for smoking lounges is clearly too low. That's there. The principal issues are the cost per lounge is too low, there are too few lounges in large buildings and too few establishments are estimated to have lounges.

Now let's look at the commenters' costs and they are far too high. Washington Consulting Group estimated $8.6 billion and Dr. Nichols' NERA estimates range up to $11 billion. Well, let's break down a few of these questions.

How many establishments will have a lounge? Washington Consulting Group says all establishments will build a lounge. That's how they got the 8.6 billion.

Well, is that really likely? No.

There is a need for lounges in some very large buildings, not necessarily all but some. And remember that the average size building is 14,000 square feet which is the square footage of the Mellon Auditorium where we started out. So most buildings because some are very large are going to be smaller than the Mellon Auditorium. Now, that does not present egress problems.

Extremes of weather, yes, that's another situation. You might also have a situation where a manager smokes and wants as his own amenity or is concerned that if he doesn't have a lounge some of his employees are going to leave, you may have that sort of situation. But under a regulation, this cuts down the scope of that sort of concern a great deal because the only thing your competitors have is a smoking lounge as opposed to a ban and they've got to incur the cost of a smoking lounge and so if you feel compelled to build one you're not going to be a cost disadvantage to them. So that's different. And you've got to recognize the difference with and without the regulation and change the environment of the competition as well as your own firm.

Who else? Well, it's really hard to think of any other compelling reasons to build a smoking lounge and that's going to be some small fraction, some fraction, of establishments.

Size of smoking lounges. Now, Dr. Nichols made some very helpful conceptual suggestions here. He suggested let's talk about square footage per person, not lounges per establishment and let's look at multiple use of lounge space. That's fine. The issue is what multiple, he picked two. I think once you open up the question you can explore that but there are a number of considerations.

Small establishments will not need much lounge space, particularly those in large buildings will be able to share and when you look at it in that way, you say, gee, this is just not a lot of smoking lounges per firm. And I think that's a very important consideration. And small firms in small buildings even in fairly inclement weather can probably figure out some method of having a sheltered area outside where an employee can smoke if he really wants to.

How much does the space cost? Now, this is a biggie because this is somewhere near half of the costs that the critics -- Washington Consulting Group gets their data from the New York Restaurant Association. This is typical? Surely Manhattan square footage is much higher in cost than almost any other place in the country.

And NERA, Dr. Nichols, uses the Take Ten data which pretty much automatically assumes new space. Is that reasonable? No. Not as a general proposition.

What is much more likely in many, many cases is that new space will not be required. You will in a lot of cases be able to convert existing lounge space and what's particularly interesting is who are the people that are likely to be providing existing lounge space? It's precisely the people that are in such large buildings that it takes a long time to get out of and people who are in very inclement weather such as Minneapolis where you can go for blocks and never go outside. And these are the places that are likely to want smoking lounges and these are the places that are likely to have enough indoor break areas that if they pick off some of them they've got their smoking lounges.

Now, you do have the problem of a rapidly growing law firm or other firm but I think law firm was mentioned as being out of space. But here the problem is the growth of the firm, not so much the smoking lounges. And, incidentally, any of you who have been up on the fifth floor found that DOL got a smoking lunchroom by enclosing a terrace area, so there was no additional square footage there. There's lots of stuff you can do.

Other costs, again, my principal complaint or criticism of Dr. Nichols' approach is using the Take Ten environmental break room data which provides a turnkey operation. Now, I have a lot of sympathy because he used the same methodology as EPA but this is likely to be quite high as a cost source and it ignores the opportunities for savings in costs that are related to specific buildings.

Many of the other costs like furniture and cleaning and all of that sort of thing are going to be transferred from other space. You don't need to go out and buy new furniture for a smoking lounge, particularly if you're converting a break room.

The point is that the more creatively one thinks the more reasonable many of OSHA's assumptions look and certainly the commenters' costs are way, way too high.

Now, there's also the issue of costs of a ban.

May I have Exhibit 3, please?

That is to the people who don't have smoking lounges. Now, I have taken an exhibit that Dr. Nichols showed. The original demand curve is labeled DD here. That is sort of the prototypical demand curve that he puts.

Dr. Nichols indicated in his testimony that D-1 D-1 is the lower bound and D-2 D-2 is the upper bound of what the demand curve for smoking lounges may look like and he's said, well, this is the cost of a lounge and anybody who is willing to pay less than the cost, of course, won't put in a lounge but that doesn't mean they won't incur costs.

Now, he's right in concept. But it turned out that he drew this as the minimum curve because it was simpler to draw.

Now, these results, the shaded area depending on the curve result in 25 to 80 percent of the total cost of the smoking provision, lounges and non-lounges, in the near NERA estimate. That is a phenomenal level. That is billions and billions of dollars.

And why do we draw a linear demand curve? It's the simplest specification.

Now, unfortunately, there are times when economists tend to think like this and this is a tradition that I've seen in 19th as well as 20th century economists but it happens.

What would you expect the demand to look like?

Well, I've suggested that there are seven categories that would want smoking lounges and because of weather or building size that part of the demand is going to be fairly inelastic. But beyond that, bearing in mind that the scope for losing smoking employees is greatly reduced because the regulation applies to your competitors too, it is hard to see how a large number of firms are going to have very high demand for smoking lounges.

There are some costs. You have to make a decision. That may be the largest cost. And once you put in the regulation, you don't have to make a decision any more. You have to write a policy, somewhere you have to type up a paragraph and say smoking will not be allowed on the premises. And you have to post signs. The last time I was in Office Depot I looked and no smoking signs cost between 59 cents and $3.49.

So you've got a little cost here. Way down there somewhere. And the point is, is there a cost to people to ban smoking rather than build smoking lounges? The answer is unequivocally yes but it's probably very small so that the area, I would suggest, is much more -- the cost is much more accurately, I would suggest, represented by the black area than by the shaded area and, as you can see, there's a huge difference in size there.

Another question that gets raised up is breaks. And the versions have varied from, "Gee, there's going to be this problem if you make people smoke outside the building you're going to have to give them breaks" to somewhat more sophisticated presentations.

Well, the idea that there are no breaks as a baseline is balderdash. Everybody takes breaks of one kind and another and there is no real reason to say, well, smokers inherently deserve longer breaks. You may have a transitional phenomenon where you have to caucus the office and say, okay, we're going to put this in and for the next two months we're going to give smokers 10 more minutes so they can get used to it. But, really, there is no reason why anything more than that would be required and that's a pretty trivial effect.

How many people really have to smoke more often than every 90 to 120 minutes? In this day and age, there are so many public places where you can't smoke that most smokers can do that pretty easily. And for those who can't, and remember, I've worked with such a smoker, I would suggest to you that the productivity losses to your non-smoking employees of letting that person smoke at his or her desk are much higher than the productivity losses for that one individual by not allowing that person to smoke at the desk. Others will be very relieved when they quit.

Now, finally, there is another issue.

May I have Exhibit 4, please?

And this is an issue Dr. Viscuzi raised about consumer surplus and smokers. And Dr. Viscuzi indicated that if you reduce smoking forcibly you will cause a major loss in consumer surplus on the part of smokers. Consumer surplus is generally the area over the price line and below the supply curve which is what smokers would be willing to pay but don't have to because the price is down at this level.

Now, Dr. Viscuzi threw up a slide which had a demand curve DD and said there's a big loss of consumer surplus which is the single hatched area, which is actually all the hatched areas.

Now, I have some problems with this. A demand curve that is normally used for consumer surplus is a price-quantity relationship and the concept of consumer surplus is widely used for issues such as monopoly power or trade restrictions, either tariffs or quotas, which in fact directly affect either the price or the quantity.

It is not clear how the demand curve relates to a smoking policy that does not say, no, you can't smoke this much, it merely says -- it merely affects the timing and the convenience of smoking. So right off the bat there's a question about the use of consumer surplus.

Now, there's also a serious question about the form in which the reduction in smoking takes place. Dr. Viscuzi posited that essentially all of the reduction will take place in the form of existing smokers smoking, I believe, sort of an illustrative figure he threw out was five cigarettes less a day.

And in that case, in that sense, consumer surplus is a legitimate tool to the extent that that's the way reductions in smoking occur.

However, if reductions in smoking take place in the form of smokers quitting, which is something that smokeless workplaces may assist them in doing, then you have a shift of the demand curve and this whole single hatched area of consumer surplus goes away. And so there is an issue which Dr. Viscuzi has not tracked down in his analysis.

Then there is a major problem of volition. If people want to quit, if they're trying to quit, as I said, a smokeless environment probably helps them accomplish what they're trying to do. And even if they don't succeed in quitting, it's very hard to say that there was a loss of consumer surplus. It is probably for those people a net benefit even if they don't succeed in quitting.

And it's interesting that Dr. Viscuzi's own data found that about 23 percent, just about a quarter of the people in the survey, were trying to quit or had tried to quit. And this is an understatement because it was a very open-ended question. In fact, there was a news story on the AP wire shortly before Christmas from the Center for Disease Control that indicated that every year a third of smokers try to quit. That's a big chunk of this consumer surplus.

And finally there is the issue of addiction. Now, addiction is not a word that has popped up a lot but when you're examining analysis you've got to consider it as a possibility. The demand is a lot less elastic, that is, it's more up and down. If you compare D prime D prime with D double prime D double prime, I've drawn this as a general representation of this would be a choice that is truly volitional and this would be a choice that is constrained by addiction. And, as you can see, the addiction produces a great deal of the quote-unquote consumer surplus.

Now, it's not at all clear that this a type of consumer surplus that society ought to be concerned about. If you look at another addictive substance, alcohol for example, and somebody sobers up, somebody gets ordered by the court into a detox program, somebody doesn't say, oh, gee, sobering this person up has caused this huge loss of consumer surplus. So I'm not sure that it's legitimate to consider addiction but the point is Dr. Viscuzi didn't.

Now, I have one more slide and with Your Honor's indulgence we will try to introduce a little bit of levity here.

This appeared with the cartoonist Jeff MacNelly shortly before the hearings started and I have finally figured out what's going on here.

What's going on is that we are having the pilot test of a new study to try to ascertain a la Viscuzi the prevalence of addiction. And the maitre d' is administering the survey instrument, you see.

And for the benefit of those who are reading the record and can't see it, the questions are, "One for dinner? Smoking or no? Active or passive? Filtered or unfiltered? Addictive or simply experiencing nicotine for its taste-enhancing properties?"

So maybe if we did some research like that we could get a little bit better handle on the role of addiction.

But basically there is one other point that needs to be made about this whole issue of consumer surplus. The issue of consumer surplus lost to the individual smoker is not a mater of economic feasibility of the regulation. It has no bearing on the economic feasibility and that is the test that OSHA has to meet.

JUDGE VITTONE: Thank you, sir.

Let me ask, who has questions for the witness?

Mr. Rupp, Mr. Gross.

You, sir?

DR. NICHOLS: Albert Nichols. I testified in December.

JUDGE VITTONE: How long is yours?

[Inaudible comment.]

JUDGE VITTONE: Mr. Rupp?

[Inaudible comment.]

JUDGE VITTONE: Mr. Gross?

MR. GROSS: Five or 10 minutes.

JUDGE VITTONE: Five or 10 minutes.

I've got 10 minutes to 12. We can take a couple of the short ones, take a break and then come back and finish up.

How does that sound to everybody?

Any objections?

(No audible response)

JUDGE VITTONE: All right. Mr. Gross, we'll take you and see how long that goes.

You say about 15?

[Inaudible comment.]

JUDGE VITTONE: Okay. Why don't we take Mr. Gross and go to lunch and then we'll come back and take you and then we'll take you.

(Pause)

JUDGE VITTONE: I assume you have copies of your slides.

DR. BEALE: There are hard copies with the slides and I have a copy here except that somehow Exhibit 5 which is not one of the more technical exhibits got detached. There was another set here with the actual transparencies.

JUDGE VITTONE: Okay. All right.

Mr. Gross?

MR. GROSS: Good morning, Dr. Beale. I am Richard Gross representing the National Energy Management Institute and the Sheet Metal Workers International Association.

Just a few brief questions.

When you first began your presentation, you characterized the OSHA rule, I think, as one that is general and quite flexible. We have heard testimony from a number of other people, and just the other day, I remember from the National Realty Association, characterizing the rule or criticizing the rule because it is "one size fits all" and that to me sounds like it's a very inflexible rule. Is there, in your view, validity to that criticism?

DR. BEALE: Well, there is always an issue with a national rule of the one size fits all. I mean, that's -- in a sense, that's a tautology. You make a rule and everybody has to comply with it. So what you do is you try to introduce flexibility.

You try to do one of two things. You try either to incorporate a lot of specific alternatives or you try to make it fairly simple and geared to what are recognized as industry standards or some other pretty basic action that either shouldn't be much of a problem to meet or, if it is a problem to meet, you've got some real concerns about what happens if you don't meet it.

And OSHA has done this to a large degree and a lot of this rule, I think, could be characterized as good industry practice and, in fact, sometimes that phrase explicitly arises. That is not a particularly strong standard. It's not what is thought to be technology forcing or anything like that.

And you've got choices that you can make. The only thing that the standard says about the smoking lounge, for example, is that it be there if smoking is allowed inside the building and that it be ventilated. And it doesn't go into architectural specifications or anything like that. And it says negative pressure. It doesn't say how negative. Those are all elements of general flexibility.

MR. GROSS: So in other words it leaves to the regulated party the means of achieving the objective.

DR. BEALE: Yes.

MR. GROSS: Okay. I want to get back to building owners who lease space to tenants rather than occupying the space themselves and what sort of market incentives they may have to voluntarily absent regulation to improve the air quality in their building because they don't obtain the productivity benefits, for example, as do employers who own their own buildings.

DR. BEALE: Well, here I think you get a real difference between long run and short run. The general benefit to a building owner is that running a good building attracts tenants. The problem is that it may take building problems a while to develop. There was some testimony from one of the indoor air quality people that suggested, and it seemed very plausible, that there is a progressive state. The building starts off healthy and it gets a little bit sick. The point is sick building syndrome and building-related illness don't just suddenly happen. And you may not see this sort of thing, so the incentives may be a little bit blunted. That's part of the long run/short run aspect. There are incentives and certainly if somebody could tell a building manager and he would believe it that if you don't maintain this building properly in six years you're going to have a sick building that's going to cost you $4 million to rehab, it wouldn't take long for him to respond to that incentive.

MR. GROSS: That's assuming the knowledge and the information is available to him.

DR. BEALE: Yes. So there is an incentive there. There is a very clear incentive. But it doesn't necessarily work quickly or reliably.

MR. GROSS: You've presented some figures this morning and I think there's been some other testimony about what the costs are for complying with the standard. Can lessors pass on these cost to tenants given the assumptions you've made?

DR. BEALE: Yes. The next time the contract comes up. And, again, the fact that the standard would apply to all buildings. In other words, you couldn't have a competitor comply with the standard and shave his costs by deferring maintenance and therefore pass on a lower cost. So everybody working under a level playing field would make it likely that the costs would be passed on.

MR. GROSS: I think it was in the discussion of the regulatory flexibility analysis that you talked about the assumptions OSHA made, these sort of equi-proportional assumptions were valid but it would be helpful to have information across building sectors.

The question I wanted to ask you is you're obviously familiar with the NEMI study. Do you feel that the information provided in the appendix, and I'll show it to you if you like, Appendix F, there's a number of tables here.

DR. BEALE: That may make it a little hard. Okay.

MR. GROSS: The question I just want to ask and I'll give you a moment to look at the tables, is that the kind of data you were referring to?

(Pause)

DR. BEALE: Partially. The problem that you run into is that there is this very complicated crosswalk between building size and establishment size and I have -- you don't know whether a small -- I don't know how big your small building is, for example.

MR. GROSS: Below 10,000.

DR. BEALE: Well, below 10,000 square feet is, you know, it's a lot of square footage. At 200 square feet per office worker, that would be about 50 people and 200 is high. And that's not a small firm any more. So that illustrates the complexity of this crosswalk between firm size and building size.

MR. GROSS: What about the listing of variable costs per building usage, although it's not actually in two-digit SIC codes?

DR. BEALE: Yes. That would help. But, again, the problem is crosswalking between building usage and SIC code.

I mean, you pretty well know what SIC code a skilled nursing facility is going to be in but to say -- and a lodging facility, you're reasonable confident where that's going to be, health care. But food service could be in all kinds of different things. Schools, for example. Any general office building that is big enough to have a cafeteria could have food service space. An office, warehouse -- I mean, warehouse you think of as wholesale trade but any manufacturing company could have a warehouse.

So it's very hard to do that kind of crosswalk and that's where the data start breaking down and where OSHA has had to rely on assumptions.

MR. GROSS: But nonetheless, you think those were valid assumptions.

DR. BEALE: Well, I think they were largely valid for the purpose. I think they are valid and reasonable up to the issue of reg flex.

Now, when you get to reg flex, they will carry you a lot of the way but I think the appropriate method is then to try to identify the industries from what you've seen so far that might give you some cause to worry, for further analysis. The way to approach even reg flex on an economy-wide regulation is not to go out and try to analyze every four-digit SIC in the economy.

MR. GROSS: One last question and it concerns regulatory flexibility. What is the likelihood that firms, new firms, will arise to perform some of the activities required by the proposed standard that would create economies of scale that small entities wouldn't otherwise be able to achieve? I think you alluded to that earlier.

DR. BEALE: I believe what I said in the presentation was that small entities would be able to contract out and there would probably be an expansion of the industry that maintains HVAC systems but a lot of small buildings that small firms are in in a lot of small towns are structurally little more than houses and so I don't think there is a lot of opportunity for economies of scale in provision of the services but certainly by the same token I don't think there's any problem in contracting the services out.

MR. GROSS: Okay. Thank you very much.

JUDGE VITTONE: Thank you, Mr. Gross.

We're going to break for lunch. Let me just ask a quick question here, though.

Is there a Mr. King here?

(No audible response)

JUDGE VITTONE: Or Mr. Pharr?

You're Mr. Pharr?

MR. PHARR: Yes, sir.

JUDGE VITTONE: Okay, sir. And how long is your presentation, direct presentation?

MR. PHARR: Ten to 15 minutes.

JUDGE VITTONE: Okay. Let me tell you and the people from AFGE and our one walk-on, Mr. Edgar, as you can see from the timing, it's going to be a while and I think you can safely foresee that we will probably not get to you, I'm talking about AFGE, get you back on the stand probably until about 3:00 at the earliest, okay? So if you want to take a walk or something like that for the next couple of hours, you may do so.

Mr. McNeely?

MR. McNEELY: Judge Vittone, are we going to get an indication from RJR whether or not they are going to be appearing next week?

JUDGE VITTONE: Well, let's see.

I see Ms. Ward here.

Ms. Ward?

MS. WARD: We'll be here.

JUDGE VITTONE: Okay.

Thank you, Ms. Ward.

Thank you, Mr. McNeely.

One o'clock. And please let's be prompt, okay?

AFTERNOON SESSION
1:08 p.m.

JUDGE VITTONE: We're back on the record.

Dr. Beale is in place, and Mr. Rupp, you're the first questioner this afternoon.

MR. RUPP: Thank you very much, Your Honor.

Dr. Beale, we've met previously.

There are other witnesses this afternoon, unfortunately, so I'm going to try to move as quickly as I can through the topics that I need to address with you. I'd appreciate to the extent you can, listening to the questions I put and trying to respond to them as sharply as you can because of the time problem that I'm afraid we all face.

Dr. Beale, you were here, as I recall, on December 6th, when Dr. Albert Nichols from National Economics Research Associates testified, were you not?

DR. BEALE: Yes, I was here that day.

MR. RUPP: At the conclusion of Dr. Nichols' testimony, I was standing beside Dr. Nichols when you stated to him that you did not have any substantial disagreement with anything that Dr. Nichols had said, that the two of you were in basic agreement. Do you recall that statement?

DR. BEALE: I don't recall saying it quite that way, no.

MR. RUPP: How did you put it?

DR. BEALE: I do not recall...

MR. RUPP: Maybe my recollection is not quite correct.

DR. BEALE: I do not have a good recollection, either, but in fact I have several points of disagreement with Dr. Nichols, and I believe that I mentioned some of them and indicated that other aspects I was in substantial agreement. For example, as I mentioned in my testimony today I think he made some useful and helpful contributions conceptually in relating area of smoking lounge to employees rather than to establishments, and also the idea that there wasn't necessarily a one-to-one relationship between employee and smoking room space, that it would be possible to have more than one employee per slot, as it were.

MR. RUPP: I noted that you took the opportunity during your presentation today to depart from your previously submitted statement to indicate some areas of specific agreement and some ares of disagreement with some of the prior economic and other witnesses. So far as Dr. Nichols' testimony is concerned, did you have an opportunity this morning to indicate any significant areas of disagreement with his testimony on December 6th?

DR. BEALE: The two most significant areas of disagreement, and I think I mentioned both of them are, in the first place, Dr. Nichols used "Take Ten Breakrooms" which provides a turn-key operation.

MR. RUPP: That's area one. The second area was?

DR. BEALE: The second area is in the interpretation of the costs to terms that do not build smoking lounges but ban. In both areas, I feel that Dr. Nichols' analysis very, very seriously overstated the costs.

MR. RUPP: Okay, we'll come back to both of those areas.

Let me step back a moment, if I may, and ask you a few questions about your background. When I reviewed your curriculum vitae, which you were good enough to submit with your statement, I was able to spot only one article that appears actually to be published. Did I miss any publications?

DR. BEALE: Yes, I think you missed one or two.

MR. RUPP: Which were...

DR. BEALE: Which one did you see?

MR. RUPP: The article I noted was "Land Values and Budget Studies, a Comparison of Evaluations of Four Irrigation Projects." My understanding is that that article appeared in a publication called Growth and Change in July of 1978.

DR. BEALE: That's correct. There was a much more recent one having to do with substance abuse treatment for hispanics.

MR. RUPP: That does not appear in your... Excuse me. "Profile of Hispanic Substance Abuse Clients in Treatment," appearing in Latino Studies Journal in May of 1992?

DR. BEALE: That's correct.

MR. RUPP: That is a second publication. Are there any other publications?

DR. BEALE: No, there are not any other publications of that sort.

MR. RUPP: Let me focus on those two for a moment, if I may.

DR. BEALE: Let me explain...

MR. RUPP: I'm going to go back to the other work that you've done and then I'd be happy to have you explain.

DR. BEALE: I would like to put in one brief explanation and that is that most of my career has been spent in the consulting business and that does not generally result in the sort of publications that an academic would produce.

MR. RUPP: I understand that, Dr. Beale.

Is the publication, or the magazine Growth in Change, is that a peer review journal?

DR. BEALE: That is a peer review journal.

MR. RUPP: How about the Latino Studies Journal?

DR. BEALE: That is, I believe, too.

MR. RUPP: I also understand that you served as an assistant professor of economics for a couple of years during the mid 1970's at Georgetown University, and prior to that time had served, I guess, three years...

DR. BEALE: Four years.

MR. RUPP: Four years, as an instructor at Georgetown. So six years total as an academic?

DR. BEALE: That's correct.

MR. RUPP: During that period were there any publications that appeared in any journals?

DR. BEALE: When I went to Georgetown, I came straight from the University of Chicago. I had, as a matter of fact, not even yet had my, or I'd just had my thesis seminar where my topic was approved. So the first four years I was at Georgetown I was completing my dissertation.

MR. RUPP: Was your dissertation published?

DR. BEALE: It was not published as such, no.

MR. RUPP: When you left Georgetown University, that would have been when?

DR. BEALE: 1976.

MR. RUPP: Had you been offered tenure at Georgetown, or was that the tenure point?

DR. BEALE: The tenure point is normally when you've been there for several years as I was, at the point where you get your PhD. However, the year that I got the PhD, the tenure window essentially slammed shut. The university put on a ceiling on the departments and the economics department was, as I recall, two people over the ceiling.

MR. RUPP: So putting their finger up to the wind, one realized at that point that tenure was not in the cards.

DR. BEALE: Tenure was not in the cards, because also the people who had been on sabbatical and had sort of very, kind of kept their seats warm in academe, they'd been doing consulting, they sort of came flocking back, too. And they had tenure.

MR. RUPP: I take it one important aspect of the tenure decision is the publications record that one amasses prior to the tenure decision being made.

DR. BEALE: Not necessarily.

MR. RUPP: That among other things, you would say, is...

DR. BEALE: It depends on where you are. That had no bearing whatsoever in my case.

MR. RUPP: A word or two, I think we'd all appreciate, about your current firm, Microeconomic Applications. How large is the firm, and how many professional economists are employed there?

DR. BEALE: The firm is home-based, and there is me. I have organized that way as a matter of personal preference.

MR. RUPP: Within the past couple of years, the staff at the Environmental Protection Agency prepared a draft report on the economics of smoking restrictions at the request of Representative Henry Waxman. Did you consult with anyone at EPA while that report was being prepared?

DR. BEALE: No, I did not. That was not one of the EPA studies that I reviewed.

MR. RUPP: Have you discussed that report with any EPA employees since that time, and in particular since taking on your current assignment for OSHA?

DR. BEALE: No, I have not. I was concerned with particularly the results, and particularly the way OSHA used the results, and I did not see it necessary.

MR. RUPP: How did you become involved in this proceeding? Perhaps a few words about that would be useful.

DR. BEALE: I was asked and given a personal services contract.

MR. RUPP: And who is your principal contact at OSHA, then, for the purposes of your work on this proceeding?

DR. BEALE: Susan Sherman.

MR. RUPP: And it was she who first contacted you, then?

DR. BEALE: Yes, I believe so.

MR. RUPP: With whom did you work in preparing your analysis?

DR. BEALE: That depends on what you mean by with whom. I really did not work with anybody in OSHA. I met occasionally with Susan Sherman and with Sunea El-MeKawi, and several other OSHA staff. I requested and was given materials by them, but I did not really work with them.

MR. RUPP: Did you do your own literature search in the areas that you believed to be relevant to the topics you would be addressing?

DR. BEALE: Very limited. I did not delve greatly into the literature, although I did partly out of my own interest and partly because it came up so many times, review Dr. Viscuzi's book, "Smoking."

MR. RUPP: I did note in your testimony this morning that you had boned up a bit on at least some of the testimony in this proceeding. Have you read all of the testimony that relates to the economics of the IAQ and ETS proposals, or were just certain things shown to you?

DR. BEALE: I don't know the answer to that. I read a number of the testimonies, but I have no way of knowing whether there were some... It's a voluminous document.

MR. RUPP: You were given the Viscuzi testimony and you were here, of course, when Dr. Nichols testified.

DR. BEALE: Right.

MR. RUPP: Were you given other pieces of the testimony, either printed statements or the actual oral testimony and examination?

DR. BEALE: Yes, I was given a number of them, and I heard some of them early on in the hearing, and I collected some of them out of there, and I specifically requested some of them. Dr. Tollison's, for example, I've reviewed. The Washington Consulting Group I mentioned. There are several others that I...

MR. RUPP: But you haven't yet had an opportunity to look through the record systematically and in a disciplined way to make sure that you're picking up all of the testimony that relates to the topics that you've addressed.

DR. BEALE: I have not, but there were enough similarities in the ones that I did, that I am not sure that extensive further review would have been that useful.

MR. RUPP: Let me give you an example that just springs to mind, and I don't mean to be comprehensive, either, but have you looked at the testimony that has been given, for example, by individual restauranteurs or representatives of the travel industry, and particularly those that have a substantial segment of their clientele in foreign travel and the casino industry?

DR. BEALE: I have not looked at individual testimony of the restaurants. I have looked at the Price Waterhouse study for, I believe, it was the San Francisco Hotel, which incidentally, I found to be quite an inferior piece of work.

MR. RUPP: Inferior to what?

DR. BEALE: Well...

MR. RUPP: The Glantz work?

DR. BEALE: Yes, for example.

MR. RUPP: Why don't we hold that topic in reserve, then for a later moment as well.

DR. BEALE: And I have forgotten the third category that you mentioned.

MR. RUPP: You have worked for OSHA previously as a consultant evaluating or actually performing RIAs, I take it?

DR. BEALE: Yes.

MR. RUPP: What have the principal topics been? Let me ask you first, how many such proceedings have there been?

DR. BEALE: Half a dozen, I guess. The principal ones were acrylonitrile trial and lead, not the original lead, but after... There were about ten industries that were remanded twice by the courts for further study. I did about half of them. I was involved in commercial diving. I was involved in, there was a funny little followup to the benzene standard cleaning barges. I've done some work recently on both the ergonomic and the comprehensive occupational safety and health regulations, neither of which has yet been promulgated.

MR. RUPP: Did you do any work in connection with the air contaminant standard?

DR. BEALE: No.

MR. RUPP: I take it it would be fair to say, though, that OSHA has been a nice client over the past several years, with work in a number of different areas.

DR. BEALE: It's been very up and down. It has not been a regular client. There have been times when it's been very busy, and there have been years where there has been no business at all.

MR. RUPP: I note that you indicated in the report that you provided to us that the RIA in the notice of proposed rulemaking in this proceeding is preliminary in nature and was prepared under substantial time pressure, and I think you repeated that this morning, didn't you?

DR. BEALE: I didn't repeat the comment about time pressure this morning. That was my understanding. It is, I would say, preliminary. It says it's preliminary.

MR. RUPP: When did you actually begin to... The report that I'm referring to is the August report.

DR. BEALE: The written testimony?

MR. RUPP: Right. August 12th it was submitted.

DR. BEALE: Right.

MR. RUPP: When did you begin to work on that report?

DR. BEALE: Late July, as I recall.

MR. RUPP: So you had a week or a week and a half or so to prepare the report?

DR. BEALE: A couple of weeks, yeah.

MR. RUPP: Did you have an opportunity at that juncture to look at any of the materials that had been provided to OSHA in response to OSHA's request for information to the public?

DR. BEALE: No, I was commenting principally on the document itself, rather than anything that was provided in response to the document.

MR. RUPP: I'm referring to an earlier stage in this proceeding. Believe it or not, this has been going on for a good long time.

(Laughter)

A couple of years ago OSHA issued a request for information and a great deal of information was provided to OSHA at that time on the topics that have been joined in this proceeding. Did you have an opportunity to review those materials before preparing your report? I take it the answer is no, since you had ten days or so.

DR. BEALE: No. My basic initial charge was to look at the analysis and see how it was done and see whether I felt there were fatal flaws in the way it had been done. I did push back on some of the data sources to see how the data sources had been interpreted, and I was pleased with what I saw, as I have indicated.

MR. RUPP: Basically, though, the assignment was cabin'd by the four corners of the document itself. You were asked to look at the document, and particularly the economic discussion in the document, and let OSHA know whether it made sense or had major flaws and so forth.

DR. BEALE: Yeah.

MR. RUPP: Did you do, yourself, at that point, a literature search to determine whether OSHA was picking up the major sources of data and commentary in the literature relating to the topics discussed in the RIA or in other portions of the economic discussion in the Preamble?

DR. BEALE: There were several sort of core issues, one of which was the health effects of smoking and one of which was the productivity issue. The health effects of smoking I told OSHA people, if your data stand up, and I'm not a health expert, I can comment on what you did with them...

MR. RUPP: Let's stop at that point. Maybe that's quite a good place to get clear on the record. You're not here and I think have been quite careful to make sure that you have not given specific comment on any health effects claims that appear in the Preamble. You're not judging those claims are you?

DR. BEALE: That is correct, and to the extent that I have made any such comments in that area even, they have been essentially rephrasing of my understanding of earlier testimony, and I've tried to identify them as such.

MR. RUPP: So if the health effects discussion the Preamble is in any sense out of whack, wrong, needs refinement, that is simply not an area in which you're able to provide any insight, and it is not an area that you are competent to evaluate, would that be fair?

DR. BEALE: That would be quite fair.

MR. RUPP: Would the same be true if I were to change the topic of those two sentences slightly to ventilation, ventilation system design, filtration, air cleaning technology. In those areas you're not a qualified expert, and I take it you're not purporting to offer any observations in those areas and inviting OSHA to rely on them.

DR. BEALE: The first part of your statement is true. I am not a qualified expert in those areas and would certainly not purport to get into the details. But to say that I am not offering any comment is stretching it a little bit. I have done enough OSHA regulations, for example, to understand something of the force of an industry good practice and how those things come about. So that when OSHA sets a standard that says follow industry good practice, I think it is appropriate for me to comment that that is not a technology forcing or particularly onerous standard in general. So in that level of comment which pertains to issues that are essentially economic, there is some overlap and I think I'm okay in that overlap.

MR. RUPP: Would it be fair to say, Dr. Beale, that you are not here to offer testimony on what industry good practice is or is not in the areas that I've described. For example, what kind of filters, what kind of filter efficiencies, what kid of air cleaners in what combination, what substances, capacity of ventilation to remove contaminants in indoor spaces, all of that is not your area of expertise.

DR. BEALE: That is correct. But when you see something like Dr. Levin's diagram that starts to have an interpretation that an economist might put on it, then as far as that interpretation is concerned, I feel I am quite well qualified to speak.

MR. RUPP: What if I were to tell you that the chart you showed from Dr. Levin is both dead wrong and silly from a technical standpoint. Would you have any basis for judging that rather bald set of assertions?

DR. BEALE: No.

MR. RUPP: You're taking what Dr. Levin said as a given, and not attempting to judge it as an expert or in any way against other testimony that can or has been offered, or other literature that would be accessible to people who actually do a search of the literature in those areas.

DR. BEALE: That is correct except to the extent that as an economist one does tend to observe that very large numbers of phenomena are subject to diminishing marginal returns of some type or other.

MR. RUPP: Let's hope that's not true in the case of this examination.

(Laughter)

MR. RUPP: You understand that the nature of the task that you've been given, and a weighty one it is, is to offer testimony in support of the rule that OSHA has proposed in this proceeding?

DR. BEALE: Not entirely.

MR. RUPP: When did you complete a draft of your report?

DR. BEALE: I think I completed it about the Tuesday of the second week in August, which I don't recall the date.

MR. RUPP: That would be about five days after you received the assignment?

DR. BEALE: No. I received the assignment in July and this was about the...

MR. RUPP: I thought you said late July.

DR. BEALE: Late July, yeah. This was approximately...

MR. RUPP: Maybe we're just quibbling over whether it's four days or six days, and that probably doesn't get us anywhere.

DR. BEALE: Well, we're quibbling about whether it's one week or two, basically, and it was...

MR. RUPP: Your statement indicates that you have, in the past, performed economic impact analyses under contract with EPA. What were those analyses, if you can recall them?

DR. BEALE: Underground storage tanks. I was working on both the technical standards and the financial responsibility standards, and I did the regulatory flexibility analysis on the technical standards.

MR. RUPP: Any others?

DR. BEALE: Not for EPA. As I mentioned, I did a review and critique of a number of EPA standards for the Small Business Administration, and that was a much broader study.

MR. RUPP: Any analyses undertaken by EPA in connection with any of their indoor air initiatives?

DR. BEALE: No.

MR. RUPP: I take it in connection with the prior work you've done for OSHA on the six standards that you mentioned, you have participated in proceedings of this sort, so you're an old hand at this kind of thing.

DR. BEALE: This is the third time I have been up here.

MR. RUPP: On each of those occasions did you provide in advance written reports of your at least preliminary conclusions?

DR. BEALE: On each of those occasions I had basically done the work, so...

MR. RUPP: Actually written the RIA.

DR. BEALE: Yes.

MR. RUPP: Then you provided testimony in support of it? Was that the way you did it?

DR. BEALE: Very brief testimony, and then sort of sat and fielded questions.

MR. RUPP: Is this the first time, then, that you've been confronted with an OSHA RIA That you did not prepare, or did you have a hand in the writing of this RIA?

DR. BEALE: No, I did not have a hand in the writing of it. This is the first time I have done this type of review work. Although as I indicated, the SBA study involved much the same work.

MR. RUPP: On the six prior occasions, were there any RIAs that you wrote that did not find that the costs, that the benefits... excuse me. On any of those six occasions did you conclude that the costs of the regulations that OSHA had proposed exceeded the benefits that could reasonably be anticipated to flow from the regulations?

DR. BEALE: I don't think you can take the RIA as a done deal. In acrylonitrile, for example, there were three PELs that were proposed and they differed by orders of magnitude. OSHA ended up promulgating the least stringent of the three. I definitely found that the most stringent was wildly cost ineffective, and the middle one was highly questionable, and the least stringent appeared to be reasonably cost effective, and I think that my analysis played a significant role in OSHA's decision as to which to promulgate.

MR. RUPP: In the other five instances you found that the benefits did outweigh the costs of the rule as proposed?

DR. BEALE: It wasn't necessarily couched in those terms. OSHA regs are not really analyzed as benefit cost analyses as such.

MR. RUPP: Let me use the word "cost effective."

DR. BEALE: Let me use the word "feasibility," which is what they really do.

MR. RUPP: Fair enough.

DR. BEALE: I myself, personally, have, as an economist, have an idea of what might be an appropriate benefit cost balance which is a topic that OSHA rather steadfastly refuses to bring up, to deal with. And indeed, their legislation does not require them to because it would, in most cases where health was involved and some where safety is involved, would require balancing lives against dollars, and OSHA has a strong aversion to doing that, which I try to respect in my work.

But OSHA has not promulgated a standard that I have done the RIA on that I have found to be infeasible.

MR. RUPP: You indicate in your report that the rather rudimentary RIA that appears in the Preamble with respect to that RIA that "A simpler RIA approach may be desirable because it is more cost effective." What did you mean by that?

DR. BEALE: I'm sorry. On all quotes, particularly those where I'm asked to interpret them...

MR. RUPP: Let me see if I can help you find the page.

DR. BEALE: Let me find the document, first. I know it's in here some place.

MR. RUPP: You'll find it at the bottom of page one of your report.

(Pause)

DR. BEALE: Okay.

My point, and this is in many ways the thrust of my testimony, is that there is a lot of information that it doesn't necessarily do you a whole lot of good to know for a particular problem. And if the problem in this case is to find whether a regulation is feasible, you can establish that by going a certain distance of the way to getting all of the knowledge that one might assemble, and you get your answer. Beyond that, to do a more complex and more detailed analysis, you're not yielding useful information and it isn't a cost effective process.

MR. RUPP: Are you saying anything more than at some point in any analysis for an RIA, you have gotten to that pitch in the road where you can fairly say that either the costs so far outweigh the benefits or the benefits so far outweigh the costs, or to use your terms, the data indicate that this is so infeasible, or so overwhelmingly feasible, that anything that you have not yet considered has a very remote likelihood of changing the ultimate outcome?

DR. BEALE: The way you put it is so nicely summarized that it's almost a tautology.

MR. RUPP: Were you saying something different?

DR. BEALE: No, no. I'm simply saying that one never goes as far as finding out everything you could possibly learn.

MR. RUPP: You reach a point at which the angels are dancing on the head of a pin.

DR. BEALE: You reach a point at which you know the answer, you feel comfortable with it, and that's where you quit.

MR. RUPP: Let's see if that's where we are here.

Let me ask you, what are the standards that we should apply in judging the RIA that was offered for public comment in this proceeding.

Let me offer a few suggestions and see whether you agree, and then I'm going to ask you to add to my list if you would.

First, whether all major cost and impact categories have been identified and a reasonable effort made to quantify the. I use the word "major."

DR. BEALE: You want me to comment on them one at a time.

MR. RUPP: I'd ask you whether you agree that that's something that needs to be done.

DR. BEALE: Not necessarily.

MR. RUPP: In what respect...

DR. BEALE: As I indicated in my testimony, in this case the question is economic feasibility. Once you have identified the costs with tolerable thoroughness...

MR. RUPP: I'm focusing on cost now. Whether all the major cost categories have been identified and a reasonable effort has been made to quantify them.

DR. BEALE: Yeah, cost I think you need to identify, and I think one could quibble about... We would probably quibble more on the definition of what is reasonable than on the usage of the word.

MR. RUPP: But we won't take up our time here to do that.

DR. BEALE: Okay.

MR. RUPP: Whether all relevant data have been taken into account concerning the individual cost categories, and perhaps I should rephrase that to make our discussion of this one shorter. That is whether all data that is reasonably accessible and could have a significant impact on the outcome of one's analysis of a particular cost category, have been assembled and evaluated.

DR. BEALE: Again, although you I think pulled out one word you substituted some others where one would agree with the general proposition, but might have disagreements as to what was...

MR. RUPP: Significant or not significant.

DR. BEALE: What might have a significant impact or... And it's a question, too, of you're asking in a sense, from a point of view of sensitivity analysis, what would change the results. You could push through to the results, and then what your judgment about what might significantly alter it would be, will depend a lot on the sort of results that you get. If the results appear to be fairly well balanced, then you're going to have one operational definition of what is significant. Then a lot of things might...

MR. RUPP: But all of that is subsumed in the word significant, is that right? Is that the use of the term?

DR. BEALE: Right, but the point is there isn't a single meaning of... And there are also different ways to get at the understanding of the meaning of the word significant.

MR. RUPP: Are you saying anything other than what may be significant in one case may not be significant in another, depending upon what else is happening in the analysis?

DR. BEALE: That's correct.

MR. RUPP: All right. Let's go on.

Impact on small business. I take it that's required by the pertinent executive orders as well as by statutory law as far as OSHA is concerned...

DR. BEALE: Uh...

MR. RUPP: But I'm not going to ask you to provide a judgment concerning the pertinent law. From the standpoint of a right thinking economist, one would want to know something about the impact on small business.

DR. BEALE: Yes.

MR. RUPP: Whether any gaps in the pertinent data can be filled by assumptions, and whether any assumptions that are made are both reasonable and reasonably verifiable.

DR. BEALE: The question of... You stated this as a whether.

MR. RUPP: That is a question one would ask...

DR. BEALE: That is a question that one would ask in part...

MR. RUPP: ...in judging the reasonableness and the appropriateness of an RIA.

DR. BEALE: Yeah, but it's not one that you give a yes or no answer to.

MR. RUPP: Perhaps not.

DR. BEALE: Just because you made assumptions does not mean you would say this is a bad analysis because it made an assumption.

MR. RUPP: ...conjunctive. That is what assumptions have been made, how important are they, and how reasonable are they and verifiable.

DR. BEALE: Again, the question of reasonableness and verifiableness is a tricky one because if you have made assumptions to cover gaps in data, virtually by definition you're not going to be able to verify them without going out and collecting the data, in which case you wouldn't have needed the assumption in the first place.

MR. RUPP: But Dr. Beale, we certainly don't want to have anybody making unreasonable assumptions, do we?

DR. BEALE: No, but there's a lot of freight in the question of what you mean by reasonable. A scientist, hard or social scientist, would probably use a very different definition of what is reasonable than would a layman, and indeed, Milton Friedman once wrote a very fascinating essay. One of the points he was making was that almost all assumptions are in fact, by laymen's standards, wildly unrealistic in just about every kind of analysis. So there's a real minefield there.

MR. RUPP: Let's get to the bottom line on it, though. Certainly you would agree that, and remember I started this litany with the question "What is a red flag for a poorly done RIA." And surely you would agree with me that an RIA in which one finds a series of unreasonable assumptions, patently unreasonable assumptions, is not a very good RIA. That's just common sense, is it not?

DR. BEALE: If the...

MR. RUPP: That's an RIA that needs refinement.

DR. BEALE: If the conclusions depend on those assumptions and are determined by them, yes.

MR. RUPP: I asked you about the impact on small business. An RIA also should take into account, should it not, the impact on businesses that are not so small?

DR. BEALE: That is correct.

MR. RUPP: One wants to look at the economy as a whole as well.

DR. BEALE: That is correct.

MR. RUPP: As well as all major segments of the economy that can be impacted or are likely to be impacted by the proposed rule.

DR. BEALE: That is, in general, correct.

MR. RUPP: You're also aware of, are you not, of case law as well as other mandatory injunctions on OSHA that they should do that at a particular SIC level.

DR. BEALE: I am not familiar with that case law. Therefore, I would not attempt to interpret it. But let me point out to you a major difference.

There are two sort of classes, roughly speaking, of regulation that one can talk about from the point of view of how you go about analyzing it. If you have a specific substance, a chemical, shall we say, that is hazardous. Acrylonitrile is as good an example as any, or lead, or benzene, you have a relatively small number of industries that are affected by it, that involve it in their production processes. Those industries are likely to be defined at a fairly high level of detail. At least four digit SIC and sometimes a lot finer than that.

In a situation like that it is extremely important to do a great deal of detail, industry detail, in your analysis. If you do analysis at the two digit SIC level, you're going to include large numbers of industries that don't have the substance at all. You're going to spread the costs across those large number of unaffected industries, and you're going to end up with very low impact, and it's going to be an artifact that you...

MR. RUPP: It's going to mask impacts. It's going to have a lot of firms drowning in a lake whose average depth is six inches.

DR. BEALE: All right, or even three inches.

And in that sort of situation, it is not an intractable job to go look at some industries at the four digit level of SIC.

MR. RUPP: Okay, let's move quickly into...

DR. BEALE: But, no, I don't... Well, let me lead you into this proceeding. This proceeding has a regulation that affects essentially the whole economy, except for areas where OSHA doesn't have jurisdiction, but it also affects buildings which, although they differ in nature, size, distribution, that kind of thing, pretty much every industry has buildings.

So on the one hand, it is really not possible because it would be so horrendously expensive, to go analyze the entire economy at the four digit SIC level which would be quite appropriate for a single chemical.

MR. RUPP: Why is that? Because basically, what you're telling me now is that there are some regulations whose application is so widespread that it is not feasible to judge their feasibility. It has to be too big.

DR. BEALE: It would be...

MR. RUPP: And you certainly couldn't do it in ten days.

DR. BEALE: It would be extremely expensive.

Then you have to ask the question, why are you concerned about looking in that level of detail? And as we agreed, for a single chemical, the reason you're concerned about it is...

MR. RUPP: To look for disproportionate impacts.

DR. BEALE: No. Not so much to look for disproportionate impacts, but to look at the impacts where they happen and not to spread costs over sectors that don't have them at all. Now with buildings, because all sectors have buildings, you don't run into the same problem.

MR. RUPP: Are you telling me then, and I hope you're not, that because all firms in the economy, that may or may not be true, whether all firms in the economy have buildings or are housed, if you will, but assuming that they are, therefore, there cannot be a disproportionate impact that makes the rules that have been proposed in this proceeding not feasible, not cost effective, and not prudent. Surely you can't be telling me that.

DR. BEALE: I am not saying there cannot be, but I am saying that the odds of it are much less.

Let me give you an example.

MR. RUPP: First, before you try to give me an example, are you relying on more than the breadth of application here in reaching that conclusion? We have to put to the side how difficult the task is going to be, because that's no excuse for not doing the job if the statute and the executive order require it. If you're telling me that it is simply because this rule will have such broad application, there cannot be wildly disproportionate impacts. There cannot be areas of the economy for which it would not be feasible to apply, let's focus on the ETS rule, the ETS rule. Then I'd like you to explain that to me.

DR. BEALE: No, I'm not suggesting that at all, but I have two points to make. The first point is that the nature of the spread of buildings, the effect, affects the degree of disproportionality that you can have.

MR. RUPP: Why is that true?

DR. BEALE: Let me give you an example. There are, I think, I'm not sure if I remember this number correctly, but just let it serve. There are approximately, overall, 85 percent of buildings have mechanical ventilation systems.

MR. RUPP: Your source for that is what?

DR. BEALE: It's...

MR. RUPP: Well, let's assume it for purposes of your example.

DR. BEALE: Eighty, 85, it's in there somewhere. You may have one industry that has 100 percent. In that case, you have understated the impacts by a fifth, less than a fifth, a sixth?

MR. RUPP: But that's too simple, isn't it? In economics we know not to be too simple.

DR. BEALE: Well...

MR. RUPP: Let's add one factor to that. Let's add the factor that the only slightly... That the industry or industry segment that's going to suffer only slightly greater costs than others, is also operating from a profit perspective right on the line, or indeed, chronically at a loss. Now we can be talking about impacts that are, indeed, quite disproportionate.

DR. BEALE: That's correct.

MR. RUPP: It's the difference between viability and bankruptcy.

DR. BEALE: We're going to start off talking at the two digit SIC level. You look at the two digit SIC results, and what you find is that the impacts are very small in almost all industries, so your second assumption turns out at the two digit level not to be true.

MR. RUPP: There's the problem that I thought we have just covered and safely put beside us, and that is that that only says that we're going to assume that no segment of an industry is going to drown here because the average depth of the water is only six inches. The fact that on average, across a two digit SIC code, nobody is drowning, doesn't mean that there are not identifiable segments of that broad industry category that will not be put in dire jeopardy by these rules. There's nothing inconsistent with that. That remains a possibility.

DR. BEALE: Yeah. There is always that possibility. However, in the single chemical example, you have a very good idea of where to look and where not to look, because when you do your industry profile, you see where these are. Now in your...

MR. RUPP: But here...

JUDGE VITTONE: Wait a minute, Mr. Rupp. Let him finish.

DR. BEALE: In your industry-wide building, or ETS, because neither indoor air quality in the areas that OSHA is regulating it, nor environmental tobacco smoke, are inherently tied to the production process. There is no fundamental a priori reason to believe that there is one particular area, one particular sub-industry, that has the type of problem you describe.

When you look at the overall impacts at the two digit SIC level, you say okay, it's very, very small. Do we know anything about any of these industries that would lead us to believe that there is some reason why that impact would in fact turn out to represent a very high impact on a couple of four digit SICs, and an even smaller impact elsewhere.

MR. RUPP: You've identified three areas in which you believe that additional evaluation of precisely that issue needs to be done, I take it, and I understand those areas to be bars, hotels, and restaurants.

DR. BEALE: I didn't identify them, OSHA identified them.

MR. RUPP: But you agree with them.

DR. BEALE: Yeah.

MR. RUPP: Let me name a few others. Casinos.

DR. BEALE: I think casinos are probably fairly similar to...

MR. RUPP: How about bowling alleys? Which haven't been too high flyers lately.

DR. BEALE: Yeah, that's an interesting possibility.

MR. RUPP: And there may be others of that sort.

DR. BEALE: There may be.

MR. RUPP: That one would identify intuitively and call for directed evaluation of the potential impact of the ETS rule in those areas.

DR. BEALE: And that, in fact, is the point in what I'm saying. The fact that it is extremely expensive to analyze the whole economy at the four digit SIC level does not mean that you shouldn't analyze anything at the four digit SIC level. It simply means that you should use other techniques, other than a detailed regulatory impact analysis to identify the four digit industries. Or they may be, I haven't checked my SIC manual lately, but I suspect that both casinos and bowling alleys are sub-four digit SIC.

MR. RUPP: They probably are.

Can we agree on this before we leave this topic, and maybe we can use this as a segue to the next topic. That is that simply because regulation is going to have broad impact is in and of itself no excuse for not undertaking the kind of detailed evaluation that the pertinent statute and regulations and executive order requires, if there is any reason to believe that the impact of the regulation may be disproportionate, and that disproportionateness may have significant as far as the ultimate feasibility decision is concerned.

DR. BEALE: I think I agree with that statement, but I noted en-route, mentally, several areas where we might have some cause to disagree. For example, I would agree to the extent that where you identify areas where there is reason to believe that that sort of impact may occur, that you would look at those areas. It does not, for example, mean that you would give the same degree of detailed analysis to areas where there is nothing that suggested that there will be that type of impact, when the more aggregate analysis indicates that mean impacts are quite low.

MR. RUPP: You've indicated at several points in your testimony that a unique regulatory approach from an economic standpoint might be justified in the case of ETS, and different treatment in RIA may be justified, because ETS is not an inherent part of the production process.

DR. BEALE: That characteristic has implications. That in itself is not the reason. It's the implications that are the issue.

MR. RUPP: Let's pursue, for a moment, if you'll indulge me, to see whether, quite apart from any implications it may have or whether there are any implications, whether it's true. Whether that is something that one can say about ETS that cannot be said about the other aspects of the current proposal, for example, okay?

DR. BEALE: Yeah.

MR. RUPP: The IAQ portion of this proposal covers, as you have rightly pointed out, a whole variety of things.

DR. BEALE: Right.

MR. RUPP: You've read that proposal, have you not? You've read the entire notice of proposed rulemaking in that proceeding.

DR. BEALE: I have given a whole lot less attention to some parts of it than to others.

MR. RUPP: I take it that carpets in an office environment of this sort are not an essential part of the production process, are they?

DR. BEALE: Umm...

MR. RUPP: In this room, for example. Is it essential that we have a carpet in this room?

DR. BEALE: No, it's not essential. You could have a wood floor.

MR. RUPP: How about, I think Ms. Sherman may be wearing some perfume today. Is it essential that she do so?

DR. BEALE: No.

MR. RUPP: How about the deodorant that I'm wearing, is it essential that I do so? And I would like that to be a general answer...

(Laughter)

DR. BEALE: You're talking to a bicyclist here, and you might choose to withdraw your question if you got a good whiff of me...

MR. RUPP: Let me ask it this way. There are places in the world that people get on and live happy lives without putting deodorant on every morning, aren't there?

DR. BEALE: Yes.

MR. RUPP: How about dry cleaned clothing? I think that all of us today have on at least one item, and most of us have on many items of clothing that have been dry cleaned. Is that an essential part of the production process?

DR. BEALE: It's not that production process, you see. It's...

MR. RUPP: I'm asking you to focus now in an office workplace setting, for example. It's not essential that people be permitted to wear dry cleaned clothing into their offices, is it?

DR. BEALE: No.

MR. RUPP: Yellow magic markers? We've had a fair number of incidents about yellow magic markers during this proceeding, which probably indicates how long this proceeding has gone on. But it's not essential that people be permitted to use yellow magic markers, is it?

DR. BEALE: Now you're starting to get into something that people do use in their actual work.

MR. RUPP: They could use blue ones or green ones or black ones or... Perhaps not black ones, but various colors.

DR. BEALE: Black ones have different properties.

MR. RUPP: All right.

How about poor cleaning practices? Now I'm going to get into things that perhaps are a little more significant. Poor hygiene, so far as the office environment is concerned. There I'm talking about vacuuming these carpets, I'm talking about cleaning the drapes periodically. I'm talking about the full range of practices that one typically would think of when one talks about cleanliness or hygiene. It is not essential that buildings be permitted to deteriorate from a hygienic perspective, is it?

DR. BEALE: I believe that now we're starting to get into things that do start to be a little bit of the production process.

MR. RUPP: Let's put it this way...

DR. BEALE: It depends on what the effects...

MR. RUPP: You would agree that even though it may not be appropriate to talk about cleaning an office as part of the production process, cleaning is nonetheless important, and the fact that cleaning is or is not a part of the production process is largely irrelevant so far as the RIA is concerned.

DR. BEALE: I don't really agree with that.

MR. RUPP: Let's go on to another one, because I think it doesn't really matter.

We've had a lot of testimony in this proceeding about indiscriminate use of pesticides in indoor environments. The indiscriminate use of pesticides in the indoor environment is not an essential part of any production process, is it?

DR. BEALE: Not the indiscriminate use, no.

MR. RUPP: Is the Legionella bacteria a part of the production process in any industry of which you're aware?

DR. BEALE: It is not part of the production process directly, but it can adversely affect the production process.

MR. RUPP: How about low rates of ventilation? Do you know of any office environment, for example, that can only get its work done if it operates with low rates of ventilation, for example below 5 cfm?

DR. BEALE: That can only get its work done if...

MR. RUPP: Right. So that if OSHA requires 20 cfm to be given, for example, that is to take into account the impact on the production process. In fact ventilation rates exist independently of the production processes in most environments, do they not?

DR. BEALE: I can't agree with that statement either.

MR. RUPP: In what respect do you disagree with it?

DR. BEALE: You said all, and there are a whole lot of industrial...

MR. RUPP: How about most?

DR. BEALE: There are a whole lot of industrial settings where you'd better ventilate.

MR. RUPP: You're misunderstanding my question, then. If OSHA were to come in and say look, we're going to propose that all office environments be operated at 20 cfm instead of the 5 cfm that many of you have typically supplied, wouldn't it be pretty hard for any industry to come in and say, oh, my heavens, we can only operate at 5 cfm because we can't produce our products if ventilation is provided at more than 5 cfm. So the ventilation required for general office space is unfeasible because it would interfere with, impair, our production process. That's a pretty silly argument, is it not?

DR. BEALE: It is so silly that I totally lost the thread of what you're trying to suggest.

MR. RUPP: I'm almost done with this and then maybe we can wrap that part of.

If I were to talk about filtration, failure to balance the air handling equipment, the excessive humidity in general office space. Nobody is going to be able to stand at this podium or sit behind that microphone and say, "OSHA, don't do it because we need poor filters. We need excessively high humidity. It is an essential part of the production process." Right?

DR. BEALE: Nobody is going to do that.

MR. RUPP: Let's wrap it up by asking this general question. What part of the proposal that you have been asked to comment on is a work process that OSHA has challenged, excuse me, is a practice being challenged by OSHA, whether it's in ventilation, smoking or anything, could be said to be part of the production process? The answer is nothing.

DR. BEALE: I think that ventilation is definitely a part of the production process to the extent that it contributes to, it is an element of the building, in effect. Being well ventilated is a characteristic of a building.

MR. RUPP: But low ventilation is not an essential part of any production process. We agreed on that.

DR. BEALE: No.

MR. RUPP: What OSHA is proposing in this proceeding is a variety of things. They want to improve ventilation, they want to improve system hygiene, they want to improve filtration, they want to improve generally the maintenance and operation of air handling systems, they want to deal with the indiscriminate use of pesticides. You can't put ETS in a separate category, can you, and say well, you can have a separate rule for ETS because that is not an essential part of the production process. But these other things have to be judged by the usual standards. Nothing here can be justified or not justified by its relationship to the production process. Would you agree?

DR. BEALE: No.

MR. RUPP: Why?

DR. BEALE: In the first place, OSHA's basic goal is health of workers. All of the types of contaminants that are in there show the characteristic that they can adversely affect the health of workers.

Now, you then have to look at how these different things enter the production process and I can't remember your list but let me just pick pesticides.

Now, pesticides are used to a degree for particular reasons that are related to maintenance of the building.

MR. RUPP: Have you heard of integrated pest management?

DR. BEALE: Yes. There are lots of ways to do it, I'm just talking about it generically. There are also a lot of substitutes to almost any of the sorts of things that you mention. You have to have a floor. Whether you choose to carpet it or whether you choose to do wood parquet or whether you choose to use wall-to-wall carpeting or Oriental rugs or how you choose to cover it, but you have to have a floor, okay? And the floor has to have some kind of covering so people don't fall through. And there are different ways of doing this so you can pick around and say, well, no single one of a bunch of substitutes is essential but something is.

Now, that is just fundamentally not the case with cigarette smoke. You don't have to smoke in order to work. You have to have a floor to have a building.

MR. RUPP: You don't have to have low ventilation. You don't have to have --

DR. BEALE: You don't have to have low ventilation.

MR. RUPP: But that's what OSHA is looking at in this proceeding.

DR. BEALE: You need to have ventilation adequate to protect the health of the workers and I simply have not been able to follow why you say you don't have to have low ventilation. I mean, why you throw that in, I can't fathom. I do not understand the suggestion.

MR. RUPP: Well, let's come back to it if we have time. You've read Executive Order 12866?

DR. BEALE: Yes.

MR. RUPP: That executive order requires, I take it, that agencies identify and assess alternatives to any regulation the agency might decide to propose and you're aware of that requirement, I take it?

DR. BEALE: Yes.

MR. RUPP: Now, for the purposes of the following series of questions, and I'll alert you when this is not so, I'm going to ask you to focus on the smoking rule so that we don't lose time. Is that all right?

DR. BEALE: Okay.

MR. RUPP: Where in the RIA in this proceeding would I find a description of any alternatives that OSHA may have considered so far as smoking is concerned?

DR. BEALE: Well, there are two alternatives proposed and there are no others discussed.

MR. RUPP: And what are those two alternatives?

DR. BEALE: A ban on smoking and smoking lounges that are ventilated.

MR. RUPP: Okay. Any other alternatives considered or discussed?

DR. BEALE: There are other possible alternatives that one might discuss.

MR. RUPP: That's not the question I asked. I appreciate the acknowledgement but that's not the question. Is there any place in the RIA in which those other alternatives are discussed?

DR. BEALE: There is no place in the RIA.

MR. RUPP: All right. Now, where would I find a description, if anywhere, I take it if it's not in the RIA maybe it's in another document to which you've had access, where I would find a description of the costs and benefits associated with those other alternatives, whether they're filtration, whether they're smoking only in private offices that are not separately ventilated, whether there are separate section alternatives. Do you know of any document? Have you had any discussions relating to the possible costs and benefits of those alternatives to the proposal that OSHA has made?

DR. BEALE: Well, there was one interesting submission to the docket by -- I think it was the Fletcher Group, an engineering firm and they said this is ridiculous, of course we can ventilate, we can get clean rooms and let's take a nut that we want to crack which is the restaurants. And they proceeded to describe ventilation, they analyzed the situation and said the real problem is that most ventilation systems mix air and pull it out from the same side and what we're going to do is to design a ventilation system that either comes out of the ceiling and is exhausted through the floor or the other way around and I was also under the general impression from the way this read that they were flirting with wind chill in a level of ventilation.

But when they put that all together they got a bottom line of approximately $1000 annual cost per seat in the restaurant. Now, that, I think, is a fairly good example of an economically infeasible, irrespective of whether the ventilation worked adequately from the point of view of health, from the point of view economics --

MR. RUPP: What you say may or may not be true but listen to the question that I ask rather than the question you might like me to ask. I've asked you whether you've seen any documents that have analyzed the costs and benefits prepared by the OSHA staff or by yourself that have analyzed the costs and benefits, the feasibility, of any of the alternatives that you and I have just begun to list.

DR. BEALE: That's not entirely the point. This --

MR. RUPP: No, I'm asking you yes or no. You've seen them or you've not seen them. Whether they're important or not let's leave to the next question.

DR. BEALE: Not to date but my point in bringing the Fletcher example up is that you don't necessarily need to do an elaborate analysis to understand that a particular alternative is going to be infeasible in some way or other.

MR. RUPP: Have you taken a look, because your job was to evaluate the -- under the executive order, the feasibility of alternatives, have you taken a look at the comparative feasibility of using filtration air cleaning devices? Or for smoking lounges and the other costs associated with smoking lounges? Have you done so?

DR. BEALE: No.

MR. RUPP: Have you seen a document from OSHA that has done so?

DR. BEALE: I have not. And --

MR. RUPP: Now, let me go on. Have you prepared such a document yourself focusing on smoking in private offices? Have you prepared such a document?

DR. BEALE: No, I have not.

MR. RUPP: Have you seen a document prepared by OSHA looking at the feasibility or economic implications of permitting smoking in private offices without separate exhaust? Have you seen such a document?

DR. BEALE: I have not but the first question that OSHA tends to ask is would this work as a health standard and those documents I don't tend to read.

MR. RUPP: All right. Now, we've already established, I think, in the course of our discussions, that in addition to the smoking rule that OSHA has proposed it's proposed a number of measures to deal with IAQ.

DR. BEALE: That's correct.

MR. RUPP: All right. And among those measures is increased ventilation.

DR. BEALE: That is also correct. Well, it's correct in buildings where ventilation is very low but it is not correct across the board.

MR. RUPP: Correct. But as a general matter, we're looking at some increase in ventilation, particularly over time as renovations occur.

DR. BEALE: That is the compliance mechanism generally speaking.

MR. RUPP: All right. Now, have you done any evaluation of whether if the IAQ rule is implemented as proposed there would be any residual costs and benefits remaining to be quantified in connection with the implementation of the smoking proposal that's been made?

DR. BEALE: That is an issue that would be driven principally by the health effects of the smoke remaining in the building and that is not my area of expertise.

MR. RUPP: Okay. But it is fair to say, is it not, as a theoretical or conceptual matter, that if OSHA were to conclude that implementation of the IAQ proposal would reduce any risks of ETS to insignificance because of enhanced ventilation, filtration or other approach required to deal with the generality of indoor air contaminants, that the costs of going ahead nonetheless in implementing the smoking proposal are going to have to be looked at in a new light because you won't have much on the benefits side?

DR. BEALE: Well, now, I promised the judge that I would not make any economist jokes --

MR. RUPP: Please don't. I --

DR. BEALE: But to have a lawyer make an assumption like that tempts me because OSHA has not concluded that and I don't think OSHA is anywhere near concluding that.

MR. RUPP: You've had that discussion and you're certain that OSHA, despite its professed open mindedness and willingness to review the record in this proceeding has its mind close on that issue at least.

DR. BEALE: From what I have seen of the air quality testimony and the type of graph that I showed up there and the Fletcher Engineering, it appears to me that it would be impractical to ventilate to a level that would get the concentrations down to a point that OSHA would be comfortable. Now, I am not saying that OSHA has a closed mind. OSHA has looked at a lot more of this evidence than I have and with a great deal more expertise of that sort but what I am sort of seeing is, as it were, the handwriting on the wall from what little I have seen. I have also heard Dr. Glantz's testimony which is very suggestive to me because it suggests that the understanding of the dangers is increasing rapidly, is moving along very rapidly, and that the direction the findings are going, particularly with coronary effects, coronary disease, are going to be found to be much more serious rather than much less serious as research progresses. That is certainly the impression that I got from Dr. Glantz's testimony. So I put those things together and I infer that your assumption is very unlikely. And, incidentally, there have been other --

MR. RUPP: Well, let me stop you. That response -- that does not respond to anything I asked. Let me focus you on it so we don't get another response of that sort in the future.

First, are you capable by training or experience to make a judgment about the merits of Dr. Glantz's testimony concerning ETS and cardiovascular disease?

DR. BEALE: No, I am not.

MR. RUPP: All right. Have you read the other evidence in this record relating to ETS and cardiovascular disease?

DR. BEALE: I have not read the --

MR. RUPP: Yes or no. You either have or you haven't.

DR. BEALE: No.

MR. RUPP: You haven't.

DR. BEALE: No.

MR. RUPP: Would you suggest that OSHA decide whether ETS causes, is associated with, has any pertinence to cardiovascular disease, on the basis of a judgment made by an economist who has not read the testimony in this proceeding?

DR. BEALE: I wasn't making the judgment. I was --

MR. RUPP: You were judging -- what you were doing was judging the likelihood that the assumption I had asked you to make for purposes of a question was going to be accepted or not by OSHA. Now, what basis do you have for judging the merit of the assumption, lacking training and lacking and conversance with the record on those issues in this proceeding?

DR. BEALE: Because I have seen other substances where this happened and where regulations had to play catch-up, particularly lead.

MR. RUPP: Are you aware that Dr. Glantz 20 years founded Americans for Non-Smokers Rights?

DR. BEALE: No.

MR. RUPP: Are you aware that for the past 20 years Dr. Glantz has campaigned almost full time for the banning of tobacco advertising, for the banning of smoking in all public places, in the workplace, for requirements that cigarettes be sold on prescription only, that he has taken part in nearly every political campaign that has come down the pike over the past 20 years relating to smoking?

DR. BEALE: I am not aware of that.

MR. RUPP: If you were going out for an objective medical or scientific opinion on a health issue, would you go to a political activist or would you go to a scientist trained in the field? Dr. Glantz, by the way, is an engineer, not a cardiologist.

DR. BEALE: It's very interesting that some of the biggest insights, some of the best insights, come from people who bring another perspective to the field so I would not entirely discount that.

MR. RUPP: All right. Now, let me go back and try to ask you again --

DR. BEALE: For example --

MR. RUPP: -- before we took the detour --

JUDGE VITTONE: Okay. We understand your answer, I think.

MR. RUPP: Before we took the detour, I had asked you a question, I think it's a simple question to which I think there is also a simple and clear answer.

If the IAQ portion of this rule is implemented as proposed and if OSHA concludes that that reduces to insignificance any health issues there may ever have been with respect to ETS, would that not very significantly alter the cost benefit analysis that you have conducted because at that point there would be preciously few benefits to see from the smoking rule that OSHA has proposed? Yes or no first.

DR. BEALE: That would definitely affect it. I didn't do the analysis, by the way.

MR. RUPP: I'm aware of that. Now, if one does not look at a range of alternatives, is there any way that one can know whether the alternative or the measure that is adopted achieves, and I'm going to quote, "the goal being sought while imposing the least burden in the most cost effective manner"?

DR. BEALE: Taken at face value, I agree with your statement. However, I think one needs to examine what you mean by "look at". It is not necessary to publish in an RIA the results of a detailed analysis if a relatively straightforward, common sense look at something clarifies the situation.

MR. RUPP: Well, let's go back to air cleaning devices. You were asked to decide, to offer your expert opinion to OSHA and to the rest of us as to whether the proposal, the smoking proposal that OSHA has made in this proceeding, complies from an economic perspective with the obligations imposed on OSHA by its statute and by Executive Order 12866, were you not? Your evaluation wasn't conducted in a vacuum, you've done many of these before, you know what the standards are, correct?

DR. BEALE: Mmm-hmm.

MR. RUPP: You know that part of that obligation is to consider reasonably available alternatives, do you not?

DR. BEALE: Mmm-hmm.

MR. RUPP: Did anyone at OSHA --

JUDGE VITTONE: Mr. Rupp --

Doctor, you're going to have to say yes or no.

DR. BEALE: Yes. I'm sorry.

MR. RUPP: Did anyone at OSHA ever discuss with you the feasibility or share with you any information concerning either filtration devices or air cleaning devices so far as ETS is concerned? Did that topic come up?

DR. BEALE: I believe there was a brief discussion to the effect that OSHA did not believe that filtration would be adequate from the protection point of view.

MR. RUPP: And so they asked they to exclude that from your analysis as a consequence of that?

DR. BEALE: If you don't think it's going to achieve the goal, you don't include it in the analysis.

MR. RUPP: Now, what else did they ask you to exclude from the analysis because they concluded --

DR. BEALE: They didn't --

MR. RUPP: Wait a minute. Let me finish my question.

Because they had made an a priori decision priori to this hearing beginning and before, frankly, the filing deadline on comments for the original proposal, that they were not going to be feasible and you should not consider them or, indeed, even today, offer any evaluation of them?

What in addition to air cleaning devices were you told to put to the side?

DR. BEALE: I was not told to put anything to the side.

MR. RUPP: Were you told to put air cleaning devices to the side?

DR. BEALE: I was not told to put them aside. I had some --

MR. RUPP: Why did you do so?

DR. BEALE: I had some conversations with them and to the best of my recollection, I told them -- I discussed briefly whether it was feasible or infeasible. There are some alternatives that I think I would probably believe to be fairly inferior myself just based on my own experience with what it takes to comply, such as a PEL, because there are much more in the way of -- you know, most PELs involve monitoring now and again, the administrative costs are --

MR. RUPP: We're talking about air cleaners, are we not?

DR. BEALE: You asked me about other alternatives.

MR. RUPP: I'm talking now about air cleaners. Let's focus on air cleaners. We can go to the others if you have an appetite for it.

DR. BEALE: I believe your question was, okay, what others --

MR. RUPP: No, I said what were the instructions given to you with respect to air cleaning devices and filtration.

MS. SHERMAN: Mr. Rupp, I believe he's already answered that question. He said that he was not told not to look at them.

MR. RUPP: I don't think he said that at all. He said he had a conversation with the OSHA staff and he was told that air cleaning devices were not feasible.

JUDGE VITTONE: No, he said that was told not to put that aside, he was not told to put that aside.

MR. RUPP: That he was not told to put that aside.

DR. BEALE: That is correct.

MR. RUPP: And when you were told not to put it aside, where would I find in your statement any consideration of the feasibility of the air cleaning devices or the economic implications of it?

DR. BEALE: I don't believe you will.

MR. RUPP: And what if I asked the same question with respect to ventilation? Were you told to put that aside or not put that aside? And if you were not told to put it aside, where would I find an evaluation as far as ETS is concerned of increasing ventilation?

DR. BEALE: You will not find a discussion.

MR. RUPP: What about private offices? Were you told to put the prospect of private offices, smoking in private offices, to one side or not? And if you were not told to exclude that as a possibility, would I find in your statement any discussion of the cost implications of permitting smoking in private offices?

DR. BEALE: I was not told to put it aside.

MR. RUPP: Would I find any place a discussion of private offices in your statement?

DR. BEALE: You would not.

JUDGE VITTONE: Mr. Rupp?

MR. RUPP: Yes?

JUDGE VITTONE: How about if we take a five-minute break here?

MR. RUPP: That would be fine, Your Honor.

JUDGE VITTONE: All right.

JUDGE VITTONE: Back on the record.

Mr. Rupp?

MR. RUPP: Thank you, Your Honor.

Dr. Beale, are you aware that Executive Order 12866 requires agencies to adopt performance standards whenever possible rather than a set of prescriptive requirements? Leaving to the affected entities the task of deciding on a site-specific basis how best to meet the performance standard that the agency has set?

DR. BEALE: Yes, in general, I think that's correct. And that's more flexible.

MR. RUPP: Are the PELs commonly set by OSHA not properly characterized as performance standards in the sense that it tells affected entities what the performance has to be and they are left to mix and match technical and other measures to meet the PEL?

DR. BEALE: In general, yes.

MR. RUPP: Are you aware of any substance other than ETS with respect to which OSHA has preliminarily decided or proposed not to set a PEL but rather a set of prescriptive or mandatory approaches to reducing exposure?

DR. BEALE: I am not aware of any situation that is comparable to ETS in quite a number of respects.

MR. RUPP: All right. Now, let's look more specifically at the RIA that OSHA has prepared for this proceeding. OSHA has suggested, has it not, that the full cost of the smoking proposal it has made in this proceeding is between zero and $68 million.

DR. BEALE: And that, as I have noted in my testimony, is clearly too low.

MR. RUPP: All right. And that's an annual figure.

DR. BEALE: I believe so.

MR. RUPP: Do I understand correctly that the only cost category considered by OSHA in coming up with the zero to $68 million set of figures is the projected cost of smoking lounges? That is what those figures are composed of, is it not?

DR. BEALE: I believe so, yes.

MR. RUPP: Now, the zero figure assumes, if I understand the matter correctly, that no smoking lounges will be constructed and that the proposed smoking rule will not involve any other costs of any sort for any affected entity.

DR. BEALE: That would certainly be a reasonable way to interpret it.

MR. RUPP: Now, do I understand also correctly that the $68 million figure assumes that a total of 145,000 smoking lounges would be built in this country?

DR. BEALE: I don't remember the exact number but --

MR. RUPP: That's the ballpark, isn't it?

DR. BEALE: That sounds like it.

MR. RUPP: Now, Dr. Nichols pointed out when he was here that that amounts to one smoking lounge for every 50 establishments, assuming that no establishment decided to create more than a single smoking lounge regardless of the size of the establishment or the remoteness of the smoking lounge from employee work sites. Does that calculation by Dr. Nichols agree with your own calculations?

DR. BEALE: I have agreed that it is too low.

MR. RUPP: That's not what I asked.

DR. BEALE: I know. I --

MR. RUPP: I'm just trying to figure out what we're talking about here.

DR. BEALE: Yes, I do not --

MR. RUPP: One in every 50 establishments.

DR. BEALE: I do not recall results of specific calculations that I may have made and I do not recall specifically a calculation that Dr. Nichols has made. So it's hard to answer your question.

MR. RUPP: But at this point you have no basis for disagreeing with that.

DR. BEALE: No. No, I would not have a basis for disagreeing.

MR. RUPP: Now, the RIA also assumes, does it not, that all but 1177 of the projected smoking lounges would be built in hotels, bars or restaurants.

DR. BEALE: I do not recall off the top of my head the contents of the RIA.

MR. RUPP: Well, let me give it to you.

DR. BEALE: I have it here. Do you want me to --

MR. RUPP: Sure.

DR. BEALE: If you want me to look and confirm, I will be happy to do so.

MR. RUPP: Please. And let's use the figure 1200 because it will easier for us. That all but 1200 of the smoking lounges contemplated by OSHA would be built in hotels, bars and restaurants. And while you're looking for it, let me say that as I understand it, OSHA arrived at that figure by assuming that 50 percent of the hotels, bars and restaurants in this country would build such a lounge, that no such entity would build more than one lounge, and that leaves 1177 smoking lounges for all other commercial establishments in the country.

DR. BEALE: Okay. I think that's correct.

MR. RUPP: All right. Now, that works out, does it not, to one smoking lounge for each 5000 non-industrial establishments that are not hotels, bars or restaurants, assuming again that no such establishment provided more than a single lounge, regardless of the size of the establishment or the proximity of its employees to the lounge, and that figure, as you probably know, was derived by looking at the 4,241,000 establishments that OSHA has referred to that are not bars, hotels or restaurants.

DR. BEALE: Okay.

MR. RUPP: And you see that, do you not?

DR. BEALE: I haven't found it quite yet but --

MR. RUPP: Okay. But that sounds correct?

DR. BEALE: The parts of it that I recognize do.

MR. RUPP: All right. Now, in assuming that 50 percent of the hotels, bars and restaurants in this country would build smoking lounges of some size, where do I find any data that supports that assumption? Is there a survey of some sort?

DR. BEALE: No, there isn't.

MR. RUPP: Was that just picked out of the air? It's a nice even number, I notice, but what's the basis for it? Could the number be 80?

DR. BEALE: Eighty percent?

MR. RUPP: Yes.

DR. BEALE: It could.

MR. RUPP: Could it be 20?

DR. BEALE: Probably.

MR. RUPP: Do you know if any interviews were conducted of any sort to come up with that 50 percent assumption?

DR. BEALE: I do not.

MR. RUPP: Any financial or econometric calculations?

DR. BEALE: No, I do not.

MR. RUPP: Let's focus on the 4,241,000 establishments that are not bars, lounges, or restaurants, but are nonetheless non-industrial establishments. The rule that OSHA has proposed, so far as ETS is concerned, would apply to both industrial and non-industrial establishments, would it not?

DR. BEALE: Yes.

MR. RUPP: So that you and I can agree, I would hope, that the 4,241,000 figure is the wrong figure. We need to take industrial establishments into account as well in talking about smoking lounges, do we not?

DR. BEALE: Yes, we need to take them into account, but there are a lot of industrial processes that already prohibit smoking, so that's certainly an over-count.

MR. RUPP: The 4,241,000 is an over-count? Or the larger figure after one takes industrial establishments into account would have to be reduced in some manner?

DR. BEALE: Reduced to...

MR. RUPP: It's the latter, is it not? The four million figure has to be increased to account for industrial establishments, and then there might be some adjustments that one might make to the overall category that one has just constructed.

DR. BEALE: That's correct.

MR. RUPP: In deciding what kind of adjustment to make, I take it one would have to do a survey, would have to engage in interviews, or would have to have some other basis for deciding what is the appropriate adjustment. Knowing that you're never going to have a perfect and precise adjustment. What is a good, reasonable, ball park adjustment.

DR. BEALE: More data would be desirable.

MR. RUPP: We don't have that data now, do we?

DR. BEALE: I don't believe so.

MR. RUPP: Do we know how many industrial establishments would be covered by the proposed smoking rule?

DR. BEALE: I believe so.

MR. RUPP: You believe so?

DR. BEALE: We should.

MR. RUPP: Do you see it in the RIA?

DR. BEALE: No, I don't think they included the industrial buildings.

MR. RUPP: You didn't take that into account, did you, in concluding preliminarily that the smoking aspect of the proposed rule was feasible or appeared to be reasonable?

DR. BEALE: This is a major shortcoming in the data.

MR. RUPP: That somebody's going to have to fill.

DR. BEALE: It would be preferable to fill, but there are some bounding aspects. There are, as I noted, a number of industrial settings where... The one that comes most quickly to mind is lead, and there the issue is the hand-to-mouth contamination that happens if you smoke in the actual workplace. It isn't any sort of relationship...

MR. RUPP: You know of a number of industrial settings, do you not, in which it's not appropriate to smoke on the production line, but that breakrooms for eating and smoking and drinking are provided.

DR. BEALE: Yes.

MR. RUPP: And those costs are going to have to be taken into account, are they not?

DR. BEALE: Yes. But those costs would be much more nearly the sort of ventilation only costs that OSHA used than the much larger costs that some of the other estimates have come up with.

MR. RUPP: It may or may not be, depending on what's already there. And we don't know what's already there do we, at this juncture?

DR. BEALE: Well, if you have breakrooms...

MR. RUPP: If we have breakrooms, but we don't know how many have breakrooms, do we, or what the characteristics of those breakrooms are? Do we? Or perhaps you do.

DR. BEALE: No, we don't.

MR. RUPP: We're talking about 1,177 smoking lounges for a total number of establishments of something in excess of four million. Whether that figure is eight million or six million, you and I don't know at this juncture, but it's certainly a good deal larger than four million.

I'm not going to even try to do the mathematics of how many lounges that is per establishment in the non-bar, restaurant and hotel setting. I'd be more interested in knowing what is the basis for the claim that if the smoking rule is adopted, that outside of bars, hotels, and restaurants, only 1,177 smoking lounges would be established. Where in the RIA is there a description of the rationale for that figure?

DR. BEALE: There isn't.

MR. RUPP: Do you have one that you would offer today to get us to that figure?

DR. BEALE: I would offer a number of things.

MR. RUPP: Do you have a mathematical formula that gets us to 1,177?

DR. BEALE: No, I don't have a formula that gets there, and I've already indicated that number seems to me too low. You asked about the feasibility and the broader conclusion of the feasibility.

A very large number of establishments should be able to ban smoking with very little cost if they... There are circumstances which I discussed in my oral testimony today, that would tend to make those certain locations need to provide indoor smoking areas.

MR. RUPP: What kind of places are we talking about now?

DR. BEALE: The two things that I think are most obvious are buildings sufficiently large that egress is a problem for smoking, that there really would be substantial time involved, and that occurs only in a very few relatively large buildings. And the other situation is a very inclement climate where you might not want to go outside.

MR. RUPP: So your assumption now is that if an establishment in the, and for the purposes of the record, let's just say that for the following questions we're going to be talking only about non-hotels, non-bars, and non-restaurants. Talking about everything else.

DR. BEALE: Right.

MR. RUPP: Your assumption is that in those several millions of places, if the particular entity is located in a quite small building, in a quite temperate climate...

DR. BEALE: You don't have to be quite temperate.

MR. RUPP: Whatever the climate may be, but climactic considerations being taken into account. That their employers might well with impunity require their employees who choose to smoke to go outside.

DR. BEALE: Yes.

MR. RUPP: That's on rainy days as well as not so rainy days.

DR. BEALE: There are a lot of places that are outside that have cover.

MR. RUPP: Any calculations of the cost of providing that outside cover for those places...

DR. BEALE: It already exists in many places.

MR. RUPP: Pardon me?

DR. BEALE: It already exists in many places.

MR. RUPP: How many?

DR. BEALE: That I do not know, but a very...

MR. RUPP: But it wasn't taken into account, how many would have to be constructed, what the cost of the might be, whether there's space for them. If they're located in the middle of Manhattan you may or may not be able to do it. Any consideration of that in the RIA?

DR. BEALE: No.

MR. RUPP: That's something that needs to be taken into account though, doesn't it?

DR. BEALE: It probably should.

MR. RUPP: Now let's then focus on, again, the establishments that we're just talking about. Weather considerations and size. How many establishments are we talking about that are located in buildings so small that walking outside is of no particular problem, and where weather we can confidently predict, will simply not be a factor -- either too hot, too cold, or too rainy. I guess those would be the three major categories of inclement so far as a weather perspective is concerned. How many facilities are we talking about?

DR. BEALE: Cold is really the only serious problem.

MR. RUPP: You've been in Florida in the summer time, or in New Orleans?

DR. BEALE: I have.

MR. RUPP: It's not pleasant, is it?

DR. BEALE: That depends on whether you move around a lot or not. I haven't seen smokers try to move around a lot, generally, when they smoke.

MR. RUPP: Do we know how many facilities we're talking about? And if you know, I'd appreciate knowing what the number is and what's your basis for giving us that number.

DR. BEALE: We do not know. Other than the fact that it is probably fairly large.

MR. RUPP: What's your basis for thinking it's probably fairly large? Have you talked to a lot of employers about that?

DR. BEALE: Well, in terms of size of buildings, I do travel quite a lot, and there are very, very few cities with buildings that provide a huge egress problem. There are fairly few buildings in those cities.

MR. RUPP: A huge egress problem. That is it's a long walk to get to the doors?

DR. BEALE: I used to step outside for a breath of air from the tenth floor of a Washington building. You don't get much higher than that in Washington. It took me not much more time than going to the bathroom. I was not smoking, I was just getting some fresh air because there was a smoker in the office. Something much larger where it might take you three to five minutes to get out of the building would really start impinging on your break time.

MR. RUPP: Let me ask you this, Dr. Beale. Would you agree that there might be some a priori considerations that would lead us to expect that climactic conditions and size of buildings may have an impact on the likelihood of an individual establishment's creating a smoking lounge, but until we've done some systematic analyses, reviewed the pertinent literature, and perhaps undertaken a study or two, we are simply not going to know whether that number is a million or two million or none.

DR. BEALE: I think most...

MR. RUPP: We simply won't know.

DR. BEALE: I think most indications are that this is a big hole in our knowledge.

MR. RUPP: On page two of your report you refer to a number of what you characterize as "simplifying assumptions." I don't have time to go through all of those assumptions at this point, other than to note by way of illustration that they include the assumption that the characteristics, occupancy, smoking rates, et cetera, are the same for all establishments regardless of SIC code, and you have noted, I think, or acknowledged, that those assumptions are built into the RIA that OSHA has offered for public comment in this proceeding. Do I read page two and the RIA correctly in that regard?

DR. BEALE: Yes.

MR. RUPP: The RIA contains no justifications for the assumptions that I've noted. Let me ask you as a general matter. Would you agree with me that the only thing that we can be absolutely certain of is that the so-called simplifying assumption made in the RIA are not correct. That is, that the occupancy, smoking rates, building characteristics, of the establishments in this country that would be affected by OSHA's smoking rule, are not identical across SIC codes. And the only question then that remains for us on that issue is how different they are.

DR. BEALE: That statement is almost a tautology, because analytical assumptions are virtually never realistically correct in the sense that you are positing. If they were, they wouldn't be assumptions, they would be descriptions. The reason people make analytical assumptions is so that they can continue with the analysis and not get totally bogged down in detail.

MR. RUPP: Would you also agree that the equal proportionality assumptions made in the RIA have the effect of preventing any assessment of the impact of the smoking rules on individual industries?

DR. BEALE: No.

MR. RUPP: Why is that true?

DR. BEALE: They have the effect of, that the estimates of the impacts are approximations. They do not have the effect of preventing the analysis.

MR. RUPP: On page 16 of your report you make the following statement which I thought was correct and I thought maybe you would still agree with, but maybe you've changed your mind.

"The simplifying assumptions essentially assume away disproportionate impacts on small businesses." They do precisely that, do they not?

DR. BEALE: Particularly with respect to economies of scale. At least to the extent that...

MR. RUPP: Well, it's not just with respect to economies of scale, is it?

DR. BEALE: That's the most important effect, but yes, there are other aspects...

MR. RUPP: For example, we know that the profit picture differs in a general and not necessarily quite linear fashion, but nonetheless varies by firm size category.

DR. BEALE: That's true.

MR. RUPP: And small businesses, as a group -- depending in part on how one defines them, and if you compare them with much larger concerns, their profit pictures are going to be impacted a good deal more than by a particular expenditure in the profit picture of a large business, whether one looks at it in absolute terms or in percentage terms.

DR. BEALE: That is generally true, but not always.

MR. RUPP: Do I read the RIA correctly to assume that no government entity anywhere in the country will provide smoking lounges to accommodate its smoking employees? That is, I've toted up the figures, and I find nothing left for the government sector. I've got a few smoking lounges in bars, restaurants, and hotels, and I've got 1,177 smoking lounges spread out i na portion of the non-industrial sector. I find the industrial sector ignored. I also find that the government sector has been ignored. Do I miss something?

DR. BEALE: I don't think so, but government buildings are among the most common smoke banners of any.

MR. RUPP: Is that your impression, whether you talk about state, local, or federal government structures?

DR. BEALE: I can't remember when I was last in a smoking government building of any of those descriptions.

MR. RUPP: Been anywhere in North Carolina lately? Kentucky? Georgia?

DR. BEALE: No.

MR. RUPP: Georgia. South Carolina?

DR. BEALE: No, I tend to be in less temperate climates.

MR. RUPP: No provision at all made in the RIA for the establishment of smoking lounges in buildings in the government sector, is that correct?

DR. BEALE: I think so. And it is generally an omission of the sort that you were discussing before.

MR. RUPP: Are you aware that smoking has been banned in the Department of Labor building in which we are currently having this discussion since January 1 of this year?

DR. BEALE: Yes.

MR. RUPP: And that two smoking lounges have been established in the DOL building here. Are you aware of that? One on the sixth floor, I think you mentioned it wa fifth, but it's the sixth floor outside the cafeteria; and on the second floor.

DR. BEALE: I haven't seen the second floor one.

MR. RUPP: Perhaps when we're done here we can go up there.

DR. BEALE: I'd prefer not, if you don't mind.

MR. RUPP: Let's just move on.

The RIA also assumes, does it not, that all government agencies are located in single establishment buildings?

DR. BEALE: I believe that assumption was basically made.

MR. RUPP: And that assumption is also incorrect, is it not? And quite radically incorrect. That is, there are many instances in this country of government facilities that are located in multi-tenant buildings where the government entity occupies leased space.

DR. BEALE: That is certainly true as a descriptive statement. However, there is also a lamentable lack of data on the SIC breakdown of occupants of multi-tenant buildings.

MR. RUPP: I take it GAO would know where most of those buildings are and what the characteristics of the buildings are.

DR. BEALE: Again, GAO would not know about state and local governments.

MR. RUPP: Federal governments at least.

DR. BEALE: They would know about federal government.

MR. RUPP: We have to pursue it at both levels, do we not? As you quite rightly note.

DR. BEALE: I think that, well, I think the assumption holds up much better for local governments and state.

MR. RUPP: Do I read the RIA correctly to assume that all...

Let me ask a different question than I started to ask.

For purposes of the RIA, OSHA has defined large establishments as those having 20 or more employees. What's the justification for that definition?

DR. BEALE: It is a very commonly used break point.

MR. RUPP: Maybe people are commonly making a mistake. What's the justification for it? We need to make that distinction, if indeed it is pertinent, in the context of this smoking rule. If you're reporting data for some other purpose, a break point of 20 may be quite appropriate. If you're deciding whether to regulate in some manner, a break point of 20 might be appropriate in imposing the regulation. Here we're analyzing economic impact and a break point of 20 was used. What is the justification in this circumstance for the use of the 20?

DR. BEALE: There is no particular justification. It is simply a very commonly used level, and I might add that there is also, so far as I am aware, not really any very good information that would lead you to suggest any other level. So 20 is, under those circumstances, a reasonable stab at it.

MR. RUPP: Would the RIA have come out different if a break point of 30 had been used, or 60?

DR. BEALE: Generally the bigger... When you're looking at regulatory flexibility issues, the bigger the cutoff, the less the impacts are.

MR. RUPP: What if we had used a cutoff of ten?

DR. BEALE: Again, depending on how that works, the impacts are...

MR. RUPP: Are going to be magnified, made larger?

DR. BEALE: Yeah, but not always. As I mentioned, I was doing some work on the ergonomic standard recently, and the reverse was true there. And ten was used principally to get a very small cutoff to look at vulnerability. So...

MR. RUPP: Have you done a sensitivity analysis in this circumstance to see what the impact would be of using a cutoff of ten or five?

DR. BEALE: No, I have not.

MR. RUPP: Has OSHA made any estimate of the cost of implementing the smoking rule in the three and four-tenths million non-governmental commercial establishments falling outside the OSHA definition of large, non-governmental, commercial establishments?

The answer, obviously, is no. The question is why?

DR. BEALE: I do not know why.

MR. RUPP: Another of the simplifying assumptions that OSHA has made, is this not correct, that had the effect of eliminating from further consideration most of the 300,000 large non-governmental commercial establishments that OSHA did consider? That is, you had 3.7, you took out 3.4 on size and non-governmental. You're left with 300,000.

Another simplifying assumption was made, and that is that the establishment had to itself be large, and would have to be located in a large building before considering the creation of a smoking lounge.

DR. BEALE: Uh huh.

MR. RUPP: As I read the RIA, a large building is defined as one having three stories or more and 100,000 square feet or more, which is, I think you said this morning, that's quite a large building. What is the basis for those cutoff points?

DR. BEALE: I do not know precisely. Three floors I think is fairly obvious. That has to do with the length of time it would take you to get out of the building, although that is my, what I would take to be OSHA's judgment rather than my knowledge.

MR. RUPP: Have you seen any time activity pattern surveys about the length of time depending on the size of the building, correlating it with a number of floors? For example, in a suburban office park as opposed to downtown Manhattan. How long it takes to get to the front, to the side, or to the rear door of the building?

DR. BEALE: Suburban office parks tend to be fairly easy to get out of.

MR. RUPP: They also tend to be short and flat and extensive, do they not?

DR. BEALE: Sometimes.

MR. RUPP: But we simply don't have any data which tells us that the cutoff point should be three stories or five stories or one story? Or 100,000 square feet or 300,000 or 2,000? Do we? Those are arbitrary decisions, arbitrary choices.

DR. BEALE: The reason I keep mentioning the Mellon Auditorium is that that happens to be the mean-sized building which is approximately one-seventh the size of the 100,000 square feet. You can get out of the Mellon Auditorium, if you assumed that the Mellon Auditorium, once you were in the hall you were out of the building, which is consistent with 14,000 square feet building...

MR. RUPP: But now you're focusing on egress, and ease of egress, and how much time it takes you to get from your desk to the front door.

DR. BEALE: That's correct.

MR. RUPP: If one of these buildings is located in Fargo, North Dakota, I take it, we have a little bit different set of considerations.

DR. BEALE: Then you have to be concerned with what sort of shelter there is outside.

MR. RUPP: OSHA assumed there would be no indoor smoking lounges built anywhere in Fargo, North Dakota, in buildings less than 100,000 square feet and less than three stories in height.

DR. BEALE: I haven't been to Fargo, North Dakota. I don't know if that captures all the buildings or not. But basically, yes.

MR. RUPP: What's the basis for that assumption?

DR. BEALE: I don't know of any.

MR. RUPP: Are there any direct data telling us or allowing us to make a reasonable estimate of the number of large establishments located in large buildings as OSHA has defined those two terms. Large establishments in large buildings.

DR. BEALE: This is one of the areas that I think is fairly difficult.

MR. RUPP: It's pretty important, though, isn't it? That is it drives many of these calculations.

DR. BEALE: It drives many of the calculations, but where you end up is that a very large establishment in a large building, or a large establishment with interest in its own smoking lounge for whatever reason, will tend to build its own smoking lounge. Now that leads to the conclusion that OSHA has, I presume there are a fair number of those, that OSHA has underestimated and failed to account for this type of case. We then have to...

MR. RUPP: It's also...

DR. BEALE: You then ask the question, for a large establishment, is the cost of the smoking lounge going to be a problem? Here the unit cost of building the smoking lounge I think becomes a much more important issue than whether the smoking lounges have been accounted for.

MR. RUPP: We're assuming here, are we not, that even large establishments located in large buildings -- a sky scraper in mid-town Manhattan occupied by a single company...

DR. BEALE: Most...

MR. RUPP: That no place in the country would they build more than one smoking lounge.

DR. BEALE: That is clearly an underestimate.

MR. RUPP: So even if we have an 80 story building, we're going to have one smoking lounge. So assumed in the RIA.

DR. BEALE: Mr. Rupp, I said in my testimony that the number of smoking lounges estimated by OSHA is clearly too small...

MR. RUPP: ...in which it's too small?

DR. BEALE: It seems to me that we have spent the last 20 minutes, at least, sort of going over the particulars of that statement. I'm not sure what information we're getting out of this.

MR. RUPP: Ultimately that is for OSHA to decide.

JUDGE VITTONE: Mr. Rupp, it's a quarter after 3:00.

MR. RUPP: I'll move as quickly as I possibly can. I realize we've got a serious dilemma here.

JUDGE VITTONE: Well, if you could wrap it up in ten minutes, I would appreciate it.

MR. RUPP: I'll do my best, Your Honor.

When we focus on large, and you're just going to have to tolerate my asking some further questions about the smoking lounge. I think it's important to get on the record areas of inquiry that OSHA ought to pursue in this area, on this issue. For better or for worse, you're the expert that OSHA has chosen to represent it on this occasion, so please bear with me.

We've just hit the assumption that even large establishments in sky scrapers are assumed to build only one smoking lounge. You've indicated that that's obviously incorrect, and that's clearly so.

Let's go quickly through some of the other assumptions that have to be looked at in this area. One is that smoking lounges would be established even in those large buildings, large companies, by only 50 percent of the company. Is there any basis for that assumption?

DR. BEALE: I do not know of any basis for that assumption other than it appears to be the fairly clear assumption that one takes when one doesn't have a particularly good idea.

MR. RUPP: There are ways to get at a figure of that sort, aren't there? That is when Dr. Nichols was here, he suggested that in this and on other issues, with a rule of this significance, OSHA has a statutory obligation to do something that makes sense, and that might even include -- revolutionary though it may sound -- some research?

DR. BEALE: I have already stated the fact that I think Dr. Nichols made some very helpful suggestions.

MR. RUPP: Let's look now at the size of the smoking lounge that OSHA has assumed in the RIA would be built.

The assumption, as I understand it, is that each smoking lounge would be 150 square feet, and that is approximately 12 feet by 12 feet, is that correct?

DR. BEALE: Approximately.

MR. RUPP: The notion is that such a space would accommodate, at any one time, ten adult smokers.

DR. BEALE: OSHA's assumption was it would accommodate 10 smokers. I'm not sure that that realistically means at one time or not.

MR. RUPP: Well, we know that in a very large establishment in a very large building, there are very likely to be many, many, many more than ten smokers.

DR. BEALE: That's certainly true.

MR. RUPP: What is the rate of occupancy that was assumed by OSHA and that you took into account in performing your regulations? How many times would an individual smoker be expected to use a smoking lounge per day?

DR. BEALE: OSHA did not make an explicit calculation. That area is one of those where I think Dr. Nichols' suggestions were useful. But the issue of the size of the smoking lounge, and the number of smoking lounges in a large building are really fairly interchangeable.

MR. RUPP: That is if you have many of them, they need be not quite so large.

DR. BEALE: Yes.

MR. RUPP: Let's focus on both ends of that spectrum. Let's focus first on our 12x12 room which is 150 square feet. Actually it's 12x12.5 to get to 150 square feet.

If the assumption is made of a maximum occupancy of ten adults, are we assuming there will be some sort of furniture in the room, chairs for those ten adults, for example?

DR. BEALE: One would assume so.

MR. RUPP: Can we get ten chairs and ten adults smoking in a room 12x12 with any degree of comfort? Was any effort made to look at what a room like this would look like, what it would feel like? That's a lot of smoking in a very small space. It's the size of a small bedroom.

DR. BEALE: I believe that the OSHA economist told me that those assumptions on the design of the room and the ventilation costs came from RJR.

MR. RUPP: From R.J. Reynolds?

DR. BEALE: Yes.

MR. RUPP: And you assumed that to be the case and just went on from there?

DR. BEALE: I don't make the contrary assumption, which is that...

MR. RUPP: ...square feet is too small?

DR. BEALE: No, the contrary assumption suggested by your question is that OSHA people would have lied to me.

MR. RUPP: No, I'm not suggesting that at all. There are any number of explanations and the one you've given may be correct. I'm asking whether you considered other possible sizes of...

DR. BEALE: No, I accepted those parameters at face value.

MR. RUPP: Whether the particular establishment in the large building has 21 employees, which is the cutoff point, as I recall it, or 10,000 employees, the size of the lounge in the RIA has not been altered. It's still 150 square feet.

DR. BEALE: That's true, but I would like to see the establishment that has 10,000 employees in one building. Many larger...

MR. RUPP: Well, let's use a figure of five in one of the sky scrapers in Manhattan.

DR. BEALE: Your point is valid.

MR. RUPP: Okay.

DR. BEALE: OSHA understated. Again, we keep coming back to the same point.

MR. RUPP: I appreciate that, and we're almost through these, you'll be happy to know.

Let's think about the cost of the smoking lounges calculated in the RIA. The RIA assumes that the only cost of providing a smoking lounge would be the capital costs of supplemental ventilation which is estimated at $500 per year, or about $3 per square foot. What is the basis for the $500 estimate? You asked about that. Do you have a basis?

DR. BEALE: I believe the ventilation costs were RJR.

MR. RUPP: What other costs would one incur in a smoking lounge, and in creating a smoking lounge, and I think you've discussed some of them in your testimony, but let's try to get it clear here. We've got costs of chairs, other furnishings in the lounge. We have the cost of outfitting the space so that it bares some relation to the decor in the rest of the building perhaps, or the rest of the office space. We may have the need for some reading materials. The space is going to have to be cleaned periodically. We have the costs of space, whether we measure that by rental costs on an annual basis or opportunity costs on an annual basis. It doesn't matter, I suppose. But those are the kinds of cost categories that one would have to approach in a disciplined way, would one not, in trying to determine the cost initially and over time of providing a smoking lounge, regardless of size and regardless of location?

DR. BEALE: Those are the sorts of costs. However, a lot of them are linked in the sense that if you are converting an existing breakroom, most of those costs will already be incurred in that breakroom.

So if you have a situation with a large building, or a situation of inclement weather where you have already provided, and I was once wandering around Minneapolis at 11 below looking for how to get into their downtown buildings, which are all interconnected with little bridges and everything. All of the breakrooms, everything is inside there. Where you have that sort of a situation, you would generally provide smoking lounges by converting some of your space in which case it would already be furnished, et cetera, et cetera, and cleaned.

MR. RUPP: Wait just a second, now. Presumably there was a reason to establish the breakroom in the first place. That is an amenity that the employer concluded was cost-justified, whether...

DR. BEALE: People take breaks.

MR. RUPP: If we're assuming that there's only going to be one smoking lounge, regardless of size and so forth, are we going to assume that in any establishment in the country, it's going to have more than one breakroom available for conversion to a smoking lounge because now, if we're going to take that breakroom and make it into a smoking lounge, the non-smoking employees are not going to have any place to take their breaks.

DR. BEALE: That is going to depend a great deal on the configuration of the building and the size of the companies involved.

MR. RUPP: But one cannot assume, I think you would agree, that there is going to be space that is free -- in this country, nothing is free. Whether opportunity costs or whether out of pocket costs, nothing is free. We can't assume that people are going to have furniture that will be appropriate for a smoking lounge. No investigation of that issue has been done, and there's no basis for any such assumption. We can't assume that there will be breakroom space, because we do not know whether that is so. No studies have been done, no surveys have been conducted, no individual discussions with building owners or operators have been had. That is an issue that remains, that set of issues remains a great black hole at this point, wouldn't you agree? You may have your suspicions, which you're entitled to. Mine may happen to go in the other direction. But in each case where the rubber meets the road, is in the research that needs to be conducted to answer the questions that you and I both agree need to be answered.

DR. BEALE: We cannot assume that. We cannot assume the contrary, either. We cannot assume that you would need in every situation, I think, all of those things new.

I agree with you that we really ought to have a better handle on what sort of number there is. My sense is that if you take an intermediate number between 68 million and 8.6 is that...

MR. RUPP: Billion.

DR. BEALE: Pick one of Dr. Nichols' numbers.

MR. RUPP: Eight point six or 11 billion. Maybe the answer is somewhere in there, but at this point we don't know.

DR. BEALE: And it came out somewhere in the vicinity say of a billion, that you would still find the, assuming that the health benefits are there, which I'm not an expert in, you would still find...

MR. RUPP: May be cost justified.

DR. BEALE: ...all of the inaccuracies that it is justified. Now I...

MR. RUPP: The number may be eight. Dr. Nichols may be right. And you will not know until you have done the research.

DR. BEALE: Dr. Nichols is not right because he's taking just as extreme a case as is OSHA.

MR. RUPP: As have you.

DR. BEALE: No, I think one ought to be somewhere in the middle.

MR. RUPP: But we don't know where the middle is or what the right number is.

DR. BEALE: I would agree with that.

MR. RUPP: Okay, let's go on and try to finish this up if we can.

Now if a smoking lounge is provided...

JUDGE VITTONE: Two more minutes, Mr. Rupp, that's it.

MR. RUPP: Excuse me, Your Honor? How many?

JUDGE VITTONE: Two more minutes, that's it.

MR. RUPP: If a smoking lounge is provided, employees are going to have to get to the lounge under the rule as proposed, and they're not going to be able to do any work while they're there. Have any estimates been included in the RIA for productivity losses of that sort?

DR. BEALE: No estimates have. I think there are some problems with your assumptions. Employees have to go somewhere to go to the bathroom. They have to go, almost by definition, somewhere to take any kind of a break. A break involves leaving the desk. I see no particular reason why employees would take any longer to smoke, than they would to take any other kind of a break.

MR. RUPP: They might not, Dr. Beale, but if they're told to go on a 15 minutes errand twice a day, three times a day, four times a day, they're told to go to the mail box down the street and it's going to take 15 minutes, it may not take longer than any number of other activities or functions they perform during the day, but it's nonetheless a productivity loss if you assume an eight hour day, and it has to be taken into account, does it not?

DR. BEALE: People do different things during breaks. Smoking is one of them.

MR. RUPP: Are you assuming that people across the industrial and non-industrial sector in this country get, are given a certain number of breaks which are available to be converted into smoking breaks at the employee's choice, and if you are making that assumption, what is the basis of it? I'd like the data that supports the assumption.

DR. BEALE: I'd like the data that suggests the fact that people sit anywhere for four hours and work without taking a break. This is a point at which a certain amount of common sense enters into the discussion.

MR. RUPP: At my law firm, for example, our secretaries are not given breaks other than their lunch break. Do you believe our law firm to be atypical in that respect?

DR. BEALE: I think it is probably fairly atypical of workplaces.

MR. RUPP: But do you know how atypical? Have you done a survey of this?

DR. BEALE: I do not. I would also point out that as for working in the breakroom, I believe that the regulation says that nobody would be required to work in the breakroom. I'm not sure that the regulation would prohibit somebody from going into a breakroom and using a telephone while he smoked.

MR. RUPP: What estimate has been made in the RIA for revenue losses?

DR. BEALE: To smokers?

MR. RUPP: Let me give you the categories quickly, because the Judge is about ready to gavel me down. Hotels, bars, restaurants, casinos, tobacco manufacturers, supplies to tobacco manufacturers, state, local, and county governments that receive tobacco taxes... We could go on and on, couldn't we? Revenue impacts. Adverse revenue impacts.

Would I find anywhere in the RIA any discussion or consideration, any effort to quantify adverse revenue impacts from the smoking ban proposal that OSHA has made in this rulemaking?

DR. BEALE: No, and the categories, the industries you mentioned fall into three categories. The hospitality-related ones is still clearly left as an open question. And as I said, Dr. Glantz's study, and I think there are others that tend to confirm it, have suggested that there really won't be any in there. There may be some industries where there are. His study only dealt with restaurants. Tax revenues...

MR. RUPP: Have you read the examination of Dr. Glantz?

DR. BEALE: Yes, and I read his study, too.

MR. RUPP: And you've read the examination of Dr. Glantz as well?

DR. BEALE: Your Cross Examination of him?

MR. RUPP: Yes.

DR. BEALE: I didn't think you were particularly on target with most of your questions.

MR. RUPP: Well, it was a bad day.

JUDGE VITTONE: Okay. I think that's a...

(Laughter)

MR. RUPP: Thank you, Your Honor.

May I say for the record, and you've been most indulgent in a situation that there's, I understand you have no choice but we've got to move, but this is not enough time to examine on this issue. It is not remotely sufficient time. I am about halfway through my examination. I have not repeated myself on a single occasion.

What we're talking about in this proceeding is a rule that would alter the livelihoods of literally millions of people in this country, and after a one and a half hour opening presentation, this simply is not enough time for examination. I would like to request that Dr. Beale return for additional examination when others are not going to be inconvenienced. And I recognize that continuing at this juncture would cause others to be inconvenienced.

So I would make that motion at this point. And I would, because Dr. Beale is local, I would ask Your Honor for consideration of my request.

JUDGE VITTONE: All right, we'll take it under consideration and we'll discuss it at some later point.

Thank you, Mr. Rupp.

DR. BEALE: Your Honor, at this point I would like a small break for reasons unrelated to smoking.

(Laughter)

JUDGE VITTONE: You can take that small break.

Dr. Nichols, I want you to come up here a second. I want to ask you a few questions here, because we are rushing here on time.

You heard all of Mr. Rupp's examination and you've heard all of the answers. You've got ten minutes, if I give it to you. What areas are you going to question him on that have not been touched on?

DR. NICHOLS: I have a couple of areas. One is the analytic device that Dr. Beale refers to of conservatism in his analysis, and I'd like to ask him a couple of questions about that.

Then, frankly, I have a couple of questions about the new information he put on the screen today talking about my analysis and Dr. Viscuzi's analysis, which I had not seen before, and which I think there are some serious misunderstandings there.

JUDGE VITTONE: Are you going to have any Redirect, Ms. Sherman?

MS. SHERMAN: One or two questions, Your Honor.

JUDGE VITTONE: Okay. Absolutely no more than ten minutes.

DR. NICHOLS: Okay.

JUDGE VITTONE: We'll wait for him to come back.

We have the AFGE people, then we will take them.

If anybody else wants a break, they're going to have to take it now while I'm sitting here, or whenever. I'm the only one who can't leave, I guess. We'll have the AFGE people.

Mr. Pharr, you are here. Is there a Mr. King here? You're Mr. King?

MR. KING: Correct.

JUDGE VITTONE: How long is your presentation, sir?

MR. KING: I would say 15 minutes.

JUDGE VITTONE: What area are you talking about?

MR. KING: I'm talking about the affects of this ruling on tourism in the United States.

JUDGE VITTONE: Okay, you're going to talk about tourism effects.

Then we have this gentleman, Mr. Edgar.

Okay.

MR. McNEELY: Judge Vittone, relative to the RJR panel, has there been any changes in the lineup we've been presented. There are six representatives. Have there been any changes?

JUDGE VITTONE: Ms. Ward, if you'd come forward and please address that.

MS. WARD: I don't have my piece of paper...

JUDGE VITTONE: I have mine.

I show Mr. Nelson, Coggins, Bohannon, Ogden, Sears, Steichen, Mr. Furr and Ms. Ward.

MS. WARD: The piece of paper that I was referring to was the piece that's out on the back desk. There have been no changes to that. Mr. Furr and I will not present direct testimony.

Are you looking at what I'm looking at?

MR. McNEELY: That was out front?

MS. WARD: Right. That's the same.

I'm thinking that four and six...

JUDGE VITTONE: Studies with experimental animals and comments on smoking status... Ogden and...

MS. WARD: I think that five might be four, and six might be five, and four might now be six, but the topics and who will give them are exactly the same. That will all take place on Tuesday.

MR. McNEELY: You're just referring to order of presentation.

MS. WARD: Right. That's the only thing that I'm aware of. I'm just not 100 percent certain about that because I haven't been there.

MR. McNEELY: There were submissions by other representatives. Will they address or take questions relative to submissions by other RJR representatives who are not presenting who were originally...

MS. WARD: To the best that they can, yes. The others are not presenting oral testimony.

MR. McNEELY: Thank you.

Thank you, Judge Vittone.

JUDGE VITTONE: You're welcome, Mr. McNeely.

Doctor, take the microphone again.

DR. NICHOLS: Thank you.

My name is Albert Nichols, as you know.

DR. BEALE: Yes.

DR. NICHOLS: I just have a couple of quick questions. One is that you make the point in your written testimony and also in your oral testimony, that it's often a useful screening device to do a conservative analysis by which simply one means that one makes assumptions unfavorable to one's case. If one is trying to prove that something is cost beneficial, one assumes the costs are higher than they probably are; one assumes the benefits are lower than they probably are.

In terms of the discussion we've just been having and with respect to the ETS portion of the rule -- not the general IAQ portion -- it seems to me that you've said that OSHA has substantially underestimated the number of lounges that would be needed; it has substantially underestimated the cost of providing those lounges; and it has ignored potential revenue impacts on bars, restaurants, hotels, which your testimony suggests could be an important concern to those industries.

Given all of that, do you think it's still appropriate to characterize their cost estimates of the ETS portion as conservative estimates?

DR. BEALE: No. I don't think this principle applies to the ETS. I think it does apply very strongly to the general IAQ. But not to the ETS.

Incidentally, I indicated that I considered the bar and restaurant aspect to have been left an open question. I think it's fairly clear OSHA is asking for more input and really hasn't reached any kind of a conclusion, has expressed some discomfort at the idea that the technical and the sort of pro forma economic analysis may have been adequate, given the nature of the industry.

DR. NICHOLS: All that may be true, but it would still be inaccurate to characterize that portion of the analysis as conservative.

DR. BEALE: Yes.

DR. NICHOLS: In fact it's quite the opposite.

DR. BEALE: Yes.

DR. NICHOLS: Could we look at your Exhibit 3 which was characterizing one of my diagrams? I have a couple of questions about that.

DR. BEALE: I wasn't exactly characterizing. I copied it.

DR. NICHOLS: Well, you copied it, but then you did some of your own artwork. You have drawn in an alternative demand curve, say, to the D1 curve which I characterized as not necessarily a lower bound but a relatively low estimate and that would be a typical estimate of consumer surplus, would it not?

DR. BEALE: In fact, if I remember correctly, you described the DD curve as a typical estimate, which is why you drew the -- why that is the only one that was in the original diagram.

DR. NICHOLS: The intercept could go anywhere from zero up to the highest level there.

DR. BEALE: Over the 100 percent.

DR. NICHOLS: Right.

DR. BEALE: Yes. That was -- and by my reading of it, that makes the D1 curve the lower bound and the D2 the upper bound.

DR. NICHOLS: You suggested that the linear demand curve was done for artistic convenience.

DR. BEALE: Well, I believe I questioned you and you said it was a simple specification. Now, I have seen a lot of economists do things because they were a simple specification.

DR. NICHOLS: Have you done analyses using consumer surplus calculations?

DR. BEALE: I have not done particularly analyses using consumer surplus calculations of this sort.

DR. NICHOLS: You've read them in the literature?

DR. BEALE: Oh, yes.

DR. NICHOLS: And what typically is used? By the way, what functional form is your curve?

DR. BEALE: You see, that's just the point. My curve is no particular functional form. My curve is drawn to reflect the considerations that I think are likely to pertain which is to say a number of employers who have not a whole lot of choice but to put in a smoking lounge for one reason or another followed by the rest of the employers who have no particularly compelling reason and would find that it costs a great deal less than a smoking lounge, in fact, doesn't cost very much at all, it costs enough that maybe they haven't done it. I mean, you've got to make a policy decision, you've got to promulgate the policy decision, you've got to post a few signs, you've got to do a few things like that, but pretty minimal costs. In other words, my curve was drawn to fit a hypothesis, not a mathematical specification.

DR. NICHOLS: A hypothesis with no data behind it and no standardized approach in the profession either.

If you were to continue your curve to the left, what would it look like? It would rise very steeply, wouldn't it?

DR. BEALE: It would probably rise steeply, yes.

DR. NICHOLS: And that would imply what about the distribution of the cost to firms of not having lounges?

DR. BEALE: Well, that depends a little bit on, I think, on what the institutional situation was.

DR. NICHOLS: Wouldn't it imply that a significant proportion, this A percent, would have extraordinarily high costs for not having a lounge and then there's another group that has extraordinarily low costs for not having a lounge, which is the group that you show in that lower tail.

DR. BEALE: No, I think it would -- if you in effect required everybody to have a lounge or if you promulgated the OSHA regulation under circumstances where people found it for some reason or other impossible to have a lounge, then you would have a situation where you would have a quite inelastic demand. But, in fact, that is going to be bounded without such regulation. At some point, people are going to say I've got some reasons for having a lounge but this is ridiculous.

DR. NICHOLS: But your curve, if you continued it, would imply that so isn't that an unreasonable curve if that's the implication? You've just said it's unreasonable.

DR. BEALE: My curve -- if we project it straight up inelasticly, it would. But there is no reason why it can't taper off.

DR. NICHOLS: I see. So it sort of snakes down. It starts out kind of flat and then suddenly it falls sharply right at this A percent and then it flattens out again.

DR. BEALE: Well, it's not that it falls sharply right at that A percent. It's that A percent is where it falls.

DR. NICHOLS: I would be interested in seeing an empirical example of such a demand curve for any product.

DR. BEALE: I doubt that you would find one because economists don't tend to use specifications that are S shaped, that result in S shaped curves.

DR. NICHOLS: I would be interested if you could show us one that you've done some time in the past, since you don't seem to be bound by normal professional choices of functional forms.

DR. BEALE: Functional forms tend to be chosen for factors related to convenience and not necessarily because of what they represent.

DR. NICHOLS: I have one other very quick question which is in your written testimony you talk a lot about assumptions of proportionality and essentially that they are harmless in the sense of estimating total costs, although they may well give you inaccurate estimates for individual sectors.

DR. BEALE: Yes. It depends on what question you're asking.

DR. NICHOLS: Right. And I would like to ask you about one proportionality assumption which is how one goes from knowing the number of large buildings and the number of large establishments to knowing the number of large establishments in large buildings which is a key step in OSHA's estimation process and how did they make that step? We have roughly 300,000 large establishments, I believe, is that right? And 40,000 large buildings, something on that order. And from that we put them together and we get something like 2500 large establishments in large buildings. How was that done?

DR. BEALE: I can't remember precisely but my recollection is that what they did was they allocated the single establishment buildings --

DR. NICHOLS: A different set. Perhaps it will refresh your memory that they assumed that 1 percent of large establishments would be in large buildings, based on the fact that 1 percent of the buildings are large by their definition?

DR. BEALE: Okay. I would have to check that. But the thrust of what you're saying is what? What's the thrust of your question?

DR. NICHOLS: The thrust is that the way that they put those together was by assuming that the distribution of establishments across buildings was independent of establishment size.

DR. BEALE: Okay.

DR. NICHOLS: Isn't that an assumption of proportionality that you've discussed?

DR. BEALE: Yes.

DR. NICHOLS: Do you think that's a reasonable assumption?

DR. BEALE: I think that assumption goes a long way. It is very hard to say a priori whether a small establishment is going to be in a small building or a large building and it is also true that many large establishments may have multiple buildings. There would be some tendency for large establishments to occupy larger buildings simply because they won't fit in very small buildings but the problem is what assumption do you make if you do not have data.

DR. NICHOLS: Well, I would just draw your attention to two establishments and two buildings and think about the implication. The two establishments are the Department of Labor headquarters and your consulting firm with one person and the two buildings are the office, your home, and this building and to think about what OSHA's assumption of proportionality implies about the likelihood of those establishments being in those two buildings.

DR. BEALE: But I would point out to you that that isn't the place to stop with those organizations because the Department of Labor will have many field and other offices that may be in quite small buildings and that there is quite a practice for even one-person consulting firms to group together in office suites and so it is much less clear than your example suggests.

JUDGE VITTONE: All right. Thank you very much, Dr. Nichols.

Let's move this thing out of here quickly.

Ms. Sherman?

Ms. Sherman, go ahead.

MS. SHERMAN: Dr. Beale, you were hired to review the OSHA preliminary regulatory impact analysis and not everything surrounding the proposed rule, were you not?

DR. BEALE: That is correct.

MS. SHERMAN: Therefore, you were not expected to do exhaustive literature searches on this issue, isn't that so?

DR. BEALE: That is also correct.

MS. SHERMAN: But based on what you did do, did you become convinced that OSHA utilized the best available published data?

DR. BEALE: I saw nothing particularly in the area of productivity to suggest that there were any other data. I asked about some of the limitations of the building data. And so, yes. Basically, yes.

MS. SHERMAN: Thank you. And thank you for your time.

JUDGE VITTONE: That's it, Ms. Sherman?

MS. SHERMAN: Yes.

JUDGE VITTONE: Dr. Beale, thank you very much for being here today. We appreciate your time.

DR. BEALE: My pleasure.

JUDGE VITTONE: AFGE?

(Pause)

JUDGE VITTONE: Would you two gentlemen identify yourselves for the record, please, and identify your organization?

MR. SCHLEIN: Good afternoon. My name is David Schlein. I am National Vice President, District 14, American Federation of Government Employees, AFL-CIO.

JUDGE VITTONE: And your name, sir?

MR. BIGGS: My name is Kirby Biggs. I am a steward and a health safety representative for the American Federation of Government Employees, Local 3331 of the U.S. Environmental Protection Agency in Washington, D.C. I am also an EPA employee from a program perspective.

JUDGE VITTONE: Okay. Which one of you wants to go first?

MR. SCHLEIN: I'm going to start off.

JUDGE VITTONE: Okay.

MR. SCHLEIN: I'm just going to summarize my comments and keep them to less than 10 minutes here since they're already on the record.

JUDGE VITTONE: Okay, sir. Thank you.

MR. SCHLEIN: As I stated, my name is David Schlein. I serve as National Vice President with AFGE. And I welcome the opportunity to appear here at this hearing on behalf of AFGE in support of OSHA's proposed standard addressing indoor air quality in occupational environments.

The American Federation of Government Employees is committed to protecting the health and safety of federal and D.C. government employees. AFGE represents over 700,000 government workers nationwide. The district that I head up has about 50,000 federal and D.C. workers in the greater Washington area. The vast majority of our employees work in office buildings.

AFGE is convinced that this proposed standard is needed to protect federal and D.C. employees from the problems of poor indoor air pollution. We urge you to move as quickly as possible to adopt the standard on indoor air quality covering these workers.

Among government office workers throughout the country, poor indoor air quality is an occupational health hazard. AFGE has been concerned about the significant health risks that indoor air pollution has posed to its members since the mid 1980s. The union's concerns were borne out in 1988 when serious indoor air quality problems erupted in workplaces of AFGE members throughout the Washington metropolitan area.

Since that time, AFGE District 14 has been in the forefront of the struggle to eliminate this growing public health problem. These cases will be discussed in more detail later.

These cases make it clear that the biggest obstacle to eliminating indoor air pollution at these workplaces has been the failure to recognize that it's a significant health problem against which government employees have the right to be protected. Thus, in buildings where federal or D.C. employees work, there exist no viable standards for proper operation and maintenance of HVAC systems, no procedures for monitoring the nature and extent of indoor air contamination or its effect on building occupants, no indoor air quality maintenance or hazard abatement programs and no medical management programs.

In short, federal and D.C. employees must depend on indoor air quality protection on the voluntary efforts of building management or on our own collective bargaining agreements. Yet, in spite of increased public awareness of the hazards of indoor air pollution, we have not witnessed acceptance of responsibility by management to rectify potentially unhealthy workplaces, whether because management feels it does not have the authority to act or because it does not know how to address the problem.

The absence of enforceable regulations is exacerbated by the fact that many buildings where federal and D.C. employees work are privately owned and controlled. Since the government ordinarily leases only the commercial building space, it has no right of access to any other areas such as rooms containing HVAC equipment for the purpose of conducting air quality inspections.

Private owners, as exemplified in the USIA case, United States Information Agency, which is going to be discussed later, have been reluctant to grant GSA or any other independent ventilation specialist permission to enter unleased space for the purpose of conducting indoor air quality inspections.

And where we have been able to carry out testing, the lessor has not always agreed to implementation of recommended changes.

Among government workers throughout the country poor indoor air quality has become an increasingly serious problem ranging from job discomfort to ill health. Indeed, AFGE's experience has led it to conclude that government employees are even more susceptible than other workers to the hazard of poor indoor air. Government managers are often encouraged to cut costs by shutting down ventilation systems and purchasing inferior office materials which emit dangerous chemicals.

In addition, managers often crowd government employees in work areas designed for fewer people, using makeshift wall separators. These practices push ventilation systems beyond capacity, often subverting the intended airflow patterns and limiting the amount of fresh air available for each worker to breathe.

AFGE's conclusion that poor indoor air quality has become a serious health problem for government workers is borne out by the study which AFGE District 14 conducted in 1988 in response to a growing number of complaints and concerns from our members. Over 75 percent of the nearly 2000 federal and D.C. government employees who responded to the survey believed that poor indoor air quality is a problem at their workplace. More than 90 percent said that they experience symptoms often associated with poor indoor air quality.

Survey participants noted that the symptoms disappear when they leave the building, an important indicator of sick building syndrome.

In addition, the majority of those surveys indicated that they believe their ailments hamper their job performance. More than 47 percent said that they have lost time from work because of their symptoms.

In 1992, AFGE also expanded the study to include 170,000 Social Security Administration AFGE members nationwide. This study, of course, has been discussed by Mr. Egerman and what happened in the case at SSA.

Mr. Biggs is going to discuss the situation at EPA, so I am going to pass over that also. I am going to mention just quickly the case in the Air Force Logistics Command where after numerous complaints of ill health had been received in one of its buildings the AFLC called in the Air Force Occupational Environmental Health Laboratory to perform a tight building syndrome study. The study revealed that the building was significantly lacking in fresh air, therefore causing excessive levels of carbon dioxide. The recommendations entailed increasing the fresh air entering the building and a number of other measures to improve operation of the HVAC system. The corrections were made and the situation remains greatly improved.

Research repeatedly has indicated that the problems of poor indoor air quality cost the government money. Decreased productivity and increases in sick leave, health care and workers compensation bills create unnecessary expense for government agencies and taxpayers.

AFGE believes that the initial expenditure necessary to clean up federal buildings will pale compared to the savings that will result from the clean air in federal buildings.

AFGE also takes note that of the two classifications of adverse health effects, sick building syndrome and building-related illnesses, AFGE members have experienced indoor air pollution symptoms which have run the gamut from those which would be classified as sick building syndrome to those under the category of building-related illnesses. AFGE is concerned that these separate classifications could be used to justify the adoption of too lax a standard for remedial actions when a building is classified as a sick building as opposed to a BRI.

We believe that the regulations should reflect the fact that both sick building syndrome and BRI are serious problems necessitating prompt action. The standard should include a definition of sick building syndrome and all the requirements of BRI such as evaluation, remediation and recordkeeping of SBS complaints and poor indoor air quality complaints.

We would submit that the best preventive measures against occurrences of BRI and SBS are prompt and effective procedures to eliminate problems in all buildings, no matter how classified.

It is AFGE's also strong belief that an effective, comprehensive indoor air quality program can and should identify and correct existing problems and prevent new problems from arising before workers develop symptoms and file complaints. Periodic testing and regular preventive maintenance are the linchpins of any program. An IAQ investigation need not wait to be triggered by the onset of complaints or other flagrant problem indicators.

In the Richmond, California Legionnaires case, for example, periodic testing and preventive maintenance might have identified the problem before it resulted in tragedy.

Where indoor air problems do already exist, AFGE's experience has demonstrated that employee feedback is the primary method for being alerted about the problems. In every case which we have cited today, it was the affected employees who, through their reactions and complaints, discovered the existence of indoor air pollution. To this end, it is crucial that workers have an employee complaint procedure which enables building occupants to alert the responsible indoor air quality official to possible problems at the earliest moment.

AFGE supports the training provisions. However, it should outline a complaint procedure for employees to follow and should include employee training on such important subjects as the factors that create indoor air problems and how to recognize and resolve these problems.

Too often problems which with proper training could be identified and resolved at an early stage become exacerbated when they are left to fester. For this reason, we believe that training provisions for government employees are a necessary part of OSHA's indoor air quality regulations.

OSHA's regulations should also assert jurisdiction over all employers who own, control or operate buildings where D.C. or federal employees work. These include the Federal Government as well as all private lessors of buildings leased to federal or D.C. government. These regulations should assert jurisdiction over all buildings which serve as a workplace for D.C. or federal employees except those used exclusively for industrial purposes.

AFGE agrees that OSHa's indoor air quality should cover all employees under its jurisdiction.

In our testimony, we also spoke in some detail of our views on the proposed element of regulations and included some of the surveys and results that we have done over the past and I think those speak for themselves, so I will close at this point.

JUDGE VITTONE: Thank you, sir.

Mr. Biggs?

MR. BIGGS: Thank you. I have been the health and safety representative for Local 3331 at the U.S. EPA headquarters for the past six years and I would like to thank you for this opportunity to testify on this issue, which effects a great cost on America's workers and on our economy and I know that proper safeguards in this area of public health protection can positively affect our nation's productivity, our economy and our worker health.

My union work began after I personally suffered severe adverse health effects during the 1988 renovations of EPA's Waterside Mall headquarters building in D.C. I have become since quite familiar with indoor air quality problems in buildings since that event.

This is a building that's leased from a landlord and the history of the air quality problems at the Waterside Mall is both lengthy and well documented, having been the subject of numerous newspaper, magazine articles, television and radio programs and, needless to say, the irony of this continuing problem, and I say continuing because it continues to happen today, at EPA's headquarters is lost to none.

In an 11/8/89 statement to the U.S. House of Representatives Subcommittee on Public Buildings and Grounds, the then Deputy Administrator, Henry Abbott, the Deputy Administrator of our agency, described the Waterside Mall structure as regularly subject to such disasters as flooding from broken water mains and by raw sewage, the presence of asbestos in the facility, Legionnella bacteria in the cooling towers, elevator malfunctions which have resulted in injury, continuing air balance, heating, cooling and air delivery problems with the ventilation systems, and during the past years, toxic and sensitizing agents such as xylene, toluene, diazo cyanate and other substances have been introduced through the ventilating system and by the installation of building materials, office materials and carpeting which have caused severe illness among a number of EPA's employees.

Several of these events have resulted in the need to actually evacuate the building at substantial cost to the government and, in the longer term, I believe have contributed to chronic illness among EPA's employees.

There are also thriving populations of rats, mice, cockroaches, fleas and flies in the mall. A wonderful place.

In a letter from a medical expert in the field of indoor air quality medicine, Dr. Mark Bradley, the EPA health physician at the health unit in 1989, wrote to Administrator Riley and said, "During the six and a half month period that I was a consultant at the EPA health unit," Dr. Bradley by the way was let go from that health unit after this letter, "at least 80 percent of the individuals who I examined had bona fide medical problems which I believe are caused by working in the Waterside Mall complex."

Fifty to 60 percent of these folks had symptoms and physical findings which were typical of a tight building syndrome, that is to say eye and throat irritation, headaches and so forth.

The letter goes on to describe that 30 to 40 percent of these individuals as having a form of occupational asthma and 10 percent as having evidence of allergic alveolitis, a condition which can be progressive leading to death.

I know now that my indoor air quality problems began in mid 1983 when I was assigned to space in the southeast mall of the Waterside Mall. I began to develop pollen and dust allergies I had never had before, experienced increasing fatigue and general malaise for several years which then developed into allergies to many common foods such as wheat, cow's milk, eggs, potatoes and many other foods.

After eliminating them from my diet, I got considerably better but in late 1987, substantial renovations began in my part of the building and I was moved next door to a recently, very recently, newly renovated area with fresh paint, new walls, new carpet, new partitions, new desks and furnishings surrounded on three sides by more large areas under renovation.

Actually at that point when I moved in there I was really happy because it had been such a terrible spot before that it just seemed nice to have a nice place. But during the four months I was assigned to that space, I experienced first at low levels and then increasingly severe symptoms such as numbness and tingling in my face and extremities, difficulty concentrating, severe restrictions in my attention span, dizziness, loss of balance, headaches, eye irritation, nausea and other symptoms such as loss of memory, short-term memory.

When I finally related these symptoms to the renovation activity, I was able to get myself moved out with great difficulty but by that time it was too late. I had become a nomad, shuffling from space to space, trying to find some place in the mall where it was okay for me to work, going outside as much as possible, gathering my materials together and spending as little time as possible in the mall.

The problems were numerous. There were no support services, no telephones. I ultimately moved home and after trying respirators, as many other EPA employees did at that point which were marginally effective because it was really so difficult to talk through the telephone with a respirator on, a respirator like Mr. Egerman was wearing, we used carbon canisters, activated carbon.

The immediate symptoms diminished but I continued to encounter substantial restrictions in my life because of my increased sensitivity to building environments from offices to shopping malls. I can't do many of the things that I once did in my life.

My health has been materially impaired and this condition appears to be permanent. I did have some recovery when I eliminated the exposures but the condition has not changed substantially for the better during the last three years.

Now I live in a specially designed work space at EPA with minimum air pollution sources and I am able to cope with that, albeit with still some problems. With keeping my exposure low, I can sometimes even go back into the mall for short periods of time which is quite useful in conducting my job.

Lest you think I am the only EPA employee that is like this, there are 75 employees now who are officially on the alternative work space rolls and that number may top 150 if you talk about those that are informally assigned to this. These employees must either work at home or in some alternative work space setting to the Waterside Mall. Some of these people are hardly able to leave their homes because their symptoms are so bad due to exposures that they received in the mall.

If this were Legionnella, CDC would have been in there in a minute. But isn't. It's just air quality problems. And this is just the tip of the iceberg because I know of a number of people, at least 20 by my count, that have left the agency because they couldn't stand the air there and we have as an agency lost these people's valuable additions to our nation's environmental protection.

To its credit, EPA has put considerable work and resources into trying to fix the Waterside Mall building and these improvements and expenditures unfortunately are supplemental to the government's lease agreement with the owner. The owner has thereby benefitted to the tune of millions of dollars due the agency's unilateral attempts to fix the multiple problems in the building.

In my assessment, the mall has improved to a small degree but the primary criterion, are people no longer becoming sick as a result of conditions in the building, has not been met.

I have walked this building during air quality and health and safety walkthroughs that we conduct on Wednesdays in all the structures from stem to stern and at least two-thirds of the offices report serious problems ranging from air quality to temperature fluctuations, from insufficient air to roaches to the common pests that you find in buildings.

As a union steward, I am presently representing five more EPA employees who are now so sick from their assignment to the Waterside Mall building that they must seek alternative work space in order to preserve their health. The agency's formal policy, an alternative work space policy collective bargaining agreement struck with AFGE and the other union at headquarters, the National Federation of Federal Employees, is virtually impossible to be approved under because it is so closely administered and the threshold requirements for medical documentation are so stringent.

What it boils down to is that if your supervisor is reasonable and a human being, you can cut a deal. If they don't like you, you're out of luck.

As a steward who helps people in this situation, I have learned some lessons that I share with members I represent. I hope you will find some of these informative.

My first message is your life can be completely changed by this illness. Get out early and protect your health.

The second one is don't expect the system to act on your behalf because it won't do it.

The third thing is that the organization will ignore your problem if it can but your next job won't. You have to take care of yourself.

I believe a new class of disability is being created by ignoring this problem.

EPA has now acquired a new building and I look longingly forward to the day when the agency finally abandons the Waterside Mall. The unions and headquarters are working hard to ensure that the new building does not become another Waterside Mall. I don't think that it will. I have walked the building myself, it looks like a pretty good building. You can eat off the mechanical room floors. GSA is keeping it up quite well, it would seem.

But this is an uphill battle because there are really no rules to go by and that is one reason why developing a strong rule is important here. To the degree this rule is weak or vague, indoor air quality problems in America will not go away, just continue to become worse.

While this rule is a good start, I would like to see the rule strengthened. In my written testimony, I provide a list of areas where strengthening, I believe, would help and I encourage you to review those areas. But let me just say that this rule is not just a no smoking rule. The focus on multiple sources in the rule is essential.

Some will say this costs too much but my personal experience tells me that the risk estimates are too low, however low they are presently. We have before us an opportunity to begin to rectify this hidden health problem for millions of Americans and actions speak louder than words. The indoor air quality rule should speak very, very loudly. In my view, clean indoor air is a right, not just a fringe benefit.

Thank you. This concludes my remarks.

JUDGE VITTONE: Thank you, sir.

Ms. Kaplan?

MS. KAPLAN: Mr. Schlein, what are the job categories of your members, professional, technical, et cetera?

MR. SCHLEIN: Virtually every job you can imagine, we cover. We cover both blue collar workers, people who do custodial functions to highly skilled technicians who take care of the Air Force's jet airplanes to medical technicians. We cover nurses, we cover doctors, we cover people who also work in buildings whether it be here at the Department of Labor where we have accountants and lawyers and economists and really just about any type of occupation you can imagine, we cover.

MS. KAPLAN: What currently are the operation and maintenance practices of the buildings your members work in?

MR. SCHLEIN: They are really -- I really can't generalize. They're all over the map s to what they do. There are some places, as you heard, at the Social Security Administration now where we've been able now to get agreements to improve those practices to other places where we just get stonewalled in terms of what the operations are.

MS. KAPLAN: Well, when you have members who are having problems with IAQ, what generally is found to be the cause, to the extent you can generalize?

MR. SCHLEIN: I would say the largest cause tends to be ventilation problems, that something is going on where the ventilation systems are not working properly and where fresh air is not being brought into the building. That tends to be the single largest cause.

MS. KAPLAN: And at these workplaces, what are the methods in place for either logging or dealing with employee complaints relating to IAQ?

MR. SCHLEIN: Again, that just varies all over the map. We are, of course -- the federal sites that we represent, of course, are covered under the executive order on health and safety which provides certain mechanisms for us to be able to report it. In D.C. government, the procedures themselves are extremely lax and more often than not we end up having to use the grievance procedure or another negotiated procedure to raise those matters.

MS. KAPLAN: You mentioned in your written comments that AFGE is unable to obtain the data needed to make the causal connection between specific contaminants and their adverse health effects. What information is this that you're having trouble obtaining?

MR. SCHLEIN: Well, we have trouble often obtaining all of the chemicals that are being used in a given workplace, whether it be cleaning materials that are being done, sometimes it's done by an outside contractor, whether it be information on just standard things that may be happening in a given office. You know, when they low bid on paper and materials to deal with the Xerox machine. Very often we're not sure what's involved there.

And really I think the situation that Mr. Biggs was in I think was a perfect example of it. One, there was terrible air quality there but, two, changes were going on at Waterside Mall involving lots of chemicals, lots of other things and we were filing grievances, we were filing FOIAs. In fact, we went to court trying to get the information.

MS. KAPLAN: You're referring to the carpeting specifically?

MR. SCHLEIN: Right. The carpeting and the glues involved and all of those matters. That's a typical example of the type of frustrations we're facing when people are getting ill.

MS. KAPLAN: And you requested that information from building management and what was their response?

MR. SCHLEIN: Do you want to talk about their response in your situation?

MR. BIGGS: Yes. There were questions about the material safety data sheets and whether or not that information was available but at the time this happened, in '89, it was not very widely recognized, at least in my quarters, as a problem and so while there was some, I think, attempts to get data, it was more a fight of is this mass psychogenic illness or is it actually happening? And the companion union there, the National Federation of Federal Employees that are not here to speak, did a considerable amount of work filing a request with the toxic substances office under, I think, Section 4 of -- I want to say FIFRA but TSCA, it must be TSCA, Section 4 of TSCA. And attempting to find out what the substances in the carpets were. When we tried to get the MSDs, they were lacking and they had to be developed. Remember we're talking about six years ago now so this was really not -- at least my personal opinion is that air quality issues at that point were not very well known at all and so we really didn't know too much about what to do. That was when I started with the union actually because I had really little or no choice, I was just being shifted out of the agency so I tried to find any place that I could find to tell my story and that's how I became involved. I've stayed for different reasons.

MR. SCHLEIN: In other places, we've just been completely stonewalled, even recently. In places that are leased by federal agencies or D.C. government, we'll raise issues about how the ventilation systems are operating or what they're doing, you know, they just stonewall us.

MS. KAPLAN: Do you think operable windows would improve IAQ?

MR. SCHLEIN: No question.

MR. BIGGS: Definitely.

MS. KAPLAN: Why do you feel when there are recommended changes that they're not made, as in the EPA situation? Is it that the cost is too high?

MR. BIGGS: Why there are not openable windows?

MS. KAPLAN: No, I meant just more generally when an IAQ investigation is undertaken and changes are recommended. I know in many situations you discussed, those changes are not implemented. The recommendations are not carried out.

MR. BIGGS: Right.

MS. KAPLAN: Is it because of the cost or --

MR. BIGGS: Cost I think is a fairly sizeable consideration.

MR. SCHLEIN: I think part of it really is the reason we're here, that there's the lack of a standard that we can go to the agency and say, look, this is the standard that you have to maintain. And since there isn't any standard, we are left to find other ways of trying to persuade them to correct the problem.

MR. BIGGS: For example, the ASHRAE guideline of 20 cfm per person. That's a guideline. You can't hold them to that. And if it's 15, well, you know, that's close. Is it at the desk? Who measures that? That doesn't happen. They take a little hood and they see how many cfm are coming out but do they count the number of people in the area and do the calculation? No. That doesn't happen. I think the science here is just nascent. People just don't understand what to do. And that's why the rules are important. That's where I've run into problems the whole way. How do I get a dust standard for asbestos dust, for example? Where do I go for complex mixtures? Who knows what the effects of complex mixtures are?

EPA, the sampling there showed 150 different substances in the air. It's a witch's brew. And who can tell me what the effect of that complex mixture of 150 substances and when you add it up it's parts per billion, you know, it starts to get heavy, who can tell me what that is? I went to a panel of medical experts, they don't know anything about that.

MS. KAPLAN: It also seems to some extent that even when they do know what to do, they don't do it because no one is forcing them to. I mean, I think there was an example with the U.S. Information Agency building where the investigation was carried out and specific recommendations were made and nevertheless they just were never implemented.

MR. BIGGS: I encounter the same problems in my walkthroughs and part of it is the problem of a leased building with us. In order for our facilities people to have the building fixed, they have to get with the building owner, they have to inform the building owner of the problem. The building owner has to respond with his staff and how important is replacing a ceiling tile to him? It isn't important. But it's hugely important to the people that are in the area, it compromises their air system. You have 10 of those things out, it doesn't work.

MS. KAPLAN: Does your organization have any data on transmission of TB outside the known risk areas like hospitals and prisons?

MR. SCHLEIN: I'm not -- we have some limited data and we'll be prepared to submit that to you, I guess the post -- whatever it is.

MS. KAPLAN: Right. Post-hearing comment. We would appreciate that.

MR. SCHLEIN: Okay. Great.

MS. KAPLAN: Do you have any data on Legionnella cases among your membership?

MR. SCHLEIN: Well, we have, again, some limited data and we'll make that available to you also.

MS. KAPLAN: And also anything on asthma.

MR. SCHLEIN: Okay.

MS. KAPLAN: And also you submitted with your materials, I think it was the first survey you had carried out among your membership, I think it was the 1988 survey and then there was a second one in 1992.

MR. SCHLEIN: Yes.

MS. KAPLAN: And I didn't see that. Did you submit that also?

MR. SCHLEIN: Yes, we did. And we can submit that again.

MS. KAPLAN: Okay. I'm not sure why, it didn't seem to be in my materials.

MR. BIGGS: Do you have copies of the EPA's survey that was done?

MS. KAPLAN: No, I don't think so.

MR. BIGGS: I have copies of that. Volume I is particularly interesting due to the size of the survey. I think it was around 4000 individuals, if I'm correct in that.

MS. KAPLAN: And also as far as that first survey, there was a pretty low response rate. I don't know if this is correct, it's 18,000 were sent out and 2000 were returned?

MR. SCHLEIN: Well, actually, we didn't consider that a low response rate at all. I mean, basically, this was our first attempt to look at the problem and what we did was basically provide it to some of our locals and then the desk dropped them or handed them out in meetings. So that was a far better than normal response to that type of survey.

In the second one we did, we got some other assistance and we actually then mailed it to locations all across the country and, of course, we were able to get a better response. In both cases, we thought they were -- and I'm comfortable that they were significant.

MS. KAPLAN: Also, is it possible for you to submit the raw data or the code books from those surveys?

MR. SCHLEIN: We'll try to do that. Another organization actually has the raw data and we'll contact them and see if we can arrange to share that with you.

MS. KAPLAN: Okay. At the VOA and the USIA buildings, who carried out that testing?

MR. SCHLEIN: That testing was done by Healthy Buildings International.

MS. KAPLAN: And what kinds of tests did they carry out?

MR. SCHLEIN: I'd have to go back and look but I can find that out also.

MS. KAPLAN: And were the problems at those buildings resolved?

MR. SCHLEIN: They were partially resolved. They were not completely resolved. No.

MS. KAPLAN: Getting back to the survey, did the survey ask any questions on smoking?

MR. SCHLEIN: I don't recall whether they did or not. I'd have to look at it. But in the federal workplace, the smoking issue has been pretty much resolved and actually, I think it provides an interesting test because in all of these places that we were having problems, smoking was already taken out of the general workplace and in segmented areas. You were either smoking in lounges or in just strictly designated areas or there was no smoking in the building and only smoking outside. So the smoking issue was not as relevant to us in this matter because environmental tobacco smoke was not a factor, really.

MS. KAPLAN: I think you mentioned in addition to ventilation systems that pesticides and various VOCs are also big contributing factors to your members' IAQ problems. What sorts of pesticide exposures are they experiencing?

MR. SCHLEIN: Again, it just really varies. You know, I mean, virtually any federal -- many federal buildings that you go into have some problems with pests of various types and either they have people in-house that are controlling them or contractors that are doing it and they will come around and do sprayings, whether it be in the evenings or when people are actually there. And obviously -- usually when that happens, our local unions know about it because that day or the next day there are people who are having symptoms as a result of it.

MS. KAPLAN: What symptoms are they having?

MR. SCHLEIN: Well, there would be nausea, headaches, the allergic type reactions. Those type of things.

Do you have anything to add to that?

MR. BIGGS: Well, I haven't too much to add to that because the Environmental Protection Agency utilizes an integrated pest management program in which they use primarily boric acid as the bait, so spraying in that building stopped some time ago. However, nausea and vomiting are certain typical exposures to the carriers, the volatiles that are carriers in pesticides. You would normally expect that to happen.

MS. KAPLAN: Even when the application was carried out the night before or the day before?

MR. BIGGS: It probably would depend to some degree on whether or not they ran the ventilation system. If it was done the night before and the ventilation system was turned off, oftentimes they're turned off at six. So if you do it at night, there would be nothing to flush the building out and it would be a remaining airborne residue or airborne concentrations of chemicals. And so unless they started early, which sometimes they don't start until seven, that is, people are arriving at the building at that point, then there could easily be substantial amounts of airborne concentrations remaining.

MS. KAPLAN: Several pesticide trade associations testified earlier in the hearing and they said if the pesticide is applied according to the manufacturer's recommendations, no one should be experiencing any adverse health effects. Do you disagree with that?

MR. SCHLEIN: Well, that has not been our experience. We have found people who are in fact experiencing adverse health effects. Now, I can't -- and it's in numerous locations. Now, I can't speak to how they're actually being applied in every location but certainly our experience has been that we've had people who are ill and we've had locals attempt to modify it, too. Sometimes when this happens they will negotiate that it be done only at night, you know, after 9:00 when people aren't there, and they will negotiate that the ventilation systems stay on and some agencies have been responsive to it, others not so.

MS. KAPLAN: Do you feel that lack of training of personnel that operate HVAC systems has been a factor in the problems as well?

MR. SCHLEIN: Yes.

MR. BIGGS: I absolutely agree with that.

MS. KAPLAN: Do you have any suggestions on what kind of training these people should receive?

MR. SCHLEIN: Well, I wouldn't say that -- we have depended to some degree on receiving advice from others on these matters. The training that ASHRAE and that the National Energy Management Institute have been putting on we are finding to be helpful. And, in fact, we have been able to use that ourselves among our own stewards so that they can develop checklists themselves as to what needs to be done. We have received some assistance along this line, too, from one of our fraternal unions, the Sheet Metal Workers Union, who have been able to assist us in understanding some of the training needs.

MR. BIGGS: I believe that training is necessary in a variety of different areas. One has to do with understanding the nature of air systems generally and the need for fresh air, that is -- I say fresh, let me just say outside air because sometimes it isn't that fresh. But just to use the Waterside Mall as an illustration, back in '89 when I first started this, we thought that there were around 95 air handling systems in the mall structure, which is two towers in the Waterside Mall. There were a number of different air conditioners added, there were some additional air handlers added, one just for comfort issues and the other for fresh air introduction, that number is up to about 125 now. The mall is a sprawling complex, it's a rabbit warren of offices that is primarily inside with no windows and no external ventilation except what is brought in. When you walk into the mall, it smells. It stinks in that building. The problem that we experience is that you can't balance the building. Willy-nilly adding things here, adding things there, no one knows what the retrofits are, you can't even find the schematics that tell you where the things are, you have to locate them. We've had major problems with the way that the -- where the intakes are. They suck the Roy Rogers smells, the chicken smells, the Jenny's Chinese restaurant smells, the diesel from the loading dock at the Safeway, a recent event where the alternate generator for the fire extinguisher system came on and contaminated the basement of the east tower with diesel. That's the kind of stuff that's a problem. And if you had people who were educated about the nature of the possibilities of the problem, where those sources might be coming from and had them looking out for it ahead of time, get them trained enough so that they could do that instead of -- you know, most of them are just Joes hired off the street. They're in there, they replace the tiles, they fix the lights. That's the level that we usually get. If you trained them more, then you could proactively address some of these problems but in the current status, I don't think that you can do that.

MS. KAPLAN: You indicated that the problems at the EPA remain. Why have they not improved?

MR. BIGGS: Well, I think that building is hopeless, to tell you the truth. We have collectively, and I'm saying the unions and management, worked with the building owner. The structure, it doesn't seem to be able to be balanced properly. You have a problem with some people having no air, they come and they change the air system a little bit and it takes air from some place else so it's robbing Peter to pay Paul all the time.

The building owner apparently doesn't care to retrofit the air handling system to improve the ventilation. I mean, there has been some retrofitting, for example, on the 12th floor in the administrator's office the air is not too bad. In most other places in the building, it's not too good.

There are many spaces that are being used for purposes for which they were really not designed. Right above the garage, we recently had an incident where the facilities people for some reason, who knows why, decided to build out over the garage. So immediately we had concerns about carbon monoxide intrusion from the floors because we had already had that problem down in our day care center from the loading dock.

Well, when they went in to put the ventilation system in, they forgot to put the air intakes into the air handler and then it collapsed the ducting all the way down into the structure. We had them fix it. They went out again and there was something else wrong and it collapsed another set of ducts and then finally we have this thing operating.

Now, do I have a lot of confidence that there's not going to be carbon monoxide infiltration into there? I can tell you the answer to that is no.

I have health and safety now coming to check on a regular basis to see if there's CO intrusion into that space. And if it is, we're going to move them out. But there are 50 individuals involved in this. That's an example of one of the reasons why the Waterside Mall can't be fixed.

There is asbestos on the mall side over by the library, whole walls and walls of it. Ceilings, rather, of it. It's been stabilized and everyone says that that's the right thing to do, we've talked about should we take it out, do encapsulation, the fully enclosed, blah blah this, blah blah that. It's just there right now. Do I know that that's safe? Not really. That's something that should have been fixed. We shouldn't even have people in that area. It's had rain come in through it, chunks of the ceiling have fallen out. I have a bargaining unit member who sat at one of the building joints and there are little pieces of asbestos dust all over his desk.

We pointed that out and then he moved. They moved him. But no sampling was done. I requested sampling but it didn't happen.

What other things are wrong? It's a morass.

JUDGE VITTONE: Next question.

MS. KAPLAN: Okay. I only have a few more.

When the Building Owners and Managers Association testified here, they felt that the remedy to IAQ problems was that dissatisfied building occupants could just vote with their checkbooks and leave. Do you feel that's a realistic option for government offices?

MR. BIGGS: That they should do what?

MR. SCHLEIN: They should leave?

MR. BIGGS: That should what?

MS. KAPLAN: That they should just move to a different office.

MR. SCHLEIN: No, that's not a realistic option for public employees and for a whole range of problems, reasons. You're in long-term leases, so you're there. Secondly, the reality is that very often these decisions end up getting made politically, too. And we've had situations in the Social Security Administration and HICVA where building owners went to well connected individuals and made sure that the leases were not changed. So it wasn't just a matter of employees making the complaint and then they move out of the building. Those decisions get made often politically as it is determined for public employees. And very often those decisions don't take into effect very often the health and safety of the employees. So there is long-term leases, there is politics rears its head in how those decisions get made. And you're also in a time right now of difficult budget constraints which very often hamper any type of free movement also.

MS. KAPLAN: Well, do you think litigation is an acceptable alternative to regulations like OSHA's?

MR. SCHLEIN: No. We don't. Litigation is far too costly and quite honestly, although we are a large union, we don't have the resources to litigate every complaint that comes about just in air quality, not to mention the other health and safety problems that are faced. It's time consuming, much too time consuming. We're not interested in getting into litigation problems, we're interested in getting the problem fixed. We don't want our members being sick and then having to litigate. We want our members to be working in a healthful environment and we believe that by having a rule that sets that standard that will better serve the health of the federal and D.C. government worker.

MS. KAPLAN: That's all thank you very much.

MR. SCHLEIN: Thank you.

JUDGE VITTONE: Does anyone else have any questions for these gentlemen?

(No audible response.)

JUDGE VITTONE: Let me ask you one quick question.

Have you had any success in resolving any of the problems, whether it's EPA or any other government organization, through the collective bargaining process? Is that an acceptable way?

MR. SCHLEIN: We've had some success but it isn't -- all too often the places that we're having the success are a place like the Social Security Administration where a tragedy has already happened and at that point the agency has become extremely responsive to trying to work something out and to fix the problem. So we've had some successes but it hasn't been uniform and even in places where we've had some successes we are greatly hampered by not having a standard that the agencies can look at and say, okay, this is what we ought to be following.

JUDGE VITTONE: And your members are in government owned buildings and they're in buildings leased by the government.

MR. SCHLEIN: Yes.

JUDGE VITTONE: Do you find a difference between the two with respect to the responsiveness of curing indoor air quality problems?

MR. SCHLEIN: We've had good situations in both, we've had bad situations in both but we have an additional hinderance in leased buildings and that is that the government does not control that space, that it's a private owner and since they don't control that space, if the private owner does not wish to do anything to rectify the situation, they feel that their hands are tied.

In numerous congressional hearings that we've been at and in trying to get indoor air quality legislation also passed, this issue has been raised time and time again and certainly we think that there's action that the government could take in terms of prudent leasing that would help us remedy that situation. But, again, that has not been -- that in fact has not happened yet and, again, a standard would once again be very helpful to us.

JUDGE VITTONE: Thank you gentlemen. I appreciate your time today.

MR. SCHLEIN: Thank you.

MR. BIGGS: Thank you.

JUDGE VITTONE: A housekeeping matter.

Mr. Egerman when he was here offered some exhibits.

Exhibit 222 will be a series of photographs called "The Western Program Service SSA 1221 Nevin Avenue, Richmond, California."

(The document referred to was marked for identification as Exhibit 222 and was received in evidence.)

JUDGE VITTONE: Exhibit 223 will be a letter addressed to Mr. Egerman signed by Eric Esswein with one attachment dated September 20, 1994.

(The document referred to was marked for identification as Exhibit 223 and was received in evidence.)

JUDGE VITTONE: Exhibit 224 will be something called the SSA Action Report, fall 1991 edition. It's a newsletter of the American Federation of Government Employees, AFL-CIO.

(The document referred to was marked for identification as Exhibit 224 and was received in evidence.)

JUDGE VITTONE: And Exhibit 225 is a multi-page document, the first page it just has some printing on it, beginning at the top saying "Field Office Closed Due to Chemical Discharge" and it goes on to explain why the field office was closed. Attached to it is a press release of the Social Security Administration and a letter addressed to Mr. Egerman from the U.S. Department of Labor, Occupational Safety and Health Administration dated May 26, 1994, and finally an attachment to that letter of a notice of unsafe or unhealthful working conditions. That will be Exhibit 225.

(The document referred to was marked for identification as Exhibit 225 and was received in evidence.)

JUDGE VITTONE: Dr. Beale used slides. His slides will be identified as Exhibit 226.

(The document referred to was marked for identification as Exhibit 226 and was received in evidence.)

JUDGE VITTONE: Mr. Pharr?

Mr. Pharr, would you state your full name, please, and the name of your organization?

MR. PHARR: My name is Tom Pharr. The organization is Powell Manufacturing Company.

JUDGE VITTONE: Okay. Do you have a presentation you want to read or a statement you would like to make?

MR. PHARR: Yes, sir.

JUDGE VITTONE: You may do so now.

MR. PHARR: Thank you. I appreciate the opportunity to be here.

Again, my name is Tom Pharr. I am the president of Powell Manufacturing Company in Bennettsville, South Carolina. I came here on my own accord and my expenses here are paid by our company and no one else.

I would like to start by telling you a little bit about myself and then about our company and then our stance about the indoor air quality and environmental tobacco smoke.

I am a native North Carlinean. I live in South Carolina now. I am a graduate of N.C. State University with a degree in engineering. I served in the United States Marine Corps in the Far East. I have been in the manufacturing business for 28 years. I've served as president of Powell Manufacturing for the past five years.

Our company is a relatively small company producing agricultural equipment for many segments of the agricultural market. We are an ESOP company, and for those that don't know the acronym, it's employee stock ownership program, wherein the employees of our company own 38 percent of the company. So what happens to the company is not only important to the employees as a workplace but financially important to them.

We are located on a 200-acre site in Marlboro County, South Carolina. This was a military base built in 1941 for fighter pilot training and subsequently released to the county and then we purchased it. On that property we have five primary production buildings, metal buildings, a number of small storage buildings and one office building. The buildings affected by the regulation would be the five metal production buildings and the office building.

We currently have 80 employees. Two years ago, we had 150 employees. The reduction in workforce was directly due to the regulations and the adverse publicity given by such things as this regulation towards tobacco and the influence it had on the agricultural economy and specifically our equipment.

That reduction in workforce was very painful. As president of the company, I make it my policy whenever we have to reduce workforce I do it personally so all these people I know by name and all of them were dealt with by me personally and not by someone else, so I know the impact on the individuals is dramatic.

We produce equipment that ranges in size from a $300 vegetable planter for gardens to a $75,000 piece of harvesting equipment that's self-propelled and hydraulically driven and many items in between. We deal in general agriculture and we specialize with a line of products for tobacco production, and that's field production of tobacco, in all aspects of it from ground preparation through harvest and curing. And through all segments of the tobacco industry, whether it be in flue-cured tobacco, Burley tobacco, dark hair and dark fired tobacco and all that's grown in the United States.

That represents a substantial part of our business in dollar volume. What happens with tobacco affects our company substantially and consequently the reason for the reduction in the workforce.

Our company has been in existence since 1951 and our policy has been one of caring towards our employees. We have an excellent rapport with employees. We try to do what's right for them and I say that as a manager but also employees are involved as a result of our ESOP program which has been in existence for five years.

The proposal on the indoor air quality while it sounds in an ideal sense to be very good can be very detrimental to our company. I think what I'm going to refer to is what affects Powell Manufacturing Company and the things I know about, I'm not trying to address the broader issues of how it affects other people in other companies, other sized companies.

We believe that to bring our company in compliance with the indoor air quality regulation would cost us on an up front basis approximately $50,000. In addition to that, the maintenance of the records and the things that go with it, as are indicated by other federal regulations that we adhere to, would cost us approximately $300 per week, or a total of $15,600 per year. One of the reasons for that figure is that it takes a professional with some experience to take care of projects such as this. It cannot be given to a near minimum wage employee and it can't be given to a new employee. It's got to be a seasoned person with the company or at least in industry to know how to deal with it.

The 70 employees that we lost in dropping from 150 to 80 employees in the last two years have impacted our community to the tune of $1.5 million per year in income that would be circulated through the community. That's a one-time circulation. I don't know how many turns that dollar would have in our community as a result of a payroll but we know it's more than one but this is a direct payroll based on 2080 hours, 70 people at an average cost of $10 per hour and that's very conservative. Our average cost is greater than that.

We're also in a county that's rural that suffers from the highest unemployment in the state of South Carolina, currently running about 14 percent. Seventy jobs and a million and a half dollar payroll not only affects those families but affects the rest of the community as well. This cost of losing the jobs is very dramatic and then the cost of maintaining things that we think we would have to do to meet the indoor air quality regulations are dramatic.

To carry that a step further, I'd like to talk about the smoking issue. I think you would assume that because we are a part of the tobacco industry that we would support the freedom to support and we do. We have a policy in our company to allow smoking but also we have a policy that we do not infringe on other people's rights and so if there is a conflict between employees where one has a problem related to the smoke, we work out between the employees a way to deal with that that's satisfactory with both.

We've had no major disagreements but we have had concessions made where, sometimes it's on a temporary basis, when someone has a reason why smoke is bothering them, the smoking people are considerate and don't smoke around them.

In looking at the regulation and what it would take for us to implement this regulation, I would like to really look at economics because my job as president of the company is to keep that company profitable so everything we do from new products to dealing with regulations is geared towards how is it going to affect us, are we going to be a viable company, are we going to have 80 jobs here, are we going to have them a year from now, so I look at economics very closely.

The cost of putting smoking rooms in the five production buildings and the office building, there would be space there, we wouldn't have to build additional space, we would have to enclose space and do some ventilation, would cost approximately $4400 each for the production buildings and $4700 for the office building, for a total of $26,700.

We believe that it would cost us approximately one-half hour per day per smoking employee in lost productivity for them to have to go to a smoking room. The reason for that, contrary to what some companies have, we don't have programmed break times for our office employees. For the plant employees, we do. Office employees are given the freedom to go take a break. If that break means going to the restroom or going to get a cup of coffee or a Coke, they go get it and they return to their desk and they work and they work with that beverage with them.

If they have to take a break to go smoke, then that's totally lost time that we believe would amount to about a half hour per day. We have a history of smokers versus non-smokers in our employment of running about 50 percent and that's been regardless of what the employment level was. Based on that and the fact that even though the situation in the office area and the production area is somewhat different, the loss in productivity would be basically equal in both ares, it would be one-half hour per day times 40 employees times 242 work days times $12 per hour, I've used that figure which is still very conservative, it comes out to $58,080 per year every year in lost productivity.

If you take those figures, $58,000 for that, $26,700 for the cost of equipment, you end up with almost $90,000, in fact about $85,000 in costs for this smoking policy. And we've already talked about cost of the indoor air quality regulation at $50,000 up front and then $15,600 or more per year in recordkeeping time. The cost is substantial.

I'd like to take just a minute and hopefully nobody finds this insulting to talk to you a little bit about profits. Many people misunderstand profits. Our company operates varying from year to year between five and ten million dollars, depending on how the market goes. We are fortunate, as are most people in the agricultural industry, if we operate in the 3 percent profit range. That's profit of gross sales. So if you take gross sales of seven and a half million dollars and you take a 3 percent profit on that which is $225,000 and then you take these costs out of that profit, then it's not insignificant. It's not that less than 1 percent that the document might indicate. It's very, very substantial.

In fact, the first year, with the costs I've outlined, it would be $150,000 in costs, that's 67 percent of the profit. I consider that very significant.

On continuing years, if everything was done the first year and that was out of the way and you had those profits on continuing years, the cost would be about $73,680 per year and that's 33 percent of the profit.

It's very difficult for us to justify putting that much money into capital improvements that will help us down the road, much less to see that money going into a program that we believe would have no return to us. And I say that because we don't have a history of any kind of illnesses due to indoor air quality that we're aware of. Our smokers and non-smokers co-exist very amiably. We don't have a problem with that. We have a liberal policy. We have a good work environment. I don't see that this regulation would add anything to the value of our company.

It was suggested in the document that these costs could be passed along to the consumers and therefore wouldn't affect profits. I'd like to point out that we're in a global economy and our company is no different. We deal with exports on a routine basis. I travel extensively out of the country. We are driven to a great deal in our pricing by offshore and out of the country entities that sell here. We don't have a chance just to say, well, everybody in our industry is going to have the same costs because they don't.

Price pressure in the marketplace right now is very intense in our industry and I think in many others and to think that you could pass it along is a pipedream.

Secondly, if you could pass it along, it's still a cost to the general public we feel like is unnecessary and it's counter to what's good for the country but specifically what's good for our company, we know it's bad.

I appreciate the opportunity to be here and express my views to you. I don't have any formal documents to present to you but if any of this information is needed, I will be glad to supply it at a later time.

JUDGE VITTONE: Thank you, sir.

Ms. Kaplan, do you have any questions?

MS. KAPLAN: Yes, I have a few.

What percentage of the agricultural equipment your company manufactures is used for tobacco farming?

MR. PHARR: I think the only way to judge that is in dollar volume of sales rather than in pieces and it would be about 75 percent. And some are used in tobacco either partially or totally. Some pieces of equipment are used in tobacco as well as other crops.

MS. KAPLAN: You mentioned a reduction that took place in your workforce. When was that?

MR. PHARR: The reason for that was the continuing pressure on the tobacco industry and the smoking issue has caused uncertainty in the buying attitudes of the growers, of the farmers that grow tobacco. It has nothing to do with what the demand for cigarettes is, it has to do with the confidence in what the future is going to be. And in the last two years, specifically in the last year, the confidence level has gone very, very low because of the continuing pressure from issues such as this. This issue has been on the table for a year, to my knowledge, so the general public has known about it. And that just erodes the confidence when they think that something like this will be enacted and that's going to have an effect on what the long-term smoking attitude is and consequently use of tobacco products.

MS. KAPLAN: What year did this reduction in workforce take place?

MR. PHARR: It took place over a period of time. It wasn't all done at one time and it was from 1992, late in 1992, through early 1994.

MS. KAPLAN: Isn't that the same time period when the U.S. was in recession?

MR. PHARR: Yes, ma'am, it was, to the best of my knowledge but I can tell you from history that our industry and our business generally trails recession by about 18 months. We trail it going in and we trail it coming out. I don't think the recession was a factor.

MS. KAPLAN: You're saying that because there have been smoking restrictions enacted throughout the country this is causing a decrease in confidence in your buyers.

MR. PHARR: In the future of being able to produce tobacco.

MS. KAPLAN: And this impression comes from?

MR. PHARR: From the farmers.

MS. KAPLAN: In this period in the '90s, have your sales been up, down...

MR. PHARR: Yes, ma'am.

MS. KAPLAN: Steady. What?

MR. PHARR: Up and down. They were up early on, and when these regulations and the pressure on tobacco started being significant in, I don't remember when in 1992, but in '92, then we started seeing a downward trend which we hope bottomed out in 1994.

MS. KAPLAN: Which of the equipment you manufacture is used for both tobacco and other crops?

MR. PHARR: Our ground preparation equipment which is de-tillage equipment and bedding equipment. We have transplanters that are used for tobacco and tomatoes and peppers and celery and a variety of other crops. A sprayer that's used for cotton and coin and soybeans and wheat as well as tobacco.

MS. KAPLAN: You gave a cost estimate of $50,000 for complying with this standard. How did you arrive at that estimate?

MR. PHARR: I had a staff engineer do a study of the regulation, and he knows our equipment, and he gave me that number. I don't have the details of how that was arrived at.

MS. KAPLAN: In arriving at that, did he read the OSHA proposal?

MR. PHARR: Yes, ma'am. He had it and he studied it. How much he read, I don't know. But he's very astute at working with government regulations.

MS. KAPLAN: Are you aware that the indoor air quality provisions of the proposal don't apply to industrial workplaces?

MR. PHARR: Yes, ma'am. It's my understanding...

MS. KAPLAN: So the $50,000 is from the designated smoking rooms?

MR. PHARR: No, ma'am. That's from the office are which, as far as I was concerned. With six separate buildings, one being an office area and five being production buildings. My understanding would be that the office areas would be included by it specifically not being industrial, and that the production areas would be excluded as industrial. If the entire facility and our company is excluded because we're an industrial company, then that cost would not be.

MS. KAPLAN: After you go home if you could submit to us his calculations in arriving at that $50,000 estimate, we would be interested in seeing that.

MR. PHARR: Very good. Is my assumption correct that the office of our company is included but that the production areas are not included?

MS. KAPLAN: I'm not really here to answer those questions today.

I was also wondering about your $300 a week estimate to comply with the recordkeeping provisions, is that also something your engineer...

MR. PHARR: Yes, ma'am, but I believe that to be fairly accurate. It's about a third of the time of a professional

MS. KAPLAN: A third of the time of a professional to comply with the recordkeeping provisions of this proposal?

MR. PHARR: Yes, ma'am.

MS. KAPLAN: Which recordkeeping provisions are those?

MR. PHARR: I can't espouse them completely. I have read through and I saw the records that had to be kept on what, on your plan. You have to develop a plan which is... No plan is simple, and it's very expensive to produce. Then you have to...

MS. KAPLAN: Do you realize that plan is a one-time...

MR. PHARR: Yes, ma'am. I do. I know it's one time to get it started, but I also know from past experience with regulations that those plans have to be updated and changed periodically as the regulations change. So the thought that that's a one-time plan is really not totally accurate.

MS. KAPLAN: Do you think it would have to be updated weekly?

MR. PHARR: No, I wouldn't think it would have to be updated yearly. I think it would be one time one year, and then within several years it would have to be updated. But then the records have to be kept on maintenance, to a level satisfactory for an inspector to walk in at any time and check your records and make sure everything you're doing is correct.

We deal with EPA, and the regulations that EPA puts on manufacturing. We deal with OSHA on such things as overhead hoists. I'm very familiar with the amount of time that it takes to keep records like that up, and it's not nearly as simple and easy as looking at it on a piece of paper would indicate.

MS. KAPLAN: I was also curious why you would assume that you would want to install a designated smoking area in each of your buildings when North Carolina is warm year round, and employees could simply leave the building to smoke.

MR. PHARR: Well, in some cases, what we would want to do is have it where they weren't away from the job too much of the time, so we'd want to keep it fairly close to them; and in some of the buildings there's quite a distance to get to the outside from their work area. Secondly, even though it's a nice climate, it gets very cold. We were in the 20's a week ago. It's not very comfortable outside in the 20's. We get rain. In the summer it's very humid and very hot. That's fine if that's what you want to do, but to be forced to do that is not something we feel like would be acceptable to the employees, and it would cause ill will if that's what we forced them to do.

MS. KAPLAN: What is the size of the buildings?

MR. PHARR: They vary in size. We have about 200,000 square feet of manufacturing space located in those five buildings, and it ranges from about 20,000 square feet up to probably 40,000, 45,000 square feet each.

MS. KAPLAN: You also calculated a cost in lost productivity. How would that estimate differ from the amount of time your employees currently are taking to smoke?

MR. PHARR: They smoke where they work. With the only exception being in areas where highly flammable materials exist, and that's in our paint and cleaning area, everyplace else they're allowed to smoke at the job, so they can work and smoke without a problem.

MS. KAPLAN: Workers engaged in industrial operations, this is manufacturing equipment, can work and smoke at the same time?

MR. PHARR: Absolutely.

MS. KAPLAN: Do you think they're as effective working with one hand?

MR. PHARR: Yes, ma'am. In smoking, the use of the second hand is not constant. If you observe an employee, whether it's in an industrial environment or not, you'll find that the cigarette is going to be in their mouth with no hands on it much more of the time than anywhere else. So the time it takes away from their work is very small.

MS. JANES: I'm Deborah Janes.

You're in South Carolina?

MR. PHARR: Yes, ma'am.

MS. JANES: Is there currently any kind of regulation in South Carolina on either indoor air or tobacco specific regulation, to your knowledge?

MR. PHARR: Not on tobacco specific. On indoor air quality, I can't address that exactly. I don't know for sure. I don't think so.

I'd like to make a point to that. We value our employees and they are part owners in the company, and we don't operate where things are unpleasant for them if at all possible to remedy it. That's an ongoing thing. If there's a problem with indoor air quality, we try to fix it to their satisfaction.

MS. JANES: Could you describe your buildings? For instance, your office building. Does it have a central ventilation system...

MR. PHARR: It has five separate units, yes, ma'am.

MS. JANES: Is it a central unit or...

MR. PHARR: Each one has a segment of the building.

MS. JANES: They're air handling units then.

MR. PHARR: Yes, ma'am.

MS. JANES: How often is maintenance done on those units?

MR. PHARR: I can't give you an accurate answer. It's done, of course, whenever there is a problem, but on the filter maintenance and all I don't know exactly. I know we have a program and I know it's adhered to, but I don't know exactly what it is.

MS. JANES: Would you be adverse to sending that in to OSHA...

MR. PHARR: No, ma'am. I wouldn't.

MS. JANES: ...so we can look and see what you are currently doing in your building.

To your knowledge, did your engineer take into account what you are currently doing when he estimated the cost of complying with the proposal?

MR. PHARR: Yes, ma'am. I'm confident he did.

MS. JANES: You gave some cost estimates for your smoking lounges of like $4400 apiece.

MR. PHARR: Yes, ma'am.

MS. JANES: Since that didn't take into account the actual space, what did that include?

MR. PHARR: That includes building a wall, putting in some kind of air handling system in it, and putting an access door. Very simple. $4400 doesn't buy you much if you expect luxury, but for basic facilities, we feel like it's very conservative.

MS. JANES: You explained that your production workers currently don't have a regular break schedule?

MR. PHARR: I'm sorry. Maybe I didn't explain that. Our office workers don't have a regular break schedule. Our production workers do have a regular break schedule.

MS. JANES: So what is the regular break schedule of the production workers?

MR. PHARR: It's ten minutes in the morning between startup and lunch time, and ten minutes in the afternoon.

MS. JANES: So you were saying that you don't really have that many indoor air quality problems. Do you have a procedure for your employees to report when they do have a problem?

MR. PHARR: Yes, ma'am. On any issue.

MS. JANES: Who do they report to? Do they report to you?

MR. PHARR: Normally they would report to their supervisor and move through that to the production manager. But they all have total access to me at any time. My door is always open and every employee knows that, and many use that opportunity.

MS. JANES: You also mentioned that you have had a few complaints about certain issues. Would you like to elaborate a little bit on what those complaints have been?

MR. PHARR: The only one that really comes to mind is we had one female employee who found out she was pregnant and didn't want to be around the smoke because she had some concern, so she asked a co-worker who smoked to refrain, and he did. It was just as simple as that. I found out about it much after it happened.

MS. JANES: In your production buildings, what type of ventilation equipment do you have in those buildings?

MR. PHARR: We have a combination of fans located around through the production areas, and we do have ventilation, roof vents for ventilation out the roof and when the weather is not inclement, we try to keep the doors open for cross ventilation.

MS. JANES: Do you have operable windows in both the office building and the production facilities?

MR. PHARR: No. In neither.

MS. JANES: Would a similar procedure for maintaining the production ventilation systems also be followed as is followed for the office system?

MR. PHARR: It would be somewhat different because in the production facility we're dealing with very high ceilinged buildings and we have roof ventilation there that does open outside, and we can keep the doors open more. In an office building, that's not an option.

MS. JANES: But those systems are maintained...

MR. PHARR: Absolutely.

MS. JANES: Thank you.

JUDGE VITTONE: At this point, because of the lateness of the hour, I'm going to restrict examination of this witness and the remaining witnesses to the OSHA staff.

Mr. Pharr, thank you very much for coming today.

With respect to your question on coverage, I think it's probably a little early to get a definite answer on that, but as this thing progresses, I'm sure you'll be able to get a very definite answer from the Occupational Safety and Health Administration.

MR. PHARR: Thank you very much.

JUDGE VITTONE: Thank you, Mr. Pharr.

Mr. King?

(Pause)

JUDGE VITTONE: Mr. King, would you state your complete name, please, and the name of your company?

MR. KING: I'm Joe King, and I represent American Sightseeing International.

JUDGE VITTONE: If you have a statement, you can make it now.

MR. KING: Thank you.

Hello, I'm Joe King, and I'm founder and president of King International, a sales and marketing firm specializing in travel and tourism promotion. We have offices in Miami, San Francisco, and Washington, D.C.

My principal client is considered one of the premier tourism operators in the world, American Sightseeing International, ASI. ASI is a 50 year old trade association whose members are involved in ground operations including hotel arrangements, sightseeing, local packaging, et cetera. ASI represents these operating wholesalers.

This is our membership directory. You can take a look at it. As you can see, ASI has members in all the major U.S. cities, like Miami, New York, D.C., LA. All these businesses depend on tourism for their livelihood. They understand that OSHA's proposal will have the effect of banning smoking in hotels, bars and restaurants and other workplaces. To a person, they believe that this will have a devastating impact on traffic from abroad and their businesses.

I've been in one part or another of the hospitality industry practically all my life. Back in the '70s I was the director of sales at two well known New York restaurants -- Maxwell's Plum and Tavern on the Green. My job was to increase sales by building the business. One area I concentrated on was the foreign travel market.

Both these restaurants depend heavily on tourists. Travelers are the lifeblood of a lot of New York restaurants, and particularly Maxwell's and Tavern's. I can't tell you the exact percentage we had back then, but probably 45 or 50 percent of our customers were from outside the United States.

We used to do all kinds of things to keep them coming back. One trick that worked pretty well was to give everybody a postcard from the restaurant. It sounds simple, but it worked. And let me tell you, it worked. Everybody wanted one of those postcards. They'd send them to a friend or a relative back home, hopefully with some good comments about their dining experience, and these friends and relatives would show up to eat when they'd come to New York City. This is what we call word of mouth. It's big in all businesses, but it's life and death in the travel business.

When people go back home they've got plenty to say about their trip, particularly when it's an international visit. It doesn't matter whether it's business or pleasure, people ask them how was your trip, and they tell them.

You can imagine what would happen to travel into the United States if you went ahead with this proposed smoking ban in indoor workplaces. It would devastate our international market. People would tell their friends, "You can't smoke anywhere in the whole country." We couldn't take it. I can feel that in my bones.

Foreign visitors just won't deal with these kinds of restrictions, period. They've got too many other places they can choose from, and they're not about to give up smoking to go anywhere. Foreigners smoke more than we do.

Take the French. They smoke with both hands. Travel anywhere in France and you'll see it. All through Europe, and for that matter, in Asia as well, everybody smokes.

What a time the foreign press would have with this one. I can see the headlines now. "Welcome to the USA. No Smoking." "Going to America? Leave your cigarettes at home."

Now about this no smoking in hotel rooms. I can picture a bunch of Japanese people standing in front of a hotel in their pajamas smoking and cursing. They wouldn't stick around long, and they wouldn't be back.

Let me take a minute here to explain how this business works. The international travel industry is a small world. Perhaps 500 executives determine what destinations their customers will travel to. This is a business decision and people's tastes are part of that decision.

These in-bound travel wholesalers, DER, Allied, JTB, T-PRO, are responsible for sending millions on millions of tourists to this country each year. They are all industry leaders and members of what's called the Receptive Services Association. RSA is a New York-based trade association made up of the primary travel wholesalers in the world. Their members handle inbound travel to the United States.

I was just up in New York at an RSA meeting two days ago. Knowing I was going to be here, I took a poll of the members. Most of their comments I shouldn't repeat publicly, but they were, to an operator, opposed to this proposed smoking ban. Many of these people didn't know about this proposal when I told them about it, and they were sorry they couldn't come down here to oppose what they say, in their words, is a crazy idea.

They said that I should be sure to emphasize that competition drives the market. So in the U.S., if the U.S. bans smoking in bars, restaurants, night clubs, casinos -- they really reacted to that one -- and hotels and hotel rooms, they feel that huge numbers of people who smoke would go to any of the 150-plus other countries in the world that don't ban smoking.

You see, tourist attractions are not limited to the Washington Monument, the Empire State Building, the Statue of Liberty, or even the Department of Labor building. It includes a lot more. Take the French Quarter in New Orleans and all of its restaurants and bars. Ever been to Pat O'Brien's? They probably get more foreign tourists in there each year than the New Orleans Zoo. The same thing goes for places like Fisherman's Wharf in San Francisco, Laramar's Square in Denver, South Beach in Miami, and even Georgetown or Old Town Alexandria right here. Every big city and a lot of small ones have them.

You may call them tourist traps, but they are major attractions to visitors -- especially international visitors. That's where the buses go, and I'm sure you've seen them. When these visitors go in for a meal or a drink, they're going to want to smoke. If they are denied that cigarette with every meal and every drink, you can bet they're going to say, "What kind of lousy vacation is this?" and tell their friends about it.

Even restaurants are tourist attractions unto themselves. Places in a city that are unique. Certainly Tavern on the Green is unique in New York. What about Blackie's in Sequoya or the Old Ebbitt's Grill here? I don't know what percentage of their customers are international or even from other states, for that matter. But I'm sure it's huge.

These are places that capture the spirit of the city in which they're located. They are all part of what we call the tourism experience, and it's extremely important that the tourism experience be an enjoyable one. The travel industry in the United States is booming right now. It creates millions of jobs directly, and has one of the largest spillover effects of any business in America. Tourism is an export, and important to our balance of payments, and it makes no sense to construct barriers to economic success.

We don't reside in a utopia. We live in a world where people have a variety of habits and lifestyles. Fortunately for us, we live in a free society. One of those freedoms is to make a decision whether to smoke or not to smoke. Privately owned businesses should have the same freedom -- to cater to smokers or non-smokers. Let the free market system work it out, and let the government stay away. And remember FDR's words, "These freedoms we now enjoy, brave men died for."

Thank you for letting me come here today.

JUDGE VITTONE: Thank you, Mr. King.

Ms. Sherman, Ms. Kaplan?

MS. KAPLAN: Yeah.

What proportion of your customers are from foreign countries?

MR. KING: Well, that varies a great deal. I'm sure I've got a lot of statistics there I'll leave with you. That breaks it down here. About 50 million a year come to the United States. I have a report here prepared on statistics by the USTTA which I'd be glad to leave with you.

JUDGE VITTONE: I don't think that was the question.

MS. KAPLAN: I was asking about King International, what...

MR. KING: Oh, all right. I'm really representing ASI at this...

MS. KAPLAN: Oh, you are.

MR. KING: So I would say 60 to 70 percent.

MS. KAPLAN: What percentage of those 60 to 70 percent are smokers?

MR. KING: I'd say the great majority of them.

MS. KAPLAN: That is based on what?

MR. KING: I would say, I have no figures on that, but observation.

MS. KAPLAN: What sort of observations?

MR. KING: Personally, it's a continuing problem in areas and in restaurants that have created smoking regulations because the foreigners don't seem to pay any attention to them. You know they're there.

MS. KAPLAN: So you've seen that some foreign visitors in your restaurant smoke?

MR. KING: A great deal of them.

MS. KAPLAN: What destinations in the U.S. do your customers tend to travel to?

MR. KING: Well, you're talking about throughout the United States. The major gateway cities are New York, Washington, San Francisco, Chicago, Miami, New Orleans. There are other ones. Secondary cities -- Seattle, Portland. An enormous number of locations in the United States. Almost all of the United States except for a rural area.

MS. KAPLAN: Since many tourist attractions in the United States like Disneyland and other theme parks museums, et cetera, have already become smoke free, how are these foreign tourists tolerating such areas?

MR. KING: I can't say. I have no direct experience with Disneyland.

MS. KAPLAN: As a travel agent, are you sending customers to Disneyland and then receiving complaints that...

MR. KING: I'm not a travel agent and I don't send customers anywhere.

MS. KAPLAN: I thought King International was a travel agency.

MR. KING: No. I'm a consultant to an association that represents ground operators throughout the country. And throughout the world. But I don't book business into various destinations, but I represent people who do. I'm sure all their experiences are different.

MS. KAPLAN: Do you think these foreign tourists, if smoking restrictions beyond what are currently in place are enacted, then these tourists will no longer visit some of the destinations you mentioned -- Fisherman's Wharf, New Orleans, et cetera?

MR. KING: I understand this is a country-wide thing. This would have an affect on them visiting this country, not just individual cities. At least that's the way I understand it here.

In other words, if this, and I've read this rule, I understand the way it's written that it would virtually outlaw smoking in all places where work is performed. In other words, that would include a hotel room, a cocktail lounge, many other ... any place where an employee actually performed some work. We're in the hospitality industry, so where our people go, we perform work.

MS. KAPLAN: What I'm asking is if these smoking restrictions are enacted, as you say, will these foreign tourists no longer visit some of the U.S. Tourist destinations, which are very popular, which you mentioned like New Orleans, Fisherman's Wharf, Laramar Square, et cetera.

At this point they're probably getting a little nervous about it. But in general, they're not paying much attention to the restrictions we have. They pretty flagrantly smoke everywhere they go. If they were no longer allowed to do that, do you think...

MR. PHARR: The vast number of them wouldn't come to the United States. Isn't the United States an extremely desirable (inaudible). It's a very desirable country for people who... It's very desirable for people who live here to visit, but there are 150 other interesting places to go.

MS. KAPLAN: So again, your assertion that they would stop visiting the United States, is that based on anything beyond informal observations at several restaurants?

MR. KING: No, no, no. I'm reflecting the views of travel professionals in this country who handle this business. These are the very people who package these tours, and they're responsible for millions and millions of people coming to this country. They will tell you that if this country is a no smoking country, these people are not going to come here. That's based on their observations, not mine.

MS. KAPLAN: So it's based on casual conversations with travel agents?

MR. KING: Not travel agents. These are tour operators. These people are the people that send business to this destination. Casual is not the word. This is a very critical issue to these people.

MS. KAPLAN: But I'm asking where you got your information. It comes from conversations with these tour operators?

MR. KING: That's right.

MS. KAPLAN: Have any of these tour operators taken surveys of their customers as to whether or not they would cease visiting the U.S. if these restrictions were enacted?

MR. KING: I don't think they'd have to.

MS. KAPLAN: As far as American Sightseeing International which comprises many different companies, do you know whether business wise they're in pretty good shape? Is their business increasing, decreasing, pretty steady?

MR. KING: The members we have? Business in general to the United States has been increasing. The favorable exchange rate has a lot to do with that. They're all in pretty good shape, my operators.

MS. KAPLAN: Thank you.

MR. KING: You bet.

JUDGE VITTONE: Mr. King, thank you very much for coming today.

MR. KING: Thank you.

JUDGE VITTONE: We appreciate your time.

Mr. Edgar?

(Pause)

JUDGE VITTONE: Mr. Edgar, would you state your full name, please?

MR. EDGAR: Robert A. Edgar, Jr.

JUDGE VITTONE: Do you represent a company or...

MR. EDGAR: I'm representing the American public, but I do own an AC company called Technacool Incorporated.

JUDGE VITTONE: You understand that you have ten minutes, sir.

MR. EDGAR: Thank you. I'll get right to it.

Right now fiberglass and fiberglass insulation are currently used for ductwork and ductwork lining, as well as lining for insulating. What it is doing is terminating people, their lungs, and their well being. Fiberglass and insulation have been linked to lung disease similar to those caused by asbestos. This comes from research done at the University of Southern California's School of Medicine, Los Angeles, by Dr. Kay Kilburn's study published in New Scientist, October 24, 1992.

December 21st, 1994, the Honorable Bob Gramm, United States Senator. "Dear Senator Gramm, Your letter to Mr. Jerry D. Kepler, Assistant Secretary for Legislation Department of Health and Human Services, the HHS, regarding the concerns of your constituent, Mr. Robert Edgar, Jr., was forwarded to the National Institute of Environmental Health and Science which says, I share Mr. Edgar's concerns about the possible hazards to health and exposure to glass fibers and other man-made minerals and asbestos. Scientific information indicates the fibers of various types that are small enough to be inhaled into the lungs have the potential to cause pulmonary injury and scarring and sometimes cancer of the lung and special tissue.

"Stop being a stupid victim. Although the government knows, they seem incapable of insisting that the present predicament has become a national priority, and as a result, the American public ...repeat the asbestos disaster, only this time the fibers are in our lung machines, engulfed in the organ they destroyed before. Now you know why they would put in bail-out clauses..." which I had to say about asbestos people, but I had to cut that out.

"The people that make this fiber are the same people that make your asbestos, and what they learned from the last time is that if they put in bail-out clauses, they can get sued but still make $25 million and it's a worthwhile adventure."

So they go ahead and sell this product, even though they know it's a carcinogen. They have to put labels on it to say so. But by the time it gets to the consumer, that label is far gone. Nobody that installs this product, such as me, for 15 years, is going to say this is a dangerous product, ma'am. We're going to put this in your house, or we're going to put this in your building. They do not do so. So you end up with carcinogenic ductwork, which is incredibly stupid.

Please listen to what I propose. Act one of my bill will prohibit the use of fiberglass or insulation of any kind inside the airstream, as well as any future material that is not breathable, sanitizable, or maintainable because it cannot be breathed. It gives people diseases, and it is known to case similar problems like asbestos.

Why did they let them put it in our lung machines? I have no reason and no rhyme for that. That is pure nonsense, and we did not use our common sense.

You cannot touch fiberglass physically. You deny the facts, because God gave you the test of touching, smelling, and sight of these problems. The act that you won't even touch fiberglass is beyond me why you would let them put it in your lung machine.

Clean airstream act two, calls for the new guidelines to limit the use of ducts down to an absolute minimum as well as upgrade the standards on ducts that must be used to duct structures that are maintainable, sanitizable and accessible for annual cleanings.

I need the slide projector, if I could. Just to clip up a slide while I'm talking.

(Slide Presentation)

MR. EDGAR: These are the type of fibers that they are currently selling you. These are different types of fibers that are found anywhere in ducts, in ductwork lining. The ductwork in here has this type of ductwork lining in it and after years that stuff becomes dry rotted, ruined and it flakes out into the air giving you these asbestos fibers flying into your lungs constantly.

We have other hazards to deal with also. The national headline, "Link to Rodent Virus Grows Stronger in Mystery Illness," New York Times, June 6, 1993. The preliminary link between rodent virus and a mystery flu-like illness that has killed 11 people and sickened many others has been linked to -- Scott Jones, health inspector says, "We really think we're on to something now." He said, "It's all coming together, that people who contracted the respiratory ailment presumably were exposed the virus by inhaling airborne particles of rat droppings."

Well, that's the problem that I'm going to show you right now in these slides. When you see what's in these ductworks, there are rats, there's mice and they put their droppings in your air machine which you are going to inhale. The problems are virtually unseen because they run when you open the ductwork up. If you look at the slides --

This is insulation lining in ductwork similar to the stuff you have in the back room here that we're all breathing. That lining cannot be cleaned. If you attempt to clean that, you will stir up the carcinogenic fibers into the air and they will become more airborne and more dangerous.

This is more insulation and fiberglass. These are the types of things they put in your air conditioner for you to breathe off of.

This is ductwork, fiberglass ductwork. Now, if you notice, there's some particles in there that really don't usually go in ductwork. That's pigeon feathers, pigeon dung and roach wings left over from the rats' meal. The rat eats the roach but leaves the wings, which I will show you even more pictures.

Here's some pigeon dung that's in your average ductwork. You breathe this and you know it's got to be a hazard.

Here is an air conditioner that is completely disgusting. Look at the insulation. There's roach droppings all over that. There is rat droppings all over that.

Here's some more pigeon feathers and pigeon dung. This is average ductwork that you breathe. This is not from a city, this is from a rural area.

More ductwork. Is this what you intend to breathe? Because you don't go up there, no one goes up there. Even the workers that I've worked with all my life do not check this stuff. They don't want to tell somebody they've got that there. They're not going to want to clean that. No one wants to touch it.

This is your average grill in an average place because it's not maintained. Look what happens to it. That grill right there can never be maintained. It's got too many holes and too many reasons why.

This is a seven-year-old wall unit a seven-year-old AC coil from a central system. Notice the difference in the top unit because it has been unmaintained because of inaccessibility. The bottom unit is seven years old and it goes back to work. The other one is dead. You cannot breathe that type of a coil.

Here's another coil that you cannot breathe. Because of inaccessibility, it was never cleaned so people got to breathe that.

Here's another one again about the dirty diseased returns and supplies. Now, see the roach droppings all over that duct? That's fiberglass, that's insulation and that's all roach droppings. They lived right there. That is disgusting.

Here's some more ductwork. See that top piece right there where it's broken down? That's how the pigeons and rats get in. The tape deteriorates, the pigeons jump in there and they live in there. Once they feel that air and it's hotter or colder, they say this is a great place to live. They nest, they have their babies, they poop, they leave their poop, roaches get inside their poop and they live in it. You move a piece of pigeon poop and you'll see about 50 roaches come out of it. Isn't that exciting?

Here's deadly AC. These fibers are carcinogenic and that little blower you see right there is brand new ductwork with a brand new blower completely clean. If you turn that blower on which I have over there but not the time, you will see the orange fibers come out onto that donut and give you free orange sprinkles which I am sure you do not want. No matter how you want to put it, you would not eat that donut right there because of the carcinogenic fibers.

Here is an air handler that has rat poop and rat urine in it. The person who owns this air handler has the definite possibility of getting hand-to-hand virus, which I have just read to you is deadly and has killed many people in the past, how many we do not know because it is hard to link it to that but they have linked it to 17 deaths.

Here is roach wings left over from a rat that lives in this air handler because he doesn't want the wings, they have no nutrition, they're just flakes, so he drops them there and eats the rest. You notice the rat poop all around it? This is the average. This is not even in the city. This is in a rural area in Florida, in St. Pete, in the retirement homes.

Here is insulation that is in an air conditioner and you notice the darkness in some areas? I have that insulation right here in that package to show you that that is rat nesting. There are spiders, roaches, bugs and all kinds of debris left over from when the rat comes in -- you see where the paths are worn in the insulation? That's where his oils from his body come in all the time and he makes that dirt.

That one on the top left has a nest that a rodent uses, that's like a refrigerator. In that nest, in that mag, is a complete lizard body, bugs, spiders and everything else that they store in your air conditioner.

I also find cat food, dog food and bird food constantly in air conditioners because they take it from your cat or your bird or whatever and they run back into the air conditioner and hide it in there, which you get to breathe forever.

Here's some more reasons why ductwork doesn't work. They penetrate this duct. There's poop on top of that plenum right there. Once they get in, you've got hand-to-hand virus.

Here's that same air handling, more hand-to-hand virus.

Here is -- you notice the bottom corner of that duct above the pan, there is where the rodents were gnawing to get in at the water that they weren't getting from the drain pan because it wasn't leaking. Well, when it leaks, they live right there and they'll just eat all day and drink all day. But the evidence is noticeable, they do chew and they get in. They want to get in.

Here is more evidence of how they chew and get in. Now, that is a rodent chewing. If you notice all the light dots all over the place? That's pigeons' poop. That's disgusting. You don't know they're there, they're up on the roofs running around.

Here's more rat poop. That is not exactly what you think you'd find in your attic, in your air conditioner.

Here's what they do to try to get into that condensate line because that condensate line is very cold and it has drippings of water off it. They eat the insulation trying to get into that water and if they can't get in there, they'll go in in different places. They're persistent.

Here is a disgusting fact. This is one of your restaurants in Florida. This is not uncommon. You see the yellow stain? It's a urine stain. Hand-to-hand virus. You see the rat poops of many different sizes. Mice, rats, everything live in this situation.

What you're looking at is an air filter covered in pigeon dung, feathers and poop. How could someone ever run that? That's not coming on one day. Those filters were infected over periods of time, which shows lack of maintenance and ignorance. That will kill somebody.

Here is Morris' Cafeteria to show you how an average central system can be a pigeon coop. If you look down underneath it there, you'll see a small hole, it seems like. And that's where they get in. I'll show you a close-up.

Here is how they get in. They get in there and they live in your air conditioner. There is the rat poop and pigeon poop up close.

Here's a better look at it right now.

Look at that. That's Morris' Cafeteria. That's incredible. How could that go like that? How could that happen? If there's no disease in there, I don't know where there would be disease.

Now, this pigeon is inside ductwork. Now, do you think when he's sick or dying, do you think he's going to go outside and lay in the street and die? No. He's going to die right in that ductwork and you're going to breathe all of his carcass all the time.

Here is what they look like when they die. That's what happened to fall out of the duct because it was going in through the top. That is not something you want to find in your duct system. I have found that on heat strips, I have found that in many ducts of people that had no idea they were breathing that.

There's another pigeon in there, just hiding like a vampire in your duct system. That's incredible.

These pictures I want to tell you I'm only taking a month's worth of time to grab these pictures. I went out hunting and it was incredible. I was scared to open the next unit because they fly out at you, they scare the death out of you. If you really go up there quietly, not like the average service did and I have done for 15 years, you just go up there, bang, clang, clang, and they hide down the duct, you never see them but you see the remnants of them.

Here is another pigeon coop. This is under an air conditioner. Because they make doghouses on air conditioners and don't put the ducts straight down through the roof, this is what happens. They get in under the doghouse which is a shroud and they poop and live and that's the result. People are breathing this. And if that doesn't look diseased, we're in trouble.

Here is an air coil with pigeon poop right next to it. You breathe off of this coil and that's what you get to breathe.

Here's that same photo with a different picture.

There's eggs there and everything.

Here's one of the photos where I caught the guy coming out. He scared the devil out of me. There is something that you wouldn't think you would find in an air conditioner. That is appalling.

Here's more pigeon poop. That's not something that is just in one air conditioner, it's all over.

More carcasses.

This is what smoke does to your ducts. You take a look at that dark duct right there, that was yellow. That is disgusting. That's no bar. To show you how much buildup of smokes creates the tackiness that collects all the other biological contaminants and byproducts.

Now here is a duct full of roach wings, rat poop, pigeon feathers. This is your average restaurant. This is stuff we can't breathe.

JUDGE VITTONE: Mr. Edgar?

MR. EDGAR: Time up?

JUDGE VITTONE: Sum it up in one minute.

MR. EDGAR: Okay. There is more pigeon dung on a duct right there.

Are ducts bacteria-ridden? It seems that way to me.

Are ducts causing major health problems? Yes.

Are ducts free? No.

Are ducts needed? No.

Would you like a maintainable oxygen machine rather than a reused tunnel of diseased air? Your answer? It is very capable and it is very easy to do. Therefore it is imperative that we limit the breeding ground by eliminating ducts and upgrading building standards.

Seventy-five percent of ducts are not needed or necessary. Therefore, we would eliminate 75 percent of this breeding ground right away. The other 25 percent could be eliminated by upgrading standards on ducts and units to structures that animal-proof, sanitizable and accessible for annual cleanings.

Why 75 percent of ducts are not needed? Most central air systems are not designed to offer you oxygen which humans need. This is very important. We can do this by using more systems mounted in the outside walls, the same way a motel might meet its needs. By separating the occupancies, you also separate the germs and limit the unneeded usage and unneeded occupancies.

JUDGE VITTONE: All right, sir. At that point, I'm going to have to cut you off. I'll give you the opportunity, you can file anything you want as a late filed exhibit, post-hearing exhibit.

MR. EDGAR: You don't think that was important? I'm sorry, sir.

JUDGE VITTONE: I am not commenting on whether it's important. Would you please sit still a second? It's not a question of importance right now, it's a question of our timing here.

Ms. Sherman, do you have any questions?

MS. SHERMAN: Yes.

Now, if I understood you correctly, the problem seems to be from insulation in ductwork.

MR. EDGAR: Mmm-hmm.

MS. SHERMAN: What purpose does insulation in ductwork serve?

MR. EDGAR: It serves the purpose of to stop the condensation you would get on the outside of a glass, okay? Which is not needed on the inside of the airstream. You could put that on the outside of the airstream so you would never have that. That way the duct would be maintainable. This way, when it's on the inside, you can't touch that fiberglass. The fiberglass gets imbedded with debris and there's no way you could vacuum that out.

MS. SHERMAN: Well, why is it on the inside and not on the outside, as you suggest?

MR. EDGAR: I think it was put there by the asbestos people to hide it, so you wouldn't see it, so that they could have it in their duct systems for years by the time we noticed it, because it takes 20 or 30 years for the debris to scar your lung tissue and for you to start noticing the effects of it.

MS. SHERMAN: So you're saying that this contains asbestos?

MR. EDGAR: Yes. Not asbestos, the fibers are similar. I have the documented proof right here that says it is similar to asbestos. Correct. A document from Berkeley Institute.

MS. SHERMAN: So in other words, this is not asbestos but it's similar to asbestos in your opinion?

MR. EDGAR: In Berkley's opinion. The scientists have proven this. It can give you the same diseases similar to asbestos, which I have read to you. And that is a danger. A major danger that we're overlooking because we don't have the common sense to say I don't want that in my lung machine.

MS. SHERMAN: And you are an HVAC --

MR. EDGAR: Technician.

MS. SHERMAN: Technician.

MR. EDGAR: Yes, ma'am.

MS. SHERMAN: And do you specialize in air conditioning or heating units or both?

MR. EDGAR: Right. And I can design a system --

MS. SHERMAN: Which one?

MR. EDGAR: I specialize in air conditioning and heating. Correct.

MS. SHERMAN: Okay. What percentage of the ductwork that you encounter has the insulation on the inside?

MR. EDGAR: Oh, 80 percent.

MS. SHERMAN: And might it not be more accessible to animals if it was on the outside?

MR. EDGAR: The insulation?

MS. SHERMAN: Yes.

MR. EDGAR: Well, I couldn't care if they ate the insulation and died, I just don't want to die from it. If they can't get in my ducts and contaminate them, that's all I'm worried about. And I don't want ducts. We do not need ducts. So therefore they couldn't get in something.

MS. SHERMAN: How would we heat and air condition large buildings like this without ducts?

MR. EDGAR: By using remote chillers, remote condensers or remote burners. You need to take the coils, instead of one major coil up top and then branching off into ductwork, you would take five coils out there and you would make the air when you get to the occupancy because that would limit the velocity. The velocity is what builds up byproducts because it's like a giant vacuum sucking up these byproducts, engulfing them inside the airstream. If you cut down the velocity, it won't suck up so many byproducts.

MS. SHERMAN: So that means that instead of having -- if you had 10 rooms, instead of having one unit you would have 10 units, each one located in the ceiling of the room?

MR. EDGAR: You could have it several different ways. You could use 10 separate units, wall units, okay? Which would give you oxygen and fresh air intake or you could use separate coils so you would have one main source of the coolant and then you would have the coils instead of -- the same size your average grill is today, you could have a coil in that room the same size so you could pull the grill down and clean the coil in five minutes and it's sanitary. It's only this much to clean, not the whole 50 foot of ductwork that is completely bacteria ridden and carcinogenic.

MS. SHERMAN: So then you would have basically a separate unit for each room and you would be making the heating or cooling right in the room.

MR. EDGAR: Correct. So that way you don't spread germs and each person could have their own air conditioner set at their own temperature. Zonability creates a great savings on energy. Plus you would have no ducts to leak all this energy that we're currently leaking. And if you've been an AC tech like I have, you've seen major ducts that are broken open which nobody wants to fix because it's up in a hot attic.

MS. SHERMAN: Well, I've just noticed that most room air conditioners need to be put out a window because they drip.

MR. EDGAR: All AC systems drip. You'd have to use a drain system of some kind but being on the outside wall, it would create less leakage into buildings. And you can put systems that are in the center of the buildings or outside, they're all going to need drains and that's the key.

MS. SHERMAN: And how would you handle heating or air conditioning rooms that didn't have windows, that were internal rooms?

MR. EDGAR: With a coil. See, like I said, you use the chiller, the remote condenser and you put just the coil in the room. See, what they do is they put the coil up in the attic and then they spread the ductwork to the rooms. Well, you lose your heat and your cool by the time it gets there and you can take those coils and instead of having one, put one in each room so you transport the coolant, not the air. That's the key. You transport the coolant you stop disease.

MS. SHERMAN: What kind of personal protective equipment do you use when you're doing maintenance on these units?

MR. EDGAR: I no longer do any. I've been too sick, I've been sickened, I've had $10,000 doctor bills on kidney ailments and hand-to-hand -- and viruses that I can no longer do my job.

I am currently not doing anything but wall units and I have to buy them fiber-free because I can't breathe it. I can't even sleep laying down, I have to sleep sitting up, because of the fibers in my lungs. And there's a study that's been performed on a man who was cut open because -- he was in a study and he died of a heart attack, they cut him open for the autopsy, found 180,000 fibers in his left lung and that's not a good sign.

MS. SHERMAN: I'd like to thank you for your time.

MR. EDGAR: Thank you.

MS. SHERMAN: We enjoyed your pictures.

JUDGE VITTONE: Thank you, Mr. Edgar. We appreciate your time and patience today.

MR. EDGAR: Thank you, sir.

Excuse me one second. I'd like to leave this with you. I didn't have the time. I'd like to be able to just give you this.

Thank you, sir.

JUDGE VITTONE: We will make this Exhibit 227. This is a booklet containing the letters and some of the comments made by Mr. Edgar and a lot of the pictures that he showed us today. They will be received as Exhibit 227 into the record. The first page is called "Proposed Bill by Robert A. Edgar, Jr., Clean Airstream."

(The document referred to was marked for identification as Exhibit 227 and was received in evidence.)

JUDGE VITTONE: Thank you very much.

JUDGE VITTONE: That concludes our witnesses today. We are off until Tuesday, the 17th. We will begin at 9:30 a.m. Our first and only witnesses for Tuesday will be representatives of the R.J. Reynolds Tobacco Company. They will be here on Tuesday, Wednesday, and Thursday.

MS. SHERMAN: Is this the order that they'll go in?

JUDGE VITTONE: I think Ms. Ward said earlier the order may be changed. The topics are the same, but the order may be... You're not sure, but it may be turned around.

MS. WARD: Four may go after six, but I'm not sure. I apologize.

I have just one housekeeping thing.

JUDGE VITTONE: Sure.

MS. WARD: I apologize for keeping you, but I've lost a little of my appetite, and I can wait a little while to eat.

I was not here yesterday, and I understand that this was raised. Specifically, I wanted to bring you from R.J. Reynolds' perspective, a problem that is on the schedule for Monday, January 23rd. Now there are three witnesses scheduled to testify -- Greenfield, Ford, and Bayard. I understand that this was raised yesterday, and I also spoke to Ms. Sherman on the break, and she indicated that she was trying to move Mr. or Dr., I don't know him, Greenfield.

I would like to strongly urge Your Honor and OSHA to consider moving Dr. Bayard from that day. In my opinion, he is going to be a very lengthy witness. We have seen some long days. There have been three witnesses so far who occupied an entire day, and they were witnesses who had a lot of technical information. Those were Dr's. LeVois, Jenkins and Roth, all three of whom were on until 5:00 o'clock. The weren't, in all cases, the only witness we heard that day, but we were going on and on.

Now Dr. Ford, of course, is OSHA's witness, and I don't think he is going to be an extremely short witness and I really haven't looked at Dr. Greenfield's presentation. But Dr. Bayard, I believe, not only will OSHA have a lot of questions, but that there will be extensive questioning, and there needs to be from other participants.

The agency has said that it is not relying, and that their NPR is not based on the EPA report. However, at the bottom of the first page of the NPR, the last paragraph, on 15,969 begins, that they believe that the available evidence supports these proposed regulations. Further stimulus for this determination was provided by conclusions reached in the report published in December by the EPA.

The further go on to say that OSHA has submitted this proposed standard to the U.S. EPA which is reviewing it in detail for purposes of submitting detailed comments to the docket.

Now Dr. Bayard has submitted some comments to the docket, but he relies on the EPA report, and the EPA report is cited several times in the NPR. That report is 600 pages long. Over 400 pages of it are on the subject of lung cancer. His addition to the docket references that and discusses it. Many of the public health groups that have testified here on examination have said that their conclusions about ETS and lung cancer are based upon the EPA report.

Therefore, I believe that it's essential that Dr. Bayard, who has been in and out of this hearing from time to time, that there be adequate time to examine him and I just want to call to the Court's and to OSHA's attention in advance, our sincere belief that if there is anybody who ever needed a day to himself, it's Dr. Bayard.

Now I understand that he travels. He appears, in fact, all over the country discussing this report. He's coming to my home town in Winston-Salem in a couple of months for a speaking engagement at Wake Forest University. But I will say that on our behalf, we would be willing to come at any day, it doesn't have to be the day after, at any day that Dr. Bayard and the OSHA staff can be here, we would be prepared to come and ask him questions.

So in conclusion, I guess, after all of this, this is no surprise, what I'm going to make is a formal motion that Dr. Bayard be rescheduled from January 23rd.

JUDGE VITTONE: Ms. Sherman, do you want to respond now or... You told me during one of the breaks that you were taking a look at the schedule.

MS. SHERMAN: I am taking a look at the schedule. I'm not prepared to give an official response now other than to note that we based our schedule on the amount of time somebody asked to testify, as well as certain considerations as to how many questions there will be. As Ms. Ward knows, the privilege to question is not limitless.

It seemed to us, and we've taken steps to try to arrange the schedule if we can, to try to thin out the schedule in the best way that we can. I am also willing to perhaps, if you are, Your Honor, to start the hearing that day at an earlier hour.

We do have an interest in moving with this hearing. We're certainly not trying to cut off debate. As you well know, Ms. Ward, there's nothing I can do to compel Dr. Bayard to come, or if he comes to stay. We will try to...

MS. WARD: I agree, but I think he's somewhat anxious to testify. He's been in and out, and he certainly makes a lot of appearances. It's those appearances, because he has made so many varied and public statements about the report, that in part bring about the need for some additional time to question him.

But I can't think of a single piece of evidence, other than the OSHA witnesses themselves, and maybe even more than many, if not most of the OSHA witnesses, that it's important to have a full and fair hearing of than the Environmental Protection Agency report and their witness. Especially in light of the way the evidence is played out. That so many of the public health groups, all the way from the Public Health Service, and even the CDC and NIOSH referenced that report and indicated their reliance on it to the Association of State and Territorial Health Officials, and Industrial Hygiene Nurses. The list goes on and on. They've referenced that report.

JUDGE VITTONE: I agree with you. A lot of people have mentioned the report.

I think we've all had it this week. Thank you for raising the issue. I think it's something that will be taken under advisement, and we can take it up near the end of next week and see what happens, see where we are.

MS. WARD: I appreciate that. Thank you, Judge.

JUDGE VITTONE: Thank you. Have a good long weekend. See you on Tuesday morning at 9:30.

This document's URL is: http://www.tobacco.org/Documents/osha/950113osha.html


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