Fearful that the Consumer Product Safety Commission is about to ban insulation made with formaldehyde, the formaldehyde industry is preparing a new, less drastic regulatory proposal that it will try to persuade the commission to adopt within the next 10 days before it is scheduled to vote on a ban.

At a special meeting scheduled for tomorrow, the association of the nation's installers will urge the commission to approve a mandatory performance standard to allow the controversial product to remain on the market.

Under the proposal to be made by the National Insulation Certification Institute, the performance standard would set a maximum level of formaldehyde gas that could be in the atmosphere of the home after insulation was installed--probably somewhere between 0.1 and 0.4 parts per million.

If the level of formaldehyde is higher than the performance standard after the insulation is in place, installers would then agree to correct the problem to reduce the level of the gas in the home, even if it meant taking the costly step of ripping out the insulation.

Additionally, installers would agree to mount a massive consumer education and information campaign to alert potential customers about the risks of urea-formaldehyde insulation, which has proven to be an irritant to many consumers, causing headaches, eye irritations, rashes, respiratory problems, severe nose bleeds, nausea and vomiting.

Although not yet formally presented to the commission, the proposal apparently is drawing significant attention from the commissioners in their last-minute considerations of the ban.

"It's got a chance," said one commissioner, adding, "If anything is going to turn the commission away from a ban, it is going to have to be a combination of a standard, warnings and consumer redress."