Tracy Heinzman

202.719.7106

theinzman@wileyrein.com

1776 K STREET NW 

WASHINGTON, DC 20006 

PHONE 202.719.7000 

FAX 202.719.7049 

7925 JONES BRANCH DRIVE 

McLEAN, VA 22102 

PHONE 703.905.2800 

FAX 703.905.2820 

www.wileyrein.com 

May 21, 2012 

VIA ELECTRONIC MAIL AND FIRST CLASS MAIL 

David Donaldson 

Team Leader 

Environmental Protection Agency 

Biological and Economic Analysis Division 

1200 Pennsylvania Avenue, NW 

Mail Code: 6205J 

Washington, DC 20460-0001 

donaldson.david@epa.gov 

Jeremy Arling 

Environmental Protection Specialist 

Environmental Protection Agency 

Stratospheric Protection Division 

1200 Pennsylvania Avenue, NW 

Mail Code 6205J 

Washington, DC 20460-0001 

arling.jeremy@epa.gov 

Re: EPA’s Method for Calculating the Supply Chain Factor 

Dear Messrs. Donaldson and Arling: 

I write on behalf of the Methyl Bromide Industry Panel (MBIP) to follow-up on one 

of the issues that we discussed at our May 2, 2012 meeting which affects the level 

of CUAs and CSAs allocated under the final 2012 Critical Use Exemption From the 

Phaseout of Methyl Bromide (2012 CUE Rule) and future rulemakings for 2013 and 

beyond. We appreciated the opportunity to discuss this issue with you and your 

team. 

We were glad to see that the final 2012 CUE Rule was published last week and that 

it allocated CUAs and CSAs at levels consistent with the 2012 proposed rule. 

While we are relieved that EPA did not reduce the CUAs in the final rule, we are 

still concerned that EPA has made an error in its calculation of the Supply Chain 

Factor (SCF), which if corrected would have resulted in a higher level of CUAs in 

the final rule.1

 Even if it is too late to correct the error for 2012, it is imperative that 

this issue is examined because EPA will likely calculate a SCF for determining 

CUAs for 2013 and beyond. 

Per your request, this letter provides more detail regarding the problem with EPA’s 

calculation of the Supply Chain Factor. As we explained at the meeting, the 

percentage that EPA used to calculate the SCF for the 2012 CUE Rule – 42% – is 

 

1

 As we explained at the meeting, the MBIP discovered the error when it reexamined the calculation 

of CUAs and CSAs for the 2012 CUE Rule following Arysta’s recent decision to cease all U.S. sales 

of iodomethane – the primary soil alternative to methyl bromide – and EPA’s release of the pre-2005 

inventory level at the end of 2011. 
Mr. David Donaldson 

Mr. Jeremy Arling 

May 21, 2012 

Page 2 

too low based on data from the two prior years, and does not reflect current 

production cycles. 

The SCF percentage is based on the proportion of annual production that 

historically has occurred during the 15-weeks of peak production in a given 

calendar year. Because the vast majority of production occurs in the 1st quarter of 

each year and has become more concentrated in that period over time, there should 

not be such a large difference between the SCF percentage determined for 2012 

(42%) and the percentages determined for the two prior years (58% and 62%). 

Since our meeting, we have conducted additional analyses that further throw into 

doubt the validity of the SCF percentage derived for the 2012 CUE Rule. As 

explained in detail below, it appears that the SCF percentage for the 2012 CUE Rule 

should have been at least 66.5% using EPA’s methodology. Even this percentage is 

suspect, however, because it is derived from older, irrelevant production data. If 

only the most recent two years of production data (which would more accurately 

reflect current production practices) are used as inputs, the SCF percentage for 2012 

would have been 91.1%. 

To be clear, the MBIP continues to believe that the SCF should equal at a minimum 

a one-year supply of critical use need, as noted in our comments on the proposed 

rule.2

 However, if EPA insists on using historical production data to derive the SCF 

value, then it must correct the error in its derivation of the SCF percentage to ensure 

that there is not a disruption in the domestic supply of methyl bromide in future 

years. Such a disruption would have a devastating impact on American growers, 

especially in light of the dwindling level of pre-2005 stocks and Arysta’s decision to 

pull iodomethane from the U.S. market. 

The remainder of this letter and the enclosed attachment outline the MBIP’s 

methodology and calculations of the SCF percentage and provides details on the 

apparent error. We would be happy to discuss these issues further if EPA needs 

additional information or has any questions. 

 

2

 The MBIP has repeatedly expressed this view in its comments on the Agency’s proposed CUE 

rules. See, e.g., MBIP Comments on EPA’s Proposed Rule for The 2012 Critical Use Exemption 

From the Phaseout of Methyl Bromide: EPA Docket OAR-2009-0277, at 6 (submitted Nov. 21, 

2011). 
Mr. David Donaldson 

Mr. Jeremy Arling 

May 21, 2012 

Page 3 

Background on the Methodology Used to Calculate the SCF 

The SCF represents the Agency’s technical estimate of the amount of pre-phaseout 

inventory that would be adequate to meet a need for critical use methyl bromide 

after an unforeseen domestic production failure. The Agency has explained that this 

estimate assumes such a production failure will occur during the peak supply period 

and that it will take 15 weeks for significant imports of replacement methyl bromide 

to reach the U.S. Accordingly, to calculate the SCF, EPA first determines the 

percentage of annual production that would be lost if the domestic supply disruption 

were to occur during the 15 weeks of the year when most new material is produced. 

Unfortunately, the manner in which the Agency calculates this percentage is not 

entirely transparent. Although there is an explanation of the calculation 

methodology in the Technical Support Document for the Proposed 2012 CUE 

Rule,3 it is both incomplete and confusing. However, based on the limited 

description available, it appears that EPA uses the following three-step process to 

determine the SCF percentage: 

Step 1 The Agency calculates the percentage of annual production that was 

produced weekly in each calendar quarter for 2005 through the most 

recent year for which the Agency has complete production data. It does 

this by first determining the percentage of annual production that 

occurred in a given calendar quarter, and then dividing this value by 13 

(i.e., the number of weeks in each quarter). For example, if 39 MT of 

methyl bromide was produced in the first quarter of 2005 and 100 MT 

was produced in total that year, the percentage of annual production 

produced weekly in the first quarter would be 3%. 

Step 2 EPA averages the percentages it calculated in Step 1 for each calendar 

quarter. It does this by totaling the percentages calculated in Step 1 for a 

given calendar quarter and dividing the sum by the appropriate number 

of years. For example, if the percentages of annual production for each 

week in the first quarters of 2005, 2006, and 2007 were 3%, 6%, and 

3%, respectively, the average percentage of annual production that was 

produced weekly in the first quarter over this three-year period would be 

4%. 

 

3 See Docket No. EPA-HQ-OAR-2009-0277-0042, at 5. 
Mr. David Donaldson 

Mr. Jeremy Arling 

May 21, 2012 

Page 4 

Step 3 The Agency selects the maximum average percentage calculated in 

Step 2 and multiplies it by 15 – the length in weeks that it would take for 

significant imports to reach the U.S. in the event of a catastrophic 

domestic supply failure. The resulting product is the percentage that 

EPA uses to calculate the SCF. 

Using the above process, EPA determined that the SCF percentage should be 42% 

for 2012 (i.e., that approximately 42% of annual critical use methyl bromide 

demand would need to be met from pre-phaseout stocks in 2012 in the event of a 

domestic production failure during the peak 15-week supply period). 76 Fed. Reg. 

65139, 65145 (Oct. 20, 2011). In contrast, the same process yielded an SCF 

percentage of 58% for 2011. 

The MBIP’s Concerns with the SCF Calculation 

As a result of large decline in the SCF percentage from 2011 to 2012, the MBIP 

suspected that there was an error in EPA’s calculations and decided to conduct its 

own analysis to see if it could replicate the SCF percentage of 42% that EPA used in 

the proposed 2012 CUE Rule. To that end, the MBIP gathered quarterly production 

and import data from its members and calculated the percentage of annual critical 

use methyl bromide produced weekly in each quarter for 2005 through 2011 

(Step 1). The results of those calculations are presented below: 

Percent of Annual Production Produced Weekly 

Q1 Q2 Q3 Q4 

2005 4.24% 0.50% 2.20% 0.75% 

2006 3.14% 2.57% 1.33% 0.65% 

2007 4.06% 1.64% 1.58% 0.41% 

2008 5.52% 1.43% 0.67% 0.07% 

2009 2.63% 2.68% 2.38% 0.00% 

2010 7.00% 0.65% 0.04% 0.00% 

2011 5.14% 1.86% 0.42% 0.27% 
Mr. David Donaldson 

Mr. Jeremy Arling 

May 21, 2012 

Page 5 

Using these data as inputs in the three-step process outlined above, the MBIP was 

able to verify the accuracy of the SCF percentages used in the 2010 CUE Rule 

(62%) and the 2011 CUE Rule (58%). Specifically, the MBIP calculated an SCF 

percentage of approximately 63% for the 2010 CUE Rule (which based the SCF on 

production data from 2005 through 2008) and an SCF percentage of 58% for the 

2011 CUE Rule (which based the SCF on production data from 2005 through 

2009).4

However, the MBIP could not verify the accuracy of EPA’s proposed SCF 

percentage for 2012 with these data. In fact, using the above data for 2005 through 

2010, the SCF percentage that EPA should have derived for the 2012 CUE Rule is 

66.5%. If the 2011 production data are included, the SCF percentage for 2012 

increases to 68.0%. 

These percentages are far more consistent with the SCF percentages for 2010 (62%) 

and 2011 (58%) than is the SCF percentage of 42% that EPA derived for 2012. 

Moreover, an SCF percentage of 42% doesn’t comport with the actual production 

data or basic math principles. The SCF percentage is directly related to the average 

percentage of annual production that is produced weekly during the first calendar 

quarter.5 The average percentage in the 2011 CUE Rule was based on first quarter 

production data from 2005 through 2009, and the average percentage in the 

proposed 2012 CUE Rule was based on data from 2005 through 2010. 

Mathematically, then, the only way the SCF percentage could have fallen from 58% 

to 42% in 2012 is if the amount of annual production produced weekly in the first 

quarter of 2010 was less than the average for this quarter during 2005 to 2009. But 

this was not the case. Indeed, the first quarter of 2010 has the highest percent of 

annual production produced weekly of any quarter since the phaseout of methyl 

bromide began. Thus, one would expect the SCF percentage to increase from 2011 

to 2012, which is precisely what the MBIP’s calculations show. 

A further flaw in the methodology that EPA uses to determine the SCF percentage 

is the Agency’s reliance on production data going back to 2005. As explained 

 

4

 Further information on the MBIP’s calculation of these values can be found in the attachment to 

this letter. 

5

 As the MBIP has explained on numerous occasions, the vast majority of critical use methyl 

bromide is produced in the first calendar quarter of the year. 
Mr. David Donaldson 

Mr. Jeremy Arling 

May 21, 2012 

Page 6 

below, production data that are older than two years should not be used to derive the 

SCF percentage because such data do not accurately reflect current production 

practices. However, if EPA insists on using production data back to 2005 when 

calculating the SCF percentage, it should exclude the data for 2006. The final 2006 

CUE Rule was not promulgated until February 6, 2006, and EPA did not issue a no 

action assurance that permitted the production of new material prior to this date. 

Thus, the production numbers for the first quarter of 2006 are artificially low due to 

the inability of any manufacturer to produce material before February 6, 2006. If 

the production data for 2006 are excluded, the SCF percentage for 2012 is 70.4% 

(without 2011 production data) or 71.5% (with 2011 production data). 

EPA Must Change How it Calculates the SCF in Future CUE Rules 

Aside from the apparent errors in EPA’s calculation of the SCF, the manner in 

which the Agency is using historic production data to derive the SCF percentage is 

problematic and should be changed in future CUE rules. As we explained at the 

May 2 meeting, methyl bromide manufacturers have made significant changes in 

their production schedules since 2009. At the beginning of the phaseout, 

manufacturers would produce material throughout the first three quarters of each 

year in a continuous production cycle. But in the last 2-3 years, manufacturers have 

produced nearly their entire annual supply of methyl bromide in small batches 

during the first quarter of the year. Consequently, production data for years prior to 

2010 are not representative of current production practices and do not accurately 

reflect the percentage of annual production that would be lost if the domestic supply 

disruption were to occur during the first 15 weeks of the year.

To account for the change in production practices, EPA should calculate the SCF 

percentage using only the two most recent years of production data. If EPA had 

followed this approach for the 2012 CUE Rule and used only 2010 and 2011 

production data as calculation inputs, the SCF percentage would have been 91.1%. 

This value more accurately represents the percentage of annual production that 

would need to be met from pre-phaseout stocks in the event of a catastrophic 

domestic supply failure in the first quarter of the year. 

As we stressed at the May 2, meeting, it is imperative that EPA correct the SCF 

percentage. By understating the SCF percentage, EPA overstates the amount of 

“available stocks.” This, in turn, leads to less new production and creates a risk that 
Mr. David Donaldson 

Mr. Jeremy Arling 

May 21, 2012 

Page 7 

there will be a shortfall in the amount of methyl bromide available to satisfy critical 

user needs in the event of a domestic production failure. Such a shortfall could 

result in serious supply constraints and a significant market disruption, particularly 

given the fact that critical users will not be able to use iodomethane as an 

alternative. 

* * * * * * * 

If you have any further questions about the issues outlined above, please contact me 

at (202) 719-7106. 

Sincerely, 

Tracy Heinzman 

Attachment 

cc: MBIP Members 

13451192
ATTACHMENT
MBIP Calculation of the SCF Percentage for 2010

Step 1. Calculate the percentage of annual production that was produced weekly in each calendar quarter for 

2005 through 2008 – the most recent year for which EPA had complete production data as of the date the 

proposed 2010 CUE rule was published. 

The following describes in mathematical terms how the MBIP calculated this percentage: 

Q1Prod = Total amount of CUE material produced/imported in Q1 2005 by all mfrs. 

Q2Prod = Total amount of CUE material produced/imported in Q2 2005 by all mfrs. 

Q3Prod = Total amount of CUE material produced/imported in Q3 2005 by all mfrs. 

Q4Prod = Total amount of CUE material produced/imported in Q4 2005 by all mfrs. 

Q1Prod 2005 Q1Percent = Q1Prod + Q2Prod + Q3Prod + Q4Prod

2005 Q1Percent 2005 Q1WeeklyPct = Number of Weeks in a Calendar Quarter 

The below table shows the results of this calculation for each calendar quarter from 2005 through 2008: 

Percent of Annual Production Produced Weekly 

Q1 Q2 Q3 Q4 

2005 4.24% 0.50% 2.20% 0.75% 

2006 3.14% 2.57% 1.33% 0.65% 

2007 4.06% 1.64% 1.58% 0.41% 

2008 5.52% 1.43% 0.67% 0.07% 

Step 2. For each quarter, calculate the average of the percentages that were derived in Step 1. Here is an 

example calculation expressed in mathematical terms: 

 2005 Q1Percent + 2006 Q1Percent + 2007 Q1Percent + 2008 Q1Percent Q1Average = 4 

The below table shows the results of this calculation for each calendar quarter from 2005 through 2008: 

Percent of Annual Production Produced Weekly 

Q1 Q2 Q3 Q4 

2005 4.24% 0.50% 2.20% 0.75% 

2006 3.14% 2.57% 1.33% 0.65% 

2007 4.06% 1.64% 1.58% 0.41% 

2008 5.52% 1.43% 0.67% 0.07% 

Average 4.24% 1.54% 1.45% 0.47% 
Step 3. Select the maximum average percentage calculated in Step 2 and multiply it by 15, which is the length in 

weeks that it would take for significant imports to reach the U.S. in the event of a catastrophic domestic 

supply failure. The resulting product is the percentage that EPA uses to estimate the SCF. 

SCFPercent = Maximum Average Percentage from Step 2 x 15 

 

 = Q1Average x 15 

 

 = 4.24% x 15 

 

 = 63.6% 
MBIP Calculation of the SCF Percentage for 2011

Step 1. Calculate the percentage of annual production that was produced weekly in each calendar quarter for 

2005 through 2009 – the most recent year for which EPA had complete production data as of the date the 

proposed 2011 CUE rule was published. 

The below table shows the results of this calculation for each calendar quarter from 2005 through 2009: 

Percent of Annual Production Produced Weekly 

Q1 Q2 Q3 Q4 

2005 4.24% 0.50% 2.20% 0.75% 

2006 3.14% 2.57% 1.33% 0.65% 

2007 4.06% 1.64% 1.58% 0.41% 

2008 5.52% 1.43% 0.67% 0.07% 

2009 2.63% 2.68% 2.38% 0.00% 

Step 2. For each quarter, calculate the average of the percentages that were derived in Step 1. 

The below table shows the results of this calculation for each calendar quarter from 2005 through 2009: 

Percent of Annual Production Produced Weekly 

Q1 Q2 Q3 Q4 

2005 4.24% 0.50% 2.20% 0.75% 

2006 3.14% 2.57% 1.33% 0.65% 

2007 4.06% 1.64% 1.58% 0.41% 

2008 5.52% 1.43% 0.67% 0.07% 

2009 2.63% 2.68% 2.38% 0.00% 

Average 3.92% 1.76% 1.63% 0.38% 

Step 3. Select the maximum average percentage calculated in Step 2 and multiply it by 15. 

SCFPercent = Maximum Average Percentage from Step 2 x 15 

 

 = Q1Average x 15 

 

 = 3.92% x 15 

 

 = 58.8% 
MBIP Calculation of the SCF Percentage for 2012 

Based on All Historical Production Data Except 2006

Step 1. Calculate the percentage of annual production that was produced weekly in each calendar quarter for 

2005 and 2007 through 2010 – the most recent year for which EPA had complete production data as of 

the date the proposed 2012 CUE rule was published. 

The below table shows the results of this calculation for each calendar quarter: 

Percent of Annual Production Produced Weekly 

Q1 Q2 Q3 Q4 

2005 4.24% 0.50% 2.20% 0.75% 

2006 -- -- -- -- 

2007 4.06% 1.64% 1.58% 0.41% 

2008 5.52% 1.43% 0.67% 0.07% 

2009 2.63% 2.68% 2.38% 0.00% 

2010 7.00% 0.65% 0.04% 0.00% 

Step 2. For each quarter, calculate the average of the percentages that were derived in Step 1. 

The below table shows the results of this calculation for each calendar quarter: 

Percent of Annual Production Produced Weekly 

Q1 Q2 Q3 Q4 

2005 4.24% 0.50% 2.20% 0.75% 

2006 -- -- -- -- 

2007 4.06% 1.64% 1.58% 0.41% 

2008 5.52% 1.43% 0.67% 0.07% 

2009 2.63% 2.68% 2.38% 0.00% 

2010 7.00% 0.65% 0.04% 0.00% 

Average 4.69% 1.38% 1.37% 0.25% 

Step 3. Select the maximum average percentage calculated in Step 2 and multiply it by 15, which is the length in 

weeks that it would take for significant imports to reach the U.S. in the event of a catastrophic domestic 

supply failure. The resulting product is the percentage that EPA uses to estimate the SCF. 

SCFPercent = Maximum Average Percentage from Step 2 x 15 

 

 = Q1Average x 15 

 

 = 4.69% x 15 

 

 = 70.4% 
MBIP Calculation of the SCF Percentage for 2012 

Based on Two Most Recent Years of Production Data

Step 1. Calculate the percentage of annual production that was produced weekly in each calendar quarter for 

2010 and 2011. 

Percent of Annual Production Produced Weekly 

Q1 Q2 Q3 Q4 

2010 7.00% 0.65% 0.04% 0.00% 

2011 5.14% 1.86% 0.42% 0.27% 

Step 2. For each quarter, calculate the average of the percentages that were derived in Step 1. 

Percent of Annual Production Produced Weekly 

Q1 Q2 Q3 Q4 

2010 7.00% 0.65% 0.04% 0.00% 

2011 5.14% 1.86% 0.42% 0.27% 

Average 6.07% 1.26% 0.23% 0.14% 

Step 3. Select the maximum average percentage calculated in Step 2 and multiply it by 15. 

SCFPercent = Maximum Average Percentage from Step 2 x 15 

 

 = Q1Average x 15 

 

 = 6.07% x 15 

 

 = 91.1% 

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