To: David Donaldson/DC/USEPA/US@EPA, Luke Hall-Jordan/DC/USEPA/US@EPA, Elizabeth 

Whiteley/DC/USEPA/US@EPA, 

Cc:

Bcc:

Subject:

Fw: Summary of Interagency Comments under EO 12866/13563 -- Protection of 

Stratospheric Ozone: Adjustments to the Allowance System for Controlling HCFC 

Production, Import, and Export

From: Jeremy Arling/DC/USEPA/US - Tuesday 09/27/2011 10:20 AM

History: This message has been replied to and forwarded.

----- Forwarded by Jeremy Arling/DC/USEPA/US on 09/27/2011 10:19 AM -----

From: "Frey, Nathan J." <Nathan_J._Frey@omb.eop.gov>

To: Jeremy Arling/DC/USEPA/US@EPA

Cc: Drusilla Hufford/DC/USEPA/US@EPA, Cindy Newberg/DC/USEPA/US@EPA

Date: 09/27/2011 10:17 AM

Subject: Summary of Interagency Comments under EO 12866/13563 -- Protection of Stratospheric Ozone: 

Adjustments to the Allowance System for Controlling HCFC Production, Import, and Export

Attached please find a summary of interagency comments on the draft proposed rule, Adjustments to 

the Allowance System for Controlling HCFC Production, Import, and Export for 2012. Also attached are 

several letters from stakeholders referenced in the summary of interagency comments. 

Scan_Attachment-330155656-000.pdf EPA letter - Comments to Interim Final Rule August 5, 2011.pdfEPAletter.pdf

Letter to EPA re ICOR.PDF

Summary of Interagency Comments_2060-AQ98 HCFC Allowance Adjustments 2012.docx
ATTACHMENT 1 

Scan_Attachment-330155656-000.pdf

ATTACHMENT 2 

EPA letter – Comments to Interim Final Rule August 5, 2011.pdf
10640 East 59th Street • Indianapolis, IN 46236 • 317.826.3200 • 800.497.6805

www.icorinternational.com • icorinfo@icorinternational.com 

September 6, 2011 

Air and Radiation Docket and Information Center 

U.S. Environmental Protection Agency 

Mail code: 6102T 

1200 Pennsylvania Avenue, NW 

Washington, DC 20460 

Docket ID No. EPA-HQ-OAR-2010-1040 

Docket Title: Protection of Stratospheric Ozone: Adjustment of the Allowance System for 

Controlling HCFC Production, Import, and Export 

ICOR International, Inc. submits these comments on the Interim final rule dated August 5, 2011 

“Protection of Stratospheric Ozone: Adjustment of the Allowance System for Controlling HCFC 

Production, Import, and Export; Interim Final Rule.” 

We would like to thank the agency for the opportunity to provide comments on the above stated 

ruling. ICOR International, Inc. is a chemical company located in Indianapolis, Indiana with 

twenty-five employees and three facilities located in Indiana and Nevada. While we realize that 

the EPA’s Interim Final Rule is the result of decision issued by the U.S. Court of Appeals for the 

District of Columbia Circuit Court in Arkema v. EPA (618 F. 3d 1, DC Cir. 2010) regarding the 

December 15, 2009 final ruling titled “Protection of Stratospheric Ozone: Adjustment of the 

Allowance System for Controlling HCFC Production, Import, and Export” we would like to 

address inequities within the December 15, 2009 final rule which have created an unleveled 

playing field in the refrigerant industry. Additionally, we will address how the above stated 

ruling is created a disincentive for the reclamation of HCFC-22 and other refrigerants used in the 

air conditioning and refrigeration industry. 

On April 24, 2011 we met with EPA staff to discuss the current HCFC allocation system and its 

negative effects on the industry and our company. During that meeting we were encouraged, by 

EPA staff, to submit comments to the Interim Final Rule, which was due to be issued in the 

coming weeks. On May 17, 2011 we delivered a letter addressed to Drusilla Hufford, Director, 

Stratospheric Protection Division, Office of Atmospheric Programs discussing solutions that we 

believe will address the dysfunctional effects of the current HCFC allocation system. As of the 

drafting of this comment letter, our letter dated May 17, 2011 has not received a serious response 

from the EPA; therefore we would like to resubmit the content of that letter as our comments to 

the recently issued Interim Final rule. 
10640 East 59th Street • Indianapolis, IN 46236 • 317.826.3200 • 800.497.6805

www.icorinternational.com • icorinfo@icorinternational.com 

To recap, we asked, during our meeting, that EPA revise and recalibrate the baseline allocations 

to grant additional allocation to ICOR under the HCFC allocation system. Such allocation 

recalibration would reflect a small part of HCFC stocks which are currently permitted under the 

Montreal protocol allowances but not used by allocation holders. The granting to ICOR of such 

additional allocation is not prohibited either by the Montreal protocol or the Clean Air Act. Most 

importantly, our request would allow EPA to remedy an allocation system which has effectively 

become a cap and NO trade system, to the detriment of innovative smaller firms and the 

consumers they serve. During the meeting we reviewed several points: 

ICOR is a small business founded in 1989 by Jim and Karen Tieken. ICOR employs 25 

people in Indianapolis, Indiana, and Henderson, Nevada. ICOR manufactures both HCFC 

and HFC refrigerant blends, and is also an EPA approved refrigerant reclaimer. 

ICOR’s flagship product, Hot Shot (R-414B), has been manufactured by ICOR since 

1995, and is now the number one selling blended refrigerant replacement for R-12 in the 

United States and Canada. Sales of Hot Shot are the majority of ICOR’s total sales 

volume. 

Hot Shot is an HCFC refrigerant blend, and as such, the availability of the components to 

manufacture the product are controlled by EPA’s HCFC allocation rules designed to meet 

U.S. obligations under the Montreal Protocol to phase out ozone depleting substances. 

ICOR has very few allocation allowances to import the components it needs to 

manufacture Hot Shot. Although ICOR was making the product during the baseline 

periods designated in the rule, it was buying the components from domestic producers, 

and not importing the products, therefore the allocation allowances were awarded to the 

companies that either produced the components, or in one case, imported them for ICOR. 

During the last several years we have repeatedly warned EPA that the three companies 

that received approximately 90% of the total HCFC allocation would use the 

extraordinary competitive advantage that the HCFC allocation rule gave them to put 

small businesses like ICOR out of business by denying them the components to make 

products, or effectively reclaim HCFC refrigerants. 

This has come to pass and ICOR is at the breaking point. We have been starved of HCFC 

components. Two of three companies will not sell to ICOR, and the other will only sell 

one component, and has doubled the price this year. ICOR’s price for allocation is 130% 

of the cost of the refrigerant. 

This sorry situation is entirely a consequence of the mechanics of EPA’s allocation system, and 

completely unnecessary and irrelevant to meeting Montreal protocol standards. The adjustment 

ICOR seeks does not upset the current rule in which EPA grants HCFC import allowances 

depending if a firm produced or imported refrigerant during the baseline years. The allocation 

locked in an EPA sanctioned oligopoly, in which three firms control (but do not fully use)

nearly all the consumption allowances for key refrigerants granted by EPA. Now a decade after 

the baseline years we merely are requesting an updated recalibration, recognizing that millions of 
10640 East 59th Street • Indianapolis, IN 46236 • 317.826.3200 • 800.497.6805

www.icorinternational.com • icorinfo@icorinternational.com 

pounds of U.S. HCFC allowance is left unused every year. Failure to use some flexibility in 

applying these rules to a successful small innovative firm will yield the loss of the number one 

blended R-12 replacement in the industry, with forced conversion of hundreds of thousands of 

pieces of equipment to a less efficient, more costly alternative. 

The 2009 HCFC allocation rule considered five proposals to modify the 2003 rule. The 2003 rule 

was a cap and trade system - the allowances EPA allocated could be traded among companies 

producing and using the regulated HCFCs. The 2009 proposal reflected EPA’s intent to further 

phase down total U.S. baseline HCFC production and consumption. But to do this EPA adopted 

the option that most benefited the legacy chemical producers, effectively a continuation of the 

existing cap and trade system for R-22 and R-142b with further reductions in the caps, and 

extending the allocations to R 124 and other substances. 

The 2009 rule allocated nearly 120 million kg in R 22 consumption allowances, 87% of which is 

held by only three firms. The rule allocated about 21 million kg in R 142b allowances, all held 

by just four companies. As explained above, because the 2003 allocation system focused on 

legacy firms, our firm has no consumption allocation of its own for either substance under the 

2003 or 2009 rule. The 2009 rule did grant ICOR an allowance for R 124, 3.3% of the total 

allotted. Three companies received more than 94% of the R 124 allocation. 

What has resulted, as ICOR predicted, is now a system of cap and NO trade. The three 

producers with the majority of allocation are not using all their allocation, but now refuse to 

trade. EPA allowed no flexibility to empower small refrigerant manufacturers like ICOR to fill 

the consumer demand in existing equipment for our product or innovate new products. 

Further, EPA stated its intent that the allocation decrease would “promote recycling and 

reclamation, which in turn should prevent shortages which might otherwise occur upon the stepdown in 2015.” 74 Fed. Reg. 66418. Unfortunately, EPA did nothing to follow through that 

intent and ignored the opportunity to encourage refrigerant reclaimers by granting them HCFC 

allowance. This lack of action on reclaimers effectively allows large refrigerant producers to 

default into control of the reclamation industry, as a reclaimer must align itself with a producer 

to obtain the material to economically reclaim HCFCs. 

The 2009 rule was based on incorrect assumptions. They were incorrect at the time, and the 

inaccuracy has since been amply demonstrated by ICOR’s plight. In 2009 EPA stated 

“Option 1 does not automatically prohibit new entrants, as they could acquire allowances 

from existing allowance holders under the existing regulatory framework” 

“EPA believes that any new entrants following the ANPRM publication would not be 

precluded from entering the market, because they could purchase allowances from 

existing allowance holders who may not intend to use their full amount of allowances.” 

EPA was incorrect. There are millions of pounds of allowances unused every year which 

theoretically could be acquired by ICOR or other new entrants, but they are not for sale by the 

holders who benefitted from EPA’s original allocation grant. Additionally the effect of the large 
10640 East 59th Street • Indianapolis, IN 46236 • 317.826.3200 • 800.497.6805

www.icorinternational.com • icorinfo@icorinternational.com 

refrigerant producers sitting on unused allocation has been a steep increase in the market price of 

the relatively small remaining allocation which is for sale by small allocation holders. In 2011 

ICOR cannot purchase that unused allocation. 

As to reclamation, the EPA admitted in the 2009 rule that “Forty five commenters encouraged 

EPA to allocate HCFC-22 consumption allowances to reclaimers...” and that “...EPA also 

received two comments stating that allocations to reclaimers are not necessary...” One of the 

reasons EPA advanced to justify no reclaimer credit was that such a system would reduce the 

allocations of current allowance holders. 74 Fed.Reg. 66423. Of course it would, but is that a 

problem if new companies are providing valuable reclamation services! Isn't reclamation a 

responsible refrigerant policy goal, more important than slavish protection of the full allocation 

of the status quo companies? It is now very clear that the 45 supporters of allowing reclaimers 

HCFC allocation were correct, and that EPA's refusal to establish reclamation credit allocation 

was bad policy. 

The United States agreed to the Montreal Protocol, and use of the allotted amount of HCFCs 

should not be exclusive to the few companies selected by EPA. The companies given allotment 

should use it or lose it. The EPA’s HCFC allocation system has already shut down three 

refrigerant blenders this year, shuttered multiple reclamation facilities, and is going to put the 

employees of ICOR in the United States in the unemployment line if something is not changed in 

the HCFC allocation system. More importantly to our economy, the allocation system is 

preventing us and other independent producers from developing innovative products and moving 

to the next generation of refrigerants. 

The industry can live with the lower Montreal production and consumption levels, as long as 

there is trade in the caps, to meet demands and opportunities for innovation. By establishing in 

2003 and then further encouraging in 2009 a rigid system giving all advantages to a handful of 

large legacy producers, EPA is picking winners and losers, driving any innovative spark or 

energy from this line of commerce, and depriving US consumes of products which are more 

efficient and competitive than those produced by the EPA blessed allocation holders. 

The proper solution would be for the EPA to utilize 2008 and 2009 Consumption data and 

reallocate all unused HCFC Consumption Allowances from those not fully utilizing them to 

those manufacturers of HCFC products who either purchased HCFC products or the HCFC 

Consumption Allowances during 2008 and 2009. Additionally, the EPA should provide each 

EPA certified reclaimer, currently not holding HCFC-22 Allocation, HCFC-22 Consumption 

Allocation equal to two times their previous year’s HCFC-22 recovery activity. This process 

should begin in 2012, using 2011 reclamation data and continue until 2014. By implementing 

these two solutions the EPA would provide a more functional supply of HCFCs for domestic 

consumption of products that consumers demand. 

As requested, ICOR is providing the EPA with comments to the Interim Final rule. Over the past 

eight years ICOR has provided comments to EPA Proposed rulings, ICOR has communicated its 

view of the industry, ICOR has explained the impact of EPA regulations on the industry, and 

ICOR has shared information about the effects of the HCFC Allocation system. For the last eight 

years the EPA has also required that those without HCFC Allocation must pay those with HCFC 
10640 East 59th Street • Indianapolis, IN 46236 • 317.826.3200 • 800.497.6805

www.icorinternational.com • icorinfo@icorinternational.com 

Allocation in order to compete in the same industry. During the past eight years the EPA has 

continued to tell ICOR that HCFCs would be plentiful and we would be able to obtain the 

necessary HCFCs from those with HCFC Allocation. During the past eight years the EPA has 

received numerous requests from ICOR and other companies requesting that the HCFC 

Allocation system be modified in order to provide for greater competition. On December 15, 

2009 the EPA chose to maintain the status quo. On August 5, 2011 the EPA chose again to 

maintain the status quo. Now our industry has reached a point where EPA policy has caused 

some companies to discontinue offering their HCFC products. 

As always, we appreciate the opportunity to comment and will continue to provide the EPA with 

a small business’ view of regulatory proposals. 

Sincerely, 

Milton J. Cuevas II 

Vice President, CFO & COO 

Senator Daniel Coats 

B40E Dirksen Senate Office Building 

Washington DC 20510 

Congressman Dan Burton 

2308 Rayburn House Office Building 

Washington, D.C. 20515-0001 

Senator Harry Reid 

522 Hart Senate Office Building 

Washington DC 20510 

Congressman Mike Pence 

1431 Longworth HOB 

Washington, DC 20515 

Senator Dean Heller 

4 Russell Courtyard 

Washington, DC 20510 

Congressman Joe Heck 

132 Cannon HOB 

Washington, DC 20515 

Senator Jon Cornyn 

517 Hart Senate Office Building 

Washington DC 20510 

Congressman Pete Sessions 

2233 Rayburn House Office Building 

Washington, DC 20515-4332 

Senator Kay Bailey Hutchinson 

284 Russell Senate Office Building 

Washington DC 20510 

Congressman Fred Upton 

2183 Rayburn House Office Building 

Washington, D.C. 20515 

Senator James M. Inhofe 

205 Russell Senate Office Building 

Washington DC 20510 

 Congressman Darrell Issa 

2347 Rayburn House Office Building 

Washington, DC 20515 
ATTACHMENT 3 

EPAletter.pdf
May 17, 2011

Ms. Drusilla Hufford, Director, 

	

	


		




		
	
		

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Letter to EPA re ICOR.pdf


ATTACHMENT 5 

Summary of Interagency Comments_2060-AQ98 HCFC Allowance Adjustments 2012.docx
	



	



 


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1. Some stakeholders have expressed concern that EPA’s system of allocations has allowed 

for the existence of an oligopoly that is artificially limiting HCFCs in the economy by 

refusing to engage in the trading that is essential to mitigating the economic effects of 

an HCFC phaseout. If true, this should raise significant concerns that EPA’s program is 

contributing to the unnecessary stifling of the very innovation that EPA knows will be 

necessary in the post2015 environment. EPA should also be very wary of using current 

market conditions as a basis for speeding up the phaseout schedule, since both the 

economic recessions and failure of the trading system would depress production and 

consumption of HCFCs. 

It would be helpful to understand how EPA would respond to these concerns, including 

whether it can release production and consumption data to confirm ICOR’s allegations 

and how it will respond to ICOR’s petition for reallocation. It would also be helpful to 

better understand whether EPA has seen recycling and reclamation at the levels 

anticipated in the 2009 rulemaking and whether the misallocation of consumption 

allocations is impeding reclamation efforts. 

2. We would like to encourage EPA to consider whether the rule could or should allow for 

flexibility to lower further the overall amount of HCFC consumption and production 

allowances authorized, particularly for HCFC22. Doing so would help to foster the 

growth of an HCFC reclamation industry and create the right incentives to ensure that 

the United States is able to be a leader in meeting and exceeding phaseout obligations 

under the Montreal Protocol in a way that is environmentally responsible. It seems 

advisable to provide for incentives for reuse/reclamation, recognizing it needs to be 

done in a practical and balanced way. Doing so would also put the United States in a 

better position to promote a faster phaseout of HCFCs in other countries, which would 

provide significant ozone and climate benefits.