Federal Register / Vol. 77, No. 2 / Wednesday, January 4, 2012 / Proposed Rules 237 

attainment and reasonable further 

progress toward attainment of the 

NAAQS or any other applicable 

requirement of the Act. The Colorado 

SIP revisions that are proposed for 

approval in this action do not interfere 

with attainment of the NAAQS or any 

other applicable requirement of the Act. 

The revisions do not make substantive 

changes that relax the stringency of the 

Colorado SIP; instead, the submittal of 

Section 1.11 of Colorado’s procedural 

rule meets a requirement of the CAA. 

Therefore, the revisions proposed for 

approval satisfy section 110(l) 

requirements. 

V. Proposed Action 

We are proposing for approval Section 

1.11 of Colorado’s procedural rule as 

adopted by the Commission on January 

16, 1998, and submitted to EPA on 

November 5, 1999. We are also 

reproposing approval of a portion of 

Colorado’s January 7, 2008, submittal to 

meet the ‘‘infrastructure’’ requirements 

of section 110(a)(2) for the 1997 8-hour 

ozone NAAQS, specifically the portion 

intended to address the requirements of 

section 110(a)(2)(E)(ii) of the CAA. 

VI. Statutory and Executive Order 

Reviews 

Under the Clean Air Act, the 

Administrator is required to approve a 

SIP submission that complies with the 

provisions of the Act and applicable 

Federal regulations. 42 U.S.C. 7410(k); 

40 CFR 52.02(a). Thus, in reviewing SIP 

submissions, EPA’s role is to approve 

state choices, provided that they meet 

the criteria of the Clean Air Act. 

Accordingly, this proposed action 

merely approves state law as meeting 

Federal requirements and does not 

impose additional requirements beyond 

those imposed by state law. For that 

reason, this proposed action: 

• Is not a ‘‘significant regulatory 

action’’ subject to review by the Office 

of Management and Budget under 

Executive Order 12866 (58 FR 51735, 

October 4, 1993); 

• Does not impose an information 

collection burden under the provisions 

of the Paperwork Reduction Act (44 

U.S.C. 3501 et seq.); 

• Is certified as not having a 

significant economic impact on a 

substantial number of small entities 

under the Regulatory Flexibility Act 

(5 U.S.C. 601 et seq.); 

• Does not contain any unfunded 

mandate or significantly or uniquely 

affect small governments, as described 

in the Unfunded Mandates Reform Act 

of 1995 (Pub. L. 104–4); 

• Does not have Federalism 

implications as specified in Executive 

Order 13132 (64 FR 43255, August 10, 

1999); 

• Is not an economically significant 

regulatory action based on health or 

safety risks subject to Executive Order 

13045 (62 FR 19885, April 23, 1997); 

• Is not a significant regulatory action 

subject to Executive Order 13211 (66 FR 

28355, May 22, 2001); 

• Is not subject to requirements of 

Section 12(d) of the National 

Technology Transfer and Advancement 

Act of 1995 (15 U.S.C. 272 note) because 

application of those requirements would 

be inconsistent with the Clean Air Act; 

and 

• Does not provide EPA with the 

discretionary authority to address, as 

appropriate, disproportionate human 

health or environmental effects, using 

practicable and legally permissible 

methods, under Executive Order 12898 

(59 FR 7629, February 16, 1994). 

In addition, this rule does not have 

tribal implications as specified by 

Executive Order 13175 (65 FR 67249, 

November 9, 2000), because the SIP is 

not approved to apply in Indian country 

located in the state, and EPA notes that 

it will not impose substantial direct 

costs on tribal governments or preempt 

tribal law. 

List of Subjects in 40 CFR Part 52 

Environmental protection, Air 

pollution control, Carbon monoxide, 

Intergovernmental relations, Lead, 

Nitrogen dioxide, Ozone, Particulate 

matter, Reporting and recordkeeping 

requirements, Sulfur oxides, Volatile 

organic compounds. 

Dated: December 23, 2011. 

James B. Martin, 

Regional Administrator, Region 8. 

[FR Doc. 2011–33760 Filed 1–3–12; 8:45 am] 

BILLING CODE 6560–50–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 82 

[EPA–HQ–OAR–2011–0354; FRL–9614–5] 

RIN 2060–AQ98 

Protection of Stratospheric Ozone: 

Adjustments to the Allowance System 

for Controlling HCFC Production, 

Import, and Export 

AGENCY: Environmental Protection 

Agency [EPA]. 

ACTION: Proposed rule. 

SUMMARY: EPA is proposing to adjust the 

allowance system controlling U.S. 

consumption and production of 

hydrochlorofluorocarbons (HCFCs) as a 

result of a recent court decision vacating 

a portion of the rule titled ‘‘Protection 

of Stratospheric Ozone: Adjustments to 

the Allowance System for Controlling 

HCFC Production, Import, and Export; 

Final Rule.’’ EPA interprets the court’s 

vacatur as applying to the part of the 

rule that establishes the company-bycompany baselines and calendar-year 

allowances for HCFC–22 and HCFC– 

142b. Following the August 5, 2011 

interim final rule allocating allowances 

for 2011, this action proposes to relieve 

the regulatory ban on production and 

consumption of these two chemicals 

following the court’s vacatur by 

establishing company-by-company 

HCFC–22 and HCFC–142b baselines and 

allocating production and consumption 

allowances for 2012–2014. 

DATES: Written comments on this 

proposed rule must be received by the 

EPA Docket on or before February 3, 

2012, unless a public hearing is 

requested. Any party requesting a public 

hearing must notify the contact listed 

below under FOR FURTHER INFORMATION

CONTACT by 5 p.m. Eastern Standard 

Time on January 11, 2012. If a public 

hearing is requested, the hearing would 

be held on January 19, 2012 and 

commenters will have until February 

21, 2012 to submit comments before the 

close of the comment period. If a 

hearing is held, it will take place at EPA 

headquarters in Washington, DC. EPA 

will post a notice on our Web site, 

http://www.epa.gov/ozone/ 

strathome.html, announcing further 

information should a hearing take place. 

ADDRESSES: Submit your comments, 

identified by Docket ID No. EPA–HQ– 

OAR–2011–0354, by one of the 

following methods: 

• www.regulations.gov: Follow the 

on-line instructions for submitting 

comments. 

• Email: a-and-r-docket@epa.gov. 

• Mail: Docket # EPA–HQ–OAR– 

2011–0354, Air and Radiation Docket 

and Information Center, U.S. 

Environmental Protection Agency, Mail 

code: 6102T, 1200 Pennsylvania Ave. 

NW., Washington, DC 20460. 

• Hand Delivery: Docket #EPA–HQ– 

OAR–2011–0354 Air and Radiation 

Docket at EPA West, 1301 Constitution 

Avenue NW., Room B108, Mail Code 

6102T, Washington, DC 20004. Such 

deliveries are only accepted during the 

Docket’s normal hours of operation, and 

special arrangements should be made 

for deliveries of boxed information. 

Instructions: Direct your comments to 

Docket ID No. EPA–HQ–OAR–2011– 

0354. EPA’s policy is that all comments 

received will be included in the public 

docket without change and may be 


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238 Federal Register / Vol. 77, No. 2 / Wednesday, January 4, 2012 / Proposed Rules 

made available online at 

www.regulations.gov, including any 

personal information provided, unless 

the comment includes information 

claimed to be Confidential Business 

Information (CBI) or other information 

whose disclosure is restricted by statute. 

Do not submit information that you 

consider to be CBI or otherwise 

protected through www.regulations.gov 

or email. The www.regulations.gov Web 

site is an ‘‘anonymous access’’ system, 

which means EPA will not know your 

identity or contact information unless 

you provide it in the body of your 

comment. If you send an email 

comment directly to EPA without going 

through www.regulations.gov, your 

email address will be automatically 

captured and included as part of the 

comment that is placed in the public 

docket and made available on the 

Internet. If you submit an electronic 

comment, EPA recommends that you 

include your name and other contact 

information in the body of your 

comment and with any disk or CD–ROM 

you submit. If EPA cannot read your 

comment due to technical difficulties 

and cannot contact you for clarification, 

EPA may not be able to consider your 

comment. Electronic files should avoid 

the use of special characters, any form 

of encryption, and be free of any defects 

or viruses. For additional information 

about EPA’s public docket, visit the EPA 

Docket Center homepage at 

www.epa.gov/epahome/dockets.htm. 

FOR FURTHER INFORMATION CONTACT: 

Luke H. Hall-Jordan by telephone at 

(202) 343–9591, or by email at halljordan.luke@epa.gov, or by mail at U.S. 

Environmental Protection Agency, 

Stratospheric Protection Division, 

Stratospheric Program Implementation 

Branch (6205J), 1200 Pennsylvania 

Avenue NW., Washington, DC 20460. 

You may also visit the Ozone Protection 

Web site of EPA’s Stratospheric 

Protection Division at www.epa.gov/ 

ozone/strathome.html for further 

information about EPA’s Stratospheric 

Ozone Protection regulations, the 

science of ozone layer depletion, and 

related topics. 

SUPPLEMENTARY INFORMATION: 

Acronyms and Abbreviations. The 

following acronyms and abbreviations 

are used in this document. 

CAA—Clean Air Act 

CAAA—Clean Air Act Amendments of 1990 

CFC—Chlorofluorocarbon 

CFR—Code of Federal Regulations 

EPA—Environmental Protection Agency 

FR—Federal Register 

HCFC—Hydrochlorofluorocarbon 

HVAC—Heating, Ventilating, and Air 

Conditioning 

Montreal Protocol—Montreal Protocol on 

Substances that Deplete the Ozone Layer 

MOP—Meeting of the Parties 

MT—Metric Ton 

ODP—Ozone Depletion Potential 

ODS—Ozone-Depleting Substances 

Party—States and regional economic 

integration organizations that have 

consented to be bound by the Montreal 

Protocol on Substances that Deplete the 

Ozone Layer 

Organization of This Document. The 

following outline is provided to aid in 

locating information in this preamble. 

I. General Information 

A. Does this action apply to me? 

B. What should I consider as I prepare my 

comments for EPA? 

1. Confidential Business Information (CBI) 

2. Tips for Preparing Your Comments 

II. Background 

A. How does the Montreal Protocol phase 

out HCFCs? 

B. How does the Clean Air Act phase out 

HCFCs? 

C. What sections of the Clean Air Act apply 

to this rulemaking? 

D. How does this action relate to the recent 

court decision? 

E. Comments Relevant to Recovery and 

Reclamation Issues in This Rulemaking 

Submitted in Response to the 2011 

Interim Final Rule Allocating HCFC 

Allowances 

III. How does EPA propose to allocate HCFC– 

22 and HCFC–142b allowances for 2012– 

2014? 

A. What baselines does EPA propose to use 

for HCFC–22 and HCFC–142b 

allowances? 

B. What factors did EPA consider in 

proposing allocation amounts for HCFC– 

22 and HCFC–142b? 

1. How important is HCFC–22 relative to 

HCFC–142b for servicing existing 

equipment? 

2. Can servicing needs be met with virgin 

and recovered material? 

3. How would the allocation decline? 

4. How will EPA address the court’s 

decision with regard to 2010 HCFC 

allowances? 

C. How Much HCFC–22 and HCFC–142b 

would be allocated in 2012–2014? 

1. How does EPA propose to allocate 

HCFC–22 consumption allowances for 

2012–2014? 

2. How does EPA Propose to allocate 

HCFC–22 production allowances for 

2012–2014? 

3. How does EPA propose to allocate 

HCFC–142b consumption and 

production allowances for 2012–2014? 

4. How would the aggregate for HCFC–22 

and HCFC–142b translate entity-byentity? 

D. Are HCFC–141b, HCFC–123, HCFC–124, 

HCFC–225ca, and HCFC–225cb 

allowances affected by this rulemaking? 

E. How will EPA allocate other HCFCs? 

IV. How does EPA propose to change the 

regulations governing transfers of 

allowances of Class II Controlled 

Substances? 

A. How does EPA propose to change the 

regulations governing permanent 

transfers of Class II Allowances? 

B. How does EPA propose to change the 

regulations governing transfers of Article 

5 HCFC Allowances? 

V. Statutory and Executive Order Reviews 

A. Executive Order 12866: Regulatory 

Planning and Review and Executive 

Order 13563: Improving Regulation and 

Regulatory Review 

B. Paperwork Reduction Act 

C. Regulatory Flexibility Act (RFA) 

D. Unfunded Mandates Reform Act 

E. Executive Order 13132: Federalism 

F. Executive Order 13175: Consultation 

and Coordination With Indian Tribal 

Governments 

G. Executive Order 13045: Protection of 

Children From Environmental Health 

and Safety Risks 

H. Executive Order 13211: Actions That 

Significantly Affect Energy Supply, 

Distribution, or Use 

I. National Technology Transfer and 

Advancement Act 

J. Executive Order 12898: Federal Actions 

To Address Environmental Justice in 

Minority Populations and Low-Income 

Populations 

I. General Information 

A. Does this action apply to me? 

This rule will affect the following 

categories: 

—Industrial Gas Manufacturing entities 

(NAICS code 325120), including 

fluorinated hydrocarbon gases 

manufacturers and reclaimers; 

—Other Chemical and Allied Products 

Merchant Wholesalers (NAICS code 

422690), including chemical gases 

and compressed gases merchant 

wholesalers; 

—Air-Conditioning and Warm Air 

Heating Equipment and Commercial 

and Industrial Refrigeration 

Equipment Manufacturing entities 

(NAICS code 333415), including airconditioning equipment and 

commercial and industrial 

refrigeration equipment 

manufacturers; 

—Air-Conditioning Equipment and 

Supplies Merchant Wholesalers 

(NAICS code 423730), including airconditioning (condensing unit, 

compressors) merchant wholesalers; 

—Electrical and Electronic Appliance, 

Television, and Radio Set Merchant 

Wholesalers (NAICS code 423620), 

including air-conditioning (room 

units) merchant wholesalers; and 

—Plumbing, Heating, and AirConditioning Contractors (NAICS 

code 238220), including Central airconditioning system and commercial 

refrigeration installation; HVAC 

contractors. 

This list is not intended to be 

exhaustive, but rather provides a guide 


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1Class I refers to the controlled substances listed 

in appendix A to 40 CFR part 82 subpart A. Class 

II refers to the controlled substances listed in 

appendix B to 40 CFR part 82 subpart A. 

for readers regarding entities likely to be 

regulated by this action. This table lists 

the types of entities that could 

potentially be regulated by this action. 

Other types of entities not listed in this 

table could also be affected. To 

determine whether your facility, 

company, business organization, or 

other entity is regulated by this action, 

you should carefully examine these 

regulations. If you have questions 

regarding the applicability of this action 

to a particular entity, consult the person 

listed in the FOR FURTHER INFORMATION

CONTACT section. 

B. What should I consider as I prepare 

my comments for EPA? 

1. Confidential Business Information 

(CBI) 

Do not submit confidential business 

information (CBI) to EPA through 

www.regulations.gov or email. Clearly 

mark the part or all of the information 

that you claim to be CBI. For CBI 

information in a disk or CD–ROM that 

you mail to EPA, mark the outside of the 

disk or CD–ROM as CBI and then 

identify electronically within the disk or 

CD–ROM the specific information that 

is claimed as CBI. In addition to one 

complete version of the comment that 

includes information claimed as CBI, a 

copy of the comment that does not 

contain the information claimed as CBI 

must be submitted for inclusion in the 

public docket. Information so marked 

will not be disclosed except in 

accordance with procedures set forth in 

40 CFR 2.2. 

2. Tips for Preparing Your Comments 

When submitting comments, 

remember to do the following: 

• Identify the rulemaking by docket 

number and other identifying 

information (subject heading, Federal 

Register date and page number). 

• Follow directions. The Agency may 

ask you to respond to specific questions 

or organize comments by referencing a 

Code of Federal Regulations (CFR) part 

or section number. 

• Explain why you agree or disagree 

with the proposal; suggest alternatives 

and substitute language for your 

requested changes. 

• Describe any assumptions and 

provide any technical information and/ 

or data that you used in preparing your 

comments. 

• If you estimate potential costs or 

burdens, explain how you arrived at 

your estimate in sufficient detail to 

allow for it to be reproduced. 

• Provide specific examples to 

illustrate your concerns, and suggest 

alternatives. 

• Explain your views as clearly as 

possible, avoiding the use of profanity 

or personal threats. 

• Make sure to submit your 

comments by the comment period 

deadline identified. 

II. Background 

EPA is undertaking this rulemaking as 

a result of the 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 

rule titled ‘‘Protection of Stratospheric 

Ozone: Adjustments to the Allowance 

System for Controlling HCFC 

Production, Import, and Export,’’ 

published at 74 FR 66413 (2009 Final 

Rule). Certain allowance holders 

affected by the 2009 Final Rule filed 

petitions for judicial review of the rule 

under section 307(b) of the Clean Air 

Act. Among other arguments, the 

petitioners contended that the rule was 

impermissibly retroactive because in 

setting the baselines for the new 

regulatory period, EPA did not take into 

account certain inter-pollutant baseline 

transfers that petitioners had performed 

during the prior regulatory period. 

The Court issued a decision on 

August 27, 2010, agreeing with 

petitioners that ‘‘the [2009] Final Rule 

unacceptably alters transactions the 

EPA approved under the 2003 Rule,’’ 

(Arkema v. EPA, 618 F.3d at 3). The 

Court vacated the rule in part, ‘‘insofar 

as it operates retroactively,’’ and 

remanded to EPA ‘‘for prompt 

resolution,’’ (618 F.3d at 10). The Court 

withheld the mandate for the decision 

pending the disposition of any petition 

for rehearing. EPA’s petition for 

rehearing was denied on January 21, 

2011. The mandate issued on February 

4, 2011. More detail is provided on the 

case and EPA’s interpretation of the 

Court’s decision in section II.D. of this 

preamble. 

EPA addressed the Court’s partial 

vacatur as it relates to 2011 in an August 

5, 2011, interim final rule, ‘‘Protection 

of Stratospheric Ozone: Adjustments to 

the Allowance System for Controlling 

HCFC Production, Import, and Export,’’ 

(2011 Interim Final Rule). This 

proposed rule is a follow-on to that 

action, and proposes a path forward for 

the remainder of the regulatory period 

ending on December 31, 2014. 

A. How does the Montreal Protocol 

phase out HCFCs? 

The Montreal Protocol on Substances 

that Deplete the Ozone Layer is the 

international agreement aimed at 

reducing and eventually eliminating the 

production and consumption of 

stratospheric ozone-depleting 

substances (ODS). The U.S. was one of 

the original signatories to the 1987 

Montreal Protocol and the U.S. ratified 

the Protocol on April 12, 1988. Congress 

then enacted, and President George 

H.W. Bush signed into law, the Clean 

Air Act Amendments of 1990 (CAAA), 

which included Title VI on 

Stratospheric Ozone Protection, codified 

as 42 U.S.C. Chapter 85, Subchapter VI, 

to ensure that the U.S. could satisfy its 

obligations under the Montreal Protocol. 

Title VI includes restrictions on 

production, consumption, and use of 

ODS that are subject to acceleration if 

‘‘the Montreal Protocol is modified to 

include a schedule to control or reduce 

production, consumption, or use * * * 

more rapidly than the applicable 

schedule’’ prescribed by the statute 

(CAA § 606). Both the Montreal Protocol 

and the Clean Air Act (CAA) define 

consumption as production plus 

imports minus exports. 

In 1990, as part of the London 

Amendment to the Montreal Protocol, 

the Parties identified HCFCs as 

‘‘transitional substances’’ to serve as 

temporary, lower ozone depletion 

potential (ODP) substitutes for CFCs and 

other ODS. EPA similarly viewed 

HCFCs as ‘‘important interim substitutes 

that will allow for the earliest possible 

phaseout of CFCs and other Class I 

substances’’1 (58 FR 65026). In 1992, 

through the Copenhagen Amendment to 

the Montreal Protocol, the Parties 

created a detailed phaseout schedule for 

HCFCs beginning with a cap on 

consumption for developed countries 

not operating under Article 5 of the 

Montreal Protocol (non-Article 5 

Parties), a schedule to which the U.S. 

adheres. The consumption cap for each 

non-Article 5 Party was set at 3.1 

percent (later tightened to 2.8 percent) 

of a Party’s CFC consumption in 1989, 

plus a Party’s consumption of HCFCs in 

1989 (weighted on an ODP basis). Based 

on this formula, the HCFC consumption 

cap for the U.S. was 15,240 ODPweighted metric tons (MT), effective 

January 1, 1996. This became the U.S. 

consumption baseline for HCFCs. 

The 1992 Copenhagen Amendment 

created a schedule with graduated 

reductions and the eventual phaseout of 

HCFC consumption (Copenhagen, 23–25 

November, 1992, Decision IV/4). Prior to 

a later adjustment in 2007, the schedule 

initially called for a 35 percent 

reduction of the consumption cap in 

2004, followed by a 65 percent 


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240 Federal Register / Vol. 77, No. 2 / Wednesday, January 4, 2012 / Proposed Rules 

2Under Article 2(9)(d) of the Montreal Protocol, 

an adjustment enters into force six months from the 

date the depositary (the Ozone Secretariat) 

circulates it to the Parties. The depositary accepts 

all notifications and documents related to the 

Protocol and examines whether all formal 

requirements are met. In accordance with the 

procedure in Article 2(9)(d), the depositary 

communicated the adjustment to all Parties on 

November 14, 2007. The adjustment entered into 

force and became binding for all Parties on May 14, 

2008. 

3Paragraphs 4–6 of adjusted Article 2F read as 

follows: 

‘‘4. Each Party shall ensure that for the twelvemonth period commencing on 1 January 2010, and 

in each twelve-month period thereafter, its 

calculated level of consumption of the controlled 

substances in Group I of Annex C does not exceed, 

annually, twenty-five per cent of the sum referred 

to in paragraph 1 of this Article. Each Party 

producing one or more of these substances shall, for 

the same periods, ensure that its calculated level of 

production of the controlled substances in Group I 

of Annex C does not exceed, annually, twenty-five 

per cent of the calculated level referred to in 

paragraph 2 of this Article. However, in order to 

satisfy the basic domestic needs of the Parties 

operating under paragraph 1 of Article 5, its 

calculated level of production may exceed that limit 

by up to ten per cent of its calculated level of 

production of the controlled substances in Group I 

of Annex C as referred to in paragraph 2. 

5. Each Party shall ensure that for the twelvemonth period commencing on 1 January 2015, and 

in each twelve-month period thereafter, its 

calculated level of consumption of the controlled 

substances in Group I of Annex C does not exceed, 

annually, ten per cent of the sum referred to in 

paragraph 1 of this Article. Each Party producing 

one or more of these substances shall, for the same 

periods, ensure that its calculated level of 

production of the controlled substances in Group I 

of Annex C does not exceed, annually, ten per cent 

of the calculated level referred to in paragraph 2 of 

this Article. However, in order to satisfy the basic 

domestic needs of the Parties operating under 

paragraph 1 of Article 5, its calculated level of 

production may exceed that limit by up to ten per 

cent of its calculated level of production of the 

controlled substances in Group I of Annex C as 

referred to in paragraph 2. 

6. Each Party shall ensure that for the twelvemonth period commencing on 1 January 2020, and 

in each twelve-month period thereafter, its 

calculated level of consumption of the controlled 

substances in Group I of Annex C does not exceed 

zero. Each Party producing one or more of these 

substances shall, for the same periods, ensure that 

its calculated level of production of the controlled 

substances in Group I of Annex C does not exceed 

zero. However: 

i. each Party may exceed that limit on 

consumption by up to zero point five per cent of 

the sum referred to in paragraph 1 of this Article 

in any such twelve-month period ending before 1 

January 2030, provided that such consumption 

shall be restricted to the servicing of refrigeration 

and air conditioning equipment existing on 1 

January 2020; 

ii. each Party may exceed that limit on 

production by up to zero point five per cent of the 

average referred to in paragraph 2 of this Article in 

any such twelve-month period ending before 1 

January 2030, provided that such production shall 

be restricted to the servicing of refrigeration and air 

conditioning equipment existing on 1 January 

2020.’’ 

reduction in 2010, a 90 percent 

reduction in 2015, a 99.5 percent 

reduction in 2020 (restricting the 

remaining 0.5 percent of baseline to the 

servicing of existing refrigeration and 

air-conditioning equipment), with a 

total phaseout in 2030. 

The Copenhagen Amendment did not 

cap HCFC production. In 1999, the 

Parties created a cap on production for 

Non-Article 5 Parties through an 

amendment to the Montreal Protocol 

agreed by the Eleventh Meeting of the 

Parties (Beijing, 29 November—3 

December 1999, Decision XI/5). The cap 

on production was set at the average of: 

(a) 1989 HCFC production plus 2.8 

percent of 1989 CFC production, and (b) 

1989 HCFC consumption plus 2.8 

percent of 1989 CFC consumption. 

Based on this formula, the HCFC 

production cap for the U.S. was 15,537 

ODP-weighted MT, effective January 1, 

2004. This became the U.S. production 

baseline for HCFCs. 

To further protect human health and 

the environment, the Parties to the 

Montreal Protocol adjusted the Montreal 

Protocol’s phaseout schedule for HCFCs 

at the 19th Meeting of the Parties in 

September 2007. In accordance with 

Article 2(9)(d) of the Montreal Protocol, 

the adjustment to the phaseout schedule 

was effective on May 14, 2008.2

As a result of the 2007 Montreal 

Adjustment (reflected in Decision XIX/ 

6), the U.S. and other developed 

countries are obligated to reduce HCFC 

production and consumption 75 percent 

below the established baseline by 2010, 

rather than 65 percent as previously 

required. The other milestones remain 

the same. The adjustment also resulted 

in a phaseout schedule for HCFC 

production that parallels the 

consumption phaseout schedule. All 

production and consumption for NonArticle 5 Parties is phased out by 2030. 

Decision XIX/6 also adjusted the 

provisions for Parties operating under 

paragraph 1 of Article 5 (developing 

countries): (1) To set HCFC production 

and consumption baselines based on the 

average 2009–2010 production and 

consumption, respectively; (2) to freeze 

HCFC production and consumption at 

those baselines in 2013; and (3) to add 

stepwise reductions of 10 percent below 

baselines by 2015, 35 percent by 2020, 

67.5 percent by 2025, and 97.5 percent 

by 2030—allowing, between 2030 and 

2040, an annual average of no more than 

2.5 percent to be produced or imported 

solely for servicing existing airconditioning and refrigeration 

equipment. All production and 

consumption for Article 5 Parties will 

be phased out by 2040. 

In addition, Decision XIX/6 adjusted 

Article 2F to allow developed countries 

to produce ‘‘up to 10 percent of baseline 

levels’’ for export to Article 5 countries 

‘‘in order to satisfy basic domestic 

needs’’ until 2020.3 Paragraph 14 of 

Decision XIX/6 notes that no later than 

2015, the Parties would consider 

‘‘further reduction of production for 

basic domestic needs’’ in 2020 and 

beyond. Under paragraph 13 of Decision 

XIX/6, the Parties will review in 2015 

and 2025, respectively, the need for the 

‘‘servicing tails’’ for developed and 

developing countries. The term 

‘‘servicing tail’’ refers to an amount of 

HCFCs used to service existing 

equipment, such as certain types of airconditioning and refrigeration 

appliances. 

B. How does the clean air act phase out 

HCFCs? 

The U.S. has chosen to implement the 

Montreal Protocol phaseout schedule on 

a chemical-by-chemical basis. In 1992, 

environmental and industry groups 

petitioned EPA to implement the 

required phaseout by eliminating the 

most ozone-depleting HCFCs first. 

Based on the available data at that time, 

EPA believed the U.S. could meet, and 

possibly exceed, the required Montreal 

Protocol reductions through a chemicalby-chemical phaseout that employed a 

‘‘worst-first’’ approach focusing on 

certain chemicals earlier than others. In 

1993, as authorized by section 606 of 

the CAA, the U.S. established a 

phaseout schedule that eliminated 

HCFC–141b first and would greatly 

restrict HCFC–142b and HCFC–22 next, 

followed by restrictions on all other 

HCFCs and ultimately a complete 

phaseout (58 FR 15014, March 18, 1993; 

58 FR 65018, December 10, 1993). 

On January 21, 2003 (68 FR 2820), 

EPA promulgated regulations (2003 

Final Rule) to ensure compliance with 

the first reduction milestone in the 

HCFC phaseout: The requirement that 

by January 1, 2004, the U.S. reduce 

HCFC consumption by 35 percent and 

freeze HCFC production. In the 2003 

Final Rule, EPA established chemicalspecific consumption and production 

baselines for HCFC–141b, HCFC–22, 

and HCFC–142b for the initial 

regulatory period ending December 31, 

2009. Section 601(2) states that EPA 

may select ‘‘a representative calendar 

year’’ to serve as the company baseline 

for HCFCs. In the 2003 Final Rule, EPA 

concluded that because the entities 

eligible for allowances had differing 

production and import histories, no 

single year was representative for all 

companies. Therefore, EPA assigned an 

individual consumption baseline year to 

each company by selecting its highest 

ODP-weighted consumption year from 

among the years 1994 through 1997. 


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EPA assigned individual production 

baseline years in the same manner. EPA 

also provided for new entrants that 

began importing after the end of 1997 

but before April 5, 1999, the date the 

advanced notice of proposed 

rulemaking was published. EPA took 

this action to ensure that small 

businesses that might not have been 

aware of the impending rulemaking 

would be able to continue in the HCFC 

market. 

The 2003 Final Rule apportioned 

production and consumption baselines 

to each company in amounts equal to 

the amounts in the company’s highest 

‘‘production year’’ or ‘‘consumption 

year,’’ as described above. It completely 

phased out the production and import 

of HCFC–141b by granting 0 percent of 

that substance’s baseline for production 

and consumption in the table at 40 CFR 

82.16. EPA did, however, create a 

petition process to allow applicants to 

request small amounts of HCFC–141b 

beyond the phaseout. The 2003 Final 

Rule also granted 100 percent of the 

baselines for production and 

consumption of HCFC–22 and HCFC– 

142b for each of the years 2003 through 

2009. EPA was able to allocate 

allowances for HCFC–22 and HCFC– 

142b at 100 percent of baseline because, 

in light of the concurrent complete 

phaseout of HCFC–141b, the allocations 

for HCFC–22 and HCFC–142b, 

combined with projections for 

consumption of all other HCFCs, 

remained below the 2004 cap of 65 

percent of the U.S. baseline. 

EPA allocates allowances for specific 

years; they are valid between January 1 

and December 31 of a given control 

period (i.e., calendar year). Prior to 

December 15, 2009, EPA had not 

allocated any HCFC allowances for year 

2010 or beyond. The regulations at 

section 82.15(a) and (b) only addressed 

the production and import of HCFC–22 

and HCFC–142b for the years 2003– 

2009. Through the 2009 Final Rule (74 

FR 66412), EPA addressed the 

production and import of HCFC–22 and 

HCFC–142b for the 2010–2014 control 

periods. Absent the granting of 

calendar-year allowances, section 82.15 

would have prohibited the production 

and import of HCFC–22 and HCFC– 

142b after December 31, 2009. The 2009 

Final Rule allowed for continued 

production and consumption, at 

specified amounts, of HCFC–142b, 

HCFC–22, and other HCFCs not 

previously included in the allowance 

system, for the 2010–2014 control 

periods. 

In the U.S., an allowance is the unit 

of measure that controls production and 

consumption of ODS. EPA establishes 

company-by-company baselines (also 

known as ‘‘baseline allowances’’) and 

allocates calendar-year allowances equal 

to a percentage of the baseline for 

specified control periods. A calendaryear allowance represents the privilege 

granted to a company to produce or 

import one kilogram (not ODPweighted) of the specific substance. EPA 

allocates two types of calendar-year 

allowances—production allowances and 

consumption allowances. ‘‘Production 

allowance’’ and ‘‘consumption 

allowance’’ are defined at section 82.3. 

To produce an HCFC for which 

allowances have been allocated, an 

allowance holder must expend both 

production and consumption 

allowances. To import an HCFC for 

which allowances have been allocated, 

an allowance holder must expend 

consumption allowances. An allowance 

holder exporting HCFCs for which it has 

expended consumption allowances may 

obtain a refund of those consumption 

allowances upon submittal of proper 

documentation to EPA. 

Since EPA is implementing the 

phaseout on a chemical-by-chemical 

basis, it allocates and tracks production 

and consumption allowances on an 

absolute kilogram basis for each 

chemical. Upon EPA approval, an 

allowance holder may transfer calendaryear allowances of one type of HCFC for 

calendar-year allowances of another 

type of HCFC, with transactions 

weighted according to the ODP of the 

chemicals involved. Pursuant to section 

607 of the CAA, EPA applies an offset 

to each HCFC transfer by deducting 0.1 

percent from the transferor’s allowance 

balance. The offset benefits the ozone 

layer since it ‘‘results in greater total 

reductions in the production in each 

year of * * * class II substances than 

would occur in that year in the absence 

of such transactions’’ (42 U.S.C. 7671f). 

The U.S. remained comfortably below 

the aggregate HCFC cap through 2009. 

The 2003 Final Rule announced that 

EPA would allocate allowances for 

2010–2014 in a subsequent action and 

that those allowances would be lower in 

aggregate than for 2003–2009, consistent 

with the next stepwise reduction for 

HCFCs under the Montreal Protocol. 

EPA stated its intention to determine 

the number of allowances that would be 

needed for HCFC–22 and HCFC–142b, 

bearing in mind that other HCFCs 

would also contribute to total HCFC 

consumption. EPA noted that it would 

likely achieve the 2010 reduction step 

by applying a percentage reduction to 

the HCFC–22 and HCFC–142b baselines. 

EPA subsequently monitored the market 

to estimate servicing needs and market 

adjustments in the use of HCFCs, 

including HCFCs for which EPA did not 

establish baselines in the 2003 Final 

Rule. 

In the 2009 Final Rule, EPA 

determined both the estimated demand 

for HCFC–22 during the 2010–2014 

regulatory period and the percentage of 

that estimated demand for which it was 

appropriate to allocate allowances. As 

described in section III.B. of this action, 

EPA determined that the percentage of 

the estimated demand allocated in the 

form of allowances should not remain 

constant from year to year but rather 

should decline on an annual basis. For 

2010, EPA allocated allowances equal to 

80 percent of the estimated demand for 

HCFC–22, concluding that reused, 

recycled, and reclaimed material could 

meet the remaining 20 percent. Under 

the 2009 Final Rule, the percentage of 

estimated demand for which there was 

no allocation, and therefore would need 

to be met through recycling and 

reclamation, rose from 20 percent in 

2010 to 29 percent in 2014 to ensure the 

U.S. market would have a viable 

reclamation industry and could meet 

the 2015 stepwise reduction under the 

Montreal Protocol. 

The determinations EPA made in the 

2009 Final Rule regarding (1) the total 

estimated demand for HCFC–22 in 

2010–2014 and (2) the percentage of that 

estimated demand that EPA would 

address through an allowance allocation 

were not at issue in the litigation and 

are unaffected by the Court’s decision. 

As such, EPA did not revisit either 

determination with respect to 2011 in 

the 2011 Interim Final Rule (76 FR 

47451), but rather relied on the existing 

record from the 2009 Final Rule (74 FR 

66412). The 2011 Interim Final Rule 

established new baselines that (1) 

credited the 2008 inter-pollutant trades 

at issue in Arkema v. EPA based on the 

Court’s decision and (2) reflected intercompany, single-pollutant baseline 

transfers that occurred since the 2009 

Final Rule was signed. The 2011 Interim 

Final Rule also (3) allocated HCFC–22 

and HCFC–142b allowances for 2011, 

(4) clarified EPA’s policy on all future 

inter-pollutant transfers, and (5) 

updated company names. 

C. What sections of the Clean Air Act 

apply to this rulemaking? 

Several sections of the CAA apply to 

this rulemaking. Section 605 of the CAA 

phases out production and consumption 

and restricts the use of HCFCs in 

accordance with the schedule set forth 

in that section. As discussed in the 2009 

Final Rule (74 FR 66416), section 606 

provides EPA authority to set a more 

stringent phaseout schedule than the 

schedule in section 605 based on an 


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EPA determination regarding current 

scientific information or the availability 

of substitutes, or to conform to any 

acceleration under the Montreal 

Protocol. EPA previously set a more 

stringent schedule than the section 605 

schedule through a rule published 

December 10, 1993 (58 FR 65018). 

Through the 2009 Final Rule, EPA made 

a further adjustment to the section 605 

schedule based on the acceleration 

under the Montreal Protocol as agreed to 

at the Meeting of the Parties in 

September 2007. The more stringent 

schedule established in that rule is 

unaffected by the recent Court decision 

and is therefore still in effect. 

Section 606 provides authority for 

EPA to promulgate regulations that 

establish a schedule for production and 

consumption that is more stringent than 

what is set forth in section 605 if: ‘‘(1) 

based on an assessment of credible 

current scientific information (including 

any assessment under the Montreal 

Protocol) regarding harmful effects on 

the stratospheric ozone layer associated 

with a class I or class II substance, the 

Administrator determines that such 

more stringent schedule may be 

necessary to protect human health and 

the environment against such effects, (2) 

based on the availability of substitutes 

for listed substances, the Administrator 

determines that such more stringent 

schedule is practicable, taking into 

account technological achievability, 

safety, and other relevant factors, or (3) 

the Montreal Protocol is modified to 

include a schedule to control or reduce 

production, consumption, or use of any 

substance more rapidly than the 

applicable schedule under this title.’’ It 

is only necessary to meet one of the 

three criteria. In the 2009 Final Rule, 

EPA determined that all three criteria 

had been met with respect to the 

schedule for phasing out production 

and consumption of HCFC–22 and 

HCFC–142b. 

As noted in the 2009 Final Rule, 

while section 606 is sufficient authority 

for establishing a more stringent 

schedule than the section 605 phaseout 

schedule, section 614(b) of the CAA 

provides that in the case of a conflict 

between the CAA and the Montreal 

Protocol, the more stringent provision 

shall govern. Thus, section 614(b) 

requires the Agency to establish 

phaseout schedules at least as stringent 

as the schedules contained in the 

Montreal Protocol. To meet the 2010 

stepdown requirement, EPA is 

continuing to allocate HCFC allowances 

at a level that will ensure the aggregate 

HCFC production and consumption will 

not exceed 25 percent of the U.S. 

baselines. For more discussion of this 

point, see 74 FR 66416. 

Finally, section 607 addresses 

transfers of allowances both between 

companies and chemicals. EPA is 

further clarifying the policy and 

procedures applicable to permanent 

inter-pollutant transfers in this action, 

and is proposing a minor change to the 

regulations governing inter-pollutant 

transfers to provide additional clarity to 

stakeholders. 

D. How does this action relate to the 

recent court decision? 

Certain allowance holders affected by 

the 2009 Final Rule filed petitions for 

review in the U.S. Court of Appeals for 

the District of Columbia Circuit. Among 

other arguments, the petitioners, 

Arkema, Inc., Solvay Fluorides, LLC, 

and Solvay Solexis, Inc., contended that 

the rule was impermissibly retroactive 

because in setting the baselines for the 

new regulatory period, EPA did not take 

into account certain inter-pollutant 

baseline transfers that petitioners had 

performed during the prior regulatory 

period. The 2011 Interim Final Rule 

contained a description of those 

transfers and the EPA approvals of those 

transfers. As explained in the 2011 

Interim Final Rule, the transfers at issue 

occurred in 2008. Solvay Solexis, Inc. 

submitted two Class II Controlled 

Substance Transfer Forms for 

consumption allowance transfers to 

Solvay Fluorides, LLC on February 15, 

2008, and March 4, 2008. Arkema, Inc. 

submitted two Class II Controlled 

Substance Transfer Forms for 

consumption and production allowance 

transfers on April 18, 2008. Each 

company requested EPA’s approval to 

convert HCFC–142b allowances to 

HCFC–22 allowances, and checked a 

box on the EPA transfer form indicating 

that ‘‘baseline’’ allowances would be 

transferred. EPA sent non-objection 

notices to both Solvay Solexis, Inc. and 

Solvay Fluorides, LLC on February 21, 

2008 and March 20, 2008 and to 

Arkema, Inc. in April 2008. The transfer 

requests and EPA’s approvals were 

attached to petitioners’ court filings and 

are available in the docket for this 

action. 

In the Notice of Proposed Rulemaking 

titled ‘‘Protection of Stratospheric 

Ozone: Adjustments to the Allowance 

System for Controlling HCFC 

Production, Import, and Export,’’ 

published in the Federal Register at 73 

FR 78680 on December 23, 2008 (2008 

Proposed Rule), EPA requested 

comments on establishing baselines for 

the 2010–2014 regulatory period ‘‘with 

or without’’ taking into account baseline 

inter-pollutant transfers made during 

the 2003–2009 regulatory period (73 FR 

78687). The proposed regulatory text 

accounted for the inter-pollutant 

transfers discussed above. The increase 

in HCFC–22 baseline allowances for 

Arkema, Inc. and Solvay Fluorides, LLC 

presented in the 2008 Proposed Rule 

resulted in a larger amount of HCFC–22 

baseline allowances overall and 

therefore a lower percentage of HCFC– 

22 baselines allocated across the board 

in each control period. Specifically, the 

proposed shift resulted in a 16 percent 

decrease in allocation share for all other 

HCFC–22 allowance holders, and 

increases for the petitioners: Arkema 

and Solvay. For more detail on the effect 

of these transfers, see section III.C. of 

this preamble. 

In the 2009 Final Rule, after 

considering comments, EPA determined 

that allowing inter-pollutant transfers 

from one regulatory period to become a 

part of the baseline in the next 

regulatory period could undermine the 

Agency’s chemical-by-chemical 

phaseout approach and could encourage 

market manipulation. EPA also 

concluded that section 607 of the CAA 

was best read as limiting inter-pollutant 

transfers to those conducted on an 

annual basis. For these reasons, EPA did 

not take the 2008 inter-pollutant 

transfers into account in establishing the 

baselines for the 2009 Final Rule 

covering 2010–2014. 

The Court issued a decision on 

August 27, 2010, agreeing with 

petitioners that ‘‘the [2009] Final Rule 

unacceptably alters transactions the 

EPA approved under the 2003 Rule’’ 

(Arkema v. EPA, 618 F.3d at 3). The 

Court vacated the rule in part, ‘‘insofar 

as it operates retroactively,’’ and 

remanded to EPA ‘‘for prompt 

resolution,’’ (618 F.3d at 10). The Court 

withheld the mandate for the decision 

pending the disposition of any petition 

for rehearing. On November 12, 2010, 

EPA filed a petition for rehearing, which 

was denied on January 21, 2011. The 

mandate issued on February 4, 2011. 

Because the Court vacated the rule 

only in part, without specifying which 

part or parts were vacated, EPA may 

adopt a reasonable interpretation of the 

vacatur’s extent. In doing so, EPA is 

relying on its expertise in administering 

the HCFC phaseout regulations under 

Title VI of the CAA. First, EPA notes 

that the rule contains elements that 

were not at issue in the litigation. EPA 

concludes that the vacatur has no effect 

on allowances for any substances other 

than HCFC–142b and HCFC–22, since 

the petitioners’ claims and the opinion 

itself discuss only those two substances. 

Similarly, EPA concludes that other 

discrete portions of the rule, such as the 


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4The reason baseline and calendar-year 

allocations are inextricable is because calendar-year 

allocations are expressed as a percentage of 

baseline, and the percentage of baseline allocated 

for a specific substance varies depending on the 

sum of all company baselines for that substance. 

The process works as follows for each specific 

HCFC: First, all the company-specific baselines 

listed in the tables at 40 CFR 82.17 and 82.19 are 

added to determine the aggregate amount of 

baseline production and consumption, respectively. 

Second, EPA determines how many consumption 

allowances the market needs for a given year, taking 

into account recycled, reused, and reclaimed 

material, and divides that amount by the aggregate 

amount of baseline allowances. The resulting 

percentage listed in the table at section 82.16 

becomes what each company is allowed to consume 

in a given control period. For example, a company 

with 100,000 kg of HCFC–22 baseline allowances 

would multiply that number by the percentage 

allowed for 2011 (for example, 32 percent) to 

determine its calendar-year allowance is 32,000 kg. 

Historically and in this proposed rule, EPA has 

allocated the same percentage of baseline 

allowances for production as it does for 

consumption. 

5The companies’ allocations are inter-related 

because, as noted in footnote 4, the percentage of 

baseline allocated varies according to the sum of the 

company-specific baselines. 

provisions on use and introduction into 

interstate commerce, are unaffected by 

the vacatur. 

The baselines for HCFC–142b and 

HCFC–22 were clearly at issue in the 

litigation and indeed are the focus of the 

Court’s opinion. The Court found that 

‘‘the Agency’s refusal to account for the 

Petitioners’ baseline transfers of interpollutant allowances in the Final Rule 

is impermissibly retroactive,’’ (618 F.3d 

at 9). Because baseline and calendar 

year allowances are inextricably 

linked,4 EPA has determined that the 

Court’s vacatur voided the HCFC–22 

and HCFC–142b baselines in 40 CFR 

82.17 and 82.19 as well as the 

percentage of baseline allocated for 

those specific substances in 40 CFR 

82.16 for all companies listed in those 

sections.5 This means that until EPA 

establishes new baselines and allocates 

new calendar-year allowances, 

production and import of these two 

substances is prohibited under 40 CFR 

82.15. Recognizing this scenario, on 

January 28, 2011, EPA sent letters to 

affected stakeholders informing them 

that the Agency would exercise 

enforcement discretion for a limited 

period provided their production and 

import did not exceed specified levels 

and provided that they adhered to 

additional conditions. 

In determining the meaning of the 

Court’s vacatur, EPA considered 

whether this interpretation was 

consistent with what the Court intended 

and a good fit for the specific 

circumstances, which include the goals 

and design of the HCFC allowance 

program and the basic structure of the 

2009 Final Rule. While this 

interpretation is appropriate in this 

instance, it is possible that another 

interpretation would be more 

appropriate in a case involving a 

program with different goals, design, or 

structure. 

EPA’s initial response to the Court’s 

partial vacatur was to issue the 2011 

Interim Final Rule (76 FR 47451). 

Through today’s notice, EPA is 

proposing a way to address the Court’s 

decision as it relates to the remainder of 

the regulatory period ending December 

31, 2014. In addition, the Agency is 

taking comment on whether the vacatur 

and remand should be interpreted as 

applying to the 2010 allocations, and if 

so, how allowances might be adjusted to 

reflect this. See section III.B.4. for EPA’s 

proposed approach to address 2010 

allowances. 

E. Comments Relevant to Recovery and 

Reclamation Issues in This Rulemaking 

Submitted in Response to the 2011 

Interim Final Rule Allocating HCFC 

Allowances 

The EPA received 15 submissions 

from 13 commenters in response to the 

2011 interim final rule. Three comments 

were received late. Specifically, the 

Agency had asked for comment on 

several issues relevant to HCFC–22 

supply and the status of recovery and 

reclamation, including: (1) Previous 

estimates of HCFC–22 demand; (2) the 

amount of virgin HCFC–22 currently in 

inventory, available for reuse and/or 

waiting for import from abroad; and (3) 

whether there is an overall surplus of 

the gas. The Agency received comments 

directly answering these questions, 

along with other comments that are of 

relevance to this proposed rulemaking. 

EPA is not providing a complete 

response to comments on the 2011 

interim final rule in this preamble; 

however, EPA is acknowledging the 

most relevant comments here in order to 

highlight certain stakeholder concerns 

regarding the future implementation of 

the HCFC phaseout program. It is the 

Agency’s responsibility to implement 

Title VI of the CAA, and its policy 

objective is to do so in a way that 

smoothly transitions the U.S. away from 

HCFCs to non-ODS alternatives. 

Therefore, EPA is particularly interested 

in stakeholder input regarding the status 

of HCFC–22 recovery and reclamation, 

because this information applies 

directly to previously-stated policy 

goals. This section notes the following 

three issues discussed in comments to 

the 2011 Interim Final Rule. 

1. Supply of HCFC–22 

a. Economic feasibility of reclamation. 

b. Economic incentives for recovery 

and emissions prevention. 

c. Effect of virgin gas supplies on dryshipped condensing units. 

2. Providing Allowances to Reclaimers 

3. Providing Allowances to 

Manufacturers of HCFC Blends 

1. Supply of HCFC–22 

Nine commenters submitted 

comments requesting that EPA decrease 

consumption allowances for 2012–2014. 

Another company also supported such a 

decrease, as long as updated market 

conditions indicate there is a need to do 

so and all allowance holders are affected 

proportionally. Commenters suggested 

that excess supply was due to several 

factors. Additionally, commenters stated 

the price of HCFC–22 is low, indicating 

that virgin supplies are not constrained 

to the extent that the Agency had 

anticipated. Some commenters pointed 

to the unused consumption allowances 

for 2010 as evidence of over-supply and 

the need for decreasing the total number 

of consumption allowances. 

(a) Economic feasibility of 

reclamation: Most commenters, many of 

whom are reclaimers, are concerned 

about the excess supply and low price 

of virgin HCFC–22 because this 

situation makes reclaim financially 

unfeasible. EPA understands that 

reclaimers can stay in business only if 

reclaimed gas can be profitably sold for 

a price that does not exceed the price of 

virgin gas, and the price of virgin gas 

will increase only when the supply has 

contracted. The Agency promotes 

reclamation via separation and 

distillation, which requires very little 

virgin gas, and recognizes that 

reclaiming without significant blending 

further increases the costs of 

reclamation. 

(b) Economic incentives for recovery 

and emissions prevention: Commenters 

also pointed out that the excess supply 

and low price of HCFC–22 do not 

incentivize recovery in general, and 

likely promote venting and poor 

maintenance practices. EPA agrees that 

if the gas is not valuable then there will 

be little incentive to reuse it or 

proactively prevent leaks, in addition to 

increasing the likelihood of venting 

(which is illegal under section 608 of 

the CAA). 

(c) Effect of virgin gas supplies on dryshipped condensing units: Two 

commenters also specifically mention 

the increased popularity in dry-shipped 

condensing units that are eventually 

charged with HCFC–22 as a symptom of 

this over-supply. The Agency recognizes 

that the majority of commenters believe 

that there is an excess of HCFC–22 on 


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the market, which has direct negative 

consequence for reclaim and recovery, 

and thus overall ODS emissions. 

Additionally, EPA has received a 

petition (included in the docket) from 

the Carrier Corporation, dated February 

3, 2011, concerning dry-shipped HCFC– 

22 condensing units. EPA is taking 

comment on whether the installation of 

dry-shipped HCFC–22 condensing units 

will affect the phaseout of virgin HCFC– 

22 production and import. 

EPA undertook an analysis to gauge 

whether there is a surplus of HCFC–22 

and, if so, how large the surplus is. A 

memo in the docket for this rulemaking 

details EPA’s analysis of the HCFC–22 

market. The results indicate EPA should 

consider allocating between 11 to 47 

percent less per year between 2012 and 

2014 relative to the amounts that 

appeared in the 2009 Final Rule. 

Consequently, EPA is proposing in this 

rulemaking to allocate fewer HCFC–22 

consumption allowances than 

contemplated in the 2009 Final Rule for 

2012–2014 in order to promote recovery 

and reclamation and encourage 

transition to non-ODS alternatives (see 

section III.B. and III.C.). As stated in the 

2009 Final Rule, ‘‘The Agency strongly 

encourages increased recovery and 

either recycling or reclamation of 

HCFC–22 * * * Recovery becomes even 

more important in light of the 2015 

Montreal Protocol phasedown step, 

when the U.S. HCFC consumption cap 

is reduced from 3,810 ODP-weighted 

metric tons to 1,524 ODP-weighted 

metric tons,’’ (74 FR 66422). 

2. Providing Allowances to Reclaimers 

Two commenters requested that EPA 

provide HCFC allowances to certified 

reclaimers. As explained in the report 

titled ‘‘Analysis of Equipment and 

Practices in the Reclamation Industry,’’ 

which is included in the docket for this 

rulemaking, ‘‘refrigerant reclamation 

refers to the reprocessing and upgrading 

of recovered refrigerant through such 

mechanisms as filtering, drying, 

distillation and chemical treatment in 

order to restore the substance to 

specifications outlined in the AirConditioning, Heating, and Refrigeration 

Institute (AHRI)’s Standard 700–1995.’’ 

The commenters argue increasing 

allocations to reclaimers would increase 

the amount of reclaimed HCFCs 

available for purchase. The comments 

are similar to those submitted prior to 

the finalization of the 2009 Final Rule, 

which allocated HCFC allowances for 

2010–2014. EPA responded to this 

request at the time (74 FR 66422; 

Response to Comments document for 

the 2008 NPRM), but discusses the issue 

further here. 

The Agency’s primary concern is that 

providing reclaimers with allowances 

could foster unsustainable reclamation 

practices that rely on blending instead 

of investing in the technology to fully 

reclaim HCFCs. Based on the phaseout 

schedule and the decrease in annual 

allocations, reclamation through 

separation and distillation will be more 

important in 2015 when the HCFC–22 

allocation must drop by at least 45 

percent from 2010 levels and absolutely 

necessary by 2020, by which time 

import and production of HCFC–22 

must be phased out entirely. In 

addition, many businesses have either 

found a way to secure reliable access to 

virgin HCFCs or have made investments 

to reclaim HCFCs in a sustainable way, 

without a direct allocation of 

allowances. 

EPA is also concerned that providing 

allowances to reclaimers does not 

address the key structural issue that the 

industry and the HCFC transition are 

facing: The price of HCFC–22 is too low 

to foster reclamation and is not sending 

the necessary signal to move consumers 

to non-ODS alternatives. While 

providing allowances to reclaimers 

would likely decrease the cost to 

recover and reclaim HCFCs, EPA is 

concerned about what effect providing 

allowances to reclaimers would have on 

the market price of HCFC–22. EPA is 

seeking comment on whether providing 

allowances to reclaimers would affect 

the market price of HCFC–22, and what 

effect that price change would have on 

the transition away from ODS and the 

sustainability of the reclamation 

industry. 

EPA continues to believe that 

allocating fewer allowances is the best 

way to foster reclamation and recovery. 

Thus, this proposal does not include an 

allocation for reclaimers. However, the 

Agency has included the relevant 

comments on the Interim Final Rule in 

the docket for this rulemaking and 

welcomes further comment on this issue 

from all interested parties. 

3. Providing Allowances to 

Manufacturers of HCFC Blends 

One small business has informed EPA 

that it cannot acquire either HCFC 

allowances or the HCFCs it needs to 

manufacture its HCFC blend (see the 

letters from ICOR dated May 17, 2011 

and September 6, 2011). The company 

asserts that the cap and trade system is 

in practice ‘‘cap and no trade,’’ where 

companies hold onto their allowances, 

even if they have no intention of using 

them. The commenter argues that this 

leads to artificially high prices for 

HCFCs and HCFC allowances. To 

remedy this situation, the commenter 

requests that EPA take unused 

allowances and provide those 

allowances to companies that either 

purchased HCFCs or HCFC 

consumption allowances in 2008 and 

2009. EPA notes that the inability to 

acquire allowances and/or HCFCs 

themselves does not appear to be a 

widespread problem, as numerous 

companies have made a significant 

number of transfers over the last year 

alone, and no other company has 

indicated it cannot acquire HCFCs. 

However, EPA is taking comment on 

whether other companies are having 

difficulty acquiring HCFCs or HCFC 

allowances. 

Some historical background may help 

to provide context on how EPA 

provided flexibility for small businesses 

when establishing the HCFC allocation 

system. In the 2003 Final Rule, 

published January 21, 2003, EPA 

assigned individual company baselines 

by considering the highest production 

and consumption years for every 

company between the years 1994– 

1997—a four year period preceding 

regulation of the production and import 

of HCFCs. ‘‘Consumption’’ is defined by 

the Clean Air Act as ‘‘the amount of that 

substance produced in the United 

States, plus the amount imported, 

minus the amount exported,’’ (42 U.S.C. 

7671). A company had to be 

manufacturing or importing HCFCs at 

that time in order to be assigned a 

baseline. In addition, the EPA provided 

an exception allowing new entrants 

provided that they began importing after 

the end of 1997, but before April 5, 

1999, the date the EPA published the 

advanced notice of proposed 

rulemaking for the regulatory period 

2003–2009. The Agency believed that 

such small businesses might not have 

been aware of the impending 

rulemaking that would affect their 

ability to continue in the HCFC market. 

In addition to the exception for late 

entrants made in the 2003 Final Rule, 

there is significant flexibility in the 

types of transfers companies can 

conduct. Companies can transfer 

allowances between companies and, on 

a temporary basis, between chemicals. A 

guidance memo, titled ‘‘Flexibility in 

the HCFC Allowance System,’’ 

describing this flexibility further is 

available in the docket and on EPA’s 

Web site. Companies can also purchase 

HCFCs at the wholesale price, which, 

according to comments on the 2011 

Interim Final Rule, has been decreasing. 

The allocation system in part was 

established to discourage the use of 

HCFCs and companies’ continuation in 

the HCFC market. As stated in the 2003 

Final Rule, ‘‘businesses that desired an 


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allocation of HCFC allowances would 

have known the risks of jumping into 

the business at this juncture’’ (66 FR 

38073). Since that statement more than 

nine years ago, access to information 

and knowledge of the risks regarding 

entering or continuing in the HCFC 

market have only increased. 

Furthermore, new entrants have entered 

the market by purchasing consumption 

allowances, as EPA predicted they 

could back in 2003. All entities wishing 

to enter the HCFC import or production 

market can continue to purchase 

allowances for HCFCs. 

As the market continues to decrease 

in size, EPA does not believe that 

expanding the pool of allowance 

holders is necessary to prevent 

disruption of the continued servicing of 

existing equipment. EPA explored 

several options that would have 

expanded the number of allowance 

holders in the 2008 NPRM (73 FR 

78867) and determined the current 

approach with adjustment for transfers 

of baseline allowances was appropriate 

(74 FR 66419; Response to Comments 

for the 2008 NPRM). Given EPA’s intent 

to phase down, and ultimately phase 

out, the use of HCFCs, consistent with 

the requirements of the CAA and 

obligations under the Montreal Protocol, 

EPA believes it is justified in continuing 

to allocate only to those entities who 

participated in the market at the initial 

stages, as well as those that have entered 

the market by purchasing HCFC 

baseline allowances in accordance with 

the established practices. EPA does not 

believe that providing allowances to 

companies that were not importing or 

producing HCFCs prior to EPA 

regulation is appropriate at this time 

given the disruption it would create to 

the existing regulatory framework. 

However, in light of the large number of 

HCFC allowances that were not used in 

2010 and the difficulty at least one 

company is having in getting HCFCs, 

EPA welcomes comments on whether 

an allocation to manufacturers of HCFC 

blends who are having difficulty 

acquiring HCFCs or HCFC allowances 

would be appropriate. Commenters 

supporting such an allocation should 

consider (1) how EPA might determine 

the total amount of such an allocation, 

(2) how EPA might determine which 

companies should receive allowances, 

(3) how EPA would verify that 

allowance holders are refusing to sell 

HCFCs and HCFC allowances, (4) how 

EPA might set baselines for these 

companies, (5) whether EPA should 

provide allowances in addition to the 

amount proposed in this rule, or as part 

of the amount proposed in this rule, and 

(6) how providing allowances to an 

additional set of companies would affect 

the U.S. transition away from HCFCs. 

III. How does EPA propose to allocate 

HCFC–22 and HCFC–142b allowances 

for 2012–2014? 

EPA is proposing to continue the 

system established in previous 

rulemakings (68 FR 2820, 74 FR 66412, 

76 FR 47451) to address HCFC 

production and import in the U.S. The 

process works as follows for each 

specific HCFC: First, all the companyspecific baselines listed in the tables at 

40 CFR 82.17 and 82.19 are added to 

determine the aggregate amount of 

baseline production and consumption, 

respectively. Second, EPA determines 

how many consumption allowances the 

market needs for a given year, taking 

into account recycled, reused, and 

reclaimed material, and divides that 

amount by the aggregate amount of 

baseline allowances. The resulting 

percentage listed in the table at section 

82.16 becomes what each company is 

allowed to consume in a given control 

period. For example, a company with 

100,000 kg of HCFC–22 baseline 

allowances would multiply that number 

by the percentage allowed for the year 

(for example, 32 percent in 2011) to 

determine its calendar-year allowance is 

32,000 kg. Historically, EPA has 

allocated the same percentage of 

baseline allowances for production as it 

does for consumption. 

Specifically, EPA is proposing to (1) 

establish 2012–2014 company-bycompany consumption and production 

baselines for HCFC–22 and HCFC–142b 

in the tables at 40 CFR 82.17 and 82.19 

identical to the baselines established in 

the 2011 Interim Final Rule (76 FR 

47468), (2) allocate company-bycompany production and consumption 

allowances for these substances for 

2012–2014 by establishing percentages 

of production and consumption 

baselines in the table at section 82.16 

and (3) revise the regulatory text at 40 

CFR 82.23 to make the procedure for all 

future inter-pollutant transfers clear. 

EPA will address the allocations for the 

control periods beyond 2014 at a later 

date. All aspects of the 2009 Final Rule 

promulgated on December 15, 2009 (74 

FR 66412) that are not addressed in this 

proposed rule are unchanged. 

Additionally, EPA notes that 

beginning January 1, 2015, section 605 

of the CAA prohibits the use and 

introduction into interstate commerce of 

any HCFC unless it ‘‘(1) has been used, 

recovered and recycled; (2) is used and 

entirely consumed (except for trace 

quantities) in the production of other 

chemicals; or (3) is used as a refrigerant 

in appliances manufactured prior to 

January 1, 2020.’’ In addition, EPA’s 

regulations at 40 CFR 82.15 restrict use 

and introduction into interstate 

commerce of HCFC–141b, HCFC–142b, 

and HCFC–22 beginning in 2010, with 

limited exceptions. If entities will need 

HCFCs in 2015 and beyond for uses 

other than the exemptions contained in 

section 605, they should contact EPA 

prior to 2013. Entities should 

understand that the statutory 

prohibition in section 605 generally will 

prevent EPA from accommodating such 

needs, with the possible exception of de 

minimis quantities. 

A. What baselines does EPA propose to 

use for HCFC–22 and HCFC–142b 

allowances? 

In the 2009 Final Rule, EPA presented 

the allocation structure for HCFC–22 

and HCFC–142b for the control periods 

2010–2014: Allocating a percentage of 

the baseline production and 

consumption allowances. The rationale 

for this system is discussed further at 74 

FR 66412. The Court found no fault 

with EPA’s framework for allocating 

HCFCs in the 2009 Final Rule, except 

the aspects of the rule deemed to be 

retroactive, i.e., not taking into account 

inter-pollutant baseline transfers that 

occurred in the prior regulatory period 

in establishing company-specific 

baseline allowances. To address this, 

EPA is proposing to establish baselines 

for 2012–2014 identical to the HCFC–22 

and HCFC–142b baselines established in 

the 2011 Interim Final Rule (76 FR 

47451) that reflect past inter-pollutant 

baseline transfers deemed permanent by 

the Court. 

EPA cited several reasons why it 

would prefer to set baselines without 

taking into account inter-pollutant 

transfers in the 2009 Final Rule (74 FR 

66420), the Response to Comments 

document included in the record for 

that rulemaking, and the 2011 Interim 

Final Rule (76 FR 47451). However, EPA 

is recognizing the 2008 transfers in 

establishing the baselines through 2014 

in accordance with the Court’s decision. 

The Agency is providing advance notice 

that for the 2015–2019 regulatory 

period, it would consider using more 

recent production and import data than 

the 1994–1997 data used to set baselines 

for the first time in the 2003 Final Rule. 

The Agency is particularly interested in 

stakeholders’ views on whether there 

would be an environmental benefit to 

doing so. 


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B. What factors did EPA consider in 

proposing allocation amounts for 

HCFC–22 and HCFC–142b? 

In the 2009 Final Rule, EPA decided 

to allocate HCFC–22 and HCFC–142b 

allowances based on the projected 

servicing needs for those compounds, 

taking into account the amount of those 

needs that can be met through recycling 

and reclamation. EPA is not changing 

that approach in this proposed 

rulemaking and continues to believe it 

is necessary to promote use of reused, 

recycled, and reclaimed material in 

anticipation of the 2015 phasedown 

step. However, EPA is proposing to 

allocate fewer consumption allowances 

for HCFC–22 relative to the 2009 Final 

Rule based on analysis of updated 

market conditions. The proposed 

allocation and the supporting 

documentation are discussed in section 

III.B.2. Regardless of the extent to which 

the total number of consumption 

allowances differs from the total number 

allocated in the 2009 Final Rule, the 

specific amounts allocated per company 

will be different than the 2009 Final 

Rule. In accordance with the Court’s 

decision in Arkema v. EPA, the Agency 

is proposing to reflect the 2008 interpollutant transfers in companies’ 

baselines, and EPA therefore needs to 

allocate a different percentage of 

company baselines in order for the 

aggregate number of annual HCFC 

consumption allowances to be less than 

(or equal to) the 2009 Final Rule. EPA 

is also proposing to allocate different 

percentages of baseline for annual 

consumption than for annual 

production (described in the rest of the 

preamble as ‘‘decoupling’’). 

Separate from the proposed allocation 

change, EPA is taking comment on 

whether or not to provide more HCFC– 

22 and/or HCFC–142b consumption 

and/or production through this 

rulemaking than it did in the 2009 Final 

Rule as a result of the unforeseen 

circumstances presented by the Court’s 

decision in Arkema v. EPA. While the 

Agency’s preference is not to provide 

recoupment, EPA is considering an 

approach to the 2013 allocation or 2013 

and 2014 allocations that could allocate 

allowances to account for lost 

opportunities to produce and consume 

in 2010, given that 2010 allowance 

levels were based on baselines that are 

inconsistent with the Court’s finding 

(section III.B.4. discusses this in more 

depth). 

1. How important is HCFC–22 relative 

to HCFC–142b for servicing existing 

equipment? 

HCFC–22 is the most widely-used 

HCFC. The demand for its use in 

servicing existing equipment was the 

primary factor affecting EPA’s allocation 

of production and consumption 

allowances of HCFCs for the current 

regulatory period. Prior to issuing the 

2009 Final Rule and the 2009 Servicing 

Tail Report, EPA issued and sought 

comment on three versions of a draft 

report analyzing servicing demand for 

the HCFC appliances in the U.S. 

refrigeration and air-conditioning sector 

projected to be in service from 2010– 

2019 (all versions available at Docket 

EPA–HQ–OAR–2008–0496: Published 

November 4, 2005 at 70 FR 67172; 

released at a stakeholder meeting on 

September 29, 2006; published 

December 23, 2008, with 2008 Proposed 

Rule). The Servicing Tail Report focuses 

on air-conditioning and refrigeration 

appliances because such equipment 

represents the bulk of the servicing 

need. In addition, the servicing 

exception to the use ban for HCFC–22 

and HCFC–142b pertains only to use as 

a refrigerant in such equipment. Under 

40 CFR 82.15(g) nearly all other uses of 

newly produced material for these two 

HCFCs were banned effective January 1, 

2010. HCFC–142b has primarily been 

used as a foam blowing agent, a use that 

was prohibited beginning in 2010 (40 

CFR 82.15(g)). The projected servicing 

demand for existing refrigeration 

equipment containing HCFC–142b is 

extremely low: Approximately 100 MT. 

EPA therefore focused the analysis on 

HCFC–22 because that compound is the 

predominant HCFC in the installed base 

of air-conditioning and refrigerant 

equipment for which servicing in the 

U.S. will likely continue. 

As discussed in the 2009 Final Rule, 

the majority of HCFC–22 equipment that 

is projected to be in use from this point 

onward will be air-conditioning 

applications, including window units, 

packaged terminal units, unitary airconditioning, chillers, dehumidifiers, 

water and ground source heat pumps, 

and motor vehicle air-conditioning in 

buses and trains. The report projected 

that approximately 145.6 million units 

of all such types of HCFC–22 airconditioning equipment were in use in 

2010, decreasing by about 41 percent in 

2015 and 86 percent in 2020. In 

addition, approximately 3.8 million 

units of HCFC–22 refrigeration 

equipment were in use in 2010. The 

installed base of HCFC–22 refrigeration 

equipment is projected to decrease from 

2010 levels by about 44 percent in 2015 

and 75 percent in 2020. For more on the 

Servicing Tail Report, see 74 FR 66424 

and the Servicing Tail Report included 

in the docket. 

EPA estimates that the servicing need 

for HCFC–22 will continue to decrease 

each year, and consistent with the 2009 

Final Rule, EPA proposes to account for 

this by allocating a smaller amount for 

2012 than was allocated for 2011. This 

approach is described in section III.B.3. 

of this action, along with more recent 

market data on the need for, and 

availability of, HCFC–22. 

2. Can servicing needs be met with 

virgin and recovered material? 

In the 2009 Final Rule, the Agency 

recognized that servicing demand can 

be met with a combination of newlymanufactured or imported HCFCs 

(virgin HCFCs) and HCFCs that have 

been recovered and either reused, 

recycled or reclaimed. Therefore, EPA 

did not anticipate that virgin HCFC–22 

would need to be produced or imported 

to meet the entire HCFC–22 servicing 

demand in each year between 2010 and 

2014. The Servicing Tail Report 

analyzes various scenarios regarding 

reclamation. EPA continues to believe 

that reused, recycled, and reclaimed 

material can help meet HCFC–22 

servicing needs and is therefore 

proposing to maintain the same 

approach to meeting servicing needs at 

this time. While the Agency is not 

changing its approach, EPA believes 

that the percentage of overall demand 

that can be met by reclaimed material is 

higher than originally projected. EPA is 

taking comment on the new projections 

of reclaim capabilities outlined in the 

memo included in the docket for this 

rulemaking titled, ‘‘Analysis of HCFC– 

22 Servicing Needs in the U.S. Air 

Conditioning and Refrigeration Sector: 

Additional Considerations for 

Estimating Virgin Demand,’’ 

(Adjustment Memo). 

3. How would the allocation decline? 

As explained in the preamble to the 

2009 Final Rule, without year-to-year 

reductions in the allocations for virgin 

HCFC–22, the HCFC–22 market could 

be oversaturated, and the contribution 

of reused, recycled, and reclaimed 

refrigerant would decrease, both in the 

total number of kilograms and as the 

proportion of overall need. 

EPA is particularly concerned with 

encouraging a smooth transition to the 

2015 stepdown. At that date, the U.S. 

must meet a 90 percent reduction below 

the baseline for all HCFCs. EPA’s 

Servicing Tail Report shows that even a 

20 percent recovery rate would be 

insufficient to meet the demand for 


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HCFC–22 in 2015. As shown in Table 4– 

5 in the report, demand for HCFC–22 in 

2015 was projected to be 38,800 MT 

while the cap for all HCFCs equates to 

27,709 MT of HCFC–22 (assuming no 

allocation for any other HCFCs). In 

developing the 2009 Final Rule, EPA 

calculated that to meet the total demand 

in 2015, the recovery rate would have to 

increase to 26 percent (representing 29 

percent of total servicing demand). 

EPA determined in the 2009 Final 

Rule a level of allocation projected to 

meet the servicing demand over 2010– 

2014. In addition to EPA’s request for 

comment on whether to address or not 

address 2010 allowances (see section 

III.B.4.), the Agency is proposing to 

establish lower overall HCFC–22 

consumption allocation levels for 2012– 

2014 than those the Agency determined 

were appropriate in the 2009 Final Rule. 

The Adjustment Memo in the docket to 

this rulemaking discusses recent data 

and stakeholder feedback that indicate 

that demand for virgin HCFC–22 is 

lower than originally projected, and that 

the number of consumption allowances 

should be 11 to 47 percent lower 

relative to the 2009 Final Rule. 

Specifically, the memo examines (1) 

surplus inventory of HCFC–22 from past 

years, (2) reclaimer capacity, and (3) 

increased recovery and re-use of HCFC– 

22 from the large retail food sector. EPA 

is taking comment on the analysis, 

supporting data, and assumptions 

presented in the Adjustment Memo. 

Since EPA is continuing to allow the 

use of existing HCFC–22 appliances 

manufactured prior to January 1, 2010, 

reused, recycled, and reclaimed HCFC– 

22 will become more valuable as the 

phaseout progresses. The demand for 

HCFC–22 to service existing equipment 

will provide an economic incentive to 

increase the quantities of recovered 

HCFC–22 available for reuse, recycling, 

and reclamation. Therefore, the Agency 

believes that establishing a lower 

aggregate HCFC–22 consumption 

allocation for 2012–2014 than in the 

2009 Final Rule is not only justified by 

decreased demand and the availability 

of surplus inventory from past years, but 

also because a lower virgin supply will 

further incentivize recovery and 

reclamation. The docket for the 2009 

Final Rule (EPA–HQ–OAR–2008–0496) 

provides information on EPA’s past 

assumptions regarding the availability 

of reused, recycled and reclaimed 

HCFC–22 to meet servicing demand, 

while the Adjustment Memo to this 

docket discusses recent changes in the 

HCFC–22 market. 

In the 2009 Final Rule, EPA 

determined it was appropriate to 

establish an annual step-down with the 

assumption that the total demand to be 

met from recovered HCFC–22 would 

equal 12,500 MT each year. This is 

approximately the amount EPA 

projected would be needed to meet the 

servicing demand in 2015. Using this 

approach, the aggregate allocation for 

consumption would equal 

approximately 40,700 MT in 2012, and 

decrease each year after, as shown in 

Table 1. These values are derived by 

subtracting 12,500 MT from the 

estimated servicing demand each year. 

However, in light of changes to both 

virgin demand and reclaimer 

capabilities, EPA believes that the 

portion of demand met by recovered 

HCFC–22 could range from 12,500 MT 

to 19,700 MT each year (see the 

Adjustment Memo), and that reduced 

demand, along with surplus inventory 

estimates, warrant a significantly lower 

total allocation for 2012, 2013 and 2014. 

While Table 1 shows how the total 

allocation in the 2009 Final Rule was 

determined, the Agency is now 

proposing to allocate between 11 and 47 

percent fewer consumption allowances 

for 2012 to 2014. EPA will not issue 

HCFC–22 and HCFC–142b allowances 

for 2015 or later until a future 

rulemaking. 

TABLE 1—2009 FINAL RULE PROJECTION OF AMOUNT OF ANNUAL HCFC–22 DEMAND TO BE MET BY ALLOCATED AND

RECOVERED MATERIAL

2012 2013 2014 

Estimated Demand (MT) ................................................................................................. 53,200 48,400 43,600 

Recovered Amount (MT) ................................................................................................. 12,500 12,500 12,500 

Total Allocation (MT) ................................................................................................ 40,700 35,900 31,100 

As the total servicing demand 

decreases, assuming the supply of 

recovered HCFCs stays at a constant 

level results in recovered material 

comprising a greater proportion of the 

total demand each year. Using this 

assumption and the projected demand 

level from the 2009 Final Rule, the 

percentage of the total servicing demand 

to be met with recovered material would 

rise from 21.6 percent of total demand 

in 2011 to 28.7 percent in 2014, though 

the total amount of recovered material 

needed would remain at 12,500 MT for 

each year. In the Adjustment Memo, 

EPA considers two HCFC–22 allocation 

scenarios for each year. The larger 

allocation scenario considers: (1) An 

annual surplus inventory drawdown of 

6,000 MT; (2) the same 12,500 MT of 

annual recovery and reclamation used 

in the 2009 Final Rule; and (3) a 

minimum expected recovery and reuse 

rate of 20 percent of total demand in the 

large retail food sector each year. The 

smaller allocation scenario considers: 

(1) The same surplus inventory 

drawdown of 6,000 MT; (2) an annual 

reclamation amount of 19,700 MT, or 35 

percent of estimated servicing demand 

in 2012; and (3) a maximum expected 

recovery and reuse rate of 70 percent of 

total demand in the large retail food 

sector. These two scenarios indicate that 

EPA should decrease annual allocations 

relative to the 2009 Final Rule by 

between 11 and 47 percent each year— 

with the exact range varying slightly 

year by year. As summarized in Table 4 

of the Adjustment Memo, the Agency is 

proposing to issue HCFC–22 

consumption allowances as follows: 

Between 25,100 and 36,200 MT in 2012 

(a decrease of 11 to 38 percent); between 

20,800 and 31,400 MT in 2013 (a 

decrease of 13 to 42 percent) and 

between 16,400 and 26,300 MT in 2014 

(a decrease of 15 to 47 percent). As 

percentages of baseline, these proposed 

amounts correspond to allocations of 

17.7 to 25.5 percent in 2012, 14.7 to 22.1 

percent in 2013, and 11.6 to 18.5 

percent in 2014. 

In summary, the Agency is proposing 

to reduce consumption allowances 

relative to the 2009 Final Rule. The 

Agency is also proposing to decouple 

production allowances and allocate 

either the same amount of production as 

in the 2009 Final Rule or the same 

percentage of baseline as in the 2009 

Final Rule. A memo included in the 

docket for this rulemaking provides an 

overview of the various scenarios (see 

the Overview Memo). 


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4. How will EPA address the court’s 

decision with regard to 2010 HCFC 

allowances? 

EPA’s first step in addressing the 

Court’s decision was to establish 

baselines for 2011 that reflected the 

2008 inter-pollutant transfers that were 

at issue in the litigation and to allocate 

allowances for 2011 as a percentage of 

those baselines. As noted in the Interim 

Final Rule (76 FR 47451), EPA 

interprets the Court’s decision as 

applying, at a minimum, to the baseline 

and calendar-year allowances for 2011– 

2014. The Agency is taking comment on 

whether to interpret the decision as 

applying to the 2010 allocation, and if 

so, how allowances in future control 

periods might be adjusted to reflect this. 

The petitioners in the case, Arkema and 

Solvay, have stated that EPA should 

‘‘restore the allowances of which 

Arkema and Solvay were deprived 

unlawfully in 2010,’’ or ‘‘provide a 

method to compensate Arkema and 

Solvay for year 2010 allowances that 

rightfully should have been available’’ 

(February 4, 2011 letter to Drusilla 

Hufford, EPA, from William Hamel, 

Arkema, and March 7, 2011 letter to 

Drusilla Hufford, EPA, from Don Magid, 

Solvay, both available in the docket for 

this rulemaking). As a result of these 

requests, EPA is considering whether to 

grant additional allowances for all 

companies that would have received 

higher allocations in 2010 if the 2008 

inter-pollutant transfers had been 

reflected in the baselines published in 

the 2009 Final Rule. The companies 

affected, and the additional allowances 

they would have received (hereinafter 

described as ‘‘recoupment allowances’’), 

are included in Table 2, below. 

TABLE 2—PROPOSED RECOUPMENT ALLOWANCES

Company Chemical Consumption 

(kg) 

Production 

(kg) 

Arkema ..................................................................... HCFC–22 .................................................................. 4,749,692 4,611,848 

DuPont ...................................................................... HCFC–142b .............................................................. 2,339 0 

Honeywell ................................................................. HCFC–142b .............................................................. 58,291 107,097 

Solvay Fluorides ....................................................... HCFC–22 .................................................................. 1,157,895 0 

Solvay Solexis .......................................................... HCFC–142b .............................................................. 0 289,800 

EPA is taking comment on four 

possible options with regard to this 

issue: (1) Providing recoupment 

allowances in 2013 in addition to the 

aggregate level of production and 

consumption specified in the 2009 Final 

Rule; (2) allocating recoupment 

allowances over two years (2013–2014) 

in addition to the aggregate level of 

production and consumption specified 

in the 2009 Final Rule; (3) allocating 

recoupment allowances from the 

aggregate level of production and 

consumption specified in the 2009 Final 

Rule over two years (2013–2014); and 

(4) treating missed allowances from 

2010 as impossible to recoup. EPA is 

also taking comment on: (1) Whether it 

should provide recoupment for HCFC– 

22 and HCFC–142b, or just HCFC–22 

allowances; and (2) whether it should 

provide recoupment for production and 

consumption, or just consumption 

allowances. EPA is seeking comment on 

these two points because: (1) The 

Court’s decision only addresses the 

losses of the petitioners Arkema and 

Solvay, who appear to be most 

concerned with recoupment for HCFC– 

22 allowances; (2) neither of the 

petitioners has specifically requested 

recoupment for production allowances; 

and (3) while Solvay Solexis could 

receive recoupment allowances for 

HCFC–142b production (see Table 2), it 

would receive nearly ten times more 

HCFC–142b production allowances 

under this proposed rule absent 

recoupment than the 2009 Final Rule, 

which could avoid the need for HCFC– 

142b production allowance recoupment. 

When considering the options included 

in this section, commenters should 

consider options 1–4 providing or not 

providing recoupment for HCFC–142b 

and providing or not providing 

recoupment for production allowances. 

Additionally, EPA recognizes that any 

option to provide recoupment in 

addition to the aggregate level of 

consumption is, to some extent, in 

tension with the proposal to decrease 

the aggregate allocation and might 

impede the intended effects of 

allocating fewer HCFC–22 allowances. 

If EPA provides recoupment, the 

Agency is proposing to address this 

issue in addition to the proposed 

establishment of baselines reflecting the 

Court’s decision on past inter-pollutant 

transfers, and the proposed allocation of 

HCFC–22 production and consumption 

allowances. Under each of these 

approaches, the U.S. would still be well 

below its HCFC cap under the Montreal 

Protocol. EPA is not proposing a 

recoupment option that would begin in 

2012 because waiting until 2013 

provides companies that may receive 

recoupment allowances time to prepare 

for the increase in calendar-year 

allowances. 

Under option 1, each company would 

get the percentage of baseline listed in 

proposed section 82.16(a)(1). The 

companies listed in Table 2 would 

receive an additional one-time 

allocation in 2013 of the amount 

specified in the table. Granting 

recoupment allowances under option 1 

would add 329 ODP-weighted MT of 

allowed HCFC consumption and 280 

ODP-weighted MT of allowed HCFC 

production in 2013. The result is an 

increase in allowed HCFC consumption 

and production (ODP-weighted) by 17 

percent and 15 percent, respectively, 

beyond that allowed in the 2009 Final 

Rule, assuming constant levels of 

overall consumption and production. 

While the number of allowances would 

be higher in 2013 than envisioned in the 

2009 Final Rule, it would not increase 

environmental damage during the 

regulatory period from 2010–2014 

relative to the projections in the 2009 

Final Rule: Approximately 425 ODPweighted MT of HCFC consumption 

allowances and approximately 930 

ODP-weighted MT of HCFC production 

allowances were not used by allowance 

holders in 2010 (source: EPA’s ODS 

Tracking System). This one-year 

increase in allowances in 2013 would 

keep the aggregate level of consumption 

and production for 2010–2014 below 

the level envisioned in the 2009 Final 

Rule. Since the 2014 allocation would 

be unchanged from (or less than) the 

2009 Final Rule level, option 1 could be 

preferable to a two-year recoupment 

option because it could smooth the 

transition to the 2015 stepdown under 

the Montreal Protocol. Option 1 would 

also restore the companies’ lost 

opportunity to produce or consume in 

2010 without reducing the amount of 

allowances other companies receive 

further. 

Option 1 is not without 

disadvantages. First, it would increase 

the number of allowances available for 

use in 2013, which might impede the 


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development of a viable reclamation 

industry and hamper the transition to 

the 2015 stepdown. Second, this option 

significantly increases the number of 

allowances in 2013 for certain 

companies receiving recoupment, 

meaning that those companies arguably 

could have difficulty selling the full 

amount of HCFC–22 produced or 

imported with allowances that year. 

However, if companies receiving extra 

allowances all in one year cannot sell 

the full amount in that year, they may 

store produced and/or imported 

material for sale or use in later years, or 

sell the allowances to other producers or 

importers for use in that same year. 

Third, companies not receiving 

recoupment would have the same 

number of allowances as they would 

under a no-recoupment scenario, but 

they would have a smaller share of all 

allowances allocated under this option 

compared to a no recoupment scenario. 

Under the second option, recoupment 

allowances would be provided over two 

years (2013–2014) instead of one year as 

in option 1. Each entity listed in Table 

2 would receive half of the amount 

listed in the table in 2013 and 2014 in 

addition to the percentage of baseline as 

listed in proposed section 82.16(a)(1). 

Option 2 would increase allowed 

consumption and production relative to 

the 2009 Final Rule levels by 8 percent 

in 2013 and by 10 percent and 9 

percent, respectively, in 2014. This 

options shares some of the advantages of 

option 1: (1) The amount allocated 

between 2010 and 2014 is still below 

the amount envisioned as total usage 

during that period in the 2009 Final 

Rule when taking into consideration the 

number of allowances not used in 2010, 

and (2) it restores the companies’ lost 

opportunity to produce or consume in 

2010 without reducing the amount of 

allowances other companies would 

receive under no recoupment. 

A significant downside to this option 

is that it increases the number of 

allowances available in 2013 and 2014, 

and may hamper the smooth transition 

in 2015 to 10 percent of baseline under 

the Montreal Protocol, since the 

decrease between the 2014 allocation 

and 2015 allocation for HCFC–22 would 

be larger under this option than in 

option 1. Also, like option 1, companies 

who would not receive recoupment 

would have a smaller share of all 

allowances compared to a no 

recoupment scenario. 

Under option 3, EPA could provide 

recoupment allowances as part of the 

aggregate allocation level. The letters 

included in the docket from Don Magid, 

Solvay Fluorides, to Drusilla Hufford, 

EPA, dated March 7, 2011, and from 

William Hamel, Arkema, to Drusilla 

Hufford, EPA, dated February 4, 2011, 

express support for this option. One 

way to do this would be to allocate 

HCFC–22 allowances (both recoupment 

for 2010 and their allotted percentage of 

baseline for 2013 and 2014) to the 

companies listed in Table 2, and then 

allocate the remainder to all other 

allowance holders by revising the 

percentage of baseline allocated. A 

memo to the docket explains this 

approach in more detail (see ‘‘Memo: 

Recoupment Options’’). Providing all 

recoupment from the allocated level in 

the 2009 Final Rule (or a lesser amount) 

in one year is not possible because there 

are too few allowances to provide 

recoupment and regular allowances for 

HCFC–142b. Additionally, the memo 

explains that if the Agency provides 

recoupment for HCFC–142b production 

allowances, the Agency will have no 

choice but to increase the aggregate 

number of production allowances. 

The primary benefit of option 3 is that 

it keeps the overall consumption 

allocation at the same level (or less) as 

that in the 2009 Final Rule, and should 

therefore not negatively affect the 

transition to the 2015 stepdown or 

recovery and reclamation. However, for 

the years during which recoupment 

occurred, companies not receiving 

recoupment under this option would 

receive fewer allowances, and a smaller 

share of overall allowances, than under 

the other recoupment scenarios. The 

amount of allowances received by these 

companies also would be smaller than 

the amount they would have received 

under the 2008 Proposed Rule, and 

would decrease further if EPA decides 

to allocate less than the amounts in the 

2009 Final Rule. 

EPA is also considering option 4, 

under which the Agency would not 

provide recoupment allowances. As part 

of the evaluation of this option, EPA is 

considering the effect of the Court’s 

partial vacatur and remand on the 2010 

allocation. The Court issued its decision 

on August 27, 2010, but stayed the 

mandate pending resolution of any 

petition for rehearing. The 2009 Final 

Rule remained in effect during 2010. 

EPA’s petition for rehearing was denied 

on January 21, 2011, and the mandate 

issued on February 4, 2011. While EPA 

has not interpreted the vacatur as 

nullifying 2010 allowances, EPA is 

considering whether to address the 2010 

allocation on remand even if the partial 

vacatur does not apply to 2010. 

EPA notes that all 2010 allowances 

expired on December 31, 2010 and 

therefore have no value in later years. 

See 74 FR 66415 (‘‘EPA allocates 

allowances for specific years; they are 

valid between January 1 and December 

31 of a given control period (i.e., 

calendar year)’’). 40 CFR Part 82 also 

makes it clear that allowances are tied 

to a specified control period. Section 

82.16(a) states that ‘‘In each control 

period * * * each person is granted the 

specified percentage of baseline 

production allowances and baseline 

consumption allowances for the 

specified class II controlled substances 

apportioned under §§ 82.17 and 82.19.’’ 

Furthermore, the definitions of 

unexpended allowances in section 82.3 

specify that allowances are valid for 

specific control periods. The protection 

of stratospheric ozone allowance system 

at 40 CFR part 82 does not allow 

banking or borrowing of allowances. 

Since the Court’s mandate issued on 

February 4, 2011, no company could 

have possessed 2010 allowances on the 

date the mandate issued, because all 

unexpended 2010 allowances had 

already expired. 

EPA seeks comment on whether it is 

possible to put the petitioners in 

Arkema v. EPA in the position they 

would have been in had they received 

the full amount of 2010 allowances to 

which they believed they were entitled. 

If EPA were to grant the petitioners 

additional 2010 allowances now, those 

allowances would have no value, as 

2010 allowances can be expended only 

in 2010. The three recoupment options 

discussed above assume that by 

providing recoupment allowances in 

2013, or 2013–2014, EPA can make up 

for the lost opportunity to provide or 

consume a specific amount of HCFC, 

which might either have been sold 

during 2010 or placed in inventory for 

sale during a subsequent year. 

Advantages of not providing 

recoupment allowances include (1) not 

increasing the amount of HCFC–22 on 

the market, which has advantages for 

the environment, public health, and for 

fostering a viable reclamation industry 

in advance of the 2015 stepdown, and 

(2) not decreasing the actual number or 

share of allowances for other allowance 

holders. Given the considerations above, 

including the structure of the program 

and the policy advantages noted, EPA’s 

preference is not to provide recoupment 

allowances. 

If EPA decides to provide 

recoupment, the Agency prefers option 

1 because it has a minimal impact on 

the 2015 stepdown to 10 percent of 

baseline, addresses the Court’s decision 

in the simplest manner, and does not 

further decrease the number of 

allowances companies would have 

received had EPA taken the 2008 interpollutant transfers into account in its 

2009 Final Rule. EPA welcomes 


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comment on the matter. A memo in the 

docket for this rulemaking shows how 

EPA would effectuate each of the 

options in the regulatory text at 40 CFR 

part 82 (see ‘‘Memo: Recoupment 

Options’’). To effectuate this option, the 

regulatory text at 40 CFR 82.16(a) would 

be amended to add paragraph (a)(2) as 

set forth in the regulatory text of this 

proposed rule. 

Any recoupment allowances allocated 

for 2013 or 2014 would function in the 

same way as other calendar-year 

allowances: For example, they could be 

used only in the calendar year for which 

they were issued and would expire at 

the end of that calendar year. 

C. How much HCFC–22 and HCFC–142b 

would be allocated in 2012–2014? 

As discussed previously, EPA is 

proposing to revise the tables in 40 CFR 

82 that together specify the production 

and consumption allowances available 

during specified control periods. The 

tables at sections 82.17 and 82.19 

apportion baseline production 

allowances and baseline consumption 

allowances, respectively, to individual 

companies for specific HCFCs during a 

particular regulatory period. 

Complementing these tables, the table at 

section 82.16 lists the percentage of 

baseline allocated to allowance holders 

for specific control periods. EPA is 

proposing to (1) retain this framework of 

complementary tables, (2) respond to 

the Court’s remand by establishing 

baselines for 2012–2014 identical to 

those established in the 2011 Interim 

Final Rule (76 FR 47451), and (3) grant 

allowances based on percentages of 

baselines in a manner that achieves the 

2010 phaseout step and lays the 

groundwork for the next phaseout step 

in 2015 (which could mean fewer 2012– 

2014 consumption allowances with or 

without fewer 2012–2014 production 

allowances as compared to the 2009 

Final Rule). EPA has published an 

Overview Memo in the docket clarifying 

how the various options presented in 

this proposed rule might work 

separately or in combination. 

In the 2009 Final Rule, 34.1 percent, 

30.1 percent, and 26.1 percent of each 

company’s HCFC–22 baselines were 

allocated for 2012, 2013, and 2014, 

respectively. As discussed above, EPA 

interprets the Court’s vacatur as 

applying to the HCFC–22 and HCFC– 

142b allocations for each of these years. 

EPA intends to put in place new 

allocations through this rulemaking. 

EPA is proposing, at maximum, to 

allocate 28.7 percent, 25.3 percent and 

21.9 percent of the HCFC–22 baseline 

for 2012, 2013 and 2014 consumption, 

respectively. EPA is also proposing an 

11 to 47 percent reduction to this 

maximum amount for each year, which 

would correspond to annual 

consumption allowances of 17.7 to 25.5 

percent of baseline in 2012, 14.7 to 22.1 

percent in 2013, and 11.6 to 18.5 

percent in 2014. The reduction could 

apply to consumption only or to 

consumption and production, if EPA 

chooses not to decouple consumption 

and production allowances. 

The percent allocation for HCFC–142b 

was 0.47 percent of baseline in the 2009 

Final Rule for 2012–2014. EPA is 

proposing to allocate 4.9 percent of 

HCFC–142b baseline for 2012–2014. As 

a reminder, the percentages allocated for 

2013 and 2014 could be different if EPA 

decides to provide recoupment. 

The 2009 Final Rule, which did not 

include the 2008 transfers of HCFC– 

142b to HCFC–22 baseline allowances 

in the baselines for the next regulatory 

period, had a total HCFC–22 

consumption baseline of 119,384 MT. 

EPA is reflecting the baseline transfers 

in section 82.17 and 82.19 in 

accordance with the Court’s decision. 

As a result, the aggregate HCFC–22 

consumption baseline has increased to 

141,865 MT. Since the aggregate HCFC– 

22 baseline is now higher due to the 

increase in the number of HCFC–22 

baseline allowances for Arkema, Inc. 

and Solvay Fluorides, LLC, EPA is 

allocating a smaller percentage of the 

company-specific baselines (even 

without the proposed decrease in 

allocation) than in the 2009 Final Rule 

to achieve the same total number of 

HCFC–22 allowances. Thus, 40,700 MT 

of HCFC–22 consumption (the aggregate 

allocation amount for 2012 in the 2009 

Final Rule) is equal to 34.1 percent of 

119,384 MT (baseline) of HCFC–22 in 

the 2009 Final Rule, and 28.7 percent of 

141,865 MT (baseline) for 2012 in this 

proposed rule. An 11 to 47 percent 

reduction in consumption allowances 

would change the percentage of baseline 

allocated to between 17.7 and 25.5 

percent for 2012. The aggregate HCFC– 

22 production baseline is also 

increasing, from 110,619 MT in the 2009 

Final Rule to 129,093 MT, to reflect 

Arkema, Inc.’s transfer of HCFC–142b 

baseline production allowances to 

HCFC–22 baseline production 

allowances. 

The opposite is true for HCFC–142b, 

which had a larger aggregate 

consumption baseline in the proposed 

rule (21,089 MT), but now has a smaller 

consumption baseline (2,047 MT) since 

EPA is accounting for inter-pollutant 

transfers from HCFC–142b to HCFC–22. 

Thus, 100 MT of HCFC–142b 

consumption allowances (the aggregate 

allocation amount in each year between 

2012 and 2014) is equal to 0.47 percent 

of 21,089 MT of HCFC–142b in the 2009 

Final Rule, and 4.9 percent of 2,047 MT 

in this proposed rule. Aggregate HCFC– 

142b baseline production allowances 

are decreasing from 25,090 MT in the 

2009 Final Rule to 9,444 MT in this 

proposed rule to reflect Arkema, Inc.’s 

transfer of HCFC–142b baseline 

production allowances. 

In summary, EPA is proposing (1) to 

establish production and consumption 

baselines for 2012–2014 identical to 

those established in the 2011 Interim 

Final Rule (76 FR 47451) for HCFC–22 

and HCFC–142b in the tables at sections 

82.17 and 82.19. EPA is also proposing 

(2) to add new specified percentages of 

baseline for those substances to the table 

in section 82.16 for the 2012–2014 

control periods. Without recoupment, 

the maximum proposed allocation 

amounts for consumption are specified 

in Table 1. Relative to the 2009 Final 

Rule, EPA is proposing to (3) allocate 

fewer HCFC–22 consumption 

allowances, the same amount or more 

HCFC–22 production allowances, and 

the same amount of HCFC–142b 

production and consumption 

allowances. If EPA chooses to provide 

recoupment allowances, the percentage 

of HCFC–22 baseline allocated to 

consumption could be 3.3 percent lower 

if EPA decides to provide recoupment 

from the total allocation in 2013 and 

2014—regardless of the total allocation. 

The percentage of HCFC–22 baseline 

allocated to production could be 2.8 

percent lower. The percentage of HCFC– 

142b baseline allocated to production 

and consumption could be 4.5 percent 

lower. Table 3 reflects the range of 

allocation percentages, including 

recoupment. 


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6Table 3 shows the highest and lowest percentage 

of baseline allocated being proposed in this rule. 

The high HCFC–22 consumption scenario shows 

the percentage allocated if EPA provides the same 

number of allowances relative to the 2009 Final 

Rule. The high HCFC–22 production scenario 

shows an increase in overall production allowances 

if EPA allocates the same percentage of baseline as 

in the 2009 Final Rule. The low HCFC–22 

production and consumption scenarios take into 

consideration a reduction in allowances relative to 

the 2009 Final Rule and recoupment from the 

aggregate allocation in 2013 and 2014. Additionally, 

the low scenario for HCFC–22 production shows 

the percentage allocated if EPA does not decouple 

production and consumption. For HCFC–142b, the 

high percentage reflects the same thinking used in 

the 2011 Interim Final Rule. The low scenario 

incorporates consumption recoupment from the 

aggregate amount for 2013 and 2014. 

TABLE 3—PROPOSED PHASEOUT SCHEDULE FOR HCFC–22 AND HCFC–142B BETWEEN 2012 AND 2014 6

Control period 

HCFC–22 Consumption HCFC–22 Production HCFC–142b Consumption and 

production 

High 

% 

Low 

% 

High 

% 

Low 

% High 

% 

Low 

% 

2012 ................................. 28.7 17.7 34.1 17.7 4.9 4.9 

2013 ................................. 25.3 11.4 30.1 11.4 4.9 0.4 

2014 ................................. 21.9 8.3 26.1 8.3 4.9 0.4 

Consistent with the 2009 Final Rule, 

EPA is allocating different baseline 

percentages for HCFC–22 and HCFC– 

142b because EPA projects that the 

needs will differ for servicing airconditioning and refrigeration 

appliances during the 2012–2014 

control periods. 

1. How does EPA propose to allocate 

HCFC–22 consumption allowances for 

2012–2014? 

For 2012, the 2009 Final Rule 

allocated HCFC–22 consumption 

allowances to meet about 76.5 percent 

of the servicing need, which translated 

into approximately 40,700 MT, or 59 

percent of the total HCFC consumption 

cap for the 2012 control period. In this 

rulemaking, EPA is proposing to 

allocate 11 to 47 percent less for 2012 

relative to the 2009 Final Rule; see the 

Adjustment Memo in the docket for a 

discussion of recent updates to 

estimated servicing demand and how 

much of that demand could reasonably 

be met by recovered or reclaimed 

refrigerant. In the 2009 Final Rule, 2013 

and 2014 consumption allocations were 

35,900 MT and 31,100 MT, respectively. 

The Agency is proposing to allocate 11 

to 47 percent less for those years as 

well. Along with any reduction in 

consumption allowances, the final 

allocations in 2013 and 2014 will 

depend on which recoupment option 

the Agency chooses (including no 

recoupment). If the Agency issues 

recoupment, its preferred option is to 

allocate all recoupment (5,907 MT) in 

2013 and do so in addition to the overall 

consumption allocation—regardless of 

whether the annual allocations are 

decreased relative to the 2009 Final 

Rule or not. In each year between 2012 

and 2014, EPA’s total HCFC 

consumption allocation including 

recoupment would be at least 36 percent 

below the Montreal Protocol cap, and 

would be below servicing demand as 

estimated in the Servicing Tail Report. 

Section III.B.4. of this preamble also 

discusses other recoupment options. 

2. How does EPA propose to allocate 

HCFC–22 production allowances for 

2012–2014? 

In the 2009 Final Rule, EPA decided 

to use the same percentages for 

production and consumption 

allocations—deriving the percentages 

based on estimated need for each 

individual HCFC. In this rulemaking, 

EPA is proposing to decouple the 

percentage of baseline allocated for 

production and consumption 

allowances. The Agency is taking 

comment on two options with regard to 

decoupling production allowances: (1) 

Allocating the same aggregate number of 

HCFC–22 production allowances as in 

the 2009 Final Rule for 2012–2014, and 

(2) using the same baseline percentages 

as in the 2009 Final Rule to allocate 

HCFC–22 production allowances in 

2012–2014. The proposal to decrease 

consumption allowances by 11 to 47 

percent relative to the 2009 Final Rule 

would also apply to production 

allowances should the Agency decide 

not to decouple production allowances 

from consumption allowances. 

Under option 1, EPA would decouple 

the percentage of baseline allocated for 

production from the percentage of 

baseline allocated for consumption. A 

range of percentages is provided in 

Table 3. EPA would effectuate this 

change in its regulations by replacing 

the table at 40 CFR 82.16 with two 

tables. One would allocate a percent of 

baseline for consumption allowances. In 

the other, EPA would allocate 28.7 

percent of production baseline in 2012, 

25.3 percent in 2013, and 21.9 percent 

in 2014. The resulting allocation would 

provide 37,050 MT of HCFC–22 

production allowances in 2012. This 

aggregate allocation in 2012 is 

approximately two percent lower than 

the amount allocated in the 2009 Final 

Rule (37,050 MT in this proposed rule 

vs. 37,721 MT in the 2009 Final Rule) 

because the aggregate amount of 

baseline production allowances in this 

rulemaking did not increase by the same 

relative amount as aggregate baseline 

consumption allowances. Because 

Solvay did not transfer its HCFC–142b 

production allowances to HCFC–22 

production allowances, HCFC–22 

baseline consumption allowances are 

18.8 percent higher in this rule, while 

baseline production allowances are only 

16.7 percent higher. The memo to the 

docket for this rulemaking titled 

‘‘Effects of HCFC–22 and HCFC–142b 

Baseline Changes: 2009 Final Rule vs. 

2011 Proposed Rule,’’ (Baseline Memo) 

discusses the slight differences in 

allocation amounts in more detail. 

Absent recoupment, EPA would allocate 

32,660 MT of HCFC–22 production 

allowances in 2013, and 28,271 MT of 

HCFC–22 production allowances in 

2014 under option 1. 

Under option 2, EPA would also 

decouple the percentage of baseline 

allocated for production from the 

percentage of baseline allocated for 

consumption. EPA would effectuate this 

change in its regulations by replacing 

the table at 40 CFR 82.16 with two 

tables. One would allocate a percentage 

of baseline for consumption allowances. 

The other would allocate 34.1 percent, 

30.1 percent and 26.1 percent of 

baseline for production allowances in 

2012, 2013, and 2014, respectively, 

consistent with the 2009 Final Rule. 

This approach would still provide the 

petitioners in Arkema v. EPA the benefit 

of their 2008 baseline transfers while 

giving other companies with production 

baselines approximately the same 

number of production allowances as 

they received in the 2009 Final Rule. 

Compared to the 2009 Final Rule, the 

net result of this option would increase 

allowed production by 6,299 MT in 

2012, 5,560 MT in 2013, and 4,821 MT 

in 2014. 


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EPA is interested in comments on a 

number of issues with regard to these 

two options. From a policy perspective, 

EPA is interested in comments on 

whether an increase in the total number 

of HCFC–22 production allowances 

would result in greater total HCFC 

production, either in the U.S. or 

globally. EPA notes that production of 

1 kilogram of an HCFC requires both a 

production allowance and a 

consumption allowance (82.15(a)(1), 

(2)). Thus, an increase in production 

allowances without a corresponding 

increase in consumption allowances 

does not automatically result in greater 

production. The most likely scenario is 

that an increase in production 

allowances would result in greater U.S. 

production for export. This is because as 

stated in 82.20(a), ‘‘A person may obtain 

at any time during the control period 

* * * consumption allowances 

equivalent to the quantity of class II 

controlled substances that the person 

exported from the U.S. and its territories 

to a foreign state * * * when that 

quantity of class II controlled substance 

was produced in the U.S. * * * with 

expended consumption allowances.’’ In 

effect, current EPA regulations allow 

exporters to receive a refund of one 

consumption allowance for each 

kilogram they export if they show one 

consumption and one production 

allowance were expended for the 

material exported. Therefore, an 

increase in production allowances 

would not be expected to result in 

greater HCFC consumption in the U.S. 

As an aside, the Agency also allows for 

additional production for export to 

Article 5 countries under the Montreal 

Protocol through its allotment of Article 

5 allowances. Until December 31, 2019, 

companies are allowed to produce up to 

10 percent of their HCFC–22, HCFC– 

141b and HCFC–142b production 

baselines annually so long as the 

produced material is exported to an 

Article 5 country. Article 5 allowances 

and their proper use are described in 

more detail at 82.18(a)(2). 

EPA welcomes comment on whether, 

relative to the 2009 Final Rule, an 

increase in the total number of 

production allowances, as proposed 

under option 2, would result in (1) an 

increase in U.S. consumption, (2) an 

increase in U.S. production, either for 

domestic use or for export, and/or (3) an 

increase in worldwide production and/ 

or consumption of HCFCs. Moreover, 

given that one potential outcome might 

be an increase in U.S. exports of HCFC– 

22, EPA invites comment on the 

implications of such an increase for the 

U.S. economy and the global 

environment, particularly as it relates to 

the smooth U.S. phaseout of HCFC–22. 

EPA also requests comments on 

whether section 605(c) would preclude 

allocating a different percentage of 

baseline for production than for 

consumption. Section 605(c) states that 

EPA must ‘‘promulgate regulations 

phasing out the production * * * of 

class II substances in accordance with 

[section 605],’’ subject to any 

acceleration under section 606. It 

further states that EPA must 

‘‘promulgate regulations to insure that 

the consumption of class II substances 

in the United States is phased out and 

terminated in accordance with the same 

schedule * * * as is applicable to the 

phase-out and termination of 

production of class II substances under 

[Title VI].’’ EPA is considering three 

possible interpretations of the term 

‘‘schedule’’ as referenced in section 

605(c): (1) The schedule that appears on 

the face of section 605, which contains 

no deadlines until 2015; (2) the 

schedule that appears on the face of 

section 605, as accelerated under 

section 606; and (3) the specific 

allocation percentages or amounts 

established by EPA through rulemaking 

for each control period. EPA believes 

that the second interpretation is the 

most consistent with the statutory 

language and purpose. The Agency 

requested comment on this issue in the 

2011 Interim Final Rule (76 FR 47451) 

and received four comments in favor of 

increasing production allowances, and 

two comments in opposition. Only one 

commenter responded specifically to 

EPA’s interpretation of section 605, and 

the commenter agreed with the second 

interpretation presented. 

In past actions, the Agency has made 

the initial schedule in section 605 more 

stringent to reflect modifications to the 

Montreal Protocol phaseout schedule for 

HCFCs. Under the 2007 Montreal 

Adjustment (reflected in Decision XIX/ 

6), the U.S. is obligated to reduce HCFC 

production and consumption 75 percent 

below its aggregate baseline by 2010. 

EPA is not proposing to increase 

production to an amount that would be 

inconsistent with that obligation. 

Instead, EPA is taking comment on 

whether to allow production to increase 

relative to consumption, without 

encroaching on the cap. 

Under option 2, the U.S. would still 

be below the Montreal Protocol’s 

production cap (when all HCFCs are 

included) by at least 33 percent in each 

year, even when including recoupment 

(the memo to the docket entitled, 

‘‘Montreal Protocol Compliance,’’ 

contains more detailed information on 

the implications of each option relative 

to the Montreal Protocol cap). 

In summary, EPA seeks comment on 

whether to decouple production from 

consumption, and if so, which 

decoupling option to choose. EPA is 

also seeking comment on whether 

increasing production allowances above 

the 2009 Final Rule level, as in option 

2, would negatively affect the transition 

to the 2015 phaseout step, under which 

the U.S. is obligated to reduce HCFC 

production and consumption 90 percent 

below its aggregate baseline. 

3. How does EPA propose to allocate 

HCFC–142b allowances for 2012–2014? 

Establishing HCFC–142b baseline 

allowances that take into account the 

2008 inter-pollutant transfers discussed 

in section II.D. results in 2,047 MT of 

aggregate baseline consumption 

allowances and 9,444 MT of aggregate 

baseline production allowances. 

Consistent with the 2009 Final Rule, 

EPA is proposing to allocate 100 percent 

of the projected servicing need for 

HCFC–142b identified in that rule: 100 

MT of consumption. To get to that level 

of consumption, EPA is proposing to 

allocate 4.9 percent of the aggregate 

consumption baseline, as reflected in 

the table at section 82.16. The aggregate 

allocation number for consumption is 

the same as in the 2009 Final Rule. 

Using the same percentage (4.9 

percent), EPA is proposing to allocate 

463 MT of HCFC–142b production 

allowances for each control period 

between 2012 and 2014. The aggregate 

allocation for production is higher than 

the amount allocated in the 2009 Final 

Rule (463 MT in this proposed rule vs. 

118 MT in the 2009 Final Rule). The 

proposed allocation is 292 percent 

higher than in the 2009 Final Rule 

because the aggregate amount of 

baseline HCFC–142b consumption 

allowances in this rulemaking decreased 

by a significantly larger amount than 

aggregate baseline HCFC–142b 

production allowances. HCFC–142b 

baseline consumption allowances are 

90.3 percent lower in this rule, while 

baseline production allowances are only 

62.4 percent lower. The difference 

between the change in production and 

consumption baselines is a result of 

Arkema trading most of its HCFC–142b 

production allowances, while Solvay 

did not. This higher amount of calendaryear production does not affect the 

U.S.’s ability to meet its obligations 

under the Montreal Protocol. The 

Baseline Memo in the docket for this 

rulemaking discusses the differences in 

more detail. 

As discussed in section III.B.4. of this 

preamble, EPA is considering options to 


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allocate recoupment allowances in 2013 

or 2013–2014 in addition to the 4.9 

percent of baseline described above. If 

finalized, the 2013 option would result 

in an additional 61 MT of HCFC–142b 

consumption allowances and 397 MT of 

HCFC–142b production allowances. The 

2013–2014 option would result in 30 

MT of additional HCFC–142b 

consumption allowances and 198 MT of 

HCFC–142b production allowances each 

year. 

4. How would the aggregate for HCFC– 

22 and HCFC–142b translate entity-byentity? 

For 2012, EPA is proposing to allocate 

(1) at maximum, approximately 40,700 

MT of HCFC–22 consumption 

allowances, (2) 37,050 MT of HCFC–22 

production allowances (with possible 

adjustments), (3) approximately 100 MT 

of HCFC–142b consumption allowances 

and (4) 463 MT of HCFC–142b 

production allowances. However, EPA 

actually allocates allowances to 

individual companies (i.e., legal 

entities). Company-specific production 

and consumption baselines (also 

referred to as ‘‘baseline allowances’’) for 

HCFC–142b and HCFC–22 are listed at 

sections 82.17 and 82.19, respectively. 

The range of percentages of baseline 

each entity would receive for HCFC–22 

and HCFC–142b in 2012 through 2014 

is shown in Table 3 above. For the low 

percentage of baseline allocated, Table 3 

shows how the proposed allocation 

combined with recoupment option 3 

(recoupment provided from the total 

allocation, not in addition to the 

allocation) would affect allowances. For 

the high percentage of baseline 

allocated, Table 3 shows no change 

relative to the 2009 Final Rule on the 

consumption side and an increase in 

allowances on the production side. The 

percentages included in the proposed 

regulatory text at the end of this 

preamble are at the lower end of the 

range EPA is proposing to allocate. 

Allowances allocated for individual 

control periods are called ‘‘calendaryear allowances’’ to distinguish them 

from the baseline production or 

consumption allowances. For 2012– 

2014, EPA is proposing to apportion 

production and consumption baselines 

for HCFC–22 and HCFC–142b on the 

same basis as in the 2009 Final Rule, 

except that EPA is making adjustments 

to reflect (1) the 2008 inter-pollutant 

transfers of baseline allowances deemed 

permanent by the Court, (2) intercompany, single-pollutant transfers of 

baseline allowances that occurred in 

2010, and (3) changes in company 

names that occurred after the 2009 Final 

Rule was signed. All of these changes 

were made in the 2011 Interim Final 

Rule (76 FR 47451), and EPA is 

proposing to do the same for 2012–2014. 

Applying the approach described above, 

EPA would apportion production and 

consumption baselines for HCFC–22 

and HCFC–142b to the following 

entities in the following amounts: 

TABLE 4—BASELINE PRODUCTION ALLOWANCES OF HCFC–22 AND HCFC–142B IN 40 CFR 82.17 

Person Controlled substance Allowances (kg) 

Arkema ................................................................................................................................................. HCFC–22 .................. 46,692,336 

HCFC–142b ............... 484,369 

DuPont ................................................................................................................................................. HCFC–22 .................. 42,638,049 

Honeywell ............................................................................................................................................ HCFC–22 .................. 37,378,252 

HCFC–142b ............... 2,417,534 

MDA Manufacturing ............................................................................................................................. HCFC–22 .................. 2,383,835 

Solvay Solexis ..................................................................................................................................... HCFC–142b .............. 6,541,764 

TABLE 5—BASELINE CONSUMPTION ALLOWANCES OF HCFC–22 AND HCFC–142B IN 40 CFR 82.19 

Person Controlled substance Allowances (kg) 

ABCO Refrigeration Supply ................................................................................................................. HCFC–22 .................. 279,366 

Altair Partners ...................................................................................................................................... HCFC–22 .................. 302,011 

Arkema ................................................................................................................................................. HCFC–22 .................. 48,637,642 

HCFC–142b ............... 483,827 

Carrier Corporation .............................................................................................................................. HCFC–22 .................. 54,088 

Coolgas Investment Property .............................................................................................................. HCFC–22 .................. 1,040,458 

DuPont ................................................................................................................................................. HCFC–22 .................. 38,814,862 

HCFC–142b ............... 52,797 

H.G. Refrigeration Supply .................................................................................................................... HCFC–22 .................. 40,068 

Honeywell ............................................................................................................................................ HCFC–22 .................. 35,392,492 

HCFC–142b ............... 1,315,819 

Mexichem Fluor Inc ............................................................................................................................. HCFC–22 .................. 2,546,305 

Kivlan & Company ............................................................................................................................... HCFC–22 .................. 2,081,018 

MDA Manufacturing ............................................................................................................................. HCFC–22 .................. 2,541,545 

Mondy Global ....................................................................................................................................... HCFC–22 .................. 281,824 

National Refrigerants ........................................................................................................................... HCFC–22 .................. 5,528,316 

Refricenter of Miami ............................................................................................................................ HCFC–22 .................. 381,293 

Refricentro ........................................................................................................................................... HCFC–22 .................. 45,979 

R-Lines ................................................................................................................................................. HCFC–22 .................. 63,172 

Saez Distributors ................................................................................................................................. HCFC–22 .................. 37,936 

Solvay Fluorides .................................................................................................................................. HCFC–22 .................. 3,781,691 

Solvay Solexis ..................................................................................................................................... HCFC–142b .............. 194,536 

USA Refrigerants ................................................................................................................................. HCFC–22 .................. 14,865 


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The proposed baselines listed above 

are identical to the tables presented in 

the 2011 Interim Final Rule (76 FR 

47451). 

D. Are HCFC–141b, HCFC–123, HCFC– 

124, HCFC–225ca, and HCFC–225cb 

allowances affected by this rulemaking? 

Since the Court’s decision did not 

vacate this portion of the 2009 Final 

Rule, EPA is not proposing to change 

baselines and percentages of baseline 

allocated as calendar-year allowances 

for HCFC–141b, HCFC–123, HCFC–124, 

HCFC–225ca, and HCFC–225cb, except 

to make adjustments for inter-company, 

single-pollutant transfers of baseline 

allowances, as reflected in the 2011 

Interim Final Rule (76 FR 47451). In the 

case of HCFC–141b, EPA is continuing 

to allocate 0 percent of baseline for U.S. 

consumption and production, consistent 

with 40 CFR 82.16(b). 

E. How will EPA allocate other HCFCs? 

As a result of EPA’s allocation 

process, which is largely based on 

projected demand for HCFC–22 and 

HCFC–142b, minus an amount of 

HCFC–22 that is assumed to be reused, 

recycled, or reclaimed, the total 

allocation is lower than the aggregate 

HCFC cap under the Montreal Protocol. 

EPA recognizes that there could be some 

additional need for HCFCs not 

specifically included in this rule. While 

some niche applications in the U.S. use 

other HCFCs, such as HCFC–21, EPA is 

not aware of additional need for 

production or import of these 

substances at this time, as adequate 

amounts appear to be in inventory. 

However, EPA is not foreclosing the 

possibility of additional production or 

import for these niche uses. Also, some 

amount of HCFC–141b will likely 

continue to be produced or imported via 

the petition process during 2012–2014. 

EPA believes there is sufficient room 

under the cap for such continued 

production and import. The current 

regulations at 40 CFR 82.15 ban the 

production and import of class II 

substances for which EPA has 

apportioned baseline production and 

consumption allowances in excess of 

allowances held by the producer or 

importer, but do not ban the production 

and import of class II substances for 

which EPA has not apportioned 

baseline production and consumption 

allowances. This rule does not alter the 

current regulations in that respect. The 

producer or importer of an HCFC that is 

not subject to the allowance system 

would be required to report to EPA 

consistent with the existing 

recordkeeping and reporting 

requirements. If necessary, EPA could 

amend the regulations to set and 

apportion baselines and issue 

allowances for these HCFCs. Therefore, 

retaining room under the cap could 

provide the benefit of accounting for 

unanticipated growth in HCFCs that do 

not have allocations or other unforeseen 

events. However, EPA is not reserving 

room under the cap for the abovedescribed reasons. EPA is allocating 

allowances based on modeled demand 

for virgin and recovered material in 

preparation for the next major stepdown 

period under the Montreal Protocol in 

2015. 

IV. How does EPA propose to change 

the regulations governing allowance 

transfers of Class II Controlled 

Substances? 

The Agency is concerned about the 

possibility of companies undermining 

the HCFC chemical-by-chemical 

phaseout by performing inter-pollutant 

transfers in advance of future phaseout 

steps. EPA interprets the 2003 Final 

Rule, which established the transfer 

provisions at 40 CFR 82.23, as allowing 

only single-pollutant, inter-company 

transfers to be made on a permanent 

basis. Nevertheless, EPA recognizes that 

in Arkema v. EPA, the Court found that 

‘‘EPA’s practice under the 2003 Rule 

was to allow petitioners’ baseline 

transfers of inter-pollutant allowances’’ 

(618 F.3d at 8). Therefore, EPA clarified 

its current policy on inter-pollutant 

transfers in the 2011 Interim Final Rule 

(76 FR 47459) and is repeating that 

clarification in this action. EPA is also 

proposing to modify the regulatory text 

in order to dispel any possibility of 

confusion in the future. In addition to 

modifying the regulatory text to address 

the duration of inter-pollutant transfers, 

EPA is also proposing to revise the 

regulatory text to reflect prior Agency 

statements pertaining to inter-pollutant 

transfers of Article 5 allowances. 

A. How does EPA propose to change the 

regulations governing permanent 

transfers of Class II Allowances? 

Sections 607(b) and (c) of the CAA 

address inter-pollutant and intercompany transfers of allowances, 

respectively. Inter-pollutant transfers 

are the transfer of an allowance of one 

substance to an allowance of another 

substance on an ODP-weighted basis. 

Inter-company transfers are transfers of 

allowances for the same ODS from one 

company to another company. Section 

607(c) also authorizes inter-company 

transfers combined with inter-pollutant 

transfers, so long as the requirements of 

both are met. The corresponding 

regulatory provisions for HCFCs appear 

at 40 CFR 82.23. 

The 2009 Final Rule updated the 

baselines for HCFC–22 and HCFC–142b 

to reflect name changes and intercompany baseline transfers, i.e., 

transfers of baseline for a specific type 

of HCFC from one company to another. 

Doing so reflected the changes in the 

marketplace that had occurred since 

EPA promulgated the 2003 Final Rule. 

Inter-company baseline transfers 

provide a mechanism for new entrants 

to join the HCFC market and for other 

companies to expand their business. 

EPA recognizes that in some cases, 

entities are no longer actively involved 

in HCFC production, import, and/or 

export activities. EPA retained the 

baseline for such entities, noting that 

this had been a mechanism by which 

new entrants had entered the HCFC 

allowance system in the past. 

The 2009 Final Rule also addressed 

four inter-pollutant baseline transfers 

made during the prior regulatory period 

(see section II.D. and the transfer forms 

in the docket for this action for more 

detail). EPA had proposed to adjust the 

company baselines to reflect these four 

inter-pollutant baseline transfers in the 

2008 Proposed Rule. Eight commenters 

opposed, and two commenters 

supported, these proposed adjustments. 

At issue was whether the inter-pollutant 

baseline transfers should be part of the 

companies’ baseline allowances in the 

next regulatory period. 

After reviewing the comments, EPA 

concluded that adjusting the baselines 

to reflect inter-pollutant baseline 

transfers could create incentives for 

future manipulation of the allocation 

system in anticipation of future control 

periods. EPA remains concerned about 

the potential for such future 

manipulation if inter-pollutant baseline 

transfers during the current regulatory 

period change a company’s baseline for 

future regulatory periods. For example, 

in 2020 EPA will no longer be issuing 

HCFC–22 production or consumption 

allowances (see section 82.16(e)). EPA 

expects that companies with HCFC–22 

allowances would no longer be in the 

HCFC market at that date if they did not 

hold allowances for other HCFCs that 

may still be produced after 2020. If EPA 

were to allow inter-pollutant baseline 

transfers that carried forward into the 

new regulatory period, companies with 

HCFC–22 baselines in 2019 could 

convert them all to baselines for HCFC– 

123. Perpetuating the HCFC–22 

baselines in a new form would be 

counter to the design of the chemicalby-chemical phaseout, under which the 

baseline allowances for a particular 

chemical are intended to drop out of the 

system upon the phase-out of that 

chemical. 


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As another example, in 2015, a 

producer or importer that previously 

had not participated in the HCFC–123 

market could dominate that market by 

converting its HCFC–22 baseline in 

2014 to HCFC–123 baseline. Given the 

different ODPs of HCFC–22 and HCFC– 

123 (0.055 and 0.02, respectively), 

converting one baseline allowance of 

HCFC–22 would result in 2.75 baseline 

allowances of HCFC–123. Also, since 

companies hold many more HCFC–22 

baseline allowances than HCFC–123 

baseline allowances, converting those 

HCFC–22 baseline allowances would 

have an overwhelming effect on the 

current HCFC–123 baseline allowance 

holders and the overall market. EPA 

agrees with commenters on the 2008 

Proposed Rule that taking interpollutant baseline transfers into account 

in setting baselines could have the effect 

of moving the U.S. HCFC phasedown 

from a chemical-by-chemical phaseout, 

as established under the ‘‘worst-first’’ 

approach in the 1993 Final Rule, 

towards an ODP-weighted phasedown. 

Thus, there are important policy reasons 

going forward for not taking interpollutant transfers into account in 

establishing baselines for new 

regulatory periods. 

Some commenters on the 2008 

Proposed Rule stated that modifying the 

baselines by taking into account interpollutant transfers would be contrary to 

the CAA. One commenter argued that 

section 607 of the CAA allows EPA to 

approve inter-pollutant transfers of 

allowances only on a year-to-year basis. 

That commenter pointed to language in 

section 607(b) stating that EPA 

regulations are to permit ‘‘a production 

allowance for a substance for any year 

to be transferred for a production 

allowance for another substance for the 

same year on an ozone depletion 

weighted basis.’’ The commenter also 

discussed the legislative history of the 

1990 CAA Amendments. 

EPA does not agree with the 

commenter that the language of section 

607(b) is clear on its face. However, 

where the statutory language is 

ambiguous, EPA has discretion to 

choose a reasonable interpretation of 

that language. EPA determined in the 

2009 Final Rule that section 607(b) is 

best read as permitting only year-byyear inter-pollutant transfers. EPA 

continues to believe that this is the best 

interpretation of the statutory language. 

Section 607(b) states that EPA’s rules 

are to permit ‘‘a production allowance 

for a substance for any year to be 

transferred for a production allowance 

for another substance for the same 

year.’’ This language emphasizes the 

year-by-year nature of such transactions. 

No parallel language appears in section 

607(c). That section does, however, 

provide that any inter-pollutant 

transfers between two or more persons 

must meet the requirements of section 

607(b). 

As the Court noted, ‘‘the Agency is 

certainly entitled to * * * institute a 

program that forbids baseline interpollutant transfers in the future,’’ 

(Arkema v. EPA, 618 F.3d at 9). Hence, 

EPA concludes that requiring all interpollutant transfers to be conducted on a 

yearly—and thus temporary—basis 

going forward is the approach most 

consistent with the wording of section 

607(b). Further discussion of the reasons 

for limiting inter-pollutant transfers to 

those conducted on a calendar-year 

basis is available in the Response to 

Comments on the 2008 Proposed Rule 

(included in the docket for this 

rulemaking). 

Consistent with the Court’s decision 

regarding past inter-pollutant transfers 

(those conducted during the prior 

regulatory period), the baselines 

established in this action for 2012–2014 

take into account the 2008 interpollutant baseline transfers. EPA is 

clarifying, however, that it has not 

approved any inter-pollutant transfers of 

baseline allowances in the current 

regulatory period, and for the reasons 

given in the 2009 Final Rule and in this 

action, in the future, EPA intends to 

approve inter-pollutant transfers only 

on a year-by-year basis. Thus, in the 

context of the allowance system for 

protection of stratospheric ozone, 

companies should not expect that any 

inter-pollutant transfers they conduct 

will affect their baselines either in the 

current regulatory period or any future 

regulatory period. 

EPA proposes to revise the regulations 

to avoid any further dispute about the 

Agency’s position on this issue. In 

addition, EPA is proposing to clarify the 

procedures that apply to permanent, 

single-pollutant transfers. Specifically, 

EPA proposes to add a sentence at the 

beginning and end of section 82.23(d) of 

40 CFR Part 82, so the text reads: ‘‘(d) 

Permanent transfers. The procedures in 

paragraph (a) of this section apply to 

permanent inter-company transfers of 

baseline production allowances or 

baseline consumption allowances. A 

person receiving a permanent transfer of 

baseline production allowances or 

baseline consumption allowances (the 

transferee) for a specific class II 

controlled substance will be the person 

who has their baseline allowances 

adjusted in accordance with phaseout 

schedules in this subpart. No person 

may conduct permanent inter-pollutant 

transfers of baseline production 

allowances or baseline consumption 

allowances.’’ 

B. How does EPA propose to change the 

regulations governing transfers of 

Article 5 HCFC allowances? 

Article 5 allowances for Class II 

substances are the privileges granted 

under 40 CFR 82.18(a) to produce the 

specified HCFC for export only to 

countries listed in 40 CFR Subpart A, 

Appendix C, Annex 4. The countries 

listed in that annex are developing 

countries whose control obligations 

under the Montreal Protocol are 

addressed in Article 5 of the treaty and 

hence are referred to as ‘‘Article 5 

Parties.’’ EPA is proposing to revise the 

regulations at 40 CFR 82.23(b) to reflect 

its previously stated intent to allow 

inter-pollutant transfers of Article 5 

allowances. The regulations currently 

provide clarity on inter-company 

(single-pollutant) transfers of Article 5 

allowances in section 82.23(a) by stating 

‘‘a person * * * may transfer to any 

other person * * * any quantity of the 

transferor’s class II * * * Article 5 

allowances for the same type of 

allowances * * *’’ While 82.23(a) 

specifically includes Article 5 

allowances in the list of allowances that 

may be transferred to another entity, 

82.23(b), which governs inter-pollutant 

transfers, makes no mention of Article 5 

allowances. 

Section 82.23 was promulgated as 

part of the 2003 Final Rule (68 FR 2820). 

EPA specifically discussed the interpollutant transfer of Article 5 

allowances at 68 FR 2834 stating, ‘‘For 

example, after the 2003 phaseout of 

HCFC–141b and before 2010, a company 

receiving * * * Article 5 allowances for 

HCFC–141b could engage in intercompany transfers of those allowances, 

but not in inter-pollutant transfers 

[because no other HCFC Article 5 

allowances would be available during 

that period]. In 2010, when * * * 

Article 5 allowances for HCFC–22 and 

HCFC–142b become available, these 

allowances will be transferable with the 

ones for HCFC–141b.’’ These statements 

indicate that the Agency intended for 

companies to be able to perform interpollutant transfers of Article 5 

allowances. The omission of Article 5 

allowances from section 82.23(b) 

appears to have been an oversight. 

Therefore, EPA is proposing to revise 

the regulations to specifically provide 

for the inter-pollutant transfers of 

Article 5 allowances through this 

rulemaking. As with other types of 

inter-pollutant transfers, these transfers 

would be limited in duration to a single 

year. 


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EPA is also proposing to change the 

text at 82.23(a)(ii) for consistency with 

its previously stated policy on offsets for 

transfers of Article 5 allowances. 

Section 607(a) requires that transfers of 

production allowances ‘‘will result in 

greater total reductions in the 

production in each year of * * * class 

II substances than would occur in that 

year in the absence of such 

transactions.’’ In a November 10, 1994, 

Federal Register notice, EPA stated its 

interpretation that the section 607 offset 

requirement applies to Article 5 

allowance transfers (59 FR 56287): 

‘‘Inter-pollutant transfers of Article 5 

allowances will continue to require a 

one percent offset, as required by 

section 607 of the CAA * * *’’ In the 

May 10, 1995 final rule at 60 FR 24980, 

EPA stated that ‘‘With today’s action, 

EPA permits inter-pollutant and intercompany transfers of Article 5 

allowances as proposed * * *’’ 

meaning EPA intended to require an 

offset for transfers of Article 5 

allowances in the class I allowance 

system. 

This intent to require an offset is also 

reflected in certain provisions of the 

class II allowance system in 40 CFR 82. 

Section 82.23(a)(i)(G) specifically 

requires an offset for Article 5 allowance 

inter-company transfers, stating that the 

transfer claim must set forth: ‘‘For trades 

of consumption allowances, production 

allowances, export production 

allowances, or Article 5 allowances, the 

quantity of the 0.1 percent offset applied 

to the unweighted quantity traded that 

will be deducted from the transferor’s 

allowance balance.’’ The offset is also 

mentioned at section 82.23(a)(iii): ‘‘In 

the case of transfers of * * * Article 5 

allowances, EPA will reduce the 

transferor’s balance of unexpended 

allowances by the quantity (in 

kilograms) to be converted plus 0.1 

percent of that quantity.’’ This contrasts 

with section 82.23(a)(ii)(A), which states 

that in the case of Article 5 allowances, 

‘‘EPA will reduce the transferor’s 

balance of unexpended allowances 

* * * by the quantity to be transferred,’’ 

with no mention of an offset. In 

addition, in the introductory text for 

82.23(a)(ii), Article 5 allowances are not 

mentioned: ‘‘The transfer claim is the 

quantity (in kilograms) to be transferred 

plus, in the case of transfers of 

production or consumption allowances, 

0.1 percent of that quantity;’’ EPA is 

proposing to amend 82.23(a)(ii) and 

82.23(a)(ii)(A) to require an offset for 

transfers of Article 5 allowances. This 

will make section 82.23(a) consistent 

throughout. Section 82.23(b) currently 

requires an offset of 0.1 percent for all 

inter-pollutant transfers. Thus, if EPA 

adds Article 5 allowances to section 

82.23(b), an offset will automatically 

apply. 

To reflect EPA’s intent to allow interpollutant transfers of Article 5 

allowances, and the requirement that an 

offset be deducted when an entity is 

transferring Article 5 allowances, the 

Agency is proposing to modify the 

regulatory text. EPA is proposing to 

modify the text at 40 CFR 82.23(a)(ii) to 

read as set forth in the regulatory text of 

this proposed rule. 

The Agency is also proposing to 

modify the text at 40 CFR 82.23(b) by 

adding Article 5 allowances to the list 

of allowances that can be traded 

between pollutants. The text would read 

as set forth in the regulatory text of this 

proposed rule. 

V. Statutory and Executive Order 

Reviews 

A. Executive Order 12866: Regulatory 

Planning and Review and Executive 

Order 13563: Improving Regulation and 

Regulatory Review 

Under Executive Order (EO) 12866 

(58 FR 51735, October 4, 1993), this 

action is a ‘‘significant regulatory 

action’’ since it raises ‘‘novel legal or 

policy issues.’’ Accordingly, EPA 

submitted this action to the Office of 

Management and Budget (OMB) for 

review under Executive Orders 12866 

and 13563 (76 FR 3821, January 21, 

2011) and any changes made in 

response to OMB recommendations 

have been documented in the docket for 

this action. 

EPA did not conduct a specific 

analysis of the benefits and costs 

associated with this action. Many 

previous analyses provide a wealth of 

information on the costs and benefits of 

the U.S. HCFC phaseout including: 

• The 1993 Addendum to the 1992 

Phaseout Regulatory Impact Analysis: 

Accelerating the Phaseout of CFCs, 

Halons, Methyl Chloroform, Carbon 

Tetrachloride, and HCFCs. 

• The 1999 Report Costs and Benefits 

of the HCFC Allowance Allocation 

System. 

• The 2000 Memorandum Cost/ 

Benefit Comparison of the HCFC 

Allowance Allocation System. 

• The 2005 Memorandum 

Recommended Scenarios for HCFC 

Phaseout Costs Estimation. 

• The 2006 ICR Reporting and 

Recordkeeping Requirements of the 

HCFC Allowance System. 

• The 2007 Memorandum 

Preliminary Estimates of the 

Incremental Cost of the HCFC Phaseout 

in Article 5 Countries. 

• The 2007 Memorandum Revised 

Ozone and Climate Benefits Associated 

with the 2010 HCFC Production and 

Consumption Stepwise Reductions and 

a Ban on HCFC Pre-charged Imports. 

A memorandum summarizing these 

analyses is available in the docket. 

B. Paperwork Reduction Act 

This action does not impose any new 

information collection burden. EPA 

already requires recordkeeping and 

reporting for HCFCs, and this action 

does not amend those provisions. The 

Office of Management and Budget 

(OMB) has previously approved the 

information collection requirements 

contained in the existing regulations at 

40 CFR part 82, subpart A under the 

provisions of the Paperwork Reduction 

Act, 44 U.S.C. 3501 et seq. and has 

assigned OMB control number 2060– 

0498. The OMB control numbers for 

EPA’s regulations in 40 CFR are listed 

in 40 CFR part 9. 

C. Regulatory Flexibility Act (RFA) 

The Regulatory Flexibility Act (RFA) 

generally requires an agency to prepare 

a regulatory flexibility analysis of any 

rule subject to notice-and-comment 

rulemaking requirements under the 

Administrative Procedure Act or any 

other statute, unless the Agency certifies 

that the rule will not have a significant 

economic impact on a substantial 

number of small entities. Small entities 

include small businesses, small 

organizations, and small governmental 

jurisdictions. We have considered the 

economic impacts of this proposed rule 

on small entities. For purposes of 

assessing the impacts of this rule on 

small entities, a small entity is defined 

as: (1) A small business as defined by 

the Small Business Administration’s 

(SBA) regulations at 13 CFR 121.201; (2) 

a small governmental jurisdiction that is 

a government of a city, county, town, 

school district or special district with a 

population of less than 50,000; and (3) 

a small organization that is any not-forprofit enterprise which is independently 

owned and operated and is not 

dominant in its field. 

This action will affect the following 

categories: 

—Industrial Gas Manufacturing entities 

(NAICS code 325120), including 

fluorinated hydrocarbon gases 

manufacturers and reclaimers; 

—Other Chemical and Allied Products 

Merchant Wholesalers (NAICS code 

422690), including chemical gases 

and compressed gases merchant 

wholesalers; 

—Air-Conditioning and Warm Air 

Heating Equipment and Commercial 


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and Industrial Refrigeration 

Equipment Manufacturing entities 

(NAICS code 333415), including airconditioning equipment and 

commercial and industrial 

refrigeration equipment 

manufacturers; 

—Air-Conditioning Equipment and 

Supplies Merchant Wholesalers 

(NAICS code 423730), including airconditioning (condensing unit, 

compressors) merchant wholesalers; 

—Electrical and Electronic Appliance, 

Television, and Radio Set Merchant 

Wholesalers (NAICS code 423620), 

including air-conditioning (room 

units) merchant wholesalers; and 

—Plumbing, Heating, and AirConditioning Contractors (NAICS 

code 238220), including Central airconditioning system and commercial 

refrigeration installation; HVAC 

contractors. 

After considering the economic 

impacts of this proposed rule on small 

entities, I certify this action will not 

have a significant economic impact on 

a substantial number of small entities as 

it relieves a regulatory ban on 

production and consumption that 

would otherwise apply in the wake of 

the Court’s vacatur. EPA is continuing 

to allocate production and consumption 

allowances using the same approach 

described in the 2009 Final Rule with 

adjustments to reflect (1) 2008 interpollutant transfers of baseline 

allowances deemed permanent by the 

Court, (2) inter-company, singlepollutant transfers of baseline 

allowances that occurred in 2010, 

(3) changes in company names that 

occurred after the 2009 Final Rule was 

signed and (4) an updated picture on the 

demand for HCFC–22. EPA is not 

modifying the recordkeeping or 

reporting provisions and thus is not 

increasing the burden to small 

businesses. EPA’s HCFC Phaseout 

Benefits and Costs Memo, included in 

this docket, provides a summary of 

previous small business analyses, as 

well as the most recent cost and benefit 

data used for the 2009 Final Rule. We 

continue to be interested in the 

potential impacts of the proposed rule 

on small entities and welcome 

comments on issues related to such 

impacts. 

D. Unfunded Mandates Reform Act 

This action contains no Federal 

mandates under the provisions of Title 

II of the Unfunded Mandates Reform 

Act of 1995 (UMRA), 2 U.S.C. 1531– 

1538 for State, local, or tribal 

governments or the private sector. 

UMRA does not apply to rules that are 

necessary for the national security or the 

ratification or implementation of 

international treaty obligations. This 

rule implements the 2010 milestone for 

the phase-out of HCFCs under the 

Montreal Protocol. Therefore, this action 

is not subject to the requirements of 

sections 202 or 205 of the UMRA. 

This action is also not subject to the 

requirements of section 203 of UMRA 

because it contains no regulatory 

requirements that might significantly or 

uniquely affect small governments. This 

action apportions production and 

consumption allowances and 

establishes baselines for private entities, 

not small governments. 

E. Executive Order 13132: Federalism 

Executive Order 13132, titled 

‘‘Federalism’’ (64 FR 43255, August 10, 

1999), requires EPA to develop an 

accountable process to ensure 

‘‘meaningful and timely input by State 

and local officials in the development of 

regulatory policies that have federalism 

implications.’’ ‘‘Policies that have 

federalism implications’’ is defined in 

the Executive Order to include 

regulations that have ‘‘substantial direct 

effects on the States, on the relationship 

between the national government and 

the States, or on the distribution of 

power and responsibilities among the 

various levels of government.’’ 

This action does not have federalism 

implications. It does not have 

substantial direct effects on the States, 

on the relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government, as specified in 

Executive Order 13132. This action is 

expected to primarily affect producers, 

importers, and exporters of HCFCs. 

Thus, the requirements of section 6 of 

the Executive Order do not apply. 

F. Executive Order 13175: Consultation 

and Coordination With Indian Tribal 

Governments 

This action does not have tribal 

implications, as specified in Executive 

Order 13175 (65 FR 67249, November 9, 

2000). This action does not significantly 

or uniquely affect the communities of 

Indian tribal governments. It does not 

impose any enforceable duties on 

communities of Indian tribal 

governments. Thus, Executive Order 

13175 does not apply to this action. 

G. Executive Order 13045: Protection of 

Children From Environmental Health 

and Safety Risks 

This action is not subject to EO 13045 

(62 FR 19885, April 23, 1997) because 

it is not economically significant as 

defined in EO 12866. The Agency 

nonetheless has reason to believe that 

the environmental health or safety risk 

addressed by this action may have a 

disproportionate effect on children. 

Depletion of stratospheric ozone results 

in greater transmission of the sun’s 

ultraviolet (UV) radiation to the earth’s 

surface. The following studies describe 

the effects of excessive exposure to UV 

radiation on children: (1) Westerdahl J, 

Olsson H, Ingvar C. ‘‘At what age do 

sunburn episodes play a crucial role for 

the development of malignant 

melanoma,’’ Eur J Cancer 1994: 30A: 

1647–54; (2) Elwood JM Japson J. 

‘‘Melanoma and sun exposure: an 

overview of published studies,’’ Int J 

Cancer 1997; 73:198–203; (3) Armstrong 

BK, ‘‘Melanoma: childhood or lifelong 

sun exposure,’’ In: Grobb JJ, Stern RS 

Mackie RM, Weinstock WA, eds. 

‘‘Epidemiology, causes and prevention 

of skin diseases,’’ 1st ed. London, 

England: Blackwell Science, 1997: 63–6; 

(4) Whiteman D., Green A. ‘‘Melanoma 

and Sunburn,’’ Cancer Causes Control, 

1994: 5:564–72; (5) Heenan, PJ. ‘‘Does 

intermittent sun exposure cause basal 

cell carcinoma? A case control study in 

Western Australia,’’ Int J Cancer 1995; 

60: 489–94; (6) Gallagher, RP, Hill, GB, 

Bajdik, CD, et. al. ‘‘Sunlight exposure, 

pigmentary factors, and risk of 

nonmelanocytic skin cancer I, Basal cell 

carcinoma,’’ Arch Dermatol 1995; 131: 

157–63; (7) Armstrong, DK. ‘‘How sun 

exposure causes skin cancer: an 

epidemiological perspective,’’ 

Prevention of Skin Cancer. 2004. 89– 

116. 

This action implements the U.S. 

commitment to reduce the total basket 

of HCFCs produced and imported to a 

level that is 75 percent below the 

respective baselines. While on an ODPweighted basis, this is not as large a step 

as previous actions, such as the 1996 

Class I phaseout, it is one of the most 

significant remaining actions the U.S. 

can take to complete the overall 

phaseout of ODS and further decrease 

impacts on children’s health from 

stratospheric ozone depletion. 

H. Executive Order 13211: Actions That 

Significantly Affect Energy Supply, 

Distribution, or Use 

This action is not a ‘‘significant 

energy action’’ as defined in Executive 

Order 13211 (66 FR 28355 (May 22, 

2001)), because it is not likely to have 

a significant adverse effect on the 

supply, distribution, or use of energy. 

The rule issues allowances for the 

production and consumption of HCFCs. 


wreier-aviles on DSK3TPTVN1PROD with PROPOSALS
258 Federal Register / Vol. 77, No. 2 / Wednesday, January 4, 2012 / Proposed Rules 

I. National Technology Transfer and 

Advancement Act 

Section 12(d) of the National 

Technology Transfer and Advancement 

Act of 1995 (‘‘NTTAA’’), Public Law 

104–113, 12(d) (15 U.S.C. 272 note) 

directs EPA to use voluntary consensus 

standards in its regulatory activities 

unless to do so would be inconsistent 

with applicable law or otherwise 

impractical. Voluntary consensus 

standards are technical standards (e.g., 

materials specifications, test methods, 

sampling procedures, and business 

practices) that are developed or adopted 

by voluntary consensus standards 

bodies. The NTTAA directs EPA to 

provide Congress, through OMB, 

explanations when the Agency decides 

not to use available and applicable 

voluntary consensus standards. This 

action does not involve technical 

standards. Therefore, EPA did not 

consider the use of any voluntary 

consensus standards. 

J. Executive Order 12898: Federal 

Actions To Address Environmental 

Justice in Minority Populations and 

Low-Income Populations 

Executive Order (EO) 12898 (59 FR 

7629 (Feb. 16, 1994)) establishes Federal 

executive policy on environmental 

justice. Its main provision directs 

Federal agencies, to the greatest extent 

practicable and permitted by law, to 

make environmental justice part of their 

mission by identifying and addressing, 

as appropriate, disproportionately high 

and adverse human health or 

environmental effects of their programs, 

policies, and activities on minority 

populations and low-income 

populations in the U.S. 

EPA has determined that this action 

will not have disproportionately high 

and adverse human health or 

environmental effects on minority or 

low-income populations because the 

2010 phaseout step increases the level 

of environmental protection for all 

affected populations without having any 

disproportionately high and adverse 

human health or environmental effects 

on any population, including any 

minority or low-income population. 

This action continues the 

implementation of the U.S. commitment 

to reduce the total basket of HCFCs 

produced and imported to a level that 

is 75 percent below the respective 

baselines. While on an ODP-weighted 

basis, this is not as large a step as 

previous actions, such as the 1996 Class 

I phaseout, it is one of the most 

significant remaining actions the U.S. 

can take to complete the overall 

phaseout of ODS and further lessen the 

adverse human health effects for the 

entire population. 

List of Subjects in 40 CFR Part 82 

Environmental protection, 

Administrative practice and procedure, 

Air pollution control, Chemicals, 

Exports, Hydrochlorofluorocarbons, 

Imports. 

Dated: December 22, 2011. 

Lisa P. Jackson, 

Administrator. 

40 CFR part 82 is proposed to be 

amended to read as follows: 

PART 82—PROTECTION OF 

STRATOSPHERIC OZONE 

1. The authority citation for part 82 

continues to read as follows: 

Authority: 42 U.S.C. 7414, 7601, 7671– 

7671q. 

2. Amend § 82.16 by revising 

paragraph (a) to read as follows: 

§ 82.16 Phaseout schedule of class II 

controlled substances. 

(a) Calendar-year Allowances. (1) In 

each control period as indicated in the 

following tables, each person is granted 

the specified percentage of baseline 

production allowances and baseline 

consumption allowances for the 

specified class II controlled substances 

apportioned under §§ 82.17 and 82.19: 

CALENDAR-YEAR HCFC PRODUCTION ALLOWANCES

Control period Percent of 

HCFC–141b 

Percent of 

HCFC–22 

Percent of 

HCFC–142b 

Percent of 

HCFC–123 

Percent of 

HCFC–124 

Percent of 

HCFC–225ca 

Percent of 

HCFC–225cb 

2003 ......................... 0 100 100 ........................ ........................ ........................ ........................

2004 ......................... 0 100 100 ........................ ........................ ........................ ........................

2005 ......................... 0 100 100 ........................ ........................ ........................ ........................

2006 ......................... 0 100 100 ........................ ........................ ........................ ........................

2007 ......................... 0 100 100 ........................ ........................ ........................ ........................

2008 ......................... 0 100 100 ........................ ........................ ........................ ........................

2009 ......................... 0 100 100 ........................ ........................ ........................ ........................

2010 ......................... 0 41 .9 0 .47 125 125 125 125 

2011 ......................... 0 32 .0 4 .9 125 125 125 125 

2012 ......................... 0 17 .7 4 .9 125 125 125 125 

2013 ......................... 0 14 .7 4 .9 125 125 125 125 

2014 ......................... 0 11 .6 4 .9 125 125 125 125 

CALENDAR-YEAR HCFC CONSUMPTION ALLOWANCES

Control period Percent of 

HCFC–141b 

Percent of 

HCFC–22 

Percent of 

HCFC–142b 

Percent of 

HCFC–123 

Percent of 

HCFC–124 

Percent of 

HCFC–225ca 

Percent of 

HCFC–225cb 

2003 ......................... 0 100 100 ........................ ........................ ........................ ........................

2004 ......................... 0 100 100 ........................ ........................ ........................ ........................

2005 ......................... 0 100 100 ........................ ........................ ........................ ........................

2006 ......................... 0 100 100 ........................ ........................ ........................ ........................

2007 ......................... 0 100 100 ........................ ........................ ........................ ........................

2008 ......................... 0 100 100 ........................ ........................ ........................ ........................

2009 ......................... 0 100 100 ........................ ........................ ........................ ........................

2010 ......................... 0 41 .9 0 .47 125 125 125 125 

2011 ......................... 0 32 .0 4 .9 125 125 125 125 

2012 ......................... 0 17 .7 4 .9 125 125 125 125 

2013 ......................... 0 14 .7 4 .9 125 125 125 125 

2014 ......................... 0 11 .6 4 .9 125 125 125 125 


wreier-aviles on DSK3TPTVN1PROD with PROPOSALS
Federal Register / Vol. 77, No. 2 / Wednesday, January 4, 2012 / Proposed Rules 259 

(2) Recoupment allowances. In the 

control period beginning January 1, 

2013 and ending December 31, 2013, the 

following companies are granted a onetime amount of HCFC consumption and 

production allowances in addition to 

the percentage of baseline listed in the 

table at paragraph (a)(1) of this section: 

4,749,692 kg of HCFC–22 consumption 

allowances and 4,611,848 kg of HCFC– 

22 production allowances to Arkema; 

2,339 kg of HCFC–142b consumption 

allowances to DuPont; 58,291 kg of 

HCFC–142b consumption allowances 

and 107,097 kg of production 

allowances to Honeywell; 1,157,895 kg 

of HCFC–22 consumption allowances to 

Solvay Fluorides; and 289,800 kg of 

HCFC–142b production allowances to 

Solvay Solexis. 

* * * * * 

3. Amend § 82.23 by revising 

paragraphs (a)(ii) introductory text, 

(a)(ii)(A), (b)(1), and (d) to read as 

follows: 

§ 82.23 Transfers of allowances of class II 

controlled substances. 

(a) * * * (ii) The Administrator will 

determine whether the records 

maintained by EPA indicate that the 

transferor possesses unexpended 

allowances sufficient to cover the 

transfer claim on the date the transfer 

claim is processed. The transfer claim is 

the quantity (in kilograms) to be 

transferred plus 0.1 percent of that 

quantity. The Administrator will take 

into account any previous transfers, any 

production, and allowable imports and 

exports of class II controlled substances 

reported by the transferor. Within three 

working days of receiving a complete 

transfer claim, the Administrator will 

take action to notify the transferor and 

transferee as follows: 

(A) The Administrator will issue a 

notice indicating that EPA does not 

object to the transfer if EPA’s records 

show that the transferor has sufficient 

unexpended allowances to cover the 

transfer claim. In the case of transfers of 

production or consumption allowances, 

EPA will reduce the transferor’s balance 

of unexpended allowances by the 

quantity to be transferred plus 0.1 

percent of that quantity. In the case of 

transfers of export production or Article 

5 allowances, EPA will reduce the 

transferor’s balance of unexpended 

allowances, respectively, by the 

quantity to be transferred plus 0.1 

percent of that quantity. The transferor 

and the transferee may proceed with the 

transfer when EPA issues a no objection 

notice. However, if EPA ultimately finds 

that the transferor did not have 

sufficient unexpended allowances to 

cover the claim, the transferor and 

transferee, where applicable, will be 

held liable for any knowing violations of 

the regulations of this subpart that occur 

as a result of, or in conjunction with, the 

improper transfer. 

* * * * * 

(b) Inter-pollutant transfers. (1) 

Effective January 1, 2003, a person 

(transferor) may convert consumption 

allowances, production allowances or 

Article 5 allowances for one class II 

controlled substance to the same type of 

allowance for another class II controlled 

substance listed in Appendix B of this 

subpart, following the procedures 

described in paragraph (b)(3) of this 

section. 

* * * * * 

(d) Permanent transfers. The 

procedures in paragraph (a) of this 

section apply to permanent intercompany transfers of baseline 

production allowances or baseline 

consumption allowances. A person 

receiving a permanent transfer of 

baseline production allowances or 

baseline consumption allowances (the 

transferee) for a specific class II 

controlled substance will be the person 

who has their baseline allowances 

adjusted in accordance with phaseout 

schedules in this subpart. No person 

may conduct permanent inter-pollutant 

transfers of baseline production 

allowances or baseline consumption 

allowances. 

* * * * * 

[FR Doc. 2011–33456 Filed 1–3–12; 8:45 am] 

BILLING CODE 6560–50–P 


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