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* * * * * PART 81—DESIGNATION OF AREAS 

FOR AIR QUALITY PLANNING 

PURPOSES 

■ 3. The authority citation for part 81 

continues to read as follows: 

Authority: 42 U.S.C. 7401 et seq. 

■ 4. In § 81.313, the table entitled 

‘‘Idaho-PM–10’’ is amended by revising 

the entry for ‘‘Bonner County: 

Sandpoint Area’’ to read as follows: 

§ 81.313 Idaho. 

* * * * * 

IDAHO-PM–10 

Designated area 

Designation Classification 

Date Type Date Type 

*******

Bonner County: Sandpoint Area: Section 1–3, 9–12, 15, 16, 21, 22, 27, 28 of range 2 

west and Township 57 north; and the western d of Sections 14, 23 and 26 of the 

same Township and range coordinates.

06/3/13 Attainment 

* * * * * * * 

* * * * * 

[FR Doc. 2013–07647 Filed 4–2–13; 8:45 am] 

BILLING CODE 6560–50–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 82 

[EPA–HQ–OAR–2011–0354; FRL–9797–5] 

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: Final rule. 

SUMMARY: EPA is adjusting the 

allowance system controlling U.S. 

consumption and production of 

hydrochlorofluorocarbons (HCFCs) as a 

result of a 2010 Court decision vacating 

a portion of the 2009 final rule titled 

‘‘Protection of Stratospheric Ozone: 

Adjustments to the Allowance System 

for Controlling HCFC Production, 

Import, and Export.’’ EPA interprets the 

Court’s vacatur as applying to the part 

of the rule that establishes the companyby-company baselines and calendar year 

allowances for HCFC–22 and HCFC– 

142b. On August 5, 2011, EPA 

published an interim final rule 

allocating allowances for 2011. Today’s 

action relieves the regulatory ban on 

production and consumption of these 

two chemicals following the Court’s 

vacatur by establishing company-bycompany HCFC–22 and HCFC–142b 

baselines and allocating production and 

consumption allowances for 2012–2014. 

DATES: This final rule is effective April 

3, 2013. 

ADDRESSES: EPA has established a 

docket for this action under Docket ID 

No. EPA–HQ–OAR–2011–0354. All 

documents in the docket are listed on 

the www.regulations.gov Web site. 

Although listed in the index, some 

information is not publicly available, 

e.g., CBI or other information whose 

disclosure is restricted by statute. 

Certain other material, such as 

copyrighted material, is not placed on 

the Internet and will be publicly 

available only in hard copy form. 

Publicly available docket materials are 

available either electronically through 

www.regulations.gov or in hard copy at 

the Air and Radiation Docket and 

Information Center, EPA/DC, EPA West, 

Room 3334, 1301 Constitution Ave. 

NW., Washington, DC. The Public 

Reading Room is open from 8:30 a.m. to 

4:30 p.m., Monday through Friday, 

excluding legal holidays. The telephone 

number for the Public Reading Room is 

(202) 566–1744, and the telephone 

number for the Air and Radiation 

Docket is (202) 566–1742. 

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 

(6205J), 1200 Pennsylvania Ave. NW., 

Washington, DC 20460. You may also 

visit the 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: 

Effective Date. This rule concerns 

Clean Air Act (CAA) restrictions on the 

consumption and production of 

hydrochlorofluorocarbon (HCFC)-22 and 

HCFC–142b during 2012–2014. Section 

553(d) of the Administrative Procedure 

Act (APA), 5 U.S.C. chapter 5, generally 

provides that rules may not take effect 

earlier than 30 days after they are 

published in the Federal Register. EPA 

is issuing this final rule under section 

307(d)(1) of the Clean Air Act, which 

states: ‘‘The provisions of section 553 

through 557 * * * of Title 5 shall not, 

except as expressly provided in this 

section, apply to actions to which this 

subsection applies.’’ Thus, section 

553(d) of the APA does not apply to this 

rule. EPA is nevertheless acting 

consistently with the policies 

underlying APA section 553(d) in 

making this rule effective April 3, 2013. 

APA section 553(d) allows an effective 

date less than 30 days after publication 

for any action ‘‘that grants or recognizes 

an exemption or relieves a restriction,’’ 

(5 U.S.C. 553(d)(1)). Since today’s action 

relieves a restriction from the regulatory 

ban on the production and consumption 

of HCFC–22 and HCFC–142b in the 

U.S., EPA is making this action effective 

immediately upon publication to ensure 

the availability of these HCFCs for 

servicing air conditioning and 

refrigeration equipment. 

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 

CDM—Clean Development Mechanism 

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 


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1Consumption allowances permit an entity to 

produce and/or import virgin HCFCs in a given 

control period (i.e., calendar year). 

2Production allowances permit an entity to 

produce virgin HCFCs in a given control period. 

Domestic production of HCFCs requires the use of 

both production and consumption allowances. 

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. Does this action apply to me? 

II. Summary of This Final Action 

III. 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 2010 

court decision? 

IV. How is EPA allocating HCFC–22 and 

HCFC–142b allowances for 2012–2014? 

A. What baselines is EPA using for HCFC– 

22 and HCFC–142b allowances? 

1. What baselines is EPA using for 2012– 

2014? 

2. What baselines is EPA considering for 

2015–2019? 

B. What factors did EPA consider in 

determining allocation amounts for 

HCFC–22 and HCFC–142b? 

1. How is EPA adjusting estimated 

servicing need to account for surplus 

inventory from past years? 

2. How is EPA adjusting allowances to 

encourage recovery, reclamation and 

reuse? 

3. How is EPA accounting for recovery and 

reuse of HCFC–22 in the supermarket 

industry? 

4. Did EPA consider providing allowances 

to small businesses in this final action? 

5. Does the installation of dry-shipped 

HCFC–22 equipment affect the phaseout 

of HCFC–22? 

6. How is EPA addressing the court’s 

decision with regard to 2010 HCFC 

allowances? 

7. Does EPA have to provide the same 

percentage of baseline for production 

allowances as it does for consumption 

allowances? 

C. How many HCFC–22 and HCFC–142b 

allowances is EPA allocating in 2012– 

2014? 

1. How many HCFC–22 consumption 

allowances is EPA allocating in 2012– 

2014? 

2. How many HCFC–22 production 

allowances is EPA allocating in 2012– 

2014? 

3. How many HCFC–142b consumption 

and production allowances is EPA 

allocating in 2012–2014? 

4. How does the aggregate allocation for 

HCFC–22 and HCFC–142b translate 

entity-by-entity? 

V. How is EPA changing the regulations 

governing transfers of Class II 

allowances? 

A. How is EPA changing the regulations 

governing permanent transfers of Class II 

allowances? 

B. How is EPA changing the regulations 

governing transfers of Article 5 Class II 

allowances? 

VI. 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 

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 

Concerning Regulations 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 

K. Congressional Review Act 

I. Does this action apply to me? 

This rule may 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 

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. 

II. Summary of This Final Action 

In today’s final rule, EPA is issuing 

HCFC–22 and HCFC–142b allowances 

for the years 2012, 2013 and 2014 in the 

wake of the U.S. Court of Appeals for 

the District of Columbia Circuit (Court) 

decision in Arkema v. EPA (618 F.3d 1, 

D.C. Cir. 2010). As discussed in this 

preamble and in the proposed rule (77 

FR 237), the Court vacated HCFC–22 

and HCFC–142b company-by-company 

baseline and calendar-year allowances 

for 2012–2014. Baselines and calendaryear allowances for these two 

substances were originally finalized in a 

December 15, 2009, rule (‘‘2009 Final 

Rule,’’ 74 FR 66412). 

EPA is finalizing HCFC–22 and 

HCFC–142b baseline allowances that 

incorporate the inter-pollutant transfers 

made by Arkema, Inc., Solvay Fluorides, 

LLC, and Solvay Solexis, Inc., (Arkema 

and Solvay) in 2008, and is setting 

calendar-year allowances for the 2012– 

2014 control periods. EPA is providing 

fewer calendar-year HCFC–22 

consumption allowances 1 and more 

calendar-year HCFC–22 production 

allowances 2 than in the 2009 Final 

Rule. The agency determined that the 

need for virgin HCFC–22 in the U.S. is 

lower than EPA anticipated in the 2009 

Final Rule and is adjusting consumption 

allowances accordingly. EPA anticipates 

this adjustment will foster a smooth 

transition away from ozone-depleting 

HCFC–22. While EPA is reducing 

domestic consumption (i.e. production 

and import for U.S. use), under the 

recalculated baselines, the overall 

production allowances will increase. 

Because other countries have different 

approaches to phasing out HCFC–22, 

EPA considers that this increase in the 

number of production allowances will 

also ensure that U.S. companies can 

continue to meet demand for HCFCs in 

global markets. This supports the 


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3Class 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. 

Montreal Protocol’s overall goal of 

limiting need for new production 

capacity for controlled chemicals by 

allowing existing producers scope to 

better meet the needs of global markets. 

Additionally, EPA has determined that 

in the narrow circumstance of the 

Court’s vacatur of the baselines in the 

2009 Final Rule, it must provide 

meaningful compensation for 2010 

calendar-year HCFC–22 and HCFC–142b 

allowances that companies would have 

received under the adjusted baselines. 

EPA will issue recoupment allowances 

for that purpose in 2013 and 2014. 

EPA is also updating HCFC–142b 

baselines and annual allowances and is 

allocating approximately the same 

amount of calendar-year consumption 

allowances as in the 2009 Final Rule. 

Due to the recalculation of HCFC–142b 

baselines, calendar-year HCFC–142b 

production allowances are higher than 

in the 2009 Final Rule, but have been 

calculated using the same methodology. 

Therefore, while the percentage of 

baseline issued for HCFC–142b is the 

same for both consumption and 

production allowances, the recalculated 

production baseline is now significantly 

larger than the consumption baseline, 

resulting in an overall increase in 

calendar-year production allowances 

compared with the 2009 Final Rule. 

Finally, EPA is modifying the transfer 

language at 40 CFR 82.23 to more 

explicitly reflect EPA’s policy on interpollutant HCFC allowance transfers; 

that is, that inter-pollutant HCFC 

transfers can occur only on an annual 

basis going forward. 

All other aspects of the 2009 Final 

Rule not addressed in this rulemaking 

are unaffected, including, but not 

limited to: HCFC–123, HCFC–124, 

HCFC–225ca and HCFC–225cb 

allowances, the formula for determining 

calendar-year Article 5 allowances, and 

the use and introduction into interstate 

commerce restrictions on HCFC–22 and 

HCFC–142b. This preamble includes a 

summary of comments EPA received in 

response to the proposed rule, as well 

as comments to the 2011 Interim Final 

Rule that are relevant to this current 

rulemaking. A full response to 

comments document (‘‘Response to 

Comments’’) is available in the docket 

for this rulemaking. 

III. Background 

EPA is undertaking this rulemaking as 

a result of the decision issued by the 

Court in Arkema v. EPA (618 F.3d 1, 

D.C. 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,’’ (‘‘2009 

Final Rule,’’ 74 FR 66412). 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 2009 Final Rule in 

part, ‘‘insofar as it operates 

retroactively,’’ and remanded it 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 III.D. of this preamble. 

For 2011, EPA addressed the Court’s 

partial vacatur 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,’’ 76 FR 47451). 

Today’s final rule follows that action, 

and establishes 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 (Montreal 

Protocol) is the international agreement 

aimed at reducing and eventually 

eliminating the production and 

consumption of stratospheric ozonedepleting 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’’ 3 (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 industrialized 

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 of graduated 

reductions and provided for the 

eventual phaseout of HCFC 

consumption (Copenhagen, 23–25 

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

a later adjustment in 2007, the schedule 

initially allowed a non-Article 5 country 

to consume 65 percent of its 

consumption cap in 2004, followed by 

35 percent in 2010, 10 percent in 2015, 

0.5 percent in 2020 for the servicing of 

existing refrigeration and airconditioning equipment, and 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 


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4Under 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. 

percent of 1989 CFC consumption. 

Based on this formula, the U.S. HCFC 

production cap was 15,537 ODPweighted 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, 2008.4

As a result of the 2007 Montreal 

Adjustment (reflected in Decision XIX/ 

6), the U.S. and other non-Article 5 

countries may only consume 25 percent 

of their HCFC baseline beginning in 

2010, rather than 35 percent. 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 non-Article 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 of 2009–2010 production and 

consumption, respectively; (2) to freeze 

HCFC production and consumption at 

those baselines in 2013; and (3) to add 

stepwise reductions to 90 percent of 

baseline by 2015, 65 percent by 2020, 

32.5 percent by 2025, and 2.5 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. Decision XIX/6, 

included in the Report of the Nineteenth 

Meeting of the Parties to the Montreal 

Protocol on Substances that Deplete the 

Ozone Layer, is available in the docket 

for this rulemaking. 

In addition, in the Montreal 

Adjustments, Parties agreed to adjust 

Article 2F to allow non-Article 5 

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. Paragraph 

14 of Decision XIX/6 notes that by 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 

non-Article 5 and Article 5 countries. 

The term ‘‘servicing tail’’ refers to an 

amount of HCFCs needed to service 

existing equipment, such as certain 

types of air-conditioning 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, which focuses 

on phasing out certain chemicals with 

higher ODP 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, EPA 

promulgated regulations (‘‘2003 Final 

Rule,’’ 68 FR 2820) 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 

chemical-specific 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 ODPweighted consumption year from among 

the years 1994 through 1997. 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 company’s highest ‘‘production 

year’’ or ‘‘consumption year,’’ as 

described above. It completely phased 

out the production and import of 

HCFC–141b by granting zero 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 

until 2015. 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 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. 

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 calendarVerDate Mar<15>2010 14:47 Apr 02, 2013 Jkt 229001 PO 00000 Frm 00027 Fmt 4700 Sfmt 4700 E:\FR\FM\03APR1.SGM 03APR1

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year 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 

request a refund of those consumption 

allowances by submitting proper 

documentation and receiving approval 

from 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 stepwise 

reduction by applying a percentage 

reduction to the HCFC–22 and HCFC– 

142b baselines. EPA subsequently 

reviewed market conditions 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 estimated 

the need for HCFC–22 during the 2010– 

2014 regulatory period, and determined 

the percentage of that need for which it 

was appropriate to allocate allowances. 

As described in section IV.B.3. of the 

proposed rule (77 FR 237), EPA 

determined that the percentage of the 

estimated need 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 need 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 

need 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. 

As explained in the Background 

section, EPA is undertaking this 

rulemaking as a result of the decision 

issued by the Court in Arkema (618 F.3d 

1, D.C. Cir. 2010), in which the Court 

vacated portions of the 2009 Final Rule. 

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 

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 

accelerated the section 605 schedule to 

reflect the acceleration under the 

Montreal Protocol as agreed to under the 

Montreal Protocol in September 2007. 

The more stringent schedule established 

in that rule is unaffected by the 2010 

Court decision and is therefore still in 

effect. 

Section 606 provides EPA authority 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 inter-pollutant 

transfers in this action, and is making a 

minor change to the regulations 

governing inter-pollutant transfers to 

provide additional clarity to 

stakeholders. 

D. How does this action relate to the 

2010 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 


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5Baseline and calendar-year allocations are 

inextricable 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 

is described in greater detail in section IV. 

6The companies’ allocations are inter-related 

because, as noted in footnote 5, the percentage of 

baseline allocated varies according to the sum of the 

company-specific baselines. 

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, 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 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 non-objection 

notices 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. 

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 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. 

EPA presented its interpretation of the 

Court’s decision with regard to baseline 

allowances and 2011–2014 calendaryear allowances in the 2011 Interim 

Final Rule (76 FR 47456). EPA has not 

changed that interpretation but is 

repeating it here for ease of reference. 

Because the Court vacated the rule only 

in part, and because various parts of the 

rule are intertwined, EPA relied on its 

expertise in administering the HCFC 

phaseout regulations under Title VI of 

the CAA to determine how to apply the 

vacatur within the confines of the 

balance of the rule, which was not 

vacated. First, EPA noted that the rule 

contains elements that were not at issue 

in the litigation. EPA concluded that the 

vacatur had 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 concluded that other discrete 

portions of the rule, such as the 

provisions on use and introduction into 

interstate commerce, were 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 calendaryear allowances are inextricably 

linked,5 EPA 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.6 This meant that in the 

absence of this rule, production and 

import of these two substances were 

prohibited under 40 CFR 82.15. 

Recognizing this scenario, EPA sent 

letters in January 2012 and January 2013 

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). That 

rule allocated allowances for 2011 only. 

Through today’s notice, EPA is 

addressing the Court’s decision as it 

relates to the remainder of the 

regulatory period ending December 31, 

2014. 

IV. How is EPA allocating HCFC–22 

and HCFC–142b allowances for 2012– 

2014? 

EPA is continuing the system 

established in previous rulemakings (68 

FR 2820, 74 FR 66412, 76 FR 47451) for 

HCFC production and import in the U.S. 

The process works as follows for each 

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 sources other than new 

production and import, and then 

divides that amount by the aggregate 


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amount of baseline allowances. The 

resulting percentage is listed in the table 

at section 82.16 and 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 consumption allowances 

would multiply that number by the 

percentage allowed for the year (for 

example, 17.7 percent in 2012) to 

determine its calendar-year 

consumption allowance is 17,700 kg. 

In this rulemaking EPA is (1) 

establishing 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) allocating company-bycompany production and consumption 

allowances for these substances for 

2012–2014 by establishing allowed 

percentages of production and 

consumption baselines in two tables at 

section 82.16; and (3) revising the 

regulatory text at 40 CFR 82.23 to make 

the procedure for all future interpollutant transfers clear. EPA will 

address the baselines and 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 final rule are 

unchanged. 

EPA again notes that beginning 

January 1, 2015, section 605 of the CAA 

prohibits the use and introduction into 

interstate commerce of any HCFC listed 

as a class II substance 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; (3) is used as a 

refrigerant in appliances manufactured 

prior to January 1, 2020; or (4) is listed 

as acceptable for use as a fire 

suppression agent for nonresidential 

applications in accordance with section 

612(c).’’ In addition, EPA’s regulations 

at 40 CFR 82.15 restricted use and 

introduction into interstate commerce of 

HCFC–141b, HCFC–142b, and HCFC–22 

beginning in 2010, with limited 

exceptions. 

A. What baselines is EPA using for 

HCFC–22 and HCFC–142b allowances? 

In the January 4, 2012, notice, EPA 

proposed to establish 2012–2014 

company-by-company consumption and 

production baselines for HCFC–22 and 

HCFC–142b that were identical to the 

baselines established in the 2011 

Interim Final Rule (see 40 CFR 82.17 

and 82.19). EPA also provided advance 

notice that it would consider updating 

baselines for the 2015–2019 regulatory 

period, especially if there is an 

environmental benefit to doing so. 

1. What baselines is EPA using for 

2012–2014? 

Four companies commented on how 

EPA should proceed with establishing 

baselines for 2012–2014. Arkema and 

Solvay both support EPA’s inclusion of 

past inter-pollutant transfers of baseline 

allowances, and believe that the 

proposed baselines are fully consistent 

with the Arkema decision. On the other 

hand, DuPont and Honeywell state that 

Arkema does not require EPA to 

recognize the inter-pollutant baseline 

transfers beyond 2009, nor does it 

address the validity of the 2008 

transfers. These commenters also state 

that recognizing these transfers beyond 

2009 is contrary to section 607, EPA’s 

transfer regulations, and the agency’s 

interpretation of those regulations for 

chemicals that are being phased down. 

In addition, they assert that if EPA does 

take those transfers into account in 

establishing baselines for 2012–2014, 

the agency should only allocate the 

percentage of the transferred baselines 

that would be allocated if the baselines 

had never been converted from HCFC– 

142b to HCFC–22. They state that 

recognizing the transfers has the effect 

of increasing the baseline share of the 

petitioners in Arkema and reducing the 

share of other companies in violation of 

their due process rights. Finally, they 

state that under the Arkema decision, 

their share of the baseline is vested. 

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), in the Response to Comments 

document included in the record for 

that rulemaking and in the 2011 Interim 

Final Rule (76 FR 47451). These 

considerations remain important, and 

are the basis for EPA’s policy on future 

inter-pollutant transfers, which is 

discussed in section V of this notice. 

However, EPA must act in accordance 

with the Court’s holding regarding the 

2008 transfers. In Arkema, the Court 

concluded that EPA’s non-objection 

notices for the 2008 transfers created 

‘‘vested rights’’ in the transferred 

baselines, which EPA must reflect in 

rules governing the current regulatory 

period, at least to the extent such rules 

continue to use the historical 

production and consumption baselines. 

The Court explicitly held that ‘‘the 

Agency’s refusal to account for the 

Petitioners’ baseline transfers of 

interpollutant allowances in the Final 

Rule is impermissibly retroactive,’’ 

(Arkema, 618 F.3d at 24). Given the 

Arkema decision, and given the recent 

decision in Honeywell International, 

Inc. v. EPA, DC Cir. No. 10–1347 

(January 22, 2013) (‘‘Honeywell’’), EPA 

is recognizing the 2008 transfers in 

establishing the baselines through 2014. 

Thus, the baselines finalized for 2012– 

2014 in today’s rule are identical to the 

HCFC–22 and HCFC–142b baselines 

established in the 2011 Interim Final 

Rule. 

The commenters assert that the 

Arkema decision did not determine the 

validity of the transfers. They further 

assert that EPA lacked authority to 

approve permanent inter-pollutant 

baseline transfers, that the 2008 

transfers as characterized by the Court 

are thus invalid, and that EPA should 

not recognize them in setting baselines. 

The validity of the 2008 transfer 

approvals was challenged in Honeywell. 

The brief filed by the agency on January 

30, 2012, provides further response to 

several of the arguments that Honeywell 

and DuPont make in their comments on 

the proposed rule and is included in the 

docket for this rulemaking. 

The commenters do not assert that 

EPA lacked authority to approve interpollutant transfers whose effects were 

limited to the regulatory period ending 

in 2009. Rather, they assert that EPA 

lacked authority to approve interpollutant transfers with effects lasting 

beyond 2009. They state that Arkema 

did not determine the validity of such 

transfers. Yet the Arkema Court found 

contrary to the Agency’s position, that 

EPA had ‘‘approved permanent changes 

to the baseline as a result of interpollutant transfers’’ and that the Agency 

could not ‘‘undo these completed 

transactions,’’ (Arkema, 618 F.3d at 23). 

It is not plausible that the Court would 

have reached this holding if it viewed 

EPA’s authority to approve interpollutant transfers with effects beyond 

the immediate regulatory period as open 

to debate. As the Court stated in 

Honeywell, ‘‘the Arkema Court 

necessarily concluded that permanent 

inter-pollutant transfers were 

permissible under the statute’’ (slip op. 

at 7). The Honeywell Court noted that it 

was bound by Arkema and denied 

commenters’ petition for review of the 

2008 transfers. The Honeywell decision 

is available in the docket for this action. 

Contrary to the commenters’ 

assertions, section 607 of the CAA is 

ambiguous with regard to whether interpollutant transfers may have permanent 

effects that carry forward to subsequent 

regulatory periods. EPA has discretion 

under section 607 to determine how to 

treat such transfers. While EPA did not 

intend its non-objection notices to 

confer permanence to the 2008 interpollutant transfers, EPA disagrees with 


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commenters’ implication that under 

section 607, the agency could not have 

done so. That would be true only if 

section 607 expressly prohibited 

permanent inter-pollutant transfers, 

which it does not. As discussed in more 

detail in section V.A. of this preamble, 

for policy reasons EPA will approve 

only annual inter-pollutant transfers in 

the future. EPA also believes that while 

section 607 is not clear on its face, it is 

best interpreted as precluding 

permanent inter-pollutant transfers, as 

explained in section V.A. of this 

preamble. As noted by the Court in 

Arkema, interpreting section 607 to 

preclude permanent inter-pollutant 

transfers ‘‘may more accurately track the 

statutory mandate,’’ (Arkema, 618 F.3d 

at 22). 

Commenters assert that EPA has 

departed from its own regulations in 

proposing to recognize the 2008 interpollutant transfers in the baselines for 

2012–2014. Commenters ignore, 

however, the Court’s interpretation of 

those regulations. EPA’s intent in the 

2003 Rule, which established the 

transfer provisions, was to preclude 

permanent inter-pollutant transfers of 

baseline allowances (see 68 FR 2835). 

EPA notes that until the rulemaking that 

resulted in the 2009 Final Rule, the 

agency did not specifically develop a 

policy on whether inter-pollutant 

transfers could ever carry forward to a 

new regulatory period following one of 

the intermediate phasedown steps. 

Nonetheless, the Arkema decision 

found that the agency’s conclusion in 

the 2009 Final Rule not to carry interpollutant transfers forward to a new 

regulatory period ‘‘departed from the 

policy it had adopted in the 2003 Rule,’’ 

(Arkema, 618 F.3d at 6). EPA cannot 

disregard the Court’s holding on the 

ground that the 2003 Rule prohibited 

permanent inter-pollutant transfers 

where the Court has found otherwise. 

The commenters are also incorrect 

that EPA previously interpreted its 

regulations as creating a ‘‘phasedown 

follows the allowance’’ principle. 

Commenters assert that under this 

principle, EPA should only allocate the 

percentage of the transferred baselines 

allocated for HCFC–142b. However, 

EPA has never adopted such a principle. 

Preamble statements leading up to and 

accompanying the 2003 Rule refer to the 

elimination of HCFC–141b baseline 

upon the chemical’s complete phaseout, 

‘‘regardless of what inter-pollutant 

transfers had taken place,’’ (68 FR 2835). 

That is a different matter from a partial 

phasedown, like the phasedown of 

HCFC–22 and HCFC–142b in 2010. 

Additionally, the commenters’ approach 

runs counter to the way EPA allocates 

allowances as described in section IV of 

this preamble. 

Finally, the commenters assert that 

EPA has violated their due process 

rights by decreasing their market share, 

which they argue is a vested right under 

Arkema. From a substantive 

perspective, what they assert is a vested 

right (i.e., a specific share of allowances) 

is not in fact a vested right, nor is it 

protected under the due process clause. 

The Court held that EPA’s actions in 

approving the 2008 transfers created 

vested rights in the transferred 

baselines. The Court placed particular 

emphasis on the fact that the Agency 

took affirmative actions that appeared to 

ratify the transfers: ‘‘The Agency’s 

approval and acknowledgement of 

Petitioners’ actions distinguishes this 

case from situations where a company’s 

unilateral business expectations are 

thwarted by a change in the regulatory 

framework,’’ (Arkema, 618 F.3d at 20). 

The Court did not examine the issue of 

whether companies possessed vested 

rights in baseline or calendar-year 

allowances generally, or in a specific 

share of allowances. Nor did the Court 

hold that the transferred baselines, 

baseline allowances generally, or 

calendar-year allowances, are property 

rights protected under the Due Process 

Clause. Furthermore, it did not state that 

companies had any right to a specific 

number of production or consumption 

allowances. On the contrary, the Court 

noted that ‘‘the 2010 stepdown gave the 

EPA occasion to adjust its distribution 

of allowances,’’ (Arkema, 618 F.3d at 

25). 

EPA’s regulatory definitions specify 

that production and consumption 

allowances are privileges, not rights (see 

40 CFR 82.3). As discussed in Section 

II, the U.S. is in the process of phasing 

out production and consumption of 

HCFCs, culminating in a complete 

phaseout in 2030. EPA’s regulations 

prohibit production and consumption of 

HCFCs without allowances (40 CFR 

82.16(a), (b)). In the absence of this final 

rule, no allowances would exist for 2012 

or beyond. In this regulatory 

environment, no company has an 

entitlement to a specific number or 

share of HCFC allowances. 

In addition, under this final rule, 

commenters are receiving the same 

number of baseline allowances they 

received under previous HCFC 

allocation rules. Recognition of the 2008 

transfers in the aggregate HCFC–22 

consumption baseline does not require 

EPA to extract baseline allowances from 

other companies. 

From a procedural perspective, 

commenters were given multiple 

opportunities to comment on or 

challenge the effects of the 2008 

transfers at issue in Arkema on 

baselines for the current regulatory 

period. As noted in Honeywell, they had 

‘‘notice and an opportunity to present 

[their] views during EPA’s pre-Arkema 

regulatory proceedings, during the 

Arkema litigation, and during EPA’s 

subsequent post-Arkema proceedings’’ 

(slip op. at 7). They commented on the 

2009 Final Rule, the 2011 Interim Final 

Rule and the proposal for this final rule. 

They also had the opportunity to 

intervene in the Arkema lawsuit and the 

opportunity to challenge the 2011 

Interim Final Rule, in which EPA 

actually reflected the 2008 transfers in 

establishing baselines. A more detailed 

summary of the comments on this issue, 

as well as the Agency’s response to 

issues not addressed in the preamble or 

the briefs, is included in the Response 

to Comments, found in the docket for 

this rulemaking. 

2. What baselines is EPA considering for 

2015–2019? 

Looking ahead to the next regulatory 

period, the agency received four 

comments on whether it should use 

more recent production and import data 

in establishing baselines for 2015–2019. 

Two commenters recommend using data 

from 2005–2007 because these years 

were used to establish baselines in the 

2009 Final Rule for newly-controlled 

HCFCs (74 FR 66412). In addition, using 

the highest production and import 

levels from 2005–2007 would reflect 

current and stable market conditions. 

One commenter points out that 

production and consumption in 2008 

and 2009 were likely affected by the 

economic downturn, while 2010 and 

2011 fall under the stepdown 

established by the 2009 Final Rule. 

Another commenter believes that 

updating baselines would avoid 

rewarding companies for attempting to 

manipulate their baselines by 

converting allowances from HCFCs with 

lower future market value (i.e., HCFC– 

142b) to HCFC allowances they knew 

would retain value in the next 

regulatory period (i.e., HCFC–22). 

Two other commenters do not support 

revised baselines. One of the 

commenters believes that the current 

allocation method is the fairest method 

because it is transparent and well 

understood by all market participants. 

The other commenter sees no benefit to 

updating baselines, but says future 

reductions in allocations will benefit the 

environment by promoting reclamation. 

Since EPA did not propose to 

establish baselines for 2015–2019, the 

agency will continue to assess the 

merits of using a more recent set of 


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years to establish baselines in a later 

rulemaking. The agency is still receptive 

to the idea of updating baselines in 

2015, but notes that it did not receive 

any evidence that there is an 

environmental benefit to doing so. 

B. What factors did EPA consider in 

determining 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 substances, 

taking into account the portion of need 

that can be met through recycling and 

reclamation. EPA is not changing that 

general approach, and continues to 

believe it is necessary in order to 

promote the use of used, recycled, and 

reclaimed material in anticipation of the 

2015 phasedown step. In accordance 

with the Court’s decision in Arkema, the 

agency proposed, and is now finalizing, 

baselines that reflect 2008 interpollutant baseline transfers. This 

approach necessitates issuing a different 

percentage of company baselines in 

order for the aggregate number of 

calendar-year HCFC–22 consumption 

allowances to be less than or equal to 

the 2009 Final Rule. In fact, EPA 

proposed to allocate significantly fewer 

consumption allowances for HCFC–22 

relative to the 2009 Final Rule based on 

an analysis of updated market 

conditions. 

Specifically, the agency considered to 

what extent servicing need can be met 

by (1) significant inventories of existing 

HCFC–22, (2) increased reclamation 

capacity, and (3) re-use of HCFC–22 

within supermarkets. See ‘‘Analysis of 

HCFC–22 Servicing Needs in the U.S. 

Air Conditioning and Refrigeration 

Sector: Additional Considerations for 

Estimating Virgin Demand’’ 

(Adjustment Memo), included in the 

docket to this rulemaking. In the 

Adjustment Memo, EPA considers a 

higher and a lower HCFC–22 allocation 

scenario for each year. In the larger 

allocation scenario: (1) Surplus 

inventory from past years (hereinafter 

called ‘‘existing inventory’’) meets 6,000 

MT of estimated need each year; (2) 

recovery and reclamation meet 12,500 

MT of need, the same amount as in the 

2009 Final Rule; and (3) 20 percent of 

total need in the large retail food sector 

is met by in-house recovery and reuse. 

In the smaller allocation scenario: (1) 

Existing inventory also meets 6,000 MT 

of estimated need each year; (2) 

recovery and reclamation meet 19,700 

MT of estimated servicing need; and (3) 

70 percent of total need in the large 

retail food sector is met by in-house 

recovery and reuse. 

As shown in Table 4 of the 

Adjustment Memo, the agency proposed 

to issue HCFC–22 consumption 

allowances as follows: (1) Between 

25,100 and 36,200 MT in 2012 (a 

decrease of 11 to 38 percent relative to 

the 2009 Final Rule); (2) between 20,800 

and 31,400 MT in 2013 (a decrease of 

13 to 42 percent); and (3) between 

16,400 and 26,300 MT in 2014 (a 

decrease of 15 to 47 percent). These 

proposed amounts correspond to 

allocations 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 agency took comment on its 

analysis of market conditions, which 

specifically looked at existing inventory, 

reclamation capacity, and HCFC–22 

reuse in the supermarket industry. EPA 

also asked for comment on potential 

difficulties faced by small businesses 

and on whether or not the installation 

of dry-shipped HCFC–22 condensing 

units affects the phaseout. 

Between the 2011 Interim Final Rule 

and the proposed rule, the agency 

received a total of 50 comments (some 

with multiple signatories) on the market 

conditions (see section 2 of the 

Response to Comments) considered in 

allocating HCFC–22 and HCFC–142b 

allowances. As discussed in the 

proposed rule, the need for HCFC–22 to 

service existing equipment is the 

primary factor affecting EPA’s overall 

allocation of production and 

consumption allowances for the current 

regulatory period. Thus, the Adjustment 

Memo only discusses HCFC–22 and 

most comments, as well as the agency’s 

response, focus primarily on HCFC–22. 

Additionally, EPA received 13 

comments, four from the Interim Final 

Rule and nine from the proposed rule, 

on whether or not to provide more 

HCFC–22 and/or HCFC–142b 

consumption and/or production 

allowances as compensation for lost 

opportunities during 2010 

(‘‘recoupment’’). Lastly, the agency 

proposed to allocate different annual 

percentages of baseline for consumption 

than for production (‘‘decoupling’’). 

Without decoupling the baselines, the 

percentage of baseline allocated for 

production would be the same as that 

for consumption for a given HCFC. Nine 

comments specifically addressed 

decoupling of baseline percentages. 

1. How is EPA adjusting estimated 

servicing need to account for surplus 

inventory from past years? 

The agency proposed to account for 

existing inventory of HCFC–22 

produced in previous years by making 

downward adjustments to the 

consumption allocation of 6,000 MT 

each year. EPA’s analysis indicated the 

amount of existing inventory was 

between 22,700 MT and 45,400 MT. 

Including relevant comments received 

on the 2011 Interim Final Rule, EPA 

received eight comments on its 

assessment of existing inventory of 

HCFC–22. Seven comments state there 

are significant volumes of HCFC–22 in 

existing inventory and that accounting 

for this inventory is essential for 

supporting recovery and reclamation. 

One of those commenters indicates the 

6,000 MT proposed annual adjustment 

and the 45,400 MT stockpile estimate 

should be considered a minimum, not 

maximum amount. Another also 

supports EPA’s consideration of existing 

inventory, and believes the estimates 

used in the proposed rule may be too 

low based on their own inventory and 

their own estimates of industry-wide 

inventory. 

All comments on EPA’s analysis, 

including confidential comments, 

indicate EPA’s estimate of existing 

inventory is reasonable and that an 

annual adjustment to the estimated 

servicing need of 6,000 MT is 

supportable. EPA considered a wide 

range of existing inventory (between 

22,700 MT and 45,500 MT), but 

comments support the proposed 6,000 

MT adjustment regardless of the total 

stock of existing inventory. Based on the 

information provided, the agency does 

not believe the annual adjustment or the 

estimate of existing inventory should be 

increased. Overestimating the amount in 

inventory could limit the ability of 

consumers to service their equipment, 

resulting in systems being prematurely 

decommissioned. EPA provides a full 

summary of comments and agency 

responses in the Response to Comments, 

but notes here that all commenters who 

addressed the proposed 6,000 MT 

adjustment specifically were in support 

of an adjustment at least that large. EPA 

is finalizing the consumption allocation 

with the proposed adjustment for 

existing inventory. 

2. How is EPA adjusting allowances to 

encourage recovery, reclamation and 

reuse? 

In the 2009 Final Rule, the agency 

recognized that servicing needs 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. The 2009 

Servicing Tail Report analyzed various 

reclamation scenarios, and after several 

rounds of industry feedback, the agency 

decided to issue allowances 12,500 MT 

below estimated need in 2010–2014. For 

2010, 12,500 MT was 20 percent of the 


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7The Vintaging Model is the primary tool that 

EPA uses to estimate projected HCFC consumption. 

The Vintaging Model estimates the annual chemical 

emissions from industry sectors that have 

historically used ODS, including air conditioning, 

refrigeration, foams, solvents, aerosols, and fire 

protection. Within these industry sectors, there are 

over fifty independently-modeled end uses. The 

model uses information on the market size and 

growth for each of the end uses, as well as a history 

and projections of the market transition from ODS 

to alternatives. As ODS are phased out, a percentage 

of the market share originally filled by the ODS is 

allocated to each of its substitutes. The model tracks 

emissions of annual ‘‘vintages’’ of new equipment 

that enter into operation by incorporating 

information on estimates of the quantity of 

equipment or products sold, serviced, and retired 

or converted each year, and the quantity of the 

compound required to manufacture, charge, and/or 

maintain the equipment. EPA’s Vintaging Model 

uses this market information to build an annual 

inventory of in-use stocks of equipment and the 

ODS refrigerant and non-ODS substitutes in each of 

the end uses. This information is used to project the 

servicing needs of ODS-containing equipment. 

Additional information on the Vintaging Model is 

available in the 2009 Servicing Tail Report, which 

can be found in the docket for this rulemaking. 

estimated need. EPA continues to 

believe that reused, recycled, and 

reclaimed material can help meet 

HCFC–22 servicing needs. The agency 

published new projections of reclaim 

capabilities in the Adjustment Memo, 

and took comment on those projections 

via this rulemaking. 

Out of the 15 comments EPA received 

on reclaim capabilities, 14 comments 

(some signed by multiple organizations) 

supported EPA’s analysis that the 

reclamation industry has the capacity to 

reclaim more than 19,700 MT per year. 

One comment stated that the 

infrastructure to effectively and 

efficiently recover, recycle, redistribute, 

and reuse HCFC–22 likely will take 

several years to develop. In addition, 

one company agreed that the industry 

has the capacity to meet reclaim needs, 

but disagreed with the base assumption 

that this activity will automatically take 

place. 

In the Adjustment Memo, EPA 

considered annual reclamation levels of 

12,500 MT and 19,700 MT. Several 

organizations state that the 19,700 MT 

figure should be a minimum, rather than 

a maximum, because established 

companies that reclaim refrigerants have 

the technical capacity to recover 19,700 

MT or more in 2012 alone and could 

easily expand capacity to meet 

additional need. One company 

comments that reclamation companies 

will be able to expand to cover the need 

that will ultimately be driven by higher 

prices and a decrease in supply. 

However, companies will not expand 

until there is a need. Another company 

also states that it could easily triple its 

current capacity, and believes the same 

is true for many reclamation companies. 

Many companies support an allowance 

reduction to encourage an increase in 

reclamation capacity and volume. These 

commenters, including 20 EPA-certified 

reclaimers that submitted a single 

comment, all believe that the capacity 

exists to handle increased reclamation 

volumes. 

Several commenters believe sufficient 

recovery and reclamation capacity 

exists, but that the supply chain of used 

refrigerant from equipment-in-use to 

reclamation facilities is fragmented and 

complex. The concern is not whether 

capacity exists, or whether reclaimers 

could quickly expand capacity, but 

whether material is actually being 

recovered and brought to reclaimers. A 

group of recovery companies believes 

that existing reclaimers have the 

capacity to process more than enough 

HCFC–22 to meet the industry needs, 

but are not convinced that given the 

present situation, there will be enough 

refrigerant recovered to meet the raw 

material needs of the reclaimers. 

However, a group of recovery 

companies that focuses exclusively in 

recovering used refrigerant from retiring 

equipment does believe reducing 

allowances will change the incentives 

for recovery. Finally, one company 

believes that EPA’s estimate of the 

potential for recovery and reuse is too 

optimistic during 2012–2014, 

particularly because residential air 

conditioners use only small quantities 

of the gas. 

EPA’s assessment that the reclamation 

industry has the capacity to reclaim 

19,700 MT of HCFC–22 per year, as 

presented in the Adjustment Memo, is 

supported by most of the comments 

received. The amount of used refrigerant 

that can be recovered from retiring 

equipment is sufficient to allow for the 

reclamation of 19,700 MT per year, 

based on expected recovery rates used 

in the Vintaging Model.7 Included in the 

docket for this rulemaking is a new 

supporting memo titled ‘‘Recovered 

HCFC–22 Available to Meet Servicing 

Needs’’ (Recovery Memo). In this memo 

EPA shows the amount of HCFC–22 that 

can be recovered from HCFC–22 

equipment that reaches its end of life 

under two scenarios. In the first 

scenario, EPA uses the end-of-life 

assumptions in the Vintaging Model to 

determine how much HCFC–22 is 

recovered from retiring equipment. The 

Vintaging Model uses a 35 percent 

recovery rate in retiring residential air 

conditioning systems. The Recovery 

Memo details all the recovery 

assumptions used, which are nearly 

identical to those used in the 2009 

Servicing Tail Report. These numbers 

are similar to those presented in table 4– 

5, ‘‘Scenario 50: 50% Recovery Rate,’’ 

which was also presented in the 2009 

Servicing Tail Report. In the second 

scenario, EPA assumes all HCFC–22 is 

recovered at the end-of-life. The intent 

of this memo is to show that it is 

technically feasible to recover and 

reclaim 19,700 MT of HCFC–22 per year 

between 2012–2014, even when only 35 

percent of the HCFC–22 is recovered 

from residential air conditioning 

systems—the largest use for HCFC–22. 

However, EPA agrees with some 

commenters that the amount of 

refrigerant that is available to be 

recovered does not necessarily equal the 

amount that is recovered in practice, 

and that it will take time for recovery 

practices to change. The agency 

recognizes that assuming 19,700 MT of 

annual servicing need can be met by 

recovered and reclaimed material— 

instead of 12,500 MT—does not mean 

that amount will actually be reclaimed 

each year. EPA’s adjustment to 

encourage recovery and reclamation 

could also encourage transition to 

HCFC–22 alternatives and more 

recovery and reuse of HCFC–22 in 

systems that require a large refrigerant 

charge. Although both of these 

outcomes are difficult to measure and 

predict, EPA expects that these 

outcomes will sufficiently deal with any 

gap between the adjustment in 

allocation and realized reclamation 

levels. EPA adopted the same general 

approach in the 2009 Final Rule (using 

12,500 MT instead of 19,700 MT) to 

foster recovery and reclamation. In 

addition, EPA has received anecdotal 

information from stakeholders that 

reclaimers are already offering increased 

incentives to return recovered 

refrigerant and that this will continue as 

long as there is an economic incentive 

to do so. As the supply of virgin 

refrigerant shrinks, the incentive to 

recover and reclaim used refrigerant 

will likely increase. EPA provides a full 

summary of comments and agency 

response in the Response to Comments. 

EPA does not believe any of the 

concerns raised should preclude the 

agency from increasing the adjustment 

for reclamation from 12,500 MT to 

19,700 MT to foster reclamation, 

especially in light of the 2015 Montreal 

Protocol cap and the 2020 phaseout of 

HCFC–22 production and import. EPA 

believes increased recovery and 

reclamation is necessary to ensure a 

smooth transition between now and 

2020 and is increasing the difference 

(relative to the 2009 Final Rule) between 

estimated servicing need and the 

allocation for virgin production and 

import. The agency is finalizing the 

proposed 19,700 MT adjustment to 


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foster increased HCFC–22 recovery and 

reclamation. 

3. How is EPA accounting for recovery 

and reuse of HCFC–22 in the 

supermarket industry? 

In the proposed rule, EPA considered 

adjusting the allocation for virgin 

HCFC–22 production and import to 

account for current recovery and reuse 

practices in the supermarket industry. 

Specifically, the agency estimated that 

between 20 percent and 70 percent of 

annual servicing need in the large retail 

food sector could be met by HCFC–22 

recovered and reused in-house. In 

addition to the analysis conducted to 

develop the Adjustment Memo, EPA 

considered late comments that 

addressed recovery and reuse of HCFC– 

22 in supermarkets. The comments, 

combined with EPA’s findings 

presented in the Adjustment Memo, 

indicate that supermarkets deal with 

recovered refrigerant in a variety of 

ways. Some appear to meet 10–20 

percent of their annual servicing need 

with material they recovered from 

internal existing prior uses. Others have 

the material reclaimed and do not reuse 

or bank any of the material. A third 

group meets 80 to 100 percent of their 

annual need with reused material. 

EPA received an additional comment 

on reuse by large end users, but not 

specifically supermarkets. The 

commenter notes that large users 

retiring equipment can efficiently and 

effectively capture the majority of 

refrigerant from commercial 

refrigeration and air conditioning units. 

These users can recover refrigerant for 

future servicing of other equipment they 

own. These users do not require 

reclamation technology or equipment, 

and can recover and reuse significant 

volumes of refrigerant. Such recovery 

and reuse should continue to be 

considered as a source of HCFC–22 

service refrigerant. 

EPA agrees that large end users, 

including supermarkets and other large 

commercial applications, can be a 

source for recovered HCFC–22. 

However, the agency only received 

information on how six companies 

reuse refrigerant in-house, and their 

reuse percentages are very different. 

Since the agency does not have 

sufficient data on in-house reuse, EPA is 

not accounting for supermarket reuse as 

its own category. However, the agency’s 

Vintaging Model has reasonable 

estimates for actual recoverable material 

for various sectors, and EPA is using 

those modeled recovery rates for 

supermarkets to help support overall 

recovery and reuse estimates in this rule 

(see the Recovery Memo for specifics on 

modeled recovery rates). 

4. Did EPA consider providing 

allowances to small businesses in this 

final action? 

In response to the 2011 Interim Final 

Rule, one small business informed EPA 

that it could not 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, available in the 

docket for this action). To remedy this 

situation, the commenter requested that 

EPA provide unused allowances to 

companies that purchased either HCFCs 

or HCFC consumption allowances in 

2008 and 2009. In the proposed rule, 

EPA noted 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 commented that it cannot 

acquire HCFCs. However, EPA took 

comment on whether other companies 

were having difficulty acquiring HCFCs 

or HCFC allowances. In the proposed 

rule, the agency also provided some 

historical background on how EPA 

provided flexibility for small businesses 

when establishing the HCFC allocation 

system. 

EPA received four comments on 

providing allowances to manufactures 

of HCFC blends, all of which were in 

opposition. Two companies point to the 

flexibility for companies without 

baselines to obtain HCFCs or HCFC 

allowances by purchasing them from 

others. Another commenter notes that 

EPA provided for new entrants when it 

established the allocation system in 

2003. 

Since EPA did not receive any 

additional comments in support of 

providing HCFC allowances to 

manufacturers of HCFC blends, and 

because the agency has previously 

stated its belief that the current 

allocation system provides significant 

flexibility for new entrants (as 

documented in the revised Flexibility 

Memo), EPA is not providing 

allowances for new entrants at this time. 

EPA also sought comment on the 

concept of providing HCFC–22 

allowances to reclaimers, but expressed 

reservations. EPA received eight 

comments on this topic: four in 

opposition and four in support. 

Comments in opposition state that 

providing allowances to reclaimers 

could encourage blending of refrigerant, 

instead of reclaiming refrigerant. They 

also cite administrative hurdles in 

establishing allowances for reclaimers 

and their skepticism that reclaimers 

would actually use the allowances to 

reclaim more material. All three 

commenters state that the proposed 

reduction in allowed production and 

import will encourage recovery and 

reclamation (without providing 

allowances). 

One comment in support encouraged 

EPA to provide allowances to reclaimers 

as a reward for reclamation activities. 

The commenter also stated that 

manufacturers create a difficult working 

environment for reclaimers, claiming, 

for example: 

• The manufacturers exert pressure 

on wholesalers and contractors not to 

return their used refrigerants to a 

reclaimer, using their supply of virgin 

refrigerants as leverage. 

• The manufacturers have asked 

cylinder manufacturers not to sell prelabeled DOT 39 cylinders for their 

blends to reclaimers. 

• The manufacturers or their agents 

will buy an account back by offering a 

higher price for the used refrigerants 

than justified. 

The commenter argues that the desire of 

manufacturers to promote their own 

best self-interest results in a difficult 

environment for a refrigerant reclaimer 

to prosper. 

EPA continues to have serious 

concerns about providing allowances to 

reclaimers that did not historically 

produce or import HCFC–22 and have 

not already acquired HCFC–22 

allowances. As stated in the proposed 

rule, the agency’s primary concern is 

that providing allowances for reclaimers 

could foster unsustainable reclamation 

practices that rely on blending, instead 

of investment in the technology to fully 

reclaim HCFCs. 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 it will be 

absolutely necessary by 2020, at which 

time production and import 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 continues to believe that 

allocating fewer allowances—rather 

than providing allowances to 

reclaimers—is the best way to foster 

reclamation and recovery. In this final 

rule, EPA is taking significant steps to 

encourage recovery and reclamation by 

providing fewer HCFC–22 consumption 

allowances. Fewer allowances for new 

production and import increases the 


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value of existing HCFCs, which in turn 

increases the incentives for recovery 

and reclamation. While the agency 

appreciates the concerns raised by 

reclaimers about the difficulties they 

encounter in the refrigerant reclamation 

business, these barriers have not 

stopped companies from becoming EPAcertified reclaimers—currently there are 

more than 50. Given the considerations 

above, the agency is not providing 

allowances to reclaimers at this time. 

5. Does the installation of dry-shipped 

HCFC–22 equipment affect the phaseout 

of HCFC–22? 

In the proposed rule, EPA took 

comment on whether allowing repairs 

using HCFC–22 dry-shipped condensing 

units affects the phaseout of HCFC–22. 

Eight commenters believe the repairs of 

existing equipment that involve 

installation of dry-shipped HCFC–22 

condensing units is affecting the 

phaseout and/or should be stopped. 

They claim that continued installation 

of dry-shipped condensing units 

effectively allows the manufacture of 

otherwise banned HCFC–22 airconditioning systems, increasing 

demand for HCFC–22 and undercutting 

the market for alternative refrigerants. 

One company does not believe dryshipped condensing unit repairs can be 

properly addressed through a reduction 

in HCFC–22 allocation levels. Cost 

associated with the HCFC–22 refrigerant 

needed for the re-charging of the HCFC– 

22 system is quite small (<5% of the 

total servicing cost), so even a 

significant inflation of the cost of 

HCFC–22 will still have a minimal 

impact on the end-user’s decision. Two 

commenters ask EPA to ban repairs 

using HCFC–22 dry-shipped condensing 

units, one explicitly asking for this 

action in lieu of further reducing HCFC– 

22 production. Another commenter is 

concerned about the negative effects of 

dry-shipped condensing units on 

equipment efficiency. 

One joint comment from several 

environmental groups indicated that the 

market for dry-shipped HCFC–22 units 

is expanding rapidly; however, no data 

were provided. The commenters express 

concern that because newly-produced 

HCFC–22 is so cheap, service 

technicians are venting HCFC–22 from 

broken units, installing dry-shipped 

units in their place, and then charging 

the unit with virgin HCFC–22. 

EPA received seven comments saying 

installation of dry-shipped condensing 

units does not significantly affect the 

phaseout and/or that dry-shipped 

HCFC–22 condensing unit repairs 

should not be banned. These 

commenters believe dry-shipped 

condensing units are providing 

consumers a legal, affordable repair 

option, and thus not actually increasing 

demand for HCFC–22 or displacing the 

sale of new systems. They contend that 

the primary application of the 

uncharged HCFC–22 replacement 

condensing units is as a service option 

to major compressor and coil failures. 

While two of the equipment 

manufacturers who do not support a ban 

on dry-shipped unit repairs also do not 

support reduced allocations of HCFC– 

22, another equipment manufacturer 

believes that addressing the availability 

of the refrigerant is the appropriate 

driver for phasing out virgin HCFC–22, 

and that the installation of dry-shipped 

HCFC–22 condensing units does not 

have a negative effect on the phaseout. 

Another commenter suggests that if EPA 

has verifiable evidence that the 

servicing or repair of HCFC–22 

appliances is resulting in increased 

emissions of the refrigerant, then EPA 

should consider extending the leak 

repair requirements to all appliances, 

not just appliances with a refrigerant 

charge greater than 50 lbs. 

Five additional comments discuss 

HCFC–22 condensing units in more 

general terms. One organization suggests 

that EPA consider that most dryshipped condensing units are being sold 

and installed with multi-year 

warranties, which may require a 

revision to EPA’s servicing tail analyses 

if HCFC–22 replacement refrigerants are 

not approved by the compressor and 

equipment manufacturers for warranty 

servicing beyond 2015. Two other 

commenters state that the installation of 

HCFC–22 condensing units affects the 

need for HCFC–22. One commenter 

states that contractors prefer selling new 

R–410a systems instead of repairing 

older systems, since it is much more 

profitable, but that American consumers 

are struggling to pay bills. One 

commenter states that further reductions 

in consumption allowances might 

discourage installation and field 

charging of new condensing units with 

HCFC–22. The commenter also states 

that continued installation of such units 

will only increase the challenge of 

meeting the 2015 stepdown and in turn 

increase emissions of HCFC–22 to the 

atmosphere. 

The issue of whether repairs 

involving the installation of dry-shipped 

HCFC–22 condensing units ‘‘affects the 

phaseout’’ can be broken into several 

questions. First, do repairs involving 

installation of dry-shipped HCFC–22 

condensing units increase demand for 

HCFC–22? Second, do such repairs slow 

transition from HCFC–22 equipment to 

equipment using non-ODS alternatives? 

And finally, does this practice affect 

EPA’s ability to stop the production and 

importation of virgin HCFC–22 by 

January 1, 2020? 

Based on comments, there is no 

industry consensus on each of these 

questions. Specific responses to each 

comment are included in the Response 

to Comments found in the docket for 

this rulemaking. However, given the 

paucity of concrete quantifiable 

information on this subject currently 

available to the Agency, EPA is not 

ready to determine whether the 

installation of dry-shipped HCFC–22 

condensing units will affect EPA’s 

ability to phase out HCFC–22 by 2020. 

The limited data received to date 

suggest that it will not. EPA did not 

propose to ban dry-shipped condensing 

units in the proposal and is not taking 

such action in this final rule. For 

purposes of future rulemakings, EPA is 

still interested in quantifiable 

information on the number of dryshipped condensing units being 

shipped, whether they are being used as 

a repair in lieu of a compressor or motor 

replacement, and whether and to what 

extent condensing unit replacements 

extend the life of an existing system. 

EPA will continue to evaluate the issue 

as it develops future regulations. 

6. How is EPA addressing the court’s 

decision with regard to 2010 HCFC 

allowances? 

As noted in the proposed rule, EPA 

interprets the Arkema decision as 

applying, at a minimum, to the baseline 

and calendar-year allowances for 2011– 

2014. The agency took 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. 

EPA also took comment on (1) whether 

it should provide recoupment 

allowances 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. In this final action, EPA 

concludes that it has an obligation to 

consider 2010 allowances in responding 

to the Court’s remand and that 

recoupment for both HCFC–22 and 

HCFC–142b production and 

consumption allowances is an 

appropriate response to the Court’s 

holding that the agency committed legal 

error in deciding not to carry the 2008 

transfers forward when it established 

the baselines for the current regulatory 

period. 

EPA received 13 comments in 

opposition to recoupment. Four 

comments specifically state that it is too 


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20016 Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Rules and Regulations 

late to address 2010 allowances, since 

the Court’s mandate did not issue until 

2011, and allowances are only good for 

the calendar year in which they are 

issued. Two comments assert that 

providing recoupment allowances 

would allow for banking or transferring 

of allowances to later years, which is at 

odds with the CAA and EPA 

regulations. Most of these comments 

point out that some allowances 

conferred in 2010 actually went unused 

in that year, and that EPA’s current 

proposal to reduce allowances in 2012– 

2014 is further rationale for not 

providing additional allowances to 

compensate for any perceived lost 

opportunity in 2010. They point to 

EPA’s statement in the proposal that not 

providing recoupment would have 

advantages for the environment, public 

health, and the goal of encouraging 

reclamation. They assert that there was 

an oversupply of HCFC–22 allowances 

in 2010, that Arkema and Solvay were 

not harmed in 2010, and that 

recoupment allowances would 

constitute a windfall. They refer to the 

Court’s denial of Arkema’s and Solvay’s 

motions for a stay of the 2009 Final Rule 

as evidence that these companies were 

not harmed. One commenter also asserts 

that if Arkema and Solvay believe they 

are entitled to compensation, they must 

file a claim for compensation under the 

Tucker Act, 28 U.S.C. 1491. Finally, 

four comments cite that providing 

recoupment distorts market share, in 

contradiction to past EPA policy and the 

Arkema decision as it relates to vested 

rights. 

On the other hand, the two companies 

that would benefit most from 

recoupment, Solvay and Arkema, state 

that EPA should provide recoupment 

and that the agency must do so in order 

to comply with the Court’s decision in 

Arkema. Solvay states that EPA 

deprived it of its rightful allowances by 

failing to recognize its permanent interpollutant trades in the 2009 Final Rule 

and that recoupment is necessary to 

remedy that error. Arkema asserts that 

its losses were significant because of its 

inability to compete effectively in the 

after-market, stockpile material for sale 

in later years, and sell other refrigerants 

to one-stop shoppers. 

The primary rationale the commenters 

present in favor of providing 

recoupment is that when an agency 

‘‘ * * * commits legal error, the proper 

remedy is one that puts the parties in 

the position they would have been in 

had errors not been made,’’ (AT&T 

Corp. v. FCC, 448 F.3d 426, 433 (D.C. 

Cir. 2006) (quoting Exxon Co. v. FERC, 

182 F.3d 30, 48 (D.C. Cir. 1999)). The 

Court has further held that the proper 

remedy to an error is ‘‘to put the victim 

of the agency ‘error in the economic 

position it would have occupied but for 

the error,’’’ (Ethyl Corp. v. Browner, 67 

F.3d 941, 945 (D.C. Cir. 1995) (quoting 

Delta Data Sys. Corp. v. Webster, 744 

F.2d 197, 206–07 (D.C. Cir. 1984)). 

Arkema contends that providing 

recoupment for losses would not require 

improper retroactive action. It states that 

because there is a strong equitable 

presumption in favor of retroactivity 

that would make the injured party 

whole, EPA can make a correction that 

goes back to the time the agency error 

occurred (Exxon Co. v. FERC, 182 F.3d 

30, 48 (D.C. Cir. 1999)). In addition, the 

commenter argues that in this 

circumstance EPA may go beyond its 

otherwise applicable statutory authority. 

The commenter states that each agency 

has ‘‘general discretionary authority to 

correct its legal errors,’’ which extends 

to imposing retroactive changes, even 

when the statute does not expressly and 

affirmatively authorize the agency to do 

so in the first instance (Natural Gas 

Clearinghouse v. FERC, 965 F.2d 1066, 

1073 (D.C. Cir. 1992)). 

As expressed in the proposed rule, 

EPA’s preferred approach to the 2010 

allocation was not to provide 

recoupment. However, EPA reviewed 

comments and considered the policy 

and legal aspects of providing or not 

providing recoupment. In particular, 

EPA considered the following questions: 

(1) Does EPA have the obligation to 

address 2010 allowances in light of the 

Court’s decision in Arkema, and (2) 

does EPA have the ability to provide 

some form of compensation that would 

remedy the retroactive aspects of the 

2009 Final Rule with respect to 2010? 

EPA believes that the answer to both 

questions is ‘‘yes.’’ 

First, EPA believes it has an 

obligation to address 2010 allowances in 

light of the Court’s decision in Arkema, 

to the extent feasible given the design 

and structure of this program. The Court 

stated that the 2009 Final Rule was, in 

part, ‘‘impermissibly retroactive’’ 

because ‘‘it attempted to undo the 

Petitioners’ inter-pollutant baseline 

transfers’’ based on what the Court saw 

as a ‘‘new interpretation of section 607’’ 

of the Clean Air Act. The Court vacated 

the rule ‘‘insofar as it operates 

retroactively’’ and remanded the case 

‘‘for prompt resolution,’’ (Arkema, 618 

F.3d. at 25). EPA believes that on 

remand, it must put allowance holders 

in the position they would have 

occupied had the agency reflected the 

Petitioners’ inter-pollutant baseline 

transfers in the 2009 Final Rule (AT&T 

v. FCC, 448 F.3d 426 (D.C. Cir. 2006); 

Exxon Co. v. FERC, 182 F.3d 30 (D.C. 

Cir. 1999)). As noted in the proposal, it 

is appropriate for EPA to consider the 

2010 allocation on remand whether or 

not the Court’s decision had the effect 

of vacating the 2010 allowances. The 

Court clearly held that the baselines 

used in the 2009 Final Rule were 

invalid, and the 2010 allocation relied 

on those baselines. 

Second, EPA believes it is feasible to 

provide compensation for lost 2010 

allowances in the form of recoupment 

allowances, even though the 2010 

period has ended and all 2010 

allowances have expired. As explained 

in the proposed rule, EPA allocates 

HCFC production and consumption 

allowances for specific calendar years: 

They are valid for that year only. Such 

allowances cannot be banked or 

borrowed. Therefore, EPA cannot 

provide meaningful compensation by 

issuing additional 2010 allowances 

since they would be void upon 

issuance. In the narrow circumstance of 

responding to the Court’s decision, 

however, EPA finds it appropriate to 

issue a corresponding number of 

allowances in later years to make up for 

the 2010 allowances that companies 

would have received if EPA had 

reflected the Petitioners’ inter-pollutant 

baseline transfers in the 2009 Final 

Rule. These recoupment allowances are 

designed to compensate for lost 

opportunities to produce or import 

HCFCs during 2010 for sale in either 

2010 or a later year. 

In responding to concerns that this is 

effectively allowing for banking or a 

transfer of allowances from 2010 to a 

later year, EPA disagrees. While EPA 

does not allow banking of allowances 

beyond the control period in which they 

are issued, nothing in the regulations 

bans companies from producing or 

importing HCFCs with allowances and 

then storing the material over time. 

Companies receiving recoupment were 

deprived of their ability to import and/ 

or produce HCFCs in 2010 at a level 

consistent with the Court’s decision in 

Arkema. Had they received the requisite 

level of allowances in 2010, they could 

have expended them during 2010 to 

produce or import HCFCs and banked 

those HCFCs until at least the years 

covered by this rulemaking. EPA also 

disagrees with one commenter’s 

characterization of recoupment as an 

effective transfer of 2010 allowances to 

later years. Contrary to the commenter’s 

assertion, EPA did not adopt this 

characterization in the proposal, but 

instead simply pointed out that the 

regulations do not allow banking or 

borrowing of allowances. The 

commenter quotes section 607(a), which 

states that EPA regulations must ensure 


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that transfers ‘‘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.’’ The commenter 

asserts that if recoupment is provided, 

the aggregate allowance total will be 

higher than it would have been if no 

recoupment were provided. However, 

EPA disagrees that section 607(a), which 

is titled ‘‘Transfers,’’ has any 

application to this situation. Section 

607(a) refers specifically to 

‘‘transactions under the authority of this 

section.’’ An EPA rulemaking providing 

allowances is not such a transaction. 

The transactions in question are the 

‘‘transfers’’ and ‘‘trades’’ within or 

between companies explicitly discussed 

in section 607. EPA has implemented 

section 607(a) by requiring an offset for 

all intra-company and inter-company 

transfers. See, e.g., 40 CFR 

82.23(a)(i)(G). 

Additionally, commenters assert that 

providing recoupment allowances 

would mean taking allowances away 

from others or distorting market share. 

One commenter said that providing 

recoupment is in violation of the 

Arkema decision, asserting that a 

company’s allowances, or its share of 

allowances, are a vested right. EPA 

disagrees with this comment on both 

factual and legal grounds. First, as a 

result of the Arkema Court’s partial 

vacatur of the 2009 Final Rule, there are 

currently no production or consumption 

allowances for HCFC–22 in 2012–2014. 

This final rule is filling a gap, rather 

than reshuffling existing allowances or 

existing market share. Second, even in 

the context of today’s allocation, EPA is 

not allocating fewer allowances to one 

company for the purpose of allocating 

more to a different company. EPA is 

allocating a fixed percentage of baseline 

to each baseline holder at a level that in 

the aggregate is expected to meet 

servicing demand, taking into account 

the amount of such demand that can be 

met through other sources. EPA is then 

allocating recoupment allowances to 

certain companies on top of that fixed 

percentage allocation. Regarding market 

share, the allocation of recoupment 

allowances is limited to two years; thus, 

as a practical matter, it is unlikely to 

cause a permanent shift in market share. 

In addition, market share is not a simple 

reflection of EPA’s allocation of 

allowances: For example, some 

companies buy or sell allowances and 

thus increase or decrease the volume of 

their business in a particular HCFC or 

HCFCs generally. 

Furthermore, EPA takes issue with the 

commenter’s characterization of the 

Arkema decision. In Arkema, the Court 

held that the petitioners had a vested 

right in transferred baselines where EPA 

had taken affirmative steps to approve 

the transfers by issuing non-objection 

notices. The commenter attempts to 

broaden the decision to state that 

allowance holders have vested rights in 

any and all allowances issued under the 

stratospheric ozone program, and in 

addition, to a specific market share or 

value attached to those allowances. EPA 

disagrees with this broad reading and 

believes the Court’s ruling is closely tied 

to its factual findings concerning the 

2008 transfers. This issue is discussed 

further at section IV.A.1. 

Two commenters state that there was 

a significant oversupply of HCFC 

allowances in 2010, that the petitioners 

in Arkema were not harmed by the 2010 

allocation in the 2009 Final Rule, and 

that they would receive a windfall if 

EPA were to provide recoupment 

allowances. However, the fact that not 

all HCFC allowances were used in 2010 

does not mean that particular 

companies were not harmed. 

Companies’ individual situations and 

business plans may differ. Also, 

although the commenter cites the 

Court’s denial of the motions to stay the 

2009 Final Rule as evidence that 

petitioners were not harmed in 2010, 

harm to the moving party is only one of 

the criteria considered by a court in 

reviewing a stay motion. Thus, it is 

erroneous to assume that the Court’s 

denial equates to a ruling that 

petitioners suffered no harm. 

Several commenters stated that 

providing recoupment allowances 

would harm human health or the 

environment; however, this action as a 

whole protects human health and the 

environment by allocating significantly 

fewer allowances in 2012–2014 than the 

agency allocated in the 2009 Final Rule. 

Viewed in relation to that rule, EPA is 

reducing the total number of HCFC–22 

consumption allowances (after 

providing for recoupment) by more than 

31,100 MT over those three years. As a 

result, providing recoupment does not 

increase the allowed amount of HCFC– 

22 production and importation for U.S. 

use relative to the 2009 Final Rule. Even 

with recoupment, total U.S. 

consumption will be at least 55 percent 

below the Montreal Protocol 

consumption cap. This overall decrease 

in consumption also increases the 

incentives for recovery and reclamation. 

In addition, as noted in the proposal, 

the amount of recoupment being granted 

(329 ODP-weighted MT of allowed 

HCFC consumption and 280 ODPweighted MT of allowed HCFC 

production) is smaller than the number 

of allowances that were not used by 

allowance holders in 2010 

(approximately 425 ODP-weighted MT 

of HCFC consumption allowances and 

approximately 930 ODP-weighted MT of 

HCFC production allowances). EPA’s 

response to additional comments on 

whether to provide recoupment can be 

found in the Response to Comments. 

The agency presented four possible 

options with regard to recoupment for 

2010: (1) Providing recoupment 

allowances in 2013 in addition to (i.e., 

on top of) the aggregate level of 

production and consumption; (2) 

allocating recoupment allowances over 

two years (2013–2014) in addition to 

(i.e., on top of) the aggregate level of 

production and consumption; (3) 

allocating recoupment allowances from 

the aggregate level of production and 

consumption over two years (2013– 

2014); and (4) not issuing recoupment 

allowances. Five comments specifically 

support one or more of these options. 

One comment supports option 1, two 

comments support option 3, and two 

comments support option 4. Two 

additional comments do not directly 

support an option, but raise concerns 

with options 1 and 2. 

EPA stated in the proposed rule that 

if it decided to issue recoupment, it 

would prefer option 1. However, after 

reviewing comment and considering the 

options further, the agency believes 

option 2 is the best approach for 

ensuring a smoother path towards 2015, 

when U.S. consumption and production 

of all HCFCs must be at or below 10% 

of baseline under the Montreal Protocol. 

In addition, it does not reduce the 

number of allowances available to 

companies not receiving recoupment. 

Also, in light of EPA’s decision to 

reduce the overall HCFC–22 allocation 

significantly in relation to the 2009 

Final Rule, EPA can adopt option 2 

while still issuing fewer consumption 

allowances in 2013 and 2014 than it did 

under the 2009 Final Rule. 

Option 1 could flood the market in 

2013, providing significantly more 

allowances in that one year than in 

either 2012 or 2014, creating an even 

more significant drop-off in the number 

of allowances between 2013 and 2014. 

EPA also has serious concerns about 

option 3. Commenters in support of 

option 3 state that companies were ‘‘on 

notice’’ that 2010 allowances were in 

dispute before the Court, so EPA should 

reduce allowances for companies not 

receiving recoupment to make Arkema 

and Solvay whole. However, the court 

rejected petitioners’ stay motion and 

stayed its own mandate, with the result 

that companies were operating under 

the 2009 Final Rule for all of 2010. 

Thus, companies that produced or 


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imported HCFCs during 2010 using 

consumption and production 

allowances received under the 2009 

Final Rule were acting in accordance 

with the regulations in effect at that 

time. 

Commenters in support of option 3 

also claim that since refrigerant 

customers prefer to purchase all 

refrigerants from one supplier, and they 

could not provide sufficient quantities 

of HCFC–22 to some of their customers, 

the 2009 Final Rule resulted in a loss of 

sales of other refrigerants during 2010. 

EPA strongly believes that if a company 

loses its ability to sell to one-stop 

shoppers when it loses allowances, the 

inverse should also be true: Providing 

additional allowances in 2013 and 2014 

equal to the amounts lost in 2010 

should provide approximately the same 

ability to compete for sales to one-stop 

shoppers as was lost in 2010. 

Only two comments addressed 

whether EPA should provide 

recoupment for both HCFC–22 and 

HCFC–142b, or just HCFC–22. One 

commenter supported providing 

recoupment for both substances, as it 

ensures traceability and consistency. 

The other commenter believes EPA 

should provide recoupment for HCFC– 

142b based on a total allowance pool of 

118 metric tons (the amount allocated 

for 2010 in the 2009 Final Rule), instead 

of using a total allowance pool of 463 

MT (the amount that results from the 

revised baselines, which are the same as 

the baselines proposed in 2008). 

According to the commenter, this means 

that the agency need only provide 69.8 

metric tons of HCFC–142b production 

allowances in recoupment. 

EPA does not agree with the 

commenter that it should scale HCFC– 

142b recoupment production 

allowances to match the exact amount 

allocated in 2010. The agency is 

providing recoupment production 

allowances based on what it proposed 

in 2008 (73 FR 78680). In 2008, the 

percent of baseline was the same for 

both consumption and production. EPA 

is therefore using the baseline amount 

and percentage proposed in 2008 to 

calculate recoupment for HCFC–142b 

production. The HCFC–142b production 

baseline is much larger than the 

consumption baseline (when accounting 

for the 2008 transfers), so the resulting 

2010 allocation would have been much 

larger, while the consumption allocation 

would have been approximately the 

same under either baseline scenario. 

Issuing recoupment based on the 2008 

proposal results in approximately 397 

MT of additional HCFC–142b 

production allowances. Since 

manufacturing HCFC–142b in the U.S. 

for domestic use requires production 

and consumption allowances, the 

agency anticipates that the only 

potential increase in HCFC–142b 

production as a result of recoupment 

would be for export. 

One commenter encouraged EPA to 

account for a company’s unused 

allowances from 2010 if EPA is 

providing that company with 

recoupment allowances. To do this, EPA 

would need to divulge information 

about how each company uses its 

allowances: such company-specific 

information has never been disclosed in 

the HCFC phaseout program, and EPA 

would need to consider claims of 

confidentiality before taking such a step. 

Also, EPA does not believe it is 

necessary to account for a company’s 

unused allowances because the agency 

is providing allowances to make up for 

the lost opportunity to produce or 

import HCFCs, not the specific usage or 

lack thereof. As a result, EPA is not 

adjusting for a company’s unused 

allowances in 2010. 

To effectuate option 2, the agency is 

issuing half of the recoupment 

allowances for each company in 2013 

and the other half in 2014 and is 

amending the regulatory text at 40 CFR 

82.16(a) accordingly. Recoupment 

allowances allocated for 2013 and 2014 

will function in the same way as other 

calendar year allowances: They can be 

used only in the calendar year for which 

they are issued and will expire at the 

end of that calendar year. The agency 

believes the issuance of these 

recoupment allowances discharges its 

obligation to consider the 2010 control 

period in responding to the remand in 

Arkema. Table 1 lists the companies 

receiving recoupment, the substance, 

and the total number of recoupment 

allowances: 

TABLE 1—FINAL 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 

A full summary and response to all 

other comments are included in the 

Response to Comments. 

7. Does EPA have to provide the same 

percentage of baseline for production 

allowances as it does for consumption 

allowances? 

In considering how to allocate HCFC– 

22 production allowances for 2012– 

2014, the agency proposed to decouple 

production and consumption baseline 

percentages. Historically, there has only 

been one table at 40 CFR 82.16, which 

lists the percentage of baseline (both 

production and consumption) that every 

baseline allowance holder is issued each 

year. EPA proposed to create two tables, 

and to allocate a different percentage of 

baseline for production than for 

consumption. Decoupling would allow 

the agency to reduce consumption 

allowances in relation to the 2009 Final 

Rule without having to make the same 

reductions to production allowances. 

EPA stated its interpretation that section 

605(c) of the CAA does not preclude 

EPA from decoupling baseline 

percentages and requested comment on 

this issue. EPA received two comments 

specifically addressing whether the 

statute precludes decoupling. 

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 

(emphasis added) * * * as is applicable 

to the phase-out and termination of 

production of class II substances under 

[Title VI].’’ Because the phrase ‘‘same 

schedule’’ is not clear on its face, the 

agency considered three possible 

interpretations of the phrase ‘‘same 

schedule,’’ as explained in the proposal 


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and in the 2011 Interim Final Rule. The 

agency stated that interpreting ‘‘same 

schedule’’ as referring to the phaseout 

schedule that appears in section 605, as 

accelerated under section 606, would be 

most consistent with the statutory 

language and purpose. Examples of 

milestones in the phaseout schedule are 

the 2010 and 2015 phasedown steps. 

The agency clarified that it was not 

proposing to allow production in an 

amount that would be inconsistent with 

those phasedown steps, but simply 

proposing to allow a greater amount of 

production than consumption, with 

both amounts below the Montreal 

Protocol and CAA caps. The one 

company that provided comment on 

this matter agreed with the agency, and 

said that it does not believe that 

production and consumption 

allowances are somehow tied to the 

same regulatory schedule (requiring the 

same number of allowances or 

percentages of baseline for production 

and consumption). Rather, the 

commenter states that production and 

consumption are tied to the same 

statutory and treaty schedule, and that 

the agency should provide for increased 

production. 

The other comment on decoupling 

was from a group of environmental 

organizations, who supported a decrease 

in production allowances relative to the 

2009 Final Rule. They believe that the 

language in section 605(c) equates the 

quantity of consumption and 

production allowances and cannot be 

interpreted to allow more production 

than consumption in a given year. 

EPA disagrees that the language in 

605(c) equates the quantity of 

consumption and production 

allowances. EPA has never allocated the 

same quantity of production and 

consumption allowances, only the same 

percentage of baseline. The agency 

would have to provide different 

percentages of baseline for calendar-year 

consumption and production 

allowances to keep the allowance 

quantities the same since the number of 

aggregate baseline production 

allowances is not equal to the number 

of aggregate baseline consumption 

allowances. Additionally, EPA does not 

believe there is a single ‘‘natural 

reading’’ of section 605(c), as the 

comment suggests. Rather, the language 

is ambiguous. As explained in the 

proposed rule, there are at least three 

possible interpretations. EPA’s 

interpretation that the word ‘‘schedule’’ 

in section 605(c) refers to the schedule 

that appears in section 605, as 

accelerated under section 606, is 

reasonable. In section 606, Congress 

used the word ‘‘schedule’’ to refer to a 

more-stringent schedule than the 

schedule set forth in section 605: ‘‘The 

Administrator shall promulgate 

regulations * * * which establish a 

schedule for phasing out the production 

and consumption of * * * class II 

substances * * * that is more stringent 

than set forth in section 7671d [section 

605].’’ The original section 605 schedule 

limited production and consumption to 

baseline quantities in 2015 and required 

a complete phaseout (with some 

exceptions) in 2030. It is logical that 

Congress would have intended the 

more-stringent schedule established 

under section 606 to have a similar 

structure: That is, to cap or eliminate 

production and consumption on certain 

milestone dates. EPA in fact established 

just this type of schedule at 40 CFR 82. 

16(b)–(g). EPA has discretion in 

managing the allowance system to 

achieve this schedule. Therefore, the 

agency believes it can issue calendaryear consumption and production 

allowances using different percentages 

of baseline, as long as it complies with 

the overall schedule set by Congress, as 

accelerated under section 606. 

Discussion of EPA’s policy decision to 

decouple baseline percentages is found 

in section IV.C.2. 

C. How many HCFC–22 and HCFC–142b 

allowances is EPA allocating in 2012– 

2014? 

The agency is revising 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. In this rulemaking, EPA is (1) 

retaining this framework of 

complementary tables, (2) establishing 

baselines for 2012–2014 identical to 

those established in the 2011 Interim 

Final Rule (76 FR 47451), (3) granting 

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, and (4) providing recoupment 

allowances. 

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. The allocation for HCFC– 

142b was 0.47 percent of baseline. As 

discussed in section III.D. of this final 

rule, EPA interpreted the Court’s 

vacatur as applying to the HCFC–22 and 

HCFC–142b allocations for each of these 

years as well as the baselines. EPA is 

putting in place new allocations through 

this rulemaking, and proposed various 

allocation amounts for consumption and 

production allowances during the 

remainder of this regulatory period. 

1. How many HCFC–22 consumption 

allowances is EPA allocating in 2012– 

2014? 

The 2009 Final Rule allocated 40,700 

MT of HCFC–22 consumption 

allowances in 2012, which was 76.5 

percent of estimated servicing need, and 

59 percent of the total 2012 HCFC 

consumption cap. EPA arrived at this 

amount by estimating the amount of 

servicing need, taking recovery and 

reclamation into consideration. EPA 

then finalized an allocation that was 

12,500 MT below estimated need. Using 

a similar approach, EPA proposed to 

allocate 11 to 38 percent less in 2012 

relative to the 2009 Final Rule (see the 

Adjustment Memo in the docket for the 

rationale behind the proposed 

reduction). In the 2009 Final Rule, 2013 

and 2014 consumption allocations were 

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

The agency proposed to allocate 13 to 

42 percent less in 2013 and 15 to 47 

percent less in 2014. 

As discussed in sections IV.B.1. and 

IV.B.2., comments directly addressing 

reclamation, recovery, and reuse, and 

the availability of existing inventory 

from past years generally support EPA’s 

estimates of the inventory and 

recoverable material that are available 

each year to meet HCFC–22 servicing 

need. The agency also received 54 

comments (some signed by multiple 

organizations) that address the overall 

consumption allocation in more general 

terms. Forty-two comments support the 

decrease in allowances relative to the 

2009 Final Rule and 13 comments 

oppose the decrease. In addition to 

these comments, EPA received 47 

additional comments that oppose a 

decrease in HCFC–22 production, but 

use the word ‘‘production’’ in a general 

sense. Upon reading, EPA believes the 

intent was to oppose a decrease in 

consumption, or ‘‘production for U.S. 

use.’’ 

Generally, comments in support of the 

reduction state that a lower allocation 

will increase the value of HCFC–22, 

resulting in more reclamation and 

increased incentives to recover HCFC– 

22 from existing systems. A lower 

allocation encourages an orderly 

phaseout and still provides enough 

allowances to meet servicing needs. 

Supporters of a lower allocation state 


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8The January 2013 No Action Assurance also 

preserved all recoupment options. 

9 Data submitted to the Greenhouse Gas Reporting 

program on byproducts of the HCFC–22 production 

process indicates that only three of the four 

companies holding production allowances 

produced HCFC–22 in 2010 and 2011 (see http:// 

ghgdata.epa.gov/ghgp/main.do and the memo in 

the docket titled ‘‘2010–2011 Greenhouse Gas 

Reporting Program Data on HCFC–22 Production 

Byproducts’’). While this company can transfer its 

allowances to another producer, the fact that they 

do not produce in the U.S. makes it unlikely that 

all calendar-year production allowances will be 

used. 

that a reduction is justified because of 

lower-than-expected need for HCFC–22 

and the availability of existing inventory 

from past years. Three environmental 

organizations state that a reduction is (1) 

necessary to protect human health and 

the environment, and (2) practicable in 

terms of technology, safety, and 

availability of alternatives. 

Comments supporting a higher 

HCFC–22 consumption allocation cite 

concerns about higher price, limited 

access to refrigerant and unexpected 

costs, all of which could lead to 

premature system retirements. Others 

point to U.S. compliance with the 

Montreal Protocol under the 2009 Final 

Rule, and are against any reductions to 

those allocation levels. 

EPA responds to individual 

comments in the Response to 

Comments, but generally agrees that the 

amount of HCFC–22 provided in the 

2009 Final Rule was too high to foster 

an orderly transition. In 2015, the U.S. 

must reduce its production and 

consumption of all HCFCs to below 10 

percent of its historic HCFC baseline 

under the Montreal Protocol. By 2020, 

HCFC production and consumption 

must be below 0.5 percent of the 

historic baseline and under EPA 

regulations HCFC–22 may not be 

produced or imported at all. Rather than 

create a drastic change in 2015, the 

agency’s goal is to finalize an allocation 

for 2012–2014 that fosters the market 

transition necessary to prevent future 

disruptions. 

Considering that objective, EPA is 

providing allowances in this final rule 

based on its assessment of market 

conditions. For 2012, the timing of this 

rule means that EPA is looking back at 

actual events during 2012 rather than 

projecting future needs. The agency is 

issuing 2012 HCFC–22 consumption 

allowances at the lowest proposed 

amount, because that amount is 

consistent with the industry’s actual 

operation in 2012. The appropriateness 

of this level is supported by the fact that 

EPA has not received any reports of 

HCFC shortages during the 2012 airconditioning season. At the same time, 

this level is commensurate with the 

amount of consumption authorized in 

the January 20, 2012, No Action 

Assurance provided by Cynthia Giles, 

Assistant Administrator for Enforcement 

and Compliance Assurance. EPA 

selected this amount as reasonable for 

purposes of the No Action Assurance, 

recognizing that it was within the 

proposed range. Issuing allowances at 

the No Action Assurance level enables 

companies to account for consumption 

that occurred in 2012 in accordance 

with the No Action Assurance. As stated 

in the No Action Assurance, any HCFCs 

produced and imported in 2012 

pursuant to the No Action Assurance 

count towards a company’s allocation 

and require the expenditure of 2012 

allowances. 

In 2013–2014, EPA is making 

reductions for existing inventory and for 

reclamation and reuse, given the 

support of comments on the agency’s 

analysis and additional data provided 

during the comment period. EPA is not 

reducing allowances to account for 

recovery and reuse in the large retail 

food sector because there were not 

sufficient comments or data, and the 

agency already accounts for 

supermarket recovery (but not in-house 

reuse) in its Vintaging Model. With 

these adjustments, the amount of 

allowed consumption in 2012–2014 is 

29 percent below amounts in the 2009 

Final Rule for the same period. The 

agency believes that the amounts in this 

rulemaking will increase market 

incentives to properly manage and 

recover HCFC–22 while still allowing 

for servicing of existing HCFC–22 

systems. 

EPA is finalizing the following HCFC– 

22 consumption allocations for 2012– 

2014: 

2012: 17.7 percent of baseline, totaling 

approximately 25,100 MT 

2013: 18.0 percent of baseline, plus 

2,954 MT of recoupment, totaling 

approximately 28,500 MT 

2014: 14.2 percent of baseline, plus 

2,954 MT of recoupment, totaling 

approximately 23,100 MT 

With this amount, EPA’s total HCFC 

consumption allocation in 2012–2014, 

including recoupment, is at least 55 

percent below the Montreal Protocol cap 

each year, and is below servicing need 

as estimated in the Servicing Tail 

Report. 

2. How many HCFC–22 production 

allowances is EPA allocating in 2012– 

2014? 

In the proposed rule, EPA described 

three options for providing production 

allowances. In considering each of these 

options, EPA recognized that taking the 

2008 transfers into account in 

accordance with the Arkema decision 

affects not only the HCFC–22 

consumption baseline, but the HCFC–22 

production baseline as well. Two 

options would have decoupled baseline 

percentage allocated for production and 

consumption. These options provided 

(1) approximately the same amount of 

production allowances as the 2009 Final 

Rule or (2) the same percentage of 

baseline as the 2009 Final Rule. The 

third option would have kept 

production and consumption 

allowances at the same percentage of 

baseline, so the resulting production 

allocation would be dependent on the 

final consumption baseline percentage. 

Option 3 is reflected in the January 2012 

and January 2013,8 No Action 

Assurances sent to allowance holders by 

the Assistant Administrator for 

Enforcement and Compliance 

Assurance. EPA took comment on 

providing the following percentages of 

baseline production in 40 CFR 82.16: 

Option 1: 28.7% in 2012, 25.3% in 

2013, 21.9% in 2014 

Option 2: 34.1% in 2012, 30.1% in 

2013, 26.1% in 2014 

Option 3: 17.7% to 25.5% in 2012, 

14.7% to 22.1% in 2013, 11.6% to 

18.5% in 2014 

Under option 1, the aggregate 

allocation in 2012 would be about two 

percent lower than in the 2009 Final 

Rule (37,050 MT in the proposed rule 

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

The intent would be to keep the 

aggregate number of allowances at about 

the same level as the amount finalized 

in the 2009 Final Rule. 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) 

explains these slight differences. While 

this option would keep the aggregate 

number of allowances at about the same 

level, U.S. production could actually 

fall under this option, because under 

Arkema a greater share of the 

allowances would go to a company that 

does not produce in the U.S.9

Under option 2, the production 

baseline percentage would be the same 

as in the 2009 Final Rule. The 

petitioners in Arkema would receive the 

benefit of their 2008 baseline transfers; 

other companies with production 

baselines would get the same number of 

production allowances as they received 

in the 2009 Final Rule, since their 

baselines did not change. While the 

percentage is the same as the 2009 Final 

Rule, since the aggregate production 

baseline is higher, the number of 

production allowances increases by 


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10Source for the GWP of HFC–23: 

Intergovernmental Panel on Climate Change (IPCC) 

Fourth Assessment Report: Climate Change 2007 

(AR4) 

6,299 MT in 2012, 5,560 MT in 2013, 

and 4,821 MT in 2014. However, as 

noted above, this would not necessarily 

translate to an increase in production. 

In addition to asking for comment on 

the two proposed decoupling options, 

the agency also asked for comment on 

several related matters. EPA asked for 

comment on whether, relative to the 

2009 Final Rule, allocating the same 

percentage of baseline for 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. EPA also 

invited comment on the implications of 

any such increase for the U.S. economy 

and the global environment, particularly 

as it relates to the smooth U.S. phaseout 

of HCFC–22. 

EPA received nine comments on 

EPA’s proposed production allocation. 

Six comments support a higher level of 

production allowances than 

consumption allowances (options 1 and 

2) and three comments oppose a higher 

level of production allowances. EPA 

provides a complete summary of and 

response to all comments in the 

Response to Comments, but highlights 

and responds to most of the comments 

in this preamble. 

Very few comments voiced a 

preference for a specific production 

option. However, two commenters 

specifically support option 2, which 

provides for the same percentage of 

baseline as provided in the 2009 Final 

Rule. Five commenters are in support of 

options 1 and 2 so that domestic 

companies can remain competitive in 

the global market. One commenter 

indicates U.S. companies could lose 

global market share if production 

allowances were not decoupled. Four 

commenters point out that allocating 

more production allowances than 

consumption allowances could allow 

for the possibility of more export, but 

will not lead to increased domestic 

consumption since consumption 

allowances limit the amount of newlyproduced HCFC–22 entering the U.S. 

market. Comments also indicate 

allowing production in the U.S. could 

be environmentally beneficial if it 

displaces production at facilities that do 

not control byproduct emissions of 

hydrofluorocarbon (HFC)–23, which has 

a global warming potential of 14,800.10

The comment cites the growth of HFC– 

23 emissions globally and indicates that 

facilities in Article 5 countries do not 

control HFC–23 emissions to the same 

degree as companies operating in the 

U.S. Since U.S. producers of HCFC–22 

largely control their HFC–23 byproduct 

emissions, the comment states that 

production in the U.S., as opposed to 

other countries, could actually result in 

lower greenhouse gas emissions. 

Comments opposing options 1 and 2 

note that the Protocol and domestic 

regulations already allow for additional 

production in order to serve basic 

domestic needs of developing countries 

in the form of Article 5 allowances. 

They argue that allowing more 

production than consumption may 

increase the global surplus of HCFC–22 

and decrease price, thus discouraging 

appropriate handling of the gas. They 

argue this could lead to an increase in 

global use and emissions of HCFC–22. 

One commenter also states that if a 

reduction in consumption allowances is 

justified, so is a decrease in production 

allowances for the same reason. 

EPA does not agree that options 1 and 

2 increase environmental harm relative 

to the 2009 Final Rule. First, EPA would 

only be providing the same number of 

overall production allowances or the 

same percentage of baseline for 

production as in the 2009 Final Rule. In 

the proposal, EPA also noted that 

production of one kilogram of an HCFC 

requires both a production allowance 

and a consumption allowance 

(82.15(a)(1), (2)). Thus, leaving 

production allowances at the same 

percentage or at the same overall 

amount without a corresponding 

increase in consumption allowances 

cannot result in greater U.S. 

consumption. Also, in order to produce 

for export, a company must submit 

documentation to verify the export of an 

HCFC for which consumption 

allowances were expended in order to 

request a reimbursement of spent 

consumption allowances. The agency 

reviews the documentation and issues a 

notice to either deny or grant the 

request. Therefore, a company would 

not be able to produce more HCFC–22 

unless it had exported an equal amount 

of material and been granted a refund of 

spent consumption allowances. 

Additionally, since HCFC consumption 

is capped globally under the Montreal 

Protocol, companies exporting HCFCs 

are constrained by the consumption 

caps established in the country 

receiving the material. 

With regard to HFC–23, EPA has 

worked with industry through its HFC– 

23 Emission Reduction Partnership to 

encourage companies to reduce HFC–23 

byproduct emissions from the 

manufacture of HCFC–22. In the 2010 

U.S. Climate Action Report, the agency 

noted that ‘‘despite a four percent 

increase in the production of HCFC–22 

compared to 1990, EPA estimates that 

total HFC emissions in 2007 were 

significantly below 1990 levels. 

Compared to business as usual, EPA 

estimates the partnership reduced 

emissions by 17.8 Tg CO2 Eq. in 2007,’’ 

(see page 55 of the U.S. Climate Action 

Report 2010, available in the docket). 

Currently, some HFC–23 emissions in 

Article 5 countries are mitigated 

through Clean Development Mechanism 

(CDM) projects using destruction 

technologies, namely thermal oxidation 

or plasma arc. However, not all HCFC– 

22 facilities are eligible to earn credits 

under CDM; therefore, a number of 

facilities may not have emission 

reduction technology installed. There 

are about 26 plants producing HCFC–22 

in Article 5 countries. Approximately 17 

plants have CDM projects that control 

HFC–23 byproduct emissions. The 

remaining nine plants may not have 

emissions control technologies 

installed. HCFC–22 production in the 

United States may provide 

environmental benefits in reduced 

HFC–23 emissions to the extent U.S. 

production supplants the Article 5 

production in those specific plants that 

do not have HFC–23 byproduct 

destruction technologies installed. 

Some commenters argue that EPA will 

increase the global supply of HCFC–22 

by allocating more production than 

consumption allowances. EPA 

disagrees. First, by decreasing 

consumption allowances relative to the 

2009 Final Rule, EPA is decreasing 

potential U.S. consumption of virgin 

material by more than 31,100 MT over 

2012–2014. Even if every single 

additional production allowance was 

used for export, global consumption 

would still be at least 9,800 MT less 

than the allocations provided in the 

2009 Final Rule if all other factors are 

constant. Because at least one company 

holding production allowances does not 

produce HCFC–22 in the United States, 

it is unlikely that every production 

allowance will be used. As a result, the 

net reduction in global consumption of 

HCFC–22 may be even greater. Finally, 

starting in 2013, Article 5 countries’ 

consumption of HCFCs is capped, 

which further limits global HCFC–22 

demand (see Montreal Protocol Art. 5, 

para. 8 ter.). As noted below, EPA is 

issuing production allowances using the 

same percentages as in the 2009 Final 

Rule only for the 2013 and 2014 control 

periods. 

EPA is also concerned that decreasing 

production allowances for the 


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remainder of the current regulatory 

period could deprive certain U.S. 

manufacturers of existing global 

business. Article 5 allowances already 

allow the export of HCFC–22; but only 

to Article 5 countries. Providing more 

production than consumption 

allowances could allow companies to 

continue exporting to non-Article 5 

countries, which have the same overall 

Montreal Protocol phaseout schedule as 

the United States but may use a basket 

approach rather than a chemical-bychemical approach to phasing out 

HCFCs. Also, using the same percentage 

of baseline as the 2009 Final Rule 

should allow companies to continue 

their exports to Article 5 countries, 

which are just beginning to phase out 

HCFCs. Since consumption allowances 

already limit production for U.S. use, 

EPA is providing the same percentage of 

baseline for HCFC–22 production as in 

the 2009 Final Rule beginning in 2013 

to avoid a scenario in which U.S. 

manufacturers might have to decrease 

their production for global markets 

relative to the amount allowed under 

the 2009 Final Rule. As noted 

previously, U.S. production may 

provide environmental benefits when 

compared to production in plants that 

lack HFC–23 byproduct destruction 

technologies. 

Recognizing the timing of this rule’s 

signature, and the fact that Article 5 

countries’ HCFC consumption is not 

capped until 2013, the agency is 

adopting a different approach for 2012 

than for 2013 and 2014. The agency is 

issuing 2012 HCFC–22 production 

allowances at the lowest proposed 

amount, because that amount is 

consistent with the industry’s actual 

operation in 2012. The appropriateness 

of this level is supported by the fact that 

EPA has not received any reports of 

HCFC shortages during the 2012 airconditioning season. At the same time, 

this level is commensurate with the 

amount of production authorized in the 

January 20, 2012, No Action Assurance 

provided by Cynthia Giles, Assistant 

Administrator for Enforcement and 

Compliance Assurance. EPA selected 

this amount as reasonable for purposes 

of the No Action Assurance, recognizing 

that it was within the proposed range. 

Issuing allowances at the No Action 

Assurance level enables companies to 

account for production that occurred in 

2012 in accordance with the No Action 

Assurance. As stated in the No Action 

Assurance, any HCFCs produced in 

2012 pursuant to the No Action 

Assurance count towards a company’s 

allocation and require the expenditure 

of 2012 allowances. EPA is finalizing 

production option 2 for 2013 and 2014. 

In summary, EPA believes providing 

the same percentage of baseline as used 

in the 2009 Final Rule for production 

allowances in 2013–2014 (1) cannot 

lead to an increase in U.S. consumption, 

(2) allows U.S. producers to produce the 

same amount as under the 2009 Final 

Rule, with potential environmental 

benefits to the extent that production 

might otherwise occur in plants that 

lack HFC–23 byproduct destruction 

technologies, and (3) would not result in 

a global increase in production or 

consumption of HCFC–22 beyond the 

limits agreed to under the Montreal 

Protocol. In addition, the environmental 

benefits achieved by the reduction in 

consumption allowances outweigh any 

potential increase in U.S. production. 

As such, EPA is allocating the following 

amounts of HCFC–22 production 

allowances in 2012–2014: 

—2012: 17.7% of baseline, resulting in 

approximately 22,800 MT of HCFC– 

22 production 

—2013: 30.1% of baseline, plus 2,306 

MT of recoupment, resulting in 

approximately 41,200 MT of HCFC– 

22 production 

—2014: 26.1% of baseline, plus 2,306 

MT of recoupment, resulting in 

approximately 36,000 MT of HCFC– 

22 production 

Combined with allowed production for 

other HCFCs, these finalized amounts 

are at least 36 percent below the 

Montreal Protocol production cap of 

3,884.25 ODP-weighted MT. 

3. How many HCFC–142b consumption 

and production allowances is EPA 

allocating in 2012–2014? 

Establishing HCFC–142b baseline 

allowances that take into account the 

2008 inter-pollutant transfers 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 proposed to allocate 

100 MT of consumption allowances. To 

get to that level, EPA would allocate 4.9 

percent of the aggregate consumption 

baseline, as reflected in the table at 

section 82.16. 

Using the same percentage (4.9 

percent) of the aggregate production 

baseline, EPA proposed 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 rule vs. 118 MT 

in the 2009 Final Rule). This is because 

the 2008 transfers out of HCFC–142b 

involved significantly more 

consumption allowances than 

production allowances. Taking those 

transfers into account decreases the 

HCFC–142b consumption baseline 

substantially but has a lesser impact on 

the HCFC–142b production baseline. 

The agency received only four 

comments on HCFC–142b allocations. 

Two comments strongly support 

reducing HCFC–142b consumption and 

production allowances; one of these 

commenters states that HCFC–142b is 

only used in blends to service old CFC 

equipment. Of the other two comments, 

one supports the consumption 

allocation of 100 MT, noting that HCFC– 

142b is a critical component of a 

refrigerant blend, but that production 

allowances need not increase. The other 

commenter asks that EPA not lower the 

HCFC–142b production allocation to 

compensate for any increase in HCFC– 

22 production. 

EPA did not propose to decrease 

HCFC–142b allowances in the proposed 

rule. The agency assessed the need for 

the chemical in the 2009 Final Rule and 

will revisit the need for HCFC–142b for 

servicing during the rulemaking for the 

next regulatory period. For this reason, 

the agency is finalizing its proposed 

consumption and production 

allocations for HCFC–142b. There will 

be 100 MT of HCFC–142b consumption 

allowances and 463 MT of production 

allowances issued in the years 2012, 

2013, and 2014. These allowance 

amounts are 4.9 percent of the HCFC– 

142b baselines, and keep the HCFC– 

142b consumption allocation 

approximately the same as in the 2009 

Final Rule. 

To provide recoupment to companies 

for lost opportunities in 2010, EPA is 

allocating a total of 61 MT of HCFC– 

142b consumption allowances and 397 

MT of HCFC–142b production 

allowances in addition to the percentage 

of baseline issued. Since the agency is 

providing recoupment over two years, 

there will be an additional 30 MT of 

consumption allowances and 198 MT of 

production allowances in 2013 and 

2014. See section IV.B.6. of this 

preamble for more discussion on 

recoupment allowances. 

4. How does the aggregate allocation for 

HCFC–22 and HCFC–142b translate 

entity-by-entity? 

For 2012–2014, EPA is setting 

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) interVerDate Mar<15>2010 14:47 Apr 02, 2013 Jkt 229001 PO 00000 Frm 00042 Fmt 4700 Sfmt 4700 E:\FR\FM\03APR1.SGM 03APR1

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Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Rules and Regulations 20023 

company, 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 proposed 

to do the same for 2012–2014. Applying 

the approach described above, EPA is 

apportioning production and 

consumption baselines for HCFC–22 

and HCFC–142b to the following 

entities in the following amounts: 

TABLE 2—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 3—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 

TABLE 3—BASELINE CONSUMPTION

ALLOWANCES OF HCFC–22 AND

HCFC–142B IN 40 CFR 82.19— 

Continued 

Person Controlled 

substance 

Allowances 

(kg) 

Solvay Solexis .... HCFC– 

142b.

194,536 

USA Refrigerants HCFC–22 14,865 

The finalized baselines listed above 

are identical to the tables presented in 

the 2011 Interim Final Rule (76 FR 

47451). 

V. How is EPA changing the regulations 

governing transfers of Class II 

allowances? 

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, 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). 

In January 2012, EPA proposed to 

modify the regulatory text to dispel any 

possibility of confusion in the future. 

Through this final action, the agency 

is modifying 40 CFR 82.23 to address 

the duration of inter-pollutant transfers, 

and to reflect prior agency statements 

pertaining to inter-pollutant transfers of 

Article 5 allowances. 

A. How is EPA changing 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 (or conversion) 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. 

EPA proposed to modify section 82.23 

to clarify that the agency will not 

approve future inter-pollutant transfers 

of baseline production allowances or 

baseline consumption allowances. EPA 

received two comments directly 

referring to this proposal. One comment 

supports EPA’s proposed changes 

because it will prevent future 

manipulation of the allowance program. 

The commenter also believes the CAA 

prohibits permanent inter-pollutant 

transfers. Another commenter 

encourages EPA to reconsider its 

proposed changes and to allow for interpollutant baseline transfers if an 

allowance holder has historically made 

the transfers. EPA also received two 

comments on the 2012–2014 baselines 

that are relevant. Both commenters state 

that section 607 of the CAA prohibits 

baseline inter-pollutant transfers. 

As discussed in the proposed rule, 

EPA remains concerned about the 

potential for future manipulation of the 

allocation system if inter-pollutant 

baseline transfers are allowed to affect a 

company’s baseline in future regulatory 

periods. For example, a HCFC–22 

producer or importer could dominate 

the HCFC–123 market in 2015 by 

converting its HCFC–22 baseline to 

HCFC–123 baseline in 2014. 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 on the overall market. 

As another 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 only HCFC–22 or 

HCFC–142b allowances would no 

longer be producing or importing 

HCFCs at that date. If EPA were to allow 

inter-pollutant baseline transfers that 

carried forward into the new regulatory 

period, companies with HCFC–22 

baselines could convert them all to 

baselines for HCFC–123 in 2019. 

Perpetuating the HCFC–22 baselines in 

a new form would be counter to the 

design of the chemical-by-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. Thus, 

there are important policy reasons for 

not taking inter-pollutant transfers from 

prior regulatory periods into account in 


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20024 Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Rules and Regulations 

establishing baselines for new 

regulatory periods. 

EPA has been clear in its past 

statements about its policy on what 

happens to allowances when a chemical 

is phased out. In the 1999 Advanced 

Notice of Proposed Rulemaking (‘‘1999 

ANPRM’’, 64 FR 16373), EPA discussed 

options for establishing the HCFC 

allocation system. Referring to HCFC– 

141b, which was phased out in 2003. 

EPA stated at 64 FR 16378: 

It is important to note that, under any 

scenario, when the phaseout date for HCFC– 

141b is reached in 2003, all HCFC–141b 

consumption (production + imports-exports) 

will cease. Those who did not participate in 

the HCFC–141b market will not be affected 

in 2003. However, those who did participate 

in the HCFC–141b market—through, for 

example, producing or importing HCFC– 

141b—would no longer receive any 

allowances associated with their historic 

HCFC–141b activity, and thus any 

authorization to produce or import HCFC– 

141b. Likewise, any company that, through a 

baseline trade, received allowances 

associated with historic HCFC–141b would 

no longer receive any allowances associated 

with the baseline trade in 2003 (emphasis 

added). 

In the 2001 Notice of Proposed 

Rulemaking for the HCFC allocation 

system (‘‘2001 NPRM,’’ 66 FR 38064), 

EPA elaborated further on what happens 

when a chemical is phased out under a 

chemical-by-chemical phaseout at 66 FR 

38068–69: 

On the first HCFC phaseout date of 2003, 

those companies that received baseline 

consumption allocations (or received a 

permanent baseline transfer) * * * of HCFC– 

141b would subtract that portion from their 

total consumption allocation. If permanent 

inter-pollutant trades had been made, an 

amount equal to the ODP-weighted kilograms 

of baseline HCFC–141b allowances that had 

been received in the transfer would be 

deducted from the baseline allocation * * * 

The same would occur in [later years] for the 

relevant chemicals being phased out 

(emphasis added). 

Finally, in the 2003 Final Rule 

establishing the HCFC phaseout, EPA 

stated its position at 68 FR 2835: ‘‘EPA 

will allow permanent transfers of 

baseline allowances with those 

allowances disappearing at the phaseout 

date for the specific HCFC, regardless of 

what inter-pollutant transfers had taken 

place.’’ Because EPA has been clear on 

this point that baseline allowances 

associated with a specific HCFC— 

regardless of their current owner or 

current status—disappear when that 

HCFC is phased out, the agency 

continues to believe allowing interpollutant baseline transfers only on an 

annual basis is appropriate. 

The commenter objecting to the 

proposed changes to the transfer 

regulations cited several issues that EPA 

should consider. The commenter cites 

its past practice of annually transferring 

its HCFC–142b allowances to HCFC–22 

and the need to consider the precedent 

this proposed change might have. The 

agency notes that prohibiting interpollutant baseline transfers in no way 

precludes the commenter, or any 

allowance holder, from continuing to 

make annual inter-pollutant transfers. 

However, when EPA established the 

‘‘worst-first’’ HCFC phaseout, the goal 

was to encourage companies to move 

out of HCFCs, not to continually 

produce or import HCFCs by switching 

from one chemical to another. 

Additionally, the commenter 

envisions a scenario where an 

allowance holder could change the 

focus of its business to produce and sell 

a substance that does less harm to the 

environment. While an allowance 

holder could move to an HCFC that is 

less harmful to the ozone layer, the 

switch results in no environmental 

benefit (excepting the 0.1 percent 

transfer offset) if all of the transferred 

allowances are used. Since transfers are 

weighted based on their ODP, moving 

from a higher ODP chemical to a lower 

ODP chemical would result in more 

allowances for the lower ODP chemical 

and an equal environmental footprint. 

Further, if EPA were to allocate 

allowances for the next regulatory 

period taking inter-pollutant transfers 

into account, those transfers would only 

affect aggregate company baselines in 

specific chemicals, not the total amount 

allocated. In the case of the 2011 Interim 

Final Rule, when EPA updated 

baselines to include past inter-pollutant 

transfers, there was no environmental 

benefit to doing so. The way EPA 

allocates allowances relies on the 

estimate of market servicing need for a 

chemical and then divides that amount 

up proportionally based on a company’s 

baseline allowances for that particular 

chemical (see section IV of this 

preamble for the detailed description). 

While taking baseline inter-pollutant 

transfers into account may have 

tremendous benefits for the company 

making the transfers, it does nothing for 

the environment. As described above, 

EPA sees this use of inter-pollutant 

transfers as manipulating the system, 

and is clarifying that baseline interpollutant transfers will not be allowed 

in the future. 

Two commenters state that modifying 

the baselines by taking into account 

inter-pollutant transfers is contrary to 

the CAA. They argue that section 607 of 

the CAA allows EPA to approve interpollutant transfers of allowances only 

on a year-to-year basis, and point 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.’’ Similar 

arguments were made in comments 

submitted on the 2008 Proposed Rule 

and on the 2011 Interim Final Rule. 

EPA does not agree with the comment 

that the language of section 607(b) is 

clear on its face. The statutory language 

is ambiguous, and 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 for the 2009 Final 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, the 2011 

Interim Final Rule, and in this action, in 

the future, EPA will approve interpollutant transfers only on a year-byyear basis. Thus, in the context of the 

allowance system for protection of 

stratospheric ozone, companies should 


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Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Rules and Regulations 20025 

not expect that any future interpollutant transfers they conduct will 

affect their baselines either in the 

current regulatory period or any future 

regulatory period. 

EPA is revising the regulations to 

avoid any further dispute about the 

agency’s position on this issue. The new 

language clarifies that permanent interpollutant transfers of baseline 

allowances will not be approved. In 

addition, EPA is clarifying that the 

procedures in section 82.23(a) apply to 

permanent, single-pollutant transfers. 

B. How is EPA changing the regulations 

governing transfers of Article 5 Class II 

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 proposed 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. 

EPA promulgated section 82.23 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 proposed 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. The 

agency received two comments on its 

proposal to revise the text at section 

82.23(b), which EPA responds to in the 

Response to Comments. 

EPA also proposed 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 ‘‘[w]ith 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 part 

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 

proposed to amend 82.23(a)(ii) and 

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

transfers of Article 5 allowances. EPA 

did not receive comments on this 

proposed clarification to the regulatory 

text, and is finalizing the clarification as 

proposed. Section 82.23(a) is now 

consistent throughout. Section 82.23(b) 

requires an offset of 0.1 percent for all 

inter-pollutant transfers and since EPA 

is adding 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 finalizing the proposed 

modifications to the regulatory text at 40 

CFR 82.23(a)(ii), 82.23(a)(ii)(A), and 

82.23(b). 

VI. 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. 


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20026 Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Rules and Regulations 

• The 2009 ICR Reporting and 

Recordkeeping Requirements of the 

HCFC Allowance System. 

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 

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 final 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 may 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. 

After considering the economic 

impacts of this final rule on small 

entities, I certify that this action will not 

have a significant economic impact on 

a substantial number of small entities. 

In determining whether a rule has a 

significant economic impact on a 

substantial number of small entities, the 

impact of concern is any significant 

adverse economic impact on small 

entities, since the primary purpose of 

the regulatory flexibility analyses is to 

identify and address regulatory 

alternatives ‘‘which minimize any 

significant economic impact of the rule 

on small entities.’’ 5 U.S.C. 603 and 604. 

Thus, an agency may certify that a rule 

will not have a significant economic 

impact on a substantial number of small 

entities if the rule relieves regulatory 

burden, or otherwise has a positive 

economic effect on all of the small 

entities subject to the rule. 

This rule relieves a regulatory ban on 

production and consumption that 

would otherwise apply in the wake of 

the Court’s vacatur. Additionally, 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 

inter-pollutant 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 

need for virgin HCFC–22 as assessed in 

the Adjustment Memo and sections 

IV.B.1–3 of this preamble. 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 cost and benefit data used 

for the 2009 Final Rule. 

We have therefore concluded that 

today’s final rule will relieve regulatory 

burden for all affected small entities. 

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 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 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 

This action does not have federalism 

implications. It will 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, Executive Order 13132 does not 

apply to this action. 

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 F.R. 19885, April 23, 1997) because 

it is not economically significant as 

defined in EO 12866. The agency 


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Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Rules and Regulations 20027 

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 25 

percent of 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 

decrease impacts on children’s health 

from stratospheric ozone depletion. 

H. Executive Order 13211: Actions 

Concerning Regulations 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. 

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. 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 United States. 

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 it 

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 more than 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. 

K. The Congressional Review Act 

The Congressional Review Act, 5 

U.S.C. 801 et seq., as added by the Small 

Business Regulatory Enforcement 

Fairness Act of 1996, generally provides 

that before a rule may take effect, the 

agency promulgating the rule must 

submit a rule report, which includes a 

copy of the rule, to each House of the 

Congress and to the Comptroller General 

of the U.S. EPA will submit a report 

containing this rule and other required 

information to the U.S. Senate, the U.S. 

House of Representatives, and the 

Comptroller General of the U.S. prior to 

publication of the rule in the Federal 

Register. A major rule cannot take effect 

until 60 days after it is published in the 

Federal Register. This action is not a 

‘‘major rule’’ as defined by 5 U.S.C. 

804(2). This rule will be effective April 

3, 2013. 

List of Subjects in 40 CFR Part 82 

Environmental protection, 

Administrative practice and procedure, 

Air pollution control, Chemicals, 

Exports, Hydrochlorofluorocarbons, 

Imports. 

Dated: March 27, 2013. 

Bob Perciasepe, 

Acting Administrator. 

40 CFR part 82 is amended 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: 


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20028 Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Rules and Regulations 

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 30.1 4.9 125 125 125 125 

2014 ......................................................... 0 26.1 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 18.0 4.9 125 125 125 125 

2014 ......................................................... 0 14.2 4.9 125 125 125 125 

(2) Recoupment allowances. In the 

control period beginning January 1, 

2013 and ending December 31, 2013, 

and again in the control period 

beginning January 1, 2014 and ending 

December 31, 2014, certain companies 

are granted HCFC consumption and 

production allowances in addition to 

the percentage of baseline listed in the 

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

The following companies will receive 

the amounts listed below in both 2013 

and 2014: 2,374,846 kg of HCFC–22 

consumption allowances and 2,305,924 

kg of HCFC–22 production allowances 

to Arkema; 1,170 kg of HCFC–142b 

consumption allowances to DuPont; 

29,146 kg of HCFC–142b consumption 

allowances and 53,549 kg of HCFC– 

142b production allowances to 

Honeywell; 578,948 kg of HCFC–22 

consumption allowances to Solvay 

Fluorides; and 144,900 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) * * * (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 


wreier-aviles on DSK5TPTVN1PROD with RULES
Federal Register / Vol. 78, No. 64 / Wednesday, April 3, 2013 / Rules and Regulations 20029 

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. 2013–07758 Filed 4–2–13; 8:45 am] 

BILLING CODE 6560–50–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 180 

[EPA–HQ–OPP–2013–0057; FRL–9381–2] 

Castor Oil, Polymer With Adipic Acid, 

Linoleic Acid, Oleic Acid and 

Ricinoleic Acid; Tolerance Exemption 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Final rule. 

SUMMARY: This regulation establishes an 

exemption from the requirement of a 

tolerance for residues of castor oil, 

polymer with adipic acid, linoleic acid, 

oleic acid and ricinoleic acid (CAS Reg. 

No. 1357486–09–9) when used as an 

inert ingredient in a pesticide 

formulation. Advance Polymer 

Technology submitted a petition to EPA 

under the Federal Food, Drug, and 

Cosmetic Act (FFDCA), requesting an 

exemption from the requirement of a 

tolerance. This regulation eliminates the 

need to establish a maximum 

permissible level for residues of castor 

oil, polymer with adipic acid, linoleic 

acid, oleic acid and ricinoleic acid on 

food or feed commodities. 

DATES: This regulation is effective April 

3, 2013. Objections and requests for 

hearings must be received on or before 

June 3, 2013, and must be filed in 

accordance with the instructions 

provided in 40 CFR part 178 (see also 

Unit I.C. of the SUPPLEMENTARY

INFORMATION). 

ADDRESSES: The docket for this action, 

identified by docket identification (ID) 

number EPA–HQ–OPP–2013–0057, is 

available at http://www.regulations.gov 

or at the Office of Pesticide Programs 

Regulatory Public Docket (OPP Docket) 

in the Environmental Protection Agency 

Docket Center (EPA/DC), EPA West 

Bldg., Rm. 3334, 1301 Constitution Ave. 

NW., Washington, DC 20460–0001. The 

Public Reading Room is open from 8:30 

a.m. to 4:30 p.m., Monday through 

Friday, excluding legal holidays. The 

telephone number for the Public 

Reading Room is (202) 566–1744, and 

the telephone number for the OPP 

Docket is (703) 305–5805. Please review 

the visitor instructions and additional 

http://www.epa.gov/dockets. 

FOR FURTHER INFORMATION CONTACT: 

David Lieu, Registration Division 

(7505P), Office of Pesticide Programs, 

Environmental Protection Agency, 1200 

Pennsylvania Ave. NW., Washington, 

DC 20460–0001; telephone number: 

(703) 305–0079; email address: 

lieu.david@epa.gov. 

SUPPLEMENTARY INFORMATION: 

I. General Information 

A. Does this action apply to me? 

You may be potentially affected by 

this action if you are an agricultural 

producer, food manufacturer, or 

pesticide manufacturer. The following 

list of North American Industrial 

Classification System (NAICS) codes is 

not intended to be exhaustive, but rather 

provides a guide to help readers 

determine whether this document 

applies to them. Potentially affected 

entities may include: 

• Crop production (NAICS code 111). 

• Animal production (NAICS code 

112). 

• Food manufacturing (NAICS code 

311). 

• Pesticide manufacturing (NAICS 

code 32532). 

B. How can I get electronic access to 

other related information? 

You may access a frequently updated 

electronic version of 40 CFR part 180 

through the Government Printing 

Office’s e-CFR site at http:// 

ecfr.gpoaccess.gov/cgi/t/text/textidx?&c=ecfr&tpl=/ecfrbrowse/Title40/ 

40tab_02.tpl. 

C. Can I file an objection or hearing 

request? 

Under FFDCA section 408(g), 21 

U.S.C. 346a, any person may file an 

objection to any aspect of this regulation 

and may also request a hearing on those 

objections. You must file your objection 

or request a hearing on this regulation 

in accordance with the instructions 

provided in 40 CFR part 178. To ensure 

proper receipt by EPA, you must 

identify docket ID number EPA–HQ– 

OPP–2013–0057 in the subject line on 

the first page of your submission. All 

objections and requests for a hearing 

must be in writing, and must be 

received by the Hearing Clerk on or 

before June 3, 2013. Addresses for mail 

and hand delivery of objections and 

hearing requests are provided in 40 CFR 

178.25(b). 

In addition to filing an objection or 

hearing request with the Hearing Clerk 

as described in 40 CFR part 178, please 

submit a copy of the filing (excluding 

any Confidential Business Information 

(CBI)) for inclusion in the public docket. 

Information not marked confidential 

pursuant to 40 CFR part 2 may be 

disclosed publicly by EPA without prior 

notice. Submit the non-CBI copy of your 

objection or hearing request, identified 

by docket ID number EPA–HQ–OPP– 

2013–0057, by one of the following 

methods. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the online 

instructions for submitting comments. 

Do not submit electronically any 

information you consider to be CBI or 

other information whose disclosure is 

restricted by statute. 

• Mail: OPP Docket, Environmental 

Protection Agency Docket Center (EPA/ 

DC), (28221T), 1200 Pennsylvania Ave. 

NW., Washington, DC 20460–0001. 

• Hand Delivery: To make special 

arrangements for hand delivery or 

delivery of boxed information, please 

follow the instructions at http:// 

www.epa.gov/dockets/contacts.html. 

Additional instructions on commenting 

or visiting the docket, along with more 

information about dockets generally, is 

available at http://www.epa.gov/ 

dockets. 

II. Background and Statutory Findings 

In the Federal Register of February 

15, 2013 (78 FR 11126) (FRL–9378–4), 

EPA issued a document pursuant to 

FFDCA section 408, 21 U.S.C. 346a, 

announcing the receipt of a pesticide 

petition (PP 2E8040) filed by Advance 

Polymer Technology, 109 Conica Lane, 

P.O. Box 160, Harmony, PA 16037. The 

petition requested that 40 CFR 180.960 

be amended by establishing an 

exemption from the requirement of a 

tolerance for residues of castor oil, 

polymer with adipic acid, linoleic acid, 

oleic acid and ricinoleic acid; CAS Reg. 

No. 1357486–09–9. That document 

included a summary of the petition 

prepared by the petitioner and solicited 

comments on the petitioner’s request. 

The Agency received 1 comment. 

Section 408(c)(2)(A)(i) of FFDCA 

allows EPA to establish an exemption 

from the requirement for a tolerance (the 

legal limit for a pesticide chemical 

residue in or on a food) only if EPA 

determines that the exemption is ‘‘safe.’’ 

Section 408(c)(2)(A)(ii) of FFDCA 

defines ‘‘safe’’ to mean that ‘‘there is a 

reasonable certainty that no harm will 

result from aggregate exposure to the 


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