1 Calculations for the Alternative Approach

EPA is taking comment in the 2012 Critical Use Rule on an alternative approach to calculating

the numbe r of critical use allowances (CUAs). 1 Under t his alternative , EPA would allocate

fewer critical use allowances than proposed. EPA could allocate the same amount of critical stock allowances (CSAs) 2 as proposed or could increase the amount

. These figures are shown in

Table 1.

Table 1. Allocation amounts in 2012 under the proposed and alternative approac hes

2012 Proposed

Allocation 2012 Alternative

Allocation

CUA (kg) 759,744 631,362

CSA (kg) 263,082 263,082 or 391,464

Total 1,022,826 894,444 or 1,022,826

EPA is considering this alternative approach because of the manner in which it calculated the

2011 CUA amounts. Due to the timing of the 2011 rulemaking, EPA issued a No Action Assurance letter December 22, 2010, to allow CUA holders to continue producing and importing methyl bromide beyond December 31, 2010, in the absence of allowances, subject to certain

conditions. The amounts authorized in the December 22, 2010, letter, and a subsequent clarification letter dated January 13, 2011, were based on the estimates of the 2010 inventory drawdown. Specifically, EP A clarified that producers and importers “may assume that the allocations for production and import will equal at least 1,500 MT.”

After EPA issued the No Action Assurance letter, companies submitted their annual end of year reports to EPA containing dat a about how much pre

- phaseout inventory they held on December 31, 2010. Th ese data show that the pre

- phaseout inventory is greater than the estimated amounts

that formed the basis of the No Action Assurance letter. If EPA had use d these data in the existing methodology for calculating “available stocks,” this would have result ed in m ore “available stocks” and fewer allowances for new production or import as compared to the

December 2010

– January 2011 estimates . However, because regulated entities acted on the estimate developed for the No Action Assurance letter in good faith, EPA proposed the amount provided for in the No Action Assurance letter, as clarified by the January 2011 letter.

1 A critical use allowance is the privilege granted through 40 CFR part 82 to produce or import 1 kg of methyl bromide for an approved critical use duri ng the specified control period. These allowances expire at the end of the control period and, as explained in the Framework Rule, are not bankable from one year to the next.

2 A critical stock allowance is the right granted through 40 CFR part 82 to sell 1 kg of methyl bromide from inventory produced or imported prior to the January 1, 2005, phaseout date for an approved critical use during the specified control period.2

Table 2 : Allocation amounts in 2011 under the proposed rule and framework calculation

2011 Proposed

Allocation 2011 Framework

Level

CUA (kg) 1,500,000 1,371,618

CSA (kg) 482,333 610,715

Total 1,982,333 1,982,333

As shown in Table 2, the proposed 2011 CUA allocation is 128,382 kg more than the CUA

allocation level that would result from follow ing the framework calculation. The proposed CSA

allocation is also 128,382 kg lower so as to ensure that the total allocation remains the same.

EPA’s alternative approach to the 2012 rule would reduce the 2012 CUA allocation by 128,382 kg , to account for the CUAs that EPA allocated in the 2011 rule above what the framework

calculation would have provided

. Viewing the two years together, there would be no differenc e in the level of environm ental protection if all allocated allowances were expended

.

While EPA is taking comment on this alternative, EPA is not proposing it as the lead approach

. First, as discussed in the preambles to the 2011 and 2012 CUE rules, EPA has discretion to

alloca te CUA amounts so long as 1) the CUA amount does not exceed the Parties’ production

authorization and 2) the CUA and CSA together do not exceed the total authorization. Because the U.S. was authorized to produce or import up to 1,855,200 kg of critical use methyl bromide in 2011 (and 2,055,200 kg total) these conditions are met under the proposed approach.

Second, EPA applies the framework calculation to each year’ s allocation rule. If the additional 128,382 kg of CUAs proposed for 2011 are expended but the resulting CUE methyl bromide is not used and thus is carried over into 2012, EPA will know that when the data is reported to EPA in February 2012. EPA would then follow the standard practice of reducing the allocation by th is

carr yover amount in the 2013 rule. EPA suspects there will not be a carryover given the tightening supply of CUAs and the fact that there was no carryover from the 2010 control period

into 2011.

Third, EPA does not have a practice of adjusting future alloc ations based on a retrospective comparison of end of year data to the estimated amounts determined by the framework calculation. When EPA issues a final rule prior to the control period at issue , following the framework requires the Agency to estimate the levels of pre

- phaseout inventory. This was the situation in the allocation rule for the 2008 control period. In most other years, EPA has not publish ed the final rule until after the control period has begun. In that situation, EPA has based the proposed rules on an estimate of inventory as outlined in the framework calculations and

based the final rule on reported data. The 2011 rule was unique in that the delay in issuing the

rule allowed EPA to notify the public of the reported da ta in the preamble to the proposed rule

. However, as discussed above and in the preamble to the proposal, EPA chose not to use the reported data because the agency had provided a No Action Assurance letter to allow a certain

level of production and import.3

EPA believes t here is no real difference in the allocation approach between a year when the rule is finalized before the control period at issue begins and the situation in the 2011 rule. In each instance, the Agency acted on an estimate of inventory levels. For the 2011 rule, EPA’s estimate

was contained in the No Action Assurance. The effect is the same whether the reported data is

unavailable or the rule is based on an estimate for other reasons.