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Page 1 of 113 **EO12866_CAA Part 82A 2060 AR04 NPRM** **_FRN_201 3**  **0 8**  **27** BILLING CODE 6560

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–P **ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 82**  **[ EPA**  **- HQ**  **- OAR** **- 2013**  **- 0263**  **; FRL -**  **xxxx -**  **x] RIN 20**  **60 -** **AR04 Protection of**  **Stratospheric Ozone:**  **Adjustments to the Allowance System for Controlling**  **HCFC Production, Import and Export AGENCY:**  Environmental Protection Agency [EPA]. **ACTION** : Notice of Proposed Rulemaking **SUMMARY** : EPA is seeking comment on options for adjusting the allowance s ys tem control ling U.S. consumption and production of hydrochlorofluorocarbons (HCFCs). Under Title VIof the Clean Air Act, EPA is require d to phase out production and import of these chemicals in accordance with U.S. obligations under the Montreal Protocol on Substances that Deplete the Ozone Layer (Protocol). Under the Protocol and the Clean Air Act , total U.S. HCFC production and consumption is capped , and will be completely phased out by 2030 . Beginning January 1, 2015, U.S. production and co nsumption of all HCFCs must be no more than ten percent of the established cap . Existing EPA regulations prohibit production and consumption of HCFC - 22 and HCFC - 142b as of January 1, 2020 . At that time , a ll other HCFC production and consumption must not exceed 0.5 percent of the cap , and is limited to use as a refrigerant in existing air conditioning and refrigeration equipment . Given these requirements, EPA is seeking comment on how best to implement the 2015 stepdown to no more than 10 percent of the cap . Since the beginning of the HCFC phaseout program, the agency has tried to ensure a sm ooth transition out*** E.O. 12866 Review

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Page 2 of 113 of HCFCs into non - ozone depleting alternatives. Essential to a smooth transition are the recycling and emissions reductions requirements mandated b y section 608 of the Clean Air Act. This proposal also includes a request for comment on potential changes to regulations promulgated under that authority , found in 40 CFR 82 subpart F. In addition to taking comment on the implementation of phaseout requirements and proposed changes to section 608 regulations , the agency

is also highlighting important Clean Air Act requirements that take effect in 2015 , specificall y the section 61 1 labeling requirements and the section 605 restrictions on HCFC use and introduction into interstate commerce. **DATES** : Comments on this notice of proposed rulemaking must be received on or before [I NSERT DATE 60 DAYS AFTER PUBLICATION IN FEDERAL REGISTER] , unless a public hearing is held . If a public hearing is held, comments must be received on or before [I NSERT DATE 75 DAYS AFTER PUBLICATION IN FEDERAL REGISTER] . Any party requesting a public hearing must notify the contact listed below under FOR FURTHER IN FORMAT ION CONTACT by 5 p.m . Eastern Daylight Time on [INSERT DATE 15 DAYS AFTER PUBLICATION]. If a public hearing is requested, the hearing will be held on [I NSERT DATE 30 DAYS AFTER PUBLI CATION]. If a hearing is held, it will take place at EPA headquarters in Washington, DC. EPA w ill post a notice on our w ebsite, www.epa.gov/ozone/strathome.html , announcing further information should a hearing take place. **ADDRESSES** : Submit your comments, identified by Docket ID No. **EPA -**  **HQ -**  **OAR -**  **201 3**  **- 0263**  , by one of the following methods:  www.regulations.gov : Follow the online instructions for submitting comments.  Email: a - and - r - docket@epa.gov*** E.O. 12866 Review

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Page 3 of 113  Mail: Docket # EPA - HQ - OAR - 201 3 - 0263 , Air and Radiation Docket and Information Center, U.S. Environmental Protection Agency , Mail code: 6102T, 1200 Pennsylvania Avenue NW, Washington, DC 20460  Hand Delivery : Docket #EPA - HQ - OAR - 201 3 - 0263 Air and Radiation Docket at EPA West, 1301 Constitution Avenue NW, Room B108, Mail Code 6102T, Washington, DC 20004. Such deliveries are only accepted during the Docket’s normal hours of operation, and special arrangements should be made for deliveries of boxed information. Instructions : Direct your comments to Docket ID No. **EPA -**  **HQ -**  **OAR -**  **201 3**  **- 0263**  . EPA’s policy is that all comments received will be included in the public docket without change and may be made available online at www.regulations.gov , including any personal information provided, unless the comment includes information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statue. Do not submit information that you consider to be CBI or otherwise protected through www.regulations.gov or email. If you want to submit confidential comments, please send them to the individual listed in the **FOR FURTHER INFORMATION CONTACT**  section. The www.regulations.gov website is an “anonym ous access” s ys tem, which means EPA will not know your identity or contact information unless you provide it in the body

of yo ur comment. If you send an email comment directly to EPA without going through www.regulations.gov , your email address will be automatically captured and included as part of the comment that is placed in the pu blic docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD - ROM you submit. I f EPA cannot read your comment due to technical difficultie s and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid*** E.O. 12866 Review

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Page 4 of 113 the use of special characters, any form of encry ption, and be free of any defects or viruses. For additional information about EPA’s public docket, visit the EPA Docket Center homepage at www.epa.gov/epahome/dockets.htm . **FOR FU RTHER INFORMATION CONTACT**  : Elizabeth Whiteley by telephone at (202) 343 - 9310 or b y email at whiteley .elizabeth@epa.gov , or b y m ail at U.S. Environmental Protection Agency , Stratospheric Protection Division, Stratospheric Program Implementation Branch (6205J), 1200 Pennsylvania Ave, NW, Washington DC, 20460. You may also visit the Ozone Protection website of EPA’s Stratospheric Protection Division at www .epa.gov/ozone/strathome.html for further information about EPA’s Stratospheric Ozone Protection regulations, the science of ozone layer depletion , and related topics. **SUPPLEMENTARY INFORMATION** : Acronyms and Abbreviations . The following acronyms and abbreviations are used in this document. ANPRM

– Advance Notice of Proposed Rulemaking CAA

– Clean Air Act CAAA

– Clean Air Act Amendments of 1990 CFC

– Chlorofluorocarbon CFR

– Code of Federal Regulations EPA

– Environmental Protection Agency FR

– Federal Re gister HCFC

– Hydrochlorofluorocarbon HVAC R

– Heating, Ventilating, Air Conditioning and Refrigeration Montreal Protocol

– Montreal Protocol on Substances that Deplete the Ozone Layer*** E.O. 12866 Review

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Page 5 of 113 MOP

– Meeting of the Parties MT

– Metric Ton ODP

– Ozone Depletion Potential ODS

– Ozone - Depleting Substance ( s ) Party

– States and regional economic integration organizations that have consented to be bound by the Montreal Protocol on Substances that Deplete the Ozone Layer RACA

– Request for Additi onal Consumption Allowances Organization of This Document. The following outline is provided to aid in locating information in this preamble. I. General Information A. Does This Action Apply to Me? B. What Should IConsider as I Prepare M y Comments for E PA? 1. Confidential Business Information (CBI) 2. Tips for Preparing Your Comments II. Background A. How Does the Montreal Protocol Phase Out HCFCs? B. How Do the Clean Air Act and EPA Regulations Phase Out HCFCs? C. What Sections of the Clean Air Act Appl y to This Rulemaking? III. Clean Air Act Requirements that Begin in 2015 A. Labeling Requirements in Section 61 1 (c) and (d) B. Use and Sales Restriction in Section 605(a) 1. What Is EPA Proposing for Existing Inventory of HCFC - 225ca and HCFC 225cb? 2 . How is EPA Planning to Update Regulations to Account for Recent Changes to Section 605(a)? C. Step Down to 10 Percent of Montreal Protocol Baseline IV . How W ill EPA Determine Baselines for 2015 - 2019? A. Using Existing Baselines B. Consideration of Establishing Revised Baselines Using More Recent Production and Import Data V. How Is EPA Developing Allocation Levels for Each HCFC? A. How Will EPA Determine the HCFC - 22 Consumption Allocation?*** E.O. 12866 Review

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Page 6 of 113 1. Using a Linear Drawdown From 2014 Allocation Levels 2. Determ ining the Allocation by Estimating Servicing Need and then Accounting for Need that Can Be Met by Sources Other than New Production 3. Accounting for Existing HCFC - 22 Inventory Under the Estimation Approach B. How Will EPA Determine the HCFC - 22 Production Allocation? 1. Allocate the Maximum Production Allocation Allowed Under the Cap 2. Allocate Approximately the Same Number of Production Allowances as Consumption Allowances C. How Will EPA Determine the HCFC - 142b Allocation? D. How Will EPA Determine the HCFC - 123 Allocation? 1. Allocate 100 Percent of HCFC - 123 Consumption Baseline Through 2019 2. Allocate Less Than 100 Percent of HCFC - 123 Consumption Baseline E. How Will EPA Determine the HCFC - 124 Allocation? F. How Will EPA Determine the HCFC - 225ca/cb Allocation? G. What is EPA Proposing to Do With the HCFC - 141b Exemption Program? H. Other HCFCs that are Class II Controlled Substances VI . What Other Adjustments to the HCFC Allowance System is EPA Considering? A. W ill EPA Consider Banning Dry- Shipped HCFC - 22 Condensing Units? B . How W ill EPA Respond to Requests for Additional Consumption Allowances in 2020 and Beyond? C . How Might EPA Maximize Compliance With HCFC Regulations? VII. What Modifications to Section 608 Regulations is EPA Proposing ? A. Overview of Current Reclamation Standards B. Benefits of Reclamation C. Regulatory

Changes that EPA is Propos ing under Section 608 Authority 1. Adoption of AHRI 700 - 2012 Standards 2 . Notification to EPA if Change in Business, M anagement, Location or Contact Information 3 . Reporting and Recordkeeping Requirements 4 . Technical and Process Information Required in Reclaimer Certification Application 5 . Expanded End Product Testing Requirements VIII. Statutory

and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review B. Paperwork Reduction Act C. Regulatory

Flexibility

Act (RFA) D. Unfunded Mandates Reform Act E. Executive Order 13132: Federalism F. Executive Order 13175: Consultation and Coordination with Indian Tribal Governments G. Executive Order 13045: Protection of Children from Environmental Health and Safety Risks*** E.O. 12866 Review

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Page 7 of 113 H. Executive Order 13211: Actions that Significantly Affect Energy Supply , Distribution, or Use I. National Technology

Transfer and Advancement Act J. Ex ecutive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low - Income Populations **I. General Information**  A. Does This Action Apply to Me? This rule will affect the following categories:

- Industrial Gas Manufacturing entities (NAICS code 325120), including fluorinated hydrocarbon gas manufacturers and reclaimers;

- Other Chemical and Allied Products Merchant Wholesalers (NAICS code 42 4 69 0 ), 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 air- co nditioning equipment and commercial and industrial refrigeration equipment manufacturers;

- Air- Conditioning Equipment and Supplies Merchant Wholesalers (NAI CS code 423730) , including air- conditioning (condensing unit, compressors) merchant wholesalers;

- Ele ctrical and Electronic Appliance, Television, and Radio Set Merchant Wholesalers (NAICS code 423620), including air- conditioning (room units) merchant wholesalers;*** E.O. 12866 Review

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Page 8 of 113 - Plumbing, Heating, and Air- Conditioning Contractors (NAICS code 238220), including Central air- conditioning system and commercial refrigeration installation , HVACR contractors ; and

- Refrigerant reclaimers, manufacturer s of recovery /recycling equipment and refrigerant recovery

/recycling equipment testing organizations. This list is not intended to be exhaustive, but rather provides a guide for readers regarding the ty pes of entities that could potentially be regulated by

this action. Other ty

pes of entities not listed in this table could also be affected. To determine whether your facility, company , business organization, or other entity is regulated b y 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 INF ORMATION CONTACT**  ” section. B. What Should I Consider as I Prepare My Comments for EPA? 1. Confidential Business Information (CBI) Do not submit CBI information to EPA through www.regulations.gov or a - and - rdocket@epa.gov . Submit CBI directly to the person listed in the “ **FOR FURTHER INFORMATION**  **CONTACT** ” section. Clearl y mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD ROM that you mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify electronically

within the disk or CD ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a cop y of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2. 2. Tips for Preparing Your Comments*** E.O. 12866 Review

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Page 9 of 113 When submitting comments, remember to:

• Id entify

the rulemaking by

docket number and other identifying information (subject heading, **Federal Register** date and page number).

• Follow directions - The agency may ask you to respond to specific questions or organize comments by

referencing a Code of Federal Regulations (CFR) part or section number.

• Explain why

you agree or disagree, suggest alternatives and substitute language for your requested changes.

• Describe any assumptions and provide any technical info rmation and/or data that yo u used.

• If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

• Provide specific examples to illustrate your concerns, and suggest alternatives.

• Explain your views as clearl y as possible, avoiding the use of profanity or personal threats.

• Make sure to submit your comments by the comment period deadline identified. **II. Background**  A. How Does the Montreal Protocol Phase Out HCFCs? The Montreal Protocol on Substances that Deplete the Ozone Layer is the international agreement aimed at reducing and eventually eliminating the production and consumption of ozone - depleting substances (ODS). The U.S. was one of the original signatories to the 1987 Montreal Protocol , and 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)*** E.O. 12866 Review

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Page 10 of 113 to ensure that the U.S. could satisfy its obligations under the Montreal Protocol. Title VI of the Act (codified as 42 U.S.C. Chapter 85, Subchapter VI) is titled Stratospheric Ozone Protection ; it includes restrictions on production, consumption, and use of ODS that are subject to acceleration if “the Montreal Protoco l is modified to include a schedule to control or reduce production, consumption, or use . . . more rapidl y than the applicable schedule” prescribed by the statute. Both the Montreal Protocol and the Clean Air Act (CAA) define consumption as production plu s 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 chlorofluorocarbons ( CFCs ) and other ODS. EPA similarly viewed HCFCs as “important interim substitutes that will allow for the earliest possible phaseout of CFCs and other c lass I substances 1 ” (58 FR 65026 , December 10, 1993 ). In 1992, through the Copenhagen Amendment to the Montreal Protocol, the Parties created a detailed phaseout schedule for HCFCs , beginning with a cap on consumption for developed countries not operating under Article 5 of the Montreal Protocol (non - Article 5 Parties), a schedule to which the U.S. adheres. The con sumption 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 set at 15,240 ODP - weighted metric tons, effective January 1, 1996. This cap is the U.S. HCFC consumption baseline . The 1992 Copenhagen Amendment created a schedule with graduated reductions and eventual phaseout of HCFC consumption (Copenhagen, 23 - 25 November, 1992, Decision IV/4). 1 Class 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; HCFCs are class II substances.*** E.O. 12866 Review

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Page 11 of 113 The schedule for non - Article 5 Parties initially called for tighter consumption cap s based on a Party ’s baseline, as follows: an annual consumption cap equal to 65 percent of baseline in 2004, 35 percent of bas eline in 2010, 10 percent of baseline in 2015, and 0.5 percent of baseline in 2020, with a complete HCFC phaseout by 2030. The Copenhagen Amendment did not cap HCFC production. In 1999, the Parties created a cap on production for n on - Article 5 Parties through an amendment to the Montreal Protocol agreed to at 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 p roduction, and (b) 1989 HCFC consumption plus 2.8 percent of 1989 CFC consumption. Based on this formula, the HCFC production cap for the United S tates was set at 15,537 ODP - MT, effective January 1, 2004. This cap is the U.S. HCFC production bas eline . 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 19 th Meeting of the Parties in September 2007. As a result of the 2007 Montreal Adjustment (reflected in Decision XIX/6), 2 the U.S. and other non - Article 5 parties were obligated to reduce HCFC production and consumption to 25 percent of baseline by 2010, rather than 35 percent as previously required. The other milestones remain the same. The adjustment also resulted in a phaseout schedule for HCFC production that parallels the consumption phaseout schedule. All production and consumption for n on - Article 5 Parties must b e phased out b y 2030.

2 Under 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.*** E.O. 12866 Review

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Page 12 of 113 Decision XIX/6 also adjusted the provisions for Parties operating under paragraph 1 of Article 5 : (1) to set HCFC production and consumption baselines based on the average 2009 - 2010 production and consumptio n, respectively; (2) to freeze HCFC production and consumption at those baselines in 2013; and (3) to add stepwise reductions to 9 0 percent of baseline b y 2015, 65 percent b y 2020, 32.5 percent b y 2025, and an average of 2.5 percent for 2030 - 2039 . All prod uction and consumption for Article 5 Parties must be phased out by 2040. In addition, Decision XIX/6 adjusted Article 2F to allow non - Article 5 Parties to produce “up to 10 percent of baseline levels” for export to Article 5 c ountries “in order to satisfy basic domestic needs” until 2020. 3 Paragraph 14 of Decision XIX/6 notes that no later than 2015, the

3 Paragraphs 4 - 6 of adjusted Article 2F read as follows: “4. Each Party shall ensure that for the twelve - mo nth period commencing on 1 January 201 0, and in each twelve mo nth period thereafter, its calculated level of consumption of the controlled substances in Group I of Annex C does not exceed, annually, twenty - five per cent of the sum referred to in paragraph 1 of this Article. Each Party producing one or more of these substances shall, for the same periods, ensure that its calculated level of production of the controlled substances in Group I of Annex C does not exceed, annually, twenty - five per cent of the calculated level referred to in paragrap h 2 of this Article. However, in order to satisfy the basic domestic needs of the Parties operating under paragraph 1 of Article 5, its calculated level of production may exceed that limit by up to ten per cent of its calculated level of production of the controlled substances in Group I of Annex C as referred to in paragraph 2. 5. Each Party shall ensure that for the twelve - mo nth period commencing on 1 January 2015, and in each twelve mo nth period thereafter, its calculated level of consumption of the controlled substances in Group I of Annex C does not exceed, annually, ten per cent of the sum referred to in paragraph 1 of this Article. Each Party producing one or more of these substances shall, for the same periods, ensure that its calculated level of pr oduction of the controlled substances in Group I of Annex C does not exceed, annually, ten per cent of the calculated level referred to in paragraph 2 of this Article. However, in order to satisfy the basic domestic needs of the Parties operating under paragraph 1 of Article 5, its calculated level of production may exceed that limit by up to ten per cent of its calculated level of production of the controlled substances in Group I of Annex C as referred to in paragraph 2. 6. Each Party shall ensure that fo r the twelve - mo nth period commencing on 1 January 2020, and in each twelve mo nth period thereafter, its calculated level of consumption of the controlled substances in Group I of Annex C does not exceed zero. Each Party producing one or more of these subst ances shall, for the same periods, ensure that its calculated level of production of the controlled substances in Group I of Annex C does not exceed zero. However: a. each Party may exceed that limit on consumption by up to zero point five per cent of the sum referred to in paragraph 1 of this Article in any such twelve - mo nth period ending before 1 January 2030, provided that such consumption shall be restricted to the servicing of refrigeration and air conditioning equipment existing on 1 January 2020;*** E.O. 12866 Review

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Page 13 of 113 Parties would consider “further reduction of production for basic domestic needs” in 2020 and beyond. Paragraph 3 of Decision XIX/6 contains the accelerated phaseout schedule, allowing consumption and production up to 0.5 percent of baseline from 2020 - 2030 for servicing needs only . Under paragraph 13 of Decision XIX/6, the Parties will review in 2015 and 2025, respectivel y, the need for the “servicing tails” for developed and developing countries. The term “servicing tail” refers to an amount of HCFCs used to service existing equipment, such as certain ty pes of air- conditioning and refrigeration appliances. B. How Do the Clean Air Act and EPA Regulations Phase Out HCFCs? The Clean Air Act schedules for th e phase out of HCFC production and consumption, and for the restriction of HCFC use , appear in Section 605. The EPA has used its authority under Section 606 to accelerate those schedules . EPA regulations that appl y to production and consumption of HCFCs are designed to enable the U.S. to meet the phaseout schedule under the Montreal Protocol. 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 b y eliminating the most ozone - depleting HCFCs first. Based on data available at that time, EPA believed the U.S. could meet, and possibly exceed, the required Montreal Protocol reductions through a chemical - by- chemical phaseout that employed a “worst first” approach. In 1993, as authorized by section 606 of the CAA, EPA established a phaseout schedule that eliminated HCFC - 141b first and would greatly restrict HCFC - 142b and HCFC - 22 b. each Party may exceed that limit on production by up to zero point five per cent of the average referred to in paragraph 2 of this Article in any such twelve - month period ending before 1 January 2030, provided that such production shall be restricted to the servicing of refrigeration and air conditioning equipment existing on 1 January 2020.”*** E.O. 12866 Review

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Page 14 of 113 next, followed by

restrictions on all other HCFCs and ultimately a complete phaseout (58 FR 15014 , March 18, 1993 and 58 FR 65018 , December 10, 1993 ). On January

21, 2003 , EPA promulgated regulations ( 68 FR 28 20 , January 21, 2003, 2003 Final Rule ) to ensure compliance with the first reduction milestone in the HCFC phaseout: the requirement that b y J anuary 1, 2004, the U.S. reduce HCFC consumption to 65 percent of baseline 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 ye ar was representative fo r all companies. Therefore, EPA assigned an individual consumption baseline year to each company by selecting its highest ODP weighted consumption year from 1994 through 1997. EPA assigned individual production baseline years in the same manner. EPA also p rovided 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. In the U.S., an allowance is the unit of measure that controls production and consumption of ODS. EPA allocates calendar - year allowances equal to a percentage of the baseline

—they are valid from January

1 to December 31 of that control period. A calendar - ye ar allowance represents the privilege granted to a company to produce or import one kilogram (not ODP weighted) of the specific substance. “Production allowance” and “consumption allowance” a re defined at section 82.3. To produce an HCFC for which allowances have been allocated, an*** E.O. 12866 Review

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Page 15 of 113 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. The 2003 Final Rule set production and consumption baselines for the 2003 - 2009 regulatory

period, using each company ’s highest “production year” or “consumption year”. It completely

phased out the production and import of HCFC - 141b by granting zero percent of baseline for production and consumption in the table at 40 CFR 82.16. EPA did, however, create a petition process to allow applicants to request small amounts of HCFC - 141b beyond the phaseout. The 2003 Final Rule allocated allowances for production and consumption of HCFC 22 and HCFC - 142b for each of the ye ars 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, c ombined with projections for consumption of all other HCFCs, remained below the 2004 cap of 65 percent of the U.S. baseline. 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 calendar- ye ar allowances of one ty pe of HCFC for calendar- ye ar 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 b y deducting 0.1 percent from the transferor’s allowance balance. The offset benefits the ozone layer since it “results in greater total reductions*** E.O. 12866 Review

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Page 16 of 113 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 subsequently monitored the market to estimate servicing needs and market adjustments in the use of HCFCs, including HCFCs for which EPA did not establish baselines in the 2003 Final Rule. In the 2009 Final Rule (74 FR 66412 , December 15, 2009 ), EPA issued production and import allowances for HCFC 22 , HCFC - 142b and other HCFCs not previously included in the allowance system, for the 2010 - 2014 control periods. In the 2009 Final Rule, EPA determined both the estimated need for HCFC - 22 during the 2010 - 2014 regulatory

period and the percentage of that estimated need for which it was appropriate to allocate allowances. EPA de cided 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 basi s. For 2010, EPA allocated HCFC - 22 allowances equal to 80 percent of the estimated need , concluding that reused, recycled, and reclaimed material could meet the remaining 20 percent. The percentage of estimated need for which there was no allocation, and that would therefore need to be met through recycling and reclamation, rose from 20 percent in 2010 to 29 percent in 2014 . The intent of this approach was to foster reclamation , and to ensure that the U.S. could meet the 2015 stepdown under the Montreal Protocol. However, p art of the 2009 Final Rule was vacated in an August 27, 2010 decision issued by the U.S. Court of Appeals for the District of Columbia Circuit (Court) in Arkema v. EPA (618*** E.O. 12866 Review

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Page 17 of 113 F.3d 1, D.C. Cir. 2010). Certain allowance holders affected b y 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 interpollutant baseline transfers that petitioners had performed during the prior regulatory period. Accounting for these transfers in the 2009 Final Rule and appl ying the same methodology would have resulted in different baselines and calendar- year allowances for HCFC - 22 and HCFC - 142b. The Court agreed with petitioners that “the [2009] Final Rule unacceptabl y 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 retroactivel y,” and remanded to EPA “for prompt resolution,” (618 F.3d at 10). EPA’s petition for rehearing was denied on January 21, 2011. EPA addressed the Court’s partial vacatur as it relate d to 2011 in an August 5, 2011 interim final rule, “Protection of Stratospheric Ozone: Adjustments to the Allowance S ys tem for Controlling HCFC Production, Import, and Export,” ( 76 FR 47451, August 5, 2011, 2011 Interim Final Rule). Inthat rule, EPA established new baselines that (1) credited the 2008 inter-pollutant trades at issue in Arkema v. EPA based on the Court’s decision, (2) reflected inter- company, single pollutant baseline transfers that occurred since the 2009 Final Rule was signed, (3) allocated HCFC - 2 2 and HCFC - 142b allowances for 2011, (4) clarified EPA’s policy on all future interpollutant transfers and (5) updated company names. The HCFC - 22 and HCFC - 142b use restrictions and the allocation for other controlled HCFCs were not affected by the partial vacatur. To complete its response to the court’s decision, EPA published a final rule with the same name o n April 3, 201 3 , allocating HCFC - 142b and HCFC - 22 allowances for 2012 - 2014 ( 78 FR*** E.O. 12866 Review

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Page 18 of 113 20004 , 201 3 Final Rule) . Inthat rule, EPA reduced HCFC - 22 allowances in 2012 - 2014 by almost 30 percent relative to the 2009 Final Rule in order to incentivize proper handling and recovery of HCFC - 22 and encourage transition to non - ODS alternatives. EPA has not yet allocated any HCFC allowances for year 2015 or beyond. The regulations at 40 CFR section 82.15(a) and (b) prohibit the production and import of HCFCs for which EPA has apportioned baseline allowances without calendar - year (or “annual”) allowances. As a result, productio n and import of HCFC - 22 and HCFC - 142b , as well as HCFC - 123, HCFC 124 and HCFC - 225ca/cb is prohibited in 2015 and beyond under current regulations, pending the allocation of allowances . This proposed rule initiates the rulemaking process for setting the 2015 - 2019 HCFC allocations. For more information on the history of the HCFC phaseout and applicable rulemakings, see: http://www.epa.gov/ozone/title6/phaseout/classtwo.html . C. What Sections of the Clean A ir Act Apply to This Rulemaking? Several sections of the CAA appl y to this rulemaking. Section 602 states that EPA shall publish an initial list of class II substances, which is to include the HCFCs specified in the statute as well as their isomers. EPA ’s listing of class II substances appears at appendix B to 40 CFR part 82, subpart A. 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 2 009 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 con form to any acceleration under the Montreal Protocol. EPA previously set a more stringent schedule than the section 605*** E.O. 12866 Review

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Page 19 of 113 schedule through a rule published December 10, 1993 (58 FR 65018). Through the 2009 Final Rule, EPA made a further adjustment to the sec tion 605 schedule based on the acceleration under the Montreal Protocol as agreed to at the Meeting of the Parties in September 2007. The more stringent schedule established in that rule is still in effect. Section 606 provides authority for EPA to promul gate 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 P rotocol) 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 ef fects, (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 Montre al 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 onl y 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. Section 608 of the CAA, titled National Recycling and Emission Reduction Program, requires EPA to est ablish standards and requirements for the use and disposal of class I and II substances. Those requirements must reduce the use and emissions of controlled sub stances to the lowest achievable level , as well as maximize their recapture and recycling. Additionall y, section 608(c) prohibits any person maintaining, servicing, repairing or disposing of an appliance that contains refrigerant from knowingl y venting , releasing , or disposing of that substanc e to the*** E.O. 12866 Review

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Page 20 of 113 environment, regardless of whether the refrigerant is an ODS or a substitute. Substitutes are exempted from this prohibition only if EPA has determined that venting , releasing, or disposing of the substitute does not pose a threat to the environment. Section 611 of the CAA requires EPA to establish and implement labeling requirements for containers of, and products containing or manufactured with class I or class II ODS. While containers of class II substances (i.e. HCFCs) already are subject to labeling requirements, products containing or manufactured with class II substances must be labeled beginning January 1, 2015. The specific requirements and existing regulation implementing those requirements are discussed in the following section . Finally , Section 614 of the CAA describes the relationship of Title VIto the Montreal Protocol. Section 614(b) states: “ In the case of conflict between any prov ision of this title and any provision of the Montreal Protocol, the more stringent provision shall govern. ” Section 614 ensures that EPA regulations are in accordance with U.S. obligations under the Montreal Protocol. **III. Clean Air Act Requirements that**  **Begin in 2015** A. Labeling Requirements in Section 61 1 (c) and (d) Section 611 of the CAA requires EPA to establish and implement labeling requirements for containers of, and products containing or manufactured with class I or class II ODS. In 1993, EPA published regulations on these labeling requirements (58 FR 8136, February 11, 1993 ) , codified at 40 CFR part 82 subpart E . Currentl y, these requirements onl y apply to containers containing class I or II ODS and products containing or manufactured with class I ODS. Products containing or manufactured with class II substances will be subject to these requirements beginning on January

1, 2015. As a result, in 2015 , containers containing, products containing,*** E.O. 12866 Review

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Page 21 of 113 and products manufactured with a class I or class II substance must bear a product label stating: “Warning: Contains [or Manufactured with, if applicable] [insert name of class I or II substance], a substance which harms public health and environment by destro ying ozone in the upper atmosphere” (40 CFR 82.106). EPA defines a “product containing” a class II substance as a “product including, but not limited to, containers, vessels, or pieces of equipment, that physicall y holds a controlled substance at the point of sale to the ultimate consumer which remains within the product , ” (40 CFR 82. 104 ) . Two examples of a “product containing” a class II substance that would require a label are (1) portable fire extinguishers containing an HCFC and (2) appliances that incorporate closed - cell foam blown with an HCFC . Foams are plastics (such as pol yurethane or pol ys ty rene) that are manufactured using blowing agents to create bubbles or cells in the material's structure. Closed - cell foam phys ically holds blowing agent within the cells. While HCFCs are no longer used as blowing agents in the United States, they are used in other countries from which the United States may

import products. In the case of p ortable fire extinguishers , the fire suppression agent i s contained in a reservoir within the extinguisher and released b y the user when needed . On the other hand , the definition of a product “manufactured with” a class II substance is a product for which the manufacturer used a class II substance directl y in that product’s manufacturing, but wher e the product itself does not contain more than trace quantities of the ODS at the point of introduction into interstate commerce. A product “manufactured with” a class II substance would include electronics cleaned with HCFC solvent and open cell foam blown with an HCFC. Open cell foam is different from closed cell foam in that it was manufactured with a blowing agent, but no longer contains the blowing agent because the cells or bubbles in open cell foam are open to the surrounding environment. Since H CFCs are no*** E.O. 12866 Review

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Page 22 of 113 longer used as foam blowing agents in the U.S., and the Nonessential Products Ban prohibits the sale or distribution of open cell plastic foam products made with HCFCs (40 CFR 82.70(c) ), EPA expects the requirement for a “manufactured with” lab el should not be relevant to most open cell foam products. The agency welcomes comment on which open or closed cell foam products are currently

being imported, and whether those products are likely blown with an HCFC. EPA would like this information so it can communicate with and offer guidance to companies that must determine whether the HCFC labeling requirement s apply to their products. Final products that incorporate another product that was “manufactured with” a class I or class II ODS do not have to b ear a label so long as the manufacturer of the final product is distinct from the manufacturer of the product “manufactured with” the ODS (40 CFR 82.116). By contrast, f inal products that incorporate “products containing” a class I or II ODS will require a warning label, even if the final product manufacturer purchases the “product containing” the ODS from another manufacturer or supplier (40 CFR 82.114). For a discussion of the labeling pass - through requirements, see the February 11, 1993 final rule that implemented the statutory labeling requirements (58 FR 8136) . EPA has created a preliminary list of products that might be affected by these requirements beginning in 2015. This list, along with guidance for manufacturers and importers of potentially

affe cted products, is titled Summary of HCFC Product Labeling Requirements & Potentially Affected Products (Labeling Memo) and can be found in the docket for this rulemaking . EPA is seeking comment on whether this list is accurate and complete, and would like to know where products made with or containing HCFCs are manufactured. This information will help the agency better inform manufacturers in the U.S. and abroad about the labeling requirement taking effect in 2015.*** E.O. 12866 Review

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Page 23 of 113 The agency

is also interested in comments on which products have mainly switched to non - ODS alternatives so it can assist companies in determining whether the labeling requirements are likel y t o apply to their products . For products that no longer are manufactured with or contain HCFCs , the agency would like to know if that change applies globall y, or onl y to manufacture in the U.S. The agency also welcomes comment on whether any clarification to the regulations at 40 CFR subpart E (82.100 - 82.124) is needed in order to implement the existing labeling requirement for p roducts containing or manufactured with class II substances . More background on the labeling requirements can be found in the 1993 Final Rule (58 FR 8136), which is also included in the docket to this rulemaking. EPA is not proposing any substantive changes to the regulations at 40 CFR subpart E; however, the agency

is proposing three very minor modifications to clarify the intent of the regulatory

language with respect to class II substances. The first two proposed clarifications are to replace “class I substance” with “controlled substance.” While the emphasis in 1993 was on class I substances , EPA is now proposing to remove any ambiguity with respect to class II substances by reconciling inco nsistent terminology , specificall y at 82.110(c) and 82.112(d). The Combined statement for multiple class I substances at 82.110(c) states, “ If a container containing or a product contains or is manufactured with, more than one class I or class II substance, the warning statement may

include the names of all of the substances in a single warning statement, provided that the combined statement clearl y distinguishes which substances the container or product contains and which were used in the manufacturing process. ” This paragraph clearl y applies to both class I and class II products, as stated in the operative text. EPA is proposing to modify the title of this paragraph to be Combined statement for multiple controlled substances , consistent with the operative text. Similarly, 82.112(d), which is titled: Manufacturers,*** E.O. 12866 Review

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Page 24 of 113 distributors, wholesalers, retailers that sell spare parts manufactured with controlled substances solely for repair, includes the more general term “controlled substances” in the title, but not the operative text. The operative text that follows the title reads: “ Manufacturers, distributors, wholesalers, and retailers that purchase spare parts manufactured with a class I substance from another manufacturer or supplier, and sell such spare parts for the sole purpose of repair, are not required to pass through an applicable warning label if such products are removed from the original packaging provided by the manufacturer f

rom whom the products are purchased...” EPA is proposing to replace “class I substance” with “controlled substance ” in order to clarify that this narrow exemption to the labeling requirements also applies to class II products in the same way it applied to cl ass I products. The final minor change that EPA is proposing is at 82.122 , Certification, recordkeeping, and notice requirements. The first sentence at (a)(1) refers to persons claiming the exemption for certain methylchloroform users provided for in 82.106(b)(2) ; however , this exemption is actuall y provided for in 82.106(b)(4). EPA is proposing to revise the current text to reference the correct paragraph , which is 82.106(b)(4) not (b)(2 ) . EPA also notes that this exemption ended May 15, 1994 and that the agency is proposing this minor change solel y to avoid confusion . B. Use and Sales Restriction in Section 605(a) Starting January

1, 2015, section 605(a) of the Clean Air Act prohibits the use or introduction into interstate commerce of any class II substance that does not meet one of four exceptions. Specifically , use or introduction into interstate commerce is allowed only if (1) the substance has been used, recovered and recycled; (2) it is entirely transformed, except for trace quantities, in the production of other chemicals; (3) it is used as a refrigerant in appliances manufactured prior to 2020; or (4) it is listed as acceptable for use as a nonresidential fire*** E.O. 12866 Review

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Page 25 of 113 suppression agent in accordance with CAA section 612(c). 4 Section 612 is the statutory authority for EPA’s Significant New Alternatives Policy program, under which the a gency reviews potential substitutes for class Iand class II substances in certain end uses and lists those potential substitutes as acceptable, acceptable subject to use conditions, acceptable subject to narrowed use limits , or unacceptable (see 40 CFR subpart G) . In the 2009 Final Rule (74 FR 66412), EPA used its authority under section 606 to accelerate the section 605(a) restrictions on use and introduction into interstate commerce for HCFC - 22 and HCFC - 142b, applying them to HCFC - 22 and HCFC - 142b 5 as of January 1, 2010, five years earlier than the date specified in section 605(a). Effective January 1, 2010, EPA prohibited the use of virgin HCFC - 22 and HCFC - 142b to manufacture or service new air conditioning and refrigeration appliances. In a separate rule, under the authority provided in section 615 of the CAA, EPA also prohibited the sale and distribution of appliances and appliance components pre - charged with virgin or used, recovered and recycled HCFC - 22 and HCFC - 142b (74 FR 66450). For all other HCFCs, including those for which EPA has not historically

issued allowances, the section 605(a) prohibitions and exceptions apply as of January 1, 2015. All HCFCs other than HCFC - 22 and HCFC - 142b may continue to be used and sold as refrigerants , but only

for use in appliances manufactured before 2020 . EPA believes the term “use” is ambiguous in the context of section 605(a) with respect to potential categories of use that Congress did not directly address. Historically , in the context of section 605, EPA has focused on use of refrigerants to manufacture and service appliances and 4 The fourth exception in this list is a recent change to the Clean Air Act, which was included in the National Defense Authorization Act for Fiscal Year 2012 [11 2th Congress, H.R. 1540, Title III, Section 320, Fire Suppression Agents ]. EPA is proposing to incorporate this change into the regulations at 40 CFR 82.15(g)(4) and 82.16(d). See Section III.B.2. of this preamble for further discussion. 5 EPA also accele rated the restrictions on use and introduction into interstate commerce for HCFC - 141b in the same rulemaking; however, HCFC - 141b is not discussed further in this section because it is not used for refrigeration purposes.*** E.O. 12866 Review

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Page 26 of 113 the section 605(a)(3) exception for servicing existing equipment. In 1993, EPA took the sectio n 605(a) use restrictions into account in establishing the HCFC chemical - by- chemical phaseout. The 1993 Notice of Proposed Rulemaking (58 FR 15014) discusses the acceleration of the use restriction for HCFC - 22 and HCFC - 142b from the standpoint of when it w ould be technologicall y feasible to cease using these two chemicals in new refrigeration and airconditioning equipment. In that rulemaking, EPA did not explore how to interpret or apply the term “use” in other circumstances. EPA considered various interpretations of that term in developing the 2009 Final Rule but again focused on refrigerants. In the 2008 Notice of Proposed Rulemaking (73 FR 78680, December 23, 2008), EPA noted that the three statutory exceptions that existed at that time “inform EPA’s understanding of the term ‘use ’ ” (73 FR 78698). The preamble to the 2009 Final Rule states: “With regard to HCFCs used as refrigerants, EPA interprets the term ‘use’ to mean initially charging as well as maintaining and servicing refrigeration equipment” (74 FR 66437). In regard to non - refrigerant uses, EPA addressed two manufacturing uses of HCFC - 22 (manufacture of sterilant blends for medical equipment and manufacture of thermostatic expansion valves) ; EPA also concluded that section 605(a) would ban the primary

pre - 2010 use of HCFC - 142b (foam - blowing). At that time, however, EPA was not yet implementing section 605(a) with respect to other HCFCs and did not fully explore what “use” might mean in the context of non - refrigerants. In the development of the 200 9 Final Rule, EPA did consider whether section 605(a) applies to the operation of products containing HCFCs. With regard to refrigeration equipment, EPA concluded : “the section 605(a) ‘use’ ban does not apply to a consumer’s operation of equipment containing HCFCs” (74 FR 66438). The agency ’s conclusion was partiall y based on the third exemption to 605(a), for class II substances that are used as refrigerants in appliances*** E.O. 12866 Review

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Page 27 of 113 manufactured before a specified date . This exemption indicated “that Congress intended to permit the continued use of previousl y manufactured appliances . ” EPA also stated that for “products containing HCFCs for non - refrigerant uses . . . . EPA interprets the term ‘use’ as relating to the manu facture (and where applicable, the service) of those products, not the utilization of those products in the hands of the end user” (74 FR 66437). EPA is not revisiting its interpretation of section 605(a) with respect to how it interprets “use” for product s containing HCFCs. For purposes of implementing the 2015 use restriction in section 605(a), “u se ” of a controlled substance would include manufacture of products that contain or are made with HCFCs ; however, it would not include use of existing products c ontaining HCFC s (i.e., for substances other than HCFC - 22 and HCFC - 142b, products manufactured before January 1, 2015) . Th e reasons for this conclusion are explained in the preamble to the 2009 Final Rule. As made clear in that notice, EPA interprets s ectio n 605(a) as prohibiting the use of substances , not the use of products. The statutory language does not directly address whether use of a product containing controlled substances might constitute a prohibited use of the substance. However, consistent with its earlier statements, EPA does not intend to treat use of a product containing HCFCs as use of the HCFC. The agency has a long history of distinguishing between products and substances in its ODS phaseout regulations. Controlled substances are defined in 40 CFR part 82 s ubpart A as listed substances “whether existing alone or in a mixture, but excluding any s uch substance or mixture that is in a manufactured product other than a container used for the transportation or storage of the substance or mixture. ” EPA distinguishes between bulk containers of HCFCs and products containing HCFCs. The s ubpart A definition of controlled substance clarifies that if a substance needs to be transferred from a bulk container to a piece of equipment or another container to*** E.O. 12866 Review

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Page 28 of 113 realize its intended use, it will be treated as a “substance.” Examples of bulk containers include jugs, drums, and cylinders. EPA refers readers to the preamble of the 2009 Final Rule for two other clarifications on how EPA interprets the term “use” in the context of section 605(a). First, the agency provided the following clarification on how the Nonessential Products Ban (CAA section 610) and the HCFC use restriction (CAA section 605(a)) should be interpreted together: “By prohibiting use and introduction into interstate commerce of HCFCs as bulk substances, section 605(a) effectivel y prohibits the continued manufacture of any products containing HCFCs (which qualifies as a type of ‘ use ’ ) unless specificall y exempted in that section. ” EPA explained that while the section 610(a) Nonessential Products Ban exempts certain products, these exempted products may

not be manufactured after 2014 due to the HCFC use restrictions in section 605(a). EPA clarified that “ such products are prohibited from continued manufacture, unless manufactured with recovered HCFCs” (74 FR 66439). Second, in the preamble to the 2009 Final Rule the agency

clarified that “EPA does not interpret ‘use’ [ in the context of section 605 ] to include destruction, recovery for disposal, discharge consistent with all other regulatory requirements, or other similar actions where the substance is part of a disposal chain” (74 FR 66439). Because the use prohibition will apply to a variety of sectors and circumstances beginning in 2015, EPA believes it may be helpful to define “use ” in the phaseout regulations (40 CFR part 82 subpart A). There is currently a definition of “use ” in the regulations for the Significant New Alternatives Policy Program (SNAP) (40 CFR part 82 subpart G), which reads as follows: “Use means any use of a substitute for a Class Ior Class II ozone - depleting compound, including but not limited to use in a manufacturing process or product, in*** E.O. 12866 Review

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Page 29 of 113 consumption by

the end user, or in intermediate uses, such as formulation or packa ging for other subsequent uses” (40 CFR 82.172) . Inthis rulemaking, the agency is proposing a related , but somewhat different definition for purposes of the section 605(a) use prohibition , which is implemented at 40 CFR 82.15 : “Use of a class II controlle d substance, for the purposes of section 82.15 of this subpart, includes but is not limited to use in a manufacturing process, use in manufacturing a product, intermediate uses such as formulation or packag ing for other subsequent uses , and use in maintaining, servicing, or repairing an appliance or other piece of equipment . Use of a class II controlled substance also includes use of that controlled substance when it is removed from a container used for the transportation or storage of the substance but does not include use of a manufactured product containing a controlled substance .” The primary difference between this proposed definition under section 605(a) and the SNAP definition is that the SNAP definition includes use by the consumer of a product c ontaining ODS. This difference reflects EPA’s interpretation of the section 605(a) use restriction as set forth in the preamble to the 2009 Final Rule. EPA welcomes comment on its proposed section 605(a) definition of “use” of a class II controlled substance, particularly with regard to how such a definition can help clarify the distinction between use of a controlled substance and use of a product. Please note that the language regarding that distinction in the last line of the proposed definition is based on the existing definition of controlled substance in 40 CFR 82.3. If finalized, the definition of use of a class II controlled substance would appear at 40 CFR 82.3, which is the Definitions section of subpart A. The s ection 605(a) restrictions on use and introduction into interstate commerce appl y to all class II controlled substances. As explained in section V.H. of this preamble, the agency is*** E.O. 12866 Review

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Page 30 of 113 proposing to revise the list of class II controlled subst ances in 40 CFR part 82 subpart A, appendix B to include all isomers of listed substances, consistent with section 602 of the CAA and the Montreal Protocol listing of HCFCs (found in Group I to Annex C of the Protocol). 1. Wh at Is EPA Proposing for Existing Inventory of HCFC - 225ca and HCFC

- 225cb? Numerous stakeholders have asked what they will be able to do with inventory of HCFC 225ca/cb that exists as of January 1, 2015 . To EPA’s knowledge, HCFC - 225ca, HCFC - 225cb and mixtures thereof are only used as solvents, primarily for precision cleaning in the aerospace and electronics industries. As explained above, the section 605(a) use ban does not apply to the use of products that contain class II controlled substances. However, some substances, including HCFC - 225ca/cb, may

be used directl y in cleaning equipment or in manufacturing a product without first being put into a manufactured product themselves . For example, a person m ay take HCFC - 225ca/cb from a bulk container and either add it to a vapor degreaser or pour it on a hand wipe to clean a piece of equipment or component . In those circumstances, the substance itself

— not a product containing the substance

—is being used . (Thi s differs from use of products that contain HCFC - 225ca/cb, such as aerosol cans or pre - soaked wipes) . In general, EPA is proposing to interpret the section 605(a) use ban to apply to use when the substance is removed from a container used for transportatio n or storage . However, EPA believes the use of HCFC - 225ca/cb entered into inventory prior to January 1, 2015 by persons that use these substances as solvents may fairl y be considered to be de minimis . Thus, for reasons discussed below, the agency is proposing a de minimis exemption to the use prohibition in 605(a), which would allow any person with HCFC - 225ca/cb in inventory prior to January

1, 2015 to use that material as a solvent for as long as needed. “Person” is defined in 40 CFR 82.3 to in clude corporations and federal agencies, among other*** E.O. 12866 Review

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Page 31 of 113 entities. EPA is not proposing an exemption to the prohibition on introduction into interstate commerce, nor is it proposing to change the existing regulatory phaseout date for production and import of H CFC - 225ca/cb. The person holding the HCFC - 225ca/cb in inventory would not be able to transfer or sell it to another person , nor would EPA issue any allowances to produce or import new HCFC - 225ca/cb. Additionally , neither companies that manufacture products for their own use , nor companies that manufacture products for sale to others would be allowed to manufacture products containing virgin HCFC - 225ca/cb, as that would constitute a prohibited use of the substance; however, a person would be able to sell any products containing HCFC 225ca/cb that had been manufactured and entered into initial inventory prior to January

1, 2015 , since at that point they

would be “products” and not “class II controlled substances . ” A product is considered to be a part of “initi al inventory” at the point where the original product has completed its manufacturing process and is ready for sale b y the product manufacturer. For more discussion of EPA’s interpretation of the term “ initial inventory , ” see the 1993 Nonessential Products Ban at 58 FR 69661. Also, for purposes of section 605(a), manufacturers may continue to use HCFC - 225ca/cb to make both products “manufactured with” and products “containing” HCFC - 225ca/cb a s of January 1, 2015 , so long a s the HCFC - 225ca/cb ha s been used, recovered and recycled . Labeling requirements for these products manufactured with either virgin or used, recovered and recycled HCFC - 225ca/cb would apply beginning January

1, 2015 (see section III.A. of this preamble) . Manufacturers should also ensure that they are in compliance with the Nonessential Products Ban and with SNAP regulations. EPA believes it has implied authority to propose a de minimis exemption from the section 605(a) use restriction. The U.S. Court of Appeals for the District of Columbia Circuit has recognized that “[u]nless Congress has been extraordinarily rigid, there is likely

a basis for an*** E.O. 12866 Review

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Page 32 of 113 implication of de minimis authority to provide exemption when the burdens of regulation yield a gain of triv ial or no value.” Alabama Power Co. v. Costle, 636 F.2d 323, 360 - 61 (D.C. Cir. 1980). In Alabama Power , the Court held that “[c]ategorical exemptions from statutory commands may ...be permissible as an exercise of agency power, inherent in most statutory schemes, to overlook circumstances that in context may fairl y be considered de minimis. It is commonplace, of course, that the law does not concern itself with trifling matters, and this principle has often found application in the administrative context. Courts should be reluctant to apply the literal terms of a statute to mandate pointless expenditures of effort.” Id. (internal citations omitted). In an earlier case cited by the court in Alabama Power, the court described the doctrine as follows: “The ' de minimis ' doctrine that was developed to prevent trivial items from draining the time of the courts has room for sound application to administration by the Government of its regulatory

programs. . . . The ability , which we describe here, to exempt de minimis situations from a statutory

command is not an ability to depart from the statute, but rather a tool to be used in implementing the legislative design.” District of Columbia v. Orleans, 406 F.2d 957, 959 (1968). In this respect, the Alabama Power opinion observed in a footnote that the de minimis principle "is a cousin of the doctrine that, notwithstanding the 'plain meaning' of a statute, a court must look beyond the words to the purpose of the act where its literal terms lead to 'absurd or futile results.' " Id. at 360 n. 89 (citations omitted). To apply an exclusion based on the de minimis doctrine, "the agency will bear the burden of making the required showing" that a matter is truly de minimis which naturally will turn on the assessment of particular circumstances. Id.*** E.O. 12866 Review

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Page 33 of 113 The Alabama Power opinion concluded that "most regulatory s tatutes, including the CAA, permit such agency

showings in appropriate cases." Id. A notable limitation on the de minimis doctrine is that it does not authorize the agency to exclude something on the basis of a cost - benefit analysis. As the court explaine d, this "implied authority is not available for a situation where the regulatory function does provide benefits, in the sense of furthering the regulatory objectives, but the agency concludes that the acknowledged benefits are exceeded b y the costs." Id. The court held that any "implied authority

to make cost benefit decisions must be based not on a general doctrine but on a fair reading of the specific statute, its aims and legislative history ." Id. Since Chevron, several courts have recognized de minimis ex ceptions (1) so long as they are not contrary

to the express terms of the statute 6 and (2) the agency's interpretation of the exception is a permissible reading of the statute. See e.g., Ober v. Whitman, 243 F.3d 1190 (9th Cir. 2001); see also Ohio v. EPA, 997 F.2d 1520 (D.C. Cir. 1993). EPA believes a de minimis exemption is permissible in this situation for several reasons. First, section 605(a) is not extraordinarily rigid. Second, the use prohibition in section 605(a) is ambiguous with respect to potential categories of use that Congress did not directly address. Third, banning the use of HCFC solvent inventory held by the end user would not advance the statutory purpose. These arguments are discussed in more detail in the following paragraphs. The purpose of Title VI of the Clean Air Act is, as its title suggests, “Stratospheric Ozone Protection.” Title VI can be summarized into three principal areas: the phaseout of production

6 In Sierra Club v. EPA , 705 F.3d 458 (D.C. Cir. 2013), the D.C. Circuit held that EPA had no de minimis authority

to create an exemption from the preconstruction monitoring requirement in § 165(e)(2) of the CAA. “ Whether we cal l preconstruction monitoring a ‘plain requirement’ o r a requirement mandated b y an ‘extraordinaril y rigid’ statute, the result is the same: the EPA has no de minimis authority

to exempt the requirement. ” Id. at 468.*** E.O. 12866 Review

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Page 34 of 113 and import of ozone depleting substances (section 602 - 607); reduction in emissions of these substances via various means such as required servicing practices, restrictions on sale and distribution of products, and consumer education (section 608 - 611); and the transition to alternatives that do not harm the stratospheric ozone layer and that reduce overall risk to human health and the environment (section 612). Section 605 specificall y addresses the “Phase - out of production and consumption of class II c ontrolled substances.” Section 604 applies to the “Phase - out of production and consumption of class Isubstances.” There are notable differences between the two phaseouts. The phaseout under section 604 operates much quicker than the phaseout under section 605. Inaddition, the section 604 phaseout operates much earlier than the section 605 phaseout. Section 604 required the first reductions in class I substances in 1992, followed b y a series of stepdowns culminating in the complete phaseout of nearl y all c lass I substances b y 2000. For class II substances, section 605 freezes production and consumption in 2015, with the complete phaseout not occurring until 2030. 7 Two principal factors drive the distinction in phaseout schedules; class I substances have much higher ODPs relative to class II substances, 8 and class II substances were recognized as important transition al chemicals, beneficial in phasing out class I substances as quickly as possible. During the development of the 1990 Clean Air Act Amendments, C ongress heard testimony on the need to phase out HCFCs as well as class I substances. Senator Chaffee acknowledged that “one difficulty , however, is the fact that achieving the goal of eliminating the potent long - lived CFCs as rapidly as possible is, to so me extent, dependent on the continued availability of HCFCs as intermediate substitutes pending development of other, safe, non - ozone depleting substances or processes.” (A

7 Through rulemakings, EPA accelerated the statutory deadlines in section 604 and 605, in acc ordance with the requirements in section 606. See 57 FR 3354 and 58 FR 65013. 8 For example, all CFCs have an ODP of 0.6 or greater, with most having an ODP of1.0, whereas the HCFC with the highest ODP is HCFC - 141b, which has an ODP of 0.11.*** E.O. 12866 Review

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Page 35 of 113 Legislative History

of the Clean Air Act Amendments of 1990, volume 1, p. 5210 (Sen ate debate) ) . It is clear that Congress’ intent was to phase out production and import of class I substances “as rapidl y as possible,” and certainly more rapidl y than class II substances given the difference in the start and duration of the two phaseout schedules; however, nowhere in section 604 does Congress restrict the use of class I substances. Instead, Congress phases out the production and import for domestic use, and allows for certain exemptions to the phaseout for specific uses (see, e.g., sectio n 604 (f) and (g).) Given the comparable titles of sections 604 and 605 and the overarching goal of phasing out both class I and class II ODS 9 , Congress likel y intended that the “use” restriction, which is unique to section 605, should be interpreted in a manner that furthers the phaseout of production and import of HCFCs while recognizing the role of HCFCs as transitional substances. Congress’ overall approach to the class II phaseout is generall y less rigid than its approach to the class I phaseout, given the longer timeframes and the presence of onl y one intermediate reduction step (see section 605(b)). Given this context, EPA is not inclined to view section 605(a) as “extraordinarily rigid.” In addition, section 605(a) provides an explicit exception for class II substances that have been “used, recovered, and recycled.” Thus, Congress clearl y did not envision that all HCFC use in applications not specificall y exempted come to a halt by 2015 . Indeed, end users of HCFC - 225ca/cb could avail themselves o f this exception by putting their entire existing inventory of HCFC - 225ca/cb into their equipment before January 1, 2015. For example, an end user could use its entire inventory of virgin HCFC - 225ca/cb in its

9 “T he centerpiece of the stratospheric ozone protection program established by this title is the phaseout of production and consumption of all ozone depleting substances.” Clean Air Act Amendments

—Conference Report (Senate - October 27, 1990) (136 Cong. Rec. S16946).*** E.O. 12866 Review

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Page 36 of 113 vapor degreaser, recover the HCFC - 225ca/cb from the degreaser, and then recycle it for reuse in 2015 and beyond . In other instances, an end user could take virgin HCFC - 225ca/cb, appl y it to a surface via the typical application method such that the surface is cleaned as intended, at which point any rec overed HCFC - 225ca/cb would be rendered “used”. EPA does not wish to encourage this approach to meeting §605(a) requirements , which would do nothing to advance the statutory purpose. Rather than insist on an inflexible reading of the statute that may create “absurd or futile results,” EPA believes the better option is to allow end users to continue to use virgin inventory that they hold prior to 2015. EPA views Section 605(a) as ambiguous with respect to potential categories of use that Congress did not exp licitly address. Section 605(a) explicitly addresses refrigerant uses of HCFCs but is silent with respect to solvents. At the time the 1990 Clean Air Act Amendments were written, HCFCs were used predominantly as refrigerants and much consideration was given to this use in the legislative history . HCFC solvent uses, on the other hand, were not considered by Congress in the context of the class II phaseout, because they did not exist. At that time, two class I substances, CFC - 113 and methyl chloroform, were u sed as solvents. Far from expecting an earl y transition, Congress allowed production and import of methyl chloroform until 2002, two years after the phaseout date for most class I substances. In addition, in 604(d)(1) , Congress specificall y allowed for limited exemptions to the production and import phaseout for methyl chloroform for “use in essential applications.” It was not until 199 5 that HCFC - 225ca/cb was listed under SNAP as acceptable subject to use conditions in electronics cleaning and precision cl eaning ( see 60 FR 31092, June 13, 1995) . HCFC - 225ca/cb was listed as acceptable in metals cleaning as recently

as 2002 (see 67 FR 77927 , De cember 20, 2002). In all three of these end uses, HCFC - 225ca/cb, which has an OD P of 0.025/0.033, is a substitute for CFC - 113 and methyl*** E.O. 12866 Review

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Page 37 of 113 chloroform, which have ODPs of 0.8 and 0.1, respectivel y. While HCFC - 225ca/cb solvents have acted since 199 5 as transitional substances between class I ODS and non - ODS substitutes for certain niche ne eds, there is no evidence that Congress anticipated in 1990 that any HCFCs would be used as solvents . Thus, Congress did not have the opportunity to consider whether to apply the section 605(a) use restriction to HCFC - 225ca/cb solvents. EPA does not b elieve that prohibiting persons that use HCFC - 225ca/cb as a solvent to clean their equipment or to clean components of products they manufacture

–

resulting in products

“manufactured with ” these HCFCs

–from using their existing inventory of HCFC - 225ca/cb woul d advance the goals of Title VI. As discussed above, any person could avoid such a prohibition by rendering all their inventory “used” in advance of the effective date. From the perspective of potential ozone destruction , there is little or no difference in this instance whether the person uses such de minimis quantities already on site at the end of 2014 or after January 1, 2015. EPA believes a de minimis exemption is appropriate for the reasons provided, and also because the quantities involved are extremely limited. This is a small niche use and EPA is only proposing to exempt HCFC - 225ca/cb held in inventory by persons that use these substances as a solvent . The quantities produced or imported using allowances act as a ceiling on the quantities that c an comprise pre - 2015 inventory , and the annual allocation of allowances for HCFC 225ca/cb from 2010 - 2014 is only 20.7 ODP - weighted MT. Recent HCFC - 225ca/cb consumption has been substantiall y less than the allocation, further decreasing the absolute maximum amount that could remain in inventories as of 2015 . EPA also considered its past use of de minimis authority under Title VI of the Clean Air Act; in fact, the agency

is modeling this proposed exemption to 605(a) on the de minimis*** E.O. 12866 Review

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Page 38 of 113 exemption to the noness ential products ban for class II substances (CAA section 610(c) and (d)). In the 1993 Nonessential Products Rule , EPA proposed and finalized an exemption to the ban on sale and distribution in interstate commerce of products manufactured with or containing HCFCs . The ban applied to products that were placed in initial inventory by December 27, 1993

—90 days after the proposed rule published and four days prior to the statutory ban on sale and distribution (58 FR 50464 , September 27, 1993 and 58 FR 69638 , Dec ember 30, 1993 ). EPA finalized this narrow “grandfather” exception for existing inventories based on the de minimis rationale: “The crux of EPA’s reasoning for providing any exemption for existing inventories was that emissions from products already in exi stence were de minimis” (58 FR 69660). EPA believes that emissions from existing inventories of HCFC - 225ca/cb would also be de minimis. As discussed, EPA believes it has sufficient authority to propose a de minimis exemption to the section 605(a) use proh ibition for use of HCFC - 225ca/cb held in inventory by persons using these substances as solvents . Inaddition to evaluating its legal authority , EPA has also considered policy

aspects of proposing an exemption. Inthe 1993 Nonessential Products Rule, EPA i dentified various policy reason s for exempting existing inventory . One policy goal was to relieve a p otentially

onerous burden on small businesses because , absent a sell through provision, existing inventories would otherwise have to be liquidated ( or in the case of the section 605(a) use restriction, intentionally used, recovered and recycled prior to the effective date of the prohibition) . EPA recognizes the potential inefficiency of a company rendering all of their HCFC - 225ca/cb inventory used in advance of 2015. The agency welcomes comment from end users of HCFC - 225ca/cb, with specifics on their continued HCFC - 225ca/cb needs, whether they are planning to transition to an alternative solvent prior to 2015, the time required to transition to*** E.O. 12866 Review

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Page 39 of 113 alternatives for specific uses of HCFC - 225ca/cb, and what hardships they would face with or without an exemption to the 605(a) use prohibition. If EPA does not finalize an exemption for inventories of virgin HCFC - 225ca/cb, use of all virgin HCFC - 225ca/cb would be prohibited as of January 1, 2015 under the current regulations. EPA urges destruction of virgin ODS for which use is prohibited as the appropriate method for disposal . There are seven EPA - approved destruction technologies for ODS (see 40 CFR 82.3). EPA re cognizes, however, that use of these technologies does have a cost . Further, the agency

is concerned that some persons might dispose of their supplies of HCFC - 225ca/cb in a manner allowing release into the environment if they are not allowed to use the sub stance for its intended purpose of cleaning. This could result in as much or more harm to the environment as the use of existing inventory as a solvent. An important policy

consideration is that the nature of precision cleaning is such that the group of affected entities is small, but their needs are very specific. Those needs often include minimal to zero flammability as well as excellent solvency properties, and if those needs are not met, human safety can be jeopardized ( for example, in the case of future space vehicle launches). The agency

believes that manufacturers of products containing HCFC - 225ca/cb have sufficient lead time to use their remaining HCFC - 225ca/cb inventory to manufacture products and place them into initial inventory, or alternativel y, to sell virgin bulk HCFC - 225ca/cb to users of these solvents prior to 2015. However, EPA has heard from several entities that use HCFC - 225ca/cb directly as solvents for cleaning existing equipment or for cleaning surfaces that are part of a newly- produced product who still have not found a suitable alternative to HCFC - 225ca/cb. In some instances, entities need more time to test alternatives in order to ensure that th e chosen replacement has acceptable solvency , flammability and usability characteristics. Also, in some*** E.O. 12866 Review

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Page 40 of 113 areas of the U.S., a number of federal, state and local regulations affect the choice of solvents. In particular , areas that are not meeting the national ambient air quality standard for ground - level ozone may

regulate solvents that are volatile organic compound s (VOC) to reduce emissions that contribute to the formation of smog. HCFC - 225ca and HCFC - 225 cb are exempt from the definition of VOC under CAA re gulations (see 40 CFR 51.100(s)) addressing the development of State Implementation Plans (SIPs) to attain and maintain the national ambient air quality standards . This exemption allow s greater flexibility in the use of HCFC - 225ca/cb than is allowed for cl eaning solvents that are regulated as VOC s . O nly some SNAP - listed alternatives to HCFC 225ca/cb are exempt from the definition of VOC (e.g., trans - 1 - chloro - 3,3,3 - trifluoroprop - 1 - ene) . Given these legal and policy considerations , EPA is proposing a de minimis exemption to the use restriction in CAA section 605(a) for entities that use HCFC - 225ca/cb as solvents and that have HCFC - 225ca/cb in their inventory prior to January

1, 2015. The exemption would appear at 40 CFR 82.15(g). This exemption would not pertain to manufacturers of products containing HCFC - 225ca/cb, such as technical aerosol solvents , or to producers and importers of HCFC - 225ca/cb . Any

aerosol solvent product manufactured prior to January 1, 2015 , could be sold and used after that date , since an aerosol can is a product, not a controlled substance; however, manufacture of the product or HCFC blends used in those products would be considered use of a controlled substance, and would be prohibited after January 1, 2015 , unless the HCFC wer e used, recovered and recycled . The agency invites comment on the proposed exemption, particularly

on the need for continued use of HCFC - 225ca/cb after 2014. The agency is also seeking comment on whether there are other small niche uses of HCFCs that Congress may not have contemplated in the 1990 CAA Amendments for which a prohibition on use of*** E.O. 12866 Review

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Page 41 of 113 inventory would yield trivial or no benefits in light of the statutory purpose. The agency

may consider extending the proposed exemption to other such niche uses in the final rule. 2. How is EPA Planning to Update Regulations to Account for Recent Changes to Section 605(a)? In the National Defense Authorization Act for fiscal year 2012, Congress amended section 605(a) of the Clean Air Act to allow for continued use and introduction into interstate commerce of a class II substance that “is listed as acceptable for use as a fire suppression agent for nonresidential applications in accordance with section 612(c).” Section 612 of the Clean Air Act requires EPA to develop a program for evaluating alternatives to ozone - depleting substances. EPA refers to this program as the Significant New Alternatives Policy (SNAP) program. Se ction 612(c) requires EPA to publish a list of the substitutes unacceptable for specific uses and to publish a corresponding list of acceptable alternatives for specific uses. The list of acceptable substitutes is found at www.epa.gov/ozone/snap/lists/index.html , and the lists of “unacceptable,” “acceptable subject to use conditions,” and “acceptable subject to narrowed use limits” substitutes are found in the appendices to subpart G of 40 CFR part 82. HCFC - 123 , HCFC - 124, and several blends containing an HCFC are currentl y listed as acceptable and acceptable subject to narrowed use limits, where the only use limit restricts use to nonresidential fire suppression. EPA assumes that Congress intended the statutory phrase “listed as acceptable for use” to include HCFCs listed as acceptable and acceptable subject to narrowed use limits . In light of this statutory

revisi on, EPA is proposing to update its regulations for use and introduction into interstate commerce of HCFCs (82.15(g)), as well as the regulations governing production and import (82.16). Specificall y, the agency intends to add the following language to 82.1 5(g)(4) allowing for use and introduction into interstate commerce of any class II controlled*** E.O. 12866 Review

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Page 42 of 113 substance not governed by the acceleration of the use prohibition to 2010, when used “ as a fire suppression streaming agent listed as acceptable for use or acceptable subject to narrowed use limits for nonresidential applications in accordance with the regulations at s ubpart G of [part 82]. ” EPA believes this addition is necessary and appropriate, given Congress’ addition to section 605(a). Though section (a) pertains only to use and introduction into interstate commerce, EPA believes that allowing for continued HCFC production and import for nonresidential fire suppression uses is a natural follow - on, and is in accordance with Congressional intent. Section 6 05 does not establish a production phaseout date for any specific HCFC . EPA has used its discretion to establish a regulatory phaseout date, which the agency is proposing to modify

in this action . This change has minimal impact on the overall allocation since the primary HCFC used for fire suppression , HCFC - 123, has a low ODP , and the quantities used for fire suppression are small relative to the other uses of HCFCs . In large part, the regulatory phaseout date for HCFCs used in fire suppression was driven by the section 605(a) limitations on use and introduction into interstate commerce of class II controlled substances, to which Congress has now created an exception. Therefore, EPA is also proposing to am end 82.16(d), by allowing for HCFC production and import in the 2015 - 2019 regulatory

period for use in nonresidential streaming fire suppression applications. Accordingl y, EPA is proposing to add the following text to 82.16(d), allowing for both production and import of class II controlled substances “ for use as a fire suppression streaming agent listed as acceptable for use or acceptable subject to narrowed use limits for nonresidential applications in accordance with the regulations at s ubpart G of [part 82].” To give practical effect to this proposed change , EPA is proposing to allocate consumption allowances for HCFC - 123, not just*** E.O. 12866 Review

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Page 43 of 113 for use as a refrigerant, but for use as a fire suppression agent as well. As discussed in section V.D.1., EPA is prop osing to allocate the maximum allowed amount of HCFC - 123 consumption allowances under section 605(b) (i.e. , 100 percent of HCFC - 123 baseline), which is still less than three percent of U.S. consumption allowed under the Montreal Protocol cap for 2015 - 2019. EPA is proposing to allow production and import for fire suppression purposes for the 2015 - 2019 regulatory

period only . Beginning January 1, 2020, Article 2F of the Montreal Protocol limits U.S. production and import of HCFCs to use in servicing and repair of existing refrigeration equipment. Under section 614(b), where either the Montreal Protocol or Title VIis more stringent, the more stringent provision governs. To reflect this Montreal Protocol time limitation, EPA is proposing to add language to 82.1 6(e) indicating the purposes for which production and import may

continue in 2020 and beyond: the proposed list does not include fire suppression purposes. The agency

welcomes comment on any aspect of these proposed regulatory additions. C. Step Down to 10 Percent of Montreal Protocol Baseline As discussed in section II.A . of this preamble , the U.S. has agreed under the Montreal Protocol to limit consumption and production of HCFCs by January 1 , 2015 to no more than 10 percent of its Montreal Protocol baseline . Starting in 2015, the U.S . cap on consumption will be 1,524 ODP - weighted MT and the cap on production will be 1,55 3.7 ODP - weighted MT. By January 1, 20 20 , the U.S. is required to limit consumption and production of HCFCs to 0.5 percent of baselin e. As required under sections 606(a) and 614(b) of the Clean Air Act, the EPA phaseout regulations reflect the Montreal Protocol schedule for phasing out HCFCs , including the 2015 and 2020 stepdowns . Indeveloping the proposed HCFC allocation schedule for 2015 - 2019 , the agency

bore in mind that as of January 1, 2020 , the consumption and production caps will be approximately

76 and 77.5 ODP - weighted MT, respectivel y . A lso, a s of January 1, 2020,*** E.O. 12866 Review

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Page 44 of 113 Article 2F of the Protocol limits U.S. production and consumption of HCFCs to servicing needs for refrigeration and air conditioning equipment . In addition, CAA section 605(a) limits the use of virgin HCFCs as of January 1, 2015, to use as a refrigerant in equipment manufactured prior to 2020, and use as a no nresidential fire suppressant. EPA regulations also prohibit the production and import of virgin HCFC - 22 or HCFC - 142b for refrigeration uses as of January 1, 2020 (see 40 CFR 82.16(e)). In determining the proposed allocation options in this rule , EPA took into account the 2015 and 2020 milestones in the Montreal Protocol and the Clean Air Act. **IV. How W** **ill EPA Determine Baselines for 2015 -**  **2019?** The current structure of the HCFC allowance program was first established in the 2003 Final Rule (68 FR 28 20 ), in which EPA decided to allocate HCFC allowances using a baseline system for the 2003 - 2009 regulatory period . Specifically , calendar- ye ar allowances for production and consumption of HCFCs would be issued as a percentage of each company’s baseline. A co mpany’ s baseline would be calculated from historic levels of production and import. Since 2003 , the program has changed very little, using the same baseline sy stem to issue consumption and production allowances on an annual basis . In the 2003 Final Rule , EPA prohibited production and consumption of HCFCs subject to the allowance system without the appropriate allowances (40 CFR 82.15(a),(b)). The agency set s the maximum production and consumption of each HCFC by issuing allowances that are val id for a single calendar year, equal to a certain percentage of each company’s baseline . 10 The

10 The process works as follows for each HCFC: First, all the company - specific consumption baselines (listed in the table at 40 CFR 82.19) are added to determine the aggregate amount of consumption baseline. Second, EPA determines how many allowances to al locate in a given year and divides that amount by the aggregate amount of baseline allowances. The resulting percentage listed in the table at section 82.16 becomes what each company is allowed to consume in a given control period. For example, a company with 100,000 kg of HCFC - 22 baseline consumption allowances would multiply that number by the percentage allowed (for example, 14.2 percent in 2014) to determine its calendar - year consumption allocation of 14,200 kg. Until the 2013 Final Rule, the percentage listed*** E.O. 12866 Review

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Page 45 of 113 agency determines the percentage of baseline for each year by taking into account limits set under the Montreal Protocol , estimated need for a particular HCFC, and restrictions under the Clean Air Act. 2015 is a significant milestone in the domestic phaseout of HCFCs , since U.S. production and consumption of all HCFCs must be at or below 10 percent of baseline levels by January 1, 2015 , and use of those HCFCs must comply with restrictions in section 605 of the Clean Air Act. A. Using Existing Baselines In the 2003 Final R

ule , EPA decided that each company producing or importing HCFC 22 or HCFC - 142b between 1994 and 1997 would receive baseline allowances equal to its highest annual production and import level from those four years , with a limited extension for small businesses that began importing before April 5, 1999

—the date EPA published the HCFC Allocation System ANPRM for the 2003 - 2009 regulatory period . In the 2 009 Final Rule (74 FR 66412) , EPA continued this approach for HCFC - 22 and HCFC - 142b. EPA also applied the same general approach to allocating allowances for HCFC - 123, HCFC - 124 and HCFC - 225ca/cb , using 2005 - 2007 as the baseline years for those substances . The portion of the 2009 Final Rule governing baselines and allocations of HCFC - 22 and HCFC - 142b allowances was vacated by the Court in Arkema v. EPA. However, the rest of the rule, including the baselines for four other HCFCs and the use restrictions on HCFC - 22 and HCFC - 142b, remains in effect . HCFC - 22 and HCFC - 142b baselines and allowances were re - established for 2011 in the 2011 Interim Final Rule (76 FR 47451) and for 2012 - 2014 in the 201 3 Final Rule ( 78 FR 20004 ). In this rulemaking , EPA is proposing to keep the post - Arkema historical baselines as reflected in the 2013 Final Rule (as adjusted to reflect subsequent name changes and inter - in 82.16 applied to production allocations as well. However, now that EPA has decoupled baseline percentages, there are two tables at 82.16 and the process of calculating baseline percentages applies to production as well.*** E.O. 12866 Review

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Page 46 of 113 company basel ine allowance transfers) for the 2015 - 2019 regulatory period. The baselines for production and consumption of the seven HCFCs for which EPA has allocated allowances can be found at 40 CFR 82.17 and 82.19, respectivel y. The agency believes there is benefit to the regulated community in continuing with the established system, with updates to reflect name changes and inter- company baseline allowance transfers. In the past, some stakeholders have acknowledged the certainty and stability

of continuing with estab lished baselines. Other s have pointed out that the established baselines do not reflect current market conditions. Because of this concern, the agency considered an option to update baselines , which in the case of HCFC - 22 and HCFC - 142b were derived from 19 94 - 1997 data . However, EPA’s preferred approach is to keep the current baselines in place . EPA has several reasons for maintaining historic baselines . EPA determines the total amount of allowances to be allocat ed independent from the baseline amounts. Re - establishing each company’s baseline would alter the distribution of allowances, but would not affect the total allocation. EPA sets the baseline percentage such that once every company receives its allowances , th e number of allowances issued equals the total allocation for that year . Therefore, EPA does not see an environmental rationale to updating baselines , since changing individual company baselines would not affect the total amount of HCFC - 22 that could be produced or imported in a given ye ar . Further, choosing and implementing changed baseline ye ars would change existing market expectations, and thus potentially may detract from the certainty that allows stakeholders , all of whom are already familiar with the existing system ( in place since 2003), to plan for an orderl y transition to alternatives. Such a change may not be justified given that there are onl y five remaining years for HCFC allocation (excluding the 0.5 percent of baseline for servicing needs). Under EPA’s preferred approach of maintaining current*** E.O. 12866 Review

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Page 47 of 113 baselines, baseline allocations w ould be the same as those shown in the p roposed regulatory text at 40 CFR 82.17 and 82.19 . EPA invites comment on the advantages and disadvantages of maintaining the established baseline s ys tem . B. Consideration of Establishing Revised Baselines Using More Recent Production and Import Data Current production and consumption baselines were established using data from 1994 - 1997 and 2005 - 2007. EPA’s preferred option is to keep the current baselines. H owever, EPA considered a second option: re - establishing baselines using more recent production and import data. Updating baselines would result in fewer allowances for companies that have full y or partially left the HCFC market and a greater number of allowances for companies that have more recentl y used calendar- ye ar allowances. In the 2012 Proposed Rule (77 FR 237 , January 4, 2012 ), the agency

provided advance notice that for the 2015 - 2019 regulatory period, it would consider using more recent production and import data than the 1994 - 1997 data used to set baselines for the first time in the 2003 Final Rule. EPA was particularly interested in stakeholders' views on whether there would be an environmental benefit to updating baselines. In response to the proposed rule , the agency received several comments, both for and against updating baselines, but did not receive any comments indicating there was an environmental benefit to changing baselines. In the 2013 Final Rule , EPA stated that it would continue to asses s the m erits of using a more recent set of ye ars to determine HCFC - 22 and HCFC - 142b baselines , but pointed out that it still had not heard an environmental rationale for making such a change .*** E.O. 12866 Review

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Page 48 of 113 Further, the program’s market - based orientation encouraged EPA to cons ider way s to promote an orderly

phaseout

– one in which stakeholders are offered advance planning certainty in their efforts to replace controlled chemicals. Thus, in completing the 2013 Final Rule we concluded that the certainty that facilitates orderly

m arket transition to new, safer alternatives could be best promoted by maintaining expectations. Given the current state of the phaseout

– within 5 years of virtual completion

– the market may be best served by

predictability

and b y the confirmation of long - established policy approaches. In developing this proposed rule, the agency evaluated whether to update baselines for the 2015 - 2019 regulatory period. First, consistent with its earlier statements, EPA considered whether there would be an environmental benefit to doing so. Second, EPA considered how it would pick “a representative calendar year” or ye ars to serve as the baseline, as required b y CAA section 601 . Third, EPA also considered whether the agency would credit only actual production and import, or if a company would receive credit for allowances held as the result of a transfer . Fourth, EPA considered the length of time the baselines have already been used, as well as the length of time remaining before the HCFC - 22 and HCFC - 142b phaseout. Based on these considerations, EPA has decided not to propose to use a more recent set of years to establish company baselines . First, the agency does not see an environment benefit to using a more recent set of years: it is the percentage of baseline issued

— no t the aggregate baseline itself

—that determines the allowed amount of production and import in a given ye ar. A shift to different baselines would simply rearrange companies’ shares of allowances. EPA has not made a practice of updating company baselines to reflect changes in the market . Rather, private entities may

use the allowance transfer provisions in Part 82 to sell or acquire baseline allowances as appropriate. Second, it is unlikely that there is a more recent ye ar or range of ye ars*** E.O. 12866 Review

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Page 49 of 113 that the majori ty

of stakeholders could accept as representative. Third, while it would be important for the agency

to consider whether to credit only actual production and import, or also allowances held as the result of a transfer, such consideration would introduce uncertainty into the process . Fourth, the use of production and import data from 1994 - 97 for HCFC - 22 and HCFC - 142b baselines began in the 2003 Final Rule and has continued through the present. Th ese substances will be phased out in 2020. The current baseline s are well understood by all affected entities and a change that would appl y only to the last few years before the phaseout might simply

cause confusion , in addition to affecting any longer- term business plans that companies may have based on the current b aselines . Confusion resulting from resetting existing baselines w ould be counter to the Agency ’s goal of promoting a smooth transition to alternatives. For these reasons, the agency is not proposing to update the baselines for the 2015 - 2019 regulatory period . **V. How**  **Is EPA**  **Developing Allocation Levels for Each HCFC?**  In developing proposed allocation levels, EPA considered what uses of HCFCs will be permitted in 2015 through 2019. Section 605(a) of the Clean Air Act limit s the use of newl yproduced (i. e. virgin) HCFCs beginning January 1, 2015 . Under the statute, virgin HCFCs may be used as a refrigerant in appliances 11 manufactured prior to 2020 (EPA accelerated this manufacturing date to 2010 for HCFC - 22 and HCFC - 142b) 12 and also as a nonresidential fire suppressant , if listed as acceptable under SNAP for this end use . HCFC - 22 and HCFC - 12 3 are

11 The Clean Air Act defines appliance as “any device which contains and uses a class I or class II substance as a refrigerant and which is used for household or commercial purposes, including any air conditioner, refrigerator, chiller or freezer.” 12 EPA accelerated the 605(a) use restrictions for HCFC - 22 and HCFC - 142b in the 2009 Final Rule. Consequently, HCFC - 22, HCFC - 142b and blends containing either can only be used as a refrigerant in appliances manufactured before January 1, 2010, not 2020. Additionally, the Clean Air Act all ow s use and introduction into interstate commerce of virgin HCFCs for use in transformation, but since this use does not require consumption or production allowances, it will not be discussed in this section.*** E.O. 12866 Review

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Page 50 of 113 both used as refrigerants , and thus EPA is proposing to issue allowances for these chemicals . HCFC - 22 has many refrigeration applications, and accounts for over 90 percent of all HCFC use; HCFC - 123 , on the other hand, accounts for a much smaller portion of refrigerant use, predominantly

in large chillers . HCFC - 123 and HCFC - 123 blend s are also listed as acceptable or acceptable subject to narrowed use limits for nonresidential fire suppression uses . EPA is proposing to issue allowances for both HCFC - 22 and HCFC - 123 ; however, since refrigeration represents a larger market than fire suppression , nearl y all consumption and production allowances proposed for 2015 - 2019 will be for HCFC - 22. EPA is also proposing to issue consumption and production allowances for HCFC - 142b and HCFC - 124, since both are listed as acceptable for certain refrigerant end uses and there continues to be small, albeit decreasing, demand for refri gerant blends containing these HCFCs . Inaddition, HCFC - 124 is listed as acceptable in certain fire suppression blends. The proposed allocation options for HCFC - 142b and HCFC - 124 are presented in section V.C. and V.E., respectively . EPA is not proposing to issue allowances for HCFC - 225ca or HCFC - 225cb because neither is used as a refrigerant n or as a fire suppress ant . Use of HCFC - 141b is banned effective January 1, 2010 under existing regulations (see 82.15(g)(1) , (3) ), with limited exceptions . In addition, the exemption from the production and import phaseout that allows for HCFC - 141b exemption allowances does not continue beyond 2014 (see 40 CFR 82.16(b),(d) ) . Since the exemption does not exist beyond 2014, EPA is proposing , effective January 1, 2015, to remove 40 CFR 82.16(h), which describes the petition requirements for receiving HCFC - 141b exemption allowances . However, in accordance with 40 CFR 82.18(a) (2) and (3), each company with an HCFC production baseline will receive Article 5 allowances 13 in 2015 through 2019 equal to 10 percent of its baseline for

13 Article 5 allowances allow a company with an HCFC baseline to produce that HCFC only for export to Article 5*** E.O. 12866 Review

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Page 51 of 113 that HCFC , even if EPA does not issue consumption , production or exemption allowances for that substance . The proposed allocations in the following sections are based on EPA’s Vintaging Model demand projections , recent market research on current HCFC uses and trends , and the expected availability

of recovered and reuse d material . In the case of HCFC - 22 and HCFC - 142b , EPA also considers the fact that under longstanding regulations, these two HCFCs will be phased out as of January

1, 2020. Thus, EPA will cease issuing HCFC - 22 and HCFC - 142b consumption and production allowances by 2020 at the latest. The agency has compi l ed Vintaging Model projections and other data supporting its proposed allocation s for 2015 - 2019 in the 201 3 Servicing Tail Report on HCFC market needs, found in the docket to this rulemaking. EPA welcomes comment on all aspects of the report , including but not limited to the underl ying assumptions and sensitivity analyses . Since the data in the report will be used to support the final allocation s for 2015 - 2019, EPA requests any relevant data and market information that would improve the accuracy

of the agency ’s projections. If commenters wish to submit confidential business information to support their comments on this proposal, please contact the person identified in the “FOR FURTHER INFORMATION CONTACT” section and review section I. B.1. of this notice . A. How W

ill EPA Determine the HCFC - 22 Consumption Allocation? EPA is considering three options for determining the HCFC - 22 consumption allocation. Each would involve a declining allocation from year to year. Under the linear drawdown (Option 1) , which is EPA’s preferred approach, the agency is proposing to decrease the allocation by th e same amount each year, such that there is a linear decrease in allowances from 201 5 through Parties under the Montreal Protocol. See 40 CFR 82.18(a).*** E.O. 12866 Review

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Page 52 of 113 2019, ending at zero in 2020. Under the Option 2 , EPA is proposing a more aggressive version of the linear drawdown , where consumption is phased out in 2018 inste ad of 2020. Under the estimation approach (Option 3) , EPA is proposing to estimate servicing need using the Vintaging Model , and then make adjustments to account for estimated recovery and reuse, and potentiall y inventory , much like it did in the 2009 and 2013 Final Rules. In 2009 , EPA published the 2009 Servicing Tail Report (available in the docket) , which estimated HCFC - 22 servicing need through 20 20 using the Vintaging Model and several rounds of industry

feedback . Through 2011 and early 2012, m arket factors and feedback from industry indicated there was an over- suppl y of HCFC - 22, which was discouraging use of recycled refrigerant and slowing transition to ozone - safe alternatives. EPA developed Analysis of HCFC22 Servicing Needs in the U.S. Air Conditioning and Refrigeration Sector: Additional Considerations for Estimating Virgin Demand (Adjustment Memo , available in the docket) to accompany the proposed rule for 2012 - 2014 , which contained new proposed allocations in the wake of the Court’s decis ion in Arkema . The Adjustment Memo examined updated projections from EPA’s Vintaging Model, and then took into account recent market conditions. The Adjustment Memo considered reductions in the allo c ation based on increased reclaimer capacity, existing HCF C - 22 inventory , and recovery and reuse by

supermarkets. After reviewing public comment and stakeholder feedback, EPA finalized HCFC - 22 allowances for 2012, 2013 and 2014 in the 201 3 Final Rule ( 78 FR 20004 ). As presented in the revised 201 3 Servicing Tail Report included in the docket , EPA’s Vintaging Model estimates that HCFC - 22 servicing need in 2015 will be 46,165 MT , or 2,539 ODP - weighted MT . In 2015, the Montreal Protocol cap for all HCFC consumption is 1,524 ODP - weighted MT , which means that even if EPA allocated onl y HCFC - 22 allowances, it still*** E.O. 12866 Review

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Page 53 of 113 could not provide enough allowances to account for all projected HCFC - 22 need . The gap in 2015 between projected servicing need and the Montreal Protocol cap is why EPA has continually

emphasized the need for recovery , reuse and reclamation of HCFC - 22 , in addition to transition to non - ODS alternatives . Recovery , reuse and reclamation will become even more important in 2020, when HCFC - 22 may no longer be produced o r imported , but the projected servicing need is 22,572 M T . EPA also uses the Vintaging Mode l to project the amount of recoverable HCFC - 22 each ye ar . This projection is based on the modeled retirement of HCFC - 22 equipment and modeled recovery rates specific to each equipment ty pe . For example, for residential air conditioning, the Vintaging Model assumes each s ys tem being retired in a given year has a full charge at decommissioning , and that an average of 35 percent of the refrigerant in e a ch retiring sy stem is recovered . For other end uses , particularl y those with very large charge sizes, the modeled recovery rate is much higher . In the Vintaging Model, the overall, industry- wide recovery rate is approximately

50 percent, though the exact number fluctuates each ye ar base d on the amount of equipment modeled as retiring in each end use . See Appendix A of the 201 3 Servicing Tail Report for modeled recovery rates specific to each equipment ty pe. In the 2013 Servicing Tail Report , EPA has also included several sensitivity anal ys es to gauge how changes in several key assumptions affect estimated servicing need in 2015 - 2019. The assumptions EPA looked at include s ys tem charge size, average annual equipment leak rates (i.e., loss rates), and the expected length of time a system is in operation (i.e., equipment lifetime ). All of these factors were examined as a result of information provided by industry representatives concern ed that the agency ’s assessment of servicing need in the Vintaging Model*** E.O. 12866 Review

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Page 54 of 113 could be too high. The agency w elcomes comment on all aspects of the 2013 Servicing Tail Report . This information will support the allocation option chosen in the final rule. 1 . Using a Linear Drawdown From 2014 Allocation Levels In 2020 , the U.S. must be at 0.5 percent of its HCFC baseline, and under EPA regulations none of the HCFC production or import at that time may be for HCFC - 22 or HCFC - 142 b . Given the agency ’s goal of ensuring a smooth transition away from HCFC - 22 and into non - ODS alternatives, EPA is proposing a linear decrease in HCFC - 22 allowances from 201 5 - 2019. That is, allowances would decrease b y the same amount each ye ar, such that a decrease by that same amount from 2019 to 2020 would bring the HCFC - 22 allocation to zero. Under the linear drawdown approach, EPA is proposing to start its drawdown from 20,100 MT, which is the 2014 allocation level before the addition of recoupment allowances. 14 Since EPA determined the final allocation for 2014 based on its market anal ys is and stakeholder comments, and then added recoupment on top of that amount, the agency believes it would be logical to start the linear drawdown from what the 2014 allocation would have been if recoupment allowances had not been issued. EPA’s preferred approac h is to use a linear drawdown, starting from the 2014 pre recoupment allocation of 20,100 MT and ending at zero in 2020 (see Option 1 in Table 1 ). Under the linear drawdown , the allocation would start at about 16, 7 00 MT in 2015 and would decrease by about 3,350 MT each year over the five year period. Since the market for virgin HCFC - 22 is solely for servicing air- conditioning and refrigeration equipment that was installed prior to 2010 (with limited exceptions through the end of 2011) , EPA believes that dec reasing the allocation

14 Recoupment allowances refer to the additional HCFC - 22 and HCFC - 142b allowances that EPA allocated for 2013 and 2014, w

hich were in addition to the aggregate allocations determined by the established percentage of baseline. EPA issued recoupment allowances to address the Court’s decision in Arkema with respect to allowances for 2010. For a discussion of the agency’s decision to provide recoupment, see the 2013 Final Rule at 78 FR 20015.*** E.O. 12866 Review

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Page 55 of 113 by the same amount each year will drive the necessary changes in the service market to prepare for the 2020 phaseout, without unnecessaril y forcing transition or retrofits out of HCFC - 22 for equipment that is still within its expecte d lifetime. EPA believes the starting allocation in 2015 is sufficient based on how the market responded in 2012 and early 2013 to the allowed amount of consumption under the No Action Assurance (i.e., non - enforcement) letters . The 2015 proposed allocation of 16, 7 00 MT is similar to the allowed amount of consumption at the start of 2013. At that time, there was minimal concern that the al lowed 2013 consumption of 17,9 0 2 MT would be too low , because several industry practices were changing to meet servicing need (summarized below) . EPA obtained this information through numerous conversations with stakeholders, all of which are noted in the memo in the docket titled Relevant Meetings with External Stakeholders . First, channel inventory (i.e. , existing material available for sale and distribution) likely helped meet servicing needs . Some industry feedback indicates a significant amount of inventory was consumed in 2012 to meet servicing needs . In dustry f eedback continues to indicate there is a signifi cant amount of inventory that can help meet servicing nee d in 2015 and later years . Second, servicing practices likely changed with the lower allocation to help meet servicing needs . With the price of HCFC - 22 increasing, industry feedback indicates service technicians may

have been more careful with the refrigerant, resulting in lower loss rates than those estimated in the Vintaging Model . Third, the demand for dry- shipped HCFC - 22 condensing units continue d to decrease. This indicates that the service contractor or the consumer's repair/replace decision is affected b y the price and availability

of HCFC - 22 .*** E.O. 12866 Review

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Page 56 of 113 Fourth, as the price of HCFC - 22 increased and as equipment reached the end of its useful life, retrofits and s ys tem replacements occurre d more rapidl y than model ed. This is particularly apparent in the retail food segment . For example, feedback from numerous contacts in the supply chain indicate supermarkets used the seven - to 10 - ye ar remodel cycle to not only update display cases, but to also switch to new refrigerants (either through retrofits or s ys tem replacements). These retrofits result in significant amounts of used refrigerant that can be reclaimed , or recovered and reused. Feedback from several sources indicates HCFC - 22 sales to su permarkets dropped off significantly

in the past few years, especiall y in 2012 and earl y 2013 with the reduction in allocation. This practice will likely accelerate as the phaseout progresses. Other evidence indicates that service technicians also became more aware of and comfortable using non - ODS retrofit refrigerants. Feedback from numerous points in the supply chain indicate sales of HCFC - 22 retrofit refrigerants (e.g., R- 438A, R - 422D, R - 407C and numerous other non - ODS alternatives ) have increased dramatically since 2011. Based on feedback from producers and distributors, as a percentage of the refrigerant charged into HCFC 22 equipment, retrofit refrigerants made up three to seven percent of sales in 201 2 . As the phaseout progresses, this percentage is expected to rise , thereb y further reducing the need for HCFC - 22 and adding to the potential inventory of reclaimed refrigerant . While EPA encourages equipment owners to retrofit when it makes sense, the agency also encourages equipment owners to look at the lowest GWP refrigerant that meets their needs and to consider the capacity and efficiency

tradeoffs associated with a retrofit out of HCFC - 2 2. HCFC - 22 is ty

pically the most efficient refrigerant to use in a piece of equipment designed to use HCFC - 22

—an important consideration when servicing an existing system.*** E.O. 12866 Review

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Page 57 of 113 Fifth, as HCFC - 22’s price increased and its perceived availability decrease d , reclamation increased b y about 1 3 percent in 2012 from 8.3 million lbs to 9.4 million lbs . While the increase between 2011 and 2012 is only one ye ar of data, the higher price of HCFC - 22 was likel y a factor as reclaimers offered a higher buyback price for used material. Since the higher price of virgin refrigerant also encouraged retrofits, HCFC - 22 from retiring s ys t ems was available for recovery and reclamation. EPA has attempted to quantify the effects on servicing need from many of these trends in the 2013 Servicing Tail Report . Coupled with the fact that an additional two years of retrofits and system retirement s will have occurred by 2015, the agency's anal ys is and feedback from industry affirm that the preferred allocation option can meet servicing needs without causing shortages . EPA seeks comment on its assessment of market trends and the agency ’s preferred allocation of 16,700 MT of HCFC consumption allowances in 2015. EPA also seeks comment on whether a lower 2015 allocation is preferable . S everal industry representatives have suggested a 2015 allocation closer to 14,000 MT of HCFC - 22 consumption allowances ; their support for such an allocation stems from the belief that the allocation for 2013 and 2014 was high er than needed, resulting in an over- supply of HCFC - 22 and potentially increasing inventory levels . Taken in the context of the preferred linear draw down approach, an allocation of 14,000 MT would correspond to starting at the lowest proposed 2014 amount in the 2013 Final Rule (approximately 16,450 MT) instead of the recoupment or pre - recoupment level (23,100 MT and 20,100 MT, respectivel y) . EPA specif ically seeks comment on adopting this lower starting point. Basing the 2015 - 2019 allocation on a linear drawdown from the lowest proposed amount in 2014 would result in a 2015 allocation of 13,700 MT followed by an annual decrease of approximately 2,750 MT each ye ar. Over the five year period, it would result in 9,200 MT (500 ODP - weighted MT)*** E.O. 12866 Review

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Page 58 of 113 fewer HCFC - 22 allowances than if the agency bases the 2015 - 2019 allocation off of the 2014 pre - recoupment level. EPA believes the linear drawdown approach has several advantages . First, it p rovides the market with a clear signal with consistent annual decreases that will drive transition to alternatives in advance of the 2020 phaseout. The agency believes , and past commenters agree , that graduall y decreasing the allocation provides the appropriate and necessary signal to encourage equipment owners and service technicians to transition when it makes sense for their individual circumstances. The linear drawdown allows the industry to establ ish plans in advance and develop the infrastructure to transition without significant market disruptions. Without a gradual transition, large quantities of system owners c ould wait until the last possible moment to transition, which could pose significant financial hardship and lead to widespread market disruptions in the 2019 to 2020 timeframe as end users scramble to find solutions to the HCFC 22 phaseout. While the estimation a pproach (Option 3) also decreases year - by- ye ar, the 2015 allocation is signifi cantl y higher than under the preferred linear drawdown approach. Additionally , the change from 2019 to 2020 is substantially higher under the estimation approach than under the linear drawdown , which could prompt system owners to stay in old HCFC - 22 equipm ent longer, potentially contributing to market disruption . Regardless of the option chosen, a lower allocation could result in economic advantages for companies investing in reclamation and alternative refrigerants and equipment if it encourages consumers to use reclaimed refrigerant or an alternative sooner . The linear drawdown is also simple and easy to explain. This aspect is important for service technicians, since they are the ones directly

interacting with home and business owners. It is often their job to explain what the HCFC phaseout means and how it works. Providing*** E.O. 12866 Review

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Page 59 of 113 technicians with an easier- to - explain transition should improve consumers’ understanding of the phaseout and the options available to them . Finally , this linear drawdown approach is preferred because it does not primarily rel y on EPA’s ability

to predict annual servic ing need , which becomes increasingl y difficult as HCFC 22 is phased out . While the Vintaging Model is updated frequentl y to reflect changes in the marketplace, it doesn’t currentl y model how the allocation in recent ye ars affects servicing need in future years. For example, the final 2012 - 2014 allocations will affect how HCFC - 22 is bought, sold and stockpiled in each year. While there are limitations of the model, t he sensitivity anal ys es in the 2013 Servicing Tail Report indicate the proposed linear drawdo wn approach is reasonable and can me et servicing need without shortages if servicing practices improve , and recycling and transition occur. The linear drawdown approach also takes into account how the market responded in 2012 and 2013 under the agency ’s No Action Assurance , which indicates the linear allocation approach may even more accuratel y reflect servicing need. The agency

could also start the drawdown from the 2014 allocation level after recoupment, 23,100 MT, however, this variant on the linear drawdown would start the allocation at a level that is likely

higher than is needed (see the discussion in the preceding paragraphs) . It would result in a 2015 allocation of 19,250 (which is above the 2013 No Action Assurance level) and an annual decrease of 3,850 MT instead of 3,350 MT . Overall, it would result in approximately

7,500 MT (400 ODP - weighted MT) more HCFC - 22 allowances over the five year period , and could result in more HCFC production and import, lower reclamation numbers, slower transition and less emphasis on improving servicing practices . The agency

is also proposing a linear drawdown option that would use fewer steps and less time to arrive at an HCFC - 22 allocation of zero . Option 2 in Table 1 shows a linear*** E.O. 12866 Review

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Page 60 of 113 drawdown over three ye ars instead of five , resulting in a consumption allocation of zero in 2018 instead of 2020 . One possible benefit of decreasing the HCFC - 22 allocation to zero sooner would be increased incentive to recover and recycle HCFC - 22, and increased incentive to transition to alternatives and replace older, less energy efficient equipment. The three ye ar linear drawdown provides environmental benefits as compared to the five year linear drawdown because it issues fewer HCFC - 22 consumption allowances over the five ye ar period. As under the five year linear drawdown (Option 1) , there is a potential variant under which the agency would start the drawdown from the 2014 level after recoupment. However , starting this three ye ar drawdown ( Option 2 ) from a 2014 allocation of 20,100 MT (without recoupment) instead of 23,100 MT (including recoupment) would provide environmental benefit by issuing fewer allowances over the five year period. The agency could also provide fewer than 15,000 MT of allowance s based on the same rationale described earlier. EPA seeks comment on an alternative proposal to base the allocation under the three year linear drawdown on the lowest proposed amount in 2014. This would result in a 2015 allocation of 12,300 MT , followed b y a three - ye ar annual decrease of approximately 4 ,100 MT each year. Compared to the three ye ar approach as shown in Table 1 ( Option 2 ) , it would result in 5,500 MT (300 ODP - weighted MT) fewer HCFC - 22 allowances. Regardless of which variant of the three year linear drawdown is chosen, it would provide the largest environmental benefit of the options presented in this rule , since it results in the fewest allowances overall. However, it may have downsides if it phases out HCFC - 22 consumption too fast, unnecess arily forcing transition ahead of the U.S. commitment under the Montreal Protocol.*** E.O. 12866 Review

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Page 61 of 113 In summary , EPA believes a linear drawdown help s ensure a smooth, simpler transition out of HCFC - 22. This method of decreasing allowances does not rel y directly on EPA ’s estimate of HCFC - 22 servicing needs or changes in demand for refrigerant , though the 2013 S ervicing Tail Report does confirm that a linear drawdown of allowances would still enable projected servicing need to be met under plausible recovery and reuse scenarios and changes in servicing practices . As a result, the agency believes making simple and consistent reductions in allowances each ye ar could provide the certainty the market needs to transition smoothly from HCFC - 22 to non - ODS alternatives. The ag ency

welcomes comment on the benefits or drawbacks to a linear allocation schedule , as well as comments on both linear drawdown options ( Option s 1 and 2 in Table 1 ) . 2 . Determining the Allocation by Estimating Servicing Need and then Accounting for Need that Can Be Met by Sources Other than New Production While not its preferred approach, EPA is also proposing to take the modeled servicing need for 2015 - 2019 as estimated in the 2013 Servicing Tail Report, subtract the amount of expected recovery

and reuse , and then issue consumption allowances to account for the remaining HCFC - 22 need . This is the estimation a pproach, shown as Option 3 in Table 1. In the 2009 Final Rule covering 2010 - 2014 , comments on the 2009 Servicing Tail Report prompted EPA to account for 12,500 MT of recovery and reuse in each ye ar. That is, the allowances issued each ye ar were 12,500 MT lower than the modeled servicing need for HCFC - 22. This same methodology

was used in the 2013 Final Rule covering 201 2 - 2014 , except the 201 3 Final Rule also accounted for existing inventory , which could be used to meet servicing need as well . When EPA addressed existing inventory in the 2013 Final Rule, it did not necessarily intend to address inventory in subsequent rules or make it part of the ongoing allocation methodology . However,*** E.O. 12866 Review

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Page 62 of 113 some industry stakeholders report that there may still be significant inventory that could be used to meet future servicing needs . The proposal to account for existing inventory when setting the final HCFC - 22 allocation under this option is discussed in section V.A . 3. In 2015, the amount of projected servicing need, minus the amount of expected recovery 15 and reuse, is actually higher than the 2014 allocation of 23,100 MT . The agency does not see any reason to increase the allocation from 2014 to 2015 because allowing the allocation to increase from 2014 to 2015 could reduce incentives for recovery and transition. In addition, EPA has learned anecdotally that the final allocations for 2013 and 201 4 were higher than the market was expecting. Thus, under this approach, the agency is proposing to issue the same amount of allowances in 2015 as in 2014, instead of allowing the allocation to increase in 2015. EPA would then apply

the methodology

presente d earlier in this section to years 2016 through 2019 . EPA is proposing to use the currently modeled average recovery and reuse rate of approximately

50 percent. The resulting allocation schedule would start at 23,100 MT in 2015 and end at 6,200 MT in 2019 before going to zero in 2020 , shown as Option 3 in Table 1 of this section . EPA welcomes comment on using the estimation approach to allocate allowances, in addition to comments on model parameters, such as the recovery rates used in the model for each end use and the installed equipment base (see 2013 Servicing Tail Report and appendices) . The agency is especiall y interested in comment on modeled equipment characteristics, like expected lifetime, charge size and leak rate, sinc e assumptions about equipment characteristics affect the projected servicing needs for each end use.

15 The expected recovery rate is approximately 50 percent industry - wide and is listed as the baseline recovery rate in the 2013 Servicing Tail Report available in the docket.*** E.O. 12866 Review

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Page 63 of 113 **Table 1**  **: Proposed Options for HCF C**  **- 22 Consumption Allocation in 2015**  **- 2019 (metric**  **tons) HCFC**  **- 22 Proposed Consumption**  **Allocation Options 2015**  **2016 2017**  **2018 2019**  **2020** Option 1: Linear drawdown over 5 ye ars 16, 700 13, 300 10, 100 6,700 3, 400 0 Option 2: Linear drawdown over 3 ye ars 15,0 00 10,0 0 0 5,0 00 0 0 0 Option 3: Estimation Approach 23,100 20,900 15,100 11,500 6,200 0 3. Accounting for Existing HCFC - 22 Inventory Under the Estimation Approach As stated earlier in this section, EPA did not commit itself to account for existing HCFC 22 inventory

when setting the allocations for 2015 - 2019; however, EPA is proposing to account for existing inventory

under the estimation a

pproach (Option 3 ) for two primary reasons . The first is that EPA has heard from stakeholders that industry- wide inventory is still very

large. In addition, many

feel that the final 2013 and 2014 allocations were higher than the market needs, and will therefore lead to a buildup of additional HCFC - 22 stocks going in to 2015. The second reason EPA is proposing to account for existing inventory is based on the agency ’s fall 2011 market anal ys is supporting its proposal to reduce allowances, as compared to the 2009 Final Rule (see Adjustment Memo, included in the docket to this rulemaking). That anal ys is assumed there was a surplus inventory between 22,700 and 45,400 MT at the beginning of 2012. Given expectations about the transition away from HCFCs, as well as the 2015 and 2020 HCFC phaseout milestones, EPA estimated that the complete drawdown could take somewhere between four to eight years . Based on its estimates of existing inventory , EPA proposed and finalized a 6,000 MT reduction in allowances for 2012 - 2 0 14. Given that 6,000 MT over 2012 - 2014 is only 18,000 MT total , the agency believes there may

still be ample existing supply of HCFC - 22. Some of that additional inventory may also have been drawn down in 2012. However, b ased on*** E.O. 12866 Review

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Page 6 4 of 113 recent industry

feedback after the finalization of the 2013 Final Rule, and the anal ys is conducted in fall 2011, EPA is proposing to continue to account for up to 6,000 MT of inventory each ye ar in 2015 - 2019 . This annual reduction would likel y be closer to 6,000 MT in earlier ye ars and less in years closer to 2020. Such a tapered approach to accounting for existing inventory would be consistent with the recent feedback and comments that EPA has received. Many stakeholders have noted that sending strong market signals early in the control period is fundamental to preparing the market for the complete phaseout of virgin HCFC - 22 by 2020. In order to finalize a reduction in allowances under this modified estimation approach , EPA seeks information on the estimated inventory of HCFC - 22. The agency need s to receive adequate data on industry inventory

levels if it is to finalize this approach . The agency may also consider inventory

data in choosing its final allocation methodology . For example, data showing a significant existing supply of virgin HCFC - 22 could further support the rationale for a lower starting point for a linear drawdown , as well as a linear drawdown ending at zero before 2020 . EPA welcomes inventory data from companies as part of their comments ; in addition, the agency is in the process of reaching out to companies to obtain similar information. B. How W

ill EPA Determine the HCFC - 22 Production Allocation? Since the start of the HCFC phaseout program in 2003, the agency has determined the HCFC - 22 production allocation in one of two ways. Under either method, EPA first determines the aggregate consumption allocation needed and assigns the consumption baseline percentage accordingl y. The process for assigning consumption baseline percentages works as follows: first, all the company- specific baselines listed in the tables at 40 CFR 82.19 are added to determine the aggregate cons umption baseline. Second, EPA determines how many consumption allowances to allocate for a given ye ar and divides that amount by the aggregate baseline. The resulting*** E.O. 12866 Review

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Page 65 of 113 percentage listed in the table at section 82.16 becomes what each company is allowed to c onsume in a given control period. For example, a company with 100,000 kg of HCFC - 22 consumption baseline allowances would multiply that number by

the percentage allowed in a given ye ar (for example, 25 percent) to determine its calendar- ye ar consumption al lowance is 25,000 kg. In the 2003 F inal R

ule covering 2003 - 2009, and again in the 2009 F inal R ule covering 2010 - 2014, EPA allocated the same percentage of baseline allowances for production as it did for consumption. A company with a production baseline at 40 CFR 82.17 would simply multiply its baseline by

the percentage listed at 82.16 to determine its calendar- ye ar production allocation. However, in the 201 3 F inal R ule covering 2012 - 2014, EPA provided a larger percentage of baseline and more HCFC - 22 production allowances than it did for consumption. That is, section 82.16 was amended to include two tables, one listing the baseline percentage for consumption and the other listing the percentage for production. As discussed in the 201 3 F inal R ule, the reason for this change was to allow U.S. manufacturers to produce at the same level as under the 2009 Final Rule and continue to compete globally , and to potentially reduce the need for less efficient production abroad ( see 78 FR 20020 ) . For the 2015 - 2019 regulatory period, EPA is considering two options for the HCFC - 22 production allocation: 1) issue production allowances at the highest allowable level under the Montreal Protocol to continue to allow U.S. producers to compete globally much like it did in the 2013 Final Rule covering 2012 - 2014, which is the agency ’s preferred approach or 2 ) provide approximately

the same number of production allowances as consumption allowances . 1. Providing the Maximu m Production Allocation Allowed Under the Cap*** E.O. 12866 Review

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Page 66 of 113 In the 201 3 F inal R

ule , EPA determined that it has the authority to issue calendar- ye ar consumption and production allowances using different percentages of baseline, as long as the agency complies with the overall schedule set b y the Montreal Protocol and Congress, as accelerated under section 606 . Therefore, the agency has the ability

to set baseline percentages such that the aggregate production allocation is larger than the consumption allocation. See the 2013 Final Rule (78 FR 20018) for a discussion of EPA’s ability to decouple production and consumption baselines. As stated in the 201 3 Final Rule, EPA believes that allo cating more production allowances than consumption allowances cannot lead to an increa se in U.S. consumption , would not result in a global increase in produ ction or consumption of HCFC - 22, but could result in more U.S. production for export relative to the scenario in which production allowances are at approximately

the same level as consumption allowances . This may have economic benefits for the U.S. and potentially

environmental benefits to the extent that production might otherwise occur in plants that lack HFC - 23 by product destruction technologies . EPA’s preferred approach is to allocate more production allowances than consumption allowances, up to the maximum allowed under the Montreal Protocol cap. Allocating more production allowances than consumption allowances would not provide U.S. producers the opportunity to produce more HCFC s for domestic consumption than the amount allowed by

the consumption allocation . Production of one kilogram of an HCFC still requires both a production allowance and a consumption allowance (82.15(a)(1), (2)). Allocating more production than consumption would provide U.S. producers the opportunity to continue production for export subject to existing regulatory constraints . A company must submit documentation to verify

the export of an HCFC for which consumption allowances were*** E.O. 12866 Review

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Page 67 of 113 expended in order to request a re imbursement 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. As mentioned previously, EPA also believes that allocating more production allowances than consumption allowances could have environmental benefit s if U.S. production displaces production at facilitie s that do not control by product emissions of hydrofluorocarbon (HFC) - 23, which has a global warming potential of 14,800 . 16 In the 2013 Final Rule , EPA responded to comments that cited the growth of HFC - 23 emissions globally and indicated that facilities in Article 5 countries do not control HFC - 23 emissions to the same degree as companies operating in the U.S. EPA has worked with industry through its HFC - 23 Emission Reduction Partnership to encourage companies to reduce HFC - 23 by product emissions from the manufacture of HCFC 22. Production of HCFC - 22 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 by product destruction technologies installed. For further discussion of HFC - 23 byproduct emissions in Article 5 countries, see the 2013 Final Rule at 78 FR 20021. EPA also determined in the 2013 Final Rule that allowing U.S. production to remain at the levels finalized in the 2009 Final Rule would not result in increased global consumption. 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 - by- chemical 16 GWP of HFC - 23 presented in the Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment Report: Climate Change 2007 (AR4)*** E.O. 12866 Review

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Page 68 of 113 approach to phasing out HCFCs. Also, consumption of HCFCs in Article 5 countries was capped starting in 2013, which further limits global HCFC - 22 demand (see Montreal Protocol Art. 5, para. 8 ter. ). And finall y, at least one company holding production allowances does not produce HCFC - 22 in the United States, so it is unlikely that every

production allowance issued will be used. EPA is concerned that the altern ative approach

—issuing production allowances at the same level as consumption, instead of at the maximum level allowed under the cap

—could deprive U.S. manufacturers of existing global business . Therefore, EPA is proposing to issue the maximum number of H CFC - 22 production allowances allowed under the Montreal Protocol cap, after accounting for production allocations of any other HCFCs. Starting in 2015, the U.S. production cap under the Montreal Protoc o l is 1 , 553.7 ODP - weighted MT; when converted entirely to HCFC - 22, the production cap is 28,249 MT of HCFC - 22 . To put the 2015 cap in perspective, EPA issued 41,200 MT of HCFC - 22 production allowances in 2013 and 36,000 MT in 2014 . Allocating the maximum allowed under the cap would still be a significant decre ase from 2013 and 2014 production allocations. EPA is proposing to take the cap of 1 , 553.7 ODP - weighted MT, subtract the final production allocation for any other HCFCs, and then issue the remaining amount for HCFC - 22 production. Under the agency ’s preferr ed options for all other production allocations, the resulting HCFC - 22 allocation in 2015 - 2019 would be approximately 28, 000 MT, or 21. 7 % percent of baseline. EPA welcomes comment on this approach. 2. Providing Approximately the Same Number of Production Allowances as Consumption Allowances A second option for determining the HCFC - 22 production allocation is to issue approximately the same number of production allowances as consumption allowances. Under*** E.O. 12866 Review

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Page 69 of 113 this approach, the production allocation would be significantl y lower than in 2013 and 2014. The highest proposed consumption allocation in this rulemaking is 23,100 MT in 2015, which is close to half as much as the 2013 production allocation and about two - thirds as much as the 2014 production allocation. Th is approach could result in less U.S. production for export, with ec onomic disadvantages for the U.S. and potentially environmental disbenefits to the extent that more production might occur in plants that lack HFC - 23 by product destruction technologies. Under this approach, EPA would determine the desired aggregate consumption allocation in each ye ar and set the percentage of consumption baseline accordingl y. The percentage of production baseline issued would be whatever percentage results in an aggregate production allocation that is approximately equal to the aggregate consumption allocation. EPA welcomes comment on the merits of this option . C. How W

ill EPA Determine the HCFC - 142 b Allocation ? In the 2009 Final R

ule for 2010 - 2014, EPA allocated 100 MT of HCFC - 142b consumption allowances for each of those ye ars ( 74 FR 66412 ) . When EPA re - established HCFC - 22 and HCFC - 142b baselines in the 2011 Interim Final Rule and 201 3 Final Rule , the HCFC - 142b consumption allocation remained at 10 0 MT. However, since the HCFC - 142b production baseline was significantl y higher than the consumption baseline , and the same percentage of baseline was used for both consumption and production, the production allocation became 463 MT (not including recoupment) in 2011 - 2014. As discussed briefl y in the 201 3 Servicing Tail Report, the Vintaging Model does not model demand for HCFC - 142b uses after 2014 . However, several HCFC manufacturers anticipate continued, albeit decreasing , sales of refrigerant blends containing HCFC - 142b in 2015 and later. HCFC - 142b is predominantly used in refrigerant blends that have historicall y*** E.O. 12866 Review

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Page 70 of 113 served as replacements for CFC - 12 and R- 50 0 in medium - and large - sized refrigeration equipment. It is important to note that some of these blends containing HCFC - 142b, namel y R409A, are in use today

but are not modeled in the Vintaging Model ; thus, the model is not an accurate reflection of the niche refrigeration needs for HCFC - 142 b . Given th at the agency knows there is some R- 409A equipment in use based on refrigerant sales data collected b y the California Air Resources Board (see Preliminary 2011 and 2012 Sales and Distribution Data from the California Air Resources Board’s Refrigerant Management Program in the docket) and industry feedback , the agency is proposing to allocate 3 5 MT in 2015 with a decrease of 5 MT each ye ar . EPA believes an allocation of 35 MT in 2015 is an appropriate balance between the 2010 - 2014 allocation of 100 MT, the actual consumption of HCFC - 142b in recent ye ars, and the fact that while R- 409A is still needed, it is used mainly in CFC retrofitted equipment (i.e. , equipment that is at or is nearing its expected retirement) . With an annual decrease of 5 MT, the HCFC - 142 b allocation would be 15 MT in 2019. The agency thinks that a decreasing allocation sends a stronger market signal that production and import of HCFC - 142 b are ending, as compared to a con s tant allocation in all five years. Such a signal should help encourage equipment owners to transition to more energy efficient equipment that uses non - ODS refrigerants. EPA will consider issuing up to 100 MT of HCFC - 142b consumption allowances , but would need substantial data supporting such an allocation . Specificall y, EPA would need to know for which blends, in what quantity and for what end use (s) the HCFC - 142b is needed . EPA is proposing to issue HCFC - 142b production allowances at the same level as consumption , not the same percentage of baseline . Given historic exports of HCFC - 142b, EPA does not believe the same rationale for allowing production to be higher than consumption applies to HCFC - 142b as it applies to HCFC - 22. In the 2013 Final Rule, HCFC - 142 b production*** E.O. 12866 Review

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Page 71 of 113 was higher than consumption due to the different changes in production and consumption baselines, not due to any concerns about HCFC - 142b export (as was the case for HCFC - 22 production). The agency

would con sider issuing up to 100 MT of production, even if the final consumption allocation is lower, if there is documented n eed for U.S. -produced HCFC - 142 b in other non - Article 5 countries. The agency is not proposing to issue any more than 100 MT of HCFC - 142b production allowances. EPA requests comments on its proposal, as well as data on current and future needs of HCFC - 142b. D. How Wi ll EPA Determine the HCFC - 123 Allocation? HCFC - 123 is currently

used as a refrigerant and as a fire suppression agent , which are the two consumptive uses of virgin HCFCs permitted by section 605(a) of the CAA as of January 1, 2015 . The agency is prop o s ing to issue consumption allowances to allow import for these two uses. For the 2010 - 2014 regulatory period, EPA issued a pproximately 2,500 MT of HCFC - 123 consumption allowances each ye ar , which is 125% of the HCFC - 123 consumption baseline. EPA has never established a production baseline for HCFC - 123, and the agency has no record of domestic production of HCFC - 123 for consumptive uses during the baseline years (2005 - 2007) . Section 605(b) of the Clean Air Act restricts production of any class II substance to 100% of baseline levels or less beginning on January 1, 2015. Section 605(c) requires that consumption of class II substances be phased out on the same schedule as production . The agency ’s reading of 605(b) and 605(c) together is that as of January 1, 2015 , EPA may

allocate no more than 100 percent of baseline for production or consumption of each class II substance . This milestone is part of the phaseout schedule contained in the CAA. EPA has accelerated the section 605 phaseout schedule under the authority of section 606. Nevertheless, the 2015 milestone in section 605(b) is still relevant because it applies to each c lass II substance individually . This is in*** E.O. 12866 Review

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Page 72 of 113 contrast to the basket approach contained in the Montreal Protocol. Under section 614(b), where there is a conflict between Title VIof the CAA and the Montreal Protocol, “the more stringent provision shall govern .” With respect to individual substances, section 605 is more stringent. Thus, for the 2015 control period and beyond, EPA may not allocate more than 100 percent of baseline for any class II substance. EPA did determine in the 201 3 Final Rule that the perc ent of production and consumption baseline allocated as calendar- ye ar allowances may be different, but only so long as the phaseout of a substance continues on the same overall schedule presented in the CAA and the Protocol ( 78 FR 20004 ). See the 201 3 Final Rule and the accompanying Response to Comments for a complete discussion of the agency ’s authority to decouple production and consumption percentages. In considering allocation options, EPA has looked at the projected need for virgin HCFC 123 for re frigeration and nonresidential fire suppression uses. EPA’s modeled need for each of these uses is presented in the 201 3 Servicing Tail Report, included in the docket to this rulemaking. EPA is taking comment on the remaining refrigerant and fire suppressi on uses of HCFC - 123, how much is needed, and why non - ODS alternatives could not meet this need. Commenters should clarify the quantity

of their specific needs, in addition to any broader comments on industry

demand for HCFC - 123. Under the current phaseout regulations , beginning in 2015, production and import of HCFC - 123 is limited to servicing of existing refrigeration and air conditioning equipment onl y . EPA is proposing to revise section 82.16(d) to allow production and import of HCFC - 123 for fire suppre ssion purposes to complement section 605(a)(4) of the CAA. This exemption would sunset on December 31, 2019 because, as discussed in more detail in Section II.A. of this preamble, beginning in 2020 , Article 2F of the Montreal Protocol restricts production and import*** E.O. 12866 Review

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Page 73 of 113 of HCFCs to servicing of existing refrigeration and air conditioning equipment. 17 Under section 614 of the CAA, where either the Montreal Protocol or the CAA is more stringent, the mo re stringent provision governs. While virgin HCFCs could continue to be used in fire suppression applications, EPA does not intend to issue consumption allowances for fire su ppression after 2019 . Inaddition, b eginning in 2020, section 605(a) of the CAA prohibits the use of virgin class II substances in the inst allation and/or manufacture of new AC and refrigeration systems. Any HCFC - 123 consumption allowances issued after 2019 would only allow HCFC - 123 import for use as a refrigerant for se rvicing existing HCFC - 123 sy stems . EPA’s understanding is that much of the HCFC - 123 refrigerant in use today is to service and manufacture low pressure chillers , which have relativel y long expected lifetimes; the Vintaging Model assumes a 27 - year average lifetime, and the U.S. tax code uses a 39 - ye ar depreciation schedule for a category of equipment that includes HCFC - 123 chillers (26 USC §168) . Given the expectation that these chillers will last for well over 20 ye ars, EPA seek s comment on whether it should provide a static amount of HCFC - 123 allowances through 2019, or wh ether it should begin to gradually reduce HCFC - 123 allowances now t o foster transition . The two proposed options for issuing HCFC - 123 consumption allowances are outlined below , though EPA ’s preferred option is to issue 100 percent of the HCFC - 123 baseline . Commenters should explain why

they prefer either option in as much detail , and with as much quantitative reasoning , as possible. 1. Issue 100 Percent of HCFC - 123 Consump tion Baseline T hrough 2019 EPA is proposing to issue approximately 2,000 MT of HCFC - 123 consumption allowances for each ye ar from 2015 - 2019, which is the maximum allocation allowed under the 17 Use of HCFC - 123 that was imported prior to 2020, or that is used, recovered and recycled, is still allowed beyond January 1, 2020.*** E.O. 12866 Review

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Page 74 of 113 CAA because it is equal to 100 percent of the consumption baseline . The agency believes this amount w ould be sufficient to meet the refrigeration and nonresidential fire suppression needs, even though projected need is 2, 2 00 MT in 2015 - 2018 and 2,300 MT in 2019 . EPA expects 2,000 MT of HCFC - 123 allowances will be sufficient to meet modeled need because the Vintaging Model projects that at least 330 MT of HCFC - 123 will be available for recovery and reuse in 2015 , and even more should be available in later years , mainly because HCFC - 123 chillers have high (90 percent) expected recovery rates due to their large charge size . So while this proposed option does not incorporate specific reductions for recovery and reuse, it does assume that some demand for HCFC - 123 can be met with recovered material. EPA prefers this approach because 1) the allocation is still below m odeled need ; 2) HCFC - 123 may be produced and imported for use as a refrigerant until 2030 ; and 3) there are no commerciall y available alternatives to HCFC - 123 in lo w -pressure chillers as of mid - 2013 . EPA welcomes comment on its prefer r ed proposal to issue 2,000 MT in each year, and again notes that it cannot issue more than 100 percent of the HCFC - 123 baseline. 2. Issue Less Than 100 Percent ofHCFC - 123 Consumption Baseline EPA is proposing in the alternative to issue onl y enough HCFC - 123 allowances to meet anticipated need, after specificall y accounting for recovery and reuse. Under this option, EPA would allocate 1,900 MT of consumption allowances in 2015 - 2017, and 1,400 MT of allowances in 2018 and 2019. The objective of this approach is to foster recovery and reuse , and to recognize that while virgin production of HCFC - 123 could occur through 2029, HCFC - 123 equipment can onl y be manufactured through 2019 . As shown in Table 4 - 1 2 of the 2013 Servicing Tail Report, the total servicing demand p lus the demand for charg ing new refrigeration and fire suppression equipment is 2,200 MT in 2015 - 2018 and 2,300 MT in 2019 . After*** E.O. 12866 Review

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Page 75 of 113 subtracting the amount of that total demand that EPA estimates can be met by recovered and reused material, the remaining need that would be met by virgin production is equal to the proposed allocation in each year . For 2015 - 2017 the proposed allocation is 1,900 MT, dropping to 1,400 MT in 2018 and 2019, as discussed in the 2013 Servicing Tail Report. The agency is seeking comment on this approach, especially the HCFC - 123 need estimates presented in the 2013 Servicing Tail Report, to what extent need could reasonabl y be met with recovered material and to what extent commenters believe the HCFC - 123 allocation will affect transition to alternatives. E. How W

ill EPA Determine the HCFC - 124 Allocation? Though HCFC - 124 has both refrigeration and fire suppression applications that are listed as acceptable under the Significant New Alternatives Policy (SNAP) program , its primary use today is in sterilant blends. Beginning January 1, 2015, CAA section 605(a) prohibits the use of virgin HCFCs as sterilant s , since sterilant use is not one of the four statutory exceptions. As discussed earlier in section III.B. of this p reamble, 605(a) restricts the use of bulk class II substances, not product s containing class II substances . However, manufacture of a product is considered “use” of a bulk substance and therefore is prohibited beginning January 1, 2015 , unless the manufacturer is using recovered and recycled HCFC - 124. EPA’s understanding is that most of the sterilant industry is on target to transition to non - ODS alternatives prior to January 1, 2015, but welcomes comment on the transition out of HCFC - 124 sterilants, particularl y the status of sterilant users’ transition to alternatives . While most HCFC - 124 use is as a sterilant, there are , in fact, several refrigerant blends with HCFC - 124 that are listed as acceptable by the SNAP program . These blends include: R401A, R- 401B, R- 409A, R - 414A, R- 414B and R- 416A . Similarly, EPA has also listed as*** E.O. 12866 Review

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Page 76 of 113 acceptable certain fire suppression alternatives that contain HCFC - 124. For total flooding applications, EPA has listed neat HCFC - 124 and HCFC Blend A (NAFS - III) as acceptable alt ernatives to Halon 1301. For streaming applications, the agency has listed neat HCFC - 124 and HCFC Blend C (NAF P - III) as acceptable alternatives to Halon 1211. However, the agency is not aware of any HC FC - 124 fire suppression uses in the U.S. Given the small projected need for HCFC - 124 beyond 2014 and the continued use of certain refrigerant blends containing HCFC - 124 , the agency is proposing to issue some HCFC 124 allowances in 2015 - 2019, consistent with the most recent Vintaging Model projections o f HCFC - 124 servicing need and recent feedback from industry stakeholders . Due to the very small projected need , HCFC - 124 is only discussed brief

ly in the 201 3 Servicing Tail Report; the remainder of the HCFC - 124 discussion is include d here. The estimate d need in the Vintaging Model decreases from 4.5 MT in 2015 to 3.1 MT in 2019, with just over half of the need modeled for use in Industrial Process Refrigeration and the other half for Medium Retail Food. EPA could propose to allocate just 4 MT in each year, but the agency recognizes that the Vintaging Model may

not capture all current uses of HCFC - 124 refrigeration equipment, as is the case with HCFC - 142b equipment. Based on Vintaging Model estimates , along with industry feedback on the needs and uses of HCFC - 12 4, and the use of HCFC - 124 allowances in recent ye ars, EPA is proposing to allocate 200 MT of HCFC - 124. For reference, the 2010 - 2014 consumption and production allocations are roughly 3,000 MT and 5,000 MT, respectivel y, though reported consumption and pro duction has been substantially less in recent years. EPA’s goal is to ensure that servicing needs can be met, while also encourag ing recovery and reuse or transition to non - ODS refrigerant blends. An allocation of 200 MT supports this goal because it accounts for allowed end uses of HCFC - 124 that may not be captured by

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Page 77 of 113 (e.g. use of niche refrigerant blends containing HCFC - 124) , but also recognizes that the primary use of HCFC - 124 will no longer be allowed as of January 1, 2015. Unlike HC FC - 123, companies do have HCFC - 124 production baselines and so EPA is proposing to allocate consumption and production at the same level . EPA’s preferred approach is to allocate 200MT of production and consumption allowances to allow for limited manufacture of niche refrigerant blends ; however, the agency is proposing in the alternative to issu e as few as 4 MT of HCFC - 124 consumption and /or production allowances , consistent with the Vintaging Model projections . This is not EPA’s preferred allocation, but the agency i s open to comments in support of this lower proposed option if commenters can provide evidence suggesting that the allocation should be as low as 4 MT. Similarly , EPA is also requesting data from commenters in support of allocating up to 400 MT of HCFC - 124 allowances and is proposing to issue up to 4 00 MT if comments and data warrant an increase . The agency seeks comment on the transition or retrofit plans of equipment owners, and for how long they expect to need virgin HCFC - 124. F. How W

ill EP A Determine the HCFC

- 225ca/ cb Allocation? According to the 2009 Servicing Tail Report , more recent updates to EPA’s Vintaging Model and conversations with stakeholders, HCFC - 225ca and HCFC - 225cb are used onl y as solvents, usually

in precision cleaning of e lectronics , optical equipment or liquid oxygen systems. In the 2009 Final Rule , the agency used HCFC - 225ca/cb as an example of the future e ffects of the section 605(a) use restriction, stating that “HCFC - 225ca and HCFC - 225cb are generall y used as solvents, but as of January 1, 2015, under section 605(a), HCFCs may not be used as solvents” (74 FR 66433). This restriction is reflected in the re gulations at section 82.15(g). However, a s discussed in section III.B, EPA is proposing a limited exemption to allow*** E.O. 12866 Review

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Page 78 of 113 entities that have HCFC - 225ca/cb in their inventory prior to January

1, 2015 to continue to use their HCFC - 225ca/cb as a solvent beyond that date. The proposed exemption would apply onl y to use of HCFC - 225ca/cb as a solvent by persons who hold that HCFC - 225ca/cb in their inventory as of January

1, 2015 ; EPA is not proposing an exemption from the restriction on introduction into interstate co mmerce of HCFCs for solvent purposes . Accordingl y, the agency is not proposing to issue any allowances for the production or consumption of HCFC - 225ca/cb. Combined with the continued use of products containing HCFC - 225ca/cb, EPA’s understanding from stakeh olders is that an exemption to the use prohibition to allow for continued use of virgin HCFC - 225ca/cb as a solvent by persons with HCFC - 225ca/cb in their inventory w ould be sufficient to meet the anticipated solvent needs for specialized, niche application s that are not able to transition to alternatives prior to 2015. EPA is proposing such an exemption in section III.B.1. of this preamble. G. What is EPA Proposing to Do W ith the HCFC- 141b Exemption Program? The HCFC - 141b exemption program has been in place since the start of the HCFC allowance program in 2003 . In the preamble to the 2009 Final Rule, EPA stated that the petition process for HCFC - 141b exemption allowances at section 82.16(h) would end in 2015, since HCFC - 141b is not used as a refrigerant and thus does not meet the criteria established by section 605(a) for continued use . HCFC - 141b similarly is not used as a fire suppression agent. EPA is proposing to revise 40 CFR 82.16, which is the se ction of subpart A that addresses the phaseout schedule of class II controlled substances. The date limitation on the HCFC - 141b petition process can already be seen by comparing section 82.16(b), which lists “HCFC - 141b exemption needs” as one of the exceptions to the HCFC - 141b phaseout, with section 82.16(d), which does not include HCFC - 141b exemption needs in the list of exceptions that continue beyond January*** E.O. 12866 Review

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Page 79 of 113 1, 2015. However, the HCFC - 14 1 b petition process in 82.16(h) does not specify an end date . EPA is proposing to remove the HCFC - 141b petition process from the regulations effective January 1, 2015. Removing the text will clarify that EPA will not grant petitions , whether new or existing, for HCFC - 141b exemption allowances in 2015 or beyond . Inrecent years the amount of HCFC - 141b imported or produced has been decreasing significantl y . The agency does not anticipate there will be any remaining need for HCFC - 141b import or production starting in 2015 . Excluding transhipments, heels or used material, the regulations at 40 CFR 82.1 5 (g)(3 ) limit the use or introduction into interstate commerce of HCFC - 141b to export to Article 5 countries and use in transformation or destruction processes , beginning January

1, 2015 . Despite the strict limits on HCFC - 141b us e in 82.15(g)(3), EPA appreciates that some current users of HCFC - 141b may face a similar situation as users of HCFC - 225ca/cb. That is, there may be users with HCFC - 141b inventory that will not be allowed to use any remaining HCFC - 141b after 2014. The agen cy has not heard from any

HCFC - 141b users, and thus does not anticipate the need for any exemption to the use restrictions for HCFC 141b; however, EPA welcomes comment on whether there are remaining niche uses of HCFC 141b. Commenters should explain the us e and the quantity of HCFC - 141b needed , why alternatives or used HCFC - 141b cannot meet this need and the plan for transitioning to alternatives. H. Other HCFCs that are Class II Controlled Substances To date, EPA has not established baselines or issued all owances for the production or import of HCFCs that are not included in the tables at 40 CFR 82.16(a). The prohibitions in 40 CFR 82.15(a) and (b) on production and import without allowances do not apply to such HCFCs. However, the phaseout schedule in 40 C FR 82.16 applies to all class II substances, whether or*** E.O. 12866 Review

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Page 80 of 113 not they are governed b y the allowance system. Similarly , all class II substances are subject to the restrictions on introduction into interstate commerce and use contained in 40 CFR 82.15(g). HCFCs that EPA has listed as class II controlled substances are identified in appendix B to subpart A. Beginning January

1, 2015, the use of all class II substances is banned, unless specifically exempted (see section III.B. of this preamble for more details ). E PA is seeking comment on whether any of the HCFCs not governed b y the allowance s ys tem qualify for the nonresidential fire suppression and/or refrigeration servicing exemptions and what quantity the market will need going forward for these purposes. Should the need for any of these chemicals grow or potentially

put the U.S. in danger of not meeting its commitments under the Montreal Protocol, EPA would consider establishing baselines and allocating calendar- ye ar allowances via a separate rulemaking . As mentioned earlier in section III.B. of this preamble, EPA is proposing to amend the list of class II controlled substances in appendix B of subpart A to better match the Clean Air Act section 602 and the Montreal Protocol HCFC lists (found in Group I to Annex C of the Protocol). Currently , both the Protocol and CAA section 602 include all isomers of listed substances, but 40 CFR part 82 subpart A, appendix B does not include all isomers, only those that are specificall y named (e.g. , HCFC - 141b is listed as such, but there are other isomers of HCFC - 141 that are not included in appendix B). CAA section 602 states that EPA “shall publish” a list of class II substances that shall include the specified HCFCs and “shall also include the isomers” of th ose substances. EPA ’ s intent was to list all isomers in appendix B, as indicated by the footnote explaining that when a range of ODPs is listed for a chemical, the range applies to an isomeric group. The proposed change would correct this omission. Specifi cally , EPA is proposing to*** E.O. 12866 Review

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Page 81 of 113 reconcile the statutory

and Montreal Protocol list s with the list in the regulations, and to add a statement that appendix B of the regulations includes all isomers of a listed chemical, even if the isomer itself is not listed on its own. **V I**  **. What Other Updates to the HCFC Allocation System is EPA Considering?**  A. Is EPA Considering Banning Dry- Shipped Condensing Units Intended for Use with HCFC - 22 ? Condensing units are a type of component in split system air conditioners. Under current regulations, the sale or distribution of a condensing unit pre - charged with HCFC - 22 is prohibited (40 CFR 82 subpart I) ; however, a dry- shipped unit may be sold and used to replace an existing condensing unit that uses HCFC - 22 as the refrigerant . InFebruary 2011, the Carrier Corporation sent a letter to EPA, asking the agency to ban this particular type of repair. In the proposed rule providing 2012 - 2014 HCFC - 22 allocations (77 FR 237) , EPA took comment on wh ether repairs using dry- shipped condensing units affect the phaseout of HCFC - 22. The agency received numerous comments, and responded to them in the 201 3 Final Rule ( 78 FR 20004 ). While many comments discussed dry- shipped condensing units, very few provided EPA any

additional data or information to indicate that repairs using condensing units affect the HCFC phaseout. The agency is again seeking quantifiable information on the number of dry- shipped 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 ; however, all evidence received to date suggest that condensing units sales are decreasing and should not affect the agency ’s ability to phase out HCFC - 22. As a result, EPA is not proposing to ban dry

shipped condensing units at this time . I f the agency receives data*** E.O. 12866 Review

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Page 82 of 113 indic ating that the agency ’s ability to phase out HCFC - 22 is jeopardized , EPA would potentially propose a ban via a separate rulemaking process . B . How Might EPA Respond to Requests for Additional Consumption Allowances In 2020 and Beyond? Currently , the regulations at 82.20 (a) allow a person to obtain consumption allowances equivalent to the quantity of class II controlled substances that the person exported during the control period , provided that the substances were originall y produced or imported with consumption allowances . The exporter must submit certain information to EPA which the agency reviews before issuing a notice either denyingthe request, or granting the additional consumption allowances. A person may submit this request (known as a Request for Additional Consumption Allowances, or RACA) upon export of any HCFC for which consumption allowances were originally expended, regardless of what control period the production or import took place. As the phaseout deadline approaches for certain H CFCs, the agency believes it makes sense to restrict RACAs accordingl y. For example, 1,000 kg of HCFC - 22 could be produced in 2019 using consumption and production allowances. In 2020, or some later year, that material could be exported

—and under the current regulations the exporter would be eligible to request 1,000 additional HCFC - 22 consumption allowances; however, there will not be any consumption allowances for HCFC - 22 in 2020 or subsequent years. The agency

believes that issuing additional consumptio n allowances past the phaseout date for an HCFC

—thereby allowing for continued import

— would be contrary

to the goals of a program that has purposeful ly set phaseout dates based on a worst - first approach. Continuing to issue RACAs beyond the phaseout date f or a substance would also be contrary to past EPA actions for class I substances . For class I substances, the option to obtain consumption*** E.O. 12866 Review

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Page 83 of 113 allowances equivalent to the level of class I controlled substances that the person exported was available for most c lass I substances onl y until January 1, 1996, which was the phaseout date for CFCs and most other class Isubstances, and until January 1, 2005 for class I group VI substances (i.e. methylbromide) , which was the phaseout date for th at substance. Therefore , EPA is proposing to add the following sentence to paragraph 82.20(a) : “ Both the export of the class II controlled substance and the request for additional consumption allowances must occur during a calendar ye ar in which consumption allowances were issued for that class II controlled substance .” EPA welcomes comment o n its proposed addition to 82.20, and on its proposal to treat class II RACAs the same as it treated the request for additional consumption allowances for class I substances. C. How Mig

ht EPA Maximize Compliance With HCFC Regulations? EPA is interested in comments and suggestions for ensuring compliance with HCFC regulations. EPA recognizes that the 2015 stepdown and the appro aching complete phaseout of HCFC - 22 may affect prices, which could have the effect of increas ing the incentives for illegal activity , particularl y illegal imports of HCFCs or HCFC blends. On the other hand, the agency believes that reduced allocations and market changes increasing the value of the material will enco urage proper recovery and decrease motivation to vent HCFCs, especially HCFC - 22. EPA seeks comment on how it could alter existing regulations to encourage compliance with the HCFC phaseout requirements and section 608 refrigerant regulations. In addition, the agency is interested in ways it could increase awareness and ensure compliance with the section 605(a) use restrictions and the section 611 labeling requirements that will begin in 2015. **VII. What Modifications to Section 608 Regulations is EPA**  **Proposing ?** *** E.O. 12866 Review

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Page 84 of 113 The portion of the stratospheric ozone regulations titled Recycling and Emissions Reduction (40 CFR 82 subpart F) contains requirements promulgated under CAA section 608 . The section 608 requirements are intended to: “reduce emissions of class I and class II refrigerants and their substitutes to the lowest achievable level,” b y designing standards for the use of “refrigerants during the service, maintenance, repair, and disposal of appliances” (40 CFR 82.150). To support this goal , EPA is propo sing to update its reclamation standards. A. Overview of Current Reclamation Standards Recovered refrigerant often contains contaminants, including air, water, particulates, acids, chlorides, high boiling residues, and other impurities. Reclamation is the re -processing and upgrading of a recovered controlled substance through such mechanisms as filtering, drying, distillation, and chemical treatment in order to restore the substance to a specified standard of performance. EPA regulations at 40 CFR 82.1 52 define reclaim as “. . . .to reprocess refrigerant to all of the specifications in appendix A to 40 CFR part 82, subpart F (based on ARI Standard 700 - 1995, Specification for Fluorocarbons and Other Refrigerants ) that are applicable to that refrigerant and to verify

that the refrigerant meets these specifications using the anal ytical methodology

prescribed in Section 5 of appendix A of 40 CFR part 82, subpart F.” Before a used refrigerant may

re - enter the market place, it must be reclaimed to the purity l evel specified b y the regulations, and its purity must be verified (40 CFR 82.15 4 (g)) . B. Benefits of Reclamation EPA believes that proper recovery , recycling or reclamation, and reuse of HCFC - 22 and other ODS refrigerants is an essential component of stratospheric protection. Refrigerant reuse is preferable to venting or destruction. Recovery and reuse reduces emissions of HCFCs to the atmosphere. Reuse also reduces the amount of virgin material that needs to be produced . Section*** E.O. 12866 Review

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Page 85 of 113 608 of the CAA prohibits knowingl y venting HCFCs due to the adverse effects on stratospheric ozone, and EPA regulations require that HCFCs be recovered during service or disposal of appliances and then be either recycled, reclaimed, or destro yed. Recovery and reuse is becoming increasingl y important as the U.S. continues its progress in the phaseout of ODS. As discussed earlier in this preamble, in 2015 the U.S. consumption cap for HCFCs will decrease from 3,810 ODP - weighted metric tons to 1,524 ODP - weighted metric ton s (i.e. 10 percent of baseline). C. Regulatory Changes that EPA is Propos ing Under Section 608 Authority 1. Adoption of AHRI 700- 20 12 Standards On July 24, 2003 (68 FR 43786), EPA adopted the requirements of ARI Standard 700 - 1995 into its regulation as appendix A of 40 CFR 82 subpart F. EPA has not updated its use of this standard since then. The current version of the ARI (now AHRI) Standard 700 is 700 - 20 12 , including addenda added in August 200 8 and August 201 2 ( AHRI 700C

- 2008: Appendix C to AHRI Standard 700-

Analytical Procedures for AHRI Standard 700- 06 and AHRI 700D - 2012: Appendix D Gas Chromatograms for AHRI Standard 700- 2012 -Informative , all three of which are included in the docket) . Appendix A to subpart F has not kept pace with these revisions . It lacks the most up - to - date listing of refrigerants , purity requirements and changes to anal ytical methodologies. EPA’s intent is for reclaimer s to use the most recent AHRI standards as reclamation technology

changes, and the agency

would like its regulations to reflect the best technical information and industry practices. For that reason EPA is proposing to revise appendix A to reflect the most recent set of AHRI standards, thereb y keeping abreast of advances in the reclamation industry . Under this option, EPA would replace Appendix A’s current text with the*** E.O. 12866 Review

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Page 86 of 113 text in AHRI700 - 2012 and its appendices. EPA also intends to revise the definition of “reclaim” to reflect this update to appendix A. Alternativel y, rather than continue its practice of modifying the language of appendix A to accommodate revisions to AHRIStandard 700 (in this case, to AHRI Standard 700 - 20 12 ), EPA is proposing to cross - ref erenc e AHRI Standard 700 - 20 12 directly , eliminating the need for reproducing the entire standard in appendix A. Such an approach, known as incorporation b y reference, allows a Federal agency to comply

with the requirement to publish rules in the Federal Re gister b y referring to materials already published elsewhere. The legal effect of incorporation by reference is that the material is treated as if it were published in the Federal Register. When EPA incorporates material by reference , it references a speci fic version of the material instead of providing a “generic” reference. Here , EPA is proposing to refer specifically to AHRI Standard 700 - 20 12 Specification for Fluorocarbon Refrigerants and not to “AHRIStandard 700” or “the most recent version of AHRIStandard 700.” The proposed regulatory text incorporates b y reference AHRI Standard 700 - 2012 at appendix A to subpart F, and changes the definition of reclaim to the updated standard incorp orated b y reference at appendix A . EPA believes incorporating AHRI Standard 700 - 20 12 by reference, and deleting the text in appendix A, has several advantages. AHRI standards are published standards, they are widel y known to and used b y the persons affec ted b y this regulation, and they are available free of charge at www.ahrinet.org/standards.aspx . Referencing the AHRI standard, in lieu of duplicating it in appendix A, would reduce any potential confusion about the relationship between the two sets of requirements. It would also substantially reduce the amount of material published in the Federal Register and Code of Federal Regulations. On the other hand, EPA recognizes that there is an advantage to including the requirements of the standard in an appendix to its own*** E.O. 12866 Review

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Page 87 of 113 regulation, avoiding the need to search for the 20 12 version of the technical standard and pro viding certainty that compliance with appendix A (although possibly outdated) constitutes compliance with EPA regulations. EPA seeks comment on incorporation by reference of a specific version of the AHRI700 standard , as compared to revising appendix A to reflect a specific version . EPA also seeks comment on whether the definition of “reclaim” should contain other aspects that are not reflected in the AHRI standard, or conversel y, whether there are aspects of the AHRI standard that are not appropriate to include in the regulatory definition. 2 . Notification to EPA if Change in Business Management, Location or Contact Information Reclaimer certification does not transfer when there is a change in ownership. Section 40 CFR 82.164(f) requires the new owner of the reclamation company to certify with EPA within thirty days of the change of ownership; however, there are no provisions that a reclamation company must notify EPA of changes in business management, location o r contact information. EPA believes that notification of changes in business information would improve accountability and benefit reclaimers in the long run. Without accurate information, EPA may not be able to communicate with a reclaimer in a timely mann er, potentially

causing unnecessary

burden to the reclaimer. For example, if EPA does not receive an annual report from a reclaimer, the agency wants to be able to contact the reclaimer b y phone or mail to follow up. If there is no response from the company, EPA sends a certification revocation letter. Prior to revoking a reclaimer certification, EPA would prefer to contact the company to find out what happened to their annual reclaim report. Additionally , as a benefit to the public, the agency wants to ens ure that the website listing certified reclaimers and their contact information is up - to - date. EPA is seeking comment on its proposal to require notification from the reclaimer when there is a change in*** E.O. 12866 Review

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Page 88 of 113 business management, location or contact information (i.e. , for the refrigerant manager who communicates with EPA) . 3 . Reporting and Recordkeeping Requirements EPA’s ability

to verify whether reclaimers are complying with section 608 regulations is limited. Currently , 40 CFR 82.166(h) requires that rec laimers, on an annual basis, report how much material was received, how much they reclaimed, and the amount of waste product generated as a result of reclamation activities. Under paragraph 82.166(g) refrigerant reclaimers must also maintain records of the names and addresses of persons sending them material for reclamation and the quantity of material (combined mass of refrigerant and contaminant) sent to them for reclamation on a transactional basis. However, the regulations do not clearl y state that info rmation must be broken down by refrigerant type. Some reclaimers do submit information broken down b y refrigerant, and EPA ty picall y asks for refrigerant - specific information when it is not provided. This information is used as part of an overall review of refrigerant supply to help ensure the continued smooth transition out of ODS refrigerants. The agency believes it is essential for EPA and the public to have accurate information concerning the amounts of specific ty pes of refrigerants that are available from reclaimers for reuse, and is therefore proposing to clarify the regulations to require disaggregated information for all reclaimed refrigerants as part of the annual reporting. The agency is proposing to revise paragraph 82.166(h) to read: “Reclaimers must maintain records of the quantity of material (the combined mass of refrigerant and contaminants) sent to them for reclamation, the mass of each refrigerant reclaimed, and the mass of waste products. Reclaimers must report this information to the Administrator annually within 30 days of the end of the calendar year. ” This information is ty pically maintained b y reclaimers and in current practice is either included in the initial report to EPA or transmitted in*** E.O. 12866 Review

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Page 89 of 113 response to a specific request ; therefore the agency does not believe this proposed option increase s reporting burden. The agency hopes that this proposed change will clarify what information it needs from reclaimers up front , and will alleviate the need for additional backand - forth between EPA and reclamation companies that in the past were not submitting refrigerant - specific data , thereby potentiall y reducing reporting burden . EPA also believes that in the future it may be beneficial to have an accountability s ys tem that tracks refri gerant material at reclaimer facilities on a longer time scale. 40 CFR 82.164(c) mandates that no more than 1.5 percent of total refrigerant reclaimed shall be released during the reclamation process. However, emissions can occur from leaks in tubing, valv es and other loss pathways and may

not be recorded or tracked. To increase accountability and awareness of any leaks or losses, in the future EPA could require reclaimers to regularl y report, by refrigerant type, how much is in inventory, including storage , regardless of when material was received. Based on information available to the agency (Stratus, 2010), EPA believes that reclaimers generally could support these modest changes. EPA believes that inventory information is routinely

maintained by reclaime rs in the course of normal business activity, and that the burden of reporting it to EPA would be minimal. EPA is seeking input on future possible reporting and recordkeeping changes that would help minimize emissions and facilitate a smooth transition away from ODS. Commenters should consider what evidence, if any, reclaimers should submit to verify their product is meeting AHRI - 700 standards, what format results should be reported in, and whether summary results would be acceptable. EPA is taking comment on the benefits of requiring reporting of testing sample results , and the mechanisms that exist for EPA to validate that samples are representative samples of reclaimer product. Additionally , the agency is seeking information on the various*** E.O. 12866 Review

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Page 90 of 113 mechanisms f

or material loss during the reclamation process, and whether the losses can be quantified. 4 . Technical and Process Information Required in Reclaimer Certification The reclamation regulations at 40 CFR 82.164(e)(2) include a general requirement to submit “a list of equipment used to reprocess and anal yz e the refrigerant.” This requirement, dating to the May

14, 1993 final rule , titled “ Protection of Stratospheric Ozone; Refrigerant Recyling ,” ( 58 FR 28660 ), was included to help EPA ensure that an applicant would own and use equipment that achieves AHRI 700 standards. Given the general language of this requirement, submissions are often incomplete or vague, forcing EPA to request additional information from the applicant. As the reclamation industry h as matured, EPA has developed a more precise understanding of technical information, which, if submitted with a certification, would enable the agency

to more reliabl y assess a reclaimer’s ability to achieve AHRI standards and minimize emissions. While EPA is not proposing changes to this requirement in this rulemaking, EPA seeks comment on whether developing a more robust reclaimer certification process that requires more specific information would clarify EPA’s expectations for submitted certification information and minimize refrigerant leaks . The agency believes that reclaimers maintain this information as part of good business practice, and that the burden of providing it to EPA as part of a certification application would be small. Specifically , the agency is seeking comment on the importance for EPA to collect the following information and the burden that would be imposed by requiring it to be submitted: (1) Detailed description of technology applied to achieve the applicable AHRI Standard 700 requirements. If home - engineered, the certification would include a schematic. If off

- the - shelf, the applicant would provide (1) the make, manufacturer, and serial*** E.O. 12866 Review

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Page 91 of 113 number; (2) Batch capacity ; (3) Ty pes of refrigerant to be reclaimed by reclaimer and standard op erating procedures for reclaiming those refrigerants; (4) Information on the instrumentation and methodology

that meets AHRI 700 requirements for determination of acidity , determination of moisture, determination of chloride, determination of non - condensab le, determination of impurities, including other refrigerants, or, for reclaimers that send refrigerant to an outside lab for anal ys is, a certified letter from the outside lab identifying the methodology that meets the AHRI700 standards. In addition, the agency is considering adding a provision to the regulations that clarifies what information is necessary in order for EPA to approve certification. The agency is also considering a new requirement that reclaimers submit a partial recertification if they pl an to accept refrigerants that are not addressed in its current certification or if the reclaimer decides to use a different type of reclamation equipment , thereby ensuring the agency can assess whether they have the capability

to properl y process all refrigerants they receive. EPA welcomes comment on other triggers for requiring recertification, for example, a significant change in the ty pe of reclamation equipment. 5 . Expanded End Product Testing Requirements EPA is interested in potentially expanding the requirements for sampling and testing of reclaimed refrigerant in a future agency rulemaking . Currently , the definition of “reclaim” says that reclaimers are required to verify that reclaimed refrigerant meets the AHRIStandard specifications using the analy tical methodology

in Section 5 of appendix A of subpart F. Section 5 contains requirements for sampling, test methods, and maximum permissible contaminant levels of reclaimed refrigerant . However, the regulations do not specify how often, or on what basis, reclaimers must use the Section 5 methodology . EPA’s concern is that it does not have current knowledge on the quality of reclaimer product, and the agency is therefore interested in*** E.O. 12866 Review

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Page 92 of 113 ways to verify

that reclaimed refrigerant is of acceptab le quali ty . It is possible that some reclaimed refrigerant entering the market does not meet the AHRI standard and is being illegall y vented due to the high cost associated with disposition or destruction of the material. Section 5 of appendix A , as well as AHRI 700 - 2012, contains test methods but does not specify testing frequency or requirements for reporting test results. EPA is seeking information on what specific criteria end product testing and reporting could be based on in order to help val idate that reclaimed product is meeting AHRI 700 standards. Specifically , the agency is interested in: sampling procedures and specific testing protocols beyond what is currentl y in section 5 ; how frequently testing should be required; how a batch of refri gerant would be defined and whether testing should be on a per batch basis, or if multiple tests should be required and on what time frame. Additionally , EPA is interested in how it could ensure product quality , for example, by

requiring third party certif ication for all reclaimers , and the advantages and disadvantages to such an approach. The agency notes that technicians must be certified by a third party in order to service equipment containing ODS, and is interested in how a third party certification fo r reclaimers c ould be similar or different. **VI I**  **I. 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.” Accordingl y, EPA submitted this action to the Office of Management and Budget (OMB) for review under Executive Orders 12866 and 13 563 (76 FR 3821, January 21, 2011) and any

changes made in response to OMB recommendations have been documented in the docket for this action.*** E.O. 12866 Review

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Page 93 of 113 EPA did not conduct a specific anal ys is 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 Allo wance 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 Precharged Imp orts . A memorandum summarizing these anal ys es is available in the docket. B. Paperwork Reduction Act 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.*** E.O. 12866 Review

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Page 94 of 113 However, EPA is proposing m odifying the regulations covering recordkeeping and reporting contained in the existing regulations at 40 CFR part 82, subpart F, which were approved b y OMB under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq . under OMB control number 2060 - 0256. The two modifications, (1) requiring reclaimers to provide updated contact information and (2) requiring reclaimers to provide the amount of each refrigerant reclaimed in their annual reporting, are already customary business practices and therefore do not affect information collection burden. In both of these cases, EPA is modifying the regulations so they

align with current practices. C. Regulatory Flexibility Act (RFA) The Regulatory

Flexibility

Act (RFA) generall y 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 a genc y 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. For purposes of assessing the impacts of this rule on small entities, a small entity

is defined as: (1) a smal l 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 - for-profit enterprise which is independentl y owned and operated and is not dominant in its field. This action will affect the following categories:

- Industrial Gas Manufacturing entities (NAICS code 325120), including fluorinated hydrocarbon gas manufacturers and reclaimers;*** E.O. 12866 Review

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Page 95 of 113 - Other Chemical and Allied Products Merchant Wholesalers (NAICS code 42 4 69 0 ), 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 air- conditioning equipment and commercial and industrial refrigeration equipment manufacturers;

- Air- Conditioning Equipment and Supplies Merchant Wholesalers (NAI CS code 423730) , including air- conditioning (condensing unit, compressors) merchant wholesalers;

- Electrical and Electronic Appliance, Television, and Radio Set Merchant Wholesalers (NAICS code 423620), including air- conditioning (ro om units) merchant wholesalers;

- Plumbing, Heating, and Air- Conditioning Contractors (NAICS code 238220), including Central air- conditioning system and commercial refrigeration installation , HVACR contractors ; and

- Refrigerant reclaimers, manufacturers of recovery /recycling equipment , and refrigerant recovery

/recycling equipment testing organizations. After considering the economic impacts of today ’s proposed 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

anal ys es is to identify

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Page 96 of 113 address regulatory

alternatives “which minimize any significant economic impact of the rule on small entities.” 5 USC 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. Without allowances for the 2015 - 2019 regulatory period, exis ting regulations would prohibit production and import of HCFCs, thus the proposal to issue allowances is not a potential burden to small business. EPA’s HCFC Phaseout Benefits and Costs Memo, included in the docket for this rulemaking , provides a summary o f previous small business anal ys es . Also, under section 608 of the CAA and 40 CFR subpart F, EPA is proposing some minor modifications to recordkeeping and reporting provisions ; however, these proposed changes are to lessen burden on small reclamation businesses by ensuring that businesses that have already reported do not have to spend additional time responding to follow - up requests from EPA , and so that EPA can reach businesses in a timely manner with any necessary information . We have therefore conc luded that today ’s proposed rule will relieve regulatory burden for all affected small entities. We continue to be interested in the potential impacts of the proposed rule on small entities and welcome comments on issues related to such impacts. D. Unfund

ed 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 r ules that are necessary

for the national security or the ratification or implementation of international treaty obligations. This*** E.O. 12866 Review

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Page 97 of 113 rule implements the 2010 milestone for the phase - out of HCFCs under the Montreal Protocol. Therefore, this action is not subje ct to the requirements of sections 202 or 205 of the UMRA. This action is also not subject to the requirements of section 203 of UMRA because it contains no regulatory

requirements that might significantly or uniquel y 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 does not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. This action is expected to primarily affect producers, importers, and exporters of HCFCs. Thus, Executive Order 13132 does not apply to this action. In the spirit of Executive Order 13132, and consistent with EPA policy to promote communications between EPA and State and local governments, EPA specifically solicits comment on this proposed action from State and local officials . 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 significantl y or uniquely affect the communities of Indian tribal governments. It does not impos e any enforceable duties on communities of Indian tribal governments. Thus, Executive Order 13175 does not apply to this action. EPA specificall y solicits additional comment on this proposed action from tribal officials. G. Executive Order 13045: Protection of Children from Environmental Health and Safety Risks*** E.O. 12866 Review

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Page 98 of 113 This action is not subject to EO 13045 (62 F.R. 19885, April 23, 1997) because it is not economicall y significant as defined in EO 12866. The Agency nonetheless has reason to believe that the environmental health or safety risk addressed by this action may have a disproportionate effect on children. Depletion of stratospheric ozone results in greater transmission of the sun’s ultraviolet (UV) radiation to the earth’s surface. The following studies describe the effects of excessive exposure to UV radiation on children: (1) Westerdahl J, Olsson H, Ingvar C. “At what age do sunburn episodes play a crucial role for the development of malignant melanoma,” Eur J Cancer 1994: 30A: 1647 - 54; (2) Elwood JM Ja pson 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 preventio n of skin diseases,” 1 st 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 nonmelanocy

tic skin cancer I, Basal cell carcinoma,” Arch Dermatol 1995; 131: 157 - 63; (7) Arms trong, DK. “How sun exposure causes skin cancer: an epidemiological perspective,” Prevention of Skin Cancer. 2004. 89 - 116. This action implements the U.S. commitment to reduce the total basket of HCFCs produced and imported to a level that is 90 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 c lass I phaseout, it is one of the most significant remaining actions the U.S. can take to complete the*** E.O. 12866 Review

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Page 99 of 113 overall phaseout of OD S and further decrease impacts on children’s health from stratospheric ozone depletion. H. Executive Order 13211: Actions that Significantly Affect Energy Supply, Distribution, or Use This action is not a “significant energy action” as defined in Executive Order 13211 (66 FR 28355 , May

22, 2001), because it is not likely to have a significant adverse effect on the supply , distribution, or use of energy . The rule issues allowances for the production and consumption of HCFCs. I. National Technology Transf er and Advancement Act Section 12(d) of the National Technology Transfer and Advancement Act of 1995 ("NTTAA"), Public Law No. 104 - 113, 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do s o 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 b y voluntary consensus standards bodies. The NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary

consensus standards. This proposed rule involves technical standards. Through this action, EPA is proposing to incorporate b y reference AHRI Standard 700 - 2012 Specification for Fluorocarbons and Other Refrigerants and its appendices , which is available in the docket for this rulemaking and online at http://www.ahrinet.org/search+standards.aspx . This industry standard for refrigerant reclamation is an updated version of the standard contained in the current regulations.*** E.O. 12866 Review

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Page 100 of 113 EPA welcomes comments on this aspect of the proposed rulemaking and, specificall y, invites the public to identify potentiall y- applicable voluntary consensus standards and to explain why such standards should be used in this regulation. J. Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations Executive Order (EO) 12898 (59 FR 7629 , Feb. 16, 1994) establishes federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low income populations in the U.S. EPA has determined that this action will not have disproportionately high and adverse human health or environmental effects on minority or low - income populations beca use the 201 5 phaseout step increases the level of environmental protection for all affected populations without having any disproportionately high and adverse human health or environmental effects on any population, including any minority or low - income population **.** This action continues the implementation of the U.S. commitment to reduce the total basket of HCFCs produced and imported to a level that is 90 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 c lass 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. **Protection of Stratospheric Ozone: Adjustments to the Allowance System for**  **Controlling HCFC Production, Import, and Export (Page 100 of 112)** *** E.O. 12866 Review

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Page 101 of 113 **List of Subj ects in 40 CFR Part 82**  Environmental protection, Administrative practice and procedure, Air pollution control, Chemicals, Exports, Hydrochlorofluorocarbons, Imports , Incorporation by reference **DATED: ___________________________**

**___________________________________ Gina McCarthy**  **, Administrator.**  40 CFR part 82 is proposed to be amended to read as follows: PART 82 - PROTECTI ON OF STRATOSPHERIC OZONE 1. The authority citation for part 82 continues to read as follows: **Authority:** 42 U.S.C. 7414, 7601, 7671

– 7671q. **Subpart A —** **Production and Consumption Controls** 2. Amend §82.3 by

adding the definition of “Use of a class II controlled substance” to read as follows: **§82.3 Definitions for class I and class II controlled substances.**  * * * U se of a class II controlled substance , for the purposes of 82.15 of this subpart, includes but is not limited to use in a manufacturing process, use in manufacturing a product, intermediate uses such as formulation or packaging for other subsequent uses, a nd use in maintaining, servicing, or repairing an appliance or other piece of equipment. Use of a class II controlled*** E.O. 12866 Review

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Page 102 of 113 substance also includes use of that controlled substance when it is removed from a container used for the transportation or storage of the substance but does not include use of a manufactured product containing a controlled substance . * * * * * 3. Amend §82.15 by revising paragraph (g)(4) to become (g)(4)(i), and adding (g)(4)(ii) to read as follows: **§82.15 Prohibitions for class II**  **controlled substances.** (g)(1) * * * (4)(i) Effective January 1, 2015, no person may

introduce into interstate commerce or use any cl ass II controlled substance not governed by paragraphs (g)(1) through (3) of this section (unless used, recovered and recycl ed) for any purpose other than for use in a process resulting in its transformation or its destruction; for use as a refrigerant in equipment manufactured before January 1, 2020; for use as a fire suppression streaming agent listed as acceptable for use or acceptable subject to narrowed use limits for nonresidential applications in accordance with the regulations at s ubpart G of this p art; for export to Article 5 Parties under §82.18(a); as a transshipment or heel; for exemptions permitted under paragraph ( f) of this section ; or for exemptions permitted under paragraph (g)(4)(ii) of this section. (ii) Effective January

1, 2015, use of HCFC - 225ca or HCFC - 225cb as a solvent (excluding use in manufacturing a product containing HCFC - 225ca or HCFC - 225cb) is not subject to the use prohibition in paragraph (g)(4)(i) of this section if the person using the HCFC - 225ca or HCFC - 225cb placed the controlled substance into inventory before January

1, 2015. This paragraph does not create an exemption to the prohibition on introduction into interstate commerce in paragraph (g)(4)(i) of this section. * * * * **** E.O. 12866 Review

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Page 103 of 113 4. Amend §82.16 by revising paragraph (a), (d) and (e) and removing paragraph (h) 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 substance s apportioned under §§82.17 and 82.19: Calendar- ye ar 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 0 125 125 125 2011 0 32.0 4.9 0 125 125 125 2012 0 17.7 4.9 0 125 125 125 2013 0 30.1 4.9 0 125 125 125 2014 0 26.1 4.9 0 125 125 125 2015 0 21.7 0.37 0 5.0 0 0 2016 0 21.7 0.32 0 5.0 0 0 2017 0 21.7 0.26 0 5.0 0 0 2018 0 21.7 0.21 0 5.0 0 0 2019 0 21.7 0.16 0 5.0 0 0 Calendar- ye ar HCFC Consumption Allowances*** E.O. 12866 Review

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Page 104 of 113 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 2015 0 11.8 1.7 100 8.3 0 0 2016 0 9.4 1.5 100 8.3 0 0 2017 0 7.1 1.2 100 8.3 0 0 2018 0 4.7 1.0 100 8.3 0 0 2019 0 2.4 0.7 100 8.3 0 0

* * * * * (d) Effective January

1, 2015, no person may

produce class II controlled substances not previously

controlled for any

purpose other than for use in a process resulting in their transformation or their destruction, for use as a refrigerant in equipment manufact ured before January 1, 2020, for use as a fire suppression streaming agent listed as acceptable for use or acceptable subject to narrowed use limits for nonresidential applications in accordance with the regulations at s ubpart G of this p art; , for export under § 82.18(b) using unexpended Article 5 allowances, or for export under § 82.18(a) using unexpended export production allowances, or for exemption permitted in § 82.15(f). Effective January 1, 2015, no person may

import class II controlled substances not s ubject to the requirements of paragraph (b) or (c) of this section (other*** E.O. 12866 Review

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Page 105 of 113 than transhipments, heels or used class II controlled substances) for any purpose other than for use in a process resulting in their transformation or their destruction, for exemptio n permitted in § 82.15(f), for use as a refrigerant in equipment manufactured prior to January 1, 2020, or for use as a fire suppression streaming agent for nonresidential applications in accordance with the regulations at s ubpart G of this p art. * * * * * (e)(1) Effective January

1, 2020, no person may

produce HCFC - 22 or HCFC - 142b for any purpose other than for use in a process resulting in their transformation or their destruction, for export under § 82.18(a) using unexpended Article 5 allowances, or for export under § 82.18(b) using unexpended export production allowances, or for exemptions permitted in § 82.15(f). Effective January

1, 2020, no person may

import HCFC - 22 or HCFC - 142b for any purpose other than for use in a process resulting in their trans formation or their destruction, or for exemptions permitted in § 82.15(f). (2) Effective January

1, 2020, no person may

produce HCFC - 123 for any purpose other than for use in a process resulting in its transformation or its destruction, for use as a ref rigerant in equipment manufactured before January 1, 2020, for export under § 82.18(a) using unexpended Article 5 allowances, or for export under § 82.18(b) using unexpended export production allowances, or for exemptions permitted in § 82.15(f). Effective January 1, 2020, no person may import HCFC - 123 for any purpose other than for use in a process resulting in its transformation or its destruction, for use as a refrigerant in equipment manufactured before January 1, 2020 or for exemptions permitted in § 8 2.15(f). * * * * **** E.O. 12866 Review

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Page 106 of 113 (h) [Remove and Reserve]. * * * * * 5. Amend §82.17 to read as follows: **§82.17 Apportionment of baseline production allowances for class II controlled substances.**  The following persons are apportioned baseline production allowances for HCFC - 22, HCFC 141b, HCFC - 142b, HCFC - 123, HCFC - 124, HCFC - 225ca and HCFC - 225cb, as set forth in the following table: **Person Controlled Substance**  **Allowances (kg)** AGC Chemicals Americas HCF C - 225ca 266,608 HCFC - 225cb 373,952 Arkema HCFC - 22 46,692,336 HCFC - 141b 24,647,925 HCFC - 142b 484,369 DuPont HCFC - 22 42,638,049 HCFC - 124 2,269,210 Honey well HCFC - 22 37,378,252 HCFC - 141b 28,705,200 HCFC - 142b 2,417,534 HCFC - 124 1,759,681 MDA Manufacturing HCFC - 22 2,383,835 Solvay Specialty Polymers USA, LLC HCFC - 142b 6,541,764

* * * * * 6. Amend §82.19 to read as follows: **§82.19 Apportionment of baseline consumption allowances for class II controlled**  **substances.** The following persons are apportioned baseline consumption allowances for HCFC - 22, HCFC 142b, HCFC - 142b, HCFC - 123, HCFC - 124, HCFC - 225ca and HCFC - 225cb, as set forth in the following table:*** E.O. 12866 Review

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Page 107 of 113 **Person Controlled Substance**  **Allowances (kg)** ABCO Refrigeration Supply HCFC - 22 279,366 AGC Chemicals Americas HCFC - 225ca 285,328 HCFC - 225cb 286,832 Altair Partners HCFC - 22 302,011 Arkema HCFC - 22 48,637,642 HCFC - 141b 25,405,570 HCFC - 142b 483,827 HCFC - 124 3,719 Carrier HCFC - 22 54,088 Continental Industrial Group HCFC - 141b 20,315 Coolgas, Inc. HCFC - 141b 16,097,869 Combes Investment Property HCFC - 22 1,040,458 HCFC - 123 19,980 HCFC - 124 3,742 Discount Refrigerants HCFC - 141b 994

DuPont HCFC - 22 38,814,862 HCFC - 141b 9,049 HCFC - 142b 52,797 HCFC - 123 1,877,042 HCFC - 124 743,312 H.G. Refrigeration Supply HCFC - 22 40,068 Honey well HCFC - 22 35,392,492 HCFC - 141b 20,749,489 HCFC - 142b 1,315,819 HCFC - 124 1,284,265 ICC Chemical Corp. HCFC - 141b 81,225 ICOR HCFC - 124 81,220 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 HCFC - 123 72,600 HCFC - 124 50,380 Perfect Technology

Center, LP HCFC - 123 9,100 Refricenter of Miami HCFC - 22 381,293 Refricentro HCFC - 22 45,979*** E.O. 12866 Review

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Page 108 of 113 R- Lines HCFC - 22 63,172 Saez Distributors HCFC - 22 37,936 Solvay Fluorides, LLC HCFC - 22 3,781,691 HCFC - 141b 3,940,115 Solvay Specialty Polymers USA, LLC HCFC - 142b 194,536 Tulstar Products HCFC - 141b 89,913 HCFC - 123 34,800 HCFC - 124 229,582 USA Refrigerants HCFC - 22 14,865

* * * * * 7. Amend §82.20 by

revising paragraph (a) to read as follows: **§82.20 Availability of consumption allowances in addition to baseline consumption allowances for class II controlled substances.**  (a) A person may

obtain at any

time during the control period, in accordance with the provisions of this section, consumption allowances equivalent to the quantity of class II controlled substances that the person exported from the U.S. and its territorie s to a foreign state in accordance with this section, when that quantity of class II controlled substance was produced in the U.S. or imported into the U.S. with expended consumption allowances. Both the export of the class II controlled substance and the request for additional consumption allowances must occur during a calendar year in which consumption allowances were issued for that class II controlled substance. (1) * * * * * * * * 8. Amend a

ppendix B to s ubpart A and insert footnote B following footnote A, to read as follows: **Appendix B to Subpart A of Part 82 —**  **Class II Controlled Substances A,B** *** E.O. 12866 Review

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Page 109 of 113 **Controlled Substance ODP**  1. HCFC - 21 (CHFCl2) Dichlorofluoromethane 0.04 2. HCFC - 22 (CHF2Cl) Monochlorodifluoromethane 0.055 3. HCFC - 31 (CH2FCl) Monochlorofluoromethane 0.02 4. HCFC - 121 (C2HFCl4) Tetrachlorofluoroethane 0.01 - 0.04 5. HCFC - 122 (C2HF2Cl3) Trichlorodifluoroethane 0.02 - 0.08 6. HCFC - 123 (C2HF3Cl2) Dichlorotrifluoroethane 0.02 7. HCFC - 124 (C2HF4Cl) Monochlorotetrafluoroethane 0.022 8. HCFC - 131 (C2H2FCl3) Trichlorofluoroethane 0.007 - 0.05 9. HCFC - 132 (C2H2F2Cl2) Dichlorodifluoroethane 0.008 - 0.05 10. HCFC - 133 (C2H2F3Cl) Monochlorotrifluoroethane 0.02 - 0.06 11. HCFC - 141 (C2H3FCl2) Dichlorofluoroethane 0.005 - 0.07 12. HCFC - 141b (CH3CFCl2) Dichlorofluoroethane 0.11 13. HCFC - 142 (C2H3F2Cl) chlorodifluoroethane 0.008 - 0.07 14. HCFC - 142b (CH3CF2Cl) Monochlorodifluoroethane 0.065 15. HCFC - 151 (C2H4FCl) Chlorofluoroethane 0.003 - 0.005 16. HCFC - 221 (C3HFCl6) Hexachlorofluoropropane 0.015 - 0.07 17. HCFC - 222 (C3HF2Cl5) Pentachlorodifluoropropane 0.01 - 0.09 18. HCFC - 223 (C3HF3Cl4) Tetrachlorotrifluoropropane 0.01 - 0.08 19. HCFC - 224 (C3HF4Cl3) Trichlorotetrafluoropropane 0.01 - 0.09 20. HCFC - 225 (C3HF5Cl2) Dichloropentafluoropropane 0.02 - 0.07 21. HCFC - 225ca (CF3CF2CHCl2) Dichloropentafluoropropane 0.025 22. HCFC - 225cb (CF2ClCF2CHClF) Dichloropentafluoropropane 0.033 23. HCFC - 226 (C3HF6Cl) Monochlorohexafluoropropane 0.02 - 0.1 24. HCFC - 231 (C3H2FCl5) Pentachlorofluoropropane 0.05 - 0.09 25. HCFC - 232 (C3H2F2Cl4) Tetrachlorodifluoropropane 0.008 - 0.1 26. HCFC - 233 (C3H2F3Cl3) Trichlorotrifluoropropane 0.007 - 0.23 27. HCFC - 234 (C3H2F4Cl2) Dichlorotetrafluoropropane 0.01 - 0.28 28. HCFC - 235 (C3H2F5Cl) Monochloropentafluoropropane 0.03 - 0.52 29. HCFC - 241 (C3H3FCl4) Tetrachlorofluoropropane 0.004 - 0.09 30. HCFC - 242 (C3H3F2Cl3) Trichlorodifluoropropane 0.005 - 0.13 31. HCFC - 243 (C3H3F3Cl2) Dichlorotrifluoropropane 0.007 - 0.12 31. HCFC - 244 (C3H3F4Cl) Monochlorotetrafluoropropane 0.009 - 0.14 33. HCFC - 251 (C3H4FCl3) Monochlorotetrafluoropropane 0.001 - 0.01 34. HCFC - 252 (C3H4F2Cl2) Dichlorodifluoropropane 0.005 - 0.04 35. HCFC - 253 (C3H4F3Cl) Monochlorotrifluoropropane 0.003 - 0.03 36. HCFC - 261 (C3H5FCl2) Dichlorofluoropropane 0.002 - 0.02 37. HCFC - 262 (C3H5F2Cl) Monochlorodifluoropropane 0.002 - 0.02 38. HCFC - 271 (C3H6FCl) Monochlorofluoropropane 0.001 - 0.03*** E.O. 12866 Review

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Page 110 of 113 a* * * b This table includes all isomers of the substances above, regardless of whether the isomer is explicitly

listed on its own. * * * * * **Su b**  **part E —** **The Labeling of Products Using Ozone -** **Depleting Substances** 9. Amend the title of §82.110(c) to correctly reference controlled substances and read as follows : **§ 82.110**  **Fo rm of label bearing warning statement.**  (b) * * * (c) Combined statement for multiple controlled substances If a container containing or a product contains or is manufactured with, more than one class I or class II substance, the warning statement may

include the names of all of the substances in a single warning statement, provided that the combined statement clearl y distinguishes which substances the container or product contains and which were used in the manufacturing process. * * * * * 10. Amend § 82.112(d) to correctl y refer to class I and class II substances and read as follows: **§82.112 Removal of label bearing warning statement.** (c) * * * (d) Manufacturers, distributors, wholesalers, retailers that sell spare parts manufactured with controlled substances solely for repair Manufacturers, distributors, wholesalers, and retailers that purchase spare parts manufactured with a class I or class II substance from another manufacturer or supplier, and sell such spare parts for the sole purpose of repair , are not required to pass through an applicable warning label if such products are removed from the original packaging provided by the manufacturer from whom the product s are purchased. * * * * * * * **** E.O. 12866 Review

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Page 111 of 113 11. Amend § 82.122(a)(1) b y correctly referencing the exemption in 82.106(b)(4) to read as follows: **§82.122 Certification, recordkeeping, and notice requirements.** (a) Certification. (1) Persons claiming the exemption provided in § 82.106(b)(4) must submit a written certification to the following address: Labeling Program Manager, Stratospheric Protection Division, Office of Atmospheric Programs, 6205 - J, 1200 Pennsylvania Ave., NW, Washington DC 20460. (2) * * * * * * * * **Subpart F —** **Recycling and Emissions Reductions** 12 . Amend § 82 .152 by revising the following definition to read as follows: **§82.152 Definitions.** * * * Reclaim refrigerant means to reprocess refrigerant to all of the specifications in AHRI Standard 700 - 2012 Specification for Fluorocarbon Refrigerants (incorporated by reference at appendix A to 40 CFR part 82 subpart F) that are applicable to that refrigerant and to verify that the refrigerant meet these specifications using the anal ytical methodology prescribed therein. * * * * * 1 3 . Amend § 82.164(f) to read as follows: **§82.164 Reclaimer Certification.** (e) * * * (f) Certificates are not transferrable. In the event of a change in ownership of an entity which reclaims refrigerant, the new owner of the entity shall certify

within 30 day s of the change o f ownership pursuant to this section. In the event of a change in business management , location or contact information, the owner of an entity shall notify EPA within 30 day s of the change.*** E.O. 12866 Review

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Page 112 of 11 3 * * * * * 1 4 . Amend § 82.166 by amending paragraph (h) to read as follows: **§82.166 Reporting and Recordkeeping Requirements.** (a) * * * (h) Reclaimers must maintain records of the quantity of material (the combined mass of refrigerant and contaminants) sent to them for reclamation, the mass of each refrigerant reclaimed, and the mass of waste products. Reclaimers must report this information to the Administrator annually

within 30 day s of the end of the calendar year. * * * * * 15 . Remove all text in appendix A to subpart F and incorporate b y reference AHRIStandard 700 - 2012: Specifications for Fluorocarbon Refrigerants : **Appendix A to Subpart F of Part 82 —**  **Specifications for Fluorocarbon and Other Refrigerants**  AHRIStandard 700 - 2012: Specifications for Fluorocarbon Refrigerants specifies acceptable levels of contaminants (purity requirements) for fluorocarbon refrigerants and lists acceptable test methods. This appendix incorporates by reference AHRI Standard 700 - 2012: Specifications f

or Fluorocarbon Refrigerants (2012 edition, Air- Conditioning, Heating, and Refrigeration Institute). The entire standard, including Appendices A and B, are made part of the regulations in part 82 subpart F. Accordance with the specifications in AHRI Standard 700 - 2012 is required b y the relevant regulations of this subpart. The Director of the Federal Register approves this incorporation b y reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. You may obtain a copy

from AHRI online at: http://www.ahrinet.org or b y contacting AHRI b **y phone** : (+1) 703 - 524 - 8800 or b **y fax:** (+1)*** E.O. 12866 Review

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Page 113 of 113 703 - 562 - 1942. You may

also obtain a copy

in person or by

mail at Air- Conditioning, Heating, and Refrigeration Institute (AHRI) 2111 Wilson Blvd, Suite 500 Arlington, VA 22201, USA. AHRIStandard 700 - 2012 is also available online at http://www.regulations.gov/ by searching for docket number: EPA - HQ - OAR - 2013 - 0263. You may also inspect a cop y at U.S. E PA’s Air Docket; EPA West Building, Room 3334; 1301 Constitution Ave., NW.; Washington, DC or at the National Archives and Records Administration (NARA). For questions regarding access to these standards, the telephone number of EPA’s Air Docket is 202

– 566

– 1742. For information on the availability of this material at NARA, call 202

–741

–6030, or go to: http://www.archives.gov/federal_register/ code_of_federal_regulations/ibr_ locations.html. * * * * *