## Just	Venting

The	phase	out	of	HCFC’s	in	the	United	States	has	been	ramped	up (yes up	not	down) in	2013. Why	or	how	could	this	happen? The	long	answer	is	very	long,	so in	a	large	nutshell it	is	something	li ke this:		The	EPA	granted	allocation (truly	a	privilege)	to	fortunate companies	to	produce	or	import	a	specified	number	of	rights	(equates to kg ’s /or	equal	#	of lbs. ).		When	two	right	holding	companies	sued	for	a conversion	of foam blowing	agent	gas	to	a	refrigerant	gas,	they	won	in court	an d	the	EPA	made	the	adjustments.	Since	no	flies	were	on	the	wall a	little	speculation	combined	with	some	facts	gives	us	this understanding	of	what	happened. It	looks	like	the	following: There	are s ome	very	large	chemical	companies that got	proactive	and	th reate ned to	sue	if	they	lost	any	of	their	allocation. So	to	avoid	this	conflict	some entity	of	the	US	Gove rnment	(N ot	the	EPA	because	the	EPA sincerely wanted	a	cut	b ack	in	ozone	depleting	chemicals,	on	second	thought	they may	be	wanting	to	avoid	another	l awsuit. ) arbitrarily increa sed	the allocation	by	25	million pounds	of	gas	(825	full	tractor	trailer	loads) to make	everyone	happy	(tongue	in	cheek	as	you	will	see)

. The	industry	operated	with confidence and	good	faith that as	per the EPA	website the	EPA w as	going	to	reduce	allocation	which	would increase prices , so reclamation practices would	thrive as	well	as	to encour age	the	production	of	less	harmful	chemic als?			But,	the	opposite happened	and	some	of	the	victims	are	as	follows:
EPA	certified reclaimers.		Before	the	25	million	pounds	was	added to	the market,	the reclamation	i ndustry was	paying contractors $8	p er pound for	used	refri gerants.		Where	as allocation	holders of	R22	can	access	gas as	low	as	50	cents	per	pound	(only	$.50).		Do	the	math ;	if	you	were r eclaiming	R22	gas	for	a	living, you	may	go	bankrupt. To	spell	it	out,	if you	are	competing	in	a market	and	your	cost	of	goods	is 8	dollars for	the used	gas,	a	dollar	or	so	to	reclaim,	transportation,	testing,	and	retesting, packaging and	de struction	cost	of	bad	gas,	etc.	etc

. While	at	the	same

### time	your	competition	is	paying	much	less	than	a	dollar	per	pound	for

virgin	raw	materials,	which	also	includes	packaging,	and	freight,	you	do not	have	a	chance	nor	does	the	environment.
Prior	to	the 25	million	pounds	being	added	to	the	market, market prices were	moving	toward	$ 16

- $ 1 8 per	pound

. Thus	many	sales	to	the aftermarket were	at these	numbers. All	honest	business	minds	would perceive	the	sudden	increase	in	allocation	would	cause	a	drop	in	prices. Thus	the	pressure	put	on vendor/customer	relati onships	is unprecedented

. Let’s	not	forget	th e	people	(everyone)	who	will be	exposed	to	the	sun withou t	the	full	benefit	of	the	ozone. What	can	be	done?		Probably	nothing,	as	the	governme nt	has dug	in it’ s heels	and	the	EPA	has	to	enforce	this	bazaar	rule	against	all	their principals	of	environmental	protection. Who	wins?		No	one,	not	ev en	the	big	winn ers	in	court,	as they	flood	the market	with	gas,	the	prices	will	fall	and	they	will	be	deemed	insensitive to	the	market	and	environmen t.		Not	to	mention	they	also	will be exposed to	the	sun	with	less	ozone	pro tection. Also	worth	mentioning	m any	allocation holders	would	gladly	forfeit their	allotment of	HCFC’s to	maintain	the	smooth	transition	the	EPA	was working	on. Equipment	manufacturers	would	have	argued	for	an	increase	of	R22. The	reason	is	the	EPA	took	away	their	(equipment	manufacturers) ability	to charge	their	own	products.		This	rule	however	put	the responsibility	of	charging	the	gas	into	the	equipment	on	the	HVAC contractor.		The	contractor	will	often	place	his	service charge	on	the R22	gas,	thus making	the	new	R22	equipment	less	marketable.		In other words,	the	equipment	manufacturers	may	have	hoped	that	the	glut	of R22	would	help	their	equipment	sales,	but	that	is	not	the	case.



## Just	Venting

## A	Smooth	Transition	away	from	HCFC’s
A	Goal	of	the	EPA *Allocation	of	HCFC’s	in	2012,	55	million pounds *Price	of	HCFC22	in	2012,	$10.	/lb. *Reclamation	is	thriving *Non

- ozone	depleting	replacement	products	gaining	market	share *Allocation	January	2013,	39	million	pounds *Price	of	HCFC22	in	February	2013,	$16.	/lb. *Reclamation	is	able	to	fund	greater volume *Blends	are	doing	great *Allocation	April	2013,	63	million	pounds *Price	of	HCFC’s,	under	2012	prices *Supply	and	demand	explains	it	all *Reclamation	is	sick,	and	may	die *Who	needs	blends? *Is	this	a	smooth	transition?

### The following	are	some	formal	request	as	well	as	informal

ones,	that	were	made	an d	no	response	was	ever	received:

May	17,	2013 Hello	Pete, Do	you	know	anyone	in	EPA	compliance,	as	this	matter	is	quite important	and	a	reliable	answer	is	required?
Before	I cut	a	deal	to	purchase	some	HCFC142b	vested	rights transferred	to	HCFC22,	I	have	some	questions	that	need	to	be	answered. The	rights	were	retroactively	awarded	for	the	years	2010,	2011,	2012 and	there	is	no	way	to	know	if	the	rights	are	legitimate.	For	example:	If it	is	found	out	that	the	company	I	bought	these	retroactive	rights	from did	not	produce	all	of	their	HCFC22	allowances	in	2010.		It	would	seem unlikely	you	could	bring	in	additional	2010	allowances	once	a	company walked	away	from	their	unexpende d	HCFC22	rights	in	2010.
The	following	helps	explains	my	concern	as	it	is	clear	that		“THE TRANSFEREE’	would	be	held	liable:

... Vol. 57 No. 147 Thursday, July 30, 1992 p 33754 (Rule) 1/5857 ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 82 ...
(2) The Administrator will determine whether the records maintained by EPA, taking into account any previous transfers and any production, imports or exports of controlled substances

### reported by the transferor, indicate that the

transferor p ossesses, as of the date the transfer claim is processed, unexpended allowances or authorizations sufficient to cover the transfer claim (i.e., the amount to be transferred plus, in the case of transferors of production or consumption allowances), one percent of that amount). Within three working days of receiving a complete transfer claim, the Administrator will take action to notify the transferor and transferee as follows: (i) If EPA's records show that the transferor has sufficient unexpende d allowances or authorizations to cover the transfer claim or if review of available information is insufficient to make a determination, the Administrator will issue a notice indicating that EPA does not object to the transfer and will reduce the transferor's balance of unexpended allowances or authorizations by the amount to be transferred plus, in the case of transfers of production or consumption allowances, one percent of that amount. When EPA issues a no objection notice, the tr ansferor and the transferee may proceed with the transfer. However, if EPA ultimately finds that the transferor did not have sufficient unexpended allowances or authorizations to cover the claim, the transferor and transferee will be held liable for an y violations of the regulations of this subpart that occur

### as a result of, or in conjunction with, the

improper transfer. (ii) If EPA's records show that the transferor has insufficient unexpended allowances or authorizations to cover the transfer c laim, or that the transferor has failed to respond to one or more Agency requests to supply information needed to make a determination, the Administrator will issue a notice disallowing the transfer. Within 10 working days after receipt of notification, either party may file a notice of appeal, with supporting reasons, with the Administrator. The Administrator may affirm or vacate the disallowance. If no appeal is taken by the tenth working day after notification, the disallowance shall be final on t hat day. In	my	humble	opinion	this	answer	should	be	publicized	to	protect everyone	who	may	be	involved,	from	manufacturer	to	unsuspecting purchasers.		Nonetheless	I	need	to	know	if	this	market	is	flooded	with unexpended	rights	who	would	be	liable?

James PS:	Feel	free	to	pass	this	on,	to	expedite	an	answer. PS:	Records	show	that	only	86%	of	the	HCFC	rights	were	expended	in 2010,	so	a	great	deal	of	poundage	(millions	of	pounds)	is	in	question. PS:	The	rule	above	is	referencing	CFC’s	however	I	believe that	HCFC’s are	under	the	same	rule. PS:	Update:	The	rule	above	is	repeated	in	the	current	HCFC	EPA documents.May 1, 2013

Bob Perciasepe Acting Administrator United States Environmental Protection Agency 1200 Pennsylvania Ave, N W (6205J) Wa shington, DC 20460 Re: Docket # EPA

- HQ

- OAR

- 2011

- 0354 Dear Mr. Perciasepe: There is wide spread support for Title VI of the Clean Air Act, which mandated regulations regarding the use and production of chemicals that harm the Earth’s stratos pheric ozone layer

. The Final Rule published on April 3, 2013 does not support the aggressive action the Agency set forth to reduce the production of HCFCs in the United States. The Agency reversed i ts direction, and in fact has allowed an additional 18,000,000 pounds in 2013 and 16,000,000 pounds in 2014 of HCFC

- 22 to be produced and sold into the market place. Consider that this amount of HCFC

- 22 has the impact of 8 coal

-fired power plants annual em ission of CO2. The increase in production and consumption allowances for HCFC

- 22 is not an action that protects the environment. Congress within the Clean Air Act Amendments required the Agency to establish a recovery and reclamation regulation for ozone depleting substances (ODS). The Agency’s 2009 Rule resulted in an increase to nearly thirteen (13%) percent in reclaiming of HCFC

- 22 in 2012. The increase was almost double over the period of 2010 to 2011. This was as a result of the reduction of product ion and consumption rights. This is more than twice the increase over calendar years 2010 to 2011. The Agency’s previously stated position gave incentives to stakeholders to recover more HCFC

- 22 and reclaim spent gas. This is the result that Congress inte nded to protect human health and the environment. The docket relating to “ Protection of Stratospheric Ozone: Adjustments to the Allowance System for Controlling HCFC Production, Import, and Export **”** was filled with comments. Many assumptions were put fort h which seem to have been given more weight than facts. Consider the events leading up to the rule making. According to facts obtained through a Freedom of Information Request (FOIA), No: HQ

- FOI

- 02013

- 11 1 the annual consumption of HCFC

- 22 fell to 43,509.9 metric tons in 2010, 14.1% less than allocated. In the April 3, 2013 final rule the Agency supports the industry that no more allowances were needed. 2 Wh ile the Court vacated the 2009 Rule, EPA did not use its authority to remove these products from production and use.

1 United	States	Environmental	Protection	Agency,	Letter	Dated	September	8,	2011 , Drusilla	Hufford,	Director 2 Summary	of	Final	Rule,	page	8 of	87,	line	1In 2011 only 94% of all rights were used. This fact does not include the HCFC

142b rights that were out of play due to litigation. By the Agency’s own numbers there is no need to increa se consumption or production rights. This table is empirical proof that allowances have never been fully utilized.
Table 1 3

2003 2004 2005 2006 2007 2008 2009 2010 2011 201 2 103,32 0 98 , 598 107483 93,064 98 , 939 93 , 045 58 , 445 43 , 50 9 N/A N/A 119,38 4 119,38

5 119,38

5 119,38

5 119,38

5 119,38

5 119,38

5 50,02

2 45,39

7 N/A 86.5% 82.6% 89.8% 78% 82.6% 77.7% 48.7% 85.9% 94% N/A **o Rights Used o Rights A** **llocated**
Since the records show that not all of the HCFC allowances were imported or produced in 2010 and 2011, then it would be up to the EPA to check the records of the individual companies which transferred their HCFC

- 142b to HCFC

- 22 vested rights to see if they indeed imported or produced all of their original allowances of HCFC

- 22 in 2010 and 201 1. If they did expend all of their HCFC

22 allowances in any given year, then a retroactive award could be acted on, if they failed to expend all of their available HCFC

- 22 allowances in either of the two years in question, then they would not be eligible to import or produce their retroactive rights. The Agency has a stated doctrine “ worst
- first”. 4 The Agency phased

- out HCFC

- 141b first and then failed to apply this stated policy to the HCFC

- 142b, which would have eliminated this issue, in its entirety! Keep in mind the ozone depletion factor of HCFC

- 142b is higher than HCFC

- 22. Did the court have the right to create a new category of HCFC's “HCFC

- 142b to HCFC

- 22 vested rights transfer"? The EPA has long ago adopted the “worst first ” method for phase o ut of ozone depleting substances and the EPA should continue to do so. By listing the “HCFC

- 142b to HCFC

- 22 vested rights transfer“ would the phase out look like this? CFC by 1995 HCFC 141b by 2004 HCFC 142b by 2010 HCFC

- 142b to HCFC

- 22 Vested Rights T ransfer by 2010 HCFC

- 22 Phase

- out begins 2010

3 42	USC	§	7671©,	Allowances not	used	by	December	31	don’t	carry	over	to	following	year 4 http://www.epa.gov/ozone/title6/phaseout/classtwo.htmlIt was said in the early stages of the comment period “there will be a shortage of

more than twenty

- seven million (27,00 0,000 lbs.) ” Market reaction, and EPA’s assessment indicate this myth is busted. Another element of this issue is equipment. Equipment that uses HCFC

- 22 has been phased

- out more than ten years sooner than previously anticipated. 5 Wh at is the argument to continue to allow more HCFC

- 22 into the market when the frontend requirement is gone? The Agency is faced with a complicated rule making on this matter. W hile balancing the rule of law the Agency missed the mark on a simple fact of reducing the percent of gas that can be allowed into commerce. In other words, if the ideal number of pounds was 40 million pounds versus 63 million pounds, the Agency could calculate a higher percentage reduction to all allocation holders, which would give the desired 40 million pounds result. The market was operating and adjusting to the published statements that were posted on the EPA We b Site. After receiving the notice that you signed the rule and the rule being published in the Federal Register, April 3, 2013, the price of HCFC

- 22 has fallen. Companies that are engaged in this industry have seen their value drop as much as 30%. This too, points to the fact that EPA’s adjustment was unwanted and unnecessary. United States based producers see tha t, that was an error on the part of the Agency and responded, “Nevertheless, we do not anticipate placing more product in the market place in 2013”. At the same time the non

- US companies will continue to benefit from this unfortunate mistake. The January price for HCFC

- 22 rose to a record high of seventeen dollars and fi fty cents per pound ($17.50 per lb.), or ($525.00 per thirty pound cylinder). The price has fallen back, a fact, which will not incent companies to continue with recovery and reclaim. This rule reverses the Agency’s actions to protect Stratospheric Ozone, Human Health and is not good Public Policy. Wewould welcome the opportunity to visit and elaborate.

5 66450	Federal	Register /Vol.	74,	No.	239/Tuesday,	December	15,	2009/Rules	and	RegulationsSincerely,

Ted Broudy President USA Refrigerants PO Box 289 Old Bridge, Ne w Jersey 08857



## The Current Market Condition

## *R22 prices are collapsing

*P roduct USA bought at $14.50 a lb. in February is hard to sell at $8. a lb. today *Every attempt to cost averages our high price gas we are faced wit h lower priced gas becoming available. The glut is looming large, and cannot be understated.

Reclamation

### As	a	result	of	the	Montreal	Protocol,	Father	EPA	and	Mother	Nature

gave	birth	to	the	EPA	certified	reclaimer. To	grow	a	strong reclamation	program,	EPA	put	a	substantial	excise	tax on	virgin	CFC	refrigerants.		Then	a	radical	reduction	in	allowances	put	a thriving	industry	to	work.		Creation	of	these	environmental	reclamation companies	was	surely	a	time	to	shine	if	you	were	in	the EPA. The	EPA	was	made	aware	of	the	supportive	excise	tax,	the	need	for	an even	playing	field	and	the	responsibility	to	have	the	back	of	their	first born	(The	EPA	Certified	Reclaimers). The	truth	is	the	EPA	certified	reclaimer	has	zero	support	from	the EPA. The	tax	or	sale	of	allocation	was	ignored,	and	the	only	promise	was	to cut	allocation	of	HCFC’s.		We	all	now are aware	that	allowances increased	and	virgin	gasses	are	dirt

- cheap. Who	can	answer	any	of	this? The	correct	answer	is	to	notify	all allocation	holders	immediately,	and state	that	there	will	be	zero	allocation	in	the	year	2015,	and	that	the EPA	will	advise	about	2016	and	beyond. Sincerely, James PS:	Google	“HC FC	Glut”	and	you	will	find	a	letter	from	the	White	House. In	2009	USA	Refr igerants	made	it	quite	clear	there	was	a	glut	of	R22, and	it	took	two	years	for	the	EPA	to	concur. PSS:	USA	Refrigerants	spoke	on	January	7,	2009,	at	an	EPA	sponsored stakeholders	meeting.		All	that	was	said	there	that	day	seemed	to	be ignored;	yet	it	is quite	accurate	in	hindsight.



## The	R22	pipeline	of	inventoryThe	wholesaler

5,000	locations	with	3,000	pounds	per	location	approximately 15	million	pounds

Contractors 300,000 individuals with 100 pounds of R22 each, approximately 30 million pounds Allowance holders 2013 63 million pounds
Allocation holders inventory (conservative ) 70 million pounds EPA Certified and ARI reclaimers 30 million pounds Investors 20 million pounds As of 2015 HVAC equipment contains minimum of 500 million pounds Equipment owners would have 3% back up stock 15 million pounds The above are educated guesses equaling 743 million pounds Illegal impo rts? Million pounds Wh ere is it all going with the demand shrinking?



### ** Unless	and	until	the	grasp	of	dead	inventory	and	obsolete	inventory	is considered	by	experts	and	explained	to	the	enforcers	of	refrigerant allocation,	there	will	be	an	unprecedented glut	of	R22	at	some	time	in the	future	with	zero	demand.		And	it	is	frustrating	that	the	glut	we	speak of	is	mitigated	to	the	here	and	now,	and	not	the	inevitable	future calamity	approaching. **