# Technical Support Document for the 2011 Critical Use Exemption to the Phaseout of Methyl Bromide

Prepared by ICF International for the U.S. Environmental Protection Agency July 22, 2010

CONTENTS

I. Analysis of a Major U.S. Methyl Bromide Supply Disruption: The Potential Role of Imports II. Projection of Future U.S. Pre-Phaseout Methyl Bromide Inventory III. Appendix A: Projection of Future U.S. Pre-Phaseout Methyl Bromide Inventory using a Linear Fit Model IV. Appendix B: Projection of Article 5 Methyl Bromide Consumption Through 2011. 

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# I. Analysis of a Major U.S. Methyl Bromide Supply Disruption: The Potential Role of Imports

1. Introduction Since 2004, U.S. methyl bromide producers’ estimate of the time needed to re-establish methyl bromide production in the United States following a major domestic supply disruption has changed, prompting a reassessment of the inventory needed to mitigate potential supply shortages following such an event. In the event of a loss of domestic methyl bromide production capacity, the supply shortfall of methyl bromide for domestic consumption is estimated based on the amount of methyl bromide needed in excess of the amount that can be expected to be imported from foreign producers to satisfy domestic demand over the period required to restore domestic production capacity. The quantity of methyl bromide authorized by the Parties to the Montreal Protocol for critical uses in the United States in 2011 (and the amount on which the projected 2011 methyl bromide demand is based) is 2,055.20 MT. To meet demand not expected to be satisfied by imports during the time required to re-establish domestic production would require domestic methyl bromide inventories of approximately 6–58% of the annual 2011 demand or between 118 and 1,192 MT . This document explains the process by which this inventory calculation was reached.

This analysis assumes that the methyl bromide supply (i.e., the lost domestic production capacity) will be reestablished However, it is important to note that in the event of a major loss of domestic production, whether U.S. methyl bromide production companies decide to re-establish methyl bromide production capacity or to reconfigure their facility to produce methyl bromide would be an individual company business decision. For example, if the methyl bromide shortfall is such that the price of methyl bromide increases and some users choose to switch to alternatives, the demand for methyl bromide may decrease. Under these circumstances, producers may choose to continue to purchase and transship methyl bromide from foreign suppliers, to not re-establish methyl bromide production capacity, and to instead re-direct production lines to manufacture other, potentially higher-value chemicals. In brief, the market response to a methyl bromide plant failure and the subsequent response of domestic and foreign methyl bromide manufacturers could follow a number of different scenarios. Additionally, chemical manufacturers that are not currently producing methyl bromide would face geographical limitations to producing methyl bromide, since they would need to be located in the vicinity of a source of elemental bromine, found principally in underground brine deposits in Arkansas and Michigan. 1 

### Quantitative analyses of these alternative scenarios are not provided in this report.

The potential for importing methyl bromide following a major domestic supply disruption depends on three key parameters: (1) the estimated total foreign production capacity for methyl bromide; (2) the amount of the foreign-produced methyl bromide that would be available to U.S. customers considering worldwide demand; and (3) the availability and capacity of specialized shipping containers needed to import methyl bromide taking into consideration the logistics of shipping methyl bromide from foreign suppliers to the U.S.


## 2. Foreign Production Capacity and Worldwide Demand The amount of methyl bromide that can be imported into the United States depends on foreign production capacity and existing claims on that capacity (i.e., existing contracts between foreign manufacturers of methyl bromide and foreign consumers). As of 2006, Israel, Japan, and China were the only countries other

1 Elemental bromine is required for methyl bromide production. Seawater does contain bromine salts, but at such low concentrations that it is very energy intensive to use as a source for the production of methyl bromide.. 

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### than the United States that were still producing methyl bromide. 2 

### The calculation of methyl bromide production capacity in China, Israel, and Japan is based on consumption data reported to UNEP, interviews with industry representatives, and publicly available information.



## 3. Worldwide Demand Calculated worldwide demand for methyl bromide in 2011 is presented in Table 1 based on U.S. and foreign critical use, QPS, and feedstock demand. Demand for critical use for both U.S. and non-Article 5 foreign users is assumed to be the amount authorized for critical uses in 2011 at the 21 st 

### Meetings of the Parties. The 2011 consumption of methyl bromide for controlled uses by Article 5 countries was calculated based on data reported to UNEP for years 1991-2008. A steady rate of decline in demand since 2002 (approximately 1,000 MT per year) was projected out to 2011 to estimate future Article 5 consumption (see Annex A). Worldwide consumption of QPS methyl bromide is based on data reported in 2008 to UNEP. U.S. and foreign demand for feedstock methyl bromide, which are assumed to be relatively constant over time, is based on UNEP (2006). 3



### In summary, total worldwide consumption of methyl bromide in 2011 is based on 2011 critical use allocations, data reported by UNEP (2006), 4 

### and data reported to the UNEP Ozone Secretariat, 5 

### and is projected to be approximately 18,383 MT (including U.S. consumption).

Table 1. Estimated Total Worldwide Methyl Bromide Demand in 2011, in Metric Tons Methyl Bro m i de Use Annual Methyl Bromide Demand (MT) U.S. Consumption of Critical Use Methyl Bromide a 2,055 Non-Article 5 Foreign Consumption of Critical Use Methyl Bromide a 288 Article 5 Consumption of Critical Use Methyl Bromide b 2,000 Worldwide Consumption of QPS Methyl Bromide C 9,026 Worldwide Consumption of Feedstock Methyl Bromide d 5,014 TOTAL 18,383 Totals may not sum due to independent rounding.

a Critical Use methyl bromide, as authorized for critical use in 2011 at the 21 st Meetings of the Parties. Available at: http://ozone.unep.org/Meeting_Documents/mop/21mop/MOP-21-9E.pdf

. b Demand in 2011 for Article 5 consumption of critical use methyl bromide was estimated based on historical trends in data reported to UNEP. See Annex A for calculation detail. Source: UNEP. 2006. 2006 Report of the Methyl Bromide Technical Options Committee: 2006 Assessment. Available at: http://ozone.unep.org/Assessment_Panels/TEAP/Reports/MBTOC/index.shtml , and UNEP Data Access Center. International Methyl Bromide Consumption Data, 1986-2008. Available at: http://ozone.unep.org/Data_Reporting/Data_Access/
C UNEP Data Access Center. Methyl Bromide QPS Consumption Data, 2008. Last accessed June 20, 2010 at: http://ozone.unep.org/Data_Reporting/Data_Access/.

2 France discontinued methyl bromide production as of 2006 and Romania in 2004. Methyl bromide production in France and Romania was not included in the calculation of foreign production capacity because it is assumed that capacity for methyl bromide production no longer exists or could not be restored in a reasonable time frame in those countries. Romania closed its methyl bromide production facilities in 2004, and the Albemarle Port de Bouc facility in France has been reconfigured as of 2006 to produce fine chemicals and is no longer producing methyl bromide. (Sources: UNEP. 2006. 2006 Report of the Methyl Bromide Technical Options Committee: 2006 Assessment. Available at: http://ozone.unep.org/Assessment_Panels/TEAP/Reports/MBTOC/index.shtml ; Scheraga, Dan. Chemical Market Reporter. “Elf strengthens bromine production.” Mar 9, 1998;v253n10:36.)
3 UNEP. 2006. 2006 Report of the Methyl Bromide Technical Options Committee: 2006 Assessment. Available at: http://ozone.unep.org/Assessment_Panels/TEAP/Reports/MBTOC/index.shtml
4 UNEP. 2006. 2006 Report of the Methyl Bromide Technical Options Committee: 2006 Assessment. Available at: http://ozone.unep.org/Assessment_Panels/TEAP/Reports/MBTOC/index.shtml
5 UNEP Data Access Center. Methyl Bromide QPS Consumption Data, 2008. Last accessed June 20, 2010 at: http://ozone.unep.org/Data_Reporting/Data_Access/.. 

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- d Demand in 2011 for feedstock methyl bromide was assumed to be equal to reported consumption for these applications in 2005. Source: UNEP. 2006. 2006 Report of the Methyl Bromide Technical Options Committee: 2006 Assessment. Available at: http://ozone.unep.org/Assessment_Panels/TEAP/Reports/MBTOC/index.shtml

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### Foreign methyl bromide production capacity is estimated to be greater than total worldwide consumption of methyl bromide in 2011, based on 2011 critical use allocations, data reported by UNEP (2006), 6 

### data reported to the UNEP Ozone Secretariat, 7 

### and interviews with industry representatives. Therefore, foreign production should be adequate for meeting U.S. critical use needs, as well as the rest of demand worldwide, if U.S. methyl bromide production is shut down. The foreign production capacity estimate is not provided in this public document because that information could be used to estimate information about the production capacity of individual companies.


## 4. Availability and Capacity of Specialized Shipping Containers and Shipping Logistics Imports and exports of methyl bromide require specialized shipping containers, or isotanks, of which there are a limited number. Because manufacturing new methyl bromide isotanks is a slow process, it may be difficult or impossible to quickly manufacture significant numbers of new isotanks in response to a production failure. As a result, in the event of a domestic supply disruption, the United States would have to depend on the existing capacity of isotanks to import methyl bromide for U.S. customers and transship methyl bromide for foreign customers from foreign manufacturers.

While methyl bromide imports have the potential to offset all of the methyl bromide needed for domestic critical use (and formerly obtained from domestic production) for the estimated period, some short-term supply deficit would be experienced in the U.S during the timeframe required to complete the first import shipment if adequate domestic inventories are not available.

The timeframe for future shipments of methyl bromide to the United States is also a crucial element in the analysis of importing methyl bromide to the United States following a major U.S. production failure. The shipping timeframe determines not only how long it will take for the first shipment of methyl bromide to arrive, but also the number of roundtrips (or “turns”) the isotanks can make in a given timeframe, thereby impacting both the speed at which methyl bromide can reach the United States and the total quantity of methyl bromide that can be imported before U.S. methyl bromide production is resumed. Based on information provided by industry representatives, it is estimated that it would take 15 weeks for the first shipment of methyl bromide to reach the United States following a domestic production failure.


## 5. Conclusion: Estimate of Supply Shortfall With sufficient foreign production capacity to meet U.S. and worldwide critical use needs, the limiting factor in the event of a major loss of domestic production capacity becomes the shipping container capacity available to import the foreign methyl bromide into the United States and the logistics of such shipments. Assuming that U.S. critical users will require the 2,055MT authorized for critical uses in 2011, the available shipping containers and estimated shipping capacity would be adequate to fulfill U.S. critical use methyl bromide demand; however, ramping-up foreign production and adjusting shipping routes to transition the United States from a major exporter to a major importer would take time. Therefore, the United States would be without newly produced or imported methyl bromide for a certain time period—estimated to be 15 weeks—after a domestic production failure (based on information from industry representatives). Meeting

6 UNEP. 2006. 2006 Report of the Methyl Bromide Technical Options Committee: 2006 Assessment. Available at: http://ozone.unep.org/Assessment_Panels/TEAP/Reports/MBTOC/index.shtml
7 UNEP Data Access Center. Methyl Bromide QPS Consumption Data, 2008. Last accessed June 20, 2010 at: http://ozone.unep.org/Data_Reporting/Data_Access/.. 

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### demand during this time period would require domestic methyl bromide inventories of approximately 6–58% of the annual 2011 demand or between 118 and 1,192 MT . These inventory estimates represent the range of critical use demand over the time period preceding the first shipment of imports, depending on the season at which the major loss of domestic production capacity occurred. The season at which the domestic supply disruption occurs will affect the inventory needed because the rate of methyl bromide use is not constant throughout the year.

The supply shortfall range of 118 MT to 1,192 MT is calculated based on average seasonal production of critical use methyl bromide in the United States in 2005 through 2009. Quarterly production data for 2005, 2006, 2007, 2008, and 2009 show consistent patterns in the level of production throughout the year; these are likely the result of normal variation in methyl bromide demand at different times of year. For example, methyl bromide used for pre-plant applications would be in the highest demand immediately prior to the growing season. The supply shortfall range is estimated by first calculating the average percentages of annual production produced weekly in each of the four quarters in 2005, 2006, 2007, 2008, and 2009 8 

### and then multiplying the maximum and minimum weekly percentages by the 15 week shortfall period and total 2011 critical use methyl bromide demand (2,055 MT). The resulting upper and lower bounds reflect seasonal differences in the level of production and critical use demand. For example, if a domestic production failure event occurred when the most methyl bromide is typically produced, an inventory of 1,192 MT of methyl bromide would be needed to satisfy demand for the 15 weeks before imports began to arrive. If a major production failure occurred at the time of lowest methyl bromide production, only 118 MT would be needed.



## 6. Limitations There are several limitations associated with the estimate that 118 MT to 1,192 MT of inventory would be adequate to meet a supply shortfall resulting from a sudden domestic supply failure. First, it should be noted that the pre-2005 inventory is held by multiple companies, and the sale of that inventory is governed by market forces. Hence, in the event of a production failure, the stockpile could be purchased by any user (i.e., critical use/non-critical use, QPS, feedstock, or foreign users). Most likely, the stockpile would go to the user willing to pay the highest price in time of short-term global shortage. Second, there may also beexisting contract agreements that must be honored. As a result, there is no guarantee that the existing pre2005 inventory of methyl bromide will flow towards U.S. critical uses in the case of a production failure. Finally, it is not clear that a contingency plan exists amongst the various methyl bromide producers and importers as to how to respond to a major supply disruption. Thus, the reallocation of shipping containers to import methyl bromide into the United States may not occur smoothly over the first weeks or months while the various manufacturers, shippers, and customers sort out their arrangements.

8 The average of 2005, 2006, 2007, 2008, and 2009 quarterly production totals were used because these are the only five full years after the CUE program began on January 1, 2005. Thus, these years are expected to be most representative of the quarterly distribution of future production.. 

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## II. Projection of Future U.S. Pre-Phaseout Methyl Bromide Inventory

This brief report presents the results of an analysis to project the pre-2005 methyl bromide inventory that will remain on January 1, 2011. In accordance with a notice published on August 25, 2004 (69 FR 52403), titled “Request for Information on Existing and Available Stocks of Methyl Bromide,” data on methyl bromide inventory existing on January 1, 2004, were collected from all entities that held inventories of methyl bromide for sale or for transfer. Data on methyl bromide inventory held as of January 1, 2005, were collected from all methyl bromide producers, importers, exporters, distributors, and applicators, pursuant to a Section 114 request dated April 15, 2005. Inventory data for January 1 st 

### of 2006, 2007, 2008, 2009, and 2010 for all methyl bromide producers, importers, distributors, and applicators were collected pursuant to a rule published on December 13, 2005 (70 FR 73604) that amended methyl bromide reporting requirements at 40 CFR 82.13 in a manner that enables EPA to calculate the aggregate inventory for each calendar year.

To estimate the future available methyl bromide inventory, a model was developed based on estimates of the amount of CSAs likely to have been expended in 2010 plus the amount of non-critical uses. This method produces a more realistic estimate of inventory drawdown than the linear estimation that has been used in earlier CUE rules. For comparison purposes, the inventory was also estimated using the same linear fit model used in previous years. The linear method projects a level of 13 MT for a projected inventory in 2011, a dramatic decrease from the reported methyl bromide inventory on January 1, 2010—3,063 MT. Further, the linear fit model does not take into account that the use of inventory on critical uses is limited by the allocation of CSAs.

The alternate method used in this analysis, which does account for the amount of expended CSAs and recent restrictions in labeling, projects that the drawdown of inventory in 2010 will be 1,524 MT. To project the expended CSAs in 2010, it is assumed that the 2010 expended CSAs will follow the historical pattern for expended CSA to allocated CSA ratios. EPA conservatively assumes the ratio will equal 70 percent of the CSAs allocated for 2010, as summarized in the table below. Based on this assumption, it is projected that 720 MT of methyl bromide CSA will be expended by the end of 2010.

Table 2: Annual CSA Allocations and Expenditures

Year Allocated CSA (MT) Expended CSA (MT) a Expended CSA to Allocated CSA 2006 1136 784 69% 2007 1915 922 48% 2008 1730 1047 61% 2009 1919 1127 b 59%

2010 1,028 720 (Projected) 70% (Projected) a) Source: Methyl Bromide Accounting Frameworks, 2006, 2007, 2008, and 2009. Available at: http://www.regulations.gov/search/Regs/home.html#docketDetail?R=EPA-HQ-OAR-2009-0351 b) The accounting framework says 1135 MT of CSAs were used. Reports received after the Framework was submitted to UNEP show that 1127 MT were used.



### The second factor in EPA’s drawdown estimate is the amount of methyl bromide used on non-critical uses in 2010. Projections of non-critical uses are based on the average non-critical use amounts from 2006-2009 as shown in the table below. The average annual use between 2006 and 2009 is 804 MT.. 

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- Table 3: Annual Non-Critical Use of Pre-phaseout Inventory

Year Non

- critical Uses

(MT) 2006 1249 2007 561 2008 1139 2009 267

2010 804 (Projected) Source: Methyl Bromide Accounting Frameworks, 2006, 2007, 2008, and 2009. Available at: http://www.regulations.gov/search/Regs/home.html#docketDetail?R=EPA-HQ-OAR-2009-0351


### By totaling the estimated amount of expended CSAs in 2010 and non-critical Group 2 uses, it is projected that the pre-phaseout methyl bromide inventory will be drawn down by 1,524 MT during 2010—resulting in pre-phaseout inventory of 1,539 MT on January 1, 2011. This calculation is summarized in the figure below.

Table 4: Projected Methyl Bromide Pre-Phaseout Inventory on January 1, 2011 Pre

- Phaseout Inventory (January 1, 2010) 3,063 MT Total Dr aw Down 1,524 MT CSAs Likely to have been Expended in 2010 720 MT Non

- Critical Uses in 2011 804 MT Pre

- Phaseout Inventory (January 1, 2011) 1, 539 MT. 

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## Appendix A: Projection of Future U.S. Pre-Phaseout Methyl Bromide Inventory using a Linear Fit Model As a secondary approach to estimating the future available methyl bromide inventory, a simple linear fit was performed using SAS® (Statistical Analysis System) software. As shown in below, approximately 13 Metric Tons of methyl bromide are projected to be held by companies in the United States as of January 1, 2011. The inventory on January 1, 2011, was estimated using the seven data points (i.e., aggregated data about the amount of inventory held in the U.S. on January 1 st 

### of 2004, 2005, 2006, 2007, 2008, 2009, and 2010) that are presented in Table 5. Figure 1 shows the reported and projected inventory values graphically.

Table 5. Projected Trend of Methyl Bromide Inventory, in Metric Tons
Year Reported Projected 2004 16,422 15,272 2005 12,994 13,092 2006 9,974 10,912 2007 7,941 8,732 2008 6,458 6,552 2009 4,271 4,372 2010 3, 06 3 2,192 2011 13

Figure 1. Projected Linear Trend of Methyl Bromide Inventory

(13) 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000

2004 2005 2006 2007 2008 2009 2010 2011
YearSartofYearMethylBromideInventory(MT) Projected Reported. 

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## Appendix B: Projection of Article 5 Methyl Bromide Consumption Through 2011 The table below shows the projection of Article 5 methyl bromide consumption through 2011. Article 5 consumption in 2002 through 2008 is from UNEP (2009). 9 

### The consumption values for 2008 through 2010 are projected based on the 2002-2008 consumption trend. The 2006 Assessment of the Methyl Bromide Technical Options Committee supports this projection method. 10



### As shown in the table below, consumption in 2011 is projected to be approximately 2,000 MT . This value is used to calculate the total worldwide methyl bromide demand in 2011.

Methyl Bromide Consumption in Article 5 Countries (MT) 2002 2003 2004 2005 2006 2007 2008 2009 (projected) b 2010 (projected) b 2011 (projected) b 12,697 11,831 10, 512 9,497 7,081 6,235 5,395 4,000 3,000 2,000 Source: UNEP. 2009. Consumption Data from UNEP Ozone Secretariat Article 7 Reporting. Available at: http://ozone.unep.org/Data_Reporting/
b UNEP. 2006. 2006 Report of the Methyl Bromide Technical Options Committee: 2006 Assessment. Available at: http://ozone.unep.org/Assessment_Panels/TEAP/Reports/MBTOC/index.shtml

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9 UNEP. 2009. Consumption Data from UNEP Ozone Secretariat Article 7 Reporting. Available at: http://ozone.unep.org/Data_Reporting/ 10 UNEP. 2006. 2006 Report of the Methyl Bromide Technical Options Committee: 2006 Assessment. Available at: http://ozone.unep.org/Assessment_Panels/TEAP/Reports/MBTOC/index.shtml. Page 35.