1 

## SUMMARY OF COMMENTS

FOR
METHYL BROMIDE CRITICAL USE EXEMPTION RULE

1. Summary of Comments Relating to CRITICAL NEED ............................................... 3

1.a. Total amount for critical uses can be reduced through use of sulfuryl floride .. 3

1.b. Total amount for critical uses can be reduced through use of other chemicals 4

1.c. No need for exemptions ................................................................................... 9

1.d. Total amount is insufficient to meet critical use demand ............................... 12

1.e. Total amount should include amounts pending before Parties ....................... 14 2. Summary of Comments Relating to AMOUNT FROM STOCKS

............................. 166

2.a. Legal basis to control stocks ......................................................................... 16

2.b. Factors in the algorithm ............................................................................... 29

2.c. Disclosure of data (CBI) ............................................................................... 35 3. Summary of Comments Relating to ACCESS TO STOCKS ....................................... 39

3.a. Who should get access to stocks .................................................................... 39

3.b. Legal basis ..............................................................................43 4. Summary of Comments Relating to CAP ON CRITICAL USE METHYL BROMIDE 46 5. Summary of Comments Relating to CRITICAL USE ALLOWANCE ALLOCATIONS 52

5.a. Baseline for critical use allowance distribution ............................................. 52

5.b. Frequency of critical use allowance distribution ........................................... 55 6. Summary of Comments Relating to CRITICAL STOCK ALLOWANCE

ALLOCATIONS ........................................................................................................... 57 7. Summary of Comments Relating to TRADING ALLOWANCES ............................... 60

7.a. Trading within allowance type ...................................................................... 60

7.b. Trading between allowances ......................................................................... 63 8. Summary of Comments Relating to ACQUIRING CRITICAL USE METHYL

BROMIDE .................................................................................................................. 64 9. Summary of Comments Relating to WHO IS AN APPROVED CRITICAL USER ...... 68

9.a. Uses .............................................................................................................. 68

9.b. Conditions .................................................................................................... 70

9.c. New market entrants ..................................................................................... 74 10. Summary of Comments Relating to REPORTING AND RECORDKEEPING REQUIREMENTS ........................................................................................................ 77

10.a. Reporting ..................................................................................................... 77

10.b. Record-Keeping ........................................................................................... 79

10.c. Treatment of Unused Critical Use Methyl Bromide ...................................... 80 11. Summary of Comments Relating to ENFORCEMENT PROVISIONS ..................... 83 12. Summary of Comments Relating to DISTRIBUTION OF PERMITS TO APPROVED

CRITICAL USERS ........................................................................................................ 86

12.a. Allocation of Allowances to Producers/Importers Versus End Users ........... 86

12.b. Historic Baseline Approach ........................................................................ 90

12.c. Auctions ....................................................................................................... 90

12.d. Redeemable System ...................................................................................... 932 13. Summary of Comments Relating to EPA TREATMENT OF BASELINE AND

INVENTORY DATA ..................................................................................................... 93 14. Summary of Comments Relating to ECONOMICS AND THE REGULATORY

IMPACT STATEMENT ................................................................................................ 93 15. Summary of Comments Relating to BURDEN ASSOCIATED WITH THIS

REGULATORY SYSTEM .............................................................................................. 94 16. Summary of Comments Relating to NEED FOR AN EXPORT MECHANISM ........ 97 17. Summary of Comments Relating to the RULEMAKING AND REGULATORY

PROCESS .................................................................................................................. 983 1. Summary of Comments Relating to CRITICAL NEED

1.a. Total amount for critical uses can be reduced through use of sulfuryl fluoride

Commenter Organization Document ID Number

John Mistretta Riviana Foods Inc. 0207 John Mueller Fumigation Service & Supply,

Inc. 0208

Tim Maniscalo Dow AgroSciences LLC (DAS)) 0247

• Three sets of comments suggest that the total amount of critical use methyl bromide could be reduced through the use of sulfuryl fluoride (ProFume®), an effective methyl bromide replacement for post-harvest uses [0207, 0208, 0247]. One of these comments is a mass letter campaign from three commenters.

• One commenter, a manufacturer of alternatives to methyl bromide, suggests that sulfuryl fluoride (ProFume) could displace around 386,000 kgs of critical use methyl bromide for the fumigation of mills and food processing facilities in 2005 [0247].

 This commenter notes that ProFume is a suitable replacement for methyl bromide for post-harvest uses. Since being U.S. EPA registered for mill fumigations in January 2004, it is claimed that ProFume has been successfully used to fumigate approximately 40 cereal grain mills across the U.S., where the use of ProFume has resulted in an average 8.9 percent increase in the overall cost of fumigation or an increase of less than $0.0015 per loaf of bread. [0247]

Response #1: EPA agrees that sulfuryl fluoride is an important alternative to methyl bromide. The overall size of the critical use exemption has already been adjusted to accommodate some market uptake in 2005. EPA looks forward to receiving additional technical and economic data on this product in the future to make assessments about the potential for market displacement in future nominations. Fumigation of 40 mills is a considerable step forward however EPA would seek further information such as the number of mills seeking repeat fumigations with Profume, the ability of Profume to control insect populations over prolonged periods of use, the number of fumigators licensed to handle the product compared to the number of mills seeking fumigations, as well as more detailed information on the costs of this alternative. Please see response #2 for more detailed

response.4 1.b. Total amount for critical uses can be reduced through use of other chemicals

Commenter Organization Document ID Number David Doniger Natural Resources Defense Council (NRDC) 0133, 0140-DD (transcript of public hearing), 0246, 0287 David K. Mueller Pest Managers for A Better

Environment 0134

Ruth Niwander N/A 0163 Amber Standridge N/A 0164

Howard Deutch N/A 0190 Taylor Young N/A 0236

Dennis Thomas N/A 0241 Tim Maniscalo Dow AgroSciences, LLC 0247 Jonathon Slevin Champon Millennium Chemicals,

Inc. 0122

• Nine commenters are of the opinion that the proposed cap on critical use methyl bromide for the US for 2005 of 8,942 metric tons is too high [0122, 0133, 0134, 0140, 0163, 0164, 0190, 0236, 0241, 0246, 0247,0287].

 One commenter asserts that “it is technically and economically feasible in 2005 to displace approximately 40% of the 8.9 million kgs of CUEs for MB with available substitutes”, based on “supporting data, available studies and experience.” As an example, this commenter suggests that 1,3- dichloropropene (1,3-D) (Telone®) could displace about 3,362,000 kgs of critical use methyl bromide for pre-plant soil fumigation in 2005. [0247]

 One commenter said that certain critical uses such as golf courses lacked “criticality” and that the Agency did not sufficiently consider organic agriculture as an alternative. [0287]

Response #2: The commenter stated in their comments that their products, 1,3- dichloropropene (1,3-D) and sulfuryl fluoride (SF) can displace a significant portion of the critical use market, 40% of the authorized amount, but they recognize that from a practical transition perspective, such reductions will not easily happen in the next year. The commenter provided a table indicating that these two products could be technical and economical substitutes in every critical use category for which their products are registered. Please see response to comments in section 1.a. as well. In the U.S. nomination, the EPA took great pains to describe the specific circumstances that make 1,3-D, which may be otherwise technically and economically feasible, not feasible for a certain portion of total domestic use. The EPA determined that 1,3-D products can be used in a variety of circumstances but there are some factors, such as regulatory limits on the use of 1,3-D or the presence of heavy nutsedge weed populations that would make the 1,3-D products not technically and economically feasible. EPA, in consultation with the U.S. Department of Agriculture (USDA), has determined that over the portion of the crop there may be technical limitations to the use of 1,3-D treatments or economic losses associated with the use of this fumigant.5 The commenter specifically pointed to comments made in the 2004 Methyl Bromide Technical Options Committee (MBTOC) report where the committee indicated that there are technically feasible herbicides available to control nutsedge, specifically halosulfuron for peppers and halosulfuron and triflxysulfuron for tomatoes, that can be used in combination with 1,3-D products to provide complete spectrum pest control. As described in the nomination, both of these herbicides have been recently registered and can provide effective control of nutsedge populations, however certain regulatory restrictions exist on the use of these products causing them to be not technically available within current cropping systems for the exempted portion of production. For example, both products have plant back restrictions which limit the ability of growers to plant a second crop. Almost without exception, U.S. pepper and tomato farmers plant more than one crop on the same acreage. The U.S. nominations additionally analyzed the feasibility of using 1,3-D products without the herbicides and finds that the treatment is not economically feasible. For example, a typical tomato farm in the southeastern U.S. would experience approximately $5,700 in losses per acre using 1,3-D products compared to using methyl bromide due to losses in product yield and quality.

The commenter indicated the use of alternatives, specifically an emulsified formulation of chloropicrin (Pic EC) and metham sodium in combination with chloropicrin, is technically feasible for strawberry production in California according to the 2004 MBTOC report. Again, the U.S. nomination describes the limitations of these alternatives for the specific circumstance of the nominated acreage. For example, 15% of the nominated area is located on hilly terrain that makes the use of drip applied fumigants a technically infeasible alternative. Furthermore, chloropicrin is not a full spectrum fumigant. Chloropicrin provides good control of disease but the nomination clearly states that the nominated area additionally has nematode and weed pres sures as well. The commenter did not provide a copy of a study documenting comparable pest control and yields using Pic EC for areas with nematode, weed, and disease pressures. Further, metham sodium used with chloropicrin is not economically feasible according to the nomination. EPA, in consultation with USDA, has determined that yield differences could result in 24% decline in gross revenues on ave rage compared to methyl bromide. EPA received comments that the Agency should reduce the amounts the methyl bromide exempted from the phaseout to allow for the uptake of a newly registered alternative, sulfuryl fluoride, for mills and grains. . Sulfuryl fluoride (SF) was registered by EPA for use on grains and flour mills on January 23, 2004 under the trade name Profume. The SF fumigant has been available in the U.S.

since 1961 under the trade name Vikane for non food uses such as structural termite fumigation. The registrant, Dow Agrochemicals, is pursuing registration of Profume for use on dried fruit and tree nuts and non-specific food handling and
storage. The U.S. originally nominated 536,328 kilograms (kg) of methyl bromide for critical uses in mills and processors for the year 2005. As described in the notice of proposed rulemaking, this nomination was reduced by the Parties to 483,000 kgs to6 account for the market uptake of alternatives including sulfuryl fluoride and to account for more efficient methyl bromide fumigation practices. This reduction is a 10% reduction from the originally nominated amount. The 2004 MBTOC report on recommended exemptions for next year (2006) states that a further 10% reduction for flour mills could be warranted to allow for the adoption of a number of alternatives, of which sulfuryl fluoride is one, and more efficient methyl bromide fumigation techniques. Since the 2005 exemption had already been reduced by 10% for sulfuryl fluoride and that 10% seems to be a reasonable technical adoption rate according to the MBTOC as quoted by the commenter. EPA does not believe further reductions for 2005 can be justified at this time given the lack of specific technical and economic feasibility data provided to the Agency on Profume and given the lack of specific market penetration data provided by the commenter to substantiate assertions for a larger market penetration. EPA understands that Profume can be effective in controlling insects, although higher rates of the chemical are required to control insect eggs. As this is a newly registered compound, EPA does not have sufficient data at this time to conduct a technical and economic analysis to determine if further reductions are warranted. One key uncertainty regardi ng the market penetration and economic feasibility of Profume is the cost of the product on a per pound basis and the cost of a typical fumigation. The Agency anticipates that as trial fumigations or commercial fumigations take place, that the registrant will be able to compile technical and economic data to EPA for use in the development of future critical use

nominations.

In addition to the technical and eco nomic data required to conduct a critical use assessment, as noted by the Technology and Economic Assessment Panel (TEAP), a scientific panel that advises the Parties to the Montreal Protocol, a specific alternative may take up to 5 fumigation cycles of use before efficacy can be determined in the specific circumstances of the user. This would mean that several repeat fumigations would be needed before determining the technical feasibility of an alternative. An additional limitation to SF uptake at this time is that many mills in the U.S. produce partial recipe products that contain ingredients such as sugar or baking soda. The registration of SF does not include tolerances for these ingredients thus limiting the use of this alternative for a certain portion of the sector. Finally SF is not registered in California and therefore can not be used by mills in that state. One commenter provided information on the alternative Dazitol and suggested that the critical use exemptions could be eliminated for all U.S. growers, except

those in California. This commenter further indicates that this alternative was not considered internationally by the MBTOC during their review of the exemptions. Dazitol is a registered nematicide and the MBTOC list of alternatives indicates

“nematicides” as one of the alternatives Pa rties must consider. EPA believes that there may be effective nematicidal compounds on the market today that are cost competitive to methyl bromide. However, those uses nominated and authorized for an exemption are not uses that require methyl bromide because of nematode pressure alone. Another commenter indicated to EPA that there are effective alternatives to control nematodes and the Agency should remove this limiting critical condition from Appendix L. These commenters are correct and the Agency7 agrees with this assessment for most uses. The Agency incorrectly characterized this limiting critical condition in the proposal and removed it accordingly from the final rule. The Agency did not intend to list this particular condition as a stand alone condition for most uses but rather as part of a high pest pressure complex. In other words, if a grower had high nematode pressure alone, the U.S. did not nominate that use for an exemption. However, if the grower has high nematode or disease pressure along with difficult weed pressure then there is a technical or in some uses a technical and economic feasibility barrier to using the alternatives. EPA did consider organic agricultural techniques in evaluating the technical and economic feasibility of alternatives however the Agency did not view these techniques as stand alone replacements for methyl bromide or as the next best

alternative.

The definition of a critical use is related to the criteria set forth in Decision IX/6, not to a subjective standard that a particular fumigation need is not important. If a particular use of methyl bromide does not have technically and economically feasible alternatives available to it, and there would be significant market disruption without an exemption, then the use may qualify for a critical use exemption.

• The majority of the commenters arguing that the proposed cap is too high state that the amount of methyl bromide to be set aside in 2005 for critical uses is larger than the total quantity of methyl bromide used in 2003 [0133, 0140, 0163, 0164, 0190, 0241, 0246]

 One commenter refers to data stating that the total methyl bromide use in the U.S. in 2003 was 7,764 metric tons, which is 1,268 metric tons lower than the amount proposed for critical uses in 2005 [0133, 0140, 0246].

 This same commenter submits that the cap for 2005 must be less than total use in 2003 for two reasons: first, “only some uses prevalent in 2003 have been deemed critical, and thus the amount used in 2003 by non-critical use categories should be subtracted off the top of the 2003 amount”; and, second, “there has been progress since 2003 in applying alternatives in the critical use categories, and this progress needs to be accounted for with further reductions in the critical use amount.” [0133, 0140, 0246]

 The commenter also refers to an October 7, 2004 letter from EPA to Senator James Jeffords providing other estimates of use. The commenter argues that the letter references data for 2002, not 2003, and thus says little about total

use in 2003.

Response #3: The commenter implicitly argues that exempted critical use should be lower than the amounts of methyl bromide used in 2003. EPA does not agree that critical use must be lower than use in some year prior to the phaseout. There could be technical reasons why use in 2005 or a future year could be higher than use in 2003: for example a pest outbreak, increasing market demand etc. The U.S. made a policy decision not to nominate or exempt methyl bromide to account for growth in a commodity sector. EPA understands that other countries did request methyl bromide quantities to accommodate growth in an industry. Although the U.S. as a8 policy matter elected to exclude growth in methyl bromide use after the phaseout, we do not agree that the U.S. is required to do so. That being said, in today’s rule, EPA is not making more methyl bromide

available in 2005 than was used in 2003 acco rding to the best available data. EPA believes that 7,764 (31% of baseline) is one estimate of use in 2003 that bounds the lower part of the range of where critical use may lie for the year 2005. Use may actually be higher than 31% of baseline and some estimates of use would indicate that the amounts used are closer to 40% of baseline or higher as described in the following paragraph. The 31% estimate is a “top down” estimate of use looking at the change in known inventories combined with production, import, and export data. This use figure may not capture all use in the U.S. because we did not have complete information on the size and drawdown on inventories in 2003. As stated in the letter to Senator Jeffords, the information we did have on inventories was collected from manufacturing facilities, importers and major distributors. It did not reflect any inventories that might ex ist on-farm or that might be held by pesticide reformulators or distributors. Nor did it reflect any amounts that might be held by individual end users. Other estimates of use employ a “bottom up” approach. EPA consulted a number of pesticide use databases and developed estimates of use that were higher than 31%. Data sources consulted include the National Agricultural Statistical Service (NASS) of the U.S. Department of Agriculture, the State of California Department of Pesticide Regulation, and proprietary sources available to the EPA. Estimates using these data sources put U.S. use in 2002, the most recent year of data available, between 35 and 50% of the 1991 baseline. Although the 2002 data does not tell us what use was like in 2003, it is the best data available to the Agency that tracks actual fumigations. An important “bottom up” estimate of critical use was developed by the cross-Agency team that prepared a detailed, sector-by-sector analysis of the projected need for methyl br omide in the U.S. in 2005. The results of that team’s analysis suggested that in 2005, the U.S. would need to request a CUE for a level equivalent to 39% of the 1991 baseline. As discussed in the preamble, during the international review process this level was adjusted to account for various factors, including double counting for example. Taking into account these adjustments, the 35% critical use level approved by the Parties largely confirmed the result of the cross-Agency team’s bottom-up analysis. EPA anticipates that the use data reported to the Agency under the exemption framework described in today’s rule will help the U.S. government develop a more complete picture of actual use in critical categories. To the extent that there are new alternatives available, EPA took them into account in preparing the nomination. EPA did not receive any additional information in response to the request for comments that would warrant further adjustments.9 1.c. No need for exemptions

Commenter Organization Document ID Number Jonathon Slevin Champon Millennium Chemicals,

Inc. 0122

B. Sachau N/A 0124 David K. Mueller Pest Managers for A Better

Environment 0134

B. Sachau N/A 0136 Christine Hoekenga N/A 0143 Harry Nelson N/A 0156 Cyril May N/A 0157

Julia Glahn N/A 0159 Anonymous N/A 0160

Linda G. Akers N/A 0161 Paul Speck N/A 0162

Ruth Niswander N/A 0163 Amber Standridge N/A 0164

Karl Hanzel N/A 0165 Laurence Kirby N/A 0166

Lance McKee N/A 0167

Laura Turner N/A 0168

Michel Ravina N/A 0169 Betty Sager N/A 0170 George & Frances Alderson N/A 0171 Anonymous N/A 0172 Mary Stock N/A 0173 Ann Lynnworth N/A 0174 Mathew Trigg N/A 0175 Neil Fahey N/A 0176 Peg & Dick Bauman N/A 0177 Randy Sailer N/A 0178 Anonymous N/A 0179 Anonymous N/A 0180 Shawn Spooner N/A 0181

T.V. Cunilio CoSAF Inc. 0182

Vincent Contreras N/A 0183

Lorne K. Garrettson N/A 0184

Anne Daletski N/A 0185

Frank & Carol Nelson N/A 0186 Doug Friedman N/A 0187

Fran Sanders N/A 0188 George Durgerian N/A 0189

Howard Deutch N/A 0190 Jerry Goodman N/A 0191

John & Sharon Stewart N/A 0192 John Reynolds N/A 0193

Marsha A. Snell N/A 0194 Amy Johnson N/A 0195

David Horvath N/A 0196 Gary Higley N/A 0197

Patricia Treece N/A 019810 Kevin Gratt N/A 0201

Brian Hebeisen N/A 0234

Liz Killian N/A 0235 Taylor Young N/A 0236 Yu-Ming Ni N/A 0238 Alex Kaplan N/A 0239

Heather Germadnik N/A 0240

Dennis Thomas N/A 0241 David Doniger (letter to Linda Fisher) NRDC 0287

• Fifty-three commenters request that EPA not allow methyl bromide critical use exemptions [0124, 0136, 0143, 0156, 0157, 0159, 0160, 0161, 0162, 0163, 0164, 0165, 0166, 0167, 0168, 0169, 0170, 0171, 0172, 0173, 0174, 0175, 0176, 0177, 0178, 0179, 0180, 0181, 0182, 0183, 0184, 0185, 0186, 0187, 0188, 0189, 0190, 0191, 0192, 0193, 0194, 0195, 0196, 0197, 0198, 0201, 0234, 0235, 0236, 0238, 0239, 0240, 0241]. In addition, EPA received four mass letter campaigns on this issue for a total of 15,123 on time comments.

 Many of these commenters note the environmental and public/occupational health concerns associated with methyl bromide use. Indeed, eight make the specific statement that methyl bromide “depletes the ozone layer, exposing millions of Americans to skin cancer and a host of other diseases” and “also causes prostate cancer in workers who apply pesticides and others directly exposed to it.” [0143, 0157, 0161, 0164, 0185, 0190, 0193, 0196]

 Six of these commenters are of the opinion that producers/users had fair warning of the methyl bromide phase out [0176, 0179, 0185, 0196, 0197, 0241]. Specifically, one commenter makes the remark that “pesticide producers and agribusiness have already had 12 years to phase out this chemical and adopt safer alternatives.” [0241]

Response #4: The CAA allows the Agency to create an exemption for critical uses to the extent consistent with the Protocol. The Protocol authorizes an exemption to the extent decided by the Parties. In Decision Ex. I/3, the Parties decided to permit a limited exemption for specified uses nominated by the United States. EPA, in conjunction with other U.S. government entities, spent substantial time reviewing applications for critical use exemptions and preparing a nomination based on the lack of technically and economically feasible alternatives for the nominated uses. As discussed below, EPA does not have new information that would change the basis for the nomination. Although the Act does not require EPA to establish an exemption, EPA believes that the lack of su itable alternatives for the uses listed as approved critical uses in today’s rulemaking warrants the establishment of an exemption. The history of the ozone protection pr ograms has been the transition of industries away from production, import, and use of ozone depleting chemicals to alternatives. In some instances a successful transition was possible within the allotted time. In other instances, additional time has been required to allow for the development and market penetration of alternatives. In fact, more than ten years11 after the phaseout of chlorofluorocarbons (CFCs), the U.S. government is still exempting the production of CFCs for essential uses in metered dose inhalers. In

the instance of critical uses where suitable alternatives are not yet available for all uses, EPA believes it would be inconsistent with the history and the goals of the ozone protection program to not allow for a safety valve in accordance with the provisions of both international and domestic law. EPA appreciates the commenters concern regarding farm worker exposureto methyl bromide. EPA will address farm worker exposure issues through the reregistration of methyl bromide under the Federal Insecticide, Fungicide, and Rodenticide Act where the Agency is specifically charged with examining human health concerns such as by-stander and worker exposure to pesticides, not under the Title VI of the Clean Air Act which is designed to address depletion of stratospheric ozone and resulting exposures to UV radiation

.

• Two commenters believe that the U.S. should not qualify for critical use exemptions because the U.S. has not made an effort to seriously evaluate and commercialize methyl bromide alternatives [0122, 0134].

 The first of these commenters is concerned that there has not been enough consideration given to methyl bromide replacements for pre-plant uses i.e. soil fumigation [0122], while the second is concerned with the lack of attention given to alternatives for post-harvest uses i.e. mill fumigation [0134].

 One commenter is concerned that applicants did not conduct sufficient research to justify their rights to an exemption based on the criteria set forth in Decision IX/6 [287]

Response #5: The U.S. government alone has spent more than $150 million on research into alternatives to methyl bromide and the U.S. is seeking ways to hone our research efforts. In addition, EPA has registered all but one methyl bromide alternative currently in the registration queue. In addition to the government funded activities, EPA believes that private sector companies have invested millions of dollars to develop and register alternativ es (e.g. Arvesta’s registration application for methyl iodide, Dow’s registration of sulfuryl fluoride) in addition to the money spent by commodity groups on research. Typically commodity groups will make sizable in-kind contributions to government funded research projects in the form of

donated land and labor. EPA does not keep detailed records on the amounts of money spent on private sector research. However, as part of an application for a critical use exemption, EPA required all commodity groups to indicate prior and future research into alternatives. Almost all of the applicants have conducted research into alternatives. In some instances there were very small users of methyl bromide who applied for an exemption such as Michigan tomato growers who had not done any research on their own but these applicants developed research plans as part of their application. In the example of Michigan to mato growers, they are currently in their second consecutive year of testing alternatives on local plots. The historic and12 prospective research information provided by applicants for the exemption is available in the docket for this rulemaking.

1.d. Total amount is insufficient to meet critical use demand

Commenter Organization Document ID Number Patrick Cushing et al. Roger Williams University

School of Law 0126

Daren Gee N/A 0140-DG (transcript of public hearing) Douglas H. Fender Turfgrass Producers International 0205 Ken Woody Plum Creek Timber Company 0209

A.R. Chase California Cut Flower

Commission 0210

Wade Purvis Pacific Collier Fresh 0215 Edward M. Ruckert Crop Protection Coalition 0219

James A. Bair North American Millers’

Association 0220

Stephen E. Payne Pet Food Institute (PFI) 0221

John T. Ivancovich N/A 0222 Daniel A. Botts Florida Fruit & Vegetable Association (FFVA) 0223

Joel D. Jackson Florida Golf Course Superintendents Association 0230

Paul Niday Trical, Inc. 0231 Don Bates Bates Sons & Daughters 0232 Rex Cunningham Emerald Island Turf, Inc. 0233 David Corbett David Corbett Farms, LLC 0249 Randy DeWitt DeWitt Produce Co., Inc. 0250 Donnie H. Morris Georgia Fruit and Vegetable

Growers Association 0251

Gibbs Patrick, Jr. Gibbs Patrick Farms, Inc. 0252 Melvin Mathis MGM Plant Company 0253 Wilbert Morgan Morgan Farms 0254 Harry Vanderveer Texas Forest Service 0255 Mark Harrell Florida Strawberry Growers

Association 0256

Don Stringfield MeadWestvaco Corporation 0257 Paul Phypers, Jr. Happiness Farms, Inc. 0259

• Two sets of comments assert that the proposed cap on the amount of methyl bromide for critical uses for the US for 2005 of 8,942 metric tons is too low and that the amount should be increased to at least 9,777 metric tons [0219, 0223].

 It is noted that the amount of methyl bromide originally applied for by US critical use exemption (CUE) applicants was approximately 16,000 metric tons and that, based on an extensive review by more than 40 government PhD scientists, a reduced amount of 9,777 metric tons was requested in the

US nomination submitted to the Parties to the Montreal Protocol. These

commenters believe that the Parties reduced the US nomination amount to 8,942 metric tons without just cause and that there is a clear need for, at a minimum, the 9,777 metric tons requested by the US in its nomination.13 Further, these commenters state that the US nominated amount should only be reduced on the basis of “clear and convincing substantial evidence which demonstrates that it can be reduced without harming the user community.” [0219, 0223]

Response #6 : With today’s action, EPA is finalizing a determination that 8,942,214 kgs of methyl bromide are required to satisfy critical uses for 2005. EPA intends to address supplemental and new CUE allocations in a subsequent rulemaking following the 16 th Meeting of the Parties to the Montreal Protocol. EPA is authorizing the full amount of new production/import allowable under Decision Ex I/3, a total of 7,659,000 kgs, and is authorizing those entities that hold inventories of methyl bromide to sell 1,283,214 kgs for approved critical uses during 2005. As described in the proposed rule, this amount is adjusted from the 9,777,288 kilograms originally nominated by the U.S. government. The difference between the two amounts is accounted for by the following adjustments as determined by MBTOC, TEAP and the Parties to the Montreal Protocol: (a) the removal of methyl bromide for tobacco seedling float trays, totaling 1,323 kilograms, a use category that the Parties agreed did not meet the conditions for a critical use exemption, (b) a reduction of 53,328 kilograms to account for the market uptake of sulfuryl fluoride, a newly registered alternative for the fumigation of stored food items, (c) a reduction of 635,027 kilograms from strawberry field uses of methyl bromide due to further adoption of alternatives, in pa rticular emulsified 1,3 dichloropropene formulations, (d) a reduction of 145,367 kilograms for turfgrass production to reflect lower application rates using mixtures with lower concentrations of methyl bromide, and (e) a small number of kilograms based on rounding adjustments. The commenter did not provide EPA with any information on which of these technical adjustments to the overall critical use amount is in error or the reason why these amounts should changed. In any event, in order to maintain consistency with the critical use provision in Article 2H of the Protocol, EPA will not authorize a greater amount of new production/import than permitted by the Parties. For a more detailed discussion of the relationship between the Parties’ decisions and this rulemaking, see Response #37.

• One commenter contends that the proposed reduction of 53,329 kgs for the Mills and Process sector to account for market uptake of sulfuryl fluoride is too much [0220].

 The commenter notes that a reduction of 53,329 kgs represents more than 10 percent of the total quantity of methyl bromide approved for this sector. Further, the commenter states “while we believe that sulfuryl fluoride will eventually replace some methyl bromide usage, we do not believe it will have achieved by 2005 either the technical or economic feasibility to replace 10 percent of the MB usage.”

Response #7: EPA does not have flexibility to adjust the total amount of exempted methyl bromide above the maximum cap of 30% of baseline for new production and 35% for total use. In today’s rule, EPA is making the maximum14 30% available for exempted production and 35% for exempted use. Therefore EPA cannot issue additional CUAs, or raise the total number of CUAs plus CSAs issued above 35% of baseline, absent additional au thorizations from the Parties. However, EPA is not adopting a sector-by-sector approach and thus is not imposing a cap on the Mills and Process sector. In today’s rule EPA is creating flexibility in the exemption program to allow amounts of critical use methyl bromide to move from one use area to another based on market forces. This flexibility is a safety valve to
address situations such as this one where the amount referenced in Decision Ex I/3 for a specific sector may not be sufficient to meet demand in that sector. EPA’s ozone protection program has a long history of using market based approaches to implement our Clean Air Act requirements and today’s rule is no exception. For more information on why EPA is not adopting a sector-by-sector approach, please

refer to comments in section 4 of this document.

• While not specifically stating that the amount of methyl bromide for critical uses is insufficient, twenty-four commenters express a concern that there is a lack of effective, economically viable alternatives [0126, 0140-DG, 0205, 0209, 0210, 0215, 0220, 0221, 0222, 0230, 0231, 0232, 0233, 0249, 0250, 0251, 0252, 0253, 0254, 0255, 0256, 0257, 0258, 0259].

Response #8: For some uses, there are not effective and economic alternatives available yet. It is for this reason that EPA is creating a critical use exemption with today’s rule to allow for exempted production to meet the needs of users who do not

have technical and economic alternatives available to them.

1.e. Total amount should include amounts pending before Parties

Commenter Organization Document ID Number Dan Legard California Strawberry

Commission 0140-DL (transcript of public hearing) Edward M. Ruckert Crop Protection Coalition 0219

• Two commenters note that current rulemaking proposal document does not make

mention of the additional CUE amounts for 2005 that the Parties to the Montreal Protocol will be considering in November 2004 [0140-DL, 0219].

 One commenter requests that EPA include these additional amounts in the final rule of this rulemaking or, alternatively, “should immediately initiate rulemaking on such supplemental amounts so that the additional amount may be made available as soon as possible in early 2005.” [0219]

 The other commenter strongly urges EPA to issue a short amendment to the notice of proposed rulemaking and publish it in the Federal Register in late September or early October 2004. Further, if the additional amounts are approved by the Parties in November, the commenter asks that the final rule

take into account the increased CUE levels. It is to be noted that this commenter is particularly concerned with the increase in the CUE amount for California strawberry field use [0140-DL]15 Response #9: EPA recognizes that there are additional nominations for a critical use exemption for the year 2005 that were authorized at the 16 th Meeting of the Parties in November 2004. The amounts exempt ed in today’s rule only include those amounts authorized by the Parties at their First Extraordinary Meeting of the Parties. EPA understands the need to have exempted 2005 material available as soon as possible in 2005 and will commence a notice and comment rulemaking as soon as possible after an authorization is received for the additional 2005 amounts. However, it should be noted that at the stakeholder meetings held in 2002, EPA counseled those who wished to wait for the second round of applications to make a 2005 exemption application, that an authorization would not be received until nearly the end of 2004 and that there would be additional risk in taking this route because of the late timing. Some uses waited until the second round to apply for an exemption and therefore will not have any certainty about their exemption until late in the process. Section 604(d)(6) of the CAA states that “after notice and the opportunity for public comment,” EPA “may exempt the production , importation, and consumption of methyl bromide for critical uses.” Thus, EPA is required to conduct a notice and comment rulemaking on all uses and amounts of methyl bromide authorized by the Parties for a critical use exemption. Therefore, EPA can not roll supplemental authorizations into today’s final rule as the public will not have had an opportunity to comment on those supplemental uses and amounts of methyl bromide. EPA is considering beginning the notice and comment process earlier for future years of the critical use exemption, potentially before an authorization from the Parties is secured, to provide as mu ch certainty as soon as possible to the regulated community. However, if EPA were to propose a critical use exemption for uses and amounts that were not ultimately authorized by the Parties for an exemption, those uses and amounts, even if they received favorable comment, could not be included in the final rule. Another issue of concern to the Agency is the framework of the decisions taken by the Parties in future years. Because this is a new exemption, EPA believes that key aspects of how the exemption must be implemented could change. If EPA were to issue a notice of proposed rulemaking before a decision was taken by the Parties, EPA might have to re-propose certain framework elements of the exemption to ensure compliance with the decision.16 2. Summary of Comments Relating to AMOUNT FROM STOCKS

2.a. Legal basis to control stocks

Commenter Organization Document ID Number David Doniger Natural Resources Defense Council (NRDC) 0133, 0140-DD (transcript of public hearing), 246 Richard Matoian California Fig Industry 0202

Dennis Balint California Walnut Commission 0203 Douglas H. Fender Turfgrass Producers International 0205

Richard Peterson California Dried Plum Board 0206 Steve Hensley USA Rice Federation (USA Rice) 0214 Edward M. Ruckert Crop Protection Coalition 0219

James A. Bair North American Millers’

Association 0220

Daniel A. Botts Florida Fruit & Vegetable Association (FFVA) 0223

Ann M. Oxford Albemarle Corporation 0226 Steve Godbehere Hendrix and Dale, Inc. 0227 Paul Niday TriCal, Inc. 0231 Courtney M. Price et al. American Chemistry Council’s Methyl Bromide Industry Panel 0245

John Sansone Cardinal Professional Products 0248 David K. Mueller Pest Managers for A Better

Environment 0134

• Three commenters commented on EPA’s approach to adjusting the amount of newly authorized methyl bromide for the exemption based on the availability of stocks. [0133,0140-DD, 0246,0245]. There are nine sets of comments that question EPA’s legal authority to impose limits on the sale and use of pre-2005 existing stocks of methyl bromide [0214, 0219, 0220, 0223, 0226, 0227, 0231, 0245, 0248].

• One commenter argues that EPA is legally required in regulating critical methyl bromide use to take into account existing stocks based on the following argument [0133, 0140-DD, 0246].

 The commenter states that the proposed rule correctly observes that EPA must comply with the terms of both Article 2H of the Montreal Protocol and the related Decisions of the Parties pursuant to that article, and that the provisions of the Protocol and its Decisions are incorporated into, and become substantive provisions, of the Clean Air Act. [0133, 0140-DD, 0246]

 The commenter then makes note of the pertinent passages of Decision Ex. I/3 and Decision IX/6. Decision Ex. I/3, paragraph 5 states: “That each Party which has an agreed critical use should ensure that the criteria in paragraph of Decision IX/6 are applied when licensing, permitting or authorizing the use of methyl bromide and that such procedures take into account available stocks.” Decision IX/6, paragraph (1)(b)(ii) states the condition that methyl bromide “is not available in sufficient quality and quantity from existing stocks of banked or recycled methyl bromide, also17 bearing in mind the developing countries’ need for methyl bromide.” [0133, 0140-DD, 0246]

 Based on the above, the commenter concludes that EPA is right to acknowledge that Protocol Decisions Ex. I/3 and IX/6 require the agency to reduce the upper limit on production and consumption taking into account available stocks. [0133, 0140-DD, 0246]

 Similarly, another commenter states “EPA should enforce Decision IX/6 which clearly states that stockpiles of MB should be deducted from eligible CUEs available starting in 2005 [0134]

Response #10: EPA’s interpretation of its obligations with resp ect to the Decisions of the Parties is set forth in the preamble to the Notice of Proposed Rulemaking and in sections two and three of this document. As discussed below in responses 11-13, EPA concludes that the appropriate level of stocks utilization is set forth in Decision Ex. I/3(1), which establishes a critical us e level of 35% but permits production and consumption of only 30%. Paragraph (1) of Decision Ex. I/3, read in conjunction with paragraph (2) of the same Decision, specifies the amount of the critical use level for 2005 that should be met from stocks. Paragraph (1) establishes a critical use level of 35% of baseline but permits production and consumption of only 30%. Paragraph (2) explains that the difference is to be made up by using available stocks. In other words, the amount of the United States’ 2005 critical use level that should be met from stocks is 1,283,214 kilograms, i.e., an amount equivalent to 5% of baseline. In addition, EPA disagrees with the commenter’s assumption that all stocks that are not specifically designated for export to developing countries are available for critical uses. For example, there may be stocks in the U.S. for quarantine and pre-shipment uses or stocks held by another entity for a non-critical use during their transition to alternatives. In addition, the U.S. is a global supplier of methyl bromide and existing inventories may be tagged for critical uses in other developed countries.

• Two commenters emphasize the need for the cap on US production and consumption for critical uses for 2005 of 7,659 metric tons to be adjusted downward [0133, 0134, 0140-DD].

 These commenters both support EPA’s proposal to reduce the cap on production and consumption to reflect the amount of methyl bromide stocks [0133, 0134, 0140-DD, 0246]. Indeed, in the words of one of the commenters, “Protocol Decisions Ex. I/3 and IX/6, and the Clean Air Act, require the agency to reduce allowable production in 2005 from the upper limit number of 7,659 metric tons to account for available stocks.” [0246] At the same time, however, this commenter contends that EPA has failed to properly reduce the amount of production and consumption allowed in 2005 to account for available stocks by having conjured up a set of illegal factors to reduce the stock amount deemed “available” [0246].

 Another reason given by one of the commenters is that if the amount for critical uses for the US for 2005 is reduced (as this commenter has argued18 that it should be), then the cap on production and consumption also needs to be reduced so that it does not exceed the critical uses amount [0140-DD].

Response #11: As discussed below in response 12 and 13, Paragraph (1) of Decision Ex. I/3, read in conjunction with paragraph (2) of the same Decision, specifies the amount of the critical use level for 2005 that should be met from stocks. Paragraph (1) establishes a critical use level of 35% of baseline but permits production and consumption of only 30%. Paragraph (2) explains that the difference is to be made up by using available stocks. In other words, the amount of the United States’ 2005 critical use level that should be met from stocks is 1,283,214 kilograms, i.e., an amount equivalent to 5% of baseline. EPA is allocating CUAs in the amount of new production authorized by the Parties in Decision Ex. I/3, while making up the difference between that level (30% of baseline) and the total critical use level (35% of baseline) by allocating CSAs in an amount equal to 5% of baseline. If an entity does not have sufficient CSAs to cover the amount of stocks it wishes to sell for critical uses, it has two options. First, the entity may buy CSAs from another CSA holder, assuming there is a willing seller. Second, the entity may obtain CSAs from EPA in exchange for retiring an equal number of CUAs. If the entity pursues the first option, the total amo unt of CSAs held by all entities remains unchanged. If the entity pursues the second option, the increase in the total amount of CSAs will be offset by a corresponding decrease in the total amount of CUAs. In that instance, the resulting decrease in the allowable level of production will ensure that the U.S. does not exceed the 35% cap on total critical use. With regard to the comment suggesting that EPA adjust the total critical use level for 2005, EPA has not received any new information that would warrant such an adjustment.

• One commenter argues that there is no legal basis for EPA to adjust the cap on US production and consumption for 2005 downward from 7,659 metric tons [0245].

 First, this commenter contends that there is nothing in paragraph 1 of Decision Ex. I/3 that requires the 7,659 metric tons to be adjusted downward. Second, according to this commenter, paragraph 2 of Decision Ex. I/3 only requires that available stocks “be used to make up the difference between 7,659 and 8,942 metric tons, not that the level of production and consumption authorized in the earlier paragraph must be lowered to make use of all stocks determined to be ‘available’”. Finally, this commenter argues that the phrase in paragraph 5 of Decision Ex. I/3 “... and that such procedures take into account available stocks” does not override paragraphs 1 and 2, and cannot provide a basis for lowering the permitted level of production and consumption. [0245]

Response #12: The U.S. has two obligations under Article 2H and Decision Ex I/3 regarding amounts of material made available for critical uses in 2005. One, the U.S. can not exceed the 35% cap on critical uses, subject to further agreements by the Parties. Two, the U.S. can not exceed a 30% cap on new production for the exemption. EPA is ensuring compliance with both obligations by allocating CUAs in an amount equal to 30% of baseline and CSAs in an amount equal to 5% of19 baseline. In order to provide flexibility to the regulated community, EPA proposed and is finalizing a provision that allows an entity to receive additional CSAs from EPA. However, to ensure that the total number of CUAs and CSAs does not exceed 35% of baseline, an entity that wishes to receive additional CSAs from EPA must retire an equivalent amount of CUAs. In evaluating the issue of the amount of the critical use level for 2005 that should be met from stocks, EPA considered comments received and the following
statements in Decision Ex. I/3. Decision Ex I/3(1) permits a level of production and consumption equal to 30% of the 1991 base line and establishes an agreed critical use level equal to 35% of the 1991 baseline. With regard to drawdown from existing inventory, Decision Ex. I/3(2) states: “That a Party with a critical-use exemption level in excess of permitted levels of production and consumption for critical uses is to make up any such difference between those levels by using quantities of methyl bromide from stocks that the Party has recognized to be available.” The availability

of stocks is also addressed in Decision Ex. I/3(5), which states: “That each Party which has an agreed critical use should ensure that the criteria in paragraph 1 of decision IX/6 are applied when licensing, permitting or authorizing the use of methyl bromide and that such procedures take into account available stocks. In acting in accordance with Decision Ex. I/3, EPA looks to Paragraph (3) of that Decision, which states that a Party “s hall prohibit” the use of stocks when the usage of stocks combined with production and consumption exceeds the total level of critical uses agreed to by the Parties, and to Paragraph (2) of that Decision, which states that a Party with a use exemption exceeding allowable production and consumption “is to make up” any such difference by using stocks recognized to be available. Additionally, Paragraph (5) of Decision Ex. I/3 states that Parties should ensure that Decision IX/6’s criteria are applied, and Decision IX/6 states that production and consumption should not be permitted where stocks are recognized

to be available. Taking into account the language of Decision Ex. I/3’s first three Paragraphs, and the fact that the fifth Paragraph is hortatory, EPA concludes that the appropriate level of stocks utilization is set forth in Decision Ex. I/3(1), which establishes a critical use level of 35% but permits production and consumption of 30%. Paragraph (1) of Decision Ex. I/3, read in conjunction with paragraph (2) of the same Decision, specifies the amount of the critical use level for 2005 that should be met from stocks. Paragraph (1) establishes a critical use level of 35% of baseline but permits production and consumption of 30%. Paragraph (2) explains that the difference is to made up by using available stocks. Therefore, the amount of the United States’ 2005 critical use level that should be met from stocks is 1,283,214 kilograms, i.e., an amount equivalent to 5% of baseline. EPA’s conclusion is consistent with Paragraph (5) of Decision Ex. I/3. That Paragraph requests each Party with an agreed critical use to take into account available stocks when authorizing the use of methyl bromide. Given the language in Paragraphs (1) and (2) of Decision Ex. I/3, EPA interprets Paragraph (5)’s language as meaning that the U.S. should not au thorize critical use exemptions without including provisions addressing drawdown from stocks for critical uses. EPA is acting consistently with Paragraph (5) by establishing requirements governing the20 sale of pre-phaseout inventories for approve d critical uses. In addition, EPA is taking into account stocks through the tr ading provisions outlin ed in section in today’s rulemaking (section V.G of the preamble), which allow critical use

allowances to be converted into critical stock allowances. EPA had proposed to undertake an independent analysis of the amount to come from stocks and to adjust the authorized level of new production and consumption for critical uses by the amount of “available” stocks determined through this analysis. The methodology propos ed for this analysis was elaborated in the NPRM and also in a Technical Support Document that can be obtained from the rulemaking docket. Although EPA believes this approach has merit and could be used in the future, it is not necessary for the 2005 allocation of CUAs and CSAs. EPA also sought comment on an alternative approach: “For the 2005 calendar year, the Agency could make a determination that the amount of methyl bromide available from existing stocks is simply based on the difference between the limit on methyl bromide for critical uses (8,942 metric tons) and the limit on new production and import (7,659 metric tons) in the Decision Ex. I/3.” 69 FR 52375. This is essentially the approach adopted in today’s final rule. EPA is clarifying, however, that the appropriate level of stock drawdown for critical uses in 2005 is set

out in Decision Ex. I/3.

• In five sets of comments, the argument is made that Title VI, or more specifically Section 604(d)(6), of the Clean Air Act does not provide EPA with the legal authority to control existing stocks [0214, 0219, 0227, 0231, 0245]

 Section 604(d)(6) is identified by one commenter as the only provision of the Clean Air Act that addresses critical uses of methyl bromide [0245].

 All five commenters state that Section 604(d)(6) permits EPA to only regulate “production, consumption and importation” for critical use, and makes no mention of existing stocks. Further, they state that existing stocks do not fall under the definition of production, consumption or importation. Specifically with regards to the term “consumption,” as noted by two commenters [0214, 0219], consumption does not mean the “use” of a controlled substance, but rather is defined as the formula: production + imports – exports of controlled substances. [0214, 0219, 0227, 0231, 0245]

 One commenter contends that, in excluding mention of “reuse” and “recycling” in Section 604(d)(6), “Congress demonstrated its intention not to extend CAA regulation of methyl bromide to post-production activities.” [0245]

• Three commenters state that Article 2H(5) of the Montreal Protocol does not give EPA the legal authority to control existing stocks [0227, 0231, 0245].

 One commenter observes that Article 2H(5) of the Montreal Protocol is the provision from which authority to control existing stocks might arise [0245].

 All three commenters make the point that Article 2H(5) of the Montreal Protocol refers only to allowing “production and consumption” necessary to satisfy critical uses and says nothing about existing stocks. [0227, 0231, 0245]21  The argument is also made by one commenter that it is not possible to stretch the definitions of “production” and “consumption,” as given in the Montreal Protocol, to apply to existing stocks [0245].

 One commenter goes on further to say that, given the absence of any mention of existing stocks in Article 2H(5), “EPA is free to interpret the Protocol and the Decisions of the Parties without imposing restrictions on the use of existing stocks” [0231]

• Five sets of comments argue that EPA incorrectly assumes that it has legal authority to control existing stocks based on its assertion that, under the Clean Air Act, the agency must comply with the terms of both Article 2H of the Montreal Protocol and the related Decisions of the Parties pursuant to that Article [0214, 0219, 0223, 0231, 0245].

 Three commenters point out that the Clean Air Act’s definition of the Montreal Protocol does not make any reference to “Decisions”. The

Montreal Protocol is defined in the Clean Air Act to mean “the Montreal Protocol on Substances that Deplete the Ozone Layer, including adjustments adopted by the Parties thereto and amendments that have entered into force.” 42 U.S.C. 7671(8). Further, these commenters state that Decisions are not binding on the Parties to the Montreal Protocol whereas, by the express terms of the Clean Air Act, the Montreal Protocol and its amendments and adjustments are binding as a matter of law. It is argued that, as a consequence, the agency is not compelled as a matter of law to abide by the provisions of these Decisions. [0214, 0219, 0223]

 In three sets of comments, it is argued that EPA is wrong to contend that it must comply with Decision Ex. I/3, which makes mention of controlling existing stocks, based on the fact that this Decision must be considered a “subsequent consensus agreement” of the Parties in accordance with Article 31 of the Vienna Convention on the Law of Treaties [0219, 0223, 0245]. One commenter argues that, at most, Decisions “may be used to interpret existing requirements in the Protocol. They cannot be used to substantively change these requirements.” [0245]

Response #13: Section 604(d)(6) of the CAAA says: “To the extent consistent with the Montreal Protocol, the Administrator, after notice and the opportunity for public comment, and after consultation with other departments or instrumentalities of the Federal Government having regulatory authority related to methyl bromide, including the Secretary of Agriculture, may exempt the production, importation, and consumption of methyl bromide for critical uses.” Article 2H (5) of the Montreal Protocol provides that the 2005 methyl bromide phaseout shall not apply “to the extent the Parties decide to permit the level of production or consumption that is necessary to satisfy uses agreed by them

to be critical uses.” Both Section 604(d)(6) and Section 614(b) of the CAA address the relationship between the Montreal Protocol and actions taken under the CAA’s stratospheric ozone provisions. Section 604(d)(6) addresses critical uses specifically,22 while Section 614(b) is more general in scope. Section 604(d)(6) states that “to the extent consistent with the Montreal Protocol,” the Administrator may exempt methyl bromide for critical uses. Section 614(b) states: “This title as added by the

Clean Air Act Amendments of 1990 shall be co nstrued, interpreted, and applied as a supplement to the terms and conditions of the Montreal Protocol, as provided in Article 2, paragraph 11 thereof, and shall not be construed, interpreted, or applied to abrogate the responsibilities or obligations of the United States to implement fully the provisions of the Montreal Protocol. In the case of conflict between any provision of this title and any provision of the Montreal Protocol, the more stringent provision shall govern.” EPA must take into account not only the text of Article 2H but also the related Decisions of the Protocol Parties that interpret that text. Under customary international law, as codified in the 1969 Vi enna Convention on the Law of Treaties (8 International Legal Materials 679 (1969)) both the treaty text and the practice of the parties in interpreting that text form the basis for its interpretation. Although the United States is not a party to the 1969 Convention, the United States has regarded it since 1971 as “the authoritative guide to current treaty law and practice.” See Secretary of State William D. Rodgers to President Richard Nixon, October 18, 1971, 92d Cong., 1 st Sess., Exec. L (Nov. 22, 1971). Specifically, Article 31(1) of the Vienna Convention provides that “[a] treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose.” Article 31(3) goes on to provide that “[t]here shall be taken into account, together with the context: (a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions.” In the current circumstances Decisions of the Parties can be construed as subsequent consensus agreements among the Parties to the Montreal Protocol, including the United States, regarding the interpretation and application of the Protocol. In accordance with Article 2H(5), the Parties have issued several Decisions pertaining to the critical use exemption. At their Ninth Meeting in 1997, the Parties issued Decision IX/6 which established criteria applicable to the critical use exemption. In paragraph 1 of Decision IX/6, the Parties agreed as follows: (a) That a use of methyl bromide should qualify as “critical” only if the nominating Party determines that: (i) The specific use is critical because the lack of availability of methyl bromide for that use would result in a significant market disruption;

and (ii) There are no technically and economically feasible alternatives or substitutes available to the user that are acceptable from the standpoint of environment and health and are suitable to the crops and circumstances of the nomination; (b) That production and consumption, if any, of methyl bromide for critical uses should be permitted only if: (i) All technically and economically feasible steps have been taken to minimize the critical use and any associated emission of methyl bromide;23 (ii) Methyl bromide is not available in sufficient quantity and quality from existing stocks of banked or recycled methyl bromide, also bearing in mind the developing countries’ need for methyl bromide; (iii) It is demonstrated that an appropriate effort is being made to evaluate, commercialize and secure national regulatory approval of alternatives and substitutes, taking into account the circumstances of the nomination . . . Non-Article V [Developed country] parties must demonstrate that research programmes are in place to develop and deploy alternatives and substitutes. . . The Parties also agreed in Decision IX/6 that the technical panels (discussed below) that reviews nominations and makes recommendations to the Parties regarding approval of critical use exemptions, would base its review and recommendations on the criteria in paragraphs (a)(ii) and (b). The criterion in paragraph (a)(i) was not subject to review by this technical panel. At the First Extraordinary Meeting of the Parties in March of 2004, the Parties issued several decisions that address the agreed critical uses, the allowable levels of new production and consumption for critical uses, the conditions for granting critical use exemptions, and reporting obligations. Decision Ex. I/3 covers the agreed critical uses and allowable levels of new production and consumption for the year 2005. This Decision includes the following terms: 1. For the agreed critical uses set forth in annex II A to the report of the First Extraordinary Meeting of the Parties to the Montreal Protocol for each Party, to permit, subject to the conditions set forth in decision Ex. I/4, the levels of production and consumption set forth in annex II B to the present report which are necessary to satisfy critical uses, with the understanding that additional levels and categories of uses may be approved by the Sixteenth Meeting of the Parties in accordance with decision IX/6; 2. That a Party with a critical-use exemption level in excess of permitted levels of production and consumption for critical uses is to make up any such difference between those levels by using quantities of methyl bromide from stocks that the Party has recognized to be available; 3. That a Party using stocks under paragraph 2 above shall prohibit the use of stocks in the categories set forth in annex II A to the report of the First Extraordinary Meeting of the Parties to the Montreal Protocol when amounts from stocks combined with allowable production and consumption for critical uses exceed the total level for that Party set forth in annex II A to the present report; 4. That Parties should endeavor to allocate the quantities of methyl bromide recommended by the Technol ogy and Economic Assessment Panel as listed in annex II A to the report of the First Extraordinary Meeting of the Parties; 5. That each Party which has an agreed critical use should ensure that the criteria in paragraph 1 of decision IX/6 are applied when licensing, permitting or authorizing the use of methyl bromide and that such procedures take into account available stocks. Each Party is requested to24 report on the implementation of the present paragraph to the Ozone Secretariat; The agreed critical uses and allowable levels of production and consumption are set forth in annexes to the Parties’ report. Decision Ex I/4 addresses the conditions for granting and reporting critical-use exemption for methyl bromide. Decisions IX/6, Ex. I/3, and Ex. I/4 are subsequent consensus agreements of the Parties that address the interpretation and application of the critical use provision in Article 2H(5) of the Protocol. For example, Decision Ex. I/3 reflects a decision called for by the text of Article 2H(5) where the parties are directed to “decide to permit the level of production or consumption that is necessary to satisfy uses agreed by them to be critical uses.” In today’s final rule, EPA is following the terms of Decisions IX/6, Ex. I/3, and Ex. I/4. This will ensure consistency with the Montreal Protocol and satisfy the requirements of Section 604(d) (6) and Section 614(b) of the CAA. For further background on this issue, please see the NPRM, 69 FR 52369-52372 (August 25, 2004). In finalizing the provisions on access to stocks, EPA considered comments received and the language of Decision Ex I/3(3), which states: “That a Party using stocks under paragraph 2 above shall prohibit the use of stocks in the categories set forth in annex II A to the report of the First Extraordinary Meeting of the Parties to

the Montreal Protocol when amounts from stocks combined with allowable production and consumption for critical uses exceed the total level for that Party set forth in annex II A to the present report.” While Congress, in the Clean Air Act, generally mandated that production and consumption of ozone-depleting substances be phased out across the board, regardless of use, the Act does contain certain provisions, including section 604(d)(6), that authorize EPA to provide exceptions on the basis of use. Thus, section 604(d)(6) is one of the provisions of the Clean Air Act where use is clearly at issue. In today’s final rule, EPA is imposing narrowly tailored use restrictions as a condition of obtaining new production and import. EPA believes that section 604(d)(6) mandates this result. In section 604(d)(6), Congress provided EPA authority to exempt production and import of methyl bromide for critical uses, but only “to the extent consistent with the Protocol.” The use restrictions in today’s final rule are necessary to ensure that total usage for critical uses does not exceed the limit agreed to by the Parties in implementing the critical use provision in

Article 2H of the Protocol. The commenters further argue that EPA cannot rely on Decision Ex I/3 to justify restrictions on use of stocks. They state that while Decisions may be used to interpret existing requirements in the Protocol, they cannot be used to substantively change those requirements. However, EPA is not suggesting that Decision Ex I/3 substantively changed the requirements of Article 2H. Article 2H establishes a prohibition on the production and consumption of methyl bromide, but states that the prohibition shall not apply “to the extent the Parties decide to permit the level of production and consumption that is necessary to satisfy uses agreed by them to be critical uses.” The Parties have not interpreted Article 2H in the manner the commenters assert. Instead, they understood the terminology referring to “uses agreed by them to be critical uses” to allow the Parties to tie the determinations of25 production and consumption to use. Unde r international law, this interpretation and practice of the Parties may, in the curren t situation, be read to be an accurate interpretation of Article 2H’s language. Although Decision Ex. I/3 focuses on regulating production and consumption, the Parties could reasonably set related conditions on agreeing to production and consumption at a particular level. Therefore, the stock restrictions are an integral part of the Parties’ decision regarding the level of production and consumption necessary to satisfy critical uses.

The commenters further characterize the restrictions on access to stocks proposed in the NPRM as “an attempt by the Agency to bypass the Treaty Clause of the U.S. Constitution by unilaterally amending the Montreal Protocol through a rulemaking, without the advice and consent of the Senate.” EPA rejects this characterization. Article 2H explicitly assigns to the Parties the task of deciding what level of production and consumption “is necessary to satisfy uses agreed by them to be critical uses...” Therefore, EPA looks to the Parties’ Decisions to provide the details of the exemption authorized in Article 2H. In Decision Ex I/3, the Parties decided what level of production and consumption was necessary given certain assumptions about stocks. Accordingly, in compliance with Article 2H, this final rule addresses both production and consumption and the use of stocks. One commenter indicated that Congress did not include the words “reuse” ore “recycle” in 604(d)(6) concluded that Congress must not have intended to regulate use. However, in authorizing EPA to exempt production of methyl bromide for “critical” uses, Congress clearly intended that EPA undertake some examination of which uses qualify as “critical.” Thus, the commenter’s statement that Congress did not intend to extend regulation of methyl bromide to “post-production activities” is incorrect. All critical use of methyl bromide occurs “post-production.” In addition, reuse and recycling of methyl bromide is not a mature technology today and certainly was not a mature technology at the time of the 1998 amendments. Thus, it is unlikely that Congress would have referred to these concepts in adding specific methyl bromide provisions to the Clean Air Act.

• One commenter disagrees with EPA’s assertion that it has legal authority to restrict the sale and use of methyl bromide stocks because other sections of the Clean Air Act allow it to restrict the use of other controlled substances [0245].

• This commenter states that “by including ‘use’ in other sections of the CAA but not in 604(d)(6), Congress demonstrated purposefully its intent to deny the Agency authority to control or prohibit the sale, distribution or use of stocks when setting critical use exemptions” of methyl bromide [0245].

Response #14: In the NPRM, EPA referenced other sections of the Clean Air Act that restrict the use of ozone depleting substances to make the point that it is incorrect to view the Clean Air Act as exclusively restricting production and import of ozone depleting substances. The commenter refers to the maxim “expression unius est exclusion alterius” (“the expression of one thing is the exclusion of another”), and quotes a Supreme Court opinion for the principle that “where Congress includes particular language in one section of a statute but omits it in26 another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.” Russello v. United States, 464 U.S. 16, 23 (1983). However, this principle does not apply here. Congress included language regarding use both in other sections, such as section 605 and section 608, and in section 604(d)(6). In addition, the provisions on access to stocks in today’s final rule, issued under section 604(d)(6) of the CAA, are not comparable to the use restrictions issued pursuant to, for example, section 608, which concerns the use and disposal of ozone depleting substances during the service, repair, and disposal of refrigeration equipment. In today’s final rule, EPA is restricting access to stocks for uses that obtain new production. EPA is not creating restrictions under the authority of section 604(d)(6) except as a condition of the critical use exemption.

• Six commenters assert that it would be wrong of EPA to restrict the sale and use of stocks that were produced or imported in accordance with the methyl bromide phase-out guidelines of the Montreal Protocol [0140- JN, 0140-DG, 0205, 0220, 0245]

 One commenter backs up this assertion by arguing that in “approving a given level of production, the Parties implicitly approve any environmental effects that might be associated with use of the approved level of production. Thus, a subsequent restriction on use of product legitimately produced by expending production and consumption allowances essentially amounts to a retroactive change in allowed levels of production.” [0245]

Response #15: EPA disagrees with the commenter’s assumption that in “approving a given level of production the Parties im plicitly approve any environmental effects that might be associated with use of the approved level of production.” The Parties have on multiple occasions urged measures to minimize the environmental impact of legally-produced ozone-depleting substances. For example, in Decision VI/11, regarding quarantine and preshipment applications of methyl bromide, the Parties stated that, in applying the quarantine and preshipment definitions, “Parties are urged to minimize emissions and use of methyl bromide through containment and recovery and recycling methodologies to the extent possible.” Decision VI/11(1)(c). Other Decisions in the same vein include Decision IV/24, Decision XI/6, and Decision X/7. In Decision IV/24, regarding recovery, reclamation and recycling of controlled substances, the Parties agreed “to urge all the Parties to take all practicable measures to prevent releases of controlled substances into the atmosphere.” Such measures were to incl ude recovery of controlled substances during the servicing and maintenance, and prior to the disposal, of certain types of equipment, for the purpose of recycling, reclamation, or destruction; minimization of refrigerant leakage during manufacture, installation, operation and servicing of commercial and industrial air-conditioning and refrigeration systems; and destruction of unneeded ozone-depleting substances “where economically feasible and environmentally appropriate.” Decision IV/24(4). Similarly, in Decision XI/16 the Parties noted “that decision IV/24 urges all Parties to take all practicable measures to prevent releases of controll ed substances into the atmosphere” and27 requested that each non-Article 5 Party submit a CFC management strategy. Options to be considered in preparing such a strategy included: “Setting target dates for bans on the refilling and/or th e use of refrigeration and air-conditioning equipment functioning on CFCs” and “Ens uring that appropriate measures are taken for the environmentally safe and effective storage, management and final disposition of recovered CFCs.” Decision XI/16(1),(5). The preambular language to Decision X/7 notes that “in the executive summary of its 1998 report, the Scientific Assessment Panel identifies complete elimination and destruction of halon-1211 and 1301 as the most environmentally beneficial option to enhance the recovery of the ozone layer.” In that Decision, the Part ies requested “all Parties to develop and

submit to the Ozone Secretariat a national or regional strategy for the management of halons, including emissions reduction and ultimate elimination of their use.” Decision X/7(1). Thus, approval of a given level of production does not necessarily imply acceptance of the environmental effects that might result from such production. Further, EPA does not agree that “a subsequent restriction on use of product legitimately produced by expending pr oduction and consumption allowances essentially amounts to a retroactive change in allowed levels of production.” Today’s final rule does not assign new legal consequences to methyl bromide production that occurred prior to January 1, 2005. If such production was legal at the time it occurred (e.g., the producer had sufficient unexpended allowances), that production remains legal under today’s rule.

• Six sets of comments state that it is unfair of EPA to completely shift its position on the central issue of the control of existing stocks of methyl bromide in the proposed rule [0202, 0203, 0206, 0227, 0231, 0245].

 All six commenters argue that, up until the publication of the proposed rule, it was always the position of EPA that the use of existing stocks would not be restricted [0202, 0203, 0206, 0227, 0231, 0245]. Three commenters give the particular example of information contained in a “Frequently Asked Questions” section of EPA’s “Methyl Bromide Phase-Out Web Site”: “Question: Does the Clean Air Act restrict the use of Methyl Bromide now or after 2005? Answer: No.” [0227, 0231, 0245].

 Two commenters point out that, until now, it was always their understanding that the use of existing stocks would be regulated by FIFRA (Federal Insecticide, Fungicide and Rodenticide Act) [0227, 0231].

 One commenter suggests that it would be “arbitrary and capricious for EPAto change its position on this central issue without providing a factuallygrounded rational basis for doing so.” [0245]

Response #16: The Frequently Asked Questions document referred to by the commenters is from 2/25/1999. The full answer to that questions is “No. The phase out applied to chemical pro duction and imports, not use. Pesticide use is governed by FIFRA (Federal Insecticide, Fungicide and Rodenticide Act) in the EPA Office of Pesticide Program).” While it remains true that the Clean Air Act does not directly restrict use of methyl bromide, section 604(d)(6) only allows EPA to exempt28 production of methyl bromide for critical uses “to the extent consistent with the Montreal Protocol.” To ensure such consistency, EPA is imposing a use restriction as a condition of obtaining new production for critical uses

.

• Two commenters argue that imposing restrictions on the sale or use of existing stocks of methyl bromide at this time would constitute a “taking” under the Fifth Amendment of the US Constitution [0231, 0245].

 One commenter states that “If the final rule prohibits the sale and distribution of stocks as contemplated in the NPRM, there will be a significant reduction in value of stocks held by suppliers.” [0245]

 It is also noted by this same commenter that “no vehicle is proposed to compensate owners or distributors for their losses.” [0245]

Response #17: EPA does not agree that the restrictions on sale of stocks into the critical use market in today’s final rule constitute a “taking” under the Fifth Amendment. This rule does not deprive entities that own stocks of methyl bromide of all economically beneficial use of such stocks, nor is it expected to impose any substantial economic impact on such enti ties. This rule does not require CSA holders or any other entities to sell any amount of methyl bromide for critical uses. It does restrict entities that own stocks of methyl bromide from selling such stocks for critical uses in excess of the amount of CSAs held. However, EPA notes that there are several domestic markets for methyl bromide as well as foreign markets (export to developing countries and export to meet the critical use demands of developed countries) which are all sizable and important markets. Therefore, EPA does not understand why the value of stocks would be greatly diminished given the number of legal markets. Even if there were a reduction in value of stocks on the unrestricted market because of a glut of material that had been previously held for CUE users now becoming available, economic theory would suggest that the corresponding scarcity of stocks in the critical use market would lead to the ability to charge a price premium in the exemption market. This would hold true unless the amount of stocks authorized for sale into the critical use market were equivalent to present demand, in which case there would not be a scarcity and ensuing premium. In this scenario there would clearly not be a takings issue to begin with since the regulatory limit on sale of stocks for critical uses would reflect the amount

that would have been sold into that market in the absence of regulation.29 2.b. Factors in the algorithm

Commenter Organization Document ID Number David Doniger Natural Resources Defense Council (NRDC) 0133, 0140 (transcript of public hearing), 0246

David McAllister Great Lakes Chemical Corporation 0138

James Nicol Great Lakes Chemical Corporation 0212

Steve Hensley USA Rice Federation (USA Rice) 0214 Edward M. Ruckert Crop Protection Coalition 0219 Daniel A. Botts Florida Fruit & Vegetable Association (FFVA) 0223

Ann M. Oxford Albemarle Corporation 0226 Courtney M. Price et al. American Chemistry Council’s Methyl Bromide Industry Panel 0245

Tim Maniscalo Dow AgroSciences LLC (DAS) 0247

John Sansone Cardinal Professional Products 0248 David R. Riggs Western Raspberry Nursery

Consortium 0217

• One commenter argues that, based on the language of the Decisions pursuant to Article 2H of the Montreal Protocol, EPA only has the authority to deduct the D (drawdown of stocks through 2004) and E1 (stocks for developing countries) factors to determine the amount of stock that is “available” [0133, 0145]. This commenter claims, in reference to what the commenter sees as a need to reduce the cap on allowable production and consumption to account for

available stocks in accordance with Protocol Decisions Ex I/3 and IX/6 and the Clean Air Act, that “in a transparent attempt to circumvent these requirements, EPA has conjured up a set of illegal factors” to reduce the amount of “available” stock [0246].

Response #18: EPA is not implementing the available stockpile methodology in today’s final rule and therefore is not resp onding to comments on the details of the methodology described in the proposal. Should EPA utilize this methodology in future, EPA will consider these comments at that time.

• Five sets of comments offer some qualified support for the methodology underlying the formula to be used by EPA in determining available stocks [0212, 0226, 0245, 0247, 0248].

 Three of these commenters note that “EPA’s proposed formula includes most of the terms that would logically be necessary to calculate the amount of stocks that are potentially available” [0212, 0226, 0245]

 One commenter “supports the methodology in principle.” [0247]

 Another commenter agrees with EPA that “a top-down approach is the most logical way to determine available stocks.” [0248]30 Response #19: EPA is not implementing the available stockpile methodology in today’s final rule and therefore is not resp onding to comments on the details of the methodology described in the proposal. Should EPA utilize this methodology in future, EPA will consider these comments at that time.

• Five commenters, while somewhat supportive of the underlying methodology, believe that the formula to be used by EPA to calculate available stocks has major flaws [0212, 0226, 0245, 0247, 0248].

 Three of these commenters regard the formula as being too complex and, given the lack of definitive numbers for most of the terms, as only being able to be used to give at best a qualitative result [0212, 0226, 0245].

 While nearly all commenters suggested changes to one or more of the terms in the formula, one commenter makes the general observation that “some of the variables used within the formula are not clearly defined which may lead

EPA to underestimate or overestimate the true extent of available stock.” [0247]

 One commenter believes that the formula in its current form will prevent stocks from being drawn down at a desirable rate. This belief is based on what the commenter sees as an incorrect assumption by EPA that the majority of existing stocks are held by producers as opposed to distributors. [0248]

Response #20: EPA is not implementing the available stockpile methodology in today’s final rule and therefore is not resp onding to comments on the details of the methodology described in the proposal. Should EPA utilize this methodology in future, EPA will consider these comments at that time.

• Three commenters request clarification of the means by, and point in time for, which the ES (existing stocks) factor is to be calculated [0212, 0226, 0245].

 These three commenters note that specific information on the method to be used in calculating the ES factor is not given [0212, 0226, 0245].

 Further, these commenters say there is some confusion as to the point in time for which the ES factor is to be calculated. “While the supporting technical document for EPA’s formula specifies this point as the end of calendar year 2003, the NPRM implies that information collected under an August 25, 2004 Section 114 request will somehow be used to develop this value.” [0212, 0226, 0245]

Response #20: EPA is not implementing the available stockpile methodology in today’s final rule and therefore is not resp onding to comments on the details of the methodology described in the proposal. Should EPA utilize this methodology in future, EPA will consider these comments at that time.

• It is proposed by three commenters that the B (banked stocks) factor be eliminated from the formula [0212, 0226, 0245].31  These three commenters note that, for the control periods following 2005, “B will include any methyl bromide produced by expending CUAs, but not sold to end users by the end of the control period.” The concern is that, in not knowing the B factor until the end of say 2005, the available stocks for 2006 will not be able to be calculated prior to the end of 2005 as is needed for planning purposes. [0212, 0226, 0245]

 In place of the factor B, these commenters propose that “EPA should allow for the unrestricted carry-over of critical use methyl bromide.” [0212, 0226, 0245]

Response #21: EPA is not implementing the available stockpile methodology in today’s final rule and therefore is not resp onding to comments on the details of the methodology described in the proposal. Should EPA utilize this methodology in future, EPA will consider these comments at that time.

• One commenter expresses a couple of concerns with regard to the E1 (stocks for developing countries not produced with Article 5 allowances) factor [0247].

 The first concern is in regards to “how it is possible to legitimately hold stocks of MB for export to developing countries when those stocks were not produced with Article 5 allowances.” [0247]

 The commenter’s second concern is that, where the E1 factor stocks are legitimate, “the definition of E1 be reviewed and more clearly defined to ensure it does not include quantities previously excluded from the existing unrestricted stock estimates.” [0247]

 It is to be noted that three sets of comments raise the somewhat unrelated

issue of the need for EPA to issue a final rule on Article 5 allowances before January 1, 2005, to ensure the continued availability of these allowances [0212, 0226, 0245].

Response #22: EPA is not implementing the available stockpile methodology in today’s final rule and therefore is not resp onding to comments on the details of the methodology described in the proposal. Should EPA utilize this methodology in future, EPA will consider these comments at that time. EPA is addressing the issue of Article 5 allowances through a separate action

.

• There are several comments of varying nature concerning the E2 (stocks for developed countries in 2004) factor [0133, 0140, 0212, 0226, 0245, 0247].

 One commenter claims that there is no basis for the E2 factor [0133, 0140].

 Three commenters support the inclusion of the E2 factor on the grounds that regulations for a critical use system may not be fully, if at all, implemented in 2005 in other developed nations and that EPA must take exports of stocks to these countries into account in determining available stocks for the US [0212, 0226, 0245].

 A concern that E2 factor stocks might be double counted under the D (estimated drawdown of stocks by US and international consumers in 2004)32 factor led one commenter to request that the definitions of E2 and D be reviewed and more clearly defined [0247].

 Response #23: EPA is not implementing the available stockpile methodology in today’s final rule and therefore is not resp onding to comments on the details of the methodology described in the proposal. Should EPA utilize this methodology in future, EPA will consider these comments at that time.

• A number of differing views are held with regard to the amount of stock, if any, needed under the C (catastrophic reserve) factor [0133, 0140, 0212, 0214, 0219, 0223, 0226, 0245, 0247].

 One commenter believes that there is no basis for the C factor. This commenter holds this belief for three reasons; first, the commenter is not aware of any precedent of inventory of a chemical being held “as a reserve against a hypothetical catastrophic loss of production capacity; second, “there has never been such an event for methyl bromide”; and, three, “EPA has not provided a basis for believing that such a catastrophe is a reasonable possibility.” [0133, 0140]

 Another commenter supports the inclusion of the C factor, but proposes that

the amount of stock that be set aside as a reserve be reduced to six weeks’ supply. To support this proposed reduction in the amount of reserve stock, this commenter points out that, to date, there has not been a catastrophic loss of methyl bromide production capacity. Further, the commenter adds that, if a single manufacturer experienced a catastrophic production failure, there exist a significant number of manufacturers worldwide with excess production capacity. [0247]

 The majority of comments regarding the C factor, however, suggest that the

amount of stock held as a reserve should be increased from three months’ to nine months’ [0212, 0226, 0245] or one year’s [0214, 0219, 0223] supply.

Response #24: EPA is not implementing the available stockpile methodology in today’s final rule and therefore is not resp onding to comments on the details of the methodology described in the proposal. Should EPA utilize this methodology in future, EPA will consider these comments at that time.

• The need for the N (stocks to be set aside for non-critical uses) factor is rejected by two commenters [0133, 0140, 0247] and supported by one [0245].

 One of the two commenters against the N factor being included argues that “non-critical users already have technically and economically feasible alternatives available and in use today” and further that “it is clearly against the intent of the Protocol to reserve MB stocks for non-critical uses that, when reserved, effectively trigger the production of new ODS for CUEs.” [0247]

Response #25: EPA is not implementing the available stockpile methodology in today’s final rule and therefore is not resp onding to comments on the details of the33 methodology described in the proposal. Should EPA utilize this methodology in future, EPA will consider these comments at that time.

• Comments received regarding the D (drawdown of stocks through 2004) factor concern either the need to increase the stock amount [0214, 0219, 0223] or to better explain how this factor is to be estimated [0212, 0226, 0245].

 One of the commenters suggesting that EPA increase the amount considered for the D factor argues that any necessary corrections can be made prior to the 2006 control period [0214].

 Three commenters request that EPA explain how the information provided to the Agency under the August 25 Section 114 request will be used to help estimate the D factor [0212, 0226, 0245].

Response #26: EPA is not implementing the available stockpile methodology in today’s final rule and therefore is not resp onding to comments on the details of the methodology described in the proposal. Should EPA utilize this methodology in future, EPA will consider these comments at that time.

• Three commenters suggest that an additional factor, which might be called “DC”, be added to the formula to set aside sufficient stock to fill the distribution chain [0212, 0226, 0245].

 It is proposed by these three commenters that the DC factor be assigned an amount of stock equivalent to three months’ production [0212, 0226, 0245].

 These commenters believe that the DC factor is needed in addition to the C factor to help protect against supply disruptions [0212, 0226, 0245].

Response #27: EPA is not implementing the available stockpile methodology in today’s final rule and therefore is not resp onding to comments on the details of the methodology described in the proposal. Should EPA utilize this methodology in future, EPA will consider these comments at that time.

• One commenter has a number of questions for EPA regarding the category labeled quarantine and preshipment stocks (QPS) [0133].

 The commenter requests EPA to clarify the definition of the so-called “restricted stocks of methyl bromide that were produced for quarantine and preshipment.” [0133]

 The commenter asks “how does the agency propose to determine the amount of stocks currently held for that purpose?” and “does the agency have information regarding the amount of stocks held for that purpose in 2002 and 2003?” [0133]

Response #30: The amount of stocks held for QPS purposes is identified at the time of production or import. To assure compliance with Montreal Protocolrequirements, EPA essentially accounts for QPS quantities separately from nonQPS methyl bromide. Those quantities designated QPS at the time of production or import are not fungible with other amounts of methyl bromide. While EPA is not34 implementing the available stockpile methodology in today’s final rule, EPA notes that 40 CFR 82.13 contains provisions requiring producers and imports to keep records and make reports regarding the production, import, and sale of methyl bromide for QPS purposes. See, for example, 82.13(f)(2)(xvii); 82.13(f)(3)(xiii); 82.13(g)(1)(xvii); 82.13(g)(4)(xv).

• One commenter states the need for currently accepted quarantine and preshipment stock (QPS) exemptions to be maintained [0217].

 The commenter notes that the amount of methyl bromide in the US nomination for the orchard nursery and raspberry nursery segment was less than that requested by the Western Raspberry Nursery Consortium based on EPA’s determination that a portion of the amount requested would be considered a quarantine-preshipment (QPS) use. Given this, the commenter asserts that “if, for any reason, the QPS definition changes, the critical need for methyl bromide is no less and therefore the amount of methyl bromide necessary to meet the needs of this segment should be increased appropriately.” [0217]

Response #31: EPA is not amending the quarantine and preshipment exemption program with today’s rule.35 2.c. Disclosure of data (CBI)

Commenter Organization Document ID Number David Doniger Natural Resources Defense Council (NRDC) 0133, 0140-DD (transcript of public hearing), 0246 Christine Hoekenga N/A 0143

Sara Hoffman Genthner N/A 0158

Linda G. Akers N/A 0161

Ruth Niswander N/A 0163 Amber Standridge N/A 0164

Laura Turner N/A 0168 George & Frances Alderson N/A 0171

Anne Daletski N/A 0185

Heather Germadnik N/A 0240

• One commenter notes that EPA has not produced data as to the stocks held by producers and top-level suppliers, and thus, asserts that EPA has not answered that portion of the commenter’s March 19, 2004, Freedom of Information Act (FOIA) request relating to methyl bromide stocks (“stocks FOIA”). The commenter has initiated a lawsuit to compel disclosure (NRDC v. Leavitt, Civil Action. No 04-1295 (HHK)). The commenter acknowledges, however, that two of the five companies that submitted the data have filed reverse-FOIA cases in two other jurisdictions. This commenter asserts that EPA cannot publish a final rule that meets CAA standards of reasoned decision making without making this data available for comment [0133, 0140, 0246]. The same commenter also argues that the Agency’s June 18, 2004 response to the commenter’s April 29, 2004 FOIA request methyl bromide use data and analysis (“use data”) was incomplete because it did not disclose data referenced in an October 7, 2004 letter from EPA to Senator James Jeffords. The commenter asserts that if EPA intends to rely on that use data, the Agency must provide an opportunity for comment on the data and the methodology by which it developed its estimate of

total use from the data. The commenter takes issue with EPA’s actions in withholding certain data with regard to both the stocks FOIA and the use FOIA, namely the individual and aggregate stocks data and “proprietary use data and/or databases.” According to the commenter, those data constitute “emission data” under section 114(c) of the CAA and therefore are not eligible for protection as confidential business information or trade secrets. The commenter also notes that section 114(c) allows EPA to disclose information that would otherwise be treated as confidential “when relevant in any proceeding” under the CAA.

• One commenter believes that EPA is not disclosing data regarding methyl bromide [0158].

• Six commenters put forward the opinion that EPA is aiding chemical companies to avoid revealing their methyl bromide stockpiles [0143, 0161, 0163, 0164, 0168, 0185, 0240].36 • One commenter believes that some companies have built up large stockpiles of methyl bromide that have not been revealed in the public record [0171].

Response #32: EPA is following its own regulations regarding responses to requests

for disclosure of information under the Freedom of Information Act and the treatment of information claimed as confidential. These regulations appear at 40 CFR §§ 2.100- 2.311. EPA received two Freedom of Information Act (FOIA) requests from one of the commenters. One requests concerned data on use of methyl bromide (“use” FOIA request) and the other concerned data on individual company and aggregate holdings of pre-phaseout inventories of me thyl bromide (“stocks” FOIA request). In addition, EPA received an additional FOIA request from an entity that did not provide comment on the rulemaking on EPA estimates of use of methyl bromide and the individual and aggregate holdings of stocks (“EIA” FOIA). EPA initially denied the “stocks” FOIA request pending a confidentiality

determination. EPA determined that the individual stocks information was confidential but the aggregate was not. Under EPA regulations, EPA was to disclose the information determined not to be confidential unless the companies that had submitted the information initiated an action in federal court to obtain judicial review of the determination. Two of the companies in question availed themselves of this opportunity. Therefore, EPA did not immediately release the aggregate stocks information. Whether EPA ultimately releases that information will depend

on the outcome of those actions. In addition, EPA disagrees with the commenter’s claim that the Agency cannot issue a final rule that meets CAA standards of reasoned decision making without making the stocks data available for comment. Because today’s final rule does not rely on the available stocks methodology described in the proposal for purposes of calculating the amount of CUE methyl bromide to come from stocks and the amount to come from new producti on, clearly EPA is not required to make public any additional information regarding the basis for such an analysis. EPA is not addressing at this time the hypothetical question of whether, if EPA were to rely on an analysis of available stocks for those purposes, EPA would need to allow comment on the individual or aggregate stocks data. EPA is relying on the individual and aggregate stocks data for only one aspect of today’s final rule, namely the pro rata distribution of CSAs. The rule states the total amount of CSAs for 2005 and the companies to which EPA is allocating CSAs but not the amount allocated to each company. This is because EPA has determined that the individual holdings of stocks of methyl bromide are confidential business information. The amount of CSAs allocated to each company could be used to calculate the individual stock holdings if information on aggregate stock holdings were released. As discussed above, EPA has determined that the aggregate stock information is not confidenti al business information but is currently withholding that information due to the filing of complaints seeking to enjoin the Agency from its release. Because release could occur depending on the outcome of that litigation, EPA is not listing the number of CSAs distributed to each entity.37 Concurrent with today’s rule, EPA is sending letters to each entity to inform them of the number of critical stock allowances EPA has issued them. In addition, EPA is placing a document listing the allocations and distribution basis of critical stock allowances for each entity in the confidential portion of the docket. EPA does not believe that commenters needed to know each company’s absolute or relative share of total inventory in order to file meanin gful comments on the CSA aspects of this rule, such as the total amount of CSAs to be allocated or the basis by which the
CSAs would be distributed. The NPRM discussed distribution of CSAs on the basis of pro rata share of total inventory and stated that a possible approach was to conclude that the amount of CUE material available from stocks was equal to the difference between the use cap and the production cap. 69 FR 52375, 52377. Therefore, there was adequate notice and opportunity to comment on these points. As noted by the commenter, section 114(c) of the CAA states that emission data may not be kept confidential. (42 U.S.C. § 7414(c)). EPA regulations define

emission data as: (A) Information necessary to determine the identity, amount, frequency, concentration, or other characteristics ... of any emission which has been emitted by the source; (B) Information necessary to determine the identity, amount, frequency, concentration, or other ch aracteristics ... of the emissions, which under an applicable standard or limitation, the source was authorized to emit. . . and (C) A general description of the location

and/or nature of the source to the extent necessary to identify the source and distinguish it from other sources .... (40 C.F.R. § 2.301(a)(2)(I).) EPA regulations further state as follows: “Emission data, standards or limitations, and any other information provided under section 114 or 208 of the Act which is determined under this subpart not to be entitled to confidential treatment, shall be available to the public notwithstanding any other provision of this part.” (40 C.F.R. § 2.301(f)) EPA does not consider either the individual or the aggregate stocks data to be emission data under Section 114(c) of the Clean Air Act. The five companies that submitted the data to EPA are producers, importers, or distributors of methyl bromide. They do not release methyl bromide into the atmosphere and thus are not themselves the “sources” of any past or future emissions. Thus, the stocks data says nothing about what those companies “emitted” or were “authorized to emit.” Any future emissions will come from the end users and not from the five companies. Furthermore, the amount in stockpile does not indicate the amount that will be drawn down from the stockpile for use during a control period. Therefore, it is impossible to determine from this information the amount of methyl bromide that will be emitted during any specified period. EPA issued initial responses to the “use” FOIA request on June 18, 2004 and to the “EIA” FOIA request on September 29,2004. In those responses, EPA noted that it had withheld documents “determined to be exempt from mandatory disclosure by virtue of 5 U.S.C. (b) (4) (confidential business information).” Such documents included “All proprietary use data and/or databases.”38 The commenter asserts that EPA cannot issue a reasoned decision without disclosing and taking comment on the “pro prietary use data a nd/or databases” and any analysis performed with that data. EPA believes that the U.S. nomination and responses to MBTOC contained sufficient information to allow interested members of the public to file comments on the basis for the nomination and today’s action. EPA notes that the analysis of critical need does not rely exclusively on proprietary data and that the analysis itself is public. EPA relied on the proprietary data sets, among others, to verify the estimated use data provided to the Agency by applicants. EPA conducted an analysis of the “critical need” for methyl bromide that examined factors such as the percentage of total production that exhibits a certain critical condition or the dosage rates used in fumigations. This information is contained in the numerical analysis (referred to as the “5 Way Analysis”) and/or the Bromide Usage Numerical Index (BUNI), available on the docket as part of the nomination of critical uses and the responses to MBTOC. In instances where EPA relied on a commercial database or other such source of data, a citation is typically provided. In instances where EPA relied upon expert judgment, no citation is provided. EIA has filed an administrative appeal of EPA’s partial denial of its FOIA request. That appeal is currently pending. EPA is committed to following the process set forth in its regulations for addressing the EIA request and pending appeal. At this time, EPA has not dete rmined whether the data in question is “emission data” for purposes of CAA section 114. As stated above, EPA believes that sufficient information was available to the public on the date of proposal to allow for meaningful comment. The commenter is correct that section 114(c) of the CAA allows EPA to

disclose information otherwise entitled to confidential treatment “when relevant in any proceeding” under the CAA. However, such action is discretionary, as evidenced by the use of the word “may” in section 114(c) and in the implementing regulations at 40 CFR 2.301(g)(1-2). Any disclosure of information under this authority would be governed by the pro cess described at 40 CFR 2.301(g)(1-2), which includes notification to the affected business, a determination of relevancy and a determination that the disclosure would be in the public interest. EPA does not believe there is sufficient cause to set that process in motion at this time.39 3. Summary of Comments Relating to ACCESS TO STOCKS

3.a. Who should get access to stocks

Commenter Organization Document ID Number

James Nicol Great Lakes Chemical Corporation 0140-JN (transcript of public hearing) Dan Legard California Strawberry

Commission 0140-DL (transcript of public hearing) Daren Gee N/A 0140-DG (transcript of public hearing) Steve Godbehere Hendrix and Dale, Inc. 0140-SG (transcript of public hearing) Richard Matoian California Fig Industry 0202

Dennis Balint California Walnut Commission 0203

Richard Peterson California Dried Plum Board 0206 Ken Woody Plum Creek Timber Company 0209

A.R. Chase California Cut Flower
Commission 0210

Steve Hensley USA Rice Federation (USA Rice) 0214

Wade Purvis Pacific Collier Fresh 0215 David R. Riggs Western Raspberry Nursery

Consortium 0217

Edward M. Ruckert Crop Protection Coalition 0219

James A. Bair North American Millers’

Association 0220

Stephen E. Payne Pet Food Institute (PFI) 0221 Daniel A. Botts Florida Fruit & Vegetable Association (FFVA) 0223

Steve Godbehere Hendrix and Dale, Inc. 0227 Gene Harrington National Pest Management Association, Inc. 0229

Paul Niday TriCal, Inc. 0231 Rex Cunningham Emerald Island Turf, Inc. 0233 Tim Maniscalo Dow AgroSciences LLC (DAS) 0247

John Sansone Cardinal Professional Products 0248 David Corbett David Corbett Farms, LLC 0249 Randy DeWitt DeWitt Produce Co., Inc. 0250 Donnie H. Morris Georgia Fruit and Vegetable

Growers Association 0251

Gibbs Patrick, Jr. Gibbs Patrick Farms, Inc. 0252 Melvin Mathis MGM Plant Company 0253 Wilbert Morgan Morgan Farms 0254 Harry Vanderveer Texas Forest Service 0255 Mark Harrell Florida Strawberry Growers

Association 0256

Don Stringfield MeadWestvaco Corporation 0257 Paul Phypers, Jr. Happiness Farms, Inc. 0259 Douglas H. Fender Turfgrass Producers International 0205 Calvin Everette Lewis, Jr. HY Yield Bromide, Inc. 024240 • Twenty-eight commenters make specific remarks regarding who should get access to existing stocks of methyl bromide [0140–DL, 0140–SG, 0202, 0203, 0206, 0209, 0210, 0214, 0215, 0217, 0219, 0220, 0223, 0227, 0229, 0231, 0233, 0247, 0249, 0250, 0251, 0252, 0253, 0254, 0255, 0256, 0257, 0259].

 Twenty of these commenters believe that existing stocks should be made freely available to both critical and non-critical users [0202, 0203, 0206, 0209, 0214, 0215, 0219, 0220, 0223, 0233, 0249, 0250, 0251, 0252, 0253, 0254, 0255, 0256, 0257, 0259].

 Four of these commenters only request that approved critical users not be denied access to existing stocks [0140–DL, 0140–SG, 0210, 0217].

 Three sets of these comments are only supportive of non-critical users being granted access to existing stocks [0227, 0229, 0231].

 The last commenter in this group “does not support the use of existing MB stockpiles for any denied CUE or non-critical use” [0247].

• Seven commenters argue that it would be particularly unfair to allow access to existing stocks by non-critical users but not approved critical users [0202, 0203, 0206, 0214, 0217, 0219, 0223].

 It is the stated position of six of these commenters that existing stocks should be available to all those who need the product and, in particular, those who expended the time, energy and substantial resources in assembling a critical use exemption (CUE) petition. Indeed, these commenters question as to what could possibly be the public policy rationale for rewarding those who chose not to participate in the CUE process, while penalizing those that did at considerable time and cost. [0202, 0203, 0206, 0217, 0219, 0223]

Response #33: Those entities that put in time and money to apply for an exemption and qualify as approved critical users have access to new production of methyl bromide not available for any other uses. Thus, approved critical users are rewarded for their efforts. The reasons for restricting the amount of stocks that can be sold for critical uses are discussed further below under “legal basis.” Those who chose not to participate in the CUE process do not obtain new production and thus are not “rewarded” for their inaction. This issue is discussed more fully below.

• The three commenters who support non-critical users having access to existing stocks do so based on a number of reasons [0227, 0229, 0231].

 Two of these commenters argue that “since EPA has deemed these growers not to have a critical use, they therefore fall outside of the use cap established by the Parties” to the Montreal Protocol [0227, 0231].

 One of these commenters also points out that “many of these users have very low volume uses of methyl bromide, but their use is very important in the entire picture of American agriculture.” [0227]

 Finally, the point is made by the latter that “these low volume methyl bromide users expected to have access to available stocks.” [0227]41 Response #34: Decision Ex I/3(3) does not require that individual Parties prohibit use of stocks by users whose uses fall ou tside the categories of agreed critical uses. One, low volume users or users in the midst of a transition may h ave been relying on the availability of stocks as they ease into alternatives and therefore decided not to apply for an exemption. Two, as a matter of policy use of stocks will cushion near term transition and as stocks are drawn down will allow a slow but steady price increase thus facilitating movement away from the ozone depleting chemicals, an environmentally positive outcome.

• The commenter against the use of existing stocks by non-critical users argues that, if non-critical users but not critical users were given access to stocks, it would provide an incentive for users not to participate in the critical use exemption (CUE) process [0247].

 The commenter makes the case that all potential users “should participate in the US and Montreal Protocol process where CUE applications are submitted, considered and accepted or rejected. Without this, users who have not participated in the process would have an advantage and easy access to MB over those who have followed the process.” [0247]

Response #35: EPA is communicating that users who anticipate a need for methyl bromide beyond the phaseout date should apply for an exemption. Reliance on the stocks is a temporary and uncertain solution whereas those uses that demonstrate a critical need are provided with additional certainty regarding supplies of methyl

bromide.

• Twenty-four commenters support access to existing stocks, whether this be by critical users, non-critical users or both, for one or more of the reasons given below [0140–JN, 0140–DL, 0140–DG, 0140-SG, 0202, 0203, 02025, 0206, 0209, 0215, 0221, 0233, 0242, 0248, 0249, 0250, 0251, 0252, 0253, 0254, 0255, 0256, 0257, 0259].

 Twelve commenters argue that access to existing stocks is needed if users are to be able to smoothly and successfully reduce their use of methyl bromide and/or switch to alternatives [0140-JN, 0202, 0203, 0206, 0209, 0215, 0221, 0233, 0249, 0250, 0251, 0252, 0255, 0256, 0259]. Indeed, as expressed by three of these commenters, the availability of existing stocks is seen to provide a short term safety net [0202, 0203, 0206].

 Fourteen sets of comments assert that access to existing stocks is needed to protect against higher prices for methyl bromide [0140-DL, 0140-DG, 0205, 0209, 0215, 0233, 0248, 0249, 0250, 0251, 0252, 0255, 0256, 0259]. In the words of one commenter, it is believed that restricting access to stocks “will result in significant increases in costs to growers above and beyond those already created by the phase-out of methyl bromide.” [0140-DL]

 Fifteen commenters are against restricting access to existing stocks on the basis that it penalizes the many users who, believing that there would be full and unrestricted use of stockpiles, took steps to reduce methyl bromide use42 [0140-SG, 0209, 0215, 0233, 0249, 0250, 0251, 0252, 0253, 0254, 0255, 0256, 0257, 0259]. The measures taken by users to lessen their use of methyl bromide included “reducing the amount of methyl bromide use per acre by going to higher chloropicrin mixtures, use of more costly high barrier tarps, and the investment in more accurate application systems.” [0209, 0215, 0233, 0249, 0250, 0251, 0252, 0255, 0256, 0259] A number of

these commenters stated “it is unfair to restrict the use of these stocks that were banked through our good stewardship.” [0209, 0215, 0233, 0249, 0250, 0251, 0252, 0253, 0254, 0255, 0256, 0257, 0259]

Response #36: EPA appreciates that there may be users who are against restricting access to existing stocks on the basis that it penalizes those users who minimized their use of methyl bromide during the phasedown believing that there would be full and unrestricted use of stockpiles in the future. EPA would point out however that Decision IX/6 requires, as a condition for an exemption, that users minimize use and emissions of methyl bromide. In addition, today’s final rule restricts access to stocks for critical uses. Approved critical users may obtain newly produced methyl bromide for such uses.

Some commenters indicated that the restriction on stocks would lead to an increase in costs of methyl bromide. Economic theory would suggest that an increase in the price of critical use methyl bromide could occur should demand for critical use methyl bromide exceed supply. EPA believes critical use demand in the U.S. does not greatly exceed 35% of baseline and would therefore not expect to see substantial price increases as a result of the 35% use cap. EPA intends to publish a separate Notice of Proposed Rulemaking reflecting the Parties’ supplemental authorization in November 2004 and believes this will resolve any remaining concern regarding inadequate supply. EPA agrees that stocks are required for a smooth transition but believes the amounts from stocks for critical uses will be sufficient when coupled with the allowable new production.43 3.b. Legal basis

Commenter Organization Document ID Number Courtney M. Price et al. American Chemistry Council’s Methyl Bromide Industry Panel 0245

David Doniger Natural Resources Defense Council (NRDC) 0140-DD

• One commenter argues that EPA not only has no legal authority to limit the use of stocks by critical users but also lacks the authority to expand these limits to include non-critical users [0245]. In section 3.A of this document, an additional 23 commenters supported unrestricted access to stocks primarily for policy reasons but many also stated that EPA does not have authority to regulate stocks.

Response #37: These commenters argue th at no provision of the CAA authorizes EPA to impose such restrictions. Specifically, they state that section 604(d)(6) refers only to production, importation, and consumption, and that by addressing use in other sections of the CAA, Congress demonstrated its intent to deny EPA authority to regulate stocks under 604(d)(6). However, section 604(d)(6) directly relates to use: the exempted production, importation and consumption is for critical “uses.” While Congress, in the Clean Air Act, generally mandated that production and consumption of ozone-depleting substances be phased out across the board, regardless of use, the Act does contain certain provisions, including section 604(d)(6), that authorize EPA to provide exceptions on the basis of use. Thus, section 604(d)(6) is one of the provisions of the Clean Air Act where use is clearly at
issue

. In today’s final rule, EPA is imposing narrowly tailored use restrictions as a condition of obtaining new production and import. EPA believes that section 604(d)(6) mandates this result. In section 604(d)(6), Congress provided EPA authority to exempt production and import of methyl bromide for critical uses, but only “to the extent consistent with the Protocol.” The use restrictions in today’s final rule are necessary to ensure that total usage for critical uses does not exceed the limit agreed to by the Parties in implementing the critical use provision in Article 2H of the Protocol. The relationship between sections 604(d)(6) and 614(b)

of the CAA and the Protocol and its Decisions is discussed in detail in the NPRM and in the background section of this preamble. EPA reads Decision Ex I/3(3) as requiring limitations on the use of stocks only with respect to uses agreed by the Parties to be critical. Annex II A to the report of the First Extraordinary Meeting is titled “Agreed critical-use categories.” Paragraph (1) of Decision Ex. I/3 permits limited production and consumption “[f]or the agreed critical uses set forth in annex II A.” Because paragraph (3) of Decision Ex I/3 also refers to Annex II A, EPA

concludes that the burden of the stock restriction is coextensive with the benefit of the new production and import. EPA does not believe that Decision Ex I/3(3) can be read to allow unlimited access to stocks for approved critical uses because the prohibition is directly linked to “the categories set forth in annex II A,” which are44 the categories of critical uses agreed to by the Parties. Nor can the Decision be read to allow unlimited access to stocks for all uses: that would fail to give any effect to the phrase “shall prohibit the use of stocks.” The commenters further argue that EPA cannot rely on Decision Ex I/3 to justify restrictions on use of stocks. They state that while Decisions may be used to interpret existing requirements in the Protocol, they cannot be used to substantively change those requirements. However, EPA is not suggesting that Decision Ex I/3 substantively changed the requirements of Article 2H. Article 2H establishes a prohibition on the production and consumption of methyl bromide, but states that the prohibition shall not apply “to the extent the Parties decide to permit the level of production and consumption that is necessary to satisfy uses agreed by them to be critical uses.” The Parties have not interpreted Article 2H in the manner the commenters assert. Instead, they understood the terminology referring to “uses agreed by them to be critical uses” to allow the Parties to tie the determinations of production and consumption to use. Unde r international law, this interpretation and practice of the Parties may, in the curren t situation, be read to be an accurate interpretation of Article 2H’s language. Although Decision Ex. I/3 focuses on regulating production and consumption, the Parties could reasonably set related conditions on agreeing to production and consumption at a particular level. Therefore, the stock restrictions are an integral part of the Parties’ decision regarding the level of production and consumption necessary to satisfy critical uses.

The commenters further characterize the restrictions on access to stocks proposed in the NPRM as “an attempt by the Agency to bypass the Treaty Clause of the U.S. Constitution by unilaterally amending the Montreal Protocol through a rulemaking, without the advice and consent of the Senate.” EPA rejects this characterization. Article 2H explicitly assigns to the Parties the task of deciding what level of production and consumption “is necessary to satisfy uses agreed by them to be critical uses...” Therefore, EPA looks to the Parties’ Decisions to provide the details of the exemption authorized in Article 2H. In Decision Ex I/3, the Parties decided what level of production and consumption was necessary given certain assumptions about stocks. Accordingly, in compliance with Article 2H, this final rule addresses both production and consumption and the use of stocks.

• Another comment states that there is “no legal basis for allowing use of stocks by users that did not apply for or did not qualify for critical use status.” [0140-DD]

 This commenter goes on to say that “there is no basis for EPA’s supposition that some users did not apply for critical use status because they were counting on use of stocks. It should be remembered that at the time CUE applications were due, the users did not even know that a sizable inventory existed.” [0140-DD]

Response #38: EPA disagrees with the comment that there is no legal basis for allowing use of stocks by users that did not apply for or did not qualify for critical use status. Decision Ex I/3(3) does not re quire that individual Parties prohibit use of stocks by users whose uses fall outside the categories of agreed critical uses. Nothing in the Protocol or the CAA mandates that EPA limit drawdown from45 stocks for such uses. In anticipating that some users did not apply for CUE status because they were counting on use of stocks, the Agency did not assume that any user had special knowledge of the total amount of stocks available but rather that an individual user might have confirmed with its supplier that enough methyl bromide would be available from that supplier’s inventory to meet the individual user’s limited transitional needs. For example, some onion growers in the southeastern U.S. informed EPA in their comments on the rulemaking they did not apply for an exemption because they intend to avail themselves of existing stocks.46 4. Summary of Comments Relating to CAP ON CRITICAL USE METHYL

BROMIDE

Commenter Organization Document ID Number David Doniger Natural Resources Defense Council (NRDC) 0133, 0140-DD (transcript of public hearing), 0246 David K. Mueller Pest Managers for A Better

Environment 0134

Gabriele Ludwig Schramm, Williams & Associates, Inc. 0137

James Nicol Great Lakes Chemical Corporation 0140-JN (transcript of public hearing) Mitch Dubensky American Forest & Paper

Association 0140-MD (transcript of public hearing) Dan Legard California Strawberry

Association 0140-DL (transcript of public hearing) Daren Gee N/A 0140-DG (transcript of public hearing) Scott Enebak Southern Forest Nursery Management Cooperative 0199

Richard Matoian California Fig Industry 0202

Dennis Balint California Walnut Commission 0203 Douglas H. Fender Turfgrass Producers International 0205

Richard Peterson California Dried Plum Board 0206 Ken Woody Plum Creek Timber Company 0209

A.R. Chase California Cut Flower

Commission 0210

George Lowerts International Paper 0211

James Nicol Great Lakes Chemical Corporation 0212

Wade Purvis Pacific Collier Fresh 0215 Edward M. Ruckert Crop Protection Coalition 0219

James A. Bair North American Millers’

Association 0220

Steve Payne Pet Food Institute (PFI) 0221 Daniel A. Botts Florida Fruit & Vegetable

Association 0223

Ann M. Oxford Albemarle Corporation 0226 Steve Godbehere Hendrix and Dale, Inc. 0227 E. Barclay Poling Southeastern Strawberry

Consortium 0228

Gene Harrington National Pest Management Association, Inc. 0229

Joel D. Jackson Florida Golf Course Superintendents Association 0230

Paul Niday TriCal, Inc. 0231 Rex Cunningham Emerald Island Turf, Inc. 0233 Calvin Everette Lewis, Jr. HY Yield Bromine, Inc. 0242 ? AmeriBrom, Inc. 0243 Courtney M. Price et al. American Chemistry Council’s Methyl Bromide Industry Panel 024547 Tim Maniscalo Dow AgroSciences, LLC 0247 David Corbett David Corbett Farms, LLC 0249 Randy DeWitt DeWitt Produce Co., Inc. 0250 Donnie H. Morris Georgia Fruit and Vegetable

Growers Association 0251

Gibbs Patrick, Jr. Gibbs Patrick Farms, Inc. 0252 Melvin Mathis MGM Plant Company 0253 Wilbert Morgan Morgan Farms 0254 Harry Vanderveer Texas Forest Service 0255 Mark Harrell Florida Strawberry Growers

Association 0256

Don Stringfield MeadWestvaco Corporation 0257 Paul Phypers, Jr. Happiness Farms, Inc. 0259 James W. Wells Environmental Solutions Group,

LLC 0260

• Forty-eight sets of comments make reference to the type of allocation system that should be utilized [see comments listed in table above], where four of these specifically refer to not only the distribution of CUAs but also CSAs [0134, 0231, 0245, 0247].

 Twenty-eight commenters express a preference for the “lump sum” or “universal” allocation method [0133, 0137, 0140-JN, 0140-DL, 0140-DD, 0209, 0210, 0212, 0215, 0221, 0226, 0227, 0228, 0230, 0231, 0233, 0242, 0243, 0245, 0246, 0249, 0250, 0251, 0252, 0253, 0254, 0255, 0256, 0257, 0259].

 The “sector-specific” approach is the allocation method preferred by four commenters [0140-MD, 0199, 0211, 0247].

 One commenter believes that the “applicant-specific” approach would be the best way of distributing CUAs and CSAs [0134].

 Three commenters “recommend the application specific or sector by sector allocation procedure with full flexibility to trade as the preferred approach.” [0202, 0203, 0206]

 In three sets of comments, the preferred allocation method is dependent on the availability of existing stocks. These commenters state that “if existing stocks are fully available to whomever needs them, including CUE holders, then a lump sum allocation system would be appropriate.” On the other hand, “if the restrictions on access to existing stocks are applied to CUE holders, then the Agency should allocate CUE amounts on a sector-by-sector basis.” [0219, 0220, 0223]

 Finally, three commenters do not specify a preferred allocation method but rather request that EPA adopts an allocation system that is “fair, easy for growers to understand, and do[es] not create substantial burdens for growers already feeling the impact of increased fumigation costs and regulations” [0140-DG], that “permits members of NPMA’s consortium complete access to the full amount for which they have applied and received approval from the Parties” [0229] and that “be as open as possible with minimal barriers” [0260].48 Response #39: The Agency believes, and has received comment to that effect, that the pre-plant and post-harvest markets operate as separate markets under the phaseout, as evidenced by the different prices for methyl bromide in the two markets, for several reasons. The timing and cycles of fumigations for the two sectors are different as well. Pre-plant fumigations typically occur once a year about a month before planting the first crop whereas fumigations for post-harvest uses occur routinely throughout the year to control ongoing insect pressures. The standard product formulations for pre-pl ant and post harvest uses substantially differ. In the pre-plant uses the formulations of methyl bromide contain substantially more chloropicrin, as much as 50%. Lastly, the post harvest sector has more purchasing power than the pre-plant sector and is therefore willing to pay more for methyl bromide. Post-harvest uses rely on nearly pure methyl bromide. For all of these reasons, EPA believes that these two use categories already function as separate markets and therefore the hybrid option would not result in substantial regulatory burden but would achieve a careful balance between flexibility and greater assurance. In today’s rulemaking, EPA is establishing two caps on new critical production/import: one cap for pre-plant soil uses and a second cap for post-harvest and structural uses. The portion of the critical use methyl bromide supplies

obtained from available stocks however will have a universal cap as proposed. EPA did not receive any adverse comment on the proposal to make the quantities from
stocks available in a universal fashion

.

• The reasons given as to why the “lump sum” or “universal” allocation method should be the preferred approach are listed below.

 One of the reasons cited by those in favor of the “lump sum” method is that this approach would the most effective in terms of getting the methyl bromide to those who needed it. [0133, 0140-DD, 0221, 0246] As stated by one commenter, the “lump sum” approach overcomes the “risk for users that there will be methyl bromide surpluses in some use categories and shortages in others.” [0133, 0140-DD, 0246]

 Another reason given in support of the “lump sum” approach is that it provides flexibility while ensuring that the total amount of methyl bromide authorized by the Parties is not exceeded [0133, 0140-DD, 0140-JN, 0231, 0246]

 A number of commenters support the “lump sum” approach on the basis that it would be the easiest to administer, the least burdensome on distributors and growers, and the most consistent with the current allowance system [0140-JN, 0212, 0221, 0226, 0228, 0231, 0245].

 One commenter in favor of the “lump sum” allocation method argues that “the short time remaining between now and January 1, 2005 makes any other approach impossible to implement.” [0210] Further, one commenter states that “to change the market would cause confusion, higher cost to both distributors and the grower, and very possibly prevent access to MB that CUE users have been awarded by the parties.” [0227]49 Response #40: EPA agrees with some of the comments made by entities supporting the universal option and believes that such a system would in fact lead to the most economically efficient outcome and impose the least burden on industry. However, to address concerns raised by smaller, less frequent and end of year uses, EPA is separating out the post-harvest uses of methyl bromide, which can typically pay more per fumigation, from pre-plant uses.

• The supporting arguments of those in favor of the “sector-specific” allocation method are given below.

 One commenter supports the “sector-specific” approach on the basis that “it rewards the sectors and individuals who played by the rules and submitted and gathered data and information and submitted it to EPA.” [0140-MD)

 Another reason given for supporting the “sector-specific” approach is that it assigns the methyl bromide by sector as requested by the Montreal TEAP Report [0140-MD].

 Finally, the “sector-specific” approach is supported on the basis that it would guarantee that members of each sector had a pool of methyl bromide to draw upon and, unlike the “lump sum” allocation method, would ensure that methyl bromide stocks would still be available for approved users late in a growing season at a reasonable cost [0211].

Response #41: Noting that Decision Ex I/3 (4) states that Parties “should endeavor” to allocate “as listed in annex II A,” EPA examined our ability to implement a sector specific system. However, there are several practical impediments to implementing such a system. EPA does not have precise data on use of methyl bromide because the current regulations on methyl brom ide require reporting of production, imports, and exports of methyl bromide, not use. The more specific the categories for which EPA is estimating use, the less precise the estimate becomes. Therefore, EPA is reluctant to create sector or applicant specific limits because of the inherent uncertainty of the data at that detailed level. With the establishment of the critical use exemption, EPA will begin to track sector level use data and therefore the concern about data viability should diminish over time. Another limitation to the sector or applicant specific approach is the upstream allowance allocation system itself where EPA issues allowances to producers and importers and not end users. Using an upstream allowance allocation system as proposed, EPA would be unable to adjust amounts of methyl bromide from one sector to another after the allowance was expending expended. This artifact of the allocation framework would deny the marketplace any flexibility to meet unforeseen demand in a particular use. For example, under a sector specific system, if a pest outbreak were to occur in the peppers sector no additional material could be made available to peppers even if there were an unanticipated surplus in a different sector. For these reasons, EPA believes it is not practicable to implement a sector specific system at this time. By virtue of this rulemaking process, EPA has made the endeavor to allocate quantities of methyl bromide in a manner consistent with Annex IIA of the Report to the First Extraordinary Meeting of the Parties. Because of the practical and50 administrative difficulties described above, however, EPA has arrived at an allocation system that relies at least partly on the market to allocate quantities on a sectoral basis. EPA anticipates, based on historical use patterns and the research undertaken pursuant to submitting the U.S. nomination, that usage patterns will generally reflect the sectoral quantities found in Annex IIA.

• It is to be noted that a number of commenters were critical of the “sector-specific” approach [0212, 0231, 0242, 0245].

 The common criticism was that the “sector-specific” approach would be overly complex, difficult to implement, unnecessarily restrictive and offer no advantages over the “lump-sum” approach [0212, 0231, 0245].

 One commenter also notes that a “sector-specific” approach would create problems in the distribution chain. The commenter explains: “Currently, methyl bromide is commonly shipped from producers/importers to distributors in bulk vessels containing from 35,000 to 180,000 pounds. It is then formulated with varying amounts of chloropicrin (depending on pests, soil types, etc.) and packaged in smaller containers. The product is then delivered to dealers and end users. This system has proven to be efficient because it simplifies distribution and reduces the number of returnable containers. However, with a sector-specific approach, product could not be neatly divided into container-sized lots because an individual container might contain product designated for several sectors” and because doing so would require the distributor to somehow ascertain if the product out of the container was accurately divvied up between the appropriate sectors. [0231]

Response #42: EPA agrees that the sector-specific approach is not the most practicable approach and therefore is implementing a hybrid approach as mentioned above in response #41.

• The commenter in favor of the “applicant-specific” allocation method states that “the cost of administering these CUEs [both CUA and CSAs] is not the real hardship” and it is “necessary to implement a fair and accurate allocation of exemptions” and “anything except applicant-specific allocation is only allowing for the increased use of MB rather than the restricted phaseout of MB.” [0134]

Response #43: EPA does not believe that an applicant specific system is necessary to meet our Protocol obligations or to ensure fairness. An applicant specific system is in fact a level of detail greater than the categories listed in the Decision itself. The commenter believes that the applicant specific system is more fair because it is the only system that doesn’t allow for the increased use of methyl bromide and is thus

more fair to those entities that are transi tioning out of methyl bromide. EPA does not believe that an applicant specific system would result less use of methyl bromide, as the finding of critical need is separate and apart from the specific distribution mechanism used in the regulatory framework. EPA does not understand why the51 commenter believes that any system apart from the applicant specific allocation would allow for increased use of methyl bromide.

• One commenter is critical of the “applicant-specific” approach on the basis that it would be even more complicated than the “sector-specific” approach because the allocations would be divided into 51 sectors [0231].

Response #44: EPA believes that dividing allowances into 51 types or more would make for a highly complex market and create additional burden above what is required to meet Protocol obligations.

• The two hybrid options proposed by EPA are criticized on the basis that, like the “sector-specific” and “applicant-specific” approaches, they would be “overly complicated, burdensome and potentially unmanageable” and that they would create the same commercial/supply difficulties associated with the “sector-specific” and “applicant-specific” approaches [0231].

Response #45: EPA believes that there is a tradeoff to be made between simplicity and assurance and that any option selected would involve giving up some benefit in exchange for another benefit. A completely flexible system such as a universal allocation scheme would be the most simple option to administer (hence the least burdensome) but would offer different commodity groups the least level of certainty regarding the amounts of exempted material available to them. An applicant specific system would be the most complex option to administer but would offer the greatest assurances on amounts of exempted material available to them. In addition, with greater assurance comes more rigidity by definition. Should an unforeseen outbreak of a pest occur, under a rigid system, there would be no ability for the commodity group to exceed the amount carved out for that use group. Given a number of reasons (please see responses #39 and #41) EPA selected a hybrid option that emphasizes flexibility but provides some assurances to address the needs of late year, small fumigation uses. The option provides some assurance without being overly burdensome or complicated.52 5. Summary of Comments Relating to CRITICAL USE ALLOWANCE

ALLOCATIONS

5.a. Baseline for critical use allowance distribution

Commenter Organization Document ID Number

James Nicol Great Lakes Chemical Corporation 0140-JN (transcript of public hearing) Mitch Dubensky American Forest & Paper

Association 0140-MD (transcript of public hearing)

James Nicol Great Lakes Chemical Corporation 0212

Ann M. Oxford Albemarle Corporation 0226 Steve Godbehere Hendrix and Dale, Inc. 0227 E. Barclay Poling Southeastern Strawberry

Consortium 0228

Calvin Everette Lewis, Jr. HY Yield Bromine, Inc. 0242 ? AmeriBrom, Inc. 0243

Eight commenters express an opinion with regards to the method for critical use allowance distribution [0140-JN, 0140-MD, 0212, 0226, 0227, 0228, 0242, 0243].

Four commenters are in favor of the distribution of critical use allowances (CUAs) to producers and importers on a pro-rata basis using the 1991 baseline allowances [0140-JN, 0212, 0227, 0228]. A preference for a distribution system for CUAs based on recent market share data is expressed by two commenters [0140-MD, 0242]. The final two commenters support the “equal shares” approach to distributing CUAs [0226, 0243].

The commenters supporting the allocation of CUAs based on the 1991 baseline method do so for either or both of the reasons given below [0140-JN, 0121, 0227, 0228]. One reason given by three commenters is that using the 1991 baseline method is consistent with the current approach and that this approach seems to work well [0140-JN, 0227, 0228]. One commenter remarks “using the 1991 historic baseline method for distributing CUAs is consistent with how the EPA has allocated methyl bromide production and consumption allowances for the past decade under the methyl bromide phaseout, and this approach has met with a very high level of approval.” [0228] One commenter also supports the 1991 baseline method on the basis that it “is a better reflection of market share than simply dividing the number of allowances by the total number of entities, and would be less burdensome than conducting a detailed recent historical market share analysis on an

annual basis.”

Response #46 : EPA is using the 1991 methyl bromide consumption baseline

for distribution of critical use allowances because this is the best data available to the Agency at the curren t time. EPA used the 1991 baseline53 to distribute allowances to the companies listed above during the phaseout of methyl bromide. The 1991 baseline is therefore familiar to the regulated community and poses the least steep learning curve on industry of all the options discussed in the proposed rule.

• Two commenters object to the use of the 1991 baseline method [0226, 0243].

 One commenter, representing the manufacturer AmeriBrom, strongly opposes the 1991 baseline method on the basis that it would greatly disadvantage Ameribrom by not capturing its true activity in the marketplace. Specifically, according to the commenter, “basing the allocation on 1991 baseline levels does not capture an accurate picture of AmeriBrom’s position in the marketplace because AmeriBrom supplies a much greater amount of methyl bromide than the total amount of allowances it holds.” [0243] Similarly, the other commenter believes that “the 1991 baseline consumption levels no longer provide a fair allotment of allowances because supply conditions have changed significantly since 1991.” [0226]

Response #47: EPA understands that market share may have changed since 1991. This is one of the reasons why the Agency is a proponent of market based mechanisms where appropriate. Instead of implementing a command and control approach where EPA permits a certain level of production or import for each entity, EPA is creating an allowance trading system where entities can buy or sell allowances to reflect their desired level of activity in the marketplace. EPA simply does not have more current data and does not have time to obtain such data for this rulemaking.

• One commenter is in favor of using the baseline method based on recent market share data for the simple reason that it would be more current [0140-MD], while the other commenter favoring this approach asserts that it would result in the fairest allocation of CUAs [0242].

Response #48: EPA does not have complete volume material on market data past 1991. Basing the distribution on the consumption baseline from 1991 would reflect the most accurate data that the Agency has, and therefore would reflect the fairest

allocation of CUAs. EPA simply does not have more current data and does not have time to obtain such data for this rulemaking.

• Two commenters are critical of the use of an updated baseline method for the distribution of CUAs [0212, 0226].

 One commenter believes that “allocation of CUAs based on current market share would be the best option but agrees with EPA that it is not practical because there is not enough time or data to generate a new baseline.” [0226]

 The other commenter is of the opinion with regards to replacing the 1991

baseline method with one based on recent market share data that “the difficult exercise of collecting and analyzing historic marketing data would54 not result in a significant change in the CUA distribution as compared to reliance on 1991 baseline data.” [0212] Response #49: EPA believes that using the 1991 consumption baseline reflects the best quality data available to EPA and allows for this final rule to be published in a timely fashion. EPA does not have data on the volume of marketed material for a year other than 1991.

• The reasons given for supporting the “equal shares” approach include that it would be the simplest, not place a burden on government or industry, be fair in terms of ensuring a level playing field and, contrary to EPA’s assertion, would clearly align allowances with current market shares [0226, 0242, 0243].

Response #50: EPA believes that the equal shares approach would create a distorted picture of the current market since the Agency believes it is highly unlikely that all companies have equal market share.

• One commenter argues strongly against dividing CUAs equally among the four entities holding production and consumption allowances on the basis that “such an arbitrary approach would drastically distort current market shares, and would create significant excess capacity at some entities, while others would struggle to supply the increased share.” [0212]

Response #51: EPA agrees that the equal share approach would distort current market shares and is adopting the 1991 baseline approach as mentioned above.55 5.b. Frequency of critical use allowance distribution

Commenter Organization Document ID Number David K. Mueller Pest Managers for A Better

Environment 0134

A.R. Chase California Cut Flower

Commission 0210

Courtney M. Price et al. American Chemistry Council’s Methyl Bromide Industry Panel 0245

• One commenter requests multiple year CUEs because the speed with which new products are developed and the cost of trials, industry education, and implementation make single year CUEs inappropriate [0210].

Response #52: Multi-year exemptions m ay only be permitted should the Parties choose to authorize multi-year exemptions. At this time, the U.S. has only received an annual exemption and is therefore not in a position to implement a multi-year exemption

.

• One commenter believes that multiple year exemptions would be a large disincentive for future research and development of technical and economically feasible alternatives to methyl bromide [0134].

Response #53: Multi-year exemptions may only be permitted should the Parties choose to authorize multi-year exemptions. At this time, the U.S. has only received an annual exemption and is therefore not in a position to implement a multi-year

.

• One commenter, noting that the NPRM does not discuss the timing for determining and distributing CUAs and CSAs for an upcoming control period, states that CUAs and CSAs should be set and distributed to producers/importers/distributors annually at least six weeks before the end of the year to allow sufficient time for production and importation planning. To avoid a situation in which regulatory delays lead to allowances not being granted before an upcoming control period, this commenter recommends that the NPRM set a deadline by which EPA must complete the necessary steps for granting CUAs and CSAs for each year.

This commenter agrees with EPA regarding the disadvantages of two rulemakings each year. In the event that CSA are included as part of the final rule, this commenter favors a “fiscal year” approach as long as it was combined with a correction mechanism that could account for any differences between stocks at the end of the fiscal and calendar year [0245].

Response #54: EPA will not establish a deadline for the date of annual allowance allocation simply because EPA can not predict the exact timing of key decision points in the process such as a decision from the Parties, the date of publication of a proposed rule etc.56 EPA is implementing a system where allowances are only distributed once a year, with the exception of distributions reflecting supplemental authorizations by the Parties. EPA’s method for addressing the issuance of CSAs to reflect actual use in the previous control period, is dealt with in response to comments in section 10 c

of this document.57 6. Summary of Comments Relating to CRITICAL STOCK ALLOWANCE

ALLOCATIONS

Commenter Organization Document ID Number Paul Niday TriCal, Inc. 0231 ? AmeriBrom, Inc. 0243 Courtney M. Price et al. American Chemistry Council’s Methyl Bromide Industry Panel 0245

Tim Maniscalo Dow AgroSciences, LLC 0247

John Sansone Cardinal Professional Products 0248 Gene Harrington National Pest Management

Association 0229

• Two commenters request that, if it is the case that existing stocks are to be regulated, EPA establish a formula or distributional system for critical stock allowances (CSAs) whereby existing inventory will be utilized within a reasonable time frame [0231, 0248].

Response #55: EPA is issuing CSAs in a ti mely fashion to ensure that inventory holders can sell methyl bromide for approved critical uses, should they choose to, starting January 1, 2005. In regard to the timeframe for use of existing stocks in the marketplace, EPA does not control the rate of use of the product. We anticipate that users will obtain existing inventories at the rate the market demands them.

• One commenter is in favor of EPA’s proposal to allocate CSAs on a pro-rated basis for all entities identifying available stocks under the Section 114 data request on the basis that it will enable EPA to keep track of methyl bromide intended for sale in 2005 and beyond consistent with Decision Ex. IX/6 of the Montreal Protocol.

Response #56: EPA will issue CSAs on a pro-rata basis to each owner of prephaseout inventories of methyl bromide relative to the proportion of the total known pre-phaseout inventory each entity owns. The amount that each entity owns will be calculated as of an average of their December 31, 2003 and August 25, 2004 level of stocks. If Company A owns 10% of the known pre-phaseout inventory on average, then Company A will receive 10% of the total number of CSAs EPA distributes for 2005. Please see the memo titled “EPA’s Methodology for Calculating Critical Stock Allowances (CSAs)” dated December 15, 2004 in the docket.

• Another commenter asks that, rather than assign CSAs on a pro-rata basis relative to the amount of existing stocks each supplier holds, EPA allocate CSAs equally among those entities that have submitted information to EPA on their unrestricted stocks of methyl bromide [0243].

 The commenter argues that it would not be fair to allocate CSAs based on the arbitrary dates of December 31, 2003 and August 25, 2004 selected by EPA for establishing stock levels, and that the simplest approach in this58 instance would be to allocate CSAs equally thereby creating a level playing field [0243].

Response #57: EPA did not describe an al ternative approach in the proposed rule for distribution on CSAs. Although the dates of December 31, 2003 and August 25, 2004 are snapshots in time and do not provide EPA with a full understanding of average levels of inventory held by a give n entity, EPA believes this data is more representative than simply dividing the number of allowances by the number of entities. EPA believes it is unreasonable to assume that stocks are owned in roughly equal amounts by all entities in the supply chain which is the assumption one would have to make to argue that such an allocation system would be fair. Furthermore, EPA is creating a tradable allowance system with this rulemaking that would allow an entity to acquire additional CS As from another allowance holder.

• One set of comments simply states that it agrees with EPA’s proposal to grant CSAs to producers, importers and distributors of methyl bromide. Indeed, the commenter notes that the other options outlined, such as using an auction system, seemed “unworkable, overly complex and otherwise problematic for a number of reasons.” [0245]

Response #58: EPA concurs that granting CSAs to producers, importers and distributors of methyl bromide is the simplest and most practical approach.

• One commenter is concerned that EPA “did not consult with state lead agencies to see if it is permissible for a commercial applicator such as a pest management professional to sell or otherwise transfer existing stocks of a restricted use pesticide like methyl bromide to a dealer, distributor, producer or an approved critical user without a dealer’s license.” [0229]

 The commenter states that, throughout the document, EPA “talks about entities with existing stocks of methyl bromide simply transferring such stocks to critical stock allowance holders, such as end users or third party applicators...” The commenter’s concern is that “many states require a person or entity to have a dealer’s license to sell or distribute a restricted use product like methyl bromide to another authorized entity” and that “most commercial applicators with existing stocks are not licensed dealers and will not be able to legally sell or distribute methyl bromide to others.” [0229]

 The commenter goes on further to ask “if such stocks are disposed or to a state lead agency during a collection initiative, how will this methyl bromide

be counted or otherwise accounted for?” and then “will the state be permitted to sell or otherwise distribute the methyl bromide to an allowance holder?” [0229]

Response #59: The commenter appears to have misunderstood the intent of the rule. In today’s rule, EPA is allowing for trading of critical stock allowances, but is not removing any existing requirements, such as the requirement to have a dealer’s license, that might apply to sale of the actual stocks themselves. This rule does not59 alter any existing federal, state, or local pesticide requirements. In addition, if an entity acquires CSAs but is not allowed to actually sell methyl bromide for some reason, that entity may sell its CSAs to another entity and receive a revenue.60 7. Summary of Comments Relating to TRADING ALLOWANCES

7.a. Trading within allowance type

Commenter Organization Document ID Number David K. Mueller Pest Managers for A Better

Environment 0134

Gabriele Ludwig Schramm, Williams & Associates, Inc. 0137

Richard Matoian California Fig Industry 0202

Dennis Balint California Walnut Commission 0203

Richard Peterson California Dried Plum Board 0206 George Lowerts International Paper 0211

James Nicol Great Lakes Chemical Corporation 0212

Edward M. Ruckert Crop Protection Coalition 0219 Daniel A. Botts Florida Fruit & Vegetable

Association 0223

Steve Godbehere Hendrix and Dail, Inc. 0227 Paul Niday TriCal, Inc. 0231 Courtney M. Price et al. American Chemistry Council’s Methyl Bromide Industry Panel 0245

Tim Maniscalo Dow AgroSciences 0247

• Two commenters support trading of CUAs and CSAs [0245, 0227]

 One commenter noted, however, that “if EPA decides to go forward with a sector-specific approach, the rule should permit entities to trade CUAs and CSAs between sectors.” [0245]

Response #60: In today’s rule, EPA is not implementing a sector specific system. EPA is not allowing for trades of CUAs from pre-plant to post harvest or vice versa because EPA believes that it is introducing sufficient flexibility by allowing trades within these groupings while being mindful of the need to provide as much certainty as possible regarding the availability of methyl bromide for critical uses. Since these allowances would have to be traded before they are expended (before methyl bromide is produced or imported) companies that would trade post harvest allowances into preplant allowances would be doing so based on a projection of market demand, not in response to real time market forces as would be the case in allowing trading of downstream allowances to end users. Again, EPA anticipates, based on historical use patterns and the research undertaken pursuant to submitting the U.S. nomination, that usage patterns will generally reflect the sectoral quantities found in Annex IIA thus additional flexibility to allow further trading between pre-plant and post-harvest uses does not appear to be warranted. Further, should the Agency allow complete flexibility to trade allowances between pre-plant and post harvest uses, it could render the creation of two caps virtually meaningless. EPA is allowing entities to trade CUAs in for additional CSAs and since CSAs are universal, in this instance th e Agency is permitting trading of a more specific allowance (the pre-plant or post-harvest CUA) for a more general allowance61 (the universal CSA). EPA is allowing this transaction as an incentive to drawdown additional stocks in lieu of new production which would have a benefit to the environment by reducing the number of molecules of ozone depleting substances

created.

• Seven commenters supported trading within allowance type [0202, 0203, 0206, 0212, 0219, 0231, 0245]

 Two commenters noted that Decision Ex I/3 asks the Parties to “endeavor to allocate the quantities of methyl bromide recommended.” [0231, 0245]

 Three commenters stated that trading excessive CUE material, either through applicant specific or sector by sector approach, seemed consistent with the

Montreal Protocol and the “Parties’ decisions that commodities successful proving their critical need get access to the full amount approved and also have the flexibility to trade with other commodities and sectors as long as they stay within the overall 35% of the 1991 baseline levels plus stocks.” [0202, 0203, 0206]

 One commenter supported trading of CUAs, continuing the flexibility entities have had under current regulations. [0212]

 One commenter wrote that “there is no rational basis to preclude trading.” [0219]

Response #61: EPA concurs that a trading system has merits and is consistent with the CAA . Section 607 paragraph (c) of the Clean Air Act Amendments of 1990 (CAAA), allows EPA to create trading mechanisms so long as there is a benefit to

the environment. In acco rdance with paragraph (c) of Section 607 of the CAAA, EPA is establishing an offset of one tenth of one percent of the amount of the CUAs transferred consistent with the proposed rule. Decision Ex I/3(4) states: “That Parties should endeavor to allocate the quantities of methyl bromide recommended by the Technology and Economic Assessment Panel as listed in annex II A to the report of the First Extraordinary Meeting of the Parties.” As discussed in section 4 of this document, EPA believes it is not practicable to implement a sector specific system and concludes that establishing distinct caps for pre-plant and post-harvest uses is consistent with the quoted language from Decision Ex I/3(4).

• One commenter did not support the trading of CUAs between sectors [0134]

 This commenter stated that the purpose of the rule is to limit the amount of methyl bromide used and that trading allows use of methyl bromide to expand and when someone reduces or eliminates the need for a CUA, the methyl bromide amount should be gone. This commenter also asserted that the approval timeframe of three working days of receipt by the EPA for trades would never work and that automatic approval would always occur, meaning that methyl bromide could be moved freely about the country [0134]

Response #62: EPA believes that this comme nt is perhaps more applicable not to the CUA system of upstream production allowances but to the downstream Critical Use62 Permit (CUP) system described by EPA in the proposed rule. EPA did not propose the CUP system as the preferred alternative but did take comment on this option. EPA believes that this comment does not apply to the CUA system because the CUA system allows for producers and importers to produce or import methyl bromide at the beginning of the control period in order to create the supply of exempted material. The CUA system is not a real time system where methyl bromide could only be produced once an order was for the material was placed. Such a system would have practical limitation for a product that takes weeks or even months to

reach market. Assuming that the commenter is in fact referring to the CUP system when he states that trading allows use of methyl bromide to expand because when someone reduces or eliminates the need for a CUP, the methyl bromide amount should be gone, EPA responds as follows. The fact that a user could sell his or her permit and receive a revenue from it, may be the reason why he no longer needs methyl bromide. The revenue from the CUP would act as a subsidy to make a marginal alternative economically feasible. Thus, there is an environmental benefit derived by allowing a user to trade a CUP. On the commenter’s last point, EPA currently processes trades within 3 business days. If EPA had to manually process hundreds or thousands of trades as could happen under a CUP system, the commenter is correct that three days would be difficult from an administrative perspective. However, EPA does not anticipate a problem with processing trades under a CUA system.

• One commenter suggested that EPA would need to allocate allowances in a supplier location appropriate way [0137].

Response #63: This commenter is suggesting that EPA issue sector or applicant specific allowances to suppliers who service those particular markets. For example, the commenter believes it would make little sense for EPA to issue any Florida strawberry allowances to a distributor in California. Although EPA believes this suggestion has merit, trading provisions would allow the market to correct itself. In addition, EPA does not have baseline data on the markets serviced by each entity in the supply chain to implement such an option. This issue is also considerably minimized because EPA is creating only two allowance groupings as opposed to adopting a sector specific approach.

• One commenter noted that they favored intrasector trading of MBr [0211].

Response #64: This commenter supports sector specific allocation of allowances and supports trading among members of a sector. Because this framework does not make sense under the allowance system where EPA issues allowances to producers and importers of methyl bromide, EPA is concluding that this commenter is referring to the Critical User Permit model. EPA is not implementing the downstream allowance system where the Agency distributes permits to critical users because of the time, burden, and data difficulties associated with this approach. However, if EPA were to implement such a system in the future, the Agency would63 like to note that limiting trade of permits to only those entities in the same sector would decrease the value of the permits, the revenue available to the permit holder for forgoing use of methyl bromide, and thus the economic incentive to move to ozone friendly alternatives that would otherwise be economically infeasible.

7.b. Trading between allowances

Commenter Organization Document ID Number Ann M. Oxford Albemarle Corporation 0226 Paul Niday TriCal, Inc. 0231 Courtney M. Price et al. American Chemistry Council’s Methyl Bromide Industry Panel 0245

Tim Maniscalo Dow AgroSciences 0247

• Three commenters agreed that entities should be permitted to trade CUAs and CSAs. [0245, 0247, 0226]

o One commenter noted that “[r]ather than requiring either that the producer acquire stocks or the distributor acquire CUAs before making the exchange, EPA should allow the CUA holder to exchange those CUAs for CSAs regardless of the level of stocks it holds” and proposed that EPA strike the words “provided they hold...critical use allowance” from the proposed regulatory language set forth in 40 CFR § 82.12(e)(1). [245]

 Another commenter noted that “the proposed rule should state that the retirement of CUAs in exchange for CSAs shall be required. This stipulation is in accordance with the Directive of the Protocol and would prevent any additional MB production from adding to available stocks at the end of control period” [0247]

Response #65: EPA agrees that it may be more efficient to allow an entity to exchange their CUAs for CSAs prior to obtaining the corresponding quantities of inventory. EPA believes that there is an environmental benefit to forgo new production and instead augment use of availa ble stocks, where possible. Therefore, EPA is amending its proposal to allow for a more efficient transaction process in the exchange of CUAs for CSAs. In exchanging a CUA for a CSA, the Agency will retire the CUA to maintain compliance with the overall cap.

The commenter is concerned that EPA will allow entities to create inventories with critical use methyl bromide and so is suggesting that EPA require allowance holders to retire any CUAs to reflect the amount of inventories on hand of critical use methyl bromide. EPA will reduce the total amount of CUAs issued in a following year based on the total amount of unused material held in the system as a
whole. See section ten of this document for additional information on the treatment of unused critical use methyl bromide.64 8. Summary of Comments Relating to ACQUIRING CRITICAL USE METHYL

BROMIDE

Commenter Organization Document ID Number

James Nicol Great Lakes Chemical Corporation 0140–JN (transcript of public hearing) Richard Matoian California Fig Industry 0202

Dennis Balint California Walnut Commission 0203 Douglas H. Fender Turfgrass Producers International 0205

Richard Peterson California Dried Plum Board 0206 Ken Woody Plum Creek Timber Company 0209

A.R. Chase California Cut Flower

Commission 0210

Steve Hensley USA Rice Federation (USA Rice) 0214

Wade Purvis Pacific Collier Fresh 0215 David R. Riggs Western Raspberry Nursery

Consortium 0217

Edward M. Ruckert Crop Protection Coalition 0219 Stephen E. Payne Pet Food Institute (PFI) 0221 Daniel A. Botts Florida Fruit & Vegetable

Association 0223

Steve Godbehere Hendrix and Dail, Inc. 0227 Paul Niday TriCal, Inc. 0231 Rex Cunningham Emerald Island Turf, Inc. 0233 Tim Maniscalo Dow AgroSciences, LLC 0247 David Corbett David Corbett Farms, LLC 0249 Randy DeWitt DeWitt Produce Co., Inc. 0250 Donnie H. Morris Georgia Fruit and Vegetable
Growers Association 0251

Gibbs Patrick, Jr. Gibbs Patrick Farms, Inc. 0252 Melvin Mathis MGM Plant Company 0253 Wilbert Morgan Morgan Farms 0254 Harry Vanderveer Texas Forest Service 0255

Mark Harrell N/A 0256 Dan Stringfield MeadWestVaco Corporation 0257 Paul Phypers, Jr. Happiness Farms, Inc. 0259 Scott Enebak Southern Forest Nursery Management Cooperative 0199

• Nine commenters believe that the most appropriate and manageable process for acquiring critical use methyl bromide is one that is based on a QPS-like process that requires self-certification [0210, 0205, 0140-JN, 0217, 0221, 0231, 0247, 0260].

 One commenter notes that, if the system works for QPS, it will be the easiest and the least expensive to implement, and that another system cannot be developed in the short time remaining [0210].

 Another commenter notes that self-certification should include an addendum that attests to the end-user’s membership in an authorized user group [0205].

 A third commenter believes that the recordkeeping and reporting system proposed by EPA is similar to the system that has been successfully used for65 QPS, which relies on periodic reports by producers and distributors and the retaining of specified records by applicators and owners. Self-certification of qualifying uses, with significant uses for noncompliance, is used. This commenter supports self-certification because of its proven success and acceptable administrative burden for stakeholders and EPA [0140-JN].

 A fourth commenter believes that it is in the legal and financial best interest of all parties to only allow for the use of methyl bromide as truly necessary [0221].

 A fifth commenter notes that, with the relatively small numbers of large growers that own the majority of the acres, a self-certification system would not be overly burdensome. This commenter cites the Florida Agricultural Statistics Service, which reported that 70 percent of the vegetable acres in production in Florida are managed by only 15 growers [0247].

 Another commenter also believes that all growers whose sector and region qualified for a CUE should be considered “pre-qualified” as approved critical users and should be allowed to self-certify that they have one or more of the limiting critical conditions [0260].

Response #66: EPA concurs that the self certification provisions are the least burdensome way to implement the exemption program and that this approach has worked well under the quarantine and preshipment exemption. EPA is requiring that entities identify themselves as an approved critical user, which by definition means that they are part of a consortium that applied for an exemption, and certify that they will use the methyl bromide for an approved critical use. EPA is requiring all approved critical users to self certify and is not “pre-qualifying” whole regions or sectors in this rule because in some instances, consortiums did not identify themselves in this manner. For example, the Turfgrass Producers only applied for an exemption on behalf of their membership, not all sod producers in the U.S.Therefore EPA, under the framework finalized in today’s rule, could not “prequalify” all sod growers.

• Fourteen commenters believe that the certification for CUE should be by the grower or nursery manager, since that person is the only one capable of making the decision that a limiting factor exists in a particular field since fumigation is done in advance of planting the crop and future soil pest pressure can only be determined on past history [0209, 0215, 0227, 0233, 0249, 0250, 0251, 0252, 0253, 0254, 0255, 0256, 0257, 0259].

Response #67: EPA concurs that the grower should certify that they have a critical use and EPA is implementing a framework where the end user must certify that the use is an approved critical use.

• One commenter objects to the proposed requirement that the user certify to the existence of limiting critical conditions immediately prior to treatment, since the weeds and/or any other plant life are not present before treatment. This commenter recommends that this certification requirement be deleted on the ground that it66 removes the availability of a CUE for most users. Instead, this commenter suggests that the user certify that they belong to an entity that submitted a CUE application that was approved, and that they will apply the chemical in accordance with the application request. The applicator would record the amount used, the size of the acreage treated, and the crops treated, and this information could be used to track the amount of methyl bromide used within each sector [0219].

Response #68: EPA agrees that weed pressures would not exist typically at the time of fumigation. The fumigation may be a preventative measure to control weed populations in areas where the problem is persistent. However, EPA is not deleting this limiting critical condition in today’s rule. Instead EPA is modifying the condition to a reasonable expectation that weed pressure would develop without fumigation to address the timing issue raised by the commenter. For more information on the Agency’s treatment of limiting critical conditions, please see

section 9b of this document

.

• Three commenters believe that requiring users to be certified as a condition of gaining access to methyl bromide is overly burdensome, and duplicates what was in the original CUE application, as it requires users to confirm that they meet the conditions of Appendix L to Part 82. Additionally, these commenters note that this requirement may ask individual users to certify to facts that didn’t exist when the application was made, including the limiting critical conditions. It is suggested that any certification be limited to the fact that the user is part of a commodity group that has an approved CUE and that the methyl bromide purchased under that CUE will be used for that purpose [0202, 0203, 0206].

Response #69: EPA does not believe the certification requirement is overly burdensome. It is a minimally burdensome way to create a paper trail that in fact exempted material went only to exempted uses. EPA does agree that some of the limiting critical conditions may not be present at the time of fumigation and has accordingly modified those conditions to incorporate a “reasonable expectation” standard. For more information on the Agency’s treatment of limiting critical conditions, please see section 9b of this document.

• One commenter expressed concern over requiring grower certification as to the existence of the undefined levels of pest pressure [0223].

Response #70: EPA does agree that some of the limiting critical conditions may not be present at the time of fumigation and has accordingly modified those conditions to incorporate a “reasonable expectation” standard. For more information on the Agency’s treatment of limiting critical conditions, please see section 9b of this

document.

• One commenter stated that certifying the existence of limiting critical conditions immediately prior to treatment was not a feasible system for rice mills because they must schedule their fumigation in advance and often over holiday weekends. It is67 suggested that EPA delete this requirement because the system would only work for emergency fumigations and would limit the number of scheduled fumigations [0214].

Response #71: The limiting critical conditions that apply to rice milling are not conditions that vary significantly over ti me. Conditions include the presence of sensitive equipment in a facility, difficulty meeting a market window during the peak season, or time needed to transition to a newly available alternative such as sulfuryl fluoride. These conditions are well known in advance of the contracted fumigation date.68 9. Summary of Comments Relating to WHO IS AN APPROVED CRITICAL USER

9.a. Uses

Commenter Organization Document ID Number Gary L. Obenauf Agricultural Research Consulting 0139 Steve Hensley USA Rice Federation (USA Rice) 0214 Stephen E. Payne Pet Food Institute (PFI) 0221 Daniel A. Botts Florida Fruit & Vegetable

Association 0223

Gene Harrington National Pest Management Association, Inc. 0229

Courtney M. Price et al. American Chemistry Council’s Methyl Bromide Industry Panel 0245

Tim Maniscalo Dow AgroSciences 0247 James W. Wells Environmental Solutions Group,

LLC 0260

• In one set of comments, the point is made that the dried plum application includes figs and raisins. Therefore, the commenter suggests that the text on page 38 of the proposed allocation regulation be revised to include commodity storage entities storing figs and raisins [0139].

Response #72: EPA inadvertently made an omission in the proposal and agrees with the commenter that figs and raisins should be included in the commodity storage sector, as this consortium’s CUE application available in the docket and the U.S. nomination included figs and raisins.

• One commenter asks that EPA “please amend the final rule to include the fact that the methyl bromide (MeBr) critical use is intended for all locations in the United States belonging to rice millers who are members of the USA Rice Millers Association. Please note that such a change will encompass all of the locations originally planned for in the CUE and will not change the amounts requested by RMA” [0214].

Response #73: EPA thanks this commenter for correcting the Agency’s characterization of their consortium. In the final rule, EPA will adjust the consortium membership to include all of the rice millers who are members of the

USA Rice Millers Association.

• One commenter requests that EPA change its interpretation of the Pet Food Institute application to include only those companies who are active members of PFI, instead of all pet food manufacturing facilities in the U.S., for the post-harvest critical use exemptions. If this request cannot be made, PFI asks that EPA only consider cats and dogs in its definition of “pets”. These requests have been made because PFI only represents 97% of dog and cat food companies in the United States and does not represent companies dealing with the production and distribution of food for69 other animals species. PFI can only provide data and knowledge about cat and dog food companies [0221].

Response #74: EPA incorrectly characterized this commodity group as all pet food facilities in the proposed rule and will ch ange the scope to be more narrow and only include cat and dog food facilities. The exemption to meet the needs of dog and cat food facilities is further limited to those companies who are active members of PFI. EPA is making these changes to be consistent with the PFI’s exemption application

to EPA available in the docket and the U.S. nomination.

• One commenter is concerned that the allocation process does not define the conditions of use related to the rates or methods of application. Consequently, growers may not have the “material available to meet their bona fide use of methyl bromide for crop sites that are included in the amounts approved by the Parties to the Montreal Protocol” [0223].

Response #75: EPA is not mandating certain rates or methods of applications under today’s rule even though the exem pted amounts were calculated assuming certain dosage rates. This is because EPA does not want to prohibit someone from using a higher application rate to control a particularly difficult pest. Although this may lead to less methyl bromide available for another user it may be necessary to guarantee control of a particularly difficult pest.

• One commenter urges EPA to incorporate into the final rule the supplemental requests to the Parties for the use of methyl bromide in 2005 which will have final approval before the end of 2004. These uses could be included in Appendix L to Subpart A of Part 82 [0229].

Response #76: In November 2004, the Part ies approved an additional 610 metric tones (2.39% of baseline) of methyl bromide for critical uses in 2005. EPA did not include this supplemental amount in the August 2004 NPRM because EPA did not know what action the Parties would take and what conditions, if any, the Parties might impose on a supplemental authorization. Accordingly, this amount is not included in today’s final rule. EPA will conduct a separate notice and comment rulemaking for the supplemental amount. EPA will expedite this separate rulemaking to prevent disruption to pr oduction process for these sectors.

• Three commenters agree with the “approved critical user” definition supplied in the NPRM and believe it should be used in the final rule [0245, 0247, 0260].

 One commenter is concerned that the language in the Protocol includes parties that have not participated in the Critical Use Nomination Process, and thus allows those who did not participate to use methyl bromide that should be available to those who did participate [0247].

Response #77: EPA generally concurs with this commenter regarding the “approved critical user” definition and has made only small changes to the definition to70 enhance clarity and to incorporate the “reasonable expectation” standard for limiting critical conditions. Those users who have not participated in the CUE process will not have access to critical use methyl bromide. The one exception would be that new members of a consortium that applied for a critical use exemption will have access to critical use methyl bromide if they otherwise qualify as approved critical users because their consortiums participated in the process for an exemption

in 2005 on behalf of their members.

9.b. Conditions

Commenter Organization Document ID Number Dan Legard California Strawberry

Commission 0140 - DL

Daren Gee N/A 0140 - DG David R. Riggs Western Raspberry Nursery

Consortium 0217

David Doniger Natural Resources Defense Council (NRDC) 0246

Tim Maniscalo Dow AgroSciences 0247 James W. Wells Environmental Solutions Group,

LLC 0260 (late comment)

David Doniger (letter to Linda Fisher) NRDC 0287

• Two commenters feel that approving users for critical use exemptions based upon their ability to prove that they have limiting critical conditions, such as pest and pathogen problems or state-mandated caps on Telone, is “unreasonable, unachievable, and unenforceable” and many qualified growers will not be able to meet such stipulations [0140- DL, 0140-DG].

 Furthermore, one of the commenters points out that growers will have trouble determining when their township has hit their Telone cap, and that mandating growers to experience great pest and disease outbreaks before they can use methyl bromide will cause many growers to go out of business [0140-DG].

Response #78: EPA recognizes that a user may not be able to certify that certain limiting critical conditions will definitely occur. For example, a grower may not know with one hundred percent certainty that moderate to severe nutsedge infestation would occur in a given fiel d in the absence of methyl bromide fumigation. However, the grower should be able to form a reasonable expectation in this regard, based on past experience and the information included in the application. EPA has modified the definition of approved critical user to reflect the “reasonable expectation” standard. Therefore, if a reasonable person expects that he would have high levels of nutsedge, perhaps because of a problem in a neighboring field or the field in question had problems the previous year that would be a sufficient basis to meet the LCC. This renders it unnecessary for the grower to wait for a nutsedge problem to develop during the growing season when it is no longer possible to remedy the problem.71 • One commenter feels that it is unfair to approve only members of the Western Raspberry Nursery Consortium who meet the limiting conditions of moderate to severe nematode infestation, medium to heavy clay soils, and prohibition of the use of 1,3 dichloropropene due to township caps to use orchard seedling applications for raspberry nurseries. The commenter feels that these limiting conditions are unfair because they were not previously a part of the Decision of the Montreal Protocol or EPA’s analysis and that no conditions not previously covered by the Decision should be included in the rule [0217].

Response #79: Limiting critical condition s are those reasons why the alternatives are not technically and economically feasible and therefore there is a critical need for methyl bromide. EPA is not instituting new factors in the rule but merely outlining the data in the nomination, responses to MBTOC and the five way analysis that describe the critical need for a particular use. For the orchard replant sector, the basis for the critical need is: to control the target pests (pests include weeds and fungal pathogens p. 7, 2003 Nomination, Orchard Nursery chapter), heavy soils leading to inadequate diffusion of 1,-3di chloropropene and metham sodium (p. 9, 2003 Nomination, Orchard Nursery chapter) and township caps (see the Five-Way Analysis)

.

• One other commenter states that conditions in the “rule go beyond the scope of the EPA nomination and Montreal Protocol exemption” [0260].

Response #80: In the Nomination, EPA explai ned the feasibility of chemical in-kind alternatives by describing what pest complexes were effectively controlled with alternatives, and which pest complexes required methyl bromide for treatment. EPA nominated amounts of methyl bromide based on these and other conditions and therefore including these conditions in this rule is not beyond the scope of the nomination or the Montreal Protocol exemption.

• However, two other commenters agree with the “limiting critical conditions”.

 One explains that without the requirement, growers whose needs could be met by alternatives would continue to use methyl bromide [0246].

 Another believes the “limiting critical conditions” (LCC) are relevant, but perhaps only to specific products. Therefore, the commenter believes that the “limiting critical conditions” should be reviewed and revised periodically. The commenter also believes that the “limiting critical conditions” may need to be more clearly explained or refined in the following areas:

♦ The yellow and purple nutsedge should qualify as an LCC only when nutsedge herbicides are not viable for nutsedge control on a particular

field.

♦ With the availability of 1,3-D as a nematicide, “nematode infestations” should not qualify as an LCC.72 ♦ Moderate to severe fungal pathogen infestation should not serve as an LCC itself because chloropicrin can be used to control pathogens.

♦ Occupied structures should be considered LCC for portions of a field impacted by an occupied structure within 100 feet, rather than 76 meters of a treated area, because U.S. EPA labels for 1,3-D products require a 100 feet buffer zone.

♦ If a local authority has imposed a buffer zone on methyl bromide which is comparable to a buffer zone for a methyl bromide alternative, then the buffer zone to the “occupied structure” should not be

considered an LCC.

♦ The commenter agrees with the township allocation limits for 1,3-D products. However the limit should only become an LCC if the allocation limit for the year has been met, which rarely happens. Furthermore, since limits vary across years and townships, they should not be stated in Appendix L.

♦ Most of southern Florida has a spodic or argillic layer that can support seepage irrigation and can be treated with 1,3-D. These areas should not be confused with karst topography which is a LCC.

♦ Older structures that cannot be properly sealed should not serve as an LCC. Methyl bromide will leak from those buildings which are not properly sealed to the same extent as alternatives such as SF.

♦ The presence of electronic equipment should not be considered an

LCC when SF is available because SF is also not corrosive to electronic equipment.

♦ Where ProFume® is registered for use, rapid fumigation for commodity storage is not a justification for a LCC because ProFume® can perform rapid fumigations to the same extent as MB [0247].

Response #81: EPA concurs that the following limiting critical conditions should be modified or eliminated. EPA is making the following changes in today’s rule: a) eliminating the LCC of “moderate to severe nematode pressure” in all uses except certain nursery type crops because the commenter correctly states that there are effective alternatives to control this condition when it occurs alone; b) eliminating “moderate to severe pathogens” in all us es except Michigan tomatoes and certain nursery type crops because there are effective alternatives to control this condition when it occurs alone and; c) modifying the buffer zone LCC to reflect recent label changes that reduce the buffer to 100 feet fr om an occupied structure. The last LCC would apply, as the commenter pointed out, only in situations where methyl bromide has a less restrictive buffer zone. EPA is eliminating the first two LCCs on nematode and pathogen infestation because there are effective alternatives to control these pests when they happen to be the only key pest. EPA had incorrectly

characterized these conditions as stand alon e circumstances that would allow for the use of methyl bromide in the proposal although the nomination describes these situations as requiring methyl bromide when in conjunction with another circumstance. EPA did not eliminate the second LCC for Michigan tomatoes because severe nematode or pathogen pressures alone make the alternatives not73 feasible. This is because Michigan is a cold climate and the alternatives which would otherwise be effective have not yet been demonstrated to properly diffuse in the cool soils. EPA did not eliminate the first two LCCs for certain nursery type crops because of the zero tolerance threshold for pests and the lack of data today that confirm such performance from an alternative. EPA agrees that the LCC for occupied structures should be modified to reflect recent label changes from 76 meters to 100 feet and EPA has made those changes to the critical use tables. With regards to the township cap, EPA believes that if the user expects that they can not do a complete fumigation with out running into the township cap, that they meet this particular limiting critical condition. Typically, users in California consult the local pesticide regulators to obtain permission to fumigate prior to fumigation and are informed if they can not use 1,3-d products due to township limits. If a user does not have any other limiting critical condition and is allowed to use 1,3-d products, then the use is not a critical use. EPA does not agree that 1,3-D products combined with an herbicide can replace a critical need for methyl bromide in areas with moderate to heavy nutsedge pressures and is not adjusting this LCC. Further, the LCC regarding karst topography is limited to those circumstan ces where 1,3-d products are not permitted to be used by either FIFRA label restrictions and/or state and local pesticide regulations to prevent groundwater contamination. EPA does not agree that Profume can replace methyl bromide for all registered uses for reasons elaborated on in section one of this document. The comments referring to the LCCs of older structures that can not be properly sealed and the presence of electronic equipment subject to corrosion are subsets of the issue raised by the commenter that Profume can replace methyl bromide for all registered uses and are therefore dealt with in the treatment of Profume more broadly in this rulemaking. EPA is not eliminating those two LCCs because they limit a users ability to use other alternatives such as heat or phosphine which are other registered alternatives and as discu ssed in section one, EPA has no basis to believe that Profume can replace the entire market by January 2005.

• One commenter believes that EPA has not properly defined or applied legal standards to a “significant market disruption”. A market disruption must affect price and availability of commodity rather than just involving an additional cost to growers [0246, 0287].

Response #82: EPA carefully weighed and analyzed many economic factors in developing the Nomination. These factors include loss as a percentage of gross revenue, absolute losses per hectare, losses per kilogram of methyl bromide requested, loss as a percentage of net cash revenue, and changes in profit margins. In the Nomination, EPA interpreted “the threshold of significant market disruption to be met if there is a significant impact on commodity suppliers using methyl bromide. The economic measures provide the basis for making that determination.” (2003 Nomination for a Critical Use Exemption for Methyl Bromide submitted by the United States of America). EPA posted a memo titled:74 “Development of 2003 Nomination for a Critical Use Exemption for Methyl
Bromide from the United States of America on the public docket as part of this rulemaking. That memorandum explains: “EPA defined ‘market’ in terms of agricultural commodities. Markets are partially defined by the interaction between supply and demand, which determines the price and quantity of a good traded in a market. EPA’s position is that a disruption to either side of a commodity market, demand or supply, would result in market disruption. EPA believes that disruptions to domestic supply of agricultural commodities would be a disruption to the market; thus, driving out domestic production [would constitute such a disruption], even if it were replaced by imports so that consumers would not experience a reduction in the amount supplied.” Thus, EPA considered the “significant market disruption” crit erion in developing the nomination.

9.c. New market entrants

Commenter Organization Document ID Number David K. Mueller Pest Managers for A Better

Environment 0134

Mitch Dubensky American Forest & Paper

Association 0140-MD

Dan Legard California Strawberry

Commission 0140-DL

Scott Enebak Southern Forest Nursery Management Cooperative 0199

Douglas H. Fender Turfgrass Producers International 0205 George Lowerts International Paper 0211 David R. Riggs Western Raspberry Nursery

Consortium 0217

Edward M. Ruckert Crop Protection Coalition 0219 Courtney M. Price et al. American Chemistry Council’s Methyl Bromide Industry Panel 0245

James W. Wells Environmental Solutions Group,

LLC 0260 (late comment)

• One commenter believes that section J will allow for companies, who do not need methyl bromide, to join a consortium and gain access to methyl bromide. Section J could act as a loophole allowing entire sectors (such as the strawberry sector) to easily purchase and use methyl bromide and this is unfair to those companies who have been working to comply with the Montreal Protocol [0134].

Response #83: The Agency wishes to accommoda te the ever shifting marketplace to allow growers to increase or move produc tion as needed provided that critical use methyl bromide only goes to those uses and locations listed in Appendix L of 40 CFR 82. EPA is finalizing a framework in today’s rule that allows a new market entrant who is a member of a consortium that applied for an exemption to be an approved critical user so long as the use is for a use listed in column A and a location listed in column B of Appendix L to 40 CFR 82. Therefore, an approved critical user includes those users who are members of a consortium that applied for75 an exemption, even if the user was not a member of the consortium at the time the application was filed. EPA has no way of tracking the names and locations of every farmer covered by an application and does not believe that the regulated community wishes for the Agency to approve each and every user and location before a fumigation. The approach taken by EPA allows for consortia to define themselves, at the time the application is made to EPA, as narrowly or broadly as they choose so as to minimize the potential for free-riders later on. Many commodity groups chose to apply on behalf of all users in their state, not just their members and in doing so, the consortium itself broadly considered the needs of potential members. However, this does not mean that a consortium can increase the amount of critical use methyl bromide simply by defining itself more broadly. As described in the proposal, EPA will not increase the amount of methyl bromide exempted to accommodate new market entrants without first seeking authorization from the Parties through the nomination and then engaging in a notice and comment rulemaking process. Any increase in demand for methyl bromide due to new market entrants must be met under the cap set forth in today’s rule.

• Three commenters agree that clarification and review is needed regarding the entrance of new users into the market because their entrance may cause current members of a consortium, who have been involved in the process all along, to get less methyl bromide [0140-DL, 0199, 0211]. It is thought that those who have not applied for critical use exemptions “should not benefit from the effort of others” [0217].

 One commenter suggests that “a new member must wait one allocation year to have access to methyl bromide stocks thus participating in the development of the CUE application with the inclusion of their methyl bromide needs unless an excess of methyl bromide exists in the current year” [0211].

Response #84: See response#83 above. Agai n, EPA does not have the ability to

monitor the market with such close detail as to discern which farmer or which acre is new and therefore could not implement a suggestion such as the one provided by

the commenter.

• One commenter believes that to allow those, who are not members of Turfgrass Producer’s International, farm access to the amount of methyl bromide authorized because of TPI’s CUE application will encourage free-riders. This must be addressed in the final rule so that at least a TPI membership is required for sod farms to be considered “approved critical users” [0205].

Response #85: EPA mischaracterized this information in the proposed rule. In the final rule, EPA is changing approved critical uses from all sod producers in the U.S. to sod producers that are members of TPI to reflect the original exemption application.76 • Two commenters believes that a new entrant should be able to qualify for existing critical use exemptions as long as they qualify for a critical use exemption group and agree to and are able to follow the provisions of the group[0219, 0260].

Response #86: As stated above, new members of a consortium can be considered approved critical users as long as they otherwise qualify.

• One commenter requests that the Agency revise the rule to automatically approve growers as a critical users, without requiring proof of limiting critical conditions, if they are in a sector or region that qualifies for a critical use exemption [0140DG].

Response #87: EPA is requiring all approved critical users to self certify and is not “pre-qualifying” whole regions or sectors in this rule because in some instances, consortiums did not identify themselves in this manner. For example, the Turfgrass Producers only applied for an exemption on behalf of their membership, not all sod producers in the U.S. Therefore EPA, under the framework finalized in today’s rule, could not “pre-qualify” all sod growers. EPA does agree that some of the limiting critical conditions may not be present at the time of fumigation and has accordingly modified those conditions to incorporate a “reasonable expectation” standard. For more information on the Agency’s treatment of limiting critical conditions, please see section 9b of this document.

• One commenter believes that EPA’s definition of “consortium” is appropriate and that new organizations should allow new members in accordance with their own rules. Furthermore, EPA and distributors should not be the parties deciding who is allowed in a particular consortium [0245].

Response #88: This comment supports the approach EPA is finalizing in today’s rule. EPA concurs that the definition posited by the Agency for a “consortium” is appropriate.77 10. Summary of Comments Relating to REPORTING AND RECORDKEEPING REQUIREMENTS

10.a. Reporting

Commenter Organization Document ID No Tim Maniscalo Dow AgroSciences LLC 0247 Courtney M. Price et al. American Chemistry Council – Methyl Bromide Industry Panel 0245

• One commenter believes that the final rule should include an effective tracking and reporting systems that allows EPA to determine methyl bromide usage during the control period. This commenter also believes that EPA should require all methyl bromide allocation users who consume more than 10,000 kg/year to report actual use during the control period in order to ensure that all methyl bromide volumes acquired under the allocation program were consumed for the use for which it was allocated. This manufacturer also suggests that EPA adopt a real-time tracking system similar to that used to document pesticides in California to manage township caps [0247].

Response #89 : EPA is primarily concerned with understanding how much methyl bromide is used for each critical use sector on an annual basis. Therefore, a real time tracking system is not warranted. The reporting requirements described in today’s action are sufficient to meet the information requirements under the Protocol and the CAAA and to ensure that EPA can implement the exemption from one control period to the next. However, there is nothing in this rule to prohibit the private development of such a system and EPA understands that one such database company has had conversations with methyl bromide registrants about developing a database similar to the one described by the commenter.

• One commenter generally supports the proposed reporting requirements, while repeating its assertion that EPA lacks the legal authority to regulate use of stocks.[0245].

− The commenter believes that requiring producers and importers to submit quarterly reports on expended and unexpended CUAs and CSAs is consistent with existing reporting obligations and is reasonable for ensuring compliance with the allowance system. The commenter notes that producers and importers of methyl bromide have extensive experience with the current reporting requirements and already have mechanisms and system in place to facilitate reporting.

− The commenter believes that the reporting requirements are made significantly more complex by requiring distributors to file annual reports on the amount of critical use methyl bromide bought, sold, and held in inventory on a sector-specific basis (regardless of the allocation approach used). It is suggested that EPA establish alphanumeric codes to differentiate and identify each sector to ensure consistency in reporting and minimize the burden.78 − The commenter states that the NPRM does not explain how the reporting requirements would be revised under a sector-specific approach, and suggests that if that approach is implemented, the type and frequency of reporting for producers and importers should remain consistent with existing requirements, but that they should be able to use any alphanumeric code system.

− The commenter notes that the preamble text indicates that distributors will be required to submit quarterly reports on their level of expended and unexpended critical stock allowances, but that the regulatory language of the NPRM does not include a provision for this requirement. The commenter suggests that the final rule be revised to correct this error.

− The commenter also believes that the compliance burden associated with data compilation and reporting under the proposed rule would increase significantly if EPA decided to impose a sector-specific allocation reporting system. The commenter considers that under the current system, data compilation and reporting times are at least two times greater than those estimated under EPA’s Paperwork Reduction Analysis, and that under a sector-specific approach, the time burden would be four times higher than

EPA has estimated.

− Lastly, the commenter notes that the NPRM does not include a reporting requirement for collecting data on the total amount of methyl bromide held in existing and available stocks, and EPA does not otherwise explain how it will obtain this data. The commenter believes that the reporting requirements should be revised to correct this oversight if EPA decides to employ its formula for available stocks (although the commenter objects to the formula). Also, the NPRM requires reporting only of “critical use methyl bromide” inventory at the end of the control period, and the commenter finds no description of how this information will be sufficient to determine the

allocation of CSAs.

Response #90: The legal authority for information collection to meet reporting requirements, as outlined in the rule, is found under Sections 603(b), 603(d) and 614(b) of the CAAA. EPA believes these reporting requirements are necessary in order to meet U.S. reporting obligations under Article 7 of the Protocol and CAAA reporting requirements to Congress under Section 603(d). It is necessary for distributors to file annual reports on the amount bought, sold and held in inventory so that EPA may obtain accurate and quality data on the use of exempted critical use methyl bromide. EPA’s authority to regulate use of methyl bromide in connection with the critical use exemption is discussed in section one of this

document. Under a sector-specific approach, the reporting requirements would be similar to the requirements finalized today because EPA is collecting sector level “use” data under either approach. Sector level data is necessary regardless of the approach because EPA recognizes that such data will improve the accuracy of the critical use determination and the nomination process. The commenter did not specify which elements of the data burden are inaccurate nor suggest an alternative number of burden hours for the allegedly inaccurate burden elements. EPA based79 these estimates on the burden associated with existing, similar requirements. Without a specific comment in this regard, EPA does not believe an adjustment to the burden hours is possible. EPA believes that establishing alphanumeric codes would reduce the burden of reporting sector level sales information by creating a standardized format. However, there are other methods to standardize the information requirements such as using a check list reporting form. EPA anticipates that the final reporting form will use a check list or similar standardizing mechanism. The regulatory text in the final rule includes requirements for producers to report to EPA on the number of unexpended and expended critical stock

allowances. EPA is requiring that producers, importers, distributors, and applicators report to EPA on the amount of critical use methyl bromide sold and not sold at the end of the year. EPA will use this data to determine how much to adjust new production in the year after the year in which the data was reported. In future rules, EPA intends to allocate CSAs in a manner consistent with the allocation made in today’s rule- pro-rata based on percent of the total inventory owned by an entity. EPA anticipates that the data reported in compliance with this rule will enable the Agency to make this type of allocation finalized in today’s rule.

10.b. Record-Keeping

Commenter Organization Document ID No Gene Harrington National Pest Management Association, Inc. 0229

Courtney M. Price et al. American Chemistry Council – Methyl Bromide Industry Panel 0245

• One commenter believes that there is no purpose for requiring a third party applicator to acquire a certification from a client, and that the client may have little or no knowledge of the “critical use” process. It is suggested that EPA reconsider the recordkeeping and reporting requirements for third party applicators, bearing in mind that the location of the application and the name of the third party applicator or commercial applicator’s client is confidential business information [0229].

Response #91: All approved critical users have to certify at the point of purchase that they are an approved critical user purchasing methyl bromide for the designated use. If a third party happens to be the point of sale of fumigation services with critical use methyl bromide to an approved critical use, then the user must self certify to the third party applicator and the applicator must retain those records. EPA is sensitive to confidential business information and will securely store records that are designated as such

. The certifications are necessary to ensure that critical use methyl bromide is used only for approved critical uses.80 • One commenter believes that, in the event that EPA employs a sector-specific approach (which the commenters do not support), EPA should impose a tracking system similar to that currently used for the QPS exemptions. Specifically, entities in the supply chain would keep records of the amounts and categories of critical use methyl bromide bought/produced and sold during the control period. Suppliers would also periodically report the transactions. Entities that acquire methyl bromide would self-certify that it would only be used in the category for which it is purchased. These commenters believe that the difficulties associated with any other approach would not be overcome through the use of commercial database system, as described in the NPRM [0245].

Response #92: Although EPA has not sel ected the sector-specific approach, the tracking system will be similar to that currently used for the QPS exemptions. The producers will keep track of how much they produce, the distributors and applicators will also keep track of what they distribute and apply. All will self certify that they are producing, distributing or using methyl bromide for the purpose of a critical use exemption

.

10.c. Treatment of Unused Critical Use Methyl Bromide

Commenter Organization Document ID No Tim Maniscalo Dow AgroSciences LLC 0247 Courtney M. Price et al. American Chemistry Council – Methyl Bromide Industry Panel 0245

• One commenter supports EPA’s proposed treatment and allocation of unused critical use methyl bromide [0247].

− The commenter notes that EPA’s rule should provide market incentives and encourage the development and use of methyl bromide alternatives, since allowing a free flow of unused methyl bromide beyond the control period may create uncertainty among producers of alternative products.

− This same commenter also supports the prohibition on banking of allowances, and notes that the banking concept should apply to end users who have purchased methyl bromide previously, but have not used all of their purchased quantity in a given year. This unused amount should be accounted for and applied against CUE needs the following year.

Response #93: EPA believes that the ma rket incentive for the development of alternatives to methyl bromide exists due to the fact that current regulations phase out production and import of methyl bromide effective January 1, 2005 and that the approved exemptions are only temporary derogations from the phaseout for critical situations. EPA will not allow for the banking of allowances from one year to the next as described in the proposed rule and will account for unused quantities of critical use methyl bromide to prevent accumulation of a stockpile with exempted

material.81 • One commenter objects to EPA’s proposed treatment of unused critical use methyl bromide [0245].

− The commenters believe that EPA does not provide sufficient detail on its proposed approach to allow meaningful comment. It is unclear to the commenters whether EPA intends to deduct any leftover critical use methyl bromide from the CUAs or CSAs for the entity holding the stock or whether that amount would be deducted from the aggregate amount of new CUAs and CSAs before any allocation of the total to individual allowance holders.

− The commenters feel that EPA’s proposed approach represents a significant departure from the way in which methyl bromide produced with production and consumption allowances is currently managed.

− Once methyl bromide is produced with CUAs, the commenters believe that no time restrictions should exist on its use for qualifying applications, and that the quantity remaining at the end of the control period should not be deducted from the next year’s CUAs or CSAs. These commenters believe that such a practice would constitute a retroactive change in allowed levels of production and contradict a historical lack of restrictions on the disposition of methyl bromide produced by expending production and consumption allowances, a practice which is consistent with the intent of the Montreal Protocol. Because much of the flexibility built into CUEs was eliminated due to reductions by EPA and other international bodies under the critical use exemption process, the commenters object to EPA further reducing the critical use exemptions by retroactively changing what has already been approved by the Parties.

− Regardless of the approach that EPA adopts for the allocation of CUAs and CSAs, these commenters believe that producers/ importers should be able to carry allowances forward as a small “buffer” against inadvertent shipment of methyl bromide to customers, in excess of that produced with current CUAs. If this provision is not included, these commenters expect that producers and importers are likely to undersell critical use methyl bromide to avoid the possibility of exceeding their CUAs and CUEs, thereby denying end users the full approved amount of critical use methyl bromide.

Response #94: At the end of each calendar year, EPA intends to deduct any leftover critical use methyl bromide that has not been sold from the aggregate amount of CUAs available for the year following the year in which the data was reported. Adjusting the supply in this way reflects the availability of critical use methyl bromide material already on the market. Unused methyl bromide is treated differently following the phaseout because the critical use exemption is a need-based exemption. EPA will use the information collected through the annual reporting requirement to determine how much unused critical use methyl bromide is available, or not already sold to an approved critical user, at the end of the calendar

year. EPA believes it provided ample opportunity for comment in the proposal. EPA specifically indicated that it would deduct the amount of unused material at the end of the year from the total number of CUAs made available the following year. [69 FR 52386 to 52387] A plain text reading of that statement is simply that82 fewer allowances will be made available and so the pro-rata allocation of allowances

will be based on a lower total number of allowances. The banking of allowances (both CUAs and CSAs) from one year to the next is prohibited because the critical use exemption approved by the Parties to the Montreal Protocol in Decision Ex I/3 is an exemption from the controls that apply during the 2005 control period. The U.S. has obligations under the MontrealProtocol and the Clean Air Act to control the production and consumption of ozonedepleting “controlled substances” on an annual, calendar year basis. While Decision Ex I/3 authorizes an exemption for one control period only, it is possible that a future decision of the Parties would authorize exemptions for multiple years. EPA will revisit the issue of banking allowances under a multi-year scenario. EPA does not agree that deducting unused quantities of critical use methyl bromide from exempted amounts in future years would constitute a retroactive change in allowed levels of production. To day’s final rule does not assign new legal consequences to methyl bromide production that occurred prior to January 1, 2005. If production was legal at the time it occurred (e.g., the producer had sufficient unexpended allowances), that past act of production remains a legal act.83 11. Summary of Comments Relating to ENFORCEMENT PROVISIONS
Commenter Organization Document ID No David K. Mueller Pest Managers for a Better

Environment 0134

Richard Matoian California Fig Industry 0202

Dennis Balint California Walnut Commission 0203

Richard Peterson California Dried Plum Board 0206

A.R. Chase California Cut Flower

Commission 0210

Steve Hensley USA Rice Federation 0214 David Riggs Western Raspberry Nursery

Consortium 0217

Edward M. Ruckert Crop Protection Coalition 0219

James A. Bair North American Millers’

Association 0220

Courtney M. Price et al. American Chemistry Council – Methyl Bromide Industry Panel 0245

• Ten comments were received on enforcement provisions [0134, 0202, 0203, 0206, 0210, 0214, 0217, 0219, 0220, 0245].

• Nine commenters believe that enforcement activities should be handled under FIFRA [0214, 0203, 0202, 0217, 0206, 0220, 0210, 0245, 0219].

− Two commenters assert that FIFRA is the traditional statute relied upon by EPA to penalize the misuse of a pesticide. These commenters believe the EPA’s example of a 10-acre farm owing $97 million in penalties for a 3,000 kg application error shows the inequality inherent in attempting to enforce a treaty violation under the CAA enforcement regulations. The commenter representing the Nursery Consortium noted that the modified fine structure that results in $487,000 for the same violation is still disproportionate to the violation. This commenter believes that any error or violation by an individual grower will not add at all to the environmental impact and thus should not face the same stiff penalties that a manufacturer or importer would [0124, 0217].

− Three commenters believe that while the proposed process of lumping together pounds of product applied can reduce the liability, it is still very inequitable when compared to the penalties under FIFRA [0203, 0202, 0206].

− One commenter supports the enforcement provisions for producers, importers, and distributors, but urges EPA to modify the enforcement provisions for end users. This commenter believes that defining each violation by an end user on a per kilogram basis could result in unreasonably high penalties, especially when compared to maximum penalties imposed under FIFRA. This

commenter recommends that EPA either revise the rule so that FIFRA penalties can be applied or so that a violation for unauthorized use is defined as one instance or event of misuse, rather than on a per kilogram basis [0245].

− One commenter believes that the penalties being enforced for use of existing stocks are not authorized under the CAA. This commenter suggests that EPA84 instead address misuse of methyl bromide under the provisions of FIFRA, or develop a penalty guide that approximates the penalties called for under that law. This commenter recommends, however, that if EPA continues to rely on the provisions of the CAA, it should further reduce the potential penalties it might seek against a CUE holder, as proposed provisions can represent substantially more than the amount of revenue derived from the acres upon which methyl bromide was erroneously applied. This commenter believes that this provision not only deters wrongdoers, but also law-abiding citizens who cannot afford the risk of such a large penalty. The commenter suggests that the maximum penalty should be $25,000 per incident, an amount that would encourage CUE holders to follow all conditions of the CUE, while not unduly frightening potential CUE holders from engaging in the process [0219].

− One commenter believes that, until the CUE system is better understood and refined, the misuse provisions under the CAA will not be appropriate [0220].

Response #95: Under the Stratospheric Ozone Program regulations, EPA has historically defined each kilogram of unauthorized production or importation of controlled substances to be a separate violation of its regulations. Likewise, for the restricted distribution under exemption programs of controlled substances, the Stratospheric Ozone Program has also considered each kilogram of inappropriate sale for a use other than the designated specific exempted purpose to be a separate violation. To ensure U.S. compliance under the Montreal Protocol, EPA believes this approach remains justified for enforcement against producers, importers, and distributors of methyl bromide because these are larger companies that have an ability to pay higher penalties and should face a substantial deterrent against producing, importing, and selling quantitie s of controlled substances in excess of allowances. Thus, EPA will continue to define violations involving the unauthorized production, import, or sale of critical use methyl bromide on a per kilogram basis. However, EPA recognizes that defining violations on a per kilogram basis for end users of methyl bromide could result in total per incident penalties that would not be commensurate with the misuse or the users’ ability to pay and would not be necessary to provide an effective deterrent. Therefore, EPA is defining violations differently for methyl bromide end users to reduce the maximum potential penalty per incidence of misuse. EPA is defining each violation associated with the improper use of critical use methyl bromide in increments of 200 kilograms. The maximum per violation penalty is currently $32,500 per kilogram. EPA emphasizes that this penalty is the maximum amount that would be assessed per 200 kilograms of misuse. EPA has broad discretion in assessing and assigning penalties; actual penalties could be lower than the specified maximum penalties. Section 113(e) of the CAA provides that criteria to be considered in assessing a penalty include the size of the business, the economic impact of the penalty on the business, the violator’s full compliance history and good faith efforts to comply, the duration of the violation, payment of penalties previously assessed, the economic benefit of noncompliance,

and the seriousness of the violation.85 FIFRA and the CAA are independent of one another. FIFRA penalties will still apply for the misuse of methyl bromide under FIFRA and its implementing regulations. However, in assessing penalties for violations of the CAA and this regulation, EPA must apply the CAA’s penalty provisions.

• Anticipating illegal smuggling of methyl bromide, one commenter believes that the proposed rule should include a plan to minimize smuggling by funding a full-scale inspection and enforcement organization with windfall profits from the sale of CUEs. Moreover, this commenter suggests that border patrols should be trained to detect methyl bromide [0134].

Response #95: Unlike other ODS, the shipment, sale, and use of methyl bromide is tightly controlled under other statutes such as FIFRA making such activities not only dangerous but difficult to undertake. Therefore, EPA does not anticipate that a significant black market will develop in th e United States for illegally produced or imported methyl bromide. In addition, border patrols cannot be trained to detect methyl bromide since it is an odorless, colorless gas and further, EPA has no authority to dedicate windfall profits from the sale of CUEs to an enforcement organization or inspection system.

• One commenter questions how EPA planned to enforce the following provision on page 24, paragraph 4: “An entity that does not submit information to EPA regarding stocks of methyl bromide they hold for sale or transfer to another entity as of August 25, 2004 will not receive critical stock allowances...” Additionally, this commenter questioned whether state or federal agencies will enforce the following provision on page 31, paragraph 3: “...full penalty of law for provided false information or for use that is not in accordance with the critical use exemption regulations.” [0134]

Response #96: The language quoted by the commenter with respect to receipt of critical stock allowances refers to an action taken in this rulemaking. EPA is not allocating CSAs to entities that did not submit information regarding stocks held for

sale or transfer. This is not an enforcement issue. To the extent that the commenter is saying that some entities that hold stocks for sale or transfer might not report this information, EPA believes that entities have a vested interest to report their data to EPA because in doing so they may receive an allocation of CSAs which would enable them to sell methyl bromide into the critical use market. Without these allowances, an entity would be prevented from selling pre 1/1/2005 inventories into this market. In addition, the penalties for not reporting are sufficiently large that even if an entity believes the chances of getting caught are low, the calculated risk of deliberate noncompliance is still very high. Knowing submission of false information is a serious matter and is specifically addressed in section 113 of the CAA and other federal statutes. Potential violations are often brought to EPA’s attention when one entity reports that they believe their competitor is not abiding by the regulation.86 12. Summary of Comments Relating to DISTRIBUTION OF PERMITS TO

APPROVED CRITICAL USERS

12.a. Allocation of Allowances to Producers/Importers versus End Users

Commenter Organization Document ID No Patrick Cushing, Tara Janosh, Steve Mushciano, Shawn Ralston, and Susan Wilson Interagency Environmental Cooperation at Roger Williams University School of Law 0126

Courtney M. Price et al. American Chemistry Council – Methyl Bromide Industry Panel 0245

Steve Hensley USA Rice Federation 0214 David Doniger Natural Resources Defense

Council 0133, 0246, 0140

Tim Maniscalo Dow AgroSciences 0247

James Nicol Great Lakes Chemical Corporation 0212

• Eight sets of comments were received on allocation of allowances to producers/importers versus end users [0126, 0245, 0214, 0133, 0246, 0140, 0247].

• Four sets of comments support the allocation of allowances to producers/importers [0245, 0247, 0214].

− Three commenters believe that the producer/importer approach is simplest and most transparent due to the few entities involved and the fact that these groups are providing or will provide accurate data on production and stock volumes

on which to base a distribution of CUAs. One of these commenters notes that only four entities, all Methyl Bromide Industry Panel members, hold methyl bromide allowances in the U.S., and all have extensive experience with allowance management [0212, 0245, 0247].

− Two commenters asserts that because the producer/importer approach is consistent with the current system of allowances for the production and import of methyl bromide, with which existing producers/importers and EPA are already familiar, a smooth transition to the management of production and import activities for critical use needs will be facilitated [0212, 0245].

− Two commenters believes that a user-based system would pose significant administrative and compliance monitoring challenges for EPA, as it would

involve hundreds to thousands of entities and individuals who do not have the same level of capability, resources, or experience. Individual farmers and growers would have to provide more information for EPA to distribute CUPs directly to users, and EPA would have to engage in a notice-and-comment rulemaking to distribute the CUPs to each entity after the data is collected [0212, 0245].

− One commenter believes that the CUP process will be costly and a large

administrative burden on the end users. This commenter also believes that the process may result in user level stockpiles and unlawful sale or exchange of87 CUPs or stockpiles. The national advocate for the rice industry also notes that the CUP process would add increased costs to the distribution network, making the product even more expensive. As a result, this commenter believes that EPA should move forward with a simple plan for allocating methyl bromide to end users in 2005 [0214].

− Two commenters believe that a CUP system would not be in place for the 2005 season. One of these commenters asserts that such a system would be unworkable for year 2005-2007 and would probably always suffer from a commercially unacceptable time lag [0214, 0245].

− Two sets of comments notes that a producer/importer-based allowance system is the best way to ensure a consistent, adequate supply of methyl bromide for critical uses, since producers and suppliers need to know how much to produce or import well in advance of actual use to efficiently plan their operations. A user-based system, these commenters believe, would not allow the level of certainty needed for planning since end-users would have to turn in their allowance or place an order for methyl bromide with a supplier [0212, 0245].

− A manufacturer of alternatives to met hyl bromide finds the use of CUAs and CSAs to be a practical, straightforward method to ensure that the total methyl

bromide critical use volume is not exceeded and that the minimum amount is produced [0247].

− Although EPA indicated that the CUP system would not be possible to implement until the 2007 control period as a result of the large number of users, one commenter encourages EPA to begin the necessary steps to create such a system. This commenter believes that through the phaseout it will be essential to ensure methyl bromide access to approved critical users, and that the CUP system is a means to track and direct that amount of methyl bromide still available under the CUE program to users that have no viable alternatives [0247].

− A national advocate for the rice industry thinks that it is not EPA’s responsibility to control market forces through the utilization of allocations, and should instead manage the overall reduction of the use of methyl bromide

in the U.S. This commenter asserts that EPA should restrict its control of methyl bromide at the production/importation level and allow CUE applicants to acquire and utilize the allowed amounts. Existing stocks, this commenter believes, should be used to fill gaps in the usage [0214].

Response # 97: EPA concurs with many of the comments above. In today’s rule, the Agency is implementing an “upstrea m” allowance system where the Agency distributes allowances to producers, importers, distributors, and third party applicators to make supplies of methyl bromide available to critical users. The Agency is doing so for several of the reasons indicated above: EPA believes that there will be a smoother transition because the upstream, approach functions in a similar manner to the current phaseout program; the Agency has high quality baseline data for the upstream entities wher eas it has almost no data on individual entity use of methyl bromide for any calendar year; the upstream system is less88 burdensome and; the downstream CUP system could not be implemented in time

for 2005. One commenter correctly notes that should EPA implement a “redeemable” CUP system where users would sell their allowances to methyl bromide producers and importers at which point a producer or importer would then be able to produce or import critical use methyl bromide, suppliers would be disadvantaged because they would not be able to make production decisions in advance. This particular product is not a just in time production system so this would cause a significant change or disruption to the market. In the proposed rule, EPA cited this reason as a limitation to this approach and indicated that should the Agency move forward with a CUP system, it would likely have to be in addition to the CUA system. In such an instance the CUP would entitle the holder to buy methyl bromide, as opposed to entitling the company to which the holder sold the permit, to produce or import methyl bromide. In today’s rule, EPA is implementing an upstream allowance system. The Agency remains open minded to the possibility of a different framework in the future. In the meantime, though, despite encouragement from one commenter, the Agency has no plans to begin tracking use of methyl bromide at the entity level. EPA will begin collecting sector level information through annual reporting under today’s rule. If it were necessary, EPA could use section 114 of the Clean Air Act to request that distributors, applicators, and other suppliers who sell methyl bromide directly to approved critical users, provide the Agency with information on their sales of critical use methyl bromide to each approved critical user. Such information would be available on the self certification forms that are required to be retained for three years. One commenter indicated that their industry supports the upstream system and believes that unlimited use of existing stocks should be allowed to supplement any additional demand. The EPA is implementing an upstream system as suggested by the commenter but is not allowing for unlimited use of stocks by approved critical uses. See section two of this document for a response to comments on the Agency’s treatment of stocks.

• Two commenters support the allocation of allowances to end users [0126, 0133, 0246, 0140-DD, 0246].

− A set of students from a school of law believes that a system of CUAs based on either a sector level or on lump-sum basis is in contradiction with “the goal of the Montreal Protocol to promote reduction in the use of greenhouse gases and encourage development of alternatives.” Additionally, these commenters believe that establishing a lump sum allocation based on 1997-2001 data

would be in conflict with the definition of critical use in Decision IX/6. These commenters support the CUP system on the ground that it is a more efficient system through market-based regulation, although they state that a regulatory framework limiting total methyl bromide production and importation would be the simplest and most transparent means of complying with the Protocol. In further support of the CUP system, the commenters note that the89 anticipated initial increase in administrative cost to the end-user would act as a further deterrent to use methyl bromide [0126].

− A representative of a legal advocacy organization favors allocating allowances to end users through their associations and dedicating the revenue derived

from them to alternatives research and demonstrations. This commenter believes that the price increase will be the same whether the allowances are granted to the producers or are granted to the users, but that the difference will be who gets the revenue associated with those allowances. The representative notes that if producers get the allowances for free, then they will add their resale value to the price of methyl bromide and pocket the windfall. If, however, the allowances are given to user associations, producers will have to purchase the allowances from the users, raising revenue for alternatives research [0133, 0246, 0140-DD].

Response #98: EPA believes that an upstrea m system is an effective way to ensure compliance with obligations under the Montreal Protocol. A producer or importer who produces or imports more methyl bromide than they have allowances for would face substantial penalties. As described in the proposal and addressed in section 12.a of this document, even under a CUP system, the Agency would still use a CUA system to ensure compliance with the cap and use the CUPs to control distribution of material in the marketplace. The Protocol does not control greenhouse gasses but rather ozone depleting substances (ODS). If the commenter mean t to indicate ODS, not greenhouse gases, EPA would like to note that the U.S. government has made a significant on going investment into research and promotion of alternatives to methyl bromide. One commenter supported the user oriented approach because the administrative burden of such a system would act as a deterrent to the use of methyl bromide and would lead to greater efficiencies. As EPA described in the proposal, the CUP system would impose additional costs and burden on industry compared to the proposed option. Although these costs could be a deterrent to the use of methyl

bromide and thus achieve an environmenta l objective of reducing methyl bromide use, EPA is committed to a fair and scientifically based process. Certain critical uses were agreed to and determined through an extensive domestic and

international review based on the technical and economic feasibility of alternatives. EPA does not believe it is fair to deliberately impose a regulatory framework with the goal of establishing high administrative costs to force growers who do not have any alternative available to them out of the market. Doing so would obviate the purpose of an exemption altogether. EPA agrees that a user based system could create additional market efficiencies by allowing users with differing marginal cost of operations to trade with one another. However, EPA does no t believe that the additional benefit of creating a novel market for a year-by-year exemption outweigh the costs associated with establishing such a market which include not only administrative costs but also learning costs and transaction costs. For a more detailed description of the economic consideration of the user based system, please refer to the Regulatory90Impact Assessment conducted for the proposed rulemaking available at EPA’s edocket number OAR-2003-0230. EPA concurs that distributing allowances to consortia would reduce the windfall profits received by suppliers. However, as EPA described in the proposal, many of the consortia are not legal entities with any sort of infrastructure. In several instances, the consortium application was filed by an extension agent on behalf of regional growers. Moreover, EPA does not believe it is efficient to institute two different regulatory systems (a CUA system and a CUP system) to control a relatively small exemption program ($20 million annually). In addition, two different regulatory systems would be difficult to effectively monitor and enforce given current EPA resources.

12.b. Historic Baseline Approach

• See above section for comments on data burden and logistical challenges associated with the baseline approach.

12.c. Auctions

Commenter Organization Document ID No Patrick Cushing, Tara Janosh, Steve Mushciano, Shawn Ralston, and Susan Wilson Interagency Environmental Cooperation at Roger Williams University School of Law 0126

Courtney M. Price et al. American Chemistry Council – Methyl Bromide Industry Panel 0245

• Two comments were received on allocating CUPs through auctions [0126, 0245].

• One set of comments supports an auction-based distribution system for CUPs [0126].

− One commenter believes that critical end users have, on one hand, relatively no economically viable and effective alternatives because of a lack of funding, and as such, require the use of methyl bromide in order to have a sustainable crop for dissemination into their markets. This commenter notes that, as a result of EPA’s implementation of the Food Quality Protection Act, farmers are finding that less of their crop protection tools are available to them. The commenter also believes that factors such as extreme weather, bacteriological impact, infestation, and low prices have negatively impacted U.S. farmers, and that many are turning to available subsidies to avoid loss.

− One commenter believes that through the use of an auction-based system, EPA can drive a market-based approach to the eventual complete phaseout of methyl bromide while fostering the development of innovative/alternative technologies to eventually replace the need for methyl bromide. The commenter further asserts that because an auction would put all of the historical and future users of methyl bromide in one room and force them to91 bid on set quantities, the realization of marginal cost structure would put more pressure on stakeholders to develop alternatives due to increased cost of acquiring methyl bromide in this market environment. Moreover, the commenter believes EPA would potentially miss the opportunity to give a narrow interpretation to the term “critical use” if the allocation of CUPs is based on baseline historical data. The commenter puts forward the opinion that if every user that, in the timeframe used for the basis of subsequent years’ allocations, used all the credited amount of methyl bromide, then there will be no net decrease in methyl bromide use prior to the 2005 phaseout deadline. While the commenter acknowledges that this may be more of a perceived than real sink, they believe that any possibility is worth including in the equation until the actual implementation of a system occurs. This commenter also asserts that “given the inconsistent manner in which the phaseout is being enforced with regard to the developed versus developing countries reduction schedules, and the fact that marketable methyl bromide still available, it is difficult to create a situation of global urgency for developing innovative/alternative technology.”

− With regard to the use of revenue generated from the auction-based market, this commenter believes that an independent non-profit agency should be used as a clearinghouse for the auction since that entity is better situated to funnel the additional resources into research and development for innovative/alternative technology development.

Response #99: The Agency concurs that th ere are distinct poli cy advantages to an auction based CUP system such as transferring market power to end users and allowing end users to obtain a revenue from the sale of their permits to facilitate their transition away from methyl bromide. EPA does not support nor dispute claims that the auction would reduce the need for other agricultural subsidies as this is not the Agency’s area of expertise. Notwithstanding such claims, even if true, the commenter fails to make a case that the merits of the auction are substantial enough to outweigh the very high administrative and logistical difficulties associated with this option. Economic theory suggests that an auction would impact windfall profits because users would pay a price premium in the form of their bid for rights to methyl bromide thus lowering the amount they are willing to pay to chemical companies for the material itself. It is a theoretically elegant policy solution but one with significant logistical barriers to implementation. EPA did not propose and is not finalizing this option at this time due to the lack of clear statutory guidance on some of the details of this approach, the time it would take to develop this program, and the relatively small size of the market compared to the burden associated with this approach.

EPA does not concur with the comment that the “inconsistent manner in which the phaseout is being enforced with regard to the developed versus developing countries reduction schedules, and the fact that marketable methyl bromide still available, it is difficult to create a situation of global urgency for developing innovative/alternative technology.” The phase out is being enforced consistently in92 all countries where this obligation has ta ken effect and the obligation has taken effect in all countries that produce methyl bromide and all major user countries as well. The commenter is correct that developed countries are required to phaseout methyl bromide by January 1, 2005 and that developing countries have until 2015 to complete their obligations. The commenter ignores information on the relative use of methyl bromide between these two groups of countries- the U.S. exemption request alone is larger than the total obligation of most developing countries for all of their ODS phaseouts, not just methyl bromide. Developing countries typically use very small amounts of this chemical. In addition, development of chemical alternatives is an expensive process and one that is likely to take place in developed countries. To date several chemical alternatives developed by companies in the developed world have been recently registered or are in the process of being registered. As with the phaseouts of othe r ozone depleting chemicals, technologies created by developed countries to meet their phaseout obligations can then be exported to developing countries later on as they meet their obligations.

• One commenter believes that the auction-based approach should not be implemented in the final rule under any allocation scheme [0245].

− This commenter asserts that the auction approach would significantly increase the complexity of the allowance system and take months, if not years, to put in place, as it would require the development and implementation of a new regulatory management system. The commenter mentions that EPA acknowledged in 2003 stakeholder meetings that an auction system could not be put in place before the January 1, 2005 phaseout. Also, the commenter notes that the auction approach was strongly opposed by users in public meetings held prior to the development of the NRPM. Because users would be competing with each other to obtain a portion of the limited amount of methyl bromide, and because price would be the only factor governing allocation, this commenter believes that it is very likely that only those with the highest value uses would be able to obtain allowances. Moreover, under the auction approach, the commenter asserts, one or more growers could purchase all of the allowances and control the entire supply of the material.

− The commenter also believes that growers would experience an increase in costs as they would have to pay a fee at the auction for the allowance, and pay again to purchase methyl bromide. Although EPA has explained that it would redistribute these “windfall profits” received by producers and importers to end users, the commenter believes the concept of windfall profits is inapplicable. Instead, the commenter believes that normal profits are being denied to manufactures and importers by limiting the future sale and use of their products.

− Moreover, this commenter disagrees with EPA’s rationale that the proposed option would redistribute windfall profits to end users, and note that the NPRM states that revenues from the auction would be held by the third party non-profit to “fund transitions to alternatives.” The commenter finds no basis to believe that auction revenues would actually be transferred to end users to decrease any of the economic burdens imposed on them. The commenter93 also finds no precedent or legal authority for EPA to set up such a system with a third party, and believe that all that would be created would be an uncontrollable institution that could justify committing funds to research or other activities of no immediate benefit to growers.

Response #100: EPA agrees that it would take months, if not years, to put a new, complicated regulatory procedure such as an auction in place. Further, since this exemption is a temporary derogation from the phaseout, it seems to EPA that the resources required to implement such a system would be better spent in the creation of a more long term program to meet other CAA or environmental obligations. Further, auctions are typically employe d as an environmental policy tool in

instances where there is no market. The auction of allowances simulates an actual market for a good. For example, before the Acid Rain Program, there was no market for emissions of sulfur dioxide and the auction served, in part, to establish a market as well as to distribute a certain amount of allowances. However, in this instance, the sale of methyl bromide is an established market. Although it is theoretically possible that one user could corner the market under an auction, EPA does not believe that it is more likely under an auction than it would be today under the phaseout. If an entity were willing to pay enough today, it could price its competitors out of the methyl bromide market now. EPA continues to believe that an auction would successfully redistribute windfall profits but is not putting an auction in place for the reason s stated above. While EPA does have sufficient authority to design an auction within certain parameters, it is not necessary to provide a detailed explanatio n of such authority here because EPA is not adopting an auction approach in today’s final rule.

12.d. Redeemable System

• Comments referring to the redeemable system are addressed in section 12.a

13. Summary of Comments Relating to EPA TREATMENT OF BASELINE AND

INVENTORY DATA

• No comments were received on Treatment of Baseline and Inventory Data.

14. Summary of Comments Relating to ECONOMICS AND THE REGULATORY

IMPACT STATEMENT

• No comments were received on Economics and the Regulatory Impact Assessment.94 15. Summary of Comments Relating to BURDEN ASSOCIATED WITH THIS

REGULATORY SYSTEM
Commenter Organization Document ID No Richard Matoian California Fig Industry 0202

Dennis Balint California Walnut Commission 0203 Douglas H. Fender Turfgrass Producers International 0205

Richard Peterson California Dried Plum Board 0206

James A. Bair North American Millers’

Association 0220

Daniel Boots Florida Fruit & Vegetable

Association 0223

Don Bates Bates Sons & Daughters 0232 Calvin Everette Lewis, Jr. Hy Yield Bromine, Inc. 0242 Courtney M. Price et al. American Chemistry Council – Methyl Bromide Industry Panel 0245

Melvin Mathis MGM Plant Company 0253 Wilbert Morgan Morgan Farms 0254

• Eleven comments were received on the burden associated with this regulatory system [0202, 0203, 0205, 0206,0220, 0232, 0242 0254, 0253, 0254].

• One commenter believes that EPA’s Paperwork Reduction Act underestimates the time burdens for compliance with certain aspects of the NPRM. In particular, this commenter notes that EPA has not included quarterly reporting by distributors in the compliance burden table in the NPRM. Additionally, the commenter believes that EPA’s Regulatory Flexibility Act review does not consider the impacts that stock restrictions will impose on distributors [0245].

Response #101: One commenter indicated that EPA grossly underestimated the time required for data compilation and reporting and suggested that it is at least two times greater than what EPA estimated in the Paperwork Reduction Analysis. This commenter did not provide additional comment to explain specifically how or why the EPA estimate was incorrect not did they indicate which particular activities should be adjusted. In regards to the consideration of stocks under the Regulatory Flexibility Act, EPA believes that there will not be a significant adverse economic impact on any small entities as a result of today’s action. The commenter did not specify why there would be a significant adverse economic impact so EPA is forced to conclude that the commenter must believe regulation of the stocks would devalue the material and thus cause economic harm to distributors, some of which may be small entities although again, the commenter did not specify. As described elsewhere in this document, EPA notes that there are several markets for methyl bromide stocks (export to developing countries and export to meet the critical use demands of developed countries) which are all sizable and important markets. Therefore, EPA does not understand why the value of stocks would be greatly diminished given the number of legal markets and does not believe there would be a significant adverse impact to small entities.95 Even if there were a reduction in value of stocks on the unrestricted market because of a glut of material that had been previously held for CUE users now becoming available, economic theory would suggest that the corresponding scarcity of stocks in the critical use market would lead to the ability to charge a price premium in the exemption market, thus resulting in no significant adverse economic impact. This would hold true unless the amount of stocks authorized for sale into the critical use market were equivalent to present demand, in which case there would not be a scarcity and ensuing premium. In this scenario there would clearly not be a significant adverse economic impact since the regulatory limit on sale of

stocks for critical uses would reflect the amount that would have been sold into that market in the absence of regulation. Thus, EPA does not believe there would be a significant adverse economic impact to small entities under today’s rule.

• One commenter believes that the proposed rule is too complex and can easily be simplified by focusing control on methyl bromide manufacturers and importers. By doing so, this commenter suggests that EPA can streamline the process to issue the necessary final rule by January 1, 2005. [0220]

Response #102: EPA is focusing on manufacturers and importers in today’s rule in part to simplify the regulatory requirements.

• Three commenters note that the proposed rule is one of the most confusing and complex rules that he has ever reviewed from a federal agency [0202, 0203, 0206].

Response #103: EPA attempted to create a clear proposed rule. In addition, the Agency gave several presentations to the stakeholder community on the proposal, and responded to many phone calls and emails with questions on the proposal. EPA hopes that the commenter finds the final rule to be clearer.

• One commenter noted that his organization has spent many hours and dollars to compile the information necessary to file their CUE application, to participate in numerous USEPA and user group meetings, and to provide additional details when requested. This commenter characterizes the process as “arduous and extremely involved.” The commenter urges EPA to establish and make public its final rule in the most expeditious manner [0205].

Response #104: EPA is making the final rule public as expeditiously as possible also mindful of the need to carefully consider the full range of comments on the proposed

rule.

• One commenter believes that it would not require much time or overburden the producers and distributors to have CUAs since EPA recently required these entities to produce inventory records. This commenter feels that it would not be a burden for producers and their distributors to produce sales records for the final user [0242].96 Response #105: EPA concurs that it requires minimal additional burden to implement the CUA system. However if EPA were to require producers and importers to produce sales records for each sale to an approved critical user, it would likely double the estimated burden hours associated with today’s rule.

• Three commenters commented that, as small family farms, they do not have the resources or time to file for critical use exemptions, and that since production of their crop was so limited, there is not a group that could file for them. A third commenter representing a small family farm noted that they have spent considerable money to participate in a CUE application, and encouraged EPA to develop a final rule that is easy to understand, fair to growers and the horticultural industry, and takes into account unsuccessful efforts to find alternatives [0254, 0253, 0232].

Response #106: EPA recognizes that it takes time and money to apply for an exemption.

• One commenter notes that it prepared petitions for critical use exemptions in several sectors, and that the initial petitions submitted in 2002 included over 8,000 pages of information and required over 3,000 hours to produce. Subsequent petitions for

2003 and 2004 resulted in additional research and documentation and included over 3,000 pages in 2003 and 1,800 in 2004. This commenter expressed continued concerns over EPA’s perceived push to make the regulatory framework for methyl bromide to match the ones currently in place for manufacturing industries dealing with substances regulated under the CAA. The commenter notes that the complex distribution and delivery systems for methyl bromide were not designed with the complexities of having to deal with three different categories of methyl bromide in mind, as envisioned in the rule [0223].

Response #107: EPA recognizes that the application for an exemption requires time and money to complete as does the continuing demonstration of research for alternatives. EPA has attempted to relieve burden by requiring less information for subsequent applications than for the initial application. EPA does in fact recognize that methyl bromide is different from other ozone depleting chemicals that are used in manufacturing settings and has addressed this point elsewhere in this document. Although there may be some additional complexity using three categories of methyl bromide as envisioned under the proposed rule, EPA believes that with today’s rule it is implementing the least burdensome, most streamlined regulation possible to ensure compliance with our Protocol obligations.97 16. Summary of Comments Relating to NEED FOR AN EXPORT MECHANISM

Commenter Organization Document ID No Courtney M. Price et al. American Chemistry Council – Methyl Bromide Industry Panel 0245

Ann M. Oxford Albemarle Corporation 0226

• Two commenters believe that it is important to have a mechanism for permitting production of critical use methyl bromide for export after January 1, 2005. Such a mechanism will ensure that an adequate supply of methyl bromide can be produced to meet critical use needs in other countries, since the U.S. is the world’s largest supplier of methyl bromide. These commenters note that, based on the current provisions of the proposed rule, producers would have to expend CUAs that should be expended to meet critical use needs in the U.S. in order to meet critical uses outside the U.S [0245, 0226].

Response #108: EPA agrees that the regu lation should include a mechanism for export to developed countries to meet their CUE. In the NPRM, EPA pointed out that the U.S. is the world’s largest supplier of methyl bromide. EPA noted, for example, that “a catastrophe in the U.S. would not only affect U.S. users but would

affect those users who have au thorized critical uses in developed countries as well as the users in developing countries who have not yet phased out methyl bromide.” 69 FR 52374. Thus, EPA raised the issue of ensuring an adequate supply of methyl bromide to meet critical uses in other developed countries

. In today’s action, the regulatory text includes provisions that permit methyl bromide production explicitly and solely to meet the needs of other countries that have been authorized critical use exemptions for the specific control period. The producers will be required to report quarterly on quantities produced solely for export to meet orders placed by other countries with authorized critical needs.98 17. Summary of Comments Relating to the RULEMAKING AND REGULATORY

PROCESS

Commenter Organization Document ID No David Doniger Natural Resources Defense

Council 0133, 0140-DD, 0246

Edward M. Ruckert Crop Protection Coalition 0219

• Two comments were received on the rulemaking and regulatory process [0133, 0140-DD, 0246, 0219].

• One commenter believes that the proposed rule does not fully implement the requirements of the CAA and the Montreal Protocol in that the rule would allow substantially higher levels of methyl bromide use, production, and consumption in 2005 than the Act and the Protocol permit. This commenter notes that, under Section 614(b) of the Act, the Act incorporates the Protocol as minimum requirements, and that, under Section 604(d)(6), EPA makes critical use exemptions

“to the extent consistent with the Montreal Protocol.” This commenter also notes that the proposed rule correctly observes that EPA must comply with the terms of

both Article 2h of the Montreal Protocol and the related Decisions of the Parties pursuant to that article, including Decision IX/6 and Decision Ex. I/3. This commenter also asserts that Section 604(d)(6) creates a domestic procedural requirement beyond the procedures of the Protocol, which EPA has consistently acknowledged. This commenter believes that the rulemaking requirement has two critical implications. First, none of the government’s prior factual assertions about critical use needs has any status yet under the CAA, because there has not yet been a rulemaking opportunity to comment on the basis for those factual assertions and to receive a reasoned response to such comments. The commenter asserts that this specifically means that EPA cannot rely on any factual assertions made in its prior

critical use nominations to the Protocol Parties. All factual assertions relevant to critical use exemptions must be presented now, with their supporting data, and made

available for comment.

Second, according to the commenter, EPA must make its exemption decisions based on up-to-date information. The rulemaking for 2005 exemptions takes place now, and as such, EPA cannot rely on factual assertions made two or three years ago without taking into account relevant data that has been made available since. The need for current information is also emphasized in paragraph 5 of Decision Ex. I/3, which requires each country to apply the Decision IX/6 criteria at the time it conducts its domestic regulatory process. Thus, this commenter concludes that the quantities included in Annex II of Decision Ex. I/3 are upper limits on the amount of methyl bromide that EPA may authorize as critical uses in 2005, and on the amount that EPA may authorize to be produced or consumed in 2005. To determine what lesser amounts are justified, EPA must apply the criteria of Decision IX/6 to current facts.99 This commenter also asserts that the current proposed rule does not comply with Section 307(d)(3), on the ground that EPA’s passive referencing of the documents in the docket and asking for comment does not satisfy this requirement. Specifically, the commenter believes that the proposed rule provides no discussion of key requirements of Decision IX/6 related to the amount of use to be deemed critical. Under Decision IX/6 paragraph (1)(a) and Decision Ex. I/3 paragraph 5, this commenter asserts that EPA must determine in this rulemaking that lack of availability would result in “a significant market disruption” and that “there are no technical and economically feasible alternatives or substitutes available.” This commenter believes that EPA has not only failed to address these issues, but also cannot make these findings based on up-to-date information. This commenter’s organization was supplied FOIA data that show, according to the commenter, that the total use of methyl bromide in 2003 was already substantially lower than the amount proposed as critical for 2005. This commenter questions how EPA can propose that 8,942 metric tons are critical in 2005, when the total used by farmers, millers, and other users in 2003 was 1,268 tons lower than this amount. The commenter notes that the proposed rule does not discuss the data released in the FOIA response, and that although EPA officials have referred to data that allegedly conflicts with the FOIA data, EPA has never explained that contention in any detail and has claimed that some

the alternative data are confidential. This commenter believes that EPA owes the public a statement of basis and purpose meeting the requirements of §307(d)(3), including the factual basis and methodology, for the proposed critical use amount for 2005, in time for interested parties to comment meaningfully.

Response #109: EPA addressed the concerns relating to use data obtained under FOIA in section two of this document. Section 307(d) of the CAA states that a notice of proposed rulemaking “shall be accompanied by a statement of its basis and purpose,” which shall include “the factual data on which the proposed rule is based” as well as “the methodology used in obtaining the data and in analyzing the data.” In the NPRM, EPA stated that the U.S. nominations and responses to questions posed by MBTOC provide the technical basis for the 2005 critical use level, as determined both domestically and by the Parties. The NPRM also described the critical use process, including the submission of information by CUE applicants and the criteria used in reviewing the information. The details of the review, including the consideration of the criteria mentioned by the commenter, are reflected in the nomination and MBTOC responses, which were docketed prior to the publication of the proposed rule. Thus, EPA provided a statement of the basis for the proposed critical use level in acco rdance with section 307(d) and interested parties had an opportunity to comment. EPA noted in the NPRM that the Agency “does not have additional information to indicate that it should adjust the amounts authorized by the Parties,

but seeks comments on whether additional research and data is available with respect to the deployment of alternatives , the adoption of emission reduction technologies, and the other criteria listed in Decision IX/6.” 69 FR 52373. Comments recommending adjustments are discussed in Section I.a. of this100 document. As explained in that section, EPA did not receive information to indicate it should adjust the amounts authorized by the Parties. EPA considered information submitted by manufacturers of alternatives in preparation of the U.S. nomination. Hence these entities have had two points of entry into the process- the first to provide information to the Agency on their alternatives when the nomination was developed and the second to provide comments to the Agency on our assessment through the notice and comment rulemaking. Similarly, applicants for an exemption have had two points of entry as well. This second point of entry has been particularly helpful to the Agency to identify any circumstances th at have changed since the time the nominations were developed, such as the registration of an alternative or the de-listing of a previously

available alternative.

• A coalition representing national, regional, and local agricultural organizations asserts that the CAA’s definition of the Montreal Protocol does not make any reference to “Decisions,” and thus “Decisions” are not binding on the Parties to the Montreal Protocol. This commenter believes that there is generally no meaningful or objective review of a “Decision” by the Parties, and that “Decisions” may be motivated by factors other than science, like the attempt by a number of countries to make life difficult for the United States. As a result, this commenter finds that the U.S. must only abide by the text in the actual Protocol text, as well as adjustments and amendments, in the critical use exemption process. [0219]

Response #110: See response in section tw o of this document regarding “decisions”

of the Protocol.