1

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1 GOVERNMENT OF THE DISTRICT OF COLUMBIA

2 U.S. Environmental Protection Agency

3 Office of Atmospheric Programs, Stratospheric 

4 Protection Division

5

6

7

8 Public hearing on the 2015-2019 Proposed HCFC 

9 Allocation Rule

10

11

12 2:34 to 5:20 p.m.

13 Thursday, January 23, 2014

14

15 Room 152

16 1310 L Street Northwest

17 Washington, D.C.

18

19

20

21

22
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1 Speakers present:

2 DAVID DONALDSON

3 ELIZABETH WHITELEY

4 KEVIN FAY

5 DAVE STIRPE

6 MICHAEL PARR

7 RUSTY THARP

8 JERRY DYKSTRA

9 BENJAMIN LONGSTRETH

10 JILL TRONCA

11 JAMES BURKE

12 DON MAGID

13 ALEXANDER VONBISMARCK

14 KRISTINA FOEHRKOLB

15 W. CAFFEY NORMAN

16 JON MELCHI

17 STEVE PORTER

18 STEPHEN MANDRACCHIA

19

20

21

22
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1 P R O C E E D I N G S

2 MR. DONALDSON: So, I'm David Donaldson. 

3 I'm going to welcome you all to our hearing here 

4 on the proposed HCFC allocation rule, and I thank 

5 you for making the trip to Washington, D.C. and 

6 our EPA facility here on L Street, if you're 

7 local. 

8 I'm joined here at the front with my 

9 colleague, Liz Whiteley. Liz is the lead author 

10 of our proposed rule. I'm the branch chief on 

11 the Stratospheric Program Implementation Branch, 

12 and both Liz and I are in that branch here in the 

13 Office of Atmospheric Programs.

14 I'm also joined here at the front by 

15 Jennifer, who is our court reporter. So thank 

16 you for your participation, Jennifer.

17 We also have Diane McConkey of our Office 

18 of General Counsel in the room, and several other 

19 EPA staff who are here as well. 

20 So, please be aware of the sign-in table 

21 at the back of the room. I suspect that everyone 

22 has signed in. But if you haven't already,
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1 please provide your name and affiliation. The 

2 people at the sign-in table can also sort of 

3 answer logistical questions, if you have any, 

4 about the hearing or you know, the EPA 

5 facilities.

6 So, the purpose of this hearing is for 

7 EPA to take verbal comment on the proposed rule 

8 titled Protection of Stratospheric Ozone: 

9 Adjustment to the Allowance System for 

10 Controlling HCFC Production, Import/Export for 

11 2015-19. The proposed rule was published on the 

12 Federal Register on December 24th, 2013. 

13 Your verbal comment will be transcribed 

14 by a court reporter and made available as a 

15 transcript on the public docket for the rule 

16 making in approximately two weeks.

17 Providing verbal comment this afternoon 

18 does not keep you from providing written comment 

19 separately and providing that directly to the 

20 docket. And we hope that you'll do that as well.

21 Written comments are due March 10, 2014. 

22 The docket number for the proposed rules is EPA-
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1 HQ-OER-2013-0263. We are providing a fact sheet 

2 that explains how to give written comment on the 

3 rule, and that fact sheet is available at the 

4 sign-in table.

5 The purpose of today's hearing is not to 

6 answer individual questions on the rule. 

7 However, we do welcome stakeholder actions and 

8 you can speak to any of us here today from EPA to 

9 set up a separate time to meet. That meeting and 

10 any documents that you provide during that 

11 meeting would also be put into the public docket 

12 for the rule making.

13 So, we will first hear verbal comments 

14 from Kevin Fay of the Alliance. He'll be up 

15 first and then we will rip through the list of 

16 others who RSVP'd to the meeting. We will then 

17 move on to folks who signed up to give verbal 

18 comment today.

19 And instructions for testifying, please 

20 come to the podium and use the microphone, state 

21 your name and affiliation, speak slowly, clearly, 

22 and directly into the microphone. And to ensure 
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1 that all interested parties have the opportunity 

2 to provide verbal comment, please be concise and 

3 try to limit your comments to no more than 10 

4 minutes. 

5 If you are reading from a prepared 

6 statement please consider providing a copy of 

7 that to our court reporter to ensure that it's 

8 transcribed accurate, most accurately and 

9 efficiently. 

10 So for those people who just signed up 

11 today to provide comment, please also either 

12 provide your name and affiliation in writing, or 

13 if you can't do that, please make sure that you 

14 spell any difficult words, such as names and 

15 business names for our court reporter. 

16 So with that I'll invite Kevin to begin.

17 MR. FAY: Thank you, David. My name is 

18 Kevin Fay. I’m the executive director of the 

19 Alliance for Responsible Atmospheric Policy, and 

20 we're pleased to have this opportunity to provide 

21 oral comments regarding EPA's proposed rule on 

22 adjustments to the Allowance System for 
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1 controlling HCFC production import and export.

2 As you know, the Alliance is an industry 

3 coalition organized in 1980 to address the issues 

4 of stratospheric ozone depletion and the 

5 production and use of fluorocarbon compounds. It 

6 is composed of manufacturers and businesses, 

7 including their trade associations which rely on 

8 HCFCs and HFCs. 

9 Today the Alliance coordinates industry 

10 participation in the development of policies 

11 regarding both ozone protection and climate 

12 change, and the Alliance has a long successful 

13 history of working in a positive and cooperative 

14 manner with EPA on these issues.

15 We appreciate the opportunity to comment 

16 on the proposed allocation of HCFC-22 allowances 

17 for the 2015 to 2019 period. There are several 

18 additional issues raised in the proposed rule. 

19 We intend to address them in our written 

20 comments, as well as address the allocation 

21 proposals for HCFCs other than HCFC-22. 

22 The Alliance believes it is important to 
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1 focus at this time on the 22 allocation amounts 

2 and schedule. It is noted that the Agency 

3 indicates in its proposal that stockpile 

4 information collected last year from 114 letters 

5 has produced information that the stockpile of 

6 this compound is larger than previously 

7 estimated. But the Agency does not provide a 

8 figure.

9 It is important that this figure be taken 

10 into account as part of the allocation proposal. 

11 In light of the larger than anticipated size of 

12 the stockpile it is questionable whether the 

13 Agency's preferred option proposal best reflects 

14 the market dynamics and the goal of an orderly 

15 transition. 

16 EPA's preferred allocation level may in 

17 fact create additional surplus supply that will 

18 discourage the efficient operation of the 

19 nation's underutilized reclamation capacity, 

20 impede the necessary market transition to the 

21 full phase out of HCFC-22, and could lead to 

22 greater emissions than is environmentally or 
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1 economically feasible or desirable. 

2 The Alliance believes that a more 

3 aggressive approach should be considered and 

4 encourages the Agency to adopt the more 

5 aggressive five-year allocation schedule for 

6 HCFC-22. This option is a five-year linear draw 

7 down beginning with 10,000 metric tons of HCFC-22 

8 in 2015, which would result in the lowest 

9 allocations of any of the proposals in the first 

10 two years of this 2015 to 2019 period. 

11 The Alliance believes this early signal 

12 is important for an orderly market transition. 

13 In December 2011 the Alliance urged EPA, quote, 

14 "To use processes and tools available to it in 

15 order to obtain appropriate production and 

16 stockpile data," end quote. We commend the 

17 Agency for doing so in 2013 and believe that you 

18 now have sufficient data on this topic to inform 

19 this rule making.

20 We encourage EPA to collect stockpile 

21 information as part of its routine annual 

22 reporting requirements for the remainder of the 
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1 2015 to 2019 period, although we do have a range 

2 of views on this issue among our membership. But 

3 we believe it is important first that the 

4 allocation rule be completed promptly and do not 

5 want changes in the reporting requirements to 

6 slow the completion of a final allocation rule.

7 If such were to be the case we'd 

8 recommend the reporting change, but as a separate 

9 administrative action.

10 In finalizing a decision on the 

11 allocations for the 2015 to 2019 period, it is 

12 important that adequate notice be provided in 

13 order to allow for the markets to adjust. This 

14 is an additional reason why the alliance urges 

15 the agency to move expeditiously and complete its 

16 proposal as quickly as possible.

17 On a cautionary note, as HCFC-22 

18 allocations are declining, the user industries 

19 are experiencing more frequent occasions of 

20 problems with substitutes that are either unsafe, 

21 unsuitable, or contaminated, thereby harming the 

22 equipment relying on these refrigerants. 
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1 It is important that the Agency utilizes 

2 its authorities under SNAP and Section 608 in 

3 order to help minimize this problem, and we look 

4 forward to working with you on this challenge.

5 The Montreal Protocol and the Clean Air 

6 Act Title VI implementation have succeeded 

7 because they have allowed for long-term 

8 management principles in order to achieve the 

9 desired environmental policy objectives. This 

10 rule should ensure an adequate supply of HCFCs 

11 for existing equipment, but not an oversupply. 

12 This rule should also recognize the significant 

13 capacity for effective recovery, recycle, and 

14 reclamation of this material, and encourage 

15 greater product stewardship through leak 

16 reduction, product recovery, and management. The 

17 inventory of HCFC-22 is substantial and efforts

18 should be made to ensure maximum reliance on 

19 these measures as an important means of servicing 

20 the existing equipment base, in addition to safe 

21 and reliable alternative refrigerants.

22 Finally, we believe that an update of the 
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1 Agency vintaging model should be conducted to 

2 include more current information on leak rates 

3 and charge sizes in order to better determine 

4 actual need over the next five to 15 years for 

5 servicing the installed equipment base. Alliance 

6 members welcome the opportunity to work with EPA 

7 staff on this update.

8 The Alliance looks forward to working 

9 with the Agency in an expeditious manner to 

10 achieve rapid completion of this allocation rule. 

11 Thank you. 

12 MS. WHITELEY: So up next is Dave Stirpe 

13 from Honeywell. And I'm just going to turn our 

14 mic on here. 

15 If you are providing verbal testimony, if 

16 you could speak directly into the mic, we'd 

17 really appreciate it. It's one of those mics 

18 where you have to be really close. 

19 MR. STIRPE: Good afternoon. My name 

20 Dave Stirpe and I am Manager of Regulatory 

21 Affairs at Honeywell International for the 

22 Fluorine Products Business. Thank you for the 
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1 opportunity to speak on behalf of Honeywell on 

2 EPA's Proposed Rule addressing the HCFC 

3 Allocation. 

4 Honeywell International is a global 

5 leader in providing energy efficient technologies 

6 and innovations that can help the world solve its 

7 energy and environmental challenges. Honeywell

8 products and services respond to the urgent and 

9 complex challenge of energy security and climate 

10 change while driving economic growth through 

11 enhanced productivity. Honeywell's portfolio 

12 delivers energy savings and efficiency across the 

13 residential, transportation, industrial, and 

14 commercial sectors.

15 We are a recognized leading innovator in 

16 the development of environmentally preferable

17 fluorocarbons for use as refrigerants, blowing

18 agents, solvents, propellants, and other uses.

19 Since the 1990s, Honeywell has helped 

20 businesses replace ozone-depleting substances in 

21 these applications with alternatives that are 

22 more energy efficient, have less ozone-depletion 
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1 potential, and less climate change impact.

2 Today Honeywell Fluorine Products has 

3 invested significantly in a new platform of low

4 and lower-global warming potential compounds for 

5 use by equipment and product manufacturers

6 worldwide. Our plans for alternatives have been 

7 shared with EPA, and announced over the last

8 several years at many conferences and workshops 

9 in the US and around the world. We are

10 working with manufacturers today to implement 

11 these new compounds in their products and

12 equipment.

13 In December, Honeywell announced plans to 

14 build a new facility in Geismar, Louisiana to 

15 produce HFO-1234yf, a new refrigerant for motor 

16 vehicle air conditioning with a Global Warming 

17 Potential of less than 1. Nearly half a million 

18 cars in the world today are using HFO-1234yf. 

19 That number is growing daily, and by the end of 

20 2014, over 2 million cars in the world will be 

21 using this compound. 

22 Honeywell is a strong supporter of EPA's 
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1 actions under the Clean Air Act and its

2 commitment to phasing down the use of ozone3 depleting substances. We are very much in favor

4 of aggressive reductions in the HCFC allocation 

5 and have been working hard to develop 

6 technologies to further those goals. We also 

7 stress that it would be tremendously helpful for 

8 our business planning, and for the industry as a

9 whole, to finalize and publish this final rule 

10 well in advance of January 1, 2015, when 

11 compliance obligations go into effect. 

12 Thank you for consideration of these 

13 comments.

14 MS. WHITELEY: Up next we have Michael 

15 Parr from DuPont.

16 MR. PARR: Thank you. I'm Michael Parr 

17 with DuPont. Thanks for the opportunity to speak 

18 today. Let me begin by noting how important the 

19 timeliness and the content of these rules are to 

20 this industry sector. It is critical to 

21 everything from our ability to source raw 

22 materials, plan production, to write contracts. 
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1 And so we appreciate the timeliness of the 

2 proposal and hope this leads to a very timely 

3 finalization so that we can service our markets 

4 in a proper fashion.

5 As we've looked at this issue I think 

6 there's several factors that we think are 

7 important to take into consideration as you 

8 decide on a final allocation option. One of 

9 course is the significant amount of inventory 

10 that's in the market and how that might affect 

11 the necessary transition. 

12 Second is the ability to finalize this 

13 rule in a very timely manner. As you know, we've 

14 struggled a little bit in the last couple of 

15 rules and I think stepping the pace up this time 

16 would be quite important in this last period for 

17 22.

18 Thirdly, because in 2020 we are 

19 essentially done with Virgin, the transition is 

20 very important to get started early, and a smooth 

21 and manageable transition so that the industry is 

22 fully prepared come 2020 to deal with the new 
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1 market reality that we will face.

2 As we look at the options that are in the 

3 Agency's rules, we think the accelerated five4 year option strikes a reasonable balance amongst 

5 those factors. And as Kevin Fay noted, it's 

6 helpful in that it starts at a level that sends a 

7 clear signal to the market, but it provides a 

8 reasonable glide path to the industry.

9 We are also evaluating some other 

10 potential options at lower levels of total 

11 allocation that might similarly balance those 

12 criteria effectively, but have not reached final 

13 determination on those as of yet. We certainly 

14 will by the time the comments come.

15 But let me reiterate that timeliness and 

16 full accounting for the significant inventory in 

17 the market is an important aspect of 

18 finalization. Thank you.

19 MS. WHITELEY: Up next we have Rusty 

20 Tharp from Goodman Manufacturing. 

21 MR. THARP: Thank you. Goodman is a 

22 manufacturer of HVAC products. Who we are. We 
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1 support the comments that have been made from 

2 Kevin and the Alliance. Goodman strongly 

3 encourages EPA to adopt a five-year fixed linear 

4 rate phase-down because we are concerned with the 

5 regulatory uncertainty that we've dealt with in 

6 recent years, and thus we are proponents of the 

7 fixed non-adjusting phase down.

8 We're also concerned with the potential 

9 for poor performance, potential increases in 

10 energy consumption of HVAC product and potential 

11 reliability and safety issues such as the notice 

12 the EPA issued last July of 2013, regarding 

13 potential propane or other unsafe alternates and 

14 other such issues associated with HCFC-22 

15 alternatives.

16 And for these reasons we also -- and due 

17 to the enormity of the installed base out there, 

18 we support the five-year time frame. And as just 

19 mentioned, we also support the final rule being 

20 issued in a timely manner. Thank you.

21 MS. WHITELEY: Thank you. Up next we 

22 have Jerry Dykstra from Rapid Recovery.
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1 MR. DYKSTRA: Jerry Dykstra with Rapid 

2 Recovery. 

3 As the representative of Rapid Recovery,

4 I want to thank the staff of the Environmental 

5 Protection Agency, and particularly Ms. Hufford, 

6 even though she's not able to be with us today 

7 for the opportunity to present our comments and 

8 concerns regarding the proposed adjustments for 

9 the allowance system for controlling the 

10 production and importation of HCFCs. 

11 Rapid Recovery is the largest refrigerant 

12 recovery in the United States with locations from 

13 coast to coast. Our entire business focuses 

14 exclusively on the recovery and processing of 

15 used refrigerant gases. As such, we are in a 

16 unique position to address not only the 

17 reclamation of recovered refrigerants but more 

18 importantly we have an in-depth understanding of 

19 the forces that encourage and increase the 

20 recoveries necessary to feed the reclamation 

21 industry.

22 We have read and studied the EPA proposal 
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1 at length. And while it contains much that 

2 deserves careful evaluation and consideration, I 

3 would like to focus my comments directly on the 

4 options presented for the allowance system and 

5 the proposed phase-down of the production and 

6 importation of HCFC-22, more commonly known as R7 22. 

8 We have observed, with great interest, 

9 the impact that recent EPA decisions have had on 

10 the price and availability of R-22 in the 

11 marketplace. The market uncertainty caused by 

12 the delay of the issuance of allocations and the 

13 use of non-enforcement levies created the 

14 perception of an impending shortage in the 

15 marketplace, which drove prices very high, very 

16 fast. 

17 This action suddenly provided higher 

18 values and contractor incentives to recover. And 

19 as a result compliance increased. 

20 Then the ultimate decision to set 

21 production import allocations higher than 

22 industry expectations drove the prices back down 
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1 again very quickly. Not only did this result in 

2 an immediate decline in recovery compliance, it 

3 sent an extremely damaging shockwave through the 

4 refrigerant reclamation and distribution 

5 industry.

6 After careful consideration, Rapid 

7 Recovery is convinced that the proposed options 

8 do not provide a viable solution to the 

9 challenges faced by the reclamation industry.

10 While the most aggressive five-year 

11 phase-out is certainly the best of the options 

12 offered, we strongly encourage a faster phase-out 

13 of R-22 production and importation. We believe 

14 the supply of current inventories of R-22 can 

15 support the service needs during a transition to 

16 alternatives. 

17 Relying on those inventories will raise 

18 the price of existing inventories to a reasonable 

19 level which will support the recovery and 

20 reclamation of massive stockpiles which are still 

21 being underutilized in operating equipment.

22 While we appreciate the EPA's willingness 
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1 to address the particular issue of R-22 

2 allocations and its impact on the industry, it is 

3 far more important to consider the broader 

4 question. What can be done to support the 

5 recovery and reclamation industry in the long

6 term? 

7 The EPA regulations created this industry 

8 in the 1990's. If the EPA is to follow its 

9 mandate to protect the atmosphere from these 

10 chemicals, the EPA must find ways to sustain the 

11 industry it created. Without the reclamation 

12 industry all refrigeration chemicals currently in 

13 use, be it ozone depleting or global warming, are 

14 going to be vented. And as a result much more 

15 will need to be produced.

16 We are talking today about the supply, 

17 and therefore the price of R-22. What about 134-

18 A, 410-A, and all of the replacement blends? The 

19 current market price of these materials does not 

20 support the cost of recovery, reclamation, and 

21 distribution. 

22 What the industry and the EPA needs to 
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1 fulfill the EPA mandate is a return to the excise 

2 tax that was so effectively supported the price 

3 of CFC during that phase-out. Like any other 

4 recycling incentive all ODS and GWP refrigerants

5 need to have a fixed price support that can 

6 provide incentives to contractors for recovery 

7 and provide stability and sufficient volume to 

8 support the reclamation industry. Returning to a 

9 time-tested strategy such as that deployed on ODS 

10 expanded to encompass all imported and 

11 manufactured refrigerants would achieve this 

12 objective.

13 Of course, I cannot close without once 

14 again beating the most important drum of all. As 

15 we have expressed in other communications to the 

16 Stratospheric Protection Division Office of 

17 Atmospheric Programs, we are convinced that the 

18 best way to reduce the release of R-22 and other 

19 refrigerants into the atmosphere is fair and 

20 consistent enforcement of the regulations already 

21 in place at the contractor level.

22 On the local level we have seen that 
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1 enforcement can have a significant impact on 

2 compliance. But on a national level the failure 

3 to enforce existing regulations has been 

4 devastating to this industry. A lack of 

5 contractor level enforcement not only results in 

6 more illegal venting, but creates a significant 

7 competitive disadvantage to those companies that 

8 handle their refrigerants safely and legally.

9 Rather than providing an economic 

10 advantage to those HVAC and refrigeration 

11 contractors who abide by the law, these companies 

12 are effectively penalized for their compliance 

13 efforts. One would hope that the EPA as well as 

14 the Small Business Administration would find such 

15 a situation intolerable. It is our continued 

16 hope that the EPA will address this lack of 

17 enforcement and the tilted playing field it 

18 presents to those in the industry.

19 I wish to close my remarks by once again 

20 thanking the director and her staff for this 

21 opportunity. Thank you.

22 MS. WHITELEY: Speaking next we have Ben 
25

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1 Longstreth of Natural Resources Defense Counsel.

2 MR. LONGSTRETH: My name is Benjamin 

3 Longstreth. I'm with the Natural Resources 

4 Defense Counsel. Thank you for providing the 

5 opportunity for me to present NRDC's views on the 

6 HCFC Allocations, and thank you also for your 

7 historic leadership in implementing the Montreal 

8 Protocol.

9 We remain concerned that the proposed 

10 Rule EPA has issued remains on a path that will 

11 prove too much HCFC-22. Specifically we continue 

12 to believe that the size of the stockpiles of 

13 HCFC are sufficient that no new consumption 

14 allocations should be approved. 

15 In our view allocation should be set with 

16 the general objective of ensuring that as little 

17 HCFC is released to the atmosphere as possible. 

18 In order to achieve this, the allocation level 

19 should support three additional objectives 

20 concerning leakage, recycling, and alternatives.

21 First, the allocation should provide 

22 significant incentives for users of HCFCs to 
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1 bring down the alarmingly high rates of leakage. 

2 The evidence suggests that the leak rate in the 

3 United States continues to be signature higher 

4 than it would be if proper leak management 

5 practices were followed. 

6 We were encouraged by EPA's settlement 

7 with Safeway this past fall, and encourage EPA to 

8 continue such investigations. But the allocation 

9 decisions EPA makes are also important to the 

10 objective of preventing leakage. 

11 EPA Must ensure that it's allocations do 

12 not contribute to the oversupply of HCFC, which 

13 makes it easier for users to simply add more 

14 HCFCs rather than fixing leaks.

15 Second, the allocation decision should be 

16 aimed at substantially increasing the level of 

17 recycling of HCFCs, the effect of over 

18 allocations on the recycling market was made 

19 clear during the last allocation rule making. As 

20 you've heard already, prior to the rule of the 

21 market, anticipated significantly reduced 

22 allocation levels, and the level of recycling 
27

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1 increased substantially after EPA announced its 

2 rule allocating more than had been expected. 

3 Recycling became significantly more difficult 

4 because recyclers were no longer able to offer 

5 technicians attractive prices. 

6 Third, the level of allocation should 

7 also support the move toward alternatives, to 

8 HCFC-22. Although we don't know the precise 

9 level of the stockpile ourselves, we believe that 

10 it is large enough that no new consumption 

11 allowances are needed. In other words, any new 

12 consumption allowances will simply lead to 

13 continued over supply.

14 EPA may be concerned that if it does not 

15 approve new allowances HCFC prices will rise too 

16 quickly. We think the capacity of the recycling 

17 industry, the capacity of the users such as the 

18 supermarket industry to reduce leakage, and the 

19 availability of alternatives are all sufficient 

20 to contain upward pressure on prices.

21 It's true that prices will rise as the 

22 oversupply is removed, but as the price increases 
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1 more demand will be met by recycling and leak 

2 reduction, and this will reduce the amount of 

3 HCFCs that end up in the atmosphere.

4 If EPA is not willing to consider zero 

5 allocation, which we think it should, we 

6 certainly believe that it should select the 

7 lowest allocation level possible.

8 Finally we believe the stockpiles of HCFC 

9 have continued to grow in 2013, and will continue 

10 to grow in the coming year, and we therefore urge 

11 EPA to use its authority under Section 114 of the 

12 Act to request updated data on those stockpiles. 

13 Thank you.

14 MS. WHITELEY: Thanks. Up next we have 

15 Jill Trunca from North Lakes Distributing.

16 MS. TRONCA: My name is Jill Trunca, and 

17 I'm the president and owner of North Lakes 

18 Distributing. I'm speaking for myself and my 

19 business, and not on behalf of any other group 

20 that I am a member of.

21 I'm here to impress upon EPA that further 

22 analysis is necessary to arrive at the 
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1 appropriate allocation level for the 2015 through 

2 2019 rule, and that the appropriate allocation 

3 level that will be supported by this analysis is 

4 zero.

5 In light of the impact of the April 3rd, 

6 2014 -- or 2013 final rule, EPA has an obligation 

7 per Executive Order, 13563 Section 6, requiring 

8 retrospective analysis of existing rules. This 

9 order instructs agencies to seek the views of 

10 those likely to be affected by a proposed rule, 

11 including likely beneficiaries and those who 

12 would be subject to a rule.

13 Notably the order directs agencies to do 

14 so before issuing announcement of a proposed rule 

15 making. Without having to solicit this 

16 information, EPA has been made aware by numerous 

17 sources of the damage created by its 2013 ruling. 

18 EPA is obligated to address a more realistic 

19 economic assessment of the impact of its 2013 

20 ruling on the subsequent docket for 2015 through 

21 2019.

22 I made the Agency aware of the damage to 
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1 my business and I know a lot of other members of 

2 the reclamation industry have contacted EPA 

3 repeatedly of the effect of the market escalation 

4 and crash after the April 13 -- or April 3rd 

5 ruling.

6 Executive Order 13563, Section 6, signed 

7 by President Obama, requiring retrospective 

8 analysis of existing rules would have uncovered 

9 dated material and incorrect assumptions in data 

10 and inadequate methods which are the underpinning 

11 of EPA's frequent regulations, refrigerant 

12 regulations, and all subsequent decisions made 

13 regarding these regulations. 

14 Such relevant analysis of the 2013 rule 

15 would have avoided the catastrophic effect the 

16 2013 rule had on small business and consumers in 

17 the refrigerant industry. Without relevant 

18 analysis, the 2015 through 19 rule will 

19 perpetuate this damage.

20 EPA's vintaging model and service tail 

21 analysis has relied on and referenced qualitative 

22 analysis on the most micro of microeconomic 
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1 concerns of the market and is dated and 

2 inaccurate.

3 The microeconomic analysis has never been 

4 completed, never addresses the actual overall 

5 microeconomic market structure, including its 

6 impact on firms in the structure. Twenty years 

7 of experience since then should have easily 

8 provided a wealth of accurate quantitative 

9 economic analysis. 

10 Most notable of these deficiencies is 

11 EPA's complete lack of recognition of the R-22 

12 market as an oligopoly, which has resulted in a 

13 lack of understanding of the impact of its 

14 decisions on that type of market. Over 86 

15 percent of allocations in the R-22 market are 

16 held by only three companies.

17 Normally an oligopoly exists when 

18 concentration ratio, the market share of the top 

19 five or fewer firms, taken against the total 

20 market accounts for more than 60 percent of the 

21 market. 

22 The implementation of the allocation 
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1 system had the effect of freezing the market in 

2 time and forming a Government sanctioned 

3 oligopoly on the R-22 market. Without EPA 

4 regulation and without U.S. protectionism, the 

5 oligopoly would not exist. And R-22 would be in 

6 a free market system which would allow the prices 

7 to fall as they have for 134-A and 410-A, into 

8 the $50, $60 cylinder range.

9 I am imploring EPA to collect additional 

10 114 information from allocation holders and other 

11 entities that they can identify as having 

12 stockpiled refrigerant. Market information 

13 should be easy to collect as 86 percent of the 

14 information on allocations is held by only three 

15 companies. 

16 As reclamation numbers are already 

17 reported, I estimate 80 percent of market 

18 information can be gathered using these three 

19 sources. An agency is allowed to use qualitative 

20 assumptions when quantitative information is 

21 difficult to collect. EPA has relied on dated 

22 qualitative data when quantitative data was 
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1 readily available. 

2 Not only has EPA not understood the right 

3 questions to ask, they have displayed a pervasive 

4 unwillingness to scrap the old inaccurate bottom 

5 up approach and start again with top down 

6 concrete data.

7 Interestingly, scrapping the old 

8 assumptions and asking the correct questions is 

9 not more work, but would be less work and a 

10 fraction of the cost to the Agency than trying to 

11 do it from the bottom up.

12 If top down information is not collected,

13 any estimates of usage in individual market 

14 sectors has no quantitative reference and is 

15 useless. Real quantitative data is readily 

16 available, so why don't we use it?

17 I find it interesting that the 2015 

18 through 2019 proposed rule addresses additional 

19 information required of reclaimers, but puts no 

20 expectations on basic information from allocation 

21 holders. EPA can use its 114 powers to demand 

22 the information now. Interestingly this further 
34

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1 analysis is readily available and easily 

2 collected in the time frame of this rule making. 

3 Oligopolies by definition have a nearly 

4 perfect knowledge of market conditions. Each 

5 oligopoly knows most of what the other

6 oligopolies are doing. 

7 In an oligopolistic market, where the 

8 goods are homogonous, some level of overt or 

9 tacit collusion is necessary to bring about 

10 market stability. These companies know a lot 

11 about their customers, and about the market. So 

12 why aren't we collecting the information from 

13 them?

14 The fact that it is historically nearly 

15 impossible to divine how much R-22 of what was 

16 consumed was actually released and how much was 

17 stockpiled tells the tale. To add to this, that 

18 the stockpiled refrigerant can be introduced into 

19 the environment for years to come makes this 

20 important to all of us. This is not privileged 

21 information.

22 An even more frightening aspect of this 
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1 lack of information is that the majority of the 

2 available and pertinent information was not 

3 collected by EPA, even though it is impossible to 

4 make informed decisions without it. Instead of 

5 listening to the reclamation industry's 

6 persistent warning against the damage of surplus 

7 to our industry, the EPA has allowed itself to be 

8 steered by the propaganda perpetuated by the 

9 oligopoly in a successful effort to preserve 

10 their market share, about quantity and shortage 

11 when the oligopoly knew that in fact there never 

12 was a shortage.

13 In January and February, 2013, DuPont and 

14 Honeywell, after creating a perception of 

15 shortage, took advantage of the consumer with 

16 exorbitant price gouging. Since DuPont was a 

17 price leader, this price gouging drove the market 

18 to all-time highs, which set the stage for the 

19 catastrophic devaluation of R-22, which followed 

20 EPA's final rule.

21 EPA didn't take this market volatility 

22 and the elasticity of a declining market into 
36

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1 account when it issued the surplus large amount 

2 of additional allocations on April 3rd. Falling 

3 market demand and the excess capacity allowed by 

4 EPA caused the cartel to break down and the 

5 market crashed.

6 In addition, the Agency seems to believe 

7 that by maintaining high supply and in fact an 

8 enormous surplus, has somehow protected the 

9 consumer from high prices and undue economic 

10 burden. Nothing could be further from the truth.

11 Reclamation should have, and does, bring 

12 diversity and elasticity of supply into the 

13 market, ultimately keeping prices down and makes 

14 the market less susceptible to disruption. 

15 In addition, a stable healthy market 

16 allows recyclers to keep harmful chemicals out of 

17 the environment. Without supporting reclamation, 

18 the market remains open to further manipulation 

19 and instability. There is plenty of material out 

20 there. There is no reason at this time to not 

21 set the allocations at zero.

22 Free the market from its oligopolistic 
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1 structure and let the free market correct itself. 

2 Zero allocations are necessary to correct the 

3 trajectory of the 2013 rule. 2015 through 2019 

4 creates a unique opportunity to correct this 

5 oversight.

6 It is EPA's opportunity to easily close 

7 the holes in its market analysis. The events of 

8 2013, and the events of 2014, do and will tell a 

9 tale. In light of what has clearly happened, the 

10 only logical and appropriate choice for EPA is to 

11 set the allocations at zero. Thank you.

12 MS. WHITELEY: Thanks, Jill. Next up is 

13 James Burke from USA Refrigerants.

14 MR. BURKE: My name is James Burke from 

15 USA refrigerants. I thank you for having me here 

16 today. I don't know if you're going to be happy 

17 with what I have to say, but I'm going to say it.

18 Stockpiled inventory. This is an excerpt 

19 from your rule. In the last rule making EPA 

20 estimated HCFC-22 inventory at 22,700 to 45,400 

21 metric tons. Based on information received 

22 recently, the inventory is above that range.
38

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1 We don't know how above that range it is, 

2 but if it's above your highest number, it's too 

3 high. So that gas that's above that number has 

4 to be removed from any future gas produced. If 

5 it's 30 million pounds higher than that number, 

6 get rid of 2015, just like that. When you get 

7 rid of 2015 just like that, the entire market 

8 will go back into some stableness. 

9 Everybody talks about an oversupply. 

10 There's plenty of oversupply. Just announcing 

11 immediately the 2015 gas is going to be off the 

12 table and 2016 through '19 will be looked at and 

13 may be also off the table. As you're going 

14 through the process of finding out how much gas 

15 is in the market, you might find out there's just 

16 so much more gas in the marketplace, and zero is 

17 needed.

18 That being said, obsolete inventory -- I 

19 wrote something down here. And this is the 

20 problem. Unless and until the grist of dead 

21 inventory, and I mean R-22 equipment and the 22 

22 that's in it, is considered by experts and 
39

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1 explained to the enforcers of refrigerant 

2 allocation, there will be an unprecedented glut 

3 of R-22 at some time in the future with zero 

4 demand. And it is frustrating that the glut we 

5 speak of is mitigated to the here and now, and 

6 not the inevitable future calamity approaching.

7 And what I'm saying is allocation equals 

8 venting. All right? If you allocate it today, 

9 it's going to be vented some day in the future. 

10 There is no destruction in the world that 

11 destroys gas. The 2 billion pounds of gas that's 

12 made every year, gets vented. There is very 

13 little gas that gets destroyed. 

14 So if you want to feel comfortable in 

15 your position, realize that you made that 

16 decision based on if you allocate it and somebody 

17 produces it, it's getting vented. It's not 

18 needed. I know it's not needed. I know how much 

19 gas is in the marketplace. I know you know how 

20 much gas is in the marketplace, and it's

21 exorbitant.

22 Give you an example. There's 100 million 
40

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1 pieces of equipment out there. I'm going to give 

2 you the number of five pounds per piece of 

3 equipment. That's 500 million pounds of product 

4 that's out in the marketplace. Five hundred 

5 million pounds is a lot of gas. It could be 

6 taken out of those systems in the future. Some 

7 of it is going to be replaced with the blends. 

8 Some of it is going to be reclaimed and reused. 

9 Or you can keep the virgin gas way high and it's 

10 going to get vented now.

11 But you can stop the gas from being 

12 vented by using that 500 million pounds. Five 

13 hundred million pounds is a big number. Nobody 

14 in the room knows what it is, so let's put it in 

15 perspective.

16 Five hundred million pounds, if you put 

17 it in cylinders, 11,020 cylinders for truckload, 

18 it is 15,000 truck loads. All right? It's 

19 15,000 truck loads. Still, you don't know what 

20 it is.

21 If a truckload is 53 feet long and you 

22 had 100 of them, it would be 5,300 feet. So a 
41

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1 little more than a mile. If you had all of them 

2 put together for the 15,000 truck loads, it's 150

3 miles. I can drive from here to my house in New 

4 Jersey alongside truckloads of gas. All right? 

5 That's how much is in the marketplace today. All 

6 right?

7 So I can drive here, all the way out the 

8 parking lot, out to the highway, get up past

9 Baltimore, go over the Delaware Bridge, 50 miles 

10 up to the Garden Turnpike, and all you see is 

11 truckloads of full gas. That's what's in the 

12 marketplace today. It's all going to the 

13 atmosphere. 

14 It could be used to sustain the products 

15 in the future. You've got an unlimited supply of 

16 -- I don't want to get anybody's names wrong, but 

17 Choice, I know, and nu-22, and everybody else 

18 these R-22 replacements. You have an unlimited

19 supply of replacement gases that have no ozone 

20 depletion. 

21 So in the future when you consider making 

22 any allocation, and you need none for 2015, you 
42

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1 need none for 2014, and you need none for 2016, 

2 and you'll find out when you get the reports back 

3 from all the gas that's in the marketplace. But 

4 stop the pleading and right now and announce, no 

5 gas for 2015. That will stabilize the market, 

6 reclamation could resolve this gas that would be 

7 coming out of those 500 million pounds that's in 

8 existence.

9 And I have actually 100 pages to read 

10 here, but I'm not going to do it at this point in

11 time. But like, that's only page one. You know. 

12 Thank you for your time and I hope you 

13 consider that there's plenty of gas. We do not 

14 need any more allocation. Thank you.

15 MR. DONALDSON: Thank you, James.

16 MS. WHITELEY: Thank you. Up next is Don

17 Magid from Combs Investment Properties.

18 MR. MAGID: Good afternoon. I'm Don 

19 Magid, Regulatory Affairs Manager for Combs 

20 Investment Property. Thank you for providing us 

21 with the opportunity today to present out views 

22 on the 2015/2019 rule.
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1 Combs Investment Properties is a small 

2 business, defined as compressed gas merchant 

3 wholesaler, and most importantly an allowance 

4 holder as well, and as such we're directly 

5 affected by the 2015 to 2019 final rule which 

6 will ultimately be released.

7 Just going back in summary very quickly, 

8 we've heard it from several other people as well, 

9 so far. The market was in, if you want to say in 

10 balance in the beginning of 2013 when there was 

11 17,902 metric tons issued on the non-enforcement 

12 action, and at that point things were sort of 

13 turning around and I'd say, as you sustained in 

14 your rule, incentivizing the reclaim on recovery 

15 market and the use of alternative drop-ins that 

16 are not HCFC based. 

17 When the final rule came out, we saw that 

18 number compared to where we were at the beginning 

19 of 2013 jump for 2013. Then it was 53 percent of 

20 an increase, and for 2014, 29 percent of an 

21 increase, and of course that does include the 

22 recoupment allowances which we feel had a 
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1 dramatic effect as well on that overall balance, 

2 and also added to the overall emissions that 

3 would ultimately result from the R-22.

4 Once that happened there was a collapse 

5 in the value. Everything sort of got turned 

6 upside down on its head, and all of a sudden then 

7 recycling efforts, along with the demand for non8 HCFC based drop-ins that were approved under SNAP 

9 were basically adversely impact and dropped.

10 Combs Investment Property strongly 

11 supports a reduction in the initial 2015 starting 

12 point. We'd like to just to be well below the 

13 level of 10,000 metric tons, which is the lowest 

14 proposed alternative in the proposed rule. And 

15 we would also include that we would support even 

16 going down to zero for the 2015 to 2019 control 

17 period. So as close to zero as possible would be 

18 our goal.

19 Also, we liked option two, which was for 

20 the three year draw down, not at those levels but 

21 at the lower levels. And especially if the role 

22 is put out promptly, say the middle of this year, 
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1 that would give in essence three and a half years 

2 for the industry to respond in terms of getting 

3 reclamation and drop-ins into the market place, 

4 and we feel that that should be an adequate time 

5 for the market to respond and five years is not 

6 needed.

7 If you do go with the 10,000 metric ton 

8 rule, which again we would consider as the 

9 maximum. We would prefer zero, that would then 

10 go down to 7,500 metric tons in '15, 5,000 tons 

11 in '16, and 2,500 metric tons in '17, with zero 

12 tons in '18 and '19. And again, anything more 

13 aggressive than that, we would welcome.

14 Other actions, while this is what we're

15 really focused on and we'll address other actions 

16 in our formal written comments as well, is with 

17 regards to 142-B. We would support going into 

18 the same three-year draw down, just for the sake 

19 of consistency, and as was mentioned by others to 

20 enhance efforts relating to good handling 

21 practices, emissions control, and enforcement of 

22 the smuggling activity as well, which has been 
46

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1 brought up.

2 So in conclusion we think that by being 

3 aggressive, the actions will result in an 

4 increase in the value of 22, which will 

5 subsequently result in the development of a 

6 robust reclamation industry. And the approved of 

7 non-HFC based drop-in alternatives in a 

8 responsible manner. If this is done, again, 

9 prior to 2018, which is a three-year step-down.

10 With these actions and combined with the 

11 large availability of stockpiled material, we 

12 think we can have an effective transition and 

13 meet the needs for 22 after the complete phase 

14 out in 2018. Thank you.

15 MS. WHITELEY: Thank you. Next up we 

16 have Alexander von Bismarck from Environmental 

17 Investigation Agency.

18 MR. VON BISMARCK: Thank you very much. 

19 My name is Alexander von Bismarck. I'm the 

20 executive director of the Environmental 

21 Investigation Agency. We are a nonprofit that 

22 has worked for almost two decades with the 
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1 Montreal Protocol, and with the U.S. F-Gas 

2 Sectors to most effectively implement phase outs 

3 with an evidence-based approach. It's become a 

4 little unclear today why the environmental NGO 

5 still needs to speak at this point, considering 

6 what the industry is saying about the 

7 availability of R-22 in the market. Normally 

8 when we agree on something to this extent, you 

9 know, we've got something figured out. 

10 Section 605 of the CAA mandates that EPA 

11 ensure that the production and consumption of 

12 HCFCs are phased out under the schedule of the 

13 Montreal Protocol. But if that schedule is not 

14 stringent enough to protect human health or the 

15 administrator determines that a more stringent 

16 schedule is practicable, Section 606 provides the 

17 authority for EPA to promulgate regulations that 

18 establishes schedule for production and 

19 consumption that is more stringent than what is 

20 set forth in Section 605.

21 In the proposed regulations EPA has set 

22 allocation rates that do not reflect the current 
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1 need of the industry and the market for R-22. 

2 EIA, and clearly many in the industry, believe 

3 that based on current stockpile data industry 

4 needs, recovery and recycling capabilities and 

5 international norms, the 2015 R-22 consumption 

6 allocation should be zero. This is in line with 

7 the allocations in other developed countries 

8 around the world who have already taken action to 

9 phase out HCFCs ahead of 2020.

10 In the U for instance, the consumption of 

11 virgin R-22 was completely phased out in 2010, 

12 and the use of recovered and recycled R-22 will 

13 be banned in January 1st, 2015. 

14 Similarly Japan and Switzerland phased 

15 out virgin R-22 in 2010. 

16 In the proposed rule, the EPA states that 

17 the estimated industry stockpiles alone of R-22, 

18 were an unspecified amount above the current 

19 servicing needs for R-22. Further, EPA states 

20 that in its 2013 Servicing Tail Report that it, 

21 quote, expects that a significant amount of HCFC22 22 servicing need in 2015 to 2019 can be met by 
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1 existing stocks. 

2 In addition to that, the estimate is that 

3 indeed up to 80 percent of total demand could be 

4 filled by current capacity of the reclamation 

5 sector. 

6 Market trends such as better leak 

7 detection and increased recovery have spent HCFC8 22 and transitions to alternatives should 

9 increase the availability of recycled 22. 

10 Unfortunately prior to the allocation period of 

11 R-22 -- I'm sorry. The prior allocation period 

12 of R-22 oversaturated the market. The price 

13 plummeted for recovered and recycled R-22. 

14 As cited in the adjustment memo, included 

15 in the docket of this rulemaking, virgin 22 in 

16 2011 was priced at around $4.50 per pound. But 

17 industry representatives suggested that the price 

18 would need to exceed $8.00 per pound for 

19 reclaimed HCFC-22 to become competitive again. 

20 The EPA, in its 2009 final rule, found 

21 the numbers to be less than predicted, the 

22 numbers of recycling capacity, because of the 
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1 relatively low price of virgin HCFC-22, which 

2 quote, challenge the economic viability of 

3 reclamation practices. Once allocation numbers 

4 are decreased, recovery and recycling industry 

5 can begin to rebound, further increasing the 

6 amount of available R-22 in the marketplace.

7 The adjustment memo again supports this 

8 assertion stating that, quote, recent interviews 

9 with reclaimers suggests that reclamation 

10 facilities have the technical capacity to meet a 

11 greater proportion of servicing demand and that 

12 many have stated that they were currently 

13 operating significantly below capacity.

14 The adjustment memo goes further, stating 

15 that interviews suggest that anywhere from 25 

16 percent to 80 percent of servicing demands could 

17 be met by increasing utilization of existing 

18 machinery and increasing the number of shifts.

19 Additionally, supermarkets themselves 

20 have been recovering R-22 from their own 

21 equipment as they begin to move towards newer 

22 systems.
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1 The adjustment memo points out that, 

2 quote, some supermarkets have converted a 

3 substantial proportion of their 22 equipment --

4 that have converted a substantial proportion of 

5 their equipment, indicated that they have 

6 sufficient recovered 22 in stock for servicing, 

7 such that they do not anticipate a need to 

8 purchase any more virgin material in the future.

9 Some example, Hudson Technologies, who is 

10 here in their comments, specifically say that, 

11 quote, the industry does not need another pound 

12 of R-22 to be produced. The existing stockpiles 

13 supplemented by reclamation and alternatives are 

14 more than sufficient to meet the servicing need 

15 for R-22 equipment.

16 ICORP International in their comments 

17 submitted for this rulemaking support a zero 

18 allocation in 2015, among many others. 

19 Yet, despite the historical evidence of 

20 increased allocations of R-22 leading to less 

21 recovery and recycling, and despite industry and 

22 NGO support for reduced allocations, the EPA is 
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1 currently putting forward a preferred consumption 

2 allocation of 40,000 metric tons of virgin R-22 

3 from 2015 to '19.

4 The effect of such an allocation would 

5 keep the price of virgin 22 low, discourage leak 

6 prevention, 22 recovery and recycling, and will 

7 increase stocks of virgin HFCs that will continue 

8 to decrease the price of 22, even after the phase 

9 out is completed. 

10 This is in direct conflict of the goals 

11 of Title 6 of the Clean Air Act, since it is 

12 unnecessary and endangers public health.

13 Regarding production, the allocations for 

14 production of 22, in the proposed rule the EPA is 

15 seeking comments on whether to allow more 

16 production allowances than consumption allowances 

17 or to provide approximately the same number. EIA

18 believes that production and consumption 

19 allowances should be the same and both should be 

20 zero in 2015.

21 We understand EPA's comments on wanting 

22 to allow industry to sell virgin R-22 abroad, but 
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1 this, too, could discourage recovery and 

2 recycling in developing countries in the same way 

3 that it does here, indeed should expect to, and 

4 discourage transitions to new more climate 

5 friendly alternatives.

6 EPA and the U.S. government broadly has a 

7 history of supporting transitions in developing 

8 countries to low GWP and ODP technologies at the 

9 multilateral fund and the Montreal Protocol. The 

10 actions here should be in support of that 

11 history.

12 The U.S. is a leader in advocating for a 

13 reduction of F-gases globally. It is a major 

14 piece, also, of the administration's Climate 

15 Action Plan. 

16 It is inconsistent with that leadership 

17 to produce as much as one can get away with under 

18 the Montreal Protocol without any analysis of 

19 that impact. We understand concern that 

20 production would simply occur in other countries. 

21 But the solution should not be to follow, say 

22 China, and compete with them to produce more 22. 
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1 The solution should be to work with China under, 

2 for example the Obama/Xi agreement to produce 

3 less.

4 In summary, consumption and production --

5 zero consumption and production sends a message 

6 that is consistent with the United States'

7 leadership and goals in this space. Higher 

8 allowances endangers those goals directly and 

9 should only be considered with a clear rationale. 

10 We do not have that rationale.

11 The EPA also requested comment on dry 

12 condensing units. In considering these units, it 

13 is well known in the industry that these types of 

14 units have created a major loophole under the 

15 Clean Air Act that undermines the purpose of the 

16 ozone regulations to phase out the use of R-22 by 

17 2020 by allowing their installation and 

18 subsequent charging with 22, rather than 

19 converting to more climate friendly alternatives. 

20 EPA should ban these units under rulemaking as 

21 soon as possible.

22 EIA would briefly like to flag two 
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1 additional related issues. First, stockpile 

2 data. For the currently existing stockpiled 

3 information the EPA should publically disclose 

4 the stockpiles of HCFC-22 inventory that was 

5 solicited by the EPA to further transparency for 

6 this rule, and further rulemakings related to 

7 HCFCs, public accessed information as a hallmark 

8 of this administration, and to bolster the 

9 purpose of the EPA to provide accurate and timely 

10 data to inform future policy decisions.

11 EPA should conduct expanded and ongoing 

12 data collection from the entire industry to 

13 ensure an accurate accounting within the industry 

14 and to ensure that there will be a smooth 

15 transition from 22 and other chemicals following 

16 to '20.

17 Finally regarding illegal trade. With 

18 the decrease in availability in R-22, increases 

19 in illegal trade are to be expected. The HCFC 

20 phase out is now at the same stage as the CFC 

21 phase out was when that spike in illegal trade 

22 occurred. HCFC consumption figures reveal both 
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1 stronger growth and a larger overall market than 

2 was the situation for CFC's pointing to a 

3 potentially larger problem. 

4 Recent seizures indicate that illegal 

5 trade is growing. The EPA must adequately fund 

6 enforcement and capacity building in this area. 

7 Failure to tackle illegal trade will result in 

8 noncompliance with control measures and increase 

9 emissions of ozone depleting and climate warming 

10 HCFCs. Thank you for your consideration.

11 MR. DONALDSON: Thank you, Mr. Magid.

12 MS. WHITELEY: Thank you. Up next we'll 

13 have Kristina Foehrkolb from Patton Boggs.

14 MS. FOEHRKOLB: My name is Kristina 

15 Foehrkolb of Patton Boggs. I speak on behalf of 

16 a coalition whose members include Altair, Combs 

17 Investment Property, Diversified PureChem, North 

18 Lakes Distributing, Inc., Refrigerants, Inc., 

19 Refrigerants Salvage, Inc., RMS of Georgia, Safe 

20 Disposal Systems, and USA Refrigerants. 

21 These are mostly small businesses that 

22 are HCFC reclaimers or blenders of alternatives 
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1 to HCFC-22. All have been adversely affected by 

2 the effect on excessive HCFC-22 allowances 

3 granted by EPA for 2013 and 2014. By some 

4 estimates, this sector has suffered damages in 

5 excess of $100 million. 

6 Our message is simple: 2015 through 2019 

7 is the final phase-down period for 22. The 

8 Agency must act decisively to eliminate the 

9 oversupply now. To bring the 22 market back into 

10 balance, EPA must take into account existing

11 inventories of virgin materials, reclaiming 

12 capacity, and the availability of alternatives. 

13 The draft Servicing Needs analysis, which relies 

14 on EPA's Vintaging Model, is seriously flawed and 

15 must be corrected. We plan to work closely with 

16 EPA during this rulemaking to improve this

17 analysis. 

18 For now, I wish to make two points.

19 First, the current state of the 22 market. In 

20 allocation rules for earlier phase-down periods, 

21 EPA was guided by the principle that over time 22 

22 allowances would drop significantly, while the 
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1 reclaiming and alternatives would account for 

2 more and more of the servicing needs. The market 

3 responded to these expectations. The price of 

4 virgin 22 climbed, reaching an all-time high 

5 prior to the April 2013 rule. The need for 

6 reclaimed 22, as well as alternative

7 refrigerants, grew. 

8 In 2012, 22 reclamation rose to nearly 13

9 percent of servicing needs. And, as the price of 

10 used refrigerant grew, demand for alternatives 

11 soared. This thriving industry collapsed with 

12 the April 2013 rule, which unexpectedly reversed

13 EPA's prior direction. Instead of pursuing a 

14 gradual but aggressive phase-down of 22

15 consumption and encouraging a stronger

16 reclamation industry, the Agency allowed an 

17 additional 18 million pounds of 22 to be produced 

18 and sold in 2013 and an additional 16 million 

19 pounds in 2014.

20 Such a drastic change of course caused 

21 the price of 22 to plummet. As a result of the

22 April 20l3 rule, the price of 22 decreased by 50 
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1 percent from $14 to $7 per pound. The glut of 

2 virgin 22 in the market released by the April

3 rule was devastating to the small businesses that 

4 make up this coalition. If the holders of the

5 consumption allocations can make virgin 22 for as 

6 low as 50 cents a pound, who would want to invest 

7 in reclamation and alternative refrigerants? The 

8 effect of the 22 oversupply is so evident and so 

9 devastating on the reclamation and alternatives 

10 industry, and the environment, that it is 

11 difficult to fathom how something like that could 

12 be allowed to happen. 

13 As a result of the April 20l3 rule alone, 

14 EPA increased the 22 supply by 34 million pounds. 

15 This has the same impact on the environment as 

16 eight coal-fired power plants' annual emissions 

17 of CO2.

18 My second point, is how did this 

19 situation come about? The answer to this 

20 question is simple, the 22 market is where it is 

21 today because of EPA's reliance on inaccurate, 

22 outdated, and insufficient data regarding the 
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1 need for virgin 22 and the size of the existing 

2 22 inventory. The root of the problem is the 

3 Agency's Vintaging Model. EPA continues to rely 

4 on this model despite evidence that it led to 

5 inaccurate assumptions in the earlier phase down 

6 periods. The model is flawed because it fails to 

7 account for existing stockpiles of virgin 22 and

8 reclaiming and alternative-refrigerant 

9 capabilities. The model is based on assumptions 

10 that are just unrealistic. 

11 The adjustment memo in the docket is 

12 based on interviews and submissions from 2011.

13 The proposed rule acknowledges that the estimates 

14 of surplus inventory in the adjustment memo

15 are wrong. The Agency refers to a very large and 

16 higher than previously estimated inventory over a 

17 dozen times in the proposed rule. Thank you.

18 MR. DONALDSON: Thank you.

19 MS. WHITELEY: Thank you. Up next we 

20 have Caffey Norman from Patton Boggs.

21 MR. NORMAN: Thank you. My name is 

22 Caffey Norman, also with Patton Boggs, 
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1 representing the same coalition.

2 It falls me to address how EPA going 

3 forward in this rulemaking can best undo the 

4 damage caused by the excess supply of HCFC-22 in 

5 the market. 

6 This past August letters went to a number 

7 of companies under Section 114 of the Clean Air 

8 Act to collect data on stockpiles of R-22 as of 

9 the end of 2012. As a first step, we recommend 

10 that EPA immediately issue further Section 114 

11 requests to a broad range of industry 

12 participants to update the inventory and other 

13 information through year end, 2013. As these 

14 letters require a response within 15 business 

15 days, they should provide current information in 

16 time to be of use to EPA as it proceeds with this 

17 rulemaking.

18 Second, the presence here today of so 

19 many small business reclaimers and blenders 

20 demonstrates that EPA's certification, that the 

21 proposed rule will not have a significant 

22 economic effect on a substantial number of small 
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1 entities, is erroneous. 

2 Although EPA recognizes that the 

3 allocation may impact small and large allowance 

4 holders in different ways, the cost benefit 

5 analysis in the docket, apparently not updated 

6 since 2010, concludes that information to date 

7 does not suggest that small businesses, as a 

8 whole, will be subject to differential impacts.

9 This ignores the fact that small 

10 reclaimers and alternatives blenders lack the 

11 financial resources that enable larger market 

12 participants to survive the fallout from the huge 

13 drop since April in the market price for R-22. 

14 Such disparate impact alone justifies the 

15 convening of a small business review panel as 

16 required by the Small Business Regulatory 

17 Enforcement Fairness Act. As such a panel is 

18 mandated to report no later than 60 days after it 

19 has been convened, this step also fits well 

20 within the time available for the current 

21 rulemaking.

22 Finally, and most significantly, assuming 
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1 those steps and other information confirm our 

2 belief that there is already available, a 

3 sufficient supply to cover servicing needs 

4 through 2019, we call on EPA to allocate zero 

5 consumption allowances for R-22 for 2015 through 

6 2019. The idea of zero allowances beginning in 

7 2015 is not new. 

8 NRDC recommended this approach in a 

9 letter to EPA in the fall of 2013. As did ICORP

10 International and Hudson Technologies. It is 

11 surprising that this was not one of the options 

12 put forward for comment in the proposed rule. 

13 Instead, the proposed rule dismissed this 

14 approach citing only concerns for quote, 

15 "Unintended consequences for end users that had 

16 been making equipment retrofit and replacement 

17 plans based on EPA's longstanding 2020 deadline 

18 for phasing out HCFC 22," end quote.

19 These concerns are not warranted. 

20 Existing stockpiles supplemented by reclamation 

21 appear to be more than sufficient to meet the 

22 servicing needs for 22 equipment. Some of this 
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1 equipment was phased out more than 10 years 

2 sooner than previously anticipated, and the 

3 earlier allowances have been used to stockpile 

4 inventories. The additional recoupment 

5 allowances issued in 2013 aggravated this 

6 oversupply even further.

7 Completely phasing out 22 consumption 

8 allowances now, as opposed to 2020, is the only 

9 way the reclamation and alternatives industries 

10 can bounce back from the devastating effect of 

11 the April 2013 rule. The reclamation industry 

12 has never functioned at its full capacity, but 

13 given a chance it can readily provide for all the 

14 servicing needs.

15 Moreover, reduction to zero is necessary 

16 to protect human health and the environment. 

17 Such a step will encourage recycling and reuse, 

18 and improvements in the price structure will 

19 reduce incentives for venting, which in the 

20 absence of targeted enforcement, is believed to 

21 be widespread. This will both limit 

22 stratospheric ozone depletion and reduce global 
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1 warming.

2 Finally, removing virgin 22 from the 

3 market and going forward would facilitate the 

4 President's Climate Action Plan, which EPA is now 

5 implementing. The benefits expected from the 

6 steps being taken by EPA to reduce HFC emissions 

7 would easily be neutralized by production over 

8 the five-year period from $55 million to $170 

9 million pounds of 22, as contemplated in the 

10 proposed rule. 

11 To conclude, the allocations in the 2013 

12 rule were much too high, combined with the 

13 existing oversupply they resulted in wildly 

14 excessive inventories and a market that is now 

15 flooded with virgin 22. It is urgent that EPA 

16 obtain and make publically available more 

17 accurate and up-to-date information on R-22 

18 stockpiles and reclamation and alternatives 

19 capabilities. We submit that these will support 

20 a zero R-22 consumption allowance after 2014. 

21 Thank you. 

22 MR. DONALDSON: Thank you.
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1 MS. WHITELEY: Thank you. Up next we 

2 have Jon Melchi from HARDI. 

3 MR. MELCHI: Good afternoon. My name is 

4 Jon Melchi and I represent Heating Air 

5 Conditioning Refrigeration Distributors 

6 International, a trade association with 

7 approximately 450 United States-based wholesale 

8 distributors. The vast majority of our wholesale 

9 distributor members, over 90 percent, classified 

10 as small businesses. 

11 We thank you for the opportunity to speak 

12 to you today. To echo some of the comments made 

13 previously, our members, too, were impacted by 

14 the 2012 through 2014 allocation rule. 

15 Therefore, as we move forward into 2015, into the 

16 ultimate phase down at the end of this period, we 

17 would like to see an aggressive phase down. And 

18 we would also ask that this rule be done quickly 

19 so that our members can prepare both their 

20 businesses, their plans, and their customers, the 

21 contractors that we serve, for this impending 

22 phase down.
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1 Doing such will also allow us to better 

2 promote our recycle and reclamation programs, 

3 which our members are extremely supportive of. 

4 To answer a question or two, respond to some of 

5 the talk about potentially going to a zero 

6 allocation for 2015, we have concerns that given 

7 the timing of this rule, likely at the latter 

8 part of this year, that our many members would 

9 have challenges planning their 2015 business 

10 plans. 

11 If they are unable to purchase or to plan 

12 for a zero allocation, that this would give them 

13 challenges with many of their vendors and 

14 suppliers. We'll further address this in our 

15 written comments before the March deadline. 

16 Thank you very much.

17 MR. DONALDSON: Thanks.

18 MS. WHITELEY: Thank you. Up next we 

19 have Steve Porter from Johnstone Supply. 

20 MR. PORTER: I'm Steve Porter from 

21 Johnstone Supply. We're a cooperative with 118 

22 members nationwide, HVAC wholesaler. 
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1 Our recommendation is an aggressive phase 

2 down that we'd like to see the EPA take action 

3 on, which is the third proposal, a five-year 

4 phase down. But we'd like to see that more on 

5 the range of about two-thirds of the allocation 

6 cut. We do not support a zero allocation. We 

7 believe that would be far too disruptive.

8 What we need is an allocation ruling as 

9 quick as possible so we can plan our businesses 

10 for the following next five years. Thank you.

11 MS. WHITELEY: Up next we have Stephen 

12 Mandracchia from Hudson Technologies.

13 MR. MANDRACCHIA: My name is Stephen 

14 Mandracchia. I'm the Vice President of Legal and 

15 Regulatory for Hudson Technologies. We

16 appreciate the opportunity to speak here today, 

17 and we do plan to submit more detailed comments 

18 in writing in the coming weeks.

19 The proposed rule, which sets production 

20 and consumption allocation for the last five 

21 years of the R-22 phase out, provides the EPA 

22 with one more opportunity to protect the 
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1 environment, ensure an orderly and efficient 

2 phase out of R-22, and promote the reuse and 

3 proper management of the hundreds of millions of 

4 pounds of R-22 currently in use in the installed 

5 base.

6 Based on what we know about the market, 

7 the industry does not need another pound of R-22 

8 to be produced. The existing stockpiles, 

9 supplemented by reclamation and alternatives, are 

10 more than sufficient, we believe, to meet the 

11 servicing need for R-22 equipment.

12 As early as December 2008, EPA stated its 

13 goal to grow reclamation three-fold to nearly 30

14 million pounds. The reclamation industry 

15 responded by investing millions of dollars in

16 infrastructure, but unfortunately reclamation has 

17 not grown because the supply gap that EPA

18 proposed never materialized. Every year of the 

19 program more allowances have been provided

20 than were needed to meet aftermarket demand, 

21 creating a substantial stockpile of R-22. Any

22 reasonable analysis would conclude that the 
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1 market is now flooded with virgin R-22.

2 In 2012 the EPA reduced consumption 

3 allowances by 45 percent, from 100 million pounds 

4 in 2011, to 55 million pounds in 2012. Despite 

5 that large, if not massive reduction, the EPA has 

6 confirmed that the stockpile of R-22 as of 

7 December 2012 was even greater than EPA's 

8 previous high estimate of 100 million pounds.

9 In the proposed rule the EPA also 

10 acknowledges that there are a number of market 

11 forces that support a far more aggressive phase 

12 down of R-22, such as the phase out and the use

13 of R-22 equipment is accelerating. The 

14 successive programs, such as the EPA's Green 

15 Chill, has resulted in a more rapid transition 

16 from R-22 in the major supermarket sector.

17 HFC alternatives to R-22 for use in R-22 

18 equipment are proliferating to the point where 

19 they now represent at least 25 percent of the 

20 market. And the EPA of course now knows that the 

21 previous estimates of R-22 stockpile were too 

22 low. 
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1 Clearly the R-22 allowances needed in 

2 2012 to serve the aftermarket were less than the 

3 55 million pounds that were permitted. Yet, 

4 despite the declining need for virgin R-22, the 

5 EPA's April 2013 final rule increased the 

6 allocations to 63 million pounds in 2013 and

7 provides for an additional 51 million pounds in

8 2014. As a direct result of that final rule,

9 growth and reclamation has stopped, and appears 

10 to be shrinking. R-22 prices have plummeted, 

11 creating a disincentive for property management 

12 practices, and stockpiles of R-22 are not being 

13 drawn down to supplement demand, but instead are 

14 continuing to grow.

15 As I stated earlier, this is the last 

16 opportunity for the EPA to get this rule right. 

17 Unfortunately, the EPA's preferred allocation 

18 option would continue to flood the market with an 

19 additional 90 million pounds of virgin gas and 

20 will not promote growth of reclamation. 

21 In addition, the EPA's preferred option 

22 is not the best environmental outcome. While the 
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1 proposed rule discusses the environmental risks 

2 of ozone depletion, it fails to even mention the 

3 dramatic global warming effects of the 90 million 

4 pounds of proposed additional production and the 

5 more than 100 million pounds in the stockpile. 

6 From a global warming standpoint, those nearly 

7 200 million pounds represent the equivalent of 

8 the annual emissions from nearly 50 coal fired 

9 plants. This outcome would obviously be counter 

10 to the goals of the Administration's Climate 

11 Action Plan announced earlier this year.

12 The best environmental result and the 

13 best result for the industry, we believe, would 

14 be to eliminate all domestic production of R-22. 

15 Again, we do not think that any additional pounds 

16 of virgin R-22 are needed in the market, and 

17 believe that the allocation should go to zero by 

18 2015. 

19 Therefore, we believe that for the sake 

20 of the environment, the allocation should be 

21 zero. To ensure responsible management reduction 

22 of leak rates and to preserve a vibrant 
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1 reclamation industry, the allocation should be 

2 zero. To ensure an orderly draw down of the more 

3 than 100 million pounds of stockpile, we believe 

4 the allocation should be zero; because the 

5 reclaim industry today has the ability to fully 

6 support the aftermarket, the allocation should be 

7 zero. And because HFC alternatives are available 

8 to supplement any unmet demand, the allocation 

9 should be zero.

10 We strongly urge the EPA to go to zero in 

11 2015. However, to the extent that EPA determines

12 to provide for additional production, the

13 allocation amounts and the schedule need to be 

14 far more aggressive than outlined under EPA's 

15 preferred approach.

16 In closing, we hope the EPA will be far 

17 more aggressive in the final rule. The 

18 Administration has a real opportunity with this 

19 rule to positively impact ozone depletion and 

20 global climate change and to improve refrigerant 

21 management practices, and to strengthen the 

22 reclamation industry as we now turn our attention 
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1 to phasing down of HFCs. But this opportunity 

2 will be wasted, and those goals will be 

3 frustrated if EPA continues to allow the market 

4 to be flooded with virgin R-22 production. 

5 Thank you.

6 MS. WHITELEY: Steve was our last speaker 

7 on the list. Was there anyone else in the 

8 audience who did not sign up who wants to give 

9 verbal testimony?

10 (No response.) 

11 MR. DONALDSON: Okay. So with that our 

12 hearing concludes. 

13 Thank you all for coming and we 

14 appreciate you taking the time and giving us 

15 comment. 

16 [Whereupon, at 3:28 p.m., the EPA

17 meeting, HCFC Allocation Rule, concluded.}

18

19

20

21

22