-1- DRAFT (10/03/06): do not cite or quote RESPONSE TO LATE COMMENTS

Supplemental Comments submitted September 20, 2006

Note: These comments (Docket ID Number OAR-2005-0538-0148) were received after the close of the comment period. Thus, section 307(6)(B), which states that a final rule “shall . . . be accompanied by a response to each of the significant comments . . . submitted in written or oral presentations during the comment period” does not apply. However, EPA is providing brief responses below.

Summary: One commenter addresses the August 29, 2006 opinion in the case NRDC v. EPA

, D.C. Cir. No. 04-1438. The commenter reads that opinion as stating that the critical use exemption decisions of the Parties are “political commitments,” not “law,” for purposes of the Montreal Protocol and the CAA. While the commenter indicates that it may seek rehearing or Supreme Court review of the August 29, 2006 opinion, the commenter states that if the opinion stands, it will have a number of impacts on the 2007 CUE rulemaking. According to the commenter, if the exemption decisions of the Parties are not legally binding, there is doubt as to whether the Parties or EPA can issue exemptions. The commenter cites Article 2H(5) of the Montreal Protocol as creating a legally-binding limit of “zero” production and consumption of methyl bromide (except for quarantine and pre-shipment use), and contends that, based on the August 29, 2006 D.C. Circuit opinion, there is no instrument for making critical exemptions under the Protocol. The commenter further states that “if the last sentence of Art. 2H is only a political commitment, then it cannot alter the zero production/consumption limit.” The commenter also cites Section 604(h) of the Clean Air Act as expressly adopting the Protocol’s phase-out schedule, making the zero production/consumption limit legally binding as a matter of domestic law. The commenter then points to Section 604(d)(6) of the Clean Air Act as providing for exemptions from the domestic legally-binding zero limit only through a rulemaking and to the extent consistent with the Montreal Protocol. [0148]

The commenter further states that if the Decisions are only political commitments, then they do not alter the legally-binding limit of zero in Article 2H. The commenter questions what criteria govern EPA’s critical use decisions under CAA 604(d)(6), and states that EPA has the obligation to define the meaning of the phrase “consistent with the Montreal Protocol” as used in that provision.

Response :
On November 17, 2006, the commenter sought rehearing of the August 29, 2006 D.C. Circuit opinion. Given that this is still an active case, EPA has not yet explored the implications of the opinion in detail. However, EPA disagrees with the commenter’s assertion that “if the Panel decision stands,” then “neither the Parties nor EPA can issue any exemptions at all.” Nothing in the August 29, 2006 opinion calls into question either the Parties’ or EPA’s authority to issue critical use exemptions. These issues were not before the court. Nor does the court purport to address them, even in dicta.-2- DRAFT (10/03/06): do not cite or quote The commenter refers to sections 604(h) and 604(d)(6) of the CAA. Section 604(h) instructs EPA to promulgate a rule terminating the production, import, and consumption of methyl bromide in accordance with the phaseout schedule under the Montreal Protocol as in effect on the date of enactment (i.e. , in accordance with the 2005 phaseout that currently appears in Article 2H). EPA has issued regulations implementing Section 604(h): the 2005 phaseout is codified at 40 CFR 82.4(b) and (d). Section 604(d)(6) of the CAA provides EPA authority to create an exemption to that phaseout: “[t]o the extent consistent with the Montreal Protocol, the Administrator, after notice and the opportunity for public comment . . . may exempt the production, importation, and consumption of methyl bromide for critical uses.” EPA has now used that authority three times, in each case acting through notice-and-comment rulemaking. Critical use exemptions appear at 40 CFR 82.8.

Like its predecessors, the 2007 CUE Rule is consistent with the Montreal Protocol. The Protocol provision that specifically addresses critical uses, Article 2H(5), states that the 2005 methyl bromide phaseout shall apply except “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.” For 2007, the Parties decided to permit a level of consumption 1 for the U.S. equivalent to 20.2% of the 1991 U.S. baseline. This is the “extent” to which the methyl bromide phaseout, as described in Article 2H, does not apply.

The 2007 CUE rule authorizes a level of new production or import equivalent to 16.9% of baseline. While this approach is more stringent than Article 2H(5) requires, Art. 2, para. 11 specifically allows Parties to take more stringent measures: “Notwithstanding the provisions contained in this Article [Art.2] and Articles 2A to 2I Parties may take more stringent measures than those required by this Article and Articles 2A to 2I.”

Several considerations led to EPA’s determination to take a more stringent approach. First, EPAreduced the total 2007 critical use amount to reflect uptake of sulfuryl fluoride in certain postharvest use categories. EPA made this reduction because the United States Government indicated, as part of its 2007 CUN, that it would do so in its domestic allocation process. The report of the Methyl Bromide Technical Options Committee (MBTOC) indicated that the MBTOC did not make any reductions in the relevant use categories for the uptake of sulfuryl fluoride in 2007 because of this assurance from the U.S. Government. Second, EPA reduced the amount of new production or import for 2007 to account for the carryover of critical use methyl bromide that had not been used by the end of 2005. EPA had announced its intent to perform this reduction in the Framework Rule. Third, EPA reduced the new production or import amount because of a corresponding increase in the amount of CSAs. The reasons for the increase in the amount of CSAs are discussed in the preamble to the final 2007 CUE rule.

1 Consumption = Production + Imports - Exports-3- DRAFT (10/03/06): do not cite or quote EPA’s review of critical uses is based on criteria proposed and adopted in the Framework Rule. These criteria, which parallel the criteria used internationally, appear in the definition of “critical

use” at 40 CFR 82.3.

Comment: The commenter states that EPA “has failed to articulate a reasonable construction of its commitment to account for stocks – a construction that can be reasonably defended as
‘consistent with the Montreal Protocol.’”

Response : EPA has addressed Decision language relating to stocks in the preamble to 2007 CUE Rule, previous Federal Register Notices, and the Response to Comments documents for the 2007, 2006, and Framework rules. EPA disagrees with the commenter’s assumption that the phrase “take into account quantities of methyl bromide available from existing stocks” is susceptible to only one interpretation. EPA has taken available inventory into account by including inventory-related provisions in the Framework Rule, by continuing the allocation of CSAs at a level equal to 5% of baseline in the CUE allocation for 2006, and by issuing CSAs at a level equal to 7.5% of baseline in the CUE allocation for 2007..

Comment: According to the commenter, EPA only requires inventory holders to report amounts for which they desire CSAs.

Response: This is not an accurate description of EPA’s reporting requirements. EPA is requiring entities to report on the amounts of unused critical use methyl bromide, as well as pre-phaseout inventory, on an annual basis, regardless of whether the entities desire CSAs for the pre-phaseout inventory. The preamble to the final 2005 Framework rule states “...on an annual basis, producers, importers, distributors, and third-party applicators are required to report to EPA... the amount of critical use methyl bromide that has not been sold to an approved critical user as of the end of the control period that the reporting entity owns [and] the amount of critical use methyl bromide that has not been sold to an approved critical user that the reporting entity is holding on behalf of another entity along with the name of the entity who owns the material” (69 FR 76996; see, e.g., 40 CFR 82.13(f)(3)(xvi). However, the 2005 CUE supplemental rule, published on Dec. 13, 2005 (70 FR 73604) expanded the reporting requirements so that entities must report not only amounts of critical use methyl bromide, but also all amounts of pre-phaseout inventoryat the end of each year, without regard to whether the amounts will be sold for critical or noncritical uses (70 FR 73609)

. For example, 40 CFR 82.13(f)(3)(xviii) requires producers to report “On an annual basis, the amount of methyl bromide produced or imported prior to the January 1, 2005, phaseout date owned by the reporting entity, as well as quantities held by the reporting entity on behalf of another entity, specifying the name of the entity on whose behalf the material is held.” This reporting requirement enables EPA to track the drawdown of the total methyl bromide pre-phaseout inventory. In addition, the section 114 requests issued to collect inventory data prior to the adoption of this reporting requirement were general in nature and did not exclude amounts destined for non-critical uses. As a result, the inventory figures released by EPA on September 7, 2006 reflect the total US pre-phaseout methyl bromide inventory, and do not omit inventories "held outside of the CSA-CUE system"-4- DRAFT (10/03/06): do not cite or quote Comment : The commenter includes a table in its submission that “presents a comparison of the stockpiles against critical use amounts authorized since 2005.”

Response: The majority of the figures in the commenter’s table were derived independently by the commenter, and do not represent EPA calculations. There are a number of errors and omissions in the commenter’s calculations and projections.

The commenter’s table does not account for carry-over methyl bromide. As discussed in the preamble to the Final Rule, 443 metric tons of newly produced or imported critical use methyl bromide went unused in 2005. This amount of methyl bromide was deducted from the amount allocated for new production/import for 2007.

According to the commenter’s table, 8,074 metric tons of critical use methyl bromide was allocated by EPA for 2006. As discussed in the 2006 Allocation Rule, the correct allocation for 2006 was 7,958 metric tons of methyl bromide (71 FR 5998).

The commenter projects that 6,681 metric tons of critical use methyl bromide will be allocated for 2007. As explained in the preamble to the Final Rule, EPA is allocating 6,231 MT of critical use methyl bromide for 2007.

As stated in a footnote to the commenter’s table, the table does not adequately address the use of pre-phaseout stocks for non-critical uses. The projected figures in the column labeled “Stock On-Hand Dec. 31” assume stock drawdown exclusively for critical uses. These omissions led the commenter to project larger inventory amounts than would be projected if non-critical uses were included. Furthermore, the commenter’s omission of non-critical uses inflates all of the derived figures in the column labeled “Stock Remaining if No New Production/Import.”

Comment: The commenter is concerned that some stocks have been used for non-critical

purposes.

Response: The stocks language in the relevant decisions taken by the Parties to the Montreal Protocol does not require that individual Parties prohibit use of stocks by users whose uses fall outside the categories of agreed critical uses. One, low volume users or users in the midst of a transition may have been relying on the availability of inventory as they ease into alternatives and therefore decided not to apply for an exemption. Two, as a matter of policy use of inventory 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. This issue is further discussed in the preamble to the 2007
CUE Final Rule.

Comment: According to the commenter, the total 2007 CUE amount should be met from stocks. The commenter objects to the approach to stock drawdown that the Agency has followed in past years and that is reflected in the 2007 proposal.-5- DRAFT (10/03/06): do not cite or quote Response: EPA has addressed similar comments in the preamble to the 2007 CUE Final Rule and in previous Federal Register notices and Response to Comment documents. On September 7, 2006 EPA released the aggregate inventory data for 2003-2005. EPA notes that these data, which are available on the docket EPA-HQ-OAR-2005-0538, show a continued decrease – approximately 16,422 metric tons in 2003, 12,994 metric tons in 2004, and 9,974 metric tons in 2005 - and demonstrate that the United States is managing its domestic inventory appropriately. The phaseout of new production and import and the orderly reduction in the existing inventory that facilitates transition to alternatives are proceeding in a manner consistent with previous successful phaseouts of ozone-depleting substances, such as chlorofluorocarbons (CFCs) and
halons.

Comment: The commenter does not support the concept of a one-year operational supply and believes that the normal supply-chain inventory for methyl bromide is less than two months.

Response: As the preamble to the 2007 CUE Final Rule states, EPA has not reached any conclusion regarding what amount of methyl bromide would be appropriate to maintain as a strategic inventory. The Agency intends to continue exploring the issue in future rulemakings, particularly in the context of the 2008 critical use exemption.