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www.wileyrein.com Tracy Heinzman
202.719.7106 theinzman@wileyrein.com November 16, 2012

VIA E-MAIL

Ms. Gina McCarthy Assistant Administrator, Office of Air and Radiatio n U.S. Environmental Protection Agency 1200 Pennsylvania Avenue, NW
Mail Code 6101-A Washington, DC 20460

Ms. Cynthia Giles Assistant Administrator, Office Enforcement and Com pliance Assurance U.S. Environmental Protection Agency 1200 Pennsylvania Avenue, NW
Mail Code 2201-A Washington, DC 20460

Re: Methyl Bromide Critical Use Allowances – Upcomi ng Expiration of
Allowances

Dear Ms. McCarthy and Ms. Giles:

I write on behalf of the Methyl Bromide Industry Pa nel LLC (MBIP) regarding allowances for critical uses of methyl bromide issu ed under Title VI of the federal Clean Air Act (CAA). The member companies of the M BIP hold all existing production and consumption (import) allowances for critical uses of methyl bromide under that title of the CAA. They are Albe marle Corporation, ICL-IP America, Inc. (formerly Ameribrom, Inc.), Great Lak es Chemical Corporation (a Chemtura Company) and TriCal, Inc.

Under EPA’s “critical use exemption” framework regu lations, allowances for critical uses of methyl bromide are set on an annua l, calendar basis beginning on January 1, and expiring on December 31. Unfortunat ely, we are now in a situation where the annual production and import allowances w ill expire at the end of this year without new allowances in place for next year. If no allowances (or other bridging mechanisms) are in place, no production or imports can occur after December 31, 2012, to meet the needs of growers for Spring planting applications in critical states. A delay in production and impo rts beyond the beginning of the New Year will make it extremely difficult, if not i mpossible, to get material into the hands of users in time for those applications.Ms. Gina McCarthy Ms. Cynthia Giles November 16, 2012 Page 2

The risk that growers will not have critical use ma terial in time for the 2013 planting season is very real. The proposed rulemak ing for the 2013 allowances has not yet been released. Given the short time betwee n now and the end of the calendar year along with the comment period require d for rulemaking, it seems highly unlikely that the necessary allowances for 2 013 will be published for comment and finally promulgated before January 1, 2 013.

Similar situations arose at the end 2008, 2009, 201 0, and 2011 because of delays in promulgating the allowances. In every case, the Ag ency issued a “no action assurance” letter to allow production and imports a fter January 1 on an interim basis until the new annual allowances were put in place. A “no action” letter (or similar decision) is again necessary to avert a gap in the allowances for 2013.

We respectfully request that a “no action” letter f or 2013 authorize the full amount of allowances in the anticipated 2013 proposed rule , instead of only 50% as EPA provided in 2012. The 2012 proposed rule allowed f or 760 metric tons of new production/imports, but the no action assurance let ter only permitted 380 metric tons. (This was a departure from prior years, wher e EPA applied the assurance to the full amount.) With the final 2012 rule not com ing out until mid-May, the industry was under a significant hardship to supply the needs of its customers, which comes largely in the first and second quarter of the year. Growers have tight application windows, and the delay of supply for ev en a short time can force them to miss an entire season of production.

In 2013, the volume authorized by the Parties is on ly 562 metric tons and there are already concerns among growers that this amount wil l be insufficient to meet needs due to the removal of a key alternative (iodomethan e) from the market. Thus, it is even more important that EPA authorize production/i mport of the full amount of the proposed allowances in the no action assurance.

The remainder of this letter provides background on the methyl bromide allowance system, the 2013 critical use rulemaking, and the i mpacts that will likely occur if there is a gap in the authorization of allowances.

Given the impending expiration of the current allow ances, and the time sensitivity involved, we would like to know if EPA intends to i ssue the “no action” letter as soon as possible.Ms. Gina McCarthy Ms. Cynthia Giles November 16, 2012 Page 3

Background

Methyl bromide is an agricultural fumigant, used to treat soil prior to planting crops, food processing facilities and imported comm odities to prevent the introduction of unwanted pests into the U.S. food s upply. Methyl bromide is used throughout the calendar year, with heavy use beginn ing in the first quarter of the year for as growers in various geographic regions t reat their soil prior to the start of the Spring planting season.

Methyl bromide is subject to the Montreal Protocol on Substances that Deplete the Ozone Layer, of which the United States is a signat ory. The United States fulfills its obligations under the Protocol through a series of regulations set forth at 40 C.F.R. Part 82. Under those regulations, methyl br omide production and imports are strictly controlled. All production and import s were banned as of January 1, 2005, except for certain “critical” and quarantine/ pre-shipment uses.

Production and imports for “critical” uses are cont rolled and capped through an allowance system. The allowances are derived from “critical use exemptions” approved on an annual basis by the Parties to the P rotocol. EPA authorizes production and imports of methyl bromide to fulfill the exemptions by granting
allowances to the MBIP members. EPA issues the all owances annually — i.e., the allowances become effective on January 1 and expire on December 31 of each year. Production and imports are strictly prohibited in t he absence of allowances, with stiff civil monetary and criminal penalties imposed for non-compliance. Furthermore, methyl bromide produced using critical use allowances must be sold in the year produced; otherwise, producers are pena lized with deductions from
future allowances.

Because EPA has chosen to implement the critical us e allowance program on a year-by-year basis, it must engage in a notice and comment rulemaking each year to set new allowances before the existing allowances e xpire at the end of the calendar

year.

The 2013 Critical Use Exemption (CUE) Rulemaking

The allowances and critical uses for 2013 were prev iously approved by the Parties to the Montreal Protocol at a meeting held on Novem ber 21-25, 2011 (Decision XXIII/4). EPA has not yet published the proposed rule for the 2013 allowances inMs. Gina McCarthy Ms. Cynthia Giles November 16, 2012 Page 4

the Federal Register. Once published, EPA must acc ept comments from the public, and then review the comments it receives on the pro posed rule – a process that generally takes EPA several months to complete – be fore it can publish the final rule with the 2013 allowances in the Federal Regist er.

Given the limited number of days left in the calend ar year, it does not appear that EPA will have enough time to promulgate the propose d rule, review the comments it receives on the proposed rule, and promulgate a final rule for the 2013 allowances before the current allowances expire on December 31 . Furthermore, given the Agency’s history of delay in promulgating final rul es – the final 2012 rule was not promulgated until May 17, 2012 – the final 2013 rul e is not likely to be promulgated until sometime well into next year. In the meantime, existing allowances will expire and MBIP members will face s ignificant legal penalties if they produce or import methyl bromide to fill criti cal use needs in the interim.

The Supply Impacts From Delays

A delay in the authorization of production and impo rt allowances for 2013 beyond January 1 is likely to create significant negative impacts in the methyl bromide supply chain.

As noted above, methyl bromide use is concentrated in the early part of the year and coincides with the growing season. Demand is heavi est in the first quarter of the year as the material must be applied to soil in adv ance of planting crops, which predominantly occurs in the Spring. The earliest s oil applications for 2013 begin in January and February, and Spring usage in some geog raphic areas, such as Florida accounts for a significant portion of the total acr eage treated for the entire year.

Because of the structure of the supply chain, mater ial does not instantaneously appear in the hands of users after it is produced o r imported. Packaging, distribution and transportation must occur once the product is manufactured or imported.

There is only one location in the United States whe re methyl bromide is produced. That facility is located in Arkansas. Primary use areas are located in California and the Southeastern region of the United States. Thus , the areas where the product is used are geographically dispersed from the manufact uring point. Even underMs. Gina McCarthy Ms. Cynthia Giles November 16, 2012 Page 5

normal production conditions, it takes four weeks a fter production begins to get product to the field.

Imported material is produced at a facility in Isra el, and arrives in the U.S. by ship. Under normal circumstances, it takes at least six w eeks to transport material from Israel to the U.S. port of entry. At that point, t he material has to be further distributed, packaged and transported to users, whi ch depending on location, adds another two weeks to the distribution process.

Given the timing of the use season and these logist ical realities, a delay in production and imports beyond two to three weeks in to 2012 will make it extremely difficult if not impossible to get material into th e hands of users in time for Spring planting applications in critical areas.

Although there is a very limited amount of methyl b romide stock that was produced and/or imported with regular allowances prior to th e 2005 phase-out remaining in the supply chain, we cannot rely on the availabilit y of these stocks to meet demand for critical uses while production and imports are halted pending the completion of the 2013 rulemaking process.

As a threshold matter, the amount of pre-2005 stock s has fallen to dramatically low levels in the last six years, as EPA has reduced th e level of CUE allowances available to producers. MBIP expects that the leve l of stocks at the start of 2013 will be significantly below the amount approved by the Parties to the Montreal Protocol for critical uses next year. Absent new p roduction and imports, many critical users would not be able to apply methyl br omide to their fields in time for the Spring planting season due to the low level of stocks.

In addition, there are other constraints on using s tocks that must be considered. First, pre-2005 stocks are not uniformly distribute d, either geographically, commercially or by formulation. Although some amoun t of stock may theoretically be available, if it is not in the right location or in the correct formulation, it will be of no use to the grower or applicator.

Second, the vast majority of the stocks is concentr ated in the hands of only a few distributors, and may already be allocated or contr acted to particular non-critical users. As such, they would not be available to cri tical users who need to fumigate before new material can be distributed through the supply chain. Moreover, thereMs. Gina McCarthy Ms. Cynthia Giles November 16, 2012 Page 6

are many distributors who have little or no pre-200 5 stocks. Delays in authorizing new production and imports will unfairly put distri butors with no pre-2005 material at a commercial disadvantage.

Third, EPA’s regulations prohibit a user from apply ing critical use methyl bromide to a field that has been fumigated with stocks. A grower who is forced to fumigate with stocks in early 2013, will be prohibited from subsequently using critical use material once the 2013 rule is authorized and may t hus lose the opportunity to avail himself of the critical use exemptions.

Finally, it is important to note that the rulemakin g for the allowances will establish the uses of methyl bromide that are recognized as “ critical” for 2013. (Like allowances, the uses expire at the end of the calen dar year.) Thus, even if there is any 2012 “critical use” methyl bromide in the suppl y chain that is carried over into 2013 (which based on historical data is unlikely), that material cannot be supplied to users until the final 2013 rule is promulgated. Th e current regulations prohibit critical use methyl bromide from being used for any purpose other than critical use applications. Since those applications won’t be e stablished until the final rule is promulgated, a grower that was able to obtain mater ial carried over from 2011 production would be prohibited from using that mate rial on his field until the application was designated as “critical” under the new rule.

Prior Rulemaking Delays and No Action Assurances

A situation similar to the one presented developed at the end of 2008, 2009, 2010 and last year when EPA was delayed in promulgating critical use production and import allowances for 2009, 2010, 2011, and 2012 re spectively. In every case, EPA recognized the significant supply constraints that would occur if production and imports were halted pending the establishment of th e annual allowances and issued
a “no action assurance” letter. The letters for ea ch year authorized production and imports on an interim basis until the rulemaking pr ocess was completed or, in some cases, a set date was reached. This allowed the su pply of methyl bromide for critical uses to continue without interruption and ensured that growers’ needs in the first quarters of 2009, 2010, 2011, and 2012 were m et.

We respectfully request that the “no action” letter for 2013 authorize the full amount of allowances in the anticipated 2013 propos ed rule as provided in 2009, 2010 and 2011. In 2012, EPA departed from this pra ctice and only authorized one-Ms. Gina McCarthy Ms. Cynthia Giles November 16, 2012 Page 7

half of the full amount. The 2012 proposed rule al lowed for 760 metric tons of new production/imports, but the no action assurance let ter only permitted 380 metric tons. With the final 2012 rule not coming out unti l mid-May, the industry was under a significant hardship to supply the needs of its customers, which comes largely in the first and second quarter of the year . As noted above, growers have tight application windows, and the delay of supply for even a short time can force them to miss an entire season of production.

In 2013, the volume authorized by the Parties is on ly 562 metric tons and there are already concerns among growers that this amount wil l be insufficient to meet needs due to the removal of a key alternative (iodomethan e) from the market. Thus, it is even more important that EPA authorize production/i mport of the full amount of the proposed allowances in the no action assurance.

Conclusion

In short, the delay in the 2013 critical use rulema king is putting both the industry and methyl bromide users on a course for a disrupti on in methyl bromide supplies for the coming year. The MBIP member-companies mus t be able to continue to produce and import methyl bromide for critical uses in early 2013 to avert that situation. Thus, we seek the Agency’s assurance th at it will not take action against any MBIP members that produce and import methyl bro mide in accordance with
interim allowance levels until the final 2013 rule is made effective.

Granting the assurance would impose little burden o n the Agency. In addition, there would be no increased environmental impact as the production and imports at issue would occur anyway if the rule was promulgate d on a normal schedule. In this case, the member companies of the MBIP are sim ply trying to do their best to supply material to meet grower needs identified as “critical” while ensuring thatMs. Gina McCarthy Ms. Cynthia Giles November 16, 2012 Page 8

their activities comply with the spirit and the let ter of EPA’s regulations and enforcement policy. It is surely in EPA’s interestto further both the goals of the critical use program, and encourage such responsibl e corporate action.

Sincerely,

Tracy A. Heinzman Counsel to the Methyl Bromide Industry Panel

cc: Larry Elworth, Agricultural Counselor Sarah Dunham, OAP Drucilla Hufford, SPD Phillip Brooks, OCE/AED David Donaldson, SPD Jeremy Arling, SPD
MBIP Members