RE: Summary of Interagency Comments under EO 12866/13563 -- Protection of Stratospheric Ozone : Adjustments to the Allowance System for Controlling HCFC Production, Import, and Export Luke Hall-Jordan to: Frey, Nathan J. 11/29/2011 01:35 PM Hi Nathan, The two memos are attached. Please let me know if you or the interagency reviewers have any additional questions. Best, Luke

OverviewMemo_final_11.29.2011.docx OverviewMemo_final_11.29.2011.docx AdjustmentMemo_final_11.29.2011.docx AdjustmentMemo_final_11.29.2011.docx "Frey, Nathan J." 11/29/2011 09:37:07 AM Luke, In an effort to better understand the basis f... From: "Frey, Nathan J." <Nathan

_ J.

_ Frey@omb.eop.gov> To: Luke Hall-Jordan/DC/USEPA/US@EPA Date: 11/29/2011 09:37 AM Subject: RE: Summary of Interagency Comments under EO 12866/13563 -- Protection of Stratospheric Ozone: Adjustments to the Allowance System for Controlling HCFC Production, Import, and Export
Luke, In an effort to better understand the basis for the new approach that the Agency has taken regarding consumption allowances, interagency reviewers have requested to see the Adjustment Memo and Overview Memo found in the docket. Could you please pass them along as soon as convenient? Many thanks, Nathan -----Original Message----- From: Hall-Jordan.Luke@epamail.epa.gov [ mailto:Hall-Jordan.Luke@epamail.epa.gov] Sent: Thursday, November 17, 2011 11:36 AM To: Frey, Nathan J. Subject: RE: Summary of Interagency Comments under EO 12866/13563 -- Protection of Stratospheric Ozone: Adjustments to the Allowance System for Controlling HCFC Production, Import, and Export Nathan, Please see our revised preamble. This should address all concerns raised in the interagency review process. Best, Luke[attachment "winmail.dat" deleted by Luke Hall-Jordan/DC/USEPA/US] [attachment "message_body.rtf" deleted by Luke Hall-Jordan/DC/USEPA/US]

# ATTACHMENT 1
OverviewMemo_final_11.29.2011.docx*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review ***

Page 1 of 4 

### Overview of the Proposed Rule Regarding HCFC Allowances Between 2012 and 2014 EPA is proposing and taking comment on a number of op tions and changes in th is Notice of Proposed Rulemaking (NPRM) titled “Adjustments to the Allowance System for Controlling HCFC Production, Import, and Export,” regarding HCFC allowances for 2012 through 2014. The preamble presents many overlapping options for how production and consumption allowances for HCFC-22 and HCFC-142b are determined for the years 2012 through 2014. Baselines and allocations for all HCFCs other than HCFC22 and HCFC-142b are the same as in the 2009 Final Ru le (74 FR 66412). In this rule, EPA is proposing to do and taking comment on the following: (1) Use the HCFC-22 and HCFC-142b baselines esta blished in the 2011 Interim Final Rule for 2012 through 2014; (2) Address 2010 allowances in light of the U.S. Appeals Court for the D.C. Circuit’s decision in Arkema v. EPA ; (3) Use the same formula to provide HCFC-142b consumption and production allowances for 2012 through 2014 as the agency di d in the 2009 Final Rule; (4) Provide the same or fewer HCFC-22 consumption allowances relative to the 2009 Final Rule; (5) Provide the same or more HCFC-22 production allowances relative to the 2009 Final Rule; and (6) Revise the regulations at 40 CFR Part 82.23 to cl arify EPA’s position on inter-pollutant transfers. A summary of each proposal is provided below. Full discussion and references to additional supporting documentation can be found in the preamble to the NPRM. 1) Baselines would be the same as set in the 2011 IFR a. 2008 inter-pollutant trades made by Arkema an d Solvay would be reflected consistent with the decision in Arkema v. EPA b. Single-pollutant, inter-company trades occurring after the 2009 Final Rule would be reflected c. All other baselines would be the same as 2009 Final Rule 2) Addressing 2010 Allowances EPA is proposing to provide or not provide recoupment to the following: Company Chemical Consumption Allowances (kg) Production Allowances (kg) Arkema HCFC-22 4,749,692 4,611,848 DuPont HCFC-142b 2,339 0 Honeywell HCFC-142b 58,291 107,097 Solvay Fluorides HCFC-22 1,157,895 0

Solvay Solexis HCFC-142b 0 289,800


### a. The agency is providing four options to a ddress recoupment (i.e. the missed opportunity to produce or import HCFCs in 2010):*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review ***

Page 2 of 4 

### i. In addition to the total al location (“the pie”) for either chemical in 2013 only ii. In addition to the pie in 2013 and 2014 iii. From the pie in 2013 and 2014 1. If EPA goes with this option, it woul d need to allocate additional HCFC142b production allowances as there are too few a llowances to provide full recoupment. iv. No recoupment: EPA cannot provide meaningful recoupment since 2010 allowances have no value beyond December 31, 2010 v. If EPA decides to provide recoupment, the agency is taking comment on whether it should provide recoupment for (1) HCFC-22 and HCFC-142b consumption and production allowances or (2) only HCFC-22 consumption allowances. 3) Annual HCFC-142b Allocation EPA is proposing to allocate HCFC-142b allowa nces, both consumption and production, using the same methodology as in the 2009 Final Rule. In order to maintain approximately the same level of consumption as in the 2009 Final Rule , the new baseline percentage would be 4.9%, which would result in the allo wance allocations shown below: 2012 2013 2014 MT ODP MT MT ODP MT MT ODP MT
R-142b Cons. 100 7 100 7 100 7 Prod. 463 30 463 30 463 30

% 4.9% 4.9% 4.9% NB: The numbers listed here are rounded 

### 4) Annual HCFC-22 Consumption Allocation EPA is considering two options for the HCFC-22 consumption allocation. The first is to leave aggregate consumption allowances the same as the 2009 Final Rule—which corresponds to a decrease in the baseline percentage issued each year. The other option is to decrease the total consumption allocation by between 11 and 47 pe rcent each year, which would affect all companies proportionally. a. With no decrease in aggregate allocation le vels, the number of HCFC-22 consumption allowances (and the corresponding percentage of baseline) would be as follows: 2012 2013 2014 MT ODP MT MT ODP MT MT ODP MT R-22 Cons. 40,700 2,200 35,900 2,000 31,100 1,700 % 28.7% 25.3% 21.9% NB: The numbers listed here are rounded*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review ***

Page 3 of 4 

### b. Under the second option, EPA would allocate an amount within the range included in the table below: 2012 2013 2014 MT ODP MT MT ODP MT MT ODP MT Highest Annual

Allocations Cons. 36,200 2,000 31,400 1,700 26,200 1,400 % 25.5% 22.1% 18.5% Lowest Annual

Allocations Cons. 25,100 1,400 20,900 1,100 16,500 900 % 17.7% 14.7% 11.6% NB: The numbers listed here are rounded 

### 5) Annual HCFC-22 Production Allocation EPA is proposing to (1) provide the same amount of HCFC-22 production a llowances as in the 2009 Final Rule, (2) provide the same percentage of baseline for HCFC-22 production allowances as in the 2009 Final Rule, or (3) provi de production allowances at the same level as consumption allowances. Under option 2, the nu mber of HCFC-22 production allowances would increase relative to the 2009 Final Rule, which would allow companies whose baselines were not changed to produce HCFC-22 at the same leve l as established in the 2009 Final Rule. The agency would need to decide to decouple pr oduction and consumption in order to finalize options 1 or 2. a. Under option 1 (same approximate amount as the 2009 Final Rule), EPA would provide the following number and percentage of allowances: 2012 2013 2014 MT ODP MT MT ODP MT MT ODP MT Prod. 37,000 2,000 32,700 1,800 28,300 1,600

% 28.7% 25.3% 21.9% NB: The numbers listed here are rounded 

### b. Under option 2 (same percentage of baseline allocated for producti on as in the 2009 Final Rule), EPA would provide the following nu mber and percentage of allowances: 2012 2013 2014 MT ODP MT MT ODP MT MT ODP MT Prod. 44,000 2,400 38,900 2,100 33,700 1,900

% 34.1% 30.1% 26.1% NB: The numbers listed here are rounded 

### c. If EPA provides the same per centage of baseline for producti on allowances as it does for consumption, EPA would allocate between the high and low amounts included in the table below: 2012 2013 2014 MT ODP MT MT ODP MT MT ODP MT Highest Annual

Allocations Prod. 32,900 1,800 28,500 1,600 23,900 1,300 % 25.5% 22.1% 18.5% Lowest Annual

Allocations Prod. 22,800 1,300 19,000 1,000 15,000 800 % 17.7% 14.7% 11.6% NB: The numbers listed here are rounded*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review ***

Page 4 of 4 

### 6) Inter-pollutant transfers EPA is proposing to: a. Modifiy the language at 82.23(d) to memorialize EPA’s policy not to allow permanent inter-pollutant transfers of baseline allowances b. Modifiy the language at 82.23(b) to clarify that EPA allows inter-pollutant transfers of Article 5 allowances 

## c. Modifiy the language at 82.23(a) to clarify that a 0.1 percent offset applies to Article 5 allowance transfers In addition to the options summarized above, EPA is also taking comment on:

• Whether the installation of dry- shipped HCFC-22 condensing units will affect the phaseout of virgin HCFC-22 production and import.

• Whether providing allowances to reclaimers w ould affect the market price of R-22, and what effect that price change would have on the tran sition away from ODS and the sustainability of the reclamation industry.

• Whether other companies (in addition to the one small business who commented on this issue) are having difficulty acquiring HCFCs or HCFC allowances.

• Whether an allocation to manuf acturers of HCFC blends who are having difficulty acquiring HCFCs or HCFC allowances would be appropria te. Commenters supporting such an allocation should consider (1) how EPA might determine the total amount of such an allocation, (2) how EPA might determine which companies should r eceive allowances, (3) how EPA would verify that allowance holders are refu sing to sell HCFCs and HCFC allo wances, (4) how EPA might set baselines for these companies, (5) whether EPA should provide allowances in addition to the amount proposed in this rule, or as part of the amount proposed in this rule, and (6) how providing allowances to an additional set of co mpanies would affect the U.S. transition away from HCFCs.

• The analysis, supporting data, a nd assumptions presented in the Adjustment Memo (formally titled, “Analysis of HCFC-22 Serv icing Needs in the U.S. Air Conditioning and Refrigeration Sector”).

• Whether there would be an environmental be nefit to updating company baselines for 2015 and beyond based on more recent data.

• Whether, relative to the 2009 Final Rule, an increase in the total number of production allowances would result in (1) an increase in U.S. consumption, (2) an increase in U.S. production, either for domestic use or for export, and/or (3) an increase in worldwide production and/or consumption of HCFCs. Moreover, given th at one potential outcome might be an increase in U.S. exports of HCFC-22, EPA invites comment on the implications of such an increase for the U.S. economy and the global environment, pa rticularly as it relates to the smooth U.S. phaseout of HCFC-22. EPA also requests comme nts on whether section 605(c) would preclude allocating a different percentage of base line for production than for consumption.

# ATTACHMENT 2
AdjustmentMemo_final_11.29.2011.docx*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review ***

Page 1 

# Adjustment Memo Analysis of HCFC‐22 Servicing Needs in the U.S. Air Conditioning and Refrigeration Sector Additional Considerations for Estimating Virgin Demand Background In December 2009, EPA published its final hydrochlor ofluorocarbon (HCFC) allocation rule, “Protection of Stratospheric Ozone: Adjustments to the Allowa nce System for Controlling HCFC Production, Import, and Export,” (2009 Final Rule). Th at rule contained consumption a nd production allocations for HCFC

‐ 22, HCFC
‐ 142b and other HCFCs for the regulatory period of 2010 to 2014. As a result of the decision in Arkema v. EPA, which vacated the HCFC

‐ 22 and HCFC

‐ 142b allocations for 2011

‐ 2014, EPA published an interim final rule allocating HCFC

‐ 22 and HCFC

‐ 142b allowances for 2011. The proposed rulemaking that this memo accompanies proposes various options for providing HCFC

‐ 22 and HCFC

‐ 142b allowances in 2012 through 2014. The HCFC allowance system is part of EPA’s Clean Air Act program to phase out ozone ‐ depleting substances (ODS) and also supports U.S. compliance with the Montreal Protocol on Substances that Deplete the Ozone Layer . The most recent milestone of EPA’s HCFC phaseout schedule was on January 1, 2010, limiting th e production and import of HCFC

‐ 142b and HCFC

‐ 22 to specified amounts significantly lower than limits se t for 2003 through 2009. Between 2010 and 2020, the production and import of HCFC

‐ 22 is permitted to service existing refrigeration and air conditioning (AC) equipment. The allocation levels in EPA’s 2009 Final Rule and 2011 Interim Final Rule were based in part on projections of HCFC

‐ 22 servicing demand, as estimated in The U.S. Phaseout of HCFCS: Projected Servicing Needs in the U.S. Air

‐ Conditioning and Refrigeration Sector (known as the Servicing Tail Report). The report (1) examined the primary sources of HCFC

‐ 22 for the service of the installed base of refrigeration and AC equipment after 2010, (2) estimated the amounts of HCFC

‐ 22 recovered from equipment that could be subsequently recycled or reclaimed for reuse, and (3) based on these projections, estimated servicing demand for virgin HCFC

‐ 22. Since the 2009 Final Rule was published, the Agency has heard from stakeholde rs that the market for HCFC
‐ 22 has evolved. Stakeholders cite a number of factors that indicate a change in the market, including low HCFC

‐ 22 prices, increased reuse in certain en d uses, increased installation of dry

‐ shipped condensing units for repair, un

‐ expended consumption allocations for HCFC

‐ 22 in past years, and reports of a potential surplus inventory of HCFC

‐ 22. Some of these factors have been identified in public comments by industry members. In addition to this in formation, the U.S. economy is in a dramatically different position than when the Servicing Tail Report was developed.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review ***

Page 2 This analysis summarizes industry feedback and s uggests adjustments to the amount of modeled servicing demand for HCFC

‐ 22 in 2012 through 2014. In the proposed rule for 2012 through 2014, EPA is seeking comment on the assumptions EPA is making in this memo. 

## Methodology Overview The analysis uses EPA’s Vintaging Model to form the basis of quantitative estimates of current and projected HCFC

‐ 22 servicing demand, including from virgin and used sources. The Vintaging Model estimates the annual chemical emissions from industry se ctors that have historically used ODS, including AC, refrigeration, foams, solvents, aerosols, and fire protection. Within these industry sectors, there are 59 independently modeled end

‐ uses. The model uses information on the market size and growth for each end

‐ use, as well as a history and projections of the market transition from ODS to alternatives. As ODS are phased out, a percentage of the market share or iginally filled by the ODS is allocated to each of its substitutes. The model tracks emissions of a nnual “vintages” of new equipment that enter into operation by incorporating information on estimate s of the quantity of equipment or products sold, serviced, and retired or retrofitted each year, and the quantity of the compound required to manufacture, charge, and/or maintain the equipm ent. EPA’s Vintaging Model uses this market information to build an annual inventory of in

‐ use stocks of equipment and the ODS and non

‐ ODS substitutes in each end

‐ use. Estimates of HCFC

‐ 22 servicing demand from EPA’s Vintaging Model were the starting point for this analysis. Targeted industry research—through inte rviews and public submissions—was conducted to identify factors affecting the current market for HCFC

‐ 22. Then, overall servicing demand was adjusted to account for surplus inventory from past years a nd supplies of recovered refrigerant (either reclaimed or directly reused in the owner’s equipment). More detail is provided on these sources and adjustments in the sections that follow. 

## Projected HCFC-22 Servicing Needs Refrigeration and AC equipment commonly requires servicing, which may include adding refrigerant to account for refrigerant losses that occur over time. 1 While EPA banned the production and import of HCFC
‐ 22 for use in new appliances starting in 2010, the agency continues to al low limited production and import of virgin HCFC

‐ 22 to service appliances manufactured prior to January 1, 2010. Figure 1 presents projected HCFC

‐ 22 demand for servicing equipment in 2012, 2013, and 2014. These estimates were developed based on EPA’s Vintaging Model. As shown, approximately 56,200 metric tons (MT) of HCFC

‐ 22 will be required to service AC and refr igeration equipment in 2012, 51,200 MT in 2013, and 45,900 MT in 2014. Residential AC represents the majority of HCFC

‐ 22 demand for 2012 to 2014.

1 The servicing need estimates projecte d in this analysis include refrigerant to replace quantities that leak from operating equipment as well as losses that ma y occur while servicing operating equipment.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review ***

Page 3 HCFC
‐ 22 servicing demand projected in this analysis di ffers slightly from the demand presented in the 2009 Servicing Tail Report and the 2009 Final Rule. These differences result from updates to the Vintaging Model. EPA’s Vintaging Model is periodically updated and peer

‐ reviewed as new information is incorporated. Since the 2009 Final Rule, updates to unitary AC and water & ground

‐ source heat pump growth rates, future growth rates, stock of refriger ated appliances, and residential unitary AC servicing emission rates were applied to produce these estimates.

Figure 1: 2012 ‐ 2014 Demand for Servicing Refrigeration and AC Equi pment, by End Use*

*"Other" refers to window units, packaged terminal units, dehumidifie rs, water & ground source heat pumps, motor vehicle AC, small & medium retail food and mobile AC. 

## Sources of HCFC-22 for Servicing As of 2010, only existing sources of HCFC

‐ 22 and a controlled quantity of virgin HCFC

‐ 22 (limited through allowance allocations distributed by EPA) are availa ble to the AC and refrigeration industry to meet servicing demand. Existing sources, whic h can offset the need for virgin HCFC

‐ 22, include (1) recycled HCFC
‐ 22, (2) reclaimed HCFC

‐ 22 and (3) imported, used HCFC

‐ 22. Previously

‐ produced virgin material may have also been stored in inventory; this surplu s inventory can also offset the need for additional virgin production and imports. HCFC

‐ 22 can also be obtained through inter

‐ pollutant transfers of 0 10,000 20,000 30,000 40,000 50,000 60,000

2012 2013 2014Demand (MT)

Year Other IPR Large Retail Food Refrigeration Cold Storage Chillers Large Commercial AC Small Commercial AC Residential AC*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review ***

Page 4 allowances. Of the five sources described below, this analysis will focus on recycled and reclaimed HCFC

‐ 22, as well as surplus inventory of virgin material.

• Recycled: Recycled HCFC

‐ 22 refers to material that has been extracted from an appliance and cleaned for reuse without meeting all the requirements for reclamation. EPA regulations allow for recharge of recycled refrigerants into the same piece of equipment or another piece of equipment with the same owner. EPA does not collect data on the amount of HCFC

‐ 22 that is recycled.

• Reclaimed: Refrigerants that are resold to be used in other equipment must be reclaimed to a standard level of purity based on the ARI Standard 700, to ensure sufficient purity of the reclaimed refrigerant. Certified re claimers must report to EPA the total quantity of material sent to them each year for reclamat ion, the mass of refrigerant reclaimed that year and the mass of waste products generated that year.

• Surplus Inventory from Past Years: Refrigerants that are import ed, produced or reclaimed in previous calendar years can be stored in inventor y and sold in later years. This practice is possible at all levels of the refrigerant distribut ion chain (producers, distributors, technicians, etc.).

• Used imports: Used HCFC

‐ 22 can be imported via EPA’s shipment

‐ by

‐ shipment petition process. The petition process ensures that HCFCs have been used (and were not newly produced) prior to import. Currently, the quantity of used HCFC

‐ 22 import is minimal and has not been included in this analysis.

• Inter ‐ pollutant transfers of allowances: Another source of HCFC

‐ 22 can result from allowance holders transferring their allowances from one HCFC to HCFC

‐ 22, which EPA permits on an annual and ODP

‐ weighted basis with a 0.1 percent deduction. Industry sources have indicated that the number of inter

‐ pollutant transfers is low, so this factor has not been included in this analysis. 

## Adjusting for Additional Considerations to Estimate Virgin HCFC-22 Demand Based on new industry research, EPA could adjust servicing demand as modeled by the Vintaging Model to produce estimates that better reflect current and anticipated market conditions. These adjustments incorporate new information about (1) surplus inventory from past years, (2) the capacity of reclaimers to meet servicing demands, and (3) recovery and reuse of HCFC

‐ 22 in the large retail food sector (i.e., supermarkets), as described below. 2 A list of companies consulted for th is analysis is provided at the end of this report.

2 Other factors may also influence servic ing demand, but data were not readily available at the time of this writing to support quantitative adjustments. These factors might include a faster or slower transition out of HCFC

‐ 22 than*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review ***

Page 5 Exhibit 1: HCFC ‐ 22 Economics Industry representatives report substantial reclamation capacity and access to recovered materials to meet a large proportion of servicing demand—as long as the price for virgin HCFC

‐ 22 increases sufficiently to provide a market incentive for recovery and reclamation. The fact that 2010 HCFC
‐ 22 consumption allowances were not fully expended suggests that there is more than sufficient virgin HCFC

‐ 22 in the aftermarket, and that supply of virgin HCFC

‐ 22 would have to decrease sizably to cause the price for virgin HCFC

‐ 22 to increase. Currently virgin HCFC

‐ 22 is priced at around $4.50 per pound; some industry representatives suggest that this price would have to exceed $8.00 per pound for reclaimed HCFC

‐ 22 to become competitive, given reclamation costs associated with storage, handling, processing, and cross

‐ contamination. • Surplus Inventory Drawdown: Because HCFC
‐ 22 inventory information is not officially reported to EPA, this analysis relies on estimates provided by industry. Feedback suggests approximately 100 million pounds (45,400 MT) of surplus HCFC

‐ 22 from past years was in inventory at the end of 2010. Half of that figure (22,700 MT, or about six months worth of demand) is comprised of packaged virgin HCFC
‐ 22 and the rest is bulk gas in large storage containers (e.g., ISO tanks). There is less certainty on the amount of bulk gas in inventory; various factors may have contributed. For example, industry contacts suggested that a cooler

‐ than

‐ anticipated summer in 2009 3 may have resulted in significant quantities going to inventory due to low servicing demands. Entities may also be holding virgin HCFC

‐ 22 produced prior to 2010 in anticipation of higher prices in future years or as preparation for the 2010 stepdown under the Montreal Protocol. This analysis assumes surplus inventory betwee n 22,700 and 45,400 MT exis ted at the beginning of 2012. Given expectations about the transition away from HCFCs, as well as the 2015 and 2020 HCFC phase

‐ out milestones, it is estimated that the complete drawdown could take somewhere between four to eight years. This analysis also assumes that surplus inventory of virgin HCFC

‐ 22 will be drawn down at an annual rate of appr oximately 6,000 MT. This quantity is an average estimate given the ranges in amounts and potent ial drawdown periods. EPA is seeking comment on this assumption in the proposed rule for 2012 through 2014.

• Reclaimer Capacity Adjustment: In its 2009 Final Rule, EPA estimated that 12,500 MT of HCFC

‐ 22 would be provided annually by recovery and reclamation through 2014. To date, reported reclaimed amounts have been lower, purportedly because of weak economic incentives. Specifically, the relatively low price of virgin HCFC

‐ 22 has challenged the economic viability of reclamation practices. However, recent interviews with reclaimers suggest that reclamation facilities have the technical capacity to meet a greater proportion of servicing demand, if the price is right (see Exhibit 1 Error! Reference source not found. ). A number of those interviewed originally anticipated. EPA is contin ually reviewing changes in the market and is updating the Vintaging Model accordingly. 3 While temperatures for the year were slightly higher th an average in the contiguous U.S., NOAA reports that summer 2009 was cooler than usual (see NOAA: 2009 Global Temperatures Well Above Average; Slightly Above

‐ Average for U.S. Available at http://www.noaanews.noaa.gov/ stories2009/20091208_ globalstats.html).*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review ***

Page 6 stated that reclaimers were cu rrently operating significantly below capacity. Interviews suggest that anywhere from 25% to 80% of servicing demands could be met by increasing the utilization of existing machinery and increasi ng the number of operational sh ifts in a week. This analysis uses 12,500 MT as a low bound for reclamation (c onsistent with the 2009 Final Rule), and 35% of total servicing demand in 2012 (19,700 MT) as the higher bound. EPA is seeking comment on this assumption in the prop osed rule for 2012 through 2014.

• Large Retail Food Recovery and Reuse Adjustment: Industry sources suggest that recovery and direct reuse is a widespread practice amongst supermarkets; however, the extent of recovery and reuse can vary significantly between chains, depending largely on the extent to which supermarkets are converting their HCFC

‐ 22 equipment to alternatives. For example, some supermarkets that have converted a substantial proportion of their HCFC

‐ 22 equipment indicated that they have sufficient recovered HCFC

‐ 22 in stock for servicing such that they do not anticipate a need to purchase any more virg in material in the future. Other supermarkets that have not converted from HCFC

‐ 22 equipment as aggressively indicated that as low as 10% to 20% of their servicing needs are met by materi al recovered from retrofitted stores they own. This analysis assumes that recovery and reuse ca n meet a range of 20% to 70% of the servicing needs of the large retail food sector. EPA is seeking comment on this assumption in the proposed rule for 2012 through 2014. Specifically, EPA is interested in learni ng if the percentage used in the final rule should be closer to 20% or 70%. Table 1 summarizes the assumptions and adjustments that could be applied to the original HCFC

‐ 22 servicing demand. Two scenarios are considered: a Larg er Allocation Scenario and a Smaller Allocation Scenario. Under both scenarios, EP A would allocate fewer consumptio n allowances relative to the 2009 Final Rule. Table 1: Annual Adjustments to Total Servicing Demand Adjustment Larger Allocation Scenario Smaller Allocation Scenario Assumed annual drawdown of surplus HCFC

‐ 22 inventory 6,000 MT (13% to 26% of total surplus per year) Market

‐ wide servicing demand met by reclaimed HCFC

‐ 22 12,500 MT (22% in 2012) 19,700 MT (35% in 2012) Servicing demand met by recovered HCFC

‐ 22 in the large retail food sector 1,100
‐ 1,600 MT (20% per year) 3,800
‐ 5,500 MT (70% per year)
Applying the adjustments shown in Table 1 results in a range of changes in servicing demand, which account for the portion of total de mand that can be met through reco very and reuse, reclamation, and surplus drawdown. Table 2 shows how these adjustments yield new overall estimates of demand for virgin HCFC

‐ 22 from 2012 through 2014.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review ***

Page 7 Table 2: Results of Adjustments to HCFC ‐ 22 Servicing Demand (Metric Tons) 2012 2013 2014 Larger Allocation Scenario Smaller Allocation Scenario Larger Allocation Scenario Smaller Allocation Scenario Larger Allocation Scenario Smaller Allocation Scenario Total Servicing Demand (Vintaging Model) 56,200 51,200 45,900

Surplus Inventory Drawdown ‐ 6,000
‐ 6,000
‐ 6,000 Market

‐ wide Servicing Demand Met by Reclaimed HCFC
‐ 22 ‐ 12,500
‐ 19,700
‐ 12,500
‐ 19,700
‐ 12,500
‐ 19,700 Servicing Demand Met by Reused HCFC
‐ 22 in Large Retail Food Equipment ‐ 1,600
‐ 5,500
‐ 1,300
‐ 4,600
‐ 1,100
‐ 3,800
Total Adjustment

‐ 20,100
‐ 31,200
‐ 19,800
‐ 30,300
‐ 19,600
‐ 29,500 Revised Allocation 36,200 25,100 31,400 20,800 26,300 16,400 Totals may not sum due to independent rounding. 

## Allocations for HCFC-22 from 2012 to 2014 Adjusting total servicing demand based on the above factors provides a new estimate of HCFC

‐ 22 virgin demand in 2012, 2013 and 2014. These new virgin demand estimates sugg est that EPA should allocate fewer allowances for 2012 through 2014 than were provided in the 2009 Final Rule. Table 3 presents revised demand, the allowance le vels in the 2009 Final Rule, and the percentage change in overall consumption allocations based on these values. As shown, a consumption allowance reduction of 11% to 38% is possible for 2012, 13% to 42% for 2013, and 15% to 47% for 2014.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review ***

Page 8 Table 3: Allocation Adjustment Relative to the 2009 Final Rule (Metric Tons) 2012 2013 2014 Larger Allocation Scenario Smaller Allocation Scenario Larger Allocation Scenario Smaller Allocation Scenario Larger Allocation Scenario Smaller Allocation Scenario HCFC
‐ 22 Consumption Allowances in the 2009 Final Rule 40,700 35,900 31,100 Revised Allocation 36,200 25,100 31,400 20,800 26,300 16,400 Percentage Allocation Change Relative to the 2009 Final Rule ‐ 11% ‐ 38% ‐ 13% ‐ 42% ‐ 15% ‐ 47% Totals may not sum due to independent rounding. Table 4 shows the possible allocation amounts for 2012 through 2014 as both an aggregate amount and percentage of baseline. The proposed HCFC

‐ 22 consumption baseline for 2012 through 2014 is 141,864,931 kg. Table 4: Summary of Proposed Allocation Adjustments (Metric Tons) 2012 2013 2014 Larger Allocation Scenario Smaller Allocation Scenario Larger Allocation Scenario Smaller Allocation Scenario Larger Allocation Scenario Smaller Allocation Scenario Revised Allocation 36,200 25,100 31,400 20,800 26,300 16,400 Percentage of Baseline Allocated 25.5% 17.7% 22.1% 14.7% 18.5% 11.6% Totals may not sum due to independent rounding.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review ***

Page 9 

## List of Companies Consulted Airgas Specialty Products Inc. Personal communication with ICF International. October 7, 2011. Coolgas. Personal communication with ICF International. October 6, 2011. Food Lion. Personal communication with ICF International. October 3, 2011. Hudson Technologies Company. Personal communication with ICF International. October 7, 2011. National Refrigerants, Inc. Personal communication with ICF International. October 12, 2011. RemTec International. Personal communication with ICF International. October 4 and 17, 2011. Supervalu. Personal communication with ICF International. October 5, 2011. Weis Markets. Personal communication with ICF International. October 3, 2011.