### Associates

Air and Radiation Docket and Information Un ited State Environmental Protect io n Agency Mail Code : 6102T 1200 Pennsy lva ni a Avenue, N . W Washington DC 20460 Docket ID No. EPA-HQ-OAR-201 0- 1040 , 

### Summary : The December 

### 15 , 2009 final rule en titled -Protection of Stratospheric Ozone has been well vetted . The Environmental Protection Agency had a very well documented docket of opinions and facts pri o r to the White House signing off on this regulation . EPA is now faced with rectify i ng th is matter as directed by the U . S . Court of Appeals for the District of Columbia in Arkema v . EPA. EPA must bring this matter back to square one , with respect to the other aggrieved parties. EPA must consider the United States Environmental Protection Agency Certified Refr i gerant Reclaimer . The allowance reg u lation has had 

### a desperate impact on the industry that EPA regulates 1 . The mathematics and interpretation of the Montreal Protocol and it's subsequent amendments is not i n question . What is at issue, is the level of the production and censumption rights that are centrolled oy EPA. Rec laimtion of HCFC- 22 reached its h i ghest level in the calender year 2008 , s li ght!y over 10 million pounds or nearly 23% over the prior year. In 2009 the number dropped to 7 .5 million pounds of HCFC-2 2 . This decrease was nearly 

### 25°,oE, less than the prior year . 

### As reported in 2010, after the phase-dawn rule was approved , there was only 

### a single dig it increase of 6% less than 8 million pounds 2. These results are 

### in spite of the prOjected 

### 27 .5 million pound shortfall for serv i cing existing equipment. l

t Title 42, Chapter 85 

### > Sub Chapter VI. 

### § 767 Lg. National recycling and emission reduction program. (a) In general 2 EPA Data on http ://www.epa.gov/07.oneititlc6/608/reciamation/recsum .pdf

### EPA's GreenChili initiat ive is to be commended for its influence on the safe handling of HCFC-22. The sharp rise in the recovery and reclaim of HCFC-22 can be attributed to this 

### meaningful initiative and it's partners . The GreenChill in itiative like the Bakery Partnership of the past is good for the environment. Actual amounts of HCFC-22 available for sa le or reuse will be hard to compile. The best i ndicator that the curre nt allowances are too high is indicated by pricing of HCFC -22 . Supp ly and demand economics is at play here . EPA must consider that the Reclaim Industry is retrenching on the value it can place on recovered mater ial. EPA could have engaged a certified public accounting firm to obta i n the pricing history of HCFC-22, under strict confidentiality agreements . A report could have been compiled and reported to the public. However, this would be extremely expensive and would not be available in time to meet the current deadline on this important matter . Informed sources suggest that any open dialogue on price could be 

### construed as "price fixing" . Wh il e never published, no reclaim facili ty can process recovered product anywhere near the cost of virgin product. The reclaimer must take into consider factors such as cross-contamination, destruction of by-products and fre ight. HCFCs that are produced new , whether domestically or imported, do not have all the same obstacles . The rec laimer must: 

# al buy the raw used product b test for contaminants c reclaim (process to industry accepted standards 

### d package

# finishe~ product into i ndustry standard packaging e return cylinders to original source Historically , the Class I ODS made recovery and reclamation flourish as a resu lt 

### of the i r value. The environment was protected as these materials represented a significant monetary value and were recovered and reused . The i r value increased after the production phase-out in 1995 . Even today, these materials are being widely held , controlled and sold in derivative environmental instrument markets . The past is a good predictor 

### of the future. We must adjust our thoughts on how to best protect the environment. We live in interesting times . We are faced with many factors today that where not and could not be 

### foreseen at the time this regulation for phase-down was authored. All Indicators suggest that there is too llIuch HCFC-22 availabl e in the United States Market.Considerations : EPA must create a manageable shortage to ensure the future of it's reclaim prog ram . Th i s act ion will support the National Recycting and Emission Reduction Program mandated by Congress . There is no empirical proof of the level of stock piled of HCFC-22. EPA need only look into the SARA Reporting of Tier II Hazardo u s C h emicals and realize that the required report i ng is done by informed companies and there is minima l compliance on a nation al basis . EPA cannot obtain information to refute or disp ute the fact that the price of this material is now at 2008 levels at best.

200. 200'} 20 10 2011 Recovered Buy Blick $2 .50 S2 . 50 Sl.50 SI.2S



### - Redaimcd UCFC -22 1>2.SS S3 . IS $3.95 S3 .1S Vilsill HCFC-22 Truck Load Prioc S3.35 $3.40 $d .1 7 $3.40 EPA engaged I CF to evaluate and report on this issue in December of 2009 . Within that report it is stated that reclaimed product is not as widely used due to the price . Virgi n HCFC-22 is now and has been, less expensive then , recovered and reclaimed material." Reclaimed HCFC -22 is in competition with virg i n HCFC-22 . There has been no incent ive for buyers to request reclaim over virgin material. There must be an economic facto r brought to bear to create a demand for reclaimed HCFCs, th us leveling the playing f ield with the virgin material. The recalimer is attempt i ng to attract an audience of cont ractors and service companies to re cov e r HCFC-22 and return it to a reclaim facility for sale and reuse .

4 

### The U .S . Phase-oul ofHCFCS: Projected Servicing Needs 

### in The U.S . Air-Conditioning 

### and Refrigerant, section 4 .2 . 1 page 16, Reclaimed 22 .

### EPA should consider that the rec laimer can be an effective arm 

### of compliance. This would be similar to the compliance activity the 

### United States T reasury used in the late 

### 19805 with the banking community. There was a major issue over the enforcement of money laundering. The banks became, in essence, 

### an arm of the government in that they were required to report on multiple large cash depoSits . With greater reductions in the availability of virg i n HCFC-22 the reclaim industry would begin to increase the buy back price 

### of this 

### material, thus give an incentive to recover and reclaim HCFC-22 . The net effect is that through 

### the reduction of allowances the compliance issue is placed, to a large extent, with a segmen t of the industry that will benefit most from recovery of HCFC-22, the EPA 

### Certified Redaimer. 

### I would also remind that in a joint meeting with the United States Department of State and 

### EPA 

### a review was presented about the condition of the 

### ice cap in Antarctica. The presenter made 

### it clear that the amount of DOCs in the ice cap is higher now, and further stated this was ma i nly due to R-23 a buy product of the production of HCFC-22 . 

### Companies that buy back used or recovered product can not , under the current cond i tions, offer a value high enough , after all 

### cost associated with reclaiming, to 

### be price competit ive wi th virgin mate rial . This fact will continue to discourage recovery and recla iming of HCFC22. 

### EPA is facing polit ical challenges as to its budget and regulations. There is nothing to suggest that the Agency has now, 

### or will have, the resources to commit to enforcement that wi ll be meaningful to bring about compliance with recovery regulations . That being said pr ice and economics will motivate companies to recover and use rec laimed HCFC-22 . ICF 

### used assumptions 5 

### that have never been attained. In the past eleven years, total refrigerant, reported as reclaimed reached 12 million pounds only once in the repotting period 2000 to 2011 . HCFC-22 reported as reclaimed never reached 12 million pounds .

S The U . S. Phase-out ofHCFCS : Projected Servicing Needs 

### in The U.S . Air-Conditioning 

### and Refiigerant, section 4.2.2, 

### at page 17Tala l R.n IWI'Yicintl ckrll&M**6l.~** l'.900 53.200 Mlld.:lcd R·ll auJlJlhcd tran. 1'OCO-y/m,IK 

# ,,,.., '.lOO 8.300 %oflcll.al It·ll """"'"""a**~\&Ad** .upplif:<! try 

# ... '''' 

# .'" .aodtl.>cl RICOWI')'fMocSdod 

# '

# ..... ....... R·Il 69.173 69.213 49.700 4<1.900 Additional 19 . } 7) 24.3 73 a "Based on modeling

_ "'"PIion u.sint EPA. 2007a b**~** in R·12 un-wrigbt.;d metric tons (l-aI ,"laa-N using au O OP o(O . O}S ror HCFC·21 j. c**N~,..iw** val ......**~t.** sbottf. LJ of R·22 . ....i labl' under Ibr oamwuptOoct ClIp**ar~** in bold 48.400 43 .600 38.100 

# ,.,00 

# ..,

# .. ..... '."'" ' .lOO



# . '" 

# , 

# ...**13~** 

# - ..a.OOO 3<1,900 30,000 '. 900 69 . 273 69. 273 0 "'.000 30 . 000 

### '.900 19.

m 3 4,l7) . 2.291 .9 .000

d 111 201 0. " ca p tqwol «>0 .0 ) pac.. .... o(1bo U.S. CIQDSUrIIPlioa**~Iinoo** _;0.;"'.**~** ....... Iho: p h __ t scbtd"lo in 2010 prewnl$:In) ,UoaUm afth; fCm.aRUng basdine 10 R·n. 

### These assumptions could not take i nto consideration the significant manufacturing decision to stop producing HCFC-22 equipment ten years early . The equ i pment manufacturers took govemme nt regulation out of equation . 

### EPA must consider that the goal post in this matter is constantly moving . The reduced amount of 

### equipment manufactured is one of the factors which has resulted in lower demand . The aggress i'V8 75% decrease in the production and consumption allowance was not enough of a decrease and compensate for this occurrence . The Green Chill i nitiative is very aggressive in it ' s actions to control leaks and move to lessor ozone depleting fluids . Consider that supermarkets have reduced HCFC-22 based system by nearly 12% of all refrigerants u sed . This decrease has taken only three sho rt years. At the same time , that percentage of decre ase has n ot been seen in the reclaim 

### numbers .According to GreenChill, their HCHC-22 reductions are being held for internal reuse 

### which may result in their having not to buy any HCFC22 into the future' Additionally , the partners are suggesting that leak rates are being monitored to ensure compliance with 

### EPA regulation . .



## 2007 

## 0.""



# ...... C R·22{ODS) C R-402A (OOS) C R-40lAtOOS) C Other (ODS) C R ..... OR·S07A 

## a ()they (HFq 

# (j)**~O'/l**S\JJ'.f'P

# M VI

# l\~ 6 

### Breakdown of Stocks 

### for All GreenChitl Partners (Conunercia\ SysLems), US EPA,.

EPA's aggress i ve approach to meet and exceed the phase-down of 

### HeFCs is to be commended . This complex issue has many moving parts . EPA must consider and adjust for the effects that the over supply of HCFC -22 i s hav i ng thro ughout the in dustry . Not 

### only does 

### i t hinde r recovery but 

### it also impacts the rectaim industry . There i s no oth er expla nation for the f lat l evel of reclaiming HCFC -22 a n d th e declining prices . Tota1 COO9.QJlptlOO for f\k. ... \ Coo,;umpion (or % ofTutai Manuf acturi n g a nd Servi c ing ( M ... '1ric Consu m ption for Servicing (Metric Tons) T =l Servicing ollil AC 73. 60< 43.3()( 59'1. ot81 R cfrigeraLiou 41,3 ()( 

# 3 3.***~** otaI " 4 .9()( 76 ,4 W hen the compi lat ion of the Total Consumption for New Manufacturing and Servicing (Metric Tons) 114,900 a n d subtract the Consumption for Servicing (Metric Tons) 76 ,400 

### we can see that there wou ld be , based on thi s data and calculation a need to reduce total consumpt ion and production levels by 38,500 tons . HCFC-22 e q uip ment s lopped being manufact u red ten years early , a successful init iat ive , GreenChill , and the overall economy greatly impacted this issue EPA has a opportun ity to consider these factors and reduce the effects of HCFCs on o u r environment at the same time giving much needed support the industry that Congress and EPA brought i nto existence . 2011 i s al ready i n t he h istory book EPA should consider l aking this opportun i ty to reduce producti on and consumpt ion by 10% for the calendar year 2 011 and implement the 10% for 

### 2012 immediately . This action would result in significant environmental benefit by enco u rag i ng recovery . Re covery is directly related to price value of th e material being recovered and recla i med When the re cove red and reclaimed HCFC- 22 i s given greater value and i mportance the companies that can recover and return will do so . Because reclaimers will 

### be able to offer greater va l ue .

### Reco m mendation: 

### First: 

## 20 1 0

so.'" OR -l2{ O DS) 

### a R-402 " (005) D Other tODS) 

### a R-40 4A DR- SO) A D R

_ 40

7 A D Other IHI'CI

The significant changes in the United States economy and a refocused air.-condition i ng industry could not have been foresee n. Based on these factors , does EPA have the ab ili ty to allow this issue to simp ly sunset? Due to the short time frame and significant changes i n the United States and Global economy, this action would give time to gain more current info r mation to evaluate the current busi n ess cl i mate for the future a s it relates to the env i ronment. 

### Second In a meeting with Domine 

### J . Mancin i, Ph . D . , Office of Informat i on and Regulatory Affairs, Office of Management and Budget, November 10, 2009, one sta keholder rose to express concern ove r the 

### EPA proposed rule . This action was in an attempt to point o u t the signific.ant changes that had occurred duri ng the rule making p rocess .l 'S"



### Third After the Clean Air Act was signed into law the government seized the opportun ity to 

### discourage the stockpiling of CFCs . Th e Government also wanted to push users and owners of CFCs to move toward more environme ntally friendly refrige rant products . The IRS DOC Tax ' was effected by the Omnibus Budget Recon ci liation Act of 1989 and imposed an excise tax an chemicals that deplete the ozone layer. The imposition of the 

### tax began in 

### 1990 . Also in 1990, the Clean A i r Act Amendments (CAAA) were signed into law . The leg islation includes comprehensive guideline5 fo r the production and U5Q of 

### CFCs, Halons , carbon tetrachloride, methyl chloroform, and HCFCIHFC substitutes. The reduced supply of CFCs and the imposition of the excise tax have resulted in a price increase for DOCs . CFC user groups have responded with strategies to reduce the i r demand which include switching to substitute chem icals , reduc ing the amount of the chem ica ls used in manufacturing, and recycling the chemicals during service and disposal. 

### HCFC 22 and its tax rate were submiUed by Sponsor California Democrat Fortney H i llman**"Pete~** Stark , Jr e . If th is tax were collected form 1990 the revenue to the United States Treasury wou ld have exceeded a billion dollars . This is based on a the ozone depletion factor of .05 . 

### This tax, if imposed would discourage the stockpiling of HCFCs and woutd all so impact the use of a ll owances that are not needed to support a normal business cycle. 

### EPA would need to wor!< with the Excise Tax Division at IRS and the Office ofTax Po l icy at the United States Treasury . The presumption is that this is an admin istrative action not at legis lative act ion .

1 Internal Revenue Publication 510, 

### LR.S Code Sections 46 81 and 4682 I H.R . ll12 in 1 98 9 , Section . 468\. Impositioc**oft~ .**  , Section . 4682 . Definitions and 

### speciaJ rules.Ms . Stephanie Bland Assistant General Counsel United States Department of the Treasury Internal Revenue Service 10th SI & Pennsylvania Ave, NW Washington, DC 20004 Dear Ms . Bland : December 3 , 2010

The purpose and intent of this letter is to obtain guidance with respect to the Excise Tax on Ozone Depleting Chemicals (ODC) . As you know, this tax was established as a result of the Omnibus Budget Reconciliation Act of 1989 . The tax that is in question is lakt oul in the IRS Publication 510 1 at page 27 column 1. While there is no Federal " Cap and**Trade~** law or regulation , the State of California has in place its' own Cap and Trade law . A simple description of the program is that chlorofluorocarbons (CFCs), ozone depleting substances (OOSs), and ozone depleting chemicals (OOCs) all have specific monetary value under a protocol which went into affect in the Spring of 201 O . As a result of this California regulation , ODes are being traded upward of eleven dollars and fifty cents per pound ($11 501Ib) . Some of these environmental derivatives are imported from what are developing nations . There is nothing that gives any exemption on this basis either . In order for value to be affixed to an DOC, it must be tested and verified in advance of destruction. Once this process is complete , these ODC's are given value on the CAR Cap and Trade Market. My observation is that there is no exemption from the ODC tax and, frankty . the question is whether IRS will 

### be collecting the tax as these products are being created for the sole purpose of the production of income . Without going through a formal request , is it possible to obtain, at the very minimum , some form of written statement on this matter.

---,----- - 

## -**~** ' 'Ozone Depictin g Chemicals (OOC) Excise 'I ' a)( Audil Techniques Guidc" hup :lI",ww .irs .govlbusiDessesism allllfrtic!cJO"id= I 865 1111 ,OO .hrml PhOHfo ;**(2 2~**  'l28 0018 w\Vw . 1'.: (,wF r" C rout) 1 nc.. co mInternal Revenue Service Letter December 3 . 2010 Page 2 Also, please consider that large amounts of these chemicals which h ave been imported to the United States from Canada. These chemicals are brokered through a United States Company . Canada pays this US Company to arrange for the destruction . I am sure this is being done for profit or the sole production of income . I have spoken to Ed McArdle of IR S. In his op in ion , these transactions represe nt a taxable event . In light of our Nation's current budget issues. a tax such as this should not be overlooked. Consider that 

### if one of these Canadian transactions were forty thou sand pounds (40 ,000 Ibs) of ODC·s. the revenue would be approximate ly four hundred eighty-four thousand dollars each . The three transaction con tained in the attachment total $1 ,450.000 .00 . Please review the attached schedu le for more detailed infor mation that can 

### be obtained on th e Climate Ai r Registry (CAR) @ http://www.climateactionreserve.org . Please favor me with you response to this inquiry .

Peter Williams

# Murphy's Law: R-22 Shortages Questioned By Mike Murphy November 30, 2009

Mike Murphy Mr. Pete Williams e-mailed The NEWS recently to complain about anarticle in our Oct. 12 issue. Something about how our article had been too one-sided, not journalistically objective, and included a reference to a heretofore anatomically impossible feat. I often call such fans of the magazine - it is fun to talk with crazy people as it keeps the creative juices flowing. Much to my dismay, I found Pete to be a regular guy who had given up the banking industry for the camaraderie of our industry - well, maybe he is just a bit challenged. The conversation with Williamsdid spur a few ideas, which are now shared with you. 

# THE FACTS PLEASE A good place to start is with some information that was recently presented at a Food Management Institute (FMI) conference. Regarding the use of HCFC refrigerant in new equipment: as of Jan. 1, 2010, virgin HCFCs will no longer be allowed to be charged or imported in new equipment or in pre-charged parts (TXVs). However, there may be a loophole allowing for the use of reclaimed refrigerants in new equipment. Hmmm. There has been some question as to what date would beapplied to virgin refrigerants. In other words, is it legal if the system or pre-charged parts were produced or shipped before 2010 - “Well, of course it’s OK if it was already in the pipeline.” - the truth is that as of this writing it is not yet defined by the Environmental Protection Agency (EPA) regulation. Rather than improperly alarm anyone, the EPA is expected to act favorably on this and other related issues by Dec. 31, 2009. However, the EPA is not indicating that it wants to allow for any stockpiling. On another note, based on the “2008 EPA Allocation Draft Proposal” and the June 2008 report: “U.S. Page 1 of 2 Murphy's Law: R-22 Shortages Questioned

9/14/2011 http://www.achrnews.com/articles/ print/113233

### Phase-out of HCFCs: Projected Servicing Needs in the U.S. Air Conditioning and Refrigeration Sector,” the 2010 R-22 demand will exceedsupply by 27.5 million pounds. 

# THE CONTRARIAN PLEASE Now, to the ideas posited by my new friend, Mr. Williams. “Nowhere in The NEWS’article is there any mention that the price of HCFC-22 has consistently fallen throughout 2009. A question one might ask: Was all of the R-22 authorized to be produced inthe United States for 2009 actually produced? Will there be a shortage? Let the free market system work. There was never a shortage of CFCs during or since the last phaseout go round. The fact is it was a function of price. Holders of CFC-11, -12, -113, - 114, -500, and -502 were willing to make their product available as long as the price was right. Look at the press releases from that era and you’ll see the same thing we are hearing today,” said Williams. 

# THE OPINION PLEASE Though all of us are sure that the volatile prices at the gasoline pumps are a result of the cruel manipulations of Big Oil as they open and close the spigot as they so desire, regardless of indicators that might point otherwise - does anyone in the HVAC industry believe that Big Refrigerant could actually be toying with the HVAC market inthe same manner? Mr. Williams, could you seriously believe that to be true? But, it does give rise to other questions: Could current moderate prices of R-22 perhaps be even lower? And what if the amount of R-22 produced was exactly commensurate with the amount of new equipment being produced? Would there really be a shortage? Maybe the phaseout schedule is simply too slow. If the spigot were simply shut off on Jan. 1, 2010, if there were no more virgin refrigerant for anyone’s use, be it new or existing equipment, it might be interesting to see how prices of R-22 would escalate. With price escalation would come more conservation of existing product, more recovery (less venting), more recycling (less venting), and more reclaiming. If there is going to be a 27.5 million pound shortfall of R-22 for servicing existing equipment, what could be done to make sure there is more around for the future? Reclaiming has not yet become profitable enough for contractors to return much more than about 3 percent annually. If R-22 became crazy expensive, like $100 per pound, there is a high likelihood that contractors would begin to search out one of the more than 2,000 refrigerant reclaim locations around the United States. For now, most contractors expect to cope with higher R-22 prices in the very near future. There is not yet enough pain, or benefit, to causeanyone to really beat a path to the door of a reclaim company. Maybe I’m just venting, but so are you. Publication date:11/30/2009 Mike Murphy is the Editor-in-Chief. E-mail him at mikemurphy@achrnews.com. Page 2 of 2 Murphy's Law: R-22 Shortages Questioned

9/14/2011 http://www.achrnews.com/articles/ print/113233U SA Refri gera nts 732972 49 66



# Options for Apportioning Baseline HCFC-22 & 

# - 142b (cont): • 3. Percentage adjusted reflecting past sales of 

### HCFCs by 

### allowance holders of HCFCs • Conside rs usa of HCFC-22 and HCFC-142b · Q To whom chemica l wa s sold , fcr'Nhat end- use? • Recog ni zes use patterns change in 2 0 10



### • 4 .**Establi~h** 

### an auction system a Allow com panies to b id fo r a ll owances - . both current a l lowance holders a nd non-allowance holders o Al locatiol1 of al lowances based o n wi lingness to pay 

# IOptions for Apportioning Baseline

HCFC-22 & 

# -142b (cant): Vari ation on Options 1 .... : Allocate based on**ODP~weigh ed**  

### formula , not chemical-by-chemical 

### • Allowances expressed as "ODP kilograms " • Company could produce or import 

### any combinat ion of HCFCs within ODP ton allowance limit ::I . Maric: et determ i n es how much. of total H C F C ca p needed for each chemical Cl No in ter.-polllJtant tran sfers needed 

## ...., ,.-I:--.t.l<' .

# ~JI

# x;I"::'/ \.11">Q 0 . 2



### 16USA Refrige ran ts 7329724966 

# I

Montreal Protocol • us lias been a global leader c Goal to restore ozone layer, prevent harmful effects of ultravi elet radiation overexposure 

### • 1987 : 27 nations signed treaty to reduce production of Ozone Depleting Substances such as CFCs • 2008: 191 Parties D Measu rable goals/a c tions for achieving success o Sound sCientific i:?asis 

### • Outstanding environmental and health benefits ;J 6.3 million U.S. skin cancer deaths prevented by 2165



## Global Ozone Depletion and Recovery

Y

... p . ,



### 2