Associates 

Air and Radiation Docket and Information 

United State Environmental Protection Agency 

Mail Code: 6102T 

1200 Pennsylvania Avenue, N.W 

Washington DC 20460 

Docket ID No. EPA-HQ-OAR-201 0-1 040, 

Summary: 

The December 15, 2009 final rule entitled -Protection of Stratospheric Ozone has been 

well vetted. The Environmental Protection Agency had a very well documented docket of 

opinions and facts prior to the White House signing off on this regulation. 

EPA is now faced with rectifying this 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 

Refrigerant Reclaimer. The allowance regulation 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 in question. What is at issue, is the level of the production and 

censumption rights that are centrolled oy EPA. 

Reclaimtion of HCFC-22 reached its highest level in the calender year 2008, slight!y over 

10 million pounds or nearly 23% over the prior year. In 2009 the number dropped to 7.5 

million pounds of HCFC-22. 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 digit 

increase of 6% less than 8 million pounds 2. These results are in spite of the prOjected 

27.5 million pound shortfall for servicing 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 initiative 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 initiative like the Bakery Partnership 

of the past is good for the environment. 

Actual amounts of HCFC-22 available for sale or reuse will be hard to compile. The best 

indicator that the current allowances are too high is indicated by pricing of HCFC-22. 

Supply and demand economics is at play here. EPA must consider that the Reclaim 

Industry is retrenching on the value it can place on recovered material. 

EPA could have engaged a certified public accounting firm to obtain 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". 

While never published, no reclaim facility 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 freight. HCFCs that are produced 

new, whether domestically or imported, do not have all the same obstacles. 

The reclaimer must: 

al buy the raw used product b test for contaminants 

c reclaim (process to industry accepted standards 

d package finishe~ product into industry standard packaging 

e return cylinders to original source 

Historically, the Class I ODS made recovery and reclamation flourish as a result of their 

value. The environment was protected as these materials represented a significant 

monetary value and were recovered and reused. Their 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 available in the 

United States Market. 
Considerations: 

EPA must create a manageable shortage to ensure the future of it's reclaim program. This 

action will support the National Recycting and Emission Reduction Program mandated by 

Congress. 

There is no empirical proof of the level of stockpiled of HCFC-22. EPA need only look into 

the SARA Reporting of Tier II Hazardous Chemicals and realize that the required reporting 

is done by informed companies and there is minimal compliance on a national basis. 

EPA cannot obtain information to refute or dispute the fact that the price of this material is 

now at 2008 levels at best. 

200. 200'} 2010 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 ICF 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. Virgin 

HCFC-22 is now and has been, less expensive then, recovered and reclaimed material." 

Reclaimed HCFC-22 is in competition with virgin HCFC-22. There has been no incentive 

for buyers to request reclaim over virgin material. There must be an economic factor 

brought to bear to create a demand for reclaimed HCFCs, thus leveling the playing field 

with the virgin material. 

The recalimer is attempting to attract an audience of contractors and service companies to 

recover 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 reclaimer can be an effective arm of compliance. This would 

be similar to the compliance activity the United States Treasury 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 virgin 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 segment 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 mainly 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 conditions, 

offer a value high enough, after all cost associated with reclaiming, to be price competitive 

with virgin material. This fact will continue to discourage recovery and reclaiming of HCFC22. 

EPA is facing political 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 will be meaningful to bring about compliance with recovery regulations. That being said 

price and economics will motivate companies to recover and use reclaimed 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 17 
Tala 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) 24.373 

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·21j. 

c N~,..iw val ...... ~t. sbottf. LJ of R·22 . .... ilabl' 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 34,l7) . 2.291 .9.000 

d 111 2010. " cap tqwol «>0.0 ) pac...... o(1bo U.S. CIQDSUrIIPlioa ~Iinoo _;0.;"'. ~ ....... Iho: ph __ t scbtd"lo in 2010 prewnl$:In) ,UoaUm 

afth; fCm.aRUng basdine 10 R·n. 

These assumptions could not take into consideration the significant manufacturing 

decision to stop producing HCFC-22 equipment ten years early. The equipment 

manufacturers took govemment 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 aggressi'V8 75% decrease in the production and consumption allowance 

was not enough of a decrease and compensate for this occurrence. 

The Green Chill initiative 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 used. This decrease has taken only three short 

years. 

At the same time, that percentage of decrease has not 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 aggressive 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 is having throughout the industry. Not 

only does it hinder recovery but it also impacts the rectaim industry. There is no other 

explanation for the flat level of reclaiming HCFC-22 and the declining prices. 

T ota1 COO9.QJlptlOO for f\k. ... \ Coo,;umpion (or % ofTutai 

Manufacturing and Servicing (M ... '1ric Consumption for 

Servicing (Metric Tons) T =l Servicing 

ollil AC 73.60< 43.3()( 59'1. 

ot81 RcfrigeraLiou 41,3()( 

otaI " 4.9()( 

3

76

3.* ,4 ~ 

When the compi lation of the Total Consumption for New Manufacturing and Servicing 

(Metric Tons) 114,900 and subtract the Consumption for Servicing (Metric Tons) 76,400 

we can see that there would be, based on this data and calculation a need to reduce total 

consumption and production levels by 38,500 tons. 

HCFC-22 equipment slopped being manufactured ten years early, a successful initiative, 

GreenChill, and the overall economy greatly impacted this issue 

EPA has a opportunity to consider these factors and reduce the effects of HCFCs on our 

environment at the same time giving much needed support the industry that Congress and 

EPA brought into existence. 

2011 is already in the history book EPA should consider l aking this opportunity to reduce 

production and consumption by 10% for the calendar year 2011 and implement the 10% 

for 2012 immediately. This action would result in significant environmental benefit by 

encouraging recovery. Recovery is directly related to price value of the material being 

recovered and reclaimed 

When the recovered and reclaimed HCFC-22 is given greater value and importance the 

companies that can recover and return will do so. Because reclaimers will be able to offer 

greater value. 
Recommendation: 

First: 

2010 

so.'" 

OR-l2{ODS) 

a R-402" (005) 

D Other tODS) 

a R-404A 

DR-SO)A 

D R_407A 

DOther IHI'CI 

The significant changes in the United States economy and a refocused air.-conditioning 

industry could not have been foreseen. Based on these factors, does EPA have the 

ability to allow this issue to simply sunset? 

Due to the short time frame and significant changes in the United States and Global 

economy, this action would give time to gain more current information to evaluate the 

current business climate for the future as it relates to the environment. 

Second 

In a meeting with Domine J. Mancini, Ph.D., Office of Information and Regulatory Affairs, 

Office of Management and Budget, November 10, 2009, one stakeholder rose to express 

concern over the EPA proposed rule. This action was in an attempt to point out the 

signific.ant changes that had occurred during the rule making process. 
l 'S" 

Third 

After the Clean Air Act was signed into law the government seized the opportunity to 

discourage the stockpiling of CFCs. The Government also wanted to push users and 

owners of CFCs to move toward more environmentally friendly refrigerant products. 

The IRS DOC Tax' was effected by the Omnibus Budget Reconciliation 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 Air Act Amendments (CAAA) were signed into 

law. The legislation includes comprehensive guideline5 for 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 their 

demand which include switching to substitute chemicals, reducing the amount of the 

chemicals used in manufacturing, and recycling the chemicals during service and 

disposal. 

HCFC 22 and its tax rate were submiUed by Sponsor California Democrat Fortney Hillman 

"Pete~ Stark, Jr e. 

If this tax were collected form 1990 the revenue to the United States Treasury would 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 allowances 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 Policy 

at the United States Treasury. The presumption is that this is an administrative action not 

at legislative action. 

1 Internal Revenue Publication 510, LR.S Code Sections 4681 and 4682 

I H.R. ll12 in 1989 , 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 Depicting Chemicals (OOC) Excise 'I'a)( Audil Techniques Guidc" 

hup:lI",ww. irs .govlbusiDessesismallllfrtic!cJO"id= I 8651111 ,OO.hrml 

PhOHfo; (2 2~ 'l28 0018 w\Vw.1'.: (,wF r "C rout)1 nc.. com 
Internal Revenue Service 

Letter 

December 3. 2010 

Page 2 

Also, please consider that large amounts of these chemicals which have 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 IRS. In his opinion, these transactions represent 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 thousand pounds 

(40,000 Ibs) of ODC·s. the revenue would be approximately four hundred eighty-four 

thousand dollars each. The three transaction contained in the attachment total 

$1 ,450.000.00. Please review the attached schedule for more detailed information that 

can be obtained on the Climate Air 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 an article 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 Williams did 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 be applied 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. 

Murphy's Law: R-22 Shortages Questioned Page 1 of 2

http://www.achrnews.com/articles/print/113233 9/14/2011
Phase-out of HCFCs: Projected Servicing Needs in the U.S. Air Conditioning and Refrigeration Sector,” 

the 2010 R-22 demand will exceed supply 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 in the 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 in the 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 cause anyone 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.

Murphy's Law: R-22 Shortages Questioned Page 2 of 2

http://www.achrnews.com/articles/print/113233 9/14/2011
USA Refrigerants 7329724966 

Options for Apportioning Baseline 

HCFC-22 & -142b (cont): 

• 3. Percentage adjusted reflecting past sales of 

HCFCs by allowance holders of HCFCs 

• Considers usa of HCFC-22 and HCFC-142b · 

Q To whom chemical was sold, fcr'Nhat end-use? 

• Recognizes use patterns change in 2010 

• 4. Establi~h an auction system 

a Allow companies to bid for allowances - .both current allowance 

holders and non-allowance holders 

o Al locatiol1 of allowances based on wilingness to pay 

I Options for Apportioning Baseline 

HCFC-22 & -142b (cant): 

Variation 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 combination of 

HCFCs within ODP ton allowance limit 

::I . Maric:et determines how much. of total HCFC cap needed for each 

chemical 

Cl No inter.-polllJtant tran sfers needed 

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

~JI x;I"::'/ \.11" >Q 

0.2 

16 
USA Refrigerants 7329724966 

I Montreal Protocol 

• us lias been a global leader 

c Goal to restore ozone layer, prevent harmful effects of 

ultravielet radiation overexposure 

• 1987: 27 nations signed treaty to reduce production 

of Ozone Depleting Substances such as CFCs 

• 2008: 191 Parties 

D Measurable goals/actions 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