Document ID: EPA-HQ-OAR-2008-0496-0145
Agency: epa
Document Type: Rule
Title: Protection of Stratospheric Ozone: Adjustments to the Allowance System for Controlling HCFC Production, Import, and Export
Posted Date: 2009-12-15T05:00Z

[Federal Register: December 15, 2009 (Volume 74, Number 239)]
[Rules and Regulations]               
[Page 66411-66448]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15de09-17]                         

[[Page 66411]]

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Part II

Environmental Protection Agency

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40 CFR Part 82

Protection of Stratospheric Ozone: Adjustments to the Allowance System 
for Controlling HCFC Production, Import, and Export; Final Rule

[[Page 66412]]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 82

[EPA-HQ-OAR-2008-0496; FRL-9091-7]
RIN 2060-A076

 
Protection of Stratospheric Ozone: Adjustments to the Allowance 
System for Controlling HCFC Production, Import, and Export

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: EPA is adjusting the allowance system controlling U.S. 
consumption and production of hydrochlorofluorocarbons (HCFCs). This 
action allocates production and consumption allowances for HCFC-22 and 
HCFC-142b, as well as other HCFCs for which allowances were not 
allocated previously, for the control periods 2010-2014. This action 
also establishes baselines for HCFCs for which EPA had not established 
baselines previously. The HCFC allowance system is part of EPA's Clean 
Air Act program to phase out ozone-depleting substances to protect the 
stratospheric ozone layer. Protection of the stratospheric ozone layer 
helps reduce rates of skin cancer and cataracts, as well as other 
health and ecological effects. The U.S. is obligated under the Montreal 
Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol) 
to limit HCFC consumption and production to a specific level and, using 
stepwise reductions, to decrease the specific level culminating in a 
complete HCFC phaseout in 2030. The next major milestone, to occur on 
January 1, 2010, is a 75 percent reduction from the aggregate U.S. HCFC 
baseline for production and consumption. The allowances allocated in 
this action ensure compliance with the international stepwise 
reduction, consistent with the 1990 Clean Air Act Amendments. In 
addition, this action amends the regulatory provisions concerning 
allowances for HCFC production for developing countries' basic domestic 
needs to be consistent with the September 2007 adjustments to the 
Montreal Protocol. Also, this action provides the Agency's 
interpretation of a self-effectuating ban on introduction into 
interstate commerce and use of HCFCs contained in section 605(a) of the 
Clean Air Act and amends existing regulatory provisions to facilitate 
implementation of the statutory requirements.

DATES: This rule is effective January 1, 2010.

ADDRESSES: EPA has established a docket for this action under Docket ID 
No. EPA-HQ-OAR-2008-0496. All documents in the docket are listed on the 
www.regulations.gov Web site. Although listed in the index, some 
information is not publicly available, e.g., confidential business 
information (CBI) or other information whose disclosure is restricted 
by statute. Certain other material, such as copyrighted material, is 
not placed on the Internet and will be publicly available only in hard 
copy form. Publicly available docket materials are available either 
electronically through www.regulations.gov or in hard copy at the Air 
and Radiation Docket, EPA/DC, EPA West, Room 3334, 1301 Constitution 
Ave., NW., Washington, DC. The Public Reading Room is open from 8:30 
a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The 
telephone number for the Public Reading Room is (202) 566-1744.

FOR FURTHER INFORMATION CONTACT: Jeremy Arling by telephone at (202) 
343-9055, or by e-mail at arling.jeremy@epa.gov or by mail at U.S. 
Environmental Protection Agency, Stratospheric Protection Division, 
Stratospheric Program Implementation Branch (6205J), 1200 Pennsylvania 
Avenue, NW., Washington, DC 20460. For technical information, contact 
Staci Gatica at (202) 343-9469, or by e-mail at gatica.staci@epa.gov or 
by mail at U.S. Environmental Protection Agency, Stratospheric 
Protection Division, Stratospheric Program Implementation Branch 
(6205J), 1200 Pennsylvania Avenue, NW., Washington, DC 20460. You may 
also visit the Ozone Depletion Web site of EPA's Stratospheric 
Protection Division at www.epa.gov/ozone/strathome.html for further 
information about EPA's Stratospheric Ozone Protection regulations, the 
science of ozone layer depletion, and related topics.

SUPPLEMENTARY INFORMATION: Under the Montreal Protocol on Substances 
that Deplete the Ozone Layer (Montreal Protocol), as amended, the U.S. 
and other industrialized countries that are Parties to the Protocol 
have agreed to limit production and consumption of 
hydrochlorofluorocarbons (HCFCs), and to phase out production and 
consumption in a stepwise fashion over time, culminating in a general 
phaseout by 2020 while permitting a small amount of HCFC production and 
consumption to continue solely for servicing existing appliances until 
2030. Title VI of the Clean Air Act Amendments of 1990 (CAAA of 1990) 
also mandates restrictions on HCFCs, culminating in a complete 
production and consumption phaseout in 2030. For purposes of both the 
Montreal Protocol and the Clean Air Act, ``consumption'' is defined as 
production plus imports minus exports. Sections 605 and 606 of the 
Clean Air Act authorize EPA to promulgate regulations to manage the 
consumption and production of HCFCs until the terminal phaseout. In 
1993, EPA established a chemical-by-chemical, ``worst-first,'' approach 
to implement the Montreal Protocol's graduated phaseout in overall HCFC 
levels (58 FR 65018). Key concepts in the ``worst-first'' approach 
include ``distinguishing among HCFCs based on their ODP [ozone 
depletion potential] and phasing out use in new equipment prior to use 
for servicing existing equipment'' (58 FR 65026).\1\ The consumption 
cap became effective in 1996, and HCFC consumption in the U.S. remained 
about 15 percent below the cap for the first two years. In 1998 and 
1999, consumption rose to levels that approached the cap. On January 
21, 2003, EPA established an allowance system for HCFCs (68 FR 2820), 
noting at that time that it would again pursue a notice-and-comment 
rulemaking to implement a 2010 stepwise reduction. EPA promulgated 
minor amendments to these regulations on June 17, 2004 (69 FR 34024), 
and July 20, 2006 (71 FR 41163).
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    \1\ The ozone depletion potential (ODP) is a number that refers 
to the amount of ozone depletion caused by a substance. It is the 
ratio of the impact on ozone of a chemical compared to the impact of 
a similar mass of CFC-11. Thus, the ODP of CFC-11 is defined to be 
1.0. Other CFCs and HCFCs have ODPs ranging from 0.01 to 1.0.
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    This action implements the next step in the chemical-by-chemical 
phaseout the United States uses to meet its international obligations. 
Specifically, EPA is granting specified percentages of the consumption 
and production baselines for HCFC-141b, HCFC-22, and HCFC-142b for the 
control periods 2010-2014. This action also establishes company-by-
company consumption and production baselines for other HCFCs and grants 
specified percentages of those baselines for the control periods 2010-
2014. This action also amends the provisions for HCFC production 
allowances to meet the basic domestic needs of developing countries. In 
addition, EPA is providing its interpretation of a self-effectuating 
ban on introduction into interstate commerce and use of HCFCs, which is 
contained in section 605(a) of the Clean Air Act.

[[Page 66413]]

    Section 553(d) of the Administrative Procedure Act (APA), 5 U.S.C. 
Chapter 5, generally provides that rules may not take effect earlier 
than 30 days after they are published in the Federal Register. EPA is 
issuing this final rule under section 307(d)(1) of the Clean Air Act, 
which states: ``The provisions of section 553 through 557 * * * of 
Title 5 shall not, except as expressly provided in this section, apply 
to actions to which this subsection applies.'' Thus, section 553(d) of 
the APA does not apply to this rule. EPA is nevertheless acting 
consistently with the policies underlying APA section 553(d) in making 
this rule effective on January 1, 2010. APA section 553(d) provides 
exceptions for any action that grants or recognizes an exemption or 
relieves a restriction or as otherwise provided by the agency for good 
cause found and published within the rule. This final rule relieves a 
restriction by authorizing the production and import of certain HCFCs 
in 2010 that would otherwise be prohibited under the existing 
regulations.

Abbreviations and Acronyms Used in This Document

AHRI--Air-Conditioning, Heating, and Refrigeration Institute
BDN--Basic Domestic Need
CAA--Clean Air Act
CAAA--Clean Air Act Amendments of 1990
CFC--Chlorofluorocarbon
EPA--Environmental Protection Agency
FDA--Food and Drug Administration
HCFC--Hydrochlorofluorocarbon
HFC--Hydrofluorocarbon
Montreal Protocol--Montreal Protocol on Substances that Deplete the 
Ozone Layer
MOP--Meeting of the Parties
MT--Metric Ton
NPRM--Notice of Proposed Rulemaking
ODP--Ozone Depletion Potential
ODS--Ozone-Depleting Substance
OEM--Original Equipment Manufacturer
Party--States and regional economic integration organizations that 
have consented to be bound by the Montreal Protocol on Substances 
that Deplete the Ozone Layer
SNAP--Significant New Alternatives Policy
TXV--Thermostatic Expansion Valve
UNEP--United Nations Environment Programme

Table of Contents

I. Regulated Entities
II. Background
    A. How Does the Montreal Protocol Phase Out HCFCs?
    B. How Does the Clean Air Act Phase Out HCFCs?
    C. What Sections of the Clean Air Act Apply to This Rulemaking?
III. Summary of this Final Action
IV. Allocation of Allowances for the 2010-2014 Control Periods
    A. Baselines for HCFC-22 and HCFC-142b Allowances
    1. Adjusting the Baseline for Inter-company and Inter-pollutant 
Transfers
    2. Meeting the Needs of Certified Reclaimers
    B. Factors for Considering Allocation Amounts for HCFC-22 and 
HCFC-142b
    1. The Importance of HCFC-22 Servicing Needs for Existing 
Equipment
    2. Meeting Servicing Needs With Virgin and Reclaimed Material
    3. Annual Reduction in Allocated Amounts
    C. Allocations of HCFC-22 and HCFC-142b
    1. HCFC-22 Allowances for 2010-2014
    2. HCFC-142b Allowances for 2010-2014
    3. How the Aggregate for HCFC-22 and HCFC-142b Translates 
Entity-by-Entity
    D. HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb Allowances
    1. Baselines for HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb
    2. Allocation Levels for HCFC-123, HCFC-124, HCFC-225ca, and 
HCFC-225cb
    E. Other HCFCs
V. Article 5 Allowances
VI. Accelerated Use Restrictions Under Section 605
    A. Definition of ``Introduction Into Interstate Commerce''
    B. Interpretation of the Term ``Use''
    C. Interpretation of the Phrase ``Appliances Manufactured Prior 
To''
    D. Exceptions to the Accelerated Use Restrictions
    1. Thermostatic Expansion Valves
    2. Medical Equipment
VII. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act (RFA)
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From 
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions That Significantly Affect 
Energy Supply, Distribution, or Use
    I. National Technology Transfer Advancement Act
    J. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    K. Congressional Review Act

I. Regulated Entities

This rule will affect the following categories:

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                  Category                     NAICS code       SIC code        Examples of regulated entities
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Industrial Gas Manufacturing...............          325120            2869  Fluorinated hydrocarbon gases
                                                                              manufacturers and reclaimers.
Other Chemical and Allied Products Merchant          424690            5169  Chemical gases and compressed gases
 Wholesalers.                                                                 merchant wholesalers.
Air-Conditioning and Warm Air Heating                333415            3585  Air-Conditioning Equipment and
 Equipment and Commercial and Industrial                                      Commercial and Industrial
 Refrigeration Equipment Manufacturing.                                       Refrigeration Equipment
                                                                              manufacturers.
Air-Conditioning Equipment and Supplies              423730            5075  Air-conditioning (condensing unit,
 Merchant Wholesalers.                                                        compressors) merchant wholesalers.
Electrical and Electronic Appliance,                 423620            5064  Air-conditioning (room units)
 Television, and Radio Set Merchant                                           merchant wholesalers.
 Wholesalers.
Plumbing, Heating, and Air-Conditioning              238220      1711, 7623  Central air-conditioning system and
 Contractors.                                                                 commercial refrigeration
                                                                              installation; HVAC contractors.
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This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. This table lists the types of entities that EPA is now aware 
potentially could be regulated by this action. Other types of entities 
not listed in this table could also be affected. To determine whether 
your facility, company, business organization, or other entity is 
regulated by this action, you should carefully examine these 
regulations. If you have questions regarding the applicability of this 
action to a particular entity, consult the person listed in the FOR 
FURTHER INFORMATION CONTACT section.

II. Background

A. How Does the Montreal Protocol Phase Out HCFCs?

    The Montreal Protocol on Substances that Deplete the Ozone Layer is 
the international agreement aimed at reducing and eventually 
eliminating the production and consumption of

[[Page 66414]]

stratospheric ozone-depleting substances. The U.S. was one of the 
original signatories to the 1987 Montreal Protocol and the U.S. 
ratified the Protocol on April 12, 1988. Congress then enacted, and 
President George H.W. Bush signed into law, the Clean Air Act 
Amendments of 1990 (CAAA of 1990), which included Title VI on 
Stratospheric Ozone Protection, codified as 42 U.S.C. Chapter 85, 
Subchapter VI, to ensure that the United States could satisfy its 
obligations under the Montreal Protocol. Title VI includes restrictions 
on production, consumption, and use of ozone-depleting substances that 
are subject to acceleration if ``the Montreal Protocol is modified to 
include a schedule to control or reduce production, consumption, or use 
* * * more rapidly than the applicable schedule'' prescribed by the 
statute. Both the Montreal Protocol and the Clean Air Act define 
consumption as production plus imports minus exports.
    In 1990, as part of the London Amendment to the Montreal Protocol, 
the Parties identified HCFCs as ``transitional substances'' to serve as 
temporary, lower-ODP substitutes for CFCs and other ODS. EPA similarly 
viewed HCFCs as ``important interim substitutes that will allow for the 
earliest possible phaseout of CFCs and other Class I substances \2\'' 
(58 FR 65026). In 1992, through the Copenhagen Amendment to the 
Montreal Protocol, the Parties created a detailed phaseout schedule for 
HCFCs beginning with a cap on consumption for industrialized (Article 
2) Parties, a schedule to which the United States adheres. The 
consumption cap for each Article 2 Party was set at 3.1 percent (later 
tightened to 2.8 percent) of a Party's CFC consumption in 1989, plus a 
Party's consumption of HCFCs in 1989 (weighted on an ODP basis). Based 
on this formula, the HCFC consumption cap for the U.S. was 15,240 ODP-
weighted metric tons, effective January 1, 1996. This became the U.S. 
consumption baseline for HCFCs.
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    \2\ Class I refers to the controlled substances listed in 
appendix A to 40 CFR part 82 subpart A. Class II refers to the 
controlled substances listed in appendix B to 40 CFR part 82 subpart 
A.
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    The 1992 Copenhagen Amendment created a schedule with graduated 
reductions and the eventual phaseout of HCFC consumption (Copenhagen, 
23-25 November, 1992, Decision IV/4). Prior to the 2007 adjustment, the 
schedule called for a 35 percent reduction of the consumption cap in 
2004, followed by a 65 percent reduction in 2010, a 90 percent 
reduction in 2015, a 99.5 percent reduction in 2020 (restricting the 
remaining 0.5 percent of baseline to the servicing of existing 
refrigeration and air-conditioning equipment), with a total phaseout in 
2030.
    The Copenhagen Amendment did not cap HCFC production. In 1999, the 
Parties created a cap on production for Article 2 Parties through an 
amendment to the Montreal Protocol agreed by the Eleventh Meeting of 
the Parties (Beijing, 29 November-3 December 1999, Decision XI/5). The 
cap on production was set at the average of: (a) 1989 HCFC production 
plus 2.8 percent of 1989 CFC production, and (b) 1989 HCFC consumption 
plus 2.8 percent of 1989 CFC consumption. Based on this formula, the 
HCFC production cap for the U.S. was 15,537 ODP-weighted metric tons, 
effective January 1, 2004. This became the U.S. production baseline for 
HCFCs.
    To further protect human health and the environment, the Parties to 
the Montreal Protocol adjusted the Montreal Protocol's phaseout 
schedule for HCFCs at the 19th Meeting of the Parties in September 
2007. In accordance with Article 2(9)(d) of the Montreal Protocol, the 
adjustment to the phaseout schedule was effective on May 14, 2008.\3\
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    \3\ Under Article 2(9)(d) of the Montreal Protocol, an 
adjustment enters into force six months from the date the depositary 
(the Ozone Secretariat) circulates it to the Parties. The depositary 
accepts all notifications and documents related to the Protocol and 
examines whether all formal requirements are met. In accordance with 
the procedure in Article 2(9)(d), the depositary communicated the 
adjustment to all Parties on November 14, 2007. The adjustment 
entered into force and become binding for all Parties on May 14, 
2008.
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    As a result of the 2007 Montreal Adjustment (reflected in Decision 
XIX/6), the United States and other industrialized countries are 
obligated to reduce HCFC production and consumption 75 percent below 
the established baseline by 2010, rather than 65 percent as was the 
previous requirement. The other milestones remain the same: 90 percent 
below the baseline by 2015, and 99.5 percent below the baseline by 
2020--allowing, during 2020 to 2030, production and consumption at only 
0.5 percent of baseline solely for servicing existing air-conditioning 
and refrigeration equipment. The adjustment also resulted in a phaseout 
schedule for HCFC production that parallels the consumption phaseout 
schedule. All production and consumption for Article 2 Parties is 
phased out by 2030.
    Decision XIX/6 also adjusted the provisions for Parties operating 
under paragraph 1 of Article 5 (developing countries): (1) To set HCFC 
production and consumption baselines based on the average 2009-2010 
production and consumption, respectively; (2) to freeze HCFC production 
and consumption at those baselines in 2013; and (3) to add stepwise 
reductions of 10 percent below baselines by 2015, 35 percent by 2020, 
67.5 percent by 2025, and 97.5 percent by 2030--allowing, between 2030 
and 2040, an annual average of no more than 2.5 percent to be produced 
or imported solely for servicing existing air-conditioning and 
refrigeration equipment. All production and consumption for Article 5 
Parties is phased out by 2040.
    In addition, Decision XIX/6 adjusted Article 2F to allow 
industrialized countries to produce ``up to 10 percent of baseline 
levels'' for export to Article 5 countries ``in order to satisfy basic 
domestic needs'' until 2020.\4\ Paragraph

[[Page 66415]]

14 of Decision XIX/6 notes that no later than 2015 the Parties would 
consider ``further reduction of production for basic domestic needs'' 
in 2020 and beyond. Under paragraph 13 of Decision XIX/6, the Parties 
will review in 2015 and 2025, respectively, the need for the 
``servicing tails'' for industrialized and developing countries. The 
term ``servicing tail'' refers to an amount of HCFCs used to service 
existing equipment, such as certain types of air-conditioning and 
refrigeration appliances.
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    \4\ Paragraphs 4-6 of adjusted Article 2F read as follows:
    4. Each Party shall ensure that for the twelve-month period 
commencing on 1 January 2010, and in each twelve-month period 
thereafter, its calculated level of consumption of the controlled 
substances in Group I of Annex C does not exceed, annually, twenty-
five percent of the sum referred to in paragraph 1 of this Article. 
Each Party producing one or more of these substances shall, for the 
same periods, ensure that its calculated level of production of the 
controlled substances in Group I of Annex C does not exceed, 
annually, twenty-five percent of the calculated level referred to in 
paragraph 2 of this Article. However, in order to satisfy the basic 
domestic needs of the Parties operating under paragraph 1 of Article 
5, its calculated level of production may exceed that limit by up to 
ten percent of its calculated level of production of the controlled 
substances in Group I of Annex C as referred to in paragraph 2.
    5. Each Party shall ensure that for the twelve-month period 
commencing on 1 January 2015, and in each twelve-month period 
thereafter, its calculated level of consumption of the controlled 
substances in Group I of Annex C does not exceed, annually, ten 
percent of the sum referred to in paragraph 1 of this Article. Each 
Party producing one or more of these substances shall, for the same 
periods, ensure that its calculated level of production of the 
controlled substances in Group I of Annex C does not exceed, 
annually, ten percent of the calculated level referred to in 
paragraph 2 of this Article. However, in order to satisfy the basic 
domestic needs of the Parties operating under paragraph 1 of Article 
5, its calculated level of production may exceed that limit by up to 
ten percent of its calculated level of production of the controlled 
substances in Group I of Annex C as referred to in paragraph 2.
    6. Each Party shall ensure that for the twelve-month period 
commencing on 1 January 2020, and in each twelve-month period 
thereafter, its calculated level of consumption of the controlled 
substances in Group I of Annex C does not exceed zero. Each Party 
producing one or more of these substances shall, for the same 
periods, ensure that its calculated level of production of the 
controlled substances in Group I of Annex C does not exceed zero. 
However:
    i. Each Party may exceed that limit on consumption by up to zero 
point five percent of the sum referred to in paragraph 1 of this 
Article in any such twelve-month period ending before 1 January 
2030, provided that such consumption shall be restricted to the 
servicing of refrigeration and air conditioning equipment existing 
on 1 January 2020;
    ii. Each Party may exceed that limit on production by up to zero 
point five percent of the average referred to in paragraph 2 of this 
Article in any such twelve-month period ending before 1 January 
2030, provided that such production shall be restricted to the 
servicing of refrigeration and air conditioning equipment existing 
on 1 January 2020.
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B. How Does the Clean Air Act Phase Out HCFCs?

    The United States has chosen to implement the Montreal Protocol 
phaseout schedule on a chemical-by-chemical basis. In 1992, 
environmental and industry groups petitioned EPA to implement the 
required phaseout by eliminating the most ozone-depleting HCFCs first. 
Based on the available data at that time, EPA believed that the U.S. 
could meet, and possibly exceed, the required Montreal Protocol 
reductions through a chemical-by-chemical phaseout that employed a 
``worst-first'' approach focusing on certain chemicals earlier than 
others. In 1993, as authorized by section 606 of the CAA, the U.S. 
established a phaseout schedule that eliminated HCFC-141b first and 
would greatly restrict HCFC-142b and HCFC-22 next, followed by 
restrictions on all other HCFCs and ultimately a complete phaseout (58 
FR 15014, March 18, 1993; 58 FR 65018, December 10, 1993). EPA 
explained that its action modified the schedule contained in paragraphs 
(a) and (b) of section 605 (58 FR 65025). Paragraph (a) addresses use 
and introduction into interstate commerce, while paragraph (b) 
addresses production.
    On January 21, 2003 (68 FR 2820), EPA promulgated regulations to 
ensure compliance with the first reduction milestone in the HCFC 
phaseout: the requirement that, by January 1, 2004, the U.S. reduce 
HCFC consumption by 35 percent and freeze HCFC production. In that rule 
EPA established chemical-specific consumption and production baselines 
for HCFC-141b, HCFC-22, and HCFC-142b. Section 601(2) states that EPA 
may select ``a representative calendar year'' to serve as the baseline 
for HCFCs. In the 2003 allocation rule, EPA concluded that because the 
entities eligible for allowances had differing production and import 
histories, no one year was representative for all companies. Therefore, 
EPA assigned an individual consumption baseline year to each company by 
selecting its highest ODP-weighted consumption year from among the 
years 1994 through 1997. EPA assigned individual production baseline 
years in the same manner. EPA also provided an exception allowing new 
entrants provided that they began importing after the end of 1997 but 
before April 5, 1999, the date the advanced notice of proposed 
rulemaking (ANPRM) was published. EPA believed that such small 
businesses might not have been aware of the impending rulemaking that 
would affect their ability to continue in the HCFC market.
    The 2003 allocation rule apportioned production and consumption 
baselines to each company in amounts equal to the amounts in the 
company's highest ``production year'' or ``consumption year,'' as 
described above. It completely phased out the production and import of 
HCFC-141b by granting 0 percent of that substance's baseline for 
production and consumption in the table at Sec.  82.16. EPA did, 
however, create a petition process to allow applicants to request very 
small amounts of HCFC-141b beyond the phaseout. The rule also granted 
100 percent of the baselines for production and consumption of HCFC-22 
and HCFC-142b. EPA was able to allocate allowances for HCFC-22 and 
HCFC-142b at 100 percent of baseline because, in light of the 
concurrent complete phaseout of HCFC-141b, the allocations for HCFC-22 
and HCFC-142b, combined with projections for consumption of all other 
HCFCs, remained below the 2004 cap of 65 percent of the U.S. baseline.
    EPA allocates allowances for specific years; they are valid between 
January 1 and December 31 of a given control period (i.e., calendar 
year). Prior to this rulemaking, EPA had not allocated any HCFC 
allowances for year 2010 or beyond. The regulations at 40 CFR 82.15(a) 
and (b) only permitted the production and import of HCFC-22 and HCFC-
142b for the years 2003-2009. Through this rulemaking, EPA is now 
allocating calendar-year allowances for HCFC-142b and HCFC-22 to allow 
production and import during the 2010-2014 control periods. Absent the 
grant of calendar-year allowances, Sec.  82.15 would prohibit their 
production and import after December 31, 2009. This final rule allows 
for continued production and consumption, at specified amounts, of 
HCFC-142b, HCFC-22, and other HCFCs not previously granted allocations, 
for the 2010-2014 control periods.
    In the United States, an allowance is the unit of measure that 
controls production and consumption of ozone-depleting substances. An 
allowance represents the privilege granted to a company to produce or 
import one kilogram (not ODP-weighted) of the specific substance. EPA 
establishes company-by-company baselines (also known as ``baseline 
allowances'') and allocates calendar-year allowances equal to a 
percentage of the baseline for specified control periods. EPA has 
allocated two types of calendar-year allowances--production allowances 
and consumption allowances--for HCFC-22 and HCFC-142b. ``Production 
allowance'' and ``consumption allowance'' are defined at 40 CFR 82.3. 
To produce an HCFC for which allowances have been allocated, an 
allowance holder must expend both production and consumption 
allowances. To import an HCFC for which allowances have been allocated, 
an allowance holder must expend consumption allowances. An allowance 
holder exporting HCFCs for which it has expended consumption allowances 
may obtain a refund of those consumption allowances upon submittal of 
proper documentation to EPA.
    Since EPA is implementing the phaseout on a chemical-by-chemical 
basis, it allocates and tracks production and consumption allowances on 
an absolute kilogram basis for each chemical. Upon EPA approval, an 
allowance holder may trade allowances of one type of HCFC for 
allowances of another type of HCFC, with transactions weighted 
according to the ozone depletion potential (ODP) of the chemicals 
involved. Pursuant to section 607 of the Clean Air Act, EPA applies an 
offset to each HCFC trade by deducting 0.1 percent from the 
transferor's allowance balance. The offset benefits the ozone layer 
since it ``results in greater total reductions in the production in 
each year of * * * class II substances than would occur in that year in 
the absence of such transactions'' (42 U.S.C. 7671f).
    Because EPA has allocated the same amount of allowances every year 
from 2004 to 2009--with minor changes reflecting permanent trades of 
baseline allowances--and because EPA tracks the production and 
consumption of all HCFCs (including those for which baselines are not 
allocated), the Agency can ascertain that the U.S. will remain 
comfortably below the aggregate HCFC cap through 2009. The 2003 
allocation rule announced that EPA would allocate allowances for 2010-
2014 in a

[[Page 66416]]

subsequent action and that those allowances would be lower in aggregate 
than for 2003-2009, consistent with the next stepwise reduction for 
HCFCs under the Montreal Protocol. EPA stated its intention to 
determine the exact amount of allowances that would be needed for HCFC-
22 and HCFC-142b, bearing in mind that other HCFCs would also 
contribute to total HCFC consumption. EPA stated that it would likely 
achieve the 2010 reduction step by applying a percentage reduction to 
the HCFC-22 and HCFC-142b baseline allowances. EPA has monitored the 
market to estimate servicing needs and market adjustments in the use of 
HCFCs, including HCFCs for which EPA did not establish baselines in the 
2003 allocation rule.

C. What Sections of the Clean Air Act Apply to This Rulemaking?

    Several sections of the Clean Air Act apply to this rulemaking. 
Section 605 of the Clean Air Act phases out production and consumption 
and restricts the use of HCFCs in accordance with the schedule set 
forth in that section. Section 606 provides for acceleration of the 
schedule in section 605 based on an EPA determination regarding current 
scientific information or the availability of substitutes, or to 
conform to any acceleration under the Montreal Protocol. EPA has 
previously accelerated the section 605 schedule through a rulemaking 
published December 10, 1993 (58 FR 65018). Through this action, EPA is 
further accelerating the HCFC production and consumption phaseouts in 
section 605(b)-(c).
    Section 606 provides authority for EPA to promulgate regulations 
that establish a schedule for production and consumption that is more 
stringent than what is set forth in section 605 if: ``(1) Based on an 
assessment of credible current scientific information (including any 
assessment under the Montreal Protocol) regarding harmful effects on 
the stratospheric ozone layer associated with a class I or class II 
substance, the Administrator determines that such more stringent 
schedule may be necessary to protect human health and the environment 
against such effects, (2) based on the availability of substitutes for 
listed substances, the Administrator determines that such more 
stringent schedule is practicable, taking into account technological 
achievability, safety, and other relevant factors, or (3) the Montreal 
Protocol is modified to include a schedule to control or reduce 
production, consumption, or use of any substance more rapidly than the 
applicable schedule under this title.'' It is only necessary to meet 
one of the three criteria. In this instance, all three criteria have 
been met with respect to the schedule for phasing out production and 
consumption of HCFC-22 and HCFC-142b.
    The first criterion allows the Administrator, based on an 
assessment of credible current scientific information, to determine 
that a more stringent schedule may be necessary to protect human 
health. The recent scientific findings by the Montreal Protocol's 
Science Assessment Panel, Science Assessment of Ozone Depletion: 2006, 
available in the docket for this rulemaking, were initially presented 
to the Parties to the Montreal Protocol in October 2006 at the 18th 
Meeting of the Parties in New Delhi, India. The Assessment was 
published in March 2007, and hard copies were available to the Parties 
in advance of the 26th Open-Ended Working Group Meeting held in June 
2007 in Nairobi, Kenya. The assessment report shows that 
notwithstanding the evidence of a healing of the ozone layer, there 
continue to be human health and environmental effects associated with 
ozone depletion and that recovery continues to rely on a successful 
total global phaseout of ODS. Specifically, the report concludes that 
the date when equivalent effective stratospheric chlorine (EESC) 
relevant to mid-latitude ozone depletion returns to pre-1980 levels is 
2049, which is five years later than projected in the previous 
Scientific Assessment. The later return is primarily due to higher 
estimated future emissions of CFC-11, CFC-12, and HCFC-22. The report 
includes scenarios where additional actions taken by the Parties would 
result in a faster recovery. While these specific scenarios (including 
complete phaseout by the end of that calendar year) were not all 
necessarily deemed to be practical, they demonstrated to the Parties 
what could be achieved with additional actions. The percentage 
reduction in EESC attributed to HCFCs is larger than previously 
reported and the scenarios showed that reducing HCFCs could have a 
greater effect than reducing any of the other compounds or groups of 
compounds given their current production levels. These findings 
contributed in part to the willingness of many Parties, including the 
United States, to consider the adjustments to the Montreal Protocol's 
HCFC phaseout schedule that were successfully negotiated in September 
2007. EPA published a notice of data availability (72 FR 35230) 
concerning the potential changes in HCFC consumption from proposed 
adjustments to the Montreal Protocol submitted by the United States for 
consideration at the 19th Meeting of the Parties held in Montreal 
September 2007. The data made available through that notice were 
specific to the United States' proposal but had general applicability 
to the other five proposals submitted by various Parties to the 
Protocol and to what was ultimately agreed to by the Parties at the 
19th Meeting. EPA believes the recent scientific findings on 
stratospheric ozone depletion, together with the well-established 
relationship between ozone depletion and increased risk of human health 
effects, support a determination that a more stringent HCFC phaseout 
schedule may be necessary to protect against such effects.
    The second criterion allows the Administrator to determine that a 
more stringent schedule is practicable based on the availability of 
substitutes for ODS, taking into account technological achievability, 
safety, and other relevant factors. Since the establishment of the 
domestic chemical-by-chemical phaseout in the United States, advances 
by industry have resulted in the availability of substitutes for a 
large variety of end-use applications. Under section 612 of the CAA, 
EPA's Significant New Alternatives Policy (SNAP) program evaluates 
alternatives for ODS and lists as acceptable those that do not pose a 
greater risk to human health than other substitutes that are currently 
or potentially available. Alternatives include chemical replacements, 
product substitutes, and alternative technologies. The SNAP program has 
reviewed approximately 400 alternatives to date. EPA makes information 
available concerning potential alternatives for various end-use 
applications. Suitable alternatives--in many cases, multiple suitable 
alternatives--are available for all end-use applications for the HCFCs 
considered in this action. However, as discussed later in this 
preamble, EPA has learned of three niche end use applications where 
substitutes exist but other factors may be affecting the timing of 
their implementation. Because sufficient quantities of HCFC have 
already been produced for these uses, EPA took this information into 
account in evaluating the schedule for phasing out use under section 
605(a) rather than the schedule for phasing out production under 
section 605(b)-(c). The use phaseout is discussed below.
    The SNAP program has reviewed substitutes to ODS for the following 
industrial sectors:
     Refrigeration & Air Conditioning
     Foam Blowing Agents

[[Page 66417]]

     Cleaning Solvents
     Fire Suppression and Explosion Protection
     Aerosols
     Sterilants
     Tobacco Expansion
     Adhesives, Coatings & Inks
    HCFCs have been used in all of these industrial sectors except for 
tobacco expansion. Within the air conditioning and refrigeration 
industrial sector, end uses where HCFCs have been used include 
chillers, industrial process refrigeration systems, industrial process 
air conditioning, bus and passenger train AC, ice machines, very low 
temperature refrigeration, ice skating rinks, cold storage warehouses, 
refrigerated transport, retail food refrigeration, household 
appliances, and residential and light commercial air conditioning and 
heat pumps. The SNAP program lists substitutes for each of these end 
uses.
    A wide range of alternative refrigerants found acceptable under 
EPA's SNAP program are available in the AC and refrigeration sector. 
Hydrofluorocarbons (HFCs) and HFC-based alternatives, including R-134a, 
R-410A (composed of HFC-32/HFC-125), R-407C (composed of HFC-32/HFC-
125/HFC-134a), R-404A (composed of HFC-125/HFC-143a/HFC-134a), and R-
507A (composed of HFC-125/HFC-143a), are currently used in a variety of 
refrigeration and AC equipment. In addition, other refrigerants such as 
CO2, ammonia, and hydrocarbons are available as 
alternatives. The pace of transition to equipment using these 
alternatives has varied by industry and type of equipment. Appendix A 
to the Servicing Tail report found in the docket to this rule presents 
EPA's estimates of the market penetration of alternatives for each end 
use within this sector.
    Some mobile AC equipment has been using alternatives since the 
early 1990s, with some buses and trains using R-134a, and some heavy 
rail cars using R-407C. Stationary AC equipment using R-410A has been 
commercially available since 1996, and is expected to dominate the U.S. 
residential market in the near future. The projections in the Servicing 
Tail report are based on information regarding the transition to 
alternatives. New sales of residential AC systems are modeled such that 
only 10 percent of the market adopts alternatives by the end of 2008 
and the remainder of the market for new equipment transitions 
completely by the end of 2009. Consumers naturally prefer equipment, 
services, and refrigerant that costs less. Previously, R-22 has been 
cheaper than alternatives. However, the economics are changing and R-
410A pricing is beginning to match that of R-22. Most residential AC 
equipment purchasers now are buying equipment using R-410A.
    Retail food refrigeration end-uses have been transitioning to 
alternatives more quickly than AC end-uses. EPA estimates that half of 
the refrigerant used in existing stores is R-22 but only 5% of new 
refrigeration systems installed in 2009 were charged with R-22. 
Advanced refrigeration technologies (e.g., distributed systems and 
secondary loop systems) represent an estimated 40% of new equipment 
sales and such systems installed in the last ten years have been 
charged with HFC refrigerants.
    As mentioned in the Servicing Tail report, several AC and 
refrigeration equipment manufacturers have indicated that they have 
discontinued production of new equipment that uses R-22. These actions 
are consistent with the actions taken in the mid-1990s, when the 
refrigeration and AC industries phased out CFC refrigerants from new 
production chillers, refrigerators, motor vehicle air conditioners, and 
other products two or more years before the 1996 CFC consumption 
phaseout.
    Alternatives are available in the other sectors as well. For 
example, numerous alternatives exist for HCFC-22 and HCFC-142b for foam 
blowing agents, including water, Ecomate[supreg], saturated light 
hydrocarbons (e.g., cyclopentane), CO2, HFO-1234ze, and a 
number of HFCs or HFC blends. In place of HCFCs as propellants, most 
aerosol cans use saturate light hydrocarbons (e.g., propane, n-butane, 
isobutane) or dimethyl ether where flammability is not a major concern 
or HFCs or compressed gases (e.g., CO2, nitrogen) where 
flammability is a concern. (A complete list of substitutes is available 
at http://www.epa.gov/ozone/snap/lists/index.html.) EPA believes that 
given the availability of substitutes, a more stringent phaseout 
schedule for HCFC-22 and HCFC-142b is now practicable.
    The last criterion is that the Montreal Protocol be modified to 
include a schedule to control or reduce production, consumption, or use 
of any substance more rapidly than section 605 would dictate. The 
United States submitted a proposal to adjust the Montreal Protocol in 
March 2007 to accelerate the phaseout of HCFCs. This was one of six 
proposals considered by the Parties at their 19th Meeting. Due to the 
efforts of the United States and others, the Parties agreed to 
adjustments that result in a more aggressive phaseout schedule for both 
developed and developing countries. Therefore, this third criterion has 
been met. Through this action, EPA is incorporating in its regulations 
a schedule that reflects the 2007 Montreal Adjustment. While section 
606 is sufficient authority for this acceleration of the section 605 
phaseout schedule, section 614(b) of the Clean Air Act provides that in 
the case of a conflict between the Act and the Protocol, the more 
stringent provision shall govern. Thus, section 614(b) requires the 
Agency to establish phaseout schedules at least as stringent as the 
schedules contained in the Protocol. To meet the 2010 stepdown 
requirement, EPA is allocating HCFC allowances for the years 2010 
through 2014 at a level that will ensure the aggregate HCFC production 
and consumption will not exceed 25 percent of the U.S. baselines.
    In addition to implementing the 2007 Montreal Adjustment, this rule 
also addresses provisions in section 605 of the Clean Air Act that 
relate to use and introduction into interstate commerce of class II 
substances. This action completes EPA's implementation (begun in 1993) 
of the section 605 provisions on use of class II substances. EPA is 
also promulgating regulatory language to reflect the section 605 
provisions on introduction into interstate commerce of class II 
substances. EPA previously addressed the provisions concerning use of 
class II substances in a 1993 rulemaking that accelerated the phaseout 
schedule for HCFC-22 and HCFC-142b (58 FR 15014, 58 FR 65018). The 
intent of the 1993 rulemaking was to accelerate not only the production 
and consumption schedule, but also the use restrictions for those two 
substances under the authority of section 606(a)(1) and (2). In the 
March 18, 1993, notice of proposed rulemaking, EPA stated that the 
effect of this acceleration was ``to prohibit the use of the chemicals 
(virgin material only) for any use except as a feedstock or as a 
refrigerant in existing equipment as of January 1, 2010'' (58 FR 
15028). EPA noted in the December 10, 1993, final rulemaking that 
``HCFC restrictions and the approach included in this final rule have 
not changed from those proposed by the Agency in March'' (58 FR 65028). 
The regulatory provisions included with that notice, however, did not 
control use directly, but instead banned production and import for most 
uses. This action completes the prohibitions contemplated in the 1993 
rule by adding to the regulatory text the restriction on use as well as 
the corresponding prohibitions on introduction into interstate 
commerce.

[[Page 66418]]

EPA is providing exceptions to this ban for medical equipment and 
thermal expansion valves, for which the practicability of substitutes 
remains an issue. EPA is also clarifying its interpretation of the 
section 605(a) restrictions on use and introduction into interstate 
commerce.

III. Summary of This Final Action

    In this action, EPA is amending the existing regulations to 
implement the next major milestone in the HCFC phaseout. As a Party to 
the Montreal Protocol, and having ratified the Montreal Protocol and 
all of its amendments, the United States is required to decrease its 
amount of HCFC consumption and production to 25 percent of the U.S. 
baseline by 2010. Our domestic chemical-by-chemical approach results in 
differing schedules for the phaseout of individual HCFCs. EPA believes 
that the chemical-by-chemical allocation of HCFC allowances ensures 
that the United States continues to maintain an overall HCFC production 
and consumption level that is below the 2010 cap specified by the 
September 2007 Montreal Adjustment, while at the same time ensuring 
that servicing needs consistent with section 605(a) of the Clean Air 
Act and EPA's implementing regulations continue to be met. Thus, the 
aggregate allowances for all U.S. HCFC consumption in the years 2010-
2014 do not exceed 3,810 ODP-weighted metric tons (25 percent of the 
aggregate U.S. consumption baseline) annually and the aggregate 
allowances for all U.S. HCFC production in the years 2010-2014 do not 
exceed 3,884.25 ODP-weighted metric tons (25 percent of the aggregate 
U.S. production baseline) annually.
    To meet the 2010 cap for the 2010-2014 control periods, EPA is 
maintaining its past practice of apportioning company-specific 
production and consumption baselines for individual HCFCs, and 
allocating a certain percent of that baseline in an amount necessary to 
meet demand. For HCFC-22, that percentage decreases on an annual basis 
to reflect a projected decrease in demand as well as to promote 
recycling and reclamation, which in turn should prevent shortages that 
might otherwise occur upon the stepdown in 2015. This approach was 
discussed briefly in the proposal (73 FR 78691) and was supported in 
comments to the Agency. For HCFC-141b, HCFC-22, and HCFC-142b, EPA is 
adjusting the previously established company-specific baselines to 
reflect (1) permanent inter-company transfers of baseline allowances 
for a particular HCFC and (2) changes to the names of entities 
identified in the tables at Sec.  82.17 and Sec.  82.19. These 
adjustments do not reflect inter-pollutant transfers occurring on an 
annual basis. For 2010-2014, given the previous phaseout of HCFC-141b, 
EPA will continue to allocate zero percent of the HCFC-141b baseline, 
and allow only limited amounts of production via the existing EPA 
petition process.\5\ EPA is allocating an annually declining percentage 
of baseline for HCFC-22 ranging from 41.9 percent in 2010 to 26.1 
percent in 2014 and is allocating 0.47 percent of baseline for HCFC-
142b in all years 2010-2014 to meet the U.S. obligations under the 
Montreal Protocol and to reflect the use restrictions under section 
605(a) of the CAA while providing for servicing needs consistent with 
those restrictions.
---------------------------------------------------------------------------

    \5\ EPA did not propose, and is not implementing in this action, 
any changes to the HCFC-141b petition process for the 2010-2014 
control periods.
---------------------------------------------------------------------------

    EPA is also implementing production and consumption controls for 
HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb, which did not have 
baselines prior to this rulemaking. EPA is apportioning company-
specific baselines for these HCFCs based on production and import data 
available to the Agency. For control periods 2010-2014, EPA is granting 
125 percent of baseline for these HCFCs.
    The allocations for HCFC-22, HCFC-142b, HCFC-123, HCFC-124, HCFC-
225ca, and HCFC-225cb reflect EPA's analysis of market data for these 
chemicals. The allocation levels for these HCFCs meet the need for 
virgin material and avoid shortages during the affected control 
periods, as well as accommodate some market growth for the HCFCs for 
which EPA is allocating allowances for the first time in this action.
    For the years 2010-2014, the Montreal Protocol allows a cap of 
3,810 ODP tons for U.S. HCFC consumption (resulting in an aggregate of 
19,050 ODP tons over the five control periods) and 3,884.25 ODP tons 
for U.S. HCFC production (resulting in 19,421.25 ODP tons over five 
control periods). Of that amount, EPA is allocating allowances totaling 
12,355.5 ODP tons of consumption and 11,621.43 ODP tons of production 
over the five control periods. These allocations represent 65 percent 
of the consumption cap and 60 percent of the production cap established 
by the Montreal Protocol for 2010-2014. The difference between the cap 
and the total allocation reflects EPA's estimate of the need for HCFCs 
during these control periods. It also will accommodate minor 
adjustments in the market, particularly to allow potential market 
growth for HCFCs that have not been produced or imported since 2003 
(and which are therefore not reflected here). As discussed in more 
detail in Section IV.B.3, it will also encourage greater reclamation of 
recovered refrigerant and will facilitate preparation for the 2015 
phasedown in the consumption cap to 10% of baseline.
    This action also changes two other components of the HCFC allowance 
allocation framework. First, to reflect the September 2007 Montreal 
Adjustments, EPA is adjusting the amount of Article 5 allowances for 
control periods 2010-2019. Second, EPA is completing its implementation 
of the provisions in section 605 of the Clean Air Act that relate to 
use and introduction into interstate commerce of class II substances. 
As discussed in Section VI.D. below, EPA is excepting the use of HCFC-
22 in thermostatic expansion valves and in medical equipment from the 
accelerated restrictions on introduction into interstate commerce and 
use. EPA also is providing a limited grandfathering for use of HCFCs in 
refrigeration appliances that have not yet been ``manufactured'' under 
EPA's interpretation of that term but whose components have been 
specified for installation under a building permit or contract dated on 
or before January 1, 2010.
    This final rule combined with the accompanying final rule titled 
``Protection of Stratospheric Ozone: Ban on the Sale or Distribution of 
Pre-Charged Appliances'' (EPA Docket: EPA-HQ-OAR-2007-0163) (referred 
to in this preamble as the Pre-Charged Appliances rule) will have the 
following effects on the sale, distribution, and installation of air-
conditioning and refrigeration products charged with HCFC-22, HCFC-
142b, or blends containing one or both of these substances.
     Sale and distribution of appliances pre-charged with HCFC-
22 or HCFC-142b is allowed for self-contained, factory-charged 
appliances such as pre-charged window units, packaged terminal air 
conditioners (PTACs), and some commercial refrigeration units, if 
manufactured before January 1, 2010. The pre-charged appliance rule 
does not prohibit sale and distribution of pre-2010 inventory (i.e., 
stockpiled inventories).
     Sale and distribution of appliances pre-charged with HCFC-
22 or HCFC-142b is not allowed for self-contained, factory-charged 
appliances such as pre-charged window units, PTACs, and some commercial 
refrigeration units, if manufactured on or after January 1,

[[Page 66419]]

2010. This prohibition which is contained in the pre-charged appliance 
rule, applies regardless of when the refrigerant was produced and 
whether it is virgin or reclaimed. Under the allocation rule, neither 
stockpiled HCFC-22 produced prior to January 1, 2010, nor new HCFC-22 
produced after that date can be used to manufacture new appliances on 
or after January 1, 2010.
     Sale and distribution of appliance components pre-charged 
with HCFC-22 or HCFC-142b is allowed if the components (e.g. condensing 
units, line sets, and coils that are charged with refrigerant) were 
manufactured before January 1, 2010. The pre-charged appliance rule 
does not prohibit sale or distribution of pre-2010 inventory (i.e., 
stockpiled inventories).
     Pre-charged components manufactured before January 1, 
2010, may be used to service appliances manufactured before January 1, 
2010, but may not be assembled to create new appliances unless there is 
no use of virgin HCFC-22 or HCFC-142b, in the components or otherwise. 
The allocation rule prohibits use of virgin HCFC-22 and HCFC-142b in 
manufacturing new appliances.
     There is no exemption from the pre-charged appliance rule 
for the sale or distribution of pre-charged appliances and pre-charged 
components that are charged with reclaimed HCFC-22 or HCFC-142b 
refrigerant. In other words, the provisions banning sale and 
distribution apply equally regardless of whether the appliances or 
components contain virgin or reclaimed refrigerant.
     Under the allocation rule, virgin HCFC-22 or HCFC-142b may 
only be used to service existing appliances. Virgin HCFC-22 and HCFC-
142b may not be used to manufacture new pre-charged appliances and 
appliance components. Virgin HCFC-22 and HCFC-142b also may not be used 
to charge new appliances assembled onsite on or after January 1, 2010, 
though new appliances (not pre-charged) may be charged with reclaimed 
refrigerant.
     EPA is providing an exception to the allocation rule that 
allows virgin HCFC-22 to be used in the onsite ``manufacture'' of 
appliances for a particular project between January 1, 2010, and 
December 31, 2011, if the components have been specified for use at 
that project under a building permit or contract dated before January 
1, 2010.
     Under the allocation rule, HCFC-22 produced prior to 
January 1, 2010, may be used until January 1, 2015, for the manufacture 
of thermostatic expansion valves (TXVs).
     The sale and distribution of used appliances is not 
affected by either rule.

IV. Allocation of Allowances for the 2010-2014 Control Periods

A. Baselines for HCFC-22 and HCFC-142b Allowances

    In the proposed rule, EPA presented five options for allocating 
HCFC-22 and HCFC-142b allowances for the control periods 2010-2014: (1) 
Allocating a percentage of the baseline production and consumption 
allowances (see 40 CFR 82.17 and 82.19 respectively), with or without 
considering any intra- and/or inter-pollutant transfers that resulted 
in a different amount of production or consumption for a specific HCFC; 
(2) allocating allowances based on evaluation of the most recent three 
years of production, import, and/or export data as reported to EPA; (3) 
allocating allowances based on an evaluation of past sales of HCFCs by 
allowance holders by considering how the HCFCs were ultimately used 
(e.g., servicing refrigeration or air-conditioning vs. original 
manufacture of refrigeration or air-conditioning equipment and foam 
blowing); (4) allocating allowances based on aggregated ODP tons; or 
(5) allocating a total amount of allowances and allowing for purchase 
by establishing an auction system.
    As discussed in the proposed rule, each of these five methods 
offers advantages and disadvantages for potential allowance holders 
that vary according to whether a particular entity is predominantly a 
producer or importer; whether it currently sells HCFC-22 and HCFC-142b 
to original equipment manufacturers, wholesalers, retailers, or 
companies that service appliances; whether the portion of its business 
that is ODS-based is expanding or contracting as the next major 
milestone in the phaseout approaches; its liquidity; whether it holds 
both HCFC-142b and HCFC-22 allowances and/or engages in inter-pollutant 
transfers; and whether it sold HCFCs for applications that do not lend 
themselves to servicing. Without regard to the practices of individual 
entities, each of the allocation schemes also offers advantages and 
disadvantages associated with the ease of implementation and other 
administrative burdens.
    In this final action, EPA is finalizing option 1 by allocating a 
percentage of the baseline allowances (Sec. Sec.  82.17 and 82.19) for 
HCFC-22 and HCFC-142b. As discussed in Section IV.A.2. of the preamble, 
EPA is modifying the baseline allowances through the consideration of 
permanent inter-company baseline transfers for the same HCFC but is not 
accounting for inter-pollutant transfers within a single company that 
resulted in a different amount of production or consumption for a 
specific HCFC on an annual basis.
    Of all the options, applying a uniformly smaller percentage of the 
existing baseline as the method for allocating HCFC-22 and HCFC-142b 
allowances is the least disruptive to the current market and best 
ensures a continued smooth transition away from ozone-depleting 
substances. This system closely matches the current HCFC allocation 
method, with which producers and importers are familiar. EPA provided 
notice of this option in the preamble to the 2003 allocation rule by 
indicating that EPA ``intends to achieve this reduction step through 
notice and comment prior to 2010 and will likely implement the 
reduction by simply listing a percent of baseline allowances to be 
granted in Sec.  82.16 for the years after 2009'' (68 FR 2823). Many 
commenters have informed EPA that, based in part on this statement, 
producers and importers have aligned their business activities around 
the baselines set forth in the 2003 allocation rule. Such planning 
includes not only ensuring capacity to produce or import these HCFCs 
but also the establishment and maintenance of relationships with 
distributors and contractors.
    Second, on a related note, EPA agrees with a comment that this 
approach is the most consistent with the existing framework for 
recordkeeping and reporting. This option utilizes EPA's existing ODS 
tracking system and does not require additional one-time or periodic 
reporting obligations that may be necessary under the other options. 
EPA uses information from quarterly, annual, and other periodic 
reporting requirements to monitor consumption, production, imports, and 
exports of all HCFCs. EPA also uses this information to ensure 
companies' compliance with regulatory requirements and to develop 
reports that are requested by the Parties to the Montreal Protocol, 
including reports ascertaining U.S. compliance with the phaseout caps. 
The information enables EPA to monitor production and consumption for 
all HCFCs, including HCFCs for which baselines have not yet been 
established and for which allowances have not yet been allocated. 
Option 1 limits administrative burden for allowance holders, and 
additionally, can be implemented more quickly than other options.
    Third, EPA prefers option 1 because it applies an established and 
well-vetted baseline. All of the other options would require the Agency 
to disregard the

[[Page 66420]]

existing baseline in its entirety and rely on another basis for 
allocating production and consumption allowances. This would minimize 
the value of establishing a baseline and lead to market uncertainty. 
EPA seeks instead to minimize unanticipated changes and prevent market 
disruptions. EPA, however is making minor changes to company baseline 
allowances to reflect inter-company baseline trades, as discussed 
below.
    Most commenters preferred option 1 for the reasons described above. 
Some commenters, however, favored the alternative approaches. The 
second-most-favored allocation method was option 5, under which EPA 
would auction allowances. Commenters favoring this option preferred it 
because it could potentially allow for new entrants into an HCFC-22 
market that those commenters say is dominated by a small number of 
large companies. These commenters typically disagreed with option 1 
because it would favor the existing set of stakeholders. Option 1 does 
not automatically prohibit new entrants, as they could acquire 
allowances from existing allowance holders under the existing 
regulatory framework. While EPA acknowledges that not having allowances 
can be a barrier to entry into this market, EPA does not believe it is 
necessary or appropriate to adopt a particular regulatory approach 
specifically for the purpose of encouraging new entrants at this point 
in a phaseout.
    In the July 20, 2001, proposed HCFC allocation rule, EPA expressed 
skepticism about promoting new entrants into the HCFC market: 
``Encouraging new companies to join the business after the ANPRM would 
counter the efforts of moving people out of HCFCs into more 
environmentally sound substitutes. EPA believes that any new entrants 
following the ANPRM publication would not be precluded from entering 
the market, because they could purchase allowances from existing 
allowance holders who may not intend to use their full amount of 
allowances. They also have the opportunity to import recovered HCFCs 
through EPA's petition system or deal in substitutes to HCFCs, which 
would benefit the ozone layer and provide longer-term business 
security. Accordingly, EPA believes that the market will sufficiently 
allow for any new entrants after April 5, 1999, as appropriate.'' (66 
FR 38073). In the 2003 final rule, EPA provided a limited exemption for 
companies that began importing HCFCs after the first stakeholder 
meeting in 1997 but before the ANPRM publication date, after which they 
would have had reason to know of an imminent rulemaking allocating 
allowances based on historical production and importation. EPA did not 
extend this exemption further because once public notice was given via 
the ANPRM, ``businesses that desired an allocation of HCFC allowances 
would have known the risks of jumping into the business at this 
juncture.'' (66 FR 38073). Since that time eight years ago, access to 
information and knowledge of the risks regarding entering the HCFC-22 
market have only increased. There have been new entrants to the market, 
as evidenced by commenters seeking allocation rights who were not in 
operation in 2003. These entities have entered the market by purchasing 
consumption allowances, as EPA predicted they could back in 2003. These 
entities can continue to purchase consumption allowances or import 
substitutes for HCFCs. As the market continues to decrease, EPA does 
not believe that providing consumption allowances to these or other new 
entities is necessary to prevent disruption to the continued servicing 
of existing equipment. Given EPA's intent to phase down, and ultimately 
phase out, the use of HCFC-22, consistent with the requirements of the 
CAA and obligations under the Montreal Protocol, EPA believes it is 
justified in continuing to allocate only to those entities who 
participated in the market at the initial stages as well as those that 
have entered the market by purchasing HCFC-22 baseline allowances in 
accordance with the established practices. EPA therefore does not 
believe that choosing this option for the purpose of opening up the 
market to new entrants is appropriate at this time as it may create 
disruption to the existing regulatory framework.
    EPA also suggested, in option 4, that it could allocate allowances 
on an ODP-ton-weighted basis, authorizing allowance holders to consume 
or produce any combination of HCFC up to that ODP limit. Only one 
commenter supported this option, saying it would be more closely 
aligned with the requirements of the Montreal Protocol, which 
established a total ODP cap, and would more closely approximate an 
unregulated market. Furthermore, EPA would not need to predict the 
supply and demand for individual HCFCs. The commenter recognized, 
though, that it would have been better to establish such a system in 
the 2003 allocation rule and that it would be more difficult to 
implement today. At this point in the phaseout, EPA does not believe 
that it would be appropriate to switch to an ODP-weighted allocation. 
EPA raised, and rejected, this option in 2003 when it initially 
established baselines and allocated production and consumption 
allowances for HCFCs. In 2003, EPA applied a ``worst first'' approach 
to the phaseout of HCFCs and set limits only on HCFC-141b, HCFC-22, and 
HCFC-142b. Moving to an ODP-weighted allocation system at this point 
would disrupt the market and not reflect the market decisions made 
between 2003 and 2009.
    Finally, options 2 and 3 received limited support from commenters. 
EPA is not persuaded that changing the baseline allowances through any 
of the methods presented in those options would be more appropriate 
than the manner proposed under option 1. EPA discusses comments on 
these options in the response to comments document, available in the 
docket for this rulemaking.
    After considering comments, EPA is allocating a percentage of the 
baseline allowances for HCFC-22 and HCFC-142b, per option 1, in this 
final rule. The specific percentages are discussed in Section IV.C. 
below.
1. Adjusting the Baseline for Inter-company and Inter-pollutant 
Transfers
    Sections 607(b) and (c) of the Clean Air Act permit inter-pollutant 
and inter-company transfers of allowances, respectively. Inter-
pollutant transfers are the transfer of an allowance of one substance 
to an allowance of another substance on an ODP-weighted basis. Inter-
company transfers are transfers of allowances for the same ODS from one 
company to another company. Section 607(c) also authorizes inter-
company transfers combined with inter-pollutant transfers, so long as 
the requirements of both are met. The corresponding regulatory 
provisions appear at 40 CFR 82.23.
    EPA proposed in allocation option 1 to establish a percentage of 
baseline allowances for each HCFC ``with or without considering any 
permanent baseline transfers and/or inter-pollutant transfers that 
resulted in a different amount of production or consumption for a 
specific HCFC included'' (emphasis added). The company-specific 
baselines in the proposed regulatory text did, though, reflect 
adjustments resulting from approved inter-company transfers of baseline 
allowances (i.e., permanent rather than calendar-year allowances) as 
well as intra-company, inter-pollutant transfers. EPA received multiple 
comments on how transfers of allowances should be reflected in company 
baselines. All comments on the issue supported

[[Page 66421]]

adjusting the baselines to reflect inter-company transfers. Most 
commenters were opposed, however, to adjusting a company's baseline to 
reflect inter-pollutant transfers occurring within that company. As 
discussed in this section, the final allocation reflects adjustments 
due to inter-company transfers but not inter-pollutant transfers.
    In this final rule, EPA is updating the baselines for HCFC-22 and 
HCFC-142b to reflect name changes and permanent inter-company baseline 
transfers. Doing so reflects the changes in the marketplace that have 
occurred since the last time EPA addressed these baselines. As 
discussed above, permanent inter-company baseline transfers provide a 
mechanism for new entrants to join or expand in the HCFC-22 market and 
for other companies to expand their business. When EPA allocated 
allowances from 2004 to 2009, the Agency made minor changes to reflect 
such permanent trades of baseline allowances. EPA recognizes that in 
some cases entities are no longer actively involved in HCFC production, 
import, and/or export activities. EPA sought comment on whether it 
should retain the baselines for such entities or whether it should 
retire, auction, or redistribute the baselines among the active 
entities. EPA received only one comment on the issue, which favored 
EPA's preferred approach of retaining the baseline for those entities. 
The commenter noted that any allowances distributed to passive holders 
will find their way into circulation if needed. EPA agrees, as this has 
been a mechanism by which new entrants have entered the HCFC allocation 
system in the past.
    Eight commenters opposed, and two commenters supported, the 
proposed adjustments to company baselines to reflect intra-company, 
inter-pollutant transfers. At issue is the fact that two companies have 
made inter-pollutant transfers with the apparent intent of reflecting 
them as permanent adjustments to their baseline allowances. Comments in 
opposition stated that adjusting the baselines to account for these 
permanent inter-pollutant transfers would inequitably redistribute 
allowances. Because allowance holders receive allocations based on a 
percentage of market share, increasing allowances to two companies has 
the effect of decreasing allowances to the other market participants. 
Thus, two companies would receive 38% and 912% more HCFC-22 allowances 
while the remaining companies would each receive 16% fewer HCFC-22 
allowances. Commenters opposed to this redistribution requested that 
EPA utilize the 2003 baseline and claim it would be the most equitable 
way of reducing and allocating allowances among the entire community.
    Three commenters also stated that allowing these transfers would 
unnecessarily disrupt the marketplace. They stated that stakeholders 
believed that EPA would allocate allowances in 2010-2014 by reducing 
allowances to all baseline allowance holders by an equal percentage and 
planned accordingly. They did not anticipate an increase in allowances 
to some companies resulting in a significant decrease for them. 
According to the commenters this shift in HCFC-22 allowances would 
require distributors to seek material from different suppliers than in 
the past and would thus disadvantage the allowance holders and their 
customers.
    In the 2003 rule, both EPA and commenters to that rule recognized 
the flexibility that inter-pollutant and inter-company transfers 
provide. One company has utilized inter-pollutant transfers annually 
since 2006. Each year it has converted over 95% of its HCFC-142b 
allowances to HCFC-22 allowances to supply the servicing market. 
Allowing inter-pollutant transfers since 2006 has had little impact on 
the greater marketplace because it did not reduce the allocation levels 
for the other allowance holders. Commenters have demonstrated to EPA 
how treating inter-pollutant trades as permanent would negatively 
affect all other allowance holders. While the company that has 
historically relied on these transfers would be negatively affected by 
not treating its inter-pollutant transfers as permanent, EPA is 
concerned that reflecting such transfers in this rule would disrupt the 
entire market in 2010 and could encourage greater disruption in future 
control periods. Commenters pointed out that adjusting the baselines to 
reflect intra-company, inter-pollutant transfers could create 
incentives for future manipulation of the allocation system in 
anticipation of the future control periods. For example, in 2020 EPA 
will no longer be issuing HCFC-22 allowances. EPA has anticipated that 
companies with HCFC-22 allowances would no longer be in the HCFC market 
at that date if they did not hold allowances for other HCFCs that are 
still allowed after 2020. For example, if EPA were to establish an 
allocation framework based on inter-pollutant trades, in 2019 companies 
with HCFC-22 allowances could convert them all to allowances for HCFC-
123 or some other compound for which allowances are available and thus 
remain in the market. As another example, in 2015 a producer or 
importer that previously had not participated in the HCFC-123 market 
could dominate that market by converting its HCFC-22 allowances in 2014 
to HCFC-123 allowances. Given the different ODPs of HCFC-22 and HCFC-
123, converting one allowance of HCFC-22 would result in 2.75 
allowances of HCFC-123. Also, since companies hold many more HCFC-22 
allowances than HCFC-123 allowances, converting those HCFC-22 
allowances would have an overwhelming effect on the current HCFC-123 
allowance holders. In effect, establishing allocations based on 
permanent inter-pollutant transfers would transform the U.S. HCFC 
phasedown from a chemical-by-chemical phaseout, as established under 
the ``worst-first'' approach in the 1993 rule, to an ODP-weighted 
phasedown. Under an ODP-weighted phasedown, allowance holders could 
permanently transfer their production and import of specific HCFCs so 
long as the total ODP cap is not affected. Companies that do not 
transfer their allowances, however, would remain holding a smaller 
percentage of the total ODP cap, and thus would be left with fewer 
allowances. The ODP-weighted method was rejected in both the 2003 rule 
and this rule, though EPA did take comment on it in the proposal, as 
discussed in the previous section.
    Some commenters stated that modifying the baselines by taking into 
account intra-company, inter-pollutant transfers would be contrary to 
the Clean Air Act. One commenter argued that section 607 of the Clean 
Air Act allows EPA to approve inter-pollutant transfers of allowances 
only on a year-to-year basis. That commenter pointed to language in 
section 607(b) stating that EPA regulations are to permit ``a 
production allowance for a substance for any year to be transferred for 
a production allowance for another substance for the same year on an 
ozone depletion weighted basis.'' The commenter also discussed the 
legislative history of the 1990 Clean Air Act Amendments.
    After considering the language of section 607 and the legislative 
history, EPA believes that section 607(b) is best read as permitting 
only year-by-year inter-pollutant transfers. Section 607(b) states that 
EPA's rules are to permit ``a production allowance for a substance for 
any year to be transferred for a production allowance for another 
substance for the same year.'' This language emphasizes the year-by-
year nature of such transactions. No parallel language appears in 
section 607(c). That section does, however, provide that any

[[Page 66422]]

inter-pollutant transfers between two or more persons must meet the 
requirements of section 607(b). Hence, EPA interprets section 607 as 
requiring that all inter-pollutant transfers, whether occurring between 
companies or within a single company, be conducted on a yearly--and 
thus temporary--basis.
    EPA has made past statements that are consistent with this 
interpretation. In the 2003 rule that established the allowance system 
for HCFCs (68 FR 2835), EPA stated: ``The permanent transfer of 
baseline allowances is a lasting shift of some quantity of a company's 
allowances to another company.'' EPA also indicated what would happen 
at the time of the next stepdown or phaseout date: ``[A]t the time of a 
reduction step or a phaseout of the substance, the current holder of 
baseline allowances that were received in a permanent transfer would be 
the person who would have them deducted.'' EPA decided in the 2003 rule 
to ``allow permanent transfers of baseline allowances with those 
allowances disappearing at the phaseout date for the specific HCFC, 
regardless of what inter-pollutant transfers had taken place'' (68 FR 
2835). Further discussion of this issue appears in the response to 
comments document available from the docket.
    In summary, this final rule reflects the changes in consumption and 
production baseline allowances from inter-company transfers but not 
inter-pollutant transfers. The resulting consumption baseline amounts 
for HCFC-22, HCFC-142b, and HCFC-141b are shown below in Table 3.
2. Meeting the Needs of Certified Reclaimers
    Many commenters requested that EPA allocate allowances to certified 
reclaimers to ensure that they would be able to obtain the virgin HCFCs 
needed for mixing with recovered HCFCs during the reclamation process. 
Recovered refrigerant often contains contaminants, including air, 
water, particulates, acidity, chlorides, high boiling residues, and 
other impurities including other refrigerants. Reclamation is the re-
processing and upgrading of a recovered controlled substance through 
such mechanisms as filtering, drying, distillation, and chemical 
treatment in order to restore the substance to the purity levels 
specified in Appendix A to 40 CFR part 82, subpart F (based on ARI 
Standard 700, ``Specifications for Fluorocarbon and Other 
Refrigerants''). While most of the contaminants can be efficiently 
removed to bring the purity to ARI Standard 700, removing cross-
contamination from other refrigerants poses additional challenges due 
to their chemistry. One method of separating out other refrigerants is 
to pass the material through a distillation tower, potentially several 
times. Some reclaimers blend virgin material with cross-contaminated 
recovered material to bring the material up to ARI Standard 700. 
Reclaimers do not currently have a consumption baseline per se; 
however, a limited number of reclaimers that also are HCFC importers do 
have a consumption baseline. Therefore, generally reclaimers purchase 
virgin HCFC-22 from allowance holders in a manner similar to other HCFC 
users such as air-conditioning and refrigeration appliance 
manufacturers.
    Forty-five commenters encouraged EPA to allocate HCFC-22 
consumption allowances to reclaimers so that they would have improved 
access to virgin HCFC-22 which they could then blend with recovered 
HCFC-22. The comments stated in various ways that having allocations 
would (1) improve the economics of reclamation, (2) foster greater 
recovery, (3) foster greater reclamation, and (4) provide environmental 
benefits. The primary mechanism suggested by commenters was that EPA 
provide to reclaimers an amount equal to 10% of the total annual HCFC-
22 allocation. This method would reduce the amounts that the existing 
allowance holders would otherwise have received by 10% and redirect 
those allowances to certified reclaimers. EPA would allocate that 10% 
among reclaimers based on the amount of material each company reclaimed 
in some prior year, as reported to EPA under existing section 608 
requirements.
    First, commenters in support of allocating consumption allowances 
to reclaimers stated that it would improve the economics of the 
reclamation industry. Reclamation through separation and distillation 
requires costly distillation towers that are energy-intensive, and thus 
expensive, to operate. Alternatively, reclaimers who practice blending 
must purchase virgin HCFC-22, often at market prices. These commenters 
stated that having allocation rights would allow reclaimers to import 
HCFC-22 at a lower cost and thus be able to sell reclaimed HCFC-22 at a 
price that is competitive with domestically produced or imported virgin 
HCFC-22.
    Second, these commenters stated that acquiring less expensive 
virgin material could help defray other costs associated with 
refrigerant reclamation, thereby allowing them to reclaim more 
contaminated (i.e., more economically marginal) refrigerant. One 
commenter stated that reclaimers have many tons of material in 
inventory that could be reclaimed through blending but that it 
currently cannot reprocess without virgin material at competitive 
prices.
    Third, these commenters stated that allocations to reclaimers would 
increase refrigerant recovery rates. Reclaimers would be more 
financially able to accept slightly cross contaminated HCFCs from 
contractors and wholesalers without needing to assess additional fees 
on them to pay for destruction or fractional distillation. Removing 
this disincentive for returning contaminated material would encourage 
more recovery and discourage an incentive to vent refrigerant. One 
commenter estimated that allocations for reclaimers would result in as 
much as a 15% increase in recovered refrigerant within the first two 
years of allocations.
    Finally, these commenters claimed an environmental benefit from 
encouraging these less expensive blending practices. They stated that 
blending reduces the need for fractional distillation, a process that 
utilizes 300 times more energy than blending and they observed that 
increased recovery means less refrigerant is vented into the 
atmosphere.
    In addition to comments supporting allocation of consumption 
allowances to certified reclaimers, EPA also received two comments 
stating that allocations to reclaimers are not necessary and will not 
encourage greater recycling/reclamation in the marketplace. These 
commenters stated that (1) current reclamation capacity is sufficient 
to meet greater future demand; (2) separation and distillation 
technology currently exists, precluding the need for virgin HCFC-22 to 
reclaim recovered HCFCs; and (3) allocating allowances to reclaimers 
creates numerous administrative and practical challenges that were not 
presented for notice and comment.
    EPA has previously detailed the importance of recovering and 
reusing HCFC-22 and the Agency strongly encourages increased recovery 
and either recycling or reclamation \6\ of

[[Page 66423]]

HCFC-22. Section 608 of the CAA prohibits the intentional venting of 
HCFCs and EPA regulations require that they be recovered and then 
either recycled, reclaimed, or destroyed. The recovery and reuse of 
HCFCs prevents emissions to the atmosphere where they can deplete the 
stratospheric ozone layer and reduces the amount of virgin material 
that needs to be produced. Recovery becomes even more important in 
light of the 2015 Montreal Protocol phasedown step, when the U.S. HCFC 
consumption cap is reduced from 3,810 ODP-weighted metric tons to 1,524 
ODP-weighted metric tons. In its report The U.S. Phaseout of HCFCs: 
Projected Servicing Needs in the U.S. Air-Conditioning and 
Refrigeration Sector (the ``Servicing Tail'' report), EPA estimates 
that to meet demand in 2015, recovered material will have to provide 
29% of the total servicing demand for HCFC-22. A smooth transition for 
stakeholders--including continued availability of needed material for 
approved uses--has historically been an essential aspect of the U.S.'s 
success in implementing the Montreal Protocol and Clean Air Act 
requirements. EPA therefore has given much consideration to the 
suggestion raised by commenters. EPA does not believe, though, that 
allocating allowances to reclaimers in this rulemaking is necessary or 
the most appropriate action that EPA can take to foster greater 
recovery and reclamation of HCFC-22.
---------------------------------------------------------------------------

    \6\ EPA has defined Recover, Recycle, and Reclaim at Sec.  
82.152 as follows: (1) Recover refrigerant means to remove 
refrigerant in any condition from an appliance and to store it in a 
external container without necessarily testing or reprocessing it in 
any way; (2) recycle refrigerant means to extract refrigerant from 
an appliance and clean refrigerant for reuse without meeting all of 
the requirements for reclamation. In general, recycled refrigerant 
is refrigerant that is cleaned using oil separation and singe or 
multiple passes through devices, such as replaceable core filter-
driers, which reduce moisture, acidity, and particulate matter. 
These procedures are usually implemented at the field job site; (3) 
reclaim refrigerant means to reprocess refrigerant to all of the 
specifications in appendix A to 40 CFR part 82, subpart F (based on 
ARI Standard 700-1995, Specification for Fluorocarbons and other 
Refrigerants) that are applicable to that refrigerant and to verify 
that the refrigerant meets these specifications using the analytical 
methodology prescribed in section 5 of appendix A of 40 CFR part 82, 
subpart F.
---------------------------------------------------------------------------

    First, while commenters stated that providing allowances to 
reclaimers for HCFCs to be used in blending may foster increased 
recovery, EPA is concerned that it may foster unsustainable reclamation 
practices. Commenters stated that the blending ratios of virgin to 
recovered material range from 4:1 to as high as 10:1 (reflecting 
``blending up'' recovered material from either 98.5% pure or 97.5% pure 
respectively, to 99.5%). The amount of virgin HCFC-22 produced or 
imported for all purposes, including for blending out impurities, will 
decrease significantly in 2015 when the overall HCFC cap declines from 
25% of baseline to 10% of baseline. Production and import of virgin 
HCFC-22 for refrigerant uses will cease in 2020. Therefore, reclamation 
through separation and distillation will be more important in 2015 and 
absolutely necessary in 2020.
    Second, allocating allowances to reclaimers would be a major change 
to the rule that would affect other stakeholders who have not had the 
opportunity to comment on the reclaimers' suggestion. Current allowance 
holders would have their allocations reduced 10% under this suggestion. 
If EPA were to finalize such a suggestion, EPA would want to provide 
other stakeholders an opportunity to comment. The suggestion raises 
several issues that would benefit from the notice and comment process. 
Specifically, issuing allowances to reclaimers raises questions of who 
would receive allowances, what the baselines would be, and how many 
allowances would be allocated. Other questions about how to implement 
this suggestion would include whether EPA should provide additional 
allowances to reclaimers that currently have baseline allocations, and 
whether EPA should set the baseline according to the amount reclaimed, 
as commenters suggested, or according to the amount recovered. 
Furthermore, some reclaimers currently manufacture and sell niche blend 
refrigerants that include HCFC-22 as a component, so EPA would need a 
mechanism to ensure that they would use the allocation for reclamation 
purposes, not for continued production of these blends. Different 
allocation methods offer advantages and disadvantages for potential 
allowance holders that vary according to the specific characteristics 
of the stakeholder. Thus, altering the final rule to accommodate the 
reclaimers' suggestion is not a simple matter. If EPA were to issue a 
supplemental proposal to provide an opportunity for all stakeholders to 
comment on these issues, the rule would likely be delayed beyond 
January 1, 2010. This would have a negative impact on all stakeholders 
who are depending on an allowance allocation for the production and 
import of HCFCs in 2010.
    Third, EPA believes that it can take other actions in this rule 
that will foster recovery and reclamation while avoiding the 
complications raised by the commenters' suggestion. The same commenters 
that suggested allocations to reclaimers also noted that a constant 
allocation rate over the five control periods, as proposed, might 
discourage rather than foster reclamation. To avoid that, in this final 
rule EPA is allocating at 80% of the estimated demand in 2010 and is 
reducing the allocation over five years. EPA anticipates that the price 
of HCFC-22 will increase as allocations decrease and supply is reduced. 
Some of the economic constraints for recovery and reclamation will 
therefore loosen and more recovered material being held in inventory 
may be reclaimed. EPA believes that encouraging the market for 
recovered material in this way will be the most effective and 
appropriate mechanism that this current rulemaking can take to increase 
recovery and reclamation.
    Overall, while EPA agrees that recovery practices should be 
improved and reclamation expanded, the Agency does not agree with 
commenters that EPA should provide allocations to reclaimers at this 
time as a way of doing so. Therefore, in this final rule, EPA is not 
adding new entrants based on their status as EPA-certified refrigerant 
reclaimers. EPA may consider such an approach when proposing future 
allocation rules.

B. Factors for Considering Allocation Amounts for HCFC-22 and HCFC-142b

    EPA proposed to allocate HCFC-22 and HCFC-142b allowances based on 
the projected servicing needs for those compounds, taking into account 
the amount of those needs that can be met through recycling and 
reclamation. The proposed rule discussed and sought public comment on 
two alternate methods for determining how many allowances to allocate 
in 2010-2014 for these two compounds. One alternative that EPA rejected 
would have allocated the maximum amount of HCFC-22 and HCFC-142b that 
ensures compliance under the Montreal Protocol aggregate cap in 2010 
without room for other HCFCs. The other alternative EPA rejected would 
have been to allocate a percentage of the aggregate HCFC consumption 
and production caps in 2010 for HCFC-22 and HCFC-142b equal to the same 
overall percentage of the aggregate HCFC consumption and production 
caps allocated for each substance in the 2003 allocation rule. Thus, in 
2003, EPA allocated HCFC-22 allowances equal to 66 percent of 9,906 ODP 
tons and HCFC-142b allowances equal to 13 percent of 9,906 ODP tons. 
This second method would have applied the same percentages to the total 
allowable HCFC consumption level for 2010-2014 of 3,810 ODP-weighted 
metric tons (i.e. 2,515 ODP tons of HCFC-22 and 495 ODP tons of HCFC-
142b). EPA rejected these alternate methods because they do not 
consider servicing needs and thus could result in shortages or 
oversupply of HCFC-22. Additional discussion of these alternatives is 
found in the proposed rule. Neither of these approaches received 
favorable comment. EPA

[[Page 66424]]

therefore concludes that an approach based on the servicing need is 
most appropriate for allocating HCFC-22 and HCFC-142b allowances. 
Because it is important to promote greater use of recycled and 
reclaimed material in anticipation of the 2015 phasedown step, EPA does 
not intend to allocate the difference between the allocation authorized 
by the Parties of the Montreal Protocol and the allocation authorized 
by this rulemaking except under unforeseen extenuating circumstances.
1. The Importance of HCFC-22 Servicing Needs for Existing Equipment
    HCFC-22 is the most widely used HCFC and the demand for its use in 
servicing existing equipment is the primary factor affecting EPA's 
estimate of production and consumption of HCFCs in the coming years. 
EPA has issued and sought comment on three versions of a draft report 
analyzing servicing demand for the HCFC appliances in the U.S. 
refrigeration and air-conditioning sector projected to be in service 
from 2010-2019. The Servicing Tail report focuses on air-conditioning 
and refrigeration appliances because such equipment will represent the 
bulk of the servicing need. In addition, the servicing exception to the 
use ban for HCFC-22 and HCFC-142b pertains only to use as a refrigerant 
in such equipment. Under section 605(a) of the Clean Air Act and EPA's 
implementing regulations, nearly all other uses of these two HCFCs are 
banned effective January 1, 2010. The projected servicing need for 
HCFC-22 in 2010 is approximately 62,500 metric tons (3,438 ODP-weighted 
metric tons), or approximately 90 percent of the consumption cap for 
all HCFCs in 2010, which is 3,810 ODP-weighted metric tons. HCFC-142b 
has primarily been used as a foam blowing agent, a use which will be 
phased out in 2010. The projected servicing need for existing 
refrigeration equipment containing HCFC-142b is extremely low: 
approximately 100 metric tons (7 ODP tons). EPA therefore has focused 
the analysis on HCFC-22 because that compound is the predominant HCFC 
in the installed base of air-conditioning and refrigerant equipment for 
which servicing in the U.S. will likely continue.
    The Servicing Tail Report provides a classification of 
refrigeration and air conditioning equipment that continue to use HCFC-
22. Refrigeration equipment can be categorized as: (1) Domestic 
refrigeration, (2) refrigerated transport, (3) industrial process 
refrigeration, and (4) commercial refrigeration. Domestic refrigeration 
includes household refrigerators, household freezers, combination 
refrigerator/freezer units, and water coolers. With the exception of 
certain older household freezers that use HCFC-22, this category 
typically does not use HCFCs or blends containing HCFCs. Refrigerated 
transport includes refrigeration used in equipment that moves products 
from one place to another and includes refrigerated ship holds, truck 
trailers (i.e., reefer trucks), railway freight cars, and other 
shipping containers. Industrial process refrigeration systems are 
complex, customized systems used to cool process streams in the 
chemical, food processing, pharmaceutical, petrochemical, and 
manufacturing industries. This sector also includes industrial ice 
machines, equipment used directly in the generation of electricity, and 
ice rinks. Commercial refrigeration appliances that continue to use 
HCFC-22 can be further broken down into two end uses: cold storage 
warehouses and retail food refrigeration systems.
    The majority of HCFC-22 equipment that is projected to be in use 
from 2010 onward will be air-conditioning applications, including 
window units, packaged terminal units, unitary air-conditioning, 
chillers, dehumidifiers, water and ground source heat pumps, and mobile 
air-conditioning in buses and trains. EPA projects that approximately 
145.6 million units of all such types of HCFC-22 air-conditioning 
equipment will be in use in 2010, decreasing from 2010 levels by about 
41 percent in 2015 and 86 percent in 2020. In addition, approximately 
3.8 million units of HCFC-22 refrigeration equipment will be in use in 
2010. The installed base of HCFC-22 refrigeration equipment is 
projected to decrease from 2010 levels by about 44 percent in 2015 and 
75 percent in 2020.
    EPA developed these estimates using its Vintaging Model. This model 
is the primary tool that EPA used to launch the analysis and form the 
basis for quantitative estimates of projected HCFC consumption. The 
Vintaging Model estimates the annual chemical emissions from industry 
sectors that have historically used ODS, including air conditioning, 
refrigeration, foams, solvents, aerosols, and fire protection. Within 
these industry sectors, there are over fifty independently modeled end 
uses. The model uses information on the market size and growth for each 
of the end uses, 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 originally filled by the ODS is 
allocated to each of its substitutes. The model tracks emissions of 
annual ``vintages'' of new equipment that enter into operation by 
incorporating information on estimates of the quantity of equipment or 
products sold, serviced, and retired or converted each year, and the 
quantity of the compound required to manufacture, charge, and/or 
maintain the equipment. EPA's Vintaging Model uses this market 
information to build an annual inventory of in-use stocks of equipment 
and the ODS refrigerant and non-ODS substitutes in each of the end 
uses. Additional information on the Vintaging Model is available in the 
docket for this rulemaking.
    On November 4, 2005, EPA published a Notice of Data Availability 
(70 FR 67172) making the first draft of the Servicing Tail report 
available for public review and comment. On September 29, 2006, EPA 
held a stakeholder meeting presenting the findings in the second draft 
of the Servicing Tail report along with other important information 
regarding the next major milestones in the HCFC phaseout. EPA solicited 
additional comments on the findings presented at the meeting. 
Representatives of air conditioning and refrigeration manufacturers, 
chemical producers, importers, reclaimers, industry associations, and 
environmental organizations commented on the projected amount of HCFCs 
needed to service the installed base of equipment and on the amounts 
expected to be available from reclamation. In June 2008, EPA prepared a 
third draft of the Servicing Tail report to: (1) Reflect the September 
2007 Montreal Adjustment, in which the Parties agreed to adjust the 
stepwise reduction in 2010 from 65 percent of baseline to 75 percent of 
baseline for non-Article 5 Parties; (2) consider more recent production 
and consumption data in the United States; and (3) consider more recent 
trends in the air-conditioning and refrigeration sectors. EPA placed 
this revised draft report in the docket and accepted comments on it 
during the public comment period. These comments are discussed below.
    The projections of past HCFC consumption, as presented in the 
Servicing Tail report, showed reasonable agreement with production, 
import, and export data reported to the Agency as required by 40 CFR 
82.24 on a quarterly, annual, and transactional basis. EPA's analysis 
of the reported data confirms that the United States is satisfying its 
obligations as it phases out ODS and enables EPA to consider trends in 
the HCFC markets on a chemical-by-chemical basis. EPA also uses this 
information to submit an annual report

[[Page 66425]]

to the Ozone Secretariat as required by the Parties to the Montreal 
Protocol.
    The projected servicing need for HCFC-22 in 2010 is 62,500 metric 
tons (3,438 ODP-weighted metric tons), or approximately 90 percent of 
the ODP-weighted consumption cap for all HCFCs in 2010, which is 3,810 
ODP-weighted metric tons. EPA estimates that the servicing need for 
HCFC-22 will continue to decrease each year, and this final rule 
accounts for this by decreasing the allocation annually in each of the 
years 2011-2014. In contrast, the lead option in the proposed rule 
would have maintained a constant HCFC-22 allocation of 50,000 metric 
tons in 2010 through 2014. EPA recognizes that in 2013 and 2014 the 
proposed HCFC-22 allocation would surpass projected need. This is one 
reason why EPA is not allocating a constant amount of HCFC-22 
allowances for the years 2010-2014. This final rule allocates at 20% 
below modeled need in 2010, decreasing to 26% below the modeled need in 
2014, and relies on a consistent amount of reclaimed material to assist 
in meeting projected servicing needs. This approach is described in 
Section IV.B.3 below. Estimates of projected need are discussed in the 
Servicing Tail report found in the docket to this rule.
    After review of comments and other data and estimates of HCFC 
servicing needs, EPA is not convinced that there is any reason to 
allocate above the need projected in the Servicing Tail report. In 
general, commenters supported the analysis presented in the Servicing 
Tail report. These repeated efforts to seek and incorporate comments on 
this analysis are important to the Agency, as the final rule bases the 
allocation amounts on the demand estimates it contains. While EPA 
received four additional comments on the Servicing Tail report in 
association with the proposed rule, the Agency is confident that this 
report accurately reflects the existing demand for HCFC-22 to support 
servicing of existing equipment.
    Two commenters asked EPA to describe why it projects a decrease in 
post-2010 HCFC-22 demand of approximately 6,100 metric tons compared to 
the previous version of its Servicing Tail report. The decrease in 
projected HCFC-22 demand between the September 2006 and June 2008 
reports is a direct result of updates made to EPA's Vintaging Model 
based on industry and stakeholder input as well as EPA's own research. 
EPA updated the Vintaging Model to reflect slight increases in HCFC-22 
demand for chillers, cold storage, and industrial process 
refrigeration, and to reflect a decrease in HCFC-22 demand for 
dehumidifiers and a significant decrease in HCFC-22 demand for retail 
food end uses. These changes are part of EPA's ongoing effort to 
improve modeling assumptions. Model assumptions and results (such as 
consumption and emissions estimates) from major air-conditioning and 
refrigeration end-uses were presented at the April 2007 spring meeting 
of the Air-Conditioning, Heating, and Refrigeration Institute (AHRI). 
EPA revised the Vintaging Model based on research done in preparation 
for those meetings and based on comments received on those 
presentations. EPA subsequently used revised model output to update the 
June 2008 report.
    One of the commenters also asked technical questions pertaining to 
the Vintaging Model and stated a belief that the change might be due to 
clerical errors in the 2008 report. Specifically, the commenter noted 
that (1) HCFC-22 chilling units expected to be in service in 2010 
increase by 4,295% between the 2006 and 2008 reports; (2) 2010 unitary 
projections for HCFC-22 retail food refrigeration equipment increases 
72% between the two most recent reports; and (3) there is a decrease of 
over two million dehumidifiers projected to be in service in 2010, 
which is the only significant projected equipment reduction. The 
increase in R-22 chiller units between the 2006 and 2008 reports is not 
a clerical error; it is the result of the addition of new chiller end-
uses into the model and resulting analysis. Second, updates made to 
assumptions for the retail food end-uses in the model did result in an 
increase in equipment. However, despite the increase in the number of 
units, there was a decrease in stocks, growth rates, leak rates, and 
charge sizes which caused a decrease in R-22 demand post-2010. Finally, 
conversations with industry indicated that dehumidifier projections in 
the September 2006 report were too high. EPA discusses these questions 
raised by commenters in more detail in the response to comments 
document.
    One commenter suggested that the current economic climate may slow 
the transition to new equipment, as owners seek to repair rather than 
replace existing equipment, an effect which the 2008 Servicing Tail 
report does not reflect. While the Servicing Tail report does not 
consider effects from the recent economic downturn, the servicing 
estimate does account for the practice of replacing components rather 
than installing new equipment. EPA notes that while the economic 
downturn may extend the time existing HCFC-22 equipment is used, it has 
also reduced the amount of HCFC-based equipment installed and hence 
will reduce future demand for servicing. EPA understands that the 
actual transition will not perfectly synchronize with the model year-
by-year, whether for economic conditions, weather, or other events. 
However, the combination of reclaimed and virgin HCFCs should be 
sufficient to meet demand.
    One commenter stated that there are significant barriers to a rapid 
transition to equipment that uses ozone-safe hydrofluorocarbons (HFCs) 
before and after January 1, 2010. EPA responds that the transition to 
HFC or other SNAP-acceptable substitute refrigerants is only required 
for new equipment. Furthermore, EPA's discussion with manufacturers of 
equipment and foam formerly reliant on HCFC-22 and HCFC-142b indicate 
that the industry has been working for some time to implement such 
alternatives by January 1, 2010. The January 1, 2010, date for 
restricting the use of newly production or imported HCFC-22 and HCFC-
142b was established and published in the Federal Register on December 
10, 1993 (58 FR 65018).
    Using reported data, the June 2008 version of the Servicing Tail 
report, and comments provided at the September 2006 stakeholder 
meeting, submitted in subsequent correspondence (available in the 
docket), and provided in response to the proposed rule, the Agency has 
sufficient information to allocate a percentage of baseline allowances 
for HCFC-22 and HCFC-142b for production and consumption in 2010-2014 
for servicing needs. The specific percentage of baseline for each of 
the affected compounds is discussed below.
2. Meeting Servicing Needs With Virgin and Reclaimed Material
    The Agency recognizes that servicing needs can be met with a 
combination of newly-manufactured HCFCs (virgin HCFCs) and HCFCs that 
have been recovered and either recycled or reclaimed. Therefore, EPA 
does not anticipate that virgin HCFC-22 will need to be produced or 
imported to meet the entire HCFC-22 servicing need (estimated to be 
3,438 ODP tons in 2010). The Servicing Tail report analyzes various 
scenarios regarding reclamation. In addition, EPA's memo to the docket 
``Summary: EPA Analysis of U.S. Reclamation Practices and Trends'' 
provides background on the reclamation industry, includes information 
concerning capacity to reclaim greater amounts of refrigerants, and for 
2010 projects that more than 20 percent of the servicing need can be 
met by recovering HCFC-22 from existing equipment.

[[Page 66426]]

    Recycled and reclaimed HCFCs offset the need for newly-manufactured 
HCFCs and after the terminal phaseout, as with the CFC phaseout, will 
become the only material available for servicing existing equipment. 
EPA regulations at 40 CFR part 82 subpart F, promulgated under section 
608 of the CAA, are targeted to reduce the use and emission of certain 
substances including HCFCs by maximizing their recapture and recycling 
during the service, maintenance, repair, and disposal of appliances. 
These regulations, and section 608 of the CAA, prohibit the venting or 
knowing release into the environment of HCFCs. The regulations require 
that they be recovered and then either recycled, reclaimed, or 
destroyed. Therefore, it is reasonable to assume that some amount of 
recovered HCFCs will be available to meet servicing needs. In 
accordance with the chemical-by-chemical phaseout regime adopted by the 
United States, after 2020 only recycled, reclaimed, and stockpiled 
HCFC-22 and HCFC-142b will be available to service appliances that 
require those substances. EPA's existing regulations at Sec.  82.16 
terminate HCFC-22 and HCFC-142b production and consumption at the end 
of 2019. The very small amount of additional production and consumption 
of HCFCs allowed under Article 2F of the Montreal Protocol between 2020 
and 2030 for servicing existing appliances (0.5 percent of baseline) 
will only be permitted for HCFCs other than HCFC-141b, HCFC-22, and 
HCFC-142b, per Sec.  82.16(e), and will be restricted to servicing air-
conditioning and refrigeration equipment manufactured prior to January 
1, 2020, per Sec.  82.16(d).
    The Servicing Tail report uses EPA's Vintaging Model to determine 
the quantities of HCFC-22 from existing (recycled or reclaimed) sources 
that can meet post-2010 servicing needs with the remaining quantities 
required through virgin manufacture (expending allowances). For a given 
year, the Vintaging Model assumes that a certain percentage, which 
varies by end use, of refrigerants are recovered from discarded 
equipment. The model aggregates the quantities recovered but does not 
distinguish the ``pool'' of refrigerant between quantities that are 
reclaimed and those that are recycled.
    For purposes of analysis, the Servicing Tail report considers 
scenarios for HCFC-22 where differing amounts of refrigerant from 
decommissioned or converted appliances were recycled or reclaimed and 
reused for servicing. For example, the report examines scenarios in 
which 10 percent, 15 percent, 20 percent, 50 percent, and 75 percent of 
the total amount of HCFC-22 in retired or converted equipment is 
recovered. These analyses depict the potential ratios of new and 
recovered HCFC-22 that could be available during the years 2010-2019 to 
meet the overall servicing needs, recognizing that the higher recovery 
rates are less likely for the earlier control periods.
    Recovery of HCFC refrigerants, with subsequent recycling or 
reclamation, will continue to increase over time. During the past 
several years the price of newly manufactured HCFC refrigerants has 
increased, creating a greater incentive for refrigerant to be reused. 
Recently, EPA has learned that many reclaimers are beginning to work 
directly with contactors to provide education concerning the benefits 
of refrigerant recovery. Certain reclaimers have recently established 
programs to provide incentives for contractors to return used 
refrigerants, including avoiding unnecessary mixing of refrigerants and 
thereby increasing the amount of refrigerant that can meet AHRI 
Standard 700. Such programs should encourage the existing trends of 
increased amounts of recovered refrigerants available for reuse. Given 
its previous experience with the class I phaseout, EPA believes that 
over time an increasing percentage of HCFCs will be recovered for 
reuse. For example, after the 1996 CFC phaseout, motor vehicles with 
CFC-12 air-conditioning systems continued to be serviced with recovered 
CFC-12. Recovered CFC refrigerants are still in use today for servicing 
a range of older equipment.
    Three commenters disagreed with EPA's assumption that 20% of the 
total amount of HCFC-22 in equipment retired or retrofitted beginning 
in 2010 can either be recovered or made available for reuse. Generally 
this concern centered on the fact that current recovery and reclamation 
rates are not 20%. One of these commenters stated that the current use 
of reclaimed HCFC-22 is closer to seven percent. Though not stated in 
the comment, EPA believes this is a reference to data reported to EPA 
under 40 CFR part 82 subpart F showing that 4,556 MT of HCFC-22 was 
reclaimed in 2008. This amounts to 7.3% of the modeled demand in 2010, 
up from 5.9% in 2007. This value, though, does not reflect the total 
recovery rate as it excludes the amount of recycled refrigerant. EPA 
does not track recycled refrigerants, since recycled refrigerant 
(unlike reclaimed refrigerant) must be charged back into equipment with 
the same ownership rather than re-enter the market. EPA therefore knows 
that the combined amount of recycled and reclaimed refrigerants is 
greater than 7.3%. Two commenters provided estimates for the combined 
reclamation and recycling rates. One commenter said it is currently 
less than 15% of the modeled demand while the other estimated 
approximately 24 million pounds, or 17%. As described in the proposed 
rule, EPA has both anecdotal and reported information concerning 
recovery rates for refrigerants, though it does not have figures for 
recycled refrigerants. Furthermore, EPA notes that the amount reclaimed 
in one year does not mean that it was recovered in that year. Many 
reclaimers collect more than they reclaim in any one year due to market 
shifts. One commenter said that reclaimers have many tons of material 
in inventory waiting to be reclaimed when the economics of reclamation 
improve, which EPA believes will occur through the allocation levels 
established in this rule. EPA is aware that 20% recovery and 
reclamation for 2010 is greater than current industry practice but has 
not received comments that convince us that the rate is unreasonable.
    The third commenter opposed to EPA's 20% recovery assumption was 
not optimistic that reclamation facilities currently had sufficient 
capacity or could increase capacity during the next few years to meet 
the demand. However, the reclamation companies together provided a 
comment stating that they currently have sufficient capacity to reclaim 
36 million pounds of refrigerants each year, which is equal to 16,329 
MT, or 26% of the estimated demand in 2010. The main concern of the 
reclaim industry is not reclamation capacity but rather the economic 
disincentive to reclaim and poor recovery practices. One commenter 
pointed to an expansion in the number of distributors offering 
refrigerant recovery services in support of EPA's goal of achieving 20% 
recovery. Multiple commenters suggested methods to improve contractor 
participation in the recovery, and recycling or reclamation of 
refrigerant, such as certification programs, enforcement, educational 
outreach, and training. EPA agrees that such approaches could improve 
contractor participation although they are beyond the scope of this 
rulemaking and welcomes further discussion with stakeholders to improve 
recovery and recycling or reclamation rates in 2010 and beyond.
    EPA is basing the HCFC-22 allocation amounts on the amount EPA has 
estimated is needed, recognizing that reclamation and recycling reduce 
the

[[Page 66427]]

amount of virgin HCFC-22 that needs to be produced to meet that 
servicing need. EPA also continues to believe that an allocation at 80% 
of the estimated servicing demand is appropriate for 2010. Ten 
commenters stated that EPA's proposal to meet 80% of servicing demand 
through HCFC-22 consumption allowances, with the remaining demand being 
met through recovered material, is an appropriate approach. Six of 
these commenters stated that reducing the available supply of new HCFC-
22 will create a need, and therefore a market, for recovery and 
reclamation. Four commenters stated that EPA should issue allowances at 
more than 80% of servicing demand and shared the concern that there 
will be insufficient recovered and reclaimed HCFC-22 to meet the 
difference. Three other commenters encouraged EPA to issue consumption 
allowances equaling less than 80% of HCFC-22 servicing demand in 2010.
    EPA believes that if the 2010 allocation is 80% of the modeled 
demand, the remaining servicing need can be met from recycled or 
reclaimed material. Given the regulatory requirements for recycling and 
reclamation (at 40 CFR part 82 subpart F), experience with the CFC 
phaseout, and industry practices, EPA believes that by January 1, 2010, 
the effective date of this rule, the remaining 2010 servicing need can 
be met with recycled or reclaimed material. The Agency believes that 
20% of the HCFC-22 in equipment that is retired or retrofitted each 
year after 2010 can be recovered and reclaimed and that the 
availability of recycled or reclaimed material will increase through 
2014 as recovery practices improve. In 2020, all HCFC-22 and HCFC-142b 
used to service air-conditioning and refrigerant equipment will be 
supplied by recycled or reclaimed refrigerant that has been recovered 
from existing appliances in light of the nearly-complete phasedown of 
production and import of virgin material in accordance with the CAA and 
the Montreal Protocol. Additionally, EPA regulations already prohibit 
the intentional venting of refrigerants and require refrigerant 
recovery, and the market for recycled and reclaimed refrigerant is 
predicted to grow as the phaseout progresses. As discussed below, EPA 
also believes that reducing the allocation each year from 2010 to 2014 
to reflect declining demand will lead to higher rates of recovery and 
recycling/reclamation. Additional information concerning recovery, 
recycling, and reclamation is found in the Servicing Tail report and 
the ``Summary: EPA Analysis of U.S. Reclamation Practices and Trends'' 
report in the docket.
3. Annual Reduction in Allocated Amounts
    EPA's proposal to allocate 80% of the 2010 servicing demand for 
HCFC-22 (50,000 metric tons) was based on its belief that the remaining 
need could be met with refrigerant that was recovered and either 
reclaimed or recycled. Thirty three commenters pointed out, though, 
that EPA's proposal to maintain a constant allocation for each control 
period over 2010-2014 did not reflect that demand will decrease over 
that time as equipment goes out of service and are replaced with 
appliances using alternative refrigerants. Therefore, while an 
allocation of 50,000 MT would equal 80% of estimated demand in 2010, an 
allocation of 50,000 MT in 2013 and 2014 would exceed the modeled 
demand for those years (by 1,600 MT in 2013 and 6,400 MT in 2014). The 
proposed rule took comment on the idea of increasing the expected 
contribution of recycled and reclaimed refrigerant for each control 
period by annually reducing the allocation of HCFC-22. EPA now believes 
that unless it were to reduce the allocations for virgin HCFC-22 
between 2010 and 2014, there could be an oversupply of HCFC-22 and the 
contribution of recycled and reclaimed refrigerant would decrease, both 
in the total number of kilograms and as the proportion of overall need.
    Commenters expressed the possibility that a constant allocation as 
proposed could harm the rates of recovery and reclamation. Reclaimers 
commented that they would not be able to compete with the less 
expensive virgin material that would exceed the market demand in 2013-
2014. With no economic incentive to reclaim, they claim they could be 
driven to idle their reclamation facilities, restarting them in 2015 to 
meet the demand resulting from that stepdown. They argue that two years 
of inactivity would weaken their contacts with contractors and 
distributors and hamper efforts to instill proper recovery practices. 
EPA is unable to predict the precise effect of allowing production 
levels in excess of demand and does not believe that all reclaimers 
will be affected in the same way. However, EPA does agree that this 
could harm the recovery and reclaim industry at exactly the time when 
rates of recovery and reclamation need to be increasing.
    EPA is particularly concerned with providing as smooth a transition 
to the 2015 stepdown as possible. At that date, the U.S. must meet a 
90% reduction below the baseline for all HCFCs, which is equivalent to 
1,524 ODP-weighted metric tons. EPA's Servicing Tail report shows that 
even a 20% recovery rate would be insufficient to meet the demand for 
HCFC-22 in 2015. As shown in Table 4-5 in the report, demand for HCFC-
22 in 2015 is projected to be 38,800 MT while the cap for all HCFCs 
equates to 27,709 MT of HCFC-22 (assuming no allocation for any other 
HCFCs). A 20% recovery rate would allow for the additional use of 8,800 
MT but would still leave a shortfall of 2,291 MT in 2015. EPA 
calculates that to meet the total demand in 2015, the recovery rate 
must increase to 26% (representing 29% of total servicing demand) by 
that year.
    Based on the comments, EPA believes it is desirable to institute a 
year-by-year reduction for the period of 2010-2014. A smooth transition 
for stakeholders--including continued availability of needed material 
for approved uses--has historically been an essential aspect of the 
U.S.'s success in implementing the Montreal Protocol and Clean Air Act 
requirements. To ease the transition to 2015 and avoid disruptions to 
the market and shortages in HCFC-22 at that date, the Agency believes 
it is necessary to take steps now to foster further recovery.
    EPA believes that the servicing demand over 2010-2014 can continue 
to be met under the new allocation levels in the final rule. Since EPA 
is not banning the use of existing HCFC-22 appliances that have been 
manufactured prior to January 1, 2010, recovered and reclaimed HCFC-22 
will become more valuable as the phaseout progresses. The demand for 
HCFC-22 to service existing equipment will provide an economic 
incentive to increase the quantities of recovered HCFC-22 available for 
reclamation. As an indicator of the improved economics, several 
reclamation companies have recently started offering financial payments 
for recovered HCFC-22. The docket provides further information on EPA's 
assumptions regarding the availability of recovered and reclaimed HCFC-
22 to meet servicing needs.
    Finally, annual reductions to the allocation provides clear 
environmental benefits compared to the lead option in the proposed 
rule, assuming the same starting point. Over the five-year period 2010-
2014, the proposed rule would have allocated 250,000 metric tons of 
HCFC-22. Over the same period, the final rule is allocating 203,100 MT 
of HCFC-22, a difference of 46,900 MT, or 2,574 ODP tons.
    Commenters suggested various possible methods for allocating HCFC-
22 allowances on a declining annual

[[Page 66428]]

basis. One commenter supported an annually declining allocation but did 
not support a total allocation over the five-year period less than what 
EPA proposed. EPA believes that such an approach would negate many of 
the benefits of annually reducing the allocations, including easing the 
transition to the 2015 control period and providing an environmental 
benefit. To implement the suggestion, the allocation would have to 
equal demand in 2010, which would not create any impetus for 
reclamation in that year, and be 84% of demand in 2014. EPA believes 
that meeting 20% of demand with used material in 2010 is feasible and 
that the Agency should not wait until 2014 to approach that goal. For 
the same reason, EPA also rejects another suggested method that would 
increase the 2010 allocation from 50,000 MT to 55,000 MT. The majority 
of commenters agree with EPA's approach of allocating at 80% of demand 
in 2010, with recovered and either recycled or reclaimed HCFC-22 
meeting the remainder. Indeed, other commenters agreed with an 
allocation of 50,000 MT in 2010 and used that value as the starting 
point for a straight-line annual reduction to other 2014 endpoints. One 
suggestion was to set allocations that decline linearly from 2010-2014, 
where the allocation if extrapolated to 2015 would equal the 2015 cap. 
This results in a yearly reduction of 4,458 MT. Another similar 
suggestion rounded up the annual reduction to 5,000 MT, which results 
in a line that would be below the cap in 2015.
    Because the primary benefit of annually reducing the allocation is 
to ensure demand in 2015 is met through greater recovery and 
reclamation, EPA believes that it is more appropriate to base the 
allocation more directly on that goal. In 2015, EPA estimates demand of 
HCFC-22 at 38,800 MT. Were the allocations to consist entirely of HCFC-
22, the cap would limit the 2015 HCFC-22 allocation to only 27,709 MT, 
a difference of 11,091 MT that would have to be made up with recovered 
material. Furthermore, it is likely that the allocation in 2015 will 
not consist entirely of HCFC-22 as EPA will need to reserve room under 
the cap for other HCFCs, similar to the approach EPA is taking in this 
rule for the 2010-2014 control periods. EPA believes it is appropriate 
to establish an annual step-down such that the amount of total demand 
to be met from recovered HCFC-22 will equal 12,500 MT each year, as 
that is the amount EPA proposed to be met in 2010 and it is 
approximately the amount that will be needed to meet the servicing 
demand in 2015. Under this approach, the allocations would equal 50,000 
MT in 2010, 45,400 MT in 2011, 40,700 MT in 2012, 35,900 MT in 2013, 
and 31,100 MT in 2014. These values, shown in the table below, are 
derived by subtracting 12,500 MT from the estimated demand each year. 
EPA will not issue allowances for 2015 and beyond until a future 
rulemaking but extends the table to 2015 to show the estimated demand 
for that year and the amount of recovered material that must be used to 
meet the demand at that date, assuming the allocation in 2015 consists 
entirely of HCFC-22 and does not include other HCFCs.

----------------------------------------------------------------------------------------------------------------
                                                        2010      2011      2012      2013      2014      2015
----------------------------------------------------------------------------------------------------------------
Estimated Demand (MT)...............................    62,500    57,900    53,200    48,400    43,600    38,800
Total Allocation (MT)...............................    50,000    45,400    40,700    35,900    31,100    27,709
                                                     -----------------------------------------------------------
    Reclaimed Amount (MT)...........................    12,500    12,500    12,500    12,500    12,500    11,091
----------------------------------------------------------------------------------------------------------------

    This annual stepdown lies between the two rates suggested by 
commenters. As the total demand decreases, maintaining the supply of 
recovered HCFCs at a constant level results in recovered material 
comprising a greater proportion of the total demand each year. Under 
this approach, the percentage of the total need to be met with 
reclaimed material will rise from 20% to 29% of total demand in 2014, 
though the total amount of reclaimed material supplied remains at 
12,500 MT for all five years. EPA believes this is appropriate as it 
facilitates meeting the demand in 2015, of which at least 29% must be 
met with recovered material.
    Commenters who requested annual reductions in the amount of HCFC-22 
allocations did not suggest that EPA annually reduce the allocations of 
HCFC-142b. EPA is not reducing the allocation of HCFC-142b on an annual 
basis because the Agency does not believe that the same rationale would 
apply to HCFC-142b. Most recovered HCFC-22 comes from refrigeration and 
air-conditioning appliances. The largest single use of HCFC-142b prior 
to 2010 was to blow foam and recovery is not required from discarded 
foam. The need for recovery is also less, given the small amounts of 
HCFC-142b needed to service existing refrigeration equipment post-2010. 
Finally, it is difficult to reclaim HCFC-142b from refrigerant blends 
and such recovery is not widely practiced. Therefore, EPA is finalizing 
annual reductions only for HCFC-22 and maintaining the allocations of 
HCFC-142b as proposed.

C. Allocations of HCFC-22 and HCFC-142b

    EPA is revising the two types of tables in 40 CFR part 82 that 
together specify the production and consumption allowances available to 
allowance holders during specified control periods. Tables at Sec.  
82.17 and Sec.  82.19 apportion baseline production allowances and 
baseline consumption allowances, respectively, to individual companies 
for individual HCFCs. Complementing these tables, the table at Sec.  
82.16 lists the percentage of baseline allocated to allowance holders 
for specific control periods. By selecting option 1, discussed in 
Section IV.A. of the preamble above, EPA is retaining this framework of 
complementary tables, revising them to reflect adjustments to 
baselines, and granting percentages of baselines in a manner that 
achieves the 2010 phasedown goal.
    The percentages for HCFC-22 and HCFC-142b in the table at Sec.  
82.16 (Table 1 below) have changed from the proposed rule. In the 
proposal, the allocation for HCFC-22 for 2010 was 35.2% of baseline. In 
the final rule, the value is 41.9%. Similarly, the percent allocation 
for HCFC-142b for 2010 was 4.9% of baseline in the proposed rule and is 
0.47% in the final rule. These changes do not reflect a change in the 
allocation amounts, as the total allocation for HCFC-22 in 2010 remains 
50,000 MT (the same as the proposal), and the total allocation for 
HCFC-142b 2010 remains at 100 metric tons (the same as the proposal). 
Instead, these changes are due to not changing the baselines to reflect 
inter-pollutant transfers occurring on an annual basis within a single 
company. The proposal, which treated the intracompany transfer of HCFC-
142b to HCFC-22 as permanent, had a total consumption baseline of 
141,865 MT. By not accounting for those transfers, the baseline in the 
final rule decreased to 119,285 MT. With a smaller total

[[Page 66429]]

baseline, the factor that each baseline allowance holder must multiply 
to reach the same amount of allowances is greater. Thus, 50,000 is 
equal to 35.2% of 141,865 and 41.9% of 119,285. The opposite is true 
for HCFC-142b, which had a proportionately smaller baseline in the 
proposed rule but now has a larger baseline since EPA is not accounting 
for inter-pollutant transfers.
    EPA is amending the table at Sec.  82.16 by including control 
periods 2010-2014, by continuing to allocate zero percent to HCFC-141b, 
and by allocating specified percentages (in separate columns) to HCFC-
22, HCFC-142b, and--as will be discussed later--other HCFCs. The 
allocations for HCFC-22 decrease on an annual basis, rather than 
remaining constant for each of the 2010-2014 control periods as was 
proposed.

                                      Table 1--Phaseout Schedule for Class II Controlled Substances in 40 CFR 82.16
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                            Percent of      Percent of      Percent of      Percent of      Percent of      Percent of      Percent of
             Control period                  HCFC-141b        HCFC-22        HCFC-142b       HCFC-123        HCFC-124       HCFC-225ca      HCFC-225cb
--------------------------------------------------------------------------------------------------------------------------------------------------------
2003....................................               0          100             100     ..............  ..............  ..............  ..............
2004....................................               0          100             100     ..............  ..............  ..............  ..............
2005....................................               0          100             100     ..............  ..............  ..............  ..............
2006....................................               0          100             100     ..............  ..............  ..............  ..............
2007....................................               0          100             100     ..............  ..............  ..............  ..............
2008....................................               0          100             100     ..............  ..............  ..............  ..............
2009....................................               0          100             100     ..............  ..............  ..............  ..............
2010....................................               0           41.9             0.47             125             125             125             125
2011....................................               0           38.0             0.47             125             125             125             125
2012....................................               0           34.1             0.47             125             125             125             125
2013....................................               0           30.1             0.47             125             125             125             125
2014....................................               0           26.1             0.47             125             125             125             125
--------------------------------------------------------------------------------------------------------------------------------------------------------

    EPA is allocating different baseline percentages for HCFC-22 and 
HCFC-142b because EPA projects that the needs will differ for servicing 
air-conditioning and refrigeration appliances during the 2010-2014 
control periods. As discussed in Section IV.B.1. of the preamble above, 
EPA's analysis shows that there will be a significantly greater need 
for HCFC-22 than for HCFC-142b during the control periods 2010-2014. 
Based on the Servicing Tail report and reporting information already 
required by EPA regulations, the needs for individual HCFCs are not 
uniform. Allocating the same percentage of baseline for HCFC-22 and 
HCFC-142b would result in too few allowances for HCFC-22 and too many 
allowances for HCFC-142b. While inter-pollutant transfers in accordance 
with Sec.  82.23(b) could be used to trade allowances of one HCFC for 
another, EPA does not believe it is appropriate to rely on such 
transfers as a mechanism for large-scale corrections. Instead, EPA 
anticipates that the continued availability of inter-pollutant 
transfers will permit the market to self-correct for unforeseen changes 
in demand and allow individuals to consider a range of options for 
their allowances. EPA seeks to avoid unnecessary disruptions in the 
marketplace and to promote a smooth transition for industry.
1. HCFC-22 Allowances for 2010-2014
    For 2010, EPA is allocating HCFC-22 consumption allowances to meet 
80 percent of the servicing need, assuming that the remainder will be 
met by recovered HCFC-22 that is either recycled or reclaimed. This 
translates into 50,000 metric tons (2,750 ODP-weighted metric tons), or 
approximately 72 percent of the total HCFC consumption cap for the 2010 
control period. For the 2011-2014 control periods, EPA is annually 
reducing the allocation amount in a linear fashion, reflecting the 
declining servicing demand over that time.
    As it did in the 2003 allocation rule, EPA is allocating production 
allowances among different chemicals using the same percentage 
breakdown as for consumption allowances. This rule allocates 46,368 
metric tons (2,550 ODP tons of the 3,884.25-ODP-ton production cap) to 
HCFC-22 production in 2010, with the amount declining in each of the 
control periods from 2010 through 2014. This is consistent with section 
605(c) of the Clean Air Act, which requires that the phaseout schedule 
for HCFC consumption be the same as that for HCFC production. EPA 
recognizes that there is a difference between the amount of imported 
and produced HCFCs and that the degree of difference may vary over 
time. However, EPA does not believe it is necessary to use two 
different chemical-by-chemical percentage breakdowns (i.e., one for 
consumption allowances and another for production allowances) to ensure 
compliance with the production and consumption caps. Therefore, for 
simplicity and for consistency with section 605(c), EPA is using the 
same percentages for production and consumption allocations--deriving 
the percentages based on estimated need for each individual HCFC.
2. HCFC-142b Allowances for 2010-2014
    As discussed in the Servicing Tail report, the projected servicing 
need for HCFC-142b is extremely low: Approximately 100 metric tons (6.5 
ODP tons) in 2010 and decreasing to zero by 2015. Prior to 2010, the 
primary use of HCFC-142b has been to blow foam, a use no longer allowed 
after 2010. In estimating the need for 2010-2014, EPA has considered 
the amount of HCFC-142b produced and imported into the United States as 
reported to EPA in recent years under the existing requirements. Unlike 
with HCFC-22, EPA has not considered the reclamation and recovery rates 
of HCFC-142b in setting the allocation amounts. HCFC-142b has primarily 
been used in foams, which is not recovered. The small amount of HCFC-
142b used in refrigeration and air conditioning applications is 
typically used as a component of a blend which is more difficult to 
reclaim. Furthermore, these blends have not gained any significant 
market share, unlike blends containing HCFC-22. Given these factors, 
the limited amount of data available to EPA indicates that less than 1 
percent of HCFC-142b is recycled or reclaimed. EPA did not receive any 
additional data in the public comment process that would suggest 
otherwise.
    In light of the limited data available, and the extremely low 
estimate of recycling and reclamation, EPA is allocating 100 percent of 
the projected HCFC-142b servicing need. Because of the lack of data and 
the small amounts being allocated, EPA is maintaining the

[[Page 66430]]

same allocation level for each of the 2010-2014 control periods, rather 
than allocating declining amounts as EPA is doing for HCFC-22. 
Therefore, EPA is issuing consumption allowances for HCFC-142b of 100 
metric tons (6.5 ODP tons) in 2010-2014. EPA is also allocating 
production allowances for HCFC-142b at the same proportion of the 
production cap as was used to allocate consumption allowances as a 
proportion of the consumption cap. Thus, EPA is allocating production 
allowances for HCFC-142b at 118 metric tons (7.7 ODP tons).
3. How the Aggregate for HCFC-22 and HCFC-142b Translates Entity-by-
Entity
    EPA is allocating 50,000 metric tons of HCFC-22 consumption 
allowances in 2010 with declining amounts in 2011-2014, 46,329 metric 
tons of HCFC-22 production allowances in 2010 with declining amounts in 
2011-2014, 100 metric tons of HCFC-142b consumption allowances, and 118 
metric tons of HCFC-142b production allowances for years 2010-2014. 
However, EPA actually allocates allowances to individual persons (i.e., 
legal entities). As discussed in Section IV.A.1 of this preamble, EPA 
is apportioning baselines and allocating allowances on a pro-rata basis 
to the entities that received baseline allowances in the 2003 
allocation rule.
    Company-specific production and consumption baselines (also 
referred to as ``baseline allowances'') for HCFC-141b, HCFC-22, and 
HCFC-142b are listed at Sec. Sec.  82.17 and 82.19, respectively. The 
percentage of baseline each entity receives in each control period from 
2003 through 2014 appears at Sec.  82.16(a), as shown in Table 1 above.
    Allowances allocated for individual control periods are called 
``calendar-year allowances'' to distinguish them from the baseline 
production or consumption allowances (Sec.  82.17 and Sec.  82.19). For 
2010-2014, EPA is apportioning production and consumption baselines for 
HCFC-22, HCFC-141b, and HCFC-142b to the same entities that were 
apportioned HCFC-22, HCFC-141b, and HCFC-142b baselines in the 2003 
allocation rule. EPA is amending that list of entities and their 
baselines to reflect changes in entities' names as well as mergers and 
acquisitions, but only where EPA has been notified of changes in 
writing before or during the comment period for this rulemaking.
    Consistent with past practice, EPA is publishing baseline allowance 
information in this rule, having first notified the affected companies 
of its intention to do so. Applying the approach described above, EPA 
is apportioning production and consumption baselines for HCFC-141b, 
HCFC-22, and HCFC-142b to the following entities in the following 
amounts:

Table 2--Baseline Production Allowances of HCFC-22, HCFC-141b, and HCFC-
                          142b in 40 CFR 82.17
------------------------------------------------------------------------
                                        Controlled
              Person                    substance        Allowances (kg)
------------------------------------------------------------------------
Arkema...........................  HCFC-22............        28,219,223
                                   HCFC-141b..........        24,647,925
                                   HCFC-142b..........        16,131,096
DuPont...........................  HCFC-22............        42,638,049
Honeywell........................  HCFC-22............        37,378,252
                                   HCFC-141b..........        28,705,200
                                   HCFC-142b..........         2,417,534
MDA Manufacturing................  HCFC-22............         2,383,835
Solvay Solexis...................  HCFC-142b..........         6,541,764
------------------------------------------------------------------------

Table 3--Baseline Consumption Allowances of HCFC-22, HCFC-141b, and HCFC-
                          142b in 40 CFR 82.19
------------------------------------------------------------------------
                                        Controlled
              Person                    substance        Allowances (kg)
------------------------------------------------------------------------
ABCO Refrigeration Supply........  HCFC-22............           279,366
Altair Partners..................  HCFC-22............           302,011
Arkema...........................  HCFC-22............        29,524,481
                                   HCFC-141b..........        25,405,570
                                   HCFC-142b..........        16,672,675
Carrier Corporation..............  HCFC-22............            54,088
Condor Products..................  HCFC-22............            74,843
Continental Industrial Group.....  HCFC-141b..........            20,315
Coolgas, Inc.....................  HCFC-141b..........        16,097,869
Coolgas Investment Property......  HCFC-22............           590,737
Discount Refrigerants............  HCFC-22............           375,328
                                   HCFC-141b..........               994
DuPont...........................  HCFC-22............        38,814,862
                                   HCFC-141b..........             9,049
                                   HCFC-142b..........            52,797
H.G. Refrigeration Supply........  HCFC-22............            40,068
Honeywell........................  HCFC-22............        35,392,492
                                   HCFC-141b..........        20,749,489
                                   HCFC-142b..........         1,315,819
ICC Chemical Corp................  HCFC-141b..........            81,225
Ineos Fluor Americas.............  HCFC-22............         2,546,305
Kivlan & Company.................  HCFC-22............         2,081,018
MDA Manufacturing................  HCFC-22............         2,541,545
Mondy Global.....................  HCFC-22............           281,824
National Refrigerants............  HCFC-22............         5,528,316
Refricenter of Miami.............  HCFC-22............           381,293
Refricentro......................  HCFC-22............            45,979
R-Lines..........................  HCFC-22............            63,172

[[Page 66431]]

Saez Distributors................  HCFC-22............            37,936
Solvay Fluorides.................  HCFC-22............           413,509
                                   HCFC-141b..........         3,940,115
Solvay Solexis...................  HCFC-142b..........         3,047,386
Tulstar Products.................  HCFC-141b..........            89,913
USA Refrigerants.................  HCFC-22............            14,865
------------------------------------------------------------------------

D. HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb Allowances

    EPA is establishing and apportioning baselines for other HCFCs that 
have been produced or imported in recent years by using information on 
production, import, export, and other transactions that has been 
reported to the Agency under existing regulations. Under the Montreal 
Protocol, all HCFCs are subject to the phaseout cap and EPA must report 
production, import, and export data for all HCFCs under Article 7 of 
the Protocol. EPA therefore requires recordkeeping and reporting for 
production, import, export, and trade of all HCFCs, including those for 
which baseline allowances have not yet been established. The 
recordkeeping and reporting requirements implement section 603 of the 
Clean Air Act and ensure that companies are in compliance with 
regulatory and Clean Air Act requirements and that the United States is 
able to document compliance with international obligations.
    EPA reviewed HCFC production, import, and export data for the years 
leading up to the 2003 allocation rule, and chose to establish 
baselines and allocate allowances for the highest-ODP HCFCs (the 
``worst-first'' approach) in a manner that ensured U.S. compliance with 
the 2004 cap (35 percent below the U.S. baseline). Prior to the 
tightening of the 2010 HCFC cap at the 19th Meeting of the Parties to 
the Montreal Protocol in September 2007 from a 65 percent reduction to 
a 75 percent reduction, EPA anticipated that limiting production and 
consumption of HCFC-22 and HCFC-142b for the 2010-2014 control periods 
would ensure sufficient room under the then-effective 65 percent 
reduction cap without the need to restrict production and consumption 
of other HCFCs. In preparing for the 19th Meeting of the Parties, EPA 
conducted an analysis, which was shared with stakeholders, to ensure 
that the U.S. could consider changes to our obligations that were both 
meaningful for ozone layer protection and achievable, allowing 
servicing needs to continue to be met. Considering that the September 
2007 Montreal Adjustment provides for adjustment of the cap from a 65 
percent to a 75 percent reduction, EPA is taking additional precautions 
to ensure that the more stringent cap will not be exceeded. These 
precautions include establishing and apportioning baselines for the 
2010-2014 control periods for other HCFCs that were produced or 
imported during the 2003-2007 control periods.
1. Baselines for HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb
    EPA is amending Sec. Sec.  82.17 and 82.19 to include company-
specific production and consumption baselines for HCFC-123, HCFC-124, 
HCFC-225ca, and HCFC-225cb. EPA data indicate that those four HCFCs 
were produced, imported, or exported during the 2003-2007 control 
periods.
    In the 2003 allocation rule, EPA did not issue allowances for all 
HCFCs, noting in part ``that the continuously developing HCFC market 
would be hampered by such distribution'' and that the market 
proportions at that time ``of these lower-ODP HCFCs do not reflect the 
rapidly expanding market and that distributing allowances for these 
HCFCs at [that] time would unnecessarily restrict their supply and 
impede transition to less ozone-depleting substances'' (68 FR 2823). 
Considering the recent adjustments to the Montreal Protocol and the 
evolution in the HCFC market, EPA believes it is now appropriate to 
establish a baseline and apportion baseline allowances for HCFC-123, 
HCFC-124, HCFC-225ca, and HCFC-225cb.
    All HCFCs are covered under the Montreal Protocol stepwise 
reductions, and EPA must consider all HCFC production and import in 
ensuring that the United States continues to meet its international 
obligations. The four HCFCs addressed in this section are the only 
remaining HCFCs commonly used in the United States that do not 
currently have established baselines. Establishing baseline allowances 
for these four HCFCs will not trigger additional recordkeeping or 
reporting obligations, since companies that produce, import, or export 
any HCFC already report production and consumption data to EPA. The 
impacts on future production and consumption of these chemicals by 
individual entities stem from the years chosen for establishing a 
baseline, the apportionment of the baseline among companies, and the 
percentage of baseline allocated for the control years 2010-2014. EPA 
discusses these issues more specifically below.
    EPA recognizes that many different methods and data sources can be 
used to establish baseline allowances. EPA proposed to use data 
reported to the Agency under Sec.  82.24 and EPA is using that method 
in this final rule. EPA did not receive any comments opposed to using 
existing reported data. EPA also said in the proposed rule that it 
could augment the data for completeness or to verify accuracy by 
issuing requests for information under section 114 of the CAA. EPA did 
not receive comment relating to this process specifically, but believes 
that seeking additional information could delay the publication of the 
final rule without providing significant additional benefit.
    EPA is making three changes to Table 5, which are found at 40 CFR 
82.17 and 82.19, as compared to the proposed rule. First, EPA is adding 
Perfect Technology Center, LP (doing business as Perfect Cycle) to the 
list of companies being allocated baselines for the other HCFCs. 
Perfect Technology Center, LP had imported HCFC-123 during the time 
period used to set the baseline but its reporting forms--although 
submitted in compliance with EPA regulations--were misdirected and the 
information was not included in EPA's baseline calculations. Second, 
DuPont corrected previously reported data, which has the effect of 
adjusting DuPont's HCFC-123 baseline from 2,933,906 kg to 1,877,042 kg. 
Third, Honeywell had corrected previous HCFC-124 production data but 
EPA did not reflect that change in the proposed rule. EPA is reflecting 
that correction now by changing Honeywell's HCFC-124 production 
baseline from 1,804,121 kg to 1,759,681

[[Page 66432]]

kg. These changes do not affect the baselines or the allocation amounts 
for the other companies receiving HCFC-123 or HCFC-124 allowances.
    In the 2003 allocation rule, EPA calculated each entity's HCFC-
141b, HCFC-22, and HCFC-142b baselines from that entity's highest 
reported consumption and production over the years 1994-1997. EPA chose 
that particular range of years because beginning in 1998, some entities 
were aware of the impending rulemaking and could have increased 
production or import in an effort to secure higher baseline allowances. 
EPA stated in the 2003 allocation rulemaking that ``by not selecting a 
year after 1997 it will avoid creating an uneven playing field that 
skews allocations to those companies with ample resources and good 
access to information'' (68 FR 2832). EPA did propose and finalize an 
exception to the general approach by allowing new entrants that began 
importing after the end of 1997 but before April 5, 1999, the date of 
the ANPRM publication. EPA believed that such new entrants, typically 
small businesses, might not have been aware of the impending rulemaking 
that would affect their ability to continue in the HCFC market.
    EPA is using the same general approach for these four HCFCs as in 
the 2003 allocation rule by considering the highest reported data from 
a range of years rather than selecting a single baseline year. However, 
EPA is not providing an exemption for new entrants. EPA did not receive 
any comments requesting a new entrant provision for these four HCFCs 
and does not believe that one is necessary as these baseline years 
reflect participants in the market in 2005-2007 and thus take into 
account relatively new entrants. As in the 2003 allocation rule, EPA is 
choosing a range of years because the entities receiving allowances 
have very different production and import histories and no one year is 
representative for all companies. EPA believes that selecting the year 
of highest activity for individual companies over a range of years 
creates less of a disadvantage to the industry and the HCFC market as a 
whole than selecting a single year. Therefore, in this final rule, EPA 
is using an entity's highest reported consumption and production data 
reported for the 2005-2007 control periods. By using past years, EPA 
avoids any ramp-up in the level of production and consumption resulting 
from a desire to maximize individual baselines in anticipation of the 
final rule. By using recent data, EPA ensures that the baseline 
reflects the current market as closely as possible, and addresses 
issues raised when EPA decided to postpone allocating baseline 
allowances for these HCFCs in 2003.
    Four commenters generally agreed with the proposal to establish 
baselines for HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb, 
acknowledging that a baseline for these chemicals will help ensure the 
United States meets its Montreal Protocol obligations and that the 
method used to establish a baseline was successfully utilized for HCFC-
141b, HCFC-142b and HCFC-22. EPA did not receive any comments in 
opposition to establishing baselines for these HCFCs.
    Two commenters disagree with EPA's proposal to establish the HCFC-
123 baseline as a company's highest-year production and consumption 
between 2005 and 2007. One of those commenters stated a belief that the 
market for chillers using HCFC-123 has been steadily declining over the 
last several years and suggested that EPA instead select the lowest 
reported data from 2005-2007 to set the HCFC-123 baseline. The other 
commenter urged EPA to calculate the baseline using calendar year 2008 
data, which it said better reflects the market. EPA disagrees with 
these alternative methods for establishing the baseline for HCFC-123. 
EPA does not support choosing the lowest year's reported data because 
EPA is not seeking to actively restrict the market for HCFC-123 in this 
rule. EPA does not wish to prejudge the market for HCFC-123, be it 
increasing or decreasing. EPA also does not believe that selecting the 
2008 year is appropriate because EPA's experience has been that a 
single year's data may actually not be reflective of the market, even 
if the date is closer to the present. For example, the economic 
conditions in 2008 may have affected production for that year in a way 
that is not reflective of the market in 2010 and beyond. Also, as 
mentioned above, the entities receiving allowances have very different 
production and import histories and no one year is representative for 
all companies. For these reasons, EPA is establishing the HCFC-123 
production and consumption baselines based on an entity's highest 
reported consumption and production for the 2005-2007 control periods.
    EPA is apportioning production and consumption baselines for HCFC-
123, HCFC-124, HCFC-225ca, and HCFC-225cb to the following entities for 
the following amounts, which are found in 40 CFR 82.17 and 82.19:

  Table 4--Baseline Production Allowances of HCFC-123, HCFC-124, HCFC-
                  225ca, and HCFC-225cb in 40 CFR 82.17
------------------------------------------------------------------------
                                        Controlled
              Person                    substance        Allowances (kg)
------------------------------------------------------------------------
AGC Chemicals Americas...........  HCFC-225ca.........           266,608
                                   HCFC-225cb.........           373,952
DuPont...........................  HCFC-124...........         2,269,210
Honeywell........................  HCFC-124...........         1,759,681
------------------------------------------------------------------------

  Table 5--Baseline Consumption Allowances of HCFC-123, HCFC-124, HCFC-
                  225ca, and HCFC-225cb in 40 CFR 82.19
------------------------------------------------------------------------
                                        Controlled
              Person                    substance        Allowances (kg)
------------------------------------------------------------------------
AGC Chemicals Americas...........  HCFC-225ca.........           285,328
                                   HCFC-225cb.........           286,832
Arkema...........................  HCFC-124...........             3,719
Condor Products..................  HCFC-124...........             3,746
Coolgas, Inc.....................  HCFC-123...........            20,000
DuPont...........................  HCFC-123...........         1,877,042
                                   HCFC-124...........           743,312
Honeywell........................  HCFC-124...........         1,284,265

[[Page 66433]]

ICOR.............................  HCFC-124...........            81,220
National Refrigerants............  HCFC-123...........            72,600
                                   HCFC-124...........            50,380
Perfect Technology Center, LP....  HCFC-123...........             9,100
Tulstar Products.................  HCFC-123...........            34,800
                                   HCFC-124...........           229,582
------------------------------------------------------------------------

2. Allocation Levels for HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb
    As proposed, EPA is allocating 125 percent of the baseline 
production and consumption allowances for HCFC-123, HCFC-124, HCFC-
225ca, and HCFC-225cb for the 2010-2014 control periods. These 
allocations appear as additions to the table at Sec.  82.16, shown in 
Table 1 above. EPA's intent in establishing baseline production and 
consumption allowances for these HCFCs is to create a mechanism for 
limiting growth in the production and consumption of these HCFCs during 
those control periods. EPA has heard from stakeholders that some amount 
of market expansion for these low-ODP HCFCs is possible during the 
2010-2014 control periods. Unlike HCFC-22 and HCFC-142b, which are 
subject to use restrictions beginning January 1, 2010, these four low-
ODP HCFCs are not subject to use restrictions until a later date. Given 
the low ODPs for these HCFCs, allocating 125 percent of the baseline 
for 2010-2014 allows for growth but still ensures that the United 
States meets the overall HCFC cap of 75 percent below the baseline 
during these control periods.
    Any growth in the non-prohibited use of these HCFCs will be 
balanced to some extent by the 605(a) self-effectuating restrictions on 
most uses of HCFCs. Regardless of any action by EPA, usage of these 
HCFCs will be constrained, and in some instances prohibited, in 2015. 
For example, HCFC-225ca and HCFC-225cb are generally used as solvents 
but as of January 1, 2015, under section 605(a), HCFCs may not be used 
in solvents. Refrigerant uses for other HCFCs may continue until 2020. 
For example, while newly manufactured HCFC-22 cannot be produced or 
imported for charging into new air-conditioning and refrigeration 
appliances as of January 1, 2010 (40 CFR 82.16(c)), HCFC-123 can be 
produced or imported for new appliances until 2020 (40 CFR 82.16(d)). 
However, HCFC-123 is a transitional alternative for CFC-11 and is still 
scheduled for phaseout in 2015 except in equipment manufactured before 
2020. Because of the section 605(a) use ban, EPA anticipates that any 
continued growth for these HCFCs will be considerably affected as of 
January 1, 2015. The section 605(a) use provisions are discussed in 
more detail below at Section VI of the preamble.
    Through this action, EPA is allocating allowances equaling 125 
percent of the baseline for HCFC-123, HCFC-124, HCFC-225ca, and HCFC-
225cb for the 2010-2014 control periods. If rapid growth were to occur, 
creating the need for additional amounts of one or more of these HCFCs, 
EPA believes that inter-pollutant transfers could be used to make 
adjustments. EPA has calculated that 125 percent of the highest year's 
consumption of HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb for all 
the companies combined equals 137 ODP-weighted metric tons, which is 
less than 4 percent of the total HCFC consumption cap of 3,810 ODP 
tons. EPA data also show that 125 percent of the highest year's 
production of HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb for all 
the companies combined equals 135 ODP-weighted metric tons, which is 
less than 4 percent of the total HCFC production cap of 3,884.25 ODP 
tons.
    In general, commenters, including those who use these other HCFCs, 
supported the proposed allocation amounts. The only comments 
disagreeing with the proposed allocation amounts were with respect to 
HCFC-123. Two commenters objected to an allocation of 125% of baseline 
for HCFC-123, claiming that this would artificially increase demand. 
These commenters proposed that EPA use a lower allocation amount, such 
as 80% of baseline. Another commenter stated that EPA should encourage 
the transition to non-ozone-depleting substances by accelerating the 
phaseout of HCFC-123 and reducing the allocation amounts on an annual 
basis. First, EPA disagrees that allocating more than 100% of baseline 
for HCFC-123 will artificially increase demand for this compound. 
Currently, there is no limit on HCFC-123 production or consumption. EPA 
does not believe that placing such a limit in this rule would 
artificially increase demand for this compound. As discussed above, EPA 
chose more than 100% to allow for normal growth in the market, not to 
impose any constraints or confer any benefits on the market. If the 
full amount of allowances is not needed, then EPA expects that the 
excess allowances may go unused or be transferred for other HCFCs. 
Second, under current domestic regulations, HCFC-123 can be produced or 
imported for new appliances until 2020 (40 CFR 82.16(d)). Third, EPA 
does not believe that the continued use of HCFC-123 at this point will 
threaten U.S. compliance with the overall HCFC cap. Therefore, the 
Agency disagrees that it is necessary to accelerate that schedule in 
this rule.
    Some commenters also questioned EPA's analysis of the HCFC-123 
market in the Servicing Tail report. They stated that the 3 million 
kilogram allocation to HCFC-123 surpasses their own estimate of needs. 
While EPA did not use a straight needs-based analysis for allocating 
HCFC-123, EPA did review the HCFC-123 needs analysis in the June 2008 
Servicing Tail report and found that the source data used to project 
needs were not the same as those used to establish the allocation of 
HCFC-123. EPA has issued a final version of the Servicing Tail report 
(accessible in the docket to this action and at http://www.epa.gov/
ozone). In any case, EPA has not chosen to allocate HCFC-123, HCFC-124, 
HCFC-225ca, or HCFC-225cb at the estimated need as shown in the 
Servicing Tail report. Instead, to allow for market growth as 
previously discussed, EPA is setting allocation baselines in the same 
manner for all four of these low-ODP HCFCs. Namely, EPA is setting each 
company's baseline at the highest consumption or production in the 
years 2005-2007, and allocating 125% of those baselines to avoid 
interfering with the existing market.
    In accordance with the Montreal Protocol, EPA will issue a rule 
prior to the 2015 HCFC milestone to limit aggregate production and 
consumption

[[Page 66434]]

of all HCFCs to no more than 10 percent of the U.S. baselines for 
production and consumption. At that time, EPA plans to consider the 
appropriate level of allowances for 2015 and beyond based on market 
demand and the section 605(a) restrictions on introduction into 
interstate commerce and use discussed later in this preamble. Examples 
of uses that will be prohibited by section 605(a) beginning in 2015 are 
solvents, sterilants, and fire suppression uses. EPA anticipates other 
changes as well. For example, EPA's allowance level for HCFC-123, HCFC-
124, HCFC-225ca, and HCFC-225cb does not assume a specified level of 
recycling and reclamation. For HCFCs used in non-refrigeration 
applications, such as solvents (e.g., HCFC-225ca and HCFC-225cb), the 
section 608 prohibition on venting is not applicable. EPA received 
comment that it should consider recovery and recycling or reclamation 
of HCFC-123 in this rule when establishing production and consumption 
allowances. HCFC-123 is used in chillers that in some cases are 
replacing CFC chillers. Given that in many cases these appliances have 
expected lifespans of more than 20 years, it will be some time before 
significant amounts of HCFC-123 are recovered and recycled or 
reclaimed. In future rulemakings, however, EPA may estimate the amount 
of the total need for HCFC-123 that can be met through recycling and 
reclamation. As the HCFC-123 market matures, the refrigerant recovery, 
recycling, and reclamation requirements in 40 CFR part 82 subpart F 
will result in a greater amount of reusable HCFC-123.

E. Other HCFCs

    As a result of EPA's allocation process, which is largely based on 
projected 2010-2014 need for HCFC-22 and HCFC-142b, minus an amount of 
HCFC-22 that is assumed to be recycled or reclaimed, the total 
allocation is lower than the aggregate HCFC cap. EPA recognizes that 
there could be some additional need for HCFCs not specifically included 
in this rule. While some niche applications in the U.S. use other 
HCFCs, such as HCFC-21, EPA is not aware of additional need for 
production or import of these substances at this time, as adequate 
amounts appear to be in inventory. However, EPA is not foreclosing the 
possibility of additional production or import for these niche uses. 
Also, some amount of HCFC-141b will likely continue to be produced or 
imported via the petition process during the 2010-2014 control periods. 
EPA believes that there is sufficient room under the cap for such 
continued production and import. The current regulations at 40 CFR 
82.15 ban the production and import of class II substances for which 
EPA has apportioned baseline production and consumption allowances in 
excess of allowances held by the producer or importer, but do not ban 
the production and import of class II substances for which EPA has not 
apportioned baseline production and consumption allowances. This rule 
does not alter the current regulations in that respect. The producer or 
importer of an HCFC that is not subject to the allowance system would 
be required to report to EPA consistent with the existing recordkeeping 
and reporting requirements. If necessary, EPA could amend the 
regulations to set and apportion baselines and issue allowances for 
these HCFCs. Therefore, retaining room under the cap provides the 
benefit of accounting for unanticipated growth in HCFCs that do not 
have allocations or other unforeseen events. However, those reasons are 
not why EPA is reserving room under the cap. Instead, it is the result 
of EPA's bottom-up approach of allocating allowances for HCFC-22 and 
HCFC-142b according to the modeled demand for virgin and reclaimed 
material.
    EPA received two comments that reserving 22% of the total HCFC cap 
for ``other'' HCFCs is too excessive, given that HCFC-22 will have the 
greatest servicing needs and projected shortages. EPA agrees that the 
greatest need for all HCFC in the future will be for servicing existing 
HCFC-22 equipment. However, as discussed in Section VI.B.1., EPA 
carefully analyzed such needs through multiple iterations of its 
Servicing Tail report to determine an allocation of HCFC-22 necessary 
to avoid shortages. EPA believes that it is appropriate to allocate 
HCFC-22 based on demand (and considering the role of reclamation) 
because this will help the transition to the 2015 phase-down step, when 
the cap is reduced from 25% to 10% of baseline. While EPA is not 
``reserving'' room under the cap for these other HCFCs, the effect of 
allocating allowances based on need is additional room under the 
aggregate HCFC cap for any HCFCs that EPA has not specifically included 
in Sec. Sec.  82.16, 82.18, and 82.19.
    One commenter encouraged EPA to retire the remaining allowances 
that have not been allocated under this rulemaking. This commenter was 
concerned that if EPA maintained a reserve, the market will look to the 
Agency to allocate additional HCFC-22 allowances in the future instead 
of seriously pursuing recovery and reclamation. EPA disagrees that the 
unallocated room under that cap constitutes a set of allowances that 
can be ``retired''; it simply represents the differential between the 
cap and the amount of allowances allocated. As stated earlier, room 
under the cap provides for potential market penetration of other HCFCs 
that do not have allocations. Furthermore, the Agency is not 
maintaining a ``reserve'' to be allocated at a future time but rather 
is maintaining an accounting of the total U.S. HCFC production and 
consumption to ensure compliance with the HCFC cap. EPA does not intend 
to allocate the extra amount under the cap, except under unforeseen 
extenuating circumstances, because it is important to promote greater 
use of recycled and reclaimed material in anticipation of the next 
phasedown step.

V. Article 5 Allowances

    Under the Montreal Protocol, industrialized countries and 
developing countries have different schedules for phasing out ODS 
production and consumption. Developing countries operating under 
Article 5, paragraph 1 of the Montreal Protocol in most cases have 
additional time in which to phase out ODS. Recognizing that it would be 
inadvisable for developing countries to spend resources to build new 
ODS manufacturing facilities to meet basic domestic needs for chemicals 
they would ultimately phase out, the Parties to the Montreal Protocol 
decided to permit a small amount of production in industrialized 
countries, in addition to the amounts otherwise permitted for such 
countries under the relevant phaseout schedules, for export to meet the 
basic domestic needs of developing countries. As discussed above, at 
the 19th Meeting of the Parties (MOP) to the Montreal Protocol held in 
September 2007, the Parties agreed to a revised phaseout schedule for 
both Article 5 and non-Article 5 Parties. Included with the changes to 
the phaseout schedule were changes to the amount of production in 
industrialized countries that would be permitted to meet the basic 
domestic needs of Article 5 Parties. These changes were in keeping with 
the more stringent phaseout schedule for developing countries. 
Previously, the Montreal Protocol had allowed non-Article 5 countries 
to produce at 15 percent of their baseline levels for export to Article 
5 countries from 2016, the year in which Article 5 countries were 
required to freeze consumption, through the terminal phaseout in 2040. 
At the 19th MOP the Parties agreed that to satisfy basic domestic needs 
of Article 5 countries,

[[Page 66435]]

non-Article 5 Parties would be allowed to produce up to 10 percent of 
baseline levels until 2020. For the period after 2020, the Parties 
agreed to consider further reduction of the production for basic 
domestic needs no later than 2015 (UNEP/Ozl.Pro.19/7 Decision XIX/6: 
Adjustments to the Montreal Protocol with regard to Annex C, Group I, 
substances (hydrochlorofluorocarbons)).
    Section 605(d)(2) of the Clean Air Act states that notwithstanding 
the restrictions on production, use, and introduction into interstate 
commerce set forth in paragraphs (a) and (b) of that section, EPA ``may 
authorize the production of limited quantities of a class II substance 
in excess of the quantities otherwise permitted under such provisions 
solely for export to and use in developing countries that are Parties 
to the Montreal Protocol, as determined by the Administrator'' (42 
U.S.C. 7671d(d)(2)). EPA's implementing regulation at 40 CFR 82.18(a) 
provides for the allocation of ``Article 5 allowances'' for production 
of specified HCFCs solely for export to Article 5 Parties to meet those 
countries' basic domestic needs. Currently under Sec.  82.18(a) an 
entity that is apportioned baseline HCFC production allowances receives 
an amount of Article 5 allowances equal to 15 percent of that 
production baseline. The Article 5 Parties are listed at 40 CFR part 
82, subpart A, appendix C, annex 4. In the proposed rule, EPA cited 
Appendix E of the same subpart which contained a less current list of 
Article 5 Parties than the one at Appendix C, Annex 4. In this final 
rule, EPA is updating both appendices to accurately reflect decisions 
taken to date under the Montreal Protocol regarding the developing 
country status of particular Parties.
    EPA is amending Sec.  82.18(a) to reflect the adjustment to the 
Montreal Protocol at the 19th MOP and to ensure that the United States 
does not permit a level of production to meet basic domestic needs in 
Article 5 Parties that exceeds the level specified in the adjustments. 
EPA is taking this action in accordance with section 606(a)(3) of the 
Clean Air Act. EPA also is making minor changes to Sec.  82.15(c) to 
clarify that HCFCs produced with Article 5 allowances may be introduced 
into interstate commerce if destined for export.
    Prior to this final rule, Sec.  82.18(a)(1) stated that a person 
apportioned baseline production allowances for specified HCFCs is also 
apportioned Article 5 allowances for the specified HCFCs equal to the 
following percentages of that person's baseline: For controls periods 
through 2014, 15 percent; for controls periods from 2015 through 2029, 
10 percent; and for control periods from 2030 through 2039, 15 percent. 
While the Montreal Protocol previously permitted production for the 
basic domestic needs of Article 5 countries equal to 15 percent of the 
U.S. production baseline for each control period until 2040, section 
605(d)(2)(B) of the Clean Air Act requires that for the period between 
2015 and 2030 the production for Article 5 countries be limited to 10 
percent of baseline. Thus, EPA regulations at Sec.  82.18(a) prior to 
this rule restricted Article 5 allowances to 10 percent of production 
baseline from January 1, 2015, through December 31, 2029, but otherwise 
allowed the full 15 percent previously permitted by the Protocol.
    In this final rule, EPA is adopting the approach in the proposed 
rule by amending Sec.  82.18(a) to allocate Article 5 allowances for 
HCFC-22, HCFC-142b, and HCFC-141b at 10 percent of a person's baseline, 
for the period 2010-2019, with no Article 5 allowances beyond 2019, 
consistent with the recent changes to the Montreal Protocol. Prior to 
2015, production for export to Article 5 Parties of HCFC-123, HCFC-124, 
HCFC-225ca, or HCFC-225cb would not require expending Article 5 
allowances.
    Given that Article 2F of the Montreal Protocol, as adjusted in 
September 2007, does not provide for additional HCFC production to meet 
the basic domestic needs of Article 5 Parties past 2019, EPA is 
discontinuing the Article 5 allowance provision for all HCFCs at the 
end of 2019 in the absence of further adjustments to the Protocol. If 
the Parties were to adjust the basic domestic needs provisions of the 
Protocol to permit continued production for such needs past 2019, EPA 
would evaluate that adjustment and consider issuing a regulation to 
extend the availability of Article 5 allowances for basic domestic 
needs to the extent consistent with the Clean Air Act. Any such 
regulation would include production levels and schedules that were at 
least as stringent as those specified in the Montreal Protocol, as 
adjusted.
    EPA did not receive adverse comments regarding the revisions to 
Sec.  82.18(a).

VI. Accelerated Use Restrictions Under CAA Section 605

    In addition to allocating HCFC allowances, this rulemaking 
completes the implementation of section 605 of the Clean Air Act. 
Section 605(a) of the Clean Air Act is a self-effectuating ban on both 
the introduction into interstate commerce and use of class II 
substances. Section 605(a) reads:
    ``Effective January 1, 2015, it shall be unlawful for any person to 
introduce into interstate commerce or use any class II substance unless 
such substance--
    (1) Has been used, recovered, and recycled;
    (2) Is used and entirely consumed (except for trace quantities) in 
the production of other chemicals; or
    (3) Is used as a refrigerant in appliances manufactured prior to 
January 1, 2020.
    As used in this subsection, the term `refrigerant' means any class 
II substance used for heat transfer in a refrigerating system.''
    Although section 605(a) is effective by its own terms, Congress 
directed EPA in section 605(c) to promulgate regulations restricting 
the use of class II substances in accordance with section 605. In this 
action, EPA is adding regulatory language to reflect the section 605 
provisions on introduction into interstate commerce and use of class II 
substances.
    The provisions governing HCFC-22 and HCFC-142b promulgated as part 
of the 1993 phaseout rule were intended ``to prohibit the use of the 
chemicals (virgin material only) for any use except as a feedstock or 
as a refrigerant in existing equipment as of January 1, 2010'' (58 FR 
15028). As promulgated, however, the regulatory prohibitions did not 
control use directly, but instead banned production and import for most 
uses. Through this action, EPA is adding the direct use prohibitions 
contemplated in the 1993 phaseout rule as well as the corresponding 
prohibitions on introduction into interstate commerce contained in 
section 605(a). Consistent with the accelerated schedule adopted in the 
1993 phaseout rule, the section 605(a) restrictions on use and 
introduction into interstate commerce apply to HCFC-22 and HCFC-142b 
beginning in 2010 and to all other HCFCs beginning in 2015.\7\ The 
section 605(a) restrictions for 2010 also apply to blends containing 
HCFC-22 or HCFC-142b. The restrictions on production and import, both 
in general and for particular uses, that were promulgated in 1993 are 
at 40 CFR 82.16(b) through (g). EPA is not changing these provisions in 
this action. However, EPA is further implementing

[[Page 66436]]

section 605(a) by codifying a restriction at Sec.  82.15 on 
introduction into interstate commerce and use and by clarifying its 
interpretation of the statutory requirements. Limited exceptions to the 
restrictions on the introduction into interstate commerce and use are 
discussed in detail in Section VI.D.
---------------------------------------------------------------------------

    \7\ The petition process for HCFC-141b exemption allowances at 
82.16(h) would sunset in 2015, since HCFC-141b is not used as a 
refrigerant and thus does not meet the criteria established by 
605(a) for an exception from the statutory ban on use. EPA intends 
to revise Sec.  82.16(h) when it addresses the control periods 2015-
2019.
---------------------------------------------------------------------------

    The existing regulatory provisions at Sec.  82.16(c) prohibit the 
production or import of HCFC-22 and HCFC-142b in 2010 and beyond for 
purposes that are not exempted in that section, consistent with section 
605(a).\8\ In this action EPA is amending Sec.  82.15 to add 
prohibitions that specifically preclude any person from introducing 
into interstate commerce or using (according to the interpretations 
below) any HCFCs for purposes that are not consistent with section 605. 
EPA believes that this is appropriate because section 605(a) 
specifically bans use and introduction into interstate commerce. Under 
the current regulatory structure the prohibitions apply to the 
production and import of the HCFC compounds as bulk chemicals. The new 
provisions promulgated in this action restrict uses of bulk chemicals, 
and thus apply to use of HCFCs by manufacturers of appliances and other 
products containing HCFCs, as well as use of HCFCs by anyone who 
services such products.
---------------------------------------------------------------------------

    \8\ As discussed earlier in this action, there is an additional 
exception for production to meet the basic domestic needs of Article 
5 countries, consistent with section 605(d).
---------------------------------------------------------------------------

    The provisions relating to introduction into interstate commerce 
and use also apply to blends containing HCFC-22 or HCFC-142b.\9\ Bulk 
gases include both neat HCFC-22 (or HCFC-142b) and blends containing 
HCFC-22 (or HCFC-142b). Blends of refrigerants are substances, not 
products, and thus are subject to the restrictions that apply to non-
blended substances.
---------------------------------------------------------------------------

    \9\ Listed here with both the trade name and ASHRAE number where 
available, they include, but are not limited to the following: MP-39 
(R-401A), MP-66 (R-401B), MP-52 (R-401C), GHG (R-406A), FX-56 (R-
409A), Hot Shot (R-414B), GHG-X4 (R-414A), Choice Refrigerant (R-
420A), Freeze 12, Free Zone, GHG-HP, GHG-X5, HP-80 (R-402A), HP-81 
(R-402B), FX-10 (R-408A), R-411A, R-411B, G2018C, R-403B, NARM-502.
---------------------------------------------------------------------------

    This action also revises the regulations on export production 
allowances at 40 CFR 82.18(b) to ensure consistency with section 
605(a). Export production allowances allow an HCFC that is subject to a 
domestic phaseout to be produced for export to Parties that continue to 
allow imports of that substance. Prior to this rulemaking, entities 
holding baseline production allowances for HCFC-141b were allocated 
export production allowances equal to 100 percent of their baseline 
production allowances until December 31, 2029. To avoid a conflict with 
the section 605(a) restrictions on use and introduction into interstate 
commerce, EPA is discontinuing this provision on December 31, 2009. 
Under the definition finalized in this rule, ``introduction into 
interstate commerce'' includes release of HCFCs by the domestic 
manufacturer for distribution and transport prior to export. HCFC-141b 
is not used as a refrigerant and has not been used in transformation 
processes; therefore, the current export production allowances would 
have no remaining purpose with the implementation of the 605(a) use 
ban. EPA is not allocating export production allowances for any other 
HCFCs; however, as discussed in Section V, EPA is allocating Article 5 
allowances for meeting the basic domestic needs of developing 
countries. EPA received no negative comments on the discontinuation of 
export production allowances.

A. Definition of ``Introduction Into Interstate Commerce''

    Since the promulgation of the 2003 allocation rule, EPA has 
received questions from stakeholders regarding the Agency's 
interpretation of section 605(a). Based on these questions, EPA has 
included in this final rule a discussion of how it interprets that 
section, particularly the terms ``introduction into interstate 
commerce'' and ``use.'' This action promulgates a definition of 
interstate commerce to facilitate the implementation of section 605(a).
    Section 605(a) states that ``it shall be unlawful for any person to 
introduce into interstate commerce * * * any class II substance'' 
unless certain exceptions apply. Section 611 (Labeling) contains a 
similar phrase, noting that certain products shall not be ``introduced 
into interstate commerce'' unless the product bears a clearly legible 
and conspicuous warning label. EPA's definition of interstate commerce 
for section 611 purposes appears at 40 CFR 82.104(n):
    Interstate commerce means the distribution or transportation of any 
product between one state, territory, possession or the District of 
Columbia, and another state, territory, possession or the District of 
Columbia, or the sale, use or manufacture of any product in more than 
one state, territory, possession or District of Columbia. The entry 
points for which a product is introduced into interstate commerce are 
the release of a product from the facility in which the product was 
manufactured, the entry into a warehouse from which the domestic 
manufacturer releases the product for sale or distribution, and at the 
site of United States customs clearance.
    After considering this regulatory definition, and noting the 
similarities in the statutory language, EPA is amending Sec.  82.3 to 
include a definition of ``interstate commerce'' that is identical to 
the definition at Sec.  82.104(n), except that the phrase ``controlled 
substance'' appears where the Sec.  82.104(n) definition uses the term 
``product.'' This is because section 605(a) addresses bulk substances 
rather than products. Adding a definition of interstate commerce to 
Sec.  82.3 clarifies the applicability of the section 605(a) 
provisions. Using a definition that is already well-established in the 
labeling program minimizes stakeholder confusion.
    Under this definition, ``introduction into interstate commerce'' 
includes release of HCFCs by the domestic manufacturer of those HCFCs 
for distribution and transport prior to export. The section 605(a) ban 
thus has relevance to the export of HCFCs--limiting exports to HCFCs 
that are ``used, recovered, and recycled'' (section 605(a)(1)); HCFCs 
that are destined for transformation (section 605(a)(2)); HCFCs that 
will be used as a refrigerant in appliances manufactured before the 
date specified in the regulations (section 605(a)(3)); and HCFCs that 
will be exported to Article 5 Parties (section 605(d)(2)). As a result, 
HCFC exports to non-Article 5 Parties are limited as of January 1, 
2010, for HCFC-22 and HCFC-142b (and blends containing those compounds) 
and January 1, 2015, for HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb 
(and blends containing those compounds).
    One commenter expressed concern about its ability to export HCFC-
22, HCFC-142b, and blends thereof beginning January 1, 2010, and HCFC-
123, HCFC-124, and blends thereof beginning January 1, 2015, to non-
Article 5 countries. The commenter stated its belief that the exception 
in section 605(a)(3) for use ``as a refrigerant in appliances 
manufactured prior to January 2020'' is not limited to appliances 
within the borders of the United States, and thus export of HCFCs 
should be allowed to service such appliances outside the United States. 
The commenter also provided regulatory language to support this idea, 
suggesting EPA add to both 82.15(g)(2) and 82.15(g)(3) the language 
``for other export as allowed under the provisions of the Montreal 
Protocol.'' EPA agrees that the exemptions provided in 605(a) are not 
limited to the boundaries of the

[[Page 66437]]

United States and reiterates that exports of HCFC-22 and HCFC-142b to 
non-Article 5 Parties are allowable if those HCFCs (1) are used, 
recovered, and recycled, (2) will be used for transformation, or (3) 
will be used as a refrigerant in appliances manufactured before January 
1, 2010. Because the current regulatory language does not prohibit such 
exports, EPA does not believe it is necessary to change the regulatory 
text as suggested by the commenter.
    Three commenters stated that the definition of ``introduction into 
interstate commerce'' penalizes domestic manufacturers by effectively 
banning the export of pre-charged appliances containing HCFC-22 to 
Article 5 countries. One of these commenters requested that EPA treat 
pre-charged equipment intended for export to Article 5 countries in the 
same fashion as it does the export of bulk refrigerant. Specifically, 
EPA should allow the factory to charge equipment intended for export 
and count that usage of HCFC-22 against the total production cap. 
Another commenter said the export ban to Article 5 countries could 
detrimentally affect its partners' ability to fund the research and 
development of new technologies for the domestic market. This commenter 
stated that this export ban is contrary to the spirit of the Montreal 
Protocol. The third commenter stated that this ban would only cost U.S. 
manufacturing jobs without yielding an environmental benefit.
    The inability to export pre-charged appliances derives from the 
section 605(a) prohibition on use of HCFCs, since manufacturers would 
not be able to use HCFC-22 to charge newly manufactured appliances and 
thus could not manufacture such equipment for either domestic or 
foreign markets. At the point of entry into interstate commerce, any 
appliances containing HCFC refrigerant would be covered under 
provisions in the Pre-Charged Appliances rule (discussed in conjunction 
with this rule in Section III of this preamble) regarding sale and 
distribution in interstate commerce, not under the section 605(a) 
introduction into interstate commerce provision, which pertains to 
substances rather than products. Therefore, the comment suggesting that 
EPA allow factories to charge equipment intended for export and to 
count that usage of HCFC-22 against the total production cap is not 
consistent with EPA's interpretation of the 605(a) use ban, as the use 
of the bulk HCFC-22 to produce the new equipment is prohibited under 
605(a). Furthermore, export of any new appliances and components 
containing HCFC-22 is prohibited under the Pre-Charged Appliances rule.
    Section 605(d)(2) states that notwithstanding 605(a) and (b), which 
contain the use and production restrictions on HCFCs, EPA may authorize 
production of limited quantities of HCFCs ``solely for export to and 
use in developing countries.'' The restrictions in section 605(a) and 
(b) pertain to bulk substances, not to products. In addition, section 
605(d)(2) refers to HCFCs directly, and not to products containing 
HCFCs. EPA interprets section 605(d)(2) as allowing production of these 
ODS where the ODS themselves, as bulk substances, will be exported to 
developing countries for use in those countries. EPA does not interpret 
section 605(d)(2) as allowing use of HCFCs in U.S. product manufacture, 
even where the products are destined for use in developing countries.
    EPA notes that export of appliances that do not contain an HCFC 
refrigerant charge is legal under both this final allocation rule and 
the pre-charged products rule. In addition, as noted above, EPA is not 
prohibiting introduction of HCFCs into interstate commerce for the 
purpose of export to Article 5 countries.

B. Interpretation of the Term ``Use''

    In addition to banning ``introduction into interstate commerce'' of 
HCFCs, section 605(a) also bans the ``use'' of HCFCs. This section 
discusses EPA's interpretation of the term ``use'' in section 605(a). 
This discussion builds on EPA's 1993 rulemaking that prohibited 
production and import of HCFC-22 and HCFC-142b for most uses as of 
January 1, 2010.
    Section 605(a) states that ``effective January 1, 2015, it shall be 
unlawful for any person to * * * use any class II substance unless such 
substance--
    (1) Has been used, recovered, and recycled;
    (2) Is used and entirely consumed (except for trace quantities) in 
the production of other chemicals; or
    (3) Is used as a refrigerant in appliances manufactured prior to 
January 1, 2020.
    As used in this subsection, the term `refrigerant' means any class 
II substance used for heat transfer in a refrigerating system.''
    Interpretation of the term ``use'' is important for the proper 
implementation of section 605(a). EPA carefully considered what the 
term ``use'' means for purposes of section 605(a). EPA analyzed whether 
``use'' in this context pertains to end-users and how this could affect 
the public's continued operation of products such as refrigeration and 
air conditioning equipment. EPA also evaluated whether section 605(a) 
pertains only to manufacturing and servicing use. The three exemptions 
to the use prohibition found in 605(a) were helpful to EPA's 
understanding of what ``use'' means for purposes of that section.
    With regard to products containing HCFCs for non-refrigerant 
purposes such as TXVs, sterilant mixtures, and products exempt from the 
section 610 ban on nonessential products, EPA interprets the term 
``use'' as relating to the manufacture (and where applicable, the 
service) of those products, not the utilization of those products in 
the hands of an end-user. By accelerating section 605(a), EPA 
prohibited all ``use'' of virgin HCFC-22 and HCFC-142b (and blends 
thereof) for purposes other than the two exempted in section 605(a)(2) 
and (3) (i.e. transformation and as a refrigerant in appliances 
manufactured before January 1, 2010) beginning January 1, 2010. For 
example, HCFC-142b may no longer be used to blow foam, which was its 
primary use prior to 2010. EPA notes that uses not covered in section 
605(a)(2) and (3) could continue if the HCFC is used, recovered, and 
recycled per section 605(a)(1). EPA received comments that HCFC-22 
continues to be used in a sterilant blend and in thermostatic expansion 
valves (TXVs). In this final rule, EPA is creating limited exemptions 
from the accelerated use prohibition for these specific uses.
    With regard to HCFCs used as refrigerants, EPA interprets the term 
``use'' to mean initially charging as well as maintaining and servicing 
refrigeration equipment. Again, EPA does not read use to mean the 
continued utilization of a finished product owned by an end user. The 
three statutory exceptions in Section 605(a) inform EPA's understanding 
of the term ``use.'' While these exceptions apply to the ``interstate 
commerce'' ban as well as the ``use'' ban, the discussion below focuses 
on the ``use'' aspects of the exceptions.
    The first exception, at section 605(a)(1), applies to class II 
substances that have been ``used, recovered, and recycled.'' This 
exception confirms EPA's understanding of the use ban as limited to the 
manufacture and servicing of HCFC products. If the ban applied to the 
use of HCFCs by a consumer, it might include the continued operation of 
an appliance (e.g., a residential air conditioner) where an HCFC acts 
as the refrigerant. Under this broad definition of ``use,'' there would 
be an incentive for consumers to

[[Page 66438]]

hire servicing technicians to recover the HCFCs from appliances already 
in their homes and businesses, to recycle the HCFCs for reuse, and to 
charge the HCFCs back into the same appliances. These steps should not 
be necessary for continued operation of installed equipment. However, 
by taking these steps, consumers could avail themselves of the 
exception for ``used, recovered, and recycled'' substances at section 
605(a)(1). There would be no environmental benefit to following such a 
procedure. There could even be an environmental detriment, given the 
potential for losses of refrigerant during the recovery and recycling 
process. EPA does not believe that Congress intended such a result. 
Moreover, EPA believes that Congress intended to permit the continued 
use of previously manufactured appliances, as indicated by the third 
exception to the use ban (section 605(a)(3)). EPA did not receive 
comments indicating that ``use'' should be understood to include use by 
the end-user. Thus, EPA is not interpreting use in a way that would 
result in shortening the useful lifetime of appliances that were 
manufactured prior to the effective date of the use restriction. EPA 
concludes that the section 605(a) ``use'' ban does not apply to a 
consumer's operation of equipment that contains HCFCs. Rather, it 
applies to the manufacture and servicing of equipment containing HCFCs. 
EPA believes that Congress meant for the section 605(a)(1) exception to 
allow the use of ``used, recovered, and recycled'' HCFCs in appropriate 
instances by servicing technicians and reclaimers.
    EPA had proposed to interpret this exception to allow use of 
reclaimed HCFCs by manufacturers, as well. However, in the Pre-Charged 
Appliances rule EPA is prohibiting sale and distribution in interstate 
commerce of pre-charged appliances and components manufactured after 
January 1, 2010, including any such appliances and components charged 
with reclaimed material. Equipment charged with reclaimed HCFCs is 
covered by the final pre-charged appliance prohibition due to the 
difficulty of distinguishing between new and reclaimed material. The 
prohibition on sale and distribution of the appliances effectively ends 
the use of all HCFCs, including reclaimed HCFCs, in the manufacture of 
the appliances. EPA believes this outcome is appropriate because it is 
not practicable to achieve the Congressional goal of ending use of 
virgin HCFCs in the manufacture of new appliances without 
simultaneously banning use of reclaimed HCFCs in pre-charged 
appliances. Further information can be found in the preamble and 
response to comments document in the docket to that rule.
    The second exception, at section 605(a)(2), refers to HCFCs that 
are ``used and entirely consumed (except for trace quantities) in the 
production of other chemicals.'' Similar language appears as an 
exception to the definition of ``production'' at section 601(11). EPA 
regulations refer to this type of use as ``transformation'' (see the 
definition of ``transform'' at 40 CFR 82.3). The current phaseout 
schedule for HCFC production and consumption already includes a 
transformation exception within Sec.  82.16. EPA did not receive any 
comments on this issue. EPA is implementing the transformation 
exception in section 605(a)(2) consistent with the transformation 
exception to the HCFC production phaseout.
    The third exception, at section 605(a)(3), provides for HCFCs that 
are ``used as a refrigerant in appliances manufactured prior to January 
1, 2020.'' EPA reads this exception as allowing appliances, as defined 
in the CAA, manufactured before the specified date to be serviced with 
virgin HCFCs. (The meaning of the term ``manufactured'' is discussed 
below.) This is consistent with the legislative history of the 
exception. The predecessor to section 605(a)(3) in the Senate bill was 
an exception for ``other regulated substances'' (such as HCFCs) that 
are ``used to maintain and service household appliances or commercial 
refrigeration units manufactured prior to January 1, 2015.'' The House 
amendment contained identical language. While the language that emerged 
in the Conference Agreement is less specific, we can infer that this 
exception was intended to address, at a minimum, maintenance and 
servicing needs.
    Based on these three exceptions to the ban, EPA interprets the term 
``use'' in section 605(a) to mean, with regard to HCFCs used as 
refrigerants, initially charging as well as maintaining and servicing 
refrigeration equipment. Any finished product that is owned by end 
users may continue to be utilized. As written, the section 605(a)(3) 
exception would permit some newly manufactured appliances (i.e., those 
manufactured prior to January 1, 2020) to be charged with virgin HCFCs 
following the effective date of the use ban. In the 1993 phaseout rule, 
however, EPA banned production and import of HCFC-22 and HCFC-142b, 
effective January 1, 2010, for use in equipment manufactured after 
January 1, 2010. EPA also indicated in the preamble to that rule that 
it intended to ban use of virgin HCFC-22 and HCFC-142b in such 
equipment. Consistent with decisions made in the 1993 rule, EPA is 
applying the section 605(a)(3) exception such that virgin HCFC-22 and 
HCFC-142b, and blends containing HCFC-22 or HCFC-142b, may be used for 
servicing and maintenance of appliances manufactured before 2010 but 
may not be used in the manufacture of equipment after January 1, 2010. 
EPA is taking this action under the authority of section 606 of the 
Clean Air Act. EPA notes that allowable servicing could entail a wide 
range of activities including replacing parts or components. Per the 
accompanying Pre-Charged Appliances rule, these parts and components 
may contain HCFCs (including virgin material) if manufactured prior to 
January 1, 2010, but must be shipped without HCFC (i.e. dry or with a 
nitrogen holding charge) if manufactured after January 1, 2010. For the 
low-ODP refrigerants covered by section 82.16(d) (HCFC-123, HCFC-124, 
HCFC-225ca, and HCFC-225cb), however, EPA is not accelerating the 
January 1, 2015, effective date or the January 1, 2020, cutoff date in 
section 605(a)(3). Thus, for these low-ODP refrigerants, virgin 
material may be used as a refrigerant in appliances manufactured before 
January 1, 2020. This will allow initial charging of appliances using 
low-ODP HCFCs for a limited period following the effective date of the 
use restriction as well as servicing and maintenance uses.
    Although EPA has not received comment on it, HCFC-22 and HCFC-142b, 
both neat or in blends with other fluids, have also been used in a 
broader range of products, including some products subject to, and 
other products exempt from, the nonessential products ban at section 
610 of the CAA. Section 610(d) includes a self-effectuating ban on the 
sale of aerosol products and other pressurized dispensers, and plastic 
foam products that are not insulating foam products that contain HCFCs. 
EPA promulgated regulations that established a list of products 
exempted from the nonessential products ban. These products, listed in 
40 CFR 82.70, consist of lubricants, coatings, or cleaning fluids for 
electrical or electronic equipment; lubricants, coatings, or cleaning 
fluids used for aircraft maintenance; mold release agents used in the 
production of plastic and elastomeric materials; spinnerette lubricants 
and cleaning sprays used in the production of synthetic fibers; 
document preservation sprays; portable fire extinguishing equipment 
used for

[[Page 66439]]

non-residential applications; wasp and hornet sprays for use near high-
tension power lines; and foam insulation products (as defined in Sec.  
82.62).
    While certain products containing HCFC-22, HCFC-142b, or blends 
thereof, are exempt from the nonessential products ban, EPA reads 
section 610 and section 605(a) together. By prohibiting use and 
introduction into interstate commerce of HCFCs as bulk substances, 
section 605(a) effectively prohibits the continued manufacture of any 
products containing HCFCs (which qualifies as a type of ``use'') unless 
specifically exempted in that section. None of the products exempt from 
the section 610(d) nonessential products ban fall under the 605(a) 
exemptions. Therefore, EPA clarifies here that such products are 
prohibited from continued manufacture, unless manufactured with 
recovered HCFCs. EPA believes that this will not impose any burden as 
manufacturers of these products have transitioned to alternatives.
    Finally, EPA does not interpret ``use'' to include destruction, 
recovery for disposal, discharge consistent with all other regulatory 
requirements, or other similar actions where the substance is part of a 
disposal chain. At the point disposal-related actions occur, other 
statutory and regulatory provisions generally govern. For example, 
Congress addressed the issue of disposal under section 608. EPA has 
promulgated regulations to implement section 608 for appliances: These 
safe disposal requirements are codified at 40 CFR part 82 subpart F. In 
some instances, HCFCs may need to be introduced into interstate 
commerce in order to reach an appropriate destruction facility. 
Consistent with its interpretation of ``use,'' EPA is interpreting the 
interstate commerce prohibition to exclude introduction into interstate 
commerce for the purpose of destruction.

C. Interpretation of the Phrase ``Appliances Manufactured Prior To''

    The exception in section 605(a)(3) limits introduction into 
interstate commerce and use to situations where the HCFC ``is used as a 
refrigerant in appliances manufactured prior to'' the specified date. 
EPA did not propose a definition of ``appliance'' specific to this 
action as ``appliance'' is already defined in 40 CFR part 82, subpart 
F, \10\ based on the definition provided in section 601 of the Clean 
Air Act. Commenters requested clarification from EPA on what is an 
appliance, therefore, to facilitate understanding of this issue EPA is 
adding this same definition to Subpart A in 40 CFR 82.3. An appliance 
is ``any device which contains and uses a refrigerant and which is used 
for household or commercial purposes, including any air conditioner, 
refrigerator, chiller, or freezer.'' Many devices meet the section 601 
definition of appliance. For example, commercial refrigeration includes 
end uses such as retail food refrigeration and cold storage. Industrial 
process refrigeration includes complex customized appliances used in 
the chemical, pharmaceutical, petrochemical, and manufacturing 
industries. This sector includes industrial ice machines, appliances 
used directly in the generation of electricity, and ice skating rinks. 
Other types of appliances include household refrigerators and freezers; 
chillers; water coolers; vending machines; residential dehumidifiers; 
and unitary systems including residential and light commercial heat 
pumps. Appliances are separate from components, which are the 
individual parts of an appliance, such as a condensing unit or line 
set, that by themselves cannot function to provide a cooling effect. In 
considering the meaning of ``manufactured,'' EPA has considered the 
definition of appliance carefully, particularly evaluating at what 
point a group of components become a manufactured appliance.
---------------------------------------------------------------------------

    \10\ See 40 CFR 82.152 which contains the definition of 
``appliance'' as well as examples of types of appliances in the 
definitions of ``commercial refrigeration,'' ``industrial process 
refrigeration,'' and ``small appliances.''
---------------------------------------------------------------------------

    In the final rule, EPA is providing a definition of the term 
``manufactured.'' This definition can also be found in the companion 
Pre-Charged Appliances rule. The term manufactured ``for an appliance, 
means the date upon which the appliance's refrigerant circuit is 
complete, the appliance can function, the appliance holds a full 
refrigerant charge, and the appliance is ready for use for its intended 
purposes; and for a pre-charged appliance component, means the date 
that such component is completely produced by the original equipment 
manufacture, charged with refrigerant, and is ready for initial sale or 
distribution in interstate commerce.''
    Small appliances, such as refrigerators and window air-
conditioners, thus are ``manufactured'' at the manufacturing facility. 
For instance, an appliance that has been pre-charged with the desired 
amount of refrigerant, has gone through the entire production line so 
that all mechanical and electrical procedures are complete, and is a 
``stand-alone'' piece of equipment (i.e., it only needs to be plugged 
into an electrical outlet and turned on to function properly) is 
``manufactured'' when it is placed into the manufacturer's initial 
inventory. Appliances used in commercial refrigeration and industrial 
process refrigeration typically involve more complex installation 
processes and may require custom-built parts and thus are considered 
differently. Appliances that are field charged or have the refrigerant 
circuit completed onsite, regardless of whether additional refrigerant 
is added or not, are ``manufactured'' at the point when installation of 
all of the components and other parts are completed and the appliance 
is fully charged with refrigerant. Some components, such as condensing 
units for split-system air conditioners, contain a refrigerant charge 
from the factory but are then typically adjusted in the field at the 
time the appliance is installed to account for different line sizes and 
indoor unit configurations. EPA considers the ``manufacture'' of that 
split-system similar to that for field-charged equipment; that is, 
manufacture is not complete until the device is installed in the field 
and fully charged. EPA clarifies that ``the date upon which the 
appliance's refrigerant circuit is complete'' means the initial date, 
and does not include any opening and re-closing of the refrigerant loop 
as a result of servicing.
    EPA received thirteen comments regarding its interpretation of the 
term ``manufacture.'' Commenters were primarily concerned with the 
effect that this interpretation will have on inventory that is still 
unsold after January 1, 2010. EPA discusses below its effort to 
minimize the effect on existing inventory. Eight commenters recommended 
that EPA define manufacture as the date the product, whether it is a 
complete appliance or not, leaves the original equipment manufacturer's 
(OEM) final assembly process, is packaged for shipment, and placed into 
initial inventory. EPA believes the commenters' concern arises with how 
the two terms ``appliance'' and ``manufacture'' are applied together. 
Small appliances, i.e., devices that have a completed refrigerant 
circuit, are fully charged, and are functional and ready for use at the 
time they leave the factory are ``manufactured'' at the time they are 
placed into initial inventory at the factory and are shipped as 
complete ``appliances'' rather than as a set of components. In 
contrast, appliances used in commercial refrigeration and industrial 
process refrigeration are not placed in inventory or shipped as 
complete ``appliances.'' In such cases, OEMs are manufacturing 
components, not appliances. The point of manufacture of the commercial 
or industrial process refrigeration

[[Page 66440]]

appliance occurs after the components have left the factory. EPA has 
consistently stated its interpretation that individual components such 
as condensers, evaporators, compressors, line sets, and valves in 
themselves do not constitute an appliance. In an earlier rulemaking 
addressing the sales of pre-charged appliance components, the Agency 
stated that pre-charged components are parts of but ``are clearly not 
appliances'' (November 9, 1994; 59 FR 55912). Commenters to the 
companion Pre-Charged Appliances rule noted that EPA provides similar 
language on its refrigerant sales restriction factsheet (found at 
(www.epa.gov/ozone/title6/608/sales/sales.html), which states that 
``EPA considers a `part' to be any component or set of components that 
makes up less than an appliance. For example, this includes line sets, 
evaporators, or condensers that are not sold as part of a set from 
which one can construct a complete split system or other appliance. EPA 
considers a part to be `pre-charged' if it contains a CFC or HCFC that 
will become part of the operating charge of an appliance.'' EPA defines 
``pre-charged components'' in the Pre-Charged Appliances rulemaking. In 
this HCFC allocation rule, EPA is clarifying that the appliance itself 
is not manufactured until the component parts, whether pre-charged or 
not, are fully installed and charged.
    Five commenters stated that the proposed interpretation would 
negatively affect HVAC equipment used in commercial and residential 
buildings (including modular buildings). For example, a situation could 
arise where both the pre-charged condensing unit and indoor coil would 
be produced and possibly shipped prior to January 1, 2010, but the 
refrigerant loop would not be completed until after that date. As 
described above, EPA believes that placement of components into initial 
inventory or partial installation of certain components does not make 
sense as a definition of manufacture for split systems or other such 
appliances. In effect, what these commenters are requesting is that the 
appliance be considered manufactured when all of its component parts, 
or one specific part, are placed into initial inventory, not when those 
various parts are combined into a functional appliance, as defined at 
Section 82.152.
    Fourteen commenters expressed concern that EPA's interpretation of 
manufacture will strand existing inventory of components and present a 
financial burden to OEMs, distributors, and contractors holding that 
equipment. EPA disagrees with the comment that inventory will have to 
be scrapped or that there are no further uses of that equipment. First, 
section 605(a) provides an exception to the use ban for used, recycled, 
or reclaimed refrigerant. Thus, reclaimed refrigerant could be used to 
charge components being installed in the field so as to manufacture a 
completely new appliance so long as charging occurs at the installation 
site rather than at the factory. Note that under the Pre-Charged 
Appliance rule, components could not be shipped with a charge of HCFC-
22 or HCFC-142b, or blend thereof (even if reclaimed), but could be 
charged with a nitrogen holding charge or shipped dry. Second, pre-
charged components manufactured before 2010 can be sold to service 
existing equipment. For example, an HCFC-22 condensing unit that fails 
after 2010 may be replaced with a similar HCFC-22 condensing unit that 
was manufactured prior to January 1, 2010. There is no limitation on 
whether the component contains virgin or reclaimed HCFC-22 or is 
shipped dry in this instance as the component was manufactured prior to 
January 1, 2010, and is being used for servicing rather than appliance 
manufacture. These continued uses of existing equipment allow holders 
of existing inventory to continue selling such equipment. 
Manufacturers, however, are prohibited from producing and charging with 
HCFC-22 components designed for use solely in the manufacture of new 
HCFC-22 systems after December 31, 2009. Based on comments submitted to 
this rule and made in prior stakeholder meetings, EPA does not 
anticipate OEMs producing such components or systems after December 31, 
2009.
    The continued sale of existing inventory will both reduce burden to 
stakeholders and be protective of the environment. EPA considers 
replacement of components as within the definition of servicing of 
existing equipment. EPA's Vintaging Model takes into account repairs 
such as these when modeling the lifetime of the appliance. Thus, 
allowing replacement of components with existing inventory does not 
change the estimated servicing demand. Furthermore, there may be no 
overall benefit to the environment in requiring companies holding 
existing equipment to scrap their inventory. In addition to the solid 
waste generated, there is the potential for losses of refrigerant 
during recovery and subsequent handling of the refrigerant.
    EPA also received comments requesting a limited waiver for HCFC-22 
and HCFC-142b appliances that had been scheduled for use in projects, 
such as construction projects, prior to January 1, 2010, but not yet 
completed. Commenters provided a range of scenarios in which building 
plans were established, but ground had not yet been broken, or 
appliance components ordered but not yet installed. Commenters noted 
that an increased financial burden would be borne by those who had made 
``good faith'' attempts to adhere to the HCFC-22/HCFC-142b use ban 
prior to 2010, but for various reasons beyond their control (e.g., 
budget shortfalls, weather delays, labor strikes) would not be able to 
complete projects prior to January 1, 2010. Commenters stated that EPA 
should accommodate new installations specifying HCFC-22 or HCFC-142b 
appliances that have entered into contracts, completed the bidding 
process, or have received building code approval prior to January 1, 
2010.
    In response to these concerns, EPA is granting flexibility in 
limited instances where projects have begun but due to delays have not 
yet been completed prior to January 1, 2010. EPA is adding to Sec.  
82.15(g)(2) the following exception: ``Introduction into interstate 
commerce and use of HCFC-22 is not subject to the prohibitions in 
paragraph (g)(2)(a)) of this section if the HCFC-22 is * * * for use as 
a refrigerant in appliances manufactured before January 1, 2012, 
provided that the components are manufactured prior to January 1, 2010, 
and are specified in a building permit or a contract dated before 
January 1, 2010, for use on a particular project.'' EPA does not intend 
to establish an across-the-board exemption to the phaseout period, but 
is adjusting the accelerated section 605(a) phaseout to allow for 
unforeseen delays in limited circumstances. In general, the Agency 
feels that ample time has been granted to allow chemical, appliance, 
and component manufacturers to phase out the manufacture of products 
dependent on HCFC-22, HCFC-142b, and blends thereof that are not 
intended to service existing installations. In 1993 EPA issued the 
first rule banning the production of HCFC-22 and HCFC-142b for use in 
equipment manufactured before January 1, 2010. Nonetheless, after 
considering comments, EPA is granting some flexibility to address 
particular circumstances affected by the definition of ``manufacture'' 
proposed in the December 23, 2008, proposal. EPA believes that a two 
year grandfathering provision will provide sufficient time to those who 
are bound by either a contract or building permit but facing

[[Page 66441]]

delays to complete the installation (i.e., ``manufacture'') of such 
equipment.
    EPA recognizes that building permits and contractual arrangements 
exist for construction projects that involve air-conditioning systems 
that will not be ``manufactured'' (e.g., completion of the refrigerant 
circuit) until after December 31, 2009. In response to comments 
expressing this concern, this rule establishes a grandfathering 
provision which allows appliances containing HCFC-22, HCFC-142b, or 
blends thereof to be ``manufactured'' onsite for a particular project 
between January 1, 2010, and December 31, 2011, if their components are 
made prior to January 1, 2010, and specified for use at that project 
under a building permit or contract dated before January 1, 2010. EPA 
believes this will provide relief to the various concerns that were 
expressed by stakeholders.
    EPA does not anticipate that this grandfathering will affect total 
modeled demand. The Vintaging Model assumes that this equipment was 
installed in 2009 and estimates servicing need based on 2009 as the 
date of manufacture. If not installed in 2009 but rather installed in 
subsequent years, the model already assumes it is installed, so the 
total servicing demand is not affected, though it is shifted forward in 
time. Thus, the model may underestimate actual annual demand from 2010 
onward.

D. Exceptions to the Accelerated Use Restrictions

    In the proposed rule, EPA clarified its prior interpretation from 
the 1993 phaseout rule (58 FR 15028) that the Agency was accelerating 
the section 605(a) prohibition on use of virgin HCFC-22, HCFC-142b, and 
blends thereof, except as a feedstock or as a refrigerant in existing 
equipment as of January 1, 2010. The accelerated use ban derives from 
EPA's authority under section 606 of the Clean Air Act to phase out the 
use of class II substances more rapidly than the schedule set forth in 
section 605. Under section 606, the Administrator is to accelerate the 
schedule ``if based on the availability of substitutes for listed 
substances, the Administrator determines that such more stringent 
schedule is practicable, taking into account technological 
achievability, safety, and other relevant factors.'' As discussed 
above, EPA believes that alternatives are available for HCFC-22 and 
HCFC-142b and therefore believes it is appropriate to accelerate the 
schedule. However, EPA received comments that described niche 
applications for HCFC-22. These two uses are for medical equipment and 
for thermostatic expansion valves (TXVs). In those two instances, EPA 
does not believe that the accelerated 605(a) ban is practicable, 
because while alternatives exist, it is not feasible to implement them 
immediately. In this final rule, EPA is exempting virgin HCFC-22 for 
use in TXVs and for medical equipment from the 2010 accelerated ban on 
introduction into interstate commerce and use.
    The existing regulations at 40 CFR 82.16(c) prohibit, beginning 
January 1, 2010, the production and import of HCFC-22 for all uses 
except for use in a process that results in their transformation or 
destruction, for use as a refrigerant in equipment manufactured prior 
to January 1, 2010, or for limited export. Therefore, these users have 
had notice of the upcoming ban on production. However, EPA believes 
that there is benefit in allowing for the continued use of already 
produced material in these few specific non-refrigerant uses. 
Therefore, under this rule EPA is exempting the use of HCFC-22 produced 
prior to January 1, 2010, for TXVs and medical equipment. This limited 
exception ends December 31, 2014, as that is the date upon which all 
uses of HCFCs, except for those specifically enumerated in section 
605(a), are banned.
1. Thermostatic Expansion Valves
    EPA received several comments regarding the effect the proposed 
rule would have on the use and manufacture of thermostatic expansion 
valves (TXV). A TXV is a hermetically sealed valve that uses a very 
small amount of HCFC-22; one commenter said that they contain as little 
as 3 grams of HCFC-22. TXVs increase the efficiency of air conditioning 
and refrigeration equipment by carefully regulating the flow of 
refrigerant in the refrigerant circuit. The HCFC-22 contained in a TXV 
is separate from the HCFCs that act as refrigerants in the refrigerant 
circuit. As such, one commenter stated that TXVs should be exempt from 
regulation because the HCFC-22 charged in the TXV bulb does not provide 
cooling effect. EPA believes the intent of this comment was to allow 
for the continued sale of TXVs under EPA's companion Pre-Charged 
Appliances rule. EPA agrees that the HCFC-22 sealed within TXVs is not 
used for heat transfer purposes and not part of the refrigerant loop. 
Since it is not used for heat transfer in a refrigeration system the 
HCFC-22 used in TXVs is therefore not used as a ``refrigerant'' as 
defined in section 605(a). Therefore, this use of HCFC-22 is not 
exempted under section 605(a)(3).
    Under section 605(a), the manufacture of TXVs containing HCFC-22 
and HCFC-142b could continue if the HCFC in the TXV is used, recycled, 
or reclaimed.\11\ Commenters argued that reclaimed HCFCs would not be 
appropriate for TXVs. They stated that virgin HCFC-22 has 100-200 ppmv 
volatile impurities while the ARI Standard 700 allows a maximum of 
5,000 ppmv volatile impurities in reclaimed refrigerant. Commenters 
stated that the effects of these additional impurities are not yet 
understood and the TXV industry has not yet analyzed the effects or 
searched for alternatives to HCFC-22 in TXVs. Commenters told EPA that 
they expect they could complete such research within two years. In the 
meantime, however, they expressed concerns that not using an 
appropriate valve could cause a system to run inefficiently and 
possibly lead to catastrophic failure, with the associated possible 
loss of ODS.
---------------------------------------------------------------------------

    \11\ EPA is not aware of any TXVs that use HCFC-142b; thus this 
provision only addresses TXVs containing HCFC-22.
---------------------------------------------------------------------------

    One commenter argued against banning the sale of TXVs because they 
said that any loss from a leaky valve would be less than the de minimis 
loss associated with routine servicing. EPA disagrees with the 
commenter's suggestion to consider providing a de minimis exception in 
this instance. EPA has regulated many products that individually 
contain small amounts of ozone-depleting substances, such as aerosols 
and metered dose inhalers. While EPA agrees that a single TXV contains 
a small amount of HCFC-22, the amount of HCFC contained within a single 
product is not determinative of whether the total amount of HCFCs 
contained in such products is trivial.
    EPA understands that the TXV manufacturers may not have been aware 
of the effects this rulemaking would have and agrees relief is 
appropriate to allow TXV manufacturers time to research appropriate 
alternatives, including reclaimed material. Such alternatives include 
cross-charge valves, which are valves that contain a different HCFC 
from the refrigerant found in the refrigerant loop. These valves 
currently exist but not all air-conditioning and refrigeration systems 
are compatible with a cross-charge valve. Further research can also be 
conducted to ascertain whether reclaimed HCFCs are suitable for use in 
TXVs.
    As described above, EPA's interpretations of ``introduction into 
interstate commerce'' and ``use'' do not affect products manufactured 
prior to January 1, 2010. Therefore, existing

[[Page 66442]]

TXVs may be used as replacements in existing air-conditioning and 
refrigeration equipment. Based on the comment that millions of TXVs are 
used each year, EPA does not believe that the existing inventory can 
meet the servicing demand of all remaining existing equipment. Nor does 
EPA believe that production of additional TXVs could be increased so 
shortly before January 1, 2010.
    The lack of a TXV could result in a system running less efficiently 
or, in a worst case scenario, lead to compressor damage. EPA is 
concerned that failing to ensure an adequate supply of TXVs will result 
in the unintended consequence of removing existing equipment from 
service faster than anticipated. While likely rare, EPA wants to avoid 
the result of requiring existing equipment owners to have to replace an 
entire system due to the unavailability of an inexpensive valve. 
Therefore, this final rule allows for the introduction into interstate 
commerce and use of HCFC-22 produced prior to January 1, 2010, to be 
used until January 1, 2015, for the manufacture of TXVs.
2. Medical Equipment
    Commenters to this rule also informed EPA that two companies 
continue to use a product containing ethylene oxide, HCFC-124, and 
HCFC-22 to sterilize medical equipment. One is a major manufacturer of 
intraocular lenses that are surgically implanted into the eye to treat 
cataracts. The other reprocesses costly heart catheters that were once 
discarded after a single use. After the close of the comment period, 
EPA received comment that another company continues to use a 
refrigerant blend containing HCFC-22 in a medical equipment device that 
provides therapy for women suffering from menorrhagia (excessive 
bleeding) by reducing menstrual flow. While this equipment uses HCFC-22 
in a refrigerant blend, it is not an ``appliance'' under the Clean Air 
Act. Under the section 601(1) definition of ``appliance,'' the device 
must be ``used for household or commercial purposes, including any air 
conditioner, refrigerator, chiller, or freezer.'' This device is used 
for medical purposes and does not provide comfort cooling or 
refrigeration. Beginning in 2010 it would be unlawful for the chemical 
producer to introduce the HCFC-22 into interstate commerce and for 
medical companies to use the HCFC-22 in their manufacture of medical 
equipment.
    The two companies began transitioning from the blend containing 
HCFC-22 to pure ethylene oxide but they are currently two to four years 
away from fully implementing that alternative. Pure ethylene oxide, a 
SNAP-approved non-ozone-depleting compound, is explosive and must be 
used in specially designed and constructed facilities. Once the 
facilities are constructed, they must then be approved by the Food and 
Drug Administration (FDA) before they can begin manufacturing medical 
devices. Thus, while an alternative is approved for sterilant use, 
these two companies are still in the process of constructing and 
receiving approval for new facilities which would allow them to 
transition to that alternative.
    EPA agrees with the commenter that the use of recovered and 
reclaimed HCFC-22 as a component of a sterilant is not a viable 
solution for sterilizing medical equipment. First, reclaimed HCFC-22 is 
purified according to Air-Conditioning, Heating, and Refrigeration 
Institute (AHRI) standards. The ARI Standard 700, among other things, 
requires that reclaimed HCFC-22 be 99.5% pure before being resold. This 
standard was designed to ensure that refrigeration equipment will work 
equally well regardless of whether the HCFC-22 is reclaimed or virgin. 
This standard does not consider medical uses of HCFC-22, where a 0.5% 
contamination level could have deleterious health effects. In addition, 
because reclaimed HCFC-22 is recovered from a variety of sources, the 
nature and the composition of the contaminants are varied and unknown. 
By contrast, commenters have told EPA that the contaminants in virgin 
HCFC-22 are constant and known because the source and production 
methods remain the same. Therefore, these contaminants have been 
screened for any medical effects and accounted for in the FDA approval 
of the sterilants for that medical use.
    After the close of the comment period, EPA also heard from a 
manufacturer of medical equipment that contains HCFC-22 in a 
refrigerant blend and is used to ablate endometrial tissue. This 
company explained that it has taken significant steps to replace the 
HCFC-22 blend with an alternative refrigerant and was on schedule to 
have the replacement approved to be used in the medical device by the 
Underwriters Laboratory (UL) but the UL approval will not take place in 
2009. This company requested a one-year exemption from the HCFC-22 use 
restriction, giving it enough time to complete the UL approval process.
    EPA believes that an exception for the medical equipment described 
above is reasonable. First, such an exception is the type that was 
contemplated by Congress when writing the Clean Air Act. Section 605(d) 
authorizes EPA and FDA, in consultation, to allow the limited 
production and use of class II substances for medical devices after the 
statutory phaseout date of 2015. The existing regulation at 40 CFR 
82.15(f) is reserved for a potential future exception for medical 
devices under Section 605(d). EPA is not invoking its authority under 
section 605(d) to create the exception for medical devices in this 
final rule because section 605(a) does not require a use phaseout until 
2015. Nevertheless, EPA finds this exemption illustrative of the 
importance that Congress placed on medical uses. EPA is not inclined to 
create an exception for medical uses of HCFC-22 under section 605(d) 
when it issues allocations for the 2015-2019 control periods because 
EPA expects it will be practicable to implement alternatives by 2015. 
Based on the comments received in this rule, the few remaining users of 
HCFC-22 for medical purposes have plans in place to transition to 
alternatives prior to 2015.
    Second, this exception will not have any adverse effects on the 
stratospheric ozone layer. EPA is limiting this exception to HCFC-22 
that was produced under consumption allowances expended prior to 
January 1, 2010. The existing regulatory text in section 82.16(c) does 
not allow for HCFC-22 production beginning in 2010 for these sterilant 
uses and this use exemption would not change those provisions. 
Therefore, this exception will not result in additional production. EPA 
finally notes that the total volume of HCFC-22 needed for this use is 
small. The three companies estimate that only 57,000 kg of HCFC-22 will 
be needed between 2010 and the end of 2014.

IV. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

    Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), 
this action is a ``significant regulatory action.'' Accordingly, EPA 
submitted this action to the Office of Management and Budget (OMB) for 
review under EO 12866 and any changes made in response to OMB 
recommendations have been documented in the docket for this action.
    EPA did not conduct a specific analysis of the benefits and costs 
associated with this action. Many previous analyses provide a wealth of 
information on the costs and benefits of the U.S. HCFC phaseout 
including:
     The 1993 Addendum to the 1992 Phaseout Regulatory Impact 
Analysis: Accelerating the Phaseout of CFCs,

[[Page 66443]]

Halons, Methyl Chloroform, Carbon Tetrachloride, and HCFCs.
     The 1999 Report Costs and Benefits of the HCFC Allowance 
Allocation System.
     The 2000 Memorandum Cost/Benefit Comparison of the HCFC 
Allowance Allocation System.
     The 2005 Memorandum Recommended Scenarios for HCFC 
Phaseout Costs Estimation.
     The 2006 ICR Reporting and Recordkeeping Requirements of 
the HCFC Allowance System.
     The 2007 Memorandum Preliminary Estimates of the 
Incremental Cost of the HCFC Phaseout in Article 5 Countries.
     The 2007 Memorandum Revised Ozone and Climate Benefits 
Associated with the 2010 HCFC Production and Consumption Stepwise 
Reductions and a Ban on HCFC Pre-charged Imports.

A memorandum summarizing these analyses is available in the docket.

B. Paperwork Reduction Act

    This action does not impose any new information collection burden. 
EPA already requires recordkeeping and reporting requirements and 
through this action is not proposing to amend those provisions. 
However, the Office of Management and Budget (OMB) has previously 
approved the information collection requirements contained in the 
existing regulations at 40 CFR part 82 subpart A under the provisions 
of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and has assigned 
OMB control number 2060-0498. The OMB control numbers for EPA's 
regulations in 40 CFR are listed in 40 CFR part 9.

C. Regulatory Flexibility Act (RFA)

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to prepare a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements under the Administrative 
Procedure Act or any other statute unless the agency certifies that the 
rule will not have a significant economic impact on a substantial 
number of small entities. Small entities include small businesses, 
small organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of this proposal on small 
entities, a small entity is defined as: (1) A small business as defined 
by the Small Business Administration's (SBA) regulations at 13 CFR 
121.201; (2) a small governmental jurisdiction that is a government of 
a city, county, town, school district or special district with a 
population of less than 50,000; and (3) a small organization that is 
any not-for-profit enterprise which is independently owned and operated 
and is not dominant in its field.
    This action will affect the following categories:

----------------------------------------------------------------------------------------------------------------
                  Category                     NAICS code       SIC code        Examples of regulated entities
----------------------------------------------------------------------------------------------------------------
Industrial Gas Manufacturing...............          325120            2869  Fluorinated hydrocarbon gases
                                                                              manufacturers and reclaimers.
Other Chemical and Allied Products Merchant          424690            5169  Chemical gases and compressed gases
 Wholesalers.                                                                 merchant wholesalers.
Air-Conditioning and Warm Air Heating                333415            3585  Air-Conditioning Equipment and
 Equipment and Commercial and Industrial                                      Commercial and Industrial
 Refrigeration Equipment Manufacturing.                                       Refrigeration Equipment
                                                                              manufacturers.
Air-Conditioning Equipment and Supplies              423730            5075  Air-conditioning (condensing unit,
 Merchant Wholesalers.                                                        compressors) merchant wholesalers.
Electrical and Electronic Appliance,                 423620            5064  Air-conditioning (room units)
 Television, and Radio Set Merchant                                           merchant wholesalers.
 Wholesalers.
Plumbing, Heating, and Air-Conditioning              238220      1711, 7623  Central air-conditioning system and
 Contractors.                                                                 commercial refrigeration
                                                                              installation; HVAC contractors.
----------------------------------------------------------------------------------------------------------------

    After considering the economic impacts of the final rule on small 
entities, I certify that this action will not have a significant 
economic impact on a substantial number of small entities. EPA is not 
changing the methodology for the 2010-2014 control periods. Instead, 
EPA is continuing to allocate production and consumption allowances 
using the same approach currently used for control periods 2003-2009. 
Thus the 13 small businesses eligible for allowances for HCFC-22 and 
HCFC-142b identified in that rulemaking (68 FR 2845) are still eligible 
for allowances under this rule. In addition, small businesses eligible 
for HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb allowance 
allocations using the same methodology, are eligible for allowances. 
EPA is not modifying the recordkeeping or reporting provisions and thus 
will not have any impact on the burden to these businesses.
    While EPA does not believe this action has a significant economic 
impact on a substantial number of small entities, nonetheless, EPA 
continues to try to reduce further any impacts on small entities. With 
respect to the allowance allocation system as a whole, EPA is 
continuing to provide flexibility. Consistent with the methodology for 
establishing baselines for HCFC-141b, HCFC-22, and HCFC-142b, while 
small entities will be on the same footing as larger entities, EPA is 
again using the highest year of consumption. EPA is also limiting 
consideration of company-specific baseline adjustments to reflect only 
permanent inter-company transfers made prior to June 16, 2008, to avoid 
skewing baselines to entities with ample resources or access to 
information. The ability to transfer allowances among entities provides 
the greatest flexibility for small entities to manage their allocation. 
As noted in the 2003 allocation rule (68 FR 2846), unlike with the 
class I substances, there is no restriction to limit inter-pollutant 
transfers to groups of substances. Both inter-pollutant and inter-
company transfers of allowances are possible. A small entity can opt 
for short-term or long term decisions concerning the allowances it 
holds after evaluating its place in the overall market.
    EPA has also tried to reduce the impact to small businesses from 
the section 605(a) provisions restricting the introduction into 
interstate commerce and use of HCFC-22 and HCFC-142b. Commenters 
expressed concern that under EPA's interpretation of the term 
``manufactured,'' components that are still in inventory on January 1, 
2010, would be stranded. In this final rule, EPA is clarifying that 
distributors and contractors, typically small businesses, may continue 
to sell such equipment in order to service existing equipment that uses 
HCFC-22. Such servicing includes the replacement of whole condensing 
units, compressors, or line sets. While the proposed rule prohibited 
the manufacture of new appliances containing HCFC-22, HCFC-142b, or 
blends thereof, EPA is providing a limited exception in this final rule 
to

[[Page 66444]]

allow for continued manufacture of such appliances between January 1, 
2010, and December 31, 2011, if the components are made prior to 
January 1, 2010, and specified for use at that project under a building 
permit or contract dated before January 1, 2010. Finally, EPA is 
clarifying that new appliances may continue to be manufactured from dry 
components if the competed appliance is charged with recovered, 
recycled, or reclaimed refrigerant. EPA believes these three options 
will provide relief to the various concerns that were expressed by 
stakeholders.

D. Unfunded Mandates Reform Act

    This action contains no Federal mandates under the provisions of 
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 
1531-1538 for State, local, or tribal governments or the private 
sector. First, UMRA does not apply to rules that are necessary for the 
implementation of international treaty obligations. This rule 
implements the 2010 milestone for the phaseout of HCFCs under the 
Montreal Protocol. The requirements already established at 40 CFR part 
82 subpart A already govern the production, import, and export of ODS. 
The regulatory changes for the next major milestone in the phaseout 
continue to implement the same general framework previously 
established. This action will not have any significant direct impacts 
or State, local and tribal governments or private sector entities. 
Therefore, this rule is not subject to the requirements of sections 202 
or 205 of UMRA.
    This rule is also not subject to the requirements of section 203 of 
UMRA because it contains no regulatory requirements that might 
significantly or uniquely affect small governments. This action 
apportions production and consumption allowances and establishes 
baselines for private entities, not small governments.

E. Executive Order 13132: Federalism

    Executive Order 13132, titled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' is defined in the 
Executive Order to include regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''
    This action does not have federalism implications. It does not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government, as 
specified in Executive Order 13132. This action is expected to 
primarily affect producers, importers, and exporters of HCFCs. Thus, 
the requirements of section 6 of the Executive Order do not apply. In 
the spirit of Executive Order 13132, and consistent with EPA policy to 
promote communications between EPA and State and local governments, EPA 
specifically solicited comment on this action from State and local 
officials.

F. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    This action does not have tribal implications, as specified in 
Executive Order 13175 (65 FR 67249, November 9, 2000). This action not 
significantly or uniquely affect the communities of Indian tribal 
governments. It does not impose any enforceable duties on communities 
of Indian tribal governments. Thus, Executive Order 13175 does not 
apply to this action.

G. Executive Order 13045: Protection of Children From Environmental 
Health and Safety Risks

    This action is not subject to EO 13045 (62 FR 19885, April 23, 
1997) because it is not economically significant as defined in EO 
12866. The Agency nonetheless has reason to believe that the 
environmental health or safety risk addressed by this action may have a 
disproportionate effect on children. Depletion of stratospheric ozone 
results in greater transmission of the sun's ultraviolet (UV) radiation 
to the earth's surface. The following studies describe the effects of 
excessive exposure to UV radiation on children: (1) Westerdahl J, 
Olsson H, Ingvar C. ``At what age do sunburn episodes play a crucial 
role for the development of malignant melanoma,'' Eur J Cancer 1994; 
30A:1647-54; (2) Elwood JM, Japson J. ``Melanoma and sun exposure: an 
overview of published studies,'' Int J Cancer 1997; 73:198-203; (3) 
Armstrong BK, ``Melanoma: childhood or lifelong sun exposure,'' In: 
Grobb JJ, Stern RS, Mackie RM, Weinstock WA, eds. ``Epidemiology, 
causes and prevention of skin diseases,'' 1st ed. London, England: 
Blackwell Science, 1997; 63-6; (4) Whieman D, Green A. ``Melanoma and 
Sunburn,'' Cancer Causes Control, 1994; 5:564-72; (5) Heenan PJ. ``Does 
intermittent sun exposure cause basal cell carcinoma? A case control 
study in Western Australia,'' Int J Cancer 1995; 60:489-94; (6) 
Gallagher RP, Hill GB, Bajdik CD, et. al. ``Sunlight exposure, 
pigmentary factors, and risk of nonmelanocytic skin cancer I, Basal 
cell carcinoma.'' Arch Dermatol 1995; 131:157-63; (7) Armstrong DK. 
``How sun exposure causes skin cancer: an epidemiological 
perspective,'' Prevention of Skin Cancer. 2004. 89-116.
    This action reduces the potential continued use of Class II 
controlled substances and the emissions of such substances. It 
implements the United States commitment to reduce the total basket of 
HCFCs produced and imported to a level that is 75 percent below the 
respective baselines. While on an ODP-weighted basis, this is not as 
large a step as previous actions, such as the 1996 Class I phaseout, it 
is one of the most significant remaining actions the United States can 
take to complete the overall phaseout of ODS and further decrease 
impacts on children's health from stratospheric ozone depletion.

H. Executive Order 13211: Actions That Significantly Affect Energy 
Supply, Distribution, or Use

    This action is not a ``significant energy action'' as defined in 
Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not 
likely to have a significant adverse effect on the supply, 
distribution, or use of energy. The regulation issues allowances for 
the production and consumption of HCFCs, and prohibits the introduction 
into interstate commerce or use of products containing HCFCs.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272 note) 
directs EPA to use voluntary consensus standards in its regulatory 
activities unless to do so would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., materials specifications, test methods, sampling 
procedures, and business practices) that are developed or adopted by 
voluntary consensus standards bodies. The NTTAA directs EPA to provide 
Congress, through OMB, explanations when the Agency decides not to use 
available and applicable voluntary consensus standards. This action 
does not involve technical standards. Therefore, EPA did not

[[Page 66445]]

consider the use of any voluntary consensus standards.

J. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes 
federal executive policy on environmental justice. Its main provision 
directs federal agencies, to the greatest extent practicable and 
permitted by law, to make environmental justice part of their mission 
by identifying and addressing, as appropriate, disproportionately high 
and adverse human health or environmental effects of their programs, 
policies, and activities on minority populations and low-income 
populations in the United States.
    EPA has determined that this action will not have 
disproportionately high and adverse human health or environmental 
effects on minority or low-income populations because it increases the 
level of environmental protection for all affected populations without 
having any disproportionately high and adverse human health or 
environmental effects on any population, including any minority or low-
income population. By allocating allowances for HCFCs and thus 
restricting the amount of HCFCs available as of January 1, 2010, this 
rule avoids emissions of these ozone-depleting substances, lessening 
the adverse human health effects for the entire population.

K. The Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
United States. EPA will submit a report containing this rule and other 
required information to the U.S. Senate, the U.S. House of 
Representatives, and the Comptroller General of the United States prior 
to publication of the rule in the Federal Register. A Major rule cannot 
take effect until 60 days after it is published in the Federal 
Register. This action is not a ``major rule'' as defined by 5 U.S.C. 
804(2). This rule will be effective January 1, 2010.

List of Subjects in 40 CFR Part 82

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Chemicals, Chlorofluorocarbons, Exports, 
Hydrochlorofluorocarbons, Imports, Reporting and recordkeeping 
requirements.

    Dated: December 7, 2009.
Lisa P. Jackson,
Administrator.

0
40 CFR part 82 is amended as follows:

PART 82--PROTECTION OF STRATOSPHERIC OZONE

0
1. The authority citation for part 82 continues to read as follows:

    Authority:  42 U.S.C. 7414, 7601, 7671-7671(q)

Subpart A--Production and Consumption Controls

0
2. Amend Sec.  82.3 by adding in alphabetical order the definition of 
``Appliance'', ``Interstate commerce'', and ``Manufactured'' to read as 
follows:

Sec.  82.3  Definitions for class I and class II controlled substances.

* * * * *
    Appliance means any device which contains and uses a refrigerant 
and which is used for household or commercial purposes, including any 
air conditioner, refrigerator, chiller, or freezer.
* * * * *
    Interstate commerce means the distribution or transportation of any 
controlled substance between one state, territory, possession or the 
District of Columbia, and another state, territory, possession or the 
District of Columbia, or the sale, use or manufacture of any controlled 
substance in more than one state, territory, possession or District of 
Columbia. The entry points for which a controlled substance is 
introduced into interstate commerce are the release of a controlled 
substance from the facility in which the controlled substance was 
manufactured, the entry into a warehouse from which the domestic 
manufacturer releases the controlled substance for sale or 
distribution, and at the site of United States customs clearance.
* * * * *
    Manufactured, for an appliance, means the date upon which the 
appliance's refrigerant circuit is complete, the appliance can 
function, the appliance holds a full refrigerant charge, and the 
appliance is ready for use for its intended purposes; and for a pre-
charged appliance component, means the date that such component is 
completely produced by the original equipment manufacture, charged with 
refrigerant, and is ready for initial sale or distribution in 
interstate commerce.
* * * * *

0
3. Amend Sec.  82.15 by revising paragraph (c) and adding paragraph (g) 
to read as follows:

Sec.  82.15  Prohibitions for class II controlled substances.

* * * * *
    (c) Production with Article 5 allowances. No person may introduce 
into U.S. interstate commerce any class II controlled substance 
produced with Article 5 allowances, except for export to an Article 5 
Party as listed in Annex 4 of Appendix C of this subpart. Every 
kilogram of a class II controlled substance produced with Article 5 
allowances that is introduced into interstate commerce other than for 
export to an Article 5 Party constitutes a separate violation under 
this subpart. No person may export any class II controlled substance 
produced with Article 5 allowances to a non-Article 5 Party. Every 
kilogram of a class II controlled substance that was produced with 
Article 5 allowances that is exported to a non-Article 5 Party 
constitutes a separate violation under this subpart.
* * * * *
    (g) Introduction into interstate commerce or use. (1) Effective 
January 1, 2010, no person may introduce into interstate commerce or 
use HCFC-141b (unless used, recovered, and recycled) for any purpose 
except for use in a process resulting in its transformation or its 
destruction; for export to Article 5 Parties under Sec.  82.18(a); for 
HCFC-141b exemption needs; as a transhipment or heel; or for exemptions 
permitted in paragraph (f) of this section.
    (2)(i) Effective January 1, 2010, no person may introduce into 
interstate commerce or use HCFC-22 or HCFC-142b (unless used, 
recovered, and recycled) for any purpose other than for use in a 
process resulting in its transformation or its destruction; for use as 
a refrigerant in equipment manufactured before January 1, 2010; for 
export to Article 5 Parties under Sec.  82.18(a); as a transhipment or 
heel; or for exemptions permitted in paragraph (f) of this section.
    (ii) Introduction into interstate commerce and use of HCFC-22 is 
not subject to the prohibitions in paragraph (g)(2)(i) of this section 
if the HCFC-22 is for use in medical equipment prior to January 1, 
2015; for use in thermostatic expansion valves prior to January 1, 
2015; or for use as a refrigerant in appliances manufactured before 
January 1, 2012, provided that the components are manufactured prior to 
January 1, 2010, and are specified in a building permit or a contract 
dated before

[[Page 66446]]

January 1, 2010, for use on a particular project.
    (3) Effective January 1, 2015, no person may introduce into 
interstate commerce or use HCFC-141b (unless used, recovered, and 
recycled) for any purpose other than for use in a process resulting in 
its transformation or its destruction; for export to Article 5 Parties 
under Sec.  82.18(a), as a transhipment or heel; or for exemptions 
permitted in paragraph (f) of this section.
    (4) Effective January 1, 2015, no person may introduce into 
interstate commerce or use any class II controlled substance not 
governed by paragraphs (g)(1) through (3) of this section (unless used, 
recovered, and recycled) for any purpose other than for use in a 
process resulting in its transformation or its destruction; for use as 
a refrigerant in equipment manufactured before January 1, 2020; for 
export to Article 5 Parties under Sec.  82.18(a); as a transhipment or 
heel; or for exemptions permitted in paragraph (f) of this section.
    (5) Effective January 1, 2030, no person may introduce into 
interstate commerce or use any class II controlled substance (unless 
used, recovered, and recycled) for any purpose other than for use in a 
process resulting in its transformation or its destruction; for export 
to Article 5 Parties under Sec.  82.18(a); as a transhipment or heel; 
or for exemptions permitted in paragraph (f) of this section.
    (6) Effective January 1, 2040, no person may introduce into 
interstate commerce or use any class II controlled substance (unless 
used, recovered, and recycled) for any purpose other than for use in a 
process resulting in its transformation or its destruction, as a 
transhipment or heel, or for exemptions permitted in paragraph (f) of 
this section.
* * * * *

0
4. Revise Sec.  82.16(a) to read as follows:

Sec.  82.16  Phaseout schedule of class II controlled substances.

    (a) In each control period as indicated in the following table, 
each person is granted the specified percentage of baseline production 
allowances and baseline consumption allowances for the specified class 
II controlled substances apportioned under Sec. Sec.  82.17 and 82.19:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Percent of    Percent of HCFC-   Percent of      Percent of      Percent of      Percent of      Percent of
             Control period                 HCFC-141b           22           HCFC-142b       HCFC-123        HCFC-124       HCFC-225ca      HCFC-225cb
--------------------------------------------------------------------------------------------------------------------------------------------------------
2003...................................               0            100            100     ..............  ..............  ..............  ..............
2004...................................               0            100            100     ..............  ..............  ..............  ..............
2005...................................               0            100            100     ..............  ..............  ..............  ..............
2006...................................               0            100            100     ..............  ..............  ..............  ..............
2007...................................               0            100            100     ..............  ..............  ..............  ..............
2008...................................               0            100            100     ..............  ..............  ..............  ..............
2009...................................               0            100            100     ..............  ..............  ..............  ..............
2010...................................               0             41.9            0.47             125             125             125             125
2011...................................               0             38.0            0.47             125             125             125             125
2012...................................               0             34.1            0.47             125             125             125             125
2013...................................               0             30.1            0.47             125             125             125             125
2014...................................               0             26.1            0.47             125             125             125             125
--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * *

0
5. Revise Sec.  82.17 to read as follows:

Sec.  82.17  Apportionment of baseline production allowances for class 
II controlled substances.

    Effective January 1, 2010, the following persons are apportioned 
baseline production allowances for HCFC-22, HCFC-141b, HCFC-142b, HCFC-
123, HCFC-124, HCFC-225ca, and HCFC-225cb, as set forth in the 
following table:

------------------------------------------------------------------------
                                        Controlled
              Person                    substance        Allowances (kg)
------------------------------------------------------------------------
AGC Chemicals Americas...........  HCFC-225ca.........           266,608
                                   HCFC-225cb.........           373,952
Arkema...........................  HCFC-22............        28,219,223
                                   HCFC-141b..........        24,647,925
                                   HCFC-142b..........        16,131,096
DuPont...........................  HCFC-22............        42,638,049
                                   HCFC-124...........         2,269,210
Honeywell........................  HCFC-22............        37,378,252
                                   HCFC-141b..........        28,705,200
                                   HCFC-142b..........         2,417,534
                                   HCFC-124...........         1,759,681
MDA Manufacturing................  HCFC-22............         2,383,835
Solvay Solexis...................  HCFC-142b..........         6,541,764
------------------------------------------------------------------------

0
6. Amend Sec.  82.18 by revising paragraphs (a) and (b) to read as 
follows:

Sec.  82.18  Availability of production in addition to baseline 
production allowances for class II controlled substances.

    (a) Article 5 allowances. (1) Effective January 1, 2003, a person 
apportioned baseline production allowances for HCFC-141b, HCFC-22, or 
HCFC-142b under Sec.  82.17 is also apportioned Article 5 allowances, 
equal to 15 percent of their baseline production allowances, for the 
specified HCFC for each control period up until December 31, 2009, to 
be used for the production of the specified HCFC for export only to 
foreign states listed in Annex 4 of Appendix C to this subpart.
    (2) Effective January 1, 2010, a person apportioned baseline 
production allowances under Sec.  82.17 for HCFC-141b, HCFC-22, or 
HCFC-142b is also apportioned Article 5 allowances, equal to 10 percent 
of their baseline production allowances, for the specified

[[Page 66447]]

HCFC for each control period up until December 31, 2019, to be used for 
the production of the specified HCFC for export only to foreign states 
listed in Annex 4 of Appendix C to this subpart.
    (3) Effective January 1, 2015, a person apportioned baseline 
production allowances under Sec.  82.17 for HCFC-123, HCFC-124, HCFC-
225ca, and HCFC-225cb is also apportioned Article 5 allowances, equal 
to 10 percent of their baseline production allowances, for the 
specified HCFC for each control period up until December 31, 2019, to 
be used for the production of the specified HCFC for export only to 
foreign states listed in Annex 4 of Appendix C to this subpart.
    (b) Export Production Allowances. (1) Effective January 1, 2003, a 
person apportioned baseline production allowances for HCFC-141b under 
Sec.  82.17 is also apportioned export production allowances, equal to 
100 percent of their baseline production allowances, for HCFC-141b for 
each control period up until December 31, 2009, to be used for the 
production of HCFC-141b for export only, in accordance with this 
section.
    (2) [Reserved]
* * * * *

0
7. Section 82.19 is revised to read as follows:

Sec.  82.19  Apportionment of baseline consumption allowances for class 
II controlled substances.

    Effective January 1, 2010, the following persons are apportioned 
baseline consumption allowances for HCFC-22, HCFC-141b, HCFC-142b, 
HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb, as set forth in the 
following table:

------------------------------------------------------------------------
                                        Controlled
              Person                    substance        Allowances (kg)
------------------------------------------------------------------------
ABCO Refrigeration Supply........  HCFC-22............           279,366
AGC Chemicals Americas...........  HCFC-225ca.........           285,328
                                   HCFC-225cb.........           286,832
Altair Partners..................  HCFC-22............           302,011
Arkema...........................  HCFC-22............        29,524,481
                                   HCFC-141b..........        25,405,570
                                   HCFC-142b..........        16,672,675
                                   HCFC-124...........             3,719
Carrier..........................  HCFC-22............            54,088
Condor Products..................  HCFC-22............            74,843
                                   HCFC-124...........             3,746
Continental Industrial Group.....  HCFC-141b..........            20,315
Coolgas, Inc.....................  HCFC-141b..........        16,097,869
                                   HCFC-123...........            20,000
Coolgas Investment Property......  HCFC-22............           590,737
Discount Refrigerants............  HCFC-22............           375,328
                                   HCFC-141b..........               994
DuPont...........................  HCFC-22............        38,814,862
                                   HCFC-141b..........             9,049
                                   HCFC-142b..........            52,797
                                   HCFC-123...........         1,877,042
                                   HCFC-124...........           743,312
H.G. Refrigeration Supply........  HCFC-22............            40,068
Honeywell........................  HCFC-22............        35,392,492
                                   HCFC-141b..........        20,749,489
                                   HCFC-142b..........         1,315,819
                                   HCFC-124...........         1,284,265
ICC Chemical Corp................  HCFC-141b..........            81,225
ICOR.............................  HCFC-124...........            81,220
Ineos Fluor Americas.............  HCFC-22............         2,546,305
Kivlan & Company.................  HCFC-22............         2,081,018
MDA Manufacturing................  HCFC-22............         2,541,545
Mondy Global.....................  HCFC-22............           281,824
National Refrigerants............  HCFC-22............         5,528,316
                                   HCFC-123...........            72,600
                                   HCFC-124...........            50,380
Perfect Technology Center, LP....  HCFC-123...........             9,100
Refricenter of Miami.............  HCFC-22............           381,293
Refricentro......................  HCFC-22............            45,979
R-Lines..........................  HCFC-22............            63,172
Saez Distributors................  HCFC-22............            37,936
Solvay Fluorides.................  HCFC-22............           413,509
                                   HCFC-141b..........         3,940,115
Solvay Solexis...................  HCFC-142b..........         3,047,386
Tulstar Products.................  HCFC-141b..........            89,913
                                   HCFC-123...........            34,800
                                   HCFC-124...........           229,582
USA Refrigerants.................  HCFC-22............            14,865
------------------------------------------------------------------------

[[Page 66448]]

0
8. Revise Annex 4 to Appendix C of subpart A of part 82 to read as 
follows:

Appendix C to Subpart A of Part 82--Parties to the Montreal Protocol, 
and Nations Complying With, But Not Parties to, the Protocol

* * * * *

Annex 4 to Appendix C of Subpart A: Nations That Are Parties to the 
Montreal Protocol and Are Operating Under Article 5(1)

List of Article 5 Parties

 1. Afghanistan
 2. Albania
 3. Algeria
 4. Angola
 5. Antigua & Barbuda
 6. Argentina
 7. Armenia
 8. Bahamas
 9. Bahrain
 10. Bangladesh
 11. Barbados
 12. Belize
 13. Benin
 14. Bhutan
 15. Bolivia
 16. Bosnia and Herzegovina
 17. Botswana
 18. Brazil
 19. Brunei Darussalam
 20. Burkina Faso
 21. Burundi
 22. Cambodia
 23. Cameroon
 24. Cape Verde
 25. Central African Republic
 26. Chad
 27. Chile
 28. China
 29. Colombia
 30. Comoros
 31. Congo
 32. Congo, Democratic Republic of
 33. Cook Islands
 34. Cost Rica
 35. C[ocirc]te d'Ivoire
 36. Croatia
 37. Cuba
 38. Djibouti
 39. Dominica
 40. Dominican Republic
 41. Ecuador
 42. Egypt
 43. El Salvador
 44. Equatorial Guinea
 45. Eritrea
 46. Ethiopia
 47. Fiji
 48. Gabon
 49. Gambia
 50. Georgia
 51. Ghana
 52. Grenada
 53. Guatemala
 54. Guinea
 55. Guinea Bissau
 56. Guyana
 57. Haiti
 58. Honduras
 59. India
 60. Indonesia
 61. Iran, Islamic Republic of
 62. Iraq
 63. Jamaica
 64. Jordan
 65. Kenya
 66. Kiribati
 67. Korea, People's Democratic Republic of
 68. Korea, Republic of
 69. Kuwait
 70. Kyrgyzstan
 71. Lao People's Democratic Republic
 72. Lebanon
 73. Lesotho
 74. Liberia
 75. Libyan Arab Jamahiriya
 76. Madagascar
 77. Malawi
 78. Malaysia
 79. Maldives
 80. Mali
 81. Marshall Islands
 82. Mauritania
 83. Mauritius
 84. Mexico
 85. Micronesia, Federal States of
 86. Moldova
 87. Mongolia
 88. Montenegro
 89. Morocco
 90. Mozambique
 91. Myanmar
 92. Namibia
 93. Nauru
 94. Nepal
 95. Nicaragua
 96. Niger
 97. Nigeria
 98. Niue
 99. Oman
100. Pakistan
101. Palau
102. Panama
103. Papua New Guinea
104. Paraguay
105. Peru
106. Philippines
107. Qatar
108. Rwanda
109. Saint Kitts and Nevis
110. Saint Lucia
111. Saint Vincent & the Grenadines
112. Samoa
113. Sao Tome and Principe
114. Saudi Arabia
115. Senegal
116. Serbia
117. Seychelles
118. Sierra Leone
119. Singapore
120. Solomon Islands
121. Somalia
122. South Africa
123. Sri Lanka
124. Sudan
125. Suriname
126. Swaziland
127. Syrian Arab Republic
128. Tanzania, United Republic of
129. Thailand
130. The Former Yugoslav Republic of Macedonia
131. Timor-Leste
132. Togo
133. Tonga
134. Trinidad and Tobago
135. Tunisia
136. Turkey
137. Turkmenistan
138. Tuvalu
139. Uganda
140. United Arab Emirates
141. Uruguay
142. Vanuatu
143. Venezuela
144. Viet Nam
145. Yemen
146. Zambia
147. Zimbabwe

0
9. Revise Appendix E to subpart A of part 82 to read as follows:

Appendix E to Subpart A of Part 82--Article 5 Parties

    Afghanistan, Albania, Algeria, Angola, Antigua & Barbuda, 
Argentina, Armenia, Bahamas, Bahrain, Bangladesh, Barbados, Belize, 
Benin, Bhutan, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, 
Brunei Darussalam, Burkina Faso, Burundi, Cambodia, Cameroon, Cape 
Verde, Central African Republic, Chad, Chile, China, Colombia, 
Comoros, Congo, Congo, Democratic Republic of, Cook Islands, Cost 
Rica, C[ocirc]te d'Ivoire, Croatia, Cuba, Djibouti, Dominica, 
Dominican Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, 
Eritrea, Ethiopia, Fiji, Gabon, Gambia, Georgia, Ghana, Grenada, 
Guatemala, Guinea, Guinea Bissau, Guyana, Haiti, Honduras, India, 
Indonesia, Iran, Islamic Republic of, Iraq, Jamaica, Jordan, Kenya, 
Kiribati, Korea, People's Democratic Republic of, Korea, Republic 
of, Kuwait, Kyrgyzstan, Lao People's Democratic Republic, Lebanon, 
Lesotho, Liberia, Libyan Arab Jamahiriya, Madagascar, Malawi, 
Malaysia, Maldives, Mali, Marshall Islands, Mauritania, Mauritius, 
Mexico, Micronesia, Federal States of, Moldova, Mongolia, 
Montenegro, Morocco, Mozambique, Myanmar, Namibia, Nauru, Nepal, 
Nicaragua, Niger, Nigeria, Niue, Oman, Pakistan, Palau, Panama, 
Papua New Guinea, Paraguay, Peru, Philippines, Qatar, Rwanda, Saint 
Kitts and Nevis, Saint Lucia, Saint Vincent & the Grenadines, Samoa, 
Sao Tome and Principe, Saudi Arabia, Senegal, Serbia, Seychelles, 
Sierra Leone, Singapore, Solomon Islands, Somalia, South Africa, Sri 
Lanka, Sudan, Suriname, Swaziland, Syrian Arab Republic, Tanzania, 
United Republic of, Thailand, The Former Yugoslav Republic of 
Macedonia, Timor-Leste, Togo, Tonga, Trinidad and Tobago, Tunisia, 
Turkey, Turkmenistan, Tuvalu, Uganda, United Arab Emirates, Uruguay, 
Vanuatu, Venezuela, Viet Nam, Yemen, Zambia, Zimbabwe.

[FR Doc. E9-29569 Filed 12-14-09; 8:45 am]

BILLING CODE 6560-50-P