Document ID: EPA-HQ-OAR-2008-0496-0001
Agency: epa
Document Type: Proposed Rule
Title: Protection of Stratospheric Ozone: Adjustments to the Allowance System for Controlling HCFC Production, Import, and Export
Posted Date: 2008-12-23T05:00Z

[Federal Register: December 23, 2008 (Volume 73, Number 247)]
[Proposed Rules]               
[Page 78680-78705]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23de08-28]                         

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 82

[EPA-HQ-OAR-2008-0496; FRL-8752-7]
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: Proposed rule.

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SUMMARY: EPA is proposing to adjust the allowance system for control of 
U.S. consumption and production of

[[Page 78681]]

hydrochlorofluorocarbons (HCFCs) by apportioning baselines and 
allocating production and consumption allowances for several HCFCs for 
which the Agency previously allocated allowances and other HCFCs that 
were not allocated allowances previously, for the control periods 2010-
2014. The HCFC allowance system is part of EPA's Clean Air Act program 
to phase out ozone-depleting substances (ODSs) 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. In this action EPA proposes to 
allocate the allowances for 2010-2014 that will ensure compliance with 
the international stepwise reduction, consistent with the 1990 Clean 
Air Act Amendments. In addition, EPA proposes to amend 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, the Agency is 
providing its 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 proposes to amend existing regulatory 
provisions to facilitate implementation of the statutory requirements.

DATES: Comments must be received on or before February 23, 2009, unless 
a public hearing is requested. If a public hearing is requested, 
comments must then be received on or before March 9, 2009. Any party 
requesting a public hearing must notify the contact listed below under 
FOR FURTHER INFORMATION CONTACT by 5 p.m. Eastern Daylight Time on 
January 2, 2009. If a hearing is held, it will take place on January 7, 
2009 and the comment period will then close on March 9, 2009.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2008-0496, by one of the following methods:
     http://www.regulations.gov: Follow the on-line 
instructions for submitting comments.
     E-mail: a-and-r-Docket@epa.gov.
     Fax: 202-566-1741.
     Mail: Docket , Air and Radiation Docket and 
Information Center, U.S. Environmental Protection Agency, Mail Code: 
6102T, 1200 Pennsylvania Ave., NW., Washington, DC 20460.
     Hand Delivery: Docket  EPA-HQ-OAR-2008-0496 Air 
and Radiation Docket at EPA West, 1301 Constitution Avenue, NW., Room 
B108, Mail Code 6102T, Washington, DC 20460. Such deliveries are only 
accepted during the Docket's normal hours of operation, and special 
arrangements should be made for deliveries of boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-HQ-OAR-
2008-0496. EPA's policy is that all comments received will be included 
in the public docket without change and may be made available online at 
http://www.regulations.gov, including any personal information 
provided, unless the comment includes information claimed to be 
Confidential Business Information (CBI) or other information whose 
disclosure is restricted by statute. Do not submit information that you 
consider to be CBI or otherwise protected through www.regulations.gov 
or e-mail. The http://www.regulations.gov Web site is an ``anonymous 
access'' system, which means EPA will not know your identity or contact 
information unless you provide it in the body of your comment. If you 
send an e-mail comment directly to EPA without going through http://
www.regulations.gov your e-mail address will be automatically captured 
and included as part of the comment that is placed in the public docket 
and made available on the Internet. If you submit an electronic 
comment, EPA recommends that you include your name and other contact 
information in the body of your comment and with any disk or CD-ROM you 
submit. If EPA cannot read your comment due to technical difficulties 
and cannot contact you for clarification, EPA may not be able to 
consider your comment. Electronic files should avoid the use of special 
characters, any form of encryption, and be free of any defects or 
viruses. For additional information about EPA's public docket visit the 
EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm.

FOR FURTHER INFORMATION CONTACT: Cindy Axinn Newberg, EPA, 
Stratospheric Protection Division, Office of Atmospheric Programs, 
Office of Air and Radiation (6205J), 1200 Pennsylvania Avenue, NW., 
Washington, DC 20460, (202) 343-9729, newberg.cindy@epa.gov.

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 step-wise fashion over time, culminating in a general 
phaseout by 2020 while permitting a small amount of HCFC production 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 
included ``distinguishing among HCFCs based on their [ozone depletion 
potential (ODP)] and phasing out use in new equipment prior to use for 
servicing existing equipment'' (58 FR 65026). 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 tracking system for HCFCs (68 FR 
2820), noting at that time that EPA 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).
    In this action, EPA proposes the next step in the chemical-by-
chemical phaseout the United States uses to meet its international 
obligations. Specifically, EPA proposes for HCFC-141b, HCFC-22, and 
HCFC-142b, to grant specified percentages of the consumption and 
production baselines for the control periods 2010-2014; and for other 
HCFCs to apportion company-by-company consumption and production 
baselines as well as grant

[[Page 78682]]

specified percentages of the consumption and production baselines for 
the control periods 2010-2014. EPA is also proposing to amend the 
provisions for HCFC production allowances to meet the basic domestic 
needs of developing countries. In addition, EPA is proposing regulatory 
changes to complete the implementation of the section 605(a) ban on 
introduction into interstate commerce or use of HCFCs and clarifies its 
interpretation of this Clean Air Act provision.

Abbreviations and Acronyms Used in this Document

CAA--Clean Air Act
CAAA--Clean Air Act Amendments of 1990
CFC--chlorofluorocarbon
EPA--Environmental Protection Agency
HCFC--hydrochlorofluorocarbon
Montreal Protocol--Montreal Protocol on Substances that Deplete the 
Ozone Layer
NPRM--Notice of Proposed Rulemaking
ODP--ozone depletion potential
ODS--ozone-depleting substance
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
UNEP--United Nations Environment Programme

Tips for Preparing Your Comments

    When submitting comments, remember to:
     Identify the rulemaking by docket number and other 
identifying information (subject heading, Federal Register date and 
page number).
     Follow directions--The Agency may ask you to respond to 
specific questions or organize comments by referencing a Code of 
Federal Regulations (CFR) part or section number.
     Explain why you agree or disagree; suggest alternatives 
and substitute language for your requested changes.
     Describe any assumptions and provide any technical 
information and/or data that you used.
     If you estimate potential costs or burdens, explain how 
you arrived at your estimate in sufficient detail to allow for it to be 
reproduced.
     Provide specific examples to illustrate your concerns, and 
suggest alternatives.
     Explain your views as clearly as possible, avoiding the 
use of profanity or personal threats.
     Make sure to submit your comments by the comment period 
deadline identified.

Table of Contents

I. Regulated Entities
II. Background
    A. How Do the Montreal Protocol and Clean Air Act Phase Out 
HCFCs?
    B. What Sections of the Clean Air Act Apply to This Rulemaking?
III. This Proposal
    A. How Does EPA Propose to Issue Production and Consumption 
Allowances for 2010-2014?
    1. What Actions Did EPA Take in the 2003 Allocation Rule?
    2. How Will EPA Allocate 2010-2014 Allowances for HCFC-22 and 
HCFC-142b?
    3. How Should EPA Consider Servicing Needs for Existing 
Equipment?
    4. How Will the Allocated Allowances Appear in the Regulations?
    5. What Other Methods Could Be Used to Determine the Allocation 
for HCFC-22 and HCFC-142b Allowances?
    6. How Important Is HCFC-22 in Determining the Allocation of 
Allowances?
    7. HCFC-22 Allowances for 2010-2014
    8. HCFC-142b Allowances for 2010-2014
    9. How Does the Aggregate for HCFC-22 and HCFC-142b Translate to 
Entity-by-Entity?
    10. Baselines for HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb
    11. What Percentage of the Baseline Will EPA Allocate for HCFC-
123, HCFC-124, HCFC-225ca, and HCFC-225cb for the Control Periods 
2010-2014?
    12. What About Other HCFCs?
    B. Does the Article 5 Allowance Provision Change Given the 
Adjustments to the Montreal Protocol?
    C. How Does EPA Interpret ``Introduce into Interstate Commerce 
or Use?''
IV. 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

I. Regulated Entities

    These proposed amendments will affect the following categories:

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                  Category                     NAICS code       SIC code        Examples of regulated entities
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Chlorofluorocarbon gas manufacturing.......          325120            2869  Chlorodifluoromethane
                                                                              manufacturers;
                                                                              Dichlorofluoroethane
                                                                              manufacturers;
                                                                              Chlorodifluoroethane
                                                                              manufacturers.
Chlorofluorocarbon gas importers...........          325120            2869  Chlorodifluoromethane importers;
                                                                              Dichlorofluoroethane importers;
                                                                              Chlorodifluoroethane importers.
Chlorofluorocarbon gas exporters...........          325120            2869  Chlorodifluoromethane exporters;
                                                                              Dichlorofluoroethane exporters;
                                                                              Chlorodifluoroethane exporters.
Manufacturers of air conditioners and                333415  ..............  Air-Conditioning Equipment and
 refrigerators.                                                               Commercial and Industrial
                                                                              Refrigeration Equipment
                                                                              manufacturers.
Importers of air conditioners and                    333415            3585  Air-Conditioning Equipment and
 refrigerators.                                                               Commercial and Industrial
                                                                              Refrigeration Equipment importers.
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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 Do the Montreal Protocol and Clean Air Act 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 78683]]

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 ODSs. EPA similarly 
viewed HCFCs as ``important interim substitutes that will allow for the 
earliest possible phaseout of CFCs and other Class I substances'' \1\ 
(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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    \1\ 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, 
however, 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.
    The U.S. 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 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. To further carry out the 1993 phaseout 
schedule, EPA issued calendar-year allowances equal to 100 percent of 
baseline for HCFC-22 and HCFC-142b for each control period \2\ from 
2003 through 2009. For those same control periods EPA issued calendar-
year allowances equal to zero for HCFC-141b; under the 1993 rule HCFC-
141b was subject to a complete phaseout on January 1, 2003, which 
allowed the United States to meet and exceed the 2004 stepwise 
reduction of 35 percent below the baseline for all HCFCs. EPA did, 
however, create a petition process to allow applicants to request very 
small amounts of HCFC-141b beyond the phaseout. EPA considered 
establishing baselines for all HCFCs in that rule but deferred such 
action for all but HCFC-141b, HCFC-142b, and HCFC-22. These regulations 
were amended with a technical correction on July 16, 2003 (68 FR 
41925), and with direct final rules adopting minor amendments on June 
17, 2004 (69 FR 34024) and July 20, 2006 (71 FR 41163).
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    \2\ A control period, as defined at 40 CFR 82.3, is a twelve-
month period from January 1 through December 31.
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    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

[[Page 78684]]

paragraph 1 of Article 5 (developing countries): (1) To set production 
and consumption baselines based on the average 2009-2010 production and 
consumption, respectively; (2) to freeze 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 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 per cent 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 per cent 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 per cent 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 per 
cent 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 per cent 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 per cent 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 per cent 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 per cent 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. What Sections of the Clean Air Act Apply to This Rulemaking?

    Several sections of the Clean Air Act apply to this proposed 
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 a determination by 
EPA 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). Though 
this action, EPA is further accelerating the section 605 HCFC 
production and consumption phaseouts.
    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. EPA believes that in this instance, all 
three criteria have been met.
    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 ODSs. 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 and 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.
    Reductions in stratospheric ozone levels lead to higher levels of 
ultraviolet radiation reaching the Earth's surface, and a higher risk 
of negative health

[[Page 78685]]

effects. According to the American Cancer Society, one in five 
Americans will develop skin cancer in their lifetime, and one American 
dies every hour from this disease. While medical research continues to 
improve the understanding of the causes and effects of skin cancer, 
many health and education groups are working to reduce the incidence of 
this disease. 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 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 and 
lists alternatives for ODSs that reduce overall risk to human health 
and the environment and are currently or potentially available. 
Alternatives include chemical replacements, product substitutes, and 
alternative technologies. The SNAP program has reviewed approximately 
450 combinations of alternatives and end uses 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. The SNAP program has reviewed 
substitutes for the following industrial sectors:
     Refrigeration & Air Conditioning.
     Foam Blowing Agents.
     Cleaning Solvents.
     Fire Suppression and Explosion Protection.
     Aerosols.
     Sterilants.
     Tobacco Expansion.
     Adhesives, Coatings & Inks.
    HCFCs have been used in almost all of these industrial sectors. For 
example, within the air conditioning and refrigeration industrial 
sector, end uses where HCFCs have been used include chillers, 
industrial process refrigeration systems, 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 the end uses. (For a complete list of substitutes the reader is 
directed to: http://www.epa.gov/ozone/snap/lists/index.html.) EPA 
believes that given the availability of substitutes, a more stringent 
HCFC phaseout schedule now is 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 proposing to incorporate a 
schedule that reflects the 2007 Montreal Adjustment in its regulations. 
In order to meet the 2010 stepdown, EPA is proposing to allocate 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.
    While section 606 is sufficient authority for this acceleration of 
the section 605 phaseout schedule, EPA also notes that 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.
    In addition to implementing the 2007 Montreal Adjustment, today's 
proposed rule would also address provisions in section 605 of the Clean 
Air Act that relate to use and introduction intro interstate commerce 
of class II substances. In today's action, EPA is proposing to complete 
its implementation (begun in 1993) of the section 605 provisions on use 
of class II substances. EPA is also proposing 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. 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 notice of final rulemaking that ``HCFC 
restrictions and the approach included in today's final rule have not 
changed from those proposed by the Agency in March'' (58 FR 65028). The 
regulatory prohibitions included with that notice, however, did not 
control use directly, but instead banned production and import for most 
uses. In today's action, EPA is proposing to add the direct use 
prohibitions contemplated in the 1993 rule as well as the corresponding 
prohibitions on introduction into interstate commerce. EPA is also 
clarifying its interpretation of section 605(a).

III. This Proposal

    EPA is proposing to adjust existing regulations to address 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 HCFC compounds. EPA believes 
that the chemical-by-chemical HCFC allocation of allowances proposed in 
this notice of proposed rulemaking (NPRM) will ensure 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 will 
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 will not exceed 
3,884.25 ODP-weighted metric tons (25 percent of the aggregate U.S. 
production baseline) annually.

[[Page 78686]]

    To meet the 2010 cap for the 2010-2014 control periods, EPA is 
proposing to continue its past practice of apportioning company-
specific production and consumption baselines for individual HCFCs, and 
granting a certain percent of that baseline as necessary to achieve 
compliance with the cap. For HCFC-141b, HCFC-22, and HCFC-142b, EPA is 
proposing to apportion company-specific baselines in amounts that are 
equivalent to those currently published at Sec.  82.17 (for production) 
and Sec.  82.19 (for consumption), adjusted as necessary to reflect 
permanent transfers of baseline allowances and changes to the names of 
entities identified in the tables at Sec.  82.17 and Sec.  82.19. 
Companies are currently granted, in Sec.  82.16, 0 percent of baseline 
for HCFC-141b and 100 percent of baseline for HCFC-22 and HCFC-142b. 
For 2010-2014, given the previous phaseout of HCFC-141b, EPA will 
continue to allocate zero percent for HCFC-141b, continuing to allow 
only limited amounts of production via an EPA petition process.\5\ EPA 
is proposing to allocate less than 100 percent of baseline for HCFC-22 
and HCFC-142b to meet our obligations under the Montreal Protocol and 
reflecting the use restrictions under section 605(a) that are discussed 
later in this proposal while providing for servicing needs consistent 
with those restrictions.
---------------------------------------------------------------------------

    \5\ EPA is not proposing any changes and thus is not seeking 
comment with regard to the HCFC-141b petition process for the 2010-
2014 control periods.
---------------------------------------------------------------------------

    EPA is proposing a similar approach for HCFC-123, HCFC-124, HCFC-
225ca, and HCFC-225cb, which currently do not have baselines. EPA is 
proposing to apportion company-specific baselines for these HCFCs based 
on production and import data available to the Agency. For control 
periods 2010-2014, EPA is proposing to grant 125 percent of baseline 
for these HCFCs.
    The allocations described above 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 proposed allocations were developed to 
allow the need for virgin material to be met and to avoid shortages 
during the affected control periods, as well as to accommodate some 
market growth for HCFCs-123, -124, -225ca, and -225cb, for which 
baselines were not developed in the 2003 allocation rule. The total 
proposed allocation of HCFC allowances to meet the U.S. need for virgin 
material is less than the 3,810 ODP-ton cap. The differential between 
the cap and the total proposed allocation will have the effect of 
accommodating 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). In 
summary, of the 3,810 ODP tons of consumption and 3,884.25 ODP tons of 
production allowable for the 2010-2014 control periods as established 
by the Montreal Protocol, EPA is proposing to allocate allowances, in 
aggregate, for 2,920 ODP tons of consumption and 2,646 ODP tons of 
production.
    These proposed allocations represent 77 percent of the consumption 
cap and 68 percent of the production cap established by the Montreal 
Protocol for 2010. EPA seeks comment on whether the proposed 
allocations, together with the amounts assumed to be available from 
reclaimed refrigerant, will suffice to meet HCFC needs for the existing 
uses (primarily refrigerant servicing) that will still be permitted in 
2010, as well as potential adjustments in the HCFC market. Please 
provide information and documentation on newly emerging uses of HCFCs 
and other uses of HCFCs, if any, that are not accounted for by EPA 
currently. EPA is especially interested in information pertaining to 
the years 2010 through 2014.
    EPA is proposing two other changes in this proposed rule. First, to 
reflect the September 2007 Montreal Adjustments, EPA is proposing to 
adjust 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.
    EPA is not proposing changes to other provisions of 40 CFR part 82 
subpart A, such as the recordkeeping and reporting obligations, the 
essential use and critical use provisions, and the HCFC-141b petition 
process. EPA is only seeking comments on the portions of 40 CFR part 82 
subpart A that are specifically addressed by this proposal.

A. How Does EPA Propose to Issue Production and Consumption Allowances 
for 2010-2014?

    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 for one type of HCFC for 
allowances of another type of HCFC, with transactions weighted 
according to the ozone depletion potential 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 is viewed as a benefit to 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).
    Under current regulations at 40 CFR 82.15(a) and (b), HCFC-22 and 
HCFC-142b may not be produced or imported in excess of the calendar-
year allowances held by the producer or importer. EPA has not yet 
allocated any calendar-year allowances for HCFC-142b or HCFC-22 to 
cover the 2010 control period and beyond. Absent a grant of calendar-
year allowances for these HCFCs, Sec.  82.15 would prohibit their 
production and import after December 31, 2009. EPA intends to avoid 
that result by issuing a final rule in advance of that date that will 
allocate calendar-year allowances for 2010-2014.
1. What Actions Did EPA Take in the 2003 Allocation Rule?
    In the January 21, 2003, allocation rule, EPA established 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, however,

[[Page 78687]]

EPA concluded that because the entities eligible for allowances had 
differing production and import histories, no one year was 
representative for all companies. Therefore, in the 2003 allocation 
rule 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 did not consider years after 
1997 to avoid creating an uneven playing field that would skew 
allocations to those companies with ample resources and good access to 
information regarding the impending phaseout. EPA is not proposing to 
revisit decisions made in the 2003 allocation rule, such as the 
Agency's discretion to consider data from multiple years in 
establishing a baseline.
    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, with the limited exception described above, by granting 0 
percent of that chemical's baseline for production and consumption in 
the table at Sec.  82.16. The rule granted 100 percent of baseline 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 baseline.
    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 cap through 2009. The January 2003 allocation 
rule announced that EPA would allocate allowances for 2010-2014 in a 
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 ascertain servicing needs and market adjustments in the use 
of HCFCs, including HCFCs for which EPA did not establish baselines in 
the 2003 allocation rule.
2. How Will EPA Allocate 2010-2014 Allowances for HCFC-22 and HCFC-
142b?
    This proposal identifies five primary options for allocating HCFC-
22 and HCFC-142b allowances for the control periods 2010-2014: (1) 
Allocating a percentage of the baseline allowances (Sec. Sec.  82.17 
and 82.19) for each HCFC respectively 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; (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 evaluation of past 
sales of HCFCs by allowance holders by considering how the HCFCs were 
ultimately used (e.g., servicing refrigeration or air-conditioning, 
original manufacture of refrigeration or air-conditioning equipment, 
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. These options are described 
in more detail in section III.A.9 of this preamble. Each of these five 
methods offers advantages and disadvantages for potential allowance 
holders which 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 potential allocation schemes also 
offers advantages and disadvantages associated with the ease of 
implementation and other administrative burdens. EPA has placed in the 
docket to this NPRM a memorandum titled ``Draft Regulatory Options for 
Allocating HCFC Allowances after 2009'' that explores the advantages 
and disadvantages of the various options. In addition to the 
memorandum, EPA has also placed in the docket written correspondence by 
entities that also discusses various options for allocating HCFC 
allowances.
    EPA provided notice of the leading option for implementing the 2010 
milestone 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). The Agency said that it would 
allocate allowances for HCFC-22 and HCFC-142b at less than 100 percent 
of the respective baselines during the control periods 2010-2014. EPA 
continues to believe that this option is the most appropriate, but 
seeks comment on other options. This approach offers a transparent 
design and provides stability in that it uses a well-vetted baseline. 
EPA believes this option also is the least burdensome because it would 
not require additional one-time or periodic reporting obligations that 
may be necessary if EPA were to adopt a different option. Producers and 
importers have adapted to the current HCFC allocation method and 
aligned their business activities around the baselines set forth in the 
2003 allocation rule. Currently, EPA manages a tracking system and 
issues calendar-year allowances per control period to specific entities 
listed in Sec.  82.17 and Sec.  82.19. An option that utilizes this 
system would limit administrative burdens for the Agency and allowance 
holders.
    In the 2003 allocation rule, EPA did not forecast the amount of 
reduction for HCFC-22 and HCFC-142b that would be needed to ensure that 
the United States stayed sufficiently below the 2010 stepwise 
reduction, which at the time was a reduction of 65 percent from the 
Montreal Protocol baseline. EPA did not determine whether it would 
reduce the allocations for the two substances by the same percentage or 
by different percentages. Several factors affect determination of the 
appropriate percentage of the HCFC-22 and HCFC-142b production and 
consumption baselines to allocate for 2010-2014. Factors include the 
percentage of the aggregate U.S. production and consumption caps that 
other HCFCs comprise as well as provisions in the Clean Air Act and 
implementing

[[Page 78688]]

regulations that include use restrictions (discussed in section III.C 
of this NPRM).
    EPA uses information from quarterly, annual, and other periodic 
reporting requirements to monitor consumption, production, imports, and 
exports of all HCFCs. EPA 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.
    Although EPA's July 20, 2001, proposed HCFC allocation rulemaking 
would have allocated production and consumption allowances for all 
HCFCs, the January 2003 final rule apportioned company-specific 
baselines, and allocated a specific percentage of baseline allowances 
for the 2003-2009 control periods, only for HCFC-141b, HCFC-22, and 
HCFC-142b. EPA applied a ``worst-first'' approach to these HCFCs since 
they are the most damaging to the stratospheric ozone layer. The 2003 
final rule noted that the HCFC market was continuing to evolve. At that 
time, the market for HCFCs with lower ODPs did not reflect rapid 
expansion and thus it was not necessary to establish specific baselines 
by chemical and issue allowances to ensure that the United States 
remained below its cap. Later in this proposal, EPA further discusses 
establishing and apportioning baselines as well as allocating calendar-
year allowances for these lower-ODP HCFCs for the control periods 2010-
2014.
3. How Should EPA Consider Servicing Needs for Existing Equipment?
    EPA is proposing to use projected servicing needs in its 
determination of the amounts of HCFC-22 and HCFC-142b allowances to be 
allocated for the 2010-2014 control periods. EPA is focusing on 
servicing needs because under section 605(a) of the Clean Air Act and 
EPA's implementing regulations, nearly all other uses of these two 
HCFCs will be banned effective January 1, 2010. EPA has previously 
issued a draft analysis of servicing demand for the HCFC appliances in 
the U.S. refrigeration and air-conditioning sector projected to be in 
service from 2010-2019. The report is titled The U.S. Phaseout of 
HCFCs: Projected Servicing Needs in the U.S. Air-Conditioning and 
Refrigeration Sector (the ``Servicing Tail'' report). On November 4, 
2005, EPA published a notice of data availability (70 FR 67172) making 
a draft of the report available for public review and comment. On 
September 29, 2006, EPA held a stakeholder meeting presenting the 
findings of a revision to the Servicing Tail report along with other 
important information regarding the next major milestones in the HCFC 
phaseout. EPA solicited comments on the findings presented at the 
meeting. Some stakeholders, including representatives of manufacturers, 
chemical producers, importers, reclaimers, industry associations, and 
environmental organizations, commented on the projected amount of HCFCs 
needed to service this installed base of equipment and on the amounts 
expected to be available from reclamation.
    EPA focused the analysis 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. EPA also focused the analysis on HCFC-22 because HCFC-22 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 findings in the Servicing Tail report have helped to 
shape EPA's views regarding the allocation for the control periods 
2010-2014.
    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, residential and commercial 
unitary air-conditioning, chillers, dehumidifiers, water and ground 
source heat pumps, and non-light duty mobile air-conditioning in buses 
and trains. Approximately 147.5 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 by 2015 and 76 percent by 2020. In 
2010, approximately 2.2 million units of HCFC-22 refrigeration 
equipment will be in use, including retail food, industrial process 
refrigeration, and transport refrigeration equipment (but not including 
cold storage warehouses). The installed base of HCFC-22 refrigeration 
equipment is projected to decrease from 2010 levels by about 29 percent 
by 2015 and 51 percent by 2020. EPA developed these estimates using its 
Vintaging Model, a tool for estimating the annual chemical emissions 
from industrial sectors that have historically used ozone-depleting 
substances in their products. Additional information on the Vintaging 
Model is available in the docket for this rulemaking.
    As a result of 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, and 
recognizing the overall advances by industry in transitioning to non-
ODS substitutes, EPA has prepared a draft revised Servicing Tail report 
to: (1) Reflect the 75 percent reduction in 2010; (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. This revised draft report is available in the docket for this 
rulemaking. EPA is accepting comments on the analysis and the draft 
findings until February 23, 2009 or March 9, 2009 if a hearing 
regarding this rulemaking is held.
    The Servicing Tail report utilizes production, import, and export 
data reported to the Agency on a quarterly, annual, and transactional 
basis, as required by Sec.  82.24. EPA's analysis of the reported data 
confirms that the United States is satisfying its obligations as it 
phases out ODSs 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 to the Ozone Secretariat as requested by the 
Parties to the Montreal Protocol.
    Using the reported data, the draft revised Servicing Tail report, 
and the comments provided at the September 2006 stakeholder meeting and 
submitted in subsequent correspondence (available in the docket), EPA 
believes it has sufficient information to propose through this action 
to allocate a percentage of baseline allowances for HCFC-22 and for 
HCFC-142b for production and consumption for the control periods 2010-
2014 that will address servicing needs. The specific percentage of 
baseline for each of the affected compounds is discussed below. EPA 
requests comments regarding whether it should consider other sources of 
information in addition to the required reports, the Servicing Tail 
report, and stakeholder comments. In particular, EPA is interested in 
whether these sources provide sufficient information to allow EPA to 
reasonably estimate servicing needs for 2010-2014, especially for HCFC-
22, which accounts for the majority of the market.
4. How Will the Allocated Allowances Appear in the Regulations?
    EPA is proposing to revise two types of tables in 40 CFR part 82 
that together

[[Page 78689]]

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 and consumption 
amounts (also referred to as 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. EPA is proposing to retain this framework 
of complementary tables, revising them to reflect adjustments to 
baselines, and to grant percentages of baselines in a manner that 
achieves the 2010 phasedown goal.
    Currently the table at Sec.  82.16 allocates zero percent of 
baseline to HCFC-141b and 100 percent of baseline to HCFC-22 and HCFC-
142b (combined in a single column) for each control period spanning 
2003-2009. EPA is proposing to amend the table 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 proposed percentages for HCFC-22 and HCFC-142b differ because 
EPA projects that the needs will differ for servicing air-conditioning 
and refrigeration appliances during the 2010-2014 control periods. 
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 (which includes inter-pollutant transfers), the needs 
for individual HCFCs are not uniform.
    EPA believes that 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.\6\ While inter-pollutant 
transfers in accordance with Sec.  82.23(b) could continue to be used 
as a means to trade allowances for one HCFC for another, EPA is not 
planning 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. EPA's goal is to promote a smooth 
transition for industry.
---------------------------------------------------------------------------

    \6\ EPA estimates that to stay below the aggregate cap while 
reducing HCFC-22 and HCFC-142b by equal percentages, the resulting 
HCFC-22 allowances would equal less than two-thirds of the projected 
demand for HCFC-22.
---------------------------------------------------------------------------

    EPA requests comments on allocating different percentages of 
baseline production allowances and baseline consumption allowances for 
HCFC-22 and HCFC-142b.
5. What Other Methods Could Be Used to Determine the Allocation for 
HCFC-22 and HCFC-142b Allowances?
    EPA is proposing 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. However, EPA can envision other methods for determining 
how many allowances to allocate for the control periods 2010-2014 for 
these two compounds, including allocating the maximum amount that 
ensures compliance under the Montreal Protocol aggregate 2010 cap 
without room for other HCFCs. EPA notes above that HCFCs other than 
HCFC-22 and HCFC-142b are likely to be needed during the control 
periods 2010-2014. Thus EPA favors an approach that includes other 
HCFCs, recognizing that for such HCFCs baselines must be established 
and apportioned for each substance, and a percentage of the baseline 
must be allocated for these control periods. EPA believes it would not 
be appropriate to allocate the full 3,810 ODP-weighted metric tons of 
consumption and 3,884.25 ODP-weighted metric tons of production solely 
to HCFC-22 and HCFC-142b, given the projected needs for other HCFCs as 
discussed in section III.B.11 of this preamble.
    Approaches that do not consider servicing needs could result in 
shortages of HCFC-22. EPA considered, but is not proposing, allocating 
a percentage of the 2010 aggregate HCFC consumption and production caps 
for HCFC-22 and HCFC-142b respectively equal to the same overall 
percentage of the aggregate HCFC consumption and production caps 
allocated for each substance in the 2003 allocation rule. Under this 
approach, EPA would start with the percentage of the total allowable 
HCFC consumption and production level attributable to each HCFC in the 
2003 rule. For example, beginning in 2004, the total allowable HCFC 
consumption level was 9,906 ODP-weighted metric tons. Using the 
consumption data for each company's highest ODP-weighted consumption 
year, 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. We 
could apply the same percentages to the total allowable HCFC 
consumption level for 2010-2014 of 3,810 ODP-weighted metric tons. This 
would provide congruence for the overall ``pie.'' EPA is concerned, 
however, that such an approach would provide significantly fewer HCFC-
22 allowances in 2010 than would be needed for servicing. Sixty-six 
percent of the aggregate HCFC cap for the control periods 2010-2014 
equals 2,515 ODP-weighted metric tons, which is approximately equal to 
46,000 metric tons of HCFC-22. The Servicing Tail report, however, 
estimates that approximately 62,500 metric tons of HCFC-22 will be 
needed for servicing in 2010. EPA is concerned that if large quantities 
of recycled or reclaimed \7\ HCFC-22 are not available, the need to 
make up the almost 20,000-metric-ton shortfall could trigger illegal 
activities such as imports of HCFC-22 by those that do not hold 
consumption allowances. As noted elsewhere in this NPRM, EPA does not 
believe it should rely on inter-pollutant transfers to secure such a 
significant amount of HCFC-22 allowances.
---------------------------------------------------------------------------

    \7\ EPA has defined Reclaim, Recover and Recycle at Sec.  82.152 
as follows: (1) 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; (2) 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; (3) 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.
---------------------------------------------------------------------------

    While EPA regulations aim at maximizing refrigerant reuse, EPA 
believes that reclamation rates in 2010-2014 would not be sufficient to 
avert a shortfall if EPA were to issue 46,000 metric tons of 
consumption allowances to HCFC-22 using this option. This shortfall 
would equal approximately 30 percent of the total projected servicing 
need for 2010-2014. As explained in the next section, amounts reported 
to EPA of reclaimed refrigerant coupled with estimates for available 
recycled refrigerants indicate that currently less than 30 percent of 
the servicing need can be met through refrigerant recovery and reuse 
during these control periods. Thus, EPA has rejected this method as a 
basis for deciding the relative amounts

[[Page 78690]]

of HCFC-22 and HCFC-142b allowances to issue for the 2010-2014 control 
periods. A memorandum to the docket entitled ``Summary: EPA Analysis of 
U.S. Reclamation Practices and Trends'' provides additional information 
on reclamation practices underlying the assumptions in EPA's analysis.
    EPA's primary objective is to ensure compliance with the obligation 
under the Montreal Protocol to reduce the ODP-weighted ``basket'' of 
HCFCs to 75 percent below the baseline for production and consumption 
beginning January 1, 2010. Various options, alone or in combination, 
could be used to meet this objective. EPA believes, however, that the 
proposed option provides the best assurance that allocations will be 
available to meet the projected needs for all HCFCs during the 2010-
2014 control periods.
6. How Important Is HCFC-22 in Determining the Allocation of 
Allowances?
    HCFC-22 is the HCFC most widely produced and used in applications 
for which servicing of existing equipment will occur during 2010-2019. 
The Servicing Tail analysis focused on HCFC-22, which represents a 
majority of the market, but also includes information on other 
refrigerants and components of blends including HCFC-142b and HCFC-123. 
The report included in the docket focuses on two major equipment types: 
refrigeration and air conditioning.
    Refrigeration equipment can be broken down into four categories: 
(1) Domestic refrigeration, (2) refrigerated transport, (3) industrial 
process refrigeration (IPR), 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 can be further broken down into 
three end-uses: cold storage warehouses, retail food systems, and ice 
makers.
    EPA estimates that HCFC-22 use in air-conditioning and 
refrigeration equipment was approximately 115,000 metric tons in 2006. 
Approximately 66 percent--about 76,000 metric tons--was for servicing 
existing equipment, with the percentage higher for the refrigeration 
industry than the air-conditioning industry. The majority of HCFC-22 
consumption for servicing is currently attributed to residential and 
small commercial unitary equipment and retail food refrigeration 
equipment.
    The projected servicing need for HCFC-22 in 2010 is approximately 
62,500 MT (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. Although EPA estimates that the servicing need 
for HCFC-22 will decrease each year beginning in 2010, EPA is not 
convinced that there is enough room under the aggregate HCFC cap to 
consider any scenario where the allocation of allowances for HCFC-22 
production or consumption is substantially higher than the projected 
servicing need, given the need to allocate allowances for other HCFCs 
as discussed elsewhere in this NPRM.
    In the 2003 allocation rule, EPA issued baseline consumption 
allowances for HCFC-22 equaling 119,384,852 kilograms (119,385 metric 
tons, or 6,566 ODP-weighted metric tons) and allocated 100 percent of 
the baseline for the 2003-2009 control periods. The Montreal Protocol 
cap for all U.S. HCFC consumption beginning in 2004 was 9,906 ODP-
weighted metric tons. The baseline allowances for HCFC-22 consumption 
represented approximately 66 percent of the Montreal Protocol HCFC 
consumption cap for the United States.
    In the 2003 allocation rule EPA issued baseline production 
allowances for HCFC-22 equaling 110,619,359 kilograms (110,619 metric 
tons, or 6,084 ODP-weighted metric tons) and allocated 100 percent of 
the baseline for the 2003-2009 control periods. The Montreal Protocol 
cap for all U.S. HCFC production beginning in 2004 was 10,999 ODP-
weighted metric tons. The baseline allowances for HCFC-22 production 
represented approximately 70 percent of the Montreal Protocol HCFC 
production cap for the United States.
    In the 2003 allocation rule EPA issued baseline consumption 
allowances for HCFC-142b equaling 21,088,677 kilograms (21,089 metric 
tons, or 1,371 ODP-weighted metric tons) and allocated 100 percent of 
the baseline for the 2003-2009 control periods. This represented 
approximately 14 percent of the Montreal Protocol HCFC consumption cap 
of 9,906 ODP-weighted metric tons for the United States.
    In the 2003 allocation rule EPA issued baseline production 
allowances for HCFC-142b equaling 25,090,394 kilograms (25,090 metric 
tons, or 1,631 ODP-weighted metric tons) and allocated 100 percent of 
the baseline for the 2003-2009 control periods. This represented 
approximately 15 percent of the 10,999 ODP-weighted metric tons allowed 
for the United States under the Montreal Protocol HCFC cap.
    In the 2003 allocation rule EPA issued baseline consumption and 
production allowances for HCFC-141b, and under its ``worst first'' 
chemical-specific approach allocated 0 percent of baseline for 
consumption and production--eliminating, with certain narrow 
exemptions, the production and import of HCFC-141b. EPA projects that a 
minimal amount of HCFC-141b will continue to be needed for exempted 
HCFC-141b production until 2015. Although EPA does not intend to 
allocate HCFC-141b production or consumption allowances, EPA must 
account for continued consumption and production of minimal exempted 
amounts of HCFC-141b to ensure compliance with the 2010 caps.
    In addition, EPA must ensure that production and consumption of 
HCFCs for which baselines were not established in the 2003 allocation 
rule does not result in an aggregate allocation exceeding the HCFC 
production or HCFC consumption caps established by the Montreal 
Protocol.
    Air-conditioning and refrigeration equipment commonly requires 
servicing, which may include the need to add refrigerant to account for 
refrigerant losses that occur over time. The limited amount of 
production and import of HCFC-22 and HCFC-142b beginning January 1, 
2010, will be allowed only for servicing equipment manufactured prior 
to January 1, 2010. Later in this proposal, EPA will consider what is 
meant by ``manufactured.''
    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 the entire projected HCFC-22 servicing need 
(3,438 ODP tons) will need to be produced or imported to meet the 
anticipated

[[Page 78691]]

demand. A percentage of that servicing need will be met by recovering 
used HCFC-22 from existing equipment. The ``servicing tail'' report 
provides analysis of 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, which includes information concerning capacity to 
reclaim greater amounts of refrigerants, and projects that more than 20 
percent of the servicing need can be met by recovering used HCFC-22 
from existing equipment.
    Recycled and reclaimed HCFCs offset the need for newly-manufactured 
HCFCs and after the terminal phaseout, as with the CFC phaseout, will 
become the sole source of HCFCs for servicing existing equipment. EPA 
regulations at 40 CFR part 82 Subpart F manage the recovery, recycling, 
reclamation, and reuse of HCFCs under section 608 of the CAAA. Under 
those regulations, HCFCs may not be vented and must be recovered and 
are then generally either recycled, reclaimed, or in some cases 
destroyed. Therefore, it is reasonable to assume that some amount of 
used 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, and EPA is 
not proposing to modify that provision. 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 
restricted to servicing only air-conditioning and refrigeration 
equipment manufactured prior to January 1, 2020 per Sec.  82.16(d).
    Given its previous experience with the Class I phaseout, EPA 
believes that over time a larger percentage of recovered HCFCs will be 
available for reuse. For example, after the 1996 CFC phaseout, motor 
vehicles with CFC-12 air-conditioning systems continued to be serviced 
with used CFC-12. In fact, even today recovered CFC refrigerants are 
still in use for servicing a range of older equipment.
    The Servicing Tail report used 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 of 
refrigerants, which varies by end-use, is recovered from discarded 
equipment. The model aggregates the quantities recovered but does not 
distinguish the ``pool'' of refrigerant between quantities that are 
reclaimed versus those that are recycled. EPA's Vintaging Model was the 
primary tool 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 50 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 makes use of 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.
    For purposes of analysis, the Servicing Tail report considers 
scenarios for HCFC-22 and HCFC-142b where differing amounts of 
servicing needs were met by recycled and reclaimed refrigerants. For 
example, the report examines scenarios in which 10 percent, 15 percent, 
20 percent, 25 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 HCFCs 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.
    EPA has anecdotal and reported information concerning recovery 
rates for refrigerants. Commenters at the September 2006 stakeholder 
meeting indicated that approximately 10 percent of HCFC-22 in current 
use was recovered and either reclaimed or recycled. Data reported to 
EPA consistent with 40 CFR Part 82 Subpart F shows that approximately 
3716 metric tons (204 ODP tons) of HCFC-22 was reclaimed in 2007. EPA 
does not track recycled refrigerants, since recycled refrigerant 
(unlike reclaimed refrigerant) typically is charged back into equipment 
with the same ownership rather than re-entering the market. Readers 
interested in additional information concerning recovery and recycling 
should review the Servicing Tail report. Given the regulatory 
requirements for recycling and reclamation (at 40 CFR part 82 subpart 
F), experience with the CFC phaseout, and industry practices, EPA 
estimates that during the period 2010-2014, an amount greater than 20 
percent of the total servicing need for HCFC-22 can be met with HCFC-22 
that has been recovered and either recycled or reclaimed. Since EPA is 
not banning the use of HCFC-22 equipment, recovered and reclaimed HCFC-
22 will become a more valuable commodity as the U.S. approaches the 
January 1, 2015, stepdown. The demand for HCFC-22 to service existing 
equipment should provide an economic incentive for an increase in the 
quantities of used HCFC-22 available for reclamation. As an indicator, 
EPA notes that several reclamation companies have recently started 
offering financial payments for used HCFC-22. The docket for this NPRM 
provides further information regarding EPA's assumptions regarding the 
availability of recycled or reclaimed HCFC-22 to meet servicing needs.
    EPA has considered, but is proposing to reject, using an increasing 
number to represent the contribution of recycled and reclaimed 
refrigerant for each of the control periods from 2010-2014 and thus 
simultaneously reducing the amount of allowances needed for HCFC-22. 
EPA believes for these control periods, maintaining a constant number 
of allowances would reduce the overall burden for the allowance holders 
and would ease business practices. EPA notes that recovery rates could 
fluctuate yearly and thus holding steady for control periods 2010-2014 
is an appropriate approach. In addition, the step downs in the expected 
recycling and reclamation rates then more closely reflect the 
international commitments in Decision XIX/6. EPA expects that for the 
2015-2019 control periods, the percent of servicing need met by 
recovered refrigerants will increase and, as noted above, beginning in 
2020 all servicing needs for HCFC-22 will be met with

[[Page 78692]]

recovered refrigerants. EPA will address the percent of servicing need 
to be met by recovered refrigerants in 2015-2019 in a subsequent 
rulemaking to reflect the 2015 stepdown required by Article 2F:

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 1 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 the controlled substances in Group 1 of 
Annex C does not exceed zero. However, * * * 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.

EPA believes that meeting demand after 2010 will require the reuse of 
HCFC-22, and is particularly concerned with ensuring that demand is met 
during the first years of the 2010-2014 control periods when a large 
number of appliances using HCFC-22 will still be suitable for use. EPA 
notes that 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. For purposes of the 
2010-2014 control periods, EPA is proposing to use a number in the 
range of 15--25 percent to represent the contribution of recovered 
refrigerant to the total servicing need. EPA requests comments on the 
amount of the total servicing need for HCFC-22 that can be met with 
recovered refrigerants, which is between 15 and 25 percent of total 
estimated servicing need.
7. HCFC-22 Allowances for 2010-2014
    EPA is proposing to allocate HCFC-22 consumption allowances to meet 
80 percent of the servicing need, assuming that the remaining 20 
percent will be met by recovered HCFC-22 that is either recycled or 
reclaimed. This translates into approximately 50,000 metric tons (2,750 
ODP-weighted metric tons), or approximately 72 percent of the total 
HCFC consumption cap for each of the control periods from 2010 through 
2014.
    As it did in the 2003 allocation rule, EPA is proposing to allocate 
production allowances among different chemicals using the same 
percentage breakdown as for consumption allowances. This would allocate 
45,498 metric tons (2,502 ODP tons) of the 3,884.25-ODP-ton production 
cap to HCFC-22 production. This is consistent with section 605(c) of 
the Clean Air Act, which states that EPA shall promulgate a phaseout 
schedule for HCFC consumption that is the same as that applicable to 
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 
proposing to use the same percentages for production and consumption 
allocations--deriving the percentages based on estimated need for each 
individual HCFC.
    If more HCFC-22 is recovered, recycled, and reclaimed than assumed 
in this proposed rule, EPA anticipates that the demand for virgin HCFC-
22 will decrease. Thus it is possible that not all the production and 
consumption allowances will be used. It is also possible that any 
``extra'' HCFC-22 allowances could be converted via inter-pollutant 
transfers to meet other HCFC needs.
    EPA requests comments on its application of a 20 percent rate of 
availability of recovered (recycled or reclaimed) HCFC-22. As discussed 
above, EPA estimates that at least 20 percent of the 2010-2014 
servicing need can be met from recycled or reclaimed material. EPA 
believes that by the January 1, 2010, effective date of this rule, 20 
percent of the 2010-2014 servicing needs should be available from 
recycled or reclaimed material, and that the availability of recycled 
or reclaimed material would be expected to increase as the phaseout 
progresses. EPA notes that in 2020 all HCFC-22 and HCFC-142b used to 
service air-conditioning and refrigerant equipment will need to be 
recycled or reclaimed, in light of the nearly-complete phasedown of 
production and import of virgin material that is scheduled to occur by 
that date. 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. EPA is interested in other data 
regarding the actual and projected rates of refrigerant recycling and 
reclamation in the U.S., as well as whether it should consider 
allocating allowances for HCFC-22 at other levels, such as 
approximately 100 percent, 90 percent, 80 percent, or 75 percent of the 
aggregate 2010 cap.
8. HCFC-142b Allowances for 2010-2014
    After subtracting out the proposed 72 percent of the 2010 cap for 
HCFC-22, 28 percent remains to meet all other HCFC needs. EPA believes 
that the remaining 28 percent is more than the projected HCFC-142b 
servicing needs, the amounts of HCFC-141b that EPA expects to allow 
based on the petition process, and all other likely HCFC consumption 
for the 2010-2014 control periods. This is based on a review of 
required quarterly, annual, and periodic reports; the Servicing Tail 
analysis; and comments submitted to EPA by stakeholders in advance of 
this proposed rulemaking. As described below, the amounts allocated for 
these substances reflect these assumptions.
    As discussed in the Servicing Tail report described above, the 
projected servicing need for HCFC-142b is extremely low: Approximately 
100 metric tons (7 ODP tons). 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. Whereas earlier versions of the Servicing Tail analysis 
focused on HCFC-22, the most recent version--which is included in the 
docket for this rulemaking--also projects the demand for all other 
HCFCs for which consumption and production are likely to occur: HCFC-
142b, HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb. The recovery, 
recycling, and reclamation requirements apply to HCFC-142b as they do 
to all refrigerants, but recovery rates for HCFC-142b are considerably 
lower than for HCFC-22, largely because HCFC-142b is typically used in 
blended refrigerants. The limited amount of data available to EPA 
indicates that less than 1 percent of HCFC-142b is recycled or 
reclaimed. In light of the limited data available, and the extremely 
low estimate of recycling and reclamation, EPA is proposing to allocate 
100 percent of the projected HCFC-142b servicing need rather than 
assuming that a specified percentage of the need will be met through 
the use of recycled or reclaimed amounts. EPA is proposing to issue 
consumption allowances for HCFC-142b of 100 metric tons (7 ODP tons). 
Allocating 72 percent of the consumption cap to HCFC-22 and less than 1 
percent to HCFC-142b allows up to 27 percent to be allocated to other 
HCFCs.

[[Page 78693]]

    EPA is proposing to allocate 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 proposing to allocate production allowances for HCFC-142b at 142 
metric tons (9.2 ODP tons).
9. How Does the Aggregate for HCFC-22 and HCFC-142b Translate to 
Entity-by-Entity?
    EPA is proposing to allocate up to a total of no more than 50,000 
metric tons of HCFC-22 consumption allowances, 45,498 metric tons of 
HCFC-22 production allowances, 100 metric tons of HCFC-142b consumption 
allowances, and 142 metric tons of HCFC-142b production allowances. 
However, EPA actually allocates allowances to individual persons (i.e., 
legal entities). As discussed in section III.A.2 of this preamble, 
EPA's preferred approach is to apportion baselines and allocate 
allowances on a pro-rata basis to the entities that received baseline 
allowances in the 2003 allocation rule. Nevertheless, the Agency is 
taking comment on other allocation options, which are discussed below.
    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(a), respectively. 
The percentage of baseline each entity receives in each control period 
from 2003 through 2009 appears at Sec.  82.16(a). EPA is proposing to 
amend Sec.  82.16(a) to include the 2010-2014 control periods. For the 
years 2010-2014, as for the years 2003-2009, EPA's preferred approach 
is to specify the same percentage of baseline for each entity. EPA 
considers allocation of the same percentage to each entity listed at 
Sec.  82.17 and Sec.  82.19 to be the most equitable approach. EPA does 
not believe that its allocation of baseline allowances should reflect 
sales of controlled substances that would subsequently occur. EPA 
believes that the market for HCFCs that the allowance holders sell to, 
will evolve to reflect these restrictions as it would evolve other 
market conditions. This approach is consistent with EPA's previous 
approach to allocations. However, EPA does note that there have been 
and continue to be restrictions on use of controlled substances. EPA 
considered alternative approaches such as evaluating sales information 
for HCFCs where allowances were expended and considering the 
differences between expended allowances versus allowances acquired via 
inter-pollutant transfers. EPA has included in the docket to this 
rulemaking a memorandum titled Draft Regulatory Options for Allocating 
HCFC Allowances after 2009 as well as comments submitted by 
stakeholders describing alternative approaches that the Agency may 
consider.
    As previously noted, allowances allocated for individual control 
periods may be thought of as ``calendar-year allowances'' to 
distinguish them from the apportioned baseline production or 
consumption allowances (Sec.  82.17 and Sec.  82.19). For 2010-2014, 
EPA is proposing to apportion production and consumption baselines for 
HCFC-22 and HCFC-142b to the same entities that were apportioned HCFC-
22 and HCFC-142b baselines in the 2003 allocation rule. EPA is 
proposing to amend that list of entities and their baselines to reflect 
changes in the 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, which closes February 23, 2009 
or March 9, 2009 if a hearing is held.
    The proposed company-specific baselines also reflect adjustments 
resulting from approved inter-pollutant and/or inter-company transfers 
of baseline allowances (i.e., permanent rather than calendar-year 
allowances) through the process described in Sec.  82.23. To be 
reflected in the final apportionment of baselines in the final rule, 
such transfers must have occurred, with EPA approval, before or during 
the second quarter of the 2008 control period (i.e., by June 16, 2008). 
As noted in the 2003 allocation rulemaking, EPA is sensitive to the 
need to avoid creating an ``uneven playing field'' that could 
potentially skew allocations to entities with ample resources and good 
access to information. EPA held a public meeting on June 16, 2008. As 
it did in the 2003 allocation rulemaking when determining which years 
to use for establishing a baseline, EPA is using the date of the public 
meeting as a cutoff date for inter-pollutant and inter-company 
transfers of permanent baseline allowances that would be reflected in 
the revised tables shown in this NPRM. EPA believes that since 
allowance transfers affect the pool of allowances for each controlled 
substance and thus the amounts apportioned company-by-company, a cutoff 
date in advance of the issuance of the NPRM is necessary and thus 
selected a date based on availability and access to information.
    EPA recognizes that in some cases entities are no longer actively 
involved in HCFC production, import, and/or export activities. EPA is 
seeking comment on whether it should retain the baselines for such 
entities (the preferred approach) or whether it should retire, auction, 
or redistribute the baselines among the active entities. EPA has placed 
in the docket to this proposed rule a memorandum that considers and 
evaluates each of these options, discussing both the advantages and 
disadvantages, titled Draft Regulatory Options for Adjusting the HCFC 
Baseline for Allowance Allocations. For example, apportioning a 
baseline to an entity that is no longer active means that its 
allowances might not be expended, resulting in a net environmental 
benefit. Allocating allowances via an auction may allow for new 
entrants to purchase allowances or for allowances to be purchased and 
intentionally retired. However, EPA currently does not use an auction 
for allocating allowances and anticipates that designing and deploying 
an auction system could cause administrative delays. An auction system 
could impose costs on new participants, which would be borne by non-
participants who received allowances for the 2003-2009 control periods 
without charge. EPA notes, however, that under the current allowance 
system for new entrants to acquire allowances, allowances must be 
transferred from an existing allowance holder and that when such a 
transfer occurs, costs are likely to arise from the purchase price and 
any transaction costs. Allocating allowances to entities that are no 
longer active in the field may provide an option for new entrants and 
for entities seeking to purchase and retire allowances, as the inactive 
entities would presumably be willing sellers. EPA is proposing to 
retain the baselines for HCFC-22 and HCFC-142b as previously 
apportioned, subject to updates to reflect name changes and permanent 
inter-company and inter-pollutant transfers.
    Consistent with past practice, EPA is publishing baseline allowance 
information in this NPRM, having first notified the affected companies 
of its intention to do so.
    Applying the approach described above, EPA proposes to apportion 
production and consumption baselines for HCFC-141b, HCFC-22, and HCFC-
142b to the following entities in the following amounts:

Table

[[Page 78694]]

------------------------------------------------------------------------
                                                            Allowances
              Person                Controlled substance       (kg)
------------------------------------------------------------------------
                     Production Allowance Allocation
------------------------------------------------------------------------
Arkema............................  HCFC-22.............      46,692,336
                                    HCFC-141b...........      24,647,925
                                    HCFC-142b...........         484,369
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
------------------------------------------------------------------------
                    Consumption Allowance Allocation
------------------------------------------------------------------------
ABCO Refrigeration Supply.........  HCFC-22.............         279,366
Altair Partners...................  HCFC-22.............         302,011
Arkema............................  HCFC-22.............      48,637,642
                                    HCFC-141b...........      25,405,570
                                    HCFC-142b...........         483,827
Automatic Equipment Sales.........  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
Full Circle.......................  HCFC-22.............          14,865
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
Saez Distributors.................  HCFC-22.............          37,936
Solvay Fluorides..................  HCFC-22.............       3,781,691
                                    HCFC-141b...........       3,940,115
Solvay Solexis....................  HCFC-142b...........         194,536
Tulstar Products..................  HCFC-141b...........          89,913
------------------------------------------------------------------------

    EPA requests comments on the proposed method and calculations for 
allocating allowances on an entity-by-entity basis for HCFC-22 and 
HCFC-142b production and consumption.
10. Baselines for HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb
    EPA is proposing to establish and apportion 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. EPA 
requires recordkeeping and reporting for production, import, export, 
and trade of all ozone-depleting substances, including HCFCs 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 meet 
international obligations. EPA is not proposing any changes to these 
requirements.
    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 (e.g., a 
``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, 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. Prior to attending the 19th Meeting of the 
Parties where agreement was reached to reduce the 2010 cap from a 65 
percent reduction to a 75 percent reduction, EPA conducted 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

[[Page 78695]]

September 2007 Montreal Adjustment provides for adjustment of the cap 
from a 65 percent to a 75 percent reduction, EPA is proposing 
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.
    EPA is proposing to apportion baselines for the other HCFCs by 
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 identified in this proposal are the only 
remaining HCFCs commonly used in the United States that do not 
currently have established baselines. EPA does not expect that 
establishing baseline allowances for these four HCFCs would 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 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 believes that the best data 
to use for this purpose are the data reported to the Agency under Sec.  
82.24. Entities that have not reported data would not be included in 
the baseline calculations and would not receive baseline allowances. If 
necessary, EPA could augment the data for completeness or to verify 
accuracy by issuing requests for information under section 114 of the 
CAA. EPA seeks comment on its proposal to use data reported under Sec.  
82.24 as the basis for identifying the entities to which allowances 
should be allocated.
    In the 2003 allocation rule, EPA calculated each entity's HCFC-
141b, HCFC-22, and HCFC-142b baseline from that entity's highest 
reported consumption and production from 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 is proposing to follow a 
similar approach for these four HCFCs by considering the highest 
reported data from a range of years rather than selecting a single 
baseline year. EPA is proposing to use the data reported for the 2005-
2007 control periods to calculate baselines for the four additional 
HCFCs, based on an entity's highest reported consumption and production 
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 this rule 
going into effect. By using recent data, EPA ensures the baseline 
reflects the current market as closely as possible, and issues raised 
when EPA decided to postpone allocating baseline allowances for these 
HCFCs in 2003.
    EPA requests comment on the need to establish baselines for these 
four additional HCFCs at this time. In particular, EPA is interested in 
comments concerning whether establishing and apportioning a baseline 
for these four HCFCs, and allocating a percentage of that baseline for 
the 2010-2014 control periods, is necessary to ensure that the United 
States does not exceed the 25 percent HCFC cap under the 2007 Montreal 
Adjustment. EPA requests comments on the appropriateness of using each 
company's highest reported consumption and production for 2005-2007 
rather than the lowest or an average.
11. What Percentage of the Baseline Will EPA Allocate for HCFC-123, 
HCFC-124, HCFC-225ca, and HCFC-225cb for the Control Periods 2010-2014?
    EPA is proposing to establish baseline production and consumption 
allowances for HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb, and to 
allocate 125 percent of these baselines for the 2010-2014 control 
periods. By establishing these baseline production and consumption 
allowances, EPA would be creating a mechanism for limiting growth in 
production and consumption for these HCFCs during those control 
periods. Regardless of any action by EPA, given the 605(a) self-
effectuating provisions, further growth for these HCFCs will be 
constrained in 2015 by the provisions on use. For example, given the 
characteristics of HCFC-225ca and HCFC-225cb, they are generally used 
as solvents. As of January 1, 2015 that application will be restricted. 
Thus any growth in the use of these HCFCs will be balanced to some 
extent by the self-effectuating provisions. Thus EPA is recognizing 
that other limiting factors, such as section 605(a) of the CAA, will 
considerably affect how these HCFCs can be used in subsequent control 
periods. While it is appropriate and necessary for EPA to allocate less 
than 100 percent of the baseline allowances for HCFC-22 and HCFC-142b, 
given the use restrictions that apply beginning January 1, 2010, these 
four low-ODP HCFCs are not subject to domestic use restrictions until a 
later date. 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)). Therefore, EPA believes that it is not appropriate to 
allocate less than 100 percent of baseline for these compounds in this 
action. EPA has included information and analysis on these HCFCs in 
Chapter 3 of the Servicing Tail analysis, which is in the docket for 
this rulemaking. After reviewing trends in the production, import, 
export, and trade data submitted to EPA since 2003, EPA believes that 
allocating 100 percent of the baseline should be sufficient to meet 
current demand. The Servicing Tail analysis available in the docket 
provides additional information concerning trends based on the 
Vintaging Model and additional information provided by stakeholders. 
However, EPA has heard

[[Page 78696]]

from stakeholders that some amount of market expansion for these low-
ODP HCFCs is possible during the 2010-2014 control periods. Given the 
low ODPs for these HCFCs, EPA believes that if it were to allocate 125 
percent of the baseline for 2010-2014, the United States could still 
meet the overall HCFC cap of 75 percent below the baseline during these 
control periods. EPA believes that any continued growth for these HCFCs 
will be considerably affected by section 605(a) as of January 1, 2015.
    Through this action, EPA is proposing to allocate 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 these 
HCFCs, EPA believes that inter-pollutant transfers could be used to 
make adjustments. If the full amount of allowances is not needed, then 
some allowances may go unused. In accordance with the next stepdown 
under the Montreal Protocol, EPA will issue a rule prior to the 2015 
HCFC milestone to limit aggregate production and consumption 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 elsewhere in this NPRM. Examples of uses that will be 
limited by section 605(a) beginning in 2015 are solvent uses and fire 
suppression. EPA anticipates other changes as well. For example, EPA's 
proposed 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 those used as 
solvents (i.e., HCFC-225ca and HCFC-225cb), the section 608 ``no 
venting'' prohibition is not applicable. HCFC-123 is used in chillers 
that in some cases are replacing CFC chillers. Given that in many cases 
these appliances will last a long time, 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. Recognizing that 
the HCFC market will continue to evolve, subject to the constraints in 
section 605(a), EPA is proposing to establish and apportion baseline 
allowances and provide calendar-year allowances for the control periods 
2010-2014 for these HCFCs.
    EPA has established company baselines for these four low-ODP HCFCs 
by choosing each company's highest production and consumption years 
from 2005, 2006, and 2007. This is the same approach EPA used to 
establish the company baselines for HCFC-141b, HCFC-22, and HCFC-142b 
in the 2003 allocation rule.
    Data show 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 163 ODP-weighted metric tons, which is slightly more 
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 
slightly more than 3 percent of the total HCFC production cap of 
3,884.25 ODP tons.
    EPA proposes to allocate production allowances to the following 
entities for the following amounts:

------------------------------------------------------------------------
                                                            Allowances
              Person                Controlled substance       (kg.)
------------------------------------------------------------------------
AGC Chemicals Americas............  HCFC-225ca..........         266,608
                                    HCFC-225cb..........         373,952
DuPont............................  HCFC-124............       2,269,210
Honeywell.........................  HCFC-124............       1,804,121
------------------------------------------------------------------------

    EPA also proposes to allocate consumption allowances to the 
following entities for the following amounts:

------------------------------------------------------------------------
                                                            Allowances
              Person                Controlled substance       (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............       2,933,906
                                    HCFC-124............         743,312
Honeywell.........................  HCFC-124............       1,284,265
ICOR..............................  HCFC-124............          81,220
National Refrigerants.............  HCFC-123............          72,600
                                    HCFC-124............          50,380
Tulstar Products..................  HCFC-123............          34,800
                                    HCFC-124............         229,582
------------------------------------------------------------------------

    EPA is proposing to allocate 125 percent of each company's baseline 
for these low-ODP HCFCs for the 2010-2014 control periods. These 
allocations would appear as additions to the table at Sec.  82.16. EPA 
requests comments on its proposal to grant 125 percent of baseline to 
companies for these HCFCs for the 2010-2014 control periods.

[[Page 78697]]

12. What About Other HCFCs?
    In addition to HCFC-141b, HCFC-22, and HCFC-142b, as well as newly 
addressed HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb, EPA 
recognizes that the list of HCFCs in appendix B to subpart A includes 
additional substances. EPA's proposed allocations, based on projected 
2010-2014 need, have the effect of reserving some room under the 2010 
aggregate HCFC cap for any HCFCs not specifically included in 
Sec. Sec.  82.16, 82.18, and 82.19. Given the 4 percent of the 3,810 
consumption cap EPA is proposing to allocate for the newly addressed 
HCFCs (-123, -124, -225ca and -225cb), room under the 2010 production 
and consumption caps still remains. EPA notes that some niche 
applications in the U.S. use other HCFCs, such as HCFC-21. However, EPA 
is not aware of additional need for production or import of these 
substances at this time. 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 it is appropriate to reserve 
some room in case circumstances were to change and users of another 
HCFC were to seek to acquire an amount either by production or by 
import. EPA notes that the producer or importer would be required to 
report to EPA consistent with the existing recordkeeping and reporting 
requirements. If necessary, EPA could subsequently propose amending the 
regulations to set and apportion baselines and issue allowances for 
these HCFCs. EPA requests comments on its proposed approach of 
allocating baseline allowances for HCFC-141b, HCFC-22, HCFC-142b, HCFC-
123, HCFC-124, HCFC-225ca, and HCFC-225cb based on the projected need 
for virgin material in the U.S., which would have the effect of not 
allocating allowances for the remaining amount under the 3,810 ODP-ton 
cap.

B. Does the Article 5 Allowance Provision Change Given the Adjustments 
to the Montreal Protocol?

    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 ODSs. Recognizing that it would 
be inadvisable for developing countries to spend their scarce 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, 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 Sec.  
82.18(a) provides for allocation of ``Article 5 allowances'' for 
production of specified ODSs solely for export to Article 5 Parties to 
meet those countries' basic domestic needs. The ``Article 5'' Parties 
are listed at 40 CFR part 82, subpart A, appendix E. 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.
    EPA is proposing to amend 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 is also proposing minor changes to 
82.15(c) to clarify that HCFCs produced with Article 5 allowances may 
be introduced into interstate commerce if destined for export.
    Section 82.18(a)(1) currently states 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 control periods through 
2014, 15 percent; for control periods from 2015 through 2029, 10 
percent; and for control periods from 2020 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) currently 
restrict Article 5 allowances to 10 percent of production baseline from 
January 1, 2015, through December 31, 2029, but otherwise allow the 
full 15 percent previously permitted by the Protocol.
    EPA is proposing to amend Sec.  82.18(a) to allocate Article 5 
allowances for the HCFCs covered by this rulemaking, for the period 
2010-2019, consistent with the recent changes to the Montreal Protocol. 
Prior to 2015, exports 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 
proposing to sunset the Article 5 allowance provision for all HCFCs at 
the end of 2019 in the absence of further adjustments to the Protocol. 
Decision XIX/6 paragraph 14 states ``In order to satisfy basic domestic 
needs [the Parties] agree to allow for up to 10% of baseline until 
2020, and for the period after that, to consider no later than 2015

[[Page 78698]]

further reductions of production for basic domestic needs.'' 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 proposed 
regulation to extend the availability of Article 5 allowances for basic 
domestic needs to the extent consistent with the Clean Air Act. Any 
such proposed regulations would include production levels and schedules 
that were at least as stringent as those specified in the Montreal 
Protocol, as adjusted.
    EPA requests comments on its proposed revisions to Sec.  82.18(a).

C. How Does EPA Interpret ``Introduce Into Interstate Commerce or 
Use''?

    Section 605(a) is titled ``Restriction of use of class II 
substances'' and 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.''
    Section 605(a) is self-effectuating, banning the introduction into 
interstate commerce and use of HCFCs by its own terms. In section 
605(c), however, Congress directed EPA to promulgate regulations 
restricting the use of class II substances in accordance with section 
605. In today's action, EPA is proposing to complete its implementation 
of the section 605 provisions on use of class II substances. EPA is 
also proposing regulatory language to reflect the section 605 
provisions on introduction into interstate commerce of class II 
substances.
    As discussed earlier in this notice, 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. EPA is proposing to 
add 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 
schedule adopted in the 1993 phaseout rule, the section 605(a) use and 
interstate commerce restrictions would apply to HCFC-22 and HCFC-142b 
beginning in 2010 and to all other HCFCs beginning in 2015.\8\ 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)-
(g). EPA is not proposing to change these provisions in this action. 
However, EPA is further implementing section 605(a) by proposing direct 
restrictions on use and introduction into interstate commerce to be 
codified at Sec.  82.15 and by clarifying its interpretation of the 
statutory requirements.
---------------------------------------------------------------------------

    \8\ 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.
---------------------------------------------------------------------------

    Since the promulgation of the 2003 allocation rule, EPA has 
received questions from stakeholders regarding the Agency's 
interpretations of section 605(a). Based on these questions, EPA has 
decided to include in this proposed rule a discussion of how it 
interprets that section, particularly the terms ``introduction into 
interstate commerce'' and ``use.'' EPA is proposing to promulgate a 
definition of interstate commerce to facilitate the implementation of 
section 605(a).
    Section 605(a) includes the phrase ``introduction into interstate 
commerce.'' 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 proposes to amend 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'' would appear where the Sec.  82.104(n) 
definition uses the term ``product.'' This is because section 605(a) 
addresses substances rather than products. Adding a definition of 
interstate commerce to Sec.  82.3 will clarify the applicability of the 
section 605(a) provisions. Choosing a definition that is already well-
established in the labeling program will minimize stakeholder 
confusion. EPA requests comments on adding this definition of 
interstate commerce to subpart A.
    EPA notes that under this definition, ``introduction into 
interstate commerce'' would include release of HCFCs by the domestic 
manufacturer 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 
would be limited as of January 1, 2010, or January 1, 2015, depending 
on the specific HCFC.
    In addition to banning ``introduction into interstate commerce'' of 
HCFCs, section 605(a) also bans ``use,'' subject to three statutory 
exceptions that 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. EPA is proposing to interpret the ``use'' ban as 
applying to the use of HCFCs in manufacturing and servicing HCFC 
products.
    The first exception, which appears 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 use of HCFCs by a consumer, such ``use'' 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 hire servicing 
technicians to recover the

[[Page 78699]]

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)). Thus, EPA is not proposing an interpretation 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 use during manufacture and servicing of equipment. 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, reclaimers, and appliance 
manufacturers.
    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). This type of use is referred to 
in EPA's regulations 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 intends to implement the transformation 
exception in section 605(a)(2) consistent with the transformation 
exception to the HCFC production phaseout.
    Section 605(a)(3) provides an exception for HCFCs that are ``used 
as a refrigerant in appliances manufactured prior to January 1, 2020.'' 
EPA reads this exception as allowing appliances manufactured before the 
specified date to be serviced with virgin HCFCs. 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.
    As noted above, EPA interprets the 605(a) use ban to cover initial 
charges as well as maintenance and servicing. 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 appliances 
manufactured after 2009. EPA also indicated that it intended to ban use 
of virgin HCFC-22 and HCFC-142b in such appliances. Consistent with 
decisions made in the 1993 rule, EPA is proposing, for HCFC-22 and 
HCFC-142b, to apply the section 605(a)(3) exception only to the use of 
these HCFCs in appliances manufactured before 2010. Such use would 
consist of servicing and maintenance of these appliances. EPA notes 
that servicing could entail a wide range of activities including 
replacing parts or components. For the low ODP-refrigerants covered by 
82.16(d), however, EPA is proposing to apply the section 605(a)(3) 
exception to the use of HCFCs in equipment manufactured before January 
1, 2020, which would allow initial charging of equipment for a limited 
period as well as servicing and maintenance uses. For those 
refrigerants, 82.16(d) bans production and import effective January 1, 
2015 for use in appliances manufactured after 2019.
    EPA notes that the exception at 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. Section 601 defines appliance as ``any device which 
contains and uses a class I or class II substance as a refrigerant and 
which is used for household or commercial purposes, including any air 
conditioner, refrigerator, chiller, or freezer.'' EPA recognizes many 
devices meet the section 601 definition of appliance. For example, 
commercial refrigeration includes the retail food and cold storage 
sectors. Industrial process refrigeration includes customized 
appliances used in the chemical, pharmaceutical, petrochemical and 
manufacturing industries. Other types of appliances include household 
refrigerators and freezers; chillers; water coolers; vending machines; 
residential and light commercial heat pumps; residential dehumidifiers; 
unitary systems; and commercial ice machines. Under the SNAP program 
and regulations promulgated under Sec.  608, EPA has recognized the 
differences in these appliances and in some cases has found substitute 
refrigerants acceptable for some appliances but not others or 
established different control thresholds such as different leak rate 
requirements. For the purposes of this action, EPA has considered the 
definition of appliance carefully, particularly evaluating at what 
point a device becomes a manufactured appliance. EPA believes that the 
difference in types of appliances affects the point when manufacture is 
complete.
    Through this action, EPA is providing an interpretation of section 
605(a) under which air-conditioning and refrigeration appliances are 
``manufactured'' when the refrigerant loop is completed, the appliance 
can function, the appliance holds the complete and proper charge, and 
is ready for use for its intended purposes. For refrigerators and room 
air-conditioners, manufacture may be complete while the appliance is 
still at a manufacturing facility. For instance, if such an appliance 
has been pre-charged with the desired amount of refrigerant, has gone 
through the entire manufacturing line so that all mechanical, 
electrical, labeling and painting/marking procedures are complete, and 
is ready to be packaged and shipped, 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), then EPA would consider the 
appliance as ``manufactured.'' The situation differs, however, for 
other appliances, such as commercial refrigeration and industrial 
process refrigeration, involving more complex installation processes. 
Such devices are field charged with refrigerant; the refrigerant loop 
typically is completed onsite, and--particularly with industrial 
process refrigeration--the parts are custom-built. EPA would consider 
these field-charged appliances ``manufactured'' at the point 
installation of all parts is completed and fully charged refrigerant 
(whether or not the appliance had started operation). For some 
appliances, such as condensing (outside) units for split-system air 
conditioners, refrigerant charge is often included in the product 
during the

[[Page 78700]]

manufacturing process but then is typically adjusted in the field to 
account for different line sizes and indoor unit configurations. EPA 
would consider the ``manufacture'' of this type of appliance similar to 
that for field-charged equipment; that is, manufacture would not be 
complete until the device is installed in the field, connected with the 
indoor unit, and charged to the proper level.
    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.
    As noted above, the current regulatory provisions already preclude 
production or import of HCFC-22 and HCFC-142b in 2010 and beyond for 
purposes that are not exempted at Sec.  82.16(c) consistent with 
section 605(a).\9\ However, EPA is proposing through this action to 
amend Sec.  82.15 to add prohibitions that specifically preclude any 
person from introducing into interstate commerce or using (according to 
the interpretations above) 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. In addition, under the current regulatory 
structure the prohibitions apply to the producer or importer of the 
HCFC compounds. The provisions EPA is proposing to add to the 
regulations would apply to manufacturers of appliances and other HCFC 
products, as well as anyone who services such products. EPA requests 
comments on adding these prohibitions and on its interpretation of 
section 605(a).
---------------------------------------------------------------------------

    \9\ 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).
---------------------------------------------------------------------------

    Finally, EPA is proposing revisions to its regulations on export 
production allowances 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 (40 CFR 82.18(b)). Currently, entities that 
hold baseline production allowances for HCFC-141b are allocated export 
production allowances equal to 100 percent of their baseline production 
allowances. EPA is proposing to sunset this provision on December 31, 
2009, in order to avoid a conflict with the section 605(a) restrictions 
on use and introduction into interstate commerce. Under the proposed 
interstate commerce definition, ``introduction into interstate 
commerce'' would include release of HCFCs by the domestic manufacturer 
for distribution and transport prior to export. EPA is not proposing to 
allocate export production allowances for any other HCFCs. EPA seeks 
comment on the sunset of provisions for export production allowances.

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 NPRM. 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, 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.

Copies of these documents and a summary memorandum 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, 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 proposal will affect the following categories:

[[Page 78701]]

----------------------------------------------------------------------------------------------------------------
                  Category                    NAICS code     SIC code         Examples of regulated entities
----------------------------------------------------------------------------------------------------------------
Chlorofluorocarbon gas manufacturing.......        325120          2869  Chlorodifluoromethane manufacturers;
                                                                          Dichlorofluoroethane manufacturers;
                                                                          Chlorodifluoroethane manufacturers.
Chlorofluorocarbon gas importers...........        325120          2869  Chlorodifluoromethane importers;
                                                                          Dichlorofluoroethane importers;
                                                                          Chlorodifluoroethane importers.
Chlorofluorocarbon gas exporters...........        325120          2869  Chlorodifluoromethane exporters;
                                                                          Dichlorofluoroethane exporters;
                                                                          Chlorodifluoroethane exporters.
Manufacturers of air conditioners and              333415  ............  Air-Conditioning Equipment and
 refrigerators.                                                           Commercial and Industrial
                                                                          Refrigeration Equipment Manufacturing.
Importers of air conditioners and                  333415          3585  Air-Conditioning Equipment and
 refrigerators.                                                           Commercial and Industrial
                                                                          Refrigeration Equipment Manufacturing.
----------------------------------------------------------------------------------------------------------------

    After considering the economic impacts of the proposed 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 
proposing to change 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 
using the same methodology, will also be eligible for allowances. EPA 
is not proposing any changes to the recordkeeping or reporting 
provisions and thus will not have any impact on the burden to these 
businesses.
    While EPA does not believe this proposal will have 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 
proposing to continue 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 is proposing to use the highest year of 
consumption. EPA is also to limit consideration of company-specific 
baseline adjustments to reflect permanent inter-company or inter-
pollutant transfers made prior to June 16, 2008 as discussed elsewhere 
in the preamble to avoiding skewing baselines to entities with ample 
resources or access to information. EPA also believes that the ability 
to transfer allowances among entities provides the greatest flexibility 
for small entities to manage their allocation. As noted in the 2003 
allocation (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, either on a calendar-year or permanent basis. 
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 continues to be interested in the potential impacts of the 
proposed rule on small entities and welcomes comments on issues related 
to such impacts.

D. Unfunded Mandates Reform Act

    This rule does not contain a Federal mandate that may result in 
expenditures of $100 million or more for State, local, and tribal 
governments, in the aggregate, or the private sector in any one year. 
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 general phaseout 
continue to implement the same general framework previously 
established. EPA does not anticipate that this proposed rulemaking will 
have any significant direct impacts or State, local and tribal 
governments or private sector entities. Thus, 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 proposed rule 
would apportion production and consumption allowances and establish 
baselines for private entities, not small governments.

E. Executive Order 13132: Federalism

    Executive Order 13132, entitled ``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 proposed rule does not have federalism implications. It will 
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. Today's proposal 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 solicits comment on this proposed rule from State and 
local officials.

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

    Executive Order 13175, entitled ``Consultation and Coordination 
with Indian Tribal Governments'' (65 FR 67249, November 9, 2000), 
requires EPA to develop an accountable process to ensure ``meaningful 
and timely input by tribal officials in the development of regulatory 
policies that have tribal implications.'' This proposed rule does not 
have tribal implications, as specified in Executive Order 13175. This 
proposal does 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 proposed rule.

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

    This action is not subject to EO 13045 (62 F.R. 19885, April 23, 
1997) because it is not economically significant as

[[Page 78702]]

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. 
The public is invited to submit or identify peer-reviewed studies and 
data, of which EPA may not be aware, that assess results of early-life 
exposure to UV radiation.
    This action proposes to reduce 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. EPA 
requests comments regarding the impacts of this proposal on the 
continued efforts to protect children's health.

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

    This rule is not a ``significant energy action'' as defined in 
Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use'' (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 proposed 
regulation predominately impacts HCFC production, imports, exports, and 
trades. The Agency has concluded that this rule is not likely to have 
any adverse energy effects.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law No. 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 
proposed rulemaking does not involve technical standards. Therefore, 
EPA is not considering 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 proposed rule 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.

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 11, 2008.
Stephen L. Johnson,
Administrator.

    40 CFR part 82 is proposed to be amended as follows:

PART 82--PROTECTION OF STRATOSPHERIC OZONE

    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

    2. Amend Sec.  82.3 by adding in alphabetical order the definition 
of ``Interstate Commerce'' to read as follows:

Sec.  82.3  Definitions for Class I and Class II Controlled Substances.

* * * * *
    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.
* * * * *

[[Page 78703]]

    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 Appendix E 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 transshipment or heel; or for 
exemptions permitted in Sec.  82.15(f).
    (2) 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 transshipment or 
heel; or for exemptions permitted in Sec.  82.15(f).
    (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 transshipment or heel; or for exemptions 
permitted in Sec.  82.15(f).
    (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 transshipment or 
heel; or for exemptions permitted in Sec.  82.15(f).
    (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 transshipment or heel; 
or for exemptions permitted in Sec.  82.15(f).
    (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 
transshipment or heel, or for exemptions permitted in Sec.  82.15(f).
    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:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                       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          35.2           4.9          125          125          125          125
2011.......................................................            0          35.2           4.9          125          125          125          125
2012.......................................................            0          35.2           4.9          125          125          125          125
2013.......................................................            0          35.2           4.9          125          125          125          125
2014.......................................................            0          35.2           4.9          125          125          125          125
--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * *
    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:

------------------------------------------------------------------------
                                                            Allowances
              Person                Controlled substance       (kg.)
------------------------------------------------------------------------
AGC Chemicals Americas............  HCFC-225ca..........         266,608
                                    HCFC-225cb..........         373,952
Arkema............................  HCFC-22.............      46,692,336
                                    HCFC-141b...........      24,647,925
                                    HCFC-142b...........         484,369
DuPont............................  HCFC-22.............      42,638,049
                                    HCFC-124............       2,269,210

[[Page 78704]]

Honeywell.........................  HCFC-22.............      37,378,252
                                    HCFC-141b...........      28,705,200
                                    HCFC-142b...........       2,417,534
                                    HCFC-124............       1,804,121
MDA Manufacturing.................  HCFC-22.............       2,383,835
Solvay Solexis....................  HCFC-142b...........       6,541,764
------------------------------------------------------------------------

    6. Revise Sec.  82.18(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 Appendix E 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 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 Appendix E 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 Appendix E 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]
* * * * *
    7. Revise Sec.  82.19 to read as follows:

Sec.  82.19  Apportionment of Baseline Consumption Allowances for Class 
II Controlled Substances.

    (a) 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:

------------------------------------------------------------------------
                                                            Allocation
              Person                Controlled substance       (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
                                    HCFC-22.............      48,637,642
Arkema............................  HCFC-141b...........      25,405,570
                                    HCFC-142b...........         483,827
                                    HCFC-124............           3,719
Automatic Equipment Sales.........  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............       2,933,906
                                    HCFC-124............         743,312
Full Circle.......................  HCFC-22.............          14,865
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

[[Page 78705]]

                                    HCFC-124............          50,380
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.............       3,781,691
                                    HCFC-141b...........       3,940,115
Solvay Solexis....................  HCFC-142b...........         194,536
Tulstar Products..................  HCFC-141b...........          89,913
                                    HCFC-123............          34,800
                                    HCFC-124............         229,582
------------------------------------------------------------------------

    (b) [Reserved]

[FR Doc. E8-29965 Filed 12-22-08; 8:45 am]

BILLING CODE 6560-50-P