Document ID: EPA-HQ-OAR-2011-0354-0017
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2012-01-04T05:00Z

[Federal Register Volume 76, Number 151 (Friday, August 5, 2011)]
[Rules and Regulations]
[Pages 47451-47469]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-19896]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 82

[EPA-HQ-OAR-2010-1040; FRL-9448-4]
RIN 2060-AQ82

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

AGENCY: Environmental Protection Agency (EPA).

ACTION: Interim final rule.

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SUMMARY: EPA is adjusting the allowance system controlling U.S. 
consumption and production of hydrochlorofluorocarbons (HCFCs) as a 
result of a recent court decision vacating a portion of the rule titled 
``Protection of Stratospheric Ozone: Adjustments to the Allowance 
System for Controlling HCFC Production, Import, and Export; Final 
Rule.'' EPA interprets the court's vacatur as applying to the part of 
the rule that establishes the company-by-company baselines and 
calendar-year allowances for HCFC-22 and HCFC-142b. This action 
relieves the regulatory ban on production and consumption of these two 
chemicals following the court's vacatur by establishing new company-by-
company HCFC-22 and HCFC-142b baselines and allocating production and 
consumption allowances for 2011.

DATES: This rule is effective August 5, 2011. While the urgent need for 
certainty regarding the consumption allowance allocations in the 2011 
control period precludes the Agency from considering any adjustments to 
the consumption allowances allocated in this action, EPA will consider 
all written comments received by September 6, 2011 to determine whether 
to issue additional production allowances for the time period covered 
by this action. Commenters may also submit comments on the issues 
addressed in this action as they pertain to future control periods.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2010-1040, 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  EPA-HQ-OAR-2010-1040, 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-2010-1040 Air 
and Radiation Docket at EPA West, 1301 Constitution Avenue NW., Room 
B108, Mail Code 6102T, Washington, DC 20004. 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-
2010-1040. 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 http://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: Luke H. Hall-Jordan by telephone at 
(202) 343-9591, or by e-mail at hall-jordan.luke@epa.gov, or by mail at 
U.S. Environmental Protection Agency, Stratospheric Protection 
Division, Stratospheric Program Implementation

[[Page 47452]]

Branch (6205J), 1200 Pennsylvania Avenue, NW., Washington, DC 20460. 
You may also visit the Ozone Protection Web site of EPA's Stratospheric 
Protection Division at http://www.epa.gov/ozone/strathome.html for 
further information about EPA's Stratospheric Ozone Protection 
regulations, the science of ozone layer depletion, and related topics.

SUPPLEMENTARY INFORMATION: Acronyms and Abbreviations. The following 
acronyms and abbreviations are used in this document.
APA--Administrative Procedure Act;
CAA--Clean Air Act;
CAAA--Clean Air Act Amendments of 1990;
CFC--Chlorofluorocarbon;
CFR--Code of Federal Regulations;
EPA--Environmental Protection Agency;
FR--Federal Register;
HCFC--Hydrochlorofluorocarbon;
HVAC--Heating, Ventilating, and Air Conditioning;
Montreal Protocol--Montreal Protocol on Substances that Deplete the 
Ozone Layer;
MOP--Meeting of the Parties;
MT--Metric Ton;
ODP--Ozone Depletion Potential;
ODS--Ozone-Depleting Substances;
Party--States and regional economic integration organizations that have 
consented to be bound by the Montreal Protocol on Substances that 
Deplete the Ozone Layer.
    Organization of This Document. The following outline is provided to 
aid in locating information in this preamble.

I. Regulated Entities
II. Background
    A. How does the Montreal Protocol phase out HCFCs?
    B. How does the Clean Air Act phase out HCFCs?
    C. What sections of the Clean Air Act apply to this rulemaking?
    D. How does this action relate to the recent court decision?
    1. Addressing 2010 Allowances
III. Justification for This Interim Final Rule
IV. Summary of This Interim Final Action
V. Allocation of Allowances for the 2011 Control Period
    A. Baselines for HCFC-22 and HCFC-142b Allowances
    1. Adjusting the Baseline for Inter-Company and Inter-Pollutant 
Transfers
    B. Factors for Considering Allocation Amounts for HCFC-22 and 
HCFC-142b
    1. The Importance of HCFC-22 Relative to HCFC-142b Servicing 
Needs for Existing Equipment
    2. Meeting Servicing Needs With Virgin and Recovered Material
    3. Annual Reduction in Allocated Amounts
    C. Allocations of HCFC-22 and HCFC-142b
    1. HCFC-22 Consumption Allowances for 2011
    2. HCFC-22 Production Allowances for 2011
    3. HCFC-142b Allowances for 2011
    4. How the Aggregate for HCFC-22 and HCFC-142b Translates 
Entity-by-Entity
    D. HCFC-141b, HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb 
Allowances
    E. Other HCFCs
VI. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and 
Executive Order 13563: Improving Regulation and Regulatory 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 and Advancement Act
    J. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    K. Congressional Review Act

I. Regulated Entities

    This rule will affect the following categories:

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                   Category                       NAICS code       SIC code      Examples of regulated entities
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Industrial Gas Manufacturing..................          325120            2869  Fluorinated hydrocarbon gases
                                                                                 manufacturers and reclaimers.
Other Chemical and Allied Products Merchant             422690            5169  Chemical gases and compressed
 Wholesalers.                                                                    gases merchant wholesalers.
Air-Conditioning and Warm Air Heating                   333415            3585  Air-conditioning equipment and
 Equipment and Commercial and Industrial                                         commercial and industrial
 Refrigeration Equipment Manufacturing.                                          refrigeration equipment
                                                                                 manufacturers.
Air-Conditioning Equipment and Supplies                 423730            5075  Air-conditioning (condensing
 Merchant Wholesalers.                                                           unit, compressors) merchant
                                                                                 wholesalers.
Electrical and Electronic Appliance,                    423620            5064  Air-conditioning (room units)
 Television, and Radio Set Merchant                                              merchant wholesalers.
 Wholesalers.
Plumbing, Heating, and Air-Conditioning                 238220      1711, 7623  Central air-conditioning system
 Contractors.                                                                    and commercial refrigeration
                                                                                 installation; HVAC contractors.
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    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. This table lists the types of entities that could potentially 
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

    EPA is undertaking this rulemaking as a result of the decision 
issued by the U.S. Court of Appeals for the District of Columbia 
Circuit (Court) in Arkema v. EPA (618 F.3d 1, DC Cir. 2010) regarding 
the December 15, 2009 final rule titled ``Protection of Stratospheric 
Ozone: Adjustments to the Allowance System for Controlling HCFC 
Production, Import, and Export,'' published at 74 FR 66413 (2009 Final 
Rule). Certain allowance holders affected by the 2009 Final Rule filed 
petitions for judicial review of the rule under section 307(b) of the 
Clean Air Act. Among other arguments, the petitioners contended that 
the rule was impermissibly retroactive because in setting the baselines 
for the new regulatory period, EPA did not take into account certain 
inter-pollutant baseline transfers that petitioners had performed 
during the prior regulatory period.
    The Court issued a decision on August 27, 2010, agreeing with 
petitioners that ``the [2009] Final Rule unacceptably alters 
transactions the EPA approved under the 2003 Rule'' (Arkema v. EPA, 618 
F.3d at 3). The Court vacated the rule in part, ``insofar

[[Page 47453]]

as it operates retroactively,'' and remanded to EPA ``for prompt 
resolution,'' (618 F.3d at 10). The Court withheld the mandate for the 
decision pending the disposition of any petition for rehearing. EPA's 
petition for rehearing was denied on January 21, 2011. The mandate 
issued on February 4, 2011. More detail is provided on the case and 
EPA's interpretation of the Court's decision in Section II.D.

A. How does the Montreal Protocol phase out HCFCs?

    The Montreal Protocol on Substances that Deplete the Ozone Layer is 
the international agreement aimed at reducing and eventually 
eliminating the production and consumption of stratospheric ozone-
depleting substances (ODS). 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), 
which included Title VI on Stratospheric Ozone Protection, codified as 
42 U.S.C. chapter 85, Subchapter VI, to ensure that the U.S. could 
satisfy its obligations under the Montreal Protocol. Title VI includes 
restrictions on production, consumption, and use of ODS 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 (CAA Sec.  606). Both the Montreal Protocol and the Clean Air 
Act (CAA) 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 ozone depletion potential (ODP) substitutes for CFCs 
and other ODS. EPA similarly viewed HCFCs as ``important interim 
substitutes that will allow for the earliest possible phaseout of CFCs 
and other Class I substances'' \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 U.S. 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 (MT), 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 a later adjustment in 
2007, the schedule initially called for a 35 percent reduction of the 
consumption cap in 2004, followed by a 65 percent reduction in 2010, a 
90 percent reduction in 2015, a 99.5 percent reduction in 2020 
(restricting the remaining 0.5 percent of baseline to the servicing of 
existing refrigeration and air-conditioning equipment), with a total 
phaseout in 2030.
    The Copenhagen Amendment did not cap HCFC production. In 1999, the 
Parties created a cap on production for Article 2 Parties through an 
amendment to the Montreal Protocol agreed by the Eleventh Meeting of 
the Parties (Beijing, 29 November-3 December 1999, Decision XI/5). The 
cap on production was set at the average of: (a) 1989 HCFC production 
plus 2.8 percent of 1989 CFC production, and (b) 1989 HCFC consumption 
plus 2.8 percent of 1989 CFC consumption. Based on this formula, the 
HCFC production cap for the U.S. was 15,537 ODP-weighted MT, effective 
January 1, 2004. This became the U.S. production baseline for HCFCs.
    To further protect human health and the environment, the Parties to 
the Montreal Protocol adjusted the Montreal Protocol's phaseout 
schedule for HCFCs at the 19th Meeting of the Parties in September 
2007. In accordance with Article 2(9)(d) of the Montreal Protocol, the 
adjustment to the phaseout schedule was effective on May 14, 2008.\2\
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    \2\ 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 U.S. 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 previously required. The 
other milestones remain the same. The adjustment also resulted in a 
phaseout schedule for HCFC production that parallels the consumption 
phaseout schedule. All production and consumption for Article 2 Parties 
is phased out by 2030.
    Decision XIX/6 also adjusted the provisions for Parties operating 
under paragraph 1 of Article 5 (developing countries): (1) To set HCFC 
production and consumption baselines based on the average 2009-2010 
production and consumption, respectively; (2) to freeze HCFC production 
and consumption at those baselines in 2013; and (3) to add stepwise 
reductions of 10 percent below baselines by 2015, 35 percent by 2020, 
67.5 percent by 2025, and 97.5 percent by 2030--allowing, between 2030 
and 2040, an annual average of no more than 2.5 percent to be produced 
or imported solely for servicing existing air-conditioning and 
refrigeration equipment. All production and consumption for Article 5 
Parties will be 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.\3\ Paragraph

[[Page 47454]]

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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    \3\ Paragraphs 4-6 of adjusted Article 2F read as follows:
    ``4. Each Party shall ensure that for the twelve-month period 
commencing on 1 January 2010, and in each twelve-month period 
thereafter, its calculated level of consumption of the controlled 
substances in Group I of Annex C does not exceed, annually, twenty-
five percent of the sum referred to in paragraph 1 of this Article. 
Each Party producing one or more of these substances shall, for the 
same periods, ensure that its calculated level of production of the 
controlled substances in Group I of Annex C does not exceed, 
annually, twenty-five percent of the calculated level referred to in 
paragraph 2 of this Article. However, in order to satisfy the basic 
domestic needs of the Parties operating under paragraph 1 of Article 
5, its calculated level of production may exceed that limit by up to 
ten percent of its calculated level of production of the controlled 
substances in Group I of Annex C as referred to in paragraph 2.
    5. Each Party shall ensure that for the twelve-month period 
commencing on 1 January 2015, and in each twelve-month period 
thereafter, its calculated level of consumption of the controlled 
substances in Group I of Annex C does not exceed, annually, ten 
percent of the sum referred to in paragraph 1 of this Article. Each 
Party producing one or more of these substances shall, for the same 
periods, ensure that its calculated level of production of the 
controlled substances in Group I of Annex C does not exceed, 
annually, ten percent of the calculated level referred to in 
paragraph 2 of this Article. However, in order to satisfy the basic 
domestic needs of the Parties operating under paragraph 1 of Article 
5, its calculated level of production may exceed that limit by up to 
ten percent of its calculated level of production of the controlled 
substances in Group I of Annex C as referred to in paragraph 2.
    6. Each Party shall ensure that for the twelve-month period 
commencing on 1 January 2020, and in each twelve-month period 
thereafter, its calculated level of consumption of the controlled 
substances in Group I of Annex C does not exceed zero. Each Party 
producing one or more of these substances shall, for the same 
periods, ensure that its calculated level of production of the 
controlled substances in Group I of Annex C does not exceed zero. 
However:
    i. Each Party may exceed that limit on consumption by up to zero 
point five percent of the sum referred to in paragraph 1 of this 
Article in any such twelve-month period ending before 1 January 
2030, provided that such consumption shall be restricted to the 
servicing of refrigeration and air conditioning equipment existing 
on 1 January 2020;
    ii. Each Party may exceed that limit on production by up to zero 
point five percent of the average referred to in paragraph 2 of this 
Article in any such twelve-month period ending before 1 January 
2030, provided that such production shall be restricted to the 
servicing of refrigeration and air conditioning equipment existing 
on 1 January 2020.''
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B. How does the Clean Air Act phase out HCFCs?

    The 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 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).
    On January 21, 2003 (68 FR 2820), EPA promulgated regulations (2003 
Final Rule) to ensure compliance with the first reduction milestone in 
the HCFC phaseout: the requirement that by January 1, 2004, the U.S. 
reduce HCFC consumption by 35 percent and freeze HCFC production. In 
the 2003 Final Rule, EPA established chemical-specific consumption and 
production baselines for HCFC-141b, HCFC-22, and HCFC-142b for the 
initial regulatory period ending December 31, 2009. Section 601(2) 
states that EPA may select ``a representative calendar year'' to serve 
as the company baseline for HCFCs. In the 2003 Final Rule, EPA 
concluded that because the entities eligible for allowances had 
differing production and import histories, no single year was 
representative for all companies. Therefore, EPA assigned an individual 
consumption baseline year to each company by selecting its highest ODP-
weighted consumption year from among the years 1994 through 1997. EPA 
assigned individual production baseline years in the same manner. EPA 
also provided an exception allowing new entrants provided that they 
began importing after the end of 1997 but before April 5, 1999, the 
date the advanced notice of proposed rulemaking was published. EPA 
believed that such small businesses might not have been aware of the 
impending rulemaking that would affect their ability to continue in the 
HCFC market.
    The 2003 Final Rule apportioned production and consumption 
baselines to each company in amounts equal to the amounts in the 
company's highest ``production year'' or ``consumption year,'' as 
described above. It completely phased out the production and import of 
HCFC-141b by granting 0 percent of that substance's baseline for 
production and consumption in the table at 40 CFR 82.16. EPA did, 
however, create a petition process to allow applicants to request very 
small amounts of HCFC-141b beyond the phaseout. The 2003 Final Rule 
also granted 100 percent of the baselines for production and 
consumption of HCFC-22 and HCFC-142b for each of the years 2003 through 
2009. EPA was able to allocate allowances for HCFC-22 and HCFC-142b at 
100 percent of baseline because, in light of the concurrent complete 
phaseout of HCFC-141b, the allocations for HCFC-22 and HCFC-142b, 
combined with projections for consumption of all other HCFCs, remained 
below the 2004 cap of 65 percent of the U.S. baseline.
    EPA allocates allowances for specific years; they are valid between 
January 1 and December 31 of a given control period (i.e., calendar 
year). Prior to December 15, 2009, EPA had not allocated any HCFC 
allowances for year 2010 or beyond. The regulations at section 82.15(a) 
and (b) only addressed the production and import of HCFC-22 and HCFC-
142b for the years 2003-2009. Through the 2009 Final Rule (74 FR 
66412), EPA addressed the production and import of HCFC-22 and HCFC-
142b for the 2010-2014 control periods. Absent the granting of 
calendar-year allowances, section 82.15 would have prohibited the 
production and import of HCFC-22 and HCFC-142b after December 31, 2009. 
The 2009 Final Rule allowed for continued production and consumption, 
at specified amounts, of HCFC-142b, HCFC-22, and other HCFCs not 
previously included in the allowance system, for the 2010-2014 control 
periods.
    In the U.S., an allowance is the unit of measure that controls 
production and consumption of ODS. 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. A calendar-year allowance represents the 
privilege granted to a company to produce or import one kilogram (not 
ODP-weighted) of the specific substance. EPA allocates two types of 
calendar-year allowances--production allowances and consumption 
allowances. ``Production allowance'' and ``consumption allowance'' are 
defined at section 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 transfer calendar-year allowances of one type of 
HCFC for calendar-year allowances of another type of HCFC, with 
transactions weighted according to the ODP of the chemicals involved. 
Pursuant to section 607 of the CAA, EPA applies an offset to each HCFC 
transfer by deducting 0.1 percent from the transferor's allowance 
balance. The offset benefits the ozone layer since it ``results in 
greater total reductions in the production in each year of * * * class 
II substances than would occur in that year in the absence of such 
transactions'' (42 U.S.C. 7671f).
    The U.S. remained comfortably below the aggregate HCFC cap through 
2009. The 2003 Final Rule announced that EPA would allocate allowances 
for

[[Page 47455]]

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 number 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 noted that it 
would likely achieve the 2010 reduction step by applying a percentage 
reduction to the HCFC-22 and HCFC-142b baselines. EPA subsequently 
monitored the market to estimate servicing needs and market adjustments 
in the use of HCFCs, including HCFCs for which EPA did not establish 
baselines in the 2003 Final Rule.
    In the 2009 Final Rule, EPA determined both the estimated demand 
for HCFC-22 during the 2010-2014 regulatory period and the percentage 
of that estimated demand for which it was appropriate to allocate 
allowances. As described in Section V.B. of this action, EPA determined 
that the percentage of the estimated demand allocated in the form of 
allowances should not remain constant from year to year but rather 
should decline on an annual basis. For 2010, EPA allocated allowances 
equal to 80 percent of the estimated demand for HCFC-22, concluding 
that reused, recycled, and reclaimed material could meet the remaining 
20 percent. Under the 2009 Final Rule, the percentage of estimated 
demand for which there was no allocation, and therefore would need to 
be met through recycling and reclamation, rose from 20 percent in 2010 
to 29 percent in 2014 to ensure the U.S. market would have a viable 
reclamation industry and could meet the 2015 stepwise reduction under 
the Montreal Protocol. The determinations EPA made in the 2009 Final 
Rule regarding (1) The total estimated demand for HCFC-22 in 2010-2014 
and (2) the percentage of that estimated demand that EPA would address 
through an allowance allocation were not at issue in the litigation and 
are unaffected by the Court's decision. EPA is not revisiting either 
determination with respect to 2011 in this interim final action, but 
rather is relying on the existing record for the 2009 Final Rule. 
However, EPA welcomes comment on whether it should revisit these 
determinations in the future. EPA is also interested in comments on 
whether it could and should allocate a different percentage of baseline 
for calendar-year production than for calendar-year consumption, while 
still meeting U.S. obligations under the Montreal Protocol and 
complying with the CAA.

C. What sections of the Clean Air Act apply to this rulemaking?

    Several sections of the CAA apply to this rulemaking. Section 605 
of the CAA phases out production and consumption and restricts the use 
of HCFCs in accordance with the schedule set forth in that section. As 
discussed in the 2009 Final Rule (74 FR 66416), section 606 provides 
EPA authority to set a more stringent phaseout schedule than the 
schedule in section 605 based on an EPA determination regarding current 
scientific information or the availability of substitutes, or to 
conform to any acceleration under the Montreal Protocol. EPA previously 
set a more stringent schedule than the section 605 schedule through a 
rule published December 10, 1993 (58 FR 65018). Through the 2009 Final 
Rule, EPA made a further adjustment to the section 605 schedule based 
on the acceleration under the Montreal Protocol as agreed to at the 
Meeting of the Parties in September 2007. The more stringent schedule 
established in that rule is unaffected by the recent Court decision and 
is therefore still in effect.
    Section 606 provides authority for EPA to promulgate regulations 
that establish a schedule for production and consumption that is more 
stringent than what is set forth in section 605 if: ``(1) Based on an 
assessment of credible current scientific information (including any 
assessment under the Montreal Protocol) regarding harmful effects on 
the stratospheric ozone layer associated with a class I or class II 
substance, the Administrator determines that such more stringent 
schedule may be necessary to protect human health and the environment 
against such effects, (2) based on the availability of substitutes for 
listed substances, the Administrator determines that such more 
stringent schedule is practicable, taking into account technological 
achievability, safety, and other relevant factors, or (3) the Montreal 
Protocol is modified to include a schedule to control or reduce 
production, consumption, or use of any substance more rapidly than the 
applicable schedule under this title.'' It is only necessary to meet 
one of the three criteria. In the 2009 Final Rule, EPA determined that 
all three criteria had been met with respect to the schedule for 
phasing out production and consumption of HCFC-22 and HCFC-142b.
    As noted in the 2009 Final Rule, while section 606 is sufficient 
authority for establishing a more stringent schedule than the section 
605 phaseout schedule, section 614(b) of the CAA provides that in the 
case of a conflict between the CAA and the Montreal 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 Montreal Protocol. To meet the 2010 stepdown 
requirement, EPA is continuing to allocate HCFC allowances at a level 
that will ensure the aggregate HCFC production and consumption will not 
exceed 25 percent of the U.S. baselines. For more discussion of this 
point, see 74 FR 66416.
    Finally, section 607 addresses transfers of allowances both between 
companies and chemicals. EPA is further clarifying its policy on inter-
pollutant transfers in this action.

D. How does this action relate to the recent court decision?

    Certain allowance holders affected by the 2009 Final Rule filed 
petitions for review in the U.S. Court of Appeals for the District of 
Columbia Circuit. Among other arguments, the petitioners, Arkema Inc., 
Solvay Fluorides, LLC, and Solvay Solexis, Inc., contended that the 
rule was impermissibly retroactive because in setting the baselines for 
the new regulatory period, EPA did not take into account certain inter-
pollutant baseline transfers that petitioners had performed during the 
prior regulatory period. The transfers at issue occurred in 2008. 
Solvay Solexis, Inc. submitted two Class II Controlled Substance 
Transfer Forms for consumption allowance transfers to Solvay Fluorides, 
LLC on February 15, 2008, and March 4, 2008. Arkema, Inc. submitted two 
Class II Controlled Substance Transfer Forms for consumption and 
production allowance transfers on April 18, 2008. Each company 
requested EPA's approval to convert HCFC-142b allowances to HCFC-22 
allowances, and checked a box on the EPA transfer form indicating that 
``baseline'' allowances would be transferred. EPA sent non-objection 
notices to both Solvay Solexis and Solvay Fluorides on February 21, 
2008 and March 20, 2008 and to Arkema, Inc. in April 2008. The transfer 
requests and EPA's approvals were attached to petitioners' court 
filings and are available in the docket for this action.
    In the Notice of Proposed Rulemaking titled ``Protection of 
Stratospheric Ozone: Adjustments to the Allowance System for 
Controlling HCFC Production, Import, and Export,'' published in the 
Federal Register at 73 FR 78680 on December 23, 2008 (2008 Proposed 
Rule), EPA requested

[[Page 47456]]

comments on establishing baselines for the 2010-2014 regulatory period 
``with or without'' taking into account baseline inter-pollutant 
transfers made during the 2003-2009 regulatory period (73 FR 78687). 
The proposed regulatory text accounted for the inter-pollutant 
transfers discussed above. The increase in HCFC-22 baseline allowances 
for Arkema, Inc. and Solvay Fluorides, LLC presented in the 2008 
Proposed Rule resulted in a larger amount of HCFC-22 baseline 
allowances overall and therefore a lower percentage of HCFC-22 
baselines allocated across the board in each control period. 
Specifically, the proposed shift resulted in a 16 percent decrease in 
market share for all other allowance holders, and increases for the 
petitioners: Arkema and Solvay. For more detail on the impact of these 
transfers, see Section V.C. of this preamble.
    In the 2009 Final Rule, after considering comments, EPA determined 
that allowing inter-pollutant transfers to carry forward from one 
regulatory period to the next could undermine the Agency's chemical-by-
chemical phaseout approach and could encourage market manipulation. For 
a more detailed discussion, see Section V.A.1. EPA also concluded that 
section 607 of the CAA was best read as limiting inter-pollutant 
transfers to those conducted on an annual basis. For these reasons, EPA 
did not take the 2008 inter-pollutant transfers into account in 
establishing the baselines for the 2009 Final Rule covering 2010-2014.
    The Court issued a decision on August 27, 2010, agreeing with 
petitioners that ``the [2009] Final Rule unacceptably alters 
transactions the EPA approved under the 2003 Rule'' (Arkema v. EPA, 618 
F.3d at 3). The Court vacated the rule in part, ``insofar as it 
operates retroactively,'' and remanded to EPA ``for prompt 
resolution,'' (618 F.3d at 10). The Court withheld the mandate for the 
decision pending the disposition of any petition for rehearing. On 
November 12, 2010, EPA filed a petition for rehearing, which was denied 
on January 21, 2011. The mandate issued on February 4, 2011.
    Because the Court vacated the rule only in part, without specifying 
which part or parts were vacated, EPA may adopt a reasonable 
interpretation of the vacatur's extent. In doing so, EPA is relying on 
its expertise in administering the HCFC phaseout regulations under 
Title VI of the CAA. First, EPA notes that the rule contains elements 
that were not at issue in the litigation. EPA concludes that the 
vacatur has no effect on allowances for any substances other than HCFC-
142b and HCFC-22, since the petitioners' claims and the opinion itself 
discuss only those two substances. Similarly, EPA concludes that other 
discrete portions of the rule, such as the provisions on use and 
introduction into interstate commerce, are unaffected by the vacatur.
    The baselines for HCFC-142b and HCFC-22 were clearly at issue in 
the litigation and indeed are the focus of the Court's opinion. The 
Court found that ``the Agency's refusal to account for the Petitioners' 
baseline transfers of inter-pollutant allowances in the Final Rule is 
impermissibly retroactive,'' (618 F.3d at 9). Because baseline and 
calendar year allowances are inextricably linked,\4\ EPA has determined 
that the Court's vacatur voids the HCFC-22 and HCFC-142b baselines in 
40 CFR 82.17 and 82.19 as well as the percentage of baseline allocated 
for those specific substances in 40 CFR 82.16 for all companies listed 
in those sections.\5\ This means that until EPA establishes new 
baselines and allocates new calendar-year allowances, production and 
import of these two substances is prohibited under 40 CFR 82.15. 
Recognizing this scenario, on January 28, 2011, EPA sent letters to 
affected stakeholders informing them that the Agency would exercise 
enforcement discretion for a limited period provided their production 
and import did not exceed specified levels and provided that they 
adhered to additional conditions.
---------------------------------------------------------------------------

    \4\ The reason baseline and calendar-year allocations are 
inextricable is because calendar-year allocations are expressed as a 
percentage of baseline, and the percentage of baseline allocated for 
a specific substance varies depending on the sum of all company 
baselines for that substance. The process works as follows for each 
specific HCFC: First, all the company-specific baselines listed in 
the tables at 40 CFR 82.17 and 82.19 are added to determine the 
aggregate amount of baseline production and consumption, 
respectively. Second, EPA determines how many consumption allowances 
the market needs for a given year, taking into account recycled, 
reused, and reclaimed material, and divides that amount by the 
aggregate amount of baseline allowances. The resulting percentage 
listed in the table at section 82.16 becomes what each company is 
allowed to consume in a given control period. For example, a company 
with 100,000 kg of HCFC-22 baseline allowances would multiply that 
number by the percentage allowed for 2011 (for example, 32 percent) 
to determine its calendar-year allowance is 32,000 kg. Historically 
and in this interim final rule, EPA has allocated the same 
percentage of baseline allowances for production as it does for 
consumption.
    \5\ The companies' allocations are inter-related because, as 
noted in footnote 4, the percentage of baseline allocated varies 
according to the sum of the company-specific baselines.
---------------------------------------------------------------------------

    In determining the meaning of the Court's vacatur, EPA considered 
whether this interpretation was consistent with what the Court intended 
and a good fit for the specific circumstances, which include the goals 
and design of the HCFC allowance program and the basic structure of the 
2009 Final Rule. While this interpretation is appropriate in this 
instance, it is possible that another interpretation would be more 
appropriate in a case involving a program with different goals, design, 
or structure.
    In the 2009 Final Rule, EPA relied on its assessment of the amount 
of virgin and recovered HCFC-22 and HCFC-142b needed to service 
existing equipment and transition to the 2015 stepdown under the 
Montreal Protocol. The Court did not take issue with this assessment. 
At this time, EPA has not received information indicating that demand 
will be higher than the Agency's assessment predicted. On the contrary, 
EPA has heard from several anecdotal sources that the amount of actual 
market demand for HCFC-22 may in fact be lower than the amount 
identified in the Servicing Tail Report. However, since EPA does not 
have sufficient data to support this conclusion at this time, and 
recognizes the urgent need to act quickly to establish allowances for 
the 2011 control period, the Agency is relying on the record for the 
2009 Final Rule, which includes the Agency's prior assessment of demand 
for HCFC-22 and HCFC-142b in 2011. Therefore, through this action, EPA 
is establishing new baselines for 2011 reflecting the court's decision 
and allocating the percentage of baseline needed to ensure that the 
total allocation for 2011 remains the same as in the 2009 Final Rule. 
If sufficient information becomes available in future, EPA may adjust 
the aggregate allocation level for future control periods.
1. Addressing 2010 Allowances
    EPA interprets the Court's decision as applying, at a minimum, to 
the HCFC-22 and HCFC-142b baseline and calendar-year allowances for 
2011-2014. EPA is not addressing 2010 allowances in this action. The 
Agency plans to take comment in a future notice-and-comment rulemaking 
on whether the vacatur and remand should be interpreted as applying to 
the 2010 allocations, and if so, how allowances in future control 
periods might be adjusted to reflect this. The 2011 control period is 
already well underway, and as discussed in the good cause finding in 
Section III, it is important that EPA establish a definitive 2011 
allocation now to dispel confusion and allow normal business activities 
to proceed. In particular, EPA believes the urgent need for certainty 
regarding the consumption

[[Page 47457]]

allowance allocations in the 2011 control period precludes the Agency 
from considering any adjustments during 2011. However, EPA intends to 
address this issue in detail in a separate notice-and-comment 
rulemaking with respect to future control periods.

III. Justification for This Interim Final Rule

    EPA is taking this action as an interim final rule without prior 
proposal and public comment because EPA finds that the good cause 
exemption from the notice-and-comment rulemaking requirement of the 
Administrative Procedure Act (APA), 5 U.S.C. 551 et seq., applies here. 
Section 307(d) of the CAA states that in the case of any rule to which 
section 307(d) applies, notice of proposed rulemaking must be published 
in the Federal Register (CAA Sec.  307(d)(3)). The promulgation or 
revision of regulations under Title VI of the CAA is generally subject 
to section 307(d). However, section 307(d) does not apply to any rule 
referred to in subparagraphs (A) or (B) of section 553(b) of the APA. 
Section 553(b)(B) of the APA, 5 U.S.C. 553(b)(B), provides that, when 
an agency for good cause finds that notice-and-comment public 
procedures are impracticable, unnecessary, or contrary to the public 
interest, the agency may issue a rule without providing notice and an 
opportunity for public comment.
    EPA has determined that there is good cause for making today's rule 
final without prior proposal and opportunity for comment because such 
notice and opportunity for comment is unnecessary, impracticable, and 
contrary to the public interest. In reaching this determination, EPA 
considered several factors: (1) Taking interim final action for 2011 
avoids regulatory confusion, disruption of normal business activities, 
and effects on consumers pending development of a notice-and-comment 
rulemaking (see, e.g., Brae Corp. v. United States, 740 F.2d 1023 (DC 
Cir. 1984)); (2) the Agency is relying on the existing record from the 
2009 Final Rule for this action (see, e.g., Chamber of Commerce v. SEC, 
443 F.3d 890 (DC Cir. 2006)); and (3) the rule's duration is limited 
(see, e.g., Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 
506 (DC Cir. 1983)).
    First, it is in the public interest to dispel confusion, allow 
normal business activities to proceed, and avoid adverse effects on 
consumers. EPA has received numerous questions from industry about 
what, if any, allowances companies currently hold in light of the 
Court's decision. The primary purpose of this interim final rule is to 
dispel confusion and provide regulatory certainty for the near term. 
EPA interprets the vacatur as voiding company baselines and calendar-
year allowances for HCFC-22 and HCFC-142b, and because entities are 
prohibited from producing or importing HCFCs without allowances, quick 
action is necessary to ensure the continued production and import of 
those two HCFCs. This interim final action will provide industry with 
certainty for 2011, and allow normal business operations to continue. 
It also gives EPA time to develop notice-and-comment rules that will 
cover subsequent control periods.
    This action will also avoid unintended consequences for consumers 
and businesses who own appliances containing HCFC-22 and/or HCFC-142b 
(e.g., refrigerators and air conditioners), as well as the businesses 
that service these appliances. Absent this rulemaking, there could be a 
shortage of these HCFCs. Consumers and businesses unable to service 
their existing HCFC-22 equipment with HCFCs would instead have to 
retrofit their existing appliances before the end of their useful life 
to use a refrigerant other than that which was intended for the 
appliance, or purchase new equipment to replace existing appliances. 
Not only would this be expensive and unexpected, especially for those 
who bought a new unit shortly before January 1, 2010, but the shortage 
could lead to improper retrofits that decrease a unit's effectiveness 
and energy efficiency, cost the consumer more to operate, and result in 
further refrigerant emissions to the atmosphere. Considering the 
current state of the economy, shortages of HCFC-22 could lead appliance 
owners, who likely do not have the same level of experience as a 
licensed professional, to recharge their units on their own. Improper 
retrofits and recharging could raise the potential for mixing 
refrigerants, which could damage systems and increase the likelihood of 
mixed refrigerants being vented into the atmosphere, since mixtures may 
not work properly and likely could not be reclaimed.
    At worst, these scenarios could lead to an unanticipated changeover 
of significant quantities of equipment, which would be at odds with 
EPA's goal of minimizing impacts to business and consumers by 
supporting a gradual turnover of the installed base of equipment as 
individual equipment reaches the end of its useful life, allowing 
existing equipment to continue to operate properly. In the preamble to 
the 2009 Final Rule, EPA stated: ``Congress intended to permit the 
continued use of previously-manufactured appliances'' (74 FR 66438). 
EPA discussed this issue in detail at that time, in the context of the 
section 605(a) ban on the ``use'' of HCFCs (74 FR 66437-66438). In this 
action, the Agency is not revisiting its analysis or conclusions with 
respect to this issue. Accordingly, EPA is allocating production and 
consumption allowances for HCFC-22 and HCFC-142b in a way that avoids 
shortening the useful lifetime of appliances that were manufactured 
prior to the effective date of the use ban (January 1, 2010).
    Furthermore, a supply shortage could raise the price of affected 
gases, thereby increasing incentives for entities to illegally smuggle 
HCFC-22 into the country to meet the demand of consumers and 
businesses. There are numerous cases cited on the EPA Web site (http://www.epa.gov/ozone/enforce/index.html) documenting the smuggling of CFCs 
and HCFCs. Not only would this hurt entities that are abiding by the 
law, it could even hurt consumers and businesses that unknowingly 
receive inferior material. For all these reasons, it is important that 
EPA take action quickly. Since it is impracticable to complete a 
notice-and-comment rulemaking prior to the 2011 summer season, when 
working air conditioners are most important, and delay would be 
contrary to the public interest, interim final action is necessary.
    The second reason for invoking the good cause exemption is that EPA 
is relying on the existing record for the 2009 Final Rule, which is 
still applicable and sufficiently current for the purposes of this 
action. In this interim final rule, EPA is not revisiting the 
determination made in the 2009 Final Rule regarding the total amount of 
HCFC production and import that the Agency will allow for 2011. EPA is 
simply addressing what share of that total amount should be allocated 
to particular companies. The 2008 Proposed Rule (73 FR 78680) provided 
all interested parties an opportunity to comment on the total HCFC 
production and import amount for 2011. Thus, it is unnecessary to 
provide a second opportunity to comment on that amount prior to issuing 
this interim final rule.
    Third, this interim final rule only addresses 2011--the current 
control period--and is thus limited in duration. The specific duration 
is defined by the structure of the stratospheric ozone protection 
program, which operates in control periods that correspond to calendar 
years. Allowances are allocated for a specific control period. EPA 
intends to initiate a notice-and-

[[Page 47458]]

comment rulemaking or rulemakings as soon as possible to address 
subsequent control periods.
    For the reasons explained above, and given the Court's statement 
that it was remanding to EPA ``for prompt resolution,'' notice and 
public procedure are impracticable, unnecessary, and contrary to the 
public interest. EPA finds that this constitutes good cause under 5 
U.S.C. 553(b)(B). Nonetheless, EPA is providing 30 days for submission 
of public comments following this action. EPA will consider all written 
comments submitted in the allotted time period to determine whether to 
issue additional production allowances for 2011.
    Section 553(d) of the Administrative Procedure Act (APA), 5 U.S.C. 
chapter 5, generally provides that rules may not take effect earlier 
than 30 days after they are published in the Federal Register. APA 
section 553(d) excepts from this provision any action that grants or 
recognizes an exemption or relieves a restriction. Since today's action 
relieves a restriction from the regulatory ban on the production and 
consumption of HCFC-22 and HCFC-142b in the U.S., EPA is making this 
action effective immediately upon publication to ensure the 
availability of these HCFCs for servicing air conditioning and 
refrigeration equipment in 2011.

IV. Summary of This Final Action

    In response to the Court's decision, EPA is (1) Establishing 2011 
company-by-company consumption and production baselines for HCFC-22 and 
HCFC-142b in the tables at 40 CFR 82.17 and 82.19 in a manner that 
reflects the 2008 inter-pollutant baseline transfers and (2) allocating 
company-by-company production and consumption allowances for these 
substances for 2011 by establishing percentages of baseline in the 
table at section 82.16. EPA is also updating the tables at sections 
82.17 and 82.19 to reflect 2010 inter-company, single-pollutant 
baseline transfers and revising the list of allowance holders to update 
company names. These actions are consistent with actions taken in the 
2009 Final Rule. To reflect the court's vacatur, EPA is removing the 
allocation percentages from the table at section 82.16 for the years 
2011-2014. In this rulemaking, EPA is adding an allocation percentage 
for 2011. In a separate notice-and-comment rulemaking or rulemakings, 
EPA will address the allocations for the control periods 2012-2014. All 
aspects of the 2009 Final Rule promulgated on December 15, 2009 (74 FR 
66412) that are not addressed in this interim final rule are unchanged.
    As a Party to the Montreal Protocol, and having ratified the 
Montreal Protocol and all of its amendments, the U.S. was required to 
decrease its amount of HCFC consumption and production to 25 percent of 
the U.S. baseline in 2010. The cap is the same for the years 2010-2014 
before it drops down to 10 percent of baseline in 2015. Under the cap, 
the aggregate allowances for all U.S. HCFC consumption in 2011 cannot 
exceed 3,810 ODP-weighted MT (25 percent of the aggregate U.S. 
consumption baseline) annually, and the aggregate allowances for all 
U.S. HCFC production in 2011 cannot exceed 3,884.25 ODP-weighted MT (25 
percent of the aggregate U.S. production baseline) annually.
    To stay below the cap set by the Montreal Protocol for the 2011 
control period addressed in this rulemaking, EPA is using the 
historical production and consumption baselines as adjusted in the 2009 
Final Rule, with further adjustments to reflect the 2008 inter-
pollutant baseline transfers and inter-company, single-pollutant 
baseline transfers that occurred after issuance of the 2009 Final Rule.
    EPA determined in the 2009 Final Rule that for HCFC-22, it was 
necessary to allocate a percentage of baseline that would decrease on 
an annual basis to reflect a projected decrease in demand as well as to 
promote recycling and reclamation. EPA is not revisiting that 
determination in this rulemaking. EPA concluded in the 2009 Final Rule 
that this approach would help prevent shortages that might otherwise 
occur upon the stepdown in 2015. In this action, EPA is allocating 32.0 
percent of baseline for HCFC-22 in 2011, which reflects an annual 
decline from the 2010 amount. EPA is allocating 4.9 percent of baseline 
for HCFC-142b in 2011. The HCFC-142b number relates solely to the 
aggregate baselines for this substance and does not reflect an annual 
decline. The reasons for establishing these allocation percentages for 
2011 are discussed in Section V.
    EPA's allocations for both HCFC-22 and HCFC-142b meet U.S. 
obligations under the Montreal Protocol and reflect the use 
restrictions under section 605(a) of the CAA while providing for 
servicing needs consistent with those restrictions. The allocations for 
HCFC-22 and HCFC-142b reflect EPA's analysis of market data for these 
chemicals, as prepared in advance of the 2009 Final Rule. The 
allocation levels for these HCFCs meet the demand for virgin material 
and avoid shortages during 2011.
    In this action, EPA is not changing the methodology used in the 
2009 Final Rule to calculate the total number of calendar-year 
consumption and production allowances. While the number of total 
calendar-year consumption allowances is unchanged, the number of 
production allowances is slightly lower (less than two percent lower) 
than in the 2009 Final Rule due to the changes in aggregate baseline 
allowances. This is explained in more detail in Section V.C. The only 
other difference is in the distribution of those allowances.
    At this time, EPA is allocating a total of 2,504 ODP-weighted MT of 
HCFC-22 and HCFC-142b calendar-year consumption allowances and 2,302 
ODP-weighted MT of HCFC-22 and HCFC-142b calendar-year production 
allowances for 2011. Both allocations remain below the limit 
established by the Montreal Protocol for the 2010-2014 phasedown step 
of 75 percent below baseline. The difference between the cap and the 
total allocation reflects EPA's estimate (developed for the 2009 Final 
Rule) of the demand for HCFCs during these control periods. It also 
will accommodate minor adjustments in the market, particularly to allow 
potential market growth for other allowed HCFCs. As discussed in more 
detail in Section V.B.3. and in the preamble to the 2009 Final Rule, it 
will also encourage greater reclamation of recovered refrigerant and 
thus facilitate preparation for the 2015 step down in the consumption 
cap to 10 percent of baseline.
    This action also clarifies EPA's policy on inter-pollutant 
transfers for 2011 and all future control periods in Section V.A.1.

V. Allocation of Allowances for the 2011 Control Period

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

    In the 2009 Final Rule, EPA presented the allocation structure for 
HCFC-22 and HCFC-142b for the control periods 2010-2014: allocating a 
percentage of the baseline production and consumption allowances. The 
rationale for this system is discussed further at 74 FR 66412. The 
Court found no fault with EPA's framework for allocating HCFCs in the 
2009 Final Rule, except the aspects of the rule they deemed to be 
retroactive, i.e., not taking into account inter-pollutant baseline 
transfers that occurred in the prior regulatory period in establishing 
company-specific baseline allowances. To address this, EPA is 
establishing HCFC-22 and HCFC-142b baseline allowances for 2011 that 
reflect past inter-pollutant baseline transfers deemed permanent by the 
Court.

[[Page 47459]]

1. Adjusting the Baseline for Inter-Company and Inter-Pollutant 
Transfers
    Sections 607(b) and (c) of the CAA address inter-pollutant and 
inter-company transfers of allowances, respectively. Inter-pollutant 
transfers are the transfer of an allowance of one substance to an 
allowance of another substance on an ODP-weighted basis. Inter-company 
transfers are transfers of allowances for the same ODS from one company 
to another company. Section 607(c) also authorizes inter-company 
transfers combined with inter-pollutant transfers, so long as the 
requirements of both are met. The corresponding regulatory provisions 
for HCFCs appear at 40 CFR 82.23.
    The 2009 Final Rule updated the baselines for HCFC-22 and HCFC-142b 
to reflect name changes and inter-company baseline transfers, i.e., 
transfers of baseline for a specific type of HCFC from one company to 
another. Doing so reflected the changes in the marketplace that had 
occurred since EPA promulgated the 2003 Final Rule. Inter-company 
baseline transfers provide a mechanism for new entrants to join the 
HCFC market and for other companies to expand their business. EPA 
recognizes that in some cases, entities are no longer actively involved 
in HCFC production, import, and/or export activities. EPA retained the 
baseline for such entities, noting that this had been a mechanism by 
which new entrants had entered the HCFC allowance system in the past.
    The 2009 Final Rule also addressed four inter-pollutant baseline 
transfers made during the prior regulatory period (see Section II.D. of 
this action for more detail). EPA had proposed to adjust the company 
baselines to reflect these four inter-pollutant baseline transfers in 
the 2008 Proposed Rule. Eight commenters opposed, and two commenters 
supported, these proposed adjustments. At issue was whether the inter-
pollutant baseline transfers should carry forward as part of the 
companies' baseline allowances in the next regulatory period.
    After reviewing the comments, EPA concluded that adjusting the 
baselines to reflect inter-pollutant baseline transfers could create 
incentives for future manipulation of the allocation system in 
anticipation of future control periods. EPA remains concerned about the 
potential for such future manipulation if inter-pollutant baseline 
transfers during the current regulatory period are carried forward as a 
change in a company's baseline for future regulatory periods. For 
example, in 2020 EPA will no longer be issuing HCFC-22 production or 
consumption allowances (see section 82.16(e)). EPA expects that 
companies with HCFC-22 allowances would no longer be in the HCFC market 
at that date if they did not hold allowances for other HCFCs that may 
still be produced after 2020. If EPA were to allow inter-pollutant 
baseline transfers that carried forward into the new regulatory period, 
companies with HCFC-22 baselines in 2019 could convert them all to 
baselines for HCFC-123. Perpetuating the HCFC-22 baselines in a new 
form would be counter to the design of the chemical-by-chemical 
phaseout, under which the baseline allowances for a particular chemical 
are intended to drop out of the system upon the phase-out of that 
chemical. As another example, in 2015, a producer or importer that 
previously had not participated in the HCFC-123 market could dominate 
that market by converting its HCFC-22 baseline in 2014 to HCFC-123 
baseline. Given the different ODPs of HCFC-22 and HCFC-123 (0.055 and 
0.02, respectively), converting one baseline allowance of HCFC-22 would 
result in 2.75 baseline allowances of HCFC-123. Also, since companies 
hold many more HCFC-22 baseline allowances than HCFC-123 baseline 
allowances, converting those HCFC-22 baseline allowances would have an 
overwhelming effect on the current HCFC-123 baseline allowance holders 
and the overall market. EPA agrees with commenters on the 2008 Proposed 
Rule that taking inter-pollutant baseline transfers into account in 
setting baselines could have the effect of moving the U.S. HCFC 
phasedown from a chemical-by-chemical phaseout, as established under 
the ``worst-first'' approach in the 1993 Final Rule, towards an ODP-
weighted phasedown. Thus, there are important policy reasons going 
forward for not taking inter-pollutant transfers into account in 
establishing baselines for new regulatory periods.
    Some commenters on the 2008 Proposed Rule stated that modifying the 
baselines by taking into account inter-pollutant transfers would be 
contrary to the CAA. One commenter argued that section 607 of the CAA 
allows EPA to approve inter-pollutant transfers of allowances only on a 
year-to-year basis. That commenter pointed to language in section 
607(b) stating that EPA regulations are to permit ``a production 
allowance for a substance for any year to be transferred for a 
production allowance for another substance for the same year on an 
ozone depletion weighted basis.'' The commenter also discussed the 
legislative history of the 1990 CAA Amendments.
    EPA does not agree with the commenter that the language of section 
607(b) is clear on its face. However, where the statutory language is 
ambiguous, EPA has discretion to choose a reasonable interpretation of 
that language. EPA determined in the 2009 Final Rule that section 
607(b) is best read as permitting only year-by-year inter-pollutant 
transfers. EPA continues to believe that this is the best 
interpretation of the statutory language. Section 607(b) states that 
EPA's rules are to permit ``a production allowance for a substance for 
any year to be transferred for a production allowance for another 
substance for the same year.'' This language emphasizes the year-by-
year nature of such transactions. No parallel language appears in 
section 607(c). That section does, however, provide that any inter-
pollutant transfers between two or more persons must meet the 
requirements of section 607(b).
    As the Court noted, ``the Agency is certainly entitled to * * * 
institute a program that forbids baseline inter-pollutant transfers in 
the future,'' (Arkema v. EPA, 618 F.3d at 9). Hence, EPA concludes that 
requiring all inter-pollutant transfers to be conducted on a yearly--
and thus temporary--basis going forward is the approach most consistent 
with the wording of section 607(b). Further discussion of the reasons 
for limiting inter-pollutant transfers to those conducted on a 
calendar-year basis is available in the Response to Comments on the 
2008 Proposed Rule (included in the docket for this rulemaking).
    Consistent with the Court's decision regarding past inter-pollutant 
transfers (those conducted during the prior regulatory period), the 
baselines established in this action for 2011 take into account the 
2008 inter-pollutant baseline transfers discussed earlier in this 
notice. EPA is clarifying, however, that it has not approved any inter-
pollutant transfers of baseline allowances in the current regulatory 
period, and for the reasons given in the 2009 Final Rule and in this 
action, in future EPA intends to approve inter-pollutant transfers only 
on a year-by-year basis. Thus, in the context of the protection of 
stratospheric ozone allowance system, companies should not expect that 
any inter-pollutant transfers they conduct will affect their baselines 
either in the current regulatory period or any future regulatory 
period.
    As it did in the 2009 Final Rule, EPA is adjusting baseline 
allowances to reflect inter-company, single-pollutant

[[Page 47460]]

baseline transfers that occurred since the last final rule was signed.
    In summary, this interim final rule reflects the changes in 
consumption and production baseline allowances from (1) The 2008 inter-
pollutant transfers deemed permanent by the Court and (2) inter-
company, single-pollutant baseline transfers that have occurred since 
the 2009 Final Rule was signed, and (3) clarifies the types of inter-
pollutant transfers that will be permitted in the future. The 
consumption and production baseline amounts for HCFC-22 and HCFC-142b 
for 2011 are shown below in Table 3.

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

    In the 2009 Final Rule, EPA decided 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. EPA is not changing that 
approach in this interim final rule. However, the specific amounts 
allocated per company are different due to the changed baselines and 
the need to apply a different allocation percentage to company 
baselines in order to keep the aggregate amount allocated the same. 
Because it is necessary to promote use of reused, recycled, and 
reclaimed material in anticipation of the 2015 phasedown step, EPA does 
not intend to allocate the difference between the consumption 
allocation authorized by the Parties to the Montreal Protocol and the 
consumption allocation authorized by this rule except under unforeseen 
extenuating circumstances.
1. The Importance of HCFC-22 Relative to HCFC-142b Servicing Needs for 
Existing Equipment
    HCFC-22 is the most widely-used HCFC. The demand for its use in 
servicing existing equipment was the primary factor affecting EPA's 
allocation of production and consumption allowances of HCFCs for the 
current regulatory period. Prior to issuing the 2009 Final Rule, EPA 
issued and sought comment on three versions of a draft report analyzing 
servicing demand for the HCFC appliances in the U.S. refrigeration and 
air-conditioning sector projected to be in service from 2010-2019 (all 
versions available at Docket EPA-HQ-OAR-2008-0496: Published November 
4, 2005 at 70 FR 67172; released at a stakeholder meeting on September 
29, 2006; published December 23, 2008, with 2008 Proposed Rule). The 
Servicing Tail Report focuses on air-conditioning and refrigeration 
appliances because such equipment represents the bulk of the servicing 
need. In addition, the servicing exception to the use ban for HCFC-22 
and HCFC-142b pertains only to use as a refrigerant in such equipment. 
Under section 605(a) of the CAA and EPA's implementing regulations, 
nearly all other uses of these two HCFCs were banned effective January 
1, 2010. The projected servicing need for HCFC-22 in 2011 is 
approximately 57,900 MT (3,185 ODP-weighted MT), or approximately 84 
percent of the consumption cap for all HCFCs in 2011 under the Montreal 
Protocol, which is 3,810 ODP-weighted MT. HCFC-142b has primarily been 
used as a foam blowing agent, a use that was phased out in 2010. The 
projected servicing demand for existing refrigeration equipment 
containing HCFC-142b is extremely low: Approximately 100 MT (7 ODP-
weighted MT). EPA therefore focused the analysis on HCFC-22 because 
that compound is the predominant HCFC in the installed base of air-
conditioning and refrigerant equipment for which servicing in the U.S. 
will likely continue.
    As discussed in the 2009 Final Rule, the majority of HCFC-22 
equipment that is projected to be in use from this point onward will be 
air-conditioning applications, including window units, packaged 
terminal units, unitary air-conditioning, chillers, dehumidifiers, 
water and ground source heat pumps, and motor vehicle air-conditioning 
in buses and trains. The report projected that approximately 145.6 
million units of all such types of HCFC-22 air-conditioning equipment 
were in use in 2010, decreasing by about 41 percent in 2015 and 86 
percent in 2020. In addition, approximately 3.8 million units of HCFC-
22 refrigeration equipment were in use in 2010. The installed base of 
HCFC-22 refrigeration equipment is projected to decrease from 2010 
levels by about 44 percent in 2015 and 75 percent in 2020. For more on 
the Servicing Tail Report and the Vintaging Model, which was used to 
develop the report, see 74 FR 66424 and the Servicing Tail Report 
included in the docket.
    EPA estimates that the servicing need for HCFC-22 will continue to 
decrease each year, and consistent with the 2009 Final Rule, this 
interim final rule accounts for this by allocating a smaller amount for 
2011 than was allocated for 2010. This approach is described in Section 
V.B.3. In this interim final action, EPA is maintaining the overall 
HCFC-22 allocation levels for 2011 that the Agency determined were 
appropriate in the 2009 Final Rule. EPA's decision not to allocate 
above the need projected in the Servicing Tail Report is discussed in 
the preamble to the 2009 Final Rule.
2. Meeting Servicing Needs With Virgin and Recovered Material
    In the 2009 Final Rule, the Agency recognized that servicing demand 
can be met with a combination of newly-manufactured or imported HCFCs 
(virgin HCFCs) and HCFCs that have been recovered and either reused, 
recycled or reclaimed. Therefore, EPA did not anticipate that virgin 
HCFC-22 would need to be produced or imported to meet the entire HCFC-
22 servicing demand (estimated to be 3,185 ODP-weighted MT in 2011). 
The Servicing Tail Report analyzes various scenarios regarding 
reclamation. EPA continues to believe that reused, recycled, and 
reclaimed material can help meet HCFC-22 servicing needs and is 
therefore not changing course at this time. Should new data be 
presented, EPA reserves the option of increasing the amount of demand 
for servicing existing equipment that should be met by reused, 
recycled, and reclaimed material in future control periods.
3. Annual Reduction in Allocated Amounts
    As explained in the preamble to the 2009 Final Rule, without year-
to-year reductions in the allocations for virgin HCFC-22, the HCFC-22 
market could be oversaturated, and the contribution of reused, 
recycled, and reclaimed refrigerant would decrease, both in the total 
number of kilograms and as the proportion of overall need.
    EPA is particularly concerned with encouraging a smooth transition 
to the 2015 stepdown. At that date, the U.S. must meet a 90 percent 
reduction below the baseline for all HCFCs, which is equivalent to 
1,524 ODP-weighted MT. EPA's Servicing Tail Report shows that even a 20 
percent recovery rate would be insufficient to meet the demand for 
HCFC-22 in 2015. As shown in Table 4-5 in the report, demand for HCFC-
22 in 2015 is projected to be 38,800 MT while the cap for all HCFCs 
equates to 27,709 MT of HCFC-22 (assuming no allocation for any other 
HCFCs). A 20 percent recovery rate would allow for the additional use 
of 8,800 MT but would still leave a shortfall of 2,291 MT in 2015. In 
developing the 2009 Final Rule, EPA calculated that to meet the total 
demand in 2015, the recovery rate would have to increase to 26 percent 
(representing 29 percent of total servicing demand).
    In the 2009 Final Rule, EPA determined that it was desirable to 
institute a year-by-year reduction for the

[[Page 47461]]

period 2010-2014. The Agency is maintaining that policy in this interim 
final action for 2011. A smooth transition for stakeholders--including 
continued availability of needed material for approved uses--has 
historically been an essential aspect of U.S. success in implementing 
the Montreal Protocol and CAA requirements. To ease the transition to 
2015 and avoid disruptions to the market and shortages in HCFC-22 at 
that date, it is necessary to take steps now to foster the development 
of a robust recovery and recycling industry in the U.S.
    EPA determined in the 2009 Final Rule the level of allocation that 
would meet the servicing demand over 2010-2014. In this interim final 
action, EPA is maintaining the overall HCFC-22 allocation levels for 
2011 that the Agency determined were appropriate in the 2009 Final 
Rule. Since EPA is not banning the use of existing HCFC-22 appliances 
manufactured prior to January 1, 2010, reused, recycled, and reclaimed 
HCFC-22 will become more valuable as the phaseout progresses. The 
demand for HCFC-22 to service existing equipment will provide an 
economic incentive to increase the quantities of recovered HCFC-22 
available for reuse, recycling, and reclamation. The docket for the 
2009 Final Rule (EPA-HQ-OAR-2008-0496) provides further information on 
EPA's assumptions regarding the availability of reused, recycled and 
reclaimed HCFC-22 to meet servicing demand.
    Because the primary benefit of annually reducing the allocation is 
to ensure demand in 2015 is met through greater recovery and 
reclamation, EPA continues to believe that it is appropriate to base 
the allocation on that goal. In developing the 2009 Final Rule, EPA 
estimated demand in 2015 for HCFC-22 would be 38,800 MT. Were the 
allocations to consist entirely of HCFC-22, the cap would limit the 
2015 HCFC-22 allocation to only 27,709 MT, a difference of 11,091 MT 
that would have to be made up with recovered material. Furthermore, it 
is likely that the allocation in 2015 will not consist entirely of 
HCFC-22, as EPA will need to reserve room under the cap for other 
HCFCs. In the 2009 Final Rule, EPA determined it was appropriate to 
establish an annual step-down such that the amount of total demand to 
be met from recovered HCFC-22 would equal 12,500 MT each year. This is 
approximately the amount EPA projected would be needed to meet the 
servicing demand in 2015. EPA is retaining this approach for 2011 in 
the interim final rule. Under this approach, the allocations equal 
approximately 45,400 MT in 2011. These values, shown in the table 
below, are derived by subtracting 12,500 MT from the estimated demand 
each year. EPA will not issue HCFC-22 and HCFC-142b allowances for 2012 
or later until a future rulemaking. Consistent with the 2009 Final 
Rule, EPA plans to reduce the allocation amount annually in future 
rulemakings to reflect the declining servicing demand.

------------------------------------------------------------------------
                                                          2010     2011
------------------------------------------------------------------------
Estimated Demand (MT).................................   62,500   57,900
Total Allocation (MT).................................   50,000   45,400
Recovered Amount (MT).................................   12,500   12,500
------------------------------------------------------------------------

    As the total demand decreases, maintaining the supply of recovered 
HCFCs at a constant level results in recovered material comprising a 
greater proportion of the total demand each year. Under this approach, 
the percentage of the total demand to be met with recovered material 
will rise from 20 percent of total demand in 2010 to 21.6 percent in 
2011, though the total amount of recovered material needed remains at 
12,500 MT for both years. EPA still believes this is appropriate as it 
facilitates meeting the demand in 2015, of which at least 29 percent 
must be met with recovered material, but takes comment on whether 
demand for HCFC-22 has changed since the 2009 Final Rule was published. 
Additionally, EPA is taking comment on whether there is surplus HCFC-22 
on the U.S. market. In particular, EPA is interested in learning more 
about: (1) The current amount of recovered HCFC-22 that is available 
for reclamation or reuse in another HCFC-22 system; (2) the amount of 
surplus HCFC-22 (virgin and reclaimed) in inventory; and (3) the amount 
of recovered HCFC-22 abroad awaiting import into the U.S. for 
reclamation and/or reuse. If new information shows a different amount 
of HCFC-22 should be allocated in future control periods to encourage 
reclamation and ensure a smooth transition, EPA will explore options to 
address this in a later proposed rule.

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

    EPA is revising the tables in 40 CFR 82 that together specify the 
production and consumption allowances available to allowance holders 
during specified control periods. The tables at sections 82.17 and 
82.19 apportion baseline production allowances and baseline consumption 
allowances, respectively, to individual companies for individual HCFCs 
during a particular regulatory period. Complementing these tables, the 
table at section 82.16 lists the percentage of baseline allocated to 
allowance holders for specific control periods. In the interim final 
rule, EPA is retaining this framework of complementary tables, revising 
them to reflect the Court's vacatur, responding to the Court's remand 
by making adjustments to the previous baselines consistent with the 
Court's ruling, and granting percentages of baselines in a manner that 
achieves the 2010 phaseout step and lays the groundwork for the next 
phaseout step in 2015.
    In the 2009 Final Rule, the percent allocation for HCFC-22 for 2011 
was 38.0 percent of baseline. In the interim final rule, the value is 
32.0 percent. The percent allocation for HCFC-142b for 2011 was 0.47 
percent of baseline in the 2009 Final Rule and is 4.9 percent of 
baseline in this interim final rule. These changes do not reflect a 
change in the total consumption allocation amounts for each substance, 
as the total allocation for HCFC-22 in 2011 remains approximately 
45,400 MT (the same as the 2009 Final Rule), and the total allocation 
for HCFC-142b in 2011 remains at approximately 100 MT. Using the same 
percentage of baseline to allocate production allowances as consumption 
allowances, the total HCFC-22 production allocation is smaller than in 
the 2009 final rule by less than two percent. The lower amount is due 
to the change in company baselines to reflect the Court's decision on 
the 2008 inter-pollutant baseline transfers, and not a change in the 
methodology used to determine allowances. More information is available 
on this subject in Section V.C.2.
    The 2009 Final Rule, which did not treat the 2008 transfers of 
HCFC-142b to HCFC-22 baseline allowances as carrying forward into the 
next regulatory period, had a total HCFC-22 consumption baseline of 
119,384 MT. In this interim final rule, EPA is reflecting the baseline 
transfers in section 82.19 in accordance with the Court's decision. As 
a result, the aggregate HCFC-22 consumption baseline has increased to 
141,865 MT. Since the aggregate HCFC-22 baseline is now higher due to 
the increase in the number of HCFC-22 baseline allowances for Arkema, 
Inc. and Solvay Fluorides, LLC, EPA is allocating a smaller percentage 
of the company-specific baselines than in the 2009 Final Rule to 
achieve the same total number of allowances. Thus, 45,400 MT of HCFC-22 
consumption (the aggregate allocation amount in 2011) is equal to 38.0 
percent of 119,384 MT (baseline) of HCFC-22 in the 2009

[[Page 47462]]

Final Rule, and 32.0 percent of 141,865 MT (baseline) in this interim 
final rule. The aggregate HCFC-22 production baseline is also 
increasing from 110,619 MT in the 2009 Final Rule to 129,093 MT in this 
interim final rule to reflect Arkema, Inc.'s transfer of HCFC-142b 
baseline production allowances to HCFC-22 baseline production 
allowances.
    The opposite is true for HCFC-142b, which had a larger aggregate 
consumption baseline in the proposed rule (21,089 MT), but now has a 
smaller baseline (2,047 MT) since EPA is accounting for inter-pollutant 
transfers from HCFC-142b to HCFC-22. Thus, 100 MT of HCFC-142b 
consumption allowances (the aggregate allocation amount in 2011) are 
equal to 0.47 percent of 21,089 MT of HCFC-142b in the 2009 Final Rule, 
and 4.9 percent of 2,047 MT in this interim final rule. Aggregate HCFC-
142b baseline production allowances are decreasing from 25,090 MT in 
the 2009 Final Rule to 9,444 MT in this interim final rule to reflect 
Arkema, Inc.'s transfer of HCFC-142b baseline production allowances.
    EPA is removing the vacated text relating to HCFC-22 and HCFC-142b 
from the tables in sections 82.16, 82.17, and 82.19; adding new 
production and consumption baselines for those substances for 2011 to 
the tables at sections 82.17 and 82.19; and adding new specified 
percentages of baseline for those substances to the table in section 
82.16 for the 2011 control period.

                                      Table 1--Phaseout Schedule for Class II Controlled Substances in 40 CFR 82.16
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Percent of    Percent of HCFC-   Percent of      Percent of      Percent of      Percent of      Percent of
             Control period                 HCFC-141b           22           HCFC-142b       HCFC-123        HCFC-124       HCFC-225ca      HCFC-225cb
--------------------------------------------------------------------------------------------------------------------------------------------------------
2003...................................               0            100            100     ..............  ..............  ..............  ..............
2004...................................               0            100            100     ..............  ..............  ..............  ..............
2005...................................               0            100            100     ..............  ..............  ..............  ..............
2006...................................               0            100            100     ..............  ..............  ..............  ..............
2007...................................               0            100            100     ..............  ..............  ..............  ..............
2008...................................               0            100            100     ..............  ..............  ..............  ..............
2009...................................               0            100            100     ..............  ..............  ..............  ..............
2010...................................               0             41.9            0.47             125             125             125             125
2011...................................               0             32.0            4.9              125             125             125             125
2012...................................               0  ...............  ..............             125             125             125             125
2013...................................               0  ...............  ..............             125             125             125             125
2014...................................               0  ...............  ..............             125             125             125             125
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Consistent with the 2009 Final Rule, EPA is allocating different 
baseline percentages for HCFC-22 and HCFC-142b because EPA projects 
that the needs will differ for servicing air-conditioning and 
refrigeration appliances during the 2011 control period. As discussed 
in Section V.B.1., the analysis prepared for the 2009 Final Rule showed 
there will be a significantly greater need for HCFC-22 than for HCFC-
142b during 2011. Based on the Servicing Tail Report and reporting 
information already required by EPA regulations, the needs for 
individual HCFCs are not uniform. EPA determined in the 2009 Final Rule 
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. While annual inter-pollutant transfers in 
accordance with section 82.23(b) could be used to transfer allowances 
of one HCFC for another on a temporary basis, EPA continues to believe 
it is not appropriate to rely on such transfers as a mechanism for 
large-scale corrections. Instead, EPA anticipates that the continued 
availability of annual, temporary inter-pollutant transfers will permit 
the market to self-correct for unforeseen changes in demand and allow 
entities to consider a range of options for their allowances. EPA seeks 
to avoid unnecessary disruptions in the marketplace and to promote a 
smooth transition for society.
1. HCFC-22 Consumption Allowances for 2011
    For 2011, EPA is allocating HCFC-22 consumption allowances to meet 
about 78 percent of the servicing need, assuming the remainder will be 
met by recovered HCFC-22 that is either reused, recycled, or reclaimed. 
This translates into approximately 45,400 MT (2,497 ODP-weighted MT), 
or 66 percent of the total HCFC consumption cap for the 2011 control 
period.
2. HCFC-22 Production Allowances for 2011
    For purposes of the 2011 interim final rule, EPA is not revisiting 
its determination in the 2009 Final Rule to use the same percentages 
for production and consumption allocations--deriving the percentages 
based on estimated need for each individual HCFC. Therefore, this rule 
allocates 41,310 MT (2,272 ODP-weighted MT of the 3,884.25 ODP-weighted 
metric ton production cap) to HCFC-22 production in 2011. The 2011 
aggregate allocation is 1.7 percent lower than the amount allocated in 
the 2009 Final Rule (41,310 MT in this Interim Final Rule vs. 42,035 MT 
in the 2009 Final Rule) because the aggregate amount of baseline 
production allowances in this rulemaking did not increase by the same 
relative amount as aggregate baseline consumption allowances. Because 
Solvay did not transfer its HCFC-142b production allowances to HCFC-22 
production allowances, consumption allowances are 18.8 percent higher 
in this rule, while production allowances are only 16.7 percent higher. 
The memo to the docket for this rulemaking (EPA-HQ-OAR-2010-1040) 
titled ``HCFC-22 and HCFC-142b Allocation Adjustments: 2009 Final Rule 
vs. 2011 Interim Final Rule,'' discusses the slight differences in 
allocation amounts in more detail.
    While some allowance holders have encouraged EPA to increase the 
number of production allowances allocated in 2011, EPA is not 
allocating additional production allowances in this interim final rule 
for several reasons. First, EPA is relying on the existing record for 
the 2009 Final Rule, in which the Agency determined it was appropriate 
to allocate production and consumption allowances at the same 
percentage of baseline. EPA believes it is important to obtain public 
comment on this issue before changing course. Second, in the 2009 Final 
Rule, EPA stated that allocating the same percentage of baseline for 
production and consumption was ``consistent with section 605(c) of the 
Clean Air Act, which requires that the phaseout

[[Page 47463]]

schedule for HCFC consumption be the same as that for HCFC production'' 
(74 FR 66429). EPA has given further thought to this provision and is 
seeking public comment on its interpretation before any changes in 
policy. Third, EPA has not previously taken comment on whether there 
would be environmental implications associated with such a change. 
Given these three considerations, EPA believes it would not be 
appropriate to increase the production amount without providing notice 
and an opportunity to comment.
    While this interim final rule contains the same allocation 
percentages for production and consumption, EPA welcomes comment on 
whether it should use different percentages to allocate HCFC-22 
production and consumption allowances in 2011 and/or future control 
periods. From a policy perspective, EPA is interested in comments on 
whether an increase in the total number of HCFC-22 production 
allowances would result in greater total HCFC production, either in the 
U.S. or globally. EPA notes that production of 1 kilogram of an HCFC 
requires both a production allowance and a consumption allowance 
(82.15(a)(1),(2)). Thus, an increase in production allowances without a 
corresponding increase in consumption allowances does not automatically 
result in greater production. The most likely scenario is that an 
increase in production allowances would result in greater U.S. 
production for export. This is because as stated in Sec.  82.20(a), ``A 
person may obtain at any time during the control period * * * 
consumption allowances equivalent to the quantity of class II 
controlled substances that the person exported from the U.S. and its 
territories to a foreign state * * * when that quantity of class II 
controlled substance was produced in the U.S. * * * with expended 
consumption allowances.'' In effect, current EPA regulations allow 
exporters to receive a refund of one consumption allowance for each 
kilogram they export if they show one consumption and one production 
allowance were expended for the material exported. Therefore, EPA would 
not expect an increase in production allowances to result in greater 
amounts of HCFCs being used in the U.S. EPA welcomes comment on whether 
an increase in the level of production allowances would result in more 
U.S. production, either for domestic use or for export, and whether any 
additional U.S. production for export would result in greater worldwide 
production of HCFCs.
    From a legal perspective, EPA is interested in comments on whether 
section 605(c) would preclude allocating a different percentage of 
baseline for production than for consumption. Section 605(c) states 
that EPA must ``promulgate regulations phasing out the production * * * 
of class II substances in accordance with [section 605],'' subject to 
any acceleration under section 606. It further states that EPA must 
``promulgate regulations to insure that the consumption of class II 
substances in the United States is phased out and terminated in 
accordance with the same schedule * * * as is applicable to the phase-
out and termination of production of class II substances under [Title 
VI].'' EPA is considering three possible interpretations of the term 
``schedule'' as referenced in section 605(c): (1) The schedule that 
appears on the face of section 605, which contains no deadlines until 
2015; (2) the schedule that appears on the face of section 605, as 
accelerated under section 606; and (3) the specific allocation 
percentages or amounts established by EPA through rulemaking for each 
control period. EPA believes that the second interpretation is the most 
consistent with the statutory language and purpose.
    In past actions, the Agency has accelerated the initial schedule in 
section 605 to reflect modifications to the Montreal Protocol phaseout 
schedule for HCFCs. Under the 2007 Montreal Adjustment (reflected in 
Decision XIX/6), the U.S. is obligated to reduce HCFC production and 
consumption 75 percent below its aggregate baseline by 2010. EPA is not 
proposing to increase production to an amount that would be 
inconsistent with that obligation. Instead, EPA is taking comment on 
whether to allow production to increase relative to consumption, 
without encroaching on the cap. Specifically, EPA is taking comment on 
whether to issue additional production allowances in the amount of 
7,746 MT when compared to this interim final rule.
    If EPA were to decide to increase production allowances in 2011, 
its preferred approach would be to decouple the percentage of baseline 
allocated for production from the percentage of baseline allocated for 
consumption. EPA would effectuate this change in its regulations by 
replacing the table at 40 CFR 82.16 with two tables. One would allocate 
32 percent of baseline for consumption allowances in 2011. The other 
would allocate 38 percent of baseline for production allowances in 
2011. This approach would still provide the petitioners in Arkema v. 
EPA the benefit of their 2008 baseline transfers while giving other 
companies with production baselines approximately the same number of 
production allowances as they received in the 2009 Final Rule. Compared 
to the 2009 Final Rule, the net result would be 7,020 MT (386 ODP-
weighted MT) additional HCFC-22 production allowed in 2011 for a total 
of 49,055 MT (2,698 ODP-weighted MT). Under this scenario, the U.S. 
would be 1,021 ODP-weighted MT below the production cap and in 
compliance with its obligations under the Montreal Protocol. EPA is 
seeking comment on whether this increase would hinder the transition to 
the 2015 phaseout step, under which the U.S. is obligated to reduce 
HCFC production and consumption 90 percent below its aggregate 
baseline. EPA's preference is to continue to use the same percentages 
for production and consumption allocations. This is because EPA is 
concerned this action could increase U.S. production of HCFCs, might 
decrease the U.S.'s ability to transition to the 2015 stepdown under 
the Montreal Protocol, and potentially increase global production of 
HCFCs. Nevertheless, the Agency welcomes comment on this option for 
increasing 2011 and/or future HCFC-22 production allowances. After 
reviewing comments, EPA may either issue a supplemental allocation of 
production allowances for 2011 or leave the 2011 production allocation 
in this interim final rule unchanged.
3. HCFC-142b Allowances for 2011
    Establishing HCFC-142b baseline allowances that take into account 
the 2008 inter-pollutant transfers discussed in Section II.D. results 
in 2,047 MT of aggregate baseline consumption allowances and 9,444 MT 
of aggregate baseline production allowances. Consistent with the 2009 
Final Rule, EPA is allocating 100 percent of the projected servicing 
need for HCFC-142b identified in that rule: 100 MT (7 ODP-weighted MT) 
of consumption. To get to that level of consumption, EPA is allocating 
4.9 percent of the aggregate consumption baseline, as reflected in the 
table at section 82.16. The aggregate allocation number for consumption 
is the same as in the 2009 Final Rule.
    Using the same percentage (4.9 percent), EPA is allocating 463 MT 
(30.1 ODP-weighted MT) of HCFC-142b production allowances for 2011. The 
2011 aggregate allocation for production is higher than the amount 
allocated in the 2009 Final Rule (463 MT in this interim final rule vs. 
118 MT in the 2009 Final Rule). The allocated amount is 292 percent 
higher than in the 2009 Final Rule because the aggregate amount

[[Page 47464]]

of baseline HCFC-142b consumption allowances in this rulemaking 
decreased by a significantly larger amount than aggregate baseline 
HCFC-142b production allowances. Baseline consumption allowances are 
90.3 percent lower in this rule, while baseline production allowances 
are only 62.4 percent lower. This occurred because Solvay did not 
transfer its HCFC-142b production allowances to HCFC-22 production 
allowances. This higher amount of calendar-year production does not 
affect the U.S.'s ability to meet its obligations under the Montreal 
Protocol. The memo to the docket for this rulemaking (EPA-HQ-OAR-2010-
1040) titled ``HCFC-22 and HCFC-142b Allocation Adjustments: 2009 Final 
Rule vs. 2011 Interim Final Rule,'' discusses the differences in exact 
allocation amounts in more detail.
4. How the Aggregate for HCFC-22 and HCFC-142b Translates Entity-by-
Entity
    EPA is allocating (1) approximately 45,400 MT of HCFC-22 
consumption allowances, (2) 41,310 MT of HCFC-22 production allowances, 
(3) approximately 100 MT of HCFC-142b consumption allowances, and (4) 
463 MT of HCFC-142b production allowances for 2011. However, EPA 
actually allocates allowances to individual companies (i.e., legal 
entities).
    Company-specific production and consumption baselines (also 
referred to as ``baseline allowances'') for HCFC-142b and HCFC-22 are 
listed at sections 82.17 and 82.19, respectively. The percentage of 
baseline each entity will receive in 2011 appears at section 82.16(a), 
as shown in Table 1 above.
    Allowances allocated for individual control periods are called 
``calendar-year allowances'' to distinguish them from the baseline 
production or consumption. For 2011, EPA is apportioning production and 
consumption baselines for HCFC-22 and HCFC-142b on the same basis as in 
the 2009 Final Rule, except that EPA is making adjustments to reflect 
(1) The 2008 inter-pollutant transfers of baseline allowances deemed 
permanent by the Court, (2) inter-company, single-pollutant transfers 
of baseline allowances that occurred in 2010, and (3) changes in 
company names that occurred after the 2009 Final Rule was signed. 
Applying the approach described above, EPA is apportioning production 
and consumption baselines for HCFC-22 and HCFC-142b to the following 
entities in the following amounts:

 Table 2--Baseline Production Allowances of HCFC-22 and HCFC-142b in 40
                                CFR 82.17
------------------------------------------------------------------------
                                                            Allowances
              Person                Controlled substance       (kg)
------------------------------------------------------------------------
Arkema............................  HCFC-22.............      46,692,336
                                    HCFC-142b...........         484,369
DuPont............................  HCFC-22.............      42,638,049
Honeywell.........................  HCFC-22.............      37,378,252
                                    HCFC-142b...........       2,417,534
MDA Manufacturing.................  HCFC-22.............       2,383,835
Solvay Solexis....................  HCFC-142b...........       6,541,764
------------------------------------------------------------------------

 Table 3--Baseline Consumption Allowances of HCFC-22 and HCFC-142b in 40
                                CFR 82.19
------------------------------------------------------------------------
                                                            Allowances
              Person                Controlled substance       (kg)
------------------------------------------------------------------------
ABCO Refrigeration Supply.........  HCFC-22.............         279,366
Altair Partners...................  HCFC-22.............         302,011
Arkema............................  HCFC-22.............      48,637,642
                                    HCFC-142b...........         483,827
Carrier Corporation...............  HCFC-22.............          54,088
Coolgas Investment Property.......  HCFC-22.............       1,040,458
DuPont............................  HCFC-22.............      38,814,862
                                    HCFC-142b...........          52,797
H.G. Refrigeration Supply.........  HCFC-22.............          40,068
Honeywell.........................  HCFC-22.............      35,392,492
                                    HCFC-142b...........       1,315,819
Mexichem Fluor Inc................  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
Solvay Solexis....................  HCFC-142b...........         194,536
USA Refrigerants..................  HCFC-22.............          14,865
------------------------------------------------------------------------

[[Page 47465]]

D. HCFC-141b, HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb Allowances

    Other than adjustments for inter-company, single-pollutant 
transfers of baseline allowances, baselines and percentages of baseline 
allocated as calendar-year allowances for HCFC-141b, HCFC-123, HCFC-
124, HCFC-225ca, and HCFC-225cb are unchanged from the 2009 Final Rule. 
In the case of HCFC-141b, EPA is continuing to allocate 0 percent of 
baseline for U.S. consumption and production, consistent with 40 CFR 
82.16(b).

E. Other HCFCs

    As a result of EPA's allocation process, which is largely based on 
projected demand for HCFC-22 and HCFC-142b, minus an amount of HCFC-22 
that is assumed to be reused, recycled, or reclaimed, the total 
allocation is lower than the aggregate HCFC cap under the Montreal 
Protocol. EPA recognizes that there could be some additional need for 
HCFCs not specifically included in this rule. While some niche 
applications in the U.S. use other HCFCs, such as HCFC-21, EPA is not 
aware of additional need for production or import of these substances 
at this time, as adequate amounts appear to be in inventory. However, 
EPA is not foreclosing the possibility of additional production or 
import for these niche uses. Also, some amount of HCFC-141b will likely 
continue to be produced or imported via the petition process during 
2011. EPA believes there is sufficient room under the cap for such 
continued production and import. The current regulations at 40 CFR 
82.15 ban the production and import of class II substances for which 
EPA has apportioned baseline production and consumption allowances in 
excess of allowances held by the producer or importer, but do not ban 
the production and import of class II substances for which EPA has not 
apportioned baseline production and consumption allowances. This rule 
does not alter the current regulations in that respect. The producer or 
importer of an HCFC that is not subject to the allowance system would 
be required to report to EPA consistent with the existing recordkeeping 
and reporting requirements. If necessary, EPA could amend the 
regulations to set and apportion baselines and issue allowances for 
these HCFCs. Therefore, retaining room under the cap provides the 
benefit of accounting for unanticipated growth in HCFCs that do not 
have allocations or other unforeseen events. However, EPA is not 
reserving room under the cap for the above-described reasons. EPA is 
allocating allowances based on modeled demand for virgin and recovered 
material in preparation for the next major stepdown period under the 
Montreal Protocol in 2015.

VI. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulation and Regulatory Review

    Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), 
this action is a ``significant regulatory action'' since it raises 
``novel legal or policy issues.'' Accordingly, EPA submitted this 
action to the Office of Management and Budget (OMB) for review under 
Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011) and any 
changes made in response to OMB recommendations have been documented in 
the docket for this action.
    EPA did not conduct a specific analysis of the benefits and costs 
associated with this action. Many previous analyses provide a wealth of 
information on the costs and benefits of the U.S. HCFC phaseout 
including:
     The 1993 Addendum to the 1992 Phaseout Regulatory Impact 
Analysis: Accelerating the Phaseout of CFCs, Halons, Methyl Chloroform, 
Carbon Tetrachloride, and HCFCs.
     The 1999 Report Costs and Benefits of the HCFC Allowance 
Allocation System.
     The 2000 Memorandum Cost/Benefit Comparison of the HCFC 
Allowance Allocation System.
     The 2005 Memorandum Recommended Scenarios for HCFC 
Phaseout Costs Estimation.
     The 2006 ICR Reporting and Recordkeeping Requirements of 
the HCFC Allowance System.
     The 2007 Memorandum Preliminary Estimates of the 
Incremental Cost of the HCFC Phaseout in Article 5 Countries.
     The 2007 Memorandum Revised Ozone and Climate Benefits 
Associated with the 2010 HCFC Production and Consumption Stepwise 
Reductions and a Ban on HCFC Pre-charged Imports.

A memorandum summarizing these analyses is available in the docket.

B. Paperwork Reduction Act

    This action does not impose any new information collection burden. 
EPA already requires recordkeeping and reporting for HCFCs, and this 
action does not amend those provisions. 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. Because this 
rule is not subject to notice-and-comment rulemaking requirements, the 
RFA does not apply and the Agency is not required to conduct a 
regulatory flexibility analysis.
    Nevertheless, in the spirit of the RFA, we have considered the 
economic impacts of this interim final rule on small entities. For 
purposes of assessing the impacts of this rule on small entities, a 
small entity is defined as: (1) A small business as defined by the 
Small Business Administration's (SBA) regulations at 13 CFR 121.201; 
(2) a small governmental jurisdiction that is a government of a city, 
county, town, school district or special district with a population of 
less than 50,000; and (3) a small organization that is any not-for-
profit enterprise which is independently owned and operated and is not 
dominant in its field.
    This action will affect the following categories:

----------------------------------------------------------------------------------------------------------------
                   Category                       NAICS code       SIC code      Examples of regulated  entities
----------------------------------------------------------------------------------------------------------------
Industrial Gas Manufacturing..................          325120            2869  Fluorinated hydrocarbon gases
                                                                                 manufacturers and reclaimers.

[[Page 47466]]

 
Other Chemical and Allied Products Merchant             422690            5169  Chemical gases and compressed
 Wholesalers.                                                                    gases merchant wholesalers.
Air-Conditioning and Warm Air Heating                   333415            3585  Air-conditioning equipment and
 Equipment and Commercial and Industrial                                         commercial and industrial
 Refrigeration Equipment Manufacturing.                                          refrigeration equipment
                                                                                 manufacturers.
Air-Conditioning Equipment and Supplies                 423730            5075  Air-conditioning (condensing
 Merchant Wholesalers.                                                           unit, compressors) merchant
                                                                                 wholesalers.
Electrical and Electronic Appliance,                    423620            5064  Air-conditioning (room units)
 Television, and Radio Set Merchant                                              merchant wholesalers.
 Wholesalers.
Plumbing, Heating, and Air-Conditioning                 238220      1711, 7623  Central air-conditioning system
 Contractors.                                                                    and commercial refrigeration
                                                                                 installation; HVAC contractors.
----------------------------------------------------------------------------------------------------------------

    After considering the economic impacts of this interim final rule 
on small entities, I certify this action will not have a significant 
economic impact on a substantial number of small entities as it 
relieves a regulatory ban on production and consumption that would 
otherwise apply in the wake of the Court's vacatur. EPA is continuing 
to allocate production and consumption allowances using the same 
approach described in the 2009 Final Rule with adjustments to reflect 
(1) 2008 inter-pollutant transfers of baseline allowances deemed 
permanent by the Court, (2) inter-company, single-pollutant transfers 
of baseline allowances that occurred in 2010, and (3) changes in 
company names that occurred after the 2009 Final Rule was signed. EPA 
is not modifying the recordkeeping or reporting provisions and thus is 
not increasing the burden to small businesses.

D. Unfunded Mandates Reform Act

    This action contains no Federal mandates under the provisions of 
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 
1531-1538 for State, local, or tribal governments or the private 
sector. First, UMRA does not apply to rules that are necessary for the 
implementation of international treaty obligations. This rule 
implements the 2010 milestone for the phaseout of HCFCs under the 
Montreal Protocol. Second, this action relieves the regulatory ban on 
production and consumption that would otherwise apply. This action will 
not have any significant direct impacts or State, local and tribal 
governments or private sector entities. Therefore, this rule is not 
subject to the requirements of sections 202 or 205 of UMRA.
    This rule is also not subject to the requirements of section 203 of 
UMRA because it contains no regulatory requirements that might 
significantly or uniquely affect small governments. This action 
apportions production and consumption allowances and establishes 
baselines for private entities, not small governments.

E. Executive Order 13132: Federalism

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

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

    This action does not have tribal implications, as specified in 
Executive Order 13175 (65 FR 67249, November 9, 2000). This action 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 action.

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

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

[[Page 47467]]

impacts on children's health from stratospheric ozone depletion.

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

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

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 
action does not involve technical standards. Therefore, EPA did not 
consider the use of any voluntary consensus standards.

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

    Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes 
federal executive policy on environmental justice. Its main provision 
directs federal agencies, to the greatest extent practicable and 
permitted by law, to make environmental justice part of their mission 
by identifying and addressing, as appropriate, disproportionately high 
and adverse human health or environmental effects of their programs, 
policies, and activities on minority populations and low-income 
populations in the U.S.
    EPA has determined that this action will not have 
disproportionately high and adverse human health or environmental 
effects on minority or low-income populations because the 2010 phaseout 
step 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. This action continues the 
implementation of the U.S. 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 U.S. can take to 
complete the overall phaseout of ODS and further lessen the adverse 
human health effects for the entire population.

K. The Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
U.S.. EPA will submit a report containing this rule and other required 
information to the U.S. Senate, the U.S. House of Representatives, and 
the Comptroller General of the U.S. prior to publication of the rule in 
the Federal Register. A major rule cannot take effect until 60 days 
after it is published in the Federal Register. This action is not a 
``major rule'' as defined by 5 U.S.C. 804(2). This rule will be 
effective August 5, 2011.

List of Subjects in 40 CFR Part 82

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Chemicals, Exports, Hydrochlorofluorocarbons, 
Imports.

    Dated: July 29, 2011.
Lisa P. Jackson,
Administrator.

    40 CFR part 82 is amended to read as follows:

PART 82--PROTECTION OF STRATOSPHERIC OZONE

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

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

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

Sec.  82.16  Phaseout schedule of class II controlled substances.

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

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Percent of    Percent of HCFC-   Percent of      Percent of      Percent of      Percent of      Percent of
             Control period                 HCFC-141b           22           HCFC-142b       HCFC-123        HCFC-124       HCFC-225ca      HCFC-225cb
--------------------------------------------------------------------------------------------------------------------------------------------------------
2003...................................               0            100            100     ..............  ..............  ..............  ..............
2004...................................               0            100            100     ..............  ..............  ..............  ..............
2005...................................               0            100            100     ..............  ..............  ..............  ..............
2006...................................               0            100            100     ..............  ..............  ..............  ..............
2007...................................               0            100            100     ..............  ..............  ..............  ..............
2008...................................               0            100            100     ..............  ..............  ..............  ..............
2009...................................               0            100            100     ..............  ..............  ..............  ..............
2010...................................               0             41.9            0.47             125             125             125             125
2011...................................               0             32.0            4.9              125             125             125             125
2012...................................               0  ...............  ..............             125             125             125             125
2013...................................               0  ...............  ..............             125             125             125             125
2014...................................               0  ...............  ..............             125             125             125             125
--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * *
    3. Revise Sec.  82.17 to read as follows:

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

    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:

[[Page 47468]]

------------------------------------------------------------------------
                                                            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
Honeywell.........................  HCFC-22.............      37,378,252
                                    HCFC-141b...........      28,705,200
                                    HCFC-142b...........       2,417,534
                                    HCFC-124............       1,759,681
MDA Manufacturing.................  HCFC-22.............       2,383,835
Solvay Solexis....................  HCFC-142b...........       6,541,764
------------------------------------------------------------------------

    3. Section 82.19 is revised to read as follows:

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

    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:

------------------------------------------------------------------------
                                                            Allowances
              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
Arkema............................  HCFC-22.............      48,637,642
                                    HCFC-141b...........      25,405,570
                                    HCFC-142b...........         483,827
                                    HCFC-124............           3,719
Carrier...........................  HCFC-22.............          54,088
Continental Industrial Group......  HCFC-141b...........          20,315
Coolgas, Inc......................  HCFC-141b...........      16,097,869
Coolgas Investment Property.......  HCFC-22.............       1,040,458
                                    HCFC-123............          19,980
                                    HCFC-124............           3,742
Discount Refrigerants.............  HCFC-141b...........             994
DuPont............................  HCFC-22.............      38,814,862
                                    HCFC-141b...........           9,049
                                    HCFC-142b...........          52,797
                                    HCFC-123............       1,877,042
                                    HCFC-124............         743,312
H.G. Refrigeration Supply.........  HCFC-22.............          40,068
Honeywell.........................  HCFC-22.............      35,392,492
                                    HCFC-141b...........      20,749,489
                                    HCFC-142b...........       1,315,819
                                    HCFC-124............       1,284,265
ICC Chemical Corp.................  HCFC-141b...........          81,225
ICOR..............................  HCFC-124............          81,220
Mexichem Fluor Inc................  HCFC-22.............       2,546,305
Kivlan & Company..................  HCFC-22.............       2,081,018
MDA Manufacturing.................  HCFC-22.............       2,541,545
Mondy Global......................  HCFC-22.............         281,824
National Refrigerants.............  HCFC-22.............       5,528,316
                                    HCFC-123............          72,600
                                    HCFC-124............          50,380
Perfect Technology Center, LP.....  HCFC-123............           9,100
Refricenter of Miami..............  HCFC-22.............         381,293
Refricentro.......................  HCFC-22.............          45,979
R-Lines...........................  HCFC-22.............          63,172
Saez Distributors.................  HCFC-22.............          37,936
Solvay Fluorides..................  HCFC-22.............       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
USA Refrigerants..................  HCFC-22.............          14,865
------------------------------------------------------------------------

[[Page 47469]]

[FR Doc. 2011-19896 Filed 8-4-11; 8:45 am]
BILLING CODE 6560-50-P