Source: https://www.federalregister.gov/documents/2012/01/04/2011-33456/protection-of-stratospheric-ozone-adjustments-to-the-allowance-system-for-controlling-hcfc
Timestamp: 2018-06-17 22:29:43
Document Index: 9972605

Matched Legal Cases: ['§\u2009606', 'art 82', '§\u200982', 'art 82', 'art 82', 'art 82', 'art 82', '§\u200982', '§\u200982', '§\u200982']

Written comments on this proposed rule must be received by the EPA Docket on or before February 3, 2012, unless a public hearing is requested. Any party requesting a public hearing must notify the contact listed below under FOR FURTHER INFORMATION CONTACT by 5 p.m. Eastern Standard Time on January 11, 2012. If a public hearing is requested, the hearing would be held on January 19, 2012 and commenters will have until February 21, 2012 to submit comments before the close of the comment period. If a hearing is held, it will take place at EPA headquarters in Washington, DC. EPA will post a notice on our Web site, http://www.epa.gov/​ozone/​strathome.html, announcing further information should a hearing take place.
237-259 (23 pages)
EPA-HQ-OAR-2011-0354
FRL-9614-5
2060-AQ98
Memorandum: 2010-2011 Greenhouse Gas Reporting Program Data on...
Court Documents from Honeywell v. EPA
Credit Suisse note on HCFC-22, dated January 24, 2012
Response to Comments on the 2012-2014 HCFC Allocation Notice...
Letter from Karim Amrane, AHRI, to Gina McCarthy, EPA, sent...
CBI Placeholder: Memo from ICF International containing...
Updated: Flexibility in the HCFC Allowance System
Overview Memorandum: Overview of the Final Rule Regarding HCFC...
1. Supply of HCFC-22
2. Providing Allowances to Reclaimers
3. Providing Allowances to Manufacturers of HCFC Blends
3. How does EPA propose to allocate HCFC-142b allowances for 2012-2014?
IV. How does EPA propose to change the regulations governing allowance transfers of Class II Controlled Substances?
https://www.federalregister.gov/d/2011-33456 https://www.federalregister.gov/d/2011-33456
EPA is proposing to adjust 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. Following the August 5, 2011 interim final rule allocating allowances for 2011, this action proposes to relieve the regulatory ban on production and consumption of these two chemicals following the court's vacatur by establishing company-by-company HCFC-22 and HCFC-142b baselines and allocating production and consumption allowances for 2012-2014.
Written comments on this proposed rule must be received by the EPA Docket on or before February 3, 2012, unless a public hearing is requested. Any party requesting a public hearing must notify the contact listed below under FOR FURTHER INFORMATION CONTACT by 5 p.m. Eastern Standard Time on January 11, 2012. If a public hearing is requested, the hearing would be held on January 19, 2012 and commenters will have until February 21, 2012 to submit comments before the close of the comment period. If a hearing is held, it will take place at EPA headquarters in Washington, DC. EPA will post a notice on our Web site, http://www.epa.gov/ozone/strathome.html, announcing further information should a hearing take place.
Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2011-0354, by one of the following methods:
Mail: Docket # EPA-HQ-OAR-2011-0354, 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-2011-0354 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-2011-0354. EPA's policy is that all comments received will be included in the public docket without change and may be made available online at www.regulations.gov, including any personal information provided, unless the comment includes information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through www.regulations.gov or email. The 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 email comment directly to EPA without going through www.regulations.gov, your email 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 www.epa.gov/epahome/dockets.htm.
Luke H. Hall-Jordan by telephone at (202) 343-9591, or by email at hall-jordan.luke@epa.gov, or by mail at U.S. Environmental Protection Agency, Stratospheric Protection Division, Stratospheric Program Implementation Branch (6205J), 1200 Pennsylvania Avenue NW., Washington, DC 20460. You may also visit the Ozone Protection Web site of EPA's Stratospheric Protection Division at www.epa.gov/ozone/strathome.html for further information about EPA's Stratospheric Ozone Protection regulations, the science of ozone layer depletion, and related topics.
This list 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.
Do not submit confidential business information (CBI) to EPA through www.regulations.gov or email. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD-ROM that you mail to EPA, mark the outside of the disk or CD-ROM as CBI and then identify electronically within the disk or CD-ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR 2.2.
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.
EPA addressed the Court's partial vacatur as it relates to 2011 in an August 5, 2011, interim final rule, “Protection of Stratospheric Ozone: Adjustments to the Allowance System for Controlling HCFC Production, Import, and Export,” (2011 Interim Final Rule). This proposed rule is a follow-on to that action, and proposes a path forward for the remainder of the regulatory period ending on December 31, 2014.
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 § 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 developed countries not operating under Article 5 of the Montreal Protocol (non-Article 5 Parties), a schedule to which the U.S. adheres. The consumption cap for each non-Article 5 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.
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]
In addition, Decision XIX/6 adjusted Article 2F to allow developed 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 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 developed 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.
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 for new entrants that began importing after the end of 1997 but before April 5, 1999, the date the advanced notice of proposed rulemaking was published. EPA took this action to ensure that small businesses that might not have been aware of the impending rulemaking would be able to continue in the HCFC market.
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. As such, EPA did not revisit either determination with respect to 2011 in the 2011 Interim Final Rule (76 FR 47451), but rather relied on the existing record from the 2009 Final Rule (74 FR 66412). The 2011 Interim Final Rule established new baselines that (1) credited the 2008 inter-pollutant trades at issue in Arkema v. EPA based on the Court's decision and (2) reflected inter-company, single-pollutant baseline transfers that occurred since the 2009 Final Rule was signed. The 2011 Interim Final Rule also (3) allocated HCFC-22 and HCFC-142b allowances for 2011, (4) clarified EPA's policy on all future inter-pollutant transfers, and (5) updated company names.
Finally, section 607 addresses transfers of allowances both between companies and chemicals. EPA is further clarifying the policy and procedures applicable to permanent inter-pollutant transfers in this action, and is proposing a minor change to the regulations governing inter-pollutant transfers to provide additional clarity to stakeholders.
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 2011 Interim Final Rule contained a description of those transfers and the EPA approvals of those transfers. As explained in the 2011 Interim Final Rule, 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, Inc. and Solvay Fluorides, LLC 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 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 allocation share for all other HCFC-22 allowance holders, and increases for the petitioners: Arkema and Solvay. For more detail on the effect of these transfers, see section III.C. of this preamble.
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 voided 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.
EPA's initial response to the Court's partial vacatur was to issue the 2011 Interim Final Rule (76 FR 47451). Through today's notice, EPA is proposing a way to address the Court's decision as it relates to the remainder of the regulatory period ending December 31, 2014. In addition, the Agency is taking comment on whether the vacatur and remand should be interpreted as applying to the 2010 allocations, and if so, how allowances might be adjusted to reflect this. See section III.B.4. for EPA's proposed approach to address 2010 allowances.
The EPA received 15 submissions from 13 commenters in response to the 2011 interim final rule. Three comments were received late. Specifically, the Agency had asked for comment on several issues relevant to HCFC-22 supply and the status of recovery and reclamation, including: (1) Previous estimates of HCFC-22 demand; (2) the amount of virgin HCFC-22 currently in inventory, available for reuse and/or waiting for import from abroad; and (3) whether there is an overall surplus of the gas. The Agency received comments directly answering these questions, along with other comments that are of relevance to this proposed rulemaking.
EPA is not providing a complete response to comments on the 2011 interim final rule in this preamble; however, EPA is acknowledging the most relevant comments here in order to highlight certain stakeholder concerns regarding the future implementation of the HCFC phaseout program. It is the Agency's responsibility to implement Title VI of the CAA, and its policy objective is to do so in a way that smoothly transitions the U.S. away from HCFCs to non-ODS alternatives. Therefore, EPA is particularly interested in stakeholder input regarding the status of HCFC-22 recovery and reclamation, because this information applies directly to previously-stated policy goals. This section notes the following three issues discussed in comments to the 2011 Interim Final Rule.
a. Economic feasibility of reclamation.
c. Effect of virgin gas supplies on dry-shipped condensing units.
Nine commenters submitted comments requesting that EPA decrease consumption allowances for 2012-2014. Another company also supported such a decrease, as long as updated market conditions indicate there is a need to do so and all allowance holders are affected proportionally. Commenters suggested that excess supply was due to several factors. Additionally, commenters stated the price of HCFC-22 is low, indicating that virgin supplies are not constrained to the extent that the Agency had anticipated. Some commenters pointed to the unused consumption allowances for 2010 as evidence of over-supply and the need for decreasing the total number of consumption allowances.
(c) Effect of virgin gas supplies on dry-shipped condensing units: Two commenters also specifically mention the increased popularity in dry-shipped condensing units that are eventually charged with HCFC-22 as a symptom of this over-supply. The Agency recognizes that the majority of commenters believe that there is an excess of HCFC-22 on the market, which has direct negative consequence for reclaim and recovery, and thus overall ODS emissions. Additionally, EPA has received a petition (included in the docket) from the Carrier Corporation, dated February 3, 2011, concerning dry-shipped HCFC-22 condensing units. EPA is taking comment on whether the installation of dry-shipped HCFC-22 condensing units will affect the phaseout of virgin HCFC-22 production and import.
EPA undertook an analysis to gauge whether there is a surplus of HCFC-22 and, if so, how large the surplus is. A memo in the docket for this rulemaking details EPA's analysis of the HCFC-22 market. The results indicate EPA should consider allocating between 11 to 47 percent less per year between 2012 and 2014 relative to the amounts that appeared in the 2009 Final Rule. Consequently, EPA is proposing in this rulemaking to allocate fewer HCFC-22 consumption allowances than contemplated in the 2009 Final Rule for 2012-2014 in order to promote recovery and reclamation and encourage transition to non-ODS alternatives (see section III.B. and III.C.). As stated in the 2009 Final Rule, “The Agency strongly encourages increased recovery and either recycling or reclamation of HCFC-22 * * * Recovery becomes even more important in light of the 2015 Montreal Protocol phasedown step, when the U.S. HCFC consumption cap is reduced from 3,810 ODP-weighted metric tons to 1,524 ODP-weighted metric tons,” (74 FR 66422).
Two commenters requested that EPA provide HCFC allowances to certified reclaimers. As explained in the report titled “Analysis of Equipment and Practices in the Reclamation Industry,” which is included in the docket for this rulemaking, “refrigerant reclamation refers to the reprocessing and upgrading of recovered refrigerant through such mechanisms as filtering, drying, distillation and chemical treatment in order to restore the substance to specifications outlined in the Air-Conditioning, Heating, and Refrigeration Institute (AHRI)'s Standard 700-1995.” The commenters argue increasing allocations to reclaimers would increase the amount of reclaimed HCFCs available for purchase. The comments are similar to those submitted prior to the finalization of the 2009 Final Rule, which allocated HCFC allowances for 2010-2014. EPA responded to this request at the time (74 FR 66422; Response to Comments document for the 2008 NPRM), but discusses the issue further here.
EPA continues to believe that allocating fewer allowances is the best way to foster reclamation and recovery. Thus, this proposal does not include an allocation for reclaimers. However, the Agency has included the relevant comments on the Interim Final Rule in the docket for this rulemaking and welcomes further comment on this issue from all interested parties.
One small business has informed EPA that it cannot acquire either HCFC allowances or the HCFCs it needs to manufacture its HCFC blend (see the letters from ICOR dated May 17, 2011 and September 6, 2011). The company asserts that the cap and trade system is in practice “cap and no trade,” where companies hold onto their allowances, even if they have no intention of using them. The commenter argues that this leads to artificially high prices for HCFCs and HCFC allowances. To remedy this situation, the commenter requests that EPA take unused allowances and provide those allowances to companies that either purchased HCFCs or HCFC consumption allowances in 2008 and 2009. EPA notes that the inability to acquire allowances and/or HCFCs themselves does not appear to be a widespread problem, as numerous companies have made a significant number of transfers over the last year alone, and no other company has indicated it cannot acquire HCFCs. However, EPA is taking comment on whether other companies are having difficulty acquiring HCFCs or HCFC allowances.
In addition to the exception for late entrants made in the 2003 Final Rule, there is significant flexibility in the types of transfers companies can conduct. Companies can transfer allowances between companies and, on a temporary basis, between chemicals. A guidance memo, titled “Flexibility in the HCFC Allowance System,” describing this flexibility further is available in the docket and on EPA's Web site. Companies can also purchase HCFCs at the wholesale price, which, according to comments on the 2011 Interim Final Rule, has been decreasing. The allocation system in part was established to discourage the use of HCFCs and companies' continuation in the HCFC market. As stated in the 2003 Final Rule, “businesses that desired an allocation of HCFC allowances would have known the risks of jumping into the business at this juncture” (66 FR 38073). Since that statement more than nine years ago, access to information and knowledge of the risks regarding entering or continuing in the HCFC market have only increased. Furthermore, new entrants have entered the market by purchasing consumption allowances, as EPA predicted they could back in 2003. All entities wishing to enter the HCFC import or production market can continue to purchase allowances for HCFCs.
As the market continues to decrease in size, EPA does not believe that expanding the pool of allowance holders is necessary to prevent disruption of the continued servicing of existing equipment. EPA explored several options that would have expanded the number of allowance holders in the 2008 NPRM (73 FR 78867) and determined the current approach with adjustment for transfers of baseline allowances was appropriate (74 FR 66419; Response to Comments for the 2008 NPRM). Given EPA's intent to phase down, and ultimately phase out, the use of HCFCs, consistent with the requirements of the CAA and obligations under the Montreal Protocol, EPA believes it is justified in continuing to allocate only to those entities who participated in the market at the initial stages, as well as those that have entered the market by purchasing HCFC baseline allowances in accordance with the established practices. EPA does not believe that providing allowances to companies that were not importing or producing HCFCs prior to EPA regulation is appropriate at this time given the disruption it would create to the existing regulatory framework. However, in light of the large number of HCFC allowances that were not used in 2010 and the difficulty at least one company is having in getting HCFCs, EPA welcomes comments on whether an allocation to manufacturers of HCFC blends who are having difficulty acquiring HCFCs or HCFC allowances would be appropriate. Commenters supporting such an allocation should consider (1) how EPA might determine the total amount of such an allocation, (2) how EPA might determine which companies should receive allowances, (3) how EPA would verify that allowance holders are refusing to sell HCFCs and HCFC allowances, (4) how EPA might set baselines for these companies, (5) whether EPA should provide allowances in addition to the amount proposed in this rule, or as part of the amount proposed in this rule, and (6) how providing allowances to an additional set of companies would affect the U.S. transition away from HCFCs.
EPA is proposing to continue the system established in previous rulemakings (68 FR 2820, 74 FR 66412, 76 FR 47451) to address HCFC production and import in the U.S. 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 the year (for example, 32 percent in 2011) to determine its calendar-year allowance is 32,000 kg. Historically, EPA has allocated the same percentage of baseline allowances for production as it does for consumption.
Additionally, EPA notes that beginning January 1, 2015, section 605 of the CAA prohibits the use and introduction into interstate commerce of any HCFC unless it “(1) has been used, recovered and recycled; (2) is used and entirely consumed (except for trace quantities) in the production of other chemicals; or (3) is used as a refrigerant in appliances manufactured prior to January 1, 2020.” In addition, EPA's regulations at 40 CFR 82.15 restrict use and introduction into interstate commerce of HCFC-141b, HCFC-142b, and HCFC-22 beginning in 2010, with limited exceptions. If entities will need HCFCs in 2015 and beyond for uses other than the exemptions contained in section 605, they should contact EPA prior to 2013. Entities should understand that the statutory prohibition in section 605 generally will prevent EPA from accommodating such needs, with the possible exception of de minimis quantities.
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 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 proposing to establish baselines for 2012-2014 identical to the HCFC-22 and HCFC-142b baselines established in the 2011 Interim Final Rule (76 FR 47451) that reflect past inter-pollutant baseline transfers deemed permanent by the Court.
EPA cited several reasons why it would prefer to set baselines without taking into account inter-pollutant transfers in the 2009 Final Rule (74 FR 66420), the Response to Comments document included in the record for that rulemaking, and the 2011 Interim Final Rule (76 FR 47451). However, EPA is recognizing the 2008 transfers in establishing the baselines through 2014 in accordance with the Court's decision. The Agency is providing advance notice that for the 2015-2019 regulatory period, it would consider using more recent production and import data than the 1994-1997 data used to set baselines for the first time in the 2003 Final Rule. The Agency is particularly interested in stakeholders' views on whether there would be an environmental benefit to doing so.
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 proposed rulemaking and continues to believe it is necessary to promote use of reused, recycled, and reclaimed material in anticipation of the 2015 phasedown step. However, EPA is proposing to allocate fewer consumption allowances for HCFC-22 relative to the 2009 Final Rule based on analysis of updated market conditions. The proposed allocation and the supporting documentation are discussed in section III.B.2. Regardless of the extent to which the total number of consumption allowances differs from the total number allocated in the 2009 Final Rule, the specific amounts allocated per company will be different than the 2009 Final Rule. In accordance with the Court's decision in Arkema v. EPA, the Agency is proposing to reflect the 2008 inter-pollutant transfers in companies' baselines, and EPA therefore needs to allocate a different percentage of company baselines in order for the aggregate number of annual HCFC consumption allowances to be less than (or equal to) the 2009 Final Rule. EPA is also proposing to allocate different percentages of baseline for annual consumption than for annual production (described in the rest of the preamble as “decoupling”).
Separate from the proposed allocation change, EPA is taking comment on whether or not to provide more HCFC-22 and/or HCFC-142b consumption and/or production through this rulemaking than it did in the 2009 Final Rule as a result of the unforeseen circumstances presented by the Court's decision in Arkema v. EPA. While the Agency's preference is not to provide recoupment, EPA is considering an approach to the 2013 allocation or 2013 and 2014 allocations that could allocate allowances to account for lost opportunities to produce and consume in 2010, given that 2010 allowance levels were based on baselines that are inconsistent with the Court's finding (section III.B.4. discusses this in more depth).
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 and the 2009 Servicing Tail Report, 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 40 CFR 82.15(g) nearly all other uses of newly produced material for these two HCFCs were banned effective January 1, 2010. HCFC-142b has primarily been used as a foam blowing agent, a use that was prohibited beginning in 2010 (40 CFR 82.15(g)). The projected servicing demand for existing refrigeration equipment containing HCFC-142b is extremely low: Approximately 100 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.
EPA estimates that the servicing need for HCFC-22 will continue to decrease each year, and consistent with the 2009 Final Rule, EPA proposes to account for this by allocating a smaller amount for 2012 than was allocated for 2011. This approach is described in section III.B.3. of this action, along with more recent market data on the need for, and availability of, HCFC-22.
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 in each year between 2010 and 2014. 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 proposing to maintain the same approach to meeting servicing needs at this time. While the Agency is not changing its approach, EPA believes that the percentage of overall demand that can be met by reclaimed material is higher than originally projected. EPA is taking comment on the new projections of reclaim capabilities outlined in the memo included in the docket for this rulemaking titled, “Analysis of HCFC-22 Servicing Needs in the U.S. Air Conditioning and Refrigeration Sector: Additional Considerations for Estimating Virgin Demand,” (Adjustment Memo).
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. 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 was 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). 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).
Estimated Demand (MT) 53,200 48,400 43,600
Recovered Amount (MT) 12,500 12,500 12,500
Total Allocation (MT) 40,700 35,900 31,100
In summary, the Agency is proposing to reduce consumption allowances relative to the 2009 Final Rule. The Agency is also proposing to decouple production allowances and allocate either the same amount of production as in the 2009 Final Rule or the same percentage of baseline as in the 2009 Final Rule. A memo included in the docket for this rulemaking provides an overview of the various scenarios (see the Overview Memo).
EPA's first step in addressing the Court's decision was to establish baselines for 2011 that reflected the 2008 inter-pollutant transfers that were at issue in the litigation and to allocate allowances for 2011 as a percentage of those baselines. As noted in the Interim Final Rule (76 FR 47451), EPA interprets the Court's decision as applying, at a minimum, to the baseline and calendar-year allowances for 2011-2014. The Agency is taking comment on whether to interpret the decision as applying to the 2010 allocation, and if so, how allowances in future control periods might be adjusted to reflect this. The petitioners in the case, Arkema and Solvay, have stated that EPA should “restore the allowances of which Arkema and Solvay were deprived unlawfully in 2010,” or “provide a method to compensate Arkema and Solvay for year 2010 allowances that rightfully should have been available” (February 4, 2011 letter to Drusilla Hufford, EPA, from William Hamel, Arkema, and March 7, 2011 letter to Drusilla Hufford, EPA, from Don Magid, Solvay, both available in the docket for this rulemaking). As a result of these requests, EPA is considering whether to grant additional allowances for all companies that would have received higher allocations in 2010 if the 2008 inter-pollutant transfers had been reflected in the baselines published in the 2009 Final Rule. The companies affected, and the additional allowances they would have received (hereinafter described as “recoupment allowances”), are included in Table 2, below.
Arkema HCFC-22 4,749,692 4,611,848
DuPont HCFC-142b 2,339 0
Honeywell HCFC-142b 58,291 107,097
Solvay Fluorides HCFC-22 1,157,895 0
Solvay Solexis HCFC-142b 0 289,800
Option 1 is not without disadvantages. First, it would increase the number of allowances available for use in 2013, which might impede the development of a viable reclamation industry and hamper the transition to the 2015 stepdown. Second, this option significantly increases the number of allowances in 2013 for certain companies receiving recoupment, meaning that those companies arguably could have difficulty selling the full amount of HCFC-22 produced or imported with allowances that year. However, if companies receiving extra allowances all in one year cannot sell the full amount in that year, they may store produced and/or imported material for sale or use in later years, or sell the allowances to other producers or importers for use in that same year. Third, companies not receiving recoupment would have the same number of allowances as they would under a no-recoupment scenario, but they would have a smaller share of all allowances allocated under this option compared to a no recoupment scenario.
EPA notes that all 2010 allowances expired on December 31, 2010 and therefore have no value in later years. See 74 FR 66415 (“EPA allocates allowances for specific years; they are valid between January 1 and December 31 of a given control period (i.e., calendar year)”). 40 CFR Part 82 also makes it clear that allowances are tied to a specified control period. Section 82.16(a) states that “In each control period * * * each person is granted the specified percentage of baseline production allowances and baseline consumption allowances for the specified class II controlled substances apportioned under §§ 82.17 and 82.19.” Furthermore, the definitions of unexpended allowances in section 82.3 specify that allowances are valid for specific control periods. The protection of stratospheric ozone allowance system at 40 CFR part 82 does not allow banking or borrowing of allowances. Since the Court's mandate issued on February 4, 2011, no company could have possessed 2010 allowances on the date the mandate issued, because all unexpended 2010 allowances had already expired.
If EPA decides to provide recoupment, the Agency prefers option 1 because it has a minimal impact on the 2015 stepdown to 10 percent of baseline, addresses the Court's decision in the simplest manner, and does not further decrease the number of allowances companies would have received had EPA taken the 2008 inter-pollutant transfers into account in its 2009 Final Rule. EPA welcomes comment on the matter. A memo in the docket for this rulemaking shows how EPA would effectuate each of the options in the regulatory text at 40 CFR part 82 (see “Memo: Recoupment Options”). To effectuate this option, the regulatory text at 40 CFR 82.16(a) would be amended to add paragraph (a)(2) as set forth in the regulatory text of this proposed rule.
Any recoupment allowances allocated for 2013 or 2014 would function in the same way as other calendar-year allowances: For example, they could be used only in the calendar year for which they were issued and would expire at the end of that calendar year.
As discussed previously, EPA is proposing to revise the tables in 40 CFR 82 that together specify the production and consumption allowances available 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 specific 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. EPA is proposing to (1) retain this framework of complementary tables, (2) respond to the Court's remand by establishing baselines for 2012-2014 identical to those established in the 2011 Interim Final Rule (76 FR 47451), and (3) grant allowances based on percentages of baselines in a manner that achieves the 2010 phaseout step and lays the groundwork for the next phaseout step in 2015 (which could mean fewer 2012-2014 consumption allowances with or without fewer 2012-2014 production allowances as compared to the 2009 Final Rule). EPA has published an Overview Memo in the docket clarifying how the various options presented in this proposed rule might work separately or in combination.
Table 3—Proposed Phaseout Schedule for HCFC-22 and HCFC-142b Between 2012 and 2014 6
HCFC-22 Consumption
HCFC-142b Consumption and production
2012 28.7 17.7 34.1 17.7 4.9 4.9
2013 25.3 11.4 30.1 11.4 4.9 0.4
2014 21.9 8.3 26.1 8.3 4.9 0.4
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 2012-2014 control periods.
For 2012, the 2009 Final Rule allocated HCFC-22 consumption allowances to meet about 76.5 percent of the servicing need, which translated into approximately 40,700 MT, or 59 percent of the total HCFC consumption cap for the 2012 control period. In this rulemaking, EPA is proposing to allocate 11 to 47 percent less for 2012 relative to the 2009 Final Rule; see the Adjustment Memo in the docket for a discussion of recent updates to estimated servicing demand and how much of that demand could reasonably be met by recovered or reclaimed refrigerant. In the 2009 Final Rule, 2013 and 2014 consumption allocations were 35,900 MT and 31,100 MT, respectively. The Agency is proposing to allocate 11 to 47 percent less for those years as well. Along with any reduction in consumption allowances, the final allocations in 2013 and 2014 will depend on which recoupment option the Agency chooses (including no recoupment). If the Agency issues recoupment, its preferred option is to allocate all recoupment (5,907 MT) in 2013 and do so in addition to the overall consumption allocation—regardless of whether the annual allocations are decreased relative to the 2009 Final Rule or not. In each year between 2012 and 2014, EPA's total HCFC consumption allocation including recoupment would be at least 36 percent below the Montreal Protocol cap, and would be below servicing demand as estimated in the Servicing Tail Report. Section III.B.4. of this preamble also discusses other recoupment options.
In the 2009 Final Rule, EPA decided to use the same percentages for production and consumption allocations—deriving the percentages based on estimated need for each individual HCFC. In this rulemaking, EPA is proposing to decouple the percentage of baseline allocated for production and consumption allowances. The Agency is taking comment on two options with regard to decoupling production allowances: (1) Allocating the same aggregate number of HCFC-22 production allowances as in the 2009 Final Rule for 2012-2014, and (2) using the same baseline percentages as in the 2009 Final Rule to allocate HCFC-22 production allowances in 2012-2014. The proposal to decrease consumption allowances by 11 to 47 percent relative to the 2009 Final Rule would also apply to production allowances should the Agency decide not to decouple production allowances from consumption allowances.
In summary, EPA seeks comment on whether to decouple production from consumption, and if so, which decoupling option to choose. EPA is also seeking comment on whether increasing production allowances above the 2009 Final Rule level, as in option 2, would negatively affect 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.
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 proposing to allocate 100 percent of the projected servicing need for HCFC-142b identified in that rule: 100 MT of consumption. To get to that level of consumption, EPA is proposing to allocate 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.
As discussed in section III.B.4. of this preamble, EPA is considering options to allocate recoupment allowances in 2013 or 2013-2014 in addition to the 4.9 percent of baseline described above. If finalized, the 2013 option would result in an additional 61 MT of HCFC-142b consumption allowances and 397 MT of HCFC-142b production allowances. The 2013-2014 option would result in 30 MT of additional HCFC-142b consumption allowances and 198 MT of HCFC-142b production allowances each year.
For 2012, EPA is proposing to allocate (1) at maximum, approximately 40,700 MT of HCFC-22 consumption allowances, (2) 37,050 MT of HCFC-22 production allowances (with possible adjustments), (3) approximately 100 MT of HCFC-142b consumption allowances and (4) 463 MT of HCFC-142b production allowances. 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 range of percentages of baseline each entity would receive for HCFC-22 and HCFC-142b in 2012 through 2014 is shown in Table 3 above. For the low percentage of baseline allocated, Table 3 shows how the proposed allocation combined with recoupment option 3 (recoupment provided from the total allocation, not in addition to the allocation) would affect allowances. For the high percentage of baseline allocated, Table 3 shows no change relative to the 2009 Final Rule on the consumption side and an increase in allowances on the production side. The percentages included in the proposed regulatory text at the end of this preamble are at the lower end of the range EPA is proposing to allocate.
Carrier Corporation HCFC-22 54,088
Coolgas Investment Property HCFC-22 1,040,458
Mexichem Fluor Inc HCFC-22 2,546,305
USA Refrigerants HCFC-22 14,865
The proposed baselines listed above are identical to the tables presented in the 2011 Interim Final Rule (76 FR 47451).
Since the Court's decision did not vacate this portion of the 2009 Final Rule, EPA is not proposing to change baselines and percentages of baseline allocated as calendar-year allowances for HCFC-141b, HCFC-123, HCFC-124, HCFC-225ca, and HCFC-225cb, except to make adjustments for inter-company, single-pollutant transfers of baseline allowances, as reflected in the 2011 Interim Final Rule (76 FR 47451). 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).
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 2012-2014. 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 could provide 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.
The Agency is concerned about the possibility of companies undermining the HCFC chemical-by-chemical phaseout by performing inter-pollutant transfers in advance of future phaseout steps. EPA interprets the 2003 Final Rule, which established the transfer provisions at 40 CFR 82.23, as allowing only single-pollutant, inter-company transfers to be made on a permanent basis. Nevertheless, EPA recognizes that in Arkema v. EPA, the Court found that “EPA's practice under the 2003 Rule was to allow petitioners' baseline transfers of inter-pollutant allowances” (618 F.3d at 8). Therefore, EPA clarified its current policy on inter-pollutant transfers in the 2011 Interim Final Rule (76 FR 47459) and is repeating that clarification in this action. EPA is also proposing to modify the regulatory text in order to dispel any possibility of confusion in the future. In addition to modifying the regulatory text to address the duration of inter-pollutant transfers, EPA is also proposing to revise the regulatory text to reflect prior Agency statements pertaining to inter-pollutant transfers of Article 5 allowances.
EPA proposes to revise the regulations to avoid any further dispute about the Agency's position on this issue. In addition, EPA is proposing to clarify the procedures that apply to permanent, single-pollutant transfers. Specifically, EPA proposes to add a sentence at the beginning and end of section 82.23(d) of 40 CFR Part 82, so the text reads: “(d) Permanent transfers. The procedures in paragraph (a) of this section apply to permanent inter-company transfers of baseline production allowances or baseline consumption allowances. A person receiving a permanent transfer of baseline production allowances or baseline consumption allowances (the transferee) for a specific class II controlled substance will be the person who has their baseline allowances adjusted in accordance with phaseout schedules in this subpart. No person may conduct permanent inter-pollutant transfers of baseline production allowances or baseline consumption allowances.”
Article 5 allowances for Class II substances are the privileges granted under 40 CFR 82.18(a) to produce the specified HCFC for export only to countries listed in 40 CFR Subpart A, Appendix C, Annex 4. The countries listed in that annex are developing countries whose control obligations under the Montreal Protocol are addressed in Article 5 of the treaty and hence are referred to as “Article 5 Parties.” EPA is proposing to revise the regulations at 40 CFR 82.23(b) to reflect its previously stated intent to allow inter-pollutant transfers of Article 5 allowances. The regulations currently provide clarity on inter-company (single-pollutant) transfers of Article 5 allowances in section 82.23(a) by stating “a person * * * may transfer to any other person * * * any quantity of the transferor's class II * * * Article 5 allowances for the same type of allowances * * *” While 82.23(a) specifically includes Article 5 allowances in the list of allowances that may be transferred to another entity, 82.23(b), which governs inter-pollutant transfers, makes no mention of Article 5 allowances.
EPA is also proposing to change the text at 82.23(a)(ii) for consistency with its previously stated policy on offsets for transfers of Article 5 allowances. Section 607(a) requires that transfers of production allowances “will result 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.” In a November 10, 1994, Federal Register notice, EPA stated its interpretation that the section 607 offset requirement applies to Article 5 allowance transfers (59 FR 56287): “Inter-pollutant transfers of Article 5 allowances will continue to require a one percent offset, as required by section 607 of the CAA * * *” In the May 10, 1995 final rule at 60 FR 24980, EPA stated that “With today's action, EPA permits inter-pollutant and inter-company transfers of Article 5 allowances as proposed * * *” meaning EPA intended to require an offset for transfers of Article 5 allowances in the class I allowance system.
The Agency is also proposing to modify the text at 40 CFR 82.23(b) by adding Article 5 allowances to the list of allowances that can be traded between pollutants. The text would read as set forth in the regulatory text of this proposed rule.
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. We have considered the economic impacts of this proposed 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.
After considering the economic impacts of this proposed 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, (3) changes in company names that occurred after the 2009 Final Rule was signed and (4) an updated picture on the demand for HCFC-22. EPA is not modifying the recordkeeping or reporting provisions and thus is not increasing the burden to small businesses. EPA's HCFC Phaseout Benefits and Costs Memo, included in this docket, provides a summary of previous small business analyses, as well as the most recent cost and benefit data used for the 2009 Final Rule. We continue to be interested in the potential impacts of the proposed rule on small entities and welcome comments on issues related to such impacts.
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. UMRA does not apply to rules that are necessary for the national security or the ratification or implementation of international treaty obligations. This rule implements the 2010 milestone for the phase-out of HCFCs under the Montreal Protocol. Therefore, this action is not subject to the requirements of sections 202 or 205 of the UMRA.
This action 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.
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.
40 CFR part 82 is proposed to be amended to read as follows:
2. Amend § 82.16 by revising paragraph (a) to read as follows:
(a) Calendar-year Allowances. (1) In each control period as indicated in the following tables, each person is granted the specified percentage of baseline production allowances and baseline consumption allowances for the specified class II controlled substances apportioned under §§ 82.17 and 82.19:
2010 0 41.9 0.47 125 125 125 125
2011 0 32.0 4.9 125 125 125 125
2012 0 17.7 4.9 125 125 125 125
2013 0 14.7 4.9 125 125 125 125
2014 0 11.6 4.9 125 125 125 125
3. Amend § 82.23 by revising paragraphs (a)(ii) introductory text, (a)(ii)(A), (b)(1), and (d) to read as follows:
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 became binding for all Parties on May 14, 2008.
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 proposed rule, EPA has allocated the same percentage of baseline allowances for production as it does for consumption.
6. Table 3 shows the highest and lowest percentage of baseline allocated being proposed in this rule. The high HCFC-22 consumption scenario shows the percentage allocated if EPA provides the same number of allowances relative to the 2009 Final Rule. The high HCFC-22 production scenario shows an increase in overall production allowances if EPA allocates the same percentage of baseline as in the 2009 Final Rule. The low HCFC-22 production and consumption scenarios take into consideration a reduction in allowances relative to the 2009 Final Rule and recoupment from the aggregate allocation in 2013 and 2014. Additionally, the low scenario for HCFC-22 production shows the percentage allocated if EPA does not decouple production and consumption. For HCFC-142b, the high percentage reflects the same thinking used in the 2011 Interim Final Rule. The low scenario incorporates consumption recoupment from the aggregate amount for 2013 and 2014.
[FR Doc. 2011-33456 Filed 1-3-12; 8:45 am]