Protection of Stratospheric Ozone: Allowance System for
Controlling HCFC Production, Import and Export
[Federal Register: January 21, 2003 (Volume 68, Number 13)]
[Rules and Regulations]
[Page 2819-2863]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21ja03-16]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 82
[FRL-7428-6]
RIN 2060-AH67
Protection of Stratospheric Ozone: Allowance System for
Controlling HCFC Production, Import and Export
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
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SUMMARY: EPA is establishing an allowance system to control the U.S.
consumption and production of ozone-depleting substances (ODSs)known as
hydrochlorofluorocarbons (HCFCs). While much less destructive to the
stratospheric ozone layer than chlorofluorocarbons (CFCs), HCFCs do
contribute to ozone depletion and alternatives are generally available.
The HCFC allowance system is part of EPA's program to reduce the
emissions of ODSs to protect the stratospheric ozone layer. Protection
of the stratospheric ozone layer helps reduce rates of skin cancer and
cataracts. The U.S. is obligated under the Montreal Protocol on
Substances that Deplete the Ozone Layer to limit HCFC consumption to a
specific level and to reduce it in a step-wise fashion beginning
January 1, 2004. The U.S. has also agreed to limit production to a
specific level beginning January 1, 2004. This action also includes a
petition process for exemptions to the January 1, 2003, phaseout of
HCFC-141b.
EFFECTIVE DATE: January 21, 2003.
ADDRESSES: Materials relevant to this rulemaking are contained in
Docket No. A-98-33 at the Air and Radiation Docket at EPA West, 1301
Constitution Avenue NW, Room B108, Mail Code 6102T, Washington, DC
20460, Phone: (202)566-1742, Fax: (202)566-1741.
FOR FURTHER INFORMATION CONTACT: Vera Au, EPA, Global Programs
Division, Office of Atmospheric Programs, Office of Air and Radiation
(6205J), 1200 Pennsylvania Avenue, NW, Washington, DC 20460, (202) 564-
2216.
SUPPLEMENTARY INFORMATION: Under the Montreal Protocol on Substances
that Deplete the Ozone Layer (Protocol), the U.S. and other
industrialized countries that are Parties to the Protocol have agreed
to limit production and consumption of hydrochlorofluorocarbons (HCFCs)
and to phase out consumption in a step-wise fashion over time,
culminating in a complete phaseout in 2030. Title VI of the Clean Air
Act (CAA) authorizes the U.S. EPA to promulgate regulations to manage
the consumption and production of HCFCs until the total phaseout in
2030. In 1992, a graduated consumption phaseout was established under
the Protocol for industrialized countries and in 1993 the EPA
established a chemical-by-chemical phaseout to implement the graduated
consumption phaseout (58 FR 65018, December 10, 1993). The consumption
cap became effective in 1996 and consumption in the U.S. was about 15%
percent below the cap for many years. In 1998 and 1999, consumption
rose to levels that approached the cap so options for an allowance
system were offered for comment with the publication of the Advance
Notice of Proposed Rulemaking on April 5, 1999 (64 FR 16373). The
Notice of Proposed Rulemaking was published on July 20, 2001, (66 FR
38064) and a public hearing was held on August 27, 2001, for comments
on the proposed rule.
Abbreviations and Acronyms Used in This Document
Act--Clean Air Act Amendments of 1990
ANPRM--Advance Notice of Proposed Rulemaking
Article 2 countries--industrialized countries
Article 5 countries--developing countries
CAA--Clean Air Act Amendments of 1990
cap--limitation in level of production or consumption
CFC--chlorofluorocarbon
CFR--Code of Federal Regulations
EPA--Environmental Protection Agency
FDA--Food and Drug Administration
FR--Federal Register
HCFC--hydrochlorofluorocarbon
NASA--National Aeronautics and Space Administration
NODA--Notice of Data Availability
NPRM--Notice of Proposed Rulemaking
ODP--ozone depletion potential (40 CFR part 82)
ODS--ozone-depleting substance
Party--Signatory country to the Montreal Protocol on Substances that
Deplete the Ozone Layer
Protocol--Montreal Protocol on Substances that Deplete the Ozone Layer
SBREFA--Small Business Regulatory Enforcement Fairness Act
SNAP--Significant New Alternatives Policy
UNEP--United Nations Environment Programme
U.S.--United States
Table of Contents
I. Regulated Entities
II. Background
A. How do the Montreal on Substances that Deplete the Ozone
Layer and the U.S. Phase Out HCFCs?
B. What Sections of the Clean Air Act Apply to this Rulemaking?
III. Discussion of Comments on the July 20, 2001, Notice of Proposed
Rulemaking (NPRM)
A. Will Production and Consumption Allowances be Available?
B. Will Allowances be Tracked Chemical-by-Chemical?
C. Will Allowances Be Distributed on a One-Time Basis?
D. Will 100 Percent of the U.S. Cap be Allocated?
1. Consumption Allowances
2. Production Allowances
E. Will There Be HCFC-141b Exemption Allowances for Continuing
Needs?
1. Who May Submit a Petition for HCFC-141b Exemption Allowances
Beyond January 1, 2003
2. Definition of ``Space Vehicle''
3. Definition of ``Formulator''
4. Petition Process to Include HCFC-141b Formulators
5. Information Supporting Decision to Expand the Petition
Process
6. Reason for Petition Process
7. Total Quantity for Exemption
8. How Long EPA Will Continue to Receive/Review Petitions
9. Information to be Submitted in a Petition
10. Deadline for Submitting Petitions
11. Length of Review Process
12. Notification of Petitioners
13. How HCFC-141b Exemption Allowances Will be Expended
14. Transfer of HCFC-141b Exemption Allowances or Carryover into
Subsequent Control Periods
15. Transfer of HCFC-141b Exemption Allowances in an Acquisition
16. Reporting and Recordkeeping Requirements
17. Renewal of Requests for HCFC-141b Exemption Allowances
Beyond the First Control Period
18. Penalties for Exceeding HCFC-141b Exemption Allowances
19. Criteria for Approval/Disapproval
20. Other Limitations to Approval of Petitions
F. How Were the Baselines Established?
G. Will I Be Able to Transfer Allowances?
1. Transfers Within Groups of HCFCs
2. Inter-Pollutant Transfers
3. Inter-Company Transfers
4. Inter-pollutant Transfers Combined with Inter-Company
Transfers
5. International Trades of Current-Year Allowances
(a) Consumption Allowances
(b) Production Allowances
6. Transfers of Current-Year Allowances
7. Permanent Transfers of Baseline Allowances
8. Offset for a Transfer of Allowances
H. Will Production for Export be Allowed After Each Phaseout?
1. Exports to Parties
2. Exports to Article 5 Countries
I. Will There Be a Petition System for Importing Used HCFCs?
[[Page 2821]]
1. Petition for Each Individual Shipment
2. Threshold Quantity Requiring a Petition
3. Information Requirements
4. Timing for Review of a Petition
5. Reasons for Issuing an Objection Notice
6. Petition and Non-Objection Letter to Accompany the Shipment
J. Will There be New Restrictions on Imports to and Exports from
Specific Parties?
K. Will There Be Changes in Definitions?
1. Modifications
2. Additions
L. Will Other Regulatory Options Be Used to Control HCFCs?
1. Labeling
2. SNAP Approval and Restrictions
3. Non-Essential Products Ban
M. Will There Be Consumption Allowance Credits for Reductions of
HCFC Production By-Products Regulated by Title VI?
N. What Will the Reporting and Recordkeeping Requirements Be?
1. Producers
2. Exporters
3. Transformation and Destruction
4. Heels
IV. Administrative Requirements
A. Executive Order 12866
B. Executive Order 13045: Children's Health Protection
C. Executive Order 13132: Federalism
D. Executive Order 13175: Consultation and Coordination with
Indian Tribal Governments
E. Executive Order 13211: Energy Effects
F. Congressional Review Act
G. National Technology Transfer and Advancement Act
H. Paperwork Reduction Act
I. Regulatory Flexibility Act (RFA), as amended by the Small
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5
U.S.C. 601 et. seq.
J. Unfunded Mandates Reform Act
I. Regulated Entities
The HCFC allowance allocation system will affect the following
categories:
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NAICS SIC Examples of
Category code code regulated entities
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Chlorofluorocarbon gas 325120 2869 Chlorodifluorometha
manufacturing. ne manufacturers;
Dichlorofluoroetha
ne manufacturers;
Chlorodifluoroetha
ne manufacturers
Chlorofluorocarbon gas importers. 325120 2869 Chlorodifluorometha
ne importers;
Dichlorofluoroetha
ne importers;
Chlorodifluoroetha
ne importers.
Chlorofluorocarbon gas exporters. 325120 2869 Chlorodifluorometha
ne exporters;
Dichlorofluoroetha
ne exporters;
Chlorodifluoroetha
ne exporters
Polystyrene foam product 326140 3086 Plastics foam
manufacturing. Products
(Polystyrene Foam
Products)
Urethane and other foam product 326150 3086 Insulation and
(except polystyrene) cushioning, foam
manufacturing. plastics (except
polystyrene)
manufacturing
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This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities likely to be regulated by this
action. This table lists the types of entities that EPA is now aware
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, etc., is regulated by
this action, you should carefully examine these regulations. If you
have questions regarding the applicability of this action to a
particular entity, consult the person listed in the FOR FURTHER
INFORMATION CONTACT section.
II. Background
A. How Do the Montreal Protocol on Substances That Deplete the Ozone
Layer and the U.S. Phase Out HCFCs?
In 1990, the Parties to the Protocol identified HCFCs as
transitional substitutes for CFCs and other more destructive ODSs
(ozone-depleting substances). In 1992, the Parties created a detailed
phaseout schedule for HCFCs, with a cap on consumption for Article 2
(industrialized) countries like the U.S. The Protocol defines
consumption as production plus imports minus exports. The consumption
cap is derived from the formula of 2.8 percent of the Party's CFC
consumption in 1989, plus the Party's consumption of HCFCs in 1989.
Based on this formula, the consumption cap for the U.S. is 15,240 ODP-
weighted metric tonnes, effective January 1, 1996.
The Parties created a schedule with graduated reductions and the
eventual phaseout of the consumption of HCFCs. The schedule calls for a
35 percent reduction of the cap in 2004, followed by a 65 percent
reduction in 2010, a 90 percent reduction in 2015, a 99.5 percent
reduction in 2020, and a total phaseout in 2030. The U.S. must comply
with this phaseout schedule under the Protocol.
In 1992, EPA was petitioned by environmental groups and industry to
implement the required phaseout by eliminating the most ozone-depleting
HCFCs first. Based on the available data at the time, EPA believed that
the U.S. could meet, and possibly exceed, the required Protocol
reductions through the chemical-by-chemical phaseout. In 1993, as
authorized by Section 606 of the Clean Air Act Amendments of 1990
(CAA), the U.S. established a phaseout schedule that will eliminate
HCFC-141b, HCFC-22, and HCFC-142b first (58 FR 65018, December 10,
1993; 58 FR 15014, March 18, 1993).
In 1999, the Parties agreed to a cap on HCFC production for
industrialized countries, effective January 1, 2004. This cap was
derived from the average of the Party's consumption cap (2.8 percent of
the Party's CFC consumption in 1989, plus the Party's HCFC consumption
in 1989) and the result of the same formula for production (2.8 percent
of the Party's CFC production in 1989, plus the Party's HCFC production
in 1989). This formula results in a U.S. production cap of 15,537 ODP-
weighted metric tonnes. As authorized by Section 606 of the CAA, EPA is
adopting provisions in today's rule that are consistent with that
production cap.
B. What Sections of the Clean Air Act Apply to This Rulemaking?
Five sections of the CAA apply to this rulemaking. Section 602
requires that EPA publish a list of class II controlled substances.
This list appears in 40 CFR part 82, subpart A, Appendix B. Since
publication of the initial list, no new substances have been added to
the list. Section 602 also requires that EPA assign ozone-depleting
potentials (ODPs) to all class II controlled substances. Appendix B to
part 82, subpart A in the regulatory text of this document lists class
II controlled substances and their corresponding ODPs as currently
specified by the Protocol.
HCFC reporting requirements mandated in Section 603 were in 40 CFR
82.13(n) and (o) but have been removed. Recordkeeping requirements and
amended reporting requirements have been placed instead in 40 CFR
82.24.
Section 605 of the CAA requires EPA to promulgate regulations to
phase out the production and consumption and restrict the use of HCFCs
in accordance with the schedule set forth in that
[[Page 2822]]
section and subject to any acceleration as authorized by Section 606.
Section 606 allows for acceleration of the phaseout of ODSs based
on a decision by EPA or to conform to any acceleration under the
Protocol.
Section 607 of the Act requires EPA to permit the transfer of any
class II allowances on an ODP-weighted basis with an offset. The
transfer plus the offset must result in greater total reduction in
production in that year than would otherwise occur, to provide an
environmental benefit.
Section 616 allows the U.S. to transfer allowances to another Party
under certain conditions. Although the language in paragraph 5 bis of
Article 2 of the Protocol restricts the U.S. from trading away HCFC
consumption allowances to another Party because of the U.S. per capita
consumption of CFCs in 1989, it is possible for the U.S. to trade
production allowances.
III. Discussion of Comments on the July 20, 2001, Notice of Proposed
Rulemaking (NPRM)
EPA published an NPRM on July 20, 2001, proposing an allowance
allocation system and a petition process for HCFC-141b (66 FR 38064).
Thirty-three comments were filed in Docket A-98-33 and fourteen of the
forty attendees spoke at the public hearing held on August 27, 2001, in
Washington, DC. The comments that arrived after the close of the
comment periods were filed in the docket. Five producers and three
importers were among the commenters; at times the producers who are
also importers commented as members of the second group. Sixteen of the
commenters were either distributors or users of HCFCs and four
commenters were trade associations representing producers, importers,
users, or a combination of the three. Four of the companies had more
than one representative send in comments.
For a more detailed discussion of the options for an allowance
allocation system that led to the proposal, refer to the ANPRM (Advance
Notice of Proposed Rulemaking) published April 5, 1999 (64 FR 16373).
A. Will Production and Consumption Allowances Be Available?
EPA created a unit of measure called an allowance to control
production and consumption of class I substances and made it equal to
one kilogram of the ODS. An allowance represented the marketable rights
and privileges granted to a company to produce or import a specific
quantity of the specific substance. There were two types of allowances:
production allowances and consumption allowances.
In the allowance system for class I ODSs, a company was required to
expend both production and consumption allowances to be able to
produce. A company was required to expend consumption allowances to be
able to import. Consumption allowances were refunded or returned to the
exporting company for future use in the same calendar year after EPA
received proper documentation reflecting an export.
EPA proposed to use both production and consumption allowances in
the HCFC allowance system. EPA proposed requiring a company to expend
both consumption and production allowances to be able to produce HCFCs.
To be able to import, EPA proposed requiring a company to expend
consumption allowances. EPA proposed that after submitting the proper
documentation verifying an export, the company would be refunded
consumption allowances. Besides seeking comment on the inclusion of
production and consumption allowances in an HCFC allowance system, EPA
also requested comment on the potential value of an allowance. The
proposal asked for comment on the potential value of an allowance and
whether it would take into account the differing ozone depletion
potentials of each HCFC and each HCFC's impending phaseout date.
Only two commenters chose to mention production and/or consumption
allowances. One commenter generally supported having production and
consumption allowances in the HCFC allowance system. The other
commenter was only concerned about production allowances for HCFC-141b.
With today's action, EPA is including consumption and production
allowances in the HCFC allowance system for several reasons. The
consumption cap that is already in place and the production cap that
will be effective in 2004 necessitate the allocation of both types of
allowances. Because many companies receiving allowances are familiar
with the class I system of allowances, EPA believes their experience
with the class I system will simplify the management of the class II
allowance system. EPA is also requiring a company to expend both
consumption and production allowances to be able to produce. To be able
to import, EPA is requiring a company to expend consumption allowances.
EPA is requiring a company to submit the proper documentation to EPA to
verify an export for the refund of the consumption allowances
associated with the quantity of HCFC exported.
B. Will Allowances Be Tracked Chemical-by-Chemical?
As in the class I allowance system, EPA is assigning each allowance
a value of one kilogram of a class II controlled substance. To produce
or import, companies will expend allowances by kilograms.
EPA proposed instituting a chemical-by-chemical absolute kilogram
system for allocating and transferring allowances rather than an ODP-
weighted approach. Of the ten commenters who commented on this issue,
five were in favor of the ODP-weighted approach and five in favor of
the chemical-by-chemical approach. One of the commenters favoring the
chemical-by-chemical approach believed that it was the simplest for
accounting purposes and would provide EPA with the least amount of
recordkeeping. This commenter also believed that it provided less
chance of error from a company using the wrong formula to convert ODP
weighting between chemicals. Flexibility in trading allowances was an
important concern for all the commenters. Three of the commenters
supporting the ODP-weighted system felt the chemical-by-chemical system
would be acceptable as long as maximum flexibility in trading was
retained.
Since the U.S. is implementing the phaseout on a chemical-by-
chemical basis as discussed in the proposal, EPA will need to monitor
production and consumption of each chemical. As one commenter pointed
out, a ``chemical-by-chemical allowance system will promote chemical-
by-chemical recordkeeping and reporting.'' A more detailed discussion
of the need for a chemical-by-chemical approach is contained in the
proposal.
EPA is establishing the chemical-by-chemical absolute kilogram
system to allocate and transfer allowances in the HCFC allowance
system. The production of one kilogram of HCFC would require the
expenditure of one production allowance and one consumption allowance.
The import of one kilogram of HCFC would require the expenditure of one
consumption allowance.
Part of the flexibility included in the HCFC allowance system in
response to the commenters' concern about ease of transferring
allowances is EPA's decision not to group HCFCs (Section III.G.1).
Class I substances were grouped and transfers were only permitted among
class I substances in the same
[[Page 2823]]
group. With today's action, allowance holders may trade allowances
among HCFCs. The offset EPA has selected to impose on transfers should
not be a burden or hinder the flexibility of the system (Section
III.G.8).
C. Will Allowances Be Distributed on a One-Time Basis?
EPA proposed allocating HCFC allowances on a one-time basis. This
would mean the allocations would remain the same from control period to
control period (one calendar year to the next) until each chemical is
phased out or until the percentage of baseline allowances is reduced to
ensure compliance with the Protocol cap. Only through permanent
transfers of allowances would a company's baseline allocation be
changed.
Of the eight commenters on this issue, seven were in favor of a
one-time allocation. One commenter believed that a one-time
distribution of allowances is the simplest allocation method from both
the EPA's and the company's perspective. Many of those that favored a
one-time allocation expressed a concern that the long-term use of one-
time allocations would not adequately reflect future market needs.
One commenter proposed that EPA allocate on a year-by-year or
period-by-period basis, with each period covering 2-3 years. EPA
believes that both of these methods would create much uncertainty in
the industry and require constant readjustment of baselines by EPA and
industry. EPA believes that a year-by-year allocation would hamper
allowance holders' long-term planning for production or import. EPA
also believes that allocating every two or three years would only be a
minor improvement over the year-by-year method and create
administrative burden for both the Agency and industry. Therefore, EPA
is not adopting either of these methods.
One producer noted the critical need for reallocation prior to 2010
for on-going service needs for equipment manufactured prior to December
31, 2009. This commenter favored a one-time allocation of the full 10
percent permitted at least one year prior to the 2010 phaseout date.
EPA recognizes the need to determine the allocation level for the 2010
reduction step in HCFC-22 and HCFC-142b allowances and will monitor the
market to determine the quantity needed for servicing equipment
manufactured before December 31, 2009. EPA intends to achieve this
reduction step through notice and comment prior to 2010 and will likely
implement the reduction by simply listing a percent of baseline
allowances to be granted in Section 82.16 for years after 2009.
EPA proposed distributing baseline allowances for all HCFCs but
believes that the continuously developing HCFC market would be hampered
by such a distribution. Many commenters favored changing the baseline
allocations at some future date to reflect shifts in the market. EPA is
therefore distributing baseline HCFC allowances only for HCFC-141b,
HCFC-22 and HCFC-142b on a one-time basis. The reductions and phaseout
of these three HCFCs are earlier than for the other HCFCs because they
are more damaging to the ozone layer. EPA believes that the HCFC market
may continue to evolve and that some sectors may switch from the higher
ozone-depleting HCFCs, such as HCFC-141b, HCFC-22, and HCFC-142b to the
lower ozone-depleting HCFCs, such as HCFC-123, HCFC-124, and HCFC-225ca
and HCFC-225cb. EPA believes that the current market proportions of
these lower-ODP HCFCs do not reflect the needs of a rapidly expanding
market and that distributing allowances for these HCFCs at this time
would unnecessarily restrict their supply and impede transitions to
less ozone-depleting substances. EPA intends to continue to monitor the
market trends as more users transition to less ozone-depleting HCFCs
and as more non-ozone-depleting alternatives become available.
D. Will 100 Percent of the U.S. Cap Be Allocated?
EPA proposed allocating 100 percent of historical HCFC activity in
the U.S. after determining that the aggregate of each individual
company's highest consumption and production would be below the caps.
Thirteen commenters agreed that EPA should allocate at least 99 or
100 percent of the consumption and production caps to maximize the
available material to meet the needs of the marketplace. Producers,
importers, and users were unanimous in this respect. They believed that
allocating less could result in artificial shortages or increase the
price of HCFCs. Three of the commenters had no objection to allocating
allowances to new entrants or narrow post-phaseout uses of HCFC-141b
but felt that the remaining allowances under the cap should be
reallocated. They argued that not allocating those allowances would
leave a shortfall in the marketplace and place unnecessary pressure on
users.
One importer believed that EPA should determine a fair allocation
to eligible late entrants and then determine if this method provided an
equitable allocation before allocating 100 percent of baseline
consumption. This commenter believed that small and disadvantaged
businesses did not have the economic resources of the larger
multinational companies, especially the producers. According to the
commenter, such small businesses would have the ability to continue
their business and meet their business plan if they receive an
equitable allocation.
1. Consumption Allowances
EPA proposed allocating 100 percent of each company's historical
consumption as the baselines for all class II controlled substances and
reserving the remaining amount above these aggregate baselines and
below the cap for eligible late entrants into the HCFC market and as
credits for reductions of substitutes regulated under Title VI that are
created as by-product(s) in the manufacture of HCFCs (Section III.M).
EPA proposed that new entrants would be small businesses that began
importing after the end of 1997 and before April 5, 1999, the date of
publication of the ANPRM. EPA believes that such small businesses might
not have been aware of the impending rulemaking that would affect their
ability to continue in the HCFC market.
Although all commenters indicated a preference for allocating 100
percent of the allowances under the consumption cap, some were willing
to grant allowances to late entrants and narrow post-phaseout uses of
HCFC-141b. A commenter from the user community of HCFCs had no
objection to allocating to new entrants but felt that the remaining
allowances after that allocation is completed should be distributed to
avoid unnecessary pressure on users. Another commenter from the same
community suggested a formula for distributing remaining allowances
under the cap after the need for narrow post-phaseout uses of HCFC-141b
was satisfied. That same commenter also felt that the amount for narrow
post-phaseout uses of HCFC-141b should not exceed 2 to 5 percent. None
commented on credits for reductions of substitutes regulated under
Title VI that are created as by-product(s) in producing HCFCs. There
were also no commenters on the possibility of auctioning off the
remaining allowances. Most commenters were in favor of re-allocating
the remaining allowances to listed allowance-holders.
With today's action, EPA is allocating up to 100 percent of the
U.S. consumption cap by allocating consumption allowances to listed
individual companies only for HCFC-
[[Page 2824]]
141b, HCFC-22, and HCFC-142b. Included in today's allocation are
allowances for a new entrant to the HCFC market in accordance with the
proposal. EPA is allocating the full amount of the U.S. consumption cap
by distributing allowances on a pro-rata basis to the listed allowance-
holders above their highest historical consumption and after the needs
of new entrants have been addressed. EPA will not reserve any
allowances as credits for reductions of substitutes regulated under
Title VI that are created as by-product(s) in producing HCFCs.
EPA will continue to monitor HCFC market trends and consider
whether to adjust the allowance allocations through notice and comment
rulemaking to ensure the U.S. meets its obligations under the Protocol.
2. Production Allowances
Using the formula agreed to by the Parties in 1999 for calculating
the production cap, U.S. production would be frozen at 15,537 metric
tonnes through the various phaseout years beginning with 2004. The
United States' formal obligation to comply with the cap would begin
following Senate ratification of this change to the Protocol and the
deposit of the U.S. instrument of ratification with the United Nations.
Today's rule avoids any actions that would be inconsistent with this
obligation. If the Parties change the current provisions associated
with the production cap, EPA will amend its regulations to reflect any
changes in U.S. obligations under the Protocol.
Since the aggregate of each company's historical production is
below the production cap, EPA proposed allocating 100 percent of each
company's historical production level as the baseline for production
allowances. One producer who noted that the aggregate of production
baselines was well below the production cap proposed using the
difference between the aggregate and the cap solely for HCFC-141b
because the commenter felt the HCFC-141b sector is clearly under-served
versus current market demand. Since EPA anticipates the need to
allocate allowances for narrow post-phaseout uses of HCFC-141b, EPA is
establishing a petition process for HCFC-141b exemption allowances, as
discussed below in Section E. The quantity of HCFC-141b exemption
allowances that will be allocated for narrow post-phaseout uses will be
determined after review of the petitions.
Nine commenters were concerned about what would happen if a
producer chose not to use all of its allowances or decided to
permanently discontinue production of an HCFC. Three were in favor of
retiring unused allowances. Some of these commenters believed a company
that restricted production in order to create a larger market share for
an alternative would receive a financial windfall. By discontinuing
production, a company could create a larger market share for a higher-
priced alternative it preferred to promote. They also felt that
granting allowances to a company that had ceased production meant
rewarding the company with marketable assets it did not deserve. These
commenters were concerned that allowing a company to hold back its
allowances could create HCFC shortages and price increases. Six were in
favor of reallocating the unused allowances to the remaining allowance
holders of that specific HCFC to prevent market shortages or price
increases. One commenter also suggested that any unused HCFC-141b
production allowances should be reallocated on a pro-rata basis among
HCFC-141b allowance-holders rather than among all HCFC allowance-
holders.
Since baselines were determined on the basis of the highest
historical production for each company in the years 1994 through 1997,
EPA believes that allocating to all the companies active in those years
will provide a potential supply of HCFCs that exceeds the historical
demand but that most accurately reflects the true HCFC market in the
United States during that period. Although the Agency proposed
allocating each company its highest production during the particular
years, resulting in an aggregate U.S. production less than the U.S.
cap, with today's action EPA is allocating each company an additional
pro-rata amount above their highest historical production which brings
the U.S. aggregate allocation up to and equal to the cap. Because
allocating allowances up to the cap should ensure a more than adequate
supply of HCFCs, EPA is not including provisions in today's action that
would require reallocation of production allowances that have not been
used. Finally, today's action makes allowances easily tradable with
minimal regulatory interference and oversight, thereby encouraging
companies to make business decision as they would in an unregulated
industry.
Because production will be frozen at a constant level throughout
the various phaseout years, EPA is granting export production
allowances so that U.S. producers can manufacture and export the
phased-out HCFCs following the respective production phaseouts.
Beginning January 1, 2004, export production allowances can only be
used to produce for export either to: (1) Parties listed in Appendix L
who are also listed in Appendix C as having ratified the Beijing
Amendments or (2) Parties not listed in Appendix L that are listed in
Appendix C as having ratified the Copenhagen Amendments. Prior to
January 1, 2004, there is no HCFC trade restriction under the Montreal
Protocol. A more detailed discussion concerning the allocation and
expending of export production allowances can be found in Section
III.H. below.
E. Will There Be HCFC-141b Exemption Allowances for Continuing Needs?
1. Who May Submit a Petition for HCFC-141b Exemption Allowances Beyond
January 1, 2003
On July 20, 2001, EPA proposed to provide space vehicle/defense
allowances for HCFC-141b to a U.S. agency, department or
instrumentality, or related entities involved in space vehicle
endeavors. EPA proposed allocating these exemption allowances for
extremely narrow needs after a demonstration by petition to EPA that no
viable alternative exists for HCFC-141b and that space vehicle or
national security viability is at issue if HCFC-141b cannot be used for
the specified purpose (66 FR 38064). EPA also proposed to provide
allowances to U.S. military departments for extremely narrow needs
after a demonstration by petition to EPA that no viable alternative
exists for HCFC-141b in narrow defense uses such as cleaning of oxygen
equipment and aircraft parts. Based on information provided to the
Agency prior to the proposal, through comments on the ANPRM published
in the Federal Register on April 5, 1999 (64 FR 16373), EPA believed
that the National Aeronautics and Space Administration (NASA), the U.S.
Air Force, and the U.S. Navy were the only entities with continuing
needs for HCFC-141b beyond January 1, 2003.
Because no other sectors submitted comments to the ANPRM
identifying technical constraints of transitioning from HCFC-141b to
alternatives, the Agency believed that technically feasible
alternatives would be available for other uses and did not propose
post-phaseout allowances for any other uses of HCFC-141b. However,
through comments on the NPRM on July 20, 2001 (66 FR 38064) and as part
of a separate action under the Agency's Significant New Alternatives
Policy (SNAP) program (65 FR 42653), EPA received information to
suggest that certain polyurethane foam applications, such as spray foam
used for roof and wall insulation, have technical
[[Page 2825]]
constraints that may impede their transition away from HCFC-141b by
January 1, 2003. To address these concerns and any unforeseen need for
HCFC-141b, two commenters recommended that EPA allow any entity to
petition the Agency for HCFC-141b allowances beyond January 1, 2003.
EPA could then, on a case-by-case basis, evaluate the petitioner's
assertions that no viable alternatives are available to meet the needs
of that specific petitioner. With today's action, EPA agrees with
comments indicating there may be legitimate needs for limited HCFC-141b
production and import beyond January 1, 2003 for non-space/defense
applications. Therefore, EPA is expanding the petition process to also
include any HCFC-141b formulator who can identify technical constraints
in transitioning from HCFC-141b to alternatives. In Sec. 82.3, EPA is
defining formulator as an entity that distributes a class II
chemical(s) or blends of a class II chemical(s) to persons who use the
chemical(s) for a specific application identified in a petition for
HCFC 141-b exemption allowances. Further, in order to reflect the
expansion of the petition process, EPA is using the term ``HCFC-141b
exemption allowance'' in the final rule in lieu of ``space vehicle/
defense allowance.'' EPA is adding a definition of ``HCFC-141b
exemption allowance'' to Sec. 82.3.
Although EPA is creating a process to allow any HCFC-141b
formulator to petition for production or import allowances for HCFC-
141b beyond January 1, 2003, the Agency believes that there will be a
small number of petitioners with legitimate claims that there are no
technically viable and commercially available alternatives to HCFC-141b
beyond January 1, 2003. EPA believes that some petitioners in the
following categories are most likely to meet the criteria established
in today's rulemaking:
? A U.S. agency, department or instrumentality, or related
entities involved in space vehicle endeavors;
? U.S. military departments for defense uses such as cleaning
of oxygen equipment and aircraft parts; and
? Some formulators that produce polyurethane foam systems for
use in insulating spray and pour foam applications.
Each individual petitioner must provide a clear and specific
justification for needing access to HCFC-141b production or import
beyond January 1, 2003. The Agency will accept and review annual
submissions of petitions which will provide up-to-date information on
HCFC-141b needs. As described in more detail below, the petitioner must
provide adequate documentation to prove that alternatives are not
technically viable, and that stockpiled HCFC-141b is not technically or
commercially available (for example, taking into consideration undue
costs for storage and transportation) to meet their transitional needs.
2. Definition of ``Space Vehicle''
Several commenters asked EPA to define ``space vehicle'' in order
to clearly establish what is covered under ``space vehicle endeavors''.
These commenters asked the Agency to adopt an existing definition
established at 40 CFR 63.742 for the National Emissions Standards for
Hazardous Air Pollutants (NESHAP) program. That definition, which was
established specifically for the NESHAP for Aerospace Manufacturing and
Rework Facilities, is:
Space vehicle means a man-made device, either manned or
unmanned, designed for operation beyond earth's atmosphere. This
definition includes integral equipment such as models, mock-ups,
prototypes, molds, jigs, tooling, hardware jackets, and test
coupons. Also included is auxiliary equipment associated with tests,
transport, and storage, which through contamination can compromise
the space vehicle performance.
To establish a consistent definition, EPA agrees with the proposed
language and has included it with other definitions in Sec. 82.3 of
this final rule. However, because this definition encompasses a broad
spectrum of equipment and/or applications, EPA would like to emphasize
that HCFC-141b exemption allowances will only be granted for particular
uses where HCFC-141b alternatives have not been developed to meet the
technical demands of the specific space vehicle application (e.g., foam
blowing agent for thermal protection system needs of space vehicles
designed to travel beyond the limit of the earth's atmosphere). As
discussed in more detail below, the technical constraints of the
specific application must be described in detail in the petition.
3. Definition of ``Formulator''
In Sec. 82.3, EPA has also defined ``formulator'' so that it is
clear who may petition the Agency for HCFC-141b exemption allowances
beyond January 1, 2003. A ``formulator'' is an entity that distributes
a class II controlled substance(s) or blends of a class II controlled
substance(s) to persons who use the controlled substance(s) for a
specific application identified in the formulator's petition for HCFC-
141b exemption allowances. In all the HCFC-141b uses EPA is aware of,
the formulator is responsible for meeting the testing and code
requirements as opposed to the end user. Therefore, in order to reduce
the burden of petitioning, EPA designed the process so the end user
does not apply for the exemption allowance. The petitioners should
either be the intermediary who blends the HCFC-141b and sells it to an
end user or in cases where the end use application employs just the
HCFC-141b directly, the petitioner should be the chemical manufacturer.
Formulators include system houses who produce polyurethane foam systems
for use in spray and pour foam applications. A foam system typically
consists of two transfer pumps that deliver the ingredients
(polyisocyanate from one side and a mixture including the blowing agent
and stabilizers from the other side) to a metering/mixing device which
allows the components to be delivered in the appropriate proportions.
The components are then sent to a mixing gun and dispensed as foam
directly to a surface such as a roof or tank. Spray foam is a
polyurethane or polyisocyanurate cellular plastic which is applied as
an atomized liquid or froth directly onto a substrate using commercial
spray foam equipment specifically designed for this purpose. This
liquid or froth begins to react, rise, and form its cellular structure
in place on the substrate in typically less than 1-2 seconds after it
is applied. Spray foam is generally used as a thermal insulation,
floatation aid or air infiltration barrier.
Spray and pour foam applications account for approximately 20% of
the HCFC-141b used in 2001. The spray foam sector of the polyurethane
industry is a diverse sector that involves an array of applications
including: Roofing, building envelope insulation, agriculture tanks,
pipes and vessels, marine and original equipment manufacture (OEM). The
pour foam sector of the polyurethane industry is also a diverse sector
that involves an array of applications including: Commercial
refrigeration (such as walk-in coolers but not consumer refrigeration),
doors (such as entry doors or garage doors), refrigerated transport,
picnic coolers, vending machines, commercial and residential
architectural panels, tank and pipe insulation, marine flotation foams,
floral foam, and taxidermy foams.
Because formulators produce polyurethane systems for a wide array
of applications, EPA would like to emphasize that HCFC-141b exemption
allowances will only be granted where a petitioner can demonstrate that
stockpiled quantities of HCFC-141b
[[Page 2826]]
produced prior to January 1, 2003 are not or will not be available in
sufficient quantities and the HCFC-141b alternatives have not yet been
developed to meet specific technical constraints within a particular
application (e.g., spray foam for roofing applications).
The definition of ``formulator'' will also cover manufacturers that
blend and package pressurized aerosol solvents. Although HCFC-141b is
illegal in most non-aerosol solvent applications, it is an acceptable
substitute as an aerosol solvent in certain cleaning applications and
as a mold release agent. One commenter expressed concern with the
timing of the HCFC-141b phaseout and the ability of aerosol solvent
packaging companies to transition. EPA believes that sufficient
alternatives are available for these applications in general and that
it is unlikely that a petitioner would be able to demonstrate that they
meet the criteria established under Sec. 82.18 for additional HCFC-
141b production/import beyond January 1, 2003. However, EPA believes it
is appropriate to keep the petition process open to users of HCFC-141b
as an aerosol solvent so that the Agency can address any need that may
arise in the aerosol solvent end use. Furthermore, given the definition
of formulator, EPA recognizes there might be other niche applications
not specifically covered by SNAP that could legitimately petition and
qualify for the HCFC-141b exemption. Thus, the petition process is open
to other formulators of products containing HCFC-141b, enabling EPA to
evaluate and address the various needs across multiple sectors in the
most effective manner.
4. Petition Process To Include All HCFC-141b Formulators
EPA believes it is appropriate to open the petition process for all
formulators of HCFC-141b. This will provide all HCFC-141b users an
equal opportunity to demonstrate their need for an ``HCFC-141b
exemption allowance.'' At this time and based on the information the
commenters provided, the Agency believes that entities involved in
space vehicle endeavors, U.S. military departments that use HCFC-141b
for defense-related applications, and formulators within the spray
polyurethane foam sector are likely to have the clearest need for
``HCFC-141b exemption allowances.''
In response to the HCFC allowance allocation proposal published on
July 20, 2001 (66 FR 38081), EPA received requests for an extension to
the HCFC-141b phaseout for the spray and pour polyurethane foam sector.
EPA received seven comments on the continued need for HCFC-141b in this
sector past the production and import ban effective January 1, 2003.
Reasons given for such an extension were: (1) Lack of commercially
viable alternatives; (2) minimal environmental impact; (3) the same
consideration as the space vehicle/defense entities that requested an
exemption; (4) availability of production and consumption allowances
under the cap; (5) inability of small businesses to stockpile; and (6)
the results of the Caleb Management Services report (discussed below).
EPA also received comments from spray and pour foam manufacturers
as part of a separate action under the Agency's Significant New
Alternatives Policy (SNAP) program (65 FR 42653). In that action, EPA
proposed a variety of restrictions on the use of HCFCs in foam end-
uses.
A final rule was published on July 22, 2002, under the SNAP program
(67 FR 47703). In response to comments on the proposal, the Agency
gathered additional information on certain sectors. The Agency
published a Notice of Data Availability (NODA) on May 23, 2001, making
the new information pertaining to the foam industry available for
public comment (66 FR 28408). The NODA included a review of the
challenges facing the polyurethane spray foam industry and other
systems house based applications (Air Docket A-2000-18, IV-D-78). This
review was conducted by an EPA consultant who was hired to assess HCFC
foam sector usage in the U.S. and determine the technical viability of
alternatives in those applications (Caleb Management Service report).
The Caleb report identified some technical hurdles faced by some
current HCFC-141b users in spray and pour foam applications.
As with other insulation, spray foam products must meet product-
specific standards which in turn are cross-referenced into the various
building codes operated across the country. Technical considerations
for final products in the spray and pour foam sectors include thermal
performance, durability, density, cell structure (open vs. closed),
finish, surface adhesion, and dimensional stability of the foam along
with its ability to meet fire codes. Technical challenges that are
unique to this sector are a function of the ambient conditions under
which spray (and sometimes pour) foam are applied. These ambient
conditions result in the potential need for special equipment and a
wide array of formulations to meet different ambient conditions and the
variety of end-use applications. Extensive field trials are also needed
to ensure that foam can be applied properly and that it will maintain
its structure and thermal insulation value over time. Re-formulating
and testing is typically done by each systems house. Systems houses are
relied upon for much of the technical expertise and support provided to
on-site contractors and others in the sector.
There are approximately 15-20 U.S. systems houses that formulate
spray foam systems for roofing contractors and other customers that
number in the thousands. Several systems house companies are large
businesses, but many are small businesses. Although EPA believes that
alternatives to HCFC-141b are currently or potentially available for
spray foam applications, some smaller systems houses may need more time
to develop and fully test these next-generation spray foam
alternatives, especially for roofing applications where durability over
multiple seasons has to be evaluated. Therefore, by opening the
petition process up to formulators of HCFC-141b, the Agency is
providing the smaller systems houses with flexibility so that diligent
efforts can be taken, where needed, to test the next generation
products, meet building codes and fire tests, and to have commercially
available products. However, the Agency is committed to facilitating
the transition away from ozone-depleting compounds as quickly as
possible. Timing is discussed in more detail below.
Pour foam systems are also developed by systems houses. Some pour
foam applications have thermal performance requirements similar to
spray foam. Also, like spray foam systems, pour foam products tend to
be sold in drums or other containers where the isocyanate is kept
separate from the blowing agent and other ingredients (systems).
However, there are some significant distinctions between the two end-
uses. For example, some applications in these sub-segments are factory-
controlled (e.g., commercial refrigeration) which means greater
potential for making a liquid to gaseous transition or implementing
hydrocarbon alternatives. Additionally, many pour foam applications do
not have rigorous product requirements such as thermal insulation
value, or extended field tests under ambient conditions.
Given the broadening of the petition process and development of the
HCFC-141b exemption allowances, EPA recognizes that some formulators
may petition the Agency for additional HCFC-141b in pour foam
applications because their ability to use the same equipment in mixing
spray and pour
[[Page 2827]]
formulas is central to their operations. However, EPA does not believe
that the technical constraints that arise from product requirements and
field application of spray foam also necessarily apply to pour foam
applications. For example, although buoyancy foam may demonstrate very
similar application constraints and concerns as spray foam, there is no
thermal requirement associated with buoyancy foam, and field trials of
new formulations over several seasons are not required. Many companies
with pour foam applications have already made transitions from HCFC-
141b to gaseous blowing agents such as HFC-134a, HCFC-22 and HCFC-22/
142b blends, and liquid blowing agents such as hydrocarbons and water.
Nonetheless, EPA will consider petitions for pour foam and other HCFC-
141b applications because, within the wide range of end-uses, there may
be HCFC-141b users who currently have technical constraints in
transitioning from HCFC-141b to non-ozone-depleting alternatives. EPA
believes that it is appropriate to allow these formulators to
demonstrate their needs. If formulators within these or other
applications can demonstrate that they have not had access to and/or
have been unable to fully implement ozone-friendly alternatives to meet
their thermal or dimensional performance, flammability control or other
product requirements, and they meet the criteria established in Sec.
82.18, EPA will grant a limited quantity of HCFC-141b exemption
allowances for a limited time.
5. Information Supporting Decision to Expand the Petition Process
All of the information can be obtained through EPA's Air Docket
(see Addresses section above for docket contact info). Please refer to
Air Docket A-98-33 when seeking supporting documents.
Allocation Rule: Comments on the space vehicle/defense petition
process and other HCFC-141b users' needs for HCFC-141b beyond January
1, 2003. Air Docket: A-98-33: IV-D-07, IV-D-09, IV-D-14, IV-D-18, IV-D-
26, IV-D-27, IV-D-30, IV-D-32, IV-F-03, IV-F-05, IV-G-01, IV-G-02, IV-
G-03, IV-G-04.
SNAP Rule: Pre-proposal letters, Comments to the July 11, 2000 SNAP
proposal (65 FR 42653), Notice of Data Availability (NODA) published on
May 23, 2001 (66 FR 28408) and comments to the NODA. Air Docket: A-98-
33, IV-D-66.
Other Correspondence: The Agency received a variety of additional
correspondence commenting on the issue of the HCFC-141b phaseout on
January 1, 2003, and a possible extension and/or exemption. A specific
request for an extension to the HCFC-141b phaseout was submitted to the
Agency by Polythane Systems, Inc. As part of this request, the
commenter asserted that a combination of factors would prevent their
company, as well as others in the pour and spray foam industry, from
being able to transition from HCFC-141b by January 1, 2003. These
factors include safety and flammability concerns and unavailability of
sufficient test quantities of alternative blowing agents, the need for
several years of field testing of new roof technologies to ensure
adequate performance, and economic and logistical constraints in
accessing stockpiled quantities of HCFC-141b. Many letters in support
of the Polythane Systems, Inc. request were sent to EPA by individual
companies and Congressional representatives. Air Docket: A-98-33: IV-D-
35 to IV-D-64 and IV-G-06, IV-G-07, IV-G-08, IV-G-09.
6. Reason for Petition Process
Of the seven commenters to the proposal who addressed continued use
of HCFC-141b, five favored a broad extension of the phaseout date for
HCFC-141b until proven cost-effective alternatives are available. Some
commenters suggested that HCFC-141b be phased out later than 2003 and
suggested that 2004, 2005, 2020, or 2029 be the new phaseout date.
Others suggested no phaseout date at all. Two commenters indicated a
preference for granting an exemption to the spray and foam polyurethane
sector after January 1, 2003, by providing allowances modeled after the
space vehicle/defense allowances proposed in the July 20, 2001, rule.
In light of these comments, EPA considered whether it was
appropriate to extend the phaseout, grant an industry-wide exemption or
provide an exemption modeled after the space vehicle/defense petition
process proposed. After considering these options, EPA maintains that
it is inappropriate to change the January 1, 2003 phaseout date
established in 1993 or grant an industry-wide exemption for the spray/
pour foam industry. Within the spray and pour foam industry there are
disparities between those who have had access to alternatives and
resources to implement alternatives in a timely fashion and those who
have faced legitimate technical hurdles because they have not had
access to alternatives. Additionally, there are numerous end-use
applications within this industry and HCFC-141b may be needed in some
applications and not in others. EPA does not believe it is appropriate
to provide an industry-wide exemption to accommodate those specific
companies and/or end-uses that may need a limited amount of HCFC-141b,
for a limited time. Further, EPA does not believe an industry-wide
exemption would guarantee that small users with technical constraints
would have access to the HCFC-141b produced after January 1, 2003,
because they would be forced to compete with other companies for a
limited amount of HCFC-141b. Also, EPA believes that an industry-wide
exemption limited to the spray and pour foam industry would not provide
for unforeseen needs for HCFC-141b in other sectors. Finally, hundreds
if not thousands of companies have been relying on the phaseout date
for HCFC-141b for nearly 10 years and have made investments
accordingly. EPA believes that changing that date would be unfair to
those companies who have invested in the transition from HCFC-141b.
EPA believes that expanding the petition process in today's rule
provides access to additional HCFC-141b beyond January 1, 2003 for
legitimate needs.
7. Total Quantity for Exemption
EPA proposed (July 20, 2001) to limit the total quantity of the
HCFC-141b exemption per year for space vehicle or narrow defense needs
to one (1) percent of the aggregate of the U.S. HCFC-141b baselines.
This reflected the expected small number of requests for small
quantities from space vehicle/defense uses. Several commenters
requested that EPA state the exact amount in order to clarify that
their specific space vehicle/defense needs could be met. Because EPA is
expanding the petition process in today's final rule, the Agency is not
adopting its proposed limit on the amount of HCFC-141b that would be
available for the space vehicle/defense needs. The quantity provided
will be based on the needs of each petitioner as demonstrated through
their petition (see Sec. 82.18). The U.S. obligation under the
Protocol is to control consumption [production + import - export], with
a 35 percent reduction in the HCFC consumption cap beginning January 1,
2004. EPA will not authorize quantities of HCFCs under the exemption
process that would cause the U.S. to exceed the HCFC consumption cap as
agreed under the Montreal Protocol. If HCFC-141b requested in petitions
exceeds the amount available under the cap, preference will be given to
petitioners who can demonstrate the most vital
[[Page 2828]]
needs and the available amount may be allocated on a pro-rata basis.
8. How Long EPA Will Continue To Receive/Review Petitions
EPA proposed to create an exemption process for the continued
production or import of HCFC-141b up to January 1, 2010 for
applications related to critical space vehicle needs or narrow defense
needs in cases where alternatives and stockpiled, recovered or recycled
quantities are deemed to be technically infeasible for use. EPA
believed that this was appropriate because the 65 percent reduction in
consumption required by 2010 to meet U.S. obligations under the
Montreal Protocol may preclude continued availability of the space
vehicle/defense exemption beyond 2010. In the proposal, EPA stated that
the availability of the exemption would be revisited in the rulemaking
implementing the January 1, 2010 phaseout.
Space vehicle/defense commenters agreed that the 2010 time frame
was reasonable as long as EPA adhered to the stated intention to
revisit the possibility of providing exemptions beyond 2010 for space/
vehicle and defense needs. Because these commenters indicated that they
may need HCFC-141b beyond 2010, EPA has decided to withdraw this
proposed end-date for the petition process for space/vehicle defense
needs. Instead, the quantity that might be granted for space vehicle/
defense needs will be analyzed during periodic petition reviews in
light of available amounts under the U.S. Protocol cap. Although the 65
percent reduction in consumption required in 2010 may preclude
continued availability of the space vehicle/defense exemption, EPA will
consider the consumption figures when conducting case-by-case reviews
of HCFC-141b petitions. Annual renewals of petitions will provide up-
to-date information on HCFC-141b needs and EPA can compare continuing
needs with the current consumption figures to determine whether it is
appropriate to renew exemptions. This will provide sufficient assurance
that HCFC-141b exemptions will not jeopardize U.S. compliance with
Montreal Protocol requirements.
Although there may be additional need for HCFC-141b in space
vehicle and defense applications up to and possibly beyond January 1,
2010, it is unlikely that other petitioners will be able to meet the
criteria established under Sec. 82.18 for more than 1 year beyond
January 1, 2003. The only industries which have indicated need for
HCFC-141b beyond January 1, 2003, are the spray and pour sectors of the
foam industry, in particular small systems houses that develop spray
and pour foam formulations. EPA believes that the large part of the
spray and pour foam sector will be well into alternative development by
January 1, 2003. Although there may be continuing research into new
alternatives, much of the work is expected to be completed over the
next year in developing potential systems for in-house trials,
conducting preliminary fire testing and field testing, conducting
additional fire testing to certify building code requirements, and
finally observing field trials. Field trials could take 6 to 12 months
or more.
In anticipation of the HCFC-141b phaseout, systems houses have been
aggressively formulating foam systems and testing new foam products
containing alternatives to HCFC-141b. Spray and pour foam products that
meet all relevant thermal, flammability and other product requirements
using HCFC-141b alternatives are commercially available today, such as
foam for garage and entry doors, picnic coolers, refrigerated trucks,
marine flotation foam, and water heaters. EPA recognizes that many (or
all) of those products were developed on a proprietary basis and their
existence does not imply that the industry as a whole has overcome all
technical hurdles. However, EPA believes that the current availability
of foam systems using several HCFC-141b alternatives supports the
viability of those alternatives and that technical constraints will be
a function of the timing of commercial availability of the alternatives
rather than technical feasibility of the alternatives. With the
exception of HFC-245fa, all of the SNAP approved alternatives to HCFC-
141b have been commercially available in sufficient quantities for
research and development for more than 5 years. Although HFC-245fa is
only now becoming fully available on a commercial scale from a recently
completed plant, EPA believes the spray and pour foam industries have
had access to sufficient quantities of HFC-245fa for research,
development, and testing purposes since early 2001 and in many cases
before. Therefore, by 2004, EPA believes that most, if not all,
formulators in this sector will have had sufficient time to test and
implement alternatives.
EPA believes all or almost all formulators can have fully-approved
commercially available foam systems using alternatives by the end of
2004. Because EPA cannot anticipate the specific constraints of every
spray and pour foam formulator, EPA is not at this time establishing an
end-date to the petition process for HCFC-141b exemption allowances.
Instead, EPA will review petition renewals annually to determine
whether it is appropriate to continue granting HCFC-141b exemptions
based on technical need. As stated above, petition requests will be
compared to current consumption figures to ensure that HCFC-141b
exemptions will not jeopardize U.S. compliance with Montreal Protocol
requirements.
9. Information To Be Submitted in a Petition
As proposed, EPA requires that the following information be
submitted by petitioners: (a) Name and address of entity; (b) Name of
contact person and phone and FAX number(s), and e-mail address; (c)
quantity (in kilograms) of HCFC-141b needed for each relevant control
period, supported by documentation about past use for at least the
previous three years; (d) quantities of HCFC-141b, if any, contained in
systems that were sold to other systems houses for at least the
previous three years; (e) description of markets and applications being
served by use of HCFC-141b; (f) technical description of processes in
which HCFC-141b is being used; (g) technical description of the
specific condition(s) under which the product will be applied; (h)
technical descriptions of why alternatives and substitutes are not
sufficient to eliminate the use of HCFC-141b; (i) amount of stockpiled
HCFC-141b (on-hand, taken title to, or available from a supplier) along
with an analysis showing why stockpiled, recovered or recycled
quantities are deemed to be infeasible for use; (j) an estimate of the
number of control periods over which such an exemption would be
necessary; (k) description of continuing investigations into and
progress on possible alternatives and substitutes. Petitioners should
indicate what information they are claiming as Confidential Business
Information. Information claimed as confidential will be treated in
accordance with EPA's regulations on confidential business information
at 40 CFR part 2 subpart B. EPA will notify petitioners of deficiencies
and give them an opportunity to provide information needed to fully
complete the petition. However, if petitioners do not respond to EPA's
requests for additional information within 15 days of the request and
the petition remains incomplete, HCFC-141b exemption allowances will
not be granted. Petitioners should also be aware that
[[Page 2829]]
EPA will consider other available information such as the availability
and technical and economic feasibility of stockpiles and the industry-
wide progress on implementing alternatives when deciding whether to
grant exemptions.
Although EPA is expanding the petition process beyond space
vehicle/defense petitioners, the Agency believes that the items listed
above will provide the information EPA needs to make individual
decisions on granting additional HCFC-141b to petitioners taking into
account their specific application. To avoid an overly burdensome
process, EPA is not requiring this information to be submitted in any
specific format nor does EPA expect petitioners to generate new
information. The Agency published the rule establishing the January 1,
2003, phaseout date in 1993. Thus, HCFC-141b users should be able to
demonstrate that they have been engaged for some time in the process of
sourcing, testing and implementing alternatives in anticipation of the
phaseout. Because of the many years that have elapsed since the
phaseout date was established, the information needed to address the
items above should be readily available.
In order to support the quantity of HCFC-141b requested,
petitioners should submit information on historical purchasing. EPA is
not establishing a strict method of determining historical use. EPA
will accept documentation demonstrating the petitioner's HCFC-141b use
covering 3 years or more. For example, petitioners may submit existing
copies of purchasing receipts or company records to support their
petition request. This information will allow EPA to determine whether
the total amount of HCFC-141b requested after 2003 is reasonable. If
the amount requested differs significantly from the amount historically
purchased, petitioners should provide a detailed explanation for the
discrepancy.
A description of the markets and applications being served by use
of HCFC-141b should include a description of where the chemical is used
(i.e., foam blowing agent, solvent) and why it provides benefits in the
specific application. Petitioners will also have to provide technical
descriptions of processes in which HCFC-141b is being used. For
example, if a petitioner is requesting HCFC-141b for a polyurethane
foam system, the petitioner must identify whether it is a spray or pour
foam process and the application (e.g., roofing, tank and pipe
insulation). If a petitioner is requesting HCFC-141b for multiple
processes and applications, the petitioner must identify the amount of
HCFC-141b that is being requested for each process and application. EPA
believes this information is necessary to assess the technical needs
and demands of specific processes and applications. For example, EPA
may approve a petitioner's request for HCFC-141b to be used in spray
roofing applications, but deny the same petitioner's request for HCFC-
141b in a non-insulating pour foam application.
In order for EPA to assess the merits of each petition, petitioners
will need a technical description of why alternatives and substitutes
are not sufficient to eliminate the use of HCFC-141b. Petitioners
should indicate what technical constraints have prevented them from
obtaining or implementing their preferred alternative. For example, if
building or fire codes have not yet been met with existing products
petitioners should provide evidence of tests demonstrating that these
standards can not be met using alternatives. Petitioners must also
explain why stockpiled, recovered or recycled quantities are not
feasible (e.g., technical or economic constraints) or are unavailable.
Petitioners should provide evidence supporting this explanation. For
example, technical constraints could include unavailability of HCFC-
141b stockpiles that meet quality specifications because of
contamination. Economic constraints could include unavailability of
HCFC-141b stockpiles at prices that would not put an undue financial
hardship on the petitioner. Evidence that stockpiled HCFC-141b is
simply unavailable could consist of letters from suppliers indicating
that stockpiled HCFC-141b is unavailable or phone logs of inquiries
made on the availability of stockpiled HCFC-141b (including the person
contacted and the date of the conversation).
In order for EPA to project potential future needs and assess the
progress of each company in implementing alternatives, petitioners must
estimate the number of control periods over which they will continue to
need HCFC-141b. The estimate must be based on a detailed description of
past investigations into possible alternatives and substitutes and a
timeline of future efforts and activities to research and test
alternatives. The detailed description of the efforts made by each
petitioner to acquire, test, and implement alternatives is a critical
item required in each petition. Petitioners must submit a list of
alternatives considered, purchased or sampled along with the dates
purchased and copies of receipts verifying that information. The
petitioner must also submit a summary of their in-house development
program, including summaries of all relevant test results and their
significance to the petitioner's subsequent decision-making and
selection of a preferred alternative(s). Full supporting test data and
relevant certificates must be made available on request. This includes
in-house tests (e.g. preliminary burn tests for foam applications) and
final product tests conducted by accredited organizations such as
Underwriter's Laboratory or Factory Mutual in order to determine
whether products meet applicable codes. If a petitioner has made good
faith efforts to test and implement their preferred alternatives and
they can demonstrate that they are not yet in a position to transition
away from HCFC-141b for legitimate reasons (e.g., no access to
stockpiles), EPA will likely approve their request for additional HCFC-
141b. If a petitioner cannot demonstrate that past efforts have been
made to pursue and implement alternatives, EPA will likely deny the
petition.
10. Deadline for Submitting Petitions
A person seeking an exemption for the production and import of
HCFC-141b under Sec. 82.15 would need to submit a petition for the
exemption under Sec. 82.18. Although EPA proposed that petitions would
be due on July 1, 2002, this date is no longer appropriate due to the
timing of publication of this final rule. Although several space
vehicle/defense commenters suggested that EPA allow petitioners to
submit petitions up to six months after the date of final publication
of this rule, that would no longer provide sufficient time for EPA to
receive and review petitions and grant exemptions in light of the
January 1, 2003, phaseout date for HCFC-141b. Therefore, EPA has
decided to accept petitions for the 2003 control period for up to 90
days after the date of publication of this rule although petitions
received within the first 30 days will be given primary consideration
for an exemption. EPA believes it is important to establish a fixed
date for submission of petitions in order to process petitions in a
timely manner while giving the petitions due consideration and ensuring
that EPA meets requirements established under the Montreal Protocol.
Those who submit after 30 days, but before 90 days, are more at risk of
denial on the grounds that additional allocations would jeopardize
compliance with the limits established under the Montreal Protocol.
Because most of the information needed to support a
[[Page 2830]]
petition should be readily available, EPA believes 30 days allows
sufficient time for petitioners to provide the information requested
and collect and compile supporting documentation. In subsequent years,
the Agency will accept petition renewals on or before October 31st of
the control period for an exemption for the next control period. This
is explained in more detail below. Although EPA may request additional
information from petitioners after these deadlines, the Agency will not
consider petitions filed after these dates or entertain requests for
more HCFC-141b than was requested in original petitions and/or
subsequent renewals.
11. Length of Review Process
EPA proposed a 90-day review period for the space vehicle/defense
petitions. In this final rule, EPA is adopting a maximum 21 business
day review period for all HCFC-141b exemption petitions in order to
expedite the review process and award the HCFC-141b exemption
allowances to the petitioners in a reasonable amount of time. Within 21
business days, EPA will review each petition and determine the amount
of HCFC-141b that will be granted to each petitioner for the specified
control period. If more information is needed, EPA will contact the
applicant and specify the necessary information. EPA will consider the
merits of each individual petition and industry-wide data on the
availability and viability of alternatives. EPA retains the right to
disallow HCFC-141b exemption allowances based on information received
regarding, inter alia, fraud, misrepresentation, inconsistency with
Articles and Decisions under the Montreal Protocol, inconsistency with
the CAA Amendments of 1990, or other reasons related to human health
and the environment.
12. Notification of Petitioners
To allocate HCFC-141b exemption allowances, EPA will send an e-mail
or letter to the petitioner identifying the total amount of newly
produced or imported HCFC-141b that may be acquired within the control
period by allocating HCFC-141b exemption allowances in this amount.
This same letter will be placed in EPA's Air Docket A-98-33 with the
total amount of the allowance redacted in order to protect the business
interests of the petitioner. If EPA decides not to grant the request
for any of the reasons stated in Sec. 82.18, EPA will issue an
objection letter disallowing the request which will include the reasons
for the decision. Within ten working days after receipt of the
objection letter, the requestor may file a one-time appeal, with
supporting reasons. EPA may affirm the objection or grant allowances,
as she/he finds appropriate in light of the available evidence. If no
appeal is taken by the tenth day after receipt of the objection letter,
the disallowance will be final on that day.
13. How HCFC-141b Exemption Allowances Will Be Expended
Once HCFC-141b exemption allowances have been granted, the
petitioner must find a supplier of HCFC-141b. Holding HCFC-141b
exemption allowances for production or import does not imply or mandate
production or import; each user must locate a willing supplier and
negotiate supply. The petitioner must locate a supplier and send a
letter to the producer/importer indicating: (1) Total quantity of
allowances held; (2) quantity of allowances expended to date; (3)
quantity of allowances requested; and (4) a written verification that
the HCFC-141b to be manufactured is for the express purpose of meeting
the HCFC-141b exemption needs. In addition, the petitioner must attach
a copy of the EPA letter indicating total HCFC-141b exemption
allowances allocated to them. If the quantity requested does not exceed
remaining allowances (total quantity of allowances held minus quantity
of allowances expended to date), the producer/importer may fill the
request.
14. Transfer of HCFC-141b Exemption Allowances or Carryover into
Subsequent Control Periods
HCFC-141b exemption allowances are not transferable between
petitioners or in a chemical-to-chemical trade with other HCFCs.
Unexpended HCFC-141b exemption allowances cannot be carried over into
subsequent control periods. Unexpended HCFC-141b allowances expire at
the end of the control period for which they were allocated. If there
are needs beyond the control period for which the HCFC-141b was
allocated, petitioners may renew their request for HCFC-141b exemption
allowances for the next control period as described below.
15. Transfer of HCFC-141b Exemption Allowances in an Acquisition
EPA does not want to attach value to the allowances and provide an
economic incentive for companies to petition the Agency for HCFC-141b
exemption allowances. Allowances are issued on the basis of need.
Therefore, if a company (the acquirer) acquires another company (the
acquiree) that holds HCFC-141b exemption allowances, the acquirer must
submit a renewal petition to EPA. The HCFC-141b exemption allowances
held by the acquiree disappear with the purchase of the acquiree. The
petition must justify why the acquirer does not possess the technical
capability or does not have access to adequate stockpiles to meet the
needs of the newly acquired customers and in turn requires the HCFC-
141b exemption allowances. Lack of technical capability means the
company has not already developed and tested alternative formulations
for the same markets to meet same or similar technical requirements.
The acquirer should submit the petition at the time of the acquisition
of the other company holding the HCFC-141b exemption allowances,
provide the necessary documentation confirming the acquisition, and
follow the requirements listed for a renewal petition pursuant to Sec.
82.18. EPA will review the petition within 21 business days and inform
the acquirer of the decision in a letter.
16. Reporting and Recordkeeping Requirements
To facilitate accurate tracking of exempted HCFC-141b production
and use, EPA proposed three levels of reporting. First, EPA proposed
that the petitioner would report quarterly to EPA on: The type of
product made with or containing HCFC-141b; the specific application of
the product; the quantity of HCFC-141b used or contained in the
product; and the identity of the manufacturer of the product. Second,
EPA proposed that the formulator of the foam or cleaning product submit
information quarterly to EPA delineating the quantity of HCFC-141b
received; the quantity of HCFC-141b used or contained in the product;
the identity of the producer or importer supplying the HCFC-141b; the
identity of the recipient of the product made with or containing HCFC-
141b; and the quantity of HCFC-141b used or contained in the product
sent to the recipient. Finally, EPA proposed that the HCFC-141b
manufacturer or importer would report to EPA, on a quarterly basis, the
total amount of HCFC-141b produced to provide for exemptions. EPA
believed that it was appropriate to require reporting from the point of
origin to the final end use of HCFC-141b in order to ensure that newly
produced/imported HCFC-141b was used for specific exempted purposes to
meet the needs identified by petitioners and that quarterly reporting
at all three levels would facilitate EPA's tracking of consumption
figures and compliance with the HCFC cap.
[[Page 2831]]
Several commenters believed that the proposed reporting
requirements as outlined above would be overly burdensome. These
commenters suggested that EPA should establish annual reporting
requirements and allow 45 days to prepare information consistent with
the class I reporting system. One commenter suggested EPA should grant
broad exemptions without imposing any reporting or ongoing petitioning
obligations. The Agency maintains that reporting is necessary in order
for the Agency to track HCFC-141b production and use. EPA modified the
proposed requirements to reduce the number of entities reporting, the
amount of information reported, and the frequency of reporting for
petitioners. EPA is also increasing the number of days provided to
prepare reports.
In today's final action, EPA is only requiring petitioners and
chemical manufacturers/importers to report HCFC-141b acquisition and
production/import. Petitioners are required to provide semi-annual
reports of total quantities of HCFC-141b received to date within the
same control period and the name of the supplier of HCFC-141b. Reports
are due 30 days after the second quarter (July 31st) and 30 days after
the fourth quarter (January 31st of the subsequent year). Commenters
suggested that reporting be conducted on an annual basis consistent
with class I reporting. EPA notes that this is an inaccurate
description of class I reporting requirements. In the class I system,
reports must be filed quarterly. Consistent with the class I reporting
system, EPA is finalizing the proposed quarterly reporting scheme for
chemical manufacturers/importers. Chemical manufacturers/importers must
report the amount of HCFC-141b produced or imported for exemptions and
submit copies of HCFC-141b requests with their quarterly class II
reports within 30 days of the end of each quarter.
Petitioners must maintain records for three years. Records include:
petitions with supporting documentation; EPA letter allocating HCFC-
141b exemption allowances; requests for production/importation of HCFC-
141b; written verification that the HCFC-141b purchased is for the
express purpose of meeting the HCFC-141b exemption needs; HCFC-141b
purchasing receipts; and sales receipts for HCFC-141b products sold.
17. Renewal of Requests for HCFC-141b Exemption Allowances Beyond the
First Control Period
Although EPA proposed that HCFC-141b exemptions for space vehicle/
defense be updated every three years via submission of an updated
report, the Agency has decided to allocate HCFC-141b exemption
allowances for one-year intervals. If a petitioner seeks additional
HCFC-141b and believes they still meet the criteria established under
Sec. 82.18 of this final rule, EPA will evaluate renewal petitions on
an annual basis. To apply for renewal of HCFC-141b exemption
allowances, petitioners must submit a petition by October 31st of the
year preceding the year for which the HCFC-141b is requested. The
petition need only include updated information. Petitioners will not be
required to submit information previously submitted to the Agency. The
update should indicate the following: whether the entity has found no
viable substitute and will need to extend their exemption for the next
control period; why the entity believes no alternatives are viable for
their application; and a detailed description of continuing
investigations into and progress on possible alternatives and
substitutes. Although the EPA believed the 3-year period was
appropriate for space vehicle/defense needs, today's expanded petition
process allows for users who may not meet the criteria established
under Sec. 82.18 for more than one year. Therefore, EPA will consider
petitions and renewals on an annual basis in order to determine
continued need for HCFC-141b. Although this process is more burdensome,
the Agency believes annual reviews will more accurately reflect current
technical needs of all petitioners including space vehicle/defense
petitioners. EPA will continue to evaluate this periodic review cycle
and the associated burden to assess whether it might be changed.
EPA will conduct no more than a 21-day review of the renewal
request. If the petitioner meets the criteria established under Sec.
82.18 and providing the HCFC-141b exemption allowances do not
jeopardize U.S. compliance with Montreal Protocol and CAA requirements,
EPA will allocate HCFC-141b exemption allowances for the next control
period. Furthermore, a petitioner who does not apply for the HCFC-141b
exemption in 2003 can submit a petition by October 31st for an
exemption in 2004. In that case, the petition would be a full petition
following the information requirements spelled out in Sec. 82.18.
18. Penalties for Exceeding HCFC-141b Exemption Allowances
Any petitioner and/or chemical manufacturer/importer who knowingly
orders production or import, or produces or imports, in excess of the
quantity of unexpended HCFC-141b exemption allowances held by the
petitioner may be fined up to $27,500 per kilogram of HCFC-141b
produced/imported above total quantity of HCFC-141b exemption
allowances held. EPA may inspect facilities to verify that information
provided in a petition is accurate and to review records to ensure
compliance. The fine for not complying with recordkeeping requirements
is up to $27,500 per day, per violation.
19. Criteria for Approval/Disapproval
EPA may grant HCFC-141b exemption allowances if the Agency
determines the allowances are necessary to maintain either safety,
operational or technical viability.
EPA may decide not to grant HCFC-141b exemption allowances if the
Agency determines:
(A) The needs can be met by the use of a substance other than HCFC-
141b;
(B) It is technically and economically feasible to use existing
supplies of HCFC-141b;
(C) There is evidence of fraud or misrepresentation;
(D) Approval of the allowances would be inconsistent with the
Montreal Protocol or Decisions of the Parties;
(E) Approval of the allowances would be inconsistent with the Clean
Air Act Amendments of 1990;
(F) There is an inadequate demonstration of efforts undertaken to
research and implement alternatives; or
(G) Approval of the allowances may reasonably be expected to
endanger human health or the environment.
20. Other Limitations to Approval of Petitions
In addition to constraints due to overall HCFC consumption limits,
petitioners should be aware of other requirements that will limit EPA's
ability to continue granting exemptions beyond 2010. Section 605 of the
CAA contains certain constraints on use, production, and consumption of
HCFCs beginning in 2015. In addition, CAA section 605(b)(2) prohibits
production of class II controlled substances on or after January 1,
2030. These constraints are discussed in more detail in the proposal
(66 FR 38082).
F. How Were the Baselines Established?
Section 601(2) of the CAA states that EPA may select ``a
representative calendar year'' to serve as the baseline for allowance
allocations for HCFCs. EPA believes that because it is allocating to
entities that have very different production and import histories, no
one year was representative for all companies. EPA believes that
selecting only one year would
[[Page 2832]]
disadvantage many. EPA believes that by not selecting a year after 1997
it will avoid creating an uneven playing field that skews allocations
to those companies with ample resources and good access to information.
As a result, EPA proposed allocating allowances to every company based
on their individual highest ODP-weighted consumption among the years
1989, and 1994 through 1997. More information on why EPA selected these
particular years is contained in the proposal (66 FR 38071). EPA
believes that selecting the year of highest activity for individual
companies over a range of years creates less of a disadvantage to the
industry and the HCFC market as a whole than selecting a single year.
Many of the sixteen commenters were either concerned about adequate
future supplies for their industries or maximum market share for HCFCs
with later phaseout dates. Two commenters generally supported the years
selected by EPA but felt these years might not adequately serve future
demand. The remainder objected to the inclusion of 1989, believed that
only 1997 would be the most representative of the market, or felt that
none of those years were representative and only the ``most recent''
year would serve. Two commenters agreed with EPA that selecting any
year from 1998 on would create a windfall for those who increased their
activity after a series of stakeholder meeting discussing the impending
allowance allocation system. Three commenters requested that EPA ensure
the accuracy of the allocation figures before finalizing the proposed
rule. Two producers proposed allowing companies to select another year
besides their highest consumption year. They stated that it would allow
the company a better mix of HCFCs for their market and perhaps benefit
the environment or the rest of the market if the difference in
allowances were reallocated.
EPA agrees with commenters that the future evolution of the HCFC
market requires an allocation different than proposed and for that
reason is only apportioning allowances at this time for the most ozone-
depleting HCFCs (HCFC-141b, HCFC-22 and HCFC-142b). In addition, EPA is
committed to monitoring future HCFC market demand and may consider
future changes to allowance allocations through future notice and
comment rulemaking.
EPA tried to ensure the accuracy of the consumption figures,
especially those for small businesses, by verifying database records
against the paper records submitted by the pertinent company. In many
cases this involved painstakingly correlating revisions to reporting
forms sent in a year later than the original report.
EPA understands the concern of those who believed that a fixed
allocation will not fully address future market demands. EPA believes
that incorporating a high degree of flexibility in the transfers of
allowances, especially its decision not to group HCFCs and restrict
transfers to those within the same group, will assist in responding to
market decisions and trends. The ability to import used HCFCs and to
use stockpiled material after the phaseout dates are other factors that
will likely avoid significant disruption of use. Finally, today's
action apportions each company a quantity of allowances that exceeds
its historical activity because of the pro-rating up to the U.S. cap,
thereby further addressing concerns about a shortage in supply. As
discussed above, EPA intends to continue to monitor the market trends
as more users transition to less ozone-depleting HCFCs and more non-
ozone-depleting alternatives become available.
With today's action, EPA is assigning individual consumption
baseline years to each company by selecting its highest ODP-weighted
consumption year from among the years 1994, 1995, 1996, and 1997. EPA
is also assigning individual production baseline years to each company
by selecting its highest ODP-weighted production year from among the
years 1994, 1995, 1996, and 1997. EPA's decision to remove 1989 from
the range of years for the selection of consumption and production
baselines was based on reassessments after numerous commenters
indicated the marked difference between the HCFC market in 1989 versus
the more recent evolving HCFC market. The mix of HCFCs being produced
in 1989 would markedly constrain the market and its participants
compared to the more recent mix of HCFCs needed to support current
uses. Allowance holders to which EPA proposed to grant allowances for
their 1989 activity as their best consumption year will receive their
best consumption year from among 1994, 1995, 1996, and 1997. By not
establishing baselines in this action for the HCFCs with relatively low
ozone depleting potential, EPA is preserving more flexibility for
companies whose mix of HCFCs is currently in flux. In addition,
companies that wish to obtain allowances for different HCFCs may take
advantage of the transfer provisions. EPA proposed an exception to its
policy to not use 1998 or later years as part of a company's baseline
in an effort to assist small businesses in the HCFC market who might
not have been familiar with EPA's plans to develop an allowance system
for HCFCs. EPA proposed granting available HCFC consumption allowances
to late entrants into the import market that met certain conditions:
(1) The HCFC market is their primary source of business income; (2)
they began importing HCFCs after the end of 1997 but before the
publication of the ANPRM on April 5, 1999, and (3) they accurately
reported all relevant required quarterly import information to EPA
prior to the publication date of the NPRM, July 20, 2001.
EPA received eight comments on granting available HCFC allowances
to late entrants. Two producers and one importer opposed the proposal.
They believed that companies that failed to take the trouble to know
and comply with the rules to report HCFCs should not be rewarded with
allowances and that the proposal was an attempt to artificially create
a basis for allocation. The third criterion listed above is intended to
ensure that companies are not rewarded for a failure to file required
reports. In addition, EPA believes that compliance with reporting
requirements does not automatically deliver information about
additional regulations under consideration. EPA also believes that
small businesses may have been disadvantaged regarding the changeable
nature of regulations and the need for monitoring the Federal Register
for notices of proposed regulations.
One commenter stated that opening up 1998 as a baseline year for
new entrants justified including that year for all companies receiving
baseline allowances. EPA does not equate late entrants with companies
that were notified about and/or attended the stakeholder meetings. The
companies that were notified of or attended stakeholder meetings in
early 1998 were given information about how EPA would establish HCFC
baselines. Immediately following these meetings, several companies
significantly increased their production/imports. Because late entrants
were not actively participating in the HCFC market in the early and
mid-1990s they were therefore presumably unaware of the baseline-
setting procedures being considered by EPA. As a result of their late
entrance into the HCFC market there are fewer years from which EPA can
make a baseline determination than for companies with an established
history in the HCFC market.
The remaining five commenters, made up of users of HCFCs and trade
associations, were mainly concerned that after late entrants received
their allocations, any allowances left be reallocated to the rest of
the field to
[[Page 2833]]
avoid a shortfall in the supply of HCFCs. With today's action, EPA is
in fact pro-rating historical levels and allocating additional
allowances up to the U.S. cap after the late entrants receive their
allocations to address concerns about a shortfall in supply.
One commenter requested a definition of ``primary source''
regarding the source of income from HCFCs for late entrants. EPA
believes that if a company is obtaining 80 percent or more of its
business income from the HCFC market, then the HCFC market is that
business' ``primary source'' of income. EPA is granting available
allowances to late entrants subject to the conditions discussed above.
One late entrant submitted the required documentation demonstrating
that: (1) They began importation of HCFCs in March 1999 after formation
in February 1999; (2) they accurately reported all relevant required
quarterly import information to EPA prior to the publication date of
the NPRM, July 20, 2001; and (3) their refrigerant imports represented
96 percent of their gross refrigerant volume. In addition to meeting
the criteria stated above, this company also demonstrated that they are
a woman-owned, small and disadvantaged business enterprise; and
although aware of regulatory requirements regarding the importing of
refrigerant, they were unaware of the impending ANPRM, April 5, 1999.
The allowances allocated to this late entrant are included in the list
of consumption allowance holders in this document.
The list of consumption allowance-holders in this document includes
an importer that did not appear in the NPRM. This importer was in the
market during the years 1994, 1995, 1996, and 1997 but EPA requested
additional information in order to verify the import records prior to
publication of the NPRM. EPA did not receive this company's
documentation in time to verify the data and assign them a baseline in
the NPRM. Subsequent to publication of the NPRM the requisite
information was submitted and verified by EPA. Based on this
information, EPA is establishing baseline allowances for this company
with today's action.
G. Will I Be Able to Transfer Allowances?
EPA proposed processing all transfers of allowances within three
working days from when EPA receives an e-mail or fax or a written
request for an inter-pollutant or inter-company transfer. EPA will send
a reply showing the new balance of unexpended allowances. EPA's
decision to propose such a fast processing time was intended to ensure
that transfers are easy and EPA's role is not disruptive to market
transactions. EPA believes that it will have sufficient time to ensure
that the company making the transfer has the requisite number of
unexpended allowances. Two commenters supported this proposed
procedure. One commenter felt this was a reasonable turnaround time, as
long as EPA can tolerate the work load and that the three days should
not put undue burden on requesting companies. EPA will process all
transfers in the time period discussed above.
Of the nine addressing transfers, seven commenters advocated
maximum flexibility in transferring allowances. This flexibility was
considered imperative if tracking were done on the proposed chemical-
by-chemical basis instead of the ODP-weighted option. The commenters
also said that an offset ratio no higher than the proposed 0.1 percent
would also contribute to flexibility in the system. Three commenters
favored allowing transfers of Article 5 allowances to increase the
flexibility of the transfer system. One of the three commenters felt
this is an appropriate policy that will encourage Article 5 countries
to transition within their economic means to less ozone-depleting
chemicals without undue social burden and still achieve the goal of
reducing ozone-depleting chemicals worldwide. EPA agrees with the
commenters and is establishing procedures for transfers with maximum
flexibility within the constraints of the allowance system.
1. Transfers Within Groups of HCFCs
EPA is permitted to establish groups of HCFCs under Section
607(b)(3) of the Act. Within such a framework, inter-pollutant
transfers of allowances would be limited to chemicals within an
assigned group. The Act does not require any such grouping for HCFCs
and EPA did not propose to group. EPA believed that limiting transfers
by grouping HCFCs would decrease the flexibility many commenters
requested. Therefore, HCFCs will not be grouped and allowance holders
will be able to transfer among all HCFCs as long as the resulting HCFC
has not been phased out.
2. Inter-Pollutant Transfers
Section 607(b) of the Act permits inter-pollutant transfers of
ODSs. An inter-pollutant transfer is the transfer of an allowance of
one substance to an allowance of another substance on an ODP-weighted
basis. In addition, Section 607 requires that any transfer result in a
benefit to the environment. The offset contained in today's action is
intended to fulfill this mandate.
Inter-pollutant transfers are sometimes called intra-company
transfers because a company might shift allowances internally from one
ODS to another to react to shifts in demand. For example, a company
might wish to transfer 10,000 kilograms of HCFC-142b allowances for
HCFC-22 allowances, which would result in 11,818 kilograms of HCFC-22
because of the adjustment for the ODPs of the two chemicals. The
calculation would proceed like this: the 10,000 kilograms of HCFC-142b
allowances are multiplied by the ODP of HCFC-142b (0.065) and then
divided by the ODP of HCFC-22 (0.055), yielding 11,818 kilograms of
HCFC-22 allowances. The 0.1 percent offset is then subtracted from
11,818 kilograms.
EPA proposed allowing inter-pollutant transfers (or intra-company
transfers) in conjunction with the chemical-by-chemical tracking
system. One commenter felt this reasonable proposal will easily enable
companies to take advantage of the capability for transfers without
undue burden. Only one commenter preferred no inter-pollutant transfers
because of the belief that allowing such transfers would reduce the
sense of urgency in researching alternatives to HCFCs. Inter-pollutant
transfers allow companies to respond to market forces and achieve
economies of scale in production and import, but as the phaseouts and
reductions in consumption proceed, the opportunities for inter-
pollutant transfers will decrease over time. This tightening of the
ability to transfer allowances parallels the tightening of the overall
quantity of allowances, leading to greater incentives for research into
and development of alternatives. In addition, companies that wish to
continue to supply their customers will have incentives to research and
develop alternatives over the long term while conducting inter-
pollutant transfers during the short term.
Because the consumption and production allowances for a specific
HCFC disappear after its phaseout date, inter-pollutant transfers of
those allowances will no longer be possible after the phaseout date.
For example, after HCFC-141b is phased out on January 1, 2003, a
company cannot transfer ODP-weighted HCFC-141b production or
consumption allowances for HCFC-22 allowances. No production or
consumption allowances for HCFC-141b will exist after December 31,
2002.
EPA will process inter-pollutant transfers within three working
days from when EPA receives a fax or a request for the transfer. EPA
will send
[[Page 2834]]
a reply showing the new balance of unexpended allowances, taking into
account the 0.1 percent offset.
3. Inter-Company Transfers
Section 607(c) of the Act permits inter-company transfers of
allowances. Inter-company transfers are transfers of allowances, for
the same ODS under a chemical-by-chemical system, from one company to
another company. For example, Company A would transfer its allowances
to Company B who wished to have more allowances. Both companies would
need to record and report the chemical(s) associated with that
transfer. The requisite offset would be deducted by EPA from the
transferor's allowance balance when processing the transfer.
EPA proposed to allow inter-company transfers, with an
environmental offset and to process all transfer requests within three
working days from when EPA receives the request.
Because the consumption and production allowances for a specific
HCFC disappear after its phaseout date, EPA proposed that inter-company
transfers of those allowances will no longer be possible after its
phaseout date. For example, after HCFC-141b is phased out on January 1,
2003, a company cannot transfer its HCFC-141b production or consumption
allowances to another company. No production or consumption allowances
for HCFC-141b will exist after December 31, 2002.
EPA also proposed allowing inter-company transfers of Article 5
allowances to allow for shifts in production that would permit market
efficiencies.
One commenter expressed support for inter-company transfers and the
remaining commenters were silent on this issue. EPA will allow inter-
company transfers of production allowances and consumption allowances
until the phaseout date of each HCFC and will allow inter-company
transfers of Article 5 allowances. After the phaseout date for a
specific HCFC, EPA will allow inter-company transfers of export
production allowances. EPA will process inter-company transfers within
three working days from when EPA receives a fax or a request for the
transfer. EPA will send replies showing the new balances of unexpended
allowances for each company. The transferor's new balance will reflect
the 0.1 percent offset.
4. Inter-pollutant Transfers Combined With Inter-Company Transfers
Section 607(c) of the CAA authorizes inter-company combined with
inter-pollutant transfers, subject to certain requirements. EPA
proposed allowing inter-pollutant transfers combined with inter-company
transfers for HCFCs, with a 0.1 percent offset. These transfers will be
treated as a single transaction and therefore require only a 0.1
percent offset. Three of the ten commenters on transfers specifically
favored inter-pollutant transfers combined with inter-company
transfers. One commenter felt this capability is flexible and will
enable companies to meet their production/import needs. Seven
commenters generally supported maximum flexibility in transfers. EPA
will allow inter-pollutant transfers combined with inter-company
transfers of production allowances and consumption allowances up to the
phaseout date of each HCFC. A 0.1 percent offset will be required to
provide the environmental benefit called for in the CAA.
The chemical-by-chemical phaseout will affect the availability of
these transfers and the types of allowances over time. For example,
after the 2003 phaseout of HCFC-141b and before 2010, a company
receiving export production allowances and Article 5 allowances for
HCFC-141b could engage in inter-company transfers of those allowances,
but not in inter-pollutant transfers. In 2010, when export production
allowances and Article 5 allowances for HCFC-22 and HCFC-142b become
available, these allowances will be transferable with the ones for
HCFC-141b.
5. International Trades of Current-Year Allowances
For purposes of industrial rationalization, international trades of
production and consumption allowances are permitted in some
circumstances but require more review than inter-pollutant and inter-
company transfers. The Protocol defines industrial rationalization in
Article 1 as ``the transfer of all or a portion of the calculated level
of production of one Party to another, for the purpose of achieving
economic efficiencies or responding to anticipated shortfalls in supply
as a result of plant closures.''
(a) Consumption Allowances
In Article 2, the Protocol restricts the international trade of
HCFC consumption by linking it with CFC consumption. A more detailed
discussion may be found in II.I.5 of the NPRM (66 FR 38076). Under the
Protocol, the U.S. cannot trade HCFC consumption to another Party
because the U.S. per capita CFC consumption in 1989 was 1.28 kilograms,
well above the 0.25 kilogram per capita limit required of a Party
trading consumption to another Party.
However, the Protocol allows the U.S. to potentially receive a
trade of HCFC consumption from another Party. Only two Article 2
countries, Norway and Poland, had a per capita CFC consumption in 1989
below 0.25 kilograms. These are the only Parties from which the U.S.
could potentially receive a trade of HCFC consumption.
Only two of the ten commenters on transfers singled out
international consumption trades for special mention. One commenter
felt that such trades would be difficult to engage in and would
therefore likely not be a part of their import business. A commenter
who was interested in the trade of consumption rights from Norway and
Poland requested that the provisions be included in the final rule.
Today's action creates provisions and requirements for EPA's processing
of a request to trade consumption from one of the two eligible
countries to the U.S. To trade consumption from a Party, EPA must
receive a letter from that country's diplomatic embassy stating that
their consumption level is being reduced by the amount being traded, in
accordance with 82.18(d).
(b) Production Allowances
During the eleventh Meeting of the Parties in 1999, the adoption of
a production cap provided the potential for trades of production
between Parties. Because of the minimal restrictions placed on the
trade of HCFC production compared to trade of HCFC consumption, EPA
proposed provisions for the international trade of production
allowances and the subsequent calculations necessary to revise the
production limits for all traders trading production in the same
control period.
Only three commenters out of ten commenting on transfers discussed
international trades of production and two were in favor while one was
not. EPA did not receive any comments suggesting alternative methods of
calculating the revised production limits. If EPA approves the proposed
trade, the Administrator is required to establish revised production
limits for the trader so that the aggregate domestic production
permitted after the trade reflects the effect of the trade of
production allowances. Such trades cannot result in an increase in
production over what would have occurred in the absence of the trade.
EPA will notify each trader of the revised production limit after
approving the trade of production allowances to a Party rather than
waiting to the end of the control period; traders will then be able to
make timely market decisions
[[Page 2835]]
with the remaining production allowances. EPA received one comment on
the proposed method of determining the trader's balance of production
allowances, pointing out that the provided formula could result in a
negative number. EPA tested the formula and is adjusting it accordingly
to prevent any negative result. In today's rule EPA is finalizing the
method of calculating the trader's balance as follows: the
Administrator would issue a notice revising the trader's balance of
production allowances to equal the lesser of: (a) The unexpended
production allowances held by the trader minus the quantity of
production allowances traded; or (b) the unexpended production
allowances held by the trader minus the amount by which the U.S.
average annual production of the HCFC being traded for the three years
prior to the trade is less than the total allowable production of the
controlled substance under this subpart minus the amount traded. For
those more comfortable with formulas, the method can be expressed in
this manner:
f = (a-d), if c <= b
or
f = a - [(c-b) -d], if c £ b
where a=the person's unexpended production allowances, b=the U.S. 3-
year average production for that HCFC, c=the total allowable U.S.
production for that HCFC, and d=the actual quantity being traded, and
f=the person's revised production allowance level. This formula is
based on the language of Section 616 of the CAA.
The single dissenting commenter encouraged prohibiting trades of
production because of the economic hardship that such trades can
produce for American workers, users of HCFCs and suppliers to plants
that produce HCFCs. This commenter felt that trades of production away
from the U.S. can reduce the total amount of allowable production,
thereby distorting markets and the availability of a substance. The
legal framework in which EPA proposed the system for international
trades of HCFC production is governed by the Protocol and the CAA. The
Parties to the Protocol met in 1999 and decided to allow for trades of
production rights between Parties because they recognized the need for
industrial rationalization. The Parties acknowledged that companies
would likely want to consolidate HCFC production in different countries
so that a company could achieve economies of scale. In addition,
Section 616 of the CAA indicates that Congress contemplated trades of
production rights between the U.S. and other Parties to the Protocol.
There have been international trades of class I production allowances
since the establishment of the allowance system for class I ozone-
depleting substances. EPA received many comments on the NPRM supporting
flexible trade mechanisms because they reduce regulatory interference
in the global HCFC market. In following the model established for class
I ozone-depleting substance, the Agency will consider (1) possible
creation of economic hardship; (2) possible effects on trade; (3)
potential environmental implications, and (4) the total amount of
unexpended production allowances held by United States entities, by
asking for concurrence on international trades from the Department of
Commerce, the United States Trade Representative, and the Department of
State.
The commenter also considered approvals of international trades a
significant administrative action and believed that publishing the
proposed trade in the Federal Register would allow users and other
affected persons an opportunity to comment on the economic impact of
the proposed international trade. EPA did not adopt such procedures for
international trades under the class I system and believes that they
would cause excessive delays in acting on requests for international
trades which is contrary to the desire of almost all commenters for a
flexible, un-burdensome system.
Beginning January 1, 2004, EPA will only allow international trades
of production allowances to and from Parties that are either: (1)
Listed in Appendix L and have ratified the Beijing Amendments as listed
in Appendix C, or (2) not listed in Appendix L but are listed in
Appendix C as having ratified the Copenhagen Amendments. EPA will
revise the production limits for all traders trading production
allowances in the same control period following the calculations
discussed above.
6. Transfers of Current-Year Allowances
A transfer of current-year allowances means the allowances being
traded can only be expended for production or import in that specific
control year. Transfers of current-year allowances do not permanently
change the quantity of baseline allowances assigned to a company. A
transfer of current-year allowances is a temporary transfer and is
reflected in a company's balance of allowances for the control period
in which the transfer occurred. EPA proposed allowing transfers of
current-year allowances and of the ten commenters on transfers, two
explicitly favored current-year transfers of allowances. One of the two
favorable commenters stated that the transfer should be subject to the
minimum possible offset. The rest of the commenters generally supported
all kinds of transfers that might confer the maximum degree of
flexibility in the transfer system.
EPA will allow trades of current year allowances so companies will
have flexibility to respond to market forces and achieve economies of
scale in production and import.
7. Permanent Transfers of Baseline Allowances
The permanent transfer of baseline allowances is a lasting shift of
some quantity of a company's allowances to another company. The
permanent nature of the transfer makes it different from the transfer
of current-year allowances. In all relevant subsequent years, the
transferor's quantity of baseline allowances would be permanently
reduced, while the transferee's quantity of baseline allowances would
be permanently increased. For example, if a person transfers baseline
allowances of HCFC-22, their baseline would be decreased permanently by
the transfer amount, and the recipient would gain HCFC-22 baseline
allowances, minus the offset, on a permanent basis. Subsequent inter-
pollutant transfers of these baseline allowances would also be
permitted. However, at the time of a reduction step or a phaseout of
the substance, the current holder of baseline allowances that were
received in a permanent transfer would be the person who would have
them deducted.
EPA proposed allowing such permanent transfers of allowances for
HCFCs. Only two of the ten commenters on transfers singled out
permanent transfers for favorable comment. One commenter felt that they
should be subject to the minimum possible offset. The other commenter
believed that as the industry evolves and the companies with it,
allowing permanent transfers may enable better production techniques
and/or streamlining of facilities. The rest of the commenters generally
supported all kinds of transfers that might confer the maximum degree
of flexibility in the transfer system. EPA will allow permanent
transfers of baseline allowances with those allowances disappearing at
the phaseout date for the specific HCFC, regardless of what inter-
pollutant transfers had taken place.
[[Page 2836]]
8. Offset for a Transfer of Allowances
Section 607(c) of the CAA requires that transfers result in a
greater environmental benefit than would occur in the absence of such a
transfer. This can be achieved by an offset for inter-pollutant and
inter-company transfers. However, inter-pollutant transfers combined
with inter-company transfers would only require one offset. Since
international transfers are governed by Section 616 of the CAA and that
section does not contain similar requirements for an environmental
benefit, no offset was proposed for such transfers.
EPA proposed a 0.1 percent offset be applied to inter-pollutant and
inter-company transfers to afford an environmental benefit associated
with domestic transfers. Of the ten commenters on transfers, three
commenters supported the proposed 0.1 percent offset while one
commenter proposed a 0.05 percent offset. EPA believes that the 0.1
percent offset reflects the lower ODP of class II controlled substances
compared to class I substances; allows for simplicity in calculation;
and still provides an environmental benefit associated with domestic
transfers. EPA believes that a lower offset, such as the 0.05 percent
proposed by a commenter would reflect the lower ODP of class II
controlled substances but provide such a small environmental benefit as
to be valueless. The remaining commenters did not mention the offset.
One of the supporters of the 0.1 percent offset suggested no offset at
all for intra-company transfers, a one-time offset for inter-company
transfers, and only a one-time offset over the lifetime of a permanent
transfer. This suggestion could not meet the requirement of Section
607(a) of the CAA. That section requires EPA's regulations to ensure
that ``transactions under the authority of this section will result in
greater total reductions in the production in each year of class I and
class II controlled substances that would occur in that year in the
absence of such transactions.'' Intra-company transfers are
transactions ``under the authority of'' Section 607 of the Act. They
are specifically provided for in Section 607(b). Thus, it is not
possible to waive the offset requirement entirely for intra-company
transfers. In addition, a one-time offset for other types of transfers
would not ensure ``greater total reductions'' in subsequent years and
thus would not meet the requirements of Sections 607(a) and (c).
EPA is requiring a 0.1 percent offset for inter-pollutant and
inter-company transfers. Inter-pollutant transfers combined with inter-
company transfers would be treated as a single transaction and
therefore require only a 0.1 percent offset. International transfers
will require no offset.
H. Will Production for Export Be Allowed After Each Phaseout?
Because the U.S. is phasing out HCFCs chemical-by-chemical rather
than by percentage, it is possible to produce an HCFC for export even
after it is phased out domestically. To differentiate pre-phaseout
allowances from post-phaseout allowances, a new type of allowance was
necessary for the phased-out HCFCs and EPA proposed creation of an
``export production allowance.'' The first HCFC scheduled for phaseout
in the U.S. is HCFC-141b. EPA believes that foreign demand for HCFC-
141b will continue in years beyond the U.S. 2003 phaseout.
1. Exports to Parties
Since production and consumption allowances for HCFC-141b will no
longer exist as of January 1, 2003, but the potential for overseas
markets for HCFC-141b will still exist, EPA proposed allowing
production for export only to Parties that had ratified the Copenhagen
Amendments. EPA proposed allocating ``export production allowances''
equal to 100 percent of baseline production allowances for HCFC-141b
with the requirement that HCFC-141b produced in the U.S. under these
allowances be exported to Parties listed in Appendix C as having
ratified the Copenhagen Amendments.
Two commenters were concerned that EPA would cease allocating
export production allowances for HCFC-141b as early as December 31,
2009, and requested that allowances be available until December 31,
2029. One commenter suggested that since exports from the European
Union are allowed through 2025, the U.S. should follow suit and not
unfairly prejudice U.S. business. In the NPRM, EPA proposed that these
allowances would remain available at least until December 31, 2009, and
that EPA expected to re-evaluate the availability of export production
allowances for HCFC-141b, HCFC-22, and HCFC-142b. EPA had planned to
issue a rule prior to 2010 which would allocate export production
allowances for subsequent control periods, taking into account any
relevant modifications to the Protocol or the CAA. With today's action,
EPA is allocating export production allowances until 2030 for HCFC-
141b, HCFC-22 and HCFC-142b. If the Protocol modifies the formula for
the production cap, EPA will modify the allocation of export production
allowances through notice and comment rulemaking accordingly. One
commenter agreed with the proposal to provide for export production
allowances as long as the exports were exported to Parties that have
ratified the Beijing Amendments. EPA proposed to limit exports to
Parties that have ratified the Copenhagen Amendments. The issue of
limiting exports to certain Parties arises because at the eleventh
meeting in 1999, the Parties agreed to an amendment to the Protocol
requiring that, beginning January 1, 2004, each Party shall ban HCFC
imports from and exports to countries that have not ratified the
amendments that contain control measures for HCFCs. This ban reflects a
strategy by the Parties to encourage ratification of the Protocol and
each successive package of amendments. The majority of the control
measures for HCFCs are contained in the Copenhagen Amendments. However,
the control measures to cap HCFC production were included with the
trade ban provisions in the Beijing Amendments. After further review,
EPA has decided that the proposed interpretation of the trade ban was
incorrect. However, EPA is not adopting the commenter's interpretation.
EPA has concluded that the trade ban should be interpreted such that
countries need only have ratified the amendments that contain controls
measures relevant to that country. EPA believes the HCFC production
control measures are only relevant to countries that produce HCFCs and
therefore believes the trade ban should differentiate between countries
that produce HCFCs, and those that do not produce HCFCs. Today's action
lists countries that produce HCFCs in Appendix L, according to the UNEP
Ozone Secretariat's compilation of information submitted in accordance
with Article 7 of the Montreal Protocol. With today's action, starting
January 1, 2004, trade in HCFCs with producing countries will be
restricted to only those that have ratified the Beijing Amendments. If
a country is not an HCFC producer, then trade in HCFCs will be
restricted to only those that have ratified the Copenhagen Amendments.
Article 4, paragraph 8 of the Protocol recognizes that countries may
actually be complying with relevant control measures without having
officially ratified the Protocol or its relevant Amendments and permits
the Parties to meet and determine that imports from and exports to
these countries is permitted. With today's action, EPA is also
including the potential for a country to be determined by the Parties
to be complying with the relevant
[[Page 2837]]
control measures, in which case they would be listed in Appendix C,
Annex 2 of the Protocol, and HCFC trade with that country would be
allowed. In summary, beginning January 1, 2004, the HCFC trade ban
provisions limit production for export to Parties that are either: (1)
Listed in Appendix L of this subpart and have ratified the Beijing
Amendments as listed in Appendix C, Annex 1 of the Protocol, or (2) not
listed in Appendix L of this subpart but listed in Appendix C, Annex 1
of the Protocol, as having ratified the Copenhagen Amendments, or (3)
listed in Appendix C, Annex 2 of the Protocol, as being a foreign state
complying with the Beijing Amendments if the foreign state is listed in
Appendix L of this subpart, or as being a foreign state complying with
the Copenhagen Amendments if the foreign state is not listed in
Appendix L of this subpart.
Because production will be frozen at a constant level throughout
the various phaseout years, unless there are further changes to the
Protocol, EPA is granting export production allowances to produce the
phased-out HCFCs at that level after the respective phaseouts. Export
production allowances may only be used to produce for export to Parties
that are either: (1) Listed in Appendix L and have ratified the Beijing
Amendments as listed in Appendix C, or (2) not listed Appendix L but
are listed in Appendix C as having ratified the Copenhagen Amendments.
The production allowances for the phased-out HCFC before the phaseout
date are equivalent to the export production allowances after the
phaseout date.
2. Exports to Article 5 Countries
The Protocol allows for production of HCFCs at a level of 15
percent of production baseline explicitly for export to Article 5
countries to meet their basic domestic needs (Article 5 countries are
listed in Appendix E to Subpart A of Part 82). But Section 605(d)(2)(B)
of the CAA requires that between 2015 and 2030 the production for
Article 5 countries be limited to 10 percent of baseline. Between 2030
and 2040, Section 605(d)(2)(B)allows production of 15 percent of
baseline for Article 5 countries. In order to reconcile the percentages
allowed by the Protocol and by the CAA, the schedule for Article 5
allowances will be: 15 percent of production baseline from January 1,
2003 (HCFC-141b) or January 1, 2010 (HCFC-22 and HCFC-142b) through
December 31, 2014; 10 percent of production baseline from January 1,
2015 through December 31, 2029; and 15 percent of production baseline
from January 1, 2030 through December 31, 2039.
EPA proposed allocating 15 percent of production baseline of the
phased-out chemical for export to Article 5 countries after the U.S.
phaseout date. Article 5 allowances could be expended without
accompanying consumption allowances. Most commenters on Article 5
allowances were primarily interested in the ability to transfer these
among themselves to respond to market demands. As explained above in
Section III.G, EPA is permitting transfers of Article 5 allowances.
One commenter noted that the proposal indicated Article 5
allowances would be available only until 2030 while the Act would allow
them until 2040. In verifying the authority to grant Article 5
allowances, EPA noted the Act authorizes Article 5 allowances up to 10
percent between 2015 and 2030 and up to 15 percent between 2030 and
2040 while the Protocol authorizes 15 percent throughout. Section 614
of the CAA states ``In the case of conflict between any provision this
title [Title VI of the CAA]
and any provision of the Montreal Protocol,
the more stringent provision shall govern.'' Consistent with Section
614, EPA has written today's final rule to reflect the most stringent
percentages.
I. Will There Be a Petition System for Importing Used HCFCs?
The Parties to the Protocol allow the import of used ODSs outside
of the consumption cap because they believe this will reduce the burden
of the transition to alternatives. The Parties to the Protocol also
believe that allowing trade in already existing used material will
offset the need for new global production.
Because illegal imports of virgin CFCs occurred in the absence of a
petition process for importing used CFCs, EPA believes that a petition
process for importing used HCFCs is needed. EPA anticipates that
attempts to illegally import virgin HCFCs will occur as HCFCs are
phased out and the supply of HCFCs diminishes in the face of continuing
demand. EPA proposed a petition process for the import of used HCFCs
similar to the process for class I substances, such as CFCs, to ensure
that relevant class II imports are legitimately used previous to
import. In finalizing the proposed petition process for used class II
controlled substances, EPA has also taken into consideration comments
on proposed changes to the petition process for used class I substances
(64 FR 41627).
1. Petition for Each Individual Shipment
EPA proposed that a petition to import used HCFCs be submitted on a
shipment-by-shipment basis. The information in a petition and the
quantity a person wishes to import into the U.S. must be limited to a
specific shipment and a single U.S. Customs entry. Since there were no
comments concerning this provision, EPA will establish the shipment-by-
shipment petition process as proposed.
2. Threshold Quantity Requiring a Petition
EPA proposed a threshold quantity of five (5) pounds or more of
used HCFCs for an individual shipment that requires a petition to
import. The five (5) pound threshold allows a company to take three
samples from a large ISO-tank for laboratory analysis and send the
samples to a test facility in the U.S. without being subject to the
petition requirements. Since there were no comments concerning this
provision, EPA will retain the proposed threshold quantity.
3. Information Requirements
EPA proposed that petitions contain the type of information needed
to independently verify the previous use of the HCFC. For example, EPA
proposed that the importer supply contact information for the entire
chain of custody of the used HCFC in the petition. EPA also proposed
requiring a copy of the contract for the purchase of the used HCFC and
information on the intended use. In light of efforts by the Parties to
the Protocol to implement a licensing system for exports as well as
imports, EPA proposed that the petitioner obtain an export license from
the appropriate government agency in the country of export. EPA
requested comment on the utility and burden of supplying information
about the name, make and model number of the equipment from which the
HCFC was removed as a means of verifying that the material had been
truly used in the operation of equipment.
In today's final rule, EPA is including a requirement that the
petition contain ``a list of the name, make and model number of the
equipment from which the material was recovered at each source
facility.'' EPA believes that the submission of this information is
vital to the Agency's ability to verify that the controlled substance
was, in fact, previously used and is not simply a quantity of falsely
labeled controlled substance that was newly produced. In the class I
petition process, EPA uses information about the specific
[[Page 2838]]
equipment to verify that the quantity a petitioner wants to import
could have been recovered from that equipment during the normal course
of its operation. In general, the Agency has access to technical
specifications for most equipment, including their typical ODS
``charge'' or amount of ODS they can hold. Over the years, the Agency
has received many petitions to import tens of metric tonnes of an ODS
claimed to have been recovered from specific equipment when the
equipment's specifications indicated that the amount specified in the
petition would not typically have been held in, or recovered from, the
specific equipment (even in leaky, malfunctioning situations) over a
10-year period. Based on these kind of analyses, and contact with the
source facility, EPA has been able to object to petitions. The Agency
also wants to note that most petitions received to date have included
this information. Finally, EPA believes that the petitioner must take
some responsibility for ensuring that the ODS was previously used
before submitting a petition, and to do this the petitioner should
follow the chain of custody of the material back to the source facility
and equipment from which it was recovered. This diligence in tracing
ODS back to the source facility would allow a petitioner to include the
specific information about the equipment from which it was recovered.
Because U.S. obligations under the Protocol limit imports to zero after
the phaseout, the Agency's ability to independently verify that a
quantity of ODS was, in fact, recovered at a source facility from
specific equipment is the most critical step in ensuring the U.S.
compliance under the international treaty.
Several commenters on proposed changes to the petition process for
used class I substances took issue with the proposed requirement that
the importer submit ``* * * a copy of the contract for the purchase of
the controlled substance that includes the name, address, contact
person, phone number and fax number of the purchaser.'' The commenters
requested that EPA clarify this information requirement, which appeared
both in the proposed changes to the class I petition process and in the
proposed class II petition process. EPA intended that the petitioner
provide a copy of the contract for the purchase of the controlled
substance by the ultimate user in the United States. The commenters
argued that in many cases the petitioner does not know the ultimate
purchaser of the material at the time the petition is being submitted.
EPA believes that in some instances the importer of a used controlled
substance will already know the purchaser, but this will not always be
the case. Therefore, EPA is revising the proposed language so that the
final requirement reads: ``A description of the intended use of the
used control substance, and when possible, the name, address, contact
person, phone number and fax number of the ultimate purchaser in the
United States.''
One commenter on the proposed petition process for class II
controlled substances noted that equipment is commonly ``top charged,''
meaning a little material is added to the equipment. This was in
response to the requirement that the importer supply the date the
material was put into equipment at each source facility and that the
material must have remained in the equipment for at least 24 months
prior to recovery. The commenter requested that EPA clarify whether a
refrigeration system that is top charged within 24 months of the
material's proposed import date may be imported as used material. In
Sec. 82.24(c)(3)(iv), EPA proposed the 24 month period for an HCFC to
be considered ``used'' in order to make certain that imported HCFCs
were actually employed in a working system (e.g., as a refrigerant).
Several commenters on the identical proposed change to the petition
process for used class I substances pointed out that the phrase ``dated
documents,'' as used in this proposed requirement, is ambiguous. The
proposed information requirement in (iv) was, ``A detailed description
of the previous use of the controlled substance at each source facility
and dated documents indicating the date the material was put into the
equipment at each source facility (material must have remained in the
equipment at least 24 months prior to recovery to be considered
previously used)''. The commenters suggested that the phrase ``dated
documents'' needs clarification as to whether the Agency is seeking
documents dated at the time the ODS was put into the equipment or
documents dated at the time a person submits a petition certifying, to
the best of their knowledge, when the ODS was put into the equipment.
In addition, several commenters expressed concern that finding
documents that are dated from the time the ODS was put into the
equipment may be virtually impossible because enterprises only keep
documents for a limited number of years and the equipment could have
been filled with the ozone-depleting substance many years ago.
Commenters on the proposed changes to the petition process for class I
substances also pointed out a number of practical objections to the
proposed requirement that the ODS must have remained in the equipment
for at least 24 months. Two commenters on those proposed changes
suggested that instead of requiring documents regarding the date when
the controlled substance was put into equipment EPA could request such
documents be submitted, when possible, but at a minimum require the
petitioner to certify a ``best estimate'' of the length of time that
the ODS was in the equipment. EPA believes that these are useful
suggestions. In addition, EPA believes that the practical realities
cited by commenters regarding a minimum residence time for the ODS in
equipment makes such a requirement unworkable. Thus, instead of
retaining the language from the proposal, EPA is adopting the following
language in today's final action: ``A detailed description of the
previous use of the controlled substance at each source facility and a
best estimate of when the specific controlled substance was put into
the equipment at each source facility, and, when possible documents
indicating the date the material was put into the equipment.''
4. Timing for Review of a Petition
Based on its experiences with the 15 working-day time limit for
processing petitions to import used CFCs, EPA proposed forty (40)
working days to allow more time for the review of petitions to import
used HCFCs. The period for review would begin on the working day after
EPA's Global Programs Division receives the petition, with no automatic
approval. The proposed 40 working-day period is an effort to balance
responsiveness and thoroughness in review of the petition. While EPA
will make every effort to respond to the petitioner within the 40
working-day period, a lack of response does not constitute a grant of
authority to import. A commenter stated that given the large amount of
data requiring verification, it may be difficult for EPA to verify the
information within two months. EPA believes that 40 working days will
be adequate to review each petition in all but exceptional cases, based
on EPA's experience processing petitions to import used CFCs. The
provisions are finalized as proposed.
5. Reasons for Issuing an Objection Notice
Since 1994, EPA has worked with the Department of Justice, the
Internal Revenue Service, the Customs Service, the State Department,
and the Department of Defense to confirm the information in petitions
to import used
[[Page 2839]]
CFCs. Based on this experience, EPA proposed a list of reasons for
issuing an objection notice to a petition to import used HCFCs.
EPA proposed five reasons for issuing an objection notice that are
included in today's action. Reason (A) is a lack of sufficient
information. Reason (B) is the submission of false or misleading
information. If the transaction appears to be contrary to the
provisions of the Vienna Convention on Substances that Deplete the
Ozone Layer, the Montreal Protocol and Decisions by the Parties, or the
Protocol's non-compliance procedures, EPA may issue an objection notice
pursuant to reason (C).
Under reason (D), EPA may issue an objection notice if the
exporting country has not granted an export license for the shipment.
Finally, under reason (E), EPA may disallow a petition to import used
HCFCs from an Article 5 country that has reclamation facilities
subsidized by the Multilateral Fund (MLF).
In the proposed rule, reason (B) for issuing an objection notice
read as follows: ``If the Administrator determines that any portion of
the petition contains false or misleading information or has reason to
believe that the petition contains false or misleading information.''
One of the commenters on the proposed changes to the petition process
for class I substances stated that an EPA objection under reason (B)
might be ``based on unsubstantiated allegations or unfounded belief.''
EPA agrees that the phrase ``has reason to believe'' may be too vague.
Thus, in today's action, EPA is modifying reason (B) for issuing an
objection notice to read: ``If the Administrator determines that any
portion of the petition contains false or misleading information, or
the Administrator has information from other U.S. or foreign government
agencies indicating that the petition contains false or misleading
information.''
EPA received one comment on its proposal to issue an objection
notice for any petition to import used HCFCs from an Article 5 country
that has reclamation facilities subsidized by the MLF. The intent of
the MLF was to allow Article 5 countries to reclaim used HCFCs for
their domestic needs. The commenter stated that there were technically
valid reasons for allowing imports of used HCFCs from Article 5
countries that had MLF reclamation facilities. That commenter believed
that most of those facilities were simple and not capable of
technically complex reclamation. However, the complexity of HCFC
reclamation from Article V countries' equipment and appliances has no
bearing on the proposed petitioning process, because the process only
applies to the import of used HCFCs and not the import of equipment
containing HCFCs; therefore, EPA is finalizing this proposed basis for
issuing an objection notice. EPA would not want to circumvent the
efforts of Article 5 countries in establishing their own HCFC
management plans. EPA believes that if it allowed the import of used
HCFCs from such Article 5 countries that this action might jeopardize
the countries' efforts to properly handle used HCFCs and reduce their
domestic demand for newly produced material. In today's final action,
this reason for objection appears as reason (E).
EPA proposed two reasons for issuing an objection notice that are
not included in today's final action. In the proposed rule, reason (F)
was: ``If the Administrator has received information indicating that a
person listed in the petition has produced at any time false
information regarding trade in class II controlled substances as
defined in this subpart, including information required by EPA or
required by the appropriate government agency in the exporting
country.'' Reason (G) was: If the Administrator has received
information indicating that a person listed in the petition is in
violation of a requirement in any regulation under Title VI of the
Clean Air Act.'' Commenters on the proposed changes to the petition
process for class I substances objected to the likely use of
``hearsay'' and information ``incorrectly or maliciously'' provided to
EPA during its petition review. EPA agrees that the potential for abuse
of these reasons by competitors or disgruntled employees is too great.
Thus, reasons (F) and (G) are not being included in today's action.
In addition, in this final action EPA has combined two reasons
relating to the exporting country's desire not to allow the export.
Reason (D) is sufficiently broad to cover both a refusal to grant an
export license in a particular instance and a general policy of not
allowing exports.
Finally, EPA is modifying the proposed language for Sec.
82.13(g)(3)(iv) to clarify that it is retaining the discretion not to
object to a petition. The new language states: ``In cases where the
Administrator does not object to the petition based on the criteria
listed in paragraph (c)(4)(i) of this section, the Administrator will
issue a non-objection notice.''
6. Petition and Non-Objection Letter To Accompany the Shipment
EPA proposed requiring that the petition and the non-objection
notice from EPA accompany each shipment through U.S. Customs in the
belief that this would facilitate clearance through customs. One
commenter believed that in most circumstances no documentation other
than labeling accompanies the shipment. This commenter also believed
that the paperwork and the shipment are not processed simultaneously
and suggested that EPA should require that the documentation be sent to
the freight forwarder and accompany the bill of lading. In saying that
the non-objection notice must accompany the shipment, EPA intends to
require that the non-objection notice be submitted and reviewed by U.S.
Customs with all documentation associated with a shipment, i.e, the
bill of lading and Customs entry form. EPA respectfully disagrees with
the commenter's belief that the paperwork does not accompany the
shipment as it passes U.S. Customs. EPA frequently receives calls from
U.S. Customs port inspectors asking questions about individual
shipments of CFCs that are at the port, when the associated bill of
lading and Customs entry form are not accompanied by the EPA non-
objection notice. When there is no EPA non-objection notice issued for
such a shipment, it is seized by U.S. Customs as an illegal import in
violation of regulations under authority of the CAA. However, when U.S.
Customs inspectors call EPA and the non-objection notice accompanies
the bill of lading and the Customs entry form, it is an easier process
to ``clear'' the shipment. The Agency wants to note that the commenter
did not provide a rationale for why the non-objection notice should not
accompany the shipment through U.S. Customs. Because the petitioner
must receive the non-objection notice before the shipment leaves the
foreign country of export, timing cannot be the reason for not
including a non-objection notice with a shipment's entry through U.S.
Customs. EPA believes requiring that the non-objection notice accompany
the shipment's entry will expedite HCFC imports through U.S. Customs.
J. Will There be New Restrictions on Imports To and Exports From
Specific Parties?
At the eleventh meeting in 1999, the Parties agreed to an amendment
to the Protocol requiring that, beginning January 1, 2004, each Party
shall ban HCFC imports from and exports to countries that have not
ratified the amendments with control measures for HCFCs relevant to
that country. This ban reflects a strategy by the Parties to encourage
ratification of the Protocol
[[Page 2840]]
and each successive package of amendments. EPA proposed to make its
HCFC regulations consistent with this provision by including a ban on
import or export of any quantity of HCFCs from or to any state that was
not a Party to the Copenhagen Amendments, unless that state was
complying with the Copenhagen Amendments.
Only one commenter requested clarification concerning allocation
rights of an importer of record that previously imported from a non-
Party. EPA agrees with the commenter's assumption that all consumption
allowances allocated to importers are valid upon promulgation of the
rule. However, beginning January 1, 2004, EPA notes that these
allowances may only be expended to produce for export to, or to import
from, Parties that are either: (1) Listed in Appendix L and have
ratified the Beijing Amendments as listed in Appendix C, or (2) not
listed in Appendix L but are listed in Appendix C as having ratified
the Copenhagen Amendments.
EPA will allow trade with all Parties upon promulgation of this
rule, but on January 1, 2004, trade will be restricted to Parties that
are either: (1) Listed in Appendix L and have ratified the Beijing
Amendments as listed in Appendix C, or (2) not listed in Appendix L but
are listed in Appendix C as having ratified the Copenhagen Amendments,
or (3) listed in Appendix C, Annex 2 of the Protocol, as complying with
the Beijing Amendments if the foreign state is listed in Appendix L, or
as complying with the Copenhagen Amendments if the foreign state is not
listed in Appendix L. The UNEP Web site maintains a real-time list of
current Parties to the Protocol and all its amendments for those
wishing to ensure they are viewing the most current list. The Internet
address is: http://www.unep.org/ozone/ratif.shtml.
K. Will There Be Changes in Definitions?
Because some of the definitions referred only to class I substances
and new definitions were necessary to explain provisions for HCFCs, EPA
proposed modifications to the existing definitions and the addition of
new definitions to Sec. 82.3.
1. Modifications
EPA proposed modifying the definitions for the following terms to
include HCFCs: ``baseline consumption allowances''; ``baseline
production allowances''; ``consumption allowances''; ``production
allowances''; and ``Article 5 allowances.'' There were no comments on
these modifications.
Since the following terms do not apply to HCFCs, EPA proposed
modifying them to make them explicitly apply to class I substances
only: ``destruction credits''; and ``transformation credits.'' There
were no comments and the Agency notes that the statutory time period in
which a person could obtain these credits for class I controlled
substances has passed, so is removing them from the rule.
EPA proposed modifying the definition for ``Party'' to include an
example relating to the HCFC trade ban that the Parties agreed to in
the 1999 Beijing Amendments. One commenter stated that the example
implied that the term ``Party'' as used in provisions based on the
Beijing Amendments includes foreign states that have not ratified the
Beijing Amendments and requested that EPA clarify the example. This
commenter believed that trade in HCFCs should only be permitted among
foreign states that have ratified the 1999 Beijing Amendments. EPA
agrees that the example in the proposed definition was confusing. In
fact, EPA interprets the HCFC trade ban provisions agreed to in the
1999 Beijing Amendments as limiting imports from and exports to Parties
that are either: (1) Listed in Appendix L and have ratified the Beijing
Amendments as listed in Appendix C, or (2) not listed Appendix L but
are listed in Appendix C as having ratified the Copenhagen Amendments.
Therefore, with today's action the example is being removed from the
definition of Party.
2. Additions
EPA proposed adding the following new definitions: ``export
production allowances''; ``unexpended export production allowances'';
``individual shipment''; ``non-objection notice''; ``source facility.''
With today's action, EPA is replacing the concept of ``space vehicle/
defense allowances'' with the broader concept of ``HCFC-141b exemption
allowances.'' Accordingly, EPA is adopting definitions for ``HCFC-141b
exemption allowances'' and ``unexpended HCFC-141b exemption
allowances'' in lieu of ``space vehicle/defense allowances'' and
``unexpended space vehicle/defense allowances.''
EPA also proposed to adopt definitions for ``individual shipment,''
``non-objection notice,'' and ``source facility'' as part of a separate
rulemaking involving changes to the petition process for used class I
substances (63 FR 41627). EPA has taken into consideration comments
received in the course of that rulemaking prior to adopting these
definitions in final form. In the class I rulemaking, EPA received one
comment on the definition of ``individual shipment.'' The comment asked
for a clarification of the phrase ``not to be dis-aggregated,'' which
appeared in the definition as initially proposed. The comment also
pointed out an inconsistency between this phrase and the phrase ``not
to be aggregated,'' which appeared in the initial paragraph under Sec.
82.13(g)(2) and the proposed Sec. 82.24(c)(3). With this action, EPA
is adding a definition of ``individual shipment'' to Sec. 82.3 that
does not employ the phrase ``not to be dis-aggregated'', and is
removing the phrase ``not to be aggregated'' from the proposed language
for Sec. 82.24(c)(3). The intent of the definition continues to be the
same as explained in the rule published in the Federal Register on
August 4, 1998 (63 FR 41627); that an importer shall submit a petition
to import a specific quantity of used class I controlled substance as a
single U.S. Customs entry. If an importer cannot arrange for the entire
quantity to be shipped as one entry through U.S. Customs, the importer
is required to submit to EPA a separate petition for the quantity of
each individual U.S. Customs entry of a used controlled substance.
One commenter on the proposed petition process for used class II
controlled substances believed EPA should clarify whether the
definition of ``individual shipment'' may include a shipment that is
the aggregate of many other shipments of used HCFCs. The commenter
requested that EPA detail the documentation required for such an
aggregated shipment. ``Individual shipment'' as it pertains to the
threshold quantity requiring a petition means the total weight in
kilograms of the HCFC that the petitioner wishes to import into the
United States at one specific instance and that can be imported as a
single U.S. Customs entry. Petitioners who wish to aggregate HCFCs from
different sources into one ``individual shipment,'' must make certain
that their petition has the required multiple source information that
makes up the individual shipment. For example, an importer that
petitions the Agency to import an individual shipment of used HCFCs
from more than one source must itemize the petition requirements
applicable to each source. This itemization will be done based on the
weight contribution of each source to the individual shipment. If the
individual shipment consists of different HCFCs from multiple sources,
EPA will respond in writing regarding each quantity of each specific
HCFC. For example, if an individual shipment
[[Page 2841]]
consists of HCFC-22 and HCFC-123, EPA will cite the quantity for each
substance in one notice.
In the rulemaking to change the petition process for used class I
substances, EPA received one comment on the proposed definition of
``source facility.'' As proposed, that definition reads as follows:
``the exact location at which a used controlled substance was recovered
from a piece of equipment, including the name of the company
responsible for, or owning the location, a contact person at the
location, the mailing address for that specific location, and a phone
number and a fax number for the contact person at the location.'' The
commenter stated that the phrase ``exact location'' is too specific,
believing that it could refer to the valve or fitting on the piece of
equipment from which the used controlled substance is recovered. The
commenter pointed out that the valve or fitting will not have a mailing
address. The commenter suggests replacing the phrase ``exact location''
with the word ``site.'' EPA believes there may be some merit to the
commenter's concern about the specificity of the proposed phrase. EPA's
intent was to refer to the postal address of the owner of the equipment
from which the ozone-depleting substance was recovered, not the exact
location of the specific piece of equipment. However, to maintain the
consistency of the wording within the definition, EPA is replacing the
phrase ``exact location'' with the word ``location'' rather than site.
L. Will Other Regulatory Options Be Used To Control HCFCs?
Other authorities under Title VI are available to ensure that the
U.S. complies with its phaseout schedule for HCFCs. These programs
include the SNAP program, labeling of products made with ODSs, and the
ban on non-essential products containing ODSs. These programs affect
the sale and/or use of HCFCs rather than their production, import, and
export. The allowance system directly affects the production, import,
and export of HCFCs.
Eight commenters were unanimous in their belief that implementing
these provisions to maintain compliance with the Protocol cap was
unnecessary.
1. Labeling
Under Section 611 of the Act, EPA could require labels on products
containing or made with HCFCs before January 1, 2015. Beginning on that
date, all products containing or manufactured with HCFCs must bear a
label indicating the association with a substance that harms public
health and the environment by destroying ozone in the upper atmosphere.
EPA did not propose to use labeling to discourage HCFC usage and to
ensure compliance with the Protocol. Nine commenters agreed with the
EPA position. At this time, EPA will not use labeling to further
control HCFCs but will continue to evaluate the potential benefit of
labeling requirements. Future action, if pursued, would be done through
notice and comment rulemaking.
2. SNAP Approval and Restrictions
The Significant New Alternatives Policy program as authorized by
Section 612 of the Act publishes lists of acceptable and unacceptable
substitutes for HCFCs. In some SNAP sector end-uses, HCFCs have been
listed as acceptable substitutes, but the availability of zero-ODP
alternatives has increased in some of these uses. It is therefore
possible that SNAP determinations regarding existing HCFC acceptable
uses could be revised.
EPA did not propose to include any SNAP-related provisions in this
rule. Seven of the eight commenters on regulatory options agreed with
the EPA decision not to include SNAP-related provisions in this rule.
The eighth commenter was silent on this issue. Although EPA is not
including any SNAP provisions with the allowance system, it is possible
that future independent SNAP approvals and restrictions might affect
HCFC production and consumption.
3. Non-Essential Products Ban
Section 610(d) of the Act prohibits the sale, distribution, or
offer for sale or distribution in interstate commerce, of certain non-
essential products that contain or are made with HCFCs. EPA is
authorized to grant exceptions to the ban under certain conditions.
EPA did not propose any provisions that would use the non-essential
products ban to ensure compliance with the HCFC caps under the
Protocol. Five of the eight commenters on regulatory options agreed
with this decision; the other three were silent on the issue of a
Section 610(d) ban. Although EPA is not including provisions in this
rule relating to the non-essential products ban, it is possible that
future independent evaluations of whether certain products containing
or manufactured with HCFCs qualify as non-essential products might
affect HCFC consumption.
M. Will There Be Consumption Allowance Credits for Reductions of HCFC
Production By-Products Regulated by Title VI?
EPA realizes that there is at least one case where the production
of an HCFC creates a by-product that is also regulated under Title VI
of the Act. In an effort to encourage emissions reductions of such by-
products, EPA has explored incentives for voluntary reductions. EPA
sought comment on a proposal to provide one production allowance and
one consumption allowance to producers of HCFCs for each kilogram of
by-product that is reduced. Allowances could be granted only to the
extent available under the cap. Only one commenter was in favor but
stated that EPA would have to be certain that adequate allowances were
available after the new entrant allocations are calculated. This
commenter felt that such an incentive approach would be difficult to
monitor and verify. Because there was not widespread support for the
proposal and the Agency agrees that adequate monitoring will be
difficult, EPA is not reserving any remaining allowances under the cap
as an incentive to reduce by-products regulated under Title VI in the
production of HCFCs.
N. What Will the Reporting and Recordkeeping Requirements Be?
EPA proposed reporting and recordkeeping requirements similar to
those used for class I substances. The requirements include quarterly
reports listing each chemical and the quantities (in kilograms)
produced, imported, exported, transformed, and destroyed. In order to
allow EPA to gather more accurate and timely HCFC market information
and fulfill its reporting obligations under the Protocol, EPA proposed
to expand the basic reporting and recordkeeping requirements for HCFC
transactions that have been in place since 1996.
Five commenters felt the proposed reporting and recordkeeping
requirements were excessive or overly burdensome and unnecessary. Three
commenters stated that the proposal to require reporting within 15 days
after each quarter failed to provide companies sufficient time to
gather the information required and to ensure the accuracy of the data.
The current regulations require reporting within 45 days after each
quarter. EPA has requested that companies report within 15 days after
each quarter during 2001 instead of the required 45 days so it could
better monitor quarterly consumption figures. Most companies
[[Page 2842]]
were able to comply with this request, allowing EPA to track whether
domestic consumption was close to the U.S. consumption cap. However,
EPA wishes be responsive to the commenters' concern that 15 days is
insufficient time. Therefore, with today's action, EPA is requiring
reporting within 30 days after each quarter. EPA believes that this is
a sufficient period of time to allow companies to gather the
information and ensure its accuracy before submission to EPA. EPA has
decided not to retain the current 45-day reporting requirement because
of the continuing need to monitor compliance with the U.S. consumption
cap as closely as possible.
Three commenters were concerned that certain proposed reporting
requirements may involve the provision of highly confidential business
information. EPA will treat all business information submitted under
the HCFC reporting requirements in accordance with the confidential
business information provisions at 40 CFR Part 2, Subpart B.
One commenter suggested that supplying hard copies of the records
EPA requires, such as the quarterly reports, may demand more human
resources than anticipated since these documents are not readily
available through normal business electronic systems. EPA has doubled
the reporting period from the proposed 15 days to 30 days to allow more
time for filing quarterly reports. This commenter suggested that
allowance holders with computer records be allowed to supply a minimal
number of hard copies and allow the computerized records to provide the
first level of recourse to resolve discrepancies. EPA is making the
forms available electronically, as a first step. In addition, EPA is
working to make it possible for people to complete the forms
electronically with special guidance on a ``file naming protocol.'' EPA
wants to create this ``file naming protocol'' so forms completed
electronically by producers and importers can be saved with similar
nomenclature for transmission to EPA by email. For example, the
company, Acme Ltd., might complete the third-quarter importer's report
electronically and save the document with the name 3Q--ImpR--Acme and
send it, by email, to EPA. The Agency believes guidance on a ``file
naming protocol'' will ease the process for electronically filing,
searching and identifying forms for both the Agency and companies, and
be especially helpful if a question arises about information in a
specific form. EPA will strive to have forms available that can be
completed electronically by the regulatory deadline for submission of
the first-quarter reports (30 days after the end of the quarter in
2003), and will make every effort to have them available no later than
for submission of second-quarter reports. Concurrent with the process
for making it possible to electronically complete forms for submission
by email, EPA is pursuing technical and logistical questions about
creating a secure Web-based system for direct electronic reporting of
data. If EPA deems that it is feasible and efficient to create a secure
Web-based database for direct electronic reporting, then EPA will work
to bring such a system online by 2004. This commenter also suggested
that records should be maintained for two years rather than the three
years proposed by EPA. However, 3 years is the standard retention
period for records concerning both class I and class II controlled
substances. (40 CFR 82.13(d)). EPA is not changing this pre-existing
requirement in this final rule.
In order to ensure that EPA reports accurate information to the
Montreal Protocol on behalf of the U.S., the Agency requires that
companies send revisions to reports no more than 180 days after the due
date for the specific report. EPA reports data on U.S. national
production and consumption of controlled substances in accordance with
obligations under Article 7 of the Montreal Protocol. This information
is used by the Parties to assess compliance with phaseout obligations
under Article 2 of the Protocol. To ensure accuracy in U.S. data
reported under Article 7 of the Protocol, EPA requests that companies
limit revisions to their reporting to no longer than 180 days after the
required submission date under Sec. 82.24.
1. Producers
For determining violations, EPA proposed to assume a company had
produced at full capacity during a control period if the producer
failed to keep records of production or failed to submit reports on
production for that control period. One commenter suggested that EPA
consider notifying the company and allow the company 30 days in which
to comply before assuming the company had produced at full capacity.
The commenter believed that such a grace period would alleviate a
potentially harsh sanction for inadvertent non-compliance or difficulty
in obtaining the required information in a timely manner. If a producer
determines that it is unable to report in 30 days because of difficulty
in obtaining information, it should immediately notify EPA and give EPA
an estimate of when it can comply with the reporting requirements. U.S.
producers have been required to report to EPA since 1996 but
inadvertent non-compliance after many years of experience may still
occur. EPA currently contacts producers after the end of the reporting
period if a report has not been filed. Under the new 30-day reporting
period, companies will be notified if a report has not been received
after 30 days due to inadvertent non-compliance. The producer will be
allowed an additional 15 days in which to file a report, after which
the determination of violations will begin.
One commenter wondered whether a bill of lading would be sufficient
verification of an export to an affiliate in an Article 5 country for
expending Article 5 allowances since EPA proposed requiring written
verification. For recordkeeping purposes, EPA will accept a bill of
lading as proof of export to an affiliate in an Article 5 country.
Two commenters believed that the 100-pound recordkeeping threshold
for spills or releases of HCFCs should not include Toxic Release
Inventory quantities for fugitive emissions. EPA agrees that producers
need not include Toxic Release Inventory quantities for fugitive
emissions. In addition, EPA is clarifying that this recordkeeping
requirement applies only to spills or releases that occur while the
producer has title to the chemical.
With respect to the proposed reporting requirement at Sec.
82.24(b)(1)(vi), a producer pointed out that it sometimes sells to
wholesalers who may export a portion of the shipment intended for
transformation or destruction and the producer may not be aware of it.
The commenter believed that producers should not be accountable for
reporting these sales and that their responsibility should be limited
to those shipments where the ``Ship to'' destination is to a foreign
entity. EPA agrees that the producer need only report the names and
quantities of HCFCs exported by that producer and has removed the
phrase ``or by other U.S. persons'' from the reporting requirement.
2. Exporters
A producer that manufactures for the export market questioned
whether it needed to supply the source of the HCFC and the date it was
purchased if it was shipping directly to its own affiliate in another
country. EPA believes interactions between a U.S. producer and an
overseas affiliate probably generate some form of paperwork to document
the manufacture of an HCFC that is subsequently exported to the
affiliate. The producer/exporter may substitute
[[Page 2843]]
this paperwork that is already generated to document an ``order'' for
an HCFC to be exported to an overseas affiliate in lieu of an invoice.
3. Transformation and Destruction
Three commenters requested that EPA clearly state that HCFCs used
as feedstocks; HCFC heels in tank trailers, cylinders, and drums; and
used HCFCs are exempted from the rule. Two of the three commenters
suggested eliminating the proposed recordkeeping and reporting
requirements associated with these exemptions. Section 82.15
(prohibitions for class II control substances) in the rule exempts the
production and import of HCFCs for transformation or destruction
purposes. That same section exempts the import of transhipments, heels,
and used HCFCs from the prohibitions. EPA believes no further
clarification of these exemptions is necessary. Although there are no
allowances associated with feedstock, heels, and used HCFCs, the
Protocol requires reporting of these quantities by each of the Parties.
Therefore, EPA needs to obtain basic information regarding such
activities. Accordingly, EPA is adopting the reporting and
recordkeeping requirements as proposed.
Another commenter on the proposed requirement that producers
maintain dated records for HCFCs used as feedstock proposed that
production records be enough to satisfy this requirement. Under the
Protocol and CAA, quantities of HCFCs used for feedstock are exempt
from calculations of production and consumption. However, in accordance
with obligations under the Protocol EPA must report the total amount of
HCFCs produced, imported and exported for use as a feedstock during a
calendar year to the Parties. The intent of monitoring feedstock
quantities is to ensure there is no abuse of the exemption. Because
feedstock quantities can be produced, imported and exported in one year
and may not actually be transformed during that same calendar year EPA
is retaining the requirement that producers, importers and exporters
submit a transformation verification for class II controlled substance
as proposed.
A commenter on reporting requirements for those purchasing HCFCs
for transformation felt a change in timing for transformation should
not require a revised verification since inventory fluctuations might
influence the decision to transform. The proposed requirement calls for
a ``period of time over which the person intends to transform'' the
HCFCs rather than a specific date. The person reporting may estimate
the period of time during which the transformation might take place
rather than report a specific date, however, the Agency is not
requiring a re-submission of the verification as proposed if the timing
happens to change.
A commenter on the reporting of transformation or destruction
believed that submitting invoices or sales agreements 15 days after the
end of the quarter might be difficult and suggested that this be
changed to a recordkeeping requirement. EPA has expanded the reporting
period from 15 days to 30 days to allow the exporter more time to
submit the required paperwork. This is especially important at the end
of the fourth quarter, when the annual figures are compiled and any
discrepancies might occur. EPA is retaining this as a reporting, rather
than a recordkeeping, requirement in order to meet U.S. reporting
obligations under the Protocol.
4. Heels
One producer suggested that heel weights be excluded from the
reporting requirements in Sec. 82.24(f) since the company does not
normally record these quantities in rail car shipments or tank trucks.
The commenter adds that it is possible to record the heels remaining in
rail cars because tare weights are assigned. The commenter feels that
heels in tank trucks are irrelevant because customers are only billed
for the net amount of HCFCs delivered. The commenter believes that
reporting of heels that are not normally recorded will result in
additional cost and provide little environmental benefit.
EPA believes that the supplier and the customer both possess
information regarding the total mass (weight) for the container,
whether it be a tank truck or a rail car. As suggested by the
commenter, the residual quantity (heel) in a rail car is the difference
between the empty weight of the rail car and the tare weight after a
delivery. Suppliers very typically determine the weight of a rail car
or tank truck after a delivery to be able to know the how much to bill
the customer (weight before the delivery minus weight after the
delivery = amount delivered). The residual quantity (heel) in a tank
truck would be calculated in the same manner; the difference between
the empty weight of the tank truck and the tare weight after the
delivery. EPA believes that determining the residual quantity (heel) in
this manner will not result in additional cost to the supplier.
The industry rule of thumb is that a heel is up to ten percent of
the volume of the container. If the residual quantity entering the
United States is ten percent or less of the total volume, the residual
quantity may be considered a heel. The supplier may certify that the
heel will remain in the container and be included in a future shipment;
be recovered and transformed; be recovered and destroyed, or be
recovered for a non-emissive use. If the residual quantity entering the
United States is greater than ten percent, then it may not be
considered a heel and the importer will be required to expend
consumption allowances. Non-reporting of residual quantities greater
than ten percent of the total volume provides the supplier with
additional consumption allowances it has not been granted and
compromises the environmental benefits of the phaseout.
The commenter requests that EPA clarify that ``heels'' do not apply
to small containers but only to bulk shipments because cylinders and
small containers are by definition returned empty and are not weighed.
In most cases, they are presumed empty; in some cases, they are vented
to a thermal oxidizer before being refilled. No residual quantity,
whether in small containers or large ISO tanks, can qualify as a heel
unless it represents ten percent or less of the volume of the
container.
The same commenter requested that the notice the Department of
Transportation mandates in 49 CFR 172.203(e)(1&2) for bulk shipments
precede the heel weight on the bill of lading. EPA agrees with the
commenter that the heel weight may follow the notice ``RESIDUE: Last
Contained * * *'' on the bill of lading.
The commenter noted that an invoice seldom accompanies a heel and
that U.S.-mandated labeling of a shipping container from an Article 5
country may be a particular problem. EPA requests the heel weight be
indicated on the bill of lading or the invoice to allow the importer
more than one place on which to record the heel weight in case one or
the other document is not available. EPA will monitor the ability of
Parties, especially Article 5 countries, to include U.S.-mandated
information on the documents accompanying heels to determine if further
refinements are necessary.
IV. Administrative Requirements
A. Executive Order 12866
Under Executive Order 12866 (58 FR 51735, October 4, 1993), the
Agency must determine whether this regulatory action is ``significant''
and therefore subject to Office of Management and Budget (OMB) review
and the
[[Page 2844]]
requirements of the Executive Order. The Executive Order defines
``significant regulatory action'' as any regulatory action that is
likely to result in a rule that may:
(1) Have an annual effect on the economy of $100 million or more or
adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities;
(2) Create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlements, grants,
user fees, or loan programs or the rights and obligations of recipients
thereof; or,
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.
It has been determined by OMB that this action is a ``significant
regulatory action'' under the terms of Executive Order 12866 and is
therefore subject to OMB review under the Executive Order even though
the annual effect on the economy is expected to be less than $100
million. This document was reviewed by OMB and changes recommended by
OMB have been made and documented for the public record.
B. Executive Order 13045: Children's Health Protection
Executive Order 13045: ``Protection of Children from Environmental
Health Risks and Safety Risks'' (62 FR 19885, April 23, 1997) applies
to any rule that: (1) Is determined to be ``economically significant''
as defined under Executive Order 12866, and (2) concerns an
environmental health or safety risk that EPA has reason to believe may
have a disproportionate effect on children. If the regulatory action
meets both criteria, the Agency must evaluate the environmental health
or safety effects of the planned rule on children, and explain why the
planned regulation is preferable to other potentially effective and
reasonably feasible alternatives considered by the Agency.
EPA interprets Executive Order 13045 as applying only to those
regulatory actions that are based on health or safety risks, such that
the analysis required under Section 5-501 of the Order has the
potential to influence the regulation. This final rule is not subject
to Executive Order 13045 because it implements specific phaseout
schedules established under the CAA and the Montreal Protocol.
C. Executive Order 13132: Federalism
Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August
10, 1999), requires EPA to develop an accountable process to ensure
``meaningful and timely input by State and local officials in the
development of regulatory policies that have federalism implications.''
``Policies that have federalism implications'' is defined in the
Executive Order to include regulations that have ``substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.''
This final rule does not have Federalism implications. It will not
have substantial direct effects on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government,
as specified in Executive Order 13132. The requirements in this
document are directed to economic entities that either produce, import,
export, transform, destroy or use HCFCs in very narrow applications,
and not to State or local governments. Thus, Executive Order 13132 does
not apply to this rule.
D. Executive Order 13175: Consultation and Coordination with Indian
Tribal Governments
Executive Order 13175, entitled ``Consultation and Coordination
with Indian Tribal Governments'' (59 FR 22951, November 6, 2000),
requires EPA to develop an accountable process to ensure ``meaningful
and timely input by tribal officials in the development of regulatory
policies that have tribal implications.''
This final rule does not have tribal implications, as specified in
Executive Order 13175. Thus, Executive Order 13175 does not apply to
this rule.
The requirements in this final rule are directed to economic
entities that either produce, import, export, transform, destroy, or
use HCFCs in very narrow applications, and not to Indian tribal
governments or their communities.
E. Executive Order 13211: Energy Effects
This rule is not a ``significant energy action'' as defined in
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution or Use'' (66 FR 28355
(May 22, 2001)) because it is not likely to have a significant adverse
effect on the supply, distribution, or use of energy. Further, we have
concluded that this rule is not likely to have any adverse energy
effects because the phaseout timetable for HCFCs, originally
established in 1993, occurs over many decades giving industries long
planning horizons for changing to alternative substances and for
adjusting new technologies. Over this long time horizon, industries are
re-tooling and maximizing energy efficiencies. Switches from HCFCs to
alternative substances and new technologies that have already taken
place, or are in process, are resulting in energy savings for the
manufacturer and the consumer.
F. Congressional Review Act
The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. EPA will submit a report containing this rule and other
required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register. A Major rule cannot
take effect until 60 days after it is published in the Federal
Register. This action is not a ``major rule'' as defined by 5 U.S.C.
804(2). This rule will be effective upon publication.
G. National Technology Transfer and Advancement Act
As noted in the proposed rule, Section 12(d) of the National
Technology Transfer and Advancement Act of 1995 (``NTTAA''), Pub L.
104-113, Section 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.
H. Paperwork Reduction Act
The information collection requirements in this rule [have been (or
will be)]
submitted for approval to the
[[Page 2845]]
Office of Management and Budget (OMB) under the Paperwork Reduction
Act, 44 U.S.C. 3501 et seq. An Information Collection Request (ICR)
document has been prepared by EPA (ICR No. 2014.01) and a copy may be
obtained from Sandy Farmer, Collection Strategies Division; U.S.
Environmental Protection Agency (2822); 1200 Pennsylvania Ave., NW.,
Washington, DC 20460 or by calling (202) 260-2740. The information
requirements are not effective until OMB approves them.
The recordkeeping and reporting requirements in this rule are
similar to those used in the class I allowance system that has been in
place for several years. The information collected will be utilized to
monitor business compliance with the class II allowance system. The
information will also be used to comply with the reporting requirements
agreed to by the Parties to the Montreal Protocol on Substances that
Deplete the Ozone Layer. The information is intended to ensure that the
U.S. meets its obligations to control and administer the phaseouts of
HCFCs under the Protocol and the CAA Amendments of 1990.
Reporting requirements mandated in Section 603 of the CAA relative
to HCFCs are currently in place in 40 CFR 82.13(n) and (o). This rule
contains new recordkeeping requirements and expanded reporting
requirements to ensure accurate expenditures of allowances and trades
of allowances. Responses to the collection of information are mandatory
pursuant to Section 114 of the CAA.
Information collected from businesses may be claimed as
confidential by clearly identifying the material as confidential. Such
information will be treated in accordance with EPA's procedures for
handling information claimed as confidential under 40 CFR Part 2,
Subpart B and will only be disclosed by the means set forth in that
subpart.
It is estimated that the annual reporting burden for producers is
1,132 hours and for importers it is 1,800 hours. This includes
maintaining records, preparing and submitting quarterly reports on
production, import, exports, and claims for transfers of allowances and
offsets. The average burden hours per response is estimated to be
between 283 and 450 hours. The proposed frequency of response is four
times per year and the likely number of respondents will be 7 producers
and 14 importers, although some of the producers and some of the
importers also function as exporters. The only industry requirements
for the start-up phase are an evaluation of the impact of the allowance
system and the development of a plan of action. The start-up burden is
estimated to be 910 hours for producers and 1,820 hours for importers.
Start-up costs are estimated to amount to $219,108, after which
annual industry cost is estimated to be $253,089 to maintain records of
production, import, and export; submit quarterly reports to EPA on
production, import and export; provide additional information requested
by EPA; prepare transfer claims; and submit petitions to import used
HCFCs. The latter two functions are not periodical tasks but are
initiated by the person based on business decisions.
In order to receive the benefit of HCFC-141b exemption allowances,
HCFC-141b formulators and U.S. agencies, departments or
instrumentalities, or related entities involved in space vehicle
endeavors are being asked to petition the Agency annually for exemption
to produce or import HCFC-141b beyond the January 1, 2003 phaseout
date. The approximate number of petitioners is likely to be 15-20
entities. EPA is requiring that the entities supply technical
descriptions of the processes in which HCFC-141b is being used, the
areas where the product will be applied, and why alternatives and
substitutes are not sufficient to eliminate the use of HCFC-141b. EPA
is also requiring that entities supply a detailed analysis showing why
stockpiled, recovered, or recycled quantities are not technically
feasible for use and a detailed description of continuing
investigations into and progress on possible alternatives and
substitutes by the applicants.
Entities granted HCFC-141b exemption allowances for the production
of HCFC-141b products will be required to report semiannually to EPA on
the total quantity of HCFC-141b received to date and the name of the
supplier. The supplier of HCFC-141b (the ``producer'' or ``importer''
under the regulations) will report quarterly along with their other
quarterly reporting to EPA the amount of HCFC-141b supplied to a
petitioner granted HCFC-141b exemption allowances and submit copies of
the requests. It is estimated that the annual reporting burden for the
recipient of the allowances is about 20 hours at a cost of about $864
and the burden for the manufacturer is about 20 hours at a cost of
about $1,538.
Burden means the total time, effort, or financial resources
expended by persons to generate, maintain, retain, or disclose or
provide information to or for a Federal agency. This includes the time
needed to review instructions; develop, acquire, install, and utilize
technology and systems for the purposes of collecting, validating, and
verifying information, processing and maintaining information, and
disclosing and providing information; adjust the existing ways to
comply with any previously applicable instructions and requirements;
train personnel to be able to respond to a collection of information;
search data sources; complete and review the collection of information;
and transmit or otherwise disclose the information.
An Agency may not conduct or sponsor, and a person is not required
to respond to a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations are listed in 40 CFR Part 9 and 48 CFR Chapter 15.
I. Regulatory Flexibility Act (RFA), as amended by the Small Business
Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 601 et.
seq.
EPA has determined that it is not necessary to prepare a regulatory
flexibility analysis in connection with this final rule. EPA has also
determined that this rule will not have a significant economic impact
on a substantial number of small entities.
For purposes of assessing the impact of today's rule on small
entities, small entities are defined as: (1) A small business that is
identified by the North American Industry Classification System code
(NAICS) in the Table below.
------------------------------------------------------------------------
Size
NAICS Standard
Type of Enterprise Code (number of
employees)
------------------------------------------------------------------------
Organic Chemical Wholesaling..................... 422690 100
------------------------------------------------------------------------
(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 today's proposed rule on
small entities, EPA has concluded that this action will not have a
significant economic impact on a substantial number of small entities.
We have determined that approximately 13 small businesses that are
eligible for allowances under this rule, would receive allowances, for
which recordkeeping and reporting to
[[Page 2846]]
EPA is required. The administrative recordkeeping and reporting these
small businesses will experience will amount to an impact of between
0.01 and 0.02 percent of their HCFC revenues alone. When considering
that the vast majority deal in numerous chemicals and/or also obtain
revenues from services provided, this percentage for the majority would
be significantly lower.
Additionally, in this final rule EPA is adopting a petition process
for HCFC-141b that is open to all entities. We expect that
approximately 15 formulators of HCFC-141b, some which are small
businesses, will petition the Agency for HCFC-141b exemption
allowances. Those qualifying entities will be granted a benefit in the
form of HCFC-141b exemption allowances which allow limited continued
production of HCFC-141b beyond the long-established phaseout date. We
estimate that each petitioner will experience an impact of .002 percent
of revenues.
Although this final rule will not have a significant economic
impact on a substantial number of small entities, EPA nonetheless has
tried to reduce the impact of this rule on small entities.
With respect to the petition process for HCFC-141b exemption
allowances, the economic impact on all affected entities, and
especially the economic impact on small entities, has been reduced to
every extent possible. For example, EPA has minimized the economic
impact by only requesting information that is readily available to all
expected to petition. In addition, in all the HCFC-141b uses EPA is
aware of, the formulator is responsible for meeting the testing and
code requirements as opposed to the end user. Therefore, in order to
reduce the burden of petitioning, EPA designed the process so the end
user does not need to apply for the exemption allowance.
With respect to the allowance allocation system as a whole, EPA has
taken a number of steps to reduce burden and provide flexibility.
Although small entities receiving allowance allocations will be subject
to the same recordkeeping and reporting requirements as the larger
entities, for purposes of tracking allowance trades and expenditures,
the small entities will be on the same footing as the larger entities;
they will be receiving their best year of activity in the range of
years discussed above as a baseline year for determining allowance
allocations, and will be able to conduct their business with a degree
of certainty in a competitive market. Like the large entities, the
small entities will receive allowances for the entire phaseout period,
with the necessary adjustments each calendar year to accommodate the
required reductions in consumption agreed to by the Parties to the
Protocol and the phaseouts of HCFC-22 and HCFC-142b.
EPA believes that the ability to transfer allowances among HCFCs
provides the greatest flexibility for small entities to manage their
allocation. Unlike the class I system for transfers, there is no
restriction to limit inter-pollutant transfers to groups of substances.
Inter-pollutant transfers, also known as intra-company transfers or
trades, allow a company to shift allowances internally from one HCFC to
another to respond to market forces, e.g. HCFC-142b allowances for
HCFC-22 allowances. Inter-company transfers of allowances are also
possible, either on a current-year basis or on a permanent basis.
Current-year trades are temporary trades and are reflected in a
company's balance of allowances in the control period in which the
trade occurs.
By using the phaseout schedules and the option for current-year or
permanent trades, a small entity can opt for short-term decisions or
long-term decisions concerning the allowances it holds after evaluating
its place in the market. In addition, although the CAA requires an
offset, EPA is requiring an offset of only 0.1 percent, 0.9 percent
less than that required under the class I allowance trading system;
such an offset will still provide the environmental benefit required by
Congress without penalizing small entities should they wish to avail
themselves of transfers. EPA estimates that the burden will be
negligible on small businesses, while those same small businesses will
gain a marketable asset in their allocated allowances. The actual
burden will consist of quarterly reports on production, imports,
exports, and allowance trades, as well as paperwork describing any
trades in which the business decides to engage. The estimated
recordkeeping and quarterly reporting burden on the affected small
businesses will be about 40 hours per year per business, at an
estimated cost of $3,070. Each trade made at the discretion of the
small business will add a burden of 4 hours at a cost of $307, basing
the calculation on a cost of $76.88 per hour.
In the proposal EPA notified the industry that late entrants to the
HCFC market could still be allocated allowances if they provided proper
documentation. One small entity provided sufficient information and is
allocated allowances in today's action. EPA also carefully reviewed the
quarterly reports submitted by other small entities for the baseline
years under consideration to ensure that the correct quantities have
been ascribed to each entity for each year. EPA consulted with the
small entities in order to reconcile any disparities encountered during
the record review.
J. Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under Section 202 of the UMRA, EPA
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with ``Federal mandates'' that
may result in expenditures to State, local, and tribal governments, in
the aggregate, or to the private sector, of $100 million or more in any
one year. Before promulgating an EPA rule for which a written statement
is needed, Section 205 of the UMRA generally requires EPA to identify
and consider a reasonable number of regulatory alternatives and adopt
the least costly, most cost-effective or least burdensome alternative
that achieves the objectives of the rule. The provisions of Section 205
do not apply when they are inconsistent with applicable law. Moreover,
Section 205 allows EPA to adopt an alternative other than the least
costly, most cost-effective or least burdensome alternative if the
Administrator publishes with the final rule an explanation why that
alternative was not adopted. Before EPA establishes any regulatory
requirements that may significantly or uniquely affect small
governments, including tribal governments, it must have developed under
Section 203 of the UMRA a small government agency plan. The plan must
provide for notifying potentially affected small governments, enabling
officials of affected small governments to have meaningful and timely
input in the development of EPA regulatory proposals with significant
Federal intergovernmental mandates, development of EPA regulatory
proposals with significant Federal intergovernmental mandates, and
informing, educating, and advising small governments on compliance with
the regulatory requirements.
Today's rule contains no Federal mandates (under the regulatory
provisions of Title II of the UMRA) for State, local, or tribal
governments or the private sector that may result in expenditures of
$100 million or more in any one year. Entities in the private sector
that either produce, import, export, transform, destroy or use HCFCs in
very narrow applications will be
[[Page 2847]]
operating under an allowance allocation system very similar to the
system selected for CFCs (53 FR 30566, August 12, 1988). The CFC
allowance allocation system was determined to be the most economically
efficient, market-based, and simple to administer in meeting the
requirements of the Protocol. Recordkeeping for HCFCs will be similar
to that for CFCs but will be somewhat simplified due to the absence of
essential use allowances, destruction credits, and transformation
credits. The experience gained by those entities familiar with the CFC
allowance allocation system will carry over in the class II allowance
allocation system.
In addition, the UMRA does not apply to rules that are necessary
for the national security or the ratification or implementation of
international treaty obligations. As a Party to the Protocol, the U.S.
must comply with the phaseout schedule for HCFCs created in 1992 the
consumption cap for HCFCs established in 1996. This final rule contains
provisions to implement these obligations.
Thus, this rule is not subject to the requirements of Sections 202
and 205 of the UMRA.
List of Subjects in 40 CFR Part 82
Environmental protection, Administrative practice and procedure,
Air pollution control, Chemicals, Chlorofluorocarbons, Exports,
Hydrochlorofluorocarbons, Imports, Reporting and recordkeeping
requirements.
Dated: December 18, 2002.
Christine Todd Whitman,
Administrator.
For the reasons stated in the preamble, 40 CFR part 82 is amended
as follows:
PART 82--PROTECTION OF STRATOSPHERIC OZONE
1. The authority citation for Part 82 continues to read as follows:
Authority: 42 U.S.C. 7414, 7601, 7671-7671q.
Subpart A--Production and Consumption Controls
2. Amend Sec. 82.3 as follows:
a. Revise the section heading.
b. Revise the definitions for ``Article 5 allowances'', ``Baseline
consumption allowances'', ``Baseline production allowances'',
``Confer'', ``Consumption allowances'', ``Party'', ``Production
allowances.''
c. Remove the definitions for ``Destruction credits'', and
``Transformation credits.''
d. Add new definitions in alphabetical order for the terms ``Export
production allowances'', ``Formulator'', ``HCFC-141b exemption
allowances'', ``Individual shipment'', ``Non-objection notice'',
``Source facility'', ``Space vehicle'', ``Unexpended export production
allowances'', and ``Unexpended HCFC-141b exemption allowances''.
The revisions and additions read as follows:
Sec. 82.3 Definitions for class I and class II controlled substances.
* * * * *
Article 5 allowances means the allowances apportioned under Sec.
82.9(a) and Sec. 82.18(a).
Baseline consumption allowances means the consumption allowances
apportioned under Sec. 82.6 and Sec. 82.19.
Baseline production allowances means the production allowances
apportioned under Sec. 82.5 and Sec. 82.17.
* * * * *
Confer means to shift the essential-use allowances obtained under
Sec. 82.4(t) from the holder of the unexpended essential-use
allowances to a person for the production of a specified controlled
substance, or to shift the HCFC-141b exemption allowances granted under
Sec. 82.16(h) from the holder of the unexpended HCFC-141b exemption
allowances to a person for the production or import of the controlled
substance.
* * * * *
Consumption allowances means the privileges granted by this subpart
to produce and import controlled substances; however, consumption
allowances may be used to produce controlled substances only in
conjunction with production allowances. A person's consumption
allowances for class I substances are the total of the allowances
obtained under Sec. Sec. 82.6 and 82.7 and 82.10, as may be modified
under Sec. 82.12 (transfer of allowances). A person's consumption
allowances for class II controlled substances are the total of the
allowances obtained under Sec. Sec. 82.19 and 82.20, as may be
modified under Sec. 82.23.
* * * * *
Export production allowances means the privileges granted by Sec.
82.18(b) to produce HCFC-141b for export following the phaseout of
HCFC-141b on January 1, 2003.
* * * * *
Formulator means an entity that distributes a class II controlled
substance(s) or blends of a class II controlled substance(s) to persons
who use the controlled substance(s) for a specific application
identified in the formulator's petition for HCFC-141b exemption
allowances.
* * * * *
HCFC-141b exemption allowances means the privileges granted to a
HCFC-141b formulator; an agency, department, or instrumentality of the
U.S.; or a non-governmental space vehicle entity by this subpart to
order production of or to import HCFC-141b, as determined in accordance
with Sec. 82.16(h).
* * * * *
Individual shipment means the kilograms of a used controlled
substance for which a person may make one (1) U.S. Customs entry, as
identified in the non-objection letter from the Administrator under
Sec. Sec. 82.13(g) and 82.24(c)(4).
* * * * *
Non-objection notice means the privilege granted by the
Administrator to import a specific individual shipment of used
controlled substance in accordance with Sec. Sec. 82.13(g) and
82.24(c)(3) and (4).
Party means any foreign state that is listed in Appendix C to this
subpart (pursuant to instruments of ratification, acceptance, or
approval deposited with the Depositary of the United Nations
Secretariat), as having ratified the specified control measure in
effect under the Montreal Protocol. Thus, for purposes of the trade
bans specified in Sec. 82.4(l)(2) pursuant to the London Amendments,
only those foreign states that are listed in Appendix C to this subpart
as having ratified both the 1987 Montreal Protocol and the London
Amendments shall be deemed to be Parties.
* * * * *
Production allowances means the privileges granted by this subpart
to produce controlled substances; however, production allowances may be
used to produce controlled substances only in conjunction with
consumption allowances. A person's production allowances for class I
substances are the total of the allowances obtained under Sec. Sec.
82.5, 82.7 and 82.9, and as may be modified under Sec. 82.12 (transfer
of allowances). A person's production allowances for class II
controlled substances are the total of the allowances obtained under
Sec. 82.17 and as may be modified under Sec. Sec. 82.18 and 82.23.
* * * * *
Source facility means the location at which a used controlled
substance was recovered from a piece of equipment, including the name
of the company responsible for, or owning the piece of
[[Page 2848]]
equipment, a contact person at the location, the mailing address for
that specific location, and a phone number and a fax number for the
contact person at the location.
* * * * *
Space vehicle means a man-made device, either manned or unmanned,
designed for operation beyond earth's atmosphere. This definition
includes integral equipment such as models, mock-ups, prototypes,
molds, jigs, tooling, hardware jackets, and test coupons. Also included
is auxiliary equipment associated with tests, transport, and storage,
which through contamination can compromise the space vehicle
performance.
* * * * *
Unexpended export production allowances means export production
allowances that have not been used. A person's unexpended export
production allowances are the total of the quantity of the export
production allowances the person has authorization under Sec. 82.18(h)
to hold for that control period, minus the quantity of class II
controlled substances that the person has produced at that time during
the same control period.
* * * * *
Unexpended HCFC-141b exemption allowances means HCFC-141b exemption
allowances that have not been used. A person's unexpended HCFC-141b
exemption allowances are the total of the quantity of the HCFC-141b
exemption allowances the person has authorization under Sec. 82.16(h)
to hold for that control period, minus the quantity of HCFC-141b that
the person has had produced or has had imported at that time during the
same control period.
* * * * *
3. Amend Sec. 82.4 as follows:
a. Revise the section heading.
b. Remove paragraphs (n) through (s) and paragraph (u).
c. Redesignate paragraphs (t) through (w) as (n) through (q).
The revision reads as follows:
Sec. 82.4 Prohibitions for class I controlled substances.
* * * * *
4. Amend Sec. 82.5 as follows:
a. Revise the section heading.
b. Remove paragraph (h).
The revision reads as follows:
Sec. 82.5 Apportionment of baseline production allowances for class I
controlled substances.
* * * * *
5. Amend Sec. 82.6 as follows:
a. Revise the section heading.
b. Remove paragraph (h).
The revision reads as follows:
Sec. 82.6 Apportionment of baseline consumption allowances for class
I controlled substances.
* * * * *
6. Section 82.8 is removed and reserved.
7. Section 82.9 is amended by revising the section heading as
follows:
Sec. 82.9 Availability of production allowances in addition to
baseline production allowances for class I controlled substances.
* * * * *
8. Section 82.10 is amended by revising the section heading as
follows:
Sec. 82.10 Availability of consumption allowances in addition to
baseline consumption allowances for class I controlled substances.
* * * * *
9. Section 82.11 is amended by revising the section heading as
follows:
Sec. 82.11 Exports of class I controlled substances to Article 5
Parties.
* * * * *
10. Section 82.12 is amended by revising the section heading as
follows:
Sec. 82.12 Transfers of allowances for class I controlled substances.
* * * * *
11. Amend Sec. 82.13 as follows:
a. Revise the section heading;
b. Remove paragraphs (n) and (o).
c. Redesignate paragraphs (p) through (cc) as (n) through (aa).
Sec. 82.13 Recordkeeping and reporting requirements for class I
controlled substances.
* * * * *
12. Add Sec. Sec. 82.15 through 82.24 to subpart A to read as
follows:
Sec. 82.15 Prohibitions for class II controlled substances.
(a) Production. (1) Effective January 21, 2003, no person may
produce class II controlled substances in excess of the quantity of
unexpended production allowances, unexpended Article 5 allowances,
unexpended export production allowances, or conferred unexpended HCFC-
141b exemption allowances held by that person for that substance under
the authority of this subpart at that time in that control period,
unless the substances are transformed or destroyed domestically or by a
person of another Party, or unless they are produced using an exemption
granted in paragraph (f) of this section. Every kilogram of excess
production constitutes a separate violation of this subpart.
(2) Effective January 21, 2003, no person may use production
allowances to produce a quantity of class II controlled substance
unless that person holds under the authority of this subpart at the
same time consumption allowances sufficient to cover that quantity of
class II controlled substances. No person may use consumption
allowances to produce a quantity of class II controlled substances
unless the person holds under authority of this subpart at the same
time production allowances sufficient to cover that quantity of class
II controlled substances.
(b) Import. (1) Effective January 21, 2003, no person may import
class II controlled substances (other than transhipments, heels or used
class II controlled substances), in excess of the quantity of
unexpended consumption allowances, or conferred unexpended HCFC-141b
exemption allowances held by that person under the authority of this
subpart at that time in that control period, unless the substances are
for use in a process resulting in their transformation or their
destruction, or unless they are produced using an exemption granted in
paragraph (f) of this section. Every kilogram of excess import
constitutes a separate violation of this subpart.
(2) Effective January 21, 2003, no person may import, at any time
in any control period, a used class II controlled substance, without
having submitted a petition to the Administrator and received a non-
objection notice in accordance with Sec. 82.24(c)(3) and (4). A person
issued a non-objection notice for the import of an individual shipment
of used class II controlled substances may not transfer or confer the
right to import, and may not import any more than the exact quantity
(in kilograms) of the used class II controlled substance stated in the
non-objection notice. Every kilogram of import of used class II
controlled substance in excess of the quantity stated in the non-
objection notice issued by the Administrator in accordance with Sec.
82.24(c)(3) and (4) constitutes a separate violation of this subpart.
(c) Production with Article 5 allowances. No person may introduce
into U.S. interstate commerce any class II controlled substance
produced with Article 5 allowances. Every kilogram of a class II
controlled substance that was produced with Article 5 allowances that
is introduced into U.S. interstate commerce constitutes a separate
violation under this subpart. No person may export any class II
controlled substance produced with Article 5 allowances to a non-
Article 5 Party to the Protocol as listed in Appendix E to this
subpart. Every kilogram of a class II controlled substance that was
[[Page 2849]]
produced with Article 5 allowances that is exported to a non-Article 5
Party to the Protocol as listed in Appendix E of this subpart
constitutes a separate violation under this subpart.
(d) Production with export production allowances. No person may
introduce into U.S. interstate commerce any class II controlled
substance produced with export production allowances. Every kilogram of
a class II controlled substance that was produced with export
production allowances that is introduced into U.S. interstate commerce
constitutes a separate violation under this subpart.
(e) Trade with Parties. Effective January 1, 2004, no person may
import or export any quantity of a class II controlled substance listed
in Appendix A to this subpart, from or to any foreign state that is not
listed as a Party either:
(1) In Appendix L of this subpart and also listed in Appendix C,
Annex 1 of the Protocol as having ratified the Beijing Amendments, or
(2) In Appendix C, Annex 1 of the Protocol as having ratified the
Copenhagen Amendments but not listed in Appendix L of this subpart, or
(3) In Appendix C, Annex 2 of the Protocol, as being a foreign
state complying with the Beijing Amendments if the foreign state is
listed in Appendix L of this subpart, or as being a foreign state
complying with the Copenhagen Amendments if the foreign state is not
listed in Appendix L of this subpart.
(f) Exemptions. (1) Medical Devices [Reserved]
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
Percent of HCFC-
Control period of HCFC- 22 & HCFC-
141b 142b
------------------------------------------------------------------------
2003.............................................. 0 100
2004.............................................. 0 100
2005.............................................. 0 100
2006.............................................. 0 100
2007.............................................. 0 100
2008.............................................. 0 100
2009.............................................. 0 100
------------------------------------------------------------------------
(b) Effective January 1, 2003, no person may produce HCFC-141b
except for use in a process resulting in its transformation or its
destruction, for export under Sec. 82.18(a) using unexpended Article 5
allowances, for export under Sec. 82.18(b) using unexpended export
production allowances, for HCFC-141b exemption needs using unexpended
HCFC-141b exemption allowances, or for exemptions permitted in Sec.
82.15(f). Effective January 1, 2003, no person may import HCFC-141b
(other than transhipments, heels or used class II controlled
substances) in excess of the quantity of unexpended HCFC-141b exemption
allowances held by that person except for use in a process resulting in
its transformation or its destruction, or for exemptions permitted in
Sec. 82.15(f).
(c) Effective January 1, 2010, no person may produce HCFC-22 or
HCFC-142b for any purpose other than for use in a process resulting in
their transformation or their destruction, for use in equipment
manufactured before January 1, 2010, for export under Sec. 82.18(a)
using unexpended Article 5 allowances, or for export under Sec.
82.18(b) using unexpended export production allowances, or for
exemptions permitted in Sec. 82.15(f). Effective January 1, 2010, no
person may import HCFC-22 or HCFC-142b (other than transhipments, heels
or used class II controlled substances) for any purpose other than for
use in a process resulting in their transformation or their
destruction, for exemptions permitted in Sec. 82.15(f), or for use in
equipment manufactured prior to January 1, 2010.
(d) Effective January 1, 2015, no person may produce class II
controlled substances not previously controlled, for any purpose other
than for use in a process resulting in their transformation or their
destruction, for use as a refrigerant in equipment manufactured before
January 1, 2020, for export under Sec. 82.18(a) using unexpended
Article 5 allowances, or for export under Sec. 82.18(b) using
unexpended export production allowances, or for exemptions permitted in
Sec. 82.15(f). Effective January 1, 2015, no person may import class
II controlled substances not subject to the requirements of paragraph
(b) or (c) of this section (other than transhipments, heels or used
class II controlled substances) for any purpose other than for use in a
process resulting in their transformation or their destruction, for
exemptions permitted in Sec. 82.15(f), or for use as a refrigerant in
equipment manufactured prior to January 1, 2020.
(e) Effective January 1, 2020, no person may produce HCFC-22 or
HCFC-142b for any purpose other than for use in a process resulting in
their transformation or their destruction, for export under Sec.
82.18(a) using unexpended Article 5 allowances, or for export under
Sec. 82.18(b) using unexpended export production allowances, or for
exemptions permitted in Sec. 82.15(f). Effective January 1, 2020, no
person may import HCFC-22 or HCFC-142b for any purpose other than for
use in a process resulting in their transformation or their
destruction, or for exemptions permitted in Sec. 82.15(f).
(f) Effective January 1, 2030, no person may produce class II
controlled substances, for any purpose other than for use in a process
resulting in their transformation or their destruction, for export
under Sec. 82.18(a) using unexpended Article 5 allowances, or for
exemptions permitted in Sec. 82.15(f). Effective January 1, 2030, no
person may import class II controlled substances for any purpose other
than for use in a process resulting in their transformation or their
destruction, or for exemptions permitted in Sec. 82.15(f).
(g) Effective January 1, 2040, no person may produce class II
controlled substances for any purpose other than for use in a process
resulting in their transformation or their destruction, or for
exemptions permitted in Sec. 82.15(f).
(h) Petition for HCFC-141b exemption allowances.
(1) Effective January 21, 2003, a formulator of HCFC-141b, an
agency, department, or instrumentality of the U.S., or a non-
governmental space vehicle entity, may petition EPA for HCFC-141b
exemption allowances for the production or import of HCFC-141b after
the phaseout date, in accordance with this section. The petitioner must
submit the following information to the Director of EPA's Office of
Atmospheric Programs no later than April 21, 2003, for the 2003 control
period; and, for any subsequent control period, no later than October
31st of the year preceding the control period for which the HCFC-141b
exemption allowances are requested:
(i) Name and address of the HCFC-141b formulator, U.S. government
entity or non-governmental space vehicle entity;
(ii) Name of contact person, phone number, fax number and e-mail
address;
(iii) Quantity (in kilograms) of HCFC-141b needed for each relevant
calendar year, supported by documentation about past use for at least
the previous three years;
(iv) Quantities of HCFC-141b, if any, contained in systems that
were sold to other systems houses for at least the previous three
years;
[[Page 2850]]
(v) Description of the markets and applications served by the use
of HCFC-141b or systems based on HCFC-141b;
(vi) Technical description of processes in which HCFC-141b is being
used;
(vii) Technical description of the specific conditions under which
the product will be applied;
(viii) Technical description of why alternatives and substitutes
are not sufficient to eliminate the use of HCFC-141b;
(ix) Amount of stockpiled HCFC-141b (on-hand, taken title to, or
available from a supplier) along with a detailed analysis showing why
stockpiled, recovered or recycled quantities are deemed to be
unavailable, or technically or commercially infeasible for use (for
example, taking into consideration undue costs for storage and
transportation);
(x) An estimate of the number of control periods over which such an
exemption would be necessary;
(xi) A detailed description of continuing investigations into and
progress on possible alternatives and substitutes;
(xii) A list of alternatives considered, purchased or sampled,
including dates and copies of receipts for verification;
(xiii) A summary of the petitioner's in-house development program
including summaries of all relevant test results and their significance
to subsequent decision-making and technology selection. Full supporting
test data must be available on request including alternative tested and
date on which it was tested;
(xiv) A clear statement of the preferred technical option(s) being
pursued at the time of the petition and the reasoning for this
selection;
(xv) A summary of product test results conducted on the preferred
technical option(s) by accredited organizations in order to determine
whether products meet applicable codes. Relevant test reports and
certifications must be made available on request; and
(xvi) A description of the further development testing to be
carried out over the number of control periods identified under
paragraph (h)(1)(x) of this section.
(2) Within 21 business days of receipt of the petition, the
Director of EPA's Office of Atmospheric Programs will issue to a HCFC-
141b formulator, agency, department, or instrumentality of the U.S., or
non-governmental space vehicle entity that has petitioned for HCFC-141b
exemption allowances, based on information received in accordance with
paragraph (h)(1) of this section, a notice indicating one of the
following:
(i) A determination by the Director of EPA's Office of Atmospheric
Programs to grant a specific quantity of HCFC-141b exemption allowances
(in kilograms) for the production or import of HCFC-141b in a specified
control period based on an assessment that HCFC-141b is necessary to
maintain either safety, or operational or technical viability;
(ii) A determination by the Director of EPA's Office of Atmospheric
Programs to request additional information because the information
received in accordance with paragraph (h)(1) of this section is not
sufficient to decide whether to grant or deny HCFC-141b exemption
allowances. The Director of EPA's Office of Atmospheric Programs will
decide whether to grant or deny HCFC-141b exemption allowances within
30 days of receipt of the additional information. However, if the
petitioner fails to submit the additional information within 20 days of
the request, such failure constitutes a basis for denying the petition
for HCFC-141b exemption allowances.
(iii) A determination by the Director of EPA's Office of
Atmospheric Programs to deny a grant of HCFC-141b exemption allowances
due to one or more of the following reasons:
(A) The needs can be met by the use of a substance other than HCFC-
141b;
(B) The needs can be met by the use of existing supplies of HCFC-
141b;
(C) There is evidence of fraud or misrepresentation;
(D) Approval of the HCFC-141b exemption allowances would be
inconsistent with U.S. obligations under the provisions of the Montreal
Protocol (including Decisions agreed by the Parties);
(E) Approval of the HCFC-141b exemption allowances would be
inconsistent with the Clean Air Act;
(F) There is an inadequate demonstration of efforts undertaken to
research and implement alternatives; or
(G) Granting the HCFC-141b exemption allowances may reasonably be
expected to endanger human health or the environment.
(3) Within ten working days after receipt of a notice outlining a
determination by the Director of EPA's Office of Atmospheric Programs
to deny a grant of HCFC-141b exemption allowances due to one or more of
the reasons in paragraph (h)(2)(iii) of this section, the petitioner
may file with the Director of EPA's Office of Atmospheric Programs a
one-time appeal with elaborated information. The Director of EPA's
Office of Atmospheric Programs may affirm the determination to deny a
grant of HCFC-141b exemption allowances or make a determination to
grant HCFC-141b exemption allowance, in light of the available evidence
submitted with the appeal. If no appeal is submitted by the tenth day
after receipt of the notice outlining a determination by the Director
of EPA's Office of Atmospheric Programs to deny a grant of HCFC-141b
exemption allowances, the denial will be final on that day.
(4) Any entity that has previously petitioned for HCFC-141b
exemption allowances under paragraph (h)(1) of this section may file a
petition for renewal for a subsequent control period by October 31st of
the year preceding that control period. The petition for renewal must
contain the following information:
(i) Name and address of the HCFC-141b formulator, U.S. government
entity or non-governmental space vehicle entity;
(ii) Name of contact person, phone number, fax number and e-mail
address;
(iii) Quantity (in kilograms) of HCFC-141b needed for the control
period;
(iv) Description of markets and applications being served by the
use of HCFC-141b;
(v) A technical description of the process in which HCFC-141b is
still being used;
(vi) A technical description of the specific conditions under which
the product is still being applied;
(vii) Technical description of why alternatives and substitutes are
still not sufficient to eliminate the use of HCFC-141b;
(viii) Amount of stockpiled HCFC-141b (on-hand, taken title to, or
available from a supplier) along with a detailed analysis showing why
stockpiled, recovered or recycled quantities are deemed to be
technically or economically infeasible for use; and
(ix) A detailed description of continuing investigations into and
progress on possible alternatives and substitutes and how this activity
differs from information given in the previous request.
(5) A person granted HCFC-141b exemption allowances by the Director
of EPA's Office of Atmospheric Programs under paragraph (h)(2)(i) or
(h)(3) of this section may request a quantity of HCFC-141b be produced
or imported in the specified control period listed in the notice by
conferring the rights to produce or import to a producer or importer.
(6) The HCFC-141b exemption allowances held by one entity do not
automatically transfer to an acquiring
[[Page 2851]]
entity. Any entity acquiring another company holding HCFC-141b
exemption allowances must submit a renewal application in accordance
with paragraph (h)(4) of this section at the time of the acquisition in
order to qualify for the HCFC-141b exemption allowances.
Sec. 82.17 Apportionment of baseline production allowances for class
II controlled substances.
Effective January 1, 2003, the following persons are apportioned
baseline production allowances for HCFC-141b, HCFC-22, or HCFC-142b as
set forth in the following table:
------------------------------------------------------------------------
Person Controlled substance Allowances(kg.)
------------------------------------------------------------------------
AlliedSignal (Honeywell)......... HCFC-22............. 37,378,252
HCFC-141b........... 28,705,200
HCFC-142b........... 2,417,534
Ausimont USA..................... HCFC-142b........... 6,541,764
DuPont Company................... HCFC-22............. 42,638,049
Elf Atochem (ATOFINA)............ HCFC-22............. 28,219,223
HCFC-141b........... 24,647,925
HCFC-142b........... 16,131,096
LaRoche Industries............... HCFC-141b........... 17,756,508
MDA Manufacturing................ HCFC-22............. 2,383,835
------------------------------------------------------------------------
Sec. 82.18 Availability of production in addition to baseline
production allowances for class II controlled substances.
(a) Article 5 allowances. (1) Effective January 1, 2003, a person
apportioned baseline production allowances under Sec. 82.17 is also
apportioned Article 5 allowances, equal to 15 percent of their baseline
production allowances for the specified HCFC for each control period up
until December 31, 2014, to be used for the production of the specified
HCFC for export only to foreign states listed in Appendix E to this
subpart.
(2) Effective January 1, 2015, for all HCFCs, a person apportioned
baseline production allowances under Sec. 82.17 is also apportioned
Article 5 allowances, equal to 10 percent of their baseline production
allowances for the specified HCFC for each control period up until
December 31, 2029, to be used for the production of the specified HCFC
for export only to foreign states listed in Appendix E to this subpart.
(3) Effective January 1, 2030, for all HCFCs, a person apportioned
baseline production allowances under Sec. 82.17 is also apportioned
Article 5 allowances, equal to 15 percent of their baseline production
allowances for the specified HCFC for each control period up until
December 31, 2039, to be used for the production of the specified HCFC
for export only to foreign states listed in Appendix E to this subpart.
(b) Export production allowances. (1) Effective January 1, 2003, a
person apportioned baseline production allowances for HCFC-141b under
Sec. 82.17 is also apportioned export production allowances equal to
100 percent of their baseline production allowances for HCFC-141b for
each control period up until December 31, 2029, to be used for the
production of HCFC-141b for export only, in accordance with this
section.
(2) [Reserved]
(c) International trades of production allowances, export
production allowances and Article 5 allowances. (1) A person may
increase or decrease its production allowances, export production
allowances, or Article 5 allowances, for a specified control period
through trades with another Party to the Protocol as set forth in this
paragraph (c). Effective January 1, 2004, a nation listed either: in
Appendix L of this subpart that is also listed in Appendix C, Annex 1
of the Protocol as having ratified the Beijing Amendments, or in
Appendix C, Annex 1 of the Protocol as having ratified the Copenhagen
Amendments but not listed in Appendix L of this subpart, or in Appendix
C, Annex 2 of the Protocol, as being a foreign state complying with the
Beijing Amendments if the foreign state is listed in Appendix L of this
subpart, or as being a foreign state complying with the Copenhagen
Amendments if the foreign state is not listed in Appendix L of this
subpart must agree either to trade to the person for the current
control period some quantity of production that the nation is permitted
under the Montreal Protocol or to receive from the person for the
current control period some quantity of production that the person is
permitted under this subpart. The person must expend its consumption
allowances allocated under Sec. 82.19, or obtained under Sec. 82.20
in order to produce with the additional production allowances.
(2) Trade from a Party--Information requirements. (i) A person
requesting a trade from a Party must submit to the Administrator a
signed document from the principal diplomatic representative in that
nation's embassy in the U.S. stating that the appropriate authority
within that nation will establish or revise production limits for the
nation to equal the lowest of the following three production
quantities:
(A) The maximum production that the nation is allowed under the
Protocol minus the quantity (in kilograms) to be traded;
(B) The maximum production that is allowed under the nation's
applicable domestic law minus the quantity (in kilograms) to be traded;
or
(C) The average of the nation's actual national production level
for the three years prior to the trade minus the production to be
traded.
(ii) A person requesting a trade from a Party must also submit to
the Administrator a true copy of the document that sets forth the
following:
(A) The identity and address of the person;
(B) The identity of the Party;
(C) The names and telephone numbers of contact persons for the
person and for the Party;
(D) The chemical type and quantity (in kilograms) of production
being traded;
(E) Documentation that the Party possesses the necessary quantity
of unexpended production rights;
(F) The control period(s) to which the trade applies; and
(G) For increased production intended for export to the Party from
whom the allowances would be received, a signed statement of intent to
export to the Party.
(3) Trade to a Party--Information requirements. A person requesting
a trade to a Party must submit a request that sets forth the following
information to the Administrator:
[[Page 2852]]
(i) The identity and address of the person;
(ii) The identity of the Party;
(iii) The names and telephone numbers of contact persons for the
person and for the Party;
(iv) The chemical type and quantity (in kilograms) of allowable
production being traded; and
(v) The control period(s) to which the trade applies.
(4) Review of international trade request to a Party. After
receiving a trade request that meets the requirements of paragraph
(c)(3) of this section, the Administrator may, at his/her discretion,
consider the following factors by seeking concurrence from the
Department of Commerce, the United States Trade Representative, and the
Department of State, where appropriate, in deciding whether to approve
such a trade:
(i) Possible creation of domestic economic hardship;
(ii) Possible effects on trade;
(iii) Potential environmental implications; and
(iv) The total quantity of unexpended production allowances held by
U.S. entities.
(5) Notice of trade. If the request meets the requirement of
paragraph (c)(2) of this section for trades from Parties and paragraphs
(c)(3) and (4) of this section for trades to Parties, the Administrator
will issue the person a notice. The notice will either grant or deduct
production allowances or export production allowances or Article 5
allowances and specify the control period to which the trade applies.
The Administrator may disapprove the trade request contingent on the
consideration of factors listed in paragraph (c)(4) of this section for
trades to Parties.
(i) For trades from a Party, the Administrator will issue a notice
revising the allowances held by the recipient of the trade to equal the
unexpended production allowances, unexpended export production
allowances, or unexpended Article 5 allowances held by the recipient of
the trade under this subpart plus the quantity of allowable production
traded from the Party.
(ii) For trades to a Party, the Administrator will issue a notice
revising the production limit for the trader to equal the lesser of:
(A) The unexpended production allowances, unexpended export
production allowances or unexpended Article 5 allowances held by the
trade or minus the quantity traded; or
(B) The unexpended production allowances held by the trader minus
the amount by which the U.S. average annual production of the class II
controlled substance being traded for the three years prior to the
trade is less than the total allowable production of that class II
controlled substance under this subpart minus the amount traded; or
(C) The total U.S. allowable production of the class II controlled
substance being traded minus the three-year average of the actual
annual U.S. production of the class II controlled substance prior to
the control period of the trade.
(6) Revised notices of production limits for subsequent traders. If
after one person obtains approval of a trade of allowable production of
a class II controlled substance to a Party and other persons obtain
approval for trades of the same class II controlled substance during
the same control period, the Administrator will issue revised notices.
The notices will revise the production limits for each of the other
persons trading to equal the lesser of:
(i) The unexpended production allowances, unexpended export
production allowances or unexpended Article 5 allowances held by the
trader under this subpart minus the quantity traded; or
(ii) The result of the following set of calculations:
(A) The total U.S. allowable production of the class II controlled
substance minus the three-year average of the actual annual U.S.
production of the class II controlled substance prior to the control
period of the trade;
(B) The quantity traded divided by the total quantity traded by all
the other persons trading the same class II controlled substance in the
same control period;
(C) The result of paragraph (c)(6)(ii)(A) of this section
multiplied by the result of paragraph (c)(6)(ii)(B) of this section;
(D) The quantity derived in paragraph (c)(6)(i) of this section,
minus the result of paragraph (c)(6)(ii)(C) of this section;
(7) Production limit for previous traders. The Administrator will
also issue a notice revising the production limit for each trader who
previously obtained approval of a trade of the class II controlled
substance to a Party in the same control period to equal the result of
the following set of calculations:
(i) The total U.S. allowable production of the class II controlled
substance minus the three-year average of the actual annual U.S.
production of the class II controlled substance prior to the control
period of the trade;
(ii) The quantity traded by the person divided by the quantity
traded by all the persons who have traded that class II controlled
substance in that control period;
(iii) The result of paragraph (c)(7)(i) of this section multiplied
by the result of paragraph (c)(7)(ii) of this section.
(iv) The unexpended production allowances, unexpended export
production allowances or unexpended Article 5 allowances held by the
person plus the result of paragraph (c)(7)(iii) of this section;
(8) Effective date of revised production limits. The change in
production allowances, export production allowances or Article 5
allowances will be effective on the date that the notice is issued.
Sec. 82.19 Apportionment of baseline consumption allowances for class
II controlled substances.
(a) Effective January 1, 2003, the following persons are
apportioned baseline consumption allowances for HCFC-141b, HCFC-22, or
HCFC-142b as set forth in the following table:
------------------------------------------------------------------------
Allowances
Person Controlled substance (kg)
------------------------------------------------------------------------
ABCO Refrigeration Supply.......... HCFC-22............... 279,366
Air Systems........................ HCFC-22............... 13,514
Allied (Honeywell)................. HCFC-22............... 35,392,492
HCFC-141b............. 20,749,489
HCFC-142b............. 1,315,819
Altair Industries.................. HCFC-22............... 279,935
Ausimont USA....................... HCFC-22............... 99,643
HCFC-142b............. 3,047,386
Automatic Equipment Sales of VA.... HCFC-22............... 54,088
Condor Products.................... HCFC-22............... 666,171
Continental........................ HCFC-141b............. 20,315
[[Page 2853]]
Discount Refrigerants.............. HCFC-22............... 375,328
HCFC-141b............. 994
DuPont Company..................... HCFC-22............... 38,814,862
HCFC-141b............. 9,049
HCFC-142b............. 52,797
Elf Atochem (ATOFINA).............. HCFC-22............... 29,524,481
HCFC-141b............. 25,405,570
HCFC-142b............. 16,672,675
Full Circle........................ HCFC-22............... 14,865
HG Refrigeration Supply............ HCFC-22............... 40,068
ICC Chemical Corp.................. HCFC-141b............. 81,225
ICI Americas (INEOS)............... HCFC-22............... 2,546,305
Kivlan & Co. (Dynatemp)............ HCFC-22............... 2,028,980
Klomar Ship Supply................. HCFC-22............... 8,585
LaRoche Industries................. HCFC-141b............. 16,097,869
MDA Manufacturing.................. HCFC-22............... 2,541,545
Mondy-Global....................... HCFC-22............... 281,824
National Refrigerants.............. HCFC-22............... 5,480,315
Refricenter of Miami............... HCFC-22............... 381,293
Refricentro........................ HCFC-22............... 45,979
Rhone-Poulenc...................... HCFC-22............... 52,090
R-Lines............................ HCFC-22............... 63,172
Saez............................... HCFC-22............... 37,936
Solvay Fluorides................... HCFC-22............... 313,966
HCFC-141b............. 3,940,115
TESCO Distributors................. HCFC-22............... 48,049
Tulstar Products................... HCFC-141b............. 89,913
------------------------------------------------------------------------
Sec. 82.20 Availability of consumption allowances in addition to
baseline consumption allowances for class II controlled substances.
(a) A person may obtain at any time during the control period, in
accordance with the provisions of this section, 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,
in accordance with this section, when that quantity of class II
controlled substance was produced in the U.S. with expended consumption
allowances.
(1) The exporter must submit to the Administrator a request for
consumption allowances setting forth the following:
(i) The identities and addresses of the exporter and the recipient
of the exports;
(ii) The exporter's Employer Identification Number;
(iii) The names and telephone numbers of contact persons for the
exporter and the recipient;
(iv) The quantity (in kilograms) and type of class II controlled
substances reported;
(v) The source of the class II controlled substances and the date
purchased;
(vi) The date on which, and the port from which, the class II
controlled substances were exported from the U.S. or its territories;
(vii) The country to which the class II controlled substances were
exported;
(viii) A copy of the bill of lading and the invoice indicating the
net quantity (in kilograms) of class II controlled substances shipped
and documenting the sale of the class II controlled substances to the
purchaser;
(ix) The commodity codes of the class II controlled substances
reported; and
(x) A written statement from the producer that the class II
controlled substances were produced with expended allowances.
(2) The Administrator will review the information and documentation
submitted under paragraph (a)(1) of this section and will issue a
notice.
(i) The Administrator will determine the quantity of class II
controlled substances that the documentation verifies was exported and
issue consumption allowances equivalent to the quantity of class II
controlled substances that were exported.
(A) The grant of the consumption allowances will be effective on
the date the notice is issued.
(B) The consumption allowances will be granted to the person the
exporter indicates, whether it is the producer or the exporter.
(ii) The Administrator will issue a notice that the consumption
allowances are not granted if the Administrator determines that the
information and documentation do not satisfactorily substantiate the
exporter's claims.
(b) International trades of consumption allowances. (1) A person
may increase its consumption allowances for a specified control period
through trades with another Party to the Protocol as set forth in this
paragraph (b). A person may only receive consumption from Poland or
Norway, or both, and only if the nation agrees to trade to the person
for the current control period some quantity of consumption that the
nation is permitted under the Montreal Protocol.
(2) Trade from a Party--Information requirements. A person must
submit the following information to the Administrator:
(i) A signed document from the principal diplomatic representative
in the Polish or Norwegian embassy in the U.S. stating that the
appropriate authority within that nation will establish or revise
consumption limits for the nation to equal the lowest of the following
three consumption quantities:
(A) The maximum consumption that the nation is allowed under the
Protocol minus the quantity (in kilograms) traded;
(B) The maximum consumption that is allowed under the nation's
applicable domestic law minus the quantity (in kilograms) traded; or
(C) The average of the nation's actual consumption level for the
three years prior to the trade minus the consumption traded.
(ii) A person requesting a consumption trade from Poland or Norway
must also submit to the Administrator a true copy of the document that
sets forth the following:
[[Page 2854]]
(A) The identity and address of the person;
(B) The identity of the Party;
(C) The names and telephone numbers of contact persons for the
person and for the Party;
(D) The chemical type and quantity (in kilograms) of consumption
being traded;
(E) Documentation that the Party possesses the necessary quantity
of unexpended consumption rights;
(F) The control period(s) to which the trade applies; and
(3) Notice of trade. If the request meets the requirement of
paragraph (b)(2) of this section for trades from Parties, the
Administrator will issue the person a notice. The notice will grant
consumption allowances and specify the control period to which the
trade applies. The Administrator may disapprove the trade request if it
does not meet the requirements of paragraph (b)(2) of this section.
(4) Trade from a Party. The Administrator will issue a notice
revising the allowances held by the recipient of the trade to equal the
unexpended consumption allowances held by the recipient of the trade
under this subpart plus the quantity of allowable consumption traded
from the Party.
(5) Effective date of revised consumption limits. The change in
consumption allowances will be effective on the date that the notice is
issued.
Sec. 82.21 [Reserved].
Sec. 82.22 [Reserved].
Sec. 82.23 Transfers of allowances of class II controlled substances.
(a) Inter-company transfers. Effective January 1, 2003, a person
(``transferor'') may transfer to any other person (``transferee'') any
quantity of the transferor's class II consumption allowances,
production allowances, export production allowances, or Article 5
allowances for the same type of allowance as follows:
(i) The transferor must submit to the Administrator a transfer
claim setting forth the following:
(A) The identities and addresses of the transferor and the
transferee;
(B) The name and telephone numbers of contact persons for the
transferor and the transferee;
(C) The type of allowances being transferred, including the names
of the class II controlled substances for which allowances are to be
transferred;
(D) The quantity (in kilograms) of allowances being transferred;
(E) The control period(s) for which the allowances are being
transferred;
(F) The quantity of unexpended allowances of the type and for the
control period being transferred that the transferor holds under
authority of this subpart on the date the claim is submitted to EPA;
and
(G) For trades of consumption allowances, production allowances,
export production allowances, or Article 5 allowances, the quantity of
the 0.1 percent offset applied to the unweighted quantity traded that
will be deducted from the transferor's allowance balance.
(ii) The Administrator will determine whether the records
maintained by EPA indicate that the transferor possesses unexpended
allowances sufficient to cover the transfer claim on the date the
transfer claim is processed. The transfer claim is the quantity (in
kilograms) to be transferred plus, in the case of transfers of
production or consumption allowances, 0.1 percent of that quantity. The
Administrator will take into account any previous transfers, any
production, and allowable imports and exports of class II controlled
substances reported by the transferor. Within three working days of
receiving a complete transfer claim, the Administrator will take action
to notify the transferor and transferee as follows:
(A) The Administrator will issue a notice indicating that EPA does
not object to the transfer if EPA's records show that the transferor
has sufficient unexpended allowances to cover the transfer claim. In
the case of transfers of production or consumption allowances, EPA will
reduce the transferor's balance of unexpended allowances by the
quantity to be transferred plus 0.1 percent of that quantity. In the
case of transfers of export production or Article 5 allowances, EPA
will reduce the transferor's balance of unexpended allowances,
respectively, by the quantity to be transferred. The transferor and the
transferee may proceed with the transfer when EPA issues a no objection
notice. However, if EPA ultimately finds that the transferor did not
have sufficient unexpended allowances to cover the claim, the
transferor and transferee, where applicable, will be held liable for
any knowing violations of the regulations of this subpart that occur as
a result of, or in conjunction with, the improper transfer.
(B) The Administrator will issue a notice disallowing the transfer
if EPA's records show that the transferor has insufficient unexpended
allowances to cover the transfer claim, or that the transferor has
failed to respond to one or more Agency requests to supply information
needed to make a determination. Either party may file a notice of
appeal, with supporting reasons, with the Administrator within 10
working days after receipt of notification. The Administrator may
affirm or vacate the disallowance. If no appeal is taken by the tenth
working day after notification, the disallowance shall be final on that
day.
(iii) The transferor and transferee may proceed with the transfer
if the Administrator does not respond to a transfer claim within the
three working days specified in paragraph (a)(1)(ii) of this section.
In the case of transfers of production or consumption allowances, EPA
will reduce the transferor's balance of unexpended allowances by the
quantity to be transferred plus 0.1 percent of that quantity. In the
case of transfers of export production allowances or Article 5
allowances, EPA will reduce the transferor's balance of unexpended
allowances by the quantity to be transferred plus 0.1 percent of that
quantity. If EPA ultimately finds that the transferor did not have
sufficient unexpended allowances to cover the claim, the transferor
and/or the transferee, where applicable, will be held liable for any
knowing violations of the regulations of this subpart that occur as a
result of, or in conjunction with, the improper transfer.
(b) Inter-pollutant transfers. (1) Effective January 1, 2003, a
person (transferor) may convert consumption allowances or production
allowances for one class II controlled substance to the same type of
allowance for another class II controlled substance listed in Appendix
B of this subpart, following the procedures described in paragraph
(b)(3) of this section.
(2) Inter-pollutant transfers will be permitted at any time during
the control period and during the 30 days after the end of a control
period.
(3) The transferor must submit to the Administrator a transfer
claim that includes the following:
(i) The identity and address of the transferor;
(ii) The name and telephone number of a contact person for the
transferor;
(iii) The type of allowances being converted, including the names
of the class II controlled substances for which allowances are to be
converted;
(iv) The quantity (in kilograms) and type of allowances to be
converted;
(v) The quantity (in kilograms) of allowances to be subtracted from
the transferor's unexpended allowances for the first class II
controlled substance, to be equal to 100.1 percent of the quantity of
allowances converted;
(vi) The quantity (in kilograms) of allowances to be added to the
transferee's unexpended allowances for the second class II controlled
substance,
[[Page 2855]]
to be equal to the quantity (in kilograms) of allowances for the first
class II controlled substance being converted multiplied by the
quotient of the ozone depletion potential of the first class II
controlled substance divided by the ozone depletion potential of the
second class II controlled substance, as listed in Appendix B to this
subpart;
(vii) The control period(s) for which the allowances are being
converted; and
(viii) The quantity (in kilograms) of unexpended allowances of the
type and for the control period being converted that the transferor
holds under authority of this subpart as of the date the claim is
submitted to EPA.
(4) The Administrator will determine whether the records maintained
by EPA indicate that the convertor possesses unexpended allowances
sufficient to cover the transfer claim on the date the transfer claim
is processed (i.e., the quantity (in kilograms) to be converted plus
0.1 percent of that quantity (in kilograms)). EPA will take into
account any previous transfers, and any production, imports (not
including transshipments or used class II controlled substances), or
exports (not including transhipments or used class II controlled
substances) of class II controlled substances reported by the
convertor. Within three working days of receiving a complete transfer
claim, the Administrator will take action to notify the convertor as
follows:
(i) The Administrator will issue a notice indicating that EPA does
not object to the transfer if EPA's records show that the convertor has
sufficient unexpended allowances to cover the transfer claim. EPA will
reduce the transferor's balance of unexpended allowances by the
quantity to be converted plus 0.1 percent of that quantity (in
kilograms). When EPA issues a no objection notice, the transferor may
proceed with the transfer. However, if EPA ultimately finds that the
transferor did not have sufficient unexpended allowances to cover the
claim, the transferor will be held liable for any violations of the
regulations of this subpart that occur as a result of, or in
conjunction with, the improper transfer.
(ii) The Administrator will issue a notice disallowing the transfer
if EPA's records show that the transferor has insufficient unexpended
allowances to cover the transfer claim, or that the transferor has
failed to respond to one or more Agency requests to supply information
needed to make a determination. The transferor may file a notice of
appeal, with supporting reasons, with the Administrator within 10
working days after receipt of notification. The Administrator may
affirm or vacate the disallowance. If no appeal is taken by the tenth
working day after notification, the disallowance shall be final on that
day.
(iii) The transferor may proceed with the transfer if the
Administrator does not respond to a transfer claim within the three
working days specified in paragraph (b)(4) of this section. EPA will
reduce the transferor's balance of unexpended allowances by the
quantity (in kilograms) to be converted plus 0.1 percent of that
quantity (in kilograms). The transferor will be held liable for any
violations of the regulations of this subpart that occur as a result
of, or in conjunction with, the improper transfer if EPA ultimately
finds that the transferor did not have sufficient unexpended allowances
or credits to cover the claim.
(c) Inter-company transfers and Inter-pollutant transfers. If a
person requests an inter-company transfer and an inter-pollutant
transfer simultaneously, the quantity (in kilograms) subtracted from
the transferor's unexpended production or consumption allowances for
the first class II controlled substance will be equal to 100.1 percent
of the quantity (in kilograms) of allowances that are being converted
and transferred.
(d) 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 section.
Sec. 82.24 Recordkeeping and reporting requirements for class II
controlled substances.
(a) Recordkeeping and reporting. Any person who produces, imports,
exports, transforms, or destroys class II controlled substances must
comply with the following recordkeeping and reporting requirements:
(1) Reports required by this section must be mailed to the
Administrator within 30 days of the end of the applicable reporting
period, unless otherwise specified.
(2) Revisions of reports that are required by this section must be
mailed to the Administrator within 180 days of the end of the
applicable reporting period, unless otherwise specified.
(3) Records and copies of reports required by this section must be
retained for three years.
(4) Quantities of class II controlled substances must be stated in
terms of kilograms in reports required by this section.
(5) Reports and records required by this section may be used for
purposes of compliance determinations. These requirements are not
intended as a limitation on the use of other evidence admissible under
the Federal Rules of Evidence. Failure to provide the reports,
petitions and records required by this section and to certify the
accuracy of the information in the reports, petitions and records
required by this section, will be considered a violation of this
subpart. False statements made in reports, petitions and records will
be considered violations of Section 113 of the Clean Air Act and under
18 U.S.C. 1001.
(b) Producers. Persons (``producers'') who produce class II
controlled substances during a control period must comply with the
following recordkeeping and reporting requirements:
(1) Reporting--Producers. For each quarter, each producer of a
class II controlled substance must provide the Administrator with a
report containing the following information:
(i) The quantity (in kilograms) of production of each class II
controlled substance used in processes resulting in their
transformation by the producer and the quantity (in kilograms) intended
for transformation by a second party;
(ii) The quantity (in kilograms) of production of each class II
controlled substance used in processes resulting in their destruction
by the producer and the quantity (in kilograms) intended for
destruction by a second party;
(iii) The expended allowances for each class II controlled
substance;
(iv) The producer's total of expended and unexpended production
allowances, consumption allowances, export production allowances, and
Article 5 allowances at the end of that quarter;
(v) The quantity (in kilograms) of class II controlled substances
sold or transferred during the quarter to a person other than the
producer for use in processes resulting in their transformation or
eventual destruction;
(vi) A list of the quantities and names of class II controlled
substances, exported by the producer to a Party to the Protocol, that
will be transformed or destroyed and therefore were not produced
expending production or consumption allowances;
(vii) For transformation in the U.S. or by a person of another
Party, one copy of a transformation verification from the transformer
for a specific class II controlled substance and a list of additional
quantities shipped to that same transformer for the quarter;
(viii) For destruction in the U.S. or by a person of another Party,
one copy of
[[Page 2856]]
a destruction verification as required in paragraph (e) of this section
for a particular destroyer, destroying the same class II controlled
substance, and a list of additional quantities shipped to that same
destroyer for the quarter;
(ix) In cases where the producer produced class II controlled
substances using export production allowances, a list of U.S. entities
that purchased those class II controlled substances and exported them
to a Party to the Protocol;
(x) In cases where the producer produced class II controlled
substances using Article 5 allowances, a list of U.S. entities that
purchased those class II controlled substances and exported them to
Article 5 countries; and
(xi) A list of the HCFC 141b-exemption allowance holders from whom
orders were received and the quantity (in kilograms) of HCFC-141b
requested and produced.
(2) Recordkeeping--Producers. Every producer of a class II
controlled substance during a control period must maintain the
following records:
(i) Dated records of the quantity (in kilograms) of each class II
controlled substance produced at each facility;
(ii) Dated records of the quantity (in kilograms) of class II
controlled substances produced for use in processes that result in
their transformation or for use in processes that result in their
destruction;
(iii) Dated records of the quantity (in kilograms) of class II
controlled substances sold for use in processes that result in their
transformation or for use in processes that result in their
destruction;
(iv) Dated records of the quantity (in kilograms) of class II
controlled substances produced with export production allowances or
Article 5 allowances;
(v) Copies of invoices or receipts documenting sale of class II
controlled substances for use in processes that result in their
transformation or for use in processes that result in their
destruction;
(vi) Dated records of the quantity (in kilograms) of each class II
controlled substance used at each facility as feedstocks or destroyed
in the manufacture of a class II controlled substance or in the
manufacture of any other substance, and any class II controlled
substance introduced into the production process of the same class II
controlled substance at each facility;
(vii) Dated records of the quantity (in kilograms) of raw materials
and feedstock chemicals used at each facility for the production of
class II controlled substances;
(viii) Dated records of the shipments of each class II controlled
substance produced at each plant;
(ix) The quantity (in kilograms) of class II controlled substances,
the date received, and names and addresses of the source of used
materials containing class II controlled substances which are recycled
or reclaimed at each plant;
(x) Records of the date, the class II controlled substance, and the
estimated quantity of any spill or release of a class II controlled
substance that equals or exceeds 100 pounds;
(xi) Transformation verification in the case of transformation, or
the destruction verification in the case of destruction as required in
paragraph (e) of this section showing that the purchaser or recipient
of a class II controlled substance, in the U.S. or in another country
that is a Party, certifies the intent to either transform or destroy
the class II controlled substance, or sell the class II controlled
substance for transformation or destruction in cases when allowances
were not expended;
(xii) Written verifications from a U.S. purchaser that the class II
controlled substance was exported to a Party in accordance with the
requirements in this section, in cases where export production
allowances were expended to produce the class II controlled substance;
(xiii) Written verifications from a U.S. purchaser that the class
II controlled substance was exported to an Article 5 country in cases
where Article 5 allowances were expended to produce the class II
controlled substance;
(xiv) Written verifications from a U.S. purchaser that HCFC-141b
was manufactured for the express purpose of meeting HCFC-141b exemption
needs in accordance with information submitted under Sec. 82.16(h), in
cases where HCFC-141b exemption allowances were expended to produce the
HCFC-141b.
(3) For any person who fails to maintain the records required by
this paragraph, or to submit the report required by this paragraph, the
Administrator may assume that the person has produced at full capacity
during the period for which records were not kept, for purposes of
determining whether the person has violated the prohibitions at Sec.
82.15.
(c) Importers. Persons (``importers'') who import class II
controlled substances during a control period must comply with the
following recordkeeping and reporting requirements:
(1) Reporting--Importers. For each quarter, an importer of a class
II controlled substance (including importers of used class II
controlled substances) must submit to the Administrator a report
containing the following information:
(i) Summaries of the records required in paragraphs (c)(2)(i)
through (xvi) of this section for the previous quarter;
(ii) The total quantity (in kilograms) imported of each class II
controlled substance for that quarter;
(iii) The commodity code for the class II controlled substances
imported, which must be one of those listed in Appendix K to this
subpart;
(iv) The quantity (in kilograms) of those class II controlled
substances imported that are used class II controlled substances;
(v) The quantity (in kilograms) of class II controlled substances
imported for that quarter and totaled by chemical for the control
period to date;
(vi) The importer's total sum of expended and unexpended
consumption allowances by chemical as of the end of that quarter;
(vii) The quantity (in kilograms) of class II controlled substances
imported for use in processes resulting in their transformation or
destruction;
(viii) The quantity (in kilograms) of class II controlled
substances sold or transferred during that quarter to each person for
use in processes resulting in their transformation or eventual
destruction; and
(ix) Transformation verifications showing that the purchaser or
recipient of imported class II controlled substances intends to
transform those substances or destruction verifications showing that
the purchaser or recipient intends to destroy the class II controlled
substances (as provided in paragraph (e) of this section).
(xi) A list of the HCFC 141b-exemption allowance holders from whom
orders were received and the quantity (in kilograms) of HCFC-141b
requested and imported.
(2) Recordkeeping--Importers. An importer of a class II controlled
substance (including used class II controlled substances) must maintain
the following records:
(i) The quantity (in kilograms) of each class II controlled
substance imported, either alone or in mixtures, including the
percentage of each mixture which consists of a class II controlled
substance;
(ii) The quantity (in kilograms) of those class II controlled
substances imported that are used and the information provided with the
petition as required under paragraph (c)(3) of this section;
(iii) The quantity (in kilograms) of class II controlled substances
other than
[[Page 2857]]
transhipments or used substances imported for use in processes
resulting in their transformation or destruction;
(iv) The quantity (in kilograms) of class II controlled substances
other than transhipments or used substances imported and sold for use
in processes that result in their destruction or transformation;
(v) The date on which the class II controlled substances were
imported;
(vi) The port of entry through which the class II controlled
substances passed;
(vii) The country from which the imported class II controlled
substances were imported;
(viii) The commodity code for the class II controlled substances
shipped, which must be one of those listed in Appendix K to this
subpart;
(ix) The importer number for the shipment;
(x) A copy of the bill of lading for the import;
(xi) The invoice for the import;
(xii) The quantity (in kilograms) of imports of used class II
controlled substances;
(xiii) The U.S. Customs entry form;
(xiv) Dated records documenting the sale or transfer of class II
controlled substances for use in processes resulting in their
transformation or destruction;
(xv) Copies of transformation verifications or destruction
verifications indicating that the class II controlled substances will
be transformed or destroyed (as provided in paragraph (e) of this
section).
(xvi) Written verifications from a U.S. purchaser that HCFC-141b
was imported for the express purpose of meeting HCFC-141b exemption
needs in accordance with information submitted under Sec. 82.16(h),
and that the quantity will not be resold, in cases where HCFC-141b
exemption allowances were expended to import the HCFC-141b.
(3) Petition to import used class II controlled substances and
transhipments--Importers. For each individual shipment over 5 pounds of
a used class II controlled substance as defined in Sec. 82.3, an
importer must submit directly to the Administrator, at least 40 working
days before the shipment is to leave the foreign port of export, the
following information in a petition:
(i) The name and quantity (in kilograms) of the used class II
controlled substance to be imported;
(ii) The name and address of the importer, the importer ID number,
the contact person, and the phone and fax numbers;
(iii) Name, address, contact person, phone number and fax number of
all previous source facilities from which the used class II controlled
substance was recovered;
(iv) A detailed description of the previous use of the class II
controlled substance at each source facility and a best estimate of
when the specific controlled substance was put into the equipment at
each source facility, and, when possible, documents indicating the date
the material was put into the equipment;
(v) A list of the name, make and model number of the equipment from
which the material was recovered at each source facility;
(vi) Name, address, contact person, phone number and fax number of
the exporter and of all persons to whom the material was transferred or
sold after it was recovered from the source facility;
(vii) The U.S. port of entry for the import, the expected date of
shipment and the vessel transporting the chemical. If at the time of
submitting a petition the importer does not know the U.S. port of
entry, the expected date of shipment and the vessel transporting the
chemical, and the importer receives a non-objection notice for the
individual shipment in the petition, the importer is required to notify
the Administrator of this information prior to the actual U.S. Customs
entry of the individual shipment;
(viii) A description of the intended use of the used class II
controlled substance, and, when possible, the name, address, contact
person, phone number and fax number of the ultimate purchaser in the
United States;
(ix) The name, address, contact person, phone number and fax number
of the U.S. reclamation facility, where applicable;
(x) If someone at the source facility recovered the class II
controlled substance from the equipment, the name and phone and fax
numbers of that person;
(xi) If the imported class II controlled substance was reclaimed in
a foreign Party, the name, address, contact person, phone number and
fax number of any or all foreign reclamation facility(ies) responsible
for reclaiming the cited shipment;
(xii) An export license from the appropriate government agency in
the country of export and, if recovered in another country, the export
license from the appropriate government agency in that country;
(xiii) If the imported used class II controlled substance is
intended to be sold as a refrigerant in the U.S., the name and address
of the U.S. reclaimer who will bring the material to the standard
required under subpart F of this part, if not already reclaimed to
those specifications; and
(xiv) A certification of accuracy of the information submitted in
the petition.
(4) Review of petition to import used class II controlled
substances and transhipments--Importers. Starting on the first working
day following receipt by the Administrator of a petition to import a
used class II controlled substance, the Administrator will initiate a
review of the information submitted under paragraph(c)(3) of this
section and take action within 40 working days to issue either an
objection-notice or a non-objection notice for the individual shipment
to the person who submitted the petition to import the used class II
controlled substance.
(i) The Administrator may issue an objection notice to a petition
for the following reasons:
(A) If the Administrator determines that the information is
insufficient, that is, if the petition lacks or appears to lack any of
the information required under paragraph (c)(3) of this section;
(B) If the Administrator determines that any portion of the
petition contains false or misleading information, or the Administrator
has information from other U.S. or foreign government agencies
indicating that the petition contains false or misleading information;
(C) If the transaction appears to be contrary to provisions of the
Vienna Convention on Substances that Deplete the Ozone Layer, the
Montreal Protocol and Decisions by the Parties, or the non-compliance
procedures outlined and instituted by the Implementation Committee of
the Montreal Protocol;
(D) If the appropriate government agency in the exporting country
has not agreed to issue an export license for the cited individual
shipment of used class II controlled substance;
(E) If reclamation capacity is installed or is being installed for
that specific class II controlled substance in the country of recovery
or country of export and the capacity is funded in full or in part
through the Multilateral Fund.
(ii) Within ten (10) working days after receipt of the objection
notice, the importer may re-petition the Administrator, only if the
Administrator indicated ``insufficient information'' as the basis for
the objection notice. If no appeal is taken by the tenth working day
after the date on the objection notice, the objection shall become
final. Only one re-petition will be accepted for any original petition
received by EPA.
(iii) Any information contained in the re-petition which is
inconsistent with the original petition must be identified
[[Page 2858]]
and a description of the reason for the inconsistency must accompany
the re-petition.
(iv) In cases where the Administrator does not object to the
petition based on the criteria listed in paragraph (c)(4)(i) of this
section, the Administrator will issue a non-objection notice.
(v) To pass the approved used class II controlled substances
through U.S. Customs, the petition and the non-objection notice issued
by EPA must accompany the shipment through U.S. Customs.
(vi) If for some reason, following EPA's issuance of a non-
objection notice, new information is brought to EPA's attention which
shows that the non-objection notice was issued based on false
information, then EPA has the right to:
(A) Revoke the non-objection notice;
(B) Pursue all means to ensure that the class II controlled
substance is not imported into the U.S.; and
(C) Take appropriate enforcement actions.
(vii) Once the Administrator issues a non-objection notice, the
person receiving the non-objection notice is permitted to import the
individual shipment of used class II controlled substance only within
the same control period as the date stamped on the non-objection
notice.
(viii) A person receiving a non-objection notice from the
Administrator for a petition to import used class II controlled
substances must maintain the following records:
(A) A copy of the petition;
(B) The EPA non-objection notice;
(C) The bill of lading for the import; and
(D) U.S. Customs entry documents for the import that must include
one of the commodity codes from Appendix K to this subpart.
(5) Recordkeeping for transhipments--Importers. Any person who
tranships a class II controlled substance must maintain records that
indicate:
(i) That the class II controlled substance shipment originated in a
foreign country;
(ii) That the class II controlled substance shipment is destined
for another foreign country; and
(iii) That the class II controlled substance shipment will not
enter interstate commerce within the U.S.
(d) Exporters. Persons (``exporters'') who export class II
controlled substances during a control period must comply with the
following reporting requirements:
(1) Reporting--Exporters. For any exports of class II controlled
substances not reported under Sec. 82.20 (additional consumption
allowances), or under paragraph (b)(2) of this section (reporting for
producers of class II controlled substances), each exporter who
exported a class II controlled substance must submit to the
Administrator the following information within 30 days after the end of
each quarter in which the unreported exports left the U.S.:
(i) The names and addresses of the exporter and the recipient of
the exports;
(ii) The exporter's Employer Identification Number;
(iii) The type and quantity (in kilograms) of each class II
controlled substance exported and what percentage, if any of the class
II controlled substance is used;
(iv) The date on which, and the port from which, the class II
controlled substances were exported from the U.S. or its territories;
(v) The country to which the class II controlled substances were
exported;
(vi) The quantity (in kilograms) exported to each Article 5
country;
(vii) The commodity code for the class II controlled substances
shipped, which must be one of those listed in Appendix K to this
subpart;
(viii) For persons reporting transformation or destruction, the
invoice or sales agreement containing language similar to the
transformation verifications that the purchaser or recipient of
imported class II controlled substances intends to transform those
substances, or destruction verifications showing that the purchaser or
recipient intends to destroy the class II controlled substances (as
provided in paragraph (e) of this section).
(2) Reporting export production allowances--Exporters. In addition
to the information required in paragraph (d)(1) of this section, any
exporter using export production allowances must also provide the
following to the Administrator:
(i) The Employer Identification Number on the Shipper's Export
Declaration Form or Employer Identification Number of the shipping
agent shown on the U.S. Customs Form 7525;
(ii) The exporting vessel on which the class II controlled
substances were shipped; and
(iii) The quantity (in kilograms) exported to each Party.
(3) Reporting Article 5 allowances--Exporters. In addition to the
information required in paragraph (d)(1) of this section, any exporter
using Article 5 allowances must also provide the following to the
Administrator:
(i) The Employer Identification Number on the Shipper's Export
Declaration Form or Employer Identification Number of the shipping
agent shown on the U.S. Customs Form 7525; and
(ii) The exporting vessel on which the class II controlled
substances were shipped.
(4) Reporting used class II controlled substances--Exporters. Any
exporter of used class II controlled substances must indicate on the
bill of lading or invoice that the class II controlled substance is
used, as defined in Sec. 82.3.
(e) Transformation and destruction. Any person who transforms or
destroys class II controlled substances must comply with the following
recordkeeping and reporting requirements:
(1) Recordkeeping--Transformation and destruction. Any person who
transforms or destroys class II controlled substances produced or
imported by another person must maintain the following:
(i) Copies of the invoices or receipts documenting the sale or
transfer of the class II controlled substances to the person;
(ii) Records identifying the producer or importer of the class II
controlled substances received by the person;
(iii) Dated records of inventories of class II controlled
substances at each plant on the first day of each quarter;
(iv) Dated records of the quantity (in kilograms) of each class II
controlled substance transformed or destroyed;
(v) In the case where class II controlled substances were purchased
or transferred for transformation purposes, a copy of the person's
transformation verification as provided under paragraph (e)(3)of this
section.
(vi) Dated records of the names, commercial use, and quantities (in
kilograms) of the resulting chemical(s) when the class II controlled
substances are transformed; and
(vii) Dated records of shipments to purchasers of the resulting
chemical(s) when the class II controlled substances are transformed.
(viii) In the case where class II controlled substances were
purchased or transferred for destruction purposes, a copy of the
person's destruction verification, as provided under paragraph (e)(5)
of this section.
(2) Reporting--Transformation and destruction. Any person who
transforms or destroys class II controlled substances and who has
submitted a transformation verification ((paragraph (e)(3) of this
section) or a destruction verification (paragraph (e)(5) of this
section) to the producer or importer of
[[Page 2859]]
the class II controlled substances, must report the following:
(i) The names and quantities (in kilograms) of the class II
controlled substances transformed for each control period within 45
days of the end of such control period; and
(ii) The names and quantities (in kilograms) of the class II
controlled substances destroyed for each control period within 45 days
of the end of such control period.
(3) Reporting--Transformation. Any person who purchases class II
controlled substances for purposes of transformation must provide the
producer or importer with a transformation verification that the class
II controlled substances are to be used in processes that result in
their transformation.
(i) The transformation verification shall include the following:
(A) Identity and address of the person intending to transform the
class II controlled substances;
(B) The quantity (in kilograms) of class II controlled substances
intended for transformation;
(C) Identity of shipments by purchase order number(s), purchaser
account number(s), by location(s), or other means of identification;
(D) Period of time over which the person intends to transform the
class II controlled substances; and
(E) Signature of the verifying person.
(ii) [Reserved]
(4) Reporting--Destruction. Any person who destroys class II
controlled substances shall provide EPA with a one-time report
containing the following information:
(i) The destruction unit's destruction efficiency;
(ii) The methods used to record the volume destroyed;
(iii) The methods used to determine destruction efficiency;
(iv) The name of other relevant federal or state regulations that
may apply to the destruction process;
(v) Any changes to the information in paragraphs (e)(4)(i), (ii),
and (iii) of this section must be reflected in a revision to be
submitted to EPA within 60 days of the change(s).
(5) Reporting--Destruction. Any person who purchases or receives
and subsequently destroys class II controlled substances that were
originally produced without expending allowances shall provide the
producer or importer from whom it purchased or received the class II
controlled substances with a verification that the class II controlled
substances will be used in processes that result in their destruction.
(i) The destruction verification shall include the following:
(A) Identity and address of the person intending to destroy class
II controlled substances;
(B) Indication of whether those class II controlled substances will
be completely destroyed, as defined in Sec. 82.3, or less than
completely destroyed, in which case the destruction efficiency at which
such substances will be destroyed must be included;
(C) Period of time over which the person intends to destroy class
II controlled substances; and
(D) Signature of the verifying person.
(ii) [Reserved]
(f) Heels--Recordkeeping and reporting. Any person who brings into
the U.S. a container with a heel, as defined in Sec. 82.3, of class II
controlled substances, must comply with the following requirements:
(1) Any person who brings a container with a heel must indicate on
its bill of lading or invoice that the class II controlled substance in
the container is a heel.
(2) Any person who brings a container with a heel must report
quarterly the quantity (in kilograms) brought into the U.S. and
certify:
(i) That the residual quantity (in kilograms) in each shipment is
no more than 10 percent of the volume of the container;
(ii) That the residual quantity (in kilograms) in each shipment
will either:
(A) Remain in the container and be included in a future shipment;
(B) Be recovered and transformed;
(C) Be recovered and destroyed; or
(D) Be recovered for a non-emissive use.
(3) Any person who brings a container with a heel into the U.S.
must report on the final disposition of each shipment within 45 days of
the end of the control period.
(g) HCFC 141b exemption allowances--Reporting and recordkeeping.
(1) Any person allocated HCFC-141b exemption allowances who confers
a quantity of the HCFC-141b exemption allowances to a producer or
import and places an order for the production or import of HCFC-141b
with a verification that the HCFC-141b will only be used for the
exempted purpose and not be resold must submit semi-annual reports, due
30 days after the end of the second and fourth respectively, to the
Administrator containing the following information:
(i) Total quantity (in kilograms) HCFC-141b received during the 6
month period; and
(ii) The identity of the supplier of HCFC-141b on a shipment-by-
shipment basis during the 6 month period.
(2) Any person allocated HCFC-141b exemption allowances must keep
records of letters to producers and importers conferring unexpended
HCFC-141b exemption allowances for the specified control period in the
notice, orders for the production or import of HCFC-141b under those
letters and written verifications that the HCFC-141b was produced or
imported for the express purpose of meeting HCFC-141b exemption needs
in accordance with information submitted under Sec. 82.16(h), and that
the quantity will not be resold.
13. Revise Appendix B to Subpart A to read as follows:
Appendix B to Part 82 Subpart A.--Class II Controlled Substances a
------------------------------------------------------------------------
Controlled Substance ODP
------------------------------------------------------------------------
1. Dichlorofluoromethane (HCFC-21)........... 0.04
2. Monochlorodifluoromethane (HCFC-22)....... 0.055
3. Monochlorofluoromethane (HCFC-31)......... 0.02
4. Tetrachlorofluoroethane (HCFC-121)........ 0.01-0.04
5. Trichlorodifluoroethane (HCFC-122)........ 0.02-0.08
6. Dichlorotrifluoroethane (HCFC-123)........ 0.02
7. Monochlorotetrafluoroethane (HCFC-124).... 0.022
8. Trichlorofluoroethane (HCFC-131).......... 0.007-0.05
9. Dichlorodifluoroethane (HCFC-132)......... 0.008-0.05
10. Monochlorotrifluoroethane (HCFC-133)..... 0.02-0.06
11. Dichlorofluoroethane (HCFC-141b)......... 0.11
12. Monochlorodifluoroethane (HCFC-142b)..... 0.065
[[Page 2860]]
13. Chlorofluoroethane (HCFC-151)............ 0.003-0.005
14. Hexachlorofluoropropane (HCFC-221)....... 0.015-0.07
15. Pentachlorodifluoropropane (HCFC-222).... 0.01-0.09
16. Tetrachlorotrifluoropropane (HCFC-223)... 0.01-0.08
17. Trichlorotetrafluoropropane (HCFC-224)... 0.01-0.09
18. Dichloropentafluoropropane (HCFC-225ca).. 0.025
19. Dichloropentafluoropropane (HCFC-225cb).. 0.033
20. Monochlorohexafluoropropane (HCFC-226)... 0.02-0.10
21. Pentachlorofluoropropane (HCFC-231)...... 0.05-0.09
22. Tetrachlorodifluoropropane (HCFC-232).... 0.008-0.10
23. Trichlorotrifluoropropane (HCFC-233)..... 0.007-0.23
24. Dichlorotetrafluoropropane (HCFC-234).... 0.01-0.28
25. Monochloropentafluoropropane (HCFC-235).. 0.03-0.52
26. Tetrachlorofluoropropane (HCFC-241)...... 0.004-0.09
27. Trichlorodifluoropropane (HCFC-242)...... 0.005-0.13
28. Dichlorotrifluoropropane (HCFC-243)...... 0.007-0.12
29. Monochlorotetrafluoropropane (HCFC-244).. 0.009-0.14
30. Trichlorofluoropropane (HCFC-251)........ 0.001-0.01
31. Dichlorodifluoropropane (HCFC-252)....... 0.005-0.04
32. Monochlorotrifluoropropane (HCFC-253).... 0.003-0.03
33. Dichlorofluoropropane (HCFC-261)......... 0.002-0.02
34. Monochlorodifluoropropane (HCFC-262)..... 0.002-0.02
35. Monochlorofluoropropane (HCFC-271)....... 0.001-0.03
------------------------------------------------------------------------
a According to Annex C of the Montreal Protocol, ``Where a range of ODPs
is indicated, the highest value in that range shall be used for the
purposes of the Protocol. The ODPs listed as a single value have been
determined from calculations based on laboratory measurements. Those
listed as a range are based on estimates and are less certain. The
range pertains to an isomeric group. The upper value is the estimate
of the ODP of the isomer with the highest ODP, and the lower value is
the estimate of the ODP of the isomer with the lowest ODP.''
14. Appendix C to Subpart A is revised to read as follows:
Appendix C to Part 82 Subpart A.--Parties to the Montreal Protocol (as of June 14, 2002).
[Updated lists of Parties to the Protocol and the Amendments can be located at the website for UNEP's Ozone Secretariat. A check mark indicates
ratification/accession/acceptance/approval of the agreement.]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Montreal London Copenhagen Montreal Beijing
Foreign state protocol amendments amendments amendments amendments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Albania............................................................ Ö
Algeria............................................................ Ö
Ö
Ö
Angola............................................................. Ö
Antigua and Barbuda................................................ Ö
Ö
Ö Ö
Argentina.......................................................... Ö
Ö
Ö Ö
Armenia............................................................ Ö
Australia.......................................................... Ö
Ö
Ö Ö
Austria............................................................ Ö
Ö
Ö Ö
Azerbaijan......................................................... Ö
Ö
Ö Ö
Bahamas............................................................ Ö
Ö
Ö
Bahrain............................................................ Ö
Ö
Ö Ö
Bangladesh......................................................... Ö
Ö
Ö Ö
Barbados........................................................... Ö
Ö
Ö
Belarus............................................................ Ö
Ö
Belgium............................................................ Ö
Ö
Ö
Belize............................................................. Ö
Ö
Ö
Benin.............................................................. Ö
Ö
Ö
Bolivia............................................................ Ö
Ö
Ö Ö
Bosnia & Herzegovina............................................... Ö
Botswana........................................................... Ö
Ö
Ö
Brazil............................................................. Ö
Ö
Ö
Brunei Darussalam.................................................. Ö
Bulgaria........................................................... Ö
Ö
Ö Ö Ö
Burkina Faso....................................................... Ö
Ö
Ö
Burundi............................................................ Ö
Ö
Ö Ö Ö
Cambodia........................................................... Ö
Cameroon........................................................... Ö
Ö
Ö
Canada............................................................. Ö
Ö
Ö Ö Ö
Cape Verde......................................................... Ö
Ö
Ö Ö
Central African Republic........................................... Ö
Chad............................................................... Ö
Ö
Ö Ö
Chile.............................................................. Ö
Ö
Ö Ö Ö
China.............................................................. Ö
Ö
Colombia........................................................... Ö
Ö
Ö
Comoros............................................................ Ö
Ö
[[Page 2861]]
Congo.............................................................. Ö
Ö
Ö Ö Ö
Congo, Democratic Republic of...................................... Ö
Ö
Ö
Costa Rica......................................................... Ö
Ö
Ö
Cote d'Ivoire...................................................... Ö
Ö
Croatia............................................................ Ö
Ö
Ö Ö Ö
Cuba............................................................... Ö
Ö
Ö
Cyprus............................................................. Ö
Ö
Czech Republic..................................................... Ö
Ö
Ö Ö Ö
Denmark............................................................ Ö
Ö
Ö
Djibouti........................................................... Ö
Ö
Ö Ö
Dominica........................................................... Ö
Ö
Dominican Republic................................................. Ö
Ö
Ö
Ecuador............................................................ Ö
Ö
Ö
Egypt.............................................................. Ö
Ö
Ö Ö
El Salvador........................................................ Ö
Ö
Ö Ö
Equatorial Guinea..................................................
Estonia............................................................ Ö
Ö
Ö
Ethiopia........................................................... Ö
European Community................................................. Ö
Ö
Ö Ö Ö
Federated States of Micronesia..................................... Ö
Ö
Ö Ö Ö
Fiji............................................................... Ö
Ö
Ö
Finland............................................................ Ö
Ö
Ö Ö Ö
France............................................................. Ö
Ö
Ö
Gabon.............................................................. Ö
Ö
Ö Ö Ö
Gambia............................................................. Ö
Ö
Georgia............................................................ Ö
Ö
Ö Ö
Germany............................................................ Ö
Ö
Ö Ö
Ghana.............................................................. Ö
Ö
Ö
Greece............................................................. Ö
Ö
Ö
Grenada............................................................ Ö
Ö
Ö Ö
Guatemala.......................................................... Ö
Ö
Ö Ö Ö
Guinea............................................................. Ö
Ö
Guyana............................................................. Ö
Ö
Ö Ö
Haiti.............................................................. Ö
Ö
Ö Ö
Honduras........................................................... Ö
Ö
Ö
Hungary............................................................ Ö
Ö
Ö Ö Ö
Iceland............................................................ Ö
Ö
Ö Ö
India.............................................................. Ö
Ö
Indonesia.......................................................... Ö
Ö
Ö
Iran, Islamic Republic of.......................................... Ö
Ö
Ö Ö
Ireland............................................................ Ö
Ö
Ö
Israel............................................................. Ö
Ö
Ö
Italy.............................................................. Ö
Ö
Ö Ö
Jamaica............................................................ Ö
Ö
Ö
Japan.............................................................. Ö
Ö
Ö
Jordan............................................................. Ö
Ö
Ö Ö Ö
Kazakhstan......................................................... Ö
Ö
Kenya.............................................................. Ö
Ö
Ö Ö
Kiribati........................................................... Ö
Korea, Democratic People's Republic of............................. Ö
Ö
Ö Ö Ö
Korea, Republic of................................................. Ö
Ö
Ö Ö
Kuwait............................................................. Ö
Ö
Ö
Kyrgyzstan......................................................... Ö
Lao, People's Democratic Republic.................................. Ö
Latvia............................................................. Ö
Ö
Ö Ö
Lebanon............................................................ Ö
Ö
Ö Ö
Lesotho............................................................ Ö
Liberia............................................................ Ö
Ö
Ö
Libyan Arab Jamahiriya............................................. Ö
Ö
Liechtenstein...................................................... Ö
Ö
Ö
Lithuania.......................................................... Ö
Ö
Ö
Luxembourg......................................................... Ö
Ö
Ö Ö Ö
Macedonia, The Former Yugoslav Republic of......................... Ö
Ö
Ö Ö Ö
Madagascar......................................................... Ö
Ö
Ö Ö Ö
Malawi............................................................. Ö
Ö
Ö
Malaysia........................................................... Ö
Ö
Ö Ö Ö
Maldives........................................................... Ö
Ö
Ö Ö
Mali............................................................... Ö
Ö
Malta.............................................................. Ö
Ö
[[Page 2862]]
Marshall Islands................................................... Ö
Ö
Ö
Mauritania......................................................... Ö
Mauritius.......................................................... Ö
Ö
Ö
Mexico............................................................. Ö
Ö
Ö
Moldova............................................................ Ö
Ö
Ö
Monaco............................................................. Ö
Ö
Ö Ö
Mongolia........................................................... Ö
Ö
Ö Ö
Morocco............................................................ Ö
Ö
Ö
Mozambique......................................................... Ö
Ö
Ö
Myanmar............................................................ Ö
Ö
Namibia............................................................ Ö
Ö
Nauru.............................................................. Ö
Nepal.............................................................. Ö
Ö
Netherlands........................................................ Ö
Ö
Ö Ö Ö
New Zealand........................................................ Ö
Ö
Ö Ö Ö
Nicaragua.......................................................... Ö
Ö
Ö
Niger.............................................................. Ö
Ö
Ö Ö
Nigeria............................................................ Ö
Ö
Ö Ö
Norway............................................................. Ö
Ö
Ö Ö Ö
Oman............................................................... Ö
Ö
Ö
Pakistan........................................................... Ö
Ö
Ö
Palau.............................................................. Ö
Ö
Ö Ö Ö
Panama............................................................. Ö
Ö
Ö Ö Ö
Papua New Guinea................................................... Ö
Ö
Paraguay........................................................... Ö
Ö
Ö Ö
Peru............................................................... Ö
Ö
Ö
Philippines........................................................ Ö
Ö
Ö
Poland............................................................. Ö
Ö
Ö Ö
Portugal........................................................... Ö
Ö
Ö
Qatar.............................................................. Ö
Ö
Ö
Romania............................................................ Ö
Ö
Ö Ö
Russian Federation................................................. Ö
Ö
Rwanda............................................................. Ö
Saint Kitts & Nevis................................................ Ö
Ö
Ö Ö Ö
Saint Lucia........................................................ Ö
Ö
Ö Ö Ö
Saint Vincent and the Grenadines................................... Ö
Ö
Ö
Samoa.............................................................. Ö
Ö
Ö Ö Ö
Sao Tome and Principe.............................................. Ö
Ö
Ö Ö Ö
Saudi Arabia....................................................... Ö
Ö
Ö
Senegal............................................................ Ö
Ö
Ö Ö
Seychelles......................................................... Ö
Ö
Ö
Sierra Leone....................................................... Ö
Ö
Ö Ö Ö
Singapore.......................................................... Ö
Ö
Ö Ö
Slovakia........................................................... Ö
Ö
Ö Ö Ö
Slovenia........................................................... Ö
Ö
Ö Ö
Solomon Islands.................................................... Ö
Ö
Ö Ö
Somalia............................................................ Ö
Ö
Ö Ö Ö
South Africa....................................................... Ö
Ö
Ö
Spain.............................................................. Ö
Ö
Ö Ö Ö
Sri Lanka.......................................................... Ö
Ö
Ö Ö
Sudan.............................................................. Ö
Ö
Ö
Suriname........................................................... Ö
Swaziland.......................................................... Ö
Sweden............................................................. Ö
Ö
Ö Ö Ö
Switzerland........................................................ Ö
Ö
Ö
Syrian Arab Republic............................................... Ö
Ö
Ö Ö
Tajikistan......................................................... Ö
Ö
Tanzania, United Republic of....................................... Ö
Ö
Thailand........................................................... Ö
Ö
Ö
Togo............................................................... Ö
Ö
Ö Ö Ö
Tonga.............................................................. Ö
Trinidad and Tobago................................................ Ö
Ö
Ö Ö
Tunisia............................................................ Ö
Ö
Ö Ö
Turkey............................................................. Ö
Ö
Ö
Turkmenistan....................................................... Ö
Ö
Tuvalu............................................................. Ö
Ö
Ö Ö
Uganda............................................................. Ö
Ö
Ö Ö
Ukraine............................................................ Ö
Ö
Ö Ö
United Arab Emirates............................................... Ö
[[Page 2863]]
United Kingdom..................................................... Ö
Ö
Ö Ö Ö
United States of America........................................... Ö
Ö
Ö
Uruguay............................................................ Ö
Ö
Ö Ö
Uzbekistan......................................................... Ö
Ö
Ö
Vanuatu............................................................ Ö
Ö
Ö
Venezuela.......................................................... Ö
Ö
Ö Ö
Viet Nam........................................................... Ö
Ö
Ö
Yemen.............................................................. Ö
Ö
Ö Ö
Yugoslavia......................................................... Ö
Zambia............................................................. Ö
Ö
Zimbabwe........................................................... Ö
Ö
Ö
--------------------------------------------------------------------------------------------------------------------------------------------------------
15. Add Appendix L to read as follows:
Appendix L to Part 82 Subpart A--Parties to the Montreal Protocol That
Have Reported Production of HCFCs Since 1996 in Accordance With Article
7, paragraph 3, of the Montreal Protocol
Argentina
Australia
Brazil
Canada
China
France
Germany
Greece
India
Italy
Japan
Korea, Republic of
Mexico
Netherlands
Russian Federation
South Africa
Spain
United Kingdom
Venezuela
[FR Doc. 03-95 Filed 1-17-03; 8:45 am]
BILLING CODE 6560-50-P
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