[Federal Register Volume 59, Number 243 (Tuesday, December 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31232]


[[Page Unknown]]

[Federal Register: December 20, 1994]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 82

[FRL-5125-1]
RIN 2060-AD91

 

Protection of Stratospheric Ozone: Supplemental Rule To Amend 
Phaseout of Ozone-Depleting Substances To Include Potential Production 
Allowances for Methyl Bromide

AGENCY: Environmental Protection Agency.

ACTION: Final rule.

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SUMMARY: With this action, EPA allocates potential production 
allowances to producers who have baseline allowances for the production 
of methyl bromide. These potential production allowances are intended 
solely for the production of methyl bromide for export to Article 5 
countries, as defined under Article 5 of the Montreal Protocol on 
Substances that Deplete the Ozone Layer. In drafting the accelerated 
phaseout rule, which was published in the Federal Register on December 
10, 1993, the Agency inadvertently omitted methyl bromide from the list 
of chemicals for which potential production allowances were granted. 
Today's action correctly allocates potential production allowances for 
all control periods beginning January 1, 1994, and ending before 
January 1, 2001, equal to 10 percent of a company's baseline production 
allowances. The Agency may propose potential production allowances for 
methyl bromide for control periods after January 1, 2001, at a later 
date. Today's action makes the above-mentioned correction while 
maintaining the goals of the accelerated phaseout to protect human 
health and the environment.

EFFECTIVE DATE: December 20, 1994. Potential production allowances for 
methyl bromide are granted for the 1994 control period (which began 
January 1, 1994) and for control periods until January 1, 2001.

ADDRESSES: Materials relevant to this amendment to the accelerated 
phaseout of ozone-depleting substances are contained in Air Docket No. 
A-92-13 at U.S. Environmental Protection Agency, 401 M St., SW, 
Washington, DC 20460. The public docket is located in room M-1500, 
Waterside Mall (Ground Floor). Material may be inspected from 8 a.m. to 
5:30 p.m. Monday through Friday. A reasonable fee may be charged by EPA 
for copying docket materials. Information on this amendment can also be 
obtained from the Stratospheric Protection Information Hotline at 1-
800-296-1996.

FOR FURTHER INFORMATION CONTACT: The Stratospheric Protection 
Information Hotline at 1-800-296-1996 or Tom Land, Stratospheric 
Protection Division, Office of Atmospheric Programs, Office of Air and 
Radiation (6205J), 401 M Street SW., Washington, DC 20460, (202)-233-
9185.

I. Background

    When Parties to the Montreal Protocol on Substances that Deplete 
the Ozone Layer (the Protocol) first met in 1987, they agreed in 
Article 2H to allow additional production of controlled substances 
beyond the levels being set for the developed countries for developing 
countries. The United States, as well as other Parties to the Protocol, 
recognized the need to continue to supply controlled substances to 
developing countries during the period of scheduled reductions and for 
a limited time after the phaseout of production of controlled 
substances. Under Article 5 of the Protocol, developing countries are 
defined as Parties to the Protocol consuming less than 0.3 kilograms 
per capita of class I, Group I and II controlled substances. These 
Article 5 countries have limited resources to adopt alternative 
technologies to replace the phased out controlled substances. To ensure 
that such countries do not purchase the technologies to produce 
controlled substances and otherwise bypass controls on controlled 
substances, the Parties to the Protocol agreed to provide a set-aside 
level of production for Article 5 countries. Article 5 countries must 
ensure that these imported controlled substances are used to meet basic 
domestic needs.
    The Environmental Protection Agency (EPA) implements a program 
domestically that limits and monitors production and consumption of 
controlled substances, including methyl bromide. Production for Article 
5 countries in the United States is monitored by allocating potential 
production allowances to those companies that have baseline production 
allowances. Since 1989, EPA has allocated potential production 
allowances equal to 10 percent of baseline production allowances for 
specific controlled substances. EPA grants authorization to producers 
to convert potential production allowances to production allowances 
once they have exported to an Article 5 country. The July 30, 1992, 
Federal Register document (57 FR 3375), as well as the December 10, 
1993, Federal Register document (58 FR 65018), explains these controls, 
as well as the recordkeeping and reporting required for such 
transactions. The specific provisions governing production for, and 
export to, Article 5 countries are in Secs. 82.9 and 82.11. Appendix D 
of subpart A of 40 CFR part 82 contains a listing of Article 5 
countries.1
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    \1\EPA is drafting a final rule that amends the accelerated 
phaseout rule to adjust the dates relating to exports for Article 5 
countries. That final rule will also reflect today's amendments 
granting methyl bromide potential production allowances.
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II. Summary of Proposal

    In the October 14, 1994 proposal to grant potential production 
allowances for methyl bromide, EPA discussed the inadvertent omission 
of the allocation of these allowances in the final rule published 
December 10, 1993 (58 FR 65018). In drafting the December 10, 1993 
final rule, EPA focused on the level of control of methyl bromide and 
its phaseout, but inadvertently failed to allocate additional 
production allowances of methyl bromide for exports to Article 5 
countries. Due to this oversight, EPA proposed on October 14 to 
allocate potential production allowances to methyl bromide producers 
equal to 10 percent of their baseline production allowances beginning 
in the current control period (which began January 1, 1994). Because 
section 82.11 indicates that authorizations to convert potential 
production allowances to production allowances are valid during the 
control period in which the controlled substance departed the United 
States, companies may use these potential production allowances for 
methyl bromide only for the control period in which the shipment 
departed the United States. The 10 percent level of additional 
production for Article 5 countries would continue until the effective 
date of the phaseout of production of methyl bromide, January 1, 2001. 
Section 602(d) of the Clean Air Act Amendments of 1990 establishes the 
phaseout date for methyl bromide by stating that production may not 
extend beyond ``a date more than seven years after January 1 of the 
year after the year in which the substance is added to the list of 
class I substances.'' Methyl bromide was added to the list of class I 
substances in 1993. With this proposal, EPA is reserving action in 
allocating potential production allowances for control periods starting 
January 1, 2001, and beyond.

III. Comments on the Proposal

a. General Comments

    EPA received three comments on the proposed allocation of potential 
production allowances for methyl bromide. Two of these comments support 
the allocation of potential production allowances for methyl bromide 
for export to Article 5 countries.
    The two supporting comments agree with EPA's proposal stating that: 
``(1) The Agency has the legal authority to adopt this amendment; (2) 
there is a serious need for this amendment; and (3) this amendment will 
have no adverse environmental consequences.'' The legal authority to 
grant potential production allowances for methyl bromide was discussed 
in the proposal published October 14, 1994 (59 FR 52126). One of the 
two supporting comments acknowledged that, ``there is no contrary 
authority (within the Montreal Protocol or the Clean Air Act Amendments 
of 1990) to these provisions; therefore, EPA has the legal authority to 
promulgate this amendment to 40 CFR Part 82.''
    The two comments state, and EPA agrees, that the need for this 
amendment to allocate potential production allowances for methyl 
bromide stems from a need to maintain competitiveness in world markets 
for U.S. methyl bromide producers. Without the additional production 
allowances, U.S. companies are placed at a competitive disadvantage 
relative to other producers of methyl bromide in developed countries 
for the methyl bromide markets in Article 5 countries. The demand 
within Article 5 countries for methyl bromide is smaller than the 
potential global supply as currently allowed under the Montreal 
Protocol (100 percent of 1991 levels plus the 10 percent to meet basic 
domestic needs in Article 5 countries). Therefore, methyl bromide will 
be produced and exported to Article 5 countries, regardless of whether 
it is supplied by U.S. companies or another Party. EPA believes that it 
is important for U.S. producers of methyl bromide to continue to 
maintain their position in these markets as international contacts will 
enable U.S. companies to lead the global transition to alternative 
pesticides other than methyl bromide.
    The two comments state, and EPA agrees, that the allocation of 
potential production allowances to U.S. companies for the export of 
methyl bromide to Article 5 countries will not have a detrimental 
environmental impact. The allocation of potential production allowances 
for methyl bromide to U.S. companies will not change global emissions; 
nor will global emissions increase if such additional allowances are 
granted. Because the demand for methyl bromide from Article 5 countries 
is limited, the percent of methyl bromide that will be emitted during 
the use and application of methyl bromide will be the same, regardless 
of the supplier.
    The provisions in the Protocol for additional production to meet 
the basic domestic needs of Article 5 countries were included by the 
Parties for sound environmental policy reasons. The additional 
production provided in the U.S. by potential production allowances is 
designed to meet the basic domestic needs of Article 5 countries. The 
Parties felt it would be preferable to meet the basic domestic needs of 
Article 5 countries through production and exports from existing 
facilities than through construction of new production facilities in 
Article 5 countries. If Article 5 countries were to build new 
production facilities, the level of production would not be subject to 
the same controls as those in developed countries and more methyl 
bromide would potentially be produced over a longer time period because 
Article 5 countries have a 10-year grace period beyond the phaseout 
date for the various ozone-depleting substances.
    The third comment EPA received on the October 14, 1994, proposal 
was from an environmental group that also expressed support for the 
Montreal Protocol and the potential production allowances for Article 5 
countries. However, the commenter expressed concern about EPA's 
argument justifying the quantity of allowances allocated. EPA does not 
believe this is a valid concern as the quantity of allowances 
authorized to be allocated (the 10 percent additional production for 
export to Article 5 countries) is not set unilaterally by EPA, but is 
derived from provisions of the Protocol.
    The commenter also expressed concern with EPA's argument that if 
U.S. companies do not produce methyl bromide for Article 5 countries, 
another Party will. The commenter indicated that if this view is 
adopted by other Parties, it would encourage increased use and 
dependence on methyl bromide by Article 5 countries. EPA disagrees with 
these comments. As stated above, the potential global supply of methyl 
bromide far exceeds current demand in Article 5 countries. Therefore, 
there is no environmental benefit in denying U.S. companies the 10 
percent additional production which is granted under the Protocol. 
Protecting stratospheric ozone can only be achieved through a 
cooperative global effort and EPA does not wish to put U.S. companies 
at a disadvantage in competing in the global methyl bromide market 
unless there is an environmental benefit. In this case, EPA does not 
believe an environmental benefit would accrue from a lesser allocation 
of potential production allowances for methyl bromide. Furthermore, 
denying the potential production allowances intended by the Parties to 
the Protocol to be allocated to all producers of class I substances at 
the 10 percent rate would be disadvantage producers without evidence of 
significant environmental detriment.
    The third comment also urged EPA to revisit the issue and ``to 
craft a more stringent regulation regarding the production of methyl 
bromide for export to Article 5 countries.'' EPA believes that the 10 
percent allocation of potential production allowances for the export of 
methyl bromide to Article 5 countries in today's notice does not 
preclude future consideration of more stringent regulations for methyl 
bromide. In fact, EPA is continuing to analyze methyl bromide's role in 
stratospheric ozone depletion and the potential environmental and 
health benefits that could potentially be obtained through further 
regulatory controls.

b. Use of Allocation and Conversions During the Control Period

    In the proposal of October 14, 1994, EPA stated that the allocation 
of potential production allowances for Article 5 countries may be 
retroactive to the beginning of the control period starting January 1, 
1994. In this final action, EPA allocates potential production 
allowances for the control period starting January 1, 1994, to those 
companies with baseline production allowances for methyl bromide.
    EPA received a comment that further clarification is needed that 
conversions of potential production allowances into production 
allowances should also be made retroactive for the 1994 control period. 
As noted earlier, authorizations to convert potential production 
allowances to production allowances are valid during the control period 
in which the controlled substance was exported. Thus, EPA agrees with 
this comment and will process requests to convert potential production 
allowances to production allowances for exports that occurred in the 
1994 control period.
    EPA will process authorizations to convert potential production 
allowances into production allowances for exports that occur within the 
1994 control period (before midnight of December 31, 1994) as long as 
the paperwork is received by EPA before the final day of the first 
quarter of 1995. The current regulations refer to control periods and 
do not prohibit companies from seeking authorizations to convert for 
quantities of methyl bromide exported, as long as the export occurs in 
the same control period in which the production allowances are used. 
The export, conversion and use of the production allowances must all 
occur within the same control period. Therefore, a company that 
receives production allowances through a conversion during the first 
quarter of the year following the export will not be able to use these 
allowances for production, but may use them to ensure compliance for 
the control period in which the export occurred.

c. Production Levels

    With this amendment, EPA allocates to companies that produced 
methyl bromide in 1991 production up to 10 percent of their baseline 
allowances for Article 5 countries for the control periods starting 
January 1, 1994, and ending before January 1, 2001. EPA is setting the 
level at 10 percent to be consistent with Article 2H of the Montreal 
Protocol, and to be consistent with the approach used for all Class I 
controlled substances except for Group VII, the hydrobromofluorocarbons 
(no additional production for Article 5 countries is granted under the 
Protocol for these chemicals.)

d. Use of 1994 Potential Production Allowances

    EPA received a comment that requests a change in the procedures for 
the use of 1994 production allowances and/or consumption allowances for 
methyl bromide exports to Article 5 countries. The commenter makes two 
proposals to rectify the granting of potential production allowances 
late in the 1994 control period. The commenter requests that companies 
be able to use production allowances converted from 1994 potential 
production allowances for six months into 1995. As a less desirable 
alternative, the commenter suggests that, ``production using the 
converted potential production allowances could occur in the 1994 
control period without the requirement that consumption allowances be 
available at the time of production.''
    EPA disagrees with the suggestions for rectifying the late granting 
of potential production allowances in 1994 because the Protocol 
establishes strict limits on production for Parties to the Protocol for 
each control period. Therefore, EPA may not alter the definition of a 
control period, nor exceed the limits on production for a control 
period. EPA's regulations lay out a system for allocating production 
and consumption allowances in accordance with the Protocol to limit 
production and importation within control periods. Both production 
allowances and consumption allowances are needed simultaneously, to be 
able to produce within a control period. To extend the use of 
allowances from one control period into the following control period 
would be a violation of the United States commitments under the 
Montreal Protocol to limit production. EPA will also not allow 
production without consumption allowances. This would set an 
unacceptable precedent that is contrary to existing regulatory 
requirements and the Protocol. EPA suggests that the companies continue 
to apply for consumption allowances for exports to Article 5 countries 
and use these to produce in conjunction with existing production 
allowances and those requested for conversion from potential production 
allowances.
    A commenter added that the time taken to grant the conversion of 
potential production allowances to production allowances ``requires at 
least 3 weeks after the documentation is submitted to EPA.'' EPA 
believes that the average time taken to process a request to convert is 
five days and almost never exceeds ten working days.

e. Allocation After the Phaseout

    In the October 14, 1994 proposal, EPA reserved the right to 
allocate potential production allowances after the phaseout date for 
methyl bromide, starting January 1, 2001, and beyond. One comment was 
received suggesting EPA state an intention to allocate potential 
production allowance, at some level, after the U.S. phaseout date. EPA 
intends to analyze the role of methyl bromide in the depletion of 
stratospheric ozone as more scientific information is gathered over the 
next few years. EPA also intends to monitor global and U.S. production 
of methyl bromide and its use. At this time, EPA cannot predict the 
future actions relative to the post-phaseout period for methyl bromide. 
Based on the monitoring and analysis activities, EPA will continue to 
consider proposing an allocation of potential production allowances 
after the U.S. phaseout date for methyl bromide.

IV. Summary of Supporting Analysis

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 OMB review and the requirements of the 
Executive Order. The Order defines ``significant'' regulatory action as 
one that is likely to lead to a rule that may:
    (1) have an annual effect on the economy of $100 million or more, 
or adversely and materially affect 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 entitlement, 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 and EPA that this amendment to the 
final rule is not a ``significant regulatory action'' under the terms 
of Executive Order 12866 and is therefore not subject to OMB review.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601-602, requires that 
Federal agencies examine the impacts of their regulations on small 
entities. Under 5 U.S.C. 604(a), whenever an agency is required to 
publish a general notice of proposed rulemaking, it must prepare and 
make available for public comment an initial regulatory flexibility 
analysis (RFA). Such an analysis is not required if the head of an 
agency certifies that a rule will not have a significant economic 
impact on a substantial number of small entities, pursuant to 5 U.S.C. 
605(b).
    EPA believes that any impact that this amendment will have on the 
regulated community will serve only to provide relief from otherwise 
applicable regulations, and will therefore limit the negative economic 
impact associated with the regulations previously promulgated under 
Section 604 and 606. An examination of the impacts on small entities 
was discussed in the final rule (58 FR 65018 and 58 FR 69235). That 
final rule assessed the impact the rule may have on small entities. A 
separate regulatory impact analysis accompanied the final rule and is 
contained in Docket A-92-01. I certify that this amendment to the 
accelerated phaseout rule will not have any additional negative 
economic impacts on any small entities.

C. Paperwork Reduction Act

    Any information collection requirements in a rule must be submitted 
for approval to the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act, 44 U.S.C. 3501 et seq. Because no additional 
informational collection requirements are required by this amendment, 
EPA has determined that the Paperwork Reduction Act does not apply to 
this rulemaking and no new Information Collection Request document has 
been prepared.

List of Subjects in 40 CFR Part 82

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Chemicals, Chlorofluorocarbons, Exports, 
Reporting and recordkeeping requirements, Stratospheric ozone layer.

    Dated: December 13, 1994.
Carol Browner,
Administrator.

    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. Section 82.9 is amended by revising paragraphs (a) introductory 
text, (a)(1) and (a)(2) to read as follows:


Sec. 82.9  Availability of production allowances in addition to 
baseline production allowances.

    (a) Every person apportioned baseline production allowances for 
class I controlled substances under Sec. 82.5 (a) through (f) is also 
granted potential production allowances equal to:
    (1) 10 percent of his apportionment under Sec. 82.5 for each 
control period ending before January 1, 2000 (January 1, 2001 for 
methyl bromide); and
    (2) 15 percent of his apportionment under Sec. 82.5 for each 
control period beginning after December 31, 1999, and ending before 
January 1, 2011 (January 1, 2013 in the case of methyl chloroform; 
except for methyl bromide which is reserved).
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[FR Doc. 94-31232 Filed 12-19-94; 8:45 am]
BILLING CODE 6560-50-P