[Federal Register Volume 86, Number 95 (Wednesday, May 19, 2021)]
[Proposed Rules]
[Pages 27150-27223]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09545]
[[Page 27149]]
Vol. 86
Wednesday,
No. 95
May 19, 2021
Part II
Environmental Protection Agency
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40 CFR Parts 9 and 84
Phasedown of Hydrofluorocarbons: Establishing the Allowance Allocation
and Trading Program Under the American Innovation and Manufacturing
Act; Proposed Rule
Federal Register / Vol. 86 , No. 95 / Wednesday, May 19, 2021 /
Proposed Rules
[[Page 27150]]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 9 and 84
[EPA-HQ-OAR-2021-0044; FRL-10023-08-OAR]
RIN 2060-AV17
Phasedown of Hydrofluorocarbons: Establishing the Allowance
Allocation and Trading Program Under the American Innovation and
Manufacturing Act
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
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SUMMARY: The Environmental Protection Agency is proposing to issue
regulations to implement certain provisions of the American Innovation
and Manufacturing Act, as enacted on December 27, 2020. This rulemaking
proposes to: Establish the hydrofluorocarbon production and consumption
baselines based on historical data; establish the allowance allocation
program to phase down hydrofluorocarbon production and consumption;
determine an initial methodology to allocating allowances and allowing
for the transfer of those allowances; establish provisions for the
international transfer of allowances; establish requirements to support
compliance with phasing down hydrofluorocarbon production and
consumption; establish recordkeeping and reporting requirements;
release certain data to provide transparency and support implementation
of the program; and, address certain other elements related to the
effective implementation of the American Innovation and Manufacturing
Act. In addition to the proposed provisions, EPA is seeking advance
input on how the Agency may alter its determination of company-specific
allocations in later years. EPA is considering these issues, and
therefore is seeking public input on them, but is not making any
particular proposal in relation to them, and therefore will not
finalize any requirements on these topics before issuing a notice of
proposed rulemaking and requesting public comment.
DATES: Comments on this notice of proposed rulemaking must be received
on or before July 6, 2021. Under the Paperwork Reduction Act (PRA),
comments on the information collection provisions are best assured of
consideration if the Office of Management and Budget (OMB) receives a
copy of your comments on or before June 18, 2021. The Environmental
Protection Agency (EPA) will hold a virtual public hearing on June 3,
2021. The date, time, and other relevant information for the virtual
public hearing will be available at https://www.epa.gov/climate-hfcs-reduction.
ADDRESSES: You may send comments, identified by Docket ID No. EPA-HQ-
OAR-2021-0044, by any of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov
(our preferred method). Follow the online instructions for submitting
comments.
Mail: U.S. Environmental Protection Agency, EPA Docket
Center, Air and Radiation Docket, Mail Code 28221T, 1200 Pennsylvania
Avenue NW, Washington, DC 20460.
Hand Delivery or Courier (by scheduled appointment only):
EPA Docket Center, WJC West Building, Room 3334, 1301 Constitution
Avenue NW, Washington, DC 20004. The Docket Center's hours of
operations are 8:30 a.m.-4:30 p.m., Monday-Friday (except Federal
Holidays).
Instructions: All submissions received must include the Docket ID
No. for this rulemaking. Comments received may be posted without change
to https://www.regulations.gov, including any personal information
provided. EPA is temporarily suspending its Docket Center and Reading
Room for public visitors, with limited exceptions, to reduce the risk
of transmitting COVID-19. Our Docket Center staff will continue to
provide remote customer service via email, phone, and webform. We
encourage the public to submit comments via https://www.regulations.gov
as there may be a delay in processing mail. Hand deliveries and
couriers may be received by scheduled appointment only. For further
information on EPA Docket Center services and the current status,
please visit us online athttps://www.epa.gov/dockets.
You may find the following suggestions helpful for preparing your
comments: Direct your comments to specific sections of this proposed
rulemaking and note where your comments may apply to future separate
actions where possible; explain your views as clearly as possible;
describe any assumptions that you used; provide any technical
information or data you used that support your views; provide specific
examples to illustrate your concerns; offer alternatives; and, make
sure to submit your comments by the comment period deadline. Please
provide any published studies or raw data supporting your position.
Multimedia submissions (audio, video, etc.) must be accompanied by a
written comment. The written comment is considered the official comment
and should include discussion of all points you wish to make. EPA will
generally not consider comments or comment contents located outside of
the primary submission (e.g., on the web, cloud, or other file sharing
system).
If you produced, imported, exported, or destroyed
hydrofluorocarbons (HFCs) and were subject to the regulatory Greenhouse
Gas Reporting Program (GHGRP) \1\ requirements (under 40 CFR part 98)
and are seeking to provide EPA with your past HFC activity, you must
report that data to EPA's electronic Greenhouse Gas Reporting Tool (e-
GGRT) (https://ghgreporting.epa.gov/ghg/login.do). Companies that were
not subject to the GHGRP may also submit HFC activity through e-GGRT.
Information on how to report through e-GGRT in general is available at:
https://ccdsupport.com/confluence, and specific guidance on HFC
reporting is available at: https://ccdsupport.com/confluence/display/help/e-GGRT+and+HFC+Data+Reporting+related+to+AIM. EPA requests that
any company that reports on HFC activity to the GHGRP in response to
the requests in this proposed rule also submit a comment to the docket
noting the date that the company submitted the information to e-GGRT so
that EPA can more easily track such submissions.
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\1\ OMB Control No. 2060-0629.
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EPA recognizes that given the nature of this proposed rulemaking,
potentially affected entities may wish to submit Confidential Business
Information (CBI) or other confidential information. CBI should not be
submitted through https://www.regulations.gov. For submission of
confidential comments or data (e.g., information relevant to your
company's use of a hydrofluorocarbon in an application listed in
subsection (e)(4)(B)(iv) titled Mandatory Allocations), please work
with the person listed in the FOR FURTHER INFORMATION CONTACT section,
particularly if submitting a comment containing CBI. For additional
submission methods, the full EPA public comment policy, information
about CBI or multimedia submissions, and general guidance on making
effective comments, please visit https://www.epa.gov/dockets/commenting-epa-dockets.
FOR FURTHER INFORMATION CONTACT: Andy Chang, U.S. Environmental
Protection Agency, Stratospheric Protection Division, telephone number:
[[Page 27151]]
202-564-6658; or email address: [email protected]. You may also visit
EPA's website at https://www.epa.gov/climate-hfcs-reduction for further
information.
SUPPLEMENTARY INFORMATION: Throughout this document, whenever ``we,''
``us,'' ``the Agency,'' or ``our'' is used, we mean EPA. Acronyms that
are used in this rulemaking that may be helpful include:
AD/CVD--Anti-Dumping/Countervailing Duties
AIM Act--American Innovation and Manufacturing Act of 2020
ANPRM--Advanced Notice of Proposed Rulemaking
CAA--Clean Air Act
CBI--Confidential Business Information
CBP--Customs and Border Protection
CFC--Chlorofluorocarbon
CO2--Carbon Dioxide
DRE--Destruction and Removal Efficiency
e-GGRT--Electronic Greenhouse Gas Reporting Tool
EVe--Exchange Value Equivalent
GHG--Greenhouse Gas
GHGRP--Greenhouse Gas Reporting Program
GWP--Global Warming Potential
HCFC--Hydrochlorofluorocarbon
HFC--Hydrofluorocarbon
IPCC--Intergovernmental Panel on Climate Change
MDI--Metered Dose Inhaler
MMTCO2 eq--Million Metric Tons of Carbon Dioxide
Equivalent
MMTEVe--Million Metric Tons of Exchange Value Equivalent
MT--Metric tons
MTCO2 eq--Metric Tons of Carbon Dioxide Equivalent
MVAC--Motor Vehicle Air Conditioner
NAICS--North American Industry Classification System
NPRM--Notice of Proposed Rulemaking
NRC--National Research Council
ODP--Ozone Depletion Potential
ODS--Ozone-Depleting Substance
RIA--Regulatory Impact Analysis
SC-HFCs--Social Cost of HFCs
TRI--Toxics Release Inventory
USGCRP--U.S. Global Change Research Program
This supplementary information section is arranged as follows:
I. What is the background for this proposed action?
A. Does this proposed action apply to me?
B. What is the AIM Act, and what are its main areas of focus?
C. What are HFCs?
D. How do HFCs affect public health and welfare?
II. What is the summary of this proposed action?
III. How is EPA considering environmental justice?
IV. What definitions are proposed to implement the AIM Act?
A. What definitions is EPA proposing to adopt from 40 CFR 82.3
without substantive change?
B. What definitions is EPA proposing to adopt from 40 CFR 82.3
with substantive change?
C. What new definitions is EPA proposing?
V. How is EPA proposing to establish the HFC production and
consumption baselines?
A. What are the components of the production and consumption
baselines?
1. How is EPA proposing to determine the HFC component of the
production and consumption baselines?
(a) What is the GHGRP and what data are available from it?
(b) What outreach is EPA doing to collect data to fill known
gaps in the GHGRP?
2. What is the current HFC component of the production and
consumption baselines?
3. What are the HCFC and CFC components of the production and
consumption baselines?
B. What are the proposed HFC production and consumption
baselines?
VI. How is EPA proposing to establish allowances?
A. What is an allowance?
B. What are EPA's proposed options for determining allowances?
1. For which years is EPA proposing to issue allowances?
2. Based on currently available data, which companies is EPA
proposing to issue allowances to?
3. What is EPA's proposed framework for determining how many
allowances each company receives?
4. What is EPA's proposed framework for issuing allowances?
5. What process is EPA proposing to respond to requests for
additional consumption allowances?
C. What are EPA's proposals for the sectors to receive
application-specific allowances?
1. Overview of the Application-Specific Sectors
2. At which point in the application-specific sector production
process is EPA proposing to issue allowances?
3. How is EPA proposing to address transfers of application-
specific allowances?
4. What are the criteria EPA is proposing to use for evaluating
application-specific allowance requests?
D. What are EPA's proposed provisions for transferring
allowances?
E. What is EPA's proposed set aside pool of allowances?
F. What is EPA proposing to require for HFC-23 emission controls
for allowance holders?
VII. What other elements of the AIM Act is EPA addressing in this
proposed rulemaking?
A. How is EPA proposing to address international trades or
transfers of HFC allowances?
B. How is EPA proposing to address destruction of regulated
HFCs?
1. Which destruction technologies is EPA proposing to approve
for the destruction of regulated HFCs?
VIII. What enforcement and compliance provisions is EPA proposing?
A. What are the proposed administrative consequences available
to EPA with respect to allowances?
B. What practices could warrant EPA's proposed administrative
action for allowances?
1. Falsifying or Failing To Disclose Relevant Information
2. Compliance With the AIM Act
3. Violation of Department of Commerce and Customs and Border
Protection Trade Provisions
C. What process is EPA proposing to apply administrative
consequences for allowances?
D. What is EPA proposing for packaging and labeling
requirements?
1. Ban on Disposable Cylinders
2. Ban on Importing HFCs To Be Used in Feedstocks in Cylinders
3. Labeling
E. What is EPA proposing to require for auditing?
F. Petitions To Import HFCs as Feedstocks or for Destruction
G. How is EPA proposing to track the movement of HFCs in
commerce?
IX. What are the proposed recordkeeping and reporting requirements?
A. What generally applicable recordkeeping and reporting
provisions is EPA proposing?
B. What recordkeeping and reporting is EPA proposing that is
applicable to specific types of entities?
C. How is EPA proposing to coordinate AIM Act reporting with
other EPA reporting requirements?
D. How does EPA propose to release HFC data collected under the
AIM Act?
1. Which general data elements does EPA propose to release?
(a) Company-Level Production and Consumption Data
(b) Aggregated National Data
(c) Company-Specific Allowance Data
(d) Transfer Data
(e) Information Relevant to the Kigali Amendment and the
Montreal Protocol
X. What are the costs and benefits of this proposed action?
XI. What should EPA consider in future rulemakings?
A. How should EPA consider future allowance allocations?
B. How should EPA address the potential health effects of air
toxics associated with changes in the production of HFCs and
substitutes in a future rulemaking?
1. Adjustments to Transfer Offsets
2. Issuing Allowances at a Facility Level
3. Release of Relevant Facility Data
XII. Statutory and Executive Order Review
I. What is the background for this proposed action?
A. Does this proposed action apply to me?
You may be potentially affected by this proposal if you produce,
import, export, destroy, use as a feedstock, reclaim, or otherwise
distribute HFCs. You may also be potentially affected by this proposal
if you use HFCs to manufacture products, such as
[[Page 27152]]
refrigeration and air conditioning systems, foams, aerosols, and fire
suppression systems, and the six applications eligible for an
allocation under section (e)(4)(B)(iv) of the American Innovation and
Manufacturing Act of 2020 (AIM Act or the Act). Potentially affected
categories, North American Industry Classification System (NAICS)
codes, and examples of potentially affected entities are included in
Table 1.
Table 1--NAICS Classification of Potentially Affected Entities
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NAICS code NAICS industry description
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211120...................... Crude Petroleum Extraction.
221210...................... Natural Gas Distribution.
236118...................... Residential Remodelers.
236220...................... Commercial and Institutional Building
Construction.
238220...................... Plumbing, Heating, and
Air[dash]Conditioning Contractors.
238990...................... All Other Specialty Trade Contractors.
311351...................... Chocolate and Confectionery Manufacturing
from Cacao Beans.
322299...................... All Other Converted Paper Product
Manufacturing.
325120...................... Industrial Gas Manufacturing.
325180...................... Other Basic Inorganic Chemical
Manufacturing.
325199...................... All Other Basic Organic Chemical
Manufacturing.
325211...................... Plastics Material and Resin Manufacturing.
325320...................... Pesticide and Other Agricultural Chemical
Manufacturing.
325412*..................... Pharmaceutical Preparation Manufacturing.
325414*..................... Biological Product (except Diagnostic)
Manufacturing.
325992...................... Photographic Film, Paper, Plate and
Chemical Manufacturing.
325998...................... All Other Miscellaneous Chemical Product
and Preparation Manufacturing.
326150*..................... Urethane and Other Foam Product.
331420...................... Copper Rolling, Drawing, Extruding, and
Alloying.
332312...................... Fabricated Structural Metal Manufacturing.
332313...................... Plate Work Manufacturing.
333132...................... Oil and Gas Field Machinery and Equipment
Manufacturing.
333314...................... Optical Instrument and Lens Manufacturing.
333316...................... Photographic and Photocopying Equipment
Manufacturing.
333413...................... Industrial and Commercial Fan and Blower
and Air Purification Equipment
Manufacturing.
333415...................... Air[dash]Conditioning and Warm Air Heating
Equipment and Commercial and Industrial
Refrigeration Equipment Manufacturing.
333611...................... Turbine and Turbine Generator Set Unit
Manufacturing.
333996...................... Fluid Power Pump and Motor Manufacturing.
334413*..................... Semiconductor and Related Device
Manufacturing.
334419*..................... Other Electronic Component Manufacturing.
334515...................... Instrument Manufacturing for Measuring and
Testing Electricity and Electrical
Signals.
334516...................... Analytical Laboratory Instrument
Manufacturing.
334613...................... Blank Magnetic and Optical Recording Media
Manufacturing.
336212*..................... Truck Trailer Manufacturing.
336214*..................... Travel Trailer and Camper Manufacturing.
336411*..................... Aircraft Manufacturing.
336510...................... Railroad Rolling Stock Manufacturing.
336611*..................... Ship Building and Repairing.
336612*..................... Boat Building.
336992*..................... Military Armored Vehicle, Tank, and Tank
Component Manufacturing.
339999*..................... All Other Miscellaneous Manufacturing.
SIC 373102*................. Military Ships, Building, and Repairing.
423120...................... Motor Vehicle Supplies and New Parts
Merchant Wholesalers.
423450...................... Medical, Dental, and Hospital Equipment
and Supplies Merchant Wholesalers.
423460...................... Ophthalmic Goods Merchant Wholesalers.
423730...................... Warm Air Heating and Air[dash]Conditioning
Equipment and Supplies Merchant
Wholesalers.
423740...................... Refrigeration Equipment and Supplies
Merchant Wholesalers.
423830...................... Industrial Machinery and Equipment
Merchant Wholesalers.
423860*..................... Transportation Equipment and Supplies
(except Motor Vehicle) Merchant
Wholesalers.
423990*..................... Other Miscellaneous Durable Goods Merchant
Wholesalers.
424210...................... Drugs and Druggists' Sundries Merchant
Wholesalers.
424410...................... General Line Grocery Merchant Wholesalers.
424610...................... Plastics Materials and Basic Forms and
Shapes Merchant Wholesalers.
424690...................... Other Chemical and Allied Products
Merchant Wholesalers.
424910...................... Farm Supplies Merchant Wholesalers.
441310...................... Automotive Parts and Accessories Stores.
443141...................... Household Appliance Stores.
443142...................... Electronics Stores.
444130...................... Hardware Stores.
446191...................... Food (Health) Supplement Stores.
452311...................... Warehouse Clubs and Supercenters.
453998...................... All Other Miscellaneous Store Retailers
(except Tobacco Stores).
454110...................... Electronic Shopping and Mail-Order Houses.
481111...................... Scheduled Passenger Air Transportation.
482111...................... Line[dash]Haul Railroads.
488510...................... Freight Transportation Arrangement.
493110...................... General Warehousing and Storage.
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522293...................... International Trade Financing.
523130...................... Commodity Contracts Dealing.
531110...................... Lessors of Residential Buildings and
Dwellings.
531120...................... Lessors of Nonresidential Buildings
(except Miniwarehouses).
532420...................... Office Machinery and Equipment Rental and
Leasing.
541330...................... Engineering Services.
541519...................... Other Computer Related Services.
541715...................... Research and Development in the Physical,
Engineering, and Life Sciences (except
Nanotechnology and Biotechnology).
561210...................... Facilities Support Services.
561910...................... Packaging and Labeling Services.
561990...................... All Other Support Services.
562920...................... Recovery and Reclamation.
722511...................... Full-Service Restaurants.
811219...................... Other Electronic and Precision Equipment
Repair and Maintenance.
811412...................... Appliance Repair and Maintenance.
922160*..................... Fire Protection.
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* Codes marked with an asterisk may apply to sectors that receive
application-specific allowances under the AIM Act.
This table is not intended to be exhaustive, but rather provide a
guide for readers regarding entities likely to be affected by this
action. Other types of entities not listed in this section could also
be affected. If you have any questions regarding the applicability of
this action to a particular entity, consult the person listed under FOR
FURTHER INFORMATION CONTACT.
B. What is the AIM Act, and what are its main areas of focus?
On December 27, 2020, the AIM Act was enacted as section 103 in
Division S, Innovation for the Environment, of the Consolidated
Appropriations Act, 2021 (Pub. L. 116-260).\2\ The AIM Act directs EPA
to address HFCs by providing new authorities in three main areas: To
phase down the production and consumption of listed HFCs, manage these
HFCs and their substitutes, and facilitate the transition to next-
generation technologies by restricting use of these HFCs in the sector
or subsectors in which they are used. This rulemaking focuses on the
first area--the phasedown of the production and consumption of HFCs.
EPA anticipates that there will be future rulemakings including those
related to the latter two main areas, and therefore EPA is only
accepting comment on the first area in this proposed rulemaking.
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\2\ EPA is proposing to interpret the phrase ``under this
section'' in the AIM Act to refer to section 103 of the Consolidated
Appropriations Act, 2021, and thus to mean ``under the AIM Act.''
This approach would be consistent with the language included in the
Act, such as subsection (a) which states that ``[t]his section may
be cited as American Innovation and Manufacturing Act of 2020.''
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Subsection (e) of the AIM Act gives EPA authority to phase down the
production and consumption of listed HFCs through an allowance
allocation and trading program. The Act uses the term ``produce'' to
mean ``the manufacture \3\ of a regulated substance from a raw material
or feedstock chemical,'' but excludes from the definition destruction
of HFCs using approved technologies; reclamation, reuse, or recycling
of HFCs; and HFCs for transformation.\4\ The Act uses the term
``consumption'' to refer to the amount of HFCs produced in and imported
to the United States, subtracting the amount exported.
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\3\ While the AIM Act and the proposed definition in this rule
use the term ``manufacture'' in defining the term ``produce,'' in
implementing EPA's CAA Title VI programs the agency has historically
used the term ``production'' when referring to the manufacture of
chemicals and ``manufacture'' when referring to the manufacture of
equipment. EPA intends to continue using this framing when
describing production of chemicals and manufacture of equipment
under the AIM Act to help distinguish between the two activities.
\4\ The AIM Act uses the phrase ``a regulated substance that is
used and entirely consumed (except for trace quantities) in the
manufacture of another chemical'' instead of ``transformation'' in
this definition. The quoted phrase is the definition used in Part 82
for the term ``transform.'' The AIM Act subsequently uses the terms
``transformation'' and ``use as a feedstock'' interchangeably. These
two terms are intended to have the same meaning and are also used
interchangeably in this proposal.
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The Act lists 18 saturated HFCs, and by reference any of their
isomers not so listed, that are covered by the statute's provisions,
referred to as ``regulated substances'' under the Act. Congress also
assigned an ``exchange value'' 5 6 to each regulated
substance (along with other chemicals that are used to calculate the
baseline). The table in subsection (c)(1), reproduced here in Table 2,
lists the 18 regulated substances and their exchange values.
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\5\ EPA has determined that the exchange values included in
subsection (c) of the AIM Act are identical to the global warming
potentials (GWPs) included in IPCC (2007). EPA uses the terms
``global warming potential'' and ``exchange value'' interchangeably
in this proposal.
\6\ IPCC (2007): Solomon, S., D. Qin, M. Manning, R.B. Alley, T.
Berntsen, N.L. Bindoff, Z. Chen, A. Chidthaisong, J.M. Gregory, G.C.
Hegerl, M. Heimann, B. Hewitson, B.J. Hoskins, F. Joos, J. Jouzel,
V. Kattsov, U. Lohmann, T. Matsuno, M. Molina, N. Nicholls, J.
Overpeck, G. Raga, V. Ramaswamy, J. Ren, M. Rusticucci, R.
Somerville, T.F. Stocker, P. Whetton, R.A. Wood and D. Wratt, 2007:
Technical Summary. In: Climate Change 2007: The Physical Science
Basis. Contribution of Working Group I to the Fourth Assessment
Report of the Intergovernmental Panel on Climate Change [Solomon,
S., D. Qin, M. Manning, Z. Chen, M. Marquis, K.B. Averyt, M. Tignor
and H.L. Miller (eds.)]. Cambridge University Press, Cambridge,
United Kingdom and New York, NY, USA https://www.ipcc.ch/report/ar4/wg1.
Table 2--List of Regulated Substances and Their Exchange Values
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Exchange
Chemical name Common name value
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CHF2CHF2........................ HFC-134.................... 1,100
CH2FCF3......................... HFC-134a................... 1,430
CH2FCHF2........................ HFC-143.................... 353
CHF2CH2CF3...................... HFC-245fa.................. 1,030
CF3CH2CF2CH3.................... HFC-365mfc................. 794
CF3CHFCF3....................... HFC-227ea.................. 3,220
CH2FCF2CF3...................... HFC-236cb.................. 1,340
CHF2CHFCF3...................... HFC-236ea.................. 1,370
CF3CH2CF3....................... HFC-236fa.................. 9,810
CH2FCF2CHF2..................... HFC-245ca.................. 693
CF3CHFCHFCF2CF3................. HFC-43-10mee............... 1,640
CH2F2........................... HFC-32..................... 675
CHF2CF3......................... HFC-125.................... 3,500
CH3CF3.......................... HFC-143a................... 4,470
CH3F............................ HFC-41..................... 92
CH2FCH2F........................ HFC-152.................... 53
CH3CHF2......................... HFC-152a................... 124
CHF3............................ HFC-23..................... 14,800
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The AIM Act requires EPA to phase down the consumption and
production of the statutorily listed HFCs on an exchange value-weighted
basis according to the schedule stated in (e)(2)(C) as outlined in
Table 3, beginning on January 1 of each year.
[[Page 27154]]
Table 3--Phasedown Schedule
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Percentage of Percentage of
Date production consumption
baseline baseline
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2020-2023............................... 90 90
2024-2028............................... 60 60
2029-2033............................... 30 30
2034-2035............................... 20 20
2036 and thereafter..................... 15 15
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The AIM Act requires that the EPA Administrator ensure the annual
quantity of all regulated substances produced or consumed \7\ in the
United States does not exceed the applicable percentage listed for the
production or consumption baseline.
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\7\ In the context of allocating and expending allowances, EPA
interprets the word ``consume'' as the verb form of the defined term
``consumption.'' For example, subsection (e)(2)(A), states the
phasedown consumption prohibition as ``no person shall . . . consume
a quantity of a regulated substance without a corresponding quantity
of consumption allowances.'' While a common usage of the word
``consume'' means ``use,'' EPA does not believe that Congress
intended for everyone who charges an appliance or fills an aerosol
can with an HFC to expend allowances.
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In order to execute this statutory directive, EPA must determine
both a production and consumption baseline from which the yearly
targets are calculated. The AIM Act provides formulas for how to set a
baseline. The equations are composed of an HFC component, a
hydrochlorofluorocarbon (HCFC) component, and a chlorofluorocarbon
(CFC) component. Specifically, EPA is directed to calculate the
production baseline by adding: (i) The average annual quantity of all
regulated substances produced in the United States from January 1,
2011, through December 31, 2013, and (ii) 15 percent of the production
level of HCFCs in calendar year 1989, and (iii) 0.42 percent of the
production level of CFCs in calendar year 1989.
EPA is directed to calculate the consumption baseline by adding:
(i) The average annual quantity of all regulated substances consumed in
the United States from January 1, 2011, through December 31, 2013, and
(ii) 15 percent of the consumption level of HCFCs in calendar year
1989, and (iii) 0.42 percent of the consumption level of CFCs in
calendar year 1989. To implement the directive that the production and
consumption of regulated substances in the United States does not
exceed the statutory targets, the AIM Act in subsection (e)(3) requires
EPA to issue regulations within 270 days of the Act's enactment
establishing an allowance allocation and trading program to phase down
the production and consumption of the listed HFCs. These allowances are
limited authorizations for the production or consumption of regulated
substances. Subsection (e)(2)(D) directs EPA to ``determine the
quantity of allowances for the production and consumption of regulated
substances that may be used for the following calendar year'' by
October 1 each year. Subsection (e)(2) of the Act has a general
prohibition that no person \8\ shall produce or consume a quantity of
regulated substances in the United States without a corresponding
quantity of allowances. Also within 270 days, EPA is directed in
subsection (g) to establish regulations governing the transfer of
production and consumption of allowances. Subsection (e)(2)(A) also
provides that no person shall hold, use, or transfer an allocated
production or consumption allowance except in accordance with the
transfer regulations. Under subsection (g), the transfer regulations
are to use the applicable exchange values and ``ensure that the
transfers . . . will result in greater total reductions'' in production
and consumption ``than would occur during the year in the absence of
the transfers.''
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\8\ Under the Act's term, this general prohibition applies to
any ``person.'' Because EPA anticipates that the parties that
produce or consume HFCs--and that would thus be subject to the Act's
production and consumption controls--are companies or other
entities, we frequently use those terms to refer to regulated
parties in this proposal. Using this shorthand, however, does not
alter the applicability of the Act's requirements and prohibitions.
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Subsection (e)(4)(B)(iv) of the Act requires EPA to allocate
allowances sufficient to meet the full quantity needed for production
and consumption for six specific applications for five years following
enactment. EPA is to determine the necessary allowance amount for these
applications ``based on projected, current, and historical trends.''
The six statutorily listed applications are: Propellants in metered-
dose inhalers; defense sprays (e.g., bear spray); structural composite
preformed polyurethane foam for marine use and trailer use; etching of
semiconductor material or wafers and the cleaning of chemical vapor
deposition (CVD) chambers within the semiconductor manufacturing
sector; mission-critical military end uses; and on board aerospace fire
suppression. The allowances EPA allocates for these applications are
for the ``exclusive use'' in one of the six applications.
Subsection (j) of the AIM Act speaks to international cooperation.
Of particular relevance to this rulemaking, subsection (j)(4) requires
EPA to promulgate a rule by December 27, 2021, to carry out the
subsection. The AIM Act outlines several restrictions and requirements
governing international transfers of production allowances in
subsections (j)(1) and (j)(2) and also provides some discretionary
authority to EPA in (j)(3) regarding the effect of such transfers on
production limits.
In subsection (k)(1)(A), the AIM Act provides EPA with the
authority to promulgate necessary regulations to carry out EPA's
functions under the Act, including its obligations to ensure that the
Act's requirements are satisfied. The Act also states that Clean Air
Act (CAA) sections 113, 114, 304, and 307 apply to the AIM Act and any
regulations EPA promulgates under the AIM Act as though the AIM Act
were part of Title VI of the CAA. Accordingly, this rulemaking is
subject to CAA section 307(d) (42 U.S.C. 7607(d)(1)(I)) (CAA section
307(d) applies to ``promulgation or revision of regulations under
subchapter VI of this chapter (relating to stratosphere and ozone
protection)'').
In addition, although there is limited legislative history
available on the AIM Act, Congress is generally presumed to legislate
with an awareness of the existing law that is pertinent to enacted
legislation. Given the similarities in the text, structure, and
function of the production and consumption phasedown provisions of the
AIM Act and EPA's program phasing out ozone-depleting substances (ODS)
under Title VI of the CAA,\9\ EPA finds it reasonable to build on its
experience phasing out ODS when developing the AIM Act's HFC allowance
allocation and trading program, while also recognizing that there are
areas where the AIM Act's requirements diverge from the text and
framework of Title VI of the CAA. For example, EPA uses the
recordkeeping and reporting provisions that the Agency has refined over
time in the ODS context as the starting point for the proposed
recordkeeping and reporting requirements in this rule. There are many
instances where the definitions and structure are either identical or
have only slight differences. For example, the definitions of
``import'' in the AIM Act and section 601 of the CAA are materially
similar though they have slightly different phrasing. In at least some
instances, Congress adopted language in the AIM Act that matches EPA's
implementation approach for
[[Page 27155]]
ODS production and consumption controls under CAA Title VI as reflected
in 40 CFR part 82, subpart A. For example, the definition for
``produce'' in the AIM Act mirrors the parallel definition in CAA
section 601 in many respects, but in contrast to the CAA definition,
the AIM Act explicitly excludes the destruction of regulated substances
using technologies approved by the Administrator from being counted in
production. While the CAA definition does not explicitly exclude
destruction from production, EPA's regulatory definition for
``production'' in 40 CFR 82.3 does exclude destruction from being
counted as production. Throughout this proposed rulemaking, EPA
explains how the Agency is relying on and building from its experience
implementing the ODS phaseout provisions in the CAA and its
implementing regulations where such considerations are relevant to
creating the framework structure for the AIM Act's required HFC
allowance allocation and trading program. Given EPA's extensive
experience phasing out ODS under similar CAA authority for a regulated
community that bears marked resemblance to entities that could be
impacted by the rulemaking, reliance on EPA's expertise will help
achieve the goals outlined by Congress in implementing the AIM Act.
---------------------------------------------------------------------------
\9\ EPA's well-established regulatory program at 40 CFR part 82,
subpart A, provides for the allocation of ODS production and
consumption allowances, implementing the ODS production and
consumption controls of Title VI of the CAA and facilitating an
orderly phaseout.
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C. What are HFCs?
HFCs are intentionally produced \10\ fluorinated chemicals that
have no known natural sources. HFCs are used in the same applications
that ODS have historically been used in, such as refrigeration and air
conditioning, foam blowing agents, solvents, aerosols, and fire
suppression. HFCs are potent greenhouse gases (GHGs) with 100-year
global warming potentials (GWPs) (a measure of the relative climatic
impact of a GHG) that can be hundreds to thousands of times more potent
than carbon dioxide (CO2).
---------------------------------------------------------------------------
\10\ While the overwhelming majority of HFC production is
intentional, EPA is aware that HFC-23 can be a byproduct associated
with the production of other chemicals, including but not limited to
HCFC-22.
---------------------------------------------------------------------------
Although HFCs represent a small fraction (~1.5 percent) of the
current total GWP-weighted amount of GHG emissions,\11\ their use is
growing worldwide due to the global phaseout of ODS under the Montreal
Protocol on Substances that Deplete the Ozone Layer (Montreal
Protocol), and the increasing use of refrigeration and air-conditioning
equipment globally. HFC emissions had previously been projected to
increase substantially over the next several decades, but global
adherence to the Kigali Amendment to the Montreal Protocol (Kigali
Amendment) would substantially reduce future emissions, leading to a
peaking of HFC emissions before 2040.\12\
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\11\ World Meteorological Organization (WMO), Scientific
Assessment of Ozone Depletion: 2018, World Meteorological
Organization, Global Ozone Research and Monitoring Project--Report
No. 58, 67 pp., Geneva, Switzerland, 2018. https://ozone.unep.org/sites/default/files/2019-05/SAP-2018-Assessment-report.pdf
\12\ Ibid
---------------------------------------------------------------------------
Atmospheric observations of most currently measured HFCs confirm
their amounts are increasing in the global atmosphere at accelerating
rates. Total emissions of HFCs increased by 23 percent from 2012 to
2016 and the four most abundant HFCs in the atmosphere, in GWP-weighted
terms, are HFC-134a, HFC-125, HFC-23, and HFC-143a.\13\
---------------------------------------------------------------------------
\13\ Ibid.
---------------------------------------------------------------------------
In 2016, HFCs accounted for a radiative forcing of 0.025 W/m\2\,
not including additional forcing from HFC-23 of 0.005 W/m\2\: this is a
36 percent increase in total HFC forcing relative to 2012. This
radiative forcing was projected to increase an order of magnitude to
0.25 W/m\2\ by 2050, not including additional forcing from HFC-23. In
2016, in Kigali, Rwanda, countries agreed to adopt an amendment to the
Montreal Protocol, known as the Kigali Amendment, which outlines a
global phasedown of the production and consumption of HFCs. If the
Kigali Amendment were to be fully implemented, it is expected to reduce
the future radiative forcing due to HFCs (excluding HFC-23) to 0.13 W/
m\2\ in 2050, a reduction of about 50 percent compared to the radiative
forcing projected in the baseline scenario of uncontrolled HFCs.\14\
---------------------------------------------------------------------------
\14\ Ibid.
---------------------------------------------------------------------------
There are hundreds of possible HFC compounds. The 18 HFCs listed as
regulated substances by the AIM Act are some of the most commonly used
HFCs and have high impacts as measured by the quantity emitted
multiplied by their respective GWPs. These 18 HFCs are all saturated,
meaning they have only single bonds between their atoms and therefore
have longer atmospheric lifetimes.
In the United States, HFCs are primarily used in refrigeration and
air-conditioning equipment in homes, commercial buildings, and
industrial operations (~75 percent of total HFC use in 2018) and in air
conditioning in vehicles and refrigerated transport (~8 percent).
Smaller amounts are used in foam products (~11 percent), aerosols (~4
percent), fire protection systems (~1 percent) and solvents (~1
percent).\15\
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\15\ Calculations based on EPA's Vintaging Model, which
estimates the annual chemical emissions from industry sectors that
historically used ODS, including refrigeration and air-conditioning,
foam blowing agents, solvents, aerosols, and fire suppression. The
model uses information on the market size and growth for each end
use, as well as a history and projections of the market transition
from ODS to alternatives. The model tracks emissions of annual
``vintages'' of new equipment that enter into operation by
incorporating information on estimates of the quantity of equipment
or products sold, serviced, and retired or converted each year, and
the quantity of the compound required to manufacture, charge, and/or
maintain the equipment. Additional information on these estimates is
available in U.S. EPA, April 2016. EPA Report EPA-430-R-16-002.
Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2014.
Available at https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2014.
---------------------------------------------------------------------------
EPA considered the emissions reductions from an HFC phasedown in
the United States and presented the results in the 2016 Biennial Report
to the United Nations Framework Climate Change Convention (UNFCCC).\16\
At the time, EPA provided a reductions estimate of 113 million metric
tons of carbon dioxide equivalent (MMTCO2e) of reduced U.S.
HFC emissions associated with the implementation of an amendment
proposal submitted in 2015 by the United States, Canada, and Mexico
that was under consideration by the parties to the Montreal Protocol
and was very similar to the Kigali Amendment. While the Kigali
Amendment ultimately adopted under the Montreal Protocol has certain
marked differences from the AIM Act, given the two documents have a
nearly identical list of HFCs to be phased down following the same
schedule, the 2016 Biennial Report provides useful information. The
Biennial Report included estimates for HFC actions under CAA section
612 modeled in the 2016 Current Measures. HFC emissions reductions
through additional measures in 2020 and 2025 relative to the 2016
Current Measures scenario were presented under the Additional Measures
scenario and included both options for continued action under the CAA
and the implementation of an HFC phasedown in the United States, which
is similar to the requirements of the AIM Act with an earlier start
date.\17\ The
[[Page 27156]]
emissions reductions for the Additional Measures were estimated to be
63 MMTCO2e in 2020 and 113 MMTCO2e in 2025.
---------------------------------------------------------------------------
\16\ U.S. Department of State. Second Biennial Report of the
United States of America Under the United Nations Framework
Convention on Climate Change. Washington, DC, 2016. Web. 15 March
2021. http://unfccc.int/national_reports/biennial_reports_and_iar/submitted_biennial_reports/items/7550.php
\17\ The ``Current Measures'' scenario in the Biennial Report
included HFC reductions estimated under a final rule EPA issued on
July 20, 2015, which, among, other things, changed listings for
certain HFCs and blends from acceptable to unacceptable in various
end uses in the aerosols, refrigeration and air conditioning, and
foam blowing sectors. The ``Additional Measures'' scenario in the
Biennial Report included additional actions, some of which were
included in a final rule EPA issued on December 1, 2016, that EPA
anticipated under a proposed amendment to the Montreal Protocol to
phase down HFC production and consumption. Since the 2016 Biennial
Report, after a challenge to the 2015 rule, the U.S. Court of
Appeals for the D.C. Circuit (``the court'') issued a partial
vacatur of the 2015 rule ``to the extent it requires manufacturers
to replace HFCs with a substitute substance,'' and remanded the rule
to EPA for further proceedings. Later, the court issued a similar
decision on portions of the final rule issued December 1, 2016. See
Mexichem Fluor, Inc. v. EPA, 866 F.3d 451, 462 (D.C. Cir. 2017); see
also Mexichem Fluor, Inc. v. EPA, Judgment, Case No. 17-1024 (D.C.
Cir., April 5, 2019), 760 Fed. Appx. 6 (Mem).
---------------------------------------------------------------------------
D. How do HFCs affect public health and welfare?
Elevated concentrations of GHGs including HFCs have been warming
the planet, leading to changes in the Earth's climate including changes
in the frequency and intensity of heat waves, precipitation, and
extreme weather events, rising seas, and retreating snow and ice. The
changes taking place in the atmosphere as a result of the well-
documented buildup of GHGs due to human activities are changing the
climate at a pace and in a way that threatens human health, society,
and the natural environment. While EPA does not need to make any
particular scientific or factual findings in order to regulate HFCs
under the AIM Act's phasedown provisions, in this section, EPA is
providing some scientific background on climate change to offer
additional context for this rulemaking and to help the public
understand the environmental impacts of GHGs such as HFCs.
Extensive additional information on climate change is available in
the scientific assessments and the EPA documents that are briefly
described in this section, as well as in the technical and scientific
information supporting them. One of those documents is EPA's 2009
Endangerment and Cause or Contribute Findings for Greenhouse Gases
Under Section 202(a) of the CAA (74 FR 66496, December 15, 2009).\18\
In the 2009 Endangerment Finding, the Administrator found under section
202(a) of the CAA that elevated atmospheric concentrations of six key
well-mixed GHGs--CO2, methane (CH4), nitrous
oxide (N2O), HFCs, perfluorocarbons (PFCs), and sulfur
hexafluoride (SF6)--``may reasonably be anticipated to
endanger the public health and welfare of current and future
generations'' (74 FR 66523). The 2009 Endangerment Finding, together
with the extensive scientific and technical evidence in the supporting
record, documented that climate change caused by human emissions of
GHGs (including HFCs) threatens the public health of the U.S.
population. It explained that by raising average temperatures, climate
change increases the likelihood of heat waves, which are associated
with increased deaths and illnesses (74 FR 66497). While climate change
also increases the likelihood of reductions in cold-related mortality,
evidence indicates that the increases in heat mortality will be larger
than the decreases in cold mortality in the United States (74 FR
66525). The 2009 Endangerment Finding further explained that compared
with a future without climate change, climate change is expected to
increase tropospheric ozone pollution over broad areas of the United
States, including in the largest metropolitan areas with the worst
tropospheric ozone problems, and thereby increase the risk of adverse
effects on public health (74 FR 66525). Climate change is also expected
to cause more intense hurricanes and more frequent and intense storms
of other types and heavy precipitation, with impacts on other areas of
public health, such as the potential for increased deaths, injuries,
infectious and waterborne diseases, and stress-related disorders (74 FR
66525). Children, the elderly, and the poor are among the most
vulnerable to these climate-related health effects (74 FR 66498).
---------------------------------------------------------------------------
\18\ In describing these 2009 Findings in this proposal, EPA is
neither reopening nor revisiting them.
---------------------------------------------------------------------------
The 2009 Endangerment Finding also documented, together with the
extensive scientific and technical evidence in the supporting record,
that climate change touches nearly every aspect of public welfare \19\
in the United States with resulting economic costs, including: Changes
in water supply and quality due to changes in drought and extreme
rainfall events; increased risk of storm surge and flooding in coastal
areas and land loss due to inundation; increases in peak electricity
demand and risks to electricity infrastructure; and the potential for
significant agricultural disruptions and crop failures (though offset
to some extent by carbon fertilization). These impacts are also global
and may exacerbate problems outside the United States that raise
humanitarian, trade, and national security issues for the United States
(74 FR 66530).
---------------------------------------------------------------------------
\19\ The CAA states in section 302(h) that ``[a]ll language
referring to effects on welfare includes, but is not limited to,
effects on soils, water, crops, vegetation, manmade materials,
animals, wildlife, weather, visibility, and climate, damage to and
deterioration of property, and hazards to transportation, as well as
effects on economic values and on personal comfort and well-being,
whether caused by transformation, conversion, or combination with
other air pollutants.'' 42 U.S.C. 7602(h).
---------------------------------------------------------------------------
In 2016, the Administrator similarly issued Endangerment and Cause
or Contribute Findings for greenhouse gas emissions from aircraft under
section 231(a)(2)(A) of the CAA (81 FR 54422).\20\ In the 2016
Endangerment Finding, the Administrator found that the body of
scientific evidence amassed in the record for the 2009 Endangerment
Finding compellingly supported a similar endangerment finding under CAA
section 231(a)(2)(A), and also found that the science assessments
released between the 2009 and the 2016 Findings ``strengthen and
further support the judgment that GHGs in the atmosphere may reasonably
be anticipated to endanger the public health and welfare of current and
future generations'' (81 FR 54424).
---------------------------------------------------------------------------
\20\ In describing these 2016 Findings in this proposal, EPA is
neither reopening nor revisiting them.
---------------------------------------------------------------------------
Since the 2016 Endangerment Finding, the climate has continued to
change, with new records being set for several climate indicators such
as global average surface temperatures, greenhouse gas concentrations,
and sea level rise. Additionally, major scientific assessments continue
to be released that further improve our understanding of the climate
system and the impacts that GHGs have on public health and welfare both
for current and future generations. These updated observations and
projections document the rapid rate of current and future climate
change both globally and in the United States.21 22 23 24
---------------------------------------------------------------------------
\21\ USGCRP, 2018: Impacts, Risks, and Adaptation in the United
States: Fourth National Climate Assessment, Volume II [Reidmiller,
D.R., C.W. Avery, D.R. Easterling, K.E. Kunkel, K.L.M. Lewis, T.K.
Maycock, and B.C. Stewart (eds.)]. U.S. Global Change Research
Program, Washington, DC, USA, 1515 pp. doi: 10.7930/NCA4.2018.
https://nca2018.globalchange.gov.
\22\ Roy, J., P. Tschakert, H. Waisman, S. Abdul Halim, P.
Antwi-Agyei, P. Dasgupta, B. Hayward, M. Kanninen, D. Liverman, C.
Okereke, P.F. Pinho, K. Riahi, and A.G. Suarez Rodriguez, 2018:
Sustainable Development, Poverty Eradication and Reducing
Inequalities. In: Global Warming of 1.5[deg]C. An IPCC Special
Report on the impacts of global warming of 1.5[deg]C above pre-
industrial levels and related global greenhouse gas emission
pathways, in the context of strengthening the global response to the
threat of climate change, sustainable development, and efforts to
eradicate poverty [Masson-Delmotte, V., P. Zhai, H.-O. P[ouml]rtner,
D. Roberts, J. Skea, P.R. Shukla, A. Pirani, W. Moufouma-Okia, C.
P[eacute]an, R. Pidcock, S. Connors, J.B.R. Matthews, Y. Chen, X.
Zhou, M.I. Gomis, E. Lonnoy, T. Maycock, M. Tignor, and T.
Waterfield (eds.)]. In Press. https://www.ipcc.ch/sr15/chapter/chapter-5.
\23\ National Academies of Sciences, Engineering, and Medicine.
2019. Climate Change and Ecosystems. Washington, DC: The National
Academies Press. https://doi.org/10.17226/25504.
\24\ NOAA National Centers for Environmental Information, State
of the Climate: Global Climate Report for Annual 2020, published
online January 2021, retrieved on February 10, 2021, from https://www.ncdc.noaa.gov/sotc/global/202013.
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[[Page 27157]]
II. What is the summary of this proposed action?
In this rulemaking, EPA is proposing to: Establish the HFC
production and consumption baselines based on historical data;
establish the allowance allocation program to phase down HFC production
and consumption; determine an initial approach to allocating calendar-
year allowances and allowing for the transfer of those allowances;
establish provisions for the international transfer of allowances;
establish recordkeeping and reporting requirements; release certain
data to provide transparency and support implementation of the program;
and, address certain other elements related to the effective
implementation of the AIM Act.
The AIM Act directs EPA to issue a final rule by September 23,
2021, to provide for the phasedown of the production and consumption of
HFCs through an allowance allocation and trading program. This
rulemaking, when finalized, is intended to fulfill that statutory
directive. Additionally, under the AIM Act, by October 1 of each
calendar year, EPA must calculate and determine the quantity of
production and consumption allowances for the following year. Thus, by
October 1, 2021, EPA must calculate and determine the quantity of
production and consumption allowances for 2022. EPA intends to issue
allowances for the 2022 calendar year no later than October 1, 2021,
using the procedure established through this rulemaking. EPA proposes
that this be a single year allocation and intends to issue individual
allowances for the 2023 calendar year no later than October 1, 2022,
using the procedure established through this rulemaking. The AIM Act
further directs EPA to promulgate by September 23, 2021, a regulation
governing the transfer of production and consumption allowances, and
EPA is herein proposing regulatory requirements related to this
statutory directive. The AIM Act also directs EPA to issue by December
27, 2021, regulations related to the international transfer of
production allowances. EPA is herein proposing regulatory requirements
related to this statutory directive as well.
EPA is proposing to establish a regulatory framework under the
statutory timelines required by the AIM Act, but also acknowledges at
the outset that we intend to revisit how to allocate allowances for
2024 and beyond and further build out aspects of the program. To
accurately reflect that intention in this rule, EPA is proposing that
the initial approach for determining allowance allocations that EPA
would establish in this framework rule be time-limited. This would
necessitate completion of another notice-and-comment rulemaking prior
to October 1, 2023, to issue allowances for calendar year 2024 and
later years. As a result, section XI of this preamble, which includes
an ANPRM, explains ideas the Agency is considering for a separate
future rulemaking that will address the criteria/framework for issuing
allowances for 2024 and later years. Given high baseline health risks
related to air toxics in communities near facilities that produce HFCs,
EPA is seeking input in sections III and XI (the ANPRM) on whether
there are potential environmental justice concerns that could be
affected by the phasedown of HFCs, allowance transfers, and/or the
production of substitutes. EPA is also seeking input on ways to ensure
that these elevated risks not be further exacerbated by changes in the
use patterns for production of HFCs or their substitutes. The Agency is
soliciting comments on the concepts introduced in the ANPRM but is not
proposing any action associated with those elements in this rulemaking.
Instead, any comments received on elements of the ANPRM will be taken
under advisement by the Agency and incorporated, as appropriate, in
future and separate rulemakings with an opportunity for public comment
prior to finalization of any provisions.
EPA estimates that in 2022 the annual net benefits are $2.6
billion, reflecting compliance costs of $200 million and social
benefits of $2.8 billion. In 2036, when the final phasedown step is
reached at 15 percent of the statutorily defined HFC baseline, the
estimated annual net benefits are $17.9 billion. The present value of
cumulative net benefits evaluated from 2022 through 2050 is $283.9
billion at a three percent discount rate or $278.6 billion at a seven
percent discount rate.\25\ The present value of net benefits are
calculated over the 29-year period from 2022-2050 to account for the
years that emissions will be reduced following the consumption
reductions from 2022-2036. Over the 15-year period of the phasedown of
HFCs, at a three percent discount rate the present value of cumulative
compliance costs are negative $5 billion, or $5 billion in savings, the
present value of cumulative social benefits is $103.6 billion, and the
present value of cumulative net benefits is $108.2 billion. Evaluated
at a seven percent discount rate, the present value of cumulative
compliance costs are negative $3 billion, or $3 billion in savings, and
the present value of cumulative net benefits is $106.6 billion. Climate
benefits are based on changes (reductions) in HFC emissions and are
calculated using four different estimates of the social cost of HFCs
(SC-HFCs) (model average at 2.5 percent, 3 percent, and 5 percent
discount rates; and 95th percentile at 3 percent discount rate). The
benefits presented in this paragraph are the benefits associated with
the average SC-HFC at a 3 percent discount rate, but the Agency does
not have a single central SC-HFC point estimate. The Interagency
Working Group on the Social Cost of Greenhouse Gases (IWG) emphasized
the importance and value of considering the benefits calculated using
all four estimates.
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\25\ All values for costs and benefits in this section are given
in 2020 dollars and are calculated by discounting future costs and
benefits to 2022 using a three percent discount rate. Calculations
using other discount rates and discussion of the impact of the
discount rate are found in the Regulatory Impact Analysis.
---------------------------------------------------------------------------
As summarized further in section X of the preamble and described
more fully in the Regulatory Impact Analysis (RIA) for this proposed
rulemaking, EPA's analysis indicates the principal costs (or savings)
result from industry transitioning to substitute chemicals and
technology. The principal benefits result from a decrease in emissions
of HFCs into the atmosphere and the corresponding effects on global
warming. The benefits are monetized by using the Social Cost of HFCs
(SC-HFCs). SC-HFCs is estimated using a method consistent with the
method used to estimate the Social Cost of Greenhouse Gases (SC-GHGs).
An alternative method was also considered which estimates SC-HFCs by
using the GWP (or exchange value) of HFCs and scaling to the known
social cost of another GHG, e.g., CO2, CH4, or
N2O.
III. How is EPA considering environmental justice?
Executive Order 12898 (59 FR 7629; February 16, 1994) and Executive
Order 14008 (86 FR 7619; January 27, 2021) establish federal executive
policy on
[[Page 27158]]
environmental justice. Executive Order 12898's main provision directs
federal agencies, to the greatest extent practicable and permitted by
law, to make environmental justice part of their mission by identifying
and addressing, as appropriate, disproportionately high and adverse
human health or environmental effects of their programs, policies, and
activities on minority populations and low-income populations in the
United States. EPA defines environmental justice as the fair treatment
and meaningful involvement of all people regardless of race, color,
national origin, or income with respect to the development,
implementation, and enforcement of environmental laws, regulations, and
policies.\26\ Meaningful involvement means that: (1) Potentially
affected populations have an appropriate opportunity to participate in
decisions about a proposed activity that will affect their environment
and/or health; (2) the public's contribution can influence the
regulatory Agency's decision; (3) the concerns of all participants
involved will be considered in the decision-making process; and (4) the
rule-writers and decision-makers seek out and facilitate the
involvement of those potentially affected.\27\ The term
``disproportionate impacts'' refers to differences in impacts or risks
that are extensive enough that they may merit Agency action. In
general, the determination of whether there is a disproportionate
impact that may merit Agency action is ultimately a policy judgment
which, while informed by analysis, is the responsibility of the
decision-maker. The terms ``difference'' or ``differential'' indicate
an analytically discernible distinction in impacts or risks across
population groups. It is the role of the analyst to assess and present
differences in anticipated impacts across population groups of concern
for both the baseline and proposed regulatory options, using the best
available information (both quantitative and qualitative) to inform the
decision-maker and the public.\28\
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\26\ See, e.g., ``Environmental Justice.'' Epa.gov,
Environmental Protection Agency, 4 Mar. 2021, www.epa.gov/environmentaljustice.
\27\ The criteria for meaningful involvement are contained in
EPA's May 2015 guidance document
``Guidance on Considering Environmental Justice During the
Development of an Action.'' Epa.gov, Environmental Protection
Agency, 17 Feb. 2017, www.epa.gov/environmentaljustice/guidance-considering-environmental-justice-during-development-action.
\28\ The definitions and criteria for ``disproportionate
impacts,'' ``difference,'' and ``differential'' are contained in
EPA's June 2016 guidance document ``Technical Guidance for Assessing
Environmental Justice in Regulatory Analysis.'' Epa.gov,
Environmental Protection Agency, https://www.epa.gov/sites/production/files/2016-06/documents/ejtg_5_6_16_v5.1.pdf.
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A regulatory action may involve potential environmental justice
concerns if it could: (1) Create new disproportionate impacts on
minority populations, low-income populations, and/or indigenous
peoples; (2) exacerbate existing disproportionate impacts on minority
populations, low-income populations, and/or indigenous peoples; or (3)
present opportunities to address existing disproportionate impacts on
minority populations, low-income populations, and/or indigenous peoples
through the action under development.
Executive Order 14008 calls on agencies to make achieving
environmental justice part of their missions ``by developing programs,
policies, and activities to address the disproportionately high and
adverse human health, environmental, climate-related and other
cumulative impacts on disadvantaged communities, as well as the
accompanying economic challenges of such impacts.'' Executive Order
14008 further declares a policy ``to secure environmental justice and
spur economic opportunity for disadvantaged communities that have been
historically marginalized and overburdened by pollution and under-
investment in housing, transportation, water and wastewater
infrastructure, and health care.'' In addition, the Presidential
Memorandum on Modernizing Regulatory Review calls for procedures to
``take into account the distributional consequences of regulations,
including as part of a quantitative or qualitative analysis of the
costs and benefits of regulations, to ensure that regulatory
initiatives appropriately benefit, and do not inappropriately burden
disadvantaged, vulnerable, or marginalized communities.'' EPA also
released its June 2016 ``Technical Guidance for Assessing Environmental
Justice in Regulatory Analysis'' (2016 Technical Guidance) to provide
recommendations that encourage analysts to conduct the highest quality
analysis feasible, recognizing that data limitations, time and resource
constraints, and analytic challenges will vary by media and
circumstance.
As described elsewhere in this notice, this rule proposes to
establish the framework for, and begin, the United States' phasedown of
HFCs, which is projected to achieve significant benefits by reducing
production and consumption of certain chemicals with high GWPs. Section
I.D. of this proposal briefly summarizes the public health and welfare
effects of GHG emissions (including HFCs) as documented in EPA's 2009
and 2016 Endangerment Findings. As part of these Endangerment Findings,
the Administrator considered climate change risks to minority
populations and low-income populations, finding that certain parts of
the population may be especially vulnerable based on their
characteristics or circumstances, including the poor, the elderly, the
very young, those already in poor health, the disabled, those living
alone, and/or indigenous populations dependent on one or limited
resources due to factors including but not limited to geography,
access, and mobility.
More recent assessment reports by the U.S. Global Change Research
Program (USGCRP), the Intergovernmental Panel on Climate Change (IPCC),
and the National Research Council (NRC) of the National Academies
demonstrate that the potential impacts of climate change raise
environmental justice issues. These reports concluded that poorer
communities can be especially vulnerable to climate change impacts
because they tend to have more limited adaptive capacities and are more
dependent on climate-sensitive resources such as local water and food
supplies. In corollary, some communities of color, specifically
populations defined jointly by both ethnic/racial characteristics and
geographic location, may be uniquely vulnerable to climate change
health impacts in the United States. Native American tribal communities
possess unique vulnerabilities to climate change, particularly those
impacted by degradation of natural and cultural resources within
established reservation boundaries and threats to traditional
subsistence lifestyles. Tribal communities whose health, economic well-
being, and cultural traditions that depend upon the natural environment
will likely be affected by the degradation of ecosystem goods and
services associated with climate change. The Technical Support Document
for the 2009 Endangerment Finding also specifically noted that
Southwest native cultures are especially vulnerable to water quality
and availability impacts, and Native Alaskan communities are already
experiencing disruptive impacts, including coastal erosion and shifts
in the range or abundance of wild species crucial to their livelihoods
and well-being.
As alluded to elsewhere in this proposal, and detailed in the RIA,
which can be found in the docket for this rulemaking, the provisions in
this proposed rulemaking as part of the phasedown of HFCs in the United
States
[[Page 27159]]
would, if finalized, achieve significant benefits associated with
reducing climate change. However, as described in the RIA and
summarized below, there is significant uncertainty about how the
phasedown of HFC production, the issuance of allowances, and market
trends independent of this proposed rulemaking could affect production
of HFCs and HFC substitutes--and associated air pollution emissions--at
individual facilities, particularly in communities that are
disproportionately burdened by air pollution. EPA is soliciting comment
and/or data or other information in section XI that could help reduce
the potential for inadvertent or unexpected distributional effects from
this program, including the potential for environmental justice
concerns due to the release of toxic chemicals that are feedstocks,
catalysts, or byproducts in the production of HFCs or HFC substitutes.
More specifically, EPA is seeking comment on whether changes in
emissions, particularly in communities that are already
disproportionately affected by air pollution, could occur as the result
of the HFC phasedown, the associated ability to transfer allowances, or
other unrelated changes in the market. EPA also seeks comment on
whether there are remedies that could be applied as part of the design
of the program in the event the Agency determines such unintended
distributional impacts exist. In addition, EPA solicits comment on
whether other regulatory authorities would be more appropriate to
address any inadvertent or unexpected distributional effects that are
identified, for example, if a producer obtained allowances in
sufficient quantities to grow HFC production, which could potentially
increase air emissions at that location. In such instances, where other
authorities may be a more appropriate avenue, EPA expects that effects
would be addressed through that avenue outside of AIM Act regulatory
processes under timelines appropriate to those other programs.
EPA intends to develop another rule before allowances are allocated
for calendar year 2024 that may alter the framework and procedure for
issuing allowance allocations and could possibly address any identified
environmental justice concerns past the year 2023. The HFC phasedown
schedule prescribed by Congress may also reduce the potential for a
facility to increase emissions above current levels for a prolonged
period. EPA notes that this rule affects a small number of entities
through a distinct allocation program, and that these entities
manufacture a wide variety of products and are subject to a number of
distinct market and regulatory forces independent of this HFC program.
As such, the issues identified here and possible remedies may not be
broadly applicable or practicable in other rulemakings.
A reasonable starting point for assessing the need for a more
detailed environmental justice analysis is to review the available
evidence from the published literature and from community input on what
factors may make population groups of concern more vulnerable to
adverse effects (e.g., cumulative exposure from multiple stressors),
including but not limited to the 2009 and 2016 Endangerment Findings
and the reports from USGCRP, IPCC, and NRC. It is also important to
evaluate the data and methods available for conducting an environmental
justice analysis.
EPA's 2016 Technical Guidance does not prescribe or recommend a
specific approach or methodology for conducting an environmental
justice analysis, though a key consideration is consistency with the
assumptions underlying other parts of the regulatory analysis when
evaluating the baseline and regulatory options. Where applicable and
practicable, the Agency's Regulatory Impact Analysis, available in the
docket for this rulemaking, examines certain metrics for an
environmental justice analysis comprising more than just climate change
effects, including: The proximity of companies receiving allowances to
minority populations, low-income populations, and/or indigenous
peoples; the number of companies receiving allowances that may be
impacting population groups of concern; the nature, amounts, and
location of regulated HFC production that may impact population groups
of concern; and potential exposure pathways associated with the
production of the regulated HFCs or with chemicals used as feedstocks,
catalysts, or byproducts of HFC production unique to particular
populations (e.g., workers). The environmental justice analysis is
described in the RIA and is based on public data from the Toxics
Release Inventory (TRI), GHGRP, EJSCREEN (an environmental justice
mapping and screening tool developed by EPA), Enforcement and
Compliance History Online (ECHO), and Census data. The analysis of
potential environmental justice concerns focuses mainly on
characterizing baseline emissions of air toxics that are also
associated with chemical feedstock use for HFC production. As noted in
the RIA, there is uncertainty around the role that HFC production plays
in emissions of these air toxics. In addition, EPA conducted a
proximity analysis to examine community characteristics within one and
three miles of these facilities. The relatively small number of
facilities affected by the proposed rule has enabled EPA to assemble a
uniquely granular assessment of the characteristics of these facilities
and the communities where they are located.
Overall, this rule would reduce GHG emissions, which would benefit
populations that may be especially vulnerable to damages associated
with climate change. However, the manner in which producers transition
from high-GWP HFCs could drive changes in future risk for communities
living near facilities that produce HFCs, to the extent the use of
toxic feedstocks, byproducts, or catalysts changes and those chemicals
are released into the environment with adverse local effects. The
environmental justice analysis, which examines racial and economic
demographic and health risk information, finds heterogeneity in
community characteristics around individual facilities. The analysis
shows that the total baseline cancer risk and total respiratory risk
from air toxics (not all of which stem from HFC production) varies, but
is generally higher, and in some cases much higher, within one to three
miles of a HFC production facility. The analysis also finds that higher
percentages of low income and Black or African American individuals
live near several HFC production facilities compared with the
appropriate national and state level average. It is not clear the
extent to which these baseline risks are directly related to HFC
production, but some HFC production feedstocks, catalysts, and
byproducts are toxic, particularly with respect to potential
carcinogenicity (e.g., carbon tetrachloride, tetrachloroethylene,
trichloroethylene, etc.). Additionally, some HFC alternatives, e.g.,
HFOs, use the same chemicals as feedstocks in their production or
released as byproducts, potentially raising concerns about local
exposure to them. However, given limited information regarding where
substitutes will be produced and what other factors might affect
production and emissions at those locations, it is unclear to what
extent this proposed rule would affect baseline risks from hazardous
air toxics for communities living near HFC production facilities. EPA
requests commenters provide data or other information to help better
characterize these changes and their implications for
[[Page 27160]]
nearby communities for analysis of the final rule.
As discussed, EPA's preliminary analysis of potential environmental
justice concerns is contained in the RIA, which is available in the
docket, as well as information on non-production releases (as defined
by TRI), water releases, and off-site disposal for chemicals used in
HFC production. EPA seeks input on the environmental justice analysis
contained in the RIA, as well as broader input on other health and
environmental risks the Agency should assess. To support the
development of comments, EPA is seeking data or analysis to identify
whether it is reasonable to expect net increases in emissions; and if
so how we might isolate the impacts of this program (i.e., effects
resulting from the phasedown itself, the trading of production
allowances, or some other factor) that would enable the Agency to
conduct a more nuanced analysis of changes in releases associated with
chemical feedstocks and byproducts for HFC substitutes, given the
inherent uncertainty regarding where, and in what quantities,
substitutes will be produced. EPA is also seeking comment on whether
there are other regulatory tools better suited than adjustments to the
HFC program design to address potential increases in emissions in non-
HFC feedstocks and byproducts observed at facilities subject to the
Congressionally mandated phasedown of HFCs under the AIM Act, if any.
EPA is also soliciting comment on key assumptions underlying the
environmental justice analysis. In addition to the questions asked in
this section III, EPA is also soliciting input in section XI on what
mechanisms the Agency could consider to prevent or mitigate any
increase in exposure to air toxics emissions from facilities located
near high risk communities, including from the proposed provisions
relating to transfer of allowances. EPA invites readers to refer to
section XI for that discussion.
IV. What definitions are proposed to implement the AIM Act?
EPA is proposing to establish definitions that would implement the
framework for the AIM Act generally and the allowance allocation and
trading program specifically. Where possible, EPA is proposing to adopt
definitions as written in 40 CFR part 82, subpart A, with modifications
if needed to conform to differences in the AIM Act.
A. What definitions is EPA proposing to adopt from 40 CFR 82.3 without
substantive change?
EPA is proposing to adopt definitions for the following defined
terms as used in 40 CFR 82.3 with only those changes that are needed to
conform with the AIM Act. These defined terms are used in the same or
substantially similar manner as in the ODS phaseout under the CAA. In
many instances, the only proposed change to the definition of a term is
to replace ``controlled substances'' with ``regulated substances,'' as
the latter is the term used to describe HFCs in the AIM Act. In other
instances, EPA is not including citations to 40 CFR part 82, subpart A,
that were found in those definitions but that are not directly relevant
for implementing the AIM Act. Because there is significant overlap
between the regulated community of the AIM Act and those who partook in
the ODS phaseout under Title VI of the CAA, maintaining the same
definitions, where consistent with AIM Act requirements, would provide
certainty to those that have been using and are familiar with these
terms from the ODS phaseout experience. EPA welcomes comment on whether
any of these terms should be updated or modified.
These terms are: Administrator, Central Data Exchange, Consumption,
Consumption allowances, Export, Exporter, Foreign country, Heel,
Importer, Individual shipment, Non-objection notice, Person, Production
allowances, Source facility, Transform, Transhipment, and Used
regulated substances.
B. What definitions is EPA proposing to adopt from 40 CFR 82.3 with
substantive change?
EPA is proposing to adopt the definitions for the following defined
terms as written in 40 CFR 82.3 with some changes necessary to align
the definition with the AIM Act beyond those described in the previous
section. The terms are: Confer, Destruction, Facility, Import, Metered
Dose Inhaler (MDI), and Reclaim.
Destruction. EPA is proposing to define destruction as ``the
expiration of a regulated substance to the destruction and removal
efficiency actually achieved. Such destruction might result in a
commercially useful end product, but such usefulness would be secondary
to the act of destruction.'' Inclusion of the second sentence clarifies
that the listed technologies in proposed section 84.29 that are
conversion technologies are included within the proposed definition for
destruction and are not considered transformation. Unlike the
definition for this term in 40 CFR part 82, subpart A, EPA is proposing
not to distinguish between destruction and completely destroy. The
Agency expects that all destruction of regulated substances occurs at
98 percent or greater, which was the definition for ``completely
destroy.'' EPA is also proposing that the new definition not include a
reference to the Parties. Lastly, in place of the part 82 list of
approved technologies, EPA is proposing to list the technologies
approved by the Administrator in Sec. 84.29.
Confer. EPA is proposing to define this term as ``to shift
unexpended application-specific allowances obtained in accordance with
subsection (e)(4)(B)(iv) of the AIM Act from the end user allocated
such allowances to another entity for the production or import of a
regulated substance for use by the end user.'' This proposed term is
intended to distinguish conferring an allowance, which is not subject
to an offset, from an allowance transfer, which is subject to an
offset.
Facility. EPA is proposing to define this term in 40 CFR part 84 to
mean ``one or more production lines at the same location owned by or
under common control of the same person.'' This is similar to the
definition of ``plant'' in 40 CFR part 82. This would align the
definition of ``facility'' more closely with definitions used in other
CAA regulatory programs, including the GHGRP. As discussed in the
following section of the preamble, EPA is creating a new definition
``production line'' that has the same meaning as the definition of
``facility'' in 40 CFR part 82.
Import. EPA is proposing to adopt the definition of the term
``import'' contained in subsection (b) of the AIM Act, which is nearly
identical to the definition of ``import'' in 40 CFR part 82, and add
one of the three exemptions from the part 82 definition. EPA is
proposing to include an exemption for the off-loading of used regulated
substances from a ship during servicing. This occurs, for example, when
a foreign ship's refrigeration system is serviced in a U.S. port and
refrigerant that is recovered from that system is offloaded for
reclamation or destruction. The alternatives would be requiring
shipping companies to hold allowances or store the used refrigerant on
board until reaching another country. Issuing allowances to shipping
companies would be impractical as servicing can happen unexpectedly to
any type of vessel and EPA does not have data on which to base an
allocation. Prohibiting offloading is potentially problematic because
it could result in venting of the
[[Page 27161]]
refrigerant when the ship is offshore rather than the proper
reclamation or disposal that is required under EPA's refrigerant
management regulations at 40 CFR part 82, subpart F.
Metered dose inhaler. EPA is proposing to define MDIs as ``a
handheld pressurized inhalation system that delivers small, precisely
measured therapeutic doses of medication directly to the airways of a
patient. MDIs treat health conditions such as asthma and chronic
obstructive pulmonary disease and are approved for such use by the U.S.
Food and Drug Administration (FDA).'' This definition is substantially
similar to the definition of ``essential metered dose inhaler'' in 40
CFR part 82 (except that the part 82 definition refers to a
determination of essentiality by either the Parties to the Montreal
Protocol or the FDA).
Reclaim. EPA is proposing to define reclaim as ``the reprocessing
of regulated substances to all of the specifications in appendix A of
40 CFR part 82, subpart F (based on AHRI Standard 700-2016) that are
applicable to that regulated substance and to verify that the regulated
substance meets these specifications using the analytical methodology
prescribed in section 5 of appendix A of 40 CFR part 82, subpart F.''
C. What new definitions is EPA proposing?
Subsection (b) of the AIM Act defines some specific terms and the
Act as a whole introduces other new terms that it does not define. EPA
is proposing to establish definitions for a number of new terms that
are relevant for the allowance allocation and trading program. These
terms are: Allowance, Application-specific allowance, Bulk, Chemical
vapor deposition chamber cleaning, Defense spray, Etching, Exchange
value, Exchange value equivalent, Final customer, Mission-critical
military end uses, On board aerospace fire suppression, Process agent,
Production/Produce, Production line, Regulated substance, and
Structural composite preformed polyurethane foam.
Allowance. The AIM Act defines allowance as a limited authorization
for the production or consumption of a regulated substance established
under subsection (e). EPA is proposing to adopt that definition and add
that an allowance allocated under this subsection does not constitute a
property right as stated in subsection (e)(2)(D)(ii)(aa) and that an
allowance allocated under the authority of the AIM Act can be retired,
revoked, or withheld at the discretion of the relevant Agency official.
EPA notes that the framework for issuing allowances is subject to
change through notice and comment rulemaking.
Application-specific allowance. EPA is proposing to establish a new
category of allowances that would be issued only to entities in the six
listed applications at (e)(4)(B)(iv) of the AIM Act. EPA is proposing
to define this term as ``a limited authorization granted in accordance
with subsection (e)(4)(B)(iv) of the AIM Act for the production or
import of a regulated substance for use in the specifically identified
applications that are listed in that subsection and in accordance with
the restrictions contained at Sec. 84.5(c). An application-specific
allowance does not constitute a property right and can be retired,
revoked, or withheld at the discretion of the relevant Agency
official.''
Bulk. EPA is proposing to define this term as ``a regulated
substance of any amount that is in a container for the transportation
or storage of that substance such as cylinders, drums, ISO tanks, and
small cans. A regulated substance that must first be transferred from a
container to another container, vessel, or piece of equipment in order
to realize its intended use is a bulk substance. A regulated substance
contained in a manufactured product such as an appliance, an aerosol
can, or a foam is not a bulk substance.'' EPA is proposing to define
this term so as to distinguish between a regulated substance that is in
a container from a regulated substance that is in a product or other
type of use system. The examples provided in the definition are not
exclusive.
Chemical vapor deposition chamber cleaning. EPA is proposing to
define this term as, ``in the context of semiconductor manufacturing, a
process type in which chambers used for depositing thin films are
cleaned periodically using plasma-generated fluorine atoms and other
reactive fluorine-containing fragments.'' This definition is closely
based on the source category definition for electronics manufacturing
in the GHGRP (40 CFR 98.90(a)(2)).
Defense spray. EPA is proposing to define this term as ``an
aerosol-based spray used for self-defense, including pepper spray and
animal sprays, and containing the irritant capsaicin and related
capsaicinoids (derived from oleoresin capsicum), an emulsifier, and an
aerosol propellant.'' EPA is taking comment on whether this definition
is inclusive of defense sprays potentially covered by subsection
(e)(4)(B)(iv) of the AIM Act.
Etching. EPA is proposing to define etching as, ``in the context of
semiconductor manufacturing, a process type that uses plasma-generated
fluorine atoms and other reactive fluorine-containing fragments that
chemically react with exposed thin-films (e.g., dielectric, metals) or
substrate (e.g., silicon) to selectively remove portions of material.''
This definition is closely based on the definition of the electronics
manufacturing source category in the GHGRP (40 CFR 98.90(a)(1)).
Exchange value. The AIM Act defines ``exchange value'' as the value
assigned to a regulated substance in accordance with subsections (c)
and (e), as applicable. Subsection (c) includes a list of regulated
substances with listed exchange values. Subsection (e) includes a list
of ODS with listed exchange values. EPA is proposing to adopt the
definition contained in the AIM Act, including the tables, which EPA
would replicate in Appendix A of 40 CFR part 84.
Exchange value equivalent. This proposal also uses the term
``exchange value equivalent'' or ``EVe'' to provide a common unit of
measure. EPA is proposing to define EVe to be determined by multiplying
the mass of a regulated substance by the exchange value of that
substance. For example, 50 kilograms of HFC-134a would be 71,500 kgEVe
(50 x 1,430). This can also be written as 71.5 metric tons exchange
value equivalent (MTEVe). EPA is proposing to issue allowances in units
of one MTEVe. This proposal also uses the term ``EV-weighted'' to
describe a number presented in exchange value equivalents. For example,
EPA is proposing that the size of an allowance be one EV-weighted ton.
EVe allows for the comparison between, and calculation with,
different regulated substances. For example, a blend containing
multiple regulated substances would have an EVe that could be used to
determine the quantity of allowances needed to produce or consume the
regulated HFCs that are components of the blend. However, the EVe would
only reflect the components of the blend that are regulated substances
under the AIM Act. In situations where the blend contains components
that are not regulated substances (e.g., hydrofluoroolefins or HFOs),
the EVe would not match the GWP of the blend and would be slightly
lower. This would be the case for blends
[[Page 27162]]
R-448A,\29\ R-449A, and R-450A, which contain a mix of HFCs and HFOs.
---------------------------------------------------------------------------
\29\ There are a number of different blends that contain HFCs
and non-regulated substances such as HFOs. As an example, the blend
R-448A is made of five components, three of which are HFCs regulated
under the AIM Act and two HFOs. The percentage of the blend and the
exchange value of the constituents are: 26 percent HFC-32 (675), 26
percent HFC-125 (3,500), 21 percent HFC-134a (1,430), 20 percent
HFO-1234yf (0), and 7 percent HFO-1234ze (0). The contribution of
each HFC to the total EVe of the blend is calculated by multiplying
the percentage of the blend made up of that HFC times its EVe, and
the sum of the contributions of all the blend constituents is the
blend EVe. Thus, the EVe of R-448A is (0.26 x 675) + (0.26 x 3,500)
+ (0.21 x 1,430) + (0.20 x 0) + (0.07 x 0) = 1,385.8.
---------------------------------------------------------------------------
Final customer. EPA is proposing to define this term as ``the last
person to purchase a bulk regulated substance before its intended
use.'' For each use of HFCs, the final customer can be different. For
example, an air-conditioning contractor would generally be the final
customer in the residential air conditioning market. For foams, the
foam systems house would be the final customer, as they are making a
product (i.e., a foam system). Likewise, aerosol fillers, semiconductor
manufacturers, air-conditioning and refrigeration equipment
manufacturers that ship equipment pre-charged, fire extinguisher
manufacturers would be the final customer. EPA seeks comment on whether
a list of examples like this should be incorporated into the
definition.
Mission-critical military end uses. EPA is proposing to define this
term as ``those uses of regulated substances by an agency of the
Federal Government responsible for national defense which have a direct
impact on mission capability, as determined by the U.S. Department of
Defense, including, but not limited to uses necessary for development,
testing, production, training, operation, and maintenance of Armed
Forces vessels, aircraft, space systems, ground vehicles, amphibious
vehicles, deployable/expeditionary support equipment, munitions, and
command and control systems.''
On board aerospace fire suppression. EPA is proposing to define
this term as ``use of a regulated substance in fire suppression
equipment used on board commercial and general aviation aircraft and
space vehicles. On board commercial aviation fire suppression systems
are installed throughout mainline and regional passenger and freighter
aircraft, including engine nacelles, auxiliary power units (APUs),
lavatory trash receptacles, baggage/crew compartments, and handheld
extinguishers.'' EPA takes comment on whether this definition should
include general aviation, which consists of private and/or business
aircraft, which may not have the same requirements as commercial
aircraft for on board fire suppression systems. This definition
excludes military aircraft because they are already covered under the
definition of mission-critical military end uses. EPA has previously
defined ``space vehicle'' under Title VI regulations at 40 CFR 82.3 as
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 test, transport, and storage, which through
contamination can compromise the space vehicle performance. EPA takes
comment on whether space vehicle, as defined above, is inclusive of
applications that would be considered as on board fire suppression. EPA
requests relevant information on HFC use in these applications.
Process agent. The AIM Act uses the term ``process agent'' without
defining it. EPA is proposing to define the term as ``the use of a
regulated substance to form the environment for a chemical reaction
(e.g., use as a solvent, catalyst, or stabilizer) where the regulated
substance is not consumed in the reaction, but is removed or recycled
back into the process and where no more than trace quantities remain in
the final product. A feedstock, in contrast, is consumed during the
reaction.'' \30\ This definition matches the definition used by the
Montreal Protocol's Technology and Economic Assessment Panel (TEAP) and
is well-established and understood in the ODS context.\31\
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\30\ The term ``consume'' in the AIM Act has two separate
meanings. In the context of describing transformation/feedstock uses
of HFCs, the word ``consume'' is used to mean the decomposition of
the substance. For example, subsection (b)(7)(B) excludes from the
definition of ``produce'' ``the manufacture of a regulated substance
that is used and entirely consumed (except for trace quantities) in
the manufacture of another chemical.'' (emphasis added).
\31\ Montreal Protocol on Substances that Deplete the Ozone
Layer, Medical and Chemical Technical Options Committee 2018
Assessment Report (United Nations Environmental Programme, 2018).
https://ozone.unep.org/sites/default/files/2019-04/MCTOC-Assessment-Report-2018.pdf.
---------------------------------------------------------------------------
Production/Produce. EPA is proposing to adopt the definition of the
term ``produce'' that is found in subsection (b) of the AIM Act. While
substantially similar to the definition of the term ``production'' at
40 CFR 82.3, there are a few differences. First, the AIM Act definition
does not use the word ``transformed'' but rather textually incorporates
most of the definition of the defined term ``transform'' from Sec.
82.3. Second, the definition specifically excludes the reclamation of a
regulated substance from the term production. This exclusion was not
found in Sec. 82.3 but matches EPA's long-held interpretation in CAA
Title VI programs that reclamation does not constitute production and
that reclaimed material is inherently reused/recycled.
In addition, EPA is proposing to specifically exclude from
production ``the inadvertent or coincidental creation of insignificant
quantities of a regulated substance during a chemical manufacturing
process, resulting from unreacted feedstock, from the listed
substance's use as a process agent present as a trace quantity in the
chemical substance being manufactured, or as an unintended byproduct of
research and development applications.'' This phrase appears in the 40
CFR 82.3 definition of ``controlled substance.'' EPA is proposing that
the exclusion of these insignificant quantities is more properly
considered in defining what qualifies as production given they describe
acts of ``creation'' or ``resulting from'' or ``byproduct of.'' Under
this proposal, such insignificant quantities created in the above-
listed circumstances would be considered regulated substances, but
would not be considered production. Combining all of the exclusions
under one term increases clarity when interpreting the terms
``produce'' and ``regulated substance'' together.
Production line. EPA is proposing to define the term ``production
line'' to mean ``any process equipment (e.g., reactor, distillation
column) used to convert raw materials or feedstock chemicals into
regulated substances or consume regulated substances in the production
of other chemicals.'' In 40 CFR part 82, EPA used this same description
to define the term ``facility.'' The Agency considers the term
``production line'' to be more consistent with common usage in the
chemical industry to refer to a specific set of process equipment, as
opposed to the buildings and land where production takes place.
Regulated substance. The AIM Act uses the term ``regulated
substance'' to refer to HFCs statutorily listed in the AIM Act and any
such substance added to the list in future consistent with subsection
(c)(3)(A). EPA is proposing to define the term as ``a hydrofluorocarbon
listed in the table contained in subsection (c)(1) of the AIM Act and a
substance included as a regulated substance by the Administrator under
[[Page 27163]]
the authority granted in subsection (c)(3). A current list of regulated
substances can be found in appendix A of this part.''
Structural composite preformed polyurethane foam. EPA is proposing
to define this term as ``a foam blown from polyurethane that is
reinforced with fibers and with polymer resin during the blowing
process, and is preformed into the required shape (e.g., specific boat
or trailer design) to increase structural strength, while reducing the
weight of such structures.''
EPA welcomes comment on these proposed defined terms and whether
any additional terms should be defined in this rulemaking.
V. How is EPA proposing to establish the HFC production and consumption
baselines?
The first step in phasing down HFCs through an allowance allocation
and trading program is to establish the U.S. production and consumption
baselines. It is from these baselines that the total annual production
and consumption allocations can be derived in a stepwise manner over
time.
A. What are the components of the production and consumption baselines?
Subsection (e)(1) of the AIM Act directs EPA to establish a
production baseline and a consumption baseline and provides the
equations for doing so. The equations comprise an HFC component, an
HCFC component, and a CFC component. Specifically, the production
baseline is equal to the sum of: (i) The average annual quantity of all
regulated substances produced in the United States from January 1,
2011, through December 31, 2013, and (ii) 15 percent of the production
level of HCFCs in calendar year 1989, and (iii) 0.42 percent of the
production level of CFCs in calendar year 1989. For the purposes of
establishing the baselines, EPA must use the exchange values assigned
by Congress to develop an exchange value-weighted amount for both
production and consumption. The equation representing the production
baseline calculation is:
[GRAPHIC] [TIFF OMITTED] TP19MY21.000
Similarly, the AIM Act defines the consumption baseline as equal to the
sum of (i) the average annual quantity of the consumption \32\ of
regulated substances in the United States from January 1, 2011, through
December 31, 2013, and (ii) 15 percent of the consumption of HCFCs in
calendar year 1989, and (iii) 0.42 percent of the consumption of CFCs
in calendar year 1989. The equation representing the consumption
baseline calculation is below.
---------------------------------------------------------------------------
\32\ Consumption is equal to production plus imports minus
exports.
[GRAPHIC] [TIFF OMITTED] TP19MY21.001
In developing the proposed HFC consumption baseline, EPA is
proposing to include HFCs that are bulk chemicals and exclude HFCs that
are contained in a product. This proposal is based on EPA's experience
implementing similar provisions under CAA Title VI for ODS.\33\ The CAA
Title VI provisions are written and structured similarly to the AIM Act
provisions, and therefore it is reasonable to interpret and implement
those terms in a similar manner. Under the phaseout requirements for
ODS (40 CFR part 82, subpart A), only imports and exports of bulk
controlled substances are counted as part of the consumption cap.\34\
Using a different mechanism under the HFC phasedown could create
confusion and would likely cause disruption within the imported
products market. Specifically, many companies that import bulk HFCs
also imported bulk ODS substances and are therefore familiar with EPA's
regulations and allocation program used to phaseout ODS under Title VI
of the Clean Air Act. If the HFC allocation framework under the AIM Act
were expanded beyond bulk substances to include products containing
HFCs, the regulated importer community would be many times greater,
would likely be caught unawares, and would encompass entities
unfamiliar with EPA's general approach to the allocation program.
Further, if the Agency were to include HFCs contained in products in
the baseline figures, it also would need to include data reflecting
HCFCs and CFCs
[[Page 27164]]
contained in products in 1989 to complete the baseline formula. The
Agency does not have this data and given the amount of time that has
passed since 1989, it would be administratively infeasible to collect
such data now (as opposed to bulk CFC and bulk HCFC data which the
Agency already collected many years ago). Given the indications that
subsection (e) of the AIM Act does contemplate regulation of bulk
substances--such as the exceptions for feedstocks and process agents
(which are both examples of bulk substances) in subsection (e)(4)(A)
and the references in (e)(4)(B)(i) and (iv) to allocation of allowances
for use of regulated HFCs in particular applications--and given that it
does not appear to contemplate the implications of importing products
or equipment, EPA believes that this proposed interpretation is
consistent with the goals of the Act.
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\33\ This approach is also consistent with the approach taken
under the Montreal Protocol. Decision I/12A, taken at the first
Meeting of the Parties to the Montreal Protocol, defines
``controlled substances'' as bulk chemical. As such, the production
and consumption schedules under the Montreal Protocol only apply to
bulk chemical.
\34\ For purposes of implementing the ODS phaseout regulations
(40 CFR part 82, subpart A), EPA defined a controlled substance, in
part, as any listed ODS, whether existing alone or in a mixture, but
excluding any such substance or mixture that is in a manufactured
product other than a container used for the transportation or
storage of the substance or mixture. Any amount of a listed
substance that is not part of a use system containing the substance
is a controlled substance. If a listed substance or mixture must
first be transferred from a bulk container to another container,
vessel, or piece of equipment in order to realize its intended use,
the listed substance or mixture is a ``controlled substance.''
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EPA is also proposing not to include transhipments within the
baseline. A transhipment is the continuous shipment of a regulated
substance, from a foreign country of origin through the United States,
to a second foreign country of final destination. Transhipments do not
enter interstate commerce in the United States. EPA proposes to not
include transhipments in the baseline calculation because the sum
effect of this activity would be zero--the regulated substance is both
imported (which would be added to the consumption baseline) and
exported (which would be subtracted from the consumption baseline) in
identical quantities.
1. How is EPA proposing to determine the HFC component of the
production and consumption baselines?
In order to calculate the production and consumption baselines, EPA
must determine the annual production and consumption of the statutorily
listed HFCs in the years 2011, 2012, and 2013. EPA is proposing to use
three sources of data in order to calculate HFC consumption and
production figures for 2011 through 2013: (1) Data reported to EPA's
GHGRP; (2) data received in response to EPA's ongoing and planned
outreach, including the notice of data availability (NODA) published
February 11, 2021, stakeholder meetings, and planned letters sent out,
including under CAA section 114; and (3) any data received in response
to this notice of proposed rulemaking by the comment due date.
(a) What is the GHGRP and what data are available from it?
The GHGRP was established in 2009 and requires various facilities
and suppliers to annually report data related to GHGs to EPA (see 40
CFR part 98). The relevant subpart that relates to reporting on HFC
production and consumption is subpart OO, ``Suppliers of Industrial
Greenhouse Gases.'' Because the HFCs listed as regulated substances
under the AIM Act are industrial GHGs, EPA has been collecting since
the GHGRP's inception a significant amount of data relevant to HFC
production and consumption as defined under the AIM Act. EPA can use
these data to begin approximating the historic HFC production and
consumption figures necessary to calculate baselines under the AIM
Act.\35\
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\35\ While EPA determined that chemical-specific GHG data at the
facility and importer/exporter level is CBI, EPA also determined
that it would release the data in aggregated amounts as long as the
aggregations meet the criteria outlined in the Federal Register
notice cited here. For purposes of the data presented in the NODA
accompanying this rulemaking and in the docket for this proposed
rule, EPA determined that release of the aggregated data would not
disclose CBI. The data presented in this proposed rule are
aggregations for which the aggregation criteria have been met to
ensure the underlying CBI is shielded from public disclosure, and
the individual reporters have been notified of EPA's intent to
aggregate.
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Under the GHGRP, reporting and other requirements apply to the
facility or supplier based on the source and/or supplier categories
located at the facility, their emission and/or supply levels (as
applicable to a source or supplier category), and other factors.
Facilities that undertake some types of activities (e.g., import or
export of fluorinated GHGs) \36\ must report for that source or
supplier category only if their emissions or supplies (or related
quantities) meet or exceed a threshold. Facilities that undertake other
types of activities (e.g., fluorinated GHG production) are required to
report for at least three years regardless of the magnitude of their
emissions or supplies. Once data are submitted, EPA conducts a multi-
step verification process to ensure reported data are complete and
accurate.
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\36\ For the purposes of the GHGRP and this proposal, the term
``fluorinated GHGs'' does not include controlled substances under
CAA Title VI.
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Subpart OO captures the vast majority of the bulk HFC production,
import, and export in the United States. Subpart OO requires reporting
from producers of HFCs and certain importers, exporters, and destroyers
of HFCs. The data reported are by chemical, and thus, EPA can exclude
from the calculation of baselines any HFCs reported to the GHGRP that
are not listed as regulated substances under the AIM Act. All producers
of HFCs, as defined in 40 CFR 98.410(b), are required to report the
quantities that they produce, transform (unless the transformed
feedstock is produced onsite), destroy, or send off-site for
transformation or destruction, unless otherwise provided in subpart OO.
Importers with bulk imports of N2O, fluorinated GHGs, and
CO2 that in combination are equivalent to 25,000 metric tons
of carbon dioxide equivalent (MTCO2e) or more are required
as part of their annual report to report the quantities that they
import, destroy, or send off-site for transformation or destruction.
Exporters with bulk exports of N2O, fluorinated GHGs, and
CO2 that in combination are equivalent to 25,000
MTCO2e or more are required as part of their annual report
to report the quantities that they export.
As a result of these requirements, the data provided through the
GHGRP reflects most of the production, import, export, and destruction
of regulated substances for the baseline years. However, EPA is aware
of some data that are not collected through GHGRP that are relevant for
calculating the HFC component of the AIM Act baselines.
Companies that import or export fewer than 25,000 MTCO2e
of industrial gases, including HFCs, are exempted from reporting.\37\
Analyses performed during the development of the GHGRP indicated that
this threshold would have minimal impact on the overall topline number
of HFCs imported and exported, exempting less than one percent of the
GWP-weighted quantities of industrial GHGs in containers that are
imported or exported.\38\ This high coverage is due in part to the high
GWPs of fluorinated GHGs, including HFCs, which trigger reporting at
relatively low volumes (e.g., 17.5 metric tons (MT) for HFC-134a or 7.2
MT of HFC-125), and in part to the fact that the largest importers and
exporters account for the
[[Page 27165]]
majority of the imported and exported quantities.
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\37\ For importers and exporters, the GHGRP also exempts the
reporting of individual shipments containing less than 25 kg of
fluorinated GHGs. In an analysis performed in 2006, EPA found that
exempting such shipments would reduce the total quantity of
industrial GHGs reported by only 0.01 percent. Thus, this exemption
is not likely to have a material impact on the figures used for
imports and exports in calculating the AIM Act consumption baseline.
\38\ See the Technical Support Documents for subpart OO (below).
One caveat is that this is based on data from 2006, and it is
possible that import and export patterns have changed since then.
U.S. Environmental Protection Agency, Office of Air and Radiation.
Technical Support Document for Bulk Imports and Exports of
Fluorinated GHGs N2O and CO2: Proposed Rule for Mandatory Reporting
of Greenhouse Gases, 2009. https://www.epa.gov/sites/production/files/2015-07/documents/tsd_bulk_imports_exports_2-02-09.pdf.
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EPA routinely reviews import data provided by U.S. Customs and
Border Protection (CBP) to verify reported supply data and identify
facilities that may be subject to annual GHG reporting under 40 CFR
part 98. Based on this review and other information, there also appear
to be companies that imported or exported more than 25,000
MTCO2e of HFCs annually that have not reported imports or
exports to the GHGRP. Section V.B.2 of this proposal provides
instructions for late reporting.
Subpart OO also does not require the reporting of HFC-23 that is
intentionally coproduced, captured, and refined for use, or
unintentionally created. Consequently, EPA is lacking data related to
the creation of HFC-23 and any subsequent destruction or refinement for
sale. To address this data gap, EPA has sought information from
facilities that create HFC-23, either intentionally or unintentionally.
EPA is not docketing the individual responses related to HFC-23 due to
companies' CBI claims, but has included aggregated data in the analyses
in the docket.
Two other data gaps include (1) the amounts of HFCs other than HFC-
23 that were destroyed by free-standing destruction facilities (i.e.,
facilities that destroy HFCs but do not import or produce) during the
baseline years \39\ and (2) any amounts of HFCs that were transformed
by facilities that transform HFCs but that do not also produce them
(which is necessary to determine the quantity of HFCs that are produced
for use as feedstock).
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\39\ Such facilities have only been required to report the
quantities that they destroy since 2019, when they reported their
destruction for 2018.
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Not accounting for quantities that were destroyed or transformed
would result in overestimates of production and consumption as those
quantities are defined under the AIM Act, since the quantities
destroyed or transformed are subtracted from GHGRP production to obtain
AIM Act production. While EPA is not aware of any facilities in the
U.S. that transform HFCs but do not produce HFCs, we cannot rule out
the possibility that they exist.
(b) What outreach is EPA doing to collect data to fill known gaps in
the GHGRP?
As outlined in the prior section, the data available through GHGRP
will significantly contribute to EPA's ability to calculate the amount
of HFCs produced and consumed in the United States in 2011-2013 for
purposes of determining the AIM Act baselines. However, there are known
gaps in the GHGRP data, and EPA is making best efforts to fill these
gaps. Specifically, EPA published a NODA on February 11, 2021,
outlining the same information provided in the prior section concerning
what data are available through GHGRP and where EPA perceived data gaps
(86 FR 9059). EPA invited the public to provide additional data and
identify other potential gaps in EPA's knowledge. In response to the
NODA, EPA received 29 public comments which can be found in the docket
for this rulemaking, five comments containing material claimed as CBI,
and at least one additional report of historic HFC data not previously
reported to the GHGRP. EPA received a number of public comments that
were outside of the scope of the NODA, i.e., several comments were not
germane to additional data that could help inform the HFC production
and consumption baselines for 2011, 2012, and 2013. Some of these
comments focused on implementation of various provisions of the AIM
Act, including but not limited to allocation methodology, the statutory
years used to establish the HFC production and consumption baselines,
application-specific allowances, and projected market trends for, and
associated with, various end uses of the regulated HFCs. EPA
appreciates these comments and, in some instances, has proposed
provisions in this rulemaking that address several of the specific
points or has integrated specific points into section XI of the
preamble, which includes the ANPRM. Nonetheless, the Agency's intent in
releasing the NODA was to ask for additional data that could inform the
HFC production and consumption baseline for 2011, 2012, and 2013. The
Agency has reviewed the comments submitted containing material claimed
as CBI as well as the data submitted via e-GGRT, and to the extent that
these submissions fill in our known data gaps, the proposed HFC
production and consumption baseline reflect this information and data
accordingly. Some of the information received starts to fill in the
gaps EPA identified in the NODA and above. EPA continues to invite
public input through this proposed rulemaking and welcomes provision of
additional data related to HFC production and consumption in the years
2011, 2012, and 2013.
EPA has separately requested approval under the Paperwork Reduction
Act to collect missing data \40\ and intends to send letters under the
authority of subsection (k)(1)(C) of the AIM Act and section 114 of the
CAA to companies who may have relevant data.
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\40\ View Information Collection Request (ICR) Package; https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202103-2060-005.
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EPA also held a stakeholder meeting on February 25, 2021.
Approximately 200 people participated in the stakeholder meeting to
learn more about the AIM Act and how EPA was moving forward with
implementation. At that meeting, EPA reminded stakeholders to submit
relevant data to help inform this rulemaking. Additionally, five
stakeholder workshops were held between March 11, 2021, and March 12,
2021, specific to stakeholders interested in the statutorily listed
applications identified in AIM Action section (e)(4)(B)(iv); as with
the February 25, 2021, stakeholder meeting, these workshops provided
participants the opportunity to learn more about the AIM Act and how
EPA was moving forward with implementation. One workshop was held for
each sector identified in AIM Act section (e)(4)(B)(iv). EPA did not
hold a stakeholder workshop for the mission-critical military sector
because, as will be explained in a subsequent section of this preamble,
EPA is working directly with the Department of Defense on distributing
allowances for mission-critical military end uses. Stakeholders at each
workshop were similarly reminded during these workshops to submit
relevant data to help inform this rulemaking. In addition, EPA has met
with numerous stakeholders and participated in meetings sponsored by
other government and non-government entities (e.g., Small Business
Administration's February 26, 2021, small business environment
roundtable). A full list of meetings EPA has conducted with
stakeholders is provided in the rulemaking docket.
For anyone seeking to submit data to the Agency regarding HFC
production, consumption or use in the six applications listed in
subsection (e)(4)(B)(iv) of the AIM Act, please contact the individual
listed under FOR FURTHER INFORMATION CONTACT.
2. What is the current HFC component of the production and consumption
baselines?
The equations in the AIM Act for the production and consumption
baselines include the average annual production and consumption of HFCs
between January 1, 2011, and December 31, 2013. Based on the
information reported to the GHGRP and gathered through recent data
collection efforts, EPA estimates average HFC consumption at 256
million metric tons of exchange value equivalent (MMTEVe) and HFC
production at 331 MMTEVe for those
[[Page 27166]]
three years. A memo to the docket (``HFC Production and Consumption
Data--Proposed Rule'') provides the current aggregated data for each of
the three years similar to that provided in the NODA, as well as a list
of companies that have reported data to EPA for those years. EPA
anticipates that these values will change in the final rule as the
Agency continues to collect additional data.
3. What are the HCFC and CFC components of the production and
consumption baselines?
The equations in the AIM Act for the production and consumption
baselines include HCFC and CFC components from 1989. That year was
designated under the Montreal Protocol as the baseline year used for
several class I substances (Groups III, IV, and V in the Montreal
Protocol) as well as for class II substances (HCFCs). See, e.g., 74 FR
66412 (December 15, 2009). As a result, EPA has previously developed a
complete accounting of ODS production, import, and export during that
year and is therefore not specifically requesting comment on that
value.\41\
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\41\ For more information on historic U.S. ODS production and
consumption data, please visit the United Nations Environment
Program's website at https://ozone.unep.org/countries/profile/usa.
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Specifically, the 1989 production and consumption levels for HCFCs
are 216.9 MMTEVe and 210.3 MMTEVe respectively, and the 1989 production
and consumption baselines for CFCs are 2,799.8 MMTEVe and 2,784.5
MMTEVe respectively. Fifteen percent of the 1989 HCFC production and
consumption baselines is 32.5 MMTEVe and 31.5 MMTEVe respectively,
while 0.42 percent of the 1989 CFC production and consumption baselines
is 11.8 MMTEVe and 11.7 MMTEVe respectively.
B. What are the proposed HFC production and consumption baselines?
Using the equation provided in the AIM Act, based on the data
currently available to EPA (which, as noted in the prior section, EPA
is still working to refine), EPA proposes to find that the U.S.
production baseline is 375 MMTEVe and the U.S. consumption baseline is
299 MMTEVe. To provide the most accurate production and consumption
baselines, EPA reiterates its request for data submissions and other
information relevant to HFC production and consumption in 2011, 2012,
and 2013. Once established through the final rule, EPA does not intend
to amend the baselines. While EPA is taking comment on the inputs to
the calculation, the Agency notes that the formulas used for
calculating the baselines are established in the AIM Act.
Table 4--Inputs for Calculation of Production and Consumption Baselines
----------------------------------------------------------------------------------------------------------------
Value Percentage in Modified value
Input (MMTEVe) baseline (MMTEVe)
----------------------------------------------------------------------------------------------------------------
2011-2013 average HFC production................................ 331 100 331
1989 HCFC production............................................ 216.9 15 32.5
1989 CFC production............................................. 2,799.8 0.42 11.8
-----------------------------------------------
Production baseline......................................... .............. .............. 375
2011-2013 average HFC consumption............................... 256 100 256
1989 HCFC consumption........................................... 210.3 15 31.5
1989 CFC consumption............................................ 2,784.5 0.42 11.7
-----------------------------------------------
Consumption baseline........................................ .............. .............. 299
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VI. How is EPA proposing to establish allowances?
This section provides an overview of how EPA intends to establish a
system providing for HFC production and consumption allowances and
EPA's proposed methodology for issuing allowances. The AIM Act in
subsection (e)(3) requires EPA to conduct a rulemaking to phase down
production and consumption of regulated substances in the United States
through an allowance allocation and trading program. Aside from
establishing the cap on the allowance program (by defining how to
calculate the baseline and requiring a set percentage reduction in
specific years from that baseline), the AIM Act provides EPA
considerable discretion in determining how to establish the allowance
program and how to allocate allowances in that program. Because EPA has
experience phasing out production and consumption of ODS under Title VI
of the CAA in similar industries, EPA is using that experience to
inform this proposal.\42\
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\42\ Collectively, EPA's regulations governing the phaseout of
ODS can be found in Subpart A to 40 CFR part 82. https://ecfr.federalregister.gov/current/title-40/chapter-I/subchapter-C/part-82.
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A. What is an allowance?
EPA uses an allowance as the unit of measure that controls
production and consumption. Subsection (e)(2)(D)(ii) of the AIM Act
specifies that an allowance allocated by EPA under the AIM Act is a
limited authorization for the production or consumption of a regulated
substance and does not constitute a property right. EPA is proposing
that the Agency would issue allowances that would be valid between
January 1 and December 31 of a given year, also known as a ``calendar-
year allowance.'' A calendar-year allowance represents the privilege
granted to a company to produce or import regulated substances in that
year. EPA proposes to allocate production allowances, consumption
allowances, and ``application-specific allowances'' for six uses
specified in the Act.\43\ EPA proposes that producing HFCs would
require expending both production allowances and consumption
allowances, since production is a component of the AIM Act definition
of what composes consumption. Importing HFCs would require expending
only consumption allowances. This is the mechanism EPA has used to
implement the ODS phaseout and would meet the expectations of, and be
understood by, producers and importers of HFCs. This design also helps
EPA ensure that both the production and consumption caps from the AIM
Act will be met through the allowances allocated. As discussed later,
EPA is proposing that ``application-specific allowances'' are a third
category of allowances that can be
[[Page 27167]]
expended to either produce or import HFCs.
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\43\ The ODS framework also issued allowances for specific uses
such as an essential use allowance or a critical use allowance.
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EPA is proposing that producing or importing HFCs that will be used
and entirely consumed (except for trace quantities) in the manufacture
of another chemical (i.e., for use as a feedstock, which is also known
as transformation) would not require expending production or
consumption allowances. In general, such HFCs are exempted from the
term ``produce'' under subsection (b) of the AIM Act. However, HFCs
intended to be used for transformation are regulated substances and
thus certain provisions, such as recordkeeping and reporting, apply to
them to verify that they are in fact transformed. As such, EPA is
proposing that an importer must submit a petition and receive a non-
objection notice before importing HFCs for transformation. EPA
discusses proposed recordkeeping and reporting requirements for HFCs
that are intended to be used for transformation in section IX.D of this
preamble.
The definition of ``Produce'' in the AIM Act and as proposed in
this rulemaking explicitly excludes the reclamation, reuse, or
recycling of a regulated substance. Because the definition of
``Consumption'' includes production, EPA intends to not include the
amounts of domestically reclaimed HFCs for calculating the yearly
production or consumption limits. The AIM Act does not exempt HFCs that
have been reclaimed or otherwise reprocessed from consideration when
determining the volume of HFCs imported into the United States. EPA is
therefore proposing to require consumption allowances for the import of
reclaimed HFCs, unless the reclaimed HFCs are being imported solely for
the purpose of destruction. In the situation of reclaimed HFCs imported
solely for the purpose of destruction, if the imported reclaimed HFCs
were counted towards consumption, it would be subtracted back out when
destroyed. If a consumption allowance were required to be expended in
this circumstance, EPA would likely give that allowance back after the
substance was destroyed. In this circumstance, it seems appropriate to
simply permit reclaimed HFCs to be imported solely for purposes of
destruction without expenditure of an allowance, assuming it can be
reasonably demonstrated that the HFC will in fact be destroyed. EPA is
accordingly proposing recordkeeping and reporting requirements in Sec.
84.31. There is further discussion of the proposed process related to
import of used HFCs for destruction in section VIII.F. of this
preamble.
EPA is also proposing that producers of HFCs need not expend
production or consumption allowances if the HFCs are destroyed in a
timely manner using an approved technology. More specifically, EPA
proposes that if a company intends to utilize onsite destruction
capability, the company does not need to expend allowances for the HFC
production if the HFCs are destroyed within 30 days. If a company
intends to utilize offsite destruction capability, the company need not
expend allowances for the HFC production if the HFCs are destroyed
within 90 days. These timelines seem achievable as a practical matter
while being short enough to avoid potential malfeasance that could
occur over an elongated time horizon. EPA welcomes comment on this
question and would consider longer time windows if necessary, to allow
companies adequate time to destroy these chemicals.
This proposal is consistent with the definition of ``Produce'' in
the AIM Act, which excludes ``the destruction of a regulated substance
by a technology approved by the Administrator.'' HFCs that are
domestically produced but are intended for destruction are regulated
substances and thus certain provisions, such as recordkeeping and
reporting, apply to them to verify that they are in fact destroyed. As
discussed in the definitions section, EPA is proposing to exclude from
production ``the inadvertent or coincidental creation of insignificant
quantities of a regulated substance during a chemical manufacturing
process, resulting from unreacted feedstock, from the listed
substance's use as a process agent present as a trace quantity in the
chemical substance being manufactured, or as an unintended byproduct of
research and development applications.'' Under this proposal, such
insignificant quantities created through the above-listed circumstances
would not be considered production. The necessary implication of this
proposed definition is that any other regulated substances created
during the manufacturing process, either in quantities that are not
insignificant or outside of the listed circumstances, would be
considered ``production'' and would require expenditure of production
and consumption allowances unless destroyed in a timely manner (there
are additional restrictions related to HFC-23, as discussed further in
subsection F). This proposal is intended to ensure that the regulated
substances identified under the AIM Act are appropriately controlled
and their production and consumption are reduced under the schedule
outlined by Congress. Whether the regulated substance is inadvertently
created through the chemical manufacturing process does not seem to be
relevant to Congress's directive to phase down regulated substances on
the statutorily defined schedule.
EPA is proposing that any import of bulk regulated substance in any
quantity requires consumption allowances. This would include a company
that brings into the United States a rail car, tank truck, or ISO tank
containing a heel of regulated substances. It would also include
imports of HFCs that are classified as ``U.S. goods returned.'' In such
situations, the company would need to expend consumption allowances for
the import. As with the proposal related to production, this proposal
is intended to ensure that all the regulated substances identified
under the AIM Act are appropriately phased down according to the
schedule outlined. EPA is additionally concerned that providing an
exemption for imports of heels or U.S. goods returned could provide
avenues for illegal imports of HFCs if an entity were to mislabel a
full container as only containing a heel or foreign produced material
as a U.S. good returned. EPA is interested in comments, however, on
whether it should consider exempting heels or U.S. goods returned as a
necessary part of importers' standard practice to enable easier import
and export of regulated substances.
However, EPA is proposing that companies that tranship HFCs do not
need to expend allowances for that transhipment. In order to meet the
definition of transhipped material, the HFCs cannot enter interstate
commerce. Transhipped materials are also, by design, intended to be
imported into, and then exported out of, the country in identical
quantities. EPA is proposing that an entity does not have to expend
consumption allowances for transhipped materials if the regulated
substances are exported within 6 months of import. If a company does
not tranship HFCs within six months of entry, EPA is proposing that the
company would have to expend allowances. As explained in the reporting
section, EPA is proposing that companies notify the Agency when a
transhipment arrives and leaves the U.S. The intent of this proposal is
to minimize the risk of illegal imports through the guise of
transhipments. The United States experienced this method of illegal
importation during the phaseouts of CFCs and HCFCs. EPA requests
comment on the length of time a transhipment could reasonably be
expected to be in the United States and
[[Page 27168]]
whether it is appropriate to allow as little as two months or as much
as twelve months. EPA also requests comment on other ways to reduce the
risk of HFC transhipments entering interstate commerce, such as monthly
reporting (or other reporting frequency) of status while it remains in
transit; making the bonded warehouse the responsible party for any
transhipments that enter the market unaccounted for or vented;
requiring a label; or registration with the certification ID tracking
system discussed later in this proposal.
EPA is proposing that allowances issued under the AIM Act be an
exchange value-weighted number rather than having allowances that are
specific to each HFC. This approach would align with the approach for
calculating the baseline envisioned in the AIM Act. Such an approach
also maintains flexibility in the market if a producer or importer
decides to switch between regulated substances. This would allow
entities to efficiently distribute allowances as the market needs and
may encourage transitions into regulated substances with lower exchange
values earlier than would happen under the statutorily outlined
schedule, which could lead to greater environmental and health
benefits.
Under this proposed approach, one allowance would be equal to one
metric ton of exchange value equivalent (MTEVe). Producers and
importers would multiply the quantity of the HFC they seek to produce
or import, in kilograms, by its exchange value and then divide by 1,000
to determine the total number of allowances needed. For example, based
on the exchange values assigned to regulated substances in the tables
provided in subsection (c) of the AIM Act, an importer would need to
expend 1.43 consumption allowances to import one kilogram of HFC-134a.
Given the variation in exchange values, one would need to expend
between 0.053 allowances to produce one kg of HFC-152 and 14.8
allowances to produce one kg of HFC-23. EPA is proposing to adopt the
table of regulated substances and their corresponding exchange values
provided in section (c) of the AIM Act into appendix A to the subpart
established for this rule.
EPA notes that the exchange values listed in the AIM Act for each
regulated HFC, and for the CFCs and HCFCs used in the baseline
calculations, are numerically identical to the 100-year global warming
potentials (GWPs) of each substance, as given in the Errata to Table
2.14 of the IPCC's Fourth Assessment Report (AR4) \44\ and Annexes A,
C, and F of the Montreal Protocol. In practical terms, producers,
importers, and exporters would be able to use the AR4 GWP of a blend
that contains only regulated HFCs in determining the amount of EVe
allowances necessary to produce or import that blend, or more
precisely, the regulated HFC components contained in the blend. If a
blend contains components that are not listed as a regulated substance,
only the components of the blend that are regulated HFCs would be
included in determining the EVe. As a result, the EVe would be lower
than the CO2e value for blends that are not limited to
regulated substances.
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\44\ IPCC, 2007: Summary for Policymakers. In: Climate Change
2007: The Physical Science Basis. Contribution of Working Group I to
the Fourth Assessment Report of the Intergovernmental Panel on
Climate Change [Solomon, S., D. Qin, M. Manning, Z. Chen, M.
Marquis, K.B. Averyt, M.Tignor and H.L. Miller (eds.)]. Cambridge
University Press, Cambridge, United Kingdom and New York, NY, USA.
https://www.ipcc.ch/report/ar4/wg1.
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Under CAA Title VI, EPA allocated baseline allowances and annual
year allowances derived from those company-specific baselines.\45\ EPA
is proposing to take a different approach for allowances allocated
under the AIM Act. Specifically, EPA is proposing to only issue
calendar-year allowances and not create company-specific baseline
allowances. Under the ODS phaseout, baseline allowances were revisited
periodically and updated based on transfers between companies. However,
baseline allowances effectively became ``permanent'' and had value
across control periods. Companies that stopped producing ODS had the
ability to continue receiving allowances annually until the phaseout
date, or could sell their market share to another company by
transferring their baseline and/or calendar-year allowances. Under the
AIM Act, EPA is proposing to only issue calendar-year allowances, which
are only usable in the year they are issued, without the system of
baseline allowances. This is intended to promote more flexibility in
future years to adjust approaches and issuances of allowances to a
dynamic marketplace as opposed to having allocations tied to a singular
time in the past.
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\45\ See, e.g. 78 FR 20007; April 3, 2013. https://www.federalregister.gov/d/2013-07758/p-93.
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B. What are EPA's proposed options for determining allocations?
1. For which years is EPA proposing to issue allowances?
EPA is planning to issue allowances for 2022 according to the
framework and procedure established through this rulemaking by October
1, 2021. EPA intends to provide notice of 2023 allowances by October 1,
2022, using the framework and procedure to be established in this
action. Given the AIM Act's deadline of finalizing a rule within 270
days of enactment, EPA has focused on what can be implemented in a
short timeframe. EPA recognizes that phasing down a regulated substance
as required under the AIM Act may have different implications for
stakeholders than the Agency's past experience with phasing out ODS. To
allow more time for consideration of these differences, EPA intends to
seek additional input from stakeholders for later years. As such, EPA
intends to develop another rule before allowances are allocated for
calendar year 2024 that may alter the approach and procedure for
allowance allocations past the year 2023. Given the phasedown schedule
in the AIM Act, EPA is intending to revisit the initial approach for
determining allowance allocations established through this rulemaking
before the 2024 phasedown step to consider whether any changes would be
appropriate and further build out aspects of this program. In 2024 the
number of allowances will decrease from 90 percent of baseline to 60
percent of baseline. Additional analysis of the market--as well as the
effects of implementing other provisions of the AIM Act--may be
necessary before issuing allowances for that stepdown.
EPA welcomes comment on its intention to issue allowances later
this year only for 2022. EPA is also considering issuing allowances for
2022 and 2023 by October 1 of this year. EPA's preference for proposing
to establish a framework but issuing allowances only one year at a time
provides time for the Agency to solicit and consider other potential
mechanisms for issuing allowances. The Agency is also uncertain it can
accurately forecast at this time the full quantity of allowances
necessary for application-specific uses at this time. As discussed
further in this section, application-specific allowances must be
provided from within the general cap of available allowances. Until EPA
can determine the number of application-specific allowances needed by
the statutorily identified end users, it cannot know how many
allowances remain from within the cap for general
[[Page 27169]]
allowances. As a result, EPA is proposing to determine the general pool
of available allowances, and subsequently provide for individual
company allocations, each calendar year, as opposed to allocating for
multiple years at a time.
2. Based on currently available data, which companies is EPA proposing
to issue allowances to?
EPA is proposing to issue allowances to companies that produced or
imported HFCs in 2017, 2018, and/or 2019, and were still active in
2020. There are two elements within this proposal to discuss: Which
companies will be eligible to receive allowances and which years of
operation will be relevant to EPA's determination. Note that this is
separate but related to how many allowances each company may be
allocated. How EPA proposes to determine individual allocation amounts
are discussed separately later.
EPA proposes that considerations for determining who should receive
allowances in this initial rulemaking would include providing as
seamless a transition as possible to a regime where allowances are
needed to produce and import HFCs, promoting equity, timeliness of
implementation, and availability of robust data. EPA is proposing to
issue allowances to active HFC producers and importers operating in
2020 while providing a set aside for new entrants as a way to meet
these objectives.
With regards to production allowances, EPA is proposing to issue
allowances to companies that produced HFCs in the United States in
2017, 2018, or 2019 that were also still producing HFCs in 2020. In
determining the appropriate approach for issuing allowances, EPA seeks
to avoid issuing production allowances to entities that are unable to
use them. In particular, EPA would like to avoid issuing allowances to
companies that no longer produce HFCs or for HFC production capacity
that has been shut down. EPA also seeks to avoid encouraging the
creation of new high-GWP HFC production capacity within the United
States, as that would be contrary to the intended goal of the AIM Act
to phase down EV-weighted production by 85 percent from the calculated
baseline figure within 15 years. Production facilities are capital
intensive and are typically used for long periods of time. The list of
HFC producers in the United States is included in a memo included in
the docket (``HFC Production and Consumption Data--Proposed Rule''). As
noted at an earlier point in this section, EPA is proposing that
production of HFCs would require expenditure of both production and
consumption allowances, since production is a component of the AIM
Act's definition of consumption. As a result, EPA is proposing to issue
production allowances to those companies that are currently listed as
HFC producers, as well as any additional companies that can document
their production of HFCs during the relevant years by the close of the
comment period listed above in the DATES section of this preamble and
report to the GHGRP.\46\
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\46\ As noted previously, there is no minimum threshold for
production of HFCs in the GHGRP. People may have previously noticed
that e-GGRT was limited to submitting and revising GHGRP annual
reports for years 2015 to 2020. However, EPA has now made available
a supplemental XLS form for years 2011 to 2014 for HFC producers who
were subject to the GHGRP, did not submit an annual report for one
or more of those years, and would now like to submit their supply
data for those corresponding years. If you have questions, please
contact the person listed under FOR FURTHER INFORMATION CONTACT.
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Consistent with the definition of ``Produce,'' EPA proposes that
companies receive production allowances based on the total EVe quantity
produced minus amounts for transformation minus amounts destroyed. EPA
proposes that consumption allowances be determined for each company
based on the EVe quantity of HFCs they produced (subtracting out
transformation and destruction) plus the amount they imported
(excluding the amount imported for transformation or destruction) minus
the amount exported. As such, if a company produced HFCs, but then
exported HFCs, their production allowances would be higher than their
consumption allowances, assuming the company did not import more HFCs
than it exported.
With regards to consumption allowances, EPA is taking a similar
approach and proposing to issue allowances to companies that produced
and/or imported HFCs during 2017, 2018, or 2019 that were still active
in 2020. Similar to the discussion in the baseline section, EPA is
proposing to use data reported to GHGRP under subpart OO requirements
to determine companies' import and export activities in 2017-2020. As
discussed in the section on establishing the baseline, there may be
companies that imported and exported HFCs in quantities less than
25,000 MTCO2e and therefore were not required to report to
the GHGRP. EPA is proposing to issue allowances to importers under the
25,000 MTCO2e threshold so long as the company provides
import and export records to EPA, such as Customs forms or bills of
lading, to document their historic practice consistent with that
required under subpart OO. EPA will consider all data provided by the
close of the comment period listed above in the DATES section of this
preamble. EPA plans to verify any claimed import and export before a
company is included in the allowance allocation.
EPA is also proposing to issue allowances at the parent company
level. If multiple companies and/or facilities that imported HFCs in
2020 are controlled or owned by the same corporate entity, EPA is
proposing to issue allowances only to their parent company. If a parent
company had multiple subsidiaries reporting consumption or production,
EPA is proposing to base the parent company's allocation on the single
year where all subsidiaries combined were at their highest level. This
approach would be administratively easier and improve transparency in
the market. It would also avoid providing allowances at a higher level
than is warranted for parent companies that have imported under
multiple company names. As discussed later, to ensure the integrity of
the set aside, EPA is proposing that new entrants cannot be a
subsidiary or otherwise related to a calendar-year allowance holder.
EPA therefore intends to request corporate ownership information from
all companies for which allowances may be allocated.
EPA discusses the question of who could receive allowances in
greater detail in another section of this proposal. As noted
previously, EPA intends to revisit the initial approach and procedure
for determining allowance allocations and for trading for the 2024 and
later control periods in a subsequent rulemaking after additional
public input and seeks advanced comment later in this proposal on ideas
that are currently under consideration.
EPA is proposing to allocate allowances only to companies that
produced or imported in 2020, even if they were active in prior years,
to increase the likelihood that allowances are allocated to companies
that are active in the HFC market. If a company was not actively
producing or importing in 2020, EPA would generally presume this means
the business exited the production and/or import market. Allocating
allowances to companies no longer producing or importing would be at
the expense of companies who are still actively invested in HFC
production and import. However, the Agency is open to consider
something different from this presumption for individual companies if
their inactivity
[[Page 27170]]
was due to the COVID-19 pandemic or some other reason, and they have
documentation to justify such inactivity. If a company wants
individualized consideration of their market inactivity or activity in
2020, it must submit comments on this rulemaking containing relevant
information no later than the end of the comment period.
EPA recognizes that some importers may be unaware of EPA's
regulatory activity in this area. EPA is undertaking best efforts to
develop a comprehensive dataset for purposes of allowance allocation by
determining the universe of potential importers. EPA is using data
available through the GHGRP, its February 11, 2021, NODA, stakeholder
outreach meetings, outreach to trade associations that can inform their
members, and direct communication with companies that EPA suspects may
have imported in relevant years that are not captured in the Agency's
data sources. EPA invites public input on whether there are any other
means EPA should use to reach this potentially regulated community. EPA
provides a list of companies that would be eligible for consumption
allowances under this framework based on currently available data in
the docket to this rule. EPA is proposing to issue allowances to those
importers that are currently listed, as well as any additional
importers that can provide import records to EPA such as Customs forms
or bills of lading. As noted previously, EPA is also willing to
consider individual circumstances of businesses that are generally
active in the HFC import market, but did not import HFCs in 2020, if
the reason for their inactivity is adequately justified to EPA by the
close of the comment period.
For companies that have not previously reported their HFC import
relevant data, such as through the GHGRP's e-GGRT or in response to the
February 11, 2021, NODA, they should report to EPA no later than by the
close of the comment period listed above in the DATES section of this
preamble if they wish to be eligible for allowances in 2022 and 2023.
Please contact the person listed under FOR FURTHER INFORMATION CONTACT
and report your HFC import data for years 2011 through 2020 at https://ghgreporting.epa.gov/ghg/login.do if you have not reported previously.
EPA needs to verify production and consumption data for companies that
have not reported previously. Failure to provide data by the stated
date will mean companies will not receive allowances for 2022 or 2023
if EPA finalizes the allocation approach as proposed, except for the
possible availability of the set aside pool for importers not
previously subject to GHGRP requirements. Any company that was required
to report to the GHGRP under 40 CFR part 98, but did not do so in
accordance with the regulatory requirements, should be aware that
information on potential noncompliance will be forwarded to the
appropriate EPA enforcement staff.
As an alternative to looking to data from 2017-2019, EPA is also
taking comment on issuing allowances only to those companies that
produced or imported HFCs in 2011-2013 or some other combination of
years, including all years, between 2011 and 2019, assuming the company
is still actively producing or importing as of 2020. To develop the
baseline, EPA has been working to address data gaps and develop a
fuller understanding of production and import in those years. EPA has
already provided the public with a list of those companies through a
Notice of Data Availability in the Federal Register (February 11, 2021;
86 FR 9059). EPA sees advantages and disadvantages to this approach.
For example, once companies began to suspect that they might receive
allowances based on the quantities that they imported, new importers
may have entered the market with more HFCs than the level of demand.
2011-2013 is also prior to any anti-dumping and countervailing duties
(AD/CVD) were finalized (see the memo to the docket on AD/CVD). To
reward such behavior could harm companies that were already
participating in the market and/or have invested heavily in developing
new alternatives to replace HFCs. On the other hand, to exclude all
newcomers based on the actions of a few could penalize those companies
that had not entered the market to game their potential for allowances.
Another factor to consider is when companies may have become aware that
a phasedown on HFCs was likely and whether companies significantly
changed their behavior. Reasonably, companies would have been aware
that the United States may be taking action to phase down HFCs as of
October 15, 2016, which is when countries agreed to the Kigali
Amendment. EPA could consider relying on years prior to 2016, or,
assuming companies that changed behavior did not significantly do so
between October 15, 2016, and January 1, 2017, EPA could consider years
prior to 2017. Using years prior to 2016 or 2017 would reflect the
production and import market prior to this global agreement to phase
down HFCs. Other proposed considerations surrounding eligibility for
allowances are discussed in section VII.C of this proposal. EPA is also
seeking comment on whether the Agency should consider individualized
circumstances to take into account a company's 2020 data for
determining allowances for companies that have newly entered the HFC
import market, for example a company that entered the market or
acquired another company late in 2019.
3. What is EPA's proposed framework for determining how many allowances
each company receives?
This section discusses how EPA proposes to determine how many
allowances each company receives from the general allocation pool. EPA
is proposing that under this initial framework, the amount of
allowances to allocate to producers and importers would be determined
based on the levels of production and import in 2017-2019.
Specifically, EPA is proposing to use a company's highest year of
production or import, on an EVe basis, in those years. Every company's
highest year amount would then be added together and used to determine
a percentage market share for each company. EPA proposes to then
multiply each company's percentage market share with the total amount
of available calendar-year allowances to determine each company's
production or consumption allowances. As noted earlier, EPA is
proposing to establish this process as an initial approach to
allocating allowances, but intends to revisit this procedure and
consider whether any changes to it would be appropriate before the 2024
phasedown step.
EPA is proposing to choose the highest year over multiple recent
years, rather than an average or a single year, to account for
fluctuations in the market. As noted in the previous section, EPA is
proposing to base the allocation amount on 2017-2019 data, but only
companies who were actively producing or importing in 2020 would be
eligible to receive allowances (unless EPA agrees that the company
merits individualized determination based on comments received through
this proposed rulemaking process). The Agency could also consider using
a company's highest market share--a company's exchange value-weighted
production and consumption relative to the total exchange value-
weighted production and consumption in a given year--over the selected
years.
As mentioned previously, EPA is proposing to set aside a small
amount of allowances out of the total cap for new market entrants. As
will be discussed in the next section, EPA is also proposing
[[Page 27171]]
to issue allowances for statutorily defined applications according to
the AIM Act requirements outlined in subsection (e)(4)(B)(iv).
Subsection (e)(2)(D) of the AIM Act ensures that the total amount of
allowances issued does not exceed the production and consumption caps,
even including application-specific allowances.\47\ Therefore, the pool
of available calendar-year allowances must be determined after the
amounts for uses in subsection (e)(4)(B)(iv) are determined. These
calculations would be conducted by EPA to protect company claims of
CBI. EPA intends to issue allowances to individual companies for 2022
and release information on the amount of allowances allocated to each
company publicly no later than October 1, 2021. EPA discusses its
approach to releasing data in a later section of the proposal. EPA
intends to issue allowances to individual companies for 2023 and
release that information publicly no later than October 1, 2022. As
discussed previously, EPA is proposing this annual process for
allowance allocations from the general allowance pool because
application-specific allowance figures may change, and those would need
to be subtracted from the general pool before EPA determines how many
allowances are remaining in the general pool to be allocated.
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\47\ Under the ODS phaseout, essential uses were exempt from the
phaseout and were therefore in addition to the amounts allocated.
Under the AIM Act, application-specific and essential use
allocations are not exemptions from the cap but rather receive
priority within the cap. In this NPRM, EPA is not proposing to issue
essential use allocations.
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4. What is EPA's proposed framework for issuing allowances?
This section contains EPA's proposed formula for determining the
amount of production and consumption allowances to be issued to each
producer and importer.
First, EPA would multiply the production and consumption baselines
by the current phasedown step shown in subsection (e)(2)(C) of the AIM
Act. EPA is proposing to codify the phasedown steps shown in the table
in (e)(2)(C) into the regulations at Sec. 84.7. For 2022 and 2023,
total production and consumption cannot exceed 90 percent of baseline.
Thus, EPA would multiply each baseline by 0.9 to determine the
production and consumption caps for those years.
Second, EPA would subtract from the consumption and production caps
the amount of application-specific allowances that EPA has determined
are necessary for the year at issue and the amount of allowances for
the set aside pool, if EPA finalizes the set aside option proposed. As
discussed in the next section, EPA is proposing to re-calculate the
amount of application-specific allowances every year. The remainder is
the general allowance pool for that year.
Third, EPA would determine the list of companies that meet the
framework eligibility criteria for allowances, add up each company's
EV-weighted high production and consumption amounts in the relevant
years, and divide each company's high production and consumption amount
by the total amount to determine what each company's market share would
be.\48\
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\48\ If EPA finalizes an approach where it uses each company's
highest market share instead of highest production and consumption
level, the Agency would add up each company's high production and
consumption market share in the relevant years, and divide each
company's high production and consumption market share by the total
amount to determine what each company's revised market share would
be for allowances available in the year.
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Fourth, EPA would multiply each producer or importer's market share
by the general allowance pool to determine each company's calendar year
production or consumption allocation amounts. For 2022 and 2023, EPA
proposes to issue allowances in whole units of MTEVe. This could result
in rounding issues. Any HFC with an exchange value more than 1,000
would be issued allowances at less than a kilogram of regulated
substance. When deducting allowances to account for production or
import, EPA would round up if the value was greater than or equal to
0.5 MTEVe and down if below that level. For example, HFC-134a has an
exchange value of 1,430 and importing one kg would require 1.4
allowances. However, EPA would only deduct one allowance. Rarely is
someone importing only one kg of a chemical though, so importing 100 kg
of HFC-134a, for example, would require 143 allowances and no rounding
is needed at the total tonnage level. EPA may revisit this approach if
low-exchange value HFCs become more prevalent and greater precision is
needed. For example, HFC-152a has an exchange value of 124 and thus the
import of one kg would require expenditure of 0.1 allowances. EPA is
taking comment on whether to use less or more granular detail for
allowance allocations, such as issuing allowances out to one or two
decimal points.
Lastly, EPA would then issue by October 1st the list of companies
receiving production or consumption allowances and application-specific
allowances as well as the quantities received.
For allowances for the 2022 calendar year, EPA intends to also
issue allowances from the set aside pool (see section VI.E. of the
preamble) by March 31, 2022, if finalized, and distribute any unused
allowances from the set aside at the same time.
5. What process is EPA proposing to respond to requests for additional
consumption allowances?
EPA is proposing a process in Sec. 84.17 to allow a person to
obtain consumption allowances equivalent to the quantity of newly
produced (``virgin'') regulated substances that the person exported,
provided that the substances were originally produced or imported with
consumption allowances in the same calendar year. Given that the AIM
Act excludes exports from the definition of ``consumption'' under
subsection (b)(3), it would be consistent with the Act to essentially
refund consumption allowances that were expended to import or produce
regulated substances if those regulated substances were later exported
from the country. In order to ensure that the statutorily defined
production and consumption reduction targets are met each year, EPA
proposes that both the export and the request for additional
consumption allowances (RACA) must occur in the year in which
consumption allowances were expended. This approach would prevent a
producer or importer from over producing or importing high-GWP HFCs
prior to January 1, 2022, and exporting them to gain additional
allowances for the initial phasedown years.
EPA is proposing to require the exporter to submit certain
information to EPA for the Agency to review before either granting or
denying the request. This information is needed to verify that the
regulated substances were in fact exported and would include: (i) The
identities and addresses of the exporter and the recipient of the
exports; (ii) the quantity (in kilograms) and names of regulated
substances exported; (iii) the source of the regulated substances and
the date purchased; (iv) the date on which, and the port from which,
the regulated substances were exported from the United States or its
territories; (v) the country to which the regulated substances were
exported; (vi) a copy of the bill of lading and the invoice indicating
the net quantity (in kilograms) of regulated substances shipped and
documenting the sale of the regulated substances to the purchaser; and
(vii) a written statement from the producer that the regulated
substances were produced with expended allowances or a written
statement from the importer that the
[[Page 27172]]
regulated substances were imported with expended allowances. The full
list of required information in a request for additional consumption
allowances can be found at Sec. 84.17. EPA is seeking comment on
whether additional records should be provided to verify allowances were
expended as part of the request, at least until the proposed
certification ID tracking system is established.
C. What are EPA's proposals for the sectors to receive application-
specific allowances?
This section discusses EPA's proposal to implement subsection
(e)(4)(B)(iv) of the AIM Act, which directs the Administrator to
allocate allowances necessary to meet HFC demand for six specified end
uses, or ``applications.'' The Act directs EPA to issue ``the full
quantity of allowances necessary, based on projected, current, and
historical trends.'' The Act also includes a limitation on application-
specific allowances in subsection (e)(4)(B)(iii). This provision
reinforces the requirement in subsection (e)(2)(A) that a person
receiving an allocation may not produce or consume a quantity of
regulated substances that exceeds the number of allowances held by
them. Further, this reinforces that application-specific allowances are
to be part of the annual production and consumption caps.
In order to carry out this statutory direction, EPA is proposing to
create a third category of allowances called ``application-specific
allowances'' that can be expended to either produce or import HFCs. EPA
is proposing to create this third category, and permit the allowance to
be used for either produced or imported HFCs, because manufacturers of
products in the statutorily identified applications may not know in
advance how HFCs will be procured, and EPA wants to promote flexibility
to ensure that end users receive the ``full quantity of allowances
necessary.'' In order to ensure that these application-specific
allowances are provided from within the overall annual production and
consumption caps, EPA proposes to subtract the amount of application-
specific allowances allocated from both the production and consumption
general allowance pools.
This section provides an overview of the applications receiving
allocations, estimated demand for HFCs in these applications in 2022,
and EPA's proposed process for issuing and transferring allowances for
these applications.
1. Overview of the Application-Specific Sectors
The AIM Act lists six applications in subsection (e)(4)(B)(iv) that
are to receive the full quantity of allowances needed, based on
projected, current, and historical trends. As part of the docket to the
NODA that preceded this proposed rule, EPA released reports
characterizing the Agency's current understanding of the market for
five of the six applications (86 FR 9059; February 11, 2021). These
reports provided data on projected, current, and historical trends for
the use of HFCs in each sector. EPA received comments on four of the
five reports (all except defense sprays) noting agreement with
definitions, consideration of additional applications, and potential
updated sources for projections of HFC use in certain applications. EPA
has updated the reports based on the information provided in the
comments, where applicable, and has included the updated reports in the
docket to this rule. EPA held a broad stakeholder meeting on February
25, 2021, related to the AIM Act and the Agency's plans for
implementation. EPA also held five workshops March 11-12, 2021, related
to the AIM Act and focused on HFC use for the five applications that
can receive allocations. Materials from the stakeholder meeting and the
five workshops are included in the docket to this rule.
Metered Dose Inhalers
MDIs are handheld pressurized inhalation systems that deliver
small, precisely measured therapeutic doses of medication directly to
the airways of a patient. MDIs provide reliable and effective therapy
for asthma and chronic obstructive pulmonary disease (COPD).
The pharmaceutical industry historically used CFCs, specifically
CFC-11, CFC-12, and CFC-114, as a propellant. The pharmaceutical
industry began introducing HFC propellants (also known as
hydrofluoroalkanes (HFAs)) for MDIs as replacements for CFCs in the
mid-1990s, specifically HFC-134a in 1996 followed by HFC-227ea in 2006.
CFCs continued to be used after their phaseout in MDIs through the
essential use exemption authorized by the CAA and the Montreal
Protocol. EPA, along with interagency partners, annually assessed
demand for CFCs in MDIs and the ability of the pharmaceutical industry
to transition in order to nominate an exempted amount under the
Montreal Protocol procedures. The United States stopped making annual
requests for CFCs for MDIs in 2009. By 2014, the CFC MDI market was
replaced with HFC MDIs and not-in-kind (NIK) medical inhalers. EPA
estimates that in 2020, approximately 458 MT of HFC-134a and 78 MT of
HFC-227ea propellant were contained in MDIs sold in the United States.
EPA received comments to the market characterizations released with the
NODA stating that the demand was twice what EPA estimates. The use of
HFC MDIs in the United States, absent a transition to alternatives, is
expected to continue as they may be more appropriate for certain
patients than NIK medical inhalers, such as when the patient requires a
reliever medication for exacerbations of asthma or other requirements
(e.g., inhalation strength).
Defense Sprays
Defense sprays are aerosol-based sprays intended for self-defense
and include pepper spray and animal sprays. The defense spray industry
historically used CFCs as a propellant. The defense spray industry
transitioned to HFC propellants as replacements to CFCs in the mid-
1990s, specifically HFC-134a.
EPA estimates that in 2020, approximately 125 MT of HFC-134a
propellant was contained in defense sprays sold in the United States.
The use of HFC-134a propellant in defense sprays in the United States,
absent a transition to alternatives, is expected to continue due to its
non-flammability and physical properties to provide adequate spray
distance for foam, fog, and vapor defense sprays. Efforts to
reformulate are underway but aerosol fillers report that alternatives
have not yet reached their desired specifications.
EPA is proposing to interpret the AIM Act statutory text to mean
that EPA provide an allocation for the propellant used in defense
sprays. EPA is not aware of any other reasonable interpretation, but
seeks comment on this. EPA's proposed definition states that these
products use capsaicin and related capsaicinoids (derived from
oleoresin capsicum) as an irritant. EPA is taking comment on whether
this definition is inclusive of defense sprays potentially covered by
subsection (e)(4)(B)(iv) of the AIM Act. One type of defense spray,
bear spray, is designed to be more potent than pepper sprays designed
for personal self-defense. EPA regulates bear spray as a pesticide, and
requires labeling consistent with 40 CFR 156.70 for human hazards
associated with a product. Labels for bear sprays often contain
language on hazards to humans & domestic animals similar to the
following statement: ``DANGER: May cause irreversible eye damage if
sprayed in the eyes at close range.
[[Page 27173]]
Contact through touching or rubbing eyes may result in substantial but
temporary eye injury. Strongly irritating to nose and skin. Do not get
in eyes, on skin or on clothing. Wash thoroughly with soap and water
after handling. Remove contaminated clothing and wash clothing before
reuse.'' \49\ Recent news reports indicate there may be use that is
inconsistent with the label in the product (i.e., use of bear spray on
people instead of bears).\50\ Bear sprays are not intended for use
against people, and EPA lacks the authority to regulate or authorize
such use under the Federal Insecticide, Fungicide and Rodenticide Act.
EPA is taking comment on whether the Agency should distinguish between
misuse and proper use when evaluating ``the full quantity of allowances
necessary'' for such sprays.
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\49\ Labeling Notification per Pesticide Registration Notice
(PRN) 2007-4, dated July 3, 2019. Available at https://www3.epa.gov/pesticides/chem_search/ppls/072265-00001-20190703.pdf.
\50\ Briley, John. ``Bear Spray Is Showing up at Protests and
Riots. Here's Why, and How It Affects Humans.'' The Washington Post,
19 Mar. 2021, www.washingtonpost.com/lifestyle/wellness/bear-spray-pepper-riot-dangerous/2021/03/19/053c3870-87fb-11eb-bfdf-4d36dab83a6d_story.html.
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Structural Composite Preformed Polyurethane Foam
Structural composite preformed polyurethane (PU) foams are used for
increased structural integrity and weight reduction in marine and
trailer applications. The structural composite foam industry
historically used HCFCs as a foam blowing agent (i.e., HCFC-22) and
transitioned to HFC blowing agents as replacements for HCFCs in the
early 2000s, specifically HFC-134a.
The PU foam and recreational boating industries estimate that in
2020, structural composite preformed PU foam for marine and trailer
uses used approximately 28 MT of HFC-134a blowing agent. This specific
use of HFC-134a blowing agent is expected to continue in the United
States due to performance issues with alternatives (e.g., lack of
structural integrity, shrinking). However, it is projected that at some
point HFC-134a blowing agent will no longer be used in structural
composite PU foam for marine and trailer use as it is anticipated that
alternatives will replace HFC-134a throughout the market.
EPA is proposing to interpret the statutory text to mean that EPA
provide application-specific allocations for HFC blowing agent used to
manufacture structural composite preformed polyurethane foam for use in
manufacturing boats and trailers. EPA is not aware of any other
reasonable interpretation, but seeks comment on this.
Semiconductors
The fourth listed application is ``the etching of semiconductor
material or wafers and the cleaning of chemical vapor deposition
chambers within the semiconductor manufacturing sector.''
Semiconductor devices are critical to the functioning of electronic
equipment. Semiconductor manufacturers use a variety of high-GWP
fluorinated gases, including HFCs, perfluorocarbons, and sulfur
hexafluoride, in two main stems of the manufacturing process: Etching,
also known as plasma etching, and to clean CVD chambers. Depending on
the complexity of the product, the manufacturing process may require
upwards of 100 steps utilizing high-GWP gases.
Semiconductor manufacture uses HFC-23, HFC-32, and HFC-41,
primarily in etching processes, but also minimally in CVD chamber
cleaning processes. HFC use in semiconductor manufacturing began in the
mid-1980s.
EPA estimates that in 2019, semiconductor fabrication facilities in
the United States used 43 MT of HFC-23, HFC-32, and HFC-41. Absent the
uptake of alternatives or use of used HFCs that meet the acceptable
purity levels, the use of HFCs in semiconductor manufacture is likely
to continue as HFCs have physical properties that make them well suited
for this use.
Mission-Critical Military End Uses
Mission-critical military end uses of HFCs are those uses by an
agency of the Federal Government responsible for national defense which
have a direct impact on mission capability as determined by the U.S.
Department of Defense (DoD), including, but not limited to, uses
necessary for development, testing, production, training, operation,
and maintenance of Armed Forces vessels, aircraft, space systems,
ground vehicles, amphibious vehicles, deployable/expeditionary support
equipment, munitions, and command and control systems. Based on
preliminary information, near-term annual EV-weighted use of HFCs in
mission-critical military end uses is anticipated to be less than 2
MMTEVe.
On Board Aerospace Fire Suppression
EPA is proposing to define on board aerospace fire suppression as
use of a regulated substance in fire suppression equipment used on
board commercial and general aviation aircraft and space vehicles. This
definition excludes military aircraft because they are already covered
under the definition of mission-critical military end uses. On board
commercial aviation fire suppression systems have historically used
halons and are installed on mainline and regional passenger and
freighter aircraft to protect valuable and sensitive assets. Fire
suppression systems on board aircraft can be divided into two main
product categories: Total flooding systems and streaming applications;
currently HFC-236fa and HFC-227ea have replaced halon 1301 in total
flooding systems in lavatory trash receptacles. Due to weight and
volume restrictions or penalties (e.g., increased fuel consumption),
HFCs have not been popularized in other fire suppression systems on
board aircraft. HFCs have replaced halon 1301 lavatory trash receptacle
fire suppression systems in new and existing commercial aircraft. EPA
estimates that in 2020, approximately 0.38 MT of HFC-227ea and 0.30 MT
of HFC-236fa were installed in new aircraft lavatory fire suppression
systems. Absent transition to use of alternatives or of used HFCs, the
use of HFCs in lavatory fire suppression systems is expected to
continue as new aircraft are sold.
EPA has previously defined ``space vehicle'' under the Title VI
regulations at 40 CFR 82.62 as ``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 test, transport,
and storage, which through contamination can compromise the space
vehicle performance.'' EPA takes comment on whether space vehicle, as
defined above, is inclusive of applications that would be considered as
on board fire suppression. EPA requests relevant information on HFC use
in these applications.
2. At which point in the application-specific sector production process
is EPA proposing to issue allowances?
EPA is requesting comment on which entity should be the recipient
of application-specific allocations. The Act does not specify who
should be issued these allowances so the Agency has considered
allocating either directly to the entity manufacturing the product
listed in the application (end user) or to the producer or importer who
supplies the bulk HFC to that entity.
EPA is proposing to issue application-specific allowances to the
end user of the HFC who is manufacturing the product listed in
subsection (e)(4)(B)(iv)
[[Page 27174]]
of the Act or the Department of Defense, in the case of mission-
critical military end uses. EPA has experience under the essential use
exemption, as implemented under Title VI of the CAA, with issuing
allowances directly to end users. In that instance, EPA issued
essential use allowances directly to MDI manufacturers, for example,
who then conferred those allowances to a company for the production or
import of a specified regulated substance. One advantage of this system
was that it ensured that those companies manufacturing MDIs had the
allowances needed and they could choose which producer or importer they
would confer their allowances to. This allowed the MDI manufacturers to
have power to make a competitive choice in a more open market for the
material and price best suited to their needs, or import the material
directly themselves. Another advantage was that it helped to ensure
that the allowances would be expended only for an essential use.
Because EPA has seen these advantages in its past practice, EPA is
proposing to use this established process for the application-specific
allocations. In other words, EPA is proposing to issue application-
specific allocations to the end users for the six statutorily listed
applications.\51\
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\51\ For the purposes of clarity and consistency, any reference
or mention of EPA issuing application-specific allowances in this
proposed rulemaking to the end user of the HFC who is manufacturing
the product excludes mission-critical military end uses. Instead, as
noted earlier, EPA proposes to directly allocate application-
specific allowances to the Department of Defense for mission-
critical military end uses.
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One challenge EPA foresees in issuing application-specific
allowances to end users is identifying all of the end users. Essential
use allowances were issued by EPA to companies that had submitted
applications to the Agency. EPA attempted to identify all of the end
users for each of the applications listed in subsection (e)(4)(B)(iv)
of the Act and put this understanding of the market in the
characterization reports contained in the docket for the NODA. Through
its NODA, EPA invited potentially affected entities to provide EPA with
further information or point to existing or suspected data gaps. EPA
also held five workshops March 11-12, 2021, related to the AIM Act and
focused on HFC use for five of the six applications (not including
mission-critical military end uses) that can receive allocations.
Materials from the five workshops are included in the docket to this
rule. EPA still through this proposed rulemaking welcomes information
on whether this is a complete listing of companies. Acknowledging the
potential limits on its knowledge, EPA also recognizes that it will
need to provide application-specific allowances on a certain schedule,
and so proposes to limit the application-specific allocation to 2022
for those companies that EPA is aware of by the close of the comment
period listed above in the DATES section of this preamble. In a
subsequent section, ``What is EPA's Proposed Set Aside Pool of
Allowances,'' EPA outlines its proposed approaches for setting aside
additional allowances in the event that other end users are identified
after the finalization of the rule. EPA recognizes that the preferred
approach may vary by application depending upon the current methods for
acquiring HFCs. EPA specifically requests comment from end users in
these applications and the suppliers of those HFCs.
3. How is EPA proposing to address transfers of application-specific
allowances?
EPA is proposing to allow limited transfer of application-specific
allowances. Specifically, end users within a specific application may
transfer their allowances only with another end user that will use the
application-specific allocation for that same application. These could
be viewed as ``intra-application transfers.'' EPA is proposing to
prohibit transfers with companies in other applications. Section
(e)(4)(B)(iv) of the AIM Act states that application-specific
allowances are provided ``for the exclusive use'' of HFCs ``in an
application solely for'' those in the statutory list. These transfer
provisions would help to ensure that, after EPA allocates the full
quantity of allowances necessary for each application, the full
quantity stays available to fully supply that application and ensure
that the application-specific allowances are being exclusively used
solely for one of the six listed applications. EPA takes comment on
this proposed approach, which seems consistent with Congress's intent
in creating this application-specific allocation program.
EPA is similarly proposing to prohibit the transfer of application-
specific allowances back into the larger market for production and
consumption allowances. The AIM Act specifies that the allocation is
for the exclusive use of one of the listed applications. It follows
that an application-specific allocation could not be transferred to
produce or import HFCs for a use that was not enumerated. Note that
there is no restriction on a company who uses HFCs in one of the listed
applications from acquiring calendar-year allowances from the general
pool or from purchasing HFCs produced or imported with calendar-year
production and consumption allowances. In other words, any company that
uses HFCs in one of the six listed applications has several avenues for
acquiring HFCs, for example if their actual demand exceeds the amount
of HFCs covered by their application-specific allowances.
EPA is proposing similar restrictions to the sale of HFCs acquired
by expending application-specific allowances. If an application-
specific allowance was expended for the production or import of a
regulated substance, that substance must be used solely for the
application it was produced or imported for. EPA is therefore proposing
to also prohibit the sale of that HFC for use in a different
application from the one that was intended. This would be an outgrowth
of the statutory restriction placed on application-specific allowances
that they be for the exclusive use in the application for which the
allowance is provided. If an entity could procure HFCs with the
application-specific allowance, but then freely sell that HFC on the
open market, that would seem to create a loophole to the restriction
placed on the use of the application-specific allowance. EPA is
proposing to allow the intra-application sale of material (i.e.,
amongst companies within the same application), since such intra-
application sale would be consistent with the exclusive use limitation.
EPA requests comment on the described approach for allowances and HFCs
acquired with those allowances.
4. What are the criteria EPA is proposing to use for evaluating
application-specific allowance requests?
As discussed in section IX.D, EPA is proposing to collect
information from companies who use HFCs in five of the six applications
listed in the AIM Act. As noted previously, companies who believe they
qualify for application-specific allowances should provide data on
their historical and current use of HFCs in the relevant application to
EPA by the date the comment period closes on this proposed rule. This
information should also include a detailed description of how the HFCs
are used so EPA can determine whether the use is consistent with the
definition of the application. EPA will use that information to
determine the full quantity of allowances necessary, based on
projected, current, and historical trends, for the production or
consumption of HFCs for the exclusive use of the regulated substance
for each application, on a company-specific
[[Page 27175]]
basis. For the initial five years after enactment of the AIM Act, EPA
is proposing to base application-specific allowances on the eligible
amount of HFCs used by each company requesting such allowances based on
the higher of the two approaches:
--HFC use by the company in the specific application in the prior year
multiplied by the average growth rate of use for the company over the
past three years; or
--HFC use by the company in the specific application in the prior year
multiplied by the average growth rate of use by all companies
requesting that type of application-specific allowances (e.g., for
MDIs) over the past three years.
EPA is seeking comment on whether the gross domestic product or
U.S. population growth rates would be appropriate for each of the
applications, and whether EPA should allow for consideration of
individual circumstances factually documented to the Agency (e.g., when
a company projects significant growth due to acquiring another
company). EPA could also factor in the availability of reclaimed HFCs
(if suitable), inventory of previously produced and imported HFCs,
availability of alternatives, or other relevant features. EPA seeks
comment on this proposed approach and other approaches it could adopt
to allocate the amount of allowances necessary for each of the
applications specified in subsection (e)(4)(B)(iv) of the Act. EPA also
proposes that if future information reveals a company applying for
application-specific allowances has provided false information, EPA
reserves the right to revoke allowances, require future retirement of
allowances at a greater level than the number of application-specific
allowances allocated, prohibit companies from receiving future
allowances if there is noncompliance with relevant legal and regulatory
requirements, and pursue any other appropriate enforcement action.
D. What are EPA's proposed provisions for transferring allowances?
Subsection (g) of the AIM Act directs EPA to issue rules that
govern the transfer of production and consumption allowances. EPA is
proposing to establish transfer provisions in Sec. 84.19 that are
based in large part on the ODS transfer provisions.
EPA is proposing to require that the transferor must submit to the
Administrator a transfer claim setting forth the following: The
identities and contact information of the transferor and the
transferee; the type of allowances being transferred (i.e., production
or consumption allowance); the quantity (in EVe) of allowances being
transferred; the total cost of allowances transferred; the remaining
quantity of allowances held by the transferor; and the quantity of the
offset. For transfers of allowances issued for use in one of the
applications listed in AIM Act subsection (e)(4)(B)(iv), the transferor
must also include a signed document from the transferee certifying that
HFCs produced or imported with these allowances will only be used for
the same application they were initially allocated for.
EPA would then certify with records in its possession that the
transferor has unexpended allowances sufficient to cover the transfer
claim. Within three working days of receiving a complete transfer
claim, EPA intends to issue either an objection letter or non-objection
letter to the transferor and transferee. The transfer cannot proceed
until EPA issues a non-objection notice. Given reporting to the Agency
is often after the fact for quarterly activity, EPA is also proposing
that if after issuance of a non-objection notice the Agency 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 violations of the regulations of this subpart that
occur as a result of, or in conjunction with, the improper transfer.
In cases where EPA issues an objection notice disallowing the
transfer, either transferor or transferee may file a notice of appeal,
with supporting reasons, with the relevant Agency official within 10
working days after receipt of notification that a transfer was
disallowed. The official may affirm or vacate the disallowance. If no
appeal is filed electronically by the tenth working day after
notification, the disallowance shall be final on that day.
EPA does not intend to broker transactions but rather solely
confirm that the transferor has sufficient allowances to cover the
transfer. EPA also proposes to collect information on the price of
allowances transferred to inform future analyses of rule costs and
provide additional insight into the market when assessing potential
regulatory changes and future allocation options.
Additionally, subsection (g)(2) of the Act requires that the
regulations ``ensure that the transfers under this subsection will
result in greater total reductions'' in the production or consumption
``of regulated substances in each year than would occur during the year
in the absence of the transfers.'' In other words, the transfer of
allowances must result in less overall production or consumption than
would have occurred absent the transfer. The AIM Act also specifies
that, for transfers between two or more persons, the transferor's
allowances be reduced by an amount greater than the amount of
allowances being transferred.
EPA is proposing to allow transfers of allowances for HFCs provided
the transferor's remaining allowances are reduced by the amount it
transferred plus some percentage of the amount transferred (i.e., an
offset). EPA is proposing that the offset be five percent, and is
taking comment on a range from one percent to 10 percent. A five
percent offset would meet the AIM Act statutory directive and provide a
net environmental benefit without discouraging trading necessary to
meet market demands.
EPA analyzed HCFC inter-company transfer data for 2010 through
2018. The amount of consumption allowances transferred each year ranged
between five percent and thirty percent of the total number of
allowances allocated. Thus, a five percent offset would result in a
reduction in the total allowances in the general pool by 0.25 percent
to 1.5 percent. Given that small size, EPA's consideration for the size
of the offset, at this time, pertains more to the effect on an
individual company and less on the impact to the market overall. As the
phasedown progresses, EPA may revisit the size of the offset.
EPA is considering and taking comment on an offset as low as one
percent and as high as 10 percent. EPA is less inclined to use an
offset as low as one percent because it would result in the least
environmental benefit of the proposed options. EPA anticipates that the
transaction costs resulting from a one percent offset would be minimal.
Under the class I ODS allowance system, EPA required through rulemaking
an offset of one percent for any U.S. transfer to achieve the
reductions in production and consumption required for transfers by
section 607 of the CAA (60 FR 24970, May 10, 1995). However, the
phaseout of HCFCs included chemical-specific allowances and required a
company to exchange allowances for one specific HCFC for another
specific HCFC (See 68 FR 2820, January 21, 2003). In this rulemaking,
EPA is proposing to issue allowances on an exchange value-weighted
basis, which would provide allowance holders with the flexibility to
determine which HFCs to produce or import without needing to make a
transfer from one HFC to another HFC. In other words, the Agency is
proposing to structure the HFC allocation program
[[Page 27176]]
in a way that negates the need to transfer allowances between regulated
substances, and thus EPA anticipates fewer transfers overall than would
occur under a chemical-specific phasedown schedule. EPA is also
considering an offset amount as high as 10 percent to be more
protective of the environment. This level of offset, however, could
discourage transfers, resulting in less efficient allocation of
production and consumption allowances. On the other hand, it may
encourage the recovery and reclamation of HFCs.
EPA seeks comment on setting the offset at five percent and is also
seeking comment on the full range presented. While numerically all the
percentages would result in a greater total reduction, EPA is
specifically seeking comment on how to balance the statute's intent of
providing flexibility through transfers yet doing so in a manner that
further reduces overall production and consumption, which would result
in greater environmental protection. This proposal seeks to maximize
the protection of the environment, while also providing for the ability
to transfer allowances. However, it may be the case that tolling
agreements, the fact that most HFCs are used in blends, or other
factors result in market dynamics for HFC production and import that
EPA has not considered. Evidence supported by data of harm to the
market for HFCs or consumer access could be compelling to the Agency.
EPA is proposing that an offset would apply to all transfers of
allowances under the AIM Act, including transfers of application-
specific allowances, as subsection (g) appears to apply generally to
transfers of allowances and does not exempt any allowances from its
requirements. However, EPA is proposing a one percent offset, but is
seeking comment on whether a lower offset amount in a range of 0.1
percent to one percent is more appropriate for the transfer of
application-specific allowances between companies in a particular
application. Since the AIM Act states that EPA should provide
allowances under subsection (e)(4)(B)(iv) of the Act at the levels
necessary for the statutorily listed applications, a lower transfer
offset level may be more consistent with the intent of that subsection
of the AIM Act.
Note that EPA is proposing that an application-specific allowance
holder could confer their allowances to an importer or producer, who
would procure the HFC for the end user, without any offset. EPA does
not consider the conferral of allowances to be a transfer but rather an
actualization of the allowance by an end user that is not a producer or
importer. Because Congress made clear in subsection (e)(4)(B)(iv) of
the Act that the statutorily listed applications should receive the
amount of allowances necessary, based on projected, current, and
historical trends, EPA is proposing to allow these conferrals as part
of the inherent process of ensuring end users can receive the necessary
amount of HFCs. As discussed previously, EPA is proposing to define the
term ``confer,'' to distinguish the concept from ``transfer.''
EPA welcomes comments on the proposed size of the offset, the
Agency's assumptions about the likely amount of transfers, and the
treatment of transfer of allowances issued under subsection
(e)(4)(B)(iv). EPA seeks comment in a later section of this proposal on
the applicability of subsection (g) to international transfers.
E. What is EPA's proposed set aside pool of allowances?
As explained previously, it is reasonable for this initial
allocation period to largely allocate allowances based on companies'
practice in the market since 2017, but EPA also acknowledges that this
approach could exclude companies that have historic practice in the HFC
market that is not reflected in EPA's existing data and could create a
market barrier to new market entrants. As a potential way to avoid
these problems, in addition to the allocation framework and procedure
outlined in the prior sections, EPA is also proposing to establish a
single set aside pool of consumption and production allowances. The set
aside pool as proposed would be available to three groups of companies:
(1) End users in applications identified for allocations under
subsection (e)(4)(B)(iv) of the AIM Act that EPA has not recognized in
the initial allocation of allowances (i.e., the allocation called for
by October 1, 2021); (2) importers of HFCs in 2017 through 2019 that
have not been required to report through the GHGRP under 40 CFR part
98, where EPA does not learn of their past imports in time to issue
allowances as part of the general pool despite the Agency's best
efforts; and (3) importers that are new market entrants. EPA is
proposing that the set aside pool would not be open to companies
looking to newly enter as producers of HFCs because the Agency does not
wish to encourage the construction of new HFC production capacity.
EPA proposes to give priority access to the set aside pool to end
users in the applications identified in subsection (e)(4)(B)(iv) of the
Act. EPA acknowledges that not all end users may be aware of EPA's
regulatory activity in the HFC space, and providing access to the
proposed set aside pool would ensure end users in the statutorily
identified applications have the allowances necessary for their
continued business. EPA proposes to issue allowances to these end users
only for 2022, recognizing that once aware of the requirements these
entities will be able to apply for 2023 in the same manner as all other
application-specific allowance holders.
After allowances are provided to the (e)(4)(B)(iv) of the Act
identified applications, EPA would provide allowances from the same set
aside pool to importers that were not previously required to report to
GHGRP and were not identified in time to be included in the general
allowance pool. EPA is not including producers in this stage because
all HFC producers were required to report to the GHGRP. EPA proposes to
issue allowances to these previously unidentified importers only for
2022. EPA's expectation would be that once these importers came into
the allocation system, these entities will have provided sufficient
information to receive allocations through the general pool for 2023.
Finally, EPA is proposing to issue remaining allowances to new
market entrants seeking to import HFCs in line with the criteria
outlined later in this subsection. EPA is proposing to provide
allowances for these new market entrants for both 2022 and 2023. EPA
proposes to issue the new market entrants allowances for 2022 and 2023
at the same time in the same quantity for both years. As noted
elsewhere in this proposal, EPA intends to revisit the overall process
for allocating allowances for all years past 2024, but would generally
expect these new market entrants to be able to participate the same as
historic importers in those later future years.
EPA acknowledges that creating a set aside pool for new market
entrants would deviate from historic regulatory practice under CAA
Title VI, but given that the AIM Act outlines a phasedown, but not
phaseout, of HFC production and consumption in the United States, in
this instance it may be appropriate to continue to facilitate
participation by new market entrants in the HFC import business. EPA
further proposes to have this set aside pool accessible only to
businesses that meet the Small Business Administration (SBA) criteria
for a small business.\52\ During the HCFC
[[Page 27177]]
phaseout, EPA heard from some small businesses that they had been
unable to source material from domestic suppliers in sufficient
quantity and/or at a competitive price. EPA's proposal would allow
small businesses experiencing this challenge to request allowances as a
new market entrant and import HFCs directly.
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\52\ A small business is principally defined and determined
based on size standards as established by the SBA. The size of a
small business is defined by either the average number of employees
over the past 12 months or the average annual receipts over the past
three years and may vary based on a business's economic activity, or
industry, under the North American Industry Classification System
(NAICS). SBA further defines a small business as a for-profit
business of any legal structure, independently owned and operated,
not nationally dominant in its field, and physically located and
operated in the United States or its territories (13 CFR part 121).
https://ecfr.federalregister.gov/current/title-13/chapter-I/part-121.
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If the set aside program is established as outlined in this
proposal, EPA specifically encourages businesses to apply for set aside
allowances that may have had particular challenges entering the HFC
import market due to systemic racism, market-access barriers, or other
challenges particularly faced by small disadvantaged businesses such as
minority- and woman-owned small businesses. EPA is mindful of the
Executive Order on Tackling the Climate Crisis at Home and Abroad (E.O.
14008), which calls for ``undertaking robust actions to mitigate
climate change'' and ``developing programs, policies, and activities to
address the disproportionately high and adverse human health,
environmental, climate-related and other cumulative impacts on
disadvantaged communities, as well as the accompanying economic
challenges of such impacts. . . .'' (86 FR 7619). EPA conducted a
preliminary review of HFC importers and HCFC allowance holders
(available in the docket). EPA is specifically soliciting comment on
whether any individuals have experienced structural barriers inhibiting
their earlier access to the HFC import market, including if there was
difficulty entering the HFC import market based on criteria such as
business location, employment of socially or economically disadvantaged
individuals, or other criteria related to business ownership, employee
characterization, or business location. The Agency is concerned that
certain businesses historically have and could continue to experience
difficulty entering the HFC market due to societal problems, such as
systemic racism or sexism, and the Agency is interested in collecting
the information requested in this paragraph to better understand
whether such issues are affecting entry into this market and to explore
future opportunities to ensure a more equitable marketplace.
EPA has reviewed data available to the Agency and determined that
of the companies that imported HFCs between 2011-2013, eight companies
were no longer importing HFCs by 2017-2019. It is possible some of
these companies were still importing under a different name. Nineteen
companies reported imports of HFCs in 2017-2019 that were not importing
HFCs in 2011-2013. Again, it is possible that some companies changed
names, which would reduce this number. With the exceptions of companies
that were reporting under a different name, EPA would generally view
these nineteen companies as new market entrants. If EPA establishes a
set aside allowance pool, it would be appropriate to establish a pool
that roughly estimates the market shifts EPA has seen over this
timeframe with additional allowances to accommodate for businesses that
would have met EPA's criteria to be eligible for general or
application-specific allowances, but were not identified in time.
Accordingly, EPA is proposing to establish a set aside pool for new HFC
importers of a total of five MMTEVe of consumption allowances for 2022,
but is considering a range up to 15 MMTEVe. Because application-
specific allowances can also function as production allowances, EPA is
proposing to set aside one MMTEVe of production allowances as well.
Because EPA anticipates the application-specific end users to be a
smaller group than the other two groups, EPA is proposing a smaller set
aside amount. EPA specifically invites comments on the size of the set
aside for consumption and production allowances.
As noted previously, EPA proposes that priority access would be
given to end users that would have been eligible for application-
specific allowances. Such end users would be given an allocation equal
to what EPA determines that end user would need. For the other
applicants to the set aside pool, EPA proposes that each would be
eligible for up to 0.2 MMTEVe in allowances. This value is based on the
aggregated median quantity of AIM Act-regulated HFC imports (highest of
2017-2019 for ``new'' importers that did not also import in 2011-2013)
reported to the GHGRP and scaled based on a common HFC blend, in
MMTCO2e. EPA seeks comment on whether it should finalize a
higher limit for companies other than those seeking application-
specific allowances, up to one MMTEVe.
If there are more applicants for allowances than EPA has set aside,
EPA proposes to reduce each new market entrant applicant's share on a
pro rata basis. EPA proposes that allowances received by applicants to
the set aside pool would be nontransferable because this is the best
way to ensure that applicants to the set aside pool only request
allowances they are able to use, and do not simply participate in the
pool in order to sell the allowances on the open market. If there are
fewer applicants for allowances such that 2022 allowances remain in the
pool, EPA proposes to redistribute them to the general pool of existing
allowance holders on a pro rata basis by March 31, 2022. Alternatively,
EPA could auction the remaining allowances by March 31, 2022, should it
finalize this proposed set aside. An auction would promote a more
dynamic market in which companies could choose to participate if they
are seeing additional demand for allowances than they were allocated,
and an auction allows companies to purchase allowances based on what
the allowance is worth to the company.
EPA is proposing that companies would have until November 30, 2021,
to apply to the set aside pool. For entities that fall within the six
statutorily identified applications in subsection (e)(4)(B)(iv), but
did not initially receive application-specific allowances from EPA,
they would apply to EPA in the same manner as they would for the
application-specific allowances. For all other applicants, in order to
apply to the set aside pool, EPA proposes that businesses would need to
demonstrate that they have the ability and intention to enter the HFC
import market. Specifically, EPA proposes to require applicants to the
pool to submit an application showing: (1) Name and address of the
company and the complete ownership of the company (with percentages of
ownership); (2) whether the company is a woman or minority owned
business; (3) contact information for the owner of the company; (4) the
date of incorporation and State in which the company is incorporated
and State license identifier; (5) a plan for importing HFCs; and (6) a
prospective foreign exporter that the applicant anticipates working
with. EPA recognizes that this new entrants pool, if not structured
appropriately, could result in allowances going to companies that are
already importing HFCs or are associated with companies that currently
import HFCs. To prevent fraud and to ensure that these allowances go to
new entrants in the HFC import business, EPA seeks comment on whether
there are other data it should
[[Page 27178]]
request. EPA also proposes to limit the set aside to owners of
companies, not operators or designated agents, and that businesses
applying to the set aside pool cannot be a subsidiary of or have any
common ownership stake or familial relationship with another allowance
holder. EPA also seeks comment on whether it should limit new entrants
to companies that have not previously imported HFCs. Given the focus of
the set aside is to allow for companies that seek to newly import HFCs,
providing allowances to companies who exited the import business seems
at odds with the general goal of the set aside. If the set aside pool
is limited to small businesses, applicants would also need
documentation demonstrating that they meet the SBA criteria for a small
business. EPA is soliciting comment on this list and invites public
input on whether any of these items should not be included or if other
elements should be added. EPA proposes that it would review the
information provided, conduct follow-up verification as needed, and
issue allowances to applicants that meet the stated program criteria no
later than March 31, 2022. EPA also proposes that if future information
reveals a company has provided false information or has not disclosed
financial or familial relationships between a new entrant and another
allowance holder, EPA reserves the right to revoke allowances and
require the company to retire a greater number of allowances than those
received through the set aside pool.
F. What is EPA proposing to require for HFC-23 emission controls for
allowance holders?
As outlined in the definition section, EPA is proposing that the
creation of a regulated substance beyond insignificant quantities
inadvertently or coincidentally created in three specific circumstances
would be considered ``production.'' As explained in an earlier portion
of this section, EPA is proposing that such production, whether
intentional or unintentional, would generally require expenditure of
production and consumption allowances unless the regulated substance is
timely destroyed. In this subsection, EPA is outlining a narrowing of
this general approach particular to HFC-23. Specifically, EPA is
proposing that HFC-23 must be captured and controlled to a specific
standard outlined later in this subsection. Entities could either
destroy the HFC-23 or expend production and consumption allowances to
capture, refine, and sell it for consumptive uses.
As noted at the start of this section, the AIM Act provides EPA
with significant discretion in how to establish an allowance allocation
system. EPA is proposing to exercise this significant discretion to
only allow production and consumption allowances to be expended for
HFC-23 if the HFC-23 is refined and sold for consumptive uses, such as
in semiconductor etching or refrigeration at very low temperatures. EPA
understands that currently, some HFC-23 is unintentionally created as a
byproduct in chemical production processes and vented to the
atmosphere.\53\ EPA proposes that allowances created through the AIM
Act cannot be expended for HFC-23 that is vented. An entity that
creates HFC-23 would need to capture the HFC-23 and could either (1)
expend production and consumption allowances to sell that HFC-23 for
consumptive uses or (2) destroy the captured HFC-23 using a technology
approved by the Administrator.
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\53\ See, e.g., ``Fluorinated Greenhouse Gas Emissions and
Supplies Reported to the GHGRP.'' Epa.gov, Environmental Protection
Agency, 24 Feb. 2021, www.epa.gov/ghgreporting/fluorinated-greenhouse-gas-emissions-and-supplies-reported-ghgrp#production.
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In the alternative, if EPA does not finalize the definition of
production as proposed, or does not finalize the requirements around
the exemption from expending allowances for production if regulated
substances are timely destroyed, EPA proposes to use the significant
discretion provided in the AIM Act to require that, in order to be
eligible to receive production allowances under the system created
through this rulemaking, companies must control, capture, and/or
destroy HFC-23 byproduct that is created at facilities that produce
regulated substances and that would otherwise be emitted to a specific
standard outlined later in this subsection.
As further support for both EPA's main and alternative proposed
approaches to addressing HFC-23, EPA notes that HFC-23 is a regulated
substance under the AIM Act. In the Congressionally provided table in
subsection (c) of the Act, HFC-23 is assigned the highest exchange
value of any regulated substance of 14,800, indicating that Congress
was well aware of the potential impact of this substance and intended
for it to be regulated on that basis. This exchange value is almost
5,000 more than the next closest regulated substance (HFC-236fa at
9,810). EPA has data available through the GHGRP indicating that there
are emissions of HFC-23 at fewer than four facilities in the country
that produce other HFCs controlled by the AIM Act.\54\ Because existing
data suggests that absent control, there may be significant emissions
of HFC-23 at facilities that produce regulated substances under the AIM
Act, the AIM Act does not prevent a new entrant from producing HFCs if
they have the necessary allowances, and because HFC-23 has a
significantly higher exchange value than any other regulated substance
under the AIM Act, EPA is proposing to require that an entity that
creates HFC-23 would need to capture the HFC-23 and could either (1)
expend production and consumption allowances to sell that HFC-23 for
consumptive uses or (2) destroy the captured HFC-23 using a technology
approved by the Administrator. Specifically, EPA is proposing that, no
later than October 1, 2022, as compared with the amount of chemical
intentionally produced on a facility line, no more than 0.1 percent of
HFC-23 created on the line may be emitted. The HFC-23 must be destroyed
using a technology approved by EPA as outlined in section VII.B. of
this rulemaking and 40 CFR 84.29(b). As explained further in the
supporting documentation provided in the docket, EPA is aware that
these facilities are already taking steps to control, capture, and/or
destroy their HFC-23 emissions and that current information suggests
that some facilities are controlling HFC-23 emissions to the proposed
0.1 percent standard or lower. EPA is also aware of continuous
improvement projects underway to limit HFC-23 emissions at these
facilities. Since some facilities have already achieved this standard,
EPA is proposing that it is reasonable to require facilities to meet
this standard. EPA acknowledges that some facilities may need to
install and calibrate new equipment in order to meet this standard, and
therefore is proposing a compliance date of October 1, 2022.
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\54\ There are also reported emissions from other sources
including from the production of HCFC-22 regulated under CAA Title
VI. If EPA were to finalize under the alternative interpretation
proposed, EPA intends to take separate action to address HFC-23
byproduct emissions from HCFC production.
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EPA recognizes that individual circumstances could arise that make
it impossible for an individual facility to install necessary controls
by October 1, 2022. Therefore, for companies that can demonstrate to
EPA that at the relevant facilities, they have taken concrete steps to
start to improve their HFC-23 control, capture, and destruction (such
as purchase and installation of necessary equipment), are reporting
[[Page 27179]]
under GHGRP, and provide information to EPA regarding their plans to
meet the 0.1 percent HFC-23 emissions limit, EPA proposes that the
Agency may grant a six-month deferral, subject to a one-time additional
six-month extension. Alternatively, EPA is taking comment (in addition
to taking comment on all proposals in this section) on whether the
Agency should grant a one-time, one-year deferral with no possible
extension. Under either method, companies would need to request such a
deferral by August 1, 2022. EPA proposes to make a determination on an
application within 30 days based on whether the company has
demonstrated good faith efforts to comply with the HFC-23 emissions
reduction requirement, there are reasons that have necessitated
compliance deferral, and there are clear plans for the company to come
into full compliance by the deferred date. EPA intends to publicly
announce any compliance deferrals granted under this process.
EPA understands that destruction of HFC-23 may occur both at the
facility where it is generated (on-site) and may also occur off-site at
another facility, which may or may not be owned by the same corporate
entity. In instances where HFC-23 is destroyed off-site, EPA proposes
that the transportation to and destruction at the off-site facility
would be considered in calculating compliance with the 0.1 percent
emissions standard.
VII. What other elements of the AIM Act is EPA addressing in this
proposed rulemaking?
A. How is EPA proposing to address international trades or transfers of
HFC allowances?
Subsection (j) of the AIM Act, titled ``International
Cooperation,'' addresses the trade or transfer of production allowances
between entities in the United States and foreign countries.\55\ To
implement this subsection, EPA must determine whether a country has
``enacted or otherwise established . . . the same or similar
requirements or otherwise undertaken commitments regarding the
production and consumption of regulated substances as are contained
in'' the AIM Act. Under subsection (j)(4), EPA is required to
promulgate a rule carrying out this subsection by December 27, 2021,
and to review that rule at least annually and, if necessary, revise
it.\56\
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\55\ Subsection (j)(1) also addresses exports. In particular,
after January 1, 2033, it prohibits the export of a regulated
substance to a person in a foreign country if EPA determines that
the country has not undertaken certain actions regarding the
production and consumption of regulated substances. Given the timing
of this prohibition, EPA does not intend to further address this
aspect of subsection (j)(1) in this rulemaking.
\56\ This review would be an internal procedure, but EPA would
engage in notice and comment rulemaking to revise the regulations.
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The statute uses the terms ``trade'' and ``transfer'' with respect
to allowances in many parts of both subsections (g) and (j). While EPA
has considered whether Congress intended ``trade'' and ``transfer'' to
signify different actions with respect to allowances in these
provisions, neither term is defined in the AIM Act and EPA cannot
discern a consistent difference in how the terms are used in this
context. EPA is therefore proposing to interpret them as being used
interchangeably.
In most instances, subsections (g) and (j) use ``transfer'' (either
exclusively or alongside the term ``trade'') to describe the exchange
of allowances between two entities. Subsection (j) uses the phrase
``trade or transfer'' throughout the subsection. However, (j)(2) and
(3) exclusively use ``transfers'' in the paragraph titles, while using
both ``trade or transfer'' and ``transfer'' in the text of both
paragraphs. For example, (j)(2) permits the ``trade or transfer of a
production allowance . . . if, at the time of the transfer'' certain
conditions are met. There is one instance in subsection (g)(2)(C) where
the AIM Act references trade alone in requiring that EPA's rule provide
for ``the trading of consumption allowances in the same manner as is
applicable [for] the trading of production allowances.'' In all other
places in subsection (g), the term ``transfer'' is used exclusively,
for example in (g)(1), which requires EPA to issue a rule that
``governs the transfer of [production] allowances.'' As Congress uses
the term ``transfer'' more frequently when only one term appears in
subsections (g) or (j), EPA is proposing that it would be appropriate
to use the term ``transfer'' in the AIM Act implementing regulations
for all instances where the AIM Act contemplates ``trades'' or
``transfers.'' Hereinafter, EPA refers to ``trade or transfer'' as used
in subsection (j) of the AIM Act as ``transfers'' for simplicity.
International transfers of production allowances allow for the
production of a chemical to be consolidated at fewer plants in order to
be able to achieve economies of scale as demand shrinks and the HFC
phasedown progresses. EPA proposes to allow such production transfers
where the requirements of the AIM Act are met.
In relevant part, subsection (j)(1) of the Act prohibits any
company subject to the AIM Act's requirements from transferring a
production allowance to a company in a foreign country that, as
determined by EPA, has not established the same or similar requirements
within a reasonable time from the Act's enactment or otherwise
undertaken commitments regarding the production and consumption of HFCs
as are contained in the Act. Subsection (j)(2) describes specific
conditions that must be satisfied for a company in the United States to
transfer a production allowance to--or from--a company in a foreign
country. Such a transfer to a company in a foreign country may occur if
at the time of the transfer EPA revises the number of production
allowances for the United States so that the aggregate national
production of the regulated substance to be transferred is equal to the
least of three different levels, which are described below. Similarly,
such a transfer may occur from a company in a foreign country to a
company in the United States if, at the time of the transfer, EPA finds
that the foreign country has revised their domestic production limits
of the regulated substance in the same manner. EPA also has discretion
under subsection (j)(3) to reduce the United States' production limits
as a prerequisite to a transfer to a company in a foreign country, or
to increase the United States' production limits to reflect production
allowances transferred from a company in a foreign country to a company
in the United States.
The proposed regulations that would implement the AIM Act's
international transfer provisions are structured similarly to the
provisions governing international transfers under the ODS phaseout
(see 40 CFR 82.9(c) and 82.18(c)). When a transfer request is
submitted, EPA is proposing to review whether the foreign country where
the foreign company is located meets the conditions of subsection
(j)(1) and is therefore eligible to participate in transfers of
production allowances to or from the United States.\57\ If the foreign
country does not meet the conditions in subsection (j)(1), EPA would
notify the
[[Page 27180]]
requestor in writing that no transfers to or from the country can
occur.
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\57\ In the ODS context, EPA developed a list of countries that
had domestic regulatory requirements in place regarding the
production and consumption of ODS. Given the limited number of
international transfers of production allowances that EPA saw under
CAA Title VI, EPA does not presently anticipate that a list will be
necessary to implement these provisions. EPA is thus not proposing
to establish a list of countries that meet the conditions in (j)(1)
at this time. EPA may consider whether to implement such a list at a
future time, such as when the Agency starts implementing the Jan. 1,
2033, export prohibition in (j)(1).
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If EPA determines that the foreign country meets the conditions in
(j)(1) of the Act, it would consider whether the applicable
requirements in subsection (j)(2) of the AIM Act are met. For transfers
to a foreign country, a U.S. company may engage in the transfer under
subsection (j)(2)(A) if at the time of the transfer EPA revises the
number of production allowances such that the aggregate national
production of the regulated substance to be transferred is equal to the
lessor of three values listed in subsection (j)(2)(A)(i)-(iii):
The maximum production level permitted under the AIM Act
for the applicable regulated substance in the year of the international
transfer minus the production allowances transferred;
the maximum production level for the applicable regulated
substances that are allowed under applicable law minus the production
allowances transferred; or
the average of the actual national production level of the
applicable regulated substances for the three years prior to the date
of the transfer minus the production allowances transferred.
In relevant part, subsection (j)(2)(A)(i)-(iii) of the AIM Act
refers to the ``applicable regulated substance'' and ``applicable
regulated substances,'' such as in the phrase ``the maximum production
level permitted for the applicable regulated substance in the year of
the transfer . . . , less the production allowances transferred.''
Since EPA is proposing to issue allowances as an exchange value-
weighted amount and not as a chemical-specific quantity, allowance
holders could use all their allocated production allowances for any one
chemical. As such, if a company transfers production allowances to a
foreign country, EPA considers the ``maximum production level permitted
for the applicable regulated substance in the year of transfer'' to be
the same as the maximum allocation listed in proposed Sec. 84.7(b),
which is an exchange value-weighted amount. EPA would take the same
approach of weighting amounts based on exchange values when considering
the levels consistent with (j)(2)(A)(ii) and (iii). As the production
allowances transferred would also be accounted for in terms of the
exchange value-weighted units, the reduction would be appropriately
reflected in the total.
EPA is proposing that the U.S. company seeking to transfer
allowances (i.e., the ``transferor'') must submit to EPA a signed
statement requesting that EPA revise the number of production
allowances consistent with the requirements of subsection (j)(2)(A)(i)-
(iii). EPA would determine which is the lesser of the three values. The
transferor would also need to submit to EPA information on the contact
person and foreign country authorizing the transfer; the chemical and
quantity being transferred; documentation that the foreign country
possesses the necessary quantity of unexpended production rights; and
the calendar year for that transfer. EPA seeks comment on whether it
should additionally require prior approval by a foreign country or some
other documentation from the foreign country verifying it can increase
allowable production in the relevant calendar year if EPA approves the
transfer, or whether an application for such reduction or some other
official government communication from the foreign country's embassy in
the United States is sufficient. For these transfers, the allowance
revisions for the company in the United States would be reflected at
the individual transferor level.
In reviewing submissions for transfers to a company in a foreign
country, EPA would consider whether the transfer and revised production
limits meet the requirements in subsection (j), as discussed above. EPA
is also proposing to define other factors the Agency could take into
account in considering whether to approve such transfers. Under the CAA
Title VI implementing regulations in 40 CFR part 82, subpart A, EPA has
the discretion to take factors into account relating to possible
economic hardships created by a transfer, potential effects on trade,
potential environmental implications, and the total amount of
unexpended allowances held by entities in the United States. For the
AIM Act regulations, EPA sees value in having discretion to consider
the environmental implications, since there could be an environmental
benefit or cost associated with the international transfer that could
influence EPA's decision-making, and the total unexpended allowances
held by entities in the United States, given EPA would not be able to
approve a transfer if there were insufficient allowances to transfer,
and is thus proposing to include these factors among those that could
be taken into account. The Agency seeks comment on this proposal, and
on whether and how it should consider other factors, including possible
economic hardships created by an international transfer (e.g., on U.S.
employment) and potential effects on trade.
For transfers from a foreign country, subsection (j)(2)(B) of the
Act provides that the U.S. company may engage in the transfer if EPA
finds that the foreign country has revised the domestic production
limits of the regulated substances in the same manner as for transfers
by a company in the United States. Accordingly, EPA proposes that the
company must submit a signed document from an official representative
in that country's embassy in the United States stating that the
appropriate authority within that country has revised the domestic
production limits for that country equal to the least of:
The maximum production level permitted under the AIM Act
for the applicable regulated substance in the year of the international
transfer minus the production allowances transferred;
the maximum production level for the applicable regulated
substances that are allowed under applicable law (including the
country's applicable domestic law) minus the production allowances
transferred; or
the average of the country's actual national production
level of the applicable regulated substances for the three years prior
to the date of the transfer minus the production allowances
transferred.
Consistent with subsection (j)(2)(B) of the Act, these three
situations are intended to align with the provisions in subsection
(j)(2)(A)(i)-(iii) of the Act. As noted above, subsection (j)(2)(A)(i)-
(iii) of the AIM Act refers to the ``applicable regulated substance''
and ``applicable regulated substances,'' such as in the phrase ``the
maximum production level permitted for the applicable regulated
substance in the year of the transfer . . ., less the production
allowances transferred.'' EPA is proposing that if the country uses an
exchange value-weighted system similar to what EPA has proposed, this
phrase should have the same meaning as for transfers from the United
States to another country. If a foreign country has established
chemical-specific production levels, this phrase would be interpreted
to mean the production level for the particular regulated substance
involved in the transfer. In such a scenario, the production allowances
transferred would be translated into exchange value-weighted amounts
for purposes of tracking compliance with obligations under the AIM Act.
EPA would take the same approach when considering the levels consistent
with (j)(2)(A)(ii) and (iii). If the foreign country has established a
different domestic regulatory approach, EPA would need to consider on a
case-by-case basis how best to review this condition to ensure
[[Page 27181]]
that requirements of the AIM Act are met.
EPA is proposing that the language in (j)(2)(A)(i) that establishes
one of the thresholds for determining the appropriate reduction in
production allowances as the maximum production level permitted ``under
this section'' for the applicable regulated substance in the year of
the international transfer be interpreted to restrict international
transfers from a foreign country to situations in which the country has
revised their production limits to establish a phasedown schedule at
least as stringent as that in the AIM Act. As noted above, under
subsection (j)(2)(B), EPA must find that the country has revised the
domestic production limits ``in the same manner'' as provided for
transfers by a company in the United States to a company in a foreign
country in order for the transfer to occur. One requirement for such
transfers to a foreign country in (j)(2)(A) is that the number of
allowances for production under subsection (e)(2) of the Act must be
revised downward such that national aggregate production is equal to
the lessor of one of three values, one of which is the maximum
production level permitted ``under this section'' for the applicable
regulated substance in the year of the international transfer. Under
this proposal, subsections (j)(2)(A) and (j)(2)(B) would be read
together to mean that Congress intended for the international transfer
provisions only to apply to countries that have revised their
production limits to establish a phasedown schedule at least as
stringent as the AIM Act's.
EPA seeks comment on this proposal and also seeks comment on
whether those provisions could instead be interpreted to allow
transfers from foreign countries where the country has satisfied the
requirements in (j)(1) of the Act and established domestic production
controls for the 18 HFCs regulated under the AIM Act, even if they are
on a different phasedown schedule, and revised the maximum production
limit established under those provisions to account for the transfer.
The language in (j)(1) would allow for transfers of production
allowances to a company in a foreign country if EPA has determined that
the country has put in place ``the same or similar requirements'' as
are contained in the AIM Act. In relevant part, this language appears
to allow for transfers (i.e., of allowed production) between the United
States and countries that have capped their production and are phasing
down listed HFCs, even if the requirements are not identical. EPA
specifically solicits comments on how the phrase ``in the same manner
as provided with respect to transfers by a person in the United States
under this subsection'' in (j)(2)(B) would be understood under such an
interpretation.
For international production allowance transfers to a U.S. company,
the company would need to submit to EPA a request that includes
information on the contact person and foreign country authorizing the
transfer; the chemical and quantity being transferred; the calendar
year for that transfer; and a signed statement describing whether the
increased production is intended to allow the company in the United
States to serve the export market or to serve the U.S. market. This
information would be helpful to EPA because once the transfer is
complete, EPA proposes to treat production allowances transferred from
a foreign country the same way as all other production allowances
issued by EPA. As such, a production allowance and a consumption
allowance must be expended for each unit of HFC produced, though if the
amounts are later exported, the consumption allowances may be
reimbursed. EPA seeks comment on whether EPA should require prior
approval by a foreign country or some other commitment from the foreign
country's embassy in the United States verifying it has decreased
allowable production before approving of the transfer. Additionally,
EPA seeks comment on whether it could approve such a transfer if the
foreign country has committed that it will decrease the allowable
production after EPA approves but before the transfer occurs. For these
transfers, any allowance revisions for the company in the United States
would be reflected at the individual company level. In reviewing
submissions for transfers from a company in a foreign country, the
Administrator would consider whether the transfer and revised
production limits meet the relevant requirements under subsection (j).
For both transfers from and to foreign countries, EPA, following
review, would notify the requestor in writing that the appropriate
production allowances were either granted or deducted and specify the
affected year(s), provided EPA determines the request meets the
proposed required conditions. In approving an international transfer,
EPA would notify the transferor in writing of the appropriate revisions
to a transferor's allowance balance at the time of approval. For
transfers from a foreign country, the Administrator would notify the
requestor in writing that the allowances of that company are revised to
equal the unexpended production allowances held by the company plus the
level of allowable production transferred from the foreign country. EPA
would not adjust available allowances until the foreign country's
representative had confirmed the appropriate number of allowances were
deducted in the foreign country.
For a transfer to a foreign country, the AIM Act does not limit the
quantity of production allowances that may be transferred. EPA is
seeking comment on whether to include a provision like the one used
under the implementing regulations for international transfers for ODS
under CAA Title VI giving the Administrator the option to disapprove
the proposed transfer if the transfer is not consistent with domestic
policy. EPA also seeks comment on what policies might be relevant in
this context. Additionally, EPA is proposing that it would deny the
transfer if the transferor did not possess sufficient allowances to
permit the necessary reduction in aggregate domestic production to be
reflected in the transferor's revised production limits.
If EPA approves the proposed transfer, EPA would establish revised
production limits for the transferor so that the aggregate national
production permitted reflects the effect of the transfer of production
allowances. In certain circumstances, following a transfer of
allowances to another country, the AIM Act requires that the aggregate
national U.S. production of the HFC to be transferred be reduced by an
additional amount beyond a simple deduction of the number of allowances
transferred to another country. For instance, if the average actual
U.S. production during the three-year period prior to the date of the
transfer is less than the total allowable U.S. production for that
substance under Sec. 84.7(b), then by the time of the transfer, U.S.
production would need to be revised downward to equal the three-year
average minus the amount transferred. This additional reduction would
also need to be reflected in the revised production limit.
EPA requests comment on whether there are any other scenarios where
a greater reduction would be needed. In such circumstances, EPA is
proposing to conclude that it would be appropriate for the required
reduction in U.S. production to be allocated among all the transferors
participating in international transfers in the same calendar year in
proportion to the number of allowances transferred by each entity. This
approach would be fair, as it treats every company equally based on the
total number of allowances transferred. To
[[Page 27182]]
ensure EPA does not need to revise allowances if companies submit their
requests at different times, e.g., one company submits a request by
February 1 and another on September 1, EPA is proposing that all
requests for international transfers of production allowances be
submitted by October 1 of the year prior to the year the transferred
allowances would be useable. If there is only one transferor, the
reduction would be applied exclusively to that company. EPA would
notify each transferor of the revised production limit before January 1
and the allowances would be useable as of January 1 for the full
calendar year. The transfers would be deemed to occur as of January 1,
the date the transferor's production limit is revised and the
allowances are useable, for purposes of determining the three-year
period for purposes of this analysis. The transferor would then be able
to make timely market decisions with the remaining production
allowances. EPA would rely upon the three most recent calendar years'
worth of data. For example, if a request were submitted by October 1,
2022, EPA would rely upon data from January 1, 2019, through December
31, 2021, to determine the average of the actual national production
level over the last three years (as specified in subsection
(j)(2)(A)(iii)). While the AIM Act states the Agency should use the
average production level for the ``three-year period ending on the date
of the transfer,'' such data for the year ending on the date of
transfer would generally not be reported until 45 days after the end of
the quarter, and then would need to be reviewed by EPA for accuracy.
Further, the timing for the availability and/or release of another
country's data is unknown. Thus, EPA is proposing that it is reasonable
to implement this provision through the three most recent calendar
years' worth of data.
EPA requests comments on this proposal, including the proposed
dates for submission of requests and approvals of the transfers, and
additionally solicits comment on whether it should use a different
three-year period for purposes of this analysis, such as based on the
three-year period starting from the quarter closest to the date of the
transfer that has data reviewed for accuracy by EPA. For example, EPA
requests comments on an alternative under which if requests were
submitted by December 31, 2022, they would be approved by March 1,
2023, and useable for the rest of that year, and the three-year period
would be evaluated from October 1, 2019, to September 30, 2022. EPA
further requests comments on how it should proceed if information on
the actual national production level for the applicable regulated
substances is not available for all of the relevant three-year period.
EPA also requests comment on whether rather than grouping the requests
together, it should alternatively allow requests for international
transfers to be submitted individually on a rolling basis over the
year, evaluate them separately as they come in, and if any request
happens to trigger a need to reduce the aggregate national U.S.
production by an additional amount beyond a simple deduction of the
number of allowances transferred, that additional amount would be
applied exclusively to that requestor's balance.
EPA is proposing the following method to determine the transferor's
balance of production allowances after a transfer to a company in a
foreign country: The Administrator would determine which of the values
under (j)(2)(A) of the Act leads to the lowest value and adjust
allowance balance(s) accordingly. EPA requests comment on the proposed
provisions and method used to calculate revised production limits for
those wishing to transfer production allowances internationally. EPA
also requests comment on its proposal if more than one company
transfers production of an HFC to a foreign country or countries in one
year, and on possible alternative methods to calculate these revised
production limits.
Given the discussion at the start of this section explaining how
``transfers'' is used in (g) and (j) of the Act, and that EPA is
proposing to interpret references to that term as synonymous with
references to trade, the Agency is also proposing to apply the
requirement in subsection (g)(2) to international transfers. Subsection
(g)(2) of the Act specifies that EPA's regulations shall ensure that
transfers ``will result in greater total reductions in the production
of regulated substances in each year than would occur during the year
in the absence of the transfer.'' The Agency is proposing to conclude
that it is reasonable to view (g)(2) of the Act as applying equally to
all transfers. This is consistent with the requirement under (g)(1)
that EPA promulgate a regulation that ``governs the transfer of
allowances for the production of regulated substances under subsection
(e)(3)(A)'' of the Act. As the international transfers under (j)(2)
would affect the production allowances issued under subsection
(e)(3)(A), it would be reasonable to apply those requirements to
international transfers as well. This approach would also result in an
additional benefit for the environment than would occur absent the
transfer, consistent with (g)(2). See the discussion earlier in this
proposal for the proposed offset that would be associated with
transfers generally, including international transfers. EPA seeks
comment on this proposal, as well as on whether international transfers
should have the same offset level as all other transfers or if a level
at the lower or higher end of the proposed one to 10 percent range is
more appropriate. For comments addressing this issue, EPA requests that
they include the commenter's views, if any, both on what level the
Agency should use as an offset for international transfers and, if at a
different level than other offsets, why a different level is warranted.
B. How is EPA proposing to address destruction of regulated HFCs?
1. Which destruction technologies is EPA proposing to approve for the
destruction of regulated HFCs?
The AIM Act in subsection (b)(7) defines the term produce to
exclude the destruction of HFCs if the destruction occurs through use
of a technology approved by the Administrator. This section proposes a
list of destruction technologies that would be considered approved for
purposes of the AIM Act.
Many of the destruction technologies previously approved by EPA to
destroy ODS have also been found capable of destroying HFCs to a
minimum destruction and removal efficiency (DRE) of 99.99 percent.\58\
EPA proposes to find that technologies that destroy HFCs to a DRE of
99.99 percent are appropriate to list for approval under the AIM Act.
There are three broad categories of destruction technologies: Thermal
oxidation (incineration), plasma, and conversion (other, non-
incineration) technologies. There are twelve destruction technologies
capable of destroying HFCs other than HFC-23 to a DRE of 99.99 percent,
and eight technologies capable of destroying HFC-23 to a DRE of 99.99
percent.
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\58\ 2018 TEAP Report, Volume 2: Decision XXIX/4 TEAP Task Force
Report on Destruction Technologies for Controlled Substances. March
15, 2021. https://ozone.unep.org/sites/default/files/2019-04/TEAP-DecXXIX4-TF-Report-April2018.pdf.
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The 12 technologies that destroy HFCs other than HFC-23 to a DRE of
99.99 percent are:
Incineration (6 technologies): Cement kilns, gaseous/fume
oxidation, liquid injection incineration, porous thermal reactor,
reactor cracking, and rotary kiln incineration.
Plasma (3): Argon plasma arc, nitrogen plasma arc, and
portable plasma arc.
[[Page 27183]]
Conversion (3): Chemical reaction with hydrogen
(H2) and CO2, gas phase catalytic de-
halogenation, and superheated steam reactor.
The eight technologies that destroy HFC-23 to a DRE of 99.99 percent
are:
Incineration (4): Gaseous/fume oxidation, liquid injection
incineration, reactor cracking, and rotary kiln incineration.
Plasma (2): Argon plasma arc and nitrogen plasma arc.
Conversion (2): Chemical reaction with H2 and
CO2 and superheated steam reactor.
EPA proposes creating two lists of approved destruction
technologies--one for HFC-23, which is more difficult to destroy, and
one for all other regulated substances. These technologies provide a
variety of technological options for the destruction of HFCs and are
capable of either destroying HFCs at a DRE of at least 99.99 percent or
converting them into non-regulated substances.
EPA solicits comment on whether the list of destruction
technologies is appropriate, whether any additional destruction
technology should be considered, and notes that the Agency intends to
consider adding additional destruction processes to the list of
approved destruction technologies in the future as further technologies
are developed. EPA also solicits comment on whether it should only
establish one list containing only the eight technologies that can
destroy HFC-23. This would ensure the technologies can adequately
destroy the HFC with the highest exchange value. EPA is concerned that
HFC-23 could be mistakenly taken to a destruction facility that is
incapable of destroying the compound, such as when HFC-23 is contained
in a mixture of other HFCs. This could be avoided by approving only
destruction technologies that can destroy all HFCs.
VIII. What enforcement and compliance provisions is EPA proposing?
Based on EPA's experience with the ODS phaseout in the United
States,\59\ the global experience phasing out ODS,\60\ and the recent
experiences in countries that have already begun phasing down HFCs,\61\
the incentive to illegally trade HFCs will likely increase as HFC
production and consumption become regulated and as allowances that
authorize import and production of HFCs decline. It is EPA's intent to
establish mechanisms that discourage and prevent illegal production,
import, and subsequent sales of illegally produced or imported HFCs.
These proposals are designed, when taken together, to deter
noncompliance, incentivize future compliance, and ensure that companies
that are complying with statutory and regulatory obligations are not
put at a competitive disadvantage.
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\59\ See, e.g., Goldberg, Carey. ``A Chilling Change in the
Contraband Being Seized at Borders.'' The New York Times, The New
York Times, 10 Nov. 1996, www.nytimes.com/1996/11/10/us/a-chilling-change-in-the-contraband-being-seized-at-borders.html and
``Enforcement Actions under Title VI of the Clean Air Act.'' EPA,
Environmental Protection Agency, 17 Dec. 2020, www.epa.gov/ozone-layer-protection/enforcement-actions-under-title-vi-clean-air-act#2011.
\60\ See, e.g., Montzka, S.A., Geoff S. Dutton, G.S., Yu, P.,
Ray, E., Portmann, R.W., Daniel, J.S., Kuijpers, L., Hall, B.D.,
Mondeel, D., Siso, C., Nance, J.D., Rigby, M., Manning, A.J., Hu,
L., Moore, F., Miller, B.R., and Elkins, J.W. (2018) ``An unexpected
and persistent increase in global emissions of ozone-depleting CFC-
11'' Nature 557: 413-417, available at: https://www.nature.com/articles/s41586-018-0106-2; WMO (World Meteorological Organization),
Scientific Assessment of Ozone Depletion: 2014, World Meteorological
Organization, Global Ozone Research and Monitoring Project-Report
No. 55, 416 pp., Geneva, Switzerland, 2014, available at https://www.esrl.noaa.gov/csd/assessments/ozone/2014/report.html;
Environmental Investigation Agency (EIA) (2018) Blowing It: Illegal
Production and Use of Banned CFC-11 in China's Foam Blowing
Industry, available at: https://eia-global.org/reports/20180709-blowing-it-illegal-production-and-use-of-banned-cfc-11-in-chinas-foam-blowing-industry; and Rigby, M. et al. ``Increase in CFC-11
emissions from eastern China based on atmospheric observations''
Nature 569 7757: 546-550, available at: https://www.nature.com/articles/s41586-019-1193-4.
\61\ ``Doors Wide Open.'' Eia-International.org, Environmental
Investigation Agency, Apr. 2019, https://reports.eia-international.org/doorswideopen. ``Resources.'' Alliancepolicy.org,
The Alliance for Responsible Atmospheric Policy, 1 Nov. 2020,
www.alliancepolicy.org/ref-imports/resources-2.
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In developing this proposal, EPA reviewed in detail the challenges
faced by the European Union (EU) in preventing illegal imports of HFCs.
Assessments available in the docket from HFC producers, industry
associations, and environmental non-governmental organizations (NGOs)
provide evidence of significant non-compliance with the EU F-gas rule
(Regulation (EU) No 517/2014), which establishes a schedule to phase
down HFC production and consumption over time, similar in concept to
the HFC phasedown in the AIM Act albeit on a different schedule. These
assessments suggest that noncompliance in the EU occurs primarily
through illegal imports, which can be grouped into two categories: (1)
``Open smuggling'' through the normal customs channels (e.g., correct
commodity codes without proper allowances to do so) and, (2)
``traditional smuggling'' where the importer seeks to avoid the typical
customs channels altogether or where HFCs are concealed (e.g.,
mislabeling). Reports show significant awareness in the industry of
illegal activity. A 2019 report by the Environmental Investigation
Agency (EIA) \62\ provided results of surveys conducted with industry
stakeholders in Europe. More than 80 percent of companies surveyed were
aware of or suspected illegal HFC trade and 72 percent had seen or been
offered refrigerants in disposable cylinders--a common feature of
illegally imported HFCs despite the EU requirement that HFCs be sold in
refillable containers.
---------------------------------------------------------------------------
\62\ ``Doors Wide Open.'' Eia-International.org, Environmental
Investigation Agency, Apr. 2019, https://reports.eia-international.org/doorswideopen.
---------------------------------------------------------------------------
The review of European customs data presented in the EIA report and
others back up this perception. EIA found that ``bulk HFC imports in
2018 were too high for compliance with the 2018 quota.'' \63\ EIA
estimated that the amount of HFCs placed on the market in 2018 could be
16.3 MMTCO2e (or 16 percent) above the quota amount (i.e.,
the amount allocated) through ``open smuggling of HFCs (i.e. imports
openly shipped through customs without quota).'' \64\ Honeywell
estimated that illegal imports were equivalent to more than five
percent of the total CO2-weighted quota in 2015.\65\ The law
firm King & Spaulding, on behalf of the Alliance for Responsible
Atmospheric Policy, found that reported imports to European customs
officials exceeded the quota amount by 16 percent in 2019 and 33
percent in 2020.\66\ The European FluoroCarbons Technical Committee
(EFCTC) cited analysis of customs records done by Oxera, who found a
significant disagreement in trade data on HFCs shipped from China to
the EU. Oxera created a database using data from the EU statistics
agency Eurostat, the United Nations' trading statistics database
Comtrade, and Chinese export data to calculate the amount of HFCs that
was illegally imported (above the quota amount). They found that what
was reported as exported from China alone was 16 percent higher than
the amounts reported as imported into the
[[Page 27184]]
EU during 2016, six percent higher in 2017, and 21 percent higher in
2018.\67\
---------------------------------------------------------------------------
\63\ Ibid.
\64\ Ibid.
\65\ ``10m Tonnes of Illegal F-Gas Enters Europe.''
Coolingpost.com, Cooling Post, 1 May 2016, www.coolingpost.com/world-news/over-10m-tonnes-of-illegal-F-gas-enters-europe/www.coolingpost.com/world-news/over-10m-tonnes-of-illegal-F-gas-enters-europe/.
\66\ See King & Spaulding, on behalf of the Alliance for
Responsible Atmospheric Policy, Side Event presentation at COP12/
MOP32 (November 23, 2020), available in the docket and online at
https://www.alliancepolicy.org/site/usermedia/application/10/Bradford%20KS%20HFC%20Presentation%2023%20Nov%202020%20v4.pdf.
\67\ ``The Black Market for HFC Refrigerant Gas Is Thriving
across Europe.'' Webinar on Illegal Trade of HFCs--2020.06.26,
European Fluorocarbons Technical Committee, 17 Sept. 2020,
www.youtube.com/watch?v=qqO8IuEt7eg and https://stopillegalcooling.eu/wp-content/uploads/Oxera-webinar-slides.pdf?utm_source=webinar&utm_medium=email&utm_campaign=oxera.
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These reports also indicate the likelihood of more covert smuggling
activity, though the scale is not fully known. Reported seizures of
illegally imported material in EU member states between 2018 and 2020
range from a few cylinders to more than 76 MT of HFCs.\68\ These
reports show significant growth in legal HFC imports from China into
countries neighboring the EU. King & Spaulding cites a 2020 report by
Oxera showing a 40 percent increase in HFC exports from China to EU
neighbor countries from 2016-2018.\69\ They note the dramatic increase
in 2018 coincides with a stepdown under the EU's HFC allocation
program, and that the increase in legal imports to neighbor countries
could be associated with smuggling HFCs into the EU. They also ``noted
that various reports found smuggled imports [into the EU] were 20 to
30% of the quota.'' \70\
---------------------------------------------------------------------------
\68\ See EFCTC, Tracking, Training, Tracing: Trade Enforcement
on Illegal HFC Imports, Side Event presentation at COP12/MOP32
(November 23, 2020), available in the docket and online at https://www.alliancepolicy.org/site/usermedia/application/3/Angelica%20Candido%20EFCTC%20Alliance%20Side%20Event%202020.pdf.
\69\ See King & Spaulding (on behalf of Arkema Inc., The
Chemours Company, Honeywell International Inc., and Mexichem Fluor
Inc.), Comments Regarding Foreign Trade Barriers to U.S. Exports of
Hydrofluorocarbons, submitted to the Office of the United States
Trade Representative (October 26, 2020), available in the docket.
\70\ Ibid.
---------------------------------------------------------------------------
While not definitive, the reports note this growth may be because
the HFCs are being illegally imported into the EU through neighboring
countries, such as with fraudulent import declarations, disguised as
something else, or through shipment in hidden compartments. The reports
also note that illegally imported HFCs that are caught are shipped
primarily in disposable cylinders. King & Spaulding cites a report from
an international investigation agency called Kroll, which was hired by
the EFCTC to investigate HFC trade in the EU. In addition to finding
that illegal HFCs travel through EU neighbor countries, illegal
shipments are often sold through online market platforms or arrive
through misdirected transhipments, allocation abuse, open smuggling,
and counterfeit material.\71\
---------------------------------------------------------------------------
\71\ See EFCTC, New Kroll findings reveal how illegal imports of
HFCs continue to enter EU (April 15, 2020), available in the docket
and online at https://www.fluorocarbons.org/wp-content/uploads/2020/04/2020-04-15_Press-release-Kroll_final_website-1.pdf.
---------------------------------------------------------------------------
In summary, there is significant evidence of noncompliance with HFC
quotas in the EU, which suggests that similar attempts will be made to
evade legal requirements in the United States. By comparison, if the
United States were to see similar noncompliance of five to 33 percent
of the total U.S. allocation, that would equate to 13-90 MMTEVe of
additional consumption than should happen under the statutorily
provided phasedown step for 2022 alone with accompanying long term
emissions and environmental and public health costs associated with
that level of consumption. This level of noncompliance would put
businesses complying with regulatory requirements at a competitive
disadvantage and could inhibit companies from investing in research and
development to identify new alternatives. In addition, illegal imports
of HFCs have consequences for other U.S. agencies, such as Customs and
Border Protection who collect duties on imports of HFCs.
Consistent with the documented experience in the EU, EPA has also
seen situations where material that appears to be illegally imported is
advertised as one chemical, but the contents of the container are
something different. EPA recently identified imports of small cans that
were advertised as ``Cool Penguin F-12'' (or CFC-12) in small cans for
use in motor vehicle air conditioners.\72\ While the cans contained
some CFC-12, they also contained an inconsistent mixture of numerous
other chemicals, including R-40 (chloromethane) which is toxic and has
the potential to explode. Given this experience with imports of
fluorocarbons that are mislabeled, there are consumer and worker safety
concerns.
---------------------------------------------------------------------------
\72\ See Mobile Air Climate Systems Association (MACS), Safety
Alert: Online Sales of Cool Penguin F-12 in Action (November/
December 2020), available in the docket.
---------------------------------------------------------------------------
Through the proposed requirements that follow, EPA is proposing to
put in place strong enforcement and compliance measures at the outset
of this new regulatory program developed pursuant to AIM Act authority
to prevent or identify illegal activity in the United States and ensure
compliance with the obligations under the AIM Act. Failure to do so
could significantly harm the environment, the U.S. economy, and
consumer and worker safety.
The experience in the EU and the grounded belief that a similar
scenario could come to fruition in the United States calls for robust
enforcement, compliance, and transparency provisions to ensure EPA can
meet the statutory directive in AIM Act subsection (e)(2)(B) that ``the
Administrator shall ensure that the annual quantity of all regulated
substances produced or consumed in the United States does not exceed''
the levels prescribed in the AIM Act. EPA understands this directive,
as well as the prescriptive schedule established in subsection (e) of
the AIM Act and the inclusion of application-specific allowances within
the overall cap, as indications that Congress intended for the
statutorily required reductions in HFC consumption and production to
occur. EPA is accordingly proposing comprehensive compliance and
enforcement measures to help ensure that it can implement the allowance
program so that it achieves these reductions.
EPA is proposing a multifaceted approach to prevent and identify
noncompliance in order to ensure the Agency can meet the statutory
directive in subsection (e)(2)(B) and to create a level playing field
for the regulated community. Each element is intended to deter illegal
activity and address such activity when it is identified. The key
components of this proposal include:
Administrative consequences to deter noncompliance and
create pathways to address the impacts of noncompliance;
Packaging (including requiring use of refillable
cylinders) and labeling requirements;
Increased oversight of imports including requiring
consumption allowances to import heels and U.S. goods returned,
petitioning to import regulated substances for transformation or
destruction processes, reporting of transhipments, and prohibiting the
import of virgin HFCs for disposal.
Establishment of a comprehensive certification ID tracking
system using QR codes or similar digital technology to track the
movement of HFCs through commerce, including requiring anyone that
introduces into interstate commerce or sells HFCs to be registered in
the system;
Recordkeeping and reporting;
Third-party auditing; and
Data transparency.
EPA intends to work with CBP to institute an automated electronic
mechanism to check in real-time if an importer has sufficient
allowances for a particular shipment. EPA and CBP have established
working relationships regarding the imports of various goods subject to
domestic regulation, including ODS. EPA intends to modify the Agency's
electronic database
[[Page 27185]]
monitoring HFC allowances such that the most current available
information is up to date to allow for real-time or near real-time
electronic confirmation by CBP of whether a company seeking to import
HFCs is an allowance holder and has sufficient allowances for that
specific import.
A. What are the proposed administrative consequences available to EPA
with respect to allowances?
As noted elsewhere in this rulemaking, production allowances,
consumption allowances, and application-specific allowances do not
constitute property rights. The AIM Act gives the Administrator
significant authority to determine an appropriate allowance system,
which EPA proposes would include the authority to retire, revoke, or
withhold allowances at the discretion of the Administrator under
certain defined circumstances. For clarity and consistency, EPA intends
to treat each of these potential consequences in the following manner:
A retired allowance would be one that EPA would have
otherwise issued to an entity for the next calendar year, but instead,
may not be expended in the following calendar year by that entity, nor
be transferred to any other entity. A retired allowance would
effectively expire unused in the next calendar year. If an entity does
not have sufficient allowances to retire, it would need to acquire
those allowances (e.g., through a transfer) and retire them.
A revoked allowance would be one that EPA rescinds after
issuance to an entity. EPA proposes that any unexpended allowances held
by an entity may be revoked as described below and then redistributed
on a pro rata basis to the general pool.
A withheld allowance would be one that EPA would have
otherwise issued to that entity for the next calendar year, but
instead, is redistributed on a pro rata basis to the general pool.
Similar to a retired allowance, the entity that would have received the
allowance would not be able to expend it nor transfer it; however,
unlike a retired allowance which would expire unused, an allowance that
is withheld from an entity would be redistributed.
EPA also proposes that there may be circumstances where the
potential administrative consequence could be a ban on a company and/or
its owner(s) receiving future allowances. In this scenario, EPA
proposes that the company and/or its owner(s) would not be eligible to
receive or obtain allowances by way of allocation or transfer, and such
a ban would effectively render the company and/or owner(s) unable to
produce or import HFCs regulated under the AIM Act. If EPA were to ban
the company, EPA proposes that any allowances that the company has
already received would be revoked, and any allowances that the company
might have otherwise received in the future would be withheld and
redistributed on a pro rata basis to the general pool. If EPA were to
ban the owner(s), EPA proposes that any allowances that the owner(s)
has already received, either through the company at fault or a
different company, would be revoked, and any allowances that the
owner(s) might have otherwise received in the future, either through
the company at fault or a different company, would be withheld and
redistributed on a pro rata basis to the general pool. EPA proposes
this potential consequence both as a deterrent to prevent illegal
production and import, but also to ensure that, if illegal activity
occurs, bad actors are removed from the HFC allocation system such that
EPA can ensure production and consumption caps are met moving forward
in line with the AIM Act's Congressional directive.
These proposed administrative consequences for allowances are not
intended to supplant or replace any enforcement action taken under the
AIM Act. Instead, such consequences would be in addition to any
applicable enforcement action.
B. What practices could warrant EPA's proposed administrative action
for allowances?
EPA has identified the following types of practices that could
warrant the Agency exercising its discretion to levy administrative
consequences for allowances: falsifying information or data; not
disclosing financial conflicts of interest or familial relationships in
certain circumstances; noncompliance with the AIM Act or proposed
prohibitions under Sec. 84.5; and noncompliance with Department of
Commerce (DoC) and CBP HFC trade provisions. Discussion of each of
these categories as well as EPA's proposal regarding what
administrative consequences may be taken for allowances follows. Any
administrative action taken is not intended to supplant or replace any
enforcement action taken under the AIM Act. Instead, such consequences
would be in addition to any applicable enforcement action. In all
cases, EPA could also ban a company and its owner(s) receiving future
allowances for such action, depending on the severity of the
noncompliance.
1. Falsifying or Failing To Disclose Relevant Information
As discussed previously in this rulemaking and detailed here, EPA
is proposing that falsifying information with respect to application-
specific allowances may warrant one or more administrative consequences
for allowances. Specifically for application-specific allowances, EPA
proposes that if future information reveals a company applying for
application-specific allowances has provided false information, EPA
reserves the right to revoke allowances and/or require future
retirement of allowances at a greater level than the number of
application-specific allowances allocated.
Falsifying or failing to disclose relevant information as described
in the preamble section, ``What is EPA's Proposed Set Aside Pool of
Allowances'' could warrant EPA exercising the right to revoke
allowances and requiring the company to retire a greater number of
allowances than those received through the set aside pool. If the
company receiving set aside allowances is later determined to be
financially connected or have a familial relationship with another
company receiving set aside allowances or another allowance holder, EPA
proposes to also have the ability to apply these provisions regarding
revoking, withholding, and retiring allowances (with a premium as
discussed elsewhere in this proposal), as well as banning all the
companies and owner(s) involved from receiving future allowances.
2. Compliance With the AIM Act
EPA is proposing that the Agency could revoke or withhold
allowances from an entity that has been found, through a concluded
enforcement action, to have unlawfully produced or imported, or
attempted to unlawfully produce or import, HFCs. EPA is also proposing
that it could ban a company and its owner(s) receiving future
allowances for such action, depending on the severity of noncompliance.
EPA is also proposing that if an allowance holder produces or
imports, or attempts to produce or import, HFCs in excess of their
allowances under the AIM Act, such as if an import arrives at a port
without the appropriate allowances or there is production at a facility
whose parent company does not have allowances, the allowance holder
would be required to retire that amount in the following year. This
administrative action would not be contingent on a concluded
enforcement case. Instead it would be based on information available to
EPA, such as
[[Page 27186]]
allowance availability at the time of production or import, or evidence
from the QR code tracking system that a company is selling material
that was produced or imported without allowances. EPA would have
discretion to add a range of premiums based on the case specific
factors such as the egregiousness of the violation and whether there
are repeated violations. EPA is proposing a range of between 20 percent
and 200 percent and welcomes comment on this range. In cases where the
amount required to be retired in the following year exceeds the
allowances held by the importing entity for the next year, EPA proposes
that the allowance holder may be subject to complete revocation or
retirement of its HFC allowances, or may not be issued allowances in
future years or may receive a reduced allocation.
EPA is proposing these potential administrative consequences to
deter illegal production and import. Illegal production and import
undermine EPA's ability to meet the AIM Act requirement that EPA ensure
that the United States' HFC production and consumption do not exceed
the statutorily defined cap. The proposal to retire allowances also
ensures there is an environmental benefit to account for noncompliance
that could result in production and/or consumption above the permitted
levels.
3. Violation of Department of Commerce and Customs and Border
Protection Trade Provisions
EPA is aware of potential concerns with allocating allowances to
entities that DoC has determined are dumping HFCs onto the U.S. market.
Dumping refers to ``when a foreign producer sells a product in the
United States at a price that is below that producer's sales price in
the country of origin, (``home market''), or at a price that is lower
than the cost of production.'' \73\ Foreign governments may subsidize
industries by providing financial assistance to benefit the production,
manufacture, or exportation of goods, thereby unfairly undercutting
domestic producers. The DoC attempts to eliminate the unfair pricing or
subsidies or the injury caused by such imports by imposing additional
duties, termed Anti-Dumping/Countervailing Duties (AD/CVD). The amount
of subsidies the foreign producer receives from the government is the
basis for the subsidy rate by which the subsidy is offset, or
``countervailed,'' through these higher import duties. Anti-dumping and
countervailing subsidy duties are two ways that the U.S. government
addresses dumping and unfair foreign subsidies. The U.S. government can
require that foreign companies involved in dumping and/or benefitting
from subsidization are charged a fee collected by CBP each time they
import products into the United States. This helps negate the value of
the dumping/subsidization and creates a fairer competition for U.S.
companies. In findings of dumping, DoC issues a ``Final Determination''
that requires importing entities to pay AD/CVD before the case is
considered resolved. EPA has placed a memo in the docket summarizing
actions taken to date, as well as the HFC-relevant Final Determinations
that it is aware of.
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\73\ ``U.S. Antidumping and Countervailing Duties.'' Trade.gov,
International Trade Administration, www.trade.gov/us-antidumping-and-countervailing-duties.
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EPA is proposing that any entity that is subject to a DoC Final
Determination and is requesting allowances for 2022 or 2023 must
provide documentation of payment of the AD/CVD for HFC imported in 2017
through the date of this proposed rule, or provide evidence that those
imports were not required to pay AD/CVD for those years. EPA is
proposing not to allocate to companies in 2022 or 2023 that CBP
determines are not in compliance with or are otherwise in arrears with
their AD/CVD during those years. After an entity is issued allowances,
if it is subject to a DoC Final Determination and does not pay the
required AD/CVD within the required time frame, as determined by CBP,
EPA proposes that the company may have its allowances for that year
revoked or retired, or may not be issued future allowances or may
receive a reduced allocation. EPA proposes that it could, after
consulting with CBP, also ban a company from receiving allowances in
the future as a result of noncompliance with the regulations governing
payment of AD/CVD.
EPA is also proposing that the Agency would have the discretion to
revoke, retire, or withhold allowances for companies that fail to use
the correct Harmonized Tariff Schedule (HTS) codes with each shipment
of HFCs or HFC blends. Intentionally misdeclaring the HFC or HFC blend
in a shipment is one way importers may attempt to illegally import HFCs
without allowances or with fewer allowances. As noted earlier, EPA
intends to work with CBP to institute an automated electronic mechanism
to check in real-time if an importer has sufficient allowances for a
particular shipment. Errors on customs forms would inhibit EPA's
ability to conduct this crosscheck to ensure accuracy in and compliance
with EPA's allowance system. EPA is also proposing that the Agency
would have the discretion to ban a company or the company owner(s) from
receiving future allowances if the company repeatedly misreports HTS
codes.
C. What process is EPA proposing to apply administrative consequences
for allowances?
EPA has provided examples where retirement, revocation, or future
withholding of allowances may be warranted, including: falsifying or
not disclosing relevant information in the case of application-specific
allowances or new entrants; producing or importing, or attempting to
produce or import, HFCs in excess of AIM Act allowances or otherwise
not in compliance with AIM Act regulations (e.g., using HFCs claimed to
be for feedstocks or in transhipments for other purposes); and an
entity in arrears for any AD/CVD. These situations are not meant to be
exhaustive, but instead are intended as examples of when EPA might
exercise discretion to apply one or more administrative consequences
for allowances. Additionally, any practice or combination of practices
specified in the proposed regulatory text in Sec. 84.5 ``Prohibitions
for regulated substances'' may warrant EPA exercising discretion to
apply one or more administrative consequences for allowances. EPA seeks
comment on whether there are additional non-compliant activities it
should explicitly list as instances where the Agency could retire,
revoke, or withhold allowances. EPA has also described what a ban on a
company and its owner(s) would entail with respect to allowances. As
stated earlier, these administrative consequences are not meant to
replace or supplant any applicable enforcement action that may be taken
under any available statutory authority; rather, such consequences
would be in addition to any applicable enforcement action.
EPA is proposing the following general process for retiring,
revoking, or withholding allowances, and for banning a company or its
owner(s) from receiving or obtaining allowances:
Upon evidence or suspicion of practices including but not
limited to the examples provided earlier, EPA would provide notice of
impending allowance retirement, revocation, or withholding, or notice
of impending ban, to the company that would set forth the facts or
conduct that provide the basis for action. Notice would be provided no
less than 30 days before the impending action. During this 30-day
period, EPA proposes that the company would not be allowed to expend or
transfer its allowances.
[[Page 27187]]
Any company that receives such a notice of impending
allowance retirement, revocation, or withholding, or notice of
impending ban may choose to provide any information or data to support
why their allowances should not be retired, revoked, or withheld, or
why they should not be subject to a ban from receiving or obtaining
allowances, within 14 days of the date of the Agency's notice. If EPA
does not receive a response within 14 days, the impending action would
be effective on the date specified in the notice, but not sooner than
the expiration of the 14-day window.
After review of the supporting data or information provided by the
company receiving notice, EPA could decide to revoke or modify its
notification, continue with the retirement, revocation, or withholding
of allowances, or continue with the implementation of a ban from
receiving or obtaining allowances. EPA's decision would occur within 30
days of the date of the Agency's notice. Should EPA revoke its
notification, the company's allowances would be unfrozen; and, should
EPA continue with its impending action, the company's allowances would
remain frozen until the effective date of the retirement, revocation,
withholding, or permanent ban.
D. What is EPA proposing for packaging and labeling requirements?
This section discusses EPA's proposals to require: (1) A ban on
disposable cylinders, such as DOT-39 cylinders, with limited
exceptions, (2) the accurate labeling of the contents of cylinders, and
(3) the use of tracking or identification technology. Together these
requirements would disincentivize illegal imports, facilitate discovery
of illegal imports, provide for better tracking of HFCs, and ensure
that companies that have successfully maintained good standing are not
put at a competitive disadvantage.
1. Ban on Disposable Cylinders
EPA is proposing a ban on the import and placement of HFCs in
disposable cylinders with limited exceptions. The vast majority of HFCs
packaged for sale to contractors are currently in DOT-39 disposable
cylinders. A DOT-39 cylinder is strictly non-refillable and thus is
designed for single use unlike refillable cylinders. A number of
countries, including the EU member states, Australia, India, and
Canada, have banned disposable cylinders in their countries.
Losses from all cylinders can occur under a variety of
circumstances during transport, storage, and disposal, the frequency
and severity of which depends in part on the type of cylinder. However,
HFC losses are most likely to occur and in the most significant
quantities from disposable cylinders, including the residual amount of
HFCs (heels) that remain in the cylinders. With disposable cylinders,
these heels, which can measure up to eight percent of the quantity that
was originally stored in the container, unless recovered would be
released to the atmosphere when the cylinder is disposed of, with
associated adverse consequences on the environment.
EPA is proposing to prohibit the import and placement of HFCs in
disposable cylinders beginning July 1, 2023. Prohibiting the use of
disposable cylinders, such as DOT-39 non-refillable cylinders, would
increase environmental benefit including by ensuring the heels left in
a cylinder are not released to the atmosphere when disposable cylinders
are discarded. At least on two occasions, Congress has requested that
EPA study the use of refillable cylinders. EPA reviewed previous
studies and has provided updated analysis in a technical support
document that can be found in the docket for this rulemaking. EPA
estimates that replacing disposable cylinders with refillable cylinders
in the United States would prevent the release of up to 5.2
MMTCO2e of HFCs per year.
In addition to the potential environmental benefit, adding a
prohibition on the import and placement of HFCs in disposable cylinders
would help ensure compliance with the consumption allowance system. EPA
understands that other countries, such as the EU member states, have
found advantages to prohibiting disposable cylinders including a
recognition that often HFCs entering their markets illegally are
contained in disposable cylinders. Several studies have found that
illegal HFCs are entering European markets in disposable cylinders.\74\
Prohibiting the use of disposable cylinders in the United States would
provide CBP officers the ability to conduct a quick visual inspection
to identify potentially illegal imports for follow-up.
---------------------------------------------------------------------------
\74\ ``Illegal Refrigerant Imports Could Be as Much as One Third
of EU Market.'' Fluorocarbons.org, The European FluoroCarbons
Technical Committee, June 26, 2020. www.fluorocarbons.org/wp-content/uploads/2020/09/EFCTC_Press-Release_EN-2.pdf. ``Doors Wide
Open.'' Eia-International.org, Environmental Investigation Agency,
Apr. 2019, https://reports.eia-international.org/doorswideopen.
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EPA recognizes that the vast majority of HFCs packaged in 25-pound
cylinders currently use DOT-39 disposable cylinders. Therefore, EPA is
proposing to prohibit the import and placement of HFCs in disposable
cylinders beginning July 1, 2023. Since similar prohibitions have been
successfully implemented in many other countries, EPA does not consider
a longer lead time necessary but does recognize that a prohibition
consistent with the effective date of the final rule may be too short
to allow for an orderly transition.
In developing this proposal, EPA considered one to two years from
the publication of the final rule to transition to refillable
cylinders. EPA is proposing that a compliance date of July 1, 2023,
would provide appropriate time but is requesting comment on a shorter
timeframe. EPA is not proposing a compliance date after January 1,
2024, since EPA wants to ensure that HFCs in heels are not vented or
otherwise go unused in order to meet demand when the next stepwise
reduction in production and consumption occurs. Therefore, EPA is
proposing to prohibit the import and placement of HFCs in DOT-39 and
other disposable cylinders starting July 1, 2023, in advance of the
step down in production and consumption that occurs on January 1, 2024.
This timing also supports the proposal to establish a certification
system for tracking legally imported and produced HFCs. EPA is also
proposing to require that all refillable cylinders have a unique etched
serial number. As noted later in the proposal, this etched number would
be useful under the proposed certification identification and labeling
requirements.
Following the July 1, 2023, ban on disposable cylinders, EPA is
proposing to still allow certain disposable containers, such as small
cans of refrigerant with a self-sealing valve, that meet the
requirements in 40 CFR 82.154(c)(2). These containers have a mechanism
in place to reduce emissions, so there would not be the same
environmental benefit from their ban as EPA perceives in banning all
other disposable cylinders. For a more complete discussion of the ways
self-sealing valves reduce emissions of refrigerant, see 81 FR 82272
(November 18, 2016).
EPA is considering how best to address disposable cylinders that
are in existing inventory on July 1, 2023, and invites comment on this
issue. This compliance date may provide sufficient time and notice to
this industry to transition into refillable cylinders such that no
special accommodation is needed. However, EPA could establish a limited
sell-through provision, such as for six months, on the condition that
[[Page 27188]]
anyone wishing to sell HFCs in a disposable cylinder after January 1,
2024, from their existing inventory would have to register each
cylinder with EPA no later than November 15, 2023, and provide
information on the HFC or HFC blend in each cylinder and the origin of
the cylinders (e.g., imported, purchased from supplier X on Y date) to
distinguish them from new refrigerant cylinders entering the market. To
support effective enforcement and compliance of the ban, EPA is
proposing that as of January 1, 2025, 18 months after the disposable
cylinders ban takes effect, EPA would prohibit the sale or offer for
sale of regulated substances contained in disposable cylinders.
Eighteen months should be sufficient to allow for existing inventory of
regulated substances contained in disposable cylinders to be sold or
transferred to refillable cylinders. EPA requests comment on whether 18
months is an appropriate length of time for cylinders to work their way
through the market, or if more or less time is warranted.
2. Ban on Importing HFCs To Be Used in Feedstocks in Cylinders
EPA is proposing to prohibit the import of HFCs intended for use in
a process resulting in their transformation or destruction in cylinders
designed to hold 100 pounds or less of a regulated substance. As
discussed in section VIII.F. of this preamble, EPA is proposing that
such HFCs may be imported without a consumption allowance. These HFCs
are typically imported, and used, in large volumes at specific
facilities. EPA does not anticipate this proposal would affect current
business practice. Instead, this proposal is intended to deter attempts
to claim that imports of HFCs in cylinders do not require allowances
because they are for transformation or destruction processes. EPA
requests comment on the typical container size for HFCs sold for use in
a process resulting in their transformation or destruction, and whether
100 pounds is an appropriate threshold for this requirement. The Agency
expects it could be higher than 100 pounds, but takes comment on
whether to finalize a higher or lower threshold.
3. Labeling
EPA is proposing that all containers that contain a regulated
substance in bulk (e.g., ISO tanks, drums, cylinders of any size, or
small cans) must have an affixed label or other marking that indicates
the specific HFC(s) in that container. Specifically, EPA is proposing
that all containers of bulk regulated substances should state, legibly
and indelibly, in numbers and letters at least \1/8\ inch high, the
common name of the HFC or HFC blend contained, and the composition and
ratios of the HFCs if a blend. This font size is consistent with the
DOT-39 labeling standards (see 49 CFR 178.65). EPA seeks comment on
whether the label should also include the quantity of HFC in the
container. EPA does not anticipate that this proposal would result in
any additional burden on refrigerant distributors or importers as such
identification is the current practice. EPA requests comment on this
presumption and whether there would be any burden associated with this
proposal.
This proposal is intended to facilitate more effective enforcement
and deter future noncompliance. EPA anticipates that smugglers will
misidentify HFCs as some other compressed gas to evade import
restrictions. One method used to illegally import ODS refrigerants was
to identify it as an HFC, since allowances were not required to import
HFCs at that time. Under this method of illegal import, once the
unidentified or misidentified regulated substance entered the United
States a domestic counterpart who knew the true identity of the
compressed gas would relabel the cylinder with the correct substance so
that it could be commercially useful. As such, EPA is also proposing
that repackaging material that was initially unlabeled or mislabeled
would be considered a knowing violation of this subpart.
EPA is also aware that some virgin material may not contain
components in ratios that match that required of the blend. While
historically that may have been due to the refrigerant being of low
quality, there are now incentives for importers to intentionally
misstate the contents which has implications for the allocation system.
Mislabeling a blend that has a high EVe as a blend with a lower EVe or
labeling a cylinder with a random mixture of HFCs as a particular blend
both are misrepresentations that would cost allowances that do not
reflect the actual contents of the cylinder. Such violations would
hinder the Agency in meeting the requirement under subsection (e)(2)(B)
of the AIM Act that EPA is charged with ``ensur[ing] that the annual
quantity of all regulated substances produced or consumed in the United
States does not exceed'' the statutorily prescribed phasedown schedule.
This proposal is aimed at helping ensure EPA meets the directive of
subsection (e)(2)(B).
To provide a way to check the accuracy of the label, EPA is
proposing to require producers and importers to batch test their
product and retain records indicating the results of the batch testing.
EPA invites comment on how to best implement this proposal.
EPA also requests comment on whether to require that containers
purporting to contain a specific HFC or an ASHRAE designated blend with
an HFC component meet the specifications in Appendix A to subpart F of
part 82--Specifications for Refrigerants. Currently, under the CAA
section 608 regulations, reclaimed refrigerant is required to meet
specifications based in large part on the AHRI-700 standard for purity
before it can be released into the market. Based on input from
industry, EPA is now aware that virgin material potentially could
include impurities or that the ratio of components in a blend do not
match that required of the blend.\75\
---------------------------------------------------------------------------
\75\ See Air Conditioning, Heating, and Refrigeration Institute
(2013). Reports of R-134a Contaminated with R-40 and Other
Refrigerants [White paper]. https://www.ahrinet.org/App_Content/ahri/files/News%20Room/Press%20Releases/2013/AHRI_R_40_Contamination_white_paper.pdf.
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If the bill of lading or other evidence suggests that cylinders
contain HFCs but the cylinder itself is not labeled or the labeling is
illegible, EPA is proposing to presume that the container is completely
full of HFC-23, unless the importer verifies the contents with
independent laboratory testing results and fixes the label on the
container before the container enters interstate commerce. Under this
proposal, a company would have to expend the requisite allowances to
import HFC-23 in order to be able to legally bring the unlabeled HFCs
into interstate commerce (i.e., clear Customs). The company could also
choose to have the shipment held at port until they can arrange for
testing to show what the contents are and would need to relabel the
container before clearing Customs and enter interstate commerce. The
goal of this presumption is to deter illegal activity and promote
accurate and clear labeling, while also simplifying the process for
EPA, in coordination with CBP for imports, to deduct a sufficient
number of allowances at the point of import. HFC identifiers and a
certified laboratory to verify the contents of a container may not be
available, for example at a port, so providing a clear presumption that
could be used in such circumstances would facilitate compliance and
enforcement efforts. This proposal would reduce the safety risk of
having unlabeled cylinders at Customs or in commerce. It would also
reduce the potential to damage
[[Page 27189]]
equipment resulting in the release of refrigerant and harm to the
environment. EPA requests comment on appropriate measures to deter the
import of unlabeled cylinders. EPA also requests comment on whether the
agency should instead simply deny entry or ban import of such unlabeled
cylinders.
E. What is EPA proposing to require for auditing?
EPA is proposing to require external audits performed by certified
public accountants (CPAs) on an annual basis for all producers,
importers and reclaimers to improve the integrity of the allocation
program. An audit would be a systematic review of financial records and
other transaction documents to verify that the annual reports provided
to EPA are accurate. EPA is proposing to require external audits
conducted by an independent accountant or auditor in the United States
that is certified by the American Institute of Certified Public
Accountants. EPA is soliciting comments on additional ways to ensure
the independence of auditors and integrity of the auditing process,
including potential compliance-related efforts.
Numerous economic studies have found that third-party auditing
improves company and individual compliance with the
law.76 77 78 EPA has used third-party auditing to improve
regulatory compliance in rules, including the Renewable Fuels Standard
(79 FR 42080). As noted in the Renewable Fuels Standard rulemaking,
there is expert consensus that well-implemented third-party auditing is
a good use of limited enforcement and oversight resources. Independent
and objective audits are a valuable tool to improve compliance and
accuracy among all companies, not just those with covert malicious
intent to be inaccurate or unfair in their auditing or reporting.
---------------------------------------------------------------------------
\76\ Esther Duflo, Michael Greenstone, Rohini Pande, and
Nicholas Ryan, ``Truth-Telling by Third-Party Auditors and the
Response of Polluting Firms: Experimental Evidence from India,''
Journal of Economics (2013), 1499-1545. doi:10.1093/qje/qjt024.
\77\ Henrik Kleven, Martin Knudsen, Claus Kreiner, S[oslash]ren
Pedersen, and Emmanuel Saez, ``Unwilling or Unable to Cheat?
Evidence From a Tax Audit Experiment in Denmark.'' Econometrica, 79:
651-692. (2011) https://doi.org/10.3982/ECTA9113.
\78\ Marcelo B[eacute]rgolo, Rodrigo Ceni, Guillermo Cruces,
Matias Giaccobasso, and Ricardo Perez-Truglia, ``Tax Audits as
Scarecrows: Evidence from a Large-Scale Field Experiment,'' NBER
Working Paper No. 23631 July 2017, Revised January 2020 JEL No. C93,
H26, K42.
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EPA is proposing that entities subject to the reporting requirement
have auditors review the reports they provide to the Agency, and the
inputs for developing those reports, to ensure that they were complete
and accurate. At a minimum, reporters would have auditors review, as
appropriate:
The amount of production and consumption allowances
allocated;
The amount, timing, and parties to allowance transfers,
and the associated documentation and offset amount;
The amount of HFCs imported, exported, produced,
destroyed, transformed, or reclaimed;
For allocation-specific allowances, the amounts of
allowances conferred, HFCs purchased, the specific application for
which the HFCs were provided, and the names, telephone numbers, and
email addresses for contact persons for the recipient companies;
The date and the port from which HFCs were imported or
exported;
A copy of the bill of lading and the invoice indicating
the quantity of HFCs imported or exported;
Relevant commodity codes;
The number and type of railcars, ISO tanks, individual
cylinders or drums, small cans, or other containers used to store and
transport HFCs;
List of QR codes used and the digital transaction history
associated with those codes; and
Other information deemed relevant.
EPA is proposing that the third-party auditor would send
the results of their audit directly to EPA no later than May 31 of the
subsequent year. EPA is proposing May 31st because it should allow
sufficient time after the annual reports are due to conduct an audit.
EPA solicits comments on requiring an annual audit performed by a
CPA covering the elements listed in this section. Among other topics,
the Agency is interested in comments on the frequency of the audits,
the qualifications of the auditors, and the timing for submission of
the audits to EPA. Recognizing there is a cost for an audit regardless
of the size and there may be less environmental value in requiring an
audit for a company reporting small volumes of HFCs, EPA also seeks
comment on whether it should limit the frequency of audits for
companies that report less than 25,000 MTEVe. EPA also seeks comment on
whether the auditor should review additional records, such as records
of raw materials and feedstock chemicals used at each facility for the
production of regulated substances, or whether that type of review
would be more appropriate for an engineer.
F. Petitions To Import HFCs as a Feedstock or for Destruction
EPA is proposing that all bulk imports of HFCs into the United
States either require the expenditure of consumption allowances or be
authorized through a non-objection notice issued by EPA. This section
discusses EPA's proposal to establish a petition process to authorize
entities to import HFCs without expending allowances. There are two
types of shipments addressed in this subsection. First, virgin HFCs are
imported for use in a process resulting in their transformation (i.e.,
as feedstocks) or destruction. Second, used HFCs are imported into the
United States to be disposed of at a destruction facility using an
approved destruction technology.
The definition of ``produce'' in section (b) of the AIM Act
excludes the manufacture of a regulated substance that is used and
entirely consumed (except for trace quantities) in the manufacture of
another chemical. The process is known as transformation and the
regulated substances used and consumed are called feedstocks. HFCs used
for transformation are exempt from production, and therefore
consumption, and do not require allowances. Typically, companies that
need HFCs for feedstock use create the HFCs at the same facility, but
HFCs can also be transported from another location. This is called
second-party transformation. This proposal addresses the risk of
unlawful behavior associated with transporting feedstock HFCs.
With respect to destruction of HFCs that have been used and
recovered, these chemicals can become contaminated beyond the point
that reclamation is economical. Providing a pathway for proper disposal
of these used HFCs within the United States can benefit the environment
and the domestic destruction industry. EPA is proposing to limit the
petition process for destruction to used HFCs, and require consumption
allowances to be expended to import virgin HFCs, to keep this process
narrow and tailored in an effort to reduce the potential for illegal
imports.
EPA is proposing a petition process based in large part on the one
found in 40 CFR 82.13(g)(5) and 82.24(c)(6) for the import of used ODS
for destruction. EPA proposes to require the importer of HFCs for
feedstocks or destruction to submit a petition to EPA at least 30
working days before the shipment's departure from the foreign port. EPA
is proposing other elements to verify that these imports will in fact
be transformed or destroyed.
[[Page 27190]]
Specifically, EPA proposes that the petition would include the
following elements: (i) Name, commodity code, and quantity in kilograms
of each regulated substance to be imported; (ii) name and address of
the importer, the importer ID number, and the contact person's name,
email address, and phone number; (iii) name and address of the
consignee and the contact person's name, email address, and phone
number; (iv) source country; (v) the U.S. port of entry for the import,
the expected date of import, and the vessel transporting the material.
If at the time of submitting the petition the importer does not know
the U.S. port of entry, the expected date of shipment and the vessel
transporting the material, and the importer receives a non-objection
notice for the individual shipment in the petition, the importer is
required to notify the relevant Agency official of this information
prior to the entry of the individual shipment into the United States;
(vi) name and address of any intermediary who will hold the material
before the HFCs are transformed or destroyed; and (vi) name, address,
contact person, email address, and phone number of the responsible
party at the transformation or destruction facility; and (vii) an
English translation, if needed, of the export license (or application
for an export license) from the appropriate government agency in the
country of export.
Within 30 working days of receiving a complete petition, EPA would
send either a non-objection notice or an objection notice to the
petitioner. The Agency may object to the petition if the petition
provides insufficient information or if it contains or is suspected to
contain false or misleading information. A petitioner may re-petition
once if the Agency indicated ``insufficient information'' as the basis
for the objection notice.
EPA is proposing that HFCs imported under this process for
transformation or destruction be transformed or destroyed, as
applicable, within 60 days of being imported into the United States.
EPA is taking comment on whether it should consider a longer timeframe
such as 90 days. EPA is also taking comment on whether it is
appropriate to allow a longer timeframe for regulated substances to be
used as feedstocks, up to 12 months. EPA is also proposing to require
that the petitioner submit records indicating that the substance has
been transformed or destroyed within 45 days after its transformation
or destruction. EPA is also proposing supporting prohibitions in Sec.
84.5 for provisions that will be similar to 40 CFR 82.4(j)(2) and
82.15(b)(3) to prohibit the import of HFCs for processes that result in
their transformation or destruction, or disposal by destruction,
without having received a non-objection notice consistent with this
petition process.
By providing an importer with documentation that the import is
authorized, this proposal would both expedite Customs clearance and
result in a more secure border. It would prevent an importer from
falsely claiming that their shipment does not require allowances or
authorization from EPA because it is exempted. It also would track the
movement of the import after entering the United States by attaching
reporting obligations of the transformer or destruction facility.
EPA requests comment on other approaches to prevent the import of
HFCs mislabeled as feedstock or intended for disposal by destruction.
For example, EPA is considering whether a notification to EPA, rather
than a petition, could be sufficient in preventing unlawful trade.
Alternatively, EPA could require importers to register with the agency
to be able to import HFCs for transformation and destruction uses or
disposal and/or participate in the QR code tracking system.
G. How is EPA proposing to track the movement of HFCs in commerce?
The Agency is proposing to establish a certification program that
would use tracking or identification technology such as QR codes \79\
or some other tracking identifier to track the sale and distribution of
HFCs starting January 1, 2024. This proposal seeks to ensure that HFCs
introduced into and distributed or sold in the United States are
covered by an allowance or were reclaimed. Distribution and sale of
HFCs that did not enter the market legally would lack a certification
and thus could be easily identified. This program would support
compliance and, where needed, enforcement action. Buyers would also be
able to know that they are purchasing legal HFCs. EPA is taking comment
on the proposals related to this electronic tracking system including
ways to make it simple and not burdensome to use, while maintaining the
same functionality including the ability to report electronically.
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\79\ A QR code is a type of matrix barcode that contains data
for a locator, identifier, or tracker that points to a website or
application using standardized encoding modes to store data. It is
recognizable as black squares arranged in a square grid on a white
background, which can be read by an imaging device such as a camera.
In this proposed rule we use the phrase QR code as a stand-in for
'physical media that facilitate digital inventory tracking'. The
final rule may or may not require QR codes specifically (bar codes
and RFID chips are other possibilities, for example).
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Under this proposal, EPA would assign certification IDs to
producers and importers based on the quantity of production and
consumption allowances they have. As allowances are expended, the
certification IDs associated with those allowances would be assigned to
the corresponding HFCs, prior to the shipment of HFCs clearing Customs
or being readied for transport from a production facility. For imports,
the appropriate QR code would need to be affixed prior to clearing
Customs so the certificates could be confirmed by Customs while still
at the port. The certification system would be linked to the allowance
allocation to ensure that allowances were obtained for each MTEVe
produced or imported. The certification would be tracked using a
physical label containing a QR code affixed to the container in which
the material was sold after being produced in the United States or
imported. When the QR code is scanned it would point to a website with
a database that would indicate at least the initial allowance holder,
the quantity and common name of the HFC, the name it is currently being
marketed under, and the date of production or import.
Each time the material is bought/sold, or partitioned into another
container, the tracking information would be updated. If HFCs are
blended, the database entry for the identifier for that container would
be updated by the blender to reflect that new information. EPA would
establish protocols that ensure once the tracking information is
entered, the system would not allow the data to be altered
retroactively, thereby preserving the integrity of the information. EPA
is proposing that the certification continue to be tracked until it is
sold to the final customer. The final customer will differ depending on
the use of the HFCs. For example, EPA would consider an aerosol filler
to be the final customer given the HFCs are being incorporated into a
product. Similarly, a factory charging HFC refrigerant into an
appliance would be the final customer. HFCs used in field charged or
field serviced applications would continue to have the certification
accompany them until they are sold to a contractor or technician.
EPA's general understanding of the supply chain is that HFCs (from
production or import) are shipped in large ISO tanks, individual
cylinders or drums, and small cans. The material is then sold to
entities that would be considered part of the distribution chain--that
is, the entity is neither the importer nor the end user (such as a
[[Page 27191]]
refrigeration or air conditioning contractor). The material may change
hands one or more times before it is purchased by the final entity in
the distribution chain and subsequently sold to the final customer. EPA
is proposing that anyone selling HFCs would need to be registered in
the system to allow for legal HFC to be tracked from the point of
introduction into commerce to the point of sale to the final customer
(i.e., the person that will use the HFC) so that any illegal HFC
offered for sale at any point in the distribution chain could be
identified. Sellers would need to scan the containers as they are sold,
and buyers who intend to sell the HFCs, other than the final customer,
would need to do the same. EPA seeks comment on ways it could minimize
burden for users, such as allowing for whole purchases or pallets to be
scanned under one code, or having the system capture the information in
a way where no or limited data entry is required once logged into the
system.
Anyone who is filling a container or cylinder, whether for the
first time or when transferring HFC from one container to one or more
smaller or larger containers, would be required to enter information in
the system and generate a new QR code for the new containers and add
information on: the brand it would be sold under, the quantity and
composition of HFC(s) in the container, the date it was packaged or
repackaged, the certification IDs associated with the HFCs (if being
repackaged), the quantity of containers it was packaged in, and the
size of the containers. EPA is providing additional information in the
docket concerning the supply chain for HFCs and the entities we believe
are potentially affected by this system, and seeks comment on whether
there are other entities that are not reflected in the memo. EPA also
seeks comment on whether exporters should have to register and note
when they export HFCs, such as destination, date of export, the
certification IDs associated with the containers exported, and other
Customs records (including bills of lading), to support the proposed
reimbursement of allowances when HFCs produced or imported with
allowances are exported.
EPA recognizes that not all HFCs would enter the market through the
expenditure of an allowance. Most significantly, HFCs recovered in the
field (e.g., refrigerants) are sent for reclamation and can be resold
into the market after they meet specific purity standards. Under the
CAA section 608 regulations, reclaimers must be certified by EPA and
report the amounts and names of the HFCs reclaimed on an annual basis.
EPA would generate certification IDs for the reclaimer in an amount
equal to the quantity reclaimed in the previous year plus an amount
based on the average annual growth in total U.S. HFC reclamation in the
prior three years or five percent, whichever is higher. EPA anticipates
reclamation will increase over time. Reclaimers could request
additional certification IDs from EPA if the initial distribution was
insufficient and the reclaimer provides information to the Agency that
can allow the Agency to confirm that additional reclamation is
occuring. The data behind that QR code would be similar to that for
HFCs produced or imported with allowances but would indicate that it is
reclaimed and list the reclaimer.
To ensure regulated HFCs sold by reclaimers are legally reclaimed
material and eligible for sale, EPA is proposing that reclaimers would
need to log into the certification ID tracking system and, for each
container of HFCs prior to selling regulated substances, provide
information like the date the HFC was reclaimed and by whom; what
regulated substance(s) (and/or the blend containing regulated
substances) is in the container; how many kilograms were put in the
container and on what date the container was filled; whether the purity
of the batch was confirmed to meet the specifications in appendix A to
40 CFR part 82, subpart F; on what date the batch was tested; and who
certified it met the specifications. If a container is filled with
reclaimed and virgin HFC(s), EPA proposes that the reclaimer would have
to also provide information on how much virgin HFC was used and what
the origin of that material was (e.g., the certificate IDs associated
with that material). EPA expects there could be a way to build in a
batch feature so the reclaimer could enter a total mass of HFCs that
are reclaimed and a total mass of HFCs that are virgin and the
certification IDs associated with the QR code on each of the containers
would reflect the relative percentage of reclaimed and virgin material
associated with each container, assuming the virgin and reclaimed HFCs
were evenly mixed before being put into the new containers.
EPA is also aware that under CAA sections 608 and 609, recovered
HFC refrigerant can be resold if it was used only in a motor vehicle
air conditioner (MVAC) or MVAC-like appliance and is to be used only in
an MVAC or MVAC-like appliance and recycled in accordance with 40 CFR
part 82, subpart B (see 40 CFR 82.154(d)). EPA is proposing to allow
this practice to continue without requiring registration in the
certification identification system. EPA requests comment on whether
additional recordkeeping and/or reporting should be required, such as
the total quantity of HFCs purchased, recovered, recycled on-site, sent
off-site for reclamation or destruction, and charged into MVACs. If
someone is selling bulk HFC, other than for use by that company for
servicing MVACs, for example to another auto shop, they would need to
be registered in the certification ID tracking system.
EPA recognizes that a large quantity of HFCs will already be in the
United States market prior to the finalization of this rule. Therefore,
the Agency is proposing a compliance date of January 1, 2024, for these
provisions. That would allow time for much of the HFCs in the
distribution chain prior to that date to work its way through the
supply chain. EPA is proposing that as of January 1, 2024, it would be
unlawful to sell or distribute HFCs in a container that does not bear a
legible QR code. The sale and purchase of uncertified HFC (or HFC in a
container without a legible QR code) would be illegal and subject to
civil and criminal enforcement to prevent smuggling and/or bypassing of
the exchange system.
EPA proposes that anyone wishing to sell HFCs produced, imported,
or reclaimed prior to January 1, 2024, must register each container of
HFC with EPA no later than November 15, 2023, for EPA to assign a
certification ID for each container. The registration must provide
information on the amount(s) and type(s) of HFCs and HFC blends, the
containers the HFC material is in, any unique identification numbers
assigned to the containers, and the origin of the HFC(s) (e.g.,
imported, purchased from supplier ``X'' on Y date) to verify they were
legally imported. EPA would assign the appropriate certification ID for
each container of HFCs if sufficient documentation is provided. EPA is
concerned that smugglers could attempt to register illegally imported
material through the process and seeks comment on whether additional
requirements are needed to ensure illegal HFCs are not receiving
certification IDs that would in effect make them legal. EPA is
proposing to require a one-time report for anyone who requests
certification IDs for previously imported, produced, or reclaimed HFCs
including the company's inventory levels as of December 31 for the
prior three to five years, so EPA could assess whether there was
significant upward growth during that time. EPA could also require a
random audit of the company's
[[Page 27192]]
records to ensure the information provided to EPA is accurate. EPA
could also establish administrative consequences for suppliers that are
found to not be in compliance or who have misrepresented information to
EPA.
Most buyers desire to purchase only legal HFCs. However, in the
absence of a way to distinguish between legal and illegal HFCs, buyers
could unwittingly buy illegal HFCs and may be unintentionally
supporting the demand for and trade in illegal HFCs. For example, in an
enforcement case that concluded in 2018,\80\ there was evidence that
cylinders likely imported without allowances were bought and sold by
multiple suppliers before they were finally determined to be
counterfeit and likely illegally imported. There was no evidence that
anyone in the supply chain knew the material was likely illegally
imported other than the importer until the final purchaser noticed the
refrigerant was off-spec and in a cylinder that did not match the
typical packaging for that brand of product. For this reason, it is
important to involve both the buyer and seller in the accountability
process and provide the buyer with accurate information on the origin
of the HFCs they intend to purchase.
---------------------------------------------------------------------------
\80\ ``O.C. Man Pleads Guilty to Illegal Sales of Ozone-
Depleting Refrigerant.'' The Orange County Register, Nov. 2018,
www.ocregister.com/2018/03/08/o-c-man-pleads-guilty-to-illegal-sales-of-ozone-depleting-refrigerant.
---------------------------------------------------------------------------
EPA views the use of QR codes that would be generated by EPA for
production, import, and reclamation of HFCs as an alternative to a more
burdensome recordkeeping option described below in this paragraph. EPA
seeks comment on whether such a recordkeeping and reporting provision,
that would not be not backed up by an EPA electronic system, would be
appropriate in lieu of a system based on electronic reporting. EPA
seeks comment on whether such a recordkeeping and reporting provision,
which would not be backed up by an EPA electronic system, would be
appropriate in lieu of a system based on electronic reporting. This
type of approach might still require a QR code, additional label, or
other identifier be affixed on each container at the point of import,
to allow for CBP to verify the contents of the container and/or to
identify the importer, or once the produced or reclaimed material is
first put into a container. But the movement of HFC material would not
necessarily be reported in real-time by market actors by scanning those
codes. Instead, detailed recordkeeping, and potentially reporting
requirements, would be used to document every sale of HFCs to verify
the chain of custody from the point of production, import, or
reclamation to the end user or final seller of the HFC. EPA could also
require a signed statement between the buyer and the seller verifying
that the material being sold was acquired legally (e.g., imported or
produced with allowances). As part of the paperwork, the seller would
have to maintain records of the prior seller(s) back to the point of
production, import or reclamation. EPA could also require this
information be reported regularly to the Agency, similar to the
requirements for Renewable Identification Numbers (RINs) under the
Renewable Fuels Standard. If EPA were to require substantial
recordkeeping and reporting it could create additional burden for all
parties, and those at the end of the distribution chain, frequently
small businesses, could be disproportionately impacted. As a result,
EPA is proposing a more streamlined approach and would develop an IT
system that could simplify this process and store the appropriate
records and data needed to verify the chain of custody of HFCs.
EPA is soliciting comment on establishing a certification program
that would follow the HFC through the supply chain including instances
where the HFCs are repackaged and/or blended as described above. EPA
solicits comment on alternatives to the proposed QR code mechanism,
including not relying on physical media attached to the shipment, and
other means to access a database. EPA understands that many companies,
including companies producing, importing, and reclaiming HFCs already
use digital inventory systems. EPA welcomes feedback on how it could
set up such a system. EPA also welcomes comments on how to streamline
data entry by entities that subsequently purchase the material after
the legal HFCs are assigned a tracking ID, including the use of QR
codes, starting January 1, 2024. EPA is also requesting comment on the
January 1, 2024, compliance date, which would align with the proposed
2024 reduction in production and consumption and would follow closely
behind the proposed prohibition on the use of disposable cylinders.
If EPA were to finalize a certification ID tracking system with QR
codes, EPA is proposing to release several data elements associated
with each container of HFCs to potential buyers of HFC material, to
support this system. To allow buyers of HFCs to determine whether the
HFC they are purchasing is legal to buy, EPA proposes to release the
following information: (1) Whether the HFC being sold is legal to
purchase based on existing records; (2) when the HFC was produced,
imported, or reclaimed and by whom; (3) what HFCs are included in the
container; (4) if reclaimed HFC, whether the purity of the batch was
confirmed to meet the refrigerant purity standard in appendix A to 40
CFR part 82, subpart F (based on AHRI 700-2016), when was that
confirmed, and by whom; (5) what the brand name associated with the
container is; and (6) all prior sales of the certification ID
associated with a container of HFCs.
As noted previously, certification-specific data would accompany
each kilogram of HFC moving through commerce (as tracked with a QR
code). While EPA sees value in releasing all of these data to the
general public in a comprehensive database both for transparency and to
enable the certification ID tracking system to fully operate in support
of overall program compliance, EPA anticipates that if all information
was publicly available in the database, item (6) could potentially
divulge information submitters customarily keep private or closely
held. For example, if all the data in the database were available
publicly without the need to scan every container of HFCs, someone
could identify the total amount of each HFC produced or imported by a
company in a given year and all the customers associated with a given
producer or importer. EPA is seeking comment on whether submitters
consider the information submitted for item (6) to be information they
customarily keep private or closely held. If so, the Agency will make a
decision in the final rule as to whether the Agency will provide an
express assurance of confidentiality for the information and how it
will protect that information from unauthorized disclosure.
Alternatively, to protect information submitters may customarily
consider to be private or closely held, and to assuage concerns about
divulging information in item (6), EPA proposes to not to make the full
dataset available publicly. The Agency could limit the ability to view
the data for a single container (or full shipment of containers) to the
current buyer and seller. EPA sees several ways this could work. The
Agency could restrict access to the system, so only registered users
could scan a QR code, and a user would only be able to view active
codes that they had scanned into their ``inventory.'' EPA could also
limit the ability of an individual to view data in the system to within
a certain time
[[Page 27193]]
period after scanning the code. EPA seeks comment on other ways to
prevent the release of information submitters customarily consider
confidential from such a system. If the Agency cannot identify a way to
protect item (6), it could withhold that data element from inclusion in
the publicly available data associated with the certificate tracking
system.
IX. What are the proposed recordkeeping and reporting requirements?
Subsection (d)(1)(A) of the AIM Act specifies that on a periodic
basis, but not less than annually, each company that, within the
applicable reporting period, produces, imports, exports, destroys,
transforms, uses as a process agent, or reclaims a regulated substance
shall submit to EPA a report that describes, as applicable, the
quantity of the regulated substance that the company: produced,
imported, and exported; reclaimed; destroyed by a technology approved
by the Administrator; used and entirely consumed (except for trace
quantities) in the manufacture of another chemical; or, used as a
process agent.
A. What generally applicable recordkeeping and reporting provisions is
EPA proposing?
EPA is proposing recordkeeping and reporting requirements for any
company that produces, imports, exports, transforms, uses as a process
agent, reclaims, or destroys regulated substances as well as any
company that receives an application-specific allowance. Given that the
AIM Act controls all production and consumption of HFCs in the United
States, and data on import, export, destruction, reclaim, feedstock,
and process agent use are relevant to determining national production
and consumption figures, all companies would be subject to the proposed
recordkeeping and reporting requirements. In other words, under this
proposal, there would be no minimum threshold for reporting. The AIM
Act in subsection (d)(1)(A) provides EPA with clear authority to
establish reporting requirements that apply to ``each person who,
within the applicable reporting period, produces, imports, exports,
destroys, transforms, uses as a process agent, or reclaims a regulated
substance'' (emphasis added).
Unless otherwise specified, such as for application-specific
allowance holders, EPA is proposing to require quarterly reporting.
Quarterly reporting helps to ensure that annual production and
consumption limits are not exceeded. The proposed frequency is
necessary for the Agency to review allowance transfer requests, of
which remaining allowances is a major component of the Agency's
decision. In EPA's experience, many companies have expressed their
preference for and found it easier to compile reports for a given
quarter than to compile an annual report.
EPA is proposing that reports required by this section be submitted
to the Administrator within 45 days of the end of the applicable
reporting period, unless otherwise specified. Quantities would be
stated in terms of kilograms for each regulated substance unless
otherwise specified. The report would need to be signed and attested by
a responsible officer (EPA is proposing to consider an appropriate
responsibility officer to match the meaning of the CAA (42 U.S.C. 7401
et seq.)) and copies of records and reports would need to be retained
for five years.
EPA is proposing that reports required by any regulations finalized
in this rulemaking be submitted electronically using the EPA's Central
Data Exchange (CDX) through e-GGRT. EPA is working to minimize
duplicative reporting between the AIM Act and the GHGRP and having
reporting done through e-GGRT will aid in the synchronization of these
systems. EPA is also proposing that reports be at the facility-level,
and not at the corporate-level, which will also add in synchronization
between these two programs and better allow utilization of the e-GGRT
system. Reporting at the facility-level will also provide finer detail
to aid in EPA's review of compliance throughout the system.
B. What recordkeeping and reporting is EPA proposing that is applicable
to specific types of entities?
This section presents a general overview of the types of records
and reports EPA is proposing. EPA encourages readers to review the
proposed regulatory text for the full reporting requirements.
Producers
EPA is proposing to require a one-time report from producers to
allow the Agency to understand how production volumes are measured, the
quantity of fugitive losses, the efficiency of the production process
for the regulated substance, the production capacity of their
facilities, and a description of any use of a regulated substance as a
process agent. Such information will allow EPA to better understand the
monitoring in place, the accuracy of reporting, and the likelihood of
emissions associated with production.
EPA is proposing to require quarterly reporting of data that
includes the quantity of each regulated substance produced, the
quantity of allowances expended, and quantities produced for
transformation or destruction. EPA is proposing quarterly reporting to
ensure that annual production and consumption limits are not exceeded.
It is also needed for EPA to be able to review allowance transfer
requests, of which remaining allowances is a major component of EPA's
review. EPA is taking comment on whether these reports need to be
submitted quarterly or could be submitted less frequently.
EPA is proposing that producers report any companies that conferred
application-specific allowances to the producer and the quantity
conferred. Producers would also report the quantities of regulated
substances sold for those applications, specifying amounts produced
using conferred application-specific allowances and amounts produced
with production and consumption allowances. This additional reporting
on production for allocation-specific allowances would allow the Agency
to track the use of application-specific allowances to confirm their
appropriate use and calculate the level of production allowances needed
in future years for the statutorily listed applications to ensure that
EPA is allocating an appropriate amount.
EPA is proposing that companies that produce regulated substances
maintain records similar to those for the ODS program. This includes,
among other things: records of the quantity of each regulated substance
produced at each facility; copies of invoices or receipts documenting
sale of regulated substances for use in processes that result in their
transformation or destruction, or use as a process agent; and records
of raw materials and feedstock chemicals used at each facility for the
production of regulated substances. In addition, EPA is proposing that
producers keep records that distinguish between regulated substances
produced with application-specific allowances and those produced with
general pool production and consumption allowances for an application
listed in (e)(4)(B)(iv) and the quantity sold for use in those
applications. As outlined in the application-specific allowance
section, EPA is proposing that end users that are allocated
application-specific allowances certify that the regulated substances
purchased through conferral of application-specific allowances were
[[Page 27194]]
purchased solely for use in the application listed on the allowance and
will not be resold or used in any other manufacturing process. Similar
to the essential use provisions for ODS, EPA is proposing that
producers maintain copies of those certifications for all conferred
application-specific allowances. EPA is also proposing that producers
maintain dated records of the quantity of each regulated substance used
at each facility as a process agent.
EPA is proposing that if a producer fails to keep records on their
production or to submit reports regarding their production, EPA may
determine that the producer produced at full capacity during the period
for which records were not kept or reports were not submitted for
purposes of determining possible violations. Producers would
additionally be subject to enforcement for failure to keep records or
submit reports.
Importers
EPA is proposing that companies that import regulated substances
provide quarterly reports that include, among other things, the total
quantity imported of each regulated substance for that quarter
distinguishing between quantities of consumption allowances expended
and quantities imported under the exemptions for processes resulting in
transformation or destruction or used HFCs intended for destruction.
Separating these categories is necessary to determine whether the HFCs
imported count towards the consumption cap. EPA is also proposing that
reports include the amount imported using conferred application-
specific allowances to confirm their appropriate use and calculate the
level of allowances needed in future years to ensure that EPA is
allocating an appropriate amount. EPA is proposing quarterly reporting
to ensure that annual production and consumption limits are not
exceeded. It is also needed for EPA to be able to review allowance
transfer requests, of which remaining allowances is a major component
of EPA's review. EPA is taking comment on whether these reports need to
be submitted quarterly or could be submitted less frequently.
EPA is proposing that companies that import regulated substances
maintain records that form the basis of the reports outlined in the
prior paragraph. For each shipment EPA is proposing that importers keep
records of the following: the date on which the regulated substances
were imported, the port of entry, the country of export, the importer
number, the bill of lading, the invoice for the import, and the U.S.
Customs entry number. EPA is proposing that the information on the bill
of lading include the specific HFC(s) in the shipment, the volume of
each HFC, and the correct HTS code to properly identify the HFC or HFC
blend (i.e., ``mixtures,'' in the terminology of the International
Trade Commission). EPA notes that these codes are in the process of
being updated so that most commonly traded HFCs will have their own
code (or be grouped with minimally traded HFCs) and most major HFC
blends will fall under separate codes. EPA is also proposing
recordkeeping requirements for imports of used regulated substances for
destruction under the process in Sec. 84.25 including a copy of the
petition to import for destruction, EPA non-objection notice, and
documentation necessary to show that the regulated substance was
destroyed.
Importers of Used HFCs for Destruction
EPA is proposing that entities that import used HFCs for
destruction without expending consumption allowances in accordance with
the procedures outlined in Sec. 84.25 maintain for five years: a copy
of the petition to import for destruction; the non-objection notice; a
copy of the export license or export license application including an
English translation thereof; U.S. Customs entry documents for the
import that must include the commodity codes; records of that date,
amount, and names of the regulated substance sent for destruction per
shipment; an invoice from the destruction facility verifying shipment
was received; and records from the destruction facility indicating the
substances were destroyed.
Aggregators of Used HFCs Imported for Destruction
EPA is proposing that companies that aggregate used HFCs that were
imported for destruction under the process in Sec. 84.25 maintain
documentation necessary to show that the regulated substance was
destroyed, such as chain of custody information.
Transhipments
EPA is proposing reporting and recordkeeping requirements for any
company that tranships a regulated substance through the United States.
EPA is proposing to require that the company notify EPA 30 days prior
to a transhipment arriving at a U.S. port. The arrival notification
must include the following information: (i) Name, commodity code, and
quantity in kilograms of each regulated substance to be transhipped;
(ii) name and address of the importer, the importer ID number, and the
contact person's name, email address, and phone number; and (iii) the
U.S. port of entry, the expected date of entry, and the vessel
transporting the material. If at the time of submitting the petition
the importer does not know this information, the importer is required
to notify the Administrator of this information prior to the entry of
the individual shipment into the United States.
Once the material has left the United States, EPA is proposing that
the company provide a second notification indicating as such. The
departure notification must include (i) name, commodity code, and
quantity in kilograms of each regulated substance to be transhipped;
and (ii) date and vessel transporting the material.
EPA is also proposing that the company maintain records that
indicate that the regulated substance shipment (i) originated in a
foreign country; (ii) is destined for another foreign country; and
(iii) did not enter interstate commerce within the United States. EPA
requests comment on whether EPA should also require monthly reporting
(or other reporting frequencies) on the status of the HFCs held at a
bonded warehouse.
Exporters
EPA is proposing that exporters provide a quarterly report that,
among other things, includes the name, quantity, and commodity code of
each regulated substance exported, the date on which, and the port from
which, the regulated substances were exported from the United States,
and the country to which the regulated substances were exported. EPA is
proposing that any exporter of used regulated substances must indicate
on the bill of lading or invoice that the regulated substance is used.
Second-Party Transformation or Destruction
EPA is proposing that any company that transforms or destroys
regulated substances produced or imported by another company without
expending allowances report annually on the names and quantities of the
regulated substances transformed or destroyed for that year, and who
they acquired those HFCs from. Companies would maintain records
documenting, among other things, amounts purchased, transformed or
destroyed, transformation or destruction verifications, and the names,
commercial use, and quantities of the resulting chemical(s) when the
regulated substances are transformed.
[[Page 27195]]
Transformation--EPA is proposing that any company that acquires
regulated substances for purposes of transformation must provide the
producer or importer with a transformation verification that the
regulated substances are to be used in processes that result in their
transformation. To ensure the accuracy of the verification, EPA is
proposing that verifications only be valid for 60 days. However, EPA is
taking comment on whether that should be extended to 12 months to
provide more flexibility to companies transforming HFCs. EPA proposes
that the transformation verification would include the following: (i)
The identity, address, and contact information of the company intending
to transform the regulated substances; (ii) the quantity of regulated
substances intended for transformation; (iii) the identity of shipments
by purchase order number(s), purchaser account number(s), location(s),
or other means of identification; and, (iv) the period of time over
which the company intends to transform the regulated substances.
Destruction--EPA is proposing that any company that purchases or
receives and subsequently destroys regulated substances that were
originally produced or imported without expending allowances shall
provide the producer or importer from whom it purchased or received the
regulated substances with a verification that the regulated substances
will be used in processes that result in their destruction. EPA is
proposing that the destruction verification include the following: (i)
Identity and address of the company intending to destroy regulated
substances; (ii) the destruction efficiency at which such substances
will be destroyed; and, (iii) period of time over which the company
intends to destroy regulated substances.
Transformation--In addition to the requirements outlined for
entities undertaking second party transformation, EPA is proposing that
any company that transforms a regulated substance provide EPA with a
one-time report containing the following information: (i) A description
of the transformation use; (ii) a description of all technologies and
actions taken to minimize emissions of regulated substances; (iii) the
name of the product manufactured in the process; (iv) a list of any
coproducts, byproducts, or emissions from the production line of any
regulated substance that are other regulated substances, ozone-
depleting substances listed in 40 CFR part 82, subpart A, or hazardous
air pollutants initially identified in Section 112 of the Clean Air
Act, and as revised through rulemaking and codified in 40 CFR 63; (v)
the estimated annual fugitive emissions by chemical associated with the
transformation process; (vi) the anticipated ratio of regulated
substance used for transformation to the amount of end product
manufactured; and (vii) a mass balance equation of the transformation
reaction.
Destruction--In addition to the requirements outlined for entities
undertaking second party transformation, EPA is proposing that any
company that destroys regulated substances, whether as part of a
process or as a disposal method of used substances, 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; and, (iv) the name of other relevant federal or
state regulations that may apply to the destruction process. 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).
Companies That Transfer Allowances
As discussed in section VI.D. of this preamble, EPA is proposing to
allow the transfer of allowances between companies. EPA proposes that
both the transferer and transferee maintain a copy of the transfer
request and a copy of EPA's non-objection notice.
Holders of Application-Specific Allowances
EPA is proposing recordkeeping and reporting provisions for holders
of application-specific allowances that builds on EPA's experience with
the requirements for ODS essential-use allowance holders.
Certification--EPA is proposing that any company issued
application-specific allowances, or that receives application-specific
allowances through a transfer, must certify to producers and importers
when purchasing HFCs produced or imported using those allowances that
the regulated substances were purchased solely for the specified
application in subsection (e)(4)(B)(iv) of the Act and will not be
resold or used for other purposes. A copy of the certification must
also be maintained by the company who uses the HFCs produced or
imported with those allowances.
Biannual Reporting--EPA is proposing that recipients of
application-specific allowances report by July 31 and January 31 of
each year. EPA is proposing biannual reporting so as to gather the data
necessary to meet two objectives: To provide end-of-year accounting
that must be coordinated with other annual reporting processes, and
providing information early enough in the year for the Agency to
determine by October 1 the quantity of application-specific allowances
to allocate for the next year.
Specifically, EPA is proposing that recipients of application-
specific allowances report the following information: (i) The quantity
of each regulated substance that was used for their application during
the previous six months; (ii) the quantity of regulated substances
acquired through conferring allowances that were imported during the
previous six months; (iii) the quantity of regulated substances
acquired through conferring allowances that were produced domestically
during the previous six months; (iv) the companies to which
application-specific allowances were conferred; (v) the quantity of
regulated substances purchased without expending application-specific
allowances during the previous six months (i.e., from the open market);
(vi) the quantity of inventory of each regulated substance held by the
reporting company or held under contract by another company for use on
the last day of the previous six-month period (i.e., December 31 and
June 30); (vii) the quantity of each regulated substance contained in
products exported by the company during the previous six months; and
(viii) the quantity of each regulated substance that was destroyed or
recycled during the previous six months.
EPA is proposing that the report due by July 31 of each year also
include a request for application-specific allowances for the next
calendar year which would include: Total quantity (in kilograms) of all
regulated substances acquired and used in the previous three years;
information on suppliers; whether HFCs were acquired through domestic
production or import; whether HFCs were acquired through conferring
allowances or from the general market; quantities held in inventory;
and a description of any plans to transition to regulated substances
with a lower exchange value or alternatives to regulated substances.
EPA is also proposing that entities allocated application-specific
allowances maintain the following records: Records necessary to develop
the biannual reports; a copy of certifications provided to producers
and/or importers when conferring allowances; a copy of the annual
[[Page 27196]]
submission requesting application-specific allowances; invoice and
order records related to the purchase of regulated substances; records
related to the transfer of allocation-specific allowances to other
entities; and records documenting the use of regulated substances.
Process Agents
EPA is proposing that any company that uses a regulated substance
as a process agent provide EPA with a one-time report containing the
following information: A description of the process agent use which
includes details of the percentages of process agent retained within
the process, recovered after the process, and emitted or entrained in
the final product. The proposed one-time report would also include a
description of all technologies and actions taken to minimize emissions
of regulated substances; the name of the product and byproducts
manufactured in the process; and the anticipated ratio of process agent
emissions to end product manufactured.
EPA is also proposing that any company that uses a regulated
substance as a process agent provide EPA with an annual report
containing the following information: An email address and phone number
for a primary contact person and for an alternate; the amount of
regulated substance used as a process agent; the amount of product and
the amount of byproducts manufactured (including amounts eventually
destroyed or used as feedstock); the stack point source emissions; and
a description of any HFC emission reduction actions planned or
currently under investigation.
Reclaimers of HFCs
EPA is proposing that reclaimers report to EPA on the same schedule
as for producers and importers--45 days after the end of each quarter
(e.g., February 14 for the period ending on December 31 of the prior
year). The data elements would generally be the same as what they
report under 40 CFR 82.164(d), with some modifications. EPA is
proposing the reports contain information on the quantities of used,
reclaimed, and virgin HFCs held in inventory onsite at the end of each
quarter. EPA is also proposing that reclaimers submit a one-time report
with similar information on inventory, as well as the name of the
laboratory that conducts the batch testing and a signed statement from
that laboratory confirming there is an ongoing business relationship
with the reclaimer, providing the number of batches tested for each
regulated substance or blend containing a regulated substance in the
prior year, and providing the number of batches that did not meet the
specifications in appendix A of 40 CFR part 82, subpart F in the prior
year. Under this proposal, reclaimers would have to maintain those
records for five years, instead of the three years required under 40
CFR part 82, subpart F. EPA also seeks comment on whether there are
other entities that reprocess HFCs and resell them back into the market
and if the existing universe of HFC reclaimers would be sufficient to
satisfy the (d)(1)(A)(ii) requirements for reclaimers.
Under the existing regulations in subpart F codified at 40 CFR
82.164 reclaimers must also maintain records of the analyses conducted
to verify that reclaimed refrigerant meets the necessary specifications
prescribed in appendix A to 40 CFR part 82, subpart F, based on AHRI
Standard 700-2016, and maintain records on a transaction basis for
three years of the names and addresses of persons sending them material
for reclamation and the quantity of the material (the combined mass of
refrigerant and contaminants) by refrigerant sent to them for
reclamation. EPA seeks comment on whether any reclaimers are selling
HFCs for use in any of the six applications listed in subsection
(e)(4)(B)(iv) of the AIM Act. EPA could consider finalizing additional
reporting requirements for such sales, similar to the requirements for
producers on the quantities of HFCs sold to users of HFCs for one of
the six applications listed in the AIM Act. EPA also seeks comment if
there are additional elements the Agency should be collecting such as
quantities sent for destruction, data on reclamation from 2011--2013,
quantity of inventory awaiting reclamation, or destruction to meet the
requirements under the AIM Act.
Inventory
EPA is proposing that all producers, importers, exporters, and
reclaimers of HFCs annually report the quantity of each HFC they hold
in inventory as of December 31 of each year. For reclaimers, the report
must include inventory of reclaimed and used HFCs awaiting reclamation
or destruction. This information would be due 45 days after the end of
the calendar year (February 14). EPA is proposing that the first annual
inventory report be due by February 14, 2022, to provide data on
inventory held at the end of 2021.
EPA is proposing to collect this information to help inform the
Agency in its evaluation of petitions and/or requests submitted under
the AIM Act. For example, subsection (e)(4)(B)(v) requires EPA to
``review the availability of substitutes, including any quantities of
the regulated substance available from reclaiming or prior
production,'' (emphasis added). Similar language is included in
subsections (f) and (i) of the AIM Act. Annual reporting would
facilitate the timely review of petitions and/or requests since this
information would already be in the Agency's possession.
HFC-23 Emissions
For entities that own or operate facilities that generate HFC-23
beyond the exemption for insignificant quantities in the definition of
production, EPA is proposing a one-time report containing the following
information: (i) Information on the capacity to produce the intended
chemical on the line where HFC-23 is also produced; (ii) description of
actions taken at the facility to control the creation of HFC-23 and its
emissions; (iii) identification of approved destruction technology and
its location intended for use for HFC-23 destruction; and (iv) a copy
of the DRE report associated with the destruction technology. EPA is
further proposing that any changes to the information provided in the
one-time report be reflected in a revision submitted to EPA within 60
days of the change(s).
EPA is also proposing to require annual reporting, to be submitted
45 days after the control period, for production line data on HFC-23
amounts: (i) Emitted; (ii) generated, whether captured or not; (iii)
generated and captured for all uses; (iv) generated and captured for
feedstock use in the United States; (v) generated and captured for
destruction; (vi) used for feedstock without prior capture; and (vii)
destroyed without prior capture. EPA is also soliciting comment on the
frequency that this information should be submitted.
If captured HFC-23 is destroyed in a subsequent control period
(e.g., it is created and captured December 15 and destroyed January 15
in the following year), EPA is further proposing to require the entity
that produced the HFC-23 submit records indicating the HFC-23 has been
destroyed within 45 days after destruction occurs.
To ensure that reported values for HFC-23 generation, capture,
transformation, and destruction are reliable, EPA is proposing to
require entities to comply with certain monitoring and calculation
provisions. Specifically, EPA is proposing to require entities to meet
the same requirements as outlined in 40 CFR part 98, subpart
[[Page 27197]]
L or subpart OO, depending on the quantity being reported. These
provisions include validated methods for measuring concentrations of
HFC-23 in process streams and the mass flow rates of those streams;
accuracy, precision, and calibration requirements for instrumentation;
and specific calculation methods for uncontrolled emissions and for
quantities transformed and destroyed. EPA proposes to include these
reporting requirements to ensure that reported data are accurate,
precise, and comparable over time and across facilities and companies.
Offramp
Subsection (d)(1)(C) of the AIM Act specifies that reporting is no
longer required if a company notifies EPA that they have permanently
ceased production, import, export, destruction, transformation, use as
a process agent, or reclamation of all regulated substances. Any
activity that occurs earlier in that year before the cessation of
activities must still be reported for that year.
Other
Section (d)(1)(C)(iii) of the AIM Act states that each periodic
report shall include, as applicable, the information described for the
baseline period of 2011 through 2013. EPA interprets this provision as
allowing the Agency to collect information necessary to establish the
United States' production and consumption baselines. EPA reads the
phrase ``as applicable'' to mean that every quarterly report does not
need to reiterate that baseline information, only an initial report.
EPA discusses in section V. of this preamble methods by which EPA
has collected, and continues to collect, data from the relevant
entities. As noted previously, once the baselines are established, EPA
does not intend to amend the values and thus any reporting of baseline
data would be unnecessary.
C. How is EPA proposing to coordinate AIM Act reporting with other EPA
reporting requirements?
Subsection (d)(2) of the AIM Act states that EPA may allow an
entity subject to the AIM Act's reporting requirements ``to combine and
include the information required to be reported under [the AIM Act]
with any other related information that the [company] is required to
report'' to EPA. This section of the notice will discuss which
reporting requirements established under other authorities EPA is
proposing to use instead of establishing new reporting obligations. EPA
is soliciting comment on whether any or all of these reporting
requirements should be established specifically under AIM Act authority
in the regulations created through this rulemaking.
Some of the data elements EPA is proposing to collect are similar
to or the same as those required to be reported under the existing
requirements associated with the GHGRP (40 CFR part 98, subparts L and
OO). While the regulatory reporting requirements are separate, and EPA
is not proposing any changes to 40 CFR part 98 in this rulemaking, EPA
intends to coordinate reporting for similar or identical data elements
by using the same online portal for submitting both AIM and GHGRP data
(e-GGRT) and intends to reduce duplicative reporting by populating the
annual report submitted under GHGRP with data submitted under the AIM
Act. In the future, EPA would also consider harmonizing terms used
under both programs or providing a document clarifying how the data
collected under the AIM Act aligns with data collected under the GHGRP.
D. How does EPA propose to release HFC data collected under the AIM
Act?
In order to effectively implement an enforceable allowance
allocation and trading program, proactively encourage compliance, and
enable third-party engagement to complement EPA enforcement efforts,
EPA is proposing several ways it intends to release data collected
under this proposed rule. Some data would be released to the Ozone
Secretariat at the United Nations Environment Programme and some data
would be released to the general public. The Agency has noted below the
intended audience for proposed data release. As a starting point, EPA
notes that if a data point is collected under the GHGRP and is already
released or determined under the GHGRP as not entitled to confidential
treatment, and that same data point is required to be reported under
these AIM Act regulations, it would not be given confidential treatment
and would be considered releasable under these AIM Act regulations.\81\
Additionally, emission data, including data used as inputs to emissions
equations, would generally be releasable under subsection (k)(1)(C),
because of the AIM Act's statement in that subsection that CAA section
114 applies to the AIM Act and any regulations promulgated under it as
if the AIM Act were part of Title VI of the CAA. In particular, under
subsection (k)(1)(C), CAA section 114(c), which provides that emission
data shall be available to the public, applies to the AIM Act and any
regulations promulgated under it.
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\81\ Nothing in this rulemaking is intended to change the
regulations EPA has established determining how EPA will maintain
data submitted in response to the GHGRP requirements. However, if
EPA determines it can release the same data that is currently
treated as CBI under the GHGRP, EPA would expect it could release
such data under the GHGRP as well after making a change to the
determination under the GHGRP consistent with 40 CFR 2.301(d)(4).
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To further support compliance efforts, in particular regarding
illegal imports, EPA is proposing to release more data than it has
historically released, some of which is currently determined to be CBI
under the GHGRP.\82\ With respect to other data EPA is proposing to
release, these data fall into several categories, including: Aggregated
data that would not divulge information submitters customarily keep
private or closely held; data to support the tracking and legal sale of
HFCs sold in commerce; and data on allowance levels to support
compliance and facilitate transfers of allowances.
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\82\ See ``Greenhouse Gas Reporting Program: Data Reported by
Facilities Subject to the Supplier Subparts LL, through QQ, Geologic
Sequestration Subject to Subpart RR*, and CO2 Injection
Subject to Subpart UU,'' available at https://www.epa.gov/sites/production/files/2020-09/documents/ghgrp_cbi_tables_for_suppliers_8-28-20_clean_v3_508c.pdf.
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1. Which general data elements does EPA propose to publicly release?
Building on EPA's experience implementing the ODS phaseout under
CAA Title VI, EPA is proposing to maximize transparency of the
allocation program under the AIM Act. Market transparency would
facilitate implementation of the allocation program and increase the
public and current market participants' ability to provide
complementary compliance assurances and pressure. It would allow the
public and the industry to identify market participants and volumes in
trade and thus enable them to alert EPA and other federal authorities
when they suspect HFCs may have been produced, imported, or sold in
violation of the regulations or of the AIM Act's prohibition in
subsection (e)(2).
(a) Company-Level Production and Consumption Data
As noted earlier, Congress has required that the Administrator
``ensure that the annual quantity of all regulated substances produced
or consumed in the United States does not exceed'' the annual caps
described in subsection (e)(2)(B). To do that, EPA will need to employ
many different compliance tools. Research shows that making data
[[Page 27198]]
publicly available facilitates compliance. Qualitative studies have
found that ``public disclosure is [an] underutilized tool; there is
powerful evidence that publishing information about company performance
drives better behavior, as pressure is applied by customers, neighbors,
investors, and insurers.'' \83\ EPA has also acknowledged the
importance of data transparency in prior rulemakings. As the Agency
explained in the preamble to a proposed rule (78 FR 46006, July 30,
2013) concerning the National Pollutant Discharge Elimination System
(NPDES):
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\83\ David Hindin and Jon Silberman, ``Designing More Effective
Rules and Permits,'' George Washington Journal of Energy &
Environmental Law, Spring 2016 at 103, 117-120.
To promote transparency and accountability, EPA intends to make
[a] more complete set of data available to the public, providing
communities and citizens with easily accessible information on
facility and government performance. Such data provides a powerful
incentive to improve performance by giving government, permittees,
and the public ready access to compliance information. This can
serve to elevate the importance of compliance information and
environmental performance within regulated entities, providing
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opportunity for them to quickly address any noncompliance.
The same principles apply in this situation to incentivize
compliance and allow the public and competing companies to identify and
report noncompliance to EPA. To promote transparency and
accountability, the Agency is taking comment on whether to release all
HFC data, unaggregated and in a format similar to how it would be
reported to EPA.\84\ This approach would allow for independent review
of these data, in addition to the auditing and reporting requirements
included in this proposal. EPA understands that many of the HFC supply
data elements that would be released under this approach have
previously been determined to be CBI (see, https://www.epa.gov/sites/production/files/2020-09/documents/ghgrp_cbi_tables_for_suppliers_8-28-20_clean_v3_508c.pdf),\85\ but still sees the value of releasing such
data.
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\84\ If EPA finalizes an approach to release a data element
collected through reporting required under the AIM Act, any of those
same data elements collected under GHGRP would be made public and
therefore would not be entitled to CBI protection regardless of any
previous determinations made under GHGRP. EPA anticipates that it
would subsequently make a corresponding change to the GHGRP CBI
determinations in accordance with 40 CFR 2.301(d)(4).
\85\ Many of the data elements reported to subpart OO of the
GHGRP were determined to be, and are treated as, confidential by EPA
(see e.g., 76 FR 30782, May 26, 2011; 76 FR 73886, November 29,
2011; 77 FR 48072, August 13, 2012, 78 FR 71904, November 29, 2013;
and, 81 FR 89188, December 9, 2016).
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Releasing all HFC activity (e.g., transfers, production data,
transformation use) at the company and transaction level (e.g.,
chemical-specific production amounts) would be a significant divergence
from past treatment of data under the GHGRP. Given the U.S. HFC market
will have extensive regulation under the rulemakings implementing the
AIM Act, it would be reasonable for EPA to take a different approach
than has been taken for the GHGRP and release more disaggregated data
than was released under those programs. Ensuring compliance with a
regulatory phasedown program, where EPA is obligated to ensure that
domestic production and consumption aligns with a statutorily defined
schedule, is different than a reporting program where one company's
noncompliance would mean less accurate accounting, but it does not have
a statutorily defined target. It is reasonable for EPA to take all
necessary steps to ensure that the Agency can ensure compliance with
the consumption and production caps of subsection (e)(2)(B) as well as
creating a level playing field.
If we were to finalize this approach, companies would know that
production and consumption information are not protected and therefore
companies would not have a reasonable expectation that the information
would be handled privately. Under recent Supreme Court case law,
Exemption 4 of the Freedom of Information Act would not apply to
information submitted with the expectation that the information would
be made public. See Food Mktg. Inst. v. Argus Leader Media, 139 S. Ct.
2356, 2360 (2019). Companies have a choice if they want to continue
participating in the U.S. HFC market. EPA could also choose to release
some elements such as transfer data since allowance holders and their
allowance levels will be publicly available at the start of the year.
As an alternative to the above proposal to release every data
element reported to the Agency under the regulatory reporting structure
being established through this rulemaking, EPA proposes to release any
and all data elements that are publicly available through a range of
datasets. Data that are already publicly available cannot be considered
privately held or merit confidential treatment. EPA has not been able
to identify a publicly available dataset on HFC production that is
complete, although EPA's Chemical Data Registry does provide some HFC
production and import data (https://chemview.epa.gov). EPA proposes to
release any information that is already publicly available through
EPA's Chemical Data Registry. EPA would not release production data
collected through the reporting regulations established through this
rulemaking, beyond what is available in the Chemical Data Registry,
unless commenters identify a source where complete production data is
available publicly.
EPA is proposing to release all import data (e.g., transaction
level shipment data) because EPA does not expect that release of these
data would divulge information that is not already available through
privately developed global trade databases.\86\ These databases charge
a fee for access to information on imports at the transaction level
based on Customs data from the United States and other countries,
including bills of lading. There are also websites that provide
selected import data at no cost.\87\ A submission available in the
docket from First Continental International (NJ) Inc., dated March 12,
2021, shows the types of information that can be ascertained from these
databases. One of the key tests under the FOIA exemption in 40 CFR part
2 regarding CBI is whether the data is available publicly elsewhere.
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\86\ Examples include PIERS (https://ihsmarkit.com/products/piers.html), Panjiva (https://panjiva.com), Datamyne (https://www.datamyne.com), and ImportGenius (https://www.importgenius.com).
Mention of or referral to commercial products or services, and/or
links to non-EPA sites does not imply official EPA endorsement of or
responsibility for the opinions, ideas, data, or products presented
at those locations, or guarantee the validity of the information
provided. Mention of commercial products/services on non-EPA
websites is provided solely as a pointer to information on topics
related to environmental protection that may be useful to the public
as they review this proposed rulemaking.
\87\ Enigma, a data science firm, makes available online what
appears to be the full Automated Manifest System import data from
2018-2020, including the names of shipment consignees and cargo
descriptions (https://aws.amazon.com/marketplace/pp/US-Imports-Automated-Manifest-System-AMS-Shipments/prodview-stk4wn3mbhx24).
Similarly, usimports.info makes a limited number of import database
queries free to users, allowing them to see data on individual bills
of lading (https://usimports.info).
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Given import data is already publicly available, albeit behind a
paywall, EPA is seeking comment on whether releasing import data
collected under the AIM Act would divulge any additional information
that could be claimed as CBI. Release of such data would also align
with EPA's particular concern over imports of HFCs, where there is
widespread global evidence of illegal activity, as outlined at the
[[Page 27199]]
beginning of section VIII of the preamble.
(b) Aggregated National Data
As a separate alternative to the above-outlined approach, if EPA
does not finalize to release all data elements to the public, EPA
proposes to release all data that is already publicly available and
otherwise to release certain aggregated HFC production and consumption
data to the public. This approach would be similar to how EPA releases
aggregated data collected pursuant to CAA Title VI authorities to
implement the ODS phaseout. For example, as part of the ODS phaseout,
EPA has released annual halon 1301 import, export, and petition data;
\88\ aggregate inventory of pre-phaseout methyl bromide; aggregate
annual HCFC consumption; and chemical-specific aggregated consumption
for HCFC-22, HCFC-123, and HCFC-124, sometimes as an average over
several years.\89\
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\88\ EPA has historically shared the amount of halon 1301
imported and exported in a year, as well as the total quantity of
material approved for import under the petition process described in
40 CFR 82.13(g)(2). This information is shared via email with the
interested stakeholder associations or posted to the EPA website
(see https://www.epa.gov/ozone-layer-protection/halons-program
(accessed February 14, 2021)).
\89\ Aggregate HCFC data can be found in the United Nations
Environment Programme's July 13, 2009, ``Workshop on management and
destruction of ozone-depleting substance banks and implications for
climate change,'' document, which can be found in the docket for
this rulemaking.
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Releasing similar aggregated HFC data would allow EPA to document
whether HFC consumption and production are at or below the levels
prescribed in subsection (e)(2)(C), providing transparency to the
public that EPA is meeting its statutory obligation. If aggregated data
shows that actual values exceed those allowed under the phasedown
schedule, it would highlight noncompliance with the requirements, and
could encourage additional outside efforts to identify the cause of the
exceedance, and to take further actions to ensure the caps are met. It
would also provide insight into the ongoing transition out of specific
HFCs, which might help inform future allocations of allowances and
business planning for entities seeking allowances.
For HFCs, EPA has already released certain aggregated data on the
GHGRP website \90\ and through the recent NODA.\91\ These data include
production minus destruction minus transformation; exports; imports;
and net supply (CO2e quantities produced + imported-
exported-transformed-destroyed) for the 18 AIM Act-listed HFCs between
2011 and 2019, as well as chemical-specific import data for HFC-134a,
HFC-125, and HFC-32 for the same time period. The NODA also included a
list of companies that produced (including those that destroyed),
imported, and exported AIM Act-listed HFCs in 2011--2013. Other data
elements that are released under the GHGRP are noted at https://www.epa.gov/sites/production/files/2020-09/documents/ghgrp_cbi_tables_for_suppliers_8-28-20_clean_v3_508c.pdf. EPA expects
that release of the information in this subsection would not run any
risk of divulging information submitters customarily keep private or
closely held.
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\90\ ``Fluorinated Greenhouse Gas Emissions and Supplies
Reported to the GHGRP.'' Epa.gov, Environmental Protection Agency,
Feb. 24, 2021, www.epa.gov/ghgreporting/fluorinated-greenhouse-gas-emissions-and-supplies-reported-ghgrp#aim.
\91\ See 86 FR 9059; February 11, 2021, https://www.federalregister.gov/d/2021-02774/p-1.
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EPA is proposing to release to the general public, without prior
communication with the affected companies, chemical-specific
information for HFCs where there are three or more reporting entities.
This is the Agency's standard practice to mask information submitters
customarily keep private or closely held. In such circumstances, a
single reporter would know their own value but would not know how to
apportion the remainder of the aggregated total among the other
entities reporting. The proposed approach would be similar in that
competitors would not be able to determine the relative share of each
HFC with just the aggregated total. EPA proposes to release the EV-
weighted quantity as a way of masking company-specific data, as well as
a list of the relevant HFCs.
Under this separate alternate framework, EPA is proposing to
release the following data annually in aggregated form in addition to
any company or chemical specific information that is already publicly
available:
Total aggregated annual HFC production, EV-weighted;
Total production by mass for each HFC;
Total aggregated annual HFC consumption, EV-weighted;
Total consumption by mass for each HFC;
Total aggregated annual HFC imported, EV-weighted;
Total imports by mass for each HFC;
Total aggregated annual HFC exported, EV-weighted;
Total exports by mass for each HFC;
Total aggregated annual destruction (in kilograms) for
each HFC;
Annual aggregate amount of each HFC produced and imported
(summed) for use as a feedstock by chemical; and
Annual aggregate amount of each HFC produced and imported
(summed) for use as a process agent, and aggregate annual emissions
from such use by HFC.
EPA would only release chemical-specific data without further
consultation with the affected companies if it comprised data from
three or more entities, if it was already publicly available, or if it
was not claimed as CBI.
The release of feedstock data could be useful to validate
atmospheric measurements of HFCs, identify precursors and byproducts,
and help inform decision making. Aggregated global data on production
of ODS for feedstock use has been used for this purpose. EPA
anticipates that publicly releasing feedstock data for HFCs could lead
to similar benefits, while also providing additional transparency to
the public on the ongoing use of HFCs that are being phased down under
the AIM Act, but not phased out.
EPA is not aware of current process agent use of HFCs and, as noted
elsewhere, is seeking comment on which HFCs are used as a process
agent, how the HFC is used as a process agent, which facilities use
HFCs as a process agent, and the annual quantity of HFCs used as a
process agent. If there were to be use of HFCs as process agents in
sufficient quantities and frequencies to allow aggregation, EPA is
proposing to release aggregated HFC process agent data.
EPA is also proposing under this separate alternative approach to
release aggregated annual consumption data associated with the use of
application-specific allowances. Specifically, EPA would release total
annual chemical-specific HFC consumption for each application, similar
to how the Agency provided chemical-specific data in the market
characterizations. Providing these data to the general public would
allow EPA to show the scale of application-specific allowance use,
identify where EPA's annual determination on the quantity of HFCs
needed for the end use may need adjustment, and inform discussion in
future rulemakings. This information would be aggregated across all
application-specific allowance holders within a specific application,
so EPA expects there would be no risk of divulging information
submitters customarily keep private or closely held.
Under this separate alternative approach, EPA is proposing to
release
[[Page 27200]]
aggregated data on the quantity (in kilograms) of each HFC held in
inventory as of December 31 of each year collectively by producers,
importers, exporters, and reclaimers of HFCs. Analogous to the approach
under CAA section 608, where almost all HFC reclamation data is
released on a chemical-by-chemical basis, EPA is proposing to release
HFC inventory by chemical. EPA would only release HFC-specific
inventory values if there are three or more companies that have
inventory of that HFC. Releasing inventory data can inform decisions of
all companies in the marketplace. One motivator for this proposal is
the experience with the phaseout of HCFC-22. Lack of reliable and
widely distributed information on the scale of the existing inventory
of HCFC-22 likely contributed to dramatic price swings associated with
delays in the issuance of EPA allocation rulemakings. While additional
information on inventory on its own may not prevent price fluctuations,
the Agency expects it could provide more price predictability for the
step-downs. Releasing inventory data could also help producers and
importers make decisions about which HFCs are in short supply and/or
could help support a smooth transition away from high-GWP HFCs.
(c) Company-Specific Allowance Data
Separate and apart from the alternatives listed in the prior
subsections, EPA is also proposing to publish on its website the names
of every company receiving calendar-year production allowances,
consumption allowances, or application-specific allowances. EPA would
also publish the amount of allowances allocated at the beginning of the
year to each company and revise that data quarterly as allowances are
expended.
Under the ODS phaseout program, EPA released similar company-
specific allowance data, including quantities produced or imported by
each company in the baseline year by chemical and annual allocation
amounts thereafter for nearly 30 years. EPA's experience has been that
the release of this information has been important to reduce illegal
imports, facilitate transfers, and provide third parties confidence
that they were buying from a company that had allowances. EPA
anticipates the same benefits would result from providing similar HFC
data.
In the case of HFCs, EPA is proposing to release an EV-weighted
allowance value which would not divulge what HFC(s) a company is
producing or consuming. Given this history and the fact that the data
will be masked by being EV-weighted, EPA does not believe that
producers or importers have a reasonable expectation of confidentiality
concerning their allowance allocation levels.
(d) Transfer Data
If EPA does not release all data, as described in section IX.D.1 of
this preamble, EPA is also proposing to publish on the Agency's website
certain aggregated data on transfers, so long as there are at least
three companies involved in transferring allowances that year.
Specifically, EPA is proposing to release data on the number of
transfers, the total EV-weighted quantity of allowances transferred,
and the average price of an allowance being transferred.
Release of these data would provide the public with information on
the frequency and scale of transfers associated with the HFC phasedown.
While EPA sees value in releasing individual transfer data
(excluding the price of the allowances transferred), the Agency expects
that this would divulge information submitters customarily keep private
or closely held. EPA seeks comment on this proposal, including whether
submitters consider such data to be customarily kept private or closely
held and whether EPA should release more data than just aggregate data.
(e) Information Relevant to the Kigali Amendment and the Montreal
Protocol
On January 27th, 2021, the President issued an Executive Order on
Tackling the Climate Crisis at Home and Abroad (Executive Order 14008;
86 FR 7619; January 27, 2021). Under part (j), the Executive Order
directs the Secretary of State to prepare within 60 days a transmittal
package seeking the Senate's advice and consent to ratification of the
Kigali Amendment to the Montreal Protocol on Substances that Deplete
the Ozone Layer. The Kigali Amendment requires an international
phasedown of the production and consumption of HFCs. To ensure the
United States would be prepared to comply with the data reporting
elements of the Kigali Amendment, EPA is proposing that, if the United
States were to join the Kigali Amendment, it would release data to the
United Nations Environment Programme's Ozone Secretariat regarding HFC
production, consumption, and limited emission data. With the exception
of emission data related to the destruction of HFC-23, the data
elements would be similar, if not identical, to those currently
released for ODS. Should the United States join the Kigali Amendment,
EPA will need to report \92\ the following data:
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\92\ The reporting forms and instructions that EPA would use to
submit such data are available in the docket and on the Ozone
Secretariat's website at https://ozone.unep.org/countries/data-reporting-tools (accessed February 14, 2021).
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Annual U.S. HFC production in MT by chemical for each of
the HFCs listed in subsection (c) of the AIM Act, including total HFC
production for all uses and HFC production for feedstock in the United
States;
Annual U.S. HFC import in MT aggregated by chemical and by
country imported from for each of the HFCs listed in subsection (c) of
the AIM Act, including the amount that was new (virgin), recovered and
reclaimed, or for feedstock use;
Annual U.S. HFC export in MT aggregated by chemical and by
country exported to for each of the HFCs listed in subsection (c) of
the AIM Act, including the amount that was new (virgin), recovered and
reclaimed, or for feedstock use;
Annual U.S. HFC destruction in MT aggregated by chemical
for each of the HFCs listed in subsection (c) of the AIM Act; and
Annual facility-level information on HFC-23 generated and
destroyed, including annual amounts of HFC-23:
[cir] Generated, whether captured or not;
[cir] generated and captured for all uses;
[cir] generated and captured for feedstock use in the United
States;
[cir] generated and captured for destruction;
[cir] used for feedstock without prior capture;
[cir] destroyed without prior capture; and
[cir] generated emissions.
Regarding annual facility-level information on HFC-23 generated and
destroyed, these data are inputs into emission equations that are used
under GHGRP subparts L and O to calculate and report emissions of HFC-
23, and inputs into emission equations may be considered ``emission
data.'' Section 114(c) of the CAA provides that ``emission data'' shall
be available to the public. As noted above, because subsection
(k)(1)(C) of the AIM Act states that section 114 of the CAA applies to
the AIM Act and rules promulgated under it as if the AIM Act were
included in Title VI of the CAA, the requirements under section 114(c)
of the CAA that apply to ``emission data'' also apply to data gathered
under the AIM Act that are determined to be ``emission data.'' EPA is
proposing to determine that these elements related to HFC-23 are
emission data and thus
[[Page 27201]]
would not be treated as confidential under this rule.
The Ozone Secretariat would release aggregated GWP-weighted annual
production and consumption on the Ozone Secretariat's website.\93\
Additional data elements released include annual amounts destroyed,
aggregated for all reported chemicals under the Montreal Protocol in
MT, import of recovered/recycled/reclaimed substances by group (e.g.,
HFCs) in MT, and export of recovered/recycled/reclaimed substances in
MT by group. Should the United States join the Kigali Amendment, EPA
would also need to submit chemical-specific production and consumption
data consistent with the data listed for 2011, 2012, and 2013 to
establish the United States' baseline for HFCs.
---------------------------------------------------------------------------
\93\ The Ozone Secretariat's handling of similarly reported data
from the United States on ODS is available at https://ozone.unep.org/countries/profile/usa.
---------------------------------------------------------------------------
The Parties to the Montreal Protocol adopted Decision I/11 \94\
during the First Meeting of the Parties, which outlines the Parties'
view on how to treat the confidentiality of data submitted to the Ozone
Secretariat. In accordance with the decision, if the United States is
submitting data that it has determined to be entitled to confidential
treatment, the United States has the ability to mark the data
accordingly such that it will be treated with secrecy and maintained
confidential by the Secretariat. EPA intends to mark any data that the
Agency is not releasing to the general public for confidential
treatment in its annual reporting, were the United States to join the
Kigali Amendment. The decision requests the Ozone Secretariat to only
release aggregated data such that any data a Party to the Protocol
considers to be confidential will not be disclosed. However, Parties to
the Protocol may exercise their right under Article 12, paragraph b of
the Protocol to have access to confidential data from other parties,
provided that they send an application in writing that guarantees such
data will be treated with secrecy and not disclosed or published in any
way.
---------------------------------------------------------------------------
\94\ ``The Montreal Protocol on Substances That Deplete the
Ozone Layer.'' Unep.org, United Nations Environment Programme,
https://ozone.unep.org/treaties/montreal-protocol/meetings/first-meeting-parties/decisions/decision-i11-report-and-confidentiality-data.
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X. What are the costs and benefits of this proposed action?
EPA conducted a Regulatory Impact Analysis which estimated the
costs and benefits of implementing the phasedown of HFCs as a result of
the passage of the AIM Act, as realized by promulgating this rule. This
analysis is intended to provide the public with information on the
relevant costs and benefits of this action and to comply with Executive
Orders.
EPA estimates that in 2022 the annual net benefits are $2.6
billion, reflecting compliance costs of $200 million and social
benefits of $2.8 billion. In 2036, when the final phasedown step is
reached at 15 percent of the statutorily defined HFC baseline, the
estimated annual net benefits are $17.9 billion. Table 5 presents a
summary of the annual costs and net benefits of the rule for selected
years in the time period 2022-2050, but with the climate benefits
discounted at 3%.
Table 5--Benefits, Costs, and Net Benefits of the Proposed Rule for 2022-2050
[Billions of 2020$] a b
----------------------------------------------------------------------------------------------------------------
Climate benefits Costs
Year (discounted at 3%) (annual) Net benefits
----------------------------------------------------------------------------------------------------------------
2022........................................................ $2.8 $0.2 $2.6
2024........................................................ 6.3 -0.2 6.5
2029........................................................ 10.2 -0.6 10.8
2034........................................................ 13.5 -0.9 14.4
2036........................................................ 17.1 -0.8 17.9
2045........................................................ 25.5 -0.9 26.4
2050........................................................ 30.2 -1.1 31.3
----------------------------------------------------------------------------------------------------------------
\a\ Benefits include only those related to climate. Climate benefits are based on changes (reductions) in HFC
emissions and are calculated using four different estimates of the social cost of HFCs (SC-HFCs) (model
average at 2.5 percent, 3 percent, and 5 percent discount rates; and 95th percentile at 3 percent discount
rate). For the presentational purposes of this table, we show the benefits associated with the average SC-HFC
at a 3 percent discount rate, but the Agency does not have a single central SC-HFC point estimate. We
emphasize the importance and value of considering the benefits calculated using all four SC-HFC estimates. See
Table 4-20 in the RIA for the full range of SC-HFC estimates. As discussed in Chapter 4 of the RIA, a
consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and
lower, are also warranted when discounting intergenerational impacts. The costs presented in this table are
annual estimates.
\b\ Rows may not appear to add correctly due to rounding.
Table 6 presents the sum of climate benefits across all HFCs
reduced for the proposed rule for 2022, 2024, 2029, 2034, 2036, 2045,
and 2050.
Table 6--Climate Benefits for the Proposed Rule for 2022-2050
[Billions of 2020$] a
----------------------------------------------------------------------------------------------------------------
Climate benefits by discount rate and statistic
-----------------------------------------------------------------
Year 2.5% 3% (95th
5% (average) 3% (average) (average) percentile)
----------------------------------------------------------------------------------------------------------------
2022.......................................... $1.2 $2.8 $3.8 $7.4
2024.......................................... 2.7 6.3 8.5 16.7
2029.......................................... 4.4 10.2 13.5 27.1
2034.......................................... 6.0 13.5 17.6 35.9
2036.......................................... 7.7 17.1 22.3 45.7
2045.......................................... 12.2 25.5 32.6 68.3
[[Page 27202]]
2050.......................................... 14.9 30.2 38.4 80.9
----------------------------------------------------------------------------------------------------------------
\a\ Climate benefits are based on changes (reductions) in HFC emissions and are calculated using four different
estimates of the social cost of HFCs (SC-HFCs) (model average at 2.5 percent, 3 percent, and 5 percent
discount rates; and 95th percentile at 3 percent discount rate). The IWG emphasized the importance and value
of considering the benefits calculated using all four estimates. As discussed in the Technical Support
Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive Order 13990 (IWG
2021), a consideration of climate benefits calculated using discount rates below 3 percent, including 2
percent and lower, are also warranted when discounting intergenerational impacts.
EPA estimates that the present value of cumulative net benefits
evaluated from 2022 through 2050 is $283.9 billion at a three percent
discount rate, comprising $272.8 billion in cumulative benefits due to
reducing HFC emissions and $11.1 billion in cumulative compliance
savings. The present value of net benefits is calculated over the 29-
year period from 2022-2050, to account for the years that emissions
will be reduced following the consumption reductions from 2022-2036.
Over the 15-year period of the phasedown of HFCs, the present value of
cumulative compliance costs is negative $5 billion, or $5 billion in
savings, and the present value of cumulative social benefits is $103.6
billion, both at a three percent discount rate. Over the same 15-year
period of the phasedown, the present value of cumulative net benefits
is $108.2 billion. At a 7% discount rate over the 15-year period of the
phasedown of HFCs, the present value of cumulative compliance costs is
negative $3billion, or $3 billion in savings. Over the same 15-year
period of the phasedown, the present value of cumulative net benefits
is $106.6 billion at a 7% discount rate for costs (and 3% for climate
benefits). The comparison of benefits and costs in PV and EAV terms for
the rule can be found in Table 7. Estimates in the table are presented
as rounded values.
Table 7--Summary of Annual Values, Present Values and Equivalent Annualized Values for the 2022-2050 Timeframe
for Estimated Abatement Costs, Benefits, and Net Benefits for the Proposed Rule
[Billions of 2020$, discounted to 2022] a b c
----------------------------------------------------------------------------------------------------------------
Costs d Net benefits
Year Climate benefits ---------------------------------------------------------------
(3%) c 3% 7% 3% 7%
----------------------------------------------------------------------------------------------------------------
Present Value................. $272.8 -$11.1 -$5.8 $283.9 $278.6
Equivalent Annualized Value... 14.2 -0.6 -0.5 14.8 14.7
----------------------------------------------------------------------------------------------------------------
\a\ Rows may not appear to add correctly due to rounding.
\b\ The annualized present value of costs and benefits are calculated over a 29-year period from 2022 to 2050.
\c\ Climate benefits are based on changes (reductions) in HFC emissions and are calculated using four different
estimates of the social cost of HFCs (SC-HFC) (model average at 2.5 percent, 3 percent, and 5 percent discount
rates; and 95th percentile at 3 percent discount rate). For purposes of this table, we show the benefits
(climate benefits and net benefits) associated with the model average at a 3 percent discount rate, but the
Agency does not have a single central SC-HFC point estimate. We emphasize the importance and value of
considering the benefits calculated using all four SC-HFC estimates. As discussed in Chapter 4 of the RIA, a
consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and
lower, are also warranted when discounting intergenerational impacts.
\d\ The costs presented in this table are consistent with the costs presented in RIA Chapter 3, Table 3-5.
The estimation of $272.8 billion in benefits due to reducing HFC
emissions involved three steps. First, the difference between the
consumption of HFCs allowed under the rule and the consumption that
would have been expected in a business-as-usual scenario (BAU) was
calculated for each year of the phasedown in exchange value-weighted
tons (EVe). Second, using EPA's Vintaging Model, the changes in
consumption were used to estimate changes in HFC emissions, which
generally lag consumption by some time as HFCs incorporated into
equipment and products are eventually released to the environment.
Finally, the climate benefits were calculated by multiplying the HFC
emission reductions for each year by the appropriate social cost of HFC
to arrive at the monetary value of HFC emission reductions.
EPA estimates the climate benefits for this proposed rulemaking
using a measure of the social cost of each HFC (collectively referred
to as SC-HFC) that is affected by the rule. The SC-HFC is the monetary
value of the net harm to society associated with a marginal increase in
HFC emissions in a given year, or the benefit of avoiding that
increase. In principle, SC-HFC includes the value of all climate change
impacts, including (but not limited to) changes in net agricultural
productivity, human health effects, property damage from increased
flood risk and natural disasters, disruption of energy systems, risk of
conflict, environmental migration, and the value of ecosystem services.
The SC-HFC, therefore, reflects the societal value of reducing
emissions of the gas in question by one metric ton. The SC-HFC is the
theoretically appropriate value to use in conducting benefit-cost
analyses of policies that affect HFC emissions. The Interagency Working
Group on the Social Cost of Greenhouse Gases (IWG) will be taking
comment on how to incorporate the recommendations of the National
Academies (2017) and other recent science including the advances
discussed in the 2021 TSD in the development of the fully updated SC-
GHG estimates to be released by January 2022 under E.O. 13990. To
complement the IWG process, and as an active member of the IWG, EPA is
soliciting comment in this proposed rule on the SC-HFC estimates used
in this RIA and the methodology underlying them,
[[Page 27203]]
including on how that methodology should be adapted in future to
accommodate advances in the scientific and economic literature.
Additional benefits are derived by requiring a five-percent offset for
allowance transfers, which decreases the cap of the total allowable
HFCs in the system. EPA is also taking comment on the RIA, which is
included in the docket. The public is invited to provide comment and/or
data that would inform various analytic matters and uncertainties in
the RIA (see Executive Summary and Chapter 7 of the RIA).
XI. What should EPA consider in future rulemakings?
In addition to the proposals included in this rulemaking, EPA is
also providing advance notice and seeking input on how the Agency
should determine company-specific allocations in 2024 and later years.
Given high baseline health risks related to air toxics in communities
near facilities that produce HFCs and potential environmental justice
concerns, EPA is also seeking input on ways to ensure that these
elevated risks not be further exacerbated by changes in the use
patterns for production of HFCs or their substitutes. Since these
topics relate to future rulemaking, rather than proposals in this
rulemaking, EPA will take comments on this section under advisement and
incorporate them, as appropriate, into such future rulemakings, with an
opportunity for public comment prior to finalization of any provisions.
A. How should EPA consider future allowance allocations?
The AIM Act requires a phasedown of HFC production and consumption
to 15 percent of baseline by 2036 with no further lowering of the cap.
This is in contrast to the approach for ODS, where production and
consumption of chemicals were phased out, with limited exceptions. As
such, EPA is considering whether a different approach is warranted for
determining allowance allocations under the AIM Act and is seeking
advance input on several options for the allowance framework and
procedure for 2024 and later years.
For ODS, EPA generally issued allowances to a set of companies
based on their historic levels of production and consumption. Given the
intent was to phase out the production and consumption of ODS, EPA did
not adjust the list of allowance holders once they were set, except to
reflect transfers of baseline allowances between companies. EPA is
considering whether allocating HFC allowances largely to historic
producers or importers is appropriate in the long-term for a phasedown.
EPA is particularly interested in whether the concepts presented in
this section would benefit the environment (e.g., by encouraging
transition to low-GWP and non-HFC substances); provide an incentive or
disincentive to companies that develop and introduce low-GWP and non-
HFC substances; support the effective functioning of the HFC production
and import market; and/or create or remove barriers to new entrants to
the market, including for socially and economically disadvantaged
individuals. EPA seeks advance input on the following concepts, as well
as suggestions for additional approaches the Agency could consider for
2024 \95\ and later years.
---------------------------------------------------------------------------
\95\ 2024 is the next milestone under the AIM Act phasedown
schedule, when aggregate allowances must be reduced to 60 percent of
the baseline.
---------------------------------------------------------------------------
(1) Allocating allowances based on past production and consumption
from a set period of years and only adjusting allowance holders to
reflect transfers between companies;
(2) Allocating allowances based on a reevaluation of the most
recent years of production and consumption data as reported to EPA
(e.g., three years);
(3) Allocating allowances based on past production and consumption,
but requiring a fee for every allowance provided for production or
import of HFCs;
(4) Establishing an auction system for the total set, or some
subset, of generally available allowances;
(5) A combination of the above approaches, such as phasing in the
use of an auction or fee over time.
Under the first concept, EPA would continue to issue allowances at
no cost. While there would be no cost associated with the allowances,
the allowances have value. Companies that receive allowances could
choose to remain in the market and produce or import HFCs, sell or
otherwise transfer their allowances to another company, or retire their
allowances. New entrants, other than those potentially established
through this rulemaking, would typically have to buy into the market
through the purchase of allowances. This approach may provide the least
flexibility for new entrants, and is most consistent with past practice
phasing out ODS. It would also provide ongoing value to companies
already in the market through the issuance of allowances regardless of
whether they continue to produce or import HFCs, effectively at the
expense of other allowance holders who are actively producing or
importing.
The second concept would be similar in many respects to the first,
but would adjust each company's share of allowances periodically--
either at phasedown steps or every few years. It would reflect
transfers periodically when EPA adjusted the years of production and
consumption considered in allocating allowances, and would require new
entrants, after this initial allocation rule, to purchase or otherwise
obtain allowances from another allowance holder to enter the market
(although such new entrants may be included in future allocations after
the years considered shifted). This approach may better ensure the
companies receiving allowances are the companies who are actively
producing and importing. EPA can see advantages to this approach,
particularly for companies that continue to produce HFCs in the United
States, since allowances associated with companies that stop domestic
production would periodically be reapportioned to companies that
continue to produce domestically. However, this approach would
encourage companies to use all of their allowances or lose them at the
next periodic adjustment, potentially resulting in production and
consumption at a higher level than the market would demand. This could
also have environmental consequences if more HFCs are produced and
imported than are needed to satisfy market demand.
The third concept would adopt an approach similar to the first two,
but would require companies pay a fee for allowances provided for
production or import of HFCs. This could address concerns about
producing or importing more HFCs than a company expects to need,
potentially resulting in benefits for the environment, but could
increase the cost of the allowance allocation and trading program.
Additionally, depending on how the fee was structured, this concept
could favor companies with more access to capital to purchase the
allowances. Given the expected increase in the market price of HFCs
that is likely to occur over time as allowances decrease, EPA would not
expect this to affect companies' profitability, but it could increase
the cost of HFCs. An increase in the cost of HFCs could foster faster
transition to alternatives, which would result in additional
environmental benefits. By increasing the cost of virgin material, it
could also increase the profitability and use of reclaimed material. As
noted previously, reclamation will be an important component to a
smooth
[[Page 27204]]
transition from HFCs, as it has been in past ODS phaseouts. It could
also foster a more active allowance transfer market to the extent
companies determine they have excess allowances that would earn more
profit if transferred to companies that are seeking additional
allowances based on their customers' demands.
Under the fourth concept, EPA would determine the total allocation
level and establish an auction system for individual allowances. This
approach would provide flexibility in the marketplace such that
producers and importers could adjust their allowances from year-to-
year. This approach may allow the broadest participation in the HFC
production and import market. It could have similar benefits for the
environment by adding an extra cost to using an allowance and
discouraging entities from seeking allowances where there isn't
corresponding market demand. Increases in the price of virgin HFCs
could encourage transition to alternatives and support the use of
reclaimed material. Under an auction, EPA could consider developing a
mechanism that would permit entities to purchase allowances for the
purpose of retiring them which could result in additional environmental
benefits. The Agency seeks advance input on how best to structure such
an auction program, so as not to discourage participation by small
businesses and businesses that are socially and economically
disadvantaged. Smaller business may not have as much access to capital
and could potentially be shut out of the HFC production and import
market if the auction price was too high. This approach may also have
administrative challenges, but EPA could rely on its experience
implementing other environmental auction programs to set up and
administer such a program.
The fifth concept would be a combination of any of the other
concepts, including allowing for future new entrants pools similar to
the one described in the proposal. In particular, EPA is interested in
whether it would be appropriate to phase in the third or fourth
concepts over time. For example, allowances in the early years of the
phasedown could be primarily allocated to companies that are currently
producing and importing (under the first two concepts), but each year
EPA could increase the share of allowances that are subject to a fee or
put up for auction. Under this approach, EPA could envision all
allowances being subject to a fee or put up for auction by 2036 when
the final phasedown step under the AIM Act is reached. This would
gradually transition the market from receiving allowances based on
historic production and import to one where any company could enter the
market.
EPA is seeking advance input on these and other approaches for
issuing allowances starting with 2024.
B. How should EPA address the potential health effects of air toxics
associated with changes in the production of HFCS and substitutes in a
future rulemaking?
Section III of the preamble describes EPA's initial approach in
assessing potential environmental justice concerns and poses several
questions designed to inform the Agency's analysis. The Agency's
preliminary screening-level analysis is included in the RIA, available
in the docket associated with this rulemaking. EPA is evaluating
whether there may be inadvertent or unexpected distributional effects
of the phasedown of HFCs that may cause potential environmental justice
concerns. Specifically, chemical feedstocks and byproducts emitted as
part of the production process at a facility expending allowances, or
producing substitutes, may cause or contribute to disproportionately
high exposure to certain air toxics in communities adjacent to, or
surrounding, that facility. As noted above, there is uncertainty about
how this rule would change production of HFCs and substitutes at
individual facilities, and how any such changes might affect air toxics
emissions and exposure in nearby communities.
To support the development of comments, EPA is seeking data or
analysis to identify whether it is reasonable to expect net increases
in emissions; and if so, how we might isolate the impacts of this
program (i.e., effects resulting from the phasedown itself, the trading
of production allowances, or some other factor) to enable the Agency to
conduct a more nuanced analysis of changes in releases associated with
chemical feedstocks and byproducts for HFC substitutes, given the
inherent uncertainty regarding where, and in what quantities,
substitutes will be produced. EPA is also seeking comment on whether
there are other regulatory tools better suited than adjustments to the
HFC program design to address potential increases in emissions in non-
HFC feedstocks and byproducts at facilities subject to the
Congressionally mandated phasedown of HFCs under the AIM Act, if any.
EPA also seeks comment on whether these are the appropriate questions
or if there are other questions the Agency should be asking. EPA is
also soliciting comment on key assumptions underlying the environmental
justice analysis.
EPA is also seeking input on the following approaches for future
rulemaking with respect to how the Agency treats allowance transfers to
address any potential for increased air toxics exposure in at-risk
communities, and the Agency is also seeking input on other approaches
that we have not considered.
1. Adjustments to Transfer Offsets
EPA could consider adjusting the transfer offset, currently
proposed at five-percent (and taking comment on one to 10 percent),
based on factors such as the location of the receiving facility and
projected impacts to the surrounding community.
2. Issuing Allowances at a Facility Level
EPA's current proposal is to issue allowances at a company level,
but the Agency could consider issuing allowances at a facility level in
future rulemakings to limit the potential for disproportionately high
production of HFCs.
3. Release of Relevant Facility Data
As part of an allowance transfer request, EPA could require the
company receiving allowances to submit relevant facility data, which
would be made available to the public, that is sufficient to
demonstrate that transfers of allowances would not increase risks in
communities with high existing air toxic emissions or elevated health
risks.
XII. Statutory and Executive Order Review
A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review
This action is an economically significant regulatory action that
was submitted to the Office of Management and Budget (OMB) for review.
Any changes made in response to OMB recommendations have been
documented in the docket. A summary of the potential costs and benefits
associated with this action is included in the section titled, ``What
is the Summary of this Action?'' of this proposed rulemaking, and EPA
prepared an analysis of the potential costs and benefits associated
with this action, which is available in Docket Number EPA-HQ-OAR-2021-
0044.
B. Paperwork Reduction Act (PRA)
The information collection activities in this proposed rule will be
submitted for approval to the Office of
[[Page 27205]]
Management and Budget (OMB) under the PRA upon publication of this
proposed rule. The Information Collection Request (ICR) document that
EPA prepared has been assigned EPA ICR number 2685.01. You can find a
copy of the ICR in the docket for this rule, and it is briefly
summarized here.
Subsection (d)(1)(A) of the AIM Act specifies that on a periodic
basis, but not less than annually, each company that, within the
applicable reporting period, produces, imports, exports, destroys,
transforms, uses as a process agent, or reclaims a regulated substance
shall submit to EPA a report that describes, as applicable, the
quantity of the regulated substance that the company: Produced,
imported, and exported; reclaimed; destroyed by a technology approved
by the Administrator; used and entirely consumed (except for trace
quantities) in the manufacture of another chemical; or, used as a
process agent. EPA is proposing to collect such data regularly to
support implementation of the AIM Act's HFC phasedown provisions. EPA
is proposing quarterly reporting to ensure that annual production and
consumption limits are not exceeded. It is also needed for EPA to be
able to review allowance transfer requests, of which remaining
allowances is a major component of EPA's review. In addition, EPA is
proposing to collect information in order to calculate allowances, to
track the movement of HFCs through commerce, and to require auditing.
Collecting these data elements would allow for EPA to ensure that the
annual quantity of all regulated substances produced or consumed in the
United States does not exceed the cap established by the AIM Act,
consistent with subsection (e)(2)(B) of the Act.
All information sent by the submitter electronically is transmitted
securely to protect information submitters customarily keep private or
closely held. The reporting tool guides the user through the process of
submitting CBI. Documents containing information claimed as CBI must be
submitted in an electronic format, in accordance with the recordkeeping
requirements. EPA also allows respondents to report CBI by fax and
through courier.
Respondents/affected entities: Respondents and affected entities
will be individuals or companies that produce, import, export,
transform, distribute, destroy, or reclaim certain HFCs that are
defined as a regulated substance under the AIM Act. Respondents and
affected entities will also be individuals and companies who produce,
import, or export products in six statutorily specified applications: A
propellant in metered dose inhalers; defense sprays; structural
composite preformed polyurethane foam for marine and trailer use; the
etching of semiconductor material or wafers and the cleaning of
chemical vapor deposition chambers within the semiconductor
manufacturing sector; mission-critical military end uses, such as
armored vehicle and shipboard fire suppression systems and systems used
in deployable and expeditionary applications; and, on board aerospace
fire suppression.
Respondent's obligation to respond: Mandatory (AIM Act).
Estimated number of respondents: 11,664.
Frequency of response: Quarterly, biannual, annual, and as needed
depending on the nature of the report.
Total estimated burden: 36,540 hours (per year). Burden is defined
at 5 CFR 1320.3(b).
Total estimated cost: $4,506,092 per year, includes $24,100
annualized capital or operation & maintenance costs.
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 in 40 CFR are listed in 40 CFR part 9.
Submit your comments on the Agency's need for this information, the
accuracy of the provided burden estimates and any suggested methods for
minimizing respondent burden to EPA using the docket identified at the
beginning of this rule. You may also send your ICR-related comments to
OMB's Office of Information and Regulatory Affairs via email to
[email protected], Attention: Desk Officer for EPA. Since OMB
is required to make a decision concerning the ICR between 30 and 60
days after receipt, OMB must receive comments no later than June 18,
2021. EPA will respond to any ICR-related comments in the final rule.
EPA used data collected under the ICR for the Greenhouse Gas
Reporting Program (OMB Control No. 2060-0629) as well as the associated
reporting tool, the electronic Greenhouse Gas Reporting Tool (e-GGRT)
in developing this proposed rulemaking. EPA has also requested an
emergency ICR for a one-time collection request pertaining to data
necessary to establish the United States consumption and production
baselines as well as to determine potential producers, importers, and
application-specific end users who were not subject to the GHGRP (OMB
Control No. 2060-0732).
C. Regulatory Flexibility Act (RFA)
I certify that this action will not have a significant economic
impact on a substantial number of small entities under the RFA. The
small entities subject to the requirements of this action are suppliers
of HFCs including producers, importers, exporters, reclaimers,
companies that destroy HFCs, and companies that sell and distribute
HFCs. Details of this analysis are presented in ``Economic Impact
Screening Analysis for Proposed Allowance System for an HFC Production
and Consumption Phasedown.'' Docket ID EPA-HQ-OAR-2021-0044.
The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis of any rule subject to
notice-and-comment rulemaking requirements under the Administrative
Procedure Act or any other statute unless the agency certifies that the
rule will not have a significant economic impact on a substantial
number of small entities (SISNOSE). Small entities include small
businesses, small organizations, and small governmental jurisdictions.
For purposes of assessing the impacts of this rule on small entities,
small entity is defined as: (1) A small business as defined by the U.S.
Small Business Administration's (SBA) regulations at 13 CFR 121.201;
(2) a small governmental jurisdiction that is a government of a city,
county, town, school district, or special district with a population of
less than 50,000; or (3) a small organization that is any not-for-
profit enterprise that is independently owned and operated and is not
dominant in its field.
If a rule may have a SISNOSE, the Agency would be required to take
certain steps to ensure that the interests of small entities were
represented in the rulemaking process. To determine whether this
proposed rule would likely have a significant economic impact on a
substantial number of small entities (SISNOSE), EPA identified
producers, importers, exporters, and reclaimers of HFCs from 2018 and
2019 that reported to EPA's Greenhouse Gas Reporting Program and the
U.S. Customs and Border Protection Automated Commercial Environment
(ACE). Available economic data about each identified entity (i.e.,
number of employees, annual sales) were obtained from the Dun and
Bradstreet databases, and the sizes compared with the U.S. Small
Business Administration's table of small business size standards
matched to NAICS codes. The small business threshold is defined by SBA
as the number of employees in the
[[Page 27206]]
company and varied between 100 and 1,500 employees. There were
identified HFC importers and reclaimers that met the definition of
small businesses, but no HFC producers were identified as small
businesses. To determine the likely economic impact on these small
businesses, it was assumed that a percentage of the HFCs they imported
would be replaced by an alternative, and the difference in the price
between the HFCs and their alternatives was applied to determine any
change in sales revenue. The methods used and assumptions made to
perform this analysis are described in detail in the technical support
document, Economic Impact Screening Analysis for Proposed Allowance
System for an HFC Production and Consumption Phasedown, found in the
docket of this proposed rule.
EPA estimates that approximately 9 of the 8,746 potentially
affected small businesses could incur costs in excess of one percent of
annual sales and that approximately 4 small businesses could incur
costs in excess of three percent of annual sales. Because these levels
are below the thresholds used in EPA's other rulemakings affecting
these industries (e.g., CAA Title VI rulemakings), it can be presumed
that this action will have no SISNOSE.
D. Unfunded Mandates Reform Act (UMRA)
This action does not contain any unfunded mandate as described in
UMRA, 2 U.S.C. 1531-1538 and does not significantly or uniquely affect
small governments. The action imposes no enforceable duty on any state,
local, or tribal governments.
E. Executive Order 13132: Federalism
This action 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.
F. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments
This action does not have tribal implications as specified in
Executive Order 13175. It will not have substantial direct effects on
tribes on the relationship between the federal government and Indian
tribes, or on the distribution of power and responsibilities between
the federal government and Indian tribes, as specified in Executive
Order 13175. Thus, Executive Order 13175 does not apply to this action.
EPA periodically updates tribal officials on air regulations through
the monthly meetings of the National Tribal Air Association and will
share information on this rulemaking through this and other fora.
G. Executive Order 13045: Protection of Children From Environmental
Health Risks and Safety Risks
This action is subject to Executive Order 13045 (62 FR 19885, April
23, 1997) because it is an economically significant regulatory action
as defined by Executive Order 12866, and EPA believes that the
environmental health or safety risk addressed by this action has a
disproportionate effect on children. Accordingly, EPA has evaluated the
environmental health and welfare effects of climate change on children.
GHGs, including HFCs, contribute to climate change. The GHG
emissions reductions resulting from implementation of this rule will
further improve children's health. The assessment literature cited in
EPA's 2009 and 2016 Endangerment Findings concluded that certain
populations and life stages, including children, the elderly, and the
poor, are most vulnerable to climate-related health effects. The
assessment literature since 2016 strengthens these conclusions by
providing more detailed findings regarding these groups'
vulnerabilities and the projected impacts they may experience.
These assessments describe how children's unique physiological and
developmental factors contribute to making them particularly vulnerable
to climate change. Impacts to children are expected from heat waves,
air pollution, infectious and waterborne illnesses, and mental health
effects resulting from extreme weather events. In addition, children
are among those especially susceptible to most allergic diseases, as
well as health effects associated with heat waves, storms, and floods.
Additional health concerns may arise in low-income households,
especially those with children, if climate change reduces food
availability and increases prices, leading to food insecurity within
households. More detailed information on the impacts of climate change
to human health and welfare is provided in section I.C. of this
preamble.
H. Executive Order 13211: Actions That Significantly Affect Energy
Supply, Distribution, or Use
This action is not a ``significant energy action'' because it is
not likely to have a significant adverse effect on the supply,
distribution, or use of energy. This action applies to certain
regulated substances and certain applications containing regulated
substances, none of which are used to supply or distribute energy.
I. National Technology Transfer and Advancement Act (NTTAA)
This rulemaking does not involve technical standards.
J. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations
This rule will reduce emissions of potent GHGs, which as noted
earlier in section I of this preamble will reduce the effects of
climate change, including the public health and welfare effects on
minority populations, low-income populations and/or indigenous peoples.
However, EPA is not yet able to determine whether this action has
disproportionately high and adverse effects on minority populations,
low-income populations and/or indigenous peoples, as specified in
Executive Order 12898 (59 FR 7629, February 16, 1994). A summary of the
Agency's approach for considering potential environmental justice
concerns as a result of this rulemaking can be found in section III of
the preamble, and our environmental justice analysis can be found in
the RIA, available in the docket for this rulemaking.
List of Subjects
40 CFR Part 9
Environmental Protection, Reporting and recordkeeping requirements.
40 CFR Part 84
Environmental protection, Administrative practice and procedure,
Air pollution control, Chemicals, Climate Change, Emissions, Imports,
Reporting and recordkeeping requirements.
Michael S. Regan,
Administrator.
For the reasons set forth in the preamble, EPA is proposing to
amend 40 CFR part 9 and add 40 CFR part 84 as follows:
PART 9--OMB APPROVALS UNDER THE PAPERWORK REDUCTION ACT
0
1. The authority citation for part 9 continues to read as follows:
Authority: 7 U.S.C. 135 et seq., 136-136y; 15 U.S.C. 2001, 2003,
2005, 2006, 2601-2671; 21 U.S.C. 331j, 346a, 31 U.S.C. 9701; 33
U.S.C. 1251 et seq., 1311, 1313d, 1314, 1318, 1321, 1326, 1330,
1342, 1344, 1345 (d) and (e), 1361; E.O. 11735, 38 FR 21243, 3 CFR,
[[Page 27207]]
1971-1975 Comp. p. 973; 42 U.S.C. 241, 242b, 243, 246, 300f, 300g,
300g-1, 300g-2, 300g-3, 300g-4, 300g-5, 300g-6, 300j-1, 300j-2,
300j-3, 300j-4, 300j-9, 1857 et seq., 6901-6992k, 7401-7671q, 7542,
9601-9657, 11023, 11048.
0
2. In Sec. 9.1 amend the table by:
0
a. Adding an undesignated heading for ``Phasedown of
Hydrofluorocarbons'' after the entry for ``82.184(e)''; and
0
b. Adding an entry for ``84.29'' in numerical order.
The additions read as follows:
Sec. 9.1 OMB approvals under the Paperwork Reduction Act.
* * * * *
------------------------------------------------------------------------
OMB control
40 CFR citation No.
------------------------------------------------------------------------
* * * * *
------------------------------------------------------------------------
Phasedown of Hydrofluorocarbons
------------------------------------------------------------------------
84.29................................................... 2060-AV17
* * * * *
------------------------------------------------------------------------
0
3. Add part 84 to read as follows:
PART 84--PHASEDOWN OF HYDROFLUOROCARBONS
Subpart A--Production and Consumption Controls
Sec.
84.1 Purpose and scope.
84.3 Definitions.
84.5 Prohibitions for regulated substances.
84.7 Phasedown schedule.
84.9 Allocation of calendar-year production allowances.
84.11 Allocation of calendar-year consumption allowances.
84.13 Allocation of application-specific allowances.
84.15 Set aside of application-specific allowances, production
allowances, and consumption allowances.
84.17 Availability of additional consumption allowances.
84.19 Transfers of allowances.
84.21 Sale or transfer of regulated substances produced or imported
with application-specific allowances
84.23 Certification identification generation and tracking
84.25 Required processes to import regulated substances as
feedstocks or for destruction
84.27 Controlling Emissions of HFC-23.
84.29 Destruction of regulated substances.
84.31 Recordkeeping and reporting.
84.33 Auditing of recordkeeping and reporting.
Subpart B--{RESERVED{time}
Appendix A to Part 84--Regulated Substances
Authority: Section 103 in Division S, Innovation for the
Environment, of the Consolidated Appropriations Act, 2021 (Pub. L.
116-260).
Subpart A--Production and Consumption Controls
Sec. 84.1 Purpose and scope.
(a) The purpose of the regulations in this subpart is to implement
the American Innovation and Manufacturing Act of 2020 (AIM Act),
enacted as part of Public Law 116-260. The AIM Act imposes limits on
the production and consumption of certain regulated substances,
according to a specified schedule.
(b) This subpart applies to any person that produces, transforms,
destroys, imports, exports, distributes, or reclaims a regulated
substance and to end users in the six applications listed in subsection
(e)(4)(B)(iv) of the AIM Act.
Sec. 84.3 Definitions.
As used in this subpart, the term:
Administrator means the Administrator of the United States
Environmental Protection Agency or his or her authorized
representative. Reports and petitions, as well as any related
supporting documents, must be submitted electronically in a format
specified by the Administrator.
Allowance means a limited authorization for the production or
consumption of a regulated substance established under subsection (e)
of section 103 in Division S, Innovation for the Environment, of the
Consolidated Appropriations Act, 2021 (Pub. L. 116-260) (the AIM Act).
An allowance allocated under subsection (e) of section 103 in Division
S of the AIM Act does not constitute a property right and can be
retired, revoked, or withheld at the discretion of the relevant Agency
official.
Application-specific allowance means a limited authorization
granted in accordance with subsection (e)(4)(B)(iv) of the AIM Act for
the production or import of a regulated substance for use in the
specifically identified applications that are listed in that subsection
and in accordance with the restrictions contained at Sec. 84.5(c). An
application-specific allowance does not constitute a property right and
can be retired, revoked, or withheld at the discretion of the relevant
Agency official.
Bulk means a regulated substance of any amount that is in a
container for the transportation or storage of that substance such as
cylinders, drums, ISO tanks, and small cans. A regulated substance that
must first be transferred from a container to another container,
vessel, or piece of equipment in order to realize its intended use is a
bulk substance. A regulated substance contained in a manufactured
product such as an appliance, an aerosol can, or a foam is not a bulk
substance.
Central Data Exchange means EPA's centralized electronic document
receiving system, or its successors.
Chemical vapor deposition chamber cleaning means, in the context of
semiconductor manufacturing, a process type in which chambers used for
depositing thin films are cleaned periodically using plasma-generated
fluorine atoms and other reactive fluorine-containing fragments.
Confer means to shift unexpended application-specific allowances
obtained in accordance with subsection (e)(4)(B)(iv) of the AIM Act
from the end user allocated such allowances to another entity for the
production or import of a regulated substance for use by the end user.
Consumption, with respect to a regulated substance, means
production plus imports minus exports.
Consumption allowances means a limited authorization to produce and
import regulated substances; however, consumption allowances may be
used to produce regulated substances only in conjunction with
production allowances. A person's consumption allowances are the total
of the allowances obtained under Sec. 84.11 or 84.15 as may be
modified under Sec. Sec. 84.17 (availability of additional consumption
allowances) and 84.19 (transfer of allowances).
Defense spray means an aerosol-based spray used for self-defense,
including pepper spray and animal sprays, and containing the irritant
capsaicin and related capsaicinoids (derived from oleoresin capsicum),
an emulsifier, and an aerosol propellant.
Destruction means the expiration of a regulated substance to the
destruction and removal efficiency actually achieved. Such destruction
might result in a commercially useful end product, but such usefulness
would be secondary to the act of destruction.
Etching means, in the context of semiconductor manufacturing, a
process type that uses plasma-generated fluorine atoms and other
reactive fluorine-containing fragments that chemically react with
exposed thin-films (e.g., dielectric, metals) or substrate (e.g.,
silicon) to selectively remove portions of material.
Exchange value means the value assigned to a regulated substance in
accordance with AIM Act subsections (c) and (e), as applicable, and as
provided in appendix A to this part.
[[Page 27208]]
Exchange value equivalent (EVe) means the exchange value-weighted
amount of a regulated substance obtained by multiplying the mass of a
regulated substance by the exchange value of that substance.
Export means the transport from inside the United States or its
territories to persons outside the United States or its territories,
excluding United States military bases and ships for on-board use.
Exporter means the person who contracts to sell regulated
substances for export or transfers regulated substances to his
affiliate in another country.
Facility means one or more production lines at the same location
owned by or under common control of the same person.
Final customer means the last person to purchase a bulk regulated
substance before its intended use.
Foreign country means an entity which is recognized as a sovereign
nation or country other than the United States of America.\1\
Heel means the amount of a regulated substance that remains in a
container after the container is discharged or off-loaded (that is no
more than ten percent of the volume of the container).
Import means to land on, bring into, or introduce into, or attempt
to land on, bring into, or introduce into, any place subject to the
jurisdiction of the United States, regardless of whether that landing,
bringing, or introduction constitutes an importation within the meaning
of the customs laws of the United States. Off-loading used regulated
substances from a ship during servicing are not considered imports.
Importer means any person who imports a regulated substance into
the United States. ``Importer'' includes the person primarily liable
for the payment of any duties on the merchandise or an authorized agent
acting on his or her behalf. The term also includes, as appropriate:
(1) The consignee;
(2) The importer of record;
(3) The actual owner; or
(4) The transferee, if the right to draw merchandise in a bonded
warehouse has been transferred.
Individual shipment means the kilograms of a regulated substance
for which a person may make one (1) U.S. Customs entry, as identified
in the non-objection notice obtained from the relevant Agency official
in accordance with Sec. 84.25.
Metered dose inhaler (MDI) means a handheld pressurized inhalation
system that delivers small, precisely measured therapeutic doses of
medication directly to the airways of a patient. MDIs treat health
conditions such as asthma and chronic obstructive pulmonary disease and
are approved for such use by the U.S. Food and Drug Administration
(FDA).
Mission-critical military end uses means those uses of regulated
substances by an agency of the Federal Government responsible for
national defense which have a direct impact on mission capability, as
determined by the U.S. Department of Defense, including, but not
limited to uses necessary for development, testing, production,
training, operation, and maintenance of Armed Forces vessels, aircraft,
space systems, ground vehicles, amphibious vehicles, deployable/
expeditionary support equipment, munitions, and command and control
systems.
Non-objection notice means the limited authorization granted by the
relevant Agency official to import a specific individual shipment of a
regulated substance in accordance with Sec. 84.25.
On board aerospace fire suppression means use of a regulated
substance in fire suppression equipment used on board commercial and
general aviation aircraft and space vehicles. On board commercial
aviation fire suppression systems are installed throughout mainline and
regional passenger and freighter aircraft, including engine nacelles,
auxiliary power units (APUs), lavatory trash receptacles, baggage/crew
compartments, and handheld extinguishers.
Person means any individual or legal entity, including an
individual, corporation, partnership, association, state, municipality,
political subdivision of a state, Indian tribe; any agency, department,
or instrumentality of the United States; and any officer, agent, or
employee thereof.
Process agent means the use of a regulated substance to form the
environment for a chemical reaction (e.g., use as a solvent, catalyst,
or stabilizer) where the regulated substance is not consumed in the
reaction, but is removed or recycled back into the process and where no
more than trace quantities remain in the final product. A feedstock, in
contrast, is consumed during the reaction.
Production/Produce means the manufacture of a regulated substance
from a raw material or feedstock chemical (but not including the
destruction of a regulated substance by a technology approved by the
Administrator as provided in Sec. 84.29). The term production does not
include:
(1) The manufacture of a regulated substance that is used and
entirely consumed (except for trace quantities) in the manufacture of
another chemical;
(2) The reclamation, reuse, or recycling of a regulated substance;
or
(3) The inadvertent or coincidental creation of insignificant
quantities of a regulated substance during a chemical manufacturing
process, resulting from unreacted feedstock, from the listed
substance's use as a process agent present as a trace quantity in the
chemical substance being manufactured, or as an unintended byproduct of
research and development applications.
Production allowances means the limited authorization to produce
regulated substances; however, production allowances may be used to
produce regulated substances only in conjunction with consumption
allowances. A person's production allowances are the total of the
allowances obtained under Sec. 84.9 or 84.15 as may be modified under
Sec. 84.19 (transfer of allowances).
Production line means any process equipment (e.g., reactor,
distillation column) used to convert raw materials or feedstock
chemicals into regulated substances or consume regulated substances in
the production of other chemicals.
Reclaim means the reprocessing of regulated substances to all of
the specifications in appendix A of 40 CFR part 82, subpart F (based on
AHRI Standard 700-2016) that are applicable to that regulated substance
and to verify that the regulated substance meets these specifications
using the analytical methodology prescribed in section 5 of appendix A
of 40 CFR part 82, subpart F.
Regulated substance means a hydrofluorocarbon listed in the table
contained in subsection (c)(1) of the AIM Act and a substance included
as a regulated substance by the Administrator under the authority
granted in subsection (c)(3). A current list of regulated substances
can be found in appendix A of this part.
Source facility means the location at which a used regulated
substance was recovered from a piece of equipment.
Structural composite preformed polyurethane foam means a foam blown
from polyurethane that is reinforced with fibers and with polymer resin
during the blowing process, and is preformed into the required shape
(e.g., specific boat or trailer design) to increase structural strength
while reducing the weight of such structures.
Transform means to use and entirely consume (except for trace
quantities) a controlled substance in the manufacture of other
chemicals. A regulated substance that is used and entirely
[[Page 27209]]
consumed (except for trace quantities) in the manufacture of another
chemical is called a feedstock.
Transhipment means the continuous shipment of a regulated
substance, from a foreign country of origin through the United States
or its territories, to a second foreign country of final destination,
as long as the shipment does not enter interstate commerce. A
transhipment, as it moves through the United States or its territories,
cannot be re-packaged, sorted or otherwise changed in condition.
Used regulated substances means regulated substances that have been
recovered from their intended use systems (including regulated
substances that have been, or may be subsequently, recycled or
reclaimed).
\1\ Taiwan is not considered a foreign country.
Sec. 84.5 Prohibitions for regulated substances.
(a) Production. (1) Effective January 1, 2022, no person may
produce regulated substances, intentionally or unintentionally, in
excess of the quantity of unexpended production allowances or
unexpended application-specific allowances held by that person under
the authority of this subpart at that time in that control period.
Every kilogram of production in excess of allowances expended
constitutes a separate violation of this subpart.
(2) Effective January 1, 2022, no person may use production
allowances to produce a quantity of regulated substances unless that
person uses an equal quantity of consumption allowances at the same
time.
(3) A person is not required to expend production allowances or
application-specific allowances to produce regulated substances if the
regulated substances are destroyed using a technology approved by the
Administrator for destruction under Sec. 84.29 within 30 days if the
destruction technology is located at the facility where production
occurred or 90 days if the destruction technology is not located at the
facility where production occurred.
(b) Import. Effective January 1, 2022, (1) No person may import
bulk regulated substances, except:
(i) By expending, at the time of the import, consumption or
application-specific allowances in a quantity equal to the exchange-
value weighted equivalent of the regulated substances imported;
(ii) After receipt of a non-objection notice for substances for use
in a process resulting in their transformation or their destruction in
accordance with Sec. 84.25(a);
(iii) After receipt of a non-objection notice for used regulated
substances imported for destruction in accordance with Sec. 84.25(b);
or
(iv) As a transhipment in accordance with Sec. 84.31(c)(3) if all
transhipped regulated substance leaves the country within six months of
its entry.
(2) Imports authorized under paragraph (b)(1)(ii) of this section
may not be in containers designed to hold 100 pounds or less of a
regulated substance.
(3) A person issued a non-objection notice for the import of an
individual shipment of regulated substances under paragraphs (b)(1)(ii)
and (iii) of this section may not transfer or confer the right to
import.
(4) No person may introduce into interstate commerce any regulated
substance claimed as a transhipment and/or held in a bonded warehouse
while in transit.
(5) Every kilogram of bulk regulated substances imported contrary
to this paragraph (b) constitutes a separate violation of this subpart.
(c) Application-specific uses. (1) Effective January 1, 2022, no
person may confer application-specific allowances for the production or
import of a regulated substance in excess of the amount of unexpended
application-specific allowances held by that person under the authority
of this subpart at that time in that control period. No person may
expend an application-specific allowance for regulated substances to be
used in any application other than the one identified by the
application-specific allocation expended. Every kilogram of production
in excess of the application-specific allowances expended by the
producer constitutes a separate violation of this subpart. Every
kilogram of import in excess of the application-specific allowances
expended by the importer constitutes a separate violation of this
subpart.
(2) No person may use a regulated substance produced or imported
using application-specific allowances for any purpose other than those
for which the application-specific allowance was allocated, and as set
forth in this paragraph (c). Application-specific allowances are
apportioned to a person under Sec. Sec. 84.13 and 84.15 for the
production or import of regulated substances solely for the individual
application listed on the allowance, which may include:
(i) A propellant in metered dose inhalers;
(ii) Defense sprays;
(iii) Structural composite preformed polyurethane foam for marine
use and trailer use;
(iv) The etching of semiconductor material or wafers and the
cleaning of chemical vapor deposition chambers within the semiconductor
manufacturing sector;
(v) Mission-critical military end uses, such as armored vehicle
engine and shipboard fire suppression systems and systems used in
deployable and expeditionary applications; and
(vi) On board aerospace fire suppression.
(3) Effective January 1, 2022. (i) No person may acquire
application-specific allowances unless for use in the same application
as associated with the application-specific allowance. No person may
transfer application-specific allowances unless for use in the same
application as associated with the application-specific allowance.
(ii) No person may acquire or sell regulated substances produced or
imported using application-specific allowances for use in anything
other than the application for which it was originally allocated. Every
kilogram of a regulated substance imported or exported in contravention
of this paragraph constitutes a separate violation of this subpart.
(d) International transfers. Effective January 1, 2022. (1) no
person subject to the requirements of this subpart may transfer a
production allowance to a person in a foreign country unless that
country has established the same or similar requirements or otherwise
undertaken commitments regarding the production and consumption of
regulated substances as are contained in the AIM Act, as determined by
the EPA.
(2) Similarly, no person may transfer production allowances to or
from a person in a foreign country without satisfying the requirements
in Sec. 84.19. Every production allowance transferred in contravention
of this paragraph constitutes a separate violation of this subpart.
(e) Violations. No person may sell or distribute, or offer for sale
or distribution, any regulated substance that was produced or imported
in violation of paragraphs (a) through (d) of this section, except for
such actions needed to re-export the regulated substance. Every
kilogram of a regulated substance sold or distributed, or offered for
sale or distribution, in contravention of this paragraph constitutes a
separate violation of this subpart.
(f) False information. No person may provide false information to
the EPA when petitioning, reporting, or for any
[[Page 27210]]
communication required under this subpart.
(g) Agency actions. The Agency has full discretion to retire,
revoke, or withhold the allocation of allowances for actions in
contravention of this part.
(h) Anti-Dumping/Countervailing Duties. The relevant Agency
official reserves the right to retire, revoke, or withhold the
allocation of allowances to any otherwise qualifying importer that is
in arrears with Anti-Dumping/Countervailing Duties required under a
final determination from the Department of Commerce.
(i) Disposable cylinders. (1) Effective July 1, 2023, no person may
import or place a regulated substance in a non-refillable cylinder.
(2) Effective January 1, 2025, no person may sell or offer for sale
regulated substances contained in a non-refillable cylinder.
(3) Small cans containing less than two pounds of regulated
substances that utilize a self-sealing valve that meets the
requirements in 40 CFR 82.154(c)(2) are not subject to this
restriction.
(j) Labeling. (1) Effective January 1, 2022, no person may sell or
distribute, or offer to sell or distribute, containers containing a
regulated substance that lacks a label or other permanent markings, in
numbers and letters at least \1/8\ inch high, stating the common name
of the regulated substances or blend contained, the composition and
ratios of the regulated substances if a blend, and a cylinder serial
number.
(2) No person other than the importer may repackage material that
was initially unlabeled or mislabeled unless the importer:
(i) Expends consumption allowances equal to the amount of
allowances that would be required if each cylinder were full of HFC-23;
or
(ii) Verifies the contents with independent laboratory testing
results and fixes a label on the container conveying the lab-verified
test results before the container enters interstate commerce.
Sec. 84.7 Phasedown schedule.
(a) Phasedown from baseline. Total production and consumption of
regulated substances in the United States in each year cannot exceed
the amounts (shown as a percentage of baseline) in the following table:
------------------------------------------------------------------------
Percentage of Percentage of
production consumption
Date baseline baseline
(percent) (percent)
------------------------------------------------------------------------
2022-2023......................... 90 90
2024-2028......................... 60 60
2029-2033......................... 30 30
2034-2035......................... 20 20
2036 and thereafter............... 15 15
------------------------------------------------------------------------
(b) Annual production and consumption limits. (1) The production
baseline for regulated substances is 375 million metric tons of
exchange value equivalent.
(2) The consumption baseline for regulated substances is 299
million metric tons of exchange value equivalent.
(3) Total production and consumption in million metric tons of
exchange value equivalent for regulated substances in the United States
in each year is derived by multiplying the production baseline or
consumption baseline by the percentage in paragraph (a) of this
section. Total production and consumption allowances issued under this
subpart may not exceed the quantities shown in the following table:
------------------------------------------------------------------------
Total production Total consumption
Date (MMTEVe) (MMTEVe)
------------------------------------------------------------------------
2022-2023......................... 337.5 269.1
2024-2028......................... 225 179.4
2029-2033......................... 112.5 89.7
2034-2035......................... 75 59.8
2036 and thereafter............... 56.25 44.85
------------------------------------------------------------------------
Sec. 84.9 Allocation of calendar-year production allowances.
(a) EPA will issue, through a separate notification, calendar year
production allowances to entities that produced a regulated substance
in 2020. The number of production allowances allocated to each eligible
entity for 2022-2023 is calculated as follows:
(1) Take the highest annual exchange value-weighted production
amount that each eligible entity reported to the agency for calendar
year 2017, 2018, or 2019, whichever year is highest.
(2) Sum the ``high year'' values determined in step 1 of all
eligible entities and determine each entity's percentage of that total.
(3) Determine the amount of general pool production allowances by
subtracting the quantity of application specific allowances for that
year as determined in accordance with Sec. 84.13 and the set aside in
Sec. 84.15 from the production cap in Sec. 84.7(b)(3).
(4) Determine individual entities' production allowance quantities
by multiplying each entity's percentage determined in step 2 by the
amount of general pool allowances determined in step 3.
(b) (1) EPA will allocate calendar year production allowances to
individual entities by October 1 of the calendar year prior to the year
in which the allowances will be used based on the exchange value-
weighted quantities calculated in paragraph (a)(4) of this section.
(2) EPA will provide public notice of the list of companies
receiving production allowances as well as the quantities they will be
allocated by that date.
(3) In addition to the procedure in paragraph (a) of this section,
EPA will allocate calendar year production allowances to entities that
qualified for allowances under Sec. 84.15.
(4) If there are remaining production allowances after distribution
from the set aside under Sec. 84.15, EPA will distribute such
allowances on a pro rata basis to the entities in paragraph (a) of
[[Page 27211]]
this section by March 31 of the calendar year in which the allowances
will be used.
Sec. 84.11 Allocation of calendar-year consumption allowances.
(a) EPA will issue, through a separate notification, calendar year
consumption allowances to entities that imported or produced a bulk
regulated substance in 2020, unless an individual accommodation is
permitted by a relevant Agency official. If multiple importers are
related through shared corporate ownership or control, EPA will
calculate and issue allowances to a single corporate owner. The number
of consumption allowances allocated to each eligible entity for 2022-
2023 is calculated as follows:
(1) Take the highest annual exchange value-weighted bulk
consumption amount chosen at the corporate-level for eligible entities
reporting to the agency for each calendar year 2017, 2018, or 2019,
whichever year is highest.
(2) Sum the ``high year'' values determined in step 1 of all
eligible entities and determine each entity's percentage of that total.
(3) Determine the amount of general pool consumption allowances by
subtracting the quantity of application specific allowances for that
year as determined in accordance with Sec. 84.13 and the set aside in
Sec. 84.15 from the consumption cap Sec. 84.7(b)(3).
(4) Determine individual entity consumption allowance quantities by
multiplying each entity's percentage determined in step 2 by the amount
of general pool allowances determined in step 3.
(b)(1) EPA will allocate calendar year consumption allowances to
individual entities by October 1 of the calendar year prior to the year
in which the allowances will be used based on the exchange value-
weighted quantities calculated in paragraph (a)(4) of this section.
(2) EPA will provide public notice of the list of companies
receiving consumption allowances as well as how they will be allocated
by that date.
(c)(1) In addition to the procedure in paragraph (a) of this
section, EPA will allocate calendar year consumption allowances to
entities that qualified for allowances under Sec. 84.15.
(2) If there are remaining consumption allowances after
distribution from the set aside under Sec. 84.15, EPA will distribute
such allowances on a pro rata basis to the entities in paragraph (a) of
this section by March 31 of the calendar year.
Sec. 84.13 Allocation of application-specific allowances.
(a) Application-specific allowances are available to entities for
calendar years 2022, 2023, 2024, and 2025 that use a regulated
substance in the following applications:
(1) As a propellant in metered dose inhalers;
(2) In the manufacture of defense sprays;
(3) In the manufacture of structural composite preformed
polyurethane foam for marine use and trailer use;
(4) In the etching of semiconductor material or wafers and the
cleaning of chemical vapor deposition chambers within the semiconductor
manufacturing sector;
(5) For mission-critical military end uses; and
(6) For on board aerospace fire suppression.
(b) Entities in paragraph (a) of this section must request an
application-specific allowance by July 31 of the calendar year prior to
the year in which the allowances will be used starting with the
calendar year 2023 allocation. The application must include the
following:
(1) Total quantity (in kilograms) of each specific regulated
substance acquired and used in the three calendar years prior to the
year in which the request is being made;
(2) For regulated substances acquired over the past twelve months
by conferring allowances to a domestic producer, the quantity (in
kilograms) acquired, the specific regulated substance acquired, and the
name and contact information of the supplier.
(3) For regulated substances acquired over the past twelve months
by conferring allowances to an importer, the quantity (in kilograms)
acquired, the specific regulated substance acquired, and the name and
contact information of the supplier.
(4) Quantity of each specific regulated substances acquired over
the past twelve months by expending application-specific allowances for
direct import;
(5) Quantity of each specific regulated substance acquired over the
past twelve months without expending application-specific allowances;
(6) Quantity of regulated substances held in inventory by the
applicant or another company on behalf of the applicant;
(7) A description of any plans to transition to regulated
substances with a lower exchange value or alternatives to regulated
substances, including not in kind substitutes.
(c) EPA will determine the quantity of application-specific
allowances to issue to each company by taking the higher of the use of
regulated substances by the company in the specific application in the
prior year multiplied by:
(1) The average growth rate of use for the company over the past
three years; or
(2) The average growth rate of use by all companies requesting
allowances for that specific application over the past three years.
(d) EPA will allocate application-specific allowances through a
letter to each eligible entity by October 1 of the calendar year prior
to the year in which the allowances will be used. The letter will
indicate the name of the company, the year of the allowance, the
quantity of allowances, and the specific application for which the
allowances may be used.
(e) Entities that EPA was unaware of as of October 1, 2021, may
request allowances under the procedure in Sec. 84.15. Such entities
must meet the criteria for eligibility in this section and are subject
to the requirements of this section.
(f) EPA will publish a list of companies allocated application-
specific allowances and their application.
(g) Application-specific allowances may be expended for either the
import or production of a regulated substance.
(h) Conferring application-specific allowances to a producer or
importer is not subject to the offset required of transfers of
allowances described in Sec. 84.19.
Sec. 84.15 Set aside of application-specific allowances, production
allowances, and consumption allowances.
(a) Total allowances available under this section to be allocated
for calendar years 2022 and 2023 are:
(1) Five million metric tons of exchange value equivalent
consumption allowances annually for calendar year 2022 and 2023.
(2) One million metric tons of exchange value equivalent production
allowances for calendar year 2022 and 2023.
(b)(1) Consumption and production allowances in paragraph (a) of
this section are available to entities that qualify for application-
specific allocations under Sec. 84.13 that EPA has not identified by
October 1, 2021.
(2) Entities must provide the relevant Agency official with the
information contained in Sec. 84.13 by November 30, 2021, to be
eligible for consideration.
(c) Consumption allowances in paragraph (a) of this section are
available to either:
(1) Persons who imported regulated substances in 2020 that were not
[[Page 27212]]
required to report under 40 CFR part 98 that EPA has not identified by
October 1, 2021; or
(2) Persons who are newly entering the HFC import market, do not
share corporate ownership or familial relations with entities in the
HFC import market, and meet the Small Business Administration
conditions for a small business in 13 CFR part 121.
(d) Persons who meet the criteria listed in paragraph (c)(1) or (2)
of this section must provide the relevant Agency official with the
following information by November 30, 2021, to be eligible for
consideration:
(1) Name and address of the company and the complete ownership of
the company (with percentages of ownership);
(2) Whether the company is a woman or minority owned business;
(3) Contact information for the owner of the company;
(4) The date of incorporation and State in which the company is
incorporated;
(5) State license identifier;
(6) A plan for importing HFCs;
(7) Company employment figures including number of employees and a
breakdown by race and gender;
(8) A prospective foreign exporter that the applicant anticipates
working with; and
(9) For persons who meet the criteria listed in paragraph (c)(2) of
this section only, documentation demonstrating that they meet
conditions for a small business concern, as defined in 13 CFR part 121.
(e) The calendar-year 2022 and 2023 allowances in paragraph (a) of
this section are to be allocated no later than March 31, 2022, in the
following manner:
(1) First, persons who meet the criteria listed in (b) are
allocated application-specific allowances (subtracted from both the
production and consumption portions of the set aside pool) for 2022
equal to the estimated need, based on projected, current, and
historical trends, and subject to the same conditions for such
allowances in Sec. 84.13;
(2) Second, persons who meet the criteria listed in paragraphs
(c)(1) and (2) of this section are allocated up to 0.2 million metric
tons exchange value equivalent in allowances for 2022 and 2023.
(3) If the requests received total an amount of allowances that
exceeds the remaining quantity of allowances in the set aside pool,
after subtracting allowances issued under paragraph (c)(1) of this
section, the amount provided to each person who meet the criteria
listed in paragraphs (c)(1) and (2) of this section that has applied to
the set aside pool will be allocated an amount of allowances that is
reduced on a pro rata basis. If any allowances remain after the steps
outlined in paragraphs (c)(1) through (3) of this section, those
allowances will be distributed to the persons who meet the criteria
listed in Sec. Sec. 84.9 and 84.11 on a pro rata basis.
(f) Restrictions:
(1) Allowances issued under this section may not be transferred to
another entity.
(2) Allowances issued under this section are not available to
companies that are a subsidiary of, or have any common ownership stake
with, another allowance holder.
(g) EPA will publish the list of entities allocated allowances
under this section by March 31, 2022.
Sec. 84.17 Availability of additional consumption allowances.
(a) A person may obtain at any time during the year, in accordance
with the provisions of this section, consumption allowances equivalent
to the quantity of regulated substances that the person exported from
the United States and its territories to a foreign country in
accordance with this section, when that quantity of regulated substance
was produced in the United States or imported into the United States
with expended consumption allowances. Both the export of the regulated
substance and the request for additional consumption allowances must
occur during the calendar year in which the consumption allowances were
expended to produce or import those same regulated substances.
(1) The exporter must submit to the relevant Agency official 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, telephone numbers, and email addresses of contact
persons for the exporter and the recipient;
(iv) The quantity (in kilograms) and name of the regulated
substances exported;
(v) The source of the regulated substances and the date purchased;
(vi) The date on which, and the port from which, the regulated
substances were exported from the United States or its territories;
(vii) The country to which the regulated substances were exported;
(viii) A copy of the bill of lading and the invoice indicating the
net quantity (in kilograms) of regulated substances shipped and
documenting the sale of the regulated substances to the purchaser;
(ix) The commodity codes of the regulated substances exported; and
(x) A written statement from the producer that the regulated
substances were produced with expended allowances or a written
statement from the importer that the regulated substances were imported
with expended allowances.
(2) The relevant Agency official will review the information and
documentation submitted under paragraph (a)(1) of this section and will
issue a notice to the requestor.
(i) The relevant Agency official will determine the quantity of
regulated substances that the documentation verifies was exported and
issue consumption allowances equivalent to the quantity of regulated
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, the importer, or the
exporter.
(ii) The relevant Agency official will issue a notice that the
consumption allowances are not granted if the official determines that
the information and documentation do not satisfactorily substantiate
the exporter's claims.
Sec. 84.19 Transfers of allowances.
(a) Inter-company transfers. Effective January 1, 2022, a person
(``transferor'') may transfer to any other person (``transferee'') any
quantity of the transferor's production allowances, consumption
allowances, or application-specific allowances for use by the same type
of application, as long as the following conditions are met:
(1) An offset equal to five percent of the amount of allowances
transferred will be deducted from the transferor's production allowance
balance if a transfer is made of production allowances, or deducted
from the transferor's consumption allowance balance if a transfer is
made of consumption allowances. In the case of transferring
application-specific allowances, one percent of the amount of
allowances transferred will be deducted from the transferor's
application-specific allowance balance.
(2) The transferor must submit to the relevant Agency official a
transfer claim setting forth the following:
(i) The identities and addresses of the transferor and the
transferee;
[[Page 27213]]
(ii) The names, telephone numbers, and email addresses of contact
persons for the transferor and the transferee;
(iii) The type of allowances being transferred, including the
specific application (if applicable), for which allowances are to be
transferred;
(iv) The quantity (in MTEVe) of allowances being transferred;
(v) The total cost of the allowances transferred;
(vi) The amount of unexpended allowances of the type and for the
year being transferred that the transferor holds under authority of
this subpart as of the date the claim is submitted to EPA;
(vii) For transfers of consumption allowances or production
allowances, the quantity of the five percent offset applied to the
quantity transferred that will be deducted from the transferor's
allowance balance. For transfers of application-specific allowances,
the quantity of the one percent offset applied to the quantity
transferred that will be deducted from the transferor's allowance
balance.
(viii) For transfers of application-specific allowances, a signed
document from the transferee certifying that the transferee will use
the application-specific allowances only for the same application for
which the application-specific allowance was allocated.
(3) The relevant Agency official will determine whether the records
maintained by EPA indicate that the transferor possesses unexpended
allowances sufficient to cover the transfer claim as of the date the
transfer claim is processed. The transfer claim is the quantity in EVe
to be transferred plus five percent of that quantity or plus one
percent for application-specific allowances. The relevant Agency
official will take into account any previous transfers, any production,
and allowable imports and exports of regulated substances reported by
the transferor. Within three working days of receiving a complete
transfer claim, the official will take action to notify the transferor
and transferee as follows:
(i) The relevant Agency official will issue a non-objection notice
to both the transferor and transferee indicating if EPA's records show
that the transferor has sufficient unexpended allowances to cover the
transfer claim. In the case of transfers of production allowances or
consumption allowances, EPA will reduce the transferor's balance of
unexpended allowances by the quantity to be transferred plus five
percent of that quantity. In the case of transfers of application-
specific allowances EPA will reduce the transferor's balance of
unexpended allowances by the quantity to be transferred plus one
percent of that quantity. The transferor and the transferee may proceed
with the transfer when EPA issues a non-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 violations of
the regulations of this subpart that occur as a result of, or in
conjunction with, the improper transfer.
(ii) The relevant Agency official will issue an objection 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 transferor or
transferee may file a notice of appeal, with supporting reasons, with
the relevant Agency official within 10 working days after receipt of
notification that a transfer was disallowed. The official may affirm or
vacate the disallowance. If no appeal is filed electronically by the
tenth working day after notification, the disallowance shall be final
on that day.
(4) The transferer and transferee must maintain a copy of the
transfer claim and a copy of EPA's non-objection or objection notice
for five years.
(b) International transfers of production allowances. (1) A person
may request to increase or decrease their production allowances for a
specified control period through transfers of such allowances with a
person in a foreign country if the applicable conditions in this
paragraph are met. Once transferred, all allowances transferred
consistent with this paragraph will function as a production allowance,
as defined in Sec. 84.3.
(i) Timing of requests. Any request for an increase or decrease in
production allowances based on an international transfer under this
paragraph must be submitted by October 1 of the year prior to the
calendar year in which the transferred allowances would be useable.
(ii) Timing of the transfer. International transfers under this
paragraph will be deemed to occur, and the transferred allowances will
be useable, as of January 1 of the calendar year to which the transfer
applies.
(2) Transfer from a person in a foreign country--Information
requirements. (i) A person requesting to change their production
allowances based on a transfer from a person in a foreign country must
submit to the relevant Agency official at the time the international
transfer is requested a signed document from an official representative
in that country's embassy in the United States stating that the
appropriate authority within that country has revised the domestic
production limits for that country equal to the lowest of the following
three production quantities:
(A) The maximum production level permitted in Sec. 84.7(b) in the
year of the international transfer minus the quantity of production
allowances (in exchange value-weighted kilograms) to be transferred;
(B) The maximum production level for the applicable regulated
substances that are allowed under applicable law (including the foreign
country's applicable domestic law) minus the quantity of production
allowances (in exchange value-weighted kilograms) to be transferred; or
(C) The average of the foreign country's actual national production
level of the applicable regulated substances for the three calendar
years prior to the year of the transfer minus the quantity of
production allowances (in exchange value-weighted kilograms) to be
transferred.
(ii) A person requesting a revision based on a transfer from a
foreign country (``transferee'') must also submit to the relevant
Agency official a true copy of the document that sets forth the
following:
(A) The identity and address of the transferee;
(B) The foreign country authorizing the transfer;
(C) The names, telephone numbers, and email addresses of contact
persons for the transferee and for the person in the foreign country;
(D) The name of the chemical and quantity (in kilograms) of
production being transferred;
(E) Documentation that the foreign country possesses the necessary
quantity of unexpended production rights;
(F) The calendar year to which the transfer applies; and
(G) A signed statement from a responsible official describing
whether the increased production is intended for export or the market
in the United States.
(3) Transfer to a person in a foreign country--Information
requirements. A person requesting a transfer to a person in a foreign
country must submit a request to the relevant Agency official that sets
forth the following information:
(i) The identity and address of the person seeking to transfer the
allowances (``transferor'');
(ii) The foreign country authorizing the transfer;
[[Page 27214]]
(iii) The names, telephone numbers, and email addresses of contact
persons for the transferor and for the person in the foreign country;
(iv) The name of the chemical and quantity (in kilograms) of
allowable production being transferred; and
(v) The calendar year to which the transfer applies;
(vi) A signed statement from a responsible official requesting that
the relevant Agency official revise the number of production allowances
the transferor holds such that the aggregate national production in the
United States is equal the lowest of the following three production
quantities:
(A) The maximum production level permitted in Sec. 84.7(b) in the
year of the international transfer minus the quantity of production
allowances (in exchange value-weighted kilograms) to be transferred;
(B) The maximum production for the applicable regulated substances
that are allowed under applicable law minus the quantity of production
allowances (in exchange value-weighted kilograms) to be transferred; or
(C) The average of the United States' actual national production
level of the applicable regulated substances for the three calendar
years prior to the year of the transfer minus the quantity of
production allowances (in exchange value-weighted kilograms) to be
transferred.
(4) Review of international transfer request to a foreign country.
After receiving a transfer request that meets the requirements of
paragraph (b)(3) of this section, the relevant Agency official may, at
his/her discretion, consider the following factors in deciding whether
to approve such a transfer:
(i) Potential environmental implications; and
(ii) The total quantity of unexpended production allowances held by
U.S. entities.
(5) Notice of transfer. The relevant Agency official will review
the submitted requests to determine whether the foreign country in
which the person is located has enacted or otherwise established the
same or similar requirements or otherwise undertaken commitments
regarding the production and consumption of regulated substances as are
contained in the AIM Act, within a reasonable time frame of the date of
its enactment. If it is determined that these conditions are not met,
the relevant Agency official will notify the requestor in writing that
no transfers to or from the country can occur. If these conditions are
satisfied such that transfers to or from the country can occur, the
relevant Agency official will consider if the request meets the
applicable requirements of paragraph (b) of this section. If the
request meets the requirements of paragraph (b)(2) of this section for
transfers from foreign countries and paragraph (b)(3) of this section
for transfers to foreign countries, and if the relevant Agency official
has not decided to disapprove the request based on consideration of
factors listed in paragraph (b)(4) of this section if applicable, the
relevant Agency official will notify the person in writing that the
appropriate production allowances were either granted or deducted and
specify the control period to which the transfer applies. Notifications
of production allowances granted or deducted will be provided before
January 1 of the calendar year to which the transfer applies.
(i) For transfers from a foreign country, such notification will
reflect a revision of the balance of allowances held by the recipient
of the transfer to equal the unexpended production allowances held by
the recipient of the transfer plus the quantity of allowable production
transferred from the foreign country minus an offset of five percent of
the quantity transferred. The relevant Agency official will not adjust
available allowances until the foreign country's representative had
confirmed the appropriate number of allowances were deducted in the
foreign country.
(ii) For transfers to a foreign country, such notification will
reflect a revision of the balance of production allowances for the
transferor such that the aggregate national production of the regulated
substance to be transferred is to equal the value the relevant Agency
official determines to be the lowest of:
(A) The maximum production level permitted in Sec. 84.7(b) in the
year of the international transfer minus the quantity of production
allowances transferred and minus an offset of five percent of the
quantity transferred; or
(B) The maximum production level for the applicable regulated
substances that is allowed under applicable law (in exchange-value
weighted kilograms) minus the quantity of production allowances
transferred and minus an offset of five percent of the quantity
transferred; or
(C) The average of the actual annual U.S. production of the
applicable regulated substances for the three years prior to the date
of the transfer (in exchange-value weighted kilograms minus the
quantity of production allowances transferred and minus an offset of
five percent of the quantity transferred.
(6) Revised production limit for previous transferors. If the
average actual U.S. production during the three most recent calendar
years before the date of the transfer is less than the total allowable
U.S. production for the applicable regulated substances permitted in
Sec. 84.7(b) for a calendar year for which international transfers are
approved to occur, the aggregate allowed national U.S. production of
those substances will be reduced by an additional amount beyond a
simple deduction of the number of allowances reflected in the
notifications under paragraph (b)(5)(ii)(B) of this section. In these
circumstances, the relevant Agency official will revise the production
limit for each transferor who obtained approval of a transfer of the
applicable regulated substances to a foreign country in the same
calendar year and notify each transferor of the revision in writing.
The amount of the revision will equal the result of the following set
of calculations:
(i) The total U.S. allowable production of the applicable regulated
substances minus the average of the actual annual U.S. production of
those substances during the three most recent calendar years prior to
the calendar year of the transfer;
(ii) The quantity of production allowances for the applicable
regulated substances transferred by the transferor in that calendar
year divided by the total quantity of production allowances for those
substances approved for transfer to a person in a foreign country by
all the persons approved to make such transfers in that calendar year;
(iii) The result of paragraph (b)(6)(i) of this section multiplied
by the result of paragraph (b)(6)(ii) of this section.
(iv) The unexpended production allowances held by the person minus
the result of paragraph (b)(6)(iii) of this section.
(7) Effective date of revised production limits. If a revision is
issued under paragraph (b)(6) of this section, the change in production
allowances will be effective on the date that the notification is
issued.
Sec. 84.21 Sale or transfer of regulated substances produced or
imported with application-specific allowances.
(a) Sale or transfer of HFCs produced or imported using
application-specific allowances. (1) Effective January 1, 2022, any
person receiving an application-specific allowance (transferor) may
sell or transfer regulated substances produced or imported using that
allowance to another person within the same application (transferee)
provided that
[[Page 27215]]
the relevant Agency official approves the sale or transfer.
(2) The transferee must submit a claim to the relevant Agency
official for approval before the sale or transfer can take place. The
claim must set forth the following:
(i) The identities and addresses of the transferor and the
transferee;
(ii) The name, telephone numbers, and email addresses of contact
persons for the transferor and the transferee;
(iii) The amount of each regulated substance being sold or
transfered;
(iv) The cost of the regulated substance;
(v) The specific products that the transferee plans to produce with
the HFCs; and
(vi) Certification that the HFCs will be used only for the same
application for which the application-specific allowance under which
the substances were produced or imported was allocated.
(3) The transferor must submit a letter to the relevant Agency
official stating that it concurs with the terms of the sale or transfer
as requested by the transferee.
(4) Once the claim is complete, and if EPA does not object to the
sale or transfer, then EPA will issue letters to the transferor and the
transferee within 10 business days indicating that the transaction may
proceed. EPA reserves the right to disallow a transaction if the claim
is incomplete, or if it has reason to believe that the transferee plans
use the regulated substance in anything other than the stated
application. If EPA objects to the transaction, EPA will issue letters
to the transferor and transferee stating the basis for disallowing the
transaction.
(5) The burden of proof is placed on the transferee to retain
sufficient records to prove that the sold or transfered regulated
substances are used only for the stated application.
(b) [Reserved].
Sec. 84.23 Certification identification generation and tracking.
(a) Scope and applicability. All containers of bulk regulated
substance must be associated with a certification identification as of
January 1, 2024. Certification identifications may only be generated by
a person that produces, imports, reclaims, repackages, or blends
regulated substance for distribution or sale in bulk and reports to EPA
consistent with paragraph (d) of this section.
(b) Prohibitions. Effective January 1, 2024, every kilogram of bulk
regulated substance sold or distributed, or offered for sale or
distribution, in violation of this section is a separate violation of
this subpart. Every kilogram of bulk regulated substance purchased or
received, or attempted to be purchased or received in violation of this
section is a separate violation of this subpart.
(1) No person may sell or distribute, or offer for sale or
distribution, and no person may purchase or receive, or attempt to
purchase or receive, a regulated substance unless the container has a
valid certification identification.
(2) No person may sell or distribute, or offer for sale or
distribution, regulated substance unless they are registered with EPA
consistent with Sec. 84.31.
(3) No person may purchase or receive, or attempt to purchase or
receive, the regulated substance unless the person is registered with
EPA consistent with paragraph (d) or a final customer;
(4) The following situations are exempt from the prohibitions in
paragraphs (b)(1) through (3) of this section:
(i) The regulated substance is part of a transhipment and the
person transhipping the regulated substance has reported to EPA
consistent with Sec. 84.31(c)(3);
(ii) The regulated substance was:
(A) Previously used, has been recovered from a piece of equipment,
and is intended for reclamation;
(B) The person selling or distributing the regulated substance
certifies in writing to the person purchasing or receiving the
regulated substance was recovered from a piece of equipment and
provides the date of recovery; and
(C) The person purchasing or receiving the regulated substance is
either an EPA-certified refrigerant reclaimer or a registered supplier
of regulated substances consistent with paragraph (d) of this section.
(iii) The regulated substance was imported consistent with the
petition process described in Sec. 84.25 and is being distributed by
an aggregator or destruction company; or
(iv) The material was collected for destruction at a destruction
facility.
(5) No producer or importer may request certification
identifications that would exceed their currently available allowances.
(6) A person who reclaims regulated substances may request
certification identifications at a level equal to their reported
reclamation for the prior year plus an amount based on the average
annual growth in total U.S. HFC reclamation in the prior three years or
five percent, whichever is higher. If that level is not sufficient, the
reclaimer must notify EPA 45 days in advance of exceeding their allowed
level and request approval to generate additional certification
identifications. The request must estimate the additional certification
identifications needed for the next six months and provide an
explanation for the increased level of reclamation. EPA will review the
request and adjust the amount of certification identifications for the
person as appropriate within 21 days. Additional requests can be
submitted throughout the year as needed.
(7) No regulated substance repackager or blender may request
certificate identifications unless they have allowances. They may
generate new QR codes based on the certification identifications
associated with the containers currently in their possession.
(c) Required Practices. The following practices are required,
unless the person purchasing or receiving the bulk regulated substance
is listed in paragraph (b)(4) of this section:
(1) Any person producing, importing, reclaiming, packaging, selling
or distributing, or offering to sell or distribute regulated substances
must register with EPA consistent with paragraph (d) of this section.
(2) Any person who introduces a container of regulated substance or
reclaimed regulated substance into U.S. commerce, must permanently
affix a QR code to the container that documents a valid certification
identification using the standards defined by EPA prior to the
container entering U.S. commerce. For the purposes of this subpart,
examples of when a container of regulated substance or reclaimed
regulated substance enters U.S. commerce include arrival at U.S.
Customs and departure from a production or reclamation facility.
(3) At the time of sale or distribution, a person selling or
distributing regulated substance must ensure there is a valid and
legible certification identification on each container of regulated
substance, scan the certification identification system to identify a
transaction, identify the person receiving the regulated substance, and
indicate whether the person receiving the regulated substance is a
final customer or supplier.
(4) At the time of sale or distribution, a person taking ownership
of a regulated substance that is a registered supplier must ensure
there is a valid and legible certification identification on each
container of regulated substance and scan the certification
identification in the certification identification system to identify a
transaction.
(d) Recordkeeping and Reporting--(1) Importers. Any person
importing a
[[Page 27216]]
container of regulated substance must enter the following information
in the certification identification system to generate a new QR code
and associated certification identification for each container of
regulated substance: The name or brand the regulated substance is being
sold and/or marketed under, the date it was imported, the unique serial
number associated with the container, and amount and name of the
regulated substance(s) in the container.
(2) Reclaimers. Any person filling a container with a reclaimed
regulated substance must enter the following information in the
certification identification system to generate a new QR code and
associated certification identification for each container of regulated
substance: The name or brand the regulated substance is being sold and/
or marketed under, the date the regulated substance was reclaimed and
by whom, the date the reclaimed regulated substance was put into a
container, the unique serial number associated with the container, the
amount and name of the regulated substance(s) in the container, whether
the purity of the batch was confirmed to meet the specifications in
appendix A to 40 CFR part 82, subpart F, the date the batch was tested
for purity, and who certified the reclaimed regulated substance meets
the purity specifications. If a container is filled with reclaimed and
virgin regulated substance(s), the reclaimer must provide the amount of
virgin regulated substance is included in the container and the
certification identification(s) associated with that regulated
substance.
(3) Producers and Packagers. Anyone who is filling a container,
whether for the first time after production or when transferring
regulated substance from one container to one or more smaller or larger
containers, must enter information in the certification identification
system and generate a new QR code for the container(s) of repackaged
regulated substances: The name or brand the regulated substance is
being sold and/or marketed under, the date it was repackaged, the
certification identification(s) associated with the regulated substance
being repackaged, the unique serial number for the container, and
amount and name of the regulated substance(s) in the container, and the
quantity of containers it was packaged in, and the size of the
containers.
(4) Receiving recovered regulated substances. Anyone receiving
recovered regulated substances for purposes of reclamation must save a
copy of the written certification required under paragraph (b)(4)(ii)
of this section.
(5) Certification identification generators registration. Any
person who introduces a container of regulated substance or reclaimed
regulated substance into U.S. commerce must register with EPA in the
certification identification system. The report must contain the name
and address of the company; contact information for the owner of the
company; the date(s) of and State(s) in which the company is
incorporated and State license identifier(s); the address of each
facility that sells or distributes regulated substances; how the
company introduces bulk regulated substances into U.S. commerce; and
the category of final customer(s) the supplier sells or distributes
regulated substances to. These reports must be updated and resubmitted
within 60 days if information changes.
(6) Supplier Registration. Any person who sells, distributes, or
offers for sale or distribution, regulated substances must register
with EPA in the certification identification system. The report must
contain the name and address of the company; contact information for
the owner of the company; the date(s) of and State(s) in which the
company is incorporated and State license identifier(s); the address of
each facility that sells or distributes regulated substances; and the
category of final customer(s) the supplier sells or distributes
regulated substances to. These reports must be updated and resubmitted
within 60 days if information changes.
(7) Container inventory. one-time report. In order to receive
certification identifications for containers of previously purchased
regulated substance, any person who sells or distributes, or offers to
sell or distribute, containers of bulk regulated substance must
register their containers in inventory by November 15, 2023. The report
must contain the name and address of the company; contact information
for the owner of the company; inventory of regulated substance owned by
the company as of December 31, 2020, December 31, 2021, and December
31, 2022; for each container of regulated substance still in the
company's possession, the amount and name of the regulated substance in
the container, any unique identification number assigned to the
container, whether the regulated substance was acquired from a domestic
supplier, though import, or through reclamation, and the date the
regulated substance was acquired, imported, or reclaimed; and a
certification from the owner of the company or other responsible
officer that the regulated substance in his/her/their possession was
acquired consistent with the laws of the United States.
Sec. 84.25 Required processes to import regulated substances as
feedstocks or for destruction.
(a)(1) Petition to import regulated substances for use in a process
resulting in transformation or destruction. A person must petition the
relevant Agency official for the import of each individual shipment of
a regulated substance imported for use in a process resulting in
transformation or destruction in order to not expend allowances. A
petition is required at least 30 working days before the shipment is to
leave the foreign port of export, and must contain the following
information:
(i) Name, commodity code, and quantity in kilograms of each
regulated substance to be imported;
(ii) Name and address of the importer, the importer ID number, and
the contact person's name, email address, and phone number;
(iii) Name and address of the consignee and the contact person's
name, email address, and phone number;
(iv) Source country;
(v) The U.S. port of entry for the import, the expected date of
import, and the vessel transporting the material. If at the time of
submitting the petition the importer does not know this information,
and the importer receives a non-objection notice for the individual
shipment in the petition, the importer is required to notify the
relevant Agency official of this information prior to the entry of the
individual shipment into the United States;
(vi) Name, address, contact person, email address, and phone number
of the responsible party at the facility where the regulated substance
will be used in a process resulting in the substance's transformation
or destruction;
(2) Review of petition to import for use in a process resulting in
transformation or destruction. (i) The relevant Agency official will
initiate a review of the information submitted under paragraph (a)(1)
of this section and take action within 30 working days to issue either
an objection notice or a non-objection notice for the individual
shipment to the person who submitted the petition.
(ii) The relevant Agency official may issue an objection notice to
a petition for the following reasons:
(A) If the relevant Agency official determines that the information
is insufficient, that is, if the petition lacks or appears to lack any
of the information
[[Page 27217]]
required under paragraph (a)(1) of this section or other information
that may be requested during the review of the petition necessary to
verify that the regulated substance is for use in a process resulting
in transformation or destruction;
(B) If the relevant Agency official determines that any portion of
the petition contains false or misleading information, or the official
has information from other U.S. or foreign government agencies
indicating that the petition contains false or misleading information.
(iii) Within 10 working days after receipt of an objection notice
with the basis being ``insufficient information,'' the importer may re-
petition the relevant Agency official. If no re-petition 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 petition received by EPA.
(iv) Any information contained in the re-petition which is
inconsistent with the original petition must be identified and a
description of the reason for the inconsistency must accompany the re-
petition.
(v) In cases where the relevant Agency official does not object to
the petition, the official will issue a non-objection notice.
(vi) If, 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 regulated substance is not
imported into the United States; and
(C) Take appropriate enforcement actions including but not limited
to seizing regulated substances that have already been imported into
the United States and revoking or withholding allowances.
(3) Timing. An individual shipment authorized through a non-
objection notice must be used in the process resulting in its
transformation or destruction within sixty days of import.
(4) Quantity. An individual shipment authorized through a non-
objection notice may not exceed the quantity (in MTEVe) of the
regulated substance stated in the non-objection notice.
(b)(1) Petition to import used regulated substances for disposal by
destruction. A person must petition the relevant Agency official for
the import of each individual shipment of a used regulated substance
imported for purposes of destruction in order to not expend allowances.
A petition is required at least 30 working days before the shipment is
to leave the foreign port of export, and contain the following
information:
(i) Name, commodity code, and quantity in kilograms of each
regulated substance to be imported;
(ii) Name and address of the importer, the importer ID number, and
the contact person's name, email address, and phone number;
(iii) Name and address of the consignee and the contact person's
name, email address, and phone number;
(iv) Name and address of any intermediary who will hold regulated
substances imported for destruction, and the contact person's name,
email address, and phone number;
(v) Source country;
(vi) An English translation, if needed, of the export license (or
application for an export license) from the appropriate government
agency in the country of export;
(vii) The U.S. port of entry for the import, the expected date of
import, and the vessel transporting the material. If at the time of
submitting the petition the importer does not know this information,
and the importer receives a non-objection notice for the individual
shipment in the petition, the importer is required to notify the
relevant Agency official of this information prior to the entry of the
individual shipment into the United States; and
(viii) Name, address, contact person, email address, and phone
number of the responsible party at the destruction facility.
(2) Review of petition to import for destruction. (i) The relevant
Agency official will initiate a review of the information submitted
under paragraph (b)(1) of this section and take action within 30
working days to issue either an objection notice or a non-objection
notice for the individual shipment to the person who submitted the
petition.
(ii) The relevant Agency official may issue an objection notice to
a petition for the following reasons:
(A) If the official determines that the information is
insufficient, that is, if the petition lacks or appears to lack any of
the information required under paragraph (b)(1) of this section or
other information that may be requested during the review of the
petition necessary to verify that the regulated substance is used;
(B) If the official determines that any portion of the petition
contains false or misleading information, or the official has
information from other U.S. or foreign government agencies indicating
that the petition contains false or misleading information;
(C) If allowing the import of the used regulated substance would
run counter to government restrictions from either the country of
recovery or export regarding regulated substances;
(D) If destruction capacity is installed or is being installed for
that specific regulated substance in the country of recovery or country
of export and the capacity is funded in full or in part through the
Multilateral Fund to the Montreal Protocol.
(iii) Within 10 working days after receipt of an objection notice
with the basis being ``insufficient information,'' the importer may re-
petition the official. If no re-petition 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 petition received
by EPA.
(iv) Any information contained in the re-petition which is
inconsistent with the original petition must be identified and a
description of the reason for the inconsistency must accompany the re-
petition.
(v) In cases where the relevant Agency official does not object to
the petition, the official will issue a non-objection notice.
(vi) If, 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 regulated substance is not
imported into the United States; and
(C) Take appropriate enforcement actions including but not limited
to seizing regulated substances that have already been imported into
the United States and revoking or withholding allowances.
(3) Timing. An individual shipment authorized through a non-
objection notice must be destroyed within sixty days of import.
(4) Quantity. An individual shipment authorized through a non-
objection notice may not exceed the quantity (in MTEVe) of the
regulated substance stated in the non-objection notice.
(5) Proof of destruction. For each individual shipment of a used
regulated substance imported with the intent to destroy that substance
for which EPA issues a non-objection notice, an importer must submit to
the Administrator records indicating that the substance has been
destroyed within 45 days after destruction of the regulated
substance(s).
[[Page 27218]]
(6) Recordkeeping. The person receiving the non-objection notice
from the relevant Agency official for a petition to import used
regulated substances must maintain the following records for five
years:
(i) A copy of the petition;
(ii) The EPA non-objection notice;
(iii) The bill of lading for the import;
(iv) The U.S. Customs entry number; and
(v) Records indicating that the substance has been destroyed.
Sec. 84.27 Controlling Emissions of HFC-23.
(a) No later than October 1, 2022, as compared to the amount of
chemical intentionally produced on a facility line, no more than 0.1
percent of HFC-23 created on the line may be emitted.
(1) Requests for extension. The producer may submit a request to
the relevant Agency official to request a six-month extension, with a
possibility of one additional six-month extension, to meeting the 0.1
percent HCFC-23 limit in Sec. 82.15(a)(3). No entity may have a
compliance date later than October 1, 2023.
(2) Timing of request. The extension request must be submitted to
EPA no later than August 1, 2022 for a first-time extension or February
1, 2023 for a second extension.
(3) Content of request. The extension request must contain the
following information:
(i) Name of the facility submitting the request; contact
information for a person at the facility; and the address of the
facility.
(ii) A description of the specific actions the facility has taken
to improve their HFC-23 control, capture, and destruction; the
facility's plans to meet the 0.1% HFC-23 limit including the expected
date by which the equipment will be installed and operating; and
verification that the facility has met all applicable reporting
requirements.
(4) Review of request. Starting on the first working day following
receipt by the relevant Agency official of a complete request for
extension, the official will initiate review of the information
submitted under paragraph (a)(3) of this section and take action within
30 working days. Any grant of a compliance deferral will be made
public.
(b) Captured HFC-23 is permitted to be destroyed at a different
facility than where it is produced. In such instances, the
transportation to and destruction at the different facility will be
incorporated into calculations of whether the producer meets the 0.1
percent standard outlined in paragraph (a) of this section.
Sec. 84.29 Destruction of regulated substances.
(a) The following technologies are approved by the Administrator
for destruction of all regulated substances except for HFC-23:
(1) Cement kiln;
(2) Gaseous/fume oxidation;
(3) Liquid injection incineration;
(4) Porous thermal reactor;
(5) Reactor cracking;
(6) Rotary kiln incineration;
(7) Argon plasma arc;
(8) Nitrogen plasma arc;
(9) Portable plasma arc;
(10) Chemical reaction with hydrogen and carbon dioxide;
(11) Gas phase catalytic de-halogenation; and
(12) Superheated steam reactor.
(b) The following technologies are approved by the Administrator
for destruction of HFC-23:
(1) Gaseous/fume oxidation;
(2) Liquid injection incineration;
(3) Reactor cracking;
(4) Rotary kiln incineration;
(5) Argon plasma arc;
(6) Nitrogen plasma arc;
(7) Chemical reaction with hydrogen and carbon dioxide; and
(8) Superheated steam reactor.
Sec. 84.31 Recordkeeping and reporting.
(a) Recordkeeping and reporting. Any person who produces, imports,
exports, transforms, uses as a process agent, destroys, or reclaims
regulated substances must comply with the following recordkeeping and
reporting requirements:
(1) Reports required by this Sec. 84.31 must be submitted within
45 days of the end of the applicable reporting period, unless otherwise
specified.
(2) Reports petitions, and any related supporting documents must be
submitted electronically in a format specified by the Administrator.
(3) Records and copies of reports required by this section must be
retained for five years.
(4) Quantities of regulated substances must be stated in terms of
kilograms unless otherwise specified.
(5) Reports are no longer required if an entity notifies the
Administrator that they have permanently ceased production, import,
export, destruction, transformation, use as a process agent, or
reclamation of regulated substance.
(b) Producers. Persons (``producers'') who produce regulated
substances must comply with the following recordkeeping and reporting
requirements:
(1) One-time report. Within 120 days of January 1, 2022, or within
120 days of the date that a producer first produces a regulated
substance, whichever is later, every producer must submit to the
Administrator a report describing:
(i) The method by which the producer in practice measures daily
quantities of regulated substances produced;
(ii) Conversion factors by which the daily records as currently
maintained can be converted into kilograms of regulated substances
produced, including any constants or assumptions used in making those
calculations (e.g., tank specifications, ambient temperature or
pressure, density of the regulated substance);
(iii) Internal accounting procedures for determining plant-wide
production;
(iv) The quantity of any fugitive losses accounted for in the
production figures;
(v) A list of any coproducts, byproducts, or emissions from the
production line of any regulated substance that are other regulated
substances, ozone-depleting substances listed in 40 CFR part 82,
subpart A, or hazardous air pollutants initially identified in Section
112 of the Clean Air Act, and as revised through rulemaking and
codified in 40 CFR 63.
(vi) The estimated percent efficiency of the production process for
the regulated substance, and
(vii) A description of any processes that use a regulated substance
as a process agent. Within 60 days of any change in the measurement
procedures or the information specified in the above report, the
producer must submit a report specifying the revised data or procedures
to the relevant Agency official.
(2) Reporting--producers. Within 45 days after the end of each
quarter, each producer of a regulated substance must provide to the
relevant Agency official a report containing the following information
for each facility:
(i) The quantity (in kilograms) of production of each regulated
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 regulated
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 quantity (in kilograms) of production of each regulated
substance used as a process agent by the producer and the quantity (in
kilograms) intended for use as a process agent by a second party;
(iv) The expended allowances for each regulated substance and the
[[Page 27219]]
quantity (in kilograms) of each regulated substance produced;
(v) The quantity (in kilograms) of regulated substances sold or
transferred during the quarter to a person other than the producer for
use in processes resulting in their transformation, destruction, or use
as a process agent;
(vi) The quantity (in kilograms) of regulated substances produced
by the producer that were exported by the producer or by other U.S.
companies to a foreign country, that will be transformed or destroyed
and therefore were not produced expending production or consumption
allowances;
(vii) For transformation in the United States or by a person in a
foreign country, one copy of a transformation verification from the
transformer for the specific regulated substance(s) and a list of
additional quantities shipped to that same transformer for the quarter;
(viii) For destruction in the United States or by a person in a
foreign country of a regulated substance that was produced without
allowances, one copy of a destruction verification for each particular
destroyer confirming it destroyed the same regulated substance, and a
list of additional quantities shipped to that same destroyer for the
quarter;
(ix) A list of the application-specific allowance holders from whom
orders were placed, and the quantity (in kilograms) of specific
regulated substances produced for those listed applications; and
(x) For the fourth quarter report only, the quantity of each
regulated substance held in inventory on December 31.
(3) Recordkeeping--producers. Every producer of a regulated
substance must maintain the following records:
(i) Dated records of the quantity (in kilograms) of each regulated
substance produced at each facility;
(ii) Dated records of the quantity (in kilograms) of regulated
substances produced for use in processes that result in their
transformation, destruction, or as a process agent;
(iii) Dated records of the quantity (in kilograms) of regulated
substances sold for use in processes that result in their
transformation, destruction, or as a process agent;
(iv) Dated records of the quantity (in kilograms) of regulated
substances produced by expending conferred application-specific
allowances and quantity sold for use in each listed application;
(v) Copies of invoices or receipts documenting sale of regulated
substances for use in processes that result in their transformation,
destruction, or as a process agent;
(vi) Dated records of the quantity (in kilograms) of each regulated
substance used at each facility as feedstocks or destroyed in the
manufacture of a regulated substance or in the manufacture of any other
substance, and any regulated substance introduced into the production
process of the same regulated substance at each facility;
(vii) Dated records of the quantity (in kilograms) of each
regulated substance used at each facility as a process agent;
(viii) Dated records identifying the quantity (in kilograms) of
each chemical not a regulated substance produced within each facility
also producing one or more regulated substances;
(ix) Dated records of the quantity (in kilograms) of raw materials
and feedstock chemicals used at each facility for the production of
regulated substances;
(x) Dated records of the shipments of each regulated substance
produced at each plant;
(xi) Dated records of batch tests of regulated substances packaged
for sale or distribution;
(xii) The quantity (in kilograms) of regulated substances, the date
received, and names and addresses of the source of used materials
containing regulated substances which are recycled or reclaimed at each
plant;
(xiii) Records of the date, the regulated substance, and the
estimated quantity of any spill or release of a regulated substance
that equals or exceeds 100 pounds;
(xiv) The transformation verification in the case of
transformation, or the destruction verification in the case of
destruction, showing that the purchaser or recipient of a regulated
substance, in the United States or in another foreign country,
certifies the intent to either transform or destroy the regulated
substance, or sell the regulated substance for transformation or
destruction in cases when allowances were not expended; and
(xv) The certifications from application-specific allowance holders
stating that the regulated substances were purchased solely for an
application listed in Sec. 84.5(c)(2) and will not be resold for use
in a different application or used in any other manufacturing process;
(4) Additional Requirements: Producers of HFC-23. (i) Each producer
of HFC-23 must include the following additional information in their
one-time report:
(A) Information on the capacity to produce the intended chemical on
the line on which HFC-23 is produced;
(B) Description of what is being done at the facility to control
the creation of HFC-23 and its emissions;
(C) Identification of approved destruction technology and its
location intended for use for HFC-23 destruction;
(D) A copy of the destruction removal efficiency report associated
with the destruction technology;
(ii) Each producer of HFC-23 must include the following additional
information in their fourth quarter report:
(A) Annual facility level data on HFC-23 in metric tons on:
Emissions; generated; generated and captured; generated and captured
for feedstock use in the United States; generated and captured for
destruction; used for feedstock without prior capture; and destroyed
without prior capture.
(B) [Reserved]
(iii) If captured HFC-23 is destroyed in a subsequent control
period, producers must submit records to EPA indicating the HFC-23 has
been destroyed within 45 days after destruction occurs.
(iv) In developing any required report, each producer of HFC-23
must abide by the following monitoring and quality assurance and
control provisions:
(A) To calculate the quantities of HFC-23 generated and captured
for any use, generated and captured for destruction, used for feedstock
without prior capture, and destroyed without prior capture, facilities
shall comply with the monitoring methods and quality assurance and
control requirements set forth at 40 CFR 98.414 and the calculation
methods set forth at 40 CFR 98.413, except 40 CFR 98.414(p) shall not
apply.
(B) To calculate the quantity of HFC-23 emitted, facilities shall
comply with the monitoring methods and quality assurance and control
requirements set forth at 40 CFR 98.124 and the calculation methods set
forth at 40 CFR 98.123.
(5) Agency assumption--For any person who fails to maintain the
records required by this paragraph, or to submit the report required by
this paragraph, EPA may assume that the person has produced at full
capacity during the period for which records were not kept.
(c) Importers. Persons (``importers'') who import regulated
substances must comply with the following recordkeeping and reporting
requirements:
(1) Reporting--importers. For each quarter, an importer of a
regulated substance must submit to the relevant Agency official a
report containing the following information:
[[Page 27220]]
(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 regulated
substance for that quarter;
(iii) The commodity code for the regulated substances or blends
imported;
(iv) A list of the application-specific allowance holders from whom
orders were placed, number of application-specific allowances
conferred, and the quantity (in kilograms) of specific regulated
substances imported for those listed applications;
(v) The quantity (in kilograms) of regulated substances imported
for use in processes resulting in their transformation or destruction;
(vi) The quantity (in kilograms) of regulated substances sold or
transferred during that quarter to each person for use in processes
resulting in their transformation or destruction;
(vii) The transformation verifications showing that the purchaser
or recipient of imported regulated substances intends to transform
those substances or destruction verifications showing that the
purchaser or recipient intends to destroy the regulated substances; and
(viii) For the fourth quarter report only, the quantity of each
regulated substance held in inventory on December 31.
(2) Recordkeeping--importers. An importer of a regulated substance
must maintain the following records:
(i) The quantity (in kilograms) of each regulated substance
imported, either alone or in mixtures, including the percentage of each
mixture which consists of a regulated substance;
(ii) The quantity (in kilograms) of used regulated substances
imported for destruction under the process described in Sec. 84.25(b);
(iii) The quantity (in kilograms) of regulated substances imported
for use in processes resulting in their transformation or destruction;
(iv) The quantity (in kilograms) of regulated substances imported
and sold for use in processes that result in their transformation or
destruction;
(v) The date on which the regulated substances were imported;
(vi) The port of entry through which the regulated substances
passed;
(vii) The country from which the imported regulated substances were
imported;
(viii) The commodity code for the regulated substances imported;
(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 U.S. Customs entry number;
(xiii) Dated records documenting the sale or transfer of regulated
substances for use in processes resulting in their transformation or
destruction;
(xiv) Copies of transformation verifications or destruction
verifications indicating that the regulated substances will be
transformed or destroyed;
(xv) Dated records of the quantity of regulated substances imported
for an application listed at Sec. 84.5(c)(2);
(xvi) The certifications from application-specific allowance
holders stating that the regulated substances were purchased solely for
an application listed in Sec. 84.5(c)(2) and will not be resold for
use in a different application or used in any other manufacturing
process; and
(xvii) Dated records of batch tests of regulated substances
packaged for sale or distribution; and
(3) Transhipments. (i) A person must notify the relevant Agency
official of each individual shipment of a regulated substance that is
to be transhipped through the United States. The notification is
required at least 30 working days before the shipment is to leave the
foreign port of export, and contain the following information:
(A) Name, commodity code, and quantity in kilograms of each
regulated substance to be transhipped;
(B) Name and address of the importer, the importer ID number, and
the contact person's name, email address, and phone number;
(C) Source country; and
(D) The U.S. port of entry, the expected date of entry, and the
vessel transporting the material. If at the time of submitting the
petition the importer does not know this information, the importer is
required to notify the relevant Agency official of this information
prior to the entry of the individual shipment into the United States.
(ii) The person in paragraph (c)(3)(i) of this section must notify
the relevant Agency official of each individual shipment of a regulated
substance that is to be transhipped when it departs the United States.
The notification is required at least 30 working days before the
shipment leaves the port in the United States, and contain the
following information:
(A) Name, commodity code, and quantity in kilograms of each
regulated substance to be transhipped;
(B) Name and address of the importer, the importer ID number, and
the contact person's name, email address, and phone number; and
(C) Date of departure, name of vessel.
(iii) Any person who tranships a regulated substance must maintain
records that indicate:
(A) That the regulated substance shipment originated in a foreign
country;
(B) That the regulated substance shipment is destined for another
foreign country; and
(C) That the regulated substance shipment will not enter interstate
commerce within the United States.
(4) Additional recordkeeping requirements--importers of used
regulated substances for destruction. A person receiving a non-
objection notice from the relevant Agency official to import used
regulated substances for destruction must maintain the following
records:
(i) A copy of the petition to import for destruction;
(ii) The EPA non-objection notice;
(iii) A copy of the export license, export license application, or
official communication from the appropriate government agency in the
country of export;
(iv) An English translation of the document in paragraph
(c)(4)(iii) of this section.
(v) U.S. Customs entry documents for the import that must include
the commodity codes;
(vi) The date, amount, and name of the regulated substances sent
for destruction, per shipment;
(vii) An invoice from the destruction facility verifying the
shipment was received; and
(viii) Records from the destruction facility indicating that the
substance has been destroyed.
(5) Recordkeeping requirements--aggregators. A person aggregating a
regulated substance prior to destruction must:
(i) Maintain transactional records that include the name and
address of the entity from whom they received the regulated substance
imported for destruction;
(ii) Maintain transactional records that include the name and
address of the entity to whom they sent the regulated substance
imported for destruction;
(iii) Maintain records that include the date and quantity of the
imported regulated substance received for destruction;
(iv) Maintain records that include the date and quantity of the
imported regulated substance sent for destruction; and
(v) If the person is the final aggregator of such a regulated
substance before the material is destroyed, maintain a copy of records
indicating that the substance has been destroyed.
[[Page 27221]]
(d) Exporters. Persons (``exporters'') who export regulated
substances must comply with the following reporting requirements:
(1) Reporting requirements--exporters. For any exports of regulated
substances not reported under paragraph (b)(2) of this section, each
exporter who exported a regulated substance must submit to the relevant
Agency official the following information within 45 days after the end
of each quarter in which the unreported exports left the United States:
(i) The names and addresses of the exporter and the recipient of
the exports;
(ii) The exporter's Employer Identification Number;
(iii) The quantity of each specific regulated substance exported,
including the quantity of regulated substance that is used, reclaimed,
or recycled;
(iv) The date on which, and the port from which, the regulated
substances were exported from the United States or its territories;
(v) The country to which the regulated substances were exported;
(vi) The commodity code for the regulated substances shipped;
(vii) For persons exporting for transformation or destruction of
the regulated substance, the invoice or sales agreement containing
language similar to the transformation verifications that importers
use, or destruction verifications showing that the purchaser or
recipient intends to destroy the regulated substances; and
(viii) For the fourth quarter report only, the quantity of each
regulated substance held in inventory on December 31.
(2) Used regulated substances. Any exporter of used regulated
substances must indicate on the bill of lading or invoice that the
regulated substance is used.
(e) Second-party transformation and destruction. Any person who
transforms or destroys regulated substances must comply with the
following recordkeeping and reporting requirements:
(1) Reporting--second-party transformation and destruction. Any
person who transforms or destroys regulated substances and who has
submitted a transformation verification ((paragraph (e)(3) of this
section) or a destruction verification (paragraph (e)(4) of this
section) to the producer or importer of the regulated substances, must
report the following for each facility:
(i) The names and quantities (in kilograms) of the regulated
substances transformed for each calendar year within 45 days after the
end of that year; and
(ii) The names and quantities (in kilograms) of the regulated
substances destroyed for each calendar year within 45 days after the
end of that year.
(2) Recordkeeping--second-party transformation and destruction. Any
person who transforms or destroys regulated 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 regulated substances to the person;
(ii) Records identifying the producer or importer of the regulated
substances received by the person;
(iii) Dated records of inventories of regulated substances at each
plant on the first day of each quarter;
(iv) Dated records of the quantity (in kilograms) of each regulated
substance transformed or destroyed;
(v) In the case where regulated substances were purchased or
transferred for transformation purposes, a copy of the person's
transformation verification;
(vi) Dated records of the names, commercial use, and quantities (in
kilograms) of the resulting chemical(s) when the regulated substances
are transformed; and
(vii) Dated records of shipments to purchasers of the resulting
chemical(s) when the regulated substances are transformed.
(viii) In the case where regulated substances were purchased or
transferred for destruction purposes, a copy of the person's
destruction verification.
(3) Transformation verifications. Any person who purchases
regulated substances for purposes of transformation must provide the
producer or importer of the regulated substances with a transformation
verification that the regulated substances are to be used in processes
that result in their transformation. The verification can only be valid
for up to 60 days. The transformation verification shall include the
following:
(i) Identity and address of the person intending to transform the
regulated substances;
(ii) The quantity (in kilograms) of regulated substances intended
for transformation;
(iii) Identity of shipments by purchase order number(s), purchaser
account number(s), location(s), or other means of identification;
(iv) Period of time over which the person intends to transform the
regulated substances; and
(v) Signature and title of the verifying person.
(4) Destruction verifications. Any person who purchases or receives
and subsequently destroys regulated substances that were originally
produced or imported without expending allowances shall provide the
producer or importer from whom it purchased or received the regulated
substances with a verification that the regulated substances will be
used in processes that result in their destruction. The destruction
verification shall include the following:
(i) Identity and address of the person intending to destroy
regulated substances;
(ii) The quantity (in kilograms) of regulated substances intended
for destruction;
(iii) Identity of shipments by purchase order number(s), purchaser
account number(s), location(s), or other means of identification;
(iv) The destruction efficiency at which such substances will be
destroyed;
(v) Period of time over which the person intends to destroy
regulated substances; and
(vi) Signature and title of the verifying person.
(5) Transformation reporting--one time report. Any person who
transforms a regulated substance must provide a one-time report
containing the following information:
(i) A description of the transformation use;
(ii) A description of all technologies and actions taken to
minimize emissions of regulated substances;
(iii) The name of the product manufactured in the process;
(iv) A list of any coproducts, byproducts, or emissions from the
production line of any regulated substance that are other regulated
substances, ozone-depleting substances listed in 40 CFR part 82,
subpart A, or hazardous air pollutants initially identified in Section
112 of the Clean Air Act, and as revised through rulemaking and
codified in 40 CFR part 63;
(v) The estimated annual fugitive emissions by chemical associated
with the transformation process;
(vi) The anticipated ratio of regulated substance used for
transformation to the amount of end product manufactured; and
(vii) A mass balance equation of the transformation reaction.
(f) All destruction facilities--(1) Destruction--one-time report.
Within 120 days of January 1, 2022, or within 120 days of the date that
an entity first destroys a regulated substance, whichever is later,
every person who
[[Page 27222]]
destroys regulated substances, whether in a process for destruction or
for disposal of a used substance, shall provide EPA with a 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; and
(v) Any changes to the information in this paragraph must be
reflected in a revision to be submitted to EPA within 60 days of the
change(s).
(2) Proof of destruction. Any person who destroys used regulated
substances for disposal of that substance, shall provide the importer
or aggregator with a record indicating the substance was destroyed
within 30 days of the date of destruction.
(g) Process agents--(1) Reporting--one time report. Any person who
uses a regulated substance as a process agent must provide a one-time
report containing the following information:
(i) A description of the process agent use which includes details
of the percentages of process agent retained within the process,
recovered after the process, and emitted or entrained in the final
product;
(ii) A description of all technologies and actions taken to
minimize emissions of regulated substances;
(iii) The name of the product and byproducts manufactured in the
process; and
(iv) The anticipated ratio of process agent emissions to end
product manufactured.
(2) Annual report. Any person who uses a regulated substance as a
process agent must provide an annual report containing the following
information:
(i) Contact information including email address and phone number
for a primary and alternate contact person;
(ii) The amount of regulated substance used as a process agent;
(iii) The amount of product and the amount of byproducts
manufactured (including amounts eventually destroyed or used as
feedstock);
(iv) The stack point source emissions; and
(v) A description of any HFC emission reduction actions planned or
currently under investigation.
(i) Holders of application-specific allowances--(1) Reporting. Any
person allocated application-specific allowances must submit to the
relevant Agency official a report containing the following information
by July 31 and January 31 of each year:
(i) The quantity (in kilograms) of each regulated substance that
was used for their application during previous six months;
(ii) The quantity of regulated substances acquired through
conferring allowances that were imported during the previous six
months;
(iii) The quantity of regulated substances acquired through
conferring allowances that were produced domestically during the
previous six months;
(iv) The companies to which application-specific allowances were
conferred;
(v) The quantity of regulated substances purchased without
expending application-specific allowances during the previous six
months (i.e., from the open market);
(vi) The quantity of inventory of each regulated substance held by
the reporting company or held under contract by another company for the
reporting company's use on the last day of the previous six-month
period;
(vii) The quantity of each regulated substance contained in
exported products during the previous six months; and
(viii) The quantity of each regulated substance that was destroyed
or recycled during the previous six months.
(2) Application. In addition to the information in paragraph (i)(1)
of this section, the report due by July 31 must include a request for
application-specific allowances for the next calendar year which would
include the following:
(i) Total quantity (in kilograms) of all regulated substances
acquired and used in the previous three years;
(ii) Information on suppliers;
(iii) whether HFCs were acquired through domestic production or
import;
(iv) Whether HFCs were acquired through conferring allowances or
from the general market; quantities held in inventory; and
(v) A description of plans to transition to regulated substances
with a lower exchange value or alternatives to regulated substances.
(3) Recordkeeping. Entities allocated application-specific
allowances must maintain the following records for five years:
(i) Records necessary to develop the biannual reports;
(ii) A copy of certifications provided to producers and/or
importers when conferring allowances;
(iii) A copy of the annual submission requesting application-
specific allowances;
(iv) Invoice and order records related to the purchase of regulated
substances;
(v) Records related to the transfer of allocation-specific
allowances to other entities; and
(vi) Records documenting the use of regulated substances.
(j) Reclaimers. Persons (``reclaimers'') who reclaim regulated
substances must comply with the following recordkeeping and reporting
requirements:
(1) One time report. By February 14, 2022, any person who reclaims
a regulated substance must provide a one-time report containing the
following information:
(i) The quantity of each regulated substance held in inventory as
of December 31, 2021;
(ii) The name of the laboratory that conducts the batch testing and
a signed statement from that laboratory confirming there is an ongoing
business relationship with the reclaimer,
(iii) The number of batches tested for each regulated substance or
blend containing a regulated substance in the prior year,
(iv) The number of batches that did not meet the specifications in
appendix A of 40 CFR part 82, subpart F in the prior year.
(2) Quarterly Reporting. For each quarter, a reclaimer of a
regulated substance must submit to the relevant Agency official a
report containing the following information:
(i) The quantity of material (the combined mass of regulated
substance and contaminants) by regulated substance sent to them for
reclamation, the total mass of each regulated substance, and the total
mass of waste products.
(ii) The quantity of each regulated substance held in inventory
onsite at the end of each quarter broken out by recovered, reclaimed,
and virgin.
(3) Recordkeeping. (i) Reclaimers must maintain records, by batch,
of the results of the analysis conducted to verify that reclaimed
regulated substance meets the necessary specifications in Appendix A to
40 CFR part 82, subpart F, based on AHRI Standard 700-2016. Such
records must be maintained for five years.
(ii) Reclaimers must maintain records of the names and addresses of
persons sending them material for reclamation and the quantity of the
material (the combined mass of regulated substance and contaminants) by
regulated substance sent to them for reclamation. Such records must be
maintained on a transactional basis for five years.
Sec. 84.33 Auditing of recordkeeping and reporting.
(a) Any person receiving production allowances, consumption
allowances, or
[[Page 27223]]
application-specific allowances, as well as any person who exports or
reclaims a regulated substance must arrange for third-party auditing of
reports submitted to the EPA.
(b) Auditors must review the inputs the regulated entities used to
develop quarterly and annual reports including, as appropriate:
(1) The amount of production and consumption allowances allocated;
(2) The amount, timing, and parties to allowance transfers, and the
associated documentation and offset amount;
(3) The amount of regulated substances imported, exported,
produced, destroyed, transformed, or reclaimed;
(4) For allocation-specific allowances, the amounts of allowances
conferred, regulated substances purchased, the specific application for
which the regulated substances were provided, and the names, telephone
numbers, and email addresses for contact persons for the recipient
companies;
(5) The date and the port from which regulated substances were
imported or exported;
(6) A copy of the bill of lading and the invoice indicating the
quantity of regulated substances imported or exported;
(7) Relevant commodity codes;
(8) The number and type of railcars, ISO tanks, individual
cylinders or drums, small cans, or other containers used to store and
transport regulated substances;
(9) List of certification identifications used; and
(10) Other information deemed relevant.
(c) An auditor must meet the following requirements:
(1) The auditor must be a certified public accountant, or firm of
such accountants, that is independent of the regulated person. Such an
auditor must comply with the AICPA Code of Professional Conduct,
including its independence requirements, the AICPA Statements on
Quality Control Standards (SQCS) No. 8, A Firm's System of Quality
Control (both incorporated by reference in 40 CFR1090.95), and
applicable rules of state boards of public accountancy. Such an auditor
must also perform the attestation engagement in accordance with the
AICPA Statements on Standards for Attestation Engagements (SSAE) No.
18, Attestation Standards: Clarification and Recodification,
(incorporated by reference in 40 CFR 1090.95).
(2) The auditor must meet the independence requirements in
paragraph (f) of this section.
(3) Any auditor suspended or debarred under 2 CFR part 1532 or 48
CFR part 9, subpart 9.4, is not qualified to perform attestation
engagements under this section.
(d) All reports required under this paragraph must be signed and
certified as meeting all the applicable requirements of this subpart by
the independent third-party auditor or a responsible corporate officer
of the independent third-party auditor.
(e) The following provisions apply to each audit performed under
this section:
(1) The auditor must prepare a report identifying the applicable
procedures specified in this section along with the auditor's
corresponding findings for each procedure. The auditor must submit the
report electronically to EPA by May 31 of the year following the
compliance period.
(2) The auditor must identify any instances where compared values
do not agree or where specified values do not meet applicable
requirements under this part.
(3) Laboratory analysis refers to the original test result for each
analysis of a product's properties.
(4) For a reclaimer that relies on a third-party laboratory for
batch testing, the laboratory analysis consists of the results provided
by the third-party laboratory.
(f) The independent third party, their contractors, subcontractors,
and their organizations must be independent of the regulated party. All
the criteria listed in paragraphs (a)(1) and (2) of this section must
be met by each person involved in the specified activities in this
section that the independent third party is hired to perform for a
regulated party.
(1) Employment criteria. No person employed by an independent third
party, including contractor and subcontractor personnel, who is
involved in a specified activity performed by the independent third
party under the provisions of this section, may be employed, currently
or previously, by the regulated party for any duration within the 12
months preceding the date when the regulated party hired the
independent third party to provide services under this section.
(2) Financial criteria. (i) The third-party's personnel, the third-
party's organization, or any organization or individual that may be
contracted or subcontracted by the third party must meet all the
following requirements:
(A) Have received no more than one-quarter of their revenue from
the regulated party during the year prior to the date of hire of the
third party by the regulated party for any purpose.
(B) Have no interest in the regulated party's business. Income
received from the third party to perform specified activities under
this section is excepted.
(C) Not receive compensation for any specified activity in this
section that is dependent on the outcome of the specified activity.
(ii) The regulated party must be free from any interest in the
third-party's business.
Subpart B--[RESERVED]
Appendix A to Part 84--Regulated Substances
HFCs Listed as Regulated Substances in the AIM Act 1
------------------------------------------------------------------------
Exchange
HFC Chemical formula value
------------------------------------------------------------------------
HFC-134.................... CHF2CHF2........................ 1,100
HFC-134a................... CH2FCF3......................... 1,430
HFC-143.................... CH2FCHF2........................ 353
HFC-245fa.................. CHF2CH2CF3...................... 1,030
HFC-365mfc................. CF3CH2CF2CH3.................... 794
HFC-227ea.................. CF3CHFCF3....................... 3,220
HFC-236cb.................. CH2FCF2CF3...................... 1,340
HFC-236ea.................. CHF2CHFCF3...................... 1,370
HFC-236fa.................. CF3CH2CF3....................... 9,810
HFC-245ca.................. CH2FCF2CHF2..................... 693
HFC-43-10mee............... CF3CHFCHFCF2CF3................. 1,640
HFC-32..................... CH2F2........................... 675
HFC-125.................... CHF2CF3......................... 3,500
HFC-143a................... CH3CF3.......................... 4,470
HFC-41..................... CH3F............................ 92
HFC-152.................... CH2FCH2F........................ 53
HFC-152a................... CH3CHF2......................... 124
HFC-23..................... CHF3............................ 14,800
------------------------------------------------------------------------
\1\ This table includes all isomers of the substances above, regardless
of whether the isomer is explicitly listed on its own.
[FR Doc. 2021-09545 Filed 5-18-21; 8:45 am]
BILLING CODE 6560-50-P