[Federal Register Volume 87, Number 212 (Thursday, November 3, 2022)]
[Proposed Rules]
[Pages 66372-66409]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-23269]
[[Page 66371]]
Vol. 87
Thursday,
No. 212
November 3, 2022
Part II
Environmental Protection Agency
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40 CFR Part 84
Phasedown of Hydrofluorocarbons: Allowance Allocation Methodology for
2024 and Later Years; Proposed Rule
Federal Register / Vol. 87, No. 212 / Thursday, November 3, 2022 /
Proposed Rules
[[Page 66372]]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 84
[EPA-HQ-OAR-2022-0430; FRL-8838-01-OAR]
RIN 2060-AV45
Phasedown of Hydrofluorocarbons: Allowance Allocation Methodology
for 2024 and Later Years
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
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SUMMARY: The U.S. Environmental Protection Agency is proposing to amend
existing regulations to implement certain provisions of the American
Innovation and Manufacturing Act, as enacted on December 27, 2020. This
rulemaking proposes to establish the methodology for allocating
hydrofluorocarbon production and consumption allowances for the
calendar years of 2024 through 2028. EPA is also proposing to amend the
consumption baseline to reflect updated data and to make other
adjustments based on lessons learned from implementation of the
hydrofluorocarbon phasedown program thus far, including proposing to:
codify the existing approach of how allowances must be expended for
import of regulated substances; revise recordkeeping and reporting
requirements; and implement other modifications to the existing
regulations.
DATES: Comments on this notice of proposed rulemaking must be received
on or before December 19, 2022. Under the Paperwork Reduction Act
(PRA), comments on the information collection provisions are best
ensured of consideration if the Office of Management and Budget (OMB)
receives a copy of your comments on or before December 5, 2022. Any
party requesting a public hearing must notify the contact listed below
under FOR FURTHER INFORMATION CONTACT by 5 p.m. Eastern Daylight Time
on November 8, 2022. If a virtual public hearing is held, it will take
place on or before November 18, 2022 and further information will be
provided at https://www.epa.gov/climate-hfcs-reduction.
ADDRESSES: You may send comments, identified by Docket ID No. EPA-HQ-
OAR-2022-0430, 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: 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. For further information on EPA Docket Center services and the
current status, please visit us online at https://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).
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, please work with the person listed in
the FOR FURTHER INFORMATION CONTACT section. 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: John Feather, U.S. Environmental
Protection Agency, Stratospheric Protection Division, telephone number:
202-564-1230; 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:
ABI--Automated Broker Interface
AES--Automated Export System
AHRI--Air-Conditioning, Heating, and Refrigeration Institute
AIM Act--American Innovation and Manufacturing Act of 2020
ASHRAE--American Society of Heating, Refrigerating and Air-
Conditioning Engineers
CAA--Clean Air Act
CBI--Confidential Business Information
CBP--U.S. Customs and Border Protection
CFR--Code of Federal Regulations
CO2--Carbon Dioxide
DBA--Doing Business As
e-GGRT--Electronic Greenhouse Gas Reporting Tool
EEI--Electronic Export Information
EPA--U.S. Environmental Protection Agency
EVe--Exchange Value Equivalent
FR--Federal Register
GHG--Greenhouse Gas
GHGRP--Greenhouse Gas Reporting Program
GWP--Global Warming Potential
HAP--Hazardous Air Pollutants
HTS--Harmonized Tariff Schedule
HCFC--Hydrochlorofluorocarbon
HFC--Hydrofluorocarbon
HFO--Hydrofluoroolefin
HTS--Harmonized Tariff Schedule
ICR--Information Collection Request
IEC--International Electrotechnical Commission
IMO--International Maritime Organization
IPCC--Intergovernmental Panel on Climate Change
ISO--International Organization for Standardization
ITN--Internal Transaction Number
JCGM--Joint Committee for Guides in Metrology
LCD--Liquid Carbon Dioxide
MMTCO2 e--Million Metric Tons of Carbon Dioxide
Equivalent
MMTEVe--Million Metric Tons of Exchange Value Equivalent
MTEve--Metric Tons of Exchange Value Equivalent
NAAQS--National Ambient Air Quality Standards
NAICS--North American Industry Classification System
NATA--National Air Toxics Assessment
NEI--National Emissions Inventory
ODS--Ozone-Depleting Substances
PRA--Paperwork Reduction Act
RACA--Request for Additional Consumption Allowances
RFA--Regulatory Flexibility Act
RIA--Regulatory Impact Analysis
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SISNOSE--Significant Economic Impact on a Substantial Number of
Small Entities
TRI--Toxics Release Inventory
XPS--Extruded Polystyrene
Table of Contents
I. General Information
A. Does this proposed action apply to me?
B. What is the AIM Act, and what authority does it provide to
EPA as it relates to this proposed action?
C. What are HFCs?
II. What is the summary of this proposed action?
III. How is EPA proposing to determine allowance allocations
starting in 2024?
A. For which years is EPA proposing to establish the allocation
methodology?
B. What is EPA's proposed framework for determining how many
allowances each entity receives?
1. Which methodology is EPA proposing to use as the basis for
allocations?
2. What other allocation methodologies did EPA consider?
3. What did EPA consider in developing its proposal as to the
appropriate entities to be allocated allowances?
C. How is EPA accounting for past production or import activity
to determine allocation eligibility?
D. Can allowances be transferred or conferred prior to the
calendar year?
IV. How is EPA proposing to update the consumption baseline?
A. How did EPA determine the consumption baseline in the
Framework Rule?
B. How is EPA proposing to adjust the consumption baseline?
C. What other opportunities is EPA providing to further update
data?
V. How is EPA proposing to revise requirements related to allowances
for import?
A. Codifying the Point in Time That an Allowance Must Be
Expended To Import Regulated Substances
B. Who must expend allowances for import?
C. Existing Requirement To Expend Allowances for Regulated
Substance Components of Blends
D. Establish Presumed Amount for Heel Imports of Unknown
Quantity
VI. How is EPA proposing to clarify and revise recordkeeping and
reporting requirements?
A. How is EPA proposing to modify the import reporting
requirements?
1. Specify Reporting Obligations on the Importer of Record
2. Modify Advance Notification of Import Requirements
3. Clarify the Reporting of Heels
4. Changes to and Requirement of Importer of Record Information
5. Joint and Several Liability for Importer Reporting
Requirements
B. Modify Recordkeeping and Reporting Requirements Regarding
Expending Allowances
C. Modify the Reporting of Regulated Substances Produced for
Transformation, Destruction or Use as a Process Agent at a Different
Facility Under the Same Owner
D. Additional HFC Production Facility Emissions Reporting
Requirements
VII. How is EPA proposing to revise sampling and testing
requirements?
A. Use of Appendix A to 40 CFR Part 82 and EPA Method 18 in
Appendix A-6 to 40 CFR Part 60 for Sampling and Testing
B. Recordkeeping of Tests
C. Define ``Batch'' and ``Representative Sample'' and Clarify
the Relationship Between These Terms
D. Laboratory Methods and Accreditation
E. Certificate of Analysis for Imports of Regulated Substances
VIII. What other revisions is EPA proposing?
A. Define the Term ``Expend''
B. Modify Labeling Requirements
C. Clarify Ability To Move Allowances Among Companies With
Certain Affiliation Without a Transfer
D. Revise Required Elements To Request Additional Consumption
Allowances
E. Petitions To Import Regulated Substances for Laboratory
Testing With Eventual Destruction
IX. What are the costs and benefits of this proposed action?
X. How is EPA considering environmental justice?
XI. Statutory and Executive Order Review
A. Executive Order 12866: Regulatory Planning and Review and
Executive Order 13563: Improving Regulation and Regulatory Review
B. Paperwork Reduction Act (PRA)
C. Regulatory Flexibility Act (RFA)
D. Unfunded Mandates Reform Act (UMRA)
E. Executive Order 13132: Federalism
F. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
G. Executive Order 13045: Protection of Children From
Environmental Health Risks and Safety Risks
H. Executive Order 13211: Actions That Significantly Affect
Energy Supply, Distribution, or Use
I. National Technology Transfer and Advancement Act (NTTAA) and
Incorporation by Reference
J. Executive Order 12898: Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations
I. General Information
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 or process agent, reclaim,
or recycle HFCs. 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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325120............................ Industrial Gas Manufacturing.
325199............................ All Other Basic Organic Chemical
Manufacturing.
325211............................ Plastics Material and Resin
Manufacturing.
325412 *.......................... Pharmaceutical Preparation
Manufacturing.
325414 *.......................... Biological Product (except
Diagnostic) Manufacturing.
325998............................ All Other Miscellaneous Chemical
Product and Preparation
Manufacturing.
326220............................ Rubber and Plastics Hoses and
Belting Manufacturing.
326150 *.......................... Urethane and Other Foam Product.
326299............................ All Other Rubber Product
Manufacturing.
333415............................ Air[dash]Conditioning and Warm Air
Heating Equipment and Commercial
and Industrial Refrigeration
Equipment Manufacturing.
333511............................ Industrial Mold Manufacturing.
334413 *.......................... Semiconductor and Related Device
Manufacturing.
334419 **......................... Other Electronic Component
Manufacturing.
334510............................ Electromedical and
Electrotherapeutic Apparatus
Manufacturing.
336212 *.......................... Truck Trailer Manufacturing.
336214 *.......................... Travel Trailer and Camper
Manufacturing.
336411 *.......................... Aircraft Manufacturing.
336611 *.......................... Ship Building and Repairing.
336612 *.......................... Boat Building.
339112............................ Surgical and Medical Instrument
Manufacturing.
423720............................ Plumbing and Heating Equipment and
Supplies (Hydronics) Merchant
Wholesalers.
423730............................ Warm Air Heating and
Air[dash]Conditioning Equipment and
Supplies Merchant Wholesalers.
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423740............................ Refrigeration Equipment and Supplies
Merchant Wholesalers.
423830............................ Industrial Machinery and Equipment
Merchant Wholesalers.
423840............................ Industrial Supplies Merchant
Wholesalers.
423860 *.......................... Transportation Equipment and
Supplies (except Motor Vehicle)
Merchant Wholesalers.
424690............................ Other Chemical and Allied Products
Merchant Wholesalers.
488510............................ Freight Transportation Arrangement.
541380............................ Testing Laboratories.
541714............................ Research and Technology in
Biotechnology (except
Nanobiotechnology).\11\
562111............................ Solid Waste Collection.
562211............................ Hazardous Waste Treatment and
Disposal.
562920............................ Materials Recovery Facilities.
922160 *.......................... Fire Protection.
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Codes marked with an asterisk may apply to sectors that receive
application-specific allowances under the American Innovation and
Manufacturing Act of 2020 (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 authority does it provide to EPA as it
relates to this proposed action?
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 (42 U.S.C. 7675). The AIM Act authorizes EPA
to address HFCs in three main ways: phasing down HFC production and
consumption through an allowance allocation program; facilitating
sector-based transitions to next-generation technologies; and
promulgating certain regulations for purposes of maximizing reclamation
and minimizing releases of HFCs and their substitutes from equipment.
This rulemaking focuses on the first area--the phasedown of the
production and consumption of HFCs.
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. Subsection (c)(1) of the AIM 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'' 1 2 to each regulated substance (along
with other chemicals that are used to calculate the baseline). EPA has
codified the list of the 18 regulated substances and their exchange
values in appendix A to 40 CFR part 84.
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\1\ 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 the Intergovernmental Panel on Climate
Change (IPCC) (2007). EPA uses the terms ``global warming
potential'' and ``exchange value'' interchangeably in this proposal.
\2\ 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.
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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 in subsection (e)(2)(C) of the AIM Act.
The AIM Act requires that the EPA Administrator ensures the annual
quantity of all regulated substances produced or consumed \3\ in the
United States does not exceed the applicable percentage listed for the
production or consumption baseline. EPA has codified the phasedown
schedule at 40 CFR 84.7.
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\3\ 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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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 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) of the Act has a general
prohibition that no person \4\ shall produce or consume a quantity of
regulated substances in the United States without a corresponding
quantity of allowances.
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\4\ 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 or regulation's requirements
and prohibitions. Similarly, in certain instances EPA may use these
terms interchangeably in this rule preamble, but such differences in
terminology should not be viewed to carry a material distinction in
how EPA interprets or is planning to apply the requirements
discussed herein.
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EPA published a final rule on October 5, 2021 (86 FR 55116;
hereinafter called the Framework Rule), that, among other things:
established the HFC production and consumption baselines; determined an
initial approach to allocating production and consumption allowances
for 2022 and 2023, identifying both the entities receiving allowances
and how to determine what quantities of allowances they would receive;
established a process for issuing ``application-specific'' allowances
to entities in six specific applications listed in subsection
(e)(4)(B)(iv) of the AIM Act; created a set-aside pool of allowances
for new entrants and entities for which the Agency did not have
verifiable data prior to the finalization of the rule; established
provisions for the transfer of allowances; established recordkeeping
and reporting requirements; and established a suite of
[[Page 66375]]
compliance and enforcement-related provisions. Unless otherwise stated
in the proposal sections included in this notice, EPA's proposed
requirements and revisions are based on the same interpretations of the
AIM Act, and the Clean Air Act as applicable under subsection (k) of
the AIM Act, as discussed in the Framework Rule. EPA also has inherent
authority to prevent and identify noncompliance, 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.
C. What are HFCs?
HFCs are anthropogenic \5\ fluorinated chemicals that have no known
natural sources. HFCs are used in a variety of applications such as
refrigeration and air conditioning, foam blowing agents, solvents,
aerosols, and fire suppression. HFCs are potent greenhouse gases (GHGs)
with 100-year GWPs (a measure of the relative climatic impact of a GHG)
that can be hundreds to thousands of times that of carbon dioxide
(CO2).
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\5\ 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
hydrochlorofluorocarbon (HCFC)-22.
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HFC use and emissions,\6\ have been growing worldwide due to the
global phaseout of ozone-depleting substances (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. In 2016, in
Kigali, Rwanda, countries agreed to adopt an amendment to the Montreal
Protocol, known as the Kigali Amendment, which provides for a global
phasedown of the production and consumption of HFCs. Global adherence
to the Kigali Amendment would substantially reduce future emissions,
leading to a peaking of HFC emissions before 2040.7 8
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\6\ 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.
\7\ Ibid.
\8\ A recent study estimated that global compliance with the
Kigali Amendment is expected to lower 2050 annual emissions by 3.0-
4.4 Million Metric Tons of Carbon Dioxide Equivalent
(MMTCO2e). Guus J.M. Velders et al. Projections of
hydrofluorocarbon (HFC) emissions and the resulting global warming
based on recent trends in observed abundances and current policies.
Atmos. Chem. Phys., 22, 6087-6101, 2022. Available at https://doi.org/10.5194/acp-22-6087-2022.
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Atmospheric observations of most currently measured HFCs confirm
their abundances are increasing 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.\9\
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\9\ WMO, 2018.
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In 2016, HFCs, excluding HFC-23, accounted for a radiative forcing
\10\ of 0.025 W/m\2\: This is a 36 percent increase in total HFC
forcing relative to 2012. Under status quo conditions, this radiative
forcing was projected to increase by an order of magnitude to 0.25 W/
m\2\ by 2050.\11\ If the Kigali Amendment were to be fully implemented,
it would be expected to reduce the future radiative forcing due to HFCs
(excluding HFC-23) to 0.13 W/m\2\ in 2050 which is a reduction of about
50 percent compared with the radiative forcing projected in the
business-as-usual scenario of uncontrolled HFCs.\12\
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\10\ Radiative forcing is expressed in units of watts per square
meter (W/m\2\) and is defined by the IPCC as ``a measure of the
influence a factor has in altering the balance of incoming and
outgoing energy in the Earth-atmosphere system and is an index of
the importance of the factor as a potential climate change
mechanism.'' IPCC, 2007: Climate Change 2007: Synthesis Report.
Contribution of Working Groups I, II and III to the Fourth
Assessment Report of the Intergovernmental Panel on Climate Change
[Core Writing Team, Pachauri, R.K and Reisinger, A. (eds.)]. IPCC,
Geneva, Switzerland, 104 pp. https://www.ipcc.ch/report/ar4/syr/.
\11\ Guus J.M. Velders, David W. Fahey, John S. Daniel, Stephen
O. Andersen, Mack McFarland, Future atmospheric abundances and
climate forcings from scenarios of global and regional
hydrofluorocarbon (HFCs) emissions, Atmospheric Environment,
doi:10.1016/j.atmosenv.2015.10.071, 2015.
\12\ Ibid.
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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 of each
substance 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 (approximately 75 percent of total HFC use in
2018) and in air conditioning in vehicles and refrigerated transport
(approximately 8 percent). Smaller amounts are used in foam products
(approximately 11 percent), aerosols (approximately 4 percent), fire
protection systems (approximately 1 percent) and solvents
(approximately 1 percent).\13\
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\13\ 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.
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More detailed information on HFCs, their uses, and their impacts is
available in the Framework Rule and its associated supporting
documentation. We also discuss costs and benefits associated with this
action in section IX of this preamble, and consider potential
environmental justice impacts in section X of this preamble.
II. What is the summary of this proposed action?
EPA proposes to:
Establish a methodology for issuing production and
consumption allowances for calendar years 2024 through 2028; \14\
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\14\ In the context of this proposal, ``2024 through 2028''
means ``2024 through, and including, 2028.''
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Confirm that entities may confer or transfer allowances as
soon as allowances are allocated;
Adjust the consumption baseline to reflect corrected data;
Codify requirements related to the expenditure of
allowances for import;
Clarify and revise recordkeeping and reporting
requirements, including a new requirement to report emissions from HFC
production facilities; and
Implement other revisions.
EPA is also carrying out further analyses in light of these
proposed actions, including:
Estimating incremental changes in costs and benefits of
the HFC phasedown from 2024 through 2050 due to the proposal to adjust
the consumption baseline and revising an abatement option used in the
analysis; and
Providing further consideration of potential environmental
justice impacts, including updating the analysis with more recent data,
adding another facility, and providing more demographic detail on
potentially affected communities.
[[Page 66376]]
III. How is EPA proposing to determine allowance allocations starting
in 2024?
This section provides an overview of EPA's proposal to establish a
methodology for issuing calendar year production and consumption
allowances starting in calendar year 2024. In the Framework Rule, EPA
codified an initial approach to allocating production and consumption
allowances for calendar years 2022 and 2023, and did not establish any
allocation methodology for further years. This rulemaking proposes an
approach to calculating production and consumption allowance
allocations for future calendar years, beginning with calendar year
2024 allowances. EPA is proposing that this methodology would apply for
calculating production and consumption allowances for calendar years
2024 through 2028.
The Framework Rule established that application-specific allowances
would be available to identified entities for calendar years 2022,
2023, 2024, and 2025. EPA is not proposing to change the methodology
for issuing application-specific allowances through this rulemaking.
The existing application-specific allowance allocation methodology
codified at 40 CFR 84.13 will continue to apply as finalized in the
Framework Rule.
Subsection (e)(3) of the AIM Act requires EPA to implement the
statutorily established phasedown of the production and consumption of
regulated substances through an allowance allocation program. Congress
established a cap on the number of allowances available each year (by
defining how to calculate the baseline and requiring a set percentage
reduction in specific years from that baseline) and requires EPA to
establish ``an allowance allocation and trading program.''
In the Framework Rule, EPA made clear that the Agency intended to
revisit how to allocate production and consumption allowances for 2024
and beyond. EPA presented and took advance comment on ideas on
potential criteria and a framework for issuing allowances for 2024 and
later years. EPA stated that comments received on the elements noted
for advance comment would 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. Accordingly, EPA has considered the advance comments
provided on potential methodology for allocation methodologies starting
with calendar year 2024 allowances in development of this proposal.
Those comments can be found at Docket ID No. EPA-HQ-OAR-2021-0044. EPA
is not including those comments in the docket for this rule, does not
consider those advance comments to be part of this rulemaking record,
and does not anticipate providing any further response to them.
A. For which years is EPA proposing to establish the allocation
methodology?
EPA is proposing to establish a methodology for allocating
production and consumption allowances for calendar year 2024 through
2028. During these five years, the annual production and consumption
caps established in the AIM Act are 60 percent of the baseline.\15\ EPA
is proposing to establish a consistent methodology for the duration of
this next phasedown step.
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\15\ In 2029, the production and consumption caps decline to 30
percent of baseline.
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In the phaseout of HCFCs, which EPA is implementing under Title VI
of the Clean Air Act, EPA has similarly used an approach of
periodically revisiting its allocation methodology and has found that a
periodic revisiting of the allowance allocation methodology allowed the
Agency to respond to changing market conditions or challenges in
program implementation. Examples of changes in market conditions that
the Agency could potentially consider in revisiting its methodology in
the HFC phasedown include, among other things, companies entering or
exiting the market, corporate mergers and acquisitions, significant
quantities of allowances unexpended at the end of the year, and/or
supply shortages for specific HFCs. EPA is proposing to implement the
current methodology through allocation of calendar year 2028 allowances
to align the next periodic revisiting of the methodology with the next
phasedown step, which occurs in 2029. This allows EPA to consider
lessons learned from implementation, prior year use of allowances, and
any concerns surrounding distribution of allowances prior to the next
reduction in the production and consumption caps. For example, EPA
might want to adjust the allocation methodology if certain allowance
allocations are not being expended, leading to supply constraints, or
if there are concerns of market disruptions tied to the next phasedown
step that EPA could alleviate through a change in allocation
methodology. Establishing a methodology for these five years, as
opposed to a shorter period of time, is intended to provide allowance
holders a predictable understanding of a likely range of allocation
levels for these five years so they can make longer term decisions and
plans about how to deploy their allowances (e.g., whether to transfer
or produce or import directly).
While the Agency's primary proposal is to establish an allowance
methodology through 2028 and reassess the methodology for allocation of
calendar year 2029 production and consumption allowances, EPA is also
considering whether it may be less disruptive to the market to reassess
and potentially change methodologies in a year prior to or after a
phasedown step (e.g., alter the methodology for allocation of calendar
year 2028 or 2030 allowances, instead of aligning with the next
phasedown step in 2029). EPA is also interested in commenters' input on
whether it is appropriate to establish the methodology through a
different phasedown step, such as through the allocation of calendar
year 2036 allowances when the production and consumption caps reach 15
percent of baseline.
B. What is EPA's proposed framework for determining how many allowances
each entity receives?
This section discusses how EPA proposes to determine the quantity
of production and consumption allowances each entity would receive. As
in the Framework Rule, EPA seeks to provide as seamless a transition as
possible as HFCs are phased down, ensure that the methodology is in
place before October 1, 2023,\16\ and develop a methodology that
utilizes robust data. EPA is proposing to use a similar methodology to
calculate allocation quantities as the initial framework used for
allocating calendar year 2022 and 2023 production and consumption
allowances, with adjustments to accommodate new market entrants \17\
that received allowances from EPA on March 31, 2022, pursuant to 40 CFR
84.15(e)(3). EPA is not proposing to establish another pool of set-
aside allowances. Nor is EPA proposing any change to the methodology
outlined in
[[Page 66377]]
40 CFR 84.13 for determining application-specific allowance allocations
and accordingly is not reopening that methodology in this
rulemaking.\18\
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\16\ 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. EPA intends to issue
allowances for the 2024 calendar year no later than October 1, 2023,
using the procedure established through this rulemaking.
\17\ EPA allocated calendar year 2022 and 2023 consumption
allowances to entities that met the criteria of 40 CFR 84.15(c)(2)
as part of the initial pool of set-aside allowances. In the context
of this proposal, EPA generally refers to these entities as new
market entrants. As discussed in this section, EPA is not proposing
to establish another pool of set-aside allowances or to extend 40
CFR 84.15(c)(2) to future new market entrants.
\18\ As noted previously, the existing methodology in 40 CFR
84.13 makes application-specific allowances available to identified
entities for calendar years 2022, 2023, 2024, and 2025. The existing
application-specific allowance allocation methodology codified at 40
CFR 84.13 will continue to apply as finalized in the Framework Rule.
EPA will consider any comments on this methodology outside the scope
of this rulemaking.
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1. Which methodology is EPA proposing to use as the basis for
allocations?
EPA is proposing to base production allowance allocations on an
entity's market share derived from the average of the three highest
years (not necessarily consecutive) of production of regulated
substances \19\ between 2011 and 2019. EPA is proposing to base
consumption allowance allocations on an entity's market share derived
from the average of the three highest years (not necessarily
consecutive) of consumption of regulated substances between 2011 and
2019.\20\ For new market entrants that were allocated allowances in
2022 and 2023, EPA is proposing an approach that would allocate
consumption allowances such that they would see an equivalent reduction
in allowances between the 2022-2023 and 2024-2028 timeframes as general
pool allowance holders. Since new market entrants do not receive
allowances based on prior import history between 2011 and 2019, EPA is
proposing to create a value that can serve as a stand in for an average
of the three highest years of consumption of regulated substances
between 2011 and 2019 for each new market entrant.
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\19\ The Agency is not, at this time, proposing to designate any
new regulated substances under subsection (c)(3), just as the Agency
did not designate any new regulated substances under subsection
(c)(3) in the Framework Rule (Response to Comments on the Framework
Rule at page 193).
\20\ If a company did not have three years of data, EPA took the
average of the years between 2011 and 2019 for which the company
produced or imported HFCs, assuming the company was active in 2020
or applied for and received special consideration (86 FR 55146).
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EPA would determine this based on the number of allowances
allocated to each new market entrant in calendar year 2023 (which is
identical to the number of allowances allocated for calendar year 2022)
and the percent reduction all general pool allowance holders experience
in calendar year 2023 relative to the average of their three highest
years of consumption. For reference, each general pool allowance holder
received allowances at a level 32.1 percent below their individual high
three-year average in calendar year 2022. The reduction in calendar
2023 will likely be different, assuming the number of application-
specific allowances allocated is different, and will be determined by
October 1, 2023. EPA would divide each new market entrant's calendar
year 2023 allowance value by the proportion of allowances received by
general pool allowance holders relative to their high three-year
average in calendar year 2023. For example, if general pool allowance
holders receive allowances equivalent to 67.9 percent of their high
three-year average identical to calendar year 2022, a new market
entrant that received 200,000 MTEVe of allowances in 2023 would be
credited with approximately 294,435 MTEVe as the stand in for their
high three-year average.
EPA would then add the high three-year average values for historic
producers and importers with the stand in values for new market
entrants to determine an aggregate total across all eligible allowance
holders. This approach is intended to ensure that new market entrants
and general pool allowance holders would experience the same
proportionate reduction between their 2023 allocation and their 2024
allocation. If any entity qualifies under both the new market entrant
and historic producer or importer methodologies, the Agency will
allocate with the methodology that issues the greater number of
allowances. EPA is proposing that if a company that has prior
production and/or import activity during the relevant timeframe
acquires a new market entrant, the Agency would add the new market
entrant's high three-year average stand-in value to the acquiring
entity's high three-year average consumption value and would use this
value for future allocation determinations.
After determining entities' market share and eligibility (see
section III.C of this preamble), EPA is proposing to then use the same
steps as described in the Framework Rule (86 FR 55147) and codified at
40 CFR 84.9(a)(2)-(4) and 40 CFR 84.11(a)(2)-(4) that currently apply
for purposes of allocations for calendar years 2022 and 2023.
Independently for production and consumption allowances, EPA would add
every entity's average to determine a percentage market share of
production and consumption allowances, respectively, for each entity.
EPA would multiply each entity's percentage market share by the total
amount of general pool calendar-year allowances available to determine
each entity's production or consumption allocation.
EPA is proposing to continue using historic production and
consumption data from 2011 to 2019, matching the approach taken for
allocating calendar year 2022 and 2023 allowances, for many of the
reasons described in the Framework Rule (86 FR 55145-55147). Among
these reasons is that a broad range of years such as 2011-2019 accounts
for changes in market behavior (e.g., actively commercializing
alternatives to high-GWP HFCs) that took place earlier in the
transition as a result of the global agreement to the Kigali Amendment
or other countries enacting HFC phasedown regulations.
Beyond the rationales detailed in the Framework Rule, EPA is
proposing to continue to use 2011-2019 data for additional reasons.
First, using the same timeframe as finalized in the Framework Rule
would minimize disruption to the market in 2024. EPA is seeking to
provide a smooth transition from HFCs through the next phasedown step.
Over the past year, allowance holders and their supply chains have been
adjusting to the HFC Allocation Program, and more specifically, entity-
specific allocation levels. Continuing to use the same set of years
reduces the disruption to the market. This is especially valuable since
reducing U.S. production and import from 90 percent of baseline to 60
percent of baseline will result in other changes to business practices,
such as the increased use and changes in production or import of
alternatives and reclaimed HFCs. Using the same methodology would
provide continuity between the 2022 to 2023 timeframe and the 2024 to
2028 timeframe, and would allow producers and importers to estimate
their anticipated allocation and plan accordingly. Since EPA has
already gone through the process of identifying entities' high three
years of historic data, averaged those, and calculated respective
market shares, entities have more specific insight on what proportion
of available production and/or consumption allowances they would be
allocated if EPA continued with the same methodology, although EPA does
anticipate some entity-specific revisions due to corrected historic
data. In comments received on the Framework Rule, EPA heard from
regulated entities that they have long planning horizons and would
prefer allowances be allocated consistently for as long as possible.
Establishing a methodology for five years that continues forward an
approach that is similar to the one used for the calendar year 2022 and
2023 allocation provides a longer-term planning horizon for HFC
producers and importers. This will help enable entities to make
decisions about which HFCs, and HFC alternatives, to produce
[[Page 66378]]
and import as the market transitions away from high exchange value
equivalent (EVe) regulated substances. Second, EPA has conducted
multiple rounds of outreach and review and most entities have reviewed
and corrected their data, if needed. EPA has reviewed 2011-2019 data
against information available through other systems, such as import
paperwork filed with U.S. Customs and Border Protection (CBP), and
conducted outreach where significant inconsistencies were identified.
If a significant inconsistency was identified, EPA requested entities
correct the data or provide source materials to verify previously
provided figures. As such, the 2011-2019 dataset is well understood and
has received more review than any other set of years. Further, after
implementing this approach through the Framework Rule, EPA has not
identified any reasons that merit significantly changing course at this
time, especially given the regulated community has recently adjusted to
this new allocation program.
Since the Agency is proposing to look at entity-specific data from
such a wide range of years, EPA is proposing to average an entity's
three highest years of data (not necessarily consecutive), as opposed
to going with a single high year. Taking an average of multiple years
minimizes the effect of market fluctuations and mitigates the
possibility of an entity receiving a large share of allocations based
on a single very high year. Using an average of the three highest years
during the 2011-2019 period incorporates consideration of both industry
history and ongoing growth and market change. EPA recognizes that there
is no single year that is ``better'' for all market participants. There
is no year in which a forward-looking entity may not have been
stockpiling in preparation for a restriction on HFCs or new duties that
were imposed by the Department of Commerce. Though countries agreed to
the Kigali Amendment in 2016, efforts to amend the Montreal Protocol
took the better part of a decade. As such, taking an average of a wider
range of years is more equitable to all entities in the market. Each
entity receives its ``best'' years regardless of actions taken by other
entities.
To determine entity-specific consumption data and an entity's three
highest years, EPA intends to rely on production, import, export,
destruction, and transformation data reported to the Greenhouse Gas
Reporting Program (GHGRP),\21\ which parallels the approach taken in
the Framework Rule and in the Agency's allocation of calendar year 2022
general pool allowances. EPA acknowledges that the definition of
``importer'' under GHGRP could apply to multiple entities, such that
more than one entity could be considered an ``importer'' for purposes
of GHGRP. As a result, entities could have played varying roles in the
import activity, but still been appropriately considered an
``importer'' under GHGRP definitions. Importantly, the GHGRP definition
of importer is substantially similar to the definition of importer in
the 40 CFR part 84 regulations.\22\
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\21\ The GHGRP requires various facilities and suppliers to
annually report data related to GHGs to EPA (see 40 CFR part 98).
Subpart OO, ``Suppliers of Industrial Greenhouse Gases,'' is the
section relevant to reporting on HFC production and consumption.
Because the HFCs listed as regulated substances under the AIM Act
are industrial GHGs, EPA has collected data relevant to HFC
production and consumption as defined under the AIM Act. Further
discussion of the GHGRP can be found in the notices and dockets
related to the Framework Rule.
\22\ Compare 40 CFR 98.6 to 40 CFR 84.3.
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It is critical to develop an approach to allocation that helps
ensure that only one entity receives credit as the ``entity that
imported'' particular HFCs. For example, if both a consignee and an
importer of record received credit for the same historically imported
HFCs, this would double-allocate allowances for that single shipment.
This double-allocation would distort the allowance system such that it
was not a best available reflection of historic patterns. For purposes
of determining historic import levels, EPA intends to rely on the
entity that has historically reported the imports for a shipment. If
two or more entities report the same import to GHGRP, EPA would include
that import in the allowance allocation calculation of the entity that
first reported the import to GHGRP. EPA considers historic reporting to
GHGRP as indicative of the entity that took primary responsibility for
complying with EPA requirements for that import and considers this a
critical data point to determining who to credit that import to. EPA is
concerned that entities who took limited if any responsibility for the
import, including complying with EPA reporting requirements, may
attempt to claim that they are in fact the importer now that EPA has
begun implementing the AIM Act.
EPA is also considering whether to include more recent data in
determining allocation levels given that more recent data may be a more
accurate reflection of the current state of the HFC production and
import market. EPA requests comment on whether to expand the range of
years to use to develop each allowance holder's high three-year average
to include 2020 and 2021. EPA has not included these years in its
primary proposal because the Agency recognizes that production and
importation of HFCs in 2020 and 2021 were likely influenced by external
factors such as the COVID-19 pandemic, and supply chain disruptions. In
addition, EPA is concerned that data from 2020 and 2021 could be
distorted due to an entity's awareness that the AIM Act may be, or had
been, passed. Data from 2021, in particular, may be skewed given the
likelihood of stockpiling in advance of the Framework Rule becoming
effective and the associated restrictions on production and import of
regulated substances that began on January 1, 2022. Expanding the range
of years could also significantly change each entity's market share,
which could disrupt the market and negatively affect ongoing
adjustments to the HFC Allocation Program that have taken place in 2022
and 2023. Further, EPA is unaware of any environmental benefit
associated with changing the years used to determine allowance
allocations. For the reasons described, EPA's primary proposal is to
not use 2020 and 2021 data to determine entity-specific allocation
amounts. However, EPA requests comment on whether there are advantages
and disadvantages of including 2020 and 2021 data, and if so, what
those would be.
EPA is proposing to include data that dates as far back as 2011
because of potential concerns that data from more recent years,
particularly 2017-2021, could reflect attempts at market manipulation,
stockpiling, or other system gaming by some entities that were aware of
agreement of the Kigali Amendment to the Montreal Protocol on October
15, 2016, and/or development and consideration of the AIM Act by
Congress. By using only later years of data, and not data from the
earlier timeline, EPA could potentially unfairly give additional weight
to entities that had inflated numbers due to attempts at artificial
market positioning or stockpiling behavior ahead of the HFC phasedown.
EPA also considered using a rolling set of years, such as
allocating based on entities' prior three years of production or
consumption data, but decided against proposing this as an option.
Using a rolling average based on the most recent production or
consumption data would allow allocations for additional new entrants
beyond entities that are allocated allowances based on historic
production and import and as new market entrants from the set-aside
pool. Under EPA's Framework Rule, 40
[[Page 66379]]
CFR 84.15, and our primary proposal in this rule, any entity that did
not receive allowances as a new market entrant to import going forward
or that lacked production or import history from 2011-2019, would have
to purchase allowances from an entity willing to engage in a transfer.
As currently established, each transfer is a one-off transaction that
only applies to the year of the transfer. Unless an entity acquires a
different entity that holds allowances outright and receives a regular
allocation, this approach does not allow for an entity to secure
allowances for the duration of the allocation period. However, there
are many advantages of using a stable set of past years instead of
using more recent data, especially data from after the start of the HFC
Allocation Program. Many stakeholders have expressed concerns that if
EPA were to base allocations on production and import volumes in 2022
and later years, entities that transferred their allowances would
effectively reduce their market share and receive fewer allowances in a
future allocation. Likewise, entities that receive allowances through
an inter-company transfer would be gaining market share that could
increase their future allocation. In the proposal prior to the
finalized Framework Rule (86 FR 27203, May 19, 2021), EPA sought
advance input on what approaches to consider for 2024 and later years,
indicating that the methodology used to determine allowance allocations
for calendar years 2022 and 2023 may not be used for the 2024
allocation. Uncertainty about whether EPA may decide to allocate future
allowances on the basis of data from a rolling set of years rather than
from a fixed historical period may have contributed to reluctance from
some allowance holders to engage in transfers. This uncertainty would
be resolved over the intermediate future if EPA finalizes the approach
of continuing to use historic production and consumption data to
determine allowance allocations for calendar years 2024 through 2028.
Transfers are important for an efficiently functioning market and
ensuring the opportunity for full utilization of allowances. Basing
allowance allocations on data from a rolling set of years during this
timeframe could promote uncertainty among allowance holders and inhibit
the efficient transfer of allowances. EPA is concerned about finalizing
an allocation methodology that would disincentivize transfers unless
there were other compelling reasons to argue for such a methodology and
is therefore not proposing to use a rolling set of years to determine
entity-specific allocation amounts for the 2024 through 2028
allocations.
2. What other allocation methodologies did EPA consider?
As indicated in the proposal to the Framework Rule (86 FR 27150),
including in the section seeking advance comment to inform future
rulemakings, EPA has been considering other ways to undertake allowance
allocation beyond allocating allowances to entities based on historic
production and import activity at no cost (86 FR 27203). In considering
different allocation mechanisms, EPA considered multiple factors,
including ease of implementation for both the regulated community and
the U.S. government; consistency with the AIM Act; facilitating an
efficient market, such as by collecting and releasing data on
production, import, and inventories of HFCs; transparency and certainty
for regulated entities and the public; distributional effects, such as
on new entrants; responsiveness to changing market conditions (e.g.,
companies entering or existing the market, corporate mergers and
acquisitions, significant quantities of allowances unexpended at the
end of the year, or supply shortages or market disruptions for specific
HFCs); small business implications; minimizing the opportunity for
fraud; and other factors.
In developing this proposed rulemaking, the Agency considered
charging a fee for allowances or establishing a system to auction
allowances. These approaches have advantages, including returning value
to taxpayers and setting a visible price signal, which could provide
useful price information for the public and for market participants. A
fee or auction would be aimed at further incentivizing the highest
economically valued use due to the upfront expenditures needed for all
entities seeking allowances to produce and import HFCs. There is
extensive literature discussing the conditions where auctions may be
more suitable than other allocation methods.\23\ The academic
literature indicates that auctions may have potential advantages in
addressing challenges such as new entrants, ensuring efficient and
equitable allocations as market conditions change, and encouraging
competition and innovation.\24\ Both EPA, and the federal government
overall (for example, the Federal Communication Commissions' spectrum
auctions and the U.S. Treasury Department's sealed pay as bid and
uniform bid auctions on debt of various maturities), have experience
administering auctions of various formats.
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\23\ See, e.g., Administrative Conference of the United States,
Recommendation 2017-4: Marketable Permits (2017), https://www.acus.gov/sites/default/files/documents/Recommendation%202017-4%20%28Marketable%20Permits%29.pdf (citing relevant literature,
including the consultant's report, which further summarizes the
literature, available at https://www.acus.gov/sites/default/files/documents/Marketable%20Permits%20Report-final.pdf).
\24\ The 2017 review conducted by the Administrative Conference
of the United States also notes that ``even when an agency has
statutory discretion to use [an auction] program, such a program may
not be the most suitable regulatory tool to achieve an agency's
goal.'' See https://www.acus.gov/sites/default/files/documents/Recommendation%202017-4%20%28Marketable%20Permits%29.pdf.
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However, EPA also anticipates challenges with establishing a
potential fee-based or auction system and is not proposing to use these
methods of allocation in this proposed rulemaking. EPA and regulated
entities have experience implementing the allocation methodology set
for the calendar years of 2022 and 2023, which is similar to the system
that many entities also participated in for the phaseout of ODS under
Title VI of the Clean Air Act (CAA).\25\ Creating and administering a
different system would result in additional burden on EPA and
uncertainty for those involved in the early stages of the HFC
phasedown. EPA is also concerned that smaller entities with less
available capital may not be able to bear the initial costs of
purchasing allowances either through a fee system or through an
auction. EPA would also need to consider what safeguards would be
appropriate to deter or prevent efforts by well-capitalized entities,
particularly in an auction system, to artificially corner a portion of
the HFC market for their overall business gains.
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\25\ A key difference between the phaseout of ODS and this
program is that consumption and production of HFCs will not be
phased out entirely.
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For these reasons, EPA is not proposing to establish a fee-based or
auction system to allocate allowances in this proposed rule. These
considerations may change as the phasedown proceeds. EPA recognizes
that the market may face scarcity as HFC production and consumption is
phased down, and we may also see allowances unused as new alternatives
not subject to allocations replace HFCs. The use of an EV-weighted
system rather than chemical-by-chemical allocation in part addresses
these different market forces by providing flexibility about which HFCs
are produced and imported. EPA intends to consider all relevant
information when developing future rulemaking. To facilitate our
continued
[[Page 66380]]
consideration, separate and apart from this current rulemaking, EPA
invites advance comments on whether there are any current or potential
future disadvantages with the currently proposed allocation system that
could be addressed by an alternate allocation mechanism, as well as
comments on design features or timing options for alternate allocation
mechanisms that EPA could consider were the Agency to determine at a
future point that changes are warranted.
3. What did EPA consider in developing its proposal as to the
appropriate entities to be allocated allowances?
As outlined in section III.B.1 of this preamble, EPA is proposing
to use a similar methodology to calculate allocation quantities as the
initial framework used for allocating calendar year 2022 and 2023
production and consumption allowances, with adjustments to accommodate
new market entrants that received allowances from EPA on March 31,
2022. In developing this proposed approach, EPA has considered whether
to allocate production and consumption allowances to entities beyond
those that have historic production and import data.
As part of this deliberation, EPA has considered whether allowance
allocations can be used to incentivize certain behavior such as to
maximize reclamation and minimize releases of regulated substances.
Some commenters to the Framework Rule encouraged EPA to issue
allowances to reclaimers. The result of this suggestion could be that
reclaimers have allowances available to directly import virgin
regulated substances that they could use to rebalance refrigerant
blends that are slightly off specification after reprocessing recovered
refrigerant. The allowances could be transferred to another entity to
import or produce on the reclaimer's behalf, or could be used to ease a
reclaimer's ability to purchase regulated substances from another
entity. This could be an indirect way to foster the development of HFC
reclamation operations. However, EPA notes that reclaimers that have
historically directly imported were included in the Framework Rule
methodology and would be included under the primary proposed
methodology for this rule. EPA notes as well that several reclaimers
applied for, and received, new market entrant allowances from the set-
aside pool for calendar years 2022 and 2023. EPA does not view issuing
allowances to reclaimers that are not eligible based on the methodology
EPA is proposing to use for 2024 through 2028 (i.e., similar to the
methodology used for 2022 and 2023 including the additional allowances
issued to new market entrants) as a meaningful way to increase
opportunities for reclamation and recognizes that by doing so, EPA
would reduce the number of allowances available to other market
participants including other reclaimers. Moreover, EPA is exploring
options to promote reclamation under other sections of the AIM act
(e.g., under subsection (h) Management of regulated substances).
Further, the phasedown of HFCs increases opportunities for use of
reclaimed HFCs by restricting the amount of newly produced and imported
HFCs that can enter U.S. commerce.
As noted previously in this section, EPA is not proposing to
establish a set-aside pool of allowances for calendar years 2024
through 2028. In the Framework Rule, EPA created a set-aside pool of
allowances to be allocated no later than March 31, 2022. The prior set-
aside pool was created for three types of entities: application-
specific allowance holders, historic importers that were under the
GHGRP reporting threshold and did not receive general pool allowances,
and new market entrants. The first two categories were created for
entities that may not have known of or fully understood the regulatory
system created in the Framework Rule given that the Agency undertook
the rulemaking in 270 days at Congress's direction and was implementing
a program under a new statute. This concern is no longer applicable.
Under 40 CFR part 84, entities are required to expend allowances for
import and production of regulated substances as of January 1, 2022;
therefore, EPA anticipates that entities active in the HFC market are
now well aware of EPA's HFC phasedown program. The third group eligible
for set-aside allowances was new market entrants. EPA determined in the
Framework Rule it was appropriate to exercise its discretion to create
a small set-aside pool of allowances for entities looking to enter the
HFC import market. It was appropriate to consider this as a one-time
opportunity at the initiation of the HFC phasedown program. EPA is not
privy to individual entities' decisions on whether to apply for new
market entrant allowances, but entities were provided notice of the
opportunity and many applied. While the number of consumption allowance
holders doubled from the initial allocation with the addition of the
eligible new market entrants, these new entrants hold a small
percentage of the overall number of allowances issued. EPA recognizes
that the goal of the AIM Act is to establish a national phase down of
HFC production and consumption by 85 percent by 2036, and therefore,
while the Agency did offer this one-time opportunity, EPA does not view
further allocations for a set-aside pool and/or allowances for entities
who have not previously produced and imported HFCs as supporting the
AIM Act's objectives.
C. How is EPA accounting for past production or import activity to
determine allocation eligibility?
In order to be eligible to receive general pool allowances for 2024
through 2028 based on historic production and import activity (i.e.,
for entities that produced and imported regulated substances in 2011
through 2019), EPA is proposing that an entity must have produced (for
production and consumption allowances) or imported (for entities only
receiving consumption allowances) HFCs in 2021 or 2022. EPA had a
similar requirement in the Framework Rule, specifically requiring
production or import in 2020.\26\ This additional eligibility
requirement, that an entity has demonstrated import or production
activity in recent years, is intended to exclude entities from
receiving allocations that are no longer undertaking the activities for
which allowances are required. EPA is interested in avoiding allocating
to entities that had historic import or production data in the 2011-
2019 timeframe, and have since ceased operations or transitioned away
from HFC production or import. Allocating allowances to entities that
cannot or will not use them could be disruptive to the market during
the phasedown if allowances go unexpended or could result in windfall
profits to an entity that will only use the allowances to transfer for
a price. The practical effect of not allocating allowances to an entity
due to their inactivity would be a pro rata increase of allocation
levels to other entities receiving allowances from the general pool
allocation.
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\26\ EPA also allowed for an entity to identify individual
circumstances for not importing in that year due to the COVID-19
pandemic, which is no longer applicable. EPA is not proposing a
mechanism to allow an entity to request unique consideration if they
did not produce or import in 2021 or 2022.
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Relying on information from 2021 or 2022 would incorporate more
recent activity than was used for the calendar year 2022 and 2023
allocations, which required production or import in 2020,
[[Page 66381]]
or for purposes of allocating consumption allowances, an entity to
identify individual circumstances for not importing or producing in
2020, given that it was an unusual year due to the COVID-19 pandemic.
Allowing two years, as opposed to a single year, provides additional
time to demonstrate activity in the market, and is intended to reduce
the impacts of supply chain delays, temporary changes in demand, or
other business decisions. Some entities also import small volumes of
HFCs and may not need to import every year. EPA is proposing to use a
fixed set of years (i.e., 2021 and 2022) to determine eligibility for
entities to be allocated allowances for calendar years 2024 through
2028 to provide a degree of clarity and certainty to entities during
this period in order to minimize disruption to existing supply chains
that have adjusted to the 2022 and 2023 allowance allocations. If this
approach is finalized as proposed, all market participants will be able
to generally understand their own and other allowance holders' market
share for the 2024 through 2028 period as of October 1, 2023, because
there would not generally be shifts in how many entities EPA is
allocating allowances to and the relative share of allowances going to
those entities. EPA considered proposing to use a rolling set of years
to confirm activity, but using a rolling set of years would not provide
the same stability since allowance holders could come into and out of
the allocation system, hereby affecting everyone's relative share of
available allowances. EPA also does not want to incentivize entities in
each subsequent rolling set of years' entities to continue importing or
producing small quantities that would otherwise be outside the entity's
plans in future years just to maintain position to receive future
calendar year HFC allowances. Looking to behavior in 2021 or 2022 would
also have administrative benefits to EPA. For example, determining
annual allocations would be more streamlined because EPA would be
relying on data that has been vetted and reviewed at a single point in
time that is in advance of the calendar year 2024 allocation as well as
all allocations through calendar year 2028.
EPA's primary proposal is to not apply this eligibility criteria
for new market entrants, and instead allocate allowances to all new
market entrants as described in section III.B.1 of this preamble, but
EPA is considering and taking comment on whether EPA should require
that new market entrants import in 2022 to be eligible for allocation
of allowances for calendar years 2024 through 2028. Most new market
entrants are, as their name suggests, new to the HFC import market and
would not reasonably be expected to have any import activity in 2021.
Therefore, if the Agency applies eligibility criteria to new market
entrants at all, it seems reasonable to look to 2022 for import
activity. Accordingly, for these entities, EPA would not be able to
look across two years for import for most new market entrants, unlike
for general pool participants. EPA anticipates that most new market
entrants would make use of allocated allowances and import regulated
substances in 2022, so it may be reasonable to look for this action to
determine whether the new entrants did in fact enter the market and if
they should maintain future eligibility. On the other hand, EPA
previously recognized that new market entrants might have difficulty
operationalizing their business to begin importing regulated substances
in 2022 if the entity was fully new to this aspect of the import
business. As a result, in the Framework Rule the Agency took the
position that EPA would ``not reduc[e] allowances to new market
entrants in 2023 for failing to use all the allowances issued in
2022,'' (86 FR 55159).
If the approach to determining eligibility for general pool
allowances from 2024 through 2028 is finalized as proposed, for
purposes of determining whether an entity imported or produced
regulated substances in 2021, the Agency intends to rely on data that
have been reported to EPA under the GHGRP.\27\ Entities who imported
HFCs in quantities below the GHGRP reporting threshold (i.e., 25,000
MTCO2e for the year) who wish to be considered for
allowances, should report their import and export activity data through
the electronic Greenhouse Gas Reporting Tool (e-GGRT) no later than the
close of the comment period on December 19, 2022. EPA will not consider
data submitted after this date for purposes of issuing allowances under
the AIM Act for 2024 and later years. For purposes of determining
whether an entity imported or produced regulated substances in 2022,
EPA intends to rely on data that have been reported pursuant to the 40
CFR part 84 requirements. EPA intends to rely on data reported no later
than February 14, 2023, which aligns with the reporting deadline for
fourth quarter calendar year 2022 HFC reports under the HFC allocation
requirements at 40 CFR part 84, subpart A.\28\ Further, EPA is
proposing that in cases where allowances were not expended at the time
of production and/or import of HFCs in 2022, that production and import
would not count as activity in 2022 for eligibility purposes. In other
words, for 2022, EPA would only consider production and import of HFCs
where allowances were expended as required when determining whether an
entity is eligible for allowances. EPA has established a GHGRP Help
Desk to assist potential reporters with issues related to registering
and electronic reporting. The hotline can be reached at
[email protected] or 1-877-444-1188 (toll free).
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\27\ In the limited situations where data on certain HFCs are
not required to or cannot be reported to the GHGRP, e.g., production
of HFC-23 that is created during production of HCFC-22, EPA would
continue to rely on verified submissions from entities no later than
the close of the comment period on December 19, 2022.
\28\ For more information, visit https://www.epa.gov/climate-hfcs-reduction/hfc-allocation-rule-reporting-and-recordkeeping.
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Alternatively, EPA is taking comment on simply basing allocations
on historic reported data between 2011 and 2019, without including an
additional eligibility requirement relating to whether the entity
produced or imported HFCs in recent years, such as 2021 or 2022. As
noted previously, EPA is concerned that this approach would result in
allocating to entities that are no longer in the HFC production or
import business, and may no longer be in business at all.
D. Can allowances be transferred or conferred prior to the calendar
year?
EPA is proposing to clarify that entities may confer or transfer
allowances at any point after they are allocated until the allowance
expires at the end of the calendar year for which it was allocated.
Allowances can only be expended to cover imports or production in the
calendar year for which they are allocated, but entities can confer or
transfer allowances before January 1 of the calendar year. 40 CFR
84.5(d) provides that all production, consumption, and application-
specific allowances are valid only for the calendar year for which they
are allocated (i.e., January 1 through December 31). The intent of this
provision was to state that allowances could only be expended in the
calendar year for which they were issued. However, use of the term
``valid'' could be read as ambiguous with regard to whether it allows
for transfers and conferrals before the calendar year. EPA is proposing
to amend this prohibition to more clearly state that entities may
transfer and confer their allowances upon their allocation, including
ahead
[[Page 66382]]
of January 1 of the calendar year for which the allowances were
allocated.
The Agency hopes that this added clarity would facilitate allowance
holders' planning for that upcoming year. EPA encourages allowance
holders to undertake transfers and conferrals early in the year and,
where possible, well in advance of when regulated substances would need
to be produced or imported. Under the existing 40 CFR part 84
regulations, the entity that is producing or importing the regulated
substances must have the allowances in their possession as required
(see section V.A of this preamble) and at the time that allowances are
required to be expended.
IV. How is EPA proposing to update the consumption baseline?
This section explains how EPA determined the consumption baseline
in the Framework Rule, how it proposes to update the baseline, and how
it plans to further update associated data. 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. In the
Framework Rule, EPA calculated and codified the production and
consumption baselines according to the formulas outlined in subsection
(e)(1) of the AIM Act. After EPA finalized these baselines, a company
informed EPA that they had misreported data previously reported to EPA
that factors into the consumption baseline. EPA is now proposing to
update the consumption baseline and associated phasedown schedule with
this corrected dataset. Separate and in parallel to this action, EPA is
also providing a final opportunity for entities to revise their HFC
data from 2011 through 2021 for purposes of issuing allowances under
the AIM Act.
A. How did EPA determine the consumption baseline in the Framework
Rule?
The AIM Act instructs EPA to calculate the consumption baseline by,
among other things, using the average annual quantity of all regulated
substances consumed in the United States from January 1, 2011, through
December 31, 2013. EPA used multiple sources of data to calculate HFC
consumption figures for 2011 through 2013: (1) Data reported to EPA's
GHGRP; (2) data received in response to the notice of data availability
published February 11, 2021 (86 FR 9059); (3) data from the Automated
Commercial Environment (ACE) and confirmed through letters sent out
under CAA section 114 (EPA ICR 2685.01); and (4) data received in
response to the notice of proposed rulemaking for the Framework Rule by
the comment due date. Through these sources, EPA received new or
revised production, import, export, and destruction data, all of which
affected the final baseline values. Based on the data reviewed and
collected through these robust efforts, EPA codified the final
consumption baseline as 303,887,017 Metric Tons of Exchange Value
Equivalent (MTEVe) (40 CFR 84.7(b)(2)). A complete description of EPA's
process in developing the codified baseline figure can be found in the
Framework Rule at 86 FR 55137--55142.
In subsection (e)(2)(C) of the AIM Act, Congress provided the HFC
phasedown schedule measured as a percentage of the baseline. In the
Framework Rule, EPA codified this phasedown schedule at 40 CFR 84.7(a).
EPA also codified the total production and consumption in MTEVe for
regulated substances in the United States in each year by multiplying
the finalized production and consumption baselines by the percentages
of the phasedown schedule. EPA codified total production and
consumption allowance quantities that could be allocated at 40 CFR
84.7(b)(3).
B. How is EPA proposing to adjust the consumption baseline?
After EPA finalized the Framework Rule, one company informed EPA
that the 2011 and 2012 HFC import data that it had reported to the
GHGRP and certified per 40 CFR 98.4(e)(1) as true, accurate, and
complete under penalty of law, was, in fact, significantly more than
its actual import quantities. Because EPA used the company's 2011 and
2012 HFC import data in the calculation of the consumption baseline,
the Agency's calculated and codified consumption baseline was high. The
company has since submitted and certified revised reports. EPA has
verified the amended data by reviewing the importer's invoices and
comparing the reported data to import data provided by CBP. EPA is
proposing to update the codified consumption baseline with the
corrected data. Specifically, EPA is proposing to revise the
consumption baseline from 303,887,017 MTEVe to 300,257,386 MTEVe, which
is a decrease of 3,629,631 MTEVe to account for this error. Because the
erroneous data related only to imports, the Agency's previously
calculated production baseline is not affected and EPA is not proposing
to reopen the production baseline in this rulemaking. There are only
nine known HFC production facilities and given EPA's experience with
these reporters, the Agency does not expect that there are material
errors in their data submissions from the 2011-2013 timeframe.
The proposed revision of the baseline amounts to about a one
percent change in the baseline. This is not an insignificant
difference, but once EPA applies the relevant phasedown step to the
baseline and then allocates the resulting allowances among eligible
recipients, the change in baseline is expected to have a small effect
on individual entities' allocations. Further, this revised baseline, if
finalized, would start affecting allowance allocations for calendar
year 2024. Because of the prior framing of EPA's regulations,
specifically the fact that there was no prior allocation methodology
that would apply to calendar year 2024 allowances and beyond, no
entities should have had a realistic expectation of allowance
allocation levels. Therefore, EPA expects that this alteration of
baseline would not affect the regulated communities' reasonable
reliance interests.
As outlined in section IV.C of this preamble, EPA is going through
a process under the AIM Act to provide a final opportunity for entities
to confirm, and if necessary correct, the data available to EPA on
those entities' historic consumption activities to inform future
allocation calculations. Should other entities identify misreporting in
2011 through 2013 through that process, and sufficiently certify and
verify the corrected numbers to EPA, the Agency would include those
revised figures in the proposed revision to the consumption baseline in
addition to the revision outlined in the prior paragraph.
Data that are submitted under the GHGRP in e-GGRT already have
undergone a variety of verification checks during and after report
submission. Facilities are sent messages about potential errors in
their report; they can either reply with an explanation of the unusual
values, or they can resubmit their report to correct any errors and
certify the accuracy of the submission. EPA may also request copies of
bills of lading, invoices, or CBP entry forms in order to verify
reports.
In 2021 in order to verify accurate data for calculation of the AIM
Act baseline and allocation of allowances, EPA compared import data
submitted to GHGRP to import data from CBP as an additional form of
verification. If the sum of metric tons of HFCs reported to e-GGRT
diverged significantly from the sum of metric tons of imports under
HFC-related Harmonized Tariff Schedule (HTS) codes in CBP records,
[[Page 66383]]
these submissions were flagged for possible issues. The Agency
generally contacted each facility that was flagged requesting that they
either:
Provide documentation (e.g., bills of lading, invoices,
and/or CBP Entry Forms substantiating their imports), or
Resubmit their report to GHGRP to correct potential errors
that would account for why the reported GHGRP data did not more closely
align with data reported to CBP.
EPA staff reviewed resubmitted reports and supporting
documentation. Any issues found in the documentation review resulted in
additional messages sent to the facility to verify reported data.
Additional steps taken to verify the data include quality assurance
reviews by EPA staff and steps to confirm corporate or common ownership
of reporting entities for each allowance holder.
Revising the consumption baseline would change the total
consumption cap in MTEVe for regulated substances in the United States
in each year after the revision takes effect. In subsection (e)(2)(C)
of the AIM Act, Congress provided the HFC phasedown schedule measured
as a percentage of the baseline, which EPA codified at 40 CFR 84.7(a).
EPA also codified the total production and consumption in MTEVe for
regulated substances in the United States in each year by multiplying
the finalized production and consumption baselines by the percentages
of the phasedown schedule. Therefore, EPA proposes to revise the table
of production and consumption limits at 40 CFR 84.7(b)(3) by replacing
the current values in Table 2, column 3 of this preamble with the
values in column 4.
Table 2--Revised Limit of Total Production and Consumption Allowances
----------------------------------------------------------------------------------------------------------------
Previously
Total production codified total Proposed revised
Year (MTEVe) consumption total consumption
(MTEVe) (MTEVe)
----------------------------------------------------------------------------------------------------------------
2024-2028.............................................. 229,532,771 182,332,210 180,154,432
2029-2033.............................................. 114,766,386 91,166,105 90,077,216
2034-2035.............................................. 76,510,924 60,777,403 60,051,477
2036 and thereafter.................................... 57,383,193 45,583,053 45,038,608
----------------------------------------------------------------------------------------------------------------
For additional context and transparency, we note that separate from
this rulemaking process, EPA has recalculated the number of allowances
that should have been allocated to the company that had reported
erroneous data. EPA took administrative consequences to retire portions
of that company's allocated calendar year 2022 and 2023 consumption
allowances equal to the difference between the allocation level based
on the updated historical import data and what was previously
calculated by the Agency based on misreported data.
C. What other opportunities is EPA providing to further update data?
Separate from this action, EPA is providing a final opportunity for
entities to verify, and if necessary correct, the data available to EPA
on those entities' historic consumption activities from 2011 through
2021 for purposes of the AIM Act. EPA sent an electronic communication
or letter to all entities that were known, or likely, to have had
consumption activity of regulated substances from 2011 through 2021
that they had until September 26, 2022, to verify, and if necessary
correct, the data available to EPA on those entities' historic
consumption activities from 2011 through 2021.\29\ EPA is providing
this final opportunity to entities to make any corrections to historic
data; after this point, EPA does not intend to consider any data
revisions in allocation decisions.\30\
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\29\ This request was for purposes of implementing the AIM Act.
Nothing in this letter or in the complementary process described
below relieves any entity of obligations under the GHGRP regulations
codified in 40 CFR part 98.
\30\ These revisions would be taken into account when
determining the annual allocation issued by October 1 of each year
for 2024 and future year allocations. If information reveals an
entity has provided false, inaccurate, or misleading information,
EPA reserves the right to issue administrative consequences to
adjust allowances downward (in the same year or a subsequent year).
Regardless of whether or not EPA applies an administrative
consequence, EPA may also pursue any and all appropriate enforcement
action.
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If there is any entity that did not receive a letter or electronic
communication from EPA that had consumption activity of regulated
substances from 2011 through 2021, EPA is hereby providing notice that
for the purposes of future HFC allowance allocations under the AIM Act,
EPA will not consider any data unless submitted to EPA through e-GGRT
by the close of the comment period on December 19, 2022. To allow EPA
to verify the reported data in a timely manner, anyone reporting past
consumption data for the first time must provide transactional records
(e.g., bills of lading, invoices, or CBP entry forms). Failure to
provide EPA with sufficient documentation at the time of submission to
verify these reports may prevent EPA from considering the data in
allowance allocations.
This final opportunity for AIM Act purposes would help ensure that
allowance allocations are based on the most accurate data available.
EPA notes that entities may be referred to EPA's enforcement office for
potential reporting violations under the CAA and EPA may issue
administrative consequences to adjust 2022 and/or 2023 allowances where
appropriate.
V. How is EPA proposing to revise requirements related to allowances
for import?
EPA is proposing to make amendments that codify our existing
practice for determining which calendar year allowances must be
expended for an import as well as who can expend allowances.
Additionally, EPA is proposing to specify the requirements for the
importation of heels \31\ when the precise quantity remaining is
uncertain. EPA is making these proposals based on the experience gained
in implementing the HFC phasedown program to date under the existing 40
CFR part 84 regulations and establishing a system for consistent
implementation and enforcement.
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\31\ ``Heel'' is defined at 40 CFR 84.3 as ``the amount of a
regulated substance that remains in a container after the container
is discharged or offloaded (that is no more than 10 percent of the
volume of the container).'' EPA views this as an amount that is no
more than 10 percent by weight of the amount of that same substance
that is typically sold in a ``full'' container of that size. For
example, if a ``full'' cylinder of HFC-134a typically contains 25
pounds of HFC-134a, then 2.5 pounds or less of HFC-134a remaining in
the cylinder would be considered a heel.
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[[Page 66384]]
A. Codifying the Point in Time That an Allowance Must Be Expended to
Import Regulated Substances
Currently in 40 CFR 84.5(b)(1)(i) EPA prohibits persons from
importing bulk \32\ regulated substances except, among other conditions
and with limited exceptions, ``[b]y 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.'' Through implementing the HFC allocation system,
EPA has described the exact point in time used to determine which
calendar year allowance would need to be expended for each import of a
regulated substance. EPA has spoken explicitly to this issue, including
through a December 21, 2021, post on our HFC phasedown Frequently Asked
Questions web page.\33\ EPA stated that a marine vessel waiting off the
coast of the United States in December 2021, that berthed in January
2022, would be required to expend a calendar year 2022 allowance for
any HFCs that berth at a port in the United States in 2022. EPA is
proposing to incorporate this previously stated interpretation into the
40 CFR part 84 regulatory text. Providing specificity on this point in
the regulations would help ensure consistent and accurate accounting
associated with allowance use for all importers.
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\32\ ``Bulk'' is defined at 40 CFR 84.3 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.''
\33\ EPA. Phasedown of Hydrofluorocarbons Final Rule Frequently
Asked Questions. https://www.epa.gov/climate-hfcs-reduction/phasedown-hydrofluorocarbons-final-rule-frequently-asked-questions.
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The AIM Act and EPA's implementing regulations define ``import''
\34\ broadly to mean:
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\34\ The definition of ``import'' is intended to allow for
effective implementation of the AIM Act's HFC phasedown provisions
and does not, nor was it intended to, match CBP's definition. The
definition of ``import'' is similar to, but different from, the
definition of ``date of importation,'' which is a CBP defined term
and is discussed later in section VI.A.1 of this preamble.
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. Offloading used regulated
substances \35\ recovered from equipment aboard a marine vessel,
aircraft, or other aerospace vehicle during servicing is not
considered an import.
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\35\ EPA defines ``used regulated substances'' (or used HFCs) in
40 CFR 84.3 as ``regulated substances that have been recovered from
their intended use systems (including regulated substances that have
been, or may be subsequently, recycled or reclaimed).''
EPA is not proposing to amend this regulatory definition given that it
matches the definition provided by Congress in the AIM Act. However,
EPA is proposing a specific regulatory definition of when an allowance
must be expended for the import of bulk regulated substances. Under
this proposed approach, EPA would revise the prohibition language in 40
CFR 84.5(b)(1)(i) to remove the point that an allowance must be
expended ``at the time of import'' and instead require that an
allowance be expended at the time of ship berthing \36\ for vessel
arrivals, border crossing for land arrivals such as trucks, rail, and
autos, and first point of terminus in U.S. jurisdiction for arrivals
via air.
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\36\ EPA has and continues to interpret berth to mean ``to moor
(a ship) in its allotted place at a wharf or dock.''
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If EPA were to finalize this proposed regulatory revision, EPA
proposes to also require that the importer of record for the purposes
of compliance with the final rule be in possession of allowances in the
amount that will need to be expended at the time of filing their
advance report under 40 CFR 84.31(c)(7). As explained in the Framework
Rule, this advance notice reporting requirement is intended to allow
``EPA to verify if allowances are available or the HFCs have prior
approval for import in the case of HFCs imported for destruction or
transformation under 40 CFR 84.25, or imported for transshipment under
40 CFR 84.31(c)(3), and confirm whether a shipment should be allowed to
clear Customs or not'' (86 FR 55186). If an entity does not possess
requisite allowances for the import of bulk regulated substances at the
time of the advance notice reporting, EPA will not be able to verify if
allowances are available and whether the shipment meets EPA's HFC
requirements to be released from CBP's custody. Given that advance
reporting is required, no later than fourteen days \37\ before
allowances must be expended, EPA does not anticipate this proposed
requirement would be a burden on regulated entities and would have
significant benefits for EPA implementation and enforcement efforts.
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\37\ Currently under EPA's regulations, importers are required
to provide advance notification of import no later than 14 days
prior to import. As explained in a subsequent section, EPA is
proposing to modify and take comment on these requirements based on
the mode of transportation.
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For context, the point in time that a vessel berths, a truck
crosses the border or the first point of terminus in U.S. jurisdiction
for planes may be reflected as the ``Conveyance Arrival'' date for
shipments, which importers or their brokers with access to the
Automated Broker Interface (ABI) may find through an ACE Cargo
Manifest/In-Bond/Entry Status Query. However, regardless of the date
identified in ABI as the ``Conveyance Arrival,'' it is the importer's
obligation, or it would be the importer of record's obligation as
proposed in this rulemaking and discussed below in section V.B of this
preamble, to ensure that it has expended the appropriate calendar year
allowances in the appropriate quantity to align with regulatory
requirements.
The Framework Rule at 40 CFR 84.5(b)(1)(i) prohibits the
importation of bulk regulated substances without expending the required
allowances, with limited exceptions. Since the definition of ``import''
in the AIM Act and the 40 CFR part 84 regulations finalized in the
Framework Rule includes an ``attempt to land on, bring into, or
introduce into, any place subject to the jurisdiction of the United
States,'' it is clear that the existing statutory and regulatory
framework prohibit an entity from attempting to land, bring, or
introduce regulated substances into the United States without expending
the required allowances, unless the importer meets one of the limited
exceptions in the regulations. EPA does not intend to narrow prohibited
behavior as defined under the AIM Act and the associated scope of
liability with attempts to land, bring, or introduce regulated
substances into the United States. We are proposing to add language at
40 CFR 84.5(b) that states: ``No person may attempt to land bulk
regulated substances on, bring regulated substances into, or introduce
regulated substances into, any place subject to the jurisdiction of the
United States without meeting one of the categories set forth in 40 CFR
84.5(b)(1).'' These proposed changes to 40 CFR 84.5(b) maintain
liability for attempting to land, bring, or introduce regulated
substances into the United States without requisite allowances.
It is possible at the final rulemaking stage for EPA to not amend
the general prohibition provided in 40 CFR 84.5(b)(1)(i). However, EPA
identified a need through implementation of the Framework Rule to
describe to importers which calendar year
[[Page 66385]]
allowance must be expended for a specific import. Since the process of
importing has multiple different events that play out over a period of
days, weeks, and months, EPA previously described which year's
allowances would be needed in case-specific examples as well as through
the above-cited post on our web page to provide direction as to which
year's allowances an individual import would be counted against for
compliance purposes.
As an alternative proposal, EPA is considering revising text at 40
CFR 84.5(b)(1)(i) to specify that the calendar year allowances that
must be expended are based on the time of ship berthing for vessel
arrivals, border crossing for land arrivals such as trucks, rail, and
autos, and first point of terminus in U.S. jurisdiction for arrivals
via air. Such specificity is appropriate given that identifying a
single point in time facilitates determination of which calendar year
allowances must be expended.
B. Who must expend allowances for import?
EPA proposes to specify that only the importer of record can expend
allowances for an import of regulated substances. Under CBP
requirements, the importer of record is ultimately responsible for the
correctness of the entry documentation and all associated duties,
taxes, and fees.\38\ Specifying that only the importer of record can
expend allowances for an import would facilitate clarity, transparency,
and accountability. It can be difficult for EPA to compare import
records and other filings from CBP against advance notification records
and the balance sheet of existing allowance holders without a clear
expectation of how the entity that will expend allowances for an import
of regulated substances would be identified in CBP filings. This can
slow down EPA and CBP processing of imports at a minimum,\39\ and in
the worst-case scenarios can hamper EPA's ability to identify shipments
to be held at the border to halt potentially illegal shipments from
entering the United States. Requiring that only the importer of record
may expend allowances for a shipment would address this difficulty
because EPA would be able to advise CBP to hold or deny entry of
merchandise where the importer of record is not an allowance holder or
had not filed appropriate reports for the destruction, transformation,
or transhipment of imported merchandise.
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\38\ CBP. Tips for New Importers and Exporters. https://www.cbp.gov/trade/basic-import-export/importer-exporter-tips.
\39\ As a real-world example, during EPA review of HFC imports,
there was a single import entry with six unique entities (referred
to as parties), where at least three parties, based on their named
roles in the entry, could expend allowances to cover the import
under EPA's existing regulations. This situation can be particularly
confusing and lead to uncertainty if multiple listed parties in an
entry are allowance holders.
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The Agency is also concerned about instances where allowance
holders may try to circumvent the requirements in 40 CFR 84.19,
including but not limited to the requisite offset for inter-company
transfers of allowances. EPA has received inquiries from entities
seeking to facilitate imports on an allowance holder's behalf where the
facilitating entity would be listed on all available CBP paperwork and
appear in meaningful ways to be the ``importer.'' In such instances, it
would seem that the facilitating entity is truly importing regulated
substances, and using a separate entity's allowances to do so. In such
an instance, it seems more in line with existing EPA regulations and
the AIM Act that either the allowance holder act more directly in the
act of importing or for the allowance holder to transfer allowances to
the facilitating entity. Making the regulatory change proposed in this
section would help lead to such an outcome and would strengthen EPA's
ability to track the importation of regulated substances and
expenditure of allowances and support compliance assurance.
The Framework Rule at 40 CFR 84.3 defines ``importer'' broadly to
include the importer of record and any person who imports a regulated
substance into the United States, the person primarily liable for the
payment of any duties on the merchandise or an authorized agent acting
on his or her behalf, the consignee, the actual owner, and the
transferee, if the right to draw merchandise in a bonded warehouse has
been transferred. The Framework Rule at 40 CFR 84.5(b)(2) states that
``[e]ach person meeting the definition of importer for a particular
regulated substance import transaction is jointly and severally liable
for a violation of paragraph (b)(1) of this section, unless they can
demonstrate that another party who meets the definition of an importer
met one of the exceptions set forth in paragraph (b)(1).''
These two sections of the regulations help EPA maintain the
integrity of the HFC Allocation Program by imposing broad liability on
parties involved in importing HFCs while providing regulated parties
with a flexible approach to contractually allocate risk. Without this
approach, EPA could be forced to pursue enforcement actions for illegal
imports against insolvent entities or entities without assets in the
United States.
In order to align the proposal to only allow the importer of record
to expend allowances with the existing regulations, we are also
proposing to amend 40 CFR 84.5(b)(2) to make it clear that a person who
meets the definition of an importer will be liable unless they can
demonstrate that the importer of record possessed and expended the
appropriate allowances. This would clarify that while the importer of
record must be the entity possessing and expending allowances for
imports of bulk regulated substances, if this requirement is not met,
EPA has discretion to pursue enforcement action and/or administrative
consequences on all entities that meet the definition of importer for
violations of those requirements. This approach will encourage all
parties who meet the definition of importer under EPA's regulations to
ensure compliance with the HFC Allocation Program, provide regulated
parties with a flexible approach to contractually allocate risk, and
facilitate EPA's compliance evaluations.
Nothing in this proposal is intended To alter the liability
provision at 40 CFR 84.5(b)(2).
C. Existing Requirement To Expend Allowances for Regulated Substance
Components of Blends
In addition to clarifying when an allowance must be expended and
the entity permitted to expend allowances for import, EPA is proposing
revisions to 40 CFR part 84.5(b)(1) to reflect and further clarify the
existing requirement that allowances must be expended to import bulk
regulated substances regardless of whether the import is of an HFC that
is imported as a single component substance, i.e., neat substance, or
whether the HFC is part of a multicomponent substance, i.e., a blend or
mixture containing one or more regulated substances.
The requirement to expend allowances equivalent to the EVe of a
regulated substance that is a component of a blend when the blend is
imported in bulk is based on a straightforward reading of the statutory
language and was already made clear in the Framework Rule (86 FR
55133). EPA stated in the Framework Rule ``allowances [are] necessary
to produce or import [a] blend, or more precisely, the regulated HFC
components contained in the blend'' (86 FR 55142). Under the Agency's
existing approach, the requisite number of allowances to import a
multicomponent substance in bulk is determined by the exchange
[[Page 66386]]
values of the blend components that are regulated substances. If a
blend contains multiple regulated substances, then the exchange values
of each component are used to determine the number of necessary
allowances (86 FR 55133-55134). If a blend contains components that are
not regulated substances, then those components are not included in
determining the number of necessary allowances. While the Framework
Rule already made this requirement clear, we are proposing to revise
the regulations so that they more explicitly reflect the already
existing requirement to expend allowances for import of bulk
multicomponent substances equivalent to the EVe quantity of regulated
substance components contained within the blend. This proposed change
to the regulations would therefore further enhance clarity but would
not further change the scope of existing requirements.
D. Establish Presumed Amount for Heel Imports of Unknown Quantity
Many cylinders when ``empty'' still retain a residual amount of its
contents, and some cylinders contain more than a heel if not all the
contents are used. Removing this ``heel'' or remaining HFC requires the
use of recovery equipment, like that used to recover refrigerant from
an appliance. Through the Framework Rule, EPA has required that any
import of bulk regulated substances in any quantity, including heels,
requires the expenditure of allowances (86 FR 55183). In the Framework
Rule EPA defined a heel as ``the amount of a regulated substance that
remains in a container after the container is discharged or offloaded
(that is no more than 10 percent of the volume of the container)'' (40
CFR 84.3; 86 FR 55183).\40\ During early implementation of the
requirement that allowances are required for the importation of heels
of regulated substances, some entities have expressed concern that
there may be situations where an entity does not know the precise
weight of the heel imported until the container arrives at the entity's
U.S. facility. Because the heel is the residual remainder left in a
container, EPA understands that entities would know the type of
regulated substance of which the heel is composed, but may not know the
precise volume or weight of regulated substance remaining. Importers of
regulated substances must expend allowances corresponding to the
exchange-value weighted equivalent, which is obtained by multiplying
the mass of the regulated substance by the exchange value particular to
that given regulated substance. An entity needs to know the volume or
weight of the heel to calculate the amount of allowances necessary to
expend for the import of that heel.
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\40\ EPA views this as an amount that is no more than 10 percent
by weight of the amount of that same substance that is typically
sold in a ``full'' container of that size. For example, if a
``full'' cylinder of HFC-134a typically contains 25 pounds of HFC-
134a, then 2.5 pounds or less of HFC-134a remaining in the cylinder
would be considered a heel.
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To address this potential concern, EPA proposes to establish a
standard presumption of an HFC heel content of 10 percent of the total
potential volume of that container in EVe terms, if the heel weight has
not been measured or documented prior to import. This standard
presumption, by its terms, would only be available for the import of a
heel, which was previously defined in the Framework Rule as ``the
amount of a regulated substance that remains in a container after the
container is discharged or offloaded (that is no more than 10 percent
of the volume of the container)'' (40 CFR 84.3; 86 FR 55183). Because
10 percent is the upper bound of the volume of the container that a
regulated substance could comprise and still be considered to be a
``heel,'' and the standard presumption, if finalized, would only be
available for a shipment that meets the regulatory definition of a
``heel.'' EPA is proposing the standard presumption at the 10 percent
level as an inherently conservative estimate of what quantity would be
a heel in a container. If an entity wanted to take advantage of this
standard presumption, under the proposed approach that entity would be
required to expend allowances equivalent to 10 percent of the volume of
the container being comprised of the regulated substance that is
residual in the container. Under this proposed approach, the entity
would also utilize the 10 percent presumption for the advance
notification requirement of 40 CFR 84.31(c)(7). The proposed standard
presumption is intended to only apply in situations where an entity is
importing a heel of a regulated substance (i.e., the container contains
10 percent or less of the total potential volume of the container) and
the entity does not know the precise quantity, volume, or weight of the
heel. If the quantity of HFCs in the container is known (or the
importer should have had reason to know), then the regulations would
apply as for any other shipment, i.e., allowances would need to be
expended to cover the quantity of HFCs held in the container. Given the
possibility that an importer could use this provision as a way to
underreport how much HFC they are importing, EPA requests comment on
whether to set limits for the number of times an importer could use
this presumption or whether to limit the total quantity that could be
eligible in a given shipment, and if so, what the appropriate limits
should be. For example, EPA could limit the use of the presumption to a
set number of containers in a given year, to a set size category of
containers (e.g., for containers that have a maximum capacity under 7
kg), to shipments with a set number of containers (e.g., fewer than 20
containers in a shipment), and/or if the net weight of regulated
substances in a shipment is below a set weight (e.g., 200 kg).
Alternatively, EPA could presume the container is full unless the
importer demonstrates otherwise, such as with records documenting the
actual weight. EPA also requests comment on whether a provision like
this is needed or if importers have resolved the early concerns with
determining the heel weight prior to import.
As an alternative, EPA is also considering an option of allowing
the importer of record to submit a provisional estimate of the quantity
of heel imported, but requiring within a two-week period that the
provisional estimate be corrected to match the exact amount of the
imported HFC heel content. EPA invites comment on how this alternative
option would align with the proposal in section V.A of this preamble.
In particular, EPA is unsure how and when allowances would be expended
under this provisional estimate model, and if allowances are expended
based on the provisional estimate, how expended allowances would be
reconciled with the corrected exact amount of imported heel. EPA is
also concerned what the enforcement implications of this approach would
be and seeks comment on whether such an approach would create avenues
for an entity to illegally import that are not currently present under
EPA's existing regulations.
EPA notes that these proposals would only apply to imports of HFCs
that are heels and would not change the requirement to know the precise
quantity of HFCs in a heel for an export. Further, anyone requesting an
additional consumption allowance under 40 CFR 84.17 and anyone
exporting HFC heels must continue to report the actual weight of a heel
that is exported.
[[Page 66387]]
VI. How is EPA proposing to clarify and revise recordkeeping and
reporting requirements?
EPA established recordkeeping and reporting requirements in the
Framework Rule, in accordance with subsection (d) of the AIM Act. These
requirements can be found in 40 CFR 84.31. EPA is proposing to make
amendments to certain recordkeeping and reporting requirements as well
as proposing new recordkeeping and reporting requirements based on the
experience gained in implementing the HFC phasedown program.
A. How is EPA proposing to modify the import reporting requirements?
In the Framework Rule, EPA established reporting requirements for
importers at 40 CFR 84.31(c). EPA is proposing amendments which include
specifying reporting obligations that fall to the importer of record,
modifying elements of the advance notification requirement, clarifying
how to consider import of heels, and new application of joint and
several liability to quarterly and advance notification reporting
requirements. EPA proposes all these amendments to provide additional
detail on requirements and further promote transparency and consistency
in implementation and enforcement of the rule.
1. Specify Reporting Obligations on the Importer of Record
To align with the proposal made elsewhere in this notice that only
the importer of record may expend allowances for the import of bulk
regulated substances, EPA is proposing to specify that certain
reporting obligations will fall to the importer of record.
Specifically, EPA is proposing that the importer of record, or their
authorized agent,\41\ would be required to file the advance
notification report pursuant to 40 CFR 84.31(c)(7), and the importer of
record will be required to make quarterly reports pursuant to 40 CFR
84.31(c)(1). EPA is making this proposal to improve clarity of who must
fulfill certain reporting requirements with the Agency and also ease
EPA implementation in aligning the reporting requirement with the
entity obligated to expend allowances for the import.
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\41\ For purposes of providing advance notification of import
through a system such as the ABI, the vast majority (if not all)
notifications for the imports of regulated HFCs have been filed by
customs brokers who are licensed and regulated by CBP to assist
importers and exporters in meeting Federal requirements governing
imports and exports. EPA included ``authorized agents'' as
permissible reporting entities to accommodate this standard business
practice.
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2. Modify Advance Notification of Import Requirements
EPA's regulations contained in 40 CFR 84.31(c)(7) require ``[a]
person importing a regulated substance, or their agent,'' to report
certain information ``no later than 14 days before importation.'' The
Agency requires reporting of data elements that are generally already
collected by CBP (e.g., cargo description, port of entry). This
approach simplifies the process for importers or their customs brokers
to provide such information to EPA on time. This would generally be at
least, and likely more than, 14 days before a vessel carrying HFCs
berths. EPA finalized these requirements because timely access to this
information helps the Agency ensure that annual production and
consumption in the United States are consistent with the reductions
established by Congress in the AIM Act. Under the AIM Act, some
entities will face burdens and costs associated with the
Congressionally mandated phasedown; those increased burdens and costs
create economic incentives to avoid compliance. That reality increases
EPA's statutory and policy imperative to identify and apply tools that
counter those incentives to increase the rate of compliance. Given the
risk of noncompliance, as described throughout section IX of the
Framework Rule, there is an imperative to develop reasonable tools to
ensure compliance and thus achieve the objectives of the AIM Act. EPA
has required entities to provide advance notification through ACE so
that EPA can conduct a real-time review of allowances before the
imported material is at a U.S. port or border. Given the serious
concerns about potential noncompliance and the undermining of
Congress's directive to ensure reductions in production and consumption
occur consistent with the statutory schedule, real-time review of
import data will support EPA's ability to effectively implement the
statute.
The regulation enumerates several required elements that must be
included in an advance notification of import filed through the CBP-
authorized electronic data interchange system, such as the ABI. To
align with the proposal made elsewhere in this notice that only the
importer of record may expend allowances for the import of bulk
regulated substances, EPA is proposing to specify that the advance
notification reporting obligation falls to the importer of record, or
their authorized agent. If EPA finalizes this proposal, this should
improve clarity of who must submit the advance notification reports and
also ease EPA implementation in aligning the reporting requirement with
the entity obligated to expend allowances for the import.
To support effective real-time review of regulated HFC imports,
including but not limited to using reported data to track imports using
CBP databases to determine when allowances must be expended, EPA is
proposing to add a required element to the report required pursuant to
40 CFR 84.31(c)(7), specifically the container number(s) of the
shipment (if applicable), for all modes of import. EPA is also
proposing that for maritime shipments, the vessel name and the
International Maritime Organization (IMO) number must be included as
part of the pre-importation notification.
EPA's current regulations in 40 CFR 84.31(c)(7) require provision
of the ``quantity'' (in kilograms) of each import in the advance
notification of import. Some regulated entities have expressed
confusion over how to interpret this term. Under the current
``quantity'' requirement, some appear to be providing the net weight,
while others appear to be providing the gross weight. EPA is seeking to
resolve this ambiguity and standardize reporting. To improve clarity in
the Agency regulations and provide for consistent treatment across
regulated entities, EPA is proposing to specifically require the
provision of both the net weight (or net product weight) and gross
weight (net weight plus container weight), as well as unit of mass
(i.e., kilogram), for each container in the shipment in the pre-import
notification. EPA requests comment on any potential difficulties that
would be associated with meeting this revised requirement.
Currently 40 CFR 84.31(c)(7) requires the submission of advance
notification ``no later than 14 days before importation'' of any
regulated substance. Footnote 97 of the preamble to the Framework Rule
states, in part: ``EPA is using the term `date of importation'
consistent with CBP's definition at 19 CFR 101.1. ``Date of
importation'' means ``in the case of merchandise imported otherwise
than by vessel, the date on which the merchandise arrives within the
Customs territory of the United States. In the case of merchandise
imported by vessel, ``date of importation'' means the date on which the
vessel arrives within the limits of a port in the United States with
intent then and there to unlade \42\ such
[[Page 66388]]
merchandise.'' To ensure consistency EPA proposes to amend 40 CFR
84.31(c)(7) to clarify that our reference to ``before importation'' in
the Framework Rule means ``before the date of importation (consistent
with the definition at 19 CFR 101.1).'' EPA also proposes to clarify in
40 CFR 84.25(a)(1)(v) and 40 CFR 84.31(c)(3)(i)(D) that these
references are consistent with the definition at 19 CFR 101.1.\43\ The
``Import Date'' box on CBP Form 7501, ``Entry Summary,'' as well as CBP
Form 214 for entries where importers are applying for foreign-trade
zone admission and/or status designation may provide information about
the date of importation, but it is the importer's obligation to ensure
that it has submitted its advance notification report in a timely
manner regardless of the date identified in the Import Date box on
these forms.
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\42\ In the context of imports, EPA considers ``unlade'' to mean
unload.
\43\ These clarifications citing, and relying on, definitions
from CBP are intended to provide a consistent point in time for
which importers must submit advance notification; however, they are
not meant to change or otherwise be linked to how EPA has defined
``import'' in 40 CFR part 84.
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As noted above in this subsection, EPA currently requires prior
notification no later than 14 days in advance. Based on EPA's
implementation experience, this timeframe is achievable for shipment by
sea, but can be impractical based on standard practices used for non-
marine vessel imports, such as from trucks, trains, and airplanes.
Importers bringing in goods via these transportation modes may not have
the necessary information available at least 14 days in advance under
current standard market practice. However, prior notification is
important for EPA and CBP to be able to adequately review the shipment
and relevant information. Accordingly, EPA is proposing to distinguish
between modes of transport and to shorten the prior notification
requirement for truck, rail, air, and other non-sea arrivals to 5 days
prior to the date of importation, as discussed in the prior paragraph.
EPA is proposing a 5-day prior notification after consultation with CBP
about similar notification provisions used by other federal government
agencies and informed by our stakeholder meetings that included customs
brokers that have experience with importing a range of goods. EPA is
requesting comment on whether this revised, 5-day prior notification is
achievable for imports arriving via air, rail, truck, and other non-sea
modes of transport. EPA is also considering whether it would be
warranted to shorten the prior notification for arrivals by sea and is
requesting comment on whether a 10-day prior notification requirement
would be appropriate for arrivals by sea, since EPA has heard from some
regulated entities that it takes fewer than 14 days for certain marine
shipments from Europe.
3. Clarify the Reporting of Heels
In the previous ODS phaseout, EPA witnessed some situations where
imported ODS, including in heels, had been reported to CBP as U.S.
goods returned as a way to evade EPA's import restrictions. The Agency
is concerned this could happen for HFCs. Given that EPA requires
expenditure of allowances for import of any bulk regulated substance
and must monitor the import of such HFCs, including for heels, as
discussed in section V.D of this preamble, we are clarifying that the
HTS Code for the regulated substance, regardless of whether or not
comprising the heel, must be used, and not the HTS codes for U.S. goods
returned or empty containers. As stated in the Framework Rule, EPA is
concerned that misreported imports of HFCs could provide avenues for
illegal imports or could contribute to inefficient implementation and
processing of EPA and CBP procedures for comparing shipments against
available allowances (86 FR 55183). Reporting all volumes of regulated
substances with the applicable HTS Code for the contained HFCs
facilitates accurate treatment of the imports of these regulated
substances under EPA regulations.
4. Changes to and Requirement of Importer of Record Information
As part of the Agency's overall efforts to better identify and
assess potentially violative shipments of regulated substances and to
simultaneously streamline the import review process, EPA proposes to
require the submission of certain information directly to EPA that had
been voluntarily provided, in part, through the importer of record form
(EPA Form #5900-556). EPA is proposing a regulatory requirement that
certain information must be submitted by any entity anticipating being
the importer of record for a shipment of regulated substances by
November 15 of the prior calendar year. In other words, an entity that
anticipates being the importer of record for a shipment of HFCs during
calendar year 2024 must submit the required information by November 15,
2023. If an entity is not issued allowances directly from EPA, is the
recipient of transferred or conferred allowances and it is
impracticable for the entity to submit the importer of record form by
November 15, EPA is proposing that the importer of record form be
submitted within 15 calendar days of receiving the Agency's non-
objection notice for conferral or inter-company transfer.
EPA is also proposing that if changes are necessary on the importer
of record form after its initial submission that those changes be made
at least 21 calendar days prior to any import of bulk regulated
substances for which the concerned entity will be the importer of
record after the change in information occurs.
As explained in the Framework Rule and reiterated in section VIII.C
of this preamble, movement of allowances between a parent company and
its subsidiaries, or among companies that are commonly owned, may occur
without a transfer (86 FR 55145). However, there may be instances where
these corporate relationships are not immediately clear to EPA. The
importer of record form provides information on corporate relationships
to EPA, and accounting for such instances would ensure not only that
allowances are being expended by the right entity, but also that
reviews of shipments are not unnecessarily delayed. In a similar
manner, entities receiving allowances may operate under different
names, e.g., ``Doing Business As'' (DBA), where it is not immediately
clear to the Agency that the DBA is associated with the allowance
holder. Accordingly, EPA is proposing that the names of all
subsidiaries, entities majority owned and/or controlled by the same
individual(s),\44\ all DBAs, and any corresponding importer of record
numbers are included on the importer of record form, even if the
importer of record number(s) is identical for the subsidiaries,
entities majority owned and/or controlled by the same individual(s),
and/or DBAs as it is for the allowance holder. In order to further
efficient and accurate review of imports by EPA, the Agency reminds
regulated entities of the importance of ensuring that when an allowance
holder or associated subsidiary, entity that is majority owned and/or
controlled by the same individual(s), and/or DBA provides advance
notification of import filed through a CBP-authorized electronic data
interchange system, such as the ABI, that the importer of record number
accurately aligns with the name of the importer.
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\44\ Note that EPA intends to align the specific definition of
``entities majority owned and/or controlled by the same
individual(s)'' with the proposal regarding the ability to move
allowances among commonly owned or companies with certain
affiliation without a transfer, if it finalizes the proposal in
section VIII.C of this preamble.
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As part of this information submission, EPA is also proposing that
[[Page 66389]]
if an entity receiving allowances (either allocated directly by EPA or
through a conferral or transfer) includes subsidiaries, entities
majority owned and/or controlled by the same individual(s), and/or DBAs
as part of its form, the corporate structure of the entity receiving
allowances must also be provided, and the description of the corporate
structure must, at a minimum, explicitly show the relationship between
the allowance holder and each subsidiary, entity that is majority owned
and/or controlled by the same individual(s), and/or DBA. An entity also
would need to provide the owners, and their respective percentage of
ownership, of each subsidiary, entity that is majority owned and/or
controlled by the same individual(s), and DBA on the submitted form.
Further, an entity would need to indicate how many allowances will be
expended by each other affiliated entity (e.g., subsidiaries, majority
owned and/or controlled), specifically a quantity of allowance that
will be expended by each affiliated entity identified by name and
importer of record number(s). Collectively, the proposed revisions to
the importer of record form would allow EPA to have a current
understanding of pertinent information concerning the allowance holder,
such as how to confirm that the importer(s) of record was still active,
whether there had been a change in ownership, and whether ownership of
subsidiaries and other majority-owned and/or controlled entities was
shared, common, or familial. These revisions would help ensure that EPA
has the updated information necessary to efficiently monitor and
implement this program.
As an alternative to EPA's proposal to require the reporting of how
many allowances will be expended by each other affiliated entity, EPA
is considering and seeking comment on requiring information as part of
the advance notification requirement of 84.31(c)(7) that would specify
which entity was allocated the allowances or received the allowances
through a transfer that are associated with an individual shipment.
5. Joint and Several Liability for Importer Reporting Requirements
EPA proposes in section VI.A.1 of this preamble to specify that the
advance notification reporting obligation of 40 CFR 84.31(c)(7) and
quarterly reporting requirements of 40 CFR 84.31(c)(1) falls to the
importer of record, or their authorized agent for advance notification.
EPA is making this proposal to align with the proposed change that the
importer of record must expend allowances to import bulk regulated
substances. However, such proposed changes to the reporting
requirements could have an adverse impact on compliance with and/or
EPA's ability to enforce reporting obligations. As explained in more
detail elsewhere in this notice and in EPA's September 2021 Framework
Rule, compliance with reporting requirement is critically important so
that EPA can build a robust and enforceable allowance system. Complete
and accurate reporting is an important component of EPA's efforts to
monitor compliance, verify relevant information, and enforce
requirements.
Accordingly, EPA proposes to apply joint and several liability for
violations of the quarterly reporting and the advance notification
reporting requirements. Specifically, in 40 CFR 84.31(c)(10), EPA
proposes that each person meeting the definition of an importer is
jointly and severally liable for a violation of the quarterly reporting
requirements at 40 CFR 84.31(c)(1) unless they can demonstrate that the
importer of record fulfilled the quarterly reporting requirements, and
in 40 CFR 84.31(c)(11), EPA proposes that each person meeting the
definition of an importer is jointly and severally liable for a
violation of the advance notification requirements at 40 CFR
84.31(c)(7) unless they can demonstrate that the importer of record or
their authorized agent fulfilled the advance notification requirements.
These revisions would provide EPA with additional enforcement tools to
ensure that EPA receives necessary information concerning past and
incoming imports.
Adding joint and several liability would parallel the proposal made
in section V.B of this preamble to apply the joint and several
liability provisions of 40 CFR 84.5(b)(2) to each person who meets the
definition of an importer, unless they can demonstrate that the
importer of record possessed and expended the appropriate allowances
for the import of bulk regulated substances. As further discussed in
section V.B of this preamble, this joint and several liability
provision provides EPA discretion to pursue enforcement actions
necessary to ensure compliance while providing regulated parties with a
flexible approach to contractually allocate risk.
With respect to the proposal to extend joint and several liability
to reporting provisions, EPA requests comment on any potential
reporting difficulties that could be associated with extending joint
and several liability for these importer reporting requirements and on
the potential burden or downsides associated with these proposed
requirements. This proposed change would require individuals involved
in the import of HFCs to coordinate to ensure reporting is complete and
accurate, so EPA also seeks comment on whether additional resources
and/or processes would be helpful to support this coordination and
prevent duplicative reporting for the same import.
Note that the importer of a regulated substance in 40 CFR
84.31(c)(2) must maintain certain records to document each import. EPA
also seeks comment on whether more specificity is needed than
``importer,'' for example to define that recordkeeping obligations
would fall specifically on the importer of record, and is taking
comment on the effectiveness, accuracy, and completeness of the
importer bearing responsibility for the recordkeeping in this section.
B. Modify Recordkeeping and Reporting Requirements Regarding Expending
Allowances
In the Framework Rule, EPA codified various recordkeeping
requirements for producers and importers of HFCs. In 40 CFR
84.31(c)(2), EPA established the types of records that importers must
maintain. In 40 CFR 84.31(b)(3), EPA codified recordkeeping obligations
for producers. For both importers and producers, EPA is proposing to
add an obligation to the existing recordkeeping requirements that
producers and importers undertake same day documentation of any
allowances expended. Put another way, if a producer or importer expends
allowances, on the same day the producer or importer would have a
recordkeeping obligation to document the date, quantity, and type of
allowances expended on that date. EPA is further proposing to require
that entities include this record of same day documentation as part of
the quarterly report required under 40 CFR 84.31(b)(2) (for producers)
and 40 CFR 84.31(c)(1) (for importers). Additionally, EPA is proposing
to require each producer and importer certify to EPA as part of their
quarterly reporting that they expended the requisite number of
allowances on the dates specified in the form for each date-specific
production or import transaction.
If this proposal is finalized, EPA would add additional fields to
the producer and importer reporting forms to document the specific date
allowances were expended. This would be a slight change for the
importer form, since it already includes a ``date of import'' column,
which should match
[[Page 66390]]
the ``date allowances were expended'' on a per transaction basis. For
the quarterly producer report, EPA would need to collect date-specific
production information.
Finalizing these additional recordkeeping and reporting obligations
would be intended to allow for better accountability to ensure no
entity is producing ``regulated substances, intentionally or
unintentionally, in excess of the quantity of unexpended production
allowances and consumption allowances or unexpended application-
specific allowances held'' by that entity at a given point in time (40
CFR 84.5(a)(1)). Finalizing these recordkeeping and reporting
obligations would also allow EPA better accountability to ensure that
entities expend allowances on import per the requirements of 40 CFR
84.5(b)(1)(i). EPA is proposing this additional requirement to
strengthen and ease implementation and enforcement of the HFC phasedown
obligations. In requiring such a recordkeeping obligation, EPA will
enable better oversight for any onsite inspections to align regulated
substances found on site and corporate records with up-to-date
information on allowances expended for such materials. In requiring
these records and a certification be included in the entity's quarterly
report, EPA intends to enable better coordination of information
provided by the Agency with Customs records and other available
information to help ensure the integrity of the allowance system. EPA
understands that entities likely already undertake this sort of date-
specific tracking of allowances for corporate records, so expects that
establishing this requirement would have minimal effect on regulated
entities, but invites comment on the potential burden or downsides
associated with this proposed requirement.
C. Modify the Reporting of Regulated Substances Produced for
Transformation, Destruction or Use as a Process Agent at a Different
Facility Under the Same Owner
EPA currently requires in 40 CFR 84.31(b)(2)(i)-(iii) that each
producer of a regulated substance include in the quarterly report for
each facility information on the quantity of each regulated substance
produced for use by the producer or a second party in processes
resulting in their transformation, destruction, or use as a process
agent. There are situations, however, where regulated substances are
produced at one facility, but transformed, destroyed, or used as a
process agent at another facility owned by the same entity. Such
situations are distinct from regulated substances transformed,
destroyed, or used at the same facility where the regulated substances
were produced and those transformed, destroyed, or used by an entity
different from the one that produced the regulated substances. EPA is
proposing that 40 CFR 84.31(b)(2)(i)-(iii) be modified to include
requirements to report the name, quantity, and recipient facility for
regulated substances produced at one facility for, correspondingly,
transformation, destruction, or use as a process agent at another
facility owned by the same entity.
Since EPA requires the names and quantities of transformed or
destroyed regulated substances produced or imported by another entity
to be reported at the facility level under 40 CFR 84.31(e)(1), these
proposed revisions to these sections would establish consistency within
the regulations under 40 CFR part 84. Furthermore, these revisions
would provide greater transparency within the system and would better
align with current AIM Act reporting forms and the GHGRP, both of which
track transformation, destruction, and use as a process agent by
facility. This facility-level reporting would increase transparency,
such as for environmental justice concerns so that local communities
have better insight into how regulated substances may move between
facilities owned by a single entity. Such information would also
provide EPA a better understanding of industry practice, help verify
disposition of regulated substances, and may inform future rulemakings.
D. Additional HFC Production Facility Emissions Reporting Requirements
Currently, EPA requires, as part of the producer one-time report,
that producers provide a ``list of any coproducts, byproducts, or
emissions from the production line that are other regulated substances;
ozone-depleting substances listed in 40 CFR part 82, subpart A; or
hazardous air pollutants [HAP] initially identified in section 112 of
the CAA, and as revised through rulemaking and codified in 40 CFR part
63'' (40 CFR 84.31(b)(1)(v)). These one-time reports were due May 1,
2022, for existing facilities and within 120 days for any facility that
begins producing HFCs after January 1, 2022.
The reported information is qualitative (i.e., producers must only
provide a list of the relevant chemicals) and is only required a single
time, so the existing regulatory requirement would not allow the Agency
to monitor changes in the list of relevant chemicals or volumes of
relevant chemicals at facilities. EPA is particularly concerned about
an inability to monitor such changes at facilities as the HFC phasedown
progresses and as facilities may transition to production of lower EVe
regulated substances or away from production of regulated substances
altogether. Some entities with multiple production facilities may
choose to consolidate production of regulated substances at a subset of
facilities as the phasedown continues, which could lead to an increase
in regulated substance production at a single facility, despite the
overall phasedown of production. EPA stated its intention in the
Framework Rule to ``continue to monitor the impacts of [the HFC
phasedown] program on HFC and substitute production, and emissions in
neighboring communities, as we move forward to implement this rule''
(86 FR 55129).
As such, EPA is proposing to build on the one-time reporting
requirement and require annual reporting of the emissions from each
facility's HFC production line emissions units, specifically HAP, ODS,
and HFCs.\45\ Collecting these data would allow the Agency to more
closely monitor potential impacts of the HFC phasedown on relevant
emissions and on communities located near facilities producing
regulated substances. As noted in the Framework Rule, ``EPA may
consider taking appropriate action in the future[,] including action [.
. .] under CAA authorities, in future HFC allocation rules, or under
other relevant authorities, if we develop further information
indicating there is a risk of disproportionate impacts'' (86 FR 55129).
EPA views information on the impacts of HFC production as important for
informing policies, regulations, and other decisions, including to
carry out the Agency's commitment to environmental justice. For
example, EPA could use data collected through this reporting
requirement, if finalized, in crafting the next allowance allocation
methodology if shifts in production resulted in disproportionate
impacts on overburdened communities. EPA could also consider using the
reported data to propose alternative offsets for production allowance
transfers based on potential disproportionate impacts. These proposed
regulatory requirements
[[Page 66391]]
can also be viewed as part of an effort to improve data transparency
particularly with regard to the Agency's commitment to 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. Therefore, EPA is proposing to require more detailed annual
reporting on emissions from each facility's HFC production lines.
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\45\ While most ODS and HFCs are not HAP and generally do not
have local effects, some do (e.g., carbon tetrachloride). Further,
collecting this information from HFC production facilities allows
EPA to better track potential changes in emissions of all three sets
of chemicals and inform policies, regulations, and other decisions.
---------------------------------------------------------------------------
The Agency has reviewed other potential sources of data to
determine if facilities producing regulated substances are already
required to report annual emissions at the production line level under
other EPA regulatory programs, but did not identify such requirements.
Based on EPA's review, data currently required to be submitted to EPA
under different authorities are not detailed or comprehensive enough to
allow the Agency to sufficiently monitor potential changes in emissions
due to the phasedown of HFCs. Emissions data reporting is required for
some larger facilities, and can be obtained, at the facility- or
process-level, through the National Emissions Inventory (NEI), Toxics
Release Inventory (TRI), and Title V permits. However, process-level
emissions data are not required for all HFC production facilities,
which results in data gaps that hinder EPA's ability to identify
relevant emissions and track changes over time.
AirToxScreen, and prior to its 2017 release the National Air Toxics
Assessment (NATA) risk screen, identifies the cumulative risk to
individuals within an area due to impacts from surrounding facilities
without distinguishing between emission sources. While community-level
analyses are available for all facilities producing regulated
substances based on cumulative emissions, an HFC production facility
may be emitting only one portion of the total modeled emissions with
other portions being attributable to other nearby facilities
contributing to the overall risk value. The currently available data do
not allow EPA to consistently isolate the portion of the risk
associated with HFC production, or to track potential changes in the
overall risk level that could be attributable to the phasedown in HFC
production and consumption, for example resulting from shifts in
production levels of HFCs.
To address these identified data and knowledge gaps, EPA is
proposing to require that each facility producing regulated substances
report on an annual basis emissions for each HFC production line,
including the:
--Quantity (in pounds) of each of the following emitted at the facility
in the prior year: HAP initially identified in section 112 of the CAA,
and as revised through rulemaking and codified in 40 CFR part 63; HFC
listed in Appendix A to 40 CFR part 84; and ODS listed in appendix F of
40 CFR part 82, subpart A; and
--Quantity (in pounds) of each such HAP, HFC, or ODS emitted in the
prior year on an emission unit basis (e.g., ``Storage tank #45a'', or
``Scrubber #2'').
EPA proposes that the reported emission levels reflect each
facility's and emission unit's actual operating hours, production
rates, in-place control equipment, and types of materials processed,
stored, or combusted during the preceding calendar year. EPA is
considering a range of options by which emissions would be reported and
is welcoming comment on the associated data, calculations, and method
used to determine emissions. While EPA is currently considering a range
of options, the Agency intends to finalize a single chosen approach for
determination of emissions in that there is a limited, well-understood
universe of HFC production facilities and those facilities share a
number of common features.
EPA is considering the following options to be applied to determine
the emissions required to be reported under this proposed approach:
--Continuous emission monitoring system;
--tack test at a six month or annual frequency;
--Material balance;
--U.S. EPA emission factor; or
--The compliance method required under the most recent permit issued to
the facility pursuant to 40 CFR part 70 or 71, under the facility's
operating permit for sources without a permit under 40 CFR part 70 or
71, or using federally recognized procedures if emissions cannot be
determined using the compliance methods from the facility's air permit.
EPA is also seeking comment on whether fenceline monitoring, in
particular of HAP that potentially pose the greatest risk to local
communities, would be appropriate, in combination with or as an
alternative to gathering data on emissions from these facilities. If
this approach is finalized instead, EPA seeks comment on the advantages
and disadvantages of this approach, what metrics should be reported,
and how EPA could use this data to better understand the role that HFC
production plays in emissions of HAP, HFCs, and ODS. EPA is proposing a
range of options and is seeking comment to inform what option to
finalize in order to allow for the effective monitoring of these
emissions and gathering of information that could be relevant if a
future rule would be appropriate under the AIM Act, CAA or other
authority to address any potential disproportionate impacts associated
with the HFC phasedown. EPA also requests comment on what methods of
emissions estimation and monitoring are in practice currently, and
whether these methods are appropriate for monitoring emissions changes
over time at regulated substance production facilities. The Agency is
also taking comment on whether the data listed in this proposal for
additional reporting are already required under different authorities.
Finally, in the interest of data transparency, if finalized, EPA
intends to publish the emissions data on the Agency's website. The
public availability of the data will allow for the public, local
environmental agencies, or other entities to also monitor emissions
changes due to changes in HFC production from facilities in their
communities.
Subsection (k) of the AIM Act provides that section 114 of the CAA
applies to ``any rule, rulemaking, or regulation'' promulgated pursuant
to the AIM Act. For purposes of applying section 114, the AIM Act
provides that section 114 of the CAA shall apply as though the AIM Act
were part of Title VI of the CAA. Section 114(a) provides EPA with the
authority, among other things, to require any person who owns or
operates any emission source that may have information necessary to
provide such information as the Administrator may reasonably require
for purposes of carrying out any provision of the CAA, or the AIM Act
pursuant to subsection (k). As noted, EPA has determined that requiring
reporting of the outlined data regarding emissions from HFC production
facilities is necessary to inform future decisions on whether it may be
appropriate to undertake a rulemaking to address potential
disproportionate impacts associated with the HFC phasedown.
The Agency requests comment on whether it would be appropriate and
feasible to require each facility producing an HFC to report on an
annual basis the quantity of each criteria air pollutant, and its
precursors, for which EPA has established a National Ambient Air
Quality Standard
[[Page 66392]]
(NAAQS) \46\ emitted by the facility and the quantity of each such
pollutant emitted annually from each HFC production line on an emission
unit basis. EPA is proposing to require reporting both for the
regulated substance production line as a whole and the emission units
associated with the production line to understand where emissions are
most significant and to better gauge what, if any, additional
regulatory action could be considered in future.
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\46\ The pollutants for which EPA has established a NAAQS are:
sulfur dioxide, PM10, PM2.5, carbon monoxide,
ozone, nitrogen dioxide, and lead. See 40 CFR part 50.
---------------------------------------------------------------------------
VII. How is EPA proposing to revise sampling and testing requirements?
In the Framework Rule codified at 40 CFR 84.5(i), EPA established
the requirement to label containers containing a regulated substance
that are sold or distributed, or offered for sale or distribution, and
for certain entities to confirm the accuracy of the labels by testing a
representative sample of contents to verify that the composition
matches the container label. In that regulatory section, EPA also
codified a prohibition on the sale or distribution of regulated
substances for use as a refrigerant that did not meet specifications in
appendix A to 40 CFR part 82. EPA is proposing to amend these
requirements and related requirements to establish additional
verification requirements and codify procedures to be followed to meet
the requirement to test a representative sample. These proposed changes
are intended to provide clarity and direction to regulated entities,
create a consistent approach to help ensure smoother implementation,
and provide greater assurance on the accuracy of these container
labels, particularly for non-refrigerant applications. If finalized,
these proposed revisions are intended to lead to improved veracity in
compositional testing, which in turn would result in more accurate
expenditures of consumption and production allowances. These
modifications would also improve the ability of EPA to understand the
process taken and reliability of information gleaned in the
compositional determinations that are made throughout the supply chain.
Specifically, EPA is proposing to (1) Modify 40 CFR 84.5(i)(3)(i)
to add that already required sampling and testing of regulated
substances must follow a combination of appendix A of 40 CFR part 82,
subpart F and EPA Method 18 in Appendix A-6 to 40 CFR part 60 to verify
the label composition for all applications; (2) add a requirement to
sample and test under specified methodology to ensure compliance with
the existing requirements in 40 CFR 84.5(i)(3)(ii); (3) define the
records required under 40 CFR 84.33 associated with testing and add
recordkeeping requirements to 40 CFR 84.33 for recyclers for fire
suppression and repackagers to ensure results from required testing are
maintained; (4) add definitions at 40 CFR 84.3 of ``batch'' and
``representative sample'' and clarify the relationship between these
terms; (5) add a definition at 40 CFR 84.3 for ``laboratory testing''
such that laboratories used by regulated entities to meet the existing
requirement in 40 CFR 84.5(i) must be accredited and follow the test
methods in appendix A of 40 CFR part 82, subpart F; and (6) add a
requirement that certificates of analysis accompany all imports of
regulated substances.
A. Use of Appendix A to 40 CFR Part 82 and EPA Method 18 in Appendix A-
6 to 40 CFR Part 60 for Sampling and Testing
In the Framework Rule EPA codified regulations in 40 CFR part 84
that require, for regulated substances sold as refrigerants, that
sampling must be done consistent with appendix A to 40 CFR part 82,
subpart F. Appendix A is based on the Air-Conditioning, Heating, and
Refrigeration Institute (AHRI) Standard 700-2016, Specifications for
Refrigerants. Appendix A references detailed ``referee tests'' that are
included in the 2008 Appendix C to AHRI Standard 700-2014, which are
incorporated by reference in 40 CFR 82.168(b)(2). Generic maximum
contaminant levels are defined in 40 CFR 82 subpart F appendix A1.
40 CFR part 84 does not specify the sampling methods that must be
used to verify that the composition of the regulated substances matches
the container labeling for regulated substances that are sold for
another use than as refrigerants. The current regulations also only
explicitly require that sampling is consistent with appendix A, but
they do not explicitly require that test methods are consistent with
appendix A.
EPA is proposing to revise 40 CFR 84.5(i)(3)(i), such that no
person producing, importing, reclaiming, recycling for fire
suppression, or repackaging regulated substances may sell or
distribute, or offer for sale or distribution, regulated substances
without first testing a representative sample of the regulated
substances that they are producing, importing, reclaiming, recycling
for fire suppression, or repackaging to verify that the composition of
the regulated substance(s) matches the container labeling using the
sampling and testing methodology prescribed in 40 CFR part 82, subpart
F appendix A for regulated substances offered for sale and distribution
as refrigerants and using the following testing methods for regulated
substances offered for non-refrigerant uses: \47\
---------------------------------------------------------------------------
\47\ EPA is proposing to use Part 7 of 2008 Appendix C for
Analytical Procedures for AHRI Standard 700-2014 as the testing
method for HFC-134 is because HFC-134a is covered as a potential
contaminant, whereas Part 9 looks at HFC-134 as a contaminant in
HFC-134a. The same rationale applies to the testing methods used for
HFC-143a and HFC-143. The testing methods are chosen based on the
list of target analytes provided at each method.
Table 3--Non-Refrigerant Regulated Substance Testing Methods
------------------------------------------------------------------------
Regulated substance Testing method
------------------------------------------------------------------------
HFC-23, HFC-134, HFC-125, HFC-143a, HFC- Part 7 of 2008 Appendix C for
41, HFC-152a. Analytical Procedures for AHRI
Standard 700-2014,
incorporated by reference in
40 CFR part 82, subpart F,
appendix A.
HFC-134a, HFC-143, HFC-245fa, HFC-32, Part 9 of 2008 Appendix C for
HFC-152. Analytical Procedures for AHRI
Standard 700-2014,
incorporated by reference in
40 CFR part 82, subpart F,
appendix A.
HFC-365mfc, HFC-227ea, HFC-236cb, HFC- EPA Method 18; Appendix A-6 to
236ea, HFC-236fa, HFC-245ca, HFC-43- 40 CFR part 60--Test Methods
10mee. 16 through 18.
------------------------------------------------------------------------
[[Page 66393]]
EPA is proposing these modifications to ensure that the testing
methods used to verify the composition of all bulk HFCs can achieve at
least the same accuracy as those specified in appendix A to 40 CFR part
82, subpart F.
Under the existing regulations at 40 CFR 84.5(i)(3)(ii), no person
may sell or distribute, or offer for sale or distribution, regulated
substances as a refrigerant that do not meet the specifications in
appendix A to 40 CFR part 82, subpart F--Specifications for
Refrigerants. EPA is proposing to clarify that this existing
requirement is applicable for a regulated substance or mixture
containing regulated substance(s). EPA is further proposing to add a
requirement under 40 CFR 84.5(i)(3)(ii) that producers, importers,
reclaimers, recyclers for fire suppression, or repackagers must verify
the applicable specifications using the sampling and testing
methodology prescribed in appendix A to 40 CFR part 82, subpart F.
EPA is proposing these modifications to ensure that the testing
methods used to verify the composition of all bulk HFCs offered for
sale or distribution can achieve at least the same accuracy as those
specified in appendix A to 40 CFR part 82, subpart F. All of these
proposed requirements are intended to reduce the frequency that
mislabeled, misrepresented, or off-specification regulated substances
enter commerce from producers, importers, reclaimers, fire suppressant
recyclers, and repackagers. EPA is also concerned that, without testing
requirements, or specification around what sampling and testing
methodology must be used, the composition of containers sold could not
be sufficiently accurate, resulting in inaccurate quantities of
consumption or production allowances expended.
Collectively, the proposed changes will ensure that defined
procedures will be used to perform testing on representative samples of
single component HFCs or multicomponent HFC mixtures by all entities
that produce, import, reclaim, recycle for fire suppression, or
repackage HFCs. Regulated substances used as refrigerants must conform
to the specifications provided in appendix A to 40 CFR part 82, subpart
F, or, if not listed therein, the Generic Maximum Contaminant Levels in
appendix A1 to 40 CFR part 82, subpart F. At a minimum, the proposed
changes require that samples of single component regulated substance
shall be quantitively analyzed for the component on the label, air and
other non-condensable compounds, impurities (both volatile impurities
and halogenated unsaturated volatile impurities), and high boiling
residue. At a minimum, the proposed changes require that samples of
multicomponent HFC mixtures shall be quantitatively analyzed for each
component expected based on the container label, air and other non-
condensables, impurities (both volatile impurities and halogenated
unsaturated volatile impurities), and high boiling residue.
EPA believes that this testing regime is appropriate to determine
the composition of HFCs sold for both refrigerant and non-refrigerant
applications. The proposed methods for testing HFCs are provided in
Table 3. For illustrative purposes, EPA is also noting the
specifications for regulated substances in Table 4.
Table 4--Regulated Substance Specifications
------------------------------------------------------------------------
Regulated substance Specifications
------------------------------------------------------------------------
HFC-23, HFC-32, HFC-125, HFC-134a, HFC- Refrigerant use: All in Table
143a, HFC-152a, HFC-227ea, HFC-236fa, 1A of 40 CFR part 82, subpart
HFC-245fa. F, appendix A.
Non-refrigerant use: Testing
results match nominal
composition on label.
HFC-41, HFC-134, HFC-143, HFC-152, HFC- Refrigerant use: All in 40 CFR
236cb, HFC-236ea, HFC-245ca, HFC- part 82, subpart F, appendix
365mfc, HFC-43-10mee. A1.
Non-refrigerant use: Testing
results match nominal
composition on label.
------------------------------------------------------------------------
The testing regime specified in AHRI 700 is sufficiently flexible
to allow for the use of more recent analytical technology. Section 5 of
appendix A to 40 CFR part 82, subpart F, entitled ``Sampling and
Summary of Test Procedures,'' identifies the test methods in the
section as ``referee tests'' and states that, ``[i]f alternative test
methods are employed, the user must be able to demonstrate that they
produce results at least equivalent to the specified referee test
method.'' The referee test for refrigerant identification is specified
in section 5.3 of appendix A as gas chromatography as described in 2008
appendix C to AHRI Standard 700-2014 (incorporated by reference, see
Sec. 82.168(b)(2)). Appendix C to AHRI Standard 700-2014 contains
several different gas chromatography methods, specialized for different
refrigerant types. Section 7 of each method in Appendix C to AHRI
Standard 700-2014 provides information concerning the sensitivity,
precision, and accuracy of that test method. Therefore, to demonstrate
that an alternate test method is equivalent, it is sufficient to
demonstrate that the alternate test method can achieve the same
sensitivity, precision, and accuracy as the referee test method.
EPA anticipates that alternate test methods could include gas
chromatography using physical layer open tubular columns alternative to
packed columns, two-dimensional alternatives to one-dimensional
chromatography, and alternate detectors (e.g., mass spectrometer as an
alternative to a flame ionization detector). Since Appendix C to AHRI
Standard 700-2014 does not include specific test procedures for
determining the quality of regulated substances that are not used as
refrigerants, EPA is proposing using EPA Method 18 for HFC-227ea, HFC-
236cb, HFC-236ea, HFC-236fa, HFC-245ca, HFC-365mfc, HFC-43-10mee,
isomers of listed regulated substances and mixtures of regulated
substances not used as a refrigerant. EPA Method 18, ``Measurement of
gaseous organic compound emissions by gas chromatography,'' can be
found at Appendix A-6 to 40 CFR part 60--Test Methods 16 through 18.
This method appears to be appropriate for the HFCs regulated under the
AIM Act and would provide a well-established standard used in other EPA
regulatory programs. EPA requests comment on whether this standard is
appropriate to fill gaps in the requirements in appendix A to 40 CFR
part 82, subpart F, or if EPA could rely on appendix A to 40 CFR part
82, subpart F, including appendix A1 and the incorporated Appendix C to
AHRI Standard 700-2014, for all sampling and testing requirements. EPA
could finalize an approach that uses one or both standards.
[[Page 66394]]
While the current testing and sampling requirement in 40 CFR
84.5(i)(3) applies to entities producing, importing, reclaiming,
recycling for fire suppression, or repackaging regulated substances,
EPA seeks comment on whether to extend this requirement to exporters
(or exporters that request additional consumption allowances under 40
CFR 84.19) to verify the regulated substances being exported match the
label and, where relevant, the request for additional consumption
allowances. EPA also seeks comment on whether to extend the testing and
sampling requirements to additional entities, including others that
sell or distribute regulated substances, or that offer them for sale
and distribution as well as those that transform, use as a process
agent, destroy, or receive application-specific allowances in the six
applications listed in subsection (e)(4)(B)(iv) of the AIM Act to
further ensure the label matches the regulated substance in containers
and aid in the detection of off-specification and potentially non-
compliant containers of regulated substances. Finally, EPA seeks
comment on whether to establish purity and other specifications for
non-refrigerants similar to those found in appendix A to 40 CFR part
82, subpart F or if the proposed approach of requiring the label to
match the nominal composition of regulated substance(s) in the
container is sufficient to ensure purchasers know the contents of the
container and that all entities can verify the number of allowances
that needed to be expended when the regulated substances in the
container were imported or produced.
B. Recordkeeping of Tests
EPA proposes to modify the existing recordkeeping requirements in
40 CFR 84.31 to specify that the types of records required to be
maintained related to testing results includes instrument calibration,
sample testing data files, and results summaries of both sample test
results and quality control test results that are in a form suitable
and readily available for review.
Since the existing requirement in 40 CFR 84.5(i)(3)(i) requires
fire suppressant recyclers \48\ and repackagers \49\ to test a
representative sample of regulated substances before they are sold, EPA
is proposing that the recordkeeping requirement for test records be
extended from producers, importers, and reclaimers to include recyclers
for fire suppression and repackagers to ensure sufficient records are
maintained. Specifically, EPA is proposing to add a recordkeeping
provision at 40 CFR 84.31(j)(3)(ii) and 84.31(k) requiring that
recyclers for fire suppression and repackagers maintain dated records
of batch tests of regulated substances packaged for sale or
distribution, including information on instrument calibration, sample
testing data files, and results summaries of both sample test results
and quality control test results that are in a form suitable and
readily available for review. This would support enforcement efforts if
EPA identifies an off-specification or mislabeled container of
regulated substances and needs to confirm proper testing was conducted
to verify the contents of the container(s).
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\48\ Generally, an entity that collects used HFC fire
suppressants and directly resells those recovered HFCs--with or
without any additional reprocessing including testing for purity--to
another person for reuse as a fire suppressant would qualify as a
fire suppressant recycler (also referred to as a ``recycler for fire
suppression'' in 40 CFR part 84, subpart A). A person that recovers
and aggregates used HFC fire suppressants for distribution to
another entity for reprocessing before being sold for reuse as a
fire suppressant would not be a fire suppressant recycler. Reselling
HFC fire suppressants that have already been recovered and
subsequently reprocessed by another person would not be a fire
suppressant recycler. In effect, a fire suppressant recycler is the
first entity to reintroduce recovered HFC fire suppressants into the
market use as fire suppressant. EPA requests comment on whether
existing interpretations and guidance provide sufficient clarity on
this issue or whether EPA should codify this explanation to provide
a regulatory definition of fire suppressant recyclers.
\49\ EPA views repackagers and cylinder fillers interchangeably
under the regulations at 40 CFR part 84, subpart A, and would define
repackagers as entities who transfer regulated substances, either
alone or in a mixture, from one container to another container prior
to sale or distribution or offer for sale or distribution. EPA
requests comment on whether it should codify this explanation to
provide a regulatory definition of repackagers.
---------------------------------------------------------------------------
To align with the request for comment on whether to extend the
testing and sampling requirements, EPA seeks comment on whether to
extend this recordkeeping requirement to other entities, such as
exporters.
C. Define ``Batch'' and ``Representative Sample'' and Clarify the
Relationship Between These Terms
In the Framework Rule, reclaimers, producers, and importers are
required to maintain records of the results of ``batch tests'' of
regulated substances. Producers and importers are required to keep
``[d]ated records of batch tests of regulated substances packaged for
sale or distribution'' (40 CFR 84.31(b)(3)(xi) and 40 CFR
84.31(c)(2)(xvi)), whereas the requirement for reclaimers does not
depend upon sale or distribution and echoes the language in the
definition of ``reclaim.'' EPA is proposing to add requirements to
maintain dated records of batch tests of regulated substances packaged
for sale or distribution for fire suppressant recyclers and
repackagers.
The current rule specifies testing requirements for producers and
importers only at 40 CFR 84.5(i)(3)(i), which requires testing of a
``representative sample.'' Regulated substances sold as refrigerants
must be sampled according to appendix A. Part 5.2, Refrigerant Sampling
at 5.2.1 provides that ``[s]pecial precautions should be taken to
ensure that representative samples are obtained for analysis.'' Since
the rest of section 5.2 specifies methods for sampling refrigerants, it
is clear that the intent of these sampling methods is to allow for the
collection of representative samples of refrigerants. The sampling
methods defined for refrigerants are specific to sampling of individual
cylinders, which are commonly used in the sale of refrigerants, but may
not cover all possible containers used for sales or distributions of
refrigerants. EPA's proposed changes for regulated substances, both
sold as a refrigerant and for other uses, is specified in the preceding
section.
EPA is proposing to include a definition of ``batch'' at 40 CFR
80.3. EPA is proposing that a batch be defined as (1) A vessel,
container, or cylinder from which a producer, importer, reclaimer,
recycler, or repackager transfers HFCs directly for sale or
distribution, or for repackaging for sale or distribution or (2) a
population of small vessels, containers, or cylinders that a producer,
importer, reclaimer, recycler, or repackager directly offers for sale
or distribution.
EPA is also proposing to define the term ``representative sample''
within the context of this regulation. EPA is proposing a two-part
definition of representative sample. The first defines a representative
sample of a container for sale as a sample collected from a container
offered for sale or distribution using a sampling method that obtains
all components of HFC(s) in an unbiased and precise manner. This
definition is consistent with the implied notion of representative
sample in appendix A of CFR part 82 Subpart F, which outlines specific
methods for sampling containers. For the second part, EPA proposes to
define a representative sample of a batch as a sample that can be used
to infer that the composition of HFC(s) in a population of containers
offered for sale or distribution that constitute, or are derived from,
the batch are within stated tolerances (e.g., within the specifications
established in the tables in section 6 of appendix A to 40 CFR part 82,
subpart F, such as
[[Page 66395]]
composition and percent by volume air and other non-condensables).
EPA is proposing to make these changes to allow for the common
scenario when testing of a batch is used to satisfy the requirement for
``testing of a representative sample'' to verify that the composition
of HFCs in containers matches the container labeling, while also
requiring that these batch test results produce valid labels for
individual containers. These changes will help clarify the
recordkeeping requirements associated with maintaining records of
``batch tests.''
D. Laboratory Methods and Accreditation
At 40 CFR 82.5(i)(2)(ii), EPA currently provides an option to
importers that want to repackage regulated substances that were
initially either unlabeled or mislabeled to ``[v]erify the contents
with independent laboratory testing results and affix a correct label
on the container that matches the test results before the date of
importation (consistent with the definition at 19 CFR 101.1) of the
container.'' But this requirement places no restrictions on what
constitutes an ``independent laboratory'' nor on the quality of the
analysis that the laboratory would have to achieve.
EPA is proposing to define ``laboratory testing'' as the use of the
sampling and testing methodology prescribed by a laboratory that is
accredited to ISO 17025. EPA is proposing this change to make clear
that laboratory testing means, for purposes of 40 CFR part 84, the use
of the methods specified (or incorporated by reference) in appendix A
to 40 CFR 82, subpart F and EPA Method 18, where appropriate. This
ensures that laboratory testing undertaken pursuant to the 40 CFR part
84 regulations uses a methodology that is consistent with the testing
required for sales and distribution of HFCs, which will ensure
consistency throughout the HFC regulatory environment. EPA is also
proposing that laboratories must be accredited in order to be used for
purposes of meeting the 40 CFR 84.5(i)(2)(ii) requirements. Laboratory
accreditation bodies assess a variety of aspects of a laboratory,
including the technical competence of staff; the validity and
appropriateness of test methods; traceability of measurements and
calibration to national standards; suitability, calibration, and
maintenance of the testing environment; sampling, handling, and
transportation of test items; and quality assurance of test and
calibration data. In November 2017, International Organization for
Standardization (ISO)/International Electrotechnical Commission (IEC)
published a new version of the test laboratory accreditation standard,
ISO/IEC 17025:2017. In addition to adding a definition of
``laboratory,'' the new version replaces certain prescriptive
requirements with performance-based requirements and allows for greater
flexibility in satisfying the standard's requirements for processes,
procedures, documented information, and organizational
responsibilities. Interested persons may purchase a copy of ISO/IEC
17025:2017 from the source provided in 40 CFR 84.37(b)(1), and it is
available at https://www.techstreet.com/standards/iso-iec-17025-2017?product_id=2000100. This accreditation would ensure that
laboratories follow good laboratory practices and that their operations
have been reviewed by a recognized accreditation authority.
EPA is seeking comment on whether to require that all testing under
40 CFR 84.5(i)(3) be conducted by an independent and/or accredited
laboratory. EPA understands that some entities have in-house
laboratories and/or unaccredited laboratories that they currently rely
upon for testing. Since the requirement for sampling and testing
generally is in response to concerns about the potential for unlabeled
or mislabeled container(s), the additional stringency of this
requirement may be justified. However, EPA seeks comment on whether
other safeguards are in place at laboratories that are currently
typically used by this regulated community that are similar in nature
to accreditation, such as certification by an independent third party,
that would decrease the importance of testing being conducted by an
independent and/or accredited laboratory.
EPA is also seeking comment on whether AHRI Certified Refrigerant
Testing Laboratory and others should be allowed in addition to ISO
17025 laboratories. The AHRI certification program requires competence
with the refrigerant testing requirements of appendix A, although the
certification is not as rigorous as an ISO 17025 accreditation.
E. Certificate of Analysis for Imports of Regulated Substances
To aid in the review and monitoring of imports of HFCs, EPA is also
proposing to require that certificates of analysis records accompany
all imports of regulated substances. Under this proposal, certificates
of analysis would include the sampling and testing that is used to
verify the composition of bulk regulated substance(s) offered for sale
or distribution, and the proposed definitions will facilitate this
recordkeeping when batch testing is used to satisfy the labeling
requirement. EPA understands that certificates of analysis regularly
accompany imports of HFCs currently and does not expect this
requirement to change current practices. If finalized, it would provide
EPA additional information to confirm the number of allowances that
need to be expended at the time of import. Under this proposal, EPA
would require that the certificate of analysis be made available to EPA
on the same timeline as the advance notice required under 40 CFR
84.31(c)(7).
EPA seeks comment on whether EPA should require that the
certificate of analysis that is provided and testing and sampling
conducted prior to import be conducted by a laboratory accredited under
ISO 17025. For the same reasons described in the prior section of this
preamble, this accreditation would ensure that laboratories follow good
laboratory practices and that their operations have been reviewed by a
recognized accreditation authority.
VIII. What other revisions is EPA proposing?
In addition to what is outlined in the prior sections, EPA is
proposing a number of additional regulatory changes based on both
lessons learned and current practices that have proved useful in
implementing the HFC phasedown.
A. Define the Term ``Expend''
Under the AIM Act and EPA's implementation of the HFC phasedown, a
person must expend allowances to produce or import regulated substances
outside of limited exceptions. In the Framework Rule, EPA did not
codify a regulatory definition of ``expend'' in 40 CFR 84.3. EPA
proposes to amend 40 CFR 84.3 to include a definition of expend. EPA
proposes to define expend to mean to subtract the number of allowances
required for the production or import of regulated substances under 40
CFR part 84 from a person's unexpended allowances. We are proposing in
section V.A of this preamble to codify the point in time that
determines when calendar year allowances are expended, in section V.B
of this preamble to codify that importers of record must expend
allowances, and in section VI.B of this preamble to require same day
recordkeeping of when producers and importers expend allowances that
would be included in quarterly reports. EPA is proposing to add a
regulatory definition of ``expend'' to accompany these proposed
regulatory revisions to provide additional
[[Page 66396]]
specificity on how parties are required to implement these
requirements.
B. Modify Labeling Requirements
EPA codified certain labeling requirements in 40 CFR 84.5(i)(1), to
require a person who is selling, distributing, offering for sale or
distribution, or importing containers containing a regulated substance
that the container include ``a label or other permanent markings
stating the common name(s), chemical name(s), or American Society of
Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE)
designation of the regulated substance(s) or blend contained within,
and the percentages of the regulated substances if a blend.'' EPA is
proposing several changes to this regulatory text to provide additional
detail on requirements, both to enable more transparency into the
movement of HFCs and to help enable implementation and enforcement,
where appropriate. Having accurate labeling of containers of regulated
substances allows EPA, CBP, and other enforcement officials to quickly
identify containers of interest, understand the contents of those
containers, and make decisions about whether further inspection is
warranted.
EPA proposes revising 40 CFR 84.5(i)(1) to require a ``permanent
label'' in place of ``a label or other permanent marking.'' In other
regulatory programs, EPA has experienced situations where an entity has
swapped out easily removable labels in anticipation of an upcoming
inspection. During the phaseout of ODS, EPA is aware of instances where
an importer would import cylinders labeled as containing HFCs (prior to
enactment of the AIM Act), when in fact they contained regulated HCFCs.
Shortly after import, the importer would relabel the cylinders and sell
them as HCFCs in an attempt to circumvent the CAA prohibition on
importing HCFCs without allowances. EPA is proposing to require a
permanent label to avoid such situations and to prohibit tampering with
the permanent label. EPA is soliciting comment on examples of
situations where permanent labels may be appropriate and is also
soliciting comment on what type of ``permanent marking'' may be
available for use on the types of containers used for regulated
substances that are consistent with other Federal requirements. EPA is
also soliciting comment on whether there are reasons why regulated
entities would benefit from the ability to use a ``permanent marking''
in place of a label. EPA is also soliciting comment on any
implementation challenges associated with requiring a ``permanent
label.'' EPA is also soliciting comment on any implementation
challenges associated with requiring a ``permanent label.''
To ensure that the labeling requirements meet their intended
purpose, EPA is also proposing to add more detail and specificity on
the regulatory labeling requirements. EPA proposes to make changes to
the existing regulatory text at 40 CFR 84.5(i)(1) to include the
following features such that all marks must be:
Durable and printed or otherwise labeled on, or affixed
to, the external surface of the bulk HFC container;
Readily visible and legible;
Able to withstand open weather exposure without a
substantial reduction in visibility or legibility;
Displayed on a background of contrasting color; and
If a container of regulated substances is contained within
a box or other overpack, the exterior packaging must contain legible
and visible information in at least 20-point font of what regulated
substance is contained within.
These proposed revisions to the labeling requirements are intended
to help ensure that all containers of regulated substances would
contain labeling that is not easily manipulated, that would be easily
visible and legible, and would contain information that is necessary
for appropriate inspection and enforcement, as appropriate. As outlined
in detail in the Framework Rule (86 FR 55166), the Agency has
significant concerns about the potential for and impact of illegal
trade in regulated substances. This concern is particularly heightened
at the start of a new phasedown step. The requirements of the HFC
phasedown are implemented at a variety of locations, including at
border entries and industrial facilities. As a result, EPA relies on a
diverse array of law enforcement officials to aid in compliance efforts
related to the 40 CFR part 84 requirements. It is particularly
important in light of these circumstances for EPA to strive to ensure a
program that can be readily and efficiently implemented. Without
appropriate labeling, containers of regulated substances may not be
readily distinguishable from containers of other products. Accordingly,
these proposed provisions would facilitate inspections by providing
durable labels that clearly identify contents.
As a complementary measure to these additional labeling
requirements, EPA is proposing to add to the prohibitions at 40 CFR
84.5(i)(2), that no one other than the importer of record may repackage
or relabel regulated substances that were initially unlabeled or
mislabeled. EPA is proposing to change the current text, which applies
to importers, to allow only for the importer of record to undertake
these actions. This is intended to parallel the proposals elsewhere in
this preamble that would permit only an importer of record to expend
allowances for the import of bulk regulated substances. Additionally,
the current regulatory text does not preclude relabeling; it only
precludes repackaging. However, this regulatory text is intended to
apply to regulated substances that were ``initially mislabeled or
unlabeled.'' While it is important to provide restrictions in such
situations on repackaging, it is equally important to speak to
relabeling for a scenario where the regulated substances are not moved
into a different container.
C. Clarify Ability To Move Allowances Among Companies With Certain
Affiliation Without a Transfer
EPA made clear in the Framework Rule that in calculating the
quantity of allowances to allocate, ``for purposes of determining the
quantity of past imports, EPA is treating all companies majority owned
and/or controlled by the same individual(s) as a single company, even
if there is no corporate parent'' (86 FR 55145). EPA also considers all
parent, \50\ subsidiary,\51\ sister,\52\ and commonly owned \53\
companies together in determining past imports. Complementarily, it is
EPA's longstanding practice that allowances can be expended by parents,
subsidiaries, sister, or commonly owned companies without a transfer.
EPA is proposing to revise the regulatory text at 40 CFR 84.19(a) to
codify this practice for additional clarity for allowance holders.
---------------------------------------------------------------------------
\50\ In referring to a parent, EPA means a company that has a
majority, i.e. at least fifty percent, stake in another company.
\51\ In referring to a subsidiary, EPA means a company that is
majority, i.e. at least fifty percent, owned by another company.
\52\ In referring to a sister company, EPA means an entity
related to another entity by a shared corporation with majority
ownership.
\53\ In referring to a commonly owned company, EPA means a
company that is related to another company by a shared individual
owner or owners, where there is at least (1) a single individual
that owns 30 percent or more of each company or (2) individuals with
direct family relationships (parent, child, sibling, or spouse) that
own a majority of each company.
---------------------------------------------------------------------------
Given that EPA considers historic activity together for these
companies in determining a single quantity of allowances to allocate,
it is appropriate to allow companies in this situation to expend from
the single pool of allowances through different arms of its corporate
chain. Therefore, it seems
[[Page 66397]]
inappropriate to require a transfer, including a petition to the Agency
and a transfer offset, when EPA considers these commonly owned
companies as a single entity for purposes of calculating and allocating
allowances. However, EPA invites comments on potential negative
implications of this proposal. EPA requests comment on whether the
proposed revisions to the text adequately capture the appropriate
entities.
D. Revise Required Elements To Request Additional Consumption
Allowances
In the Framework Rule EPA created a process by which a person may
obtain consumption allowances equivalent to the quantity of regulated
substances exported by that person. Given that the AIM Act subtracts
exports in the definition of ``consumption'' under subsection (b)(3),
it is consistent with the Act to refund consumption allowances that
were expended to import or produce regulated substances if those
regulated substances were later exported from the country. An exporter
must submit certain information (40 CFR 84.17(a)) for EPA's review to
verify that the regulated substances were in fact exported.
Through implementation of the existing 40 CFR 84.17 regulations,
EPA has learned that the review of requests for additional consumption
allowances (RACAs) could be more efficient if exporters provided
additional information with their RACA requests. Specifically, EPA is
proposing to require that RACA applicants submit the following
additional data points: (1) Internal Transaction Numbers (ITNs) for all
shipments regardless of monetary value, destination country, or other
characteristics that could otherwise exempt or preclude an exporting
entity from obtaining an ITN, (2) conveyance names, (3) IMOs of the
vessel(s) carrying the export, as applicable and (4) container numbers
(e.g., ISO tank numbers). Inclusion of this additional information
would aid EPA in verifying reported exports through CBP data. These
proposed additional data points should help ensure that EPA can quickly
locate exports and review RACA applications expeditiously. An ITN is
received as confirmation that the Electronic Export Information (EEI)
has been accepted in the Automated Export System (AES). EPA notes that
there are some exports where an exporter is not required to receive an
ITN. This may be the case for certain exports destined for Canada or
valued under $2,500, for example. This proposal would require that all
exports of regulated substances have associated EEI that is filed by
way of AES, regardless of whether the exports are destined for Canada,
under a low value threshold, or otherwise not required to have an ITN.
EPA requests comment on whether there are any additional data points
that would aid the Agency in quickly verifying the information provided
in a RACA application, including but not limited to customs release
documents from the country receiving the exports and proof of receipt
at the final destination. EPA also requests comment on whether any
entity that may apply for a RACA would have difficulty gathering and
submitting the additional data points proposed here. EPA's
understanding is that these data points appear on existing bills of
lading, although the specific data points on a given bill of lading may
differ by broker.
EPA is also taking comment on whether the Agency should require the
reporting of certain EEI, which are data that must be filed through
AES, to aid in EPA's review of RACAs and to verify export data more
generally similar to those required (and proposed to be required) under
40 CFR 84.31(c)(7), such as cargo description, gross and net weight,
unit of mass (i.e., kilograms), HTS Code, container number(s) of the
shipment (if applicable), vessel name and the IMO number, where
applicable, CAS Number(s) of the regulated substance(s) imported and,
for regulated substances that are in a mixture, either the ASHRAE
numerical designation of the refrigerant or the percentage of the
mixture containing each regulated substance.
Finally, while the current RACA requirements allow an entity to
receive a refund on allowances for an export regardless of when the HFC
was initially produced or imported, EPA is considering amending the
regulations to require that exporters provide documentation to verify
an allowance was expended when the regulated substance being exported
was produced or imported. This could reduce the opportunity for an
entity to illegally import an HFC, export it legally, and receive a
legal consumption allowance, effectively allowing a bad actor to
launder smuggled HFCs. It would also reduce the opportunity for
entities to receive RACAs for stockpiled HFCs imported or produced
prior to 2022. EPA noted its concern in the proposed Framework Rule
that an entity could over produce or import high-GWP HFCs prior to
January 1, 2022, and export them to gain additional allowances in later
years. In the Framework Rule, EPA initially proposed that RACAs would
only be available for regulated substances that were produced or
imported in the same year as the export occurred, but did not finalize
that time restriction noting that it could be unnecessarily
prescriptive, cause challenges around the change in calendar year, and
the challenges such a requirement would have for net exporters who are
not allocated allowances at the start of the year since their historic
consumption would be negative. EPA seeks comment on whether these
reasons will still be valid by 2024 and also whether it is appropriate
to finalize a requirement with some more flexible time-related
restriction.
E. Petitions To Import Regulated Substances for Laboratory Testing with
Eventual Destruction
EPA's regulations codified in 40 CFR 84.25(b) detail the process by
which entities can import used regulated substances into the United
States for destruction without expending allowances. The Framework Rule
explained that used HFCs may need to be destroyed when they are
contaminated beyond the point that reclamation is economical, and that
providing a pathway to import used HFCs for proper disposal in the
United States can benefit the environment and the domestic destruction
industry (86 FR 55181). The Agency explicitly excluded importing virgin
HFCs for disposal from the petition process, stating that ``Importing
virgin HFCs, even for disposal, requires the expenditure of consumption
allowances.''
In reviewing import activity, EPA has learned that some entities
may import small amounts of regulated substances for laboratory testing
to determine the type and amount of any impurities in the United
States, after which point the substances are destroyed. In such
situations the regulated substances are virgin material, but may not
meet the exact specifications required by the producer or for the
intended applications. The current regulations require allowances to be
expended in these instances, as these materials are not used regulated
substances. Even if these regulated substances could be considered
used, there are no provisions in the current regulations to allow for
an intermediary step (such as laboratory testing) prior to destruction
without expending allowances.
Based on current information, EPA does not consider laboratory
testing of regulated substances that are ultimately bound for
destruction as meriting an exemption from expending allowances. EPA
established a regulatory petition process for other situations where
[[Page 66398]]
regulated substances are imported without expending allowances, such as
for feedstock uses or disposal by destruction. Those standardized
processes provide a means for EPA to document shipments, verify that
the intended functions are being carried out, and expedite reviews. In
the case of laboratory testing with eventual destruction, the
frequency, quantity, and number of potentially affected entities are
not fully known, though the Agency does not believe that that they are
sufficient enough in scale to necessitate a regulatory petition process
for the entities to be exempt from expending allowances. The Agency
currently lacks compelling reasons or rationale for why such testing
cannot be performed in the country of use. Nonetheless, EPA is
soliciting comment on whether a petition process like that in 40 CFR
84.25(b) would be appropriate and necessary, and on the number of
entities that would potentially make use of a petition process as well
as the frequency and quantity of such imports. If compelling comments
are received demonstrating that these tests cannot be performed in the
countries of use or that the scope of these activities warrant a
regulatory petition process, EPA would consider finalizing a process as
outlined further in this section.
Should EPA determine there is need for such a petition process, EPA
is taking comment on whether a petition process should be provided, by
which allowances would not be necessary for importing virgin or used
regulated substances exclusively for laboratory testing for the type
and quantity of impurities, where the regulated materials are
ultimately bound for destruction.
Specifically, EPA is taking comment on a process for which imports
of regulated substances could qualify if they are imported for
laboratory testing and ultimately bound for destruction and are limited
to 0.5 kg per shipment, and that a person must petition the Agency for
the import of each individual shipment of a regulated substance that
met these criteria in order to not expend allowances. If EPA were to
determine such a process is needed, it is taking comment on including
the following requirements in that process: a petition would be
required at least 30 days before the shipment is to arrive at a U.S.
port, containing the following information:
Name, HTS code, and quantity in kilograms (limited to 0.5
kg) of each regulated substance to be imported;
Name and address of the importer, the importer
identification number, and the contact person's name, email address,
and phone number;
Name and address of the consignee and the contact person's
name, email address, and phone number;
Name and address of any intermediary who will hold the
imported regulated substances for laboratory testing, and the contact
person's name, email address, and phone number;
Name and address of any intermediary who will hold the
imported regulated substances for destruction, and the contact person's
name, email address, and phone number;
Source country;
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;
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;
Name, address, contact person, email address, and phone
number of the responsible party at the laboratory testing facility;
Name, address, contact person, email address, and phone
number of the responsible party at the destruction facility;
A certification from the importer attesting that prior to
destruction, the regulated substances are only being imported for
testing to determine the type and quantity of impurities with no other
use;
A certification from the laboratory conducting the testing
that they will only distribute the regulated substances to the
destruction facility specified in the petition after testing is
complete and will send the regulated substances to the destruction
facility within 60 days of receipt; and
A certification from the destruction facility that they
will destroy the regulated substance within 45 days of receipt.
EPA is further taking comment on using a review process, time by
which the regulated substances must be destroyed, quantity (in MTEVe)
limits, proof of destruction requirements, and recordkeeping provisions
for the petition process described above in this section, that would be
similar to those currently codified in 40 CFR 84.25 (b)(2)-(6). Finally
with respect to this petition process, the Agency is taking comment on
requiring that the laboratory performing the purity testing submit to
EPA information demonstrating and confirming that the regulated
substances have been delivered to a destruction facility in accordance
with approved technologies in 40 CFR 84.29 within 15 calendar days of
the destruction facility receiving the regulated substances.
IX. What are the costs and benefits of this proposed action?
In the Framework Rule, EPA conducted a Regulatory Impact Analysis
(RIA) 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 that rule. This action proposes to follow an
allocation methodology and framework nearly identical to that rule, and
this action is not expected to result in significant changes to the
phasedown program as a whole or fundamentally change the assumptions
made in the RIA. As described in this preamble, we are proposing to
adjust the consumption baseline, revise particular recordkeeping and
reporting requirements, and carry out other limited revisions to the
existing regulations. These revisions would generally apply from the
years 2024 and beyond. In this section we discuss two discrete changes
to the analysis of benefits and costs as presented in the RIA for the
Framework Rule. First, we are providing an analysis of the incremental
change in benefits and costs associated with the proposed adjustment to
the consumption baseline from 2024 through 2050 relative to the
benefits and costs estimate for the same time period as estimated in
the supporting analysis for the Framework Rule. Secondly and
separately, we have adjusted estimated costs associated with the HFC
phasedown from 2024 through 2050 due to updating assumptions for an
abatement option used in the analysis.
This analysis is intended to provide the public with updated
information on the relevant costs and benefits of this action and to
comply with Executive Orders. The analysis does not form a basis or
rationale for any of the actions EPA is proposing in this rulemaking.
The Framework Rule, its RIA, and supporting documentation provide more
detail on our analysis methodology of the costs and benefits of the HFC
phasedown between 2022 and 2050, and are available in the docket for
this action (Docket ID No. EPA-HQ-OAR-
[[Page 66399]]
2022-0430). More information on the analysis for this action is
available in an addendum to the Framework Rule's RIA in the docket for
this action.
As discussed in section IV of this preamble, this rule proposes to
reduce the consumption baseline by 3.6 million metric tons of exchange
value equivalent (MMTEVe) (approximately 1.2 percent) relative to the
baseline codified in the Framework Rule at 40 CFR 84.7(b)(2). With a
lower consumption baseline, more abatement will be necessary in each
year starting in 2024 to reduce HFC consumption from its business-as-
usual level to a level below the maximum allowed consumption. However,
for the years 2029 through 2035, the abatement options modeled
previously using the higher baseline had already lowered consumption
below the maximum consumption allowed. This ``overshoot'' reached a
level of consumption that is already below the maximum consumption that
would be allowed with the lowered baseline, so no additional abatement
options are needed in these years and no incremental costs are accrued.
More detail is provided in the RIA addendum for this rule. Assuming EPA
finalizes the proposed change, using the same abatement option approach
as used in the Framework Rule RIA, we estimate consumption will
decrease relative to the business-as-usual forecast by an additional
22.3 MMTEVe through 2050 (i.e., 7,183 MMTEVe compared with the previous
estimate of 7,160 MMTEVe).
Reducing the consumption of HFCs reduces the emissions of HFCs,
although the time profile of emissions reduction can vary depending on
the application the HFCs are used in because consumption in some
applications, e.g., aerosols, may result in an immediate emissions
release, while others, e.g., closed-cell foams, emit the HFCs used to
produce them over many years. Thus, the percentage reduction in a
discounted stream of consumption may not match the percentage reduction
in a discounted stream of emissions. EPA's Vintaging Model is used to
calculate consumption and emissions under a ``business-as-usual''
forecast and an alternative scenario in which the AIM Act allowance
allocation phasedowns are in effect and abatement options are
undertaken. The difference results in the reduction in consumption as
well as the reduction of emissions of HFCs in each year. The 2024-2050
total reduction in emissions of regulated HFCs from the proposed
reduction in the consumption baseline is estimated to be 2 MMTEVe fewer
relative to the previous estimate from the Framework Rule. By
multiplying the change in emissions of each HFC in each year by the
social cost of HFCs for that HFC for that year, the monetary value of
the climate benefits of the emissions reduction can be estimated. These
reductions in HFC consumption, emissions, and associated climate
benefits, are all attributable to the baseline adjustment. From 2024
through 2050 at a discount rate of 3 percent in 2020 dollars and
discounted to 2022, this proposed baseline adjustment would result in
incremental climate benefits of $125 million, costs of $1.2 billion,
and a net cost of $1.1 billion. Relative to the present value of
cumulative net benefits for the HFC Allocation Program between 2022 and
2050, this increase represents a 0.4 percent decrease in cumulative net
benefits. Although EPA is using the social costs of HFCs for purposes
of this analysis, this proposed action does not rely on the estimates
of these costs as a record basis for the Agency action, and EPA would
reach the proposal conclusion even in the absence of the social costs
of HFCs.
EPA also updated an abatement option used in the analysis to
reflect the most recently available information. Specifically, the
previous analysis assumed that some consumption of HFC-134a could be
abated by transitioning the foam-blowing agent used to produce extruded
polystyrene (XPS) boardstock foam. If XPS foam producers shifted from
using a combination of HFC-134a and carbon dioxide to a mixture of
liquid carbon dioxide (LCD) and alcohol, all of the HFC consumption
associated with producing XPS foam could be avoided. However, EPA
received comment from two foam manufacturers that the abatement option
of using LCD/alcohol has not been proven to meet the safety and
performance standards required in the United States and would not be a
viable option. While the LCD/alcohol technology is successfully used in
other countries, we understand that U.S. companies expect XPS foam
production to transition from using HFC-34a/CO2 to blends
containing a hydrochlorofluoroolefin (HCFO) and/or a hydrofluoroolefin
(HFO). This revision of an abatement option did not result in any
changes to the emissions or benefits, because these options are applied
to reduce consumption to the respective phasedown step. The updated
assumption resulted in a cost increase of $2.7 billion from 2024-2050
at a 3 percent discount rate relative to the prior estimate provided
with the Framework Rule RIA. The effect is a one percent change in the
estimated net benefit of the HFC phasedown in 2022-2050. This revision
solely reflects a change in assumptions. It is not the result of a
regulatory change and does not reflect a change in costs from actions
proposed in this rule. EPA requests comment on this assumption,
including on the modeled transition and estimated cost, and other
transition scenarios described in the RIA addendum in the docket.
For informational purposes, considering the incremental change to
the consumption baseline associated with this proposed rule and the
separate update to the analytical model described further in the
addendum in the docket for this rulemaking, the present value of
cumulative net benefits for the HFC Allocation Program between 2022 and
2050 is now estimated to be $268.9 billion.
X. How is EPA considering environmental justice?
As part of the RIA addendum for this proposed rule, EPA updated the
environmental justice analysis that was previously conducted for the
Framework Rule. The updated environmental justice analysis used the
same analytical approach used previously, along with updated data on
cancer and respiratory risks. The analysis also includes the addition
of another facility that reported HFC production. Furthermore, as
described in section VI.D of this preamble, EPA is also proposing to
require that HFC production facilities report annual emissions of HAP,
ODS, and HFCs from their HFC production lines.
Executive Order 12898 (59 FR 7629, February 16, 1994) and Executive
Order 14008 (86 FR 7619, January 27, 2021) establish Federal executive
policy on 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 people of color 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,
[[Page 66400]]
regulations, and policies.\54\ 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.\55\ 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.\56\
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\54\ See, e.g., ``Environmental Justice.'' Epa.gov, EPA, 4 Mar.
2021, www.epa.gov/environmentaljustice.
\55\ 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, EPA, 17 Feb. 2017, www.epa.gov/environmentaljustice/guidance-considering-environmental-justice-during-development-action.
\56\ 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, EPA,
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 people
of color, low-income populations, and/or indigenous peoples; (2)
exacerbate existing disproportionate impacts on people of color, low-
income populations, and/or indigenous peoples; or (3) present
opportunities to address existing disproportionate impacts on people of
color, 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.
In the Framework Rule, EPA established the baselines for the
production and consumption of regulated substances, determined the
quantity of allowances that would be available nationwide according to
the AIM Act's phasedown schedule, and created an allowance allocation
and trading program. EPA also summarized the public health and welfare
effects of GHG emissions (including HFCs), including findings that
certain parts of the population may be especially vulnerable to climate
change risks 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 (86 FR 55124-55125).
Potential impacts of climate change raise environmental justice issues.
Low-income communities can be especially vulnerable to climate change
impacts because they tend to have more limited capacity to bear the
costs of adaptation 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.
EPA has not assessed climate-based impacts to communities that
surround HFC production facilities for this rule or as part of the
Framework Rule. The location of HFC production facilities has no
significant bearing on the climate impacts that these communities will
experience.
As detailed in the Framework Rule and its accompanying RIA, the
phasedown of HFCs in the United States will achieve significant
benefits associated with reducing climate change. However, as described
in the RIA for the Framework Rule and in the addendum for this proposed
rule, there continues to be 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. 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.
For the environmental justice analysis performed to support the
Framework Rule, as a starting point for assessing the need for a more
detailed environmental justice analysis, EPA reviewed 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 IPCC, the U.S. Global Change Research Program, and
the National Research Council. It was 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
[[Page 66401]]
and regulatory options. Where applicable and practicable, the Agency's
RIA examined certain metrics for an environmental justice analysis
comprising more than just climate change effects, including: the
proximity of entities receiving allowances to populations disaggregated
by race and ethnicity, low-income populations, and/or indigenous
peoples; the number of entities receiving allowances that may be
adversely affecting population groups of concern; the nature, amounts,
and location of regulated HFC production that may adversely affect
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 for the Framework Rule and is based on
public data from the TRI, GHGRP, EJSCREEN (an environmental justice
mapping and screening tool developed by EPA), Enforcement and
Compliance History Online (ECHO), and Census data. In addition, the
analysis integrated suggestions received during the public comment
period to the extent possible. The environmental justice analysis also
contains information on non-production releases (as defined by TRI),
water releases, and offsite disposal for chemicals used in HFC
production. The analysis of potential environmental justice concerns
focused mainly on characterizing baseline emissions of air toxics that
are also associated with chemical feedstock use for HFC production. As
noted in the RIA for the Framework Rule, 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
Agency also explored larger radii (5 and 10 miles) in response to
public comments that releases from these facilities may travel longer
distances.
The relatively small number of facilities directly affected by this
rule enabled EPA to assemble a uniquely granular assessment of the
characteristics of these facilities and the communities where they are
located. The environmental justice analysis, which examines racial and
economic demographic and health risk information, found heterogeneity
in community characteristics around individual facilities. The analysis
showed that the total baseline cancer risk and total respiratory risk
from air toxics (not all of which are due to emissions from HFC
production) varies, but is generally higher, and in some cases much
higher, within one to ten miles of an HFC production facility. The
analysis also found that higher percentages of both low-income and
Black or African American individuals live near several HFC production
facilities compared with the appropriate national and state level
average. EPA noted in the final rulemaking, and reiterates here, that
it is not clear the extent to which these baseline risks are directly
related to HFC production, but some feedstocks, catalysts, and
byproducts are toxic, particularly with respect to potential
carcinogenicity (e.g., carbon tetrachloride, tetrachloroethylene, and
trichloroethylene). All HFC production facilities are near other
industrial facilities that could contribute to the AirToxScreen
cumulative cancer and respiratory risk; the number of neighboring TRI
facilities within one mile of an HFC production facility ranges from 2
to 14, within 3 miles there are 2 to 19 neighboring TRI facilities,
within 5 miles there are 2 to 34 neighboring TRI facilities, and within
10 miles there are 6 to 66 neighboring TRI facilities.
At this time, it is not clear how emissions related to HFC
production compare to other chemical production at the same or nearby
facilities. Additionally, some HFC alternatives, such as
hydrofluoroolefins (HFOs), use the same chemicals as feedstocks in
their production or release the same chemicals as byproducts,
potentially raising concerns about local exposure. Emissions from
production facilities manufacturing non-fluorinated substitutes (e.g.,
hydrocarbons, ammonia) could also be affected by the phasedown of HFCs.
However, there is still limited information regarding how much of each
substitute would be produced, which substitutes would be used, and what
other factors might affect production and emissions at those locations,
so it continues to be unclear to what extent this rule may affect
baseline risks from hazardous air toxics for communities. Further, the
HFC phasedown schedule prescribed by Congress--with a 40 percent
reduction by 2024, a 70 percent reduction by 2029, an 80 percent
reduction by 2034 and an 85 percent reduction by 2036--may also reduce
the potential for a facility to increase emissions above current levels
for a prolonged period, if at all.
For this proposed rulemaking, EPA is updating the environmental
justice analysis that was done as part of the Framework Rule. Not much
time has elapsed since this rule was signed last September, and the
Agency still does not have enough data to determine how the
implementation of the HFC phasedown may affect production and emissions
at facilities that produce HFCs and their substitutes. For this reason,
EPA is following the analytical approach used in the Framework Rule RIA
to provide updated data on the total number of TRI facilities near HFC
production facilities and the cancer and respiratory risks to
surrounding communities. This update includes the use of the most
recent data available for the AirToxScreen data set from 2017,
replacing the 2014 NATA data used in the previous analysis.
Additionally, EPA is updating the list of HFC production facilities as
part of this analysis to include an additional ninth facility that
reported production of HFCs in 2022.
Finally, EPA is including a demonstration of a microsimulation
approach to analyze the proximity of communities to potentially
affected HFC production facilities. Microsimulation is a technique
relying upon advanced statistics and data science to combine disparate
survey and geospatial data. It has long been used in a variety of
economic and social science research and has been used before by EPA
(in the context of understanding the implications of underground
storage tank impacts on groundwater). Recent advances in data science
and computational power have increased the availability of
microsimulation for applications such as environmental justice
analysis. The demonstration analysis included in the RIA addendum
contributes to understanding communities that may warrant further
environmental justice analysis.
The updated environmental justice analysis found that for eight of
the nine facilities identified as HFC producers, the demographic data
are identical to that included in the Framework Rule RIA. The racial,
ethnic, and income figures for the 8 communities within 1, 3, 5, and 10
miles of the respective facilities are drawn from the most recent
American Communities Survey data from 2019. Using the updated 2017
AirToxScreen data, the total cancer risk and total respiratory risk
generally decreased compared with the previous analysis for the
communities surrounding several production facilities. The exception is
the apparent rise in total cancer risk within one mile of the Mexichem
Fluor facility in St. Gabriel, LA. The total cancer risk identified
using the 2014 NATA data was 180 per million at a one-mile
[[Page 66402]]
radius. Using the 2017 AirToxScreen dataset, the total cancer risk
rises within one mile of the facility to 200 per million. However,
further from the facility, the total cancer risk was lower using the
updated 2017 AirToxScreen data compared with that identified using the
2014 NATA data. In particular, the total cancer risk drops to 130 per
million from 140 per million within the three-mile radius, 120 per
million from 140 per million within the five-mile radius, and further
to 82 per million from 98 per million within the 10-mile radius. The
total respiratory risk near the facility appears lower using the new
data. Additionally, looking across the nine HFC production facilities,
the risks from air emissions (not all of which necessarily stem from
HFC production), while varied, were still generally higher, and in some
cases much higher, within one to three miles of an HFC production
facility and compared with the overall national and state averages.
For the additional ninth facility, Islechem, the total cancer risk
and total respiratory risk within 1 to 10 miles of the facility were
similar to or lower than the risks based on the national and state
average. The proportion of low-income and Black or African American and
other communities of color were lower than the national and state
averages and increased with increasing distance from this facility.
As mentioned above in this section, emissions from facilities
producing fluorinated and non-fluorinated substitutes may also be
affected by the phasedown of HFCs. For the forthcoming proposed
technology transitions rulemaking under the AIM Act, EPA is conducting
an environmental justice analysis to assess the potential impacts of
that proposed rule by examining the characteristics of communities near
facilities producing HFC substitutes (e.g., hydrocarbons,
CO2, ammonia, HFOs) used in the sectors or subsectors
addressed in the petitions. More information will be provided in
conjunction with that proposed rule, which the Agency anticipates
publishing later this year.
EPA seeks input on the environmental justice analysis contained in
the RIA addendum for this proposed rule, 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 (e.g.,
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 seeks comment and further discussion of the use of
microsimulation approaches and techniques for regulatory impact
analysis and other program activities. For example, what
microsimulation tools are appropriate for better understanding the
burdens faced by communities, and in what circumstances? The
demonstration analysis presented in this RIA addendum uses a dataset of
``synthetic households'' based on geospatial data combined through
microsimulation techniques with information from the U.S. Decennial
Census and the American Communities Survey (ACS). What other surveys or
other geospatial datasets should be the focus of EPA efforts to combine
with the ACS and/or Decennial Census data? How can microsimulation
tools supplement other EPA tools for understanding demographics,
multiple burdens facing communities, and assessing the impact of EPA
programs? Can microsimulation and other techniques to use current
survey information be used to identify data gaps which might be filled
with refinements or improvements to existing survey tools?
For the final rule, EPA is also considering updating the analysis
to estimate exposure of the communities near the identified facilities
to toxics using the Risk Screening Environmental Index Geographic
Microdata (RSEI-GM). The Agency seeks comment on whether updating the
analysis provided with the Framework Rule would be useful and what
additional insight it might provide for the environmental justice
analysis.
EPA is taking comment on whether the proposal to require annual
reporting of certain emissions, as described in more detail above in
section VI.D of this preamble, would allow for the effective monitoring
of these emissions and their localized impacts of the HFC phasedown on
surrounding communities. EPA is also taking comment on whether there
are other authorities that would allow for the reporting of emissions
tied to HFC and HFC substitute production. Finally, EPA is seeking
comment in order to aid our efforts to understand further cumulative
impacts and how they might be addressed. Since the updated
environmental justice analysis and proposed reporting requirement are
focused on chemical stressors, the Agency is requesting additional
information on how both the chemical and non-chemical stressors
associated with the HFC phasedown can alter the cumulative impacts
experienced by communities surrounding HFC production facilities, how
the Agency can share this information with the public, and whether and
how the Agency can assess and measure cumulative impacts in the context
of the HFC phasedown.
XI. 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
are the costs and benefits of this proposed 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 ID
No. EPA-HQ-OAR-2022-0430.
B. Paperwork Reduction Act (PRA)
The information collection activities in this proposed rule have
been submitted for approval to OMB under the PRA. The ICR document that
EPA prepared has been assigned EPA ICR number 2685.03 and proposes to
revise OMB Control No. 2060-0734. You can find a copy of the ICR in the
docket for this rule (Docket ID. No. EPA-HQ-OAR-2022-0430), 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 person 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 person: 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 collects such data regularly to support
implementation of the AIM Act's HFC
[[Page 66403]]
phasedown provisions. EPA requires 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 collects information in order to calculate allowances, to
track the movement of HFCs through commerce, and to require auditing.
Collecting these data elements allows 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. As described above in this
preamble, EPA proposes revisions to the recordkeeping and reporting
requirements and new requirements, including annual reporting of
estimated emissions from HFC production facilities and recordkeeping of
analysis results on regulated substances.
All information sent by the submitter electronically is transmitted
securely to protect information that is CBI or claimed as CBI
consistent with the confidentiality determinations made in the
Framework Rule. The reporting tool guides the user through the process
of submitting such data. Documents containing information claimed as
CBI must be submitted in an electronic format, in accordance with the
recordkeeping requirements.
For reference, EPA continued to use data collected under the ICR
for the GHGRP (OMB Control No. 2060-0629) as well as the associated
reporting tool, the e-GGRT in developing this proposed rulemaking. EPA
also earlier requested an emergency ICR for a one-time collection
request pertaining to data necessary to establish the U.S. 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). EPA is not revising either ICR
through this proposed rule.
Respondents/affected entities: Respondents and affected entities
will be individuals or entities 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 entities 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: 10,195.
Frequency of response: Quarterly, biannual, annual, and as needed
depending on the nature of the report.
Total estimated burden: 57,617 hours (per year). Burden is defined
at 5 CFR 1320.3(b).
Total estimated cost: $7,765,111 per year, includes $817,607
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. EPA will respond to any ICR-related comments in
the final rule. You may also send your ICR-related comments to OMB's
Office of Information and Regulatory Affairs using the interface at
www.reginfo.gov/public/do/PRAMain. Find this particular information
collection by selecting ``Currently under Review--Open for Public
Comments'' or by using the search function. OMB must receive comments
no later than January 3, 2023.
C. Regulatory Flexibility Act (RFA)
I certify that this action will not have a significant economic
impact on a substantial number of small entities (SISNOSE) under the
RFA. The small entities subject to the requirements of this action
include those that may produce, import, export, destroy, use as a
feedstock or process agent, reclaim, or recycle HFCs. EPA estimates
that approximately 32 of the 279 potentially affected small businesses
could incur costs in excess of one percent of annual sales and that
approximately 28 small businesses could incur costs in excess of three
percent of annual sales. Because there is not a significant number of
small businesses that may experience a significant impact, it can be
presumed that this action will have no SISNOSE. Details of this
analysis are presented in ``Economic Impact Screening Analysis for
Phasedown of Hydrofluorocarbons: Allowance Allocation Methodology for
2024 and Later Years.'' (Docket ID EPA-HQ-OAR-2022-0430).
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 has
shared 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 would
further improve children's health. The assessment literature cited in
EPA's
[[Page 66404]]
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) and
Incorporation by Reference
This action involves a technical standard. EPA is proposing to
require laboratory testing be conducted by a laboratory that is
accredited to ISO 17025 and accordingly is incorporating by reference
ISO/IEC 17025:2017, ``General requirements for the competence of
testing and calibration laboratories'', Third Edition, November 2017.
ISO/IEC 17025:2017 specifies general requirements for competence,
impartiality, and consistent operation of laboratories. The standard is
applicable to all organizations performing laboratory activities,
regardless of the number of personnel. This standard is available for
purchase from Techstreet at 3025 Boardwalk Drive, Suite 220, Ann Arbor,
MI 48108; tel.: 855.999.9870; email: [email protected]; website:
http://www.techstreet.com/, or https://www.techstreet.com/standards/iso-iec-17025-2017?product_id=2000100. The cost of an electronic copy
of ISO 17025:2017 is approximately $162. The cost of obtaining this
accreditation standard is not a significant financial burden for
laboratories. Therefore, EPA concludes that the ISO 17025 standard
being incorporated by reference is reasonably available.
J. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations
EPA believes that it is not feasible 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).
This rule would continue to 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
overburdened and underserved communities, including low-income
communities and communities of color, and/or indigenous peoples. At the
same time, the Agency recognizes that phasing down the production of
HFCs may cause significant changes in the location and quantity of
production of both HFCs and their substitutes, and that these changes
may in turn affect emissions of HAP at chemical production facilities.
EPA carefully evaluated available information on HFC production
facilities and the characteristics of nearby communities to evaluate
these impacts. In the Framework Rule, EPA also solicited comment on
whether these changes pose risks to communities with environmental
justice concerns and what steps, if any, should be taken either under
the AIM Act or under EPA's other statutory authorities to address any
concerns that might exist. Based on EPA's analysis, EPA finds evidence
of environmental justice concerns near HFC production facilities from
cumulative exposure to existing environmental hazards in these
communities. Given uncertainties about which and in what quantities HFC
substitutes will be produced, EPA cannot determine how this rule would
affect existing disproportionate adverse effects on communities of
color and low-income people as specified in Executive Order 12898.
However, the Agency is proposing to require additional reporting on
emissions from HFC production facilities and is taking comment on its
revised analysis for this rule. A summary of the Agency's approach for
considering potential environmental justice concerns as a result of
this rulemaking can be found in section X of this preamble, and our
environmental justice analysis can be found in the RIA addendum,
available in the docket for this rulemaking.
List of Subjects in 40 CFR Part 84
Environmental protection, Administrative practice and procedure,
Air pollution control, Chemicals, Climate Change, Emissions, Imports,
Incorporation by Reference, Reporting and recordkeeping requirements.
Michael S. Regan,
Administrator.
For the reasons set out in the preamble, EPA proposed to amend 40
CFR part 84 as follows:
PART 84--PHASEDOWN OF HYDROFLUOROCARBONS
0
1. The authority citation for part 84 continues to read as follows:
Authority: Pub. L. 116-260, Division S, Sec. 103.
Subpart A--[Amended]
0
2. Amend Sec. 84.3 by adding the definitions ``batch'', ``berth'',
``certificate of analysis'', ``commonly owned'', ``expend'',
``laboratory testing'', ``majority owned'', and ``representative
sample'' in alphabetical order to read as follows:
Sec. 84.3 Definitions.
* * * * *
Batch means a vessel, container, or cylinder from which a producer,
importer, reclaimer, recycler, or repackager transfers regulated
substances directly for sale or distribution, or for repackaging for
sale or distribution; or a population of small vessel(s), container(s),
or cylinder(s) that a producer, importer, reclaimer, recycler, or
repackager directly offers for sale or distribution.
Berth means to moor a ship in its allotted place at a wharf or
dock.
* * * * *
Certificate of Analysis means a document that certifies the
contents of an import meets recognized specifications following
sampling and testing methodology in appendix A to 40 CFR part 82 and
the testing methodology in appendix A to 40 CFR part 82 or EPA Method
18 for the
[[Page 66405]]
appropriate regulated substance or mixture of regulated substances.
* * * * *
Commonly Owned: An entity that is related to another entity by a
shared individual natural person(s), where either (a) there is at least
a single individual that owns 30 percent or more of each entity or (b)
individuals that share a direct family relationship (parent, child,
sibling, or spouse) own a majority of each entity.
* * * * *
Expend means to subtract the number of allowances required for the
production or import of regulated substances under this part from a
person's unexpended allowances.
* * * * *
Laboratory testing means the use of the sampling and testing
methodology prescribed in Sec. 84.5(i)(c) by a laboratory that is
accredited to ISO 17025 (incorporated by reference, see Sec. 84.37).
Majority owned means when a corporate entity has at least a fifty
percent stake in another entity.
* * * * *
Representative sample means a sample collected from a container
offered for sale or distribution using a sampling method that obtains
all components of regulated substance(s) in an unbiased and precise
manner; and a sample that can be used to infer that the composition of
regulated substance(s) in a population of containers offered for sale
or distribution that constitute, or are derived from, the batch, are
within stated tolerances.
* * * * *
0
3. Amend Sec. 84.5 by:
0
a. In (b)(1), adding ``either as a single component or a multicomponent
substance,'' before the word ``except'';
0
b. Revising paragraph (b)(1)(i);
0
c. In (b)(1)(iii), removing ``or''
0
d. In (b)(1)(iv), replacing ``.'' with ``; or''
0
e. Adding paragraphs (b)(1)(v) and (vi);
0
f. Redesignating (b)(2) through (b)(6) as paragraphs (b)(3) through
(b)(7) and adding a new paragraph (b)(2);
0
g. Revising the newly redesignated paragraph (b)(3); and
0
h. Revising paragraphs (d) and (i).
The additions and revisions read as follows:
Sec. 84.5 Prohibitions relating to regulated substances.
* * * * *
(b) * * *
(1) * * *
(i) If the importer of record possesses at the time they are
required to submit reports to EPA pursuant to Sec. 84.31(c)(7), and
expends at the time of ship berthing for vessel arrivals, border
crossing for land arrivals such as trucks, rails, and autos, and first
point of terminus in U.S. jurisdiction for arrivals via air,
consumption or application-specific allowances in a quantity equal to
the exchange-value weighted equivalent of the regulated substances
imported, whether present as a single component or a multicomponent
blend. The required amount of allowances must be calculated to the
tenth, but a minimum expenditure of 0.1 allowances is required for any
import of regulated substances;
(A) The calendar year of the expended allowances must be for the
same calendar year in which the ship containing regulated substances
berthed for sea arrivals, at the border crossing for land arrivals, or
in which an air arrival first reached its point of terminus in U.S.
jurisdiction;
(B) [Reserved]
* * * * *
(v) In the case of a heel when the precise quantity is unknown or
has not been measured prior to import, if the importer of record
expends, at the time of the import, consumption or application-specific
allowances in a quantity equal to 10 percent of the total potential
volume of the container in exchange value-weighted equivalent terms for
the regulated substance contained therein.
(vi) All imports pursuant to paragraphs (b)(1)(i) or (v) of this
section must be accompanied by a certificate of analysis.
(2) No person may attempt to land bulk regulated substances on,
bring regulated substances into, or introduce regulated substances
into, any place subject to the jurisdiction of the United States
without meeting one of the categories set forth in Sec. 84.5(b)(1).
(3) Each person meeting the definition of importer for a particular
regulated substance import transaction is jointly and severally liable
for a violation of paragraph (b)(1) of this section, unless they can
demonstrate that the importer of record possessed and expended
allowances in accordance with the requirement outlined in (b)(1)(i) or
(v) or another party who meets the definition of an importer met one of
the exceptions set forth in (b)(1)(ii) through (iv) of this section.
* * * * *
(d) Calendar-year allowances. All production, consumption, and
application-specific allowances may only be expended for production or
import occurring in the calendar year for which the allowances are
allocated (i.e., January 1 through December 31). No person may expend,
transfer, or confer a production, consumption, or application-specific
allowance after December 31 of the year for which it was issued.
Entities may transfer or confer their production, consumption, or
application-specific allowances before January 1 of the calendar year
for which the allowances were allocated.
* * * * *
(i) Labeling. (1) As of January 1, 2022, no person may sell or
distribute, offer for sale or distribution, or import containers
containing a regulated substance that lacks a permanent label stating
the common name(s), chemical name(s), or ASHRAE designation of the
regulated substance(s) or blend contained within, and the percentages
of the regulated substances if a blend. Removing or tampering with this
permanent label is prohibited. The permanent label must be:
(i) Durable and printed or otherwise labeled on, or affixed to, the
external surface of the bulk regulated substance container;
(ii) Readily visible and legible;
(iii) Able to withstand open weather exposure without a substantial
reduction in visibility or legibility;
(iv) Displayed on a background of contrasting color; and
(v) If a container of a regulated substances is contained within a
box or other overpack, the exterior packaging must contain legible and
visible information in at least 20-point font of what regulated
substance is contained within.
(2) No person other than the importer of record may repackage or
relabel regulated substances that were initially unlabeled or
mislabeled. In order to repackage the regulated substances, the
importer must either:
(i) Expend consumption allowances equal to the amount of allowances
that would be required if each cylinder were full of HFC-23; or
(ii) Verify the contents with independent laboratory testing
results and affix a correct label on the container that matches the
lab-verified test results before the date of importation (consistent
with the definition at 19 CFR 101.1) of the container.
(3)(i) No person producing, importing, reclaiming, recycling for
fire suppression, or repackaging regulated substances may sell or
distribute, or offer for sale or distribution, regulated substances
without first testing a representative sample of the regulated
substances that they are producing, importing, reclaiming, recycling
for fire suppression, or repackaging to verify
[[Page 66406]]
that the composition of the regulated substance(s) matches the
container labeling using the sampling and testing methodology
prescribed in 40 CFR part 82, subpart F appendix A for regulated
substances offered for sale and distribution as refrigerants and using
the following testing method for regulated substances offered for non-
refrigerant uses:
Table 1 to Paragraph (d)(3)(i)--Non-Refrigerant Regulated Substance
Testing Methods
------------------------------------------------------------------------
Regulated substance Testing method
------------------------------------------------------------------------
HFC-23, HFC-134, HFC-125, HFC-143a, HFC- Part 7 of 2008 Appendix C for
41, HFC-152a. Analytical Procedures For AHRI
Standard 700-2014,
incorporated by reference in
40 CFR part 82, subpart F,
appendix A.
HFC-134a, HFC-143, HFC-245fa, HFC-32, Part 9 of 2008 Appendix C for
HFC-152. Analytical Procedures For AHRI
Standard 700-2014,
incorporated by reference in
40 CFR part 82, subpart F,
appendix A.
HFC-227ea, HFC-236cb, HFC-236ea, HFC- EPA Method 18; Appendix A-6 to
236fa, HFC-245ca, HFC-365mfc, HFC-43- 40 CFR part 60--Test Methods
10mee. 16 through 18.
------------------------------------------------------------------------
(ii) No person may sell or distribute, or offer for sale or
distribution, regulated substances as a refrigerant that do not meet
the specifications in appendix A to 40 CFR part 82, subpart F--
Specifications for Refrigerants that are applicable to that regulated
substance or mixture containing regulated substance(s). For persons who
are producing, importing, reclaiming, recycling for fire suppression,
or repackaging regulated substances, the applicable specifications must
be verified using the sampling and testing methodology prescribed in
appendix A to 40 CFR part 82, subpart F.
* * * * *
0
4. Amend Sec. 84.7 by
0
a. In (b)(2), removing ``303,887,017'' and adding in its place
``300,257,386''; and
0
b. Revising the table in paragraph (b)(3).
The addition and revision read as follows:
Sec. 84.7 Phasedown schedule.
* * * * *
(b) * * *
(3) * * *
Table 2 to Paragraph (b)(3)
------------------------------------------------------------------------
Total production Total consumption
Year (MTEVe) (MTEVe)
------------------------------------------------------------------------
(i) 2022-2023..................... 344,299,157 273,498,315
(ii) 2024-2028.................... 229,532,771 180,154,432
(iii) 2029-2033................... 114,766,386 90,077,216
(iv) 2034-2035.................... 76,510,924 60,051,477
(v) 2036 and thereafter........... 57,383,193 45,038,608
------------------------------------------------------------------------
0
5. Amend Sec. 84.9 by:
0
a. In paragraph (a) introductory text, add ``2022 and 2023'' after the
words ``calendar year''; and
0
b. Redesignating paragraph (b) as paragraph (c) and adding a new
paragraph (b).
The addition reads as follows:
Sec. 84.9 Allocation of calendar-year production allowances.
* * * * *
(b) Starting with the allocation of 2024 calendar years allowances,
the relevant Agency official will issue, through a separate
notification, calendar year production allowances to entities that
produced a regulated substance in 2021 or 2022, or both 2021 and 2022.
The allocation of calendar year 2024, 2025, 2026, 2027, and 2028
production allowances is calculated as follows for each entity:
(1) Take the average of the three highest annual exchange value-
weighted production amounts that each eligible entity reported to the
Agency for calendar years 2011 through 2019;
(2) Sum every entity's average values determined in paragraph
(b)(1) of this section 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 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 (b)(2) of this
section by the amount of general pool allowances determined in (b)(3)
of this section.
* * * * *
0
6. Amend Sec. 84.11 by:
0
a. In paragraph (a) introductory text, add ``2022 and 2023'' after the
words ``calendar year''; and
0
b. Removing paragraph (c), redesignating paragraph (b) as paragraph (c)
and adding a new paragraph (b).
The addition reads as follows:
Sec. 84.11 Allocation of calendar-year consumption allowances.
* * * * *
(b) Starting with the allocation of 2024 calendar years allowances
the relevant Agency official will issue, through a separate
notification, calendar year consumption allowances. The allocation of
calendar year 2024, 2025, 2026, 2027, and 2028 consumption allowances
is calculated as follows for each entity:
(1) For new market entrants that were allocated allowances pursuant
to Sec. 84.15(e)(3), take the allowances allocated for calendar year
2023 and divide that value by the proportion of calendar year 2023
consumption allowances received by general pool allowance holders
pursuant to paragraph (a) of this section relative to their high three
average calculated pursuant to paragraph (a)(2) of this section;
[[Page 66407]]
(2) For entities that produced or imported a regulated substance in
2021 or 2022, or both 2021 and 2022, and have not been allocated
allowances pursuant to Sec. 84.15(e)(3), the relevant Agency official
will calculate and issue allowances to a single entity if multiple
importers are related through shared corporate or common ownership. The
relevant Agency official will take the average of the three highest
annual exchange value-weighted consumption amounts, which for entities
related through shared corporate or common ownership or control would
be aggregated and averaged at the corporate or common ownership level,
that each eligible entity reported to the Agency for calendar years
2011 through 2019;
(3) If an entity has a value calculated under (b)(1) of this
section and (b)(2) of this section, take the single higher value;
(4) Sum every entity's values as determined in (b)(1), (2), and (3)
of this section and determine each entity's percentage of that total;
(5) 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 from the consumption
cap in Sec. 84.7(b)(3);
(6) Determine individual entities' consumption allowance quantities
by multiplying each entity's percentage determined in (b)(3) of this
section by the amount of general pool allowances determined in (b)(4)
of this section.
0
7. Amend Sec. 84.17 by:
0
a. Revising paragraphs (a)(8) and (9).
0
b. Adding paragraphs (a)(10) through (13).
The revisions and additions read as follows:
Sec. 84.17 Availability of additional consumption allowances.
* * * * *
(a) * * *
(8) 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;
(9) The Harmonized Tariff Schedule codes of the regulated
substances exported;
(10) Internal Transaction Numbers for all shipments;
(11) Conveyance names;
(12) International Maritime Organization number of the marine
vessel(s) carrying the export, if applicable; and
(13) Container numbers.
* * * * *
0
8. Amend Sec. 84.19 by adding paragraph (a)(5) to read as follows:
Sec. 84.19 Transfers of allowances.
(a) * * *
(5) An entity does not need to follow the procedures in this
paragraph to expend allowances possessed by another entity that is
majority owned by it, it majority owns, related to it through majority
ownership, or commonly owned with it.
* * * * *
0
9. Amend Sec. 84.25 by revising paragraph (a)(1)(v) to read as
follows:
Sec. 84.25 Required processes to import regulated substances as
feedstocks or for destruction.
(a) * * *
(1) * * *
(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 date of
importation (consistent with the definition at 19 CFR 101.1) of the
individual shipment into the United States;
* * * * *
0
10. Amend Sec. 84.31 by:
0
a. Revising paragraphs (b)(2)(i), (ii), (iii), (ix), (x), and adding
paragraph (b)(2)(xi);
0
b. Redesignating (b)(3) through (5) as paragraphs (b)(4) through (6)
and adding a new paragraph (b)(3);
0
c. Revising newly designated paragraph (b)(4)(xi);
0
d. Redesignating (b)(4)(xiv) through (b)(4)(xv) as paragraphs
(b)(4)(xv) through (b)(4)(xvi) and adding a new paragraph (b)(4)(xiv);
0
e. In paragraph (c)(1) adding ``record of'' after ``importer of'';
0
f. Redesignating (c)(1)(ix) as (c)(1)(x) and adding a new paragraph
(c)(1)(ix);
0
g. Redesignating paragraphs (c)(2)(xvii) through (xix) as paragraphs
(c)(2)(xviii) through (xx) and adding a new paragraph (c)(2)(xvii);
0
h. In newly redesignated paragraph (c)(2)(xix) adding ``, including
instrument calibration, sample testing data files, and results
summaries of both sample test results and quality control test results
that are in a form suitable and readily available for review'' after
``distribution'';
0
i. In paragraph (c)(3)(i)(D) adding ``(consistent with the definition
at 19 CFR 101.1)'' after ``date of importation'';
0
j. Revising paragraph (c)(7);
0
k. Adding paragraphs (c)(9), (10), and (11);
0
l. Revising paragraph (i)(4)(i);
0
m. Revising paragraph (j)(3); and
0
n. Redesignating paragraph (k) as paragraph (l) and adding a new
paragraph (k).
The additions and revisions read as follows:
Sec. 84.31 Recordkeeping and reporting.
* * * * *
(b) * * *
(2) * * *
(i) The quantity (in kilograms) of production of each regulated
substance used in processes resulting in their transformation by the
producer; for any regulated substance that is used in processes
resulting in their transformation at a facility that differs from the
facility of production, but both facilities are owned by the producer,
the name, quantity (in kilograms), and recipient facility of each
regulated substance; 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; for any regulated substance that is used in processes
resulting in their destruction at a facility that differs from the
facility of production, but both facilities are owned by the producer,
the name, quantity (in kilograms), and recipient facility of each
regulated substance; 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; for any regulated
substance that is used as a process agent at a facility that differs
from the facility of production, but both facilities are owned by the
producer, the name, quantity (in kilograms), and recipient facility of
each regulated substance; and the quantity (in kilograms) intended for
use as a process agent by a second party;
(ix) A list of the entities conferring application-specific
allowances from whom orders were placed, and the quantity (in
kilograms) of specific regulated substances produced for those listed
applications;
* * * * *
(x) Daily dated records required to be maintained pursuant to
paragraph (b)(4)(xiv) of this section of the quantity of allowances
expended for the production of regulated substances for all dates
falling within the reported quarter and a certification that such
allowances were expended on the specified date; and
[[Page 66408]]
(xi) For the fourth quarter report only, the quantity of each
regulated substance held in inventory on December 31.
(3) Annual report. Within 45 days after the end of the fourth
quarter, each producer of a regulated substance must provide to the
relevant Agency official a report of emissions on a regulated substance
production line and emissions unit basis for each facility that
produces regulated substances. This report must contain the following:
(i) Quantity (in pounds) of each of the following emitted in the
prior calendar year on a regulated substance production line basis:
hazardous air pollutants initially identified in section 112 of the
CAA, and as revised through rulemaking and codified in 40 CFR part 63;
regulated substances listed in Appendix A to 40 CFR part 84; and ozone-
depleting substances listed in appendix F of 40 CFR part 82, subpart A;
and
(ii) Quantity (in pounds) of each such substance listed in
paragraph (b)(3)(i) of this section emitted in the prior calendar year
on an emission unit basis from each regulated substance production
line.
(4) * * *
(xi) Dated records of batch tests of regulated substances packaged
for sale or distribution, including instrument calibration, sample
testing data files, and results summaries of both sample test results
and quality control test results that are in a form suitable and
readily available for review;
* * * * *
(xiv) On any day allowances are expended for the production of
regulated substances, record, on that same day, the date, quantity, and
type of allowances expended.
* * * * *
(c) * * *
(1) * * *
(ix) Daily dated records required to be maintained pursuant to
(2)(xvii) of this paragraph of the quantity of allowances expended for
the import of regulated substances for all dates falling within the
reported quarter and a certification that such allowances were expended
on the specified date.
* * * * *
(2) * * *
(xvii) On any day allowances are expended for the import of
regulated substances, record on that same day, the date, quantity, and
type of allowances expended.
* * * * *
(7) Additional reporting for importers. The importer of record, or
their authorized agent, must include the following no later than 14
days if arriving by marine vessel or 5 days for non-marine vessel prior
to the date of importation (consistent with the definition at 19 CFR
101.1), via a U.S. Customs and Border Protection-authorized electronic
data interchange system, such as the Automated Broker Interface:
(i) Cargo Description;
(ii) Net weight, or if importing a heel when the precise quantity
is unknown or has not been measured, the number equivalent to net
weight if the volume of the container was 10 percent full;
(iii) Container number(s), as applicable;
(iv) Vessel name, for maritime shipments;
(v) International Maritime Organization number, for maritime
shipments;
(vi) Gross Weight, or if importing a heel when the precise quantity
is unknown or has not been measured, the number equivalent to gross
weight if the volume of the container was 10 percent full;
(vii) Weight Unit of Measure;
(viii) Port of Entry;
(ix) Scheduled Entry Date;
(x) Harmonized Tariff Schedule (HTS) code;
(xi) Harmonized Tariff Schedule (HTS) Description;
(xii) Origin Country;
(xiii) Importer Name and Importer Number;
(xiv) Consignee Entity Name;
(xv) CAS Number(s) of the regulated substance(s) imported and, for
regulated substances that are in a mixture, either the ASHRAE numerical
designation of the refrigerant or the percentage of the mixture
containing each regulated substance;
(xvi) If importing regulated substances for transformation or
destruction, a copy of the non-objection notice issued consistent with
Sec. 84.25;
(xvii) If importing regulated substances as a transhipment, a copy
of the confirmation documenting the importer reported the transhipment
consistent with paragraph (c)(3)(i) of this section; and
(xviii) A certificate of analysis.
* * * * *
(9) Importer of record information. (i) Any entity that falls under
any of the following criteria must submit the information outlined in
paragraph (c)(9)(ii) of this section:
(A) That anticipates being the importer of record for a shipment of
regulated substances must, by November 15 of the prior calendar year;
or
(B) That is not issued allowances by EPA, but receives transferred
or conferred allowances must, within 15 calendar days of receiving a
non-objection notice for conferral of application-specific allowances
pursuant to Sec. 84.13(h) or for inter-company transfer of consumption
allowances pursuant to Sec. 84.19(a).
(ii) The following information must be submitted to EPA by the date
specified under paragraph(c)(9)(i) of this section:
(A) Names of all subsidiaries,
(B) Entities commonly owned or majority owned by the same person or
persons,
(C) Alternative names under which the entity does business,
(D) Importer of record numbers, and
(E) If providing information under (b)(9)(i)(A), (B), or (C) of
this section:
(1) the relationship between the allowance holder and each
subsidiary and each entity commonly owned or majority owned by the same
person or persons, including alternative names under which each listed
entity does business;
(2) if applicable, the identity of owners and their respective
percentage of ownership; and
(3) The quantity and type of allowances to be expended in the
calendar year by each affiliated entity, identified by name and
importer of record number(s).
(iii) If changes occur to the information previously provided to
the Agency, such changes must be transmitted to the Agency at least 21
days prior to expenditure of allowances pursuant to Sec.
84.5(b)(1)(i).
(10) Each person meeting the definition of importer for a
particular regulated substance import transaction is jointly and
severally liable for a violation of paragraph (c)(1) of this section,
unless they can demonstrate that the importer of record fulfilled the
requirements in paragraph (c)(1) of this section.
(11) Each person meeting the definition of importer for a
particular regulated substance import transaction is jointly and
severally liable for a violation of paragraph (c)(7) of this section,
unless they can demonstrate that the importer of record or the importer
of record's authorized agent fulfilled the requirements of paragraph
(c)(7) of this section.
* * * * *
(i) * * *
(4) * * *
(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
[[Page 66409]]
Standard 700-2016), including instrument calibration, sample testing
data files, and results summaries of both sample test results and
quality control test results that are in a form suitable and readily
available for review. Such records must be maintained for five years.
* * * * *
(j) * * *
(3) Recordkeeping. (i) Recyclers must maintain records of the names
and addresses of persons sending them material for recycling and the
quantity of the material (the combined mass of regulated substance and
contaminants) by regulated substance sent to them for recycling. Such
records must be maintained on a transactional basis for five years.
(ii) Recyclers must maintain dated records of batch tests of
regulated substances packaged for sale or distribution, including
instrument calibration, sample testing data files, and results
summaries of both sample test results and quality control test results
that are in a form suitable and readily available for review.
(k) Repackagers. Persons who transfer regulated substances, either
alone or in a mixture, from one container to another container prior to
sale or distribution or offer for sale or distribution must comply with
the following recordkeeping requirements:
(1) Recordkeeping. Repackagers must maintain dated records of batch
tests of regulated substances packaged for sale or distribution,
including instrument calibration, sample testing data files, and
results summaries of both sample test results and quality control test
results that are in a form suitable and readily available for review.
(2) [Reserved]
* * * * *
0
11. Add Sec. 84.37 to read as follows:
Sec. 84.37 Incorporation by Reference.
(a) Certain material is incorporated by reference into this subpart
part with the approval of the Director of the Federal Register under 5
U.S.C. 552(a) and 1 CFR part 51. All approved incorporation by
reference (IBR) material is available for inspection at EPA and at the
National Archives and Records Administration (NARA). Contact EPA at:
U.S. EPA's Air and Radiation Docket; EPA West Building, Room 3334, 1301
Constitution Ave. NW, Washington, DC. For information on the
availability of this material at NARA, email [email protected] or
go to www.archives.gov/federal-register/cfr/ibr-locations.html. The
material may be obtained from the source(s) in the following paragraphs
of this section.
(b) International Organization for Standardization (ISO), Chemin de
Blandonnet 8, CP 401--1214 Vernier, Geneva, Switzerland; tel.: + 41 22
749 01 11; fax: + 41 22 733 34 30; email: [email protected]; website:
www.iso.org.
(1) ISO/IEC 17025:2017 (ISO 17025), ``General requirements for the
competence of testing and calibration laboratories'', Third Edition,
November 2017; IBR approved for Sec. 84.3.
(2) [Reserved]
[FR Doc. 2022-23269 Filed 10-27-22; 4:15 pm]
BILLING CODE 6560-50-P